<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1996
REGISTRATION NO. 33-12791
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 11 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 12 /X/
</TABLE>
FBL VARIABLE INSURANCE SERIES FUND
(Exact Name of Registrant as Specified in Charter)
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
(Address of Principal Executive Offices) (Zip Code)
(515) 225-5586
(Registrant's Telephone Number, Including Area Code)
STEPHEN M. MORAIN, ESQUIRE
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
(Name and Address of Agent for Service)
------------------------
COPY TO:
STEPHEN E. ROTH
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
------------------------
It is proposed that this filing become effective (check appropriate box):
/X/ immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on May 1, 1995 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(2) of Rule 485
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
------------------------
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940 THE
REGISTRANT HAS PREVIOUSLY REGISTERED AN INDEFINITE NUMBER OF SECURITIES UNDER
THE SECURITIES ACT OF 1933. THE REGISTRANT FILED A RULE 24F-2 NOTICE FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1995 ON FEBRUARY 26, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
<TABLE>
<CAPTION>
N-1A ITEM NO. CAPTION
- ------------------------------------------ -----------------------------------
<C> <S> <C>
PART A INFORMATION REQUIRED IN A PROSPECTUS
1. Cover Page......................... Cover Page
2. Synopsis........................... Not Applicable
3. Condensed Financial Information.... Financial Highlights
4. General Description of
Registrant........................ Investment Objectives and Policies
of the Portfolios; Organization of
the Fund
5. Management of the Fund............. Management of Fund
6. Capital Stock and Other
Securities........................ General Information; Organization
of the Fund; Taxes and
Distributions
7. Purchase of Securities Being
Offered........................... Purchase of Shares
8. Redemption or Repurchase........... Redemption of Shares
9. Pending Legal Proceedings.......... General Information
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page......................... Cover Page
11. Table of Contents.................. Table of Contents
12. General Information and History.... Not Applicable
13. Investment Objectives and
Policies.......................... Investment Objectives, Policies and
Techniques
14. Management of the Registrant....... Officers and Trustees
15. Control Persons and Principal
Holders of Securities............. Control Persons
16. Investment Advisory and Other
Services.......................... Investment Adviser; Other
Information
17. Brokerage Allocation and Other
Practices......................... Portfolio Transactions and
Brokerage Commissions
18. Capital Stock and Other
Securities........................ Shareholder Voting Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered.......... Purchases and Redemption; Net Asset
Value
20. Tax Status......................... Taxes
21. Underwriters....................... Underwriting and Distribution
Expenses
22. Calculation of Yield Quotations of
Money Market Funds................ Performance Information
23. Financial Statements............... Financial Statements
</TABLE>
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
i
<PAGE>
FARM BUREAU MUTUAL FUNDS
5400 University Avenue
West Des Moines, Iowa 50266
(515) 225-5586
- --------------------------------------------------------------------------------
FBL VARIABLE INSURANCE SERIES FUND
- --------------------------------------------------------------------------------
FBL Variable Insurance Series Fund (the "Fund") is an open-end, diversified
management investment company consisting of six Portfolios, each with its own
investment objectives and policies. For most purposes, each Portfolio operates
like a separate mutual fund issuing its own shares.
Growth Common Stock Portfolio
High Grade Bond Portfolio
High Yield Bond Portfolio
Managed Portfolio
Money Market Portfolio
Blue Chip Portfolio
Shares of the Fund are sold only to certain life insurance companies' separate
accounts to fund the benefits under variable insurance contracts issued by such
life insurance companies.
THE HIGH YIELD BOND PORTFOLIO INVESTS PRIMARILY IN LOWER-RATED BONDS, COMMONLY
REFERRED TO AS "JUNK BONDS," WHICH ENTAIL DEFAULT AND OTHER RISKS GREATER THAN
THOSE ASSOCIATED WITH HIGHER-RATED SECURITIES. PURCHASERS SHOULD CAREFULLY
ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS PORTFOLIO. SEE
"INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS--HIGH YIELD BOND
PORTFOLIO," P. 13 AND "PRINCIPAL RISK FACTORS--SPECIAL CONSIDERATIONS--HIGH
YIELD BONDS," P. 16.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus contains information about the Fund that a prospective applicant
should know before purchasing certain variable life insurance policies and
variable annuity contracts offered by Participating Insurance Companies. Please
read it carefully and retain it for future reference. A Statement of Additional
Information for the Fund, dated May 1, 1996, has been filed with Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available upon request and without charge from the
Fund by writing or calling the Fund at the address or telephone number set forth
above.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR A VARIABLE LIFE
INSURANCE POLICY OR VARIABLE ANNUITY CONTRACT ISSUED BY A PARTICIPATING
INSURANCE COMPANY. BOTH PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.
- --------------------------------------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
in connection with the offer contained in this Prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund, the Adviser or the Distributor. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, the securities of the Fund in any jurisdiction in which such sale, offer
to sell, or solicitation may not be lawfully made.
PROSPECTUS DATED MAY 1, 1996.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
<TABLE>
<S> <C>
SUMMARY........................................................................................... 3
</TABLE>
<TABLE>
<S> <C> <C>
The Fund............................................................. 3
</TABLE>
<TABLE>
<S> <C> <C>
Investment Objectives................................................ 3
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS.............................................................................. 5
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS.............................................. 11
</TABLE>
<TABLE>
<S> <C> <C>
Growth Common Stock Portfolio........................................ 11
</TABLE>
<TABLE>
<S> <C> <C>
High Grade Bond Portfolio............................................ 12
</TABLE>
<TABLE>
<S> <C> <C>
High Yield Bond Portfolio............................................ 13
</TABLE>
<TABLE>
<S> <C> <C>
Managed Portfolio.................................................... 14
</TABLE>
<TABLE>
<S> <C> <C>
Money Market Portfolio............................................... 14
</TABLE>
<TABLE>
<S> <C> <C>
Blue Chip Portfolio.................................................. 15
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PRINCIPAL RISK FACTORS............................................................................ 15
</TABLE>
<TABLE>
<S> <C> <C>
Special Considerations--High Yield Bonds............................. 16
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DESCRIPTION OF CERTAIN INVESTMENT TECHNIQUES...................................................... 18
</TABLE>
<TABLE>
<S> <C> <C>
Foreign Securities................................................... 18
</TABLE>
<TABLE>
<S> <C> <C>
When-Issued and Delayed Delivery Transactions........................ 19
</TABLE>
<TABLE>
<S> <C> <C>
Loans of Portfolio Securities........................................ 19
</TABLE>
<TABLE>
<S> <C> <C>
Covered Call Options................................................. 20
</TABLE>
<TABLE>
<S> <C> <C>
Repurchase Agreements................................................ 20
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PURCHASE OF SHARES................................................................................ 21
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
REDEMPTION OF SHARES.............................................................................. 21
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET ASSET VALUE INFORMATION....................................................................... 21
</TABLE>
<TABLE>
<S> <C> <C>
Money Market Portfolio............................................... 21
</TABLE>
<TABLE>
<S> <C> <C>
Other Portfolios..................................................... 21
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PERFORMANCE INFORMATION........................................................................... 22
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
MANAGEMENT OF THE FUND............................................................................ 23
</TABLE>
<TABLE>
<S> <C> <C>
Board of Trustees.................................................... 23
</TABLE>
<TABLE>
<S> <C> <C>
Investment Adviser................................................... 23
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PORTFOLIO TRANSACTIONS............................................................................ 24
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TAXES AND DISTRIBUTIONS........................................................................... 25
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ORGANIZATION OF THE FUND.......................................................................... 25
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
GENERAL INFORMATION............................................................................... 26
</TABLE>
<TABLE>
<S> <C> <C>
Reports to Policyowners and Contract Holders......................... 26
</TABLE>
<TABLE>
<S> <C> <C>
Shareholder Inquiries................................................ 26
</TABLE>
<TABLE>
<S> <C> <C>
Shareholder Voting Rights............................................ 26
</TABLE>
<TABLE>
<S> <C> <C>
Distributor and Dividend Disbursing and Transfer Agent............... 27
</TABLE>
<TABLE>
<S> <C> <C>
Accounting Services.................................................. 27
</TABLE>
<TABLE>
<S> <C> <C>
Registration Statement............................................... 27
</TABLE>
<TABLE>
<S> <C> <C>
Legal Matters........................................................ 27
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
APPENDIX A........................................................................................ A-1
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
APPENDIX B........................................................................................ B-1
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
APPENDIX C........................................................................................ C-1
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
FBL Variable Insurance Series Fund (the "Fund") was
established as a Massachusetts Business Trust under a
Declaration of Trust dated November 3, 1986. The Fund is
an open-end, diversified management investment company
registered under the Investment Company Act of 1940 (the
"Investment Company Act"). It is a series-type investment
company consisting of the Growth Common Stock Portfolio,
High Grade Bond Portfolio, High Yield Bond Portfolio,
Managed Portfolio, Money Market Portfolio and Blue Chip
Portfolio (individually, a "Portfolio"; collectively, the
"Portfolios"). The Board of Trustees of the Fund (the
"Board of Trustees") may provide for additional
Portfolios at any time.
Other than shares sold to Farm Bureau Life Insurance
Company to seed the Fund, shares of the Fund are offered
only to separate accounts of certain life insurance
companies ("Participating Insurance Companies") to fund
variable annuity contracts ("VA contracts") and variable
life insurance policies ("VLI policies") issued by such
life insurance companies. The Fund currently does not
foresee any disadvantages to the holders of VA contracts
and VLI policies arising from the fact that the interests
of the holders of such contracts and policies may differ.
Nevertheless, the Board of Trustees intends to monitor
events in order to identify any material irreconcilable
conflicts that possibly may arise and to determine what
action, if any, should be taken in response to those
events or conflicts. Farm Bureau Life Insurance Company
will purchase shares of the Fund to serve as the
underlying investment for VLI policies and VA contracts.
The VA contracts and VLI policies are described in the
separate prospectuses for the contracts and policies
issued by the Participating Insurance Companies. The Fund
assumes no responsibility for such prospectuses.
Individual VA contract holders and VLI policyowners are
not "shareholders" of the Fund. Rather, the Participating
Insurance Companies and their separate accounts are the
shareholders (the "Shareholders"), although such
companies pass through voting rights to their VA contract
holders and VLI policyowners. The interest of a contract
holder or policyowner in the Fund is described in his or
her VA contract or VLI policy and in the current
prospectus for such contract or policy.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The Fund currently offers a choice of six investment
Portfolios, having the following investment objectives:
GROWTH COMMON STOCK PORTFOLIO. This Portfolio seeks
long-term capital appreciation with current income as a
secondary objective. The Portfolio pursues these
objectives by investing in common stocks which appear to
the Fund's investment adviser to possess above-average
potential for appreciation in market value.
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as high
a level of current income as is consistent with
investment in a high quality portfolio of debt
securities. The Portfolio pursues this objective by
investing primarily in debt securities rated AAA, AA or A
by Standard & Poor's Corporation or Aaa, Aa or A by
Moody's Investors Service, Inc. and in debt securities
issued or guaranteed by the U.S. Government or its
agencies or instrumentalities.
HIGH YIELD BOND PORTFOLIO. This Portfolio seeks, as a
primary objective, as high a level of current income as
is consistent with investment in a portfolio of
fixed-income securities rated in the lower categories of
established rating services. As a secondary objective,
the Portfolio seeks capital appreciation when consistent
with its primary objective. The Portfolio pursues these
objectives by investing primarily in fixed-income
securities rated Baa or lower by Moody's Investors
Service, Inc. and/or BBB or lower by Standard & Poor's
Corporation, or unrated securities of comparable quality.
AN INVESTMENT IN THIS PORTFOLIO MAY ENTAIL GREATER THAN
ORDINARY FINANCIAL RISK.
3
<PAGE>
MANAGED PORTFOLIO. This Portfolio seeks the highest
total investment return of income and capital
appreciation. The Portfolio will pursue this objective
through a fully managed investment policy consisting of
investment in the following three market sectors: (i)
common stocks and other equity securities of the type in
which the Growth Common Stock Portfolio may invest; (ii)
high quality debt securities and preferred stocks of the
type in which the High Grade Bond Portfolio may invest;
and (iii) high quality short-term money market
instruments of the type in which the Money Market
Portfolio may invest.
MONEY MARKET PORTFOLIO. This Portfolio seeks maximum
current income consistent with liquidity and stability
of principal. The Portfolio will pursue this objective by
investing in high quality short-term money market
instruments. AN INVESTMENT IN THE MONEY MARKET PORTFOLIO
IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE.
BLUE CHIP PORTFOLIO. This Portfolio seeks growth of
capital and income. The Portfolio pursues this objective
by investing primarily in common stocks of
well-capitalized, established companies. Because this
Portfolio may be invested heavily in particular stocks or
industries, an investment in this Portfolio may entail
relatively greater risk of loss.
There can be no assurance that the objectives of any
Portfolio will be realized. During periods when the
Adviser believes that the equity market is overvalued, or
when warranted by other prevailing market or economic
conditions, the Growth Common Stock Portfolio may hold
substantial amounts of non-equity investments. For
further information regarding the investment practices of
the Portfolios, see "Investment Objectives and Policies
of the Portfolios." For further information regarding the
principal risk factors associated with investment in any
of the Fund's Portfolios, see "Principal Risk Factors."
4
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The condensed financial information set forth below and
on the following pages has been derived from the
financial statements and financial highlights of the
Fund, which have been audited by independent auditors.
These tables should be read in conjunction with the
financial statements and notes thereto included in the
Annual Report of Shareholders, which financial statements
and notes are incorporated herein by reference.
Selected data for a share of beneficial interest
outstanding throughout each year:
<TABLE>
<CAPTION>
GROWTH COMMON STOCK PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year......... $ 10.39 $ 11.52 $ 10.05 $ 9.55 $ 8.65 $ 8.76 $ 8.34
Income from Investment Operations
Net investment income.................. 0.55 0.48 0.63 0.46 0.51 0.52 0.50
Net gains or losses on securities (both
realized and unrealized).............. 2.13 (0.99) 2.10 0.54 0.75 (0.11) 0.42
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations......... 2.68 (0.51) 2.73 1.00 1.26 0.41 0.92
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment
income)............................... (0.50) (0.36) (0.57) (0.50) (0.36) (0.52) (0.50)
Distributions (from capital gains)..... (0.26) (0.11) (0.69)
Distributions in excess of net realized
gains................................. (0.15)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions...................... (0.76) (0.62) (1.26) (0.50) (0.36) (0.52) (0.50)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year............... $ 12.31 $ 10.39 $ 11.52 $ 10.05 $ 9.55 $ 8.65 $ 8.76
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net
asset value (2)......................... 25.87% -4.43% 27.20% 10.46% 14.53% 4.65% 11.13%
Ratios/Supplemental Data:
Net assets, end of year (000's
omitted)................................ $ 16,295 $ 10,603 $ 4,730 $ 3,017 $ 3,663 $ 2,166 $ 2,007
Ratio of net expenses to average net
assets.................................. 0.55 % 0.55 % 0.55 % 0.55 % 0.58 % 0.96 % 1.09%
Ratio of net income to average net
assets.................................. 4.78 % 4.35 % 5.41 % 4.54 % 5.23 % 5.91 % 5.69%
Portfolio turnover rate.................. 98 % 78 % 81 % 88 % 117 % 115 % 89%
Information assuming no voluntary
reimbursement or waiver by
FBL Investment Advisory Services, Inc. of
excess operating
expenses:
Per share net investment income.......... $ 0.53 $ 0.46 $ 0.59 $ 0.41 $ 0.46
Ratio of expenses to average net
assets.................................. 0.72 % 0.77 % 0.89 % 1.09 % 1.07 %
Amount reimbursed........................ $ 22,306 $ 16,706 $ 13,353 $ 17,373 $ 12,733
<CAPTION>
GROWTH COMMON STOCK PORTFOLIO
<S> <C> <C>
1988 1987(1)
---------- ----------
Net asset value, beginning of year......... $ 7.66 $ 10.34
Income from Investment Operations
Net investment income.................. 0.37 0.04
Net gains or losses on securities (both
realized and unrealized).............. 0.68 (2.45)
---------- ----------
Total from investment operations......... 1.05 (2.41)
---------- ----------
Less Distributions
Dividends (from net investment
income)............................... (0.37) (0.13)
Distributions (from capital gains).....
Distributions in excess of net realized
gains................................. (0.14)
---------- ----------
Total distributions...................... (0.37) (0.27)
---------- ----------
Net asset value, end of year............... $ 8.34 $ 7.66
---------- ----------
---------- ----------
Total Return:
Total investment return based on net
asset value (2)......................... 13.65% -71.60%(3)
Ratios/Supplemental Data:
Net assets, end of year (000's
omitted)................................ $ 1,805 $ 1,589
Ratio of net expenses to average net
assets.................................. 1.22 % 1.08 %(3)
Ratio of net income to average net
assets.................................. 4.36 % 2.00 %(3)
Portfolio turnover rate.................. 109 % 215 %(3)
Information assuming no voluntary
reimbursement or waiver by
FBL Investment Advisory Services, Inc. of
excess operating
expenses:
Per share net investment income..........
Ratio of expenses to average net
assets..................................
Amount reimbursed........................
</TABLE>
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from October 17, 1987, date shares first registered and operations
commenced, through December 31, 1987. Net investment income aggregating
$0.10 per share, for the period from the initial purchase of shares on April
9, 1987 through October 14, 1987, was recognized, none of which was
distributed during the period. Additionally, the Portfolio incurred net
unrealized gains of $0.24 per share during this interim period. This
represented activities of the Portfolio prior to the initial registration of
the portfolio shares.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(3) Computed on an annualized basis.
5
<PAGE>
<TABLE>
<CAPTION>
HIGH GRADE BOND PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year.............. $ 9.44 $ 10.23 $ 10.14 $ 10.15 $ 9.52 $ 9.56 $ 9.23
Income from Investment Operations
Net investment income....................... 0.77 0.76 0.77 0.83 0.86 0.84 0.84
Net gains or losses on securities (both
realized and
unrealized)................................ 0.54 (0.79) 0.09 (0.01) 0.63 (0.04) 0.33
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations.............. 1.31 (0.03) 0.86 0.82 1.49 0.80 1.17
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)...... (0.77) (0.76) (0.77) (0.83) (0.86) (0.84) (0.84)
Distributions (from capital gains)..........
Distributions in excess of net realized
gains......................................
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions........................... (0.77) (0.76) (0.77) (0.83) (0.86) (0.84) (0.84)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year.................... $ 9.98 $ 9.44 $ 10.23 $ 10.14 $ 10.15 $ 9.52 $ 9.56
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset
value (2).................................... 14.26% -0.26% 8.74% 8.40% 16.42% 8.85% 12.74%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)....... $ 3,208 $ 2,452 $ 2,349 $ 3,704 $ 3,659 $ 3,287 $ 3,014
Ratio of net expenses to average net assets... 0.55 % 0.55 % 0.55 % 0.55 % 0.43 % 0.71 % 0.71%
Ratio of net income to average net assets..... 7.81 % 7.76 % 7.58 % 8.19 % 8.82 % 8.88 % 8.56%
Portfolio turnover rate....................... 14 % 15 % 38 % 16 % 38 % 69 % 70%
Information assuming no voluntary reimbursement
or waiver by
FBL Investment Advisory Services, Inc. of
excess operating
expenses:
Per share net investment income............... $ 0.74 $ 0.73 $ 0.76 $ 0.80 $ 0.83
Ratio of expenses to average net assets....... 0.84 % 0.80 % 0.72 % 0.79 % 0.73 %
Amount reimbursed............................. $ 8,255 $ 6,207 $ 5,343 $ 9,004 $ 10,458
<CAPTION>
HIGH GRADE BOND PORTFOLIO
<S> <C> <C>
1988 1987(1)
---------- ----------
Net asset value, beginning of year.............. $ 9.41 $ 9.35
Income from Investment Operations
Net investment income....................... 0.84 0.18
Net gains or losses on securities (both
realized and
unrealized)................................ (0.18) 0.41
---------- ----------
Total from investment operations.............. 0.66 0.59
---------- ----------
Less Distributions
Dividends (from net investment income)...... (0.84) (0.53)
Distributions (from capital gains)..........
Distributions in excess of net realized
gains......................................
---------- ----------
Total distributions........................... (0.84) (0.53)
---------- ----------
Net asset value, end of year.................... $ 9.23 $ 9.41
---------- ----------
---------- ----------
Total Return:
Total investment return based on net asset
value (2).................................... 13.87% 38.56%(3)
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)....... $ 2,672 $ 2,497
Ratio of net expenses to average net assets... 0.71 % 0.75 %(3)
Ratio of net income to average net assets..... 8.62 % 7.26 %(3)
Portfolio turnover rate....................... 12 % 77 %(3)
Information assuming no voluntary reimbursement
or waiver by
FBL Investment Advisory Services, Inc. of
excess operating
expenses:
Per share net investment income...............
Ratio of expenses to average net assets.......
Amount reimbursed.............................
</TABLE>
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from October 17, 1987, date shares first registered and operations
commenced, through December 31, 1987. Net investment income aggregating
$0.35 per share, for the period from the initial purchase of shares on April
6, 1987 through October 14, 1987, was recognized, none of which was
distributed during the period. Additionally, the Portfolio incurred net
unrealized losses of ($1.00) per share during this interim period. This
represented activities of the Portfolio prior to the initial registration of
the portfolio shares.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(3) Computed on an annualized basis.
6
<PAGE>
<TABLE>
<CAPTION>
HIGH YIELD BOND PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year........... $ 9.32 $ 10.44 $ 9.92 $ 9.65 $ 8.47 $ 9.44 $ 9.81
Income from Investment Operations
Net investment income.................... 0.87 0.91 0.95 0.98 1.04 1.03 1.14
Net gains or losses on securities (both
realized and
unrealized)............................. 0.49 (1.01) 0.58 0.27 1.18 (0.97) (0.35)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations........... 1.36 (0.10) 1.53 1.25 2.22 0.06 0.79
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)... (0.87) (0.91) (0.95) (0.98) (1.04) (1.03) (1.16)
Distributions (from capital gains)....... (0.12) (0.11) (0.06)
Distributions in excess of net realized
gains...................................
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions........................ (0.99) (1.02) (1.01) (0.98) (1.04) (1.03) (1.16)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year................. $ 9.69 $ 9.32 $ 10.44 $ 9.92 $ 9.65 $ 8.47 $ 9.44
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset
value (2)................................. 15.15% -1.01% 15.05% 13.39% 27.49% 0.67% 8.08%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted).... $ 4,810 $ 4,172 $ 4,536 $ 4,015 $ 3,965 $ 3,165 $ 3,134
Ratio of net expenses to average net
assets.................................... 0.55 % 0.55 % 0.55 % 0.55 % 0.43 % 0.91 % 0.94%
Ratio of net income to average net
assets.................................... 8.96 % 9.17 % 9.25 % 9.88 % 11.32 % 11.40 % 11.18%
Portfolio turnover rate.................... 32 % 10 % 58 % 35 % 76 % 49 % 98%
Information assuming no voluntary
reimbursement or waiver by
FBL Investment Advisory Services, Inc. of
excess operating
expenses:
Per share net investment income............ $ 0.84 $ 0.88 $ 0.92 $ 0.88 $ 0.99
Ratio of expenses to average net assets.... 0.88 % 0.84 % 0.85 % 0.99 % 0.93 %
Amount reimbursed.......................... $ 15,105 $ 12,667 $ 12,872 $ 17,310 $ 18,111
<CAPTION>
HIGH YIELD BOND PORTFOLIO
<S> <C> <C>
1988 1987(1)
---------- ----------
Net asset value, beginning of year........... $ 9.76 $ 9.95
Income from Investment Operations
Net investment income.................... 1.13 0.21
Net gains or losses on securities (both
realized and
unrealized)............................. 0.03 0.20
---------- ----------
Total from investment operations........... 1.16 0.41
---------- ----------
Less Distributions
Dividends (from net investment income)... (1.11) (0.59)
Distributions (from capital gains).......
Distributions in excess of net realized
gains................................... (0.01)
---------- ----------
Total distributions........................ (1.11) (0.60)
---------- ----------
Net asset value, end of year................. $ 9.81 $ 9.76
---------- ----------
---------- ----------
Total Return:
Total investment return based on net asset
value (2)................................. 11.93% 21.55%(3)
Ratios/Supplemental Data:
Net assets, end of year (000's omitted).... $ 2,900 $ 2,591
Ratio of net expenses to average net
assets.................................... 0.96 % 0.88 %(3)
Ratio of net income to average net
assets.................................... 10.89 % 8.45 %(3)
Portfolio turnover rate.................... 50 % 20 %(3)
Information assuming no voluntary
reimbursement or waiver by
FBL Investment Advisory Services, Inc. of
excess operating
expenses:
Per share net investment income............
Ratio of expenses to average net assets....
Amount reimbursed..........................
</TABLE>
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from October 17, 1987, date shares first registered and operations
commenced, through December 31, 1987. Net investment income aggregating
$0.38 per share, for the period from the initial purchase of shares on April
6, 1987 through October 14, 1987, was recognized, none of which was
distributed during the period. Additionally, the Portfolio incurred net
unrealized losses of ($0.43) per share during this interim period. This
represented activities of the Portfolio prior to the initial registration of
the portfolio shares.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(3) Computed on an annualized basis.
7
<PAGE>
<TABLE>
<CAPTION>
MANAGED PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year......... $ 9.93 $ 11.33 $ 10.06 $ 9.27 $ 8.99 $ 8.97 $ 8.87
Income from Investment Operations
Net investment income.................. 0.65 0.66 0.72 0.69 0.75 0.71 0.68
Net gains or losses on securities (both
realized and unrealized).............. 1.90 (1.22) 1.57 0.77 0.39 0.02 0.10
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations......... 2.55 (0.56) 2.29 1.46 1.14 0.73 0.78
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment
income)............................... (0.59) (0.54) (0.63) (0.67) (0.86) (0.71) (0.68)
Distributions (from capital gains)..... (0.18) (0.23) (0.39)
Distributions in excess of net realized
gains................................. (0.07)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions...................... (0.77) (0.84) (1.02) (0.67) (0.86) (0.71) (0.68)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year............... $ 11.71 $ 9.93 $ 11.33 $ 10.06 $ 9.27 $ 8.99 $ 8.97
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net
asset value (2)......................... 25.69% -4.96% 22.71% 15.72% 12.69% 8.15% 8.86%
Ratios/Supplemental Data:
Net assets, end of year (000's
omitted)................................ $ 14,487 $ 9,758 $ 4,951 $ 3,019 $ 2,633 $ 2,964 $ 2,728
Ratio of net expenses to average net
assets.................................. 0.55 % 0.55 % 0.55 % 0.55 % 0.47 % 0.97 % 0.96%
Ratio of net income to average net
assets.................................. 5.80 % 6.23 % 6.23 % 7.00 % 7.97 % 7.68 % 7.36%
Portfolio turnover rate.................. 48 % 59 % 59 % 60 % 40 % 83 % 44%
Information assuming no voluntary
reimbursement or waiver by FBL Investment
Advisory Services, Inc. of excess operating
expenses:
Per share net investment income.......... $ 0.62 $ 0.63 $ 0.67 $ 0.64 $ 0.69
Ratio of expenses to average net
assets.................................. 0.77 % 0.80 % 0.91 % 1.13 % 1.03%
Amount reimbursed........................ $ 26,008 $ 19,147 $ 15,076 $ 16,480 $ 17,024
<CAPTION>
MANAGED PORTFOLIO
<S> <C> <C>
1988 1987(1)
---------- ----------
Net asset value, beginning of year......... $ 8.83 $ 9.50
Income from Investment Operations
Net investment income.................. 0.65 0.13
Net gains or losses on securities (both
realized and unrealized).............. 0.05 (0.41)
---------- ----------
Total from investment operations......... 0.70 (0.28)
---------- ----------
Less Distributions
Dividends (from net investment
income)............................... (0.66) (0.39)
Distributions (from capital gains).....
Distributions in excess of net realized
gains.................................
---------- ----------
Total distributions...................... (0.66) (0.39)
---------- ----------
Net asset value, end of year............... $ 8.87 $ 8.83
---------- ----------
---------- ----------
Total Return:
Total investment return based on net
asset value (2)......................... 7.94% -13.20%(3)
Ratios/Supplemental Data:
Net assets, end of year (000's
omitted)................................ $ 2,506 $ 2,322
Ratio of net expenses to average net
assets.................................. 1.03 % 1.05 %(3)
Ratio of net income to average net
assets.................................. 7.02 % 5.55 %(3)
Portfolio turnover rate.................. 101 % 95 %(3)
Information assuming no voluntary
reimbursement or waiver by FBL Investment
Advisory Services, Inc. of excess operating
expenses:
Per share net investment income..........
Ratio of expenses to average net
assets..................................
Amount reimbursed........................
</TABLE>
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from October 17, 1987, date shares first registered and operations
commenced, through December 31, 1987. Net investment income aggregating
$0.27 per share, for the period from the initial purchase of shares on April
6, 1987 through October 14, 1987, was recognized, none of which was
distributed during the period. Additionally, the Portfolio incurred net
unrealized losses of ($0.77) per share during this interim period. This
represented activities of the Portfolio prior to the initial registration of
the portfolio shares.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(3) Computed on an annualized basis.
8
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations
Net investment income................................. 0.05 0.04 0.03 0.03 0.05
Net gains or losses on securities (both realized and
unrealized)..........................................
---------- ---------- ---------- ---------- ----------
Total from investment operations........................ 0.05 0.04 0.03 0.03 0.05
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)................ (0.05) (0.04) (0.03) (0.03) (0.05)
Distributions (from capital gains)....................
Distributions in excess of net realized gains.........
---------- ---------- ---------- ---------- ----------
Total distributions..................................... (0.05) (0.04) (0.03) (0.03) (0.05)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset value (2).... 5.47% 3.68% 2.68% 3.28% 5.77%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)................. $ 3,159 $ 2,658 $ 2,300 $ 2,530 $ 2,798
Ratio of net expenses to average net assets............. 0.55 % 0.55 % 0.55 % 0.55 % 0.48%
Ratio of net income to average net assets............... 5.27 % 3.63 % 2.65 % 3.30 % 5.60%
Portfolio turnover rate................................. 0 % 0 % 0 % 0 % 0%
Information assuming no voluntary reimbursement or waiver
by FBL
Investment Advisory Services, Inc. of excess operating
expenses:
Per share net investment income......................... $ 0.05 $ 0.04 $ 0.02 $ 0.03 $ 0.05
Ratio of expenses to average net assets................. 0.90 % 0.82 % 0.79 % 0.93 % 0.78%
Amount reimbursed....................................... $ 9,816 $ 7,157 $ 5,838 $ 10,168 $ 8,232
<CAPTION>
MONEY MARKET PORTFOLIO
<S> <C>
1990 (1)
--------------
Net asset value, beginning of year........................ $ 1.00
Income from Investment Operations
Net investment income................................. 0.06
Net gains or losses on securities (both realized and
unrealized)..........................................
-------
Total from investment operations........................ 0.06
-------
Less Distributions
Dividends (from net investment income)................ (0.06)
Distributions (from capital gains)....................
Distributions in excess of net realized gains.........
-------
Total distributions..................................... (0.06)
-------
Net asset value, end of year.............................. $ 1.00
-------
-------
Total Return:
Total investment return based on net asset value (2).... 7.50%(3)
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)................. $ 2,665
Ratio of net expenses to average net assets............. 0.75 %(3)
Ratio of net income to average net assets............... 7.22 %(3)
Portfolio turnover rate................................. 0 %(3)
Information assuming no voluntary reimbursement or waiver
by FBL
Investment Advisory Services, Inc. of excess operating
expenses:
Per share net investment income.........................
Ratio of expenses to average net assets.................
Amount reimbursed.......................................
</TABLE>
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from February 20, 1990, date shares first registered and operations
commenced, through December 31, 1990.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(3) Computed on an annualized basis.
9
<PAGE>
<TABLE>
<CAPTION>
BLUE CHIP PORTFOLIO
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year........................ $ 15.82 $ 15.67 $ 13.96 $ 12.91 $ 10.51
Income from Investment Operations
Net investment income................................. 0.39 0.34 0.29 0.29 0.31
Net gains or losses on securities (both realized and
unrealized).......................................... 4.80 0.07 1.72 1.05 2.65
---------- ---------- ---------- ---------- ----------
Total from investment operations........................ 5.19 0.41 2.01 1.34 2.96
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)................ (0.31) (0.26) (0.30) (0.29) (0.31)
Distributions (from capital gains).................... (0.25)
Distributions in excess of net realized gains.........
---------- ---------- ---------- ---------- ----------
Total distributions..................................... (0.31) (0.26) (0.30) (0.29) (0.56)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.............................. $ 20.70 $ 15.82 $ 15.67 $ 13.96 $ 12.91
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset value (2).... 32.81% 2.65% 14.36% 10.38% 28.20%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)................. $ 6,665 $ 3,262 $ 1,654 $ 1,502 $ 1,352
Ratio of net expenses to average net assets............. 0.55 % 0.55 % 0.55 % 0.55 % 0.71%
Ratio of net income to average net assets............... 2.07 % 2.19 % 1.92 % 2.13 % 2.57%
Portfolio turnover rate................................. 1 % 0 % 0 % 0 % 7%
Information assuming no voluntary reimbursement or waiver
by FBL
Investment Advisory Services, Inc. of excess operating
expenses:
Per share net investment income......................... $ 0.38 $ 0.30 $ 0.24 $ 0.22 $ 0.29
Ratio of expenses to average net assets................. 0.59 % 0.81 % 0.89 % 1.06 % 0.91%
Amount reimbursed....................................... $ 1,952 $ 6,360 $ 5,495 $ 7,320 $ 2,556
<CAPTION>
BLUE CHIP PORTFOLIO
<S> <C>
1990 (1)
--------------
Net asset value, beginning of year........................ $ 9.64
Income from Investment Operations
Net investment income................................. 0.09
Net gains or losses on securities (both realized and
unrealized).......................................... 0.88
-------
Total from investment operations........................ 0.97
-------
Less Distributions
Dividends (from net investment income)................ (0.10)
Distributions (from capital gains)....................
Distributions in excess of net realized gains.........
-------
Total distributions..................................... (0.10)
-------
Net asset value, end of year.............................. $ 10.51
-------
-------
Total Return:
Total investment return based on net asset value (2).... 56.93%(3)
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)................. $ 1,061
Ratio of net expenses to average net assets............. 0.54 %(3)
Ratio of net income to average net assets............... 4.22 %(3)
Portfolio turnover rate................................. 0 %(3)
Information assuming no voluntary reimbursement or waiver
by FBL
Investment Advisory Services, Inc. of excess operating
expenses:
Per share net investment income.........................
Ratio of expenses to average net assets.................
Amount reimbursed.......................................
</TABLE>
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from October 15, 1990, date shares first registered and operations
commenced, through December 31, 1990. Net investment income aggregating
$0.01 per share, for the period from the initial purchase of shares on
October 9, 1990 through October 14, 1990, was recognized, none of which was
distributed during the period. Additionally, the Portfolio incurred net
unrealized losses of $0.37 per share during this interim period. This
represented activities of the Portfolio prior to the initial registration of
the portfolio shares.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(3) Computed on an annualized basis.
10
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
Each Portfolio of the Fund has distinct investment
objectives which it pursues through separate investment
policies as described below. There can be no assurance
that the objectives of any Portfolio will be achieved.
The differences in objectives and policies among the
Portfolios can be expected to affect the return of each
Portfolio and the degree of market and financial risk to
which each Portfolio is subject.
The Statement of Additional Information contains specific
investment restrictions which govern the Portfolios'
investments. Those restrictions which are identified as
fundamental policies, as well as the investment
objectives and investment policies of each Portfolio
described below in the first paragraph for each Portfolio
are fundamental policies, and may not be changed without
a majority vote of the outstanding shares of the affected
Portfolio. See "General Information--Shareholder Voting
Rights." All other investment policies and practices
described in this Prospectus and in the Statement of
Additional Information are not fundamental and may be
changed by the Board of Trustees without approval of the
Shareholders. Each of the Portfolios may engage in
certain of the portfolio strategies described in this
Prospectus under "Description of Certain Investment
Techniques" and in the Statement of Additional
Information. "Appendix C -- Description of Corporate Bond
Ratings" describes the ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's
Corporation ("Standard & Poor's") that are referred to
herein.
The portfolio turnover rates for the Portfolios are set
forth under "Financial Highlights." Portfolio turnover is
calculated by dividing the lesser of purchases or sales
of a Portfolio's securities during a fiscal year by the
average monthly value of the Portfolio's securities
during such fiscal year. In determining the portfolio
turnover rate, all securities whose maturities or
expiration dates at the time of acquisition were one year
or less are excluded. Thus, the portfolio turnover rate
measures only that portion of the Portfolio that is
considered to be long-term. Portfolio turnover rates may
be affected by factors such as purchase and redemption
requirements and market volatility and may vary greatly
from time to time. Frequency of portfolio turnover will
not be a limiting factor if the investment adviser deems
it desirable to purchase or sell securities. Increased
portfolio turnover may result in greater brokerage
commissions and consequent expense to the Portfolio. If
any Portfolio were to derive more than 30% of its gross
income from the sale of securities held less than three
months, it might fail to qualify under the tax laws as a
regulated investment company for that year and
consequently would lose certain beneficial tax treatment
of its income; however, each Portfolio intends to
continue to qualify as a regulated investment company
each year. See "Taxes and Distributions."
Following is a description of the investment objectives
and certain of the investment practices of each of the
Fund's Portfolios. For a further description of the
investment practices of the various Portfolios, see
"Description of Certain Investment Techniques."
- --------------------------------------------------------------------------------
GROWTH COMMON
The primary investment objective of the Growth Common
Stock Portfolio is long-
STOCK PORTFOLIO
term capital appreciation. Current income is a secondary
objective. The Portfolio pursues its objectives by
investing primarily in growth common stocks and
securities convertible or exchangeable into growth common
stocks, including warrants and rights.
A growth common stock is one which, in the opinion of the
Fund's investment adviser, appears to possess
above-average potential for appreciation in market value,
usually as a result of the issuer's relatively favorable
prospects for improvement in earnings. Such securities
generally include those of companies with established
records of growth in sales or earnings, and companies
with promising new products, services or processes.
11
<PAGE>
The Portfolio may also invest in companies in cyclical
industries during periods when the common stock of such
companies appears to the Fund's investment adviser to
have good potential for capital appreciation. The
Portfolio may also invest up to 35% of its assets in
preferred stocks and debt securities when such
instruments are believed to offer opportunities for
capital growth.
The investment adviser's strategy for the Growth Common
Stock Portfolio is based on a value-oriented analysis of
common stocks where it evaluates price to book value,
price to earnings, debt to total capital ratio, price to
cash flow and other similar measures relative to historic
standards. When in the opinion of the investment adviser,
the equity market reaches periods of overvaluation by
such measures, or when warranted by other prevailing
market or economic conditions, the Portfolio for
temporary defensive purposes may invest up to 100% of its
assets in other types of securities, including
investment-grade commercial paper, corporate bonds,
debentures, preferred stocks, obligations of banks and
savings institutions, U.S. Government securities,
government agency securities and repurchase agreements,
or it may retain funds in cash. "Investment-grade
commercial paper" is commercial paper rated A-2 or better
by Standard & Poor's or Prime-2 or better by Moody's.
Through careful selection of individual securities,
diversification of investments by industry and by type of
security and constant supervision of the investment
portfolio, the investment adviser strives to reduce risk
and thereby conserve principal. However, the Portfolio's
investments are subject to market fluctuations and the
risks inherent in all securities, and thus there can be
no assurance that its investment objectives will be
achieved.
- --------------------------------------------------------------------------------
HIGH GRADE BOND
PORTFOLIO
The investment objective of the High Grade Bond Portfolio
is to provide as high a level of current income as is
consistent with investment in a high quality portfolio of
debt securities. The Portfolio pursues its objective by
investing primarily in debt securities rated AAA, AA or A
by Standard & Poor's or Aaa, Aa or A by Moody's and in
U.S. Government securities and government agency
securities.
From time to time, up to 20% of the Portfolio's assets
may be invested in unrated debt securities or debt
securities which are not rated within the three highest
grades of Standard & Poor's or Moody's as described above
or in convertible debt securities, convertible preferred
stocks and nonconvertible preferred stocks rated within
the three highest grades of Standard & Poor's or Moody's
applicable to such securities. To the extent that the
Portfolio does invest in debt securities that are rated
lower than A by Moody's or Standard & Poor's (or are
unrated but equivalent in quality to such securities),
the Fund's investment portfolio will be subject to
relatively greater risk of loss of income and principal
as discussed under "Principal Risk Factors--Special
Considerations--High Yield Bonds." Securities rated Baa
or lower by Moody's and BBB or lower by Standard & Poor's
are considered by those rating agencies to have varying
degrees of speculative characteristics. Consequently,
although they can be expected to provide higher yields,
such securities may be subject to greater market
fluctuations and risk of loss of income and principal
than lower-yielding, higher-rated fixed-income
securities. It is intended that at least 65% of the
Portfolio's total assets will be invested in medium- and
long-term debt securities that are rated A or better or
that are unrated but of equivalent quality.
The Portfolio will not directly purchase common stocks.
However, it may retain up to 10% of the value of its
assets in common stocks acquired either by conversion of
debt securities or by the exercise of warrants attached
to debt securities.
When warranted, in the opinion of the investment adviser,
by prevailing market or economic conditions, the
Portfolio for temporary defensive purposes may invest up
to 100% of its assets in other types of securities,
including investment-grade commercial paper, obligations
of banks and savings institutions, U.S. Government
securities, government agency securities and repurchase
agreements, or it may retain funds in cash.
12
<PAGE>
Although in the opinion of the Fund's investment adviser,
the risk of loss of principal should be minimized by the
quality of the investments in which the Portfolio will
invest primarily, the long maturities that typically
provide the best yields may subject the Portfolio to
substantial price changes resulting from market yield
fluctuations. The market price of fixed-income securities
such as those purchased by the Portfolio is affected by
changes in interest rates; generally, the market value of
fixed income securities will fall as interest rates rise,
and will rise as interest rates fall. There can be no
assurance that the Portfolio will achieve its objective.
- --------------------------------------------------------------------------------
HIGH YIELD BOND
PORTFOLIO
The primary investment objective of the High Yield Bond
Portfolio is to obtain as high a level of current income
as is consistent with investment in a portfolio of fixed-
income securities rated in the lower categories of
established rating services. As a secondary objective,
the Portfolio seeks capital appreciation when consistent
with its primary objective. The Portfolio pursues its
investment objectives by investing primarily in
fixed-income securities, including corporate bonds and
notes, convertible debt securities and preferred stocks
that are rated in the lower categories of established
rating services (Baa or lower by Moody's and BBB or lower
by Standard & Poor's), or in unrated securities of
comparable quality. Such securities are commonly known as
"junk bonds."
Securities rated Ba or lower by Moody's and BB or lower
by Standard & Poor's are considered by those rating
services to have varying degrees of speculative
characteristics. Consequently, although they can be
expected to provide higher yields, such securities may be
subject to greater market fluctuations and risk of loss
of income and principal than lower-yielding,
higher-rated, fixed-income securities. See "Principal
Risk Factors -- Special Considerations -- High Yield
Bonds" for a discussion of various risk factors relating
to high yield bonds. The investment adviser will not rely
solely on the ratings assigned by the rating services,
and the Portfolio may invest, without limit, in unrated
securities if such securities offer, in the opinion of
the investment adviser, a relatively high yield without
undue risk. Although the Portfolio will invest primarily
in lower-rated securities, it will not invest in
securities in the lowest rating categories (Ca or lower
for Moody's and CC or lower for Standard & Poor's) unless
the investment adviser believes that the financial
condition of the issuer or the protection afforded to the
particular securities is stronger than would otherwise be
indicated by such low ratings.
The Portfolio anticipates that under normal circumstances
more than 80% of its assets will be invested in
fixed-income securities, including convertible and
non-convertible debt securities and preferred stock, and
that at least 65% of its assets will be invested in debt
securities. The remaining assets of the Portfolio may be
held in cash or investment-grade commercial paper,
obligations of banks and savings institutions, U.S.
Government securities, government agency securities and
repurchase agreements. The Portfolio does not intend to
invest in common stocks, rights or other equity
securities, but it may acquire or hold such securities
(if consistent with its objectives) when they are
acquired in unit offerings with fixed-income securities
or in connection with an actual or proposed conversion or
exchange of fixed-income securities.
When changing economic conditions and other factors cause
the yield difference between lower-rated and higher-rated
securities to narrow, the Portfolio may purchase
higher-rated securities if the investment adviser
believes that the risk of loss of income and principal
may be substantially reduced with only a relatively small
reduction in yield. In addition, when warranted, in the
opinion of the investment adviser, by prevailing market
or economic conditions, the Portfolio for temporary
defensive purposes may invest up to 100% of its assets in
other types of securities, including investment-grade
commercial paper, obligations of banks and savings
institutions, U.S. Government securities, government
agency securities and repurchase agreements, or it may
retain funds in cash. The yield on such securities may be
lower than the yield on lower-rated fixed-income
securities.
13
<PAGE>
Because an investment in high-yield securities entails
relatively greater risk of loss of income and principal,
an investment in the Portfolio may not constitute a
complete investment program and may not be appropriate
for all investors. There can be no assurance that the
Portfolio will achieve its objectives.
- --------------------------------------------------------------------------------
MANAGED PORTFOLIO
The investment objective of the Managed Portfolio is to
seek the highest total investment return of income and
capital appreciation. The Portfolio pursues its objective
through a fully managed investment policy consisting of
investment in the following three market sectors: (i)
common stocks and other equity securities of the type in
which the Growth Common Stock Portfolio may invest; (ii)
high quality debt securities and preferred stocks of the
type in which the High Grade Bond Portfolio may invest;
and (iii) high quality short-term money market
instruments of the type in which the Money Market
Portfolio may invest.
The Portfolio's investment policies for the stock, debt
and money market sectors are substantially identical to
those which have been established for the Growth Common
Stock Portfolio, High Grade Bond Portfolio and Money
Market Portfolio, respectively. The Managed Portfolio
will, from time to time, adjust the mix of investments
among the three market sectors to capitalize on perceived
variations in return potential produced by the
interaction of changing financial markets and economic
conditions. There are no restrictions as to the
proportion of one or another type of security which the
Portfolio may hold. Accordingly, the Portfolio may, at
any given time, be substantially invested in equity
securities, in high quality debt securities or in short-
term money market instruments. Major changes in the
investment mix may occur over several years or during a
single year or shorter period depending upon market and
economic conditions. The fact that the investment mix may
be adjusted from time to time may result in high
portfolio turnover and, consequently, high brokerage
charges to the Portfolio.
Achieving the Portfolio's objective depends on the
investment adviser's ability to assess the effect of
economic and market trends on different sectors of the
market. There can be no assurance that the investment
objective of the Portfolio will be achieved.
- --------------------------------------------------------------------------------
MONEY MARKET
PORTFOLIO
The investment objective of the Money Market Portfolio is
to obtain maximum current income consistent with
liquidity and stability of principal. The Portfolio
pursues its objective by investing in high quality
short-term debt obligations denominated in U.S. dollars
that have been determined to present minimal credit risk.
Money market instruments which the Money Market Portfolio
may purchase include U.S. Government securities,
government agency securities, obligations of banks and
savings institutions, commercial paper, short-term
corporate debt securities and repurchase agreements.
Appendix A contains a more detailed description of the
money market instruments in which the Money Market
Portfolio may invest. The Portfolio's investments will be
limited to money market instruments which mature in
thirteen months or less from the date of purchase;
however, the Portfolio may invest in repurchase
agreements in which the underlying securities have
maturities in excess of one year from the date of
purchase. In addition, the Portfolio limits its
investments to securities that meet the quality and
diversification requirements of Rule 2a-7 under the
Investment Company Act of 1940. See Appendix A.
The dollar weighted average portfolio maturity of the
Portfolio will not exceed 90 days. The Portfolio seeks to
maintain a constant net asset value of $1.00 per share,
and will use the amortized cost method of securities
valuation. See "Valuation of Portfolio Securities."
Because of the short-term nature of the investments of
this Portfolio, a portfolio turnover rate is not
applicable.
While the Money Market Portfolio strives to maintain a
stable net asset value, there can be no assurance that
the net asset value will remain stable at $1.00. An
investment in the Money Market Portfolio is neither
insured nor guaranteed by the U.S. Government.
14
<PAGE>
- --------------------------------------------------------------------------------
BLUE CHIP PORTFOLIO
The investment objective of the Blue Chip Portfolio is
growth of capital and income. The Portfolio pursues its
objective by investing primarily in common stocks of
well-capitalized, established companies.
In pursuing its objective, the Portfolio will invest in
stocks of approximately 40 large, well-known companies
that the Fund's investment adviser believes to
collectively comprise a representative cross-section of
major industries. Companies of this type are commonly
referred to as "blue chip." Blue chip companies are
generally identified by their substantial capitalization,
established history of earnings and superior management
structure. The investment adviser will base its
determination of the companies to be included or retained
in the Portfolio, not on the basis of any analysis of the
companies' underlying economic or financial fundamentals
or of the relative value of the securities, but rather on
whether the companies in the Portfolio, taken together,
reasonably represent a cross-section of major industries.
The adviser anticipates that the Portfolio will purchase
approximately equal dollar amounts of shares of each
company. However, the Portfolio will not own positions of
equal value in the various companies, partly because of
price fluctuations after purchases by the Portfolio.
The Portfolio may, from time to time, have more than 5%
of the value of its total assets invested in each of one
or more particular companies. However, as to 75% of the
Portfolio's total assets, no more than 5% of the
Portfolio's total assets (at the time of purchase) will
be invested in securities of any one issuer (other than
the U.S. Government and its agencies and
instrumentalities). The concentration of a significant
portion of its assets in stocks of one or a few companies
(or in a relatively limited number of industries) may
subject the Portfolio to increased risk of loss if those
stocks (or stocks in those industries) were to decline in
value.
The Portfolio expects that it will remain substantially
invested in stocks at all times. However, at most times
the Portfolio will hold a small portion of its assets
(not to exceed 15% of its total assets) in cash or cash
equivalents to accommodate redemptions and so as to avoid
having to purchase stocks in small quantities and thereby
incur excessive brokerage costs. Any such cash balances
will be invested in high-quality short-term money market
instruments of the type in which the Money Market
Portfolio may invest, or retained in cash. The Portfolio
will not engage in the trading of securities for the
purpose of realizing short-term profits.
- --------------------------------------------------------------------------------
PRINCIPAL RISK FACTORS
- --------------------------------------------------------------------------------
In general, the risk associated with the investments of a
particular Portfolio can be described in terms of current
income volatility, financial risk and market risk.
Current income volatility refers to the degree and
rapidity with which changes in overall market interest
rates affect the level of current income. Financial risk
refers to the ability of an issuer of a debt security to
pay, on a timely basis, principal and interest on such
security. With respect to the issuer of an equity
security, financial risk refers to its earning stability
and overall financial soundness. Market risk refers to
the effect of changes in the overall level of interest
rates on the price of debt securities. Generally, the
current value of debt securities varies inversely with
changes in prevailing interest rates; if interest rates
rise, the value of a debt security will tend to fall.
Market risk for equity securities refers to overall stock
market valuation levels.
The GROWTH COMMON STOCK PORTFOLIO and BLUE CHIP PORTFOLIO
most likely will be subject to moderate levels of both
market and financial risk.
The HIGH GRADE BOND PORTFOLIO most likely will be subject
to moderate levels of market risk and relatively low
levels of financial risk and current income volatility.
The HIGH YIELD BOND PORTFOLIO most likely will be subject
to relatively high levels of financial risk, moderate
levels of market risk and relatively low levels of
current income volatility.
15
<PAGE>
The market value of fixed-income securities is affected
by changes in general market interest rates. If interest
rates decline, the market value of fixed-income
securities tends to increase, while if interest rates
increase, the market value of fixed-income securities
tends to decrease. Higher-rated fixed-income securities
tend to have lower interest rates and yields, and less
market or financial risk, than do lower-rated fixed-
income securities. Lower-rated and unrated securities are
generally subject to a greater degree of market and
financial risk than higher-rated securities, for reasons
including the greater possibility that issuers of
lower-rated or unrated securities may not be able to pay
the principal and interest due on such securities,
especially during periods of adverse economic conditions.
The MANAGED PORTFOLIO most likely will be subject to
moderate levels of market and financial risk and
relatively low levels of current income volatility,
although current income volatility could be higher if the
Portfolio is heavily invested in short-term money market
instruments.
The MONEY MARKET PORTFOLIO should be subject to little
market or financial risk because it invests in high
quality short-term investments that reflect current
market interest rates. Although these types of securities
generally are considered to have low financial risk,
there is some possibility that issuers may fail to meet
their principal and interest obligations on a timely
basis. The Portfolio could experience a high level of
current income volatility because the level of its
current income directly reflects short-term interest
rates.
- --------------------------------------------------------------------------------
SPECIAL
CONSIDERATIONS-- HIGH
YIELD BONDS
As reflected above, the High Yield Bond Portfolio intends
to invest a substantial portion of its assets in
fixed-income securities offering high current income.
Additionally, subject to its specific investment
objectives and policies as described above, the High
Grade Bond Portfolio may invest a portion of its assets
in such securities. Such high yielding fixed-income
securities are ordinarily in the lower rating categories
of Moody's or Standard & Poor's or will be unrated
securities of comparable quality. Such securities are
commonly known as "junk bonds." These lower-rated,
fixed-income securities are considered, on balance, as
predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms
of the obligation and will generally involve more credit
risk than securities in the higher rating categories. The
market values of such securities tend to reflect
individual corporate developments to a greater extent
than do higher-rated securities, which react primarily to
fluctuations in the general level of interest rates. Such
lower-rated securities also tend to be more sensitive to
economic conditions than are higher-rated securities.
Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, regarding lower-rated
bonds may depress prices and liquidity for such
securities. Factors adversely affecting the market value
of high yielding securities will adversely affect a
Portfolio's net asset value. In addition, a Portfolio may
incur additional expenses to the extent it were required
to seek recovery upon a default in the payment of
principal or interest on its portfolio holdings. Although
some risk is inherent in all securities ownership,
holders of fixed-income securities have a claim on the
assets of the issuer prior to the holders of common
stock. Therefore, an investment in fixed-income
securities generally entails less risk than an investment
in common stock of the same issuer.
The investment philosophy of the High Yield Bond
Portfolio with respect to high yield bonds is based on
the premise that over the long-term a broadly diversified
portfolio of high yield fixed-income securities should,
even taking into account possible losses, provide a
higher net return than that achievable on a portfolio of
higher-rated securities. The High Yield Bond Portfolio
seeks to achieve the highest yields possible while
reducing relative risks through:
(a) broad diversification;
(b) credit analysis by the investment adviser of the
issuers in which the Portfolio invests;
16
<PAGE>
(c) monitoring and seeking to anticipate changes and
trends in the economy and financial markets that
might affect the prices of portfolio securities.
The investment adviser's judgment as to the
"reasonableness" of the risk involved in any particular
investment will be a function of its experience in
managing fixed-income investments and its evaluation of
general economic and financial conditions of a specific
issuer.
In some circumstances, defensive strategies may be
implemented to preserve or enhance capital even at the
sacrifice of current yield. Defensive strategies, which
may be used singly or in any combination, may include,
but are not limited to, investments in discount
securities or investments in money market instruments.
High yielding securities may be issued by corporations in
the growth stage of their development. They may also be
issued in connection with a corporate reorganization or
as part of a corporate takeover. Companies that issue
such high yielding securities are often highly leveraged
and may not have available to them more traditional
methods of financing. Therefore, the risk associated with
acquiring the securities of such issuers generally is
greater than is the case with higher-rated securities.
For example, during an economic downturn or a sustained
period of rising interest rates, highly leveraged issuers
of high yielding securities may experience financial
stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific
corporate developments, or the issuer's inability to meet
specific projected business forecasts, or the
unavailability of additional financing. The risk of loss
due to default by the issuer is significantly greater for
the holders of high yielding securities because such
securities are generally unsecured and are often
subordinated to other creditors of the issuer.
High yielding securities frequently have call or buy-back
features that would permit an issuer to call or
repurchase the security from the Portfolio. If a call
were exercised by the issuer during a period of declining
interest rates, a Portfolio would likely have to replace
such called security with a lower yielding security, thus
decreasing the net investment income to the Portfolio.
The premature disposition of a high yielding security
because of a call or buy-back feature, the deterioration
of the issuer's creditworthiness or a default may also
make it more difficult for a Portfolio to time its
receipt of income, which may have tax implications.
A Portfolio may have difficulty disposing of certain high
yielding securities for which there is a thin trading
market. Because not all dealers maintain markets in all
high yielding securities, there is no established retail
secondary market for many of these securities, and the
Fund anticipates that they could be sold only to a
limited number of dealers or institutional investors. To
the extent there is a secondary trading market for high
yielding securities, it is generally not so liquid as
that for higher-rated securities. The lack of a liquid
secondary market may have an adverse impact on market
price and a Portfolio's ability to dispose of particular
issues when necessary to meet the Portfolio's liquidity
needs or in response to a specific economic event such as
a deterioration in the creditworthiness of the issuer.
The lack of a liquid secondary market for certain
securities may also make it more difficult for the Fund
to obtain accurate market quotations for purposes of
valuing a Portfolio's assets. Market quotations are
generally available on many high yield issues only from a
limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual
sales.
It is likely that a major economic recession could
severely affect the market for and the values of high
yielding securities, as well as the ability of the
issuers of such securities to repay principal and pay
interest thereon.
A Portfolio may acquire high yielding securities that are
sold without registration under the federal securities
laws and therefore carry restrictions on resale. While
many recent high yielding securities have been sold with
registration rights, covenants and penalty provisions for
delayed registration, if a Portfolio is required to
17
<PAGE>
sell such restricted securities before the securities
have been registered, it may be deemed an underwriter of
such securities as defined in the Securities Act of 1933,
which entails special responsibilities and liabilities. A
Portfolio may incur special costs in disposing of such
securities, but will generally incur no costs when the
issuer is responsible for registering the securities.
A Portfolio may acquire high yielding securities during
an initial underwriting. Such securities involve special
risks because they are new issues. The Fund has no
arrangement with any person concerning the acquisition of
such securities and the investment adviser will carefully
review the credit and other characteristics pertinent to
such new issues.
From time to time, there have been proposals for
legislation designed to limit the use of certain high
yielding securities in connection with leveraged
buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities.
Such proposals, if enacted into law, could reduce the
market for such securities generally, could negatively
affect the financial condition of issuers of high yield
securities by removing or reducing a source of future
financing and could negatively affect the value of
specific high yield issues. However, the likelihood of
any such legislation or the effect thereof is uncertain.
Zero coupon securities and pay-in-kind bonds involve
additional special obligations. Zero coupon securities
are debt obligations that do not entitle the holder to
any periodic payments of interest prior to maturity or to
a specified cash payment date when the securities begin
paying current interest (the "cash payment date"), and
therefore are issued and traded at a discount from their
face amount or par value. The discount varies depending
upon the time remaining until maturity or cash payment
date, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer.
The discount, absent financial difficulties of the
issuer, decreases as the final maturity or cash payment
date of the security approaches. The market prices of
zero coupon securities are generally more volatile than
those of securities that pay interest periodically, and
they are more likely to respond to changes in interest
rates than non-zero coupon securities having similar
maturities and credit quality. The credit risk factors
pertaining to lower-rated securities generally also apply
to lower-rated zero coupon bonds and pay-in-kind bonds.
Such zero coupon, pay-in-kind or delayed interest bonds
carry an additional risk in that, unlike bonds that pay
interest throughout the period to maturity, a Portfolio
will realize no cash until the cash payment date unless a
portion of such securities is sold and, if the issuer
defaults, a Portfolio may obtain no return at all on its
investment.
Current federal income tax law requires the holder of
zero coupon securities or of certain pay-in-kind bonds
(bonds that pay interest through the issuance of
additional bonds) to accrue income with respect to these
securities prior to the receipt of cash payments. To
maintain its qualification as a registered investment
company and avoid liability for federal income and excise
taxes, a Portfolio will be required to distribute income
accrued with respect to these securities and may have to
dispose of portfolio securities under disadvantageous
circumstances in order to generate cash to satisfy these
distribution requirements.
Additional information concerning high yielding
securities appears under "Appendix C -- Description of
Corporate Bond Ratings."
- --------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN INVESTMENT TECHNIQUES
- --------------------------------------------------------------------------------
Except as otherwise noted below, the following investment
strategies and techniques may be used by all Portfolios.
- --------------------------------------------------------------------------------
FOREIGN SECURITIES
The Growth Common Stock Portfolio and Managed Portfolio
each may invest up to 25% of its assets in equity
securities of foreign issuers to the extent the purchase
of such foreign securities is otherwise consistent with
the Portfolio's investment objectives. Investments will
be made only in foreign securities which are publicly
18
<PAGE>
traded on U.S. exchanges and payable in U.S. dollars.
With respect to quality and risk, the investment adviser
will attempt to select investments in foreign securities
on the same basis that it selects investments in domestic
securities.
- --------------------------------------------------------------------------------
WHEN-ISSUED AND
DELAYED DELIVERY
TRANSACTIONS
From time to time, in the ordinary course of business,
any of the Portfolios may purchase newly-issued
securities appropriate for the Portfolio on a
"when-issued" basis and may purchase or sell securities
appropriate for the Portfolio on a "delayed delivery"
basis. When-issued or delayed delivery transactions
involve a commitment by a Portfolio to purchase or sell
particular securities with payment and delivery to take
place at a future date. These transactions allow the
Portfolio to lock in an attractive purchase price or
yield on a security the Portfolio intends to purchase or
an attractive sale price on a security the Portfolio
intends to sell. Normally, settlement occurs within one
month of the purchase or sale. During the period between
purchase or sale and settlement, no payment is made or
received by a Portfolio and, for delayed delivery
purchases, no interest accrues to the Portfolio. A
Portfolio will only make commitments to purchase
securities on a when-issued or delayed delivery basis
with the intention of actually acquiring the securities,
but each Portfolio reserves the right to sell such
securities before the settlement date if deemed
advisable.
At the time a Portfolio makes the commitment to purchase
a security on a when-issued or delayed delivery basis, it
will record the transaction and reflect the amount due
and the market value of the security, in determining its
net asset value. Likewise, at the time a Portfolio makes
the commitment to sell a security on a delayed delivery
basis, it will record the transaction and include the
proceeds to be received in determining its net asset
value; accordingly, any fluctuations in the value of the
security sold pursuant to a delayed delivery commitment
are ignored in calculating net asset value so long as the
commitment remains in effect.
The market value of the when-issued or delayed delivery
securities at any time may be more or less than the
purchase price to be paid or the sale price to be
received at the settlement date. To the extent that a
Portfolio engages in when-issued or delayed delivery
transactions, it will do so for the purpose of acquiring
or selling Portfolio securities consistent with the
Portfolio's investment objectives and policies and not
for the purpose of investment leverage or to speculate on
interest rate changes. The investment adviser does not
believe that a Portfolio's net asset value or income will
be adversely affected by the purchase of securities on a
when-issued or delayed delivery basis or the sale of
securities on a delayed delivery basis.
Each Portfolio will establish a segregated account with
the Fund's custodian bank in which it will maintain cash
or U.S. Government securities or other high-grade debt
obligations at least equal in value to commitments to
purchase securities on a when-issued or delayed delivery
basis; subject to this requirement, a Portfolio may
purchase securities on a when-issued or delayed delivery
basis without limit. To the extent that assets of a
Portfolio are held in cash pending the settlement of a
purchase of securities, that Portfolio would earn no
income; however, it is the investment adviser's intention
that each Portfolio will be fully invested to the extent
practicable and subject to the policies stated above. In
the case of a commitment to sell portfolio securities on
a delayed delivery basis, each Portfolio will instruct
the custodian to hold the portfolio securities themselves
in a segregated account while the commitment is
outstanding.
- --------------------------------------------------------------------------------
LOANS OF PORTFOLIO
SECURITIES
Each Portfolio may, from time to time, lend securities
(but not in excess of 20% of its assets) from its
portfolio to brokers, dealers and financial institutions,
provided that: (i) the loan is secured continuously by
collateral consisting of U.S. Government securities,
government agency securities, cash or cash equivalents
adjusted daily to have a market value at least equal to
the current market value of the securities loaned plus
accrued interest; (ii) the Portfolio may at any time call
the loan and regain the securities loaned; and (iii) the
investment adviser (under the review of the Board of
Trustees) has reviewed the creditworthiness of the
borrower and has found such creditworthiness
satisfactory. Any cash collateral will be invested in
short-term securities, the income from which will
increase the return to the Portfolio.
19
<PAGE>
- --------------------------------------------------------------------------------
COVERED CALL OPTIONS
Each Portfolio (other than the Money Market Portfolio)
may write (sell) covered call options on portfolio
securities representing up to 100% of its net assets in
an attempt to enhance investment performance or to reduce
the risks associated with investments. A call option
gives the purchaser the right to buy, and the writer the
obligation to sell, an underlying security at a
particular exercise price during the option period. A
Portfolio will write call options only on a covered
basis, which means that the Portfolio will own the
underlying security subject to the call option at all
times during the option period. Options written by a
Portfolio will normally have expiration dates between
three and nine months from the date written. Such options
and the securities underlying the option will both be
listed on national securities exchanges, except for
certain transactions in debt securities and related
options need not be so listed.
The advantage to a Portfolio of writing covered call
options is that the Portfolio receives a premium which
constitutes additional income, which would serve both to
enhance investment performance and to offset in whole or
in part any decline in value of the underlying security.
However, the disadvantage is that during the option
period the Portfolio would give up the potential for
capital appreciation above the exercise price if the
underlying security were to rise in value; and that,
unless a closing purchase transaction is effected, the
Portfolio will be required to continue to hold the
underlying security for the entire option period, and
would bear the risk of loss if the price of the security
were to decline.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements as a
means of earning income for periods as short as
overnight. A repurchase agreement is an agreement under
which the Portfolio purchases a security and the seller
agrees, at the time of sale, to repurchase the security
at a specified time and price, thereby determining the
yield during the Portfolio's holding period. That yield
is determined by current short-term rates and may be more
or less than the interest rate on the underlying
security. The value of the underlying securities is
marked to market daily. Should the value of the
underlying securities decline, the seller would be
required to provide the Portfolio with additional
securities so that the aggregate value of the underlying
securities was at least equal to the repurchase price.
The Portfolios may also enter into a special type of
repurchase agreement known as an "open repurchase
agreement." An open repurchase agreement varies from the
typical repurchase agreement in the following respects:
(i) the agreement has no set maturity, but instead
matures upon 24 hours' notice to the seller; and (ii) the
repurchase price is not determined at the time the
agreement is entered into, but instead is based on a
variable interest rate and the duration of the agreement.
The Portfolios may enter into repurchase agreements only
with banks or securities dealers and the underlying
securities will consist of securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities. If a seller of a repurchase agreement
were to default, the Portfolio might experience losses,
including delays and expenses in enforcing its rights. To
minimize this risk, the investment adviser (under the
review of the Board of Trustees) will review the
creditworthiness of the seller of the repurchase
agreement and must find such creditworthiness
satisfactory before a Portfolio may enter into the
repurchase agreement.
A Portfolio may invest no more than 10% of its assets in
repurchase agreements maturing in more than seven days,
and no more than 25% of its assets in repurchase
agreements in which the underlying securities have
maturities in excess of one year, although there is no
limit on the percentage of each Portfolio's assets which
may be invested in repurchase agreements which mature in
less than seven days and which have underlying securities
with maturities of less than one year. Open repurchase
agreements are considered to mature in one day.
20
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The Fund continuously offers shares of the various
Portfolios at the respective net asset values of the
Portfolios determined in the manner set forth below under
"Net Asset Value Information." The Fund offers its
shares, without sales charge, only to the separate
accounts of Participating Insurance Companies as the
investment medium for the VA contracts or VLI policies
issued by the Participating Insurance Companies.
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
The Fund ordinarily will redeem full and fractional
shares of a Portfolio for cash at the net asset value
next determined after receipt of a proper notice of
redemption. No redemption fee is charged. Except as
described below, the Fund is required to pay redemption
proceeds within seven days after receipt of a proper
notice of redemption; however, the Fund intends to pay
redemption proceeds within one business day after receipt
of such notice. The Fund may suspend the right of
redemption or postpone the date of payment, with respect
to the shares of a Portfolio, during any period when (a)
trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission or
such exchange is closed for trading other than customary
weekend and holiday closings; (b) an emergency exists, as
determined by the Securities and Exchange Commission, a
result of which would make disposal of such Portfolio's
securities or determination of the net asset value of
such Portfolio not reasonably practicable; or (c) the
Securities and Exchange Commission by order permits
postponement for the protection of Shareholders.
If a conflict between VA contract holders and VLI
policyowners arose that required a substantial amount of
assets be withdrawn from the Fund, orderly portfolio
management could be disrupted to the potential detriment
of such contract holders and policyowners.
- --------------------------------------------------------------------------------
NET ASSET VALUE INFORMATION
- --------------------------------------------------------------------------------
The net asset value per share of each Portfolio is
determined as of the earlier of 3:00 p.m. (Central Time)
or the close of the New York Stock Exchange, on each day
that (i) the New York Stock Exchange is open for business
(except the day after Thanksgiving, the Tuesday before
Christmas and any day on which the Fund offices are
closed because of a weather-related or comparable type of
emergency); and (ii) an order for purchase or redemption
of shares of the Portfolio is received. The net asset
value per share of each Portfolio is computed by dividing
the total value of the Portfolio's securities and other
assets, less liabilities, by the total number of
outstanding shares of such Portfolio.
The Fund reserves the right to calculate or estimate the
net asset value of a Portfolio more frequently than once
daily if deemed desirable. If the Fund offices should be
closed because of a weather-related or comparable type of
emergency and the Fund is unable to segregate orders and
redemption requests received on that day, the Fund will
price those orders and redemptions at the net asset value
next determined for each Portfolio.
- --------------------------------------------------------------------------------
MONEY MARKET
PORTFOLIO
The Money Market Portfolio's securities are valued using
the amortized cost method of valuation. This involves
valuing a security at cost on the date of acquisition and
thereafter assuming a constant accretion of a discount or
amortization of a premium to maturity. For a further
discussion of the manner in which such values are
determined, see the Statement of Additional Information
under the heading "Net Asset Value."
- --------------------------------------------------------------------------------
OTHER PORTFOLIOS
Portfolio securities that are traded on a national
exchange are valued at the last sale price as of the
close of business on the day the securities are being
valued, or, lacking any sales, at the mean between the
closing bid and asked prices. Securities, other than
21
<PAGE>
money market instruments, 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. Portfolio
securities that are traded both in the over-the-counter
market and on a national exchange are valued according to
the broadest and most representative market; and it is
expected that for debt securities this ordinarily will be
the over-the-counter market. Values of securities and
assets for which market quotations are not readily
available are determined in good faith by, or under the
direction of, the Board of Trustees.
Money market instruments are valued at market value,
except that debt instruments maturing in 60 days or less
are valued using the amortized cost method of valuation
described above with respect to the Money Market
Portfolio.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund may advertise several types
of performance information for a Portfolio. All
Portfolios, except the Money Market Portfolio, may
advertise "average annual total return" and "total
return." The High Grade Bond and High Yield Bond
Portfolios may also advertise "yield." The Money Market
Portfolio may advertise "yield" and "effective yield."
Each of these figures is based upon historical results
and is not necessarily representative of the future
performance of a Portfolio. The rate of return for a
Portfolio should be distinguished from the rate of return
of a corresponding Subaccount of a separate account of a
Participating Insurance Company, whose rate will reflect
the deduction of additional charges, including a
mortality and expense risk charge, and therefore will be
lower. Contract holders and policyowners should consult
the prospectus for such VA contract or VLI policy.
Average annual total return and total return figures
measure both the net income generated by, and the effect
of any realized and unrealized appreciation or
depreciation of, the underlying investments in the
Portfolio for the designated period, assuming the
reinvestment of all dividends and distributions during
the period. Thus, these figures reflect the change in
value of an investment in the Portfolio during a
specified period. Average annual total return will be
quoted for at least one-, five- and ten-year periods (or,
if such periods have not yet elapsed, at the end of a
shorter period corresponding to the life of the
Portfolio). Average annual total return figures represent
the average annual percentage change in the value of a
specific dollar amount invested in the Portfolio's shares
for the designated period. Total return figures are not
annualized and represent the aggregate percentage or
dollar value change over the period.
Yield is a measure of the net investment income per share
earned over a specific one-month or 30-day period
(seven-day period for the Money Market Portfolio)
expressed as a percentage of the Portfolio's net asset
value per share at the end of the period (except for the
Money Market Portfolio where the net asset value per
share at the beginning of the period is used). Yield is
an annualized figure which means that it is assumed that
the Portfolio generates the same level of investment
income over a one-year period. The effective yield for
the Money Market Portfolio is calculated similarly, but
the net investment income earned is assumed to be
compounded when annualized. The Money Market Portfolio's
effective yield will be slightly higher than its yield
due to this compounding. Semi-annual compounding is
assumed for Portfolios other than the Money Market
Portfolio.
From time to time, the Fund may include in its sales
literature and shareholder reports for the High Grade
Bond and High Yield Bond Portfolios a quotation of the
current "distribution rate" for the Portfolios. The
distribution rate is simply a measure of the level of
income and short-term capital gain dividends distributed
for a specified period. It differs from yield, which is a
measure of the income actually earned by the Portfolio's
investments and from total return, which is a measure of
the income actually earned by, plus the effect of any
realized or unrealized appreciation or depreciation of
such investments, during the period. Distribution rate,
therefore, is
22
<PAGE>
not intended to be a complete measure of performance.
Distribution rate may sometimes be greater than yield
since, for instance, it may include short-term gains
(which may be non-recurring) and may not reflect the
amortization of bond premiums.
Additionally, from time to time, in advertisements or
reports to shareholders, a Portfolio may compare its
performance to that of the Consumer Price Index or
various unmanaged indexes such as the Dow Jones
Industrial Average, the Standard & Poor's 500, the
Shearson/Lehman Government and Corporate Bond Index and
the Salomon Brothers High Grade Bond Index. A Portfolio
may also use mutual fund quotation services such as
Lipper Analytical Services, Inc., an independent mutual
fund reporting service, or similar industry services, for
purposes of comparing a Portfolio's rank or performance
with that of other mutual funds having similar investment
objectives. Performance comparisons should not be
considered representative of the future performance of
any Portfolio.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
The Board of Trustees consists of nine individuals, five
of whom are not "interested persons" of the Fund as
defined in the Investment Company Act.
The Board of Trustees is responsible for the overall
supervision of the operations of the Fund and performs
the various duties imposed on the Trustees of investment
companies by the Investment Company Act. The Board of
Trustees elects officers of the Fund annually.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
FBL Investment Advisory Services, Inc. ("FBL" or
"Adviser"), 5400 University Avenue, West Des Moines, Iowa
50266, serves as the Fund's investment adviser and
manager pursuant to an Investment Advisory and Management
Services Agreement. This relationship has existed since
the Fund commenced operations in 1987.
The Adviser is an indirect subsidiary of FBL Financial
Group, Inc. (formerly Farm Bureau Multi-State Services,
Inc.), an Iowa corporation. At December 31, 1995, 63.86%
of the outstanding voting shares of FBL Financial Group,
Inc. is owned by Iowa Farm Bureau Federation. The
following individuals are officers and/or directors of
the Adviser and are officers and/or trustees of the Fund:
Stephen M. Morain, Thomas R. Gibson, William J. Oddy,
Timothy J. Hoffman, Dennis M. Marker, James W. Noyce,
Richard D. Warming, Sue A. Cornick, Kristi Rojohn and
Elaine A. Followwill. The Adviser also acts as the
investment adviser to individuals, institutions and two
other investment companies: FBL Money Market Fund, Inc.
and FBL Series Fund, Inc. Personnel of the Adviser also
manage investments for the portfolios of insurance
companies.
The Adviser handles the investment and reinvestment of
the Fund's assets, and is responsible for the overall
management of the Fund's business affairs, subject to the
review of the Board of Trustees.
Roger F. Grefe and Robert J. Rummelhart serve as managers
for various portfolios of the Fund. Mr. Grefe joined FBL
in 1986 and has managed the Growth Common Stock and
Managed Portfolios since their inception in 1987. Mr.
Grefe is a graduate of Coe College in Cedar Rapids, Iowa
and is a Chartered Financial Analyst and NASD Registered
Principal.
Mr. Rummelhart has managed both the High Grade Bond and
High Yield Bond Portfolios since their inception in 1987.
He received his BA and MBA degrees from the University of
Iowa and is a Chartered Financial Analyst and NASD
Registered Representative.
The Adviser provides investment supervision to the Blue
Chip Portfolio through the use of a team approach. As
cash accumulates for investment, trading personnel are
notified to execute the necessary transactions in order
to maintain the relative weights of the equity securities
in this Portfolio.
23
<PAGE>
As compensation for the advisory and management services
provided by the Adviser, the Fund has agreed to pay the
Adviser an annual management fee, accrued daily and
payable monthly, based on the average daily net assets of
each Portfolio as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS
-------------------------------------
FIRST SECOND OVER
$200 $200 $400
PORTFOLIO MILLION MILLION MILLION
- ------------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Growth Common Stock..................................................... 0.50 % 0.45 % 0.40 %
High Grade Bond......................................................... 0.30 % 0.275 % 0.25 %
High Yield Bond......................................................... 0.50 % 0.45 % 0.40 %
Managed................................................................. 0.55 % 0.50 % 0.45 %
Money Market............................................................ 0.30 % 0.275 % 0.25 %
Blue Chip............................................................... 0.20 % 0.20 % 0.20 %
</TABLE>
The Adviser, at its expense, furnishes the Fund with
office space and facilities, simple business equipment,
advisory, research and statistical facilities, and
clerical services and personnel to administer the
business affairs of the Fund. The Fund pays its other
expenses which include, but are not limited to, the
following: net asset value calculations; portfolio
transaction costs; interest on Fund obligations; stock
certificates; miscellaneous reports; membership dues;
reports and notices to Shareholders; all expenses of
registration of its shares under federal and state
securities laws; investor services (including allocable
telephone and personnel expenses); all taxes and fees
payable to federal, state or other governmental
authorities; fees of Trustees who are not affiliated with
the Adviser; and the fees and expenses of independent
public auditors, legal counsel, custodian, transfer and
dividend disbursing agent and any registrar.
The Adviser has agreed to reimburse any Portfolio to the
extent that the annual operating expenses (including the
investment advisory fee but excluding brokerage,
interest, taxes and extraordinary expenses) of that
Portfolio exceed 1.50% of the average daily net assets of
that Portfolio for any fiscal year of the Portfolio.
However, the amount reimbursed shall not exceed the
amount of the advisory fee paid by the Portfolio for such
period. This reimbursement agreement will remain in
effect as long as the Investment Advisory Agreement
remains in effect and cannot be changed without
shareholder approval. Additionally, the Adviser has
agreed to reimburse any Portfolio for calendar year 1996
to the extent that annual operating expenses, including
the investment advisory fee, exceed .55%. There can be no
assurance that the Adviser will continue to limit
expenses beyond December 31, 1996.
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
With respect to transactions in portfolio securities,
whether through a broker as agent or with a dealer as
principal, the Adviser endeavors to obtain for the Fund
the most favorable prices and efficient execution of
orders. Subject to this primary consideration, and while
there is no understanding or arrangement to do so, the
Adviser places substantially all the Fund's portfolio
transactions with brokerage firms which furnish research,
statistical and other services to the Fund. Certain
affiliates and other clients of the Adviser also place
portfolio transactions with these brokerage firms, and
such affiliates and clients share the benefits of the
research and other services obtained from these brokers.
The Adviser regards information which is customarily
available only in return for brokerage as among the many
elements to be considered in arriving at investment
decisions. No specific value can be determined for most
such information and services and they are deemed
supplemental to the Adviser's own efforts in the
performance of its duties under the Investment Advisory
and Management Services Agreement. Any research benefits
derived are available for all clients.
The investment decisions for the Fund are reached
independently from those for the other funds and accounts
managed by the Adviser. At certain times one or more
Portfolios of the Fund may purchase the same securities
at the same time as the other
24
<PAGE>
funds and accounts managed by the Adviser. When multiple
accounts and/or funds have assets available for
investment in the same securities, available investments
are allocated as to amount in a manner considered
equitable to each. In some cases, this procedure may
affect the size or price of the position obtainable for
the Fund. It is the opinion of the Board of Trustees that
the benefits to the Fund arising out of simultaneous
transactions outweigh any disadvantages.
- --------------------------------------------------------------------------------
TAXES AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
For federal income tax purposes, each Portfolio will be
treated as a separate entity. Each Portfolio intends to
qualify each year as a "regulated investment company"
under the Internal Revenue Code as amended ("Code"). By
so qualifying, a Portfolio will not be subject to federal
income taxes to the extent that its net investment income
and net realized capital gains are distributed to the
separate accounts of insurance companies.
Since the Shareholders of the Fund are the separate
accounts of Participating Insurance Companies, no
discussion is included herein as to the federal income
tax consequences at the shareholder level. For
information concerning the federal tax consequences to
the purchasers of the VA contracts and VLI policies, see
the attached prospectus for such contract or policy.
Federal tax law imposes a four-percent nondeductible
excise tax on each regulated investment company with
respect to an amount, if any, by which such company does
not meet distribution requirements specified in such tax
laws. Each Portfolio intends to comply with such
distribution requirements and thus does not expect to
incur the four-percent nondeductible excise tax.
- --------------------------------------------------------------------------------
DISTRIBUTIONS
GROWTH COMMON STOCK, BLUE CHIP AND MANAGED PORTFOLIO
DISTRIBUTIONS: Each Portfolio normally follows the
practice of distributing substantially all net investment
income and substantially all net short-term and long-term
capital gains, if any, during the Fund's fiscal year.
HIGH GRADE BOND AND HIGH YIELD BOND PORTFOLIO
DISTRIBUTIONS: On each day that a Portfolio's net asset
value per share is calculated, that Portfolio's net
investment income will be declared, as of the close of
the New York Stock Exchange, as a dividend to
Shareholders of record prior to the declaration. Any net
short-term and long-term gains will be declared and
distributed periodically, but in no event less frequently
than annually.
MONEY MARKET PORTFOLIO DISTRIBUTIONS: On each day that
the net asset value per share of the Money Market
Portfolio is determined, the Money Market Portfolio's net
investment income will be declared, as of the close of
the New York Stock Exchange, as a dividend to
Shareholders of record prior to the declaration.
It is the Fund's intention to distribute substantially
all its net investment income, if any, and any net
realized capital gains of each Portfolio. All
distributions are reinvested in additional shares of the
respective Portfolio at net asset value unless a
Shareholder elects to have such distributions paid in
cash.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE FUND
- --------------------------------------------------------------------------------
The Fund was organized as a business trust under the laws
of the Commonwealth of Massachusetts on November 3, 1986.
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of the
Portfolios and to divide or combine the shares of any
Portfolio into a greater or lesser number of shares of
that Portfolio without thereby changing the proportionate
beneficial interests in the Portfolio. The shares of the
Fund are divided into six separate series (i.e.,
Portfolios), and the shares of each Portfolio have equal
rights and privileges and represent an equal
proportionate interest with all
25
<PAGE>
other shares of that Portfolio. Upon liquidation of the
Fund or any Portfolio of the Fund, Shareholders of each
Portfolio are entitled to share pro rata in the net
assets of that Portfolio available for distribution to
Shareholders. Shares have no preemptive or conversion
rights. The right of redemption is described elsewhere
herein. Shares of each Portfolio are fully paid and
non-assessable by the Fund. The Trustees are authorized
to classify unissued shares of the Fund by assigning them
to a Portfolio for issuance.
The assets received by the Fund on the sale of shares of
each Portfolio and all income, earnings, profits and
proceeds thereof, (subject only to the rights of
creditors), are allocated to each Portfolio, and
constitute the assets of such Portfolio. The assets of
each Portfolio are required to be segregated on the
Fund's books of account.
Under Massachusetts law, shareholders of a business trust
may, under certain circumstances, be held personally
liable as partners for the obligations of the Fund. The
Declaration of Trust contains an express disclaimer of
Shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in
each instrument entered into or executed by the Fund. The
Declaration of Trust also provides for indemnification
out of Fund property of any Shareholder held personally
liable for the claims and liabilities to which a
Shareholder may become subject by reason of being or
having been a Shareholder. Thus, the risk of a
Shareholder incurring financial loss on account of
Shareholder liability is limited to circumstances in
which the Fund itself would be unable to meet its
obligations.
Farm Bureau Life Insurance Company provided the initial
capital for five Portfolios of the Fund in April of 1987
by purchasing $2 million worth of shares of each of the
Growth Common Stock and Aggressive Growth Common Stock
Portfolios, and $2.5 million worth of shares of each of
the High Grade Bond, High Yield Bond and Managed
Portfolios. Pursuant to a vote of Shareholders, the
assets of the Aggressive Growth Common Stock Portfolio
were consolidated with those of the Growth Common Stock
Portfolio. Farm Bureau Life Insurance Company provided
the initial capital for the Money Market Portfolio, in
February of 1990, by purchasing $2.5 million worth of
shares. Farm Bureau Life Insurance Company provided the
initial capital for the Blue Chip Portfolio, in October
1990, by purchasing $1 million worth of shares. From time
to time, Farm Bureau Life Insurance Company withdraws
portions of this capital. As of the date of this
prospectus, Farm Bureau Life Insurance Company owned more
than 25% of the Fund and will be deemed to control the
Fund. Farm Bureau Life Insurance Company is a subsidiary
of FBL Financial Group, Inc. Such shares have been
acquired for investment and can only be disposed of by
redemption or transfer to an affiliate. The
organizational expenses of the Fund have been paid by
Farm Bureau Life Insurance Company.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
REPORTS TO POLICY-
Owners of VLI policies and VA contracts issued by
Participating Insurance Companies,
OWNERS AND
for which shares of one or more Portfolios are the
investment vehicles, will receive
CONTRACT HOLDERS
from the Participating Insurance Companies unaudited
semi-annual financial statements and audited year-end
financial statements of the Fund which are certified by
the Fund's independent auditors.
- --------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES
Participating Insurance Companies with inquiries
regarding the Fund may contact the Fund at (800) 247-4170
or at 5400 University Avenue, West Des Moines, Iowa
50266.
- --------------------------------------------------------------------------------
SHAREHOLDER VOTING
RIGHTS
Shareholders have the right to vote on the election of
Trustees and on any and all matters which, by law or the
provisions of the Fund's by-laws, they may be entitled to
vote. Shareholders of all Portfolios vote for a single
set of Trustees; thereafter, the Trustees will serve for
terms of unlimited duration (subject to certain removal
procedures by the Trustees or the Shareholders). The Fund
does not intend to hold annual meetings of Shareholders.
The Board of Trustees has the power to alter the number
of Trustees and to appoint successor Trustees, provided
that immediately after the appointment of any successor
Trustee at least two-thirds of the Trustees have
26
<PAGE>
been elected by the Shareholders of the Fund. However, if
at any time less than a majority of the Trustees holding
office has been elected by the Shareholders, the Trustees
are required to call a special meeting of Shareholders
for the purpose of electing Trustees to fill any existing
vacancies in the Board.
To the extent required by law, the Participating
Insurance Companies will vote Fund shares held in their
separate accounts in accordance with instructions
received from the VLI policyowners or VA contract holders
having voting interests in the separate accounts. In
addition, to the extent required by law, Farm Bureau Life
Insurance Company will vote Fund shares held in its
general account in proportion to voting instructions
received from its VLI policyowners and its VA contract
holders. Each share will have one vote and fractional
shares will be counted. On any matters affecting an
individual Portfolio, only the Shareholders of that
Portfolio will be entitled to vote. On matters relating
to all the Portfolios, but affecting the Portfolios
differently, separate votes by Portfolio will be
required. Shares for which no voting instructions are
received shall be voted by the Participating Insurance
Companies in proportion to the shares for which voting
instructions are received.
As used in this Prospectus and in the Statement of
Additional Information, the phrase "majority vote" of a
Portfolio (or of the Fund) means the vote of the lesser
of (i) 67% of the shares of the Portfolio (Fund) present
at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or
(ii) more than 50% of the outstanding shares of the
Portfolio (Fund).
- --------------------------------------------------------------------------------
DISTRIBUTOR AND
DIVIDEND DISBURSING
AND TRANSFER AGENT
The Adviser also serves as the principal underwriter and
distributor of the Fund's shares and as the Fund's
dividend disbursing and transfer agent.
- --------------------------------------------------------------------------------
ACCOUNTING SERVICES
The Fund has entered into an accounting services
agreement with FBL pursuant to which FBL performs
accounting services for the Fund. In addition, the
agreement provides that FBL shall calculate the Fund's
net asset values in accordance with the Fund's prospectus
and prepare for Fund approval and use various tax returns
and other reports. For such services, each Portfolio pays
FBL an annual fee, payable monthly, of 0.05% of the
Portfolio's average daily net assets, with the annual fee
payable by a Portfolio not to exceed $30,000.
- --------------------------------------------------------------------------------
REGISTRATION
STATEMENT
The Statement of Additional Information and this
Prospectus omit certain information contained in the
Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933, and
reference is hereby made to the Registration Statement
for further information with respect to the Fund and the
securities offered hereby. The Registration Statement is
available for inspection by the public at the Securities
and Exchange Commission in Washington, D.C.
- --------------------------------------------------------------------------------
LEGAL MATTERS
Sutherland, Asbill & Brennan of Washington, D.C. is
counsel for the Fund. There are no material legal
proceedings to which the Fund is a party.
- --------------------------------------------------------------------------------
INVESTMENT ADVISER,
FBL Investment Advisory Services, Inc.
DISTRIBUTOR, DIVIDEND
DISBURSING
5400 University Avenue
West Des Moines, Iowa 50266
AND TRANSFER AGENT
- --------------------------------------------------------------------------------
SPECIAL LEGAL COUNSEL
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
- --------------------------------------------------------------------------------
CUSTODIAN
Bankers Trust Company
Global Assets-Insurance Group
16 Wall Street
New York, New York 10005
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS
Ernst & Young LLP
Suite 3400
801 Grand Avenue
Des Moines, Iowa 50309
27
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A -- MONEY MARKET INSTRUMENTS
- --------------------------------------------------------------------------------
The Money Market Portfolio invests in money market
instruments maturing in thirteen months or less from the
time of investment, including the instruments described
below. In addition, the other Portfolios subject to their
respective investment objectives, may invest in certain
money market instruments.
U.S. GOVERNMENT SECURITIES: Bills, notes, bonds and
other debt securities issued by the U.S. Treasury.
These are direct obligations of the U.S. Government
and differ mainly in the length of their maturities.
U.S. GOVERNMENT AGENCY OR INSTRUMENTALITY
SECURITIES: Debt securities issued or guaranteed by
agencies or instrumentalities of the U.S. Government.
Although these securities are not direct obligations
of the U.S. Government, some are supported by the
full faith and credit of the U.S. Treasury; others
are supported only by the limited right of the issuer
to borrow from the U.S. Treasury; and others are
supported only by the credit of the instrumentality
and not the U.S. Treasury.
OBLIGATIONS OF BANKS OR SAVINGS
INSTITUTIONS: Certificates of deposit, bankers'
acceptances and other short-term debt obligations of
commercial banks or savings and loan associations.
None of the Portfolios will invest in any instruments
issued by a commercial bank unless it has total
assets of at least $100 million and has its deposits
insured by the Federal Deposit Insurance Corporation
("FDIC"). Similarly, the Portfolios will not invest
in any instrument issued by a savings and loan
association unless it has total assets of at least
$100 million, has been issued a charter by the Office
of Thrift Supervision ("OTS") or was formerly a
member of the Federal Home Loan Bank System and is
now subject to regulation by the OTS and is insured
by the FDIC. However, the Portfolios may invest in an
obligation of a bank or savings and loan association
with assets of less than $100 million if the
principal amount of such obligation is fully covered
by FDIC insurance. The limit of such coverage is
currently $100,000.
COMMERCIAL PAPER: Short-term unsecured promissory
notes issued by corporations, primarily to finance
short-term credit needs.
In addition, the Fund will invest in commercial paper
issued by major corporations in reliance on the
so-called "private placement" exemption from
registration by Section 4(2) of the Securities Act of
1933 ("Section 4(2) paper") subject to the below
noted requirements with respect to ratings. Section
4(2) paper is restricted as to disposition under the
federal securities laws, and generally is sold to
institutional investors such as the Fund, who agree
that it is purchasing the paper for investment and
not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other
institutional investors through or with the
assistance of the issuer or investment dealers who
make a market in the Section 4(2) paper, thus
providing liquidity. The Fund's investment adviser
considers the legally restricted but readily saleable
Section 4(2) paper to be liquid; however, the paper
will be treated as illiquid unless, pursuant to
procedures approved by the Board of Trustees, a
particular investment in Section 4(2) paper is
determined to be liquid. The investment adviser
monitors the liquidity of the Fund's investments in
Section 4(2) paper on a continuing basis.
OTHER CORPORATE DEBT SECURITIES: Outstanding
nonconvertible corporate debt securities (e.g.,
bonds and debentures) which were not issued as
short-term obligations but which have thirteen months
or less remaining until maturity.
REPURCHASE AGREEMENTS: See "Description of Certain
Investment Techniques-- Repurchase Agreements."
A-1
<PAGE>
As to obligations of banks or savings institutions,
commercial paper, other corporate debt securities and
repurchase agreements, the Portfolio will only invest
in U.S. dollar-denominated instruments which the
Board of Trustees determines present minimal credit
risks and which, at the time of acquisition,
generally are either:
1. rated in one of the two highest rating categories
by at least two nationally recognized statistical
rating organizations ("NRSRO"); or
2. rated in one of the two highest rating categories
by only one NRSRO if that NRSRO is the only NRSRO
that has rated the instrument or issuer; or
3. in the case of an unrated instrument, determined
by the Board of Trustees to be of comparable
quality to either of the above; or
4. issued by an issuer that has received a rating of
the type described in 1 or 2 above on other
securities that are comparable in priority and
security to the instrument.
FLOATING AND VARIABLE RATE SECURITIES: The Portfolio
may invest in instruments having rates of interest
that are adjusted periodically or that float
continuously or periodically according to formulas
intended to minimize fluctuation in the value of the
instruments ("Variable Rate Securities"). The
interest rate on a Variable Rate Security is
ordinarily determined by reference to, or is a
percentage of, a specified market rate such as a
bank's prime rate, the 90-day U.S. Treasury Bill
rate, or the rate of return on commercial paper or
bank certificates of deposit. Generally, the changes
in the interest rate on Variable Rate Securities
reduce the fluctuation in the market value of such
securities. Accordingly, as interest rates decrease
or increase, the potential for capital appreciation
or depreciation is less than for fixed-rate
obligations. Some Variable Rate Securities have a
demand feature ("Variable Rate Demand Securities")
entitling the purchaser to resell the securities at
an amount approximately equal to the principal amount
thereof plus accrued interest. As in the case for
other Variable Rate Securities, the interest rate on
Variable Rate Demand Securities varies according to
some specified market rate intended to minimize
fluctuation in the value of the instruments. Some of
these Variable Rate Demand Securities are unrated,
their transfer is restricted by the issuer and there
is little if any secondary market for the securities.
Thus, any inability of the issuers of such securities
to pay on demand could adversely affect the liquidity
of these securities. The Portfolio determines the
maturity of Variable Rate Securities in accordance
with Securities and Exchange Commission rules which
allow the Portfolio to consider certain of such
instruments as having maturities shorter than the
maturity date on the face of the instrument.
A-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B -- QUALITY COMPOSITION OF BOND PORTFOLIOS
- --------------------------------------------------------------------------------
The tables below reflect the average composition by
quality of the High Yield Bond Portfolio and the High
Grade Bond Portfolio for the one-year period ended
December 31, 1995. Percentages are weighted averages
based upon the portfolio composition at the end of each
month during the period. The percentage of total assets
represented by bonds rated by Moody's and Standard &
Poor's ("S&P") is shown. The percentage of total assets
represented by unrated bonds is also shown. Although not
specifically rated by Moody's or Standard & Poor's, U.S.
Government securities are reflected as Aaa and AAA
(highest quality) for purposes of the tables. The
category noted as "Cash and Other Assets" includes all
assets other than the rated and unrated bonds reflected
in the table including, without limitation, equity
securities, preferred stocks, money market instruments,
repurchase agreements, options and cash.
The allocations reflected in the tables do not
necessarily reflect the view of the investment adviser as
to the quality of the bonds in the Portfolio on the date
shown; and they are not necessarily representative of the
composition of the Portfolio at other times. The
composition of the Portfolio will change over time.
HIGH YIELD BOND PORTFOLIO
COMPOSITION OF PORTFOLIO BY QUALITY
<TABLE>
<CAPTION>
PERCENTAGE OF
PORTFOLIO BY PERCENTAGE OF
MOODY'S MOODY'S S&P PORTFOLIO BY
RATING CATEGORY RATINGS RATING CATEGORY S&P RATINGS
------------------------- -------------- ------------------------- --------------
<S> <C> <C> <C> <C>
A........................ 4.00% A........................ 3.70%
Baa...................... 6.35 BBB...................... 10.84
Ba....................... 37.92 BB....................... 31.64
B........................ 39.36 B........................ 43.11
Caa...................... 1.74 CCC......................
Ca....................... 0.85 D........................ 0.85
Not rated................ 0.71 Not Rated................ 0.79
Cash and Other Cash and Other
Assets.................. 9.07 Assets................... 9.07
------- -------
100.00% 100.00 %
------- -------
------- -------
</TABLE>
HIGH GRADE BOND PORTFOLIO
COMPOSITION OF PORTFOLIO BY QUALITY
<TABLE>
<CAPTION>
PERCENTAGE OF
PORTFOLIO BY PERCENTAGE OF
MOODY'S MOODY'S S&P PORTFOLIO BY
RATING CATEGORY RATINGS RATING CATEGORY S&P RATINGS
------------------------- -------------- ------------------------- --------------
<S> <C> <C> <C> <C>
Aaa...................... 20.21% AAA...................... 16.55%
Aa....................... 17.71 AA....................... 17.71
A........................ 35.45 A........................ 38.01
Baa...................... 13.47 BBB...................... 14.53
Ba....................... 3.93 BB....................... 0.31
Not rated................ 4.25 Not Rated................ 7.91
Cash and Other Cash and Other
Assets.................. 4.98 Assets................... 4.98
------- -------
100.00% 100.00 %
------- -------
------- -------
</TABLE>
B-1
<PAGE>
The description of each bond quality category set forth
in the tables is intended to be a general guide and not a
definitive statement as to how Moody's and Standard &
Poor's define such rating category. A more complete
description of the rating categories is set forth under
"Appendix C--Description of Corporate Bond Ratings." The
ratings of Moody's and Standard & Poor's represent their
opinions as to the capacity to pay interest and principal
of the securities that they undertake to rate. It should
be emphasized, however, that ratings are relative and
subjective and do not evaluate market value risk. After
purchase by a Portfolio, an obligation may cease to be
rated or its rating may be reduced. Neither event would
require a Portfolio to eliminate the obligation from its
portfolio. An issue may be unrated simply because the
issuer chose not to have it rated, and not necessarily
because it is of lower quality. Unrated issues may be
less marketable.
B-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C -- DESCRIPTION OF CORPORATE BOND RATINGS
- --------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC.
AAA: Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest
payments are protected by a large or exceptionally stable
margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be anticipated are most unlikely to impair the
fundamentally strong position of such issues.
AA: Bonds that are rated Aa are judged to be of high quality
by all standards. Together with the "Aaa" group they
comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins
of protection may not be as large as in "Aaa" securities
or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than with
"Aaa" securities.
A: Bonds that are rated A possess many favorable investment
attributes and may be considered as upper medium-grade
obligations. This rating indicates an extremely strong
capacity to pay principal and interest which is considered
adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
BAA: Bonds rated Baa are considered medium-grade obligations,
i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements
may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative
characteristics as well.
BA: Bonds rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be
very moderate and thereby not well-safeguarded during both
good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract
over any long period of time may be small.
CAA: Bonds rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with
respect to principal or interest.
CA: Bonds rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have
other market shortcomings.
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA are highest grade debt obligations. This
rating indicates an extremely strong capacity to pay
principal and interest.
AA: Bonds rated AA also qualify as high-quality obligations.
Capacity to pay principal and interest is very strong, and
in the majority of instances they differ from "AAA" issues
only in a small degree.
A: Bonds rated A have a strong capacity to pay principal and
interest, although they are more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
C-1
<PAGE>
<TABLE>
<C> <S>
BBB: Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they
normally exhibit protection parameters, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity to pay principal and interest
for bonds in this category, than for bonds in the "A"
category.
BB-B-CCC-CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance
with the terms of the obligations. BB indicates the lowest
degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some
quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures
to adverse conditions.
D: Bonds rated D are in default, and payment of interest
and/or principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "BB" may
be modified by the addition of a plus or minus sign to
show relative standing within the rating categories.
NR: Not rated by the indicated rating agency.
</TABLE>
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
P-1: The rating P-1 is the highest commercial paper rating
assigned by Moody's and indicates that, in Moody's
opinion, the issuer or supporting institution has a
superior ability for repayment of senior short-term debt
obligations. P-1 repayment ability will often be evidenced
by many of the following characteristics: (1) leading
market positions in well-established industries, (2) high
rates of return on funds employed, (3) conservative
capitalization structures with moderate reliance on debt
and ample asset protection, (4) broad margins in earnings
coverage of fixed financial charges and high internal cash
generation and (5) well-established access to a range of
financial markets and assured sources of alternate
liquidity.
P-2: The rating P-2 indicates that, in Moody's opinion, the
issuer or supporting institution has a strong ability for
repayment of senior short-term debt obligations. Strong
ability for repayment will normally be evidenced by many
of the characteristics listed under the description of
"P-1." Earnings trends and coverage ratios, while sound,
may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity
is maintained.
STANDARD & POOR'S CORPORATION
A-1: This designation indicates that the degree of safety
regarding timely payment of debt having an original
maturity of no more than 365 days is either overwhelming
or very strong.
A-2: This designation indicates that capacity for timely
payment of debt having an original maturity of no more
than 365 days is strong; however, the relative degree of
safety is not as high as for issues designated "A-1."
C-2
<PAGE>
FARM BUREAU MUTUAL FUNDS
5400 University Avenue
West Des Moines, Iowa 50266
(515) 225-5586
FBL VARIABLE INSURANCE SERIES FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
FBL Variable Insurance Series Fund (the "Fund") is an open-end
diversified management investment company which consists of six Portfolios:
Growth Common Stock Portfolio, High Grade Bond Portfolio, High Yield Bond
Portfolio, Managed Portfolio, Money Market Portfolio and Blue Chip Portfolio.
Each Portfolio has distinct investment objectives and policies and each is in
effect a separate fund issuing its own shares.
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of the Fund dated May 1,
1996. A copy of the Prospectus may be obtained without charge by calling the
Participating Insurance Companies or by writing or calling the Fund at the
address and telephone number shown above.
<PAGE>
TABLE OF CONTENTS
PAGE
----
INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES . . . . . . . . . . . . . . . 3
Loans of Portfolio Securities. . . . . . . . . . . . . . . . . . . . . . . 3
Covered Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Ginnie Mae Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fundamental Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Non-Fundamental (Operating) Policies . . . . . . . . . . . . . . . . . . . 9
OFFICERS AND TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
UNDERWRITING AND DISTRIBUTION EXPENSES . . . . . . . . . . . . . . . . . . . 18
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS . . . . . . . . . . . . . . 20
PURCHASES AND REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Other Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 25
Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 25
High Grade Bond and High Yield Bond Portfolios . . . . . . . . . . . . . . 26
Other Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SHAREHOLDER VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . 31
CONTROL PERSONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Accounting Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Dividend Disbursing and Transfer Agent . . . . . . . . . . . . . . . . . . 33
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 33
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
- 2 -
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES
The investment objectives and policies of each of the six Portfolios
are set forth in the Prospectus under the heading "Investment Objectives and
Policies of the Portfolios." A description of certain investment strategies and
techniques applicable to some or all of the Portfolios is set forth in the
Prospectus under the heading "Description of Certain Investment Techniques." A
description of the money market instruments in which the Money Market Portfolio
may invest is contained in Appendix A to the Prospectus. A description of the
corporate bond and commercial paper ratings of Moody's Investors Services, Inc.
("Moody's") and Standard Poor's Corporation ("Standard & Poor's") is contained
in Appendix C to the Prospectus.
The following is intended to augment the explanation in the Prospectus
of certain strategies and techniques which are applicable to one or more of the
Portfolios.
LOANS OF PORTFOLIO SECURITIES
Each Portfolio may from time to time lend securities (but not in
excess of 20% of its assets) from its portfolio to brokers, dealers and
financial institutions, provided that: (i) the loan is secured continuously by
collateral consisting of U.S. Government securities, government agency
securities, or cash or cash equivalents adjusted daily to have a market value at
least equal to the current market value of the securities loaned plus accrued
interest; (ii) the Portfolio may at any time call the loan and regain the
securities loaned; and (iii) the Adviser (under the review of the Board of
Trustees) has reviewed the creditworthiness of the borrower and found such
creditworthiness satisfactory. The collateral will be invested in short-term
securities, the income from which will increase the return to the Portfolio.
The Portfolio will retain all rights of beneficial ownership in the
loaned securities, including voting rights and rights to interest or other
distributions, and will have the right to regain record ownership of loaned
securities to exercise such beneficial rights. The Portfolio may pay reasonable
finders', administrative and custodial fees to persons unaffiliated with the
Fund in connection with the arranging of such loans. Unless certain
requirements contained in the Internal Revenue Code are satisfied, the
dividends, interest and other distributions received by the Portfolio on loaned
securities may not be treated, for tax purposes, as qualified income for the
purposes of the 90% test discussed under "Taxes." Each Portfolio intends to
loan portfolio securities only to the extent that such activity does not
jeopardize such Portfolio's qualification as a
- 3 -
<PAGE>
regulated investment company under Subchapter M of the Internal Revenue Code.
COVERED CALL OPTIONS
Each Portfolio (other than the Money Market Portfolio) may write
(sell) covered call options on its portfolio securities in an attempt to enhance
investment performance. A call option is a short-term contract, ordinarily
having a duration of nine months or less which gives the purchaser of the
option, in return for a premium paid, the right to buy, and the writer of the
option the obligation to sell, the underlying security at the exercise price at
any time prior to the expiration of the option period. An option is covered
when the writer owns the optioned security.
A Portfolio may write covered call options on debt securities that are
traded over-the-counter. When a Portfolio writes an over-the-counter option,
there is no assurance that the Portfolio will be able to enter into a closing
purchase transaction. It may not always be possible for the Portfolio to
negotiate a closing purchase transaction with the same dealer for the same
exercise price and expiration date as the option which the Portfolio previously
had written. Although the Portfolio may choose to purchase an option from a
different dealer, the Portfolio would then be subject to the additional credit
risk of such dealer. If the Portfolio is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or until it delivers the underlying security upon exercise.
A Portfolio will write covered call options both to reduce the risks
associated with certain of its investments and to increase total investment
return. In return for the premium income, the Portfolio will forgo the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price so long as its obligations under the contract
continue, except insofar as the premium represents a profit. Moreover, in
writing the option, the Portfolio will retain the risk of loss should the price
of the security decline, which loss the premium is intended to offset in whole
or in part. A Portfolio, in writing call options, must assume that the call may
be exercised at any time prior to the expiration of its obligations as a writer
and, that in such circumstances, the net proceeds realized from the sale of the
underlying securities pursuant to the call may be substantially below the
prevailing market price. Covered call options and the securities underlying the
option will be listed on national securities exchanges, except that certain
transactions in debt securities and related options need not be so listed.
- 4 -
<PAGE>
GINNIE MAE CERTIFICATES
The Managed Portfolio, High Grade Bond Portfolio and High Yield Bond
Portfolio may each invest in debt securities ("Ginnie Maes") of the Government
National Mortgage Association ("GNMA"), a government corporation within the U.S.
Department of Housing and Urban Development. Ginnie Mae certificates are
securities representing part ownership in a pool of mortgage loans. These
loans, which are issued by lenders such as mortgage bankers, commercial banks
and savings and loan associations, are either insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by the Veterans
Administration. A pool of these mortgages is assembled and, after being
approved by GNMA, is offered to investors through securities dealers.
The Ginnie Maes in which these Portfolios may invest are of the
"modified pass-through" type, which means that GNMA guarantees the timely
payment of principal and interest installments (whether or not the amounts are
collected by the issuer of the Ginnie Maes). The National Housing Act provides
that the full faith and credit of the United States is pledged to the timely
payment of principal and interest by GNMA of amounts due on these Ginnie Maes,
and an assistant attorney general of the United States has rendered an opinion
that this guarantee by GNMA is a general obligation of the United States backed
by its full faith and credit. Under the other general type of Ginnie Maes,
referred to as "straight pass-through" Ginnie Maes, the payment of principal and
interest on a timely basis is not guaranteed.
The average life of Ginnie Maes varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as the result of prepayments or
refinancing of such mortgages or foreclosure. Such prepayments are passed
through to the registered holder with the regular monthly payments of principal
and interest and have the effect of reducing future payments. Due to the
guarantee of Ginnie Maes by GNMA, foreclosures impose no risk to the principal
invested.
The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be
shortened by unscheduled or early payments of principal and interest on the
underlying mortgages. The occurrence of mortgage prepayments is affected by
factors including the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
As prepayment rates vary widely, it is not possible
- 5 -
<PAGE>
to accurately predict the average life of a particular pool. However,
statistics indicate that the average life of the type of mortgages backing the
majority of Ginnie Maes is approximately 12 years. For this reason, it is
standard practice to treat Ginnie Maes as 30-year mortgage-backed securities
that prepay fully in the twelfth year. Pools of mortgages with other maturities
or different characteristics will have varying assumptions for average life.
The assumed average life of pools of mortgages having terms of less than 30
years is less than 12 years, but typically not less than 5 years.
The coupon rate of interest on Ginnie Maes is lower than the interest
rate paid on the VA-guaranteed or FHA-insured mortgages underlying the
certificates, but only by the amount of the fees paid to GNMA and the issuer.
Such fees in the aggregate usually amount to approximately 1/2 of 1%.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average-life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. Prepayments generally occur when interest rates have
fallen. Reinvestment of prepayments at such times will be at lower rates, which
would lower the return to the Portfolios. The actual yield of each Ginnie Mae
is influenced by the prepayment experience of the mortgage pool underlying the
certificates and may differ from the yield based on the assumed average life.
Interest on Ginnie Maes is paid monthly rather than semi-annually as for
traditional bonds.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES
In seeking to achieve its investment objective(s), each Portfolio has
adopted the following investment restrictions. These are fundamental policies
and may not be changed without a majority vote of the outstanding shares of each
Portfolio affected. As used in this Statement of Additional Information and in
the Prospectus, the phrase "majority vote" of a Portfolio (or the Fund) means
the vote of the lesser of (i) 67% of the shares of the Portfolio (Fund) present
at a meeting if the holders of more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the Portfolio (Fund). A change in policy affecting only one Port-
- 6 -
<PAGE>
folio may be effected by a majority vote of the outstanding shares of such
Portfolio.
Except as noted below, each Portfolio may not:
1. Purchase securities of any issuer (other than U.S. Government
securities or government agency securities) if, immediately after such purchase,
more than 5% of the value of the Portfolio's total net assets (taken at current
value at the time of purchase) would be invested in securities of that issuer
(except that the Blue Chip Portfolio is subject to this restriction only as to
75% of its total assets).
2. Purchase more than 10% of any class of securities of any issuer
(other than U.S. Government securities or government agency securities). For
the purpose of this restriction, all outstanding debt securities of an issuer
shall be deemed a single class of security and all preferred stocks of an issuer
shall be deemed a single class of security.
3. Purchase any security, if, immediately after such purchase, more
than 25% of the Portfolio's total net assets would be invested in issuers in the
same industry. This restriction does not apply to U.S. Government securities,
government agency securities, obligations of banks or savings institutions, or
to instruments secured by these instruments, such as repurchase agreements for
U.S. Government securities (these instruments are described in Appendix A to the
Prospectus).
4. Purchase securities of other investment companies, except (i) by
purchase in the open market involving only customary brokers' commissions and
only if immediately thereafter not more than 5% of such Portfolio's total net
assets would be invested in such securities, or (ii) as part of a merger,
consolidation or acquisition of assets.
5. Purchase or sell (although it may purchase securities of issuers
which invest or deal in) interests in oil, gas or other mineral exploration or
development programs, real estate, commodities or commodity contracts.
6. Purchase any securities on margin (except that the Portfolio may
obtain such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities) or make short sales unless, by virtue of its
ownership of other securities, it has the right to obtain securities equivalent
in kind and amount to the securities sold and, if the right is conditional, the
sale is made upon the same condition.
- 7 -
<PAGE>
7. Purchase or retain the securities of any issuer if any of the
officers or trustees of the Fund or any officers or directors of the Fund's
investment adviser own individually more than .50% of the securities of such
issuer and together own more than 5% of the securities of such issuer.
8. Issue senior securities, except as appropriate to evidence
indebtedness which a Portfolio is permitted to incur pursuant to (9) below.
9. Borrow money, except from banks for temporary or emergency
purposes, and in no event in excess of 5% of its total net assets, or pledge or
mortgage more than 15% of its gross assets.
10. Underwrite securities issued by others, except to the extent that
it may be deemed to be a statutory underwriter in the sale of restricted
securities that it holds in its portfolios which require registration under the
Securities Act of 1933 before resale.
11. Participate on a joint (or a joint and several) basis in any
trading account in securities (but this does not include the "bunching" of
orders for the sale or purchase of portfolio securities with the other
Portfolios or with other investment company and client accounts managed by the
Fund's investment adviser or its affiliates to reduce brokerage commissions or
otherwise to achieve best overall execution).
12. Alone, or together with any other Portfolios, make investments
for the purpose of exercising control over, or management of, any issuer.
13. Lend money or securities, except as provided in (14) below (the
making of demand deposits with banks, and the purchase of securities such as
bonds, debentures, commercial paper and short-term obligations in accordance
with the Portfolio's investment objectives and policies, shall not be considered
the making of a loan).
14. Lend its portfolio securities in excess of 20% of its net assets
or in a manner inconsistent with the guidelines set forth under "Description of
Certain Investment Techniques" in the Prospectus and "Investment Objectives,
Policies and Techniques" in this Statement of Additional Information.
15. Invest in foreign securities except for foreign equity securities
traded on U.S. exchanges and payable in U.S. dollars (and in no event in excess
of 25% of the Portfolio's net assets).
- 8 -
<PAGE>
16. Write, purchase or sell puts, calls or combinations thereof,
other than writing covered call options.
NON-FUNDAMENTAL (OPERATING) POLICIES
The following are non-fundamental (operating) policies approved by the
Board of Trustees. Such policies may be changed by the Board of Trustees
without approval of the Shareholders. These non-fundamental policies are
applicable to each of the Portfolios.
1. Each Portfolio will not invest more than 10% of its total assets
in "illiquid" securities (which includes restricted securities, securities used
to cover call options written by the Fund and repurchase agreements with more
than seven days to maturity).
2. Each Portfolio intends to meet either the diversification
standards set by Section 817(h)(2) of the Internal Revenue Code or the
diversification requirements prescribed by regulations promulgated under Section
817(h).
3. Each Portfolio intends to comply in all material respects with
insurance laws and regulations applicable to investments of separate accounts of
Participating Insurance Companies.
If a percentage limitation is adhered to at the time of
investment, a later increase or decrease in percentage beyond the specified
limit resulting from a change in values or net assets will not be considered a
violation.
- 9 -
<PAGE>
OFFICERS AND TRUSTEES
The officers and trustees (1) of the Fund (2) and their principal
occupations (3) for the past five years are set forth below.
EDWARD M. WIEDERSTEIN*, PRESIDENT AND TRUSTEE (48)
5400 University Avenue
West Des Moines, Iowa 50266
Farmer; President and Director, FBL Financial Group, Inc., Iowa Farm Bureau
Federation, Farm Bureau Life Insurance Company, FBL Insurance Brokerage,
Inc., Farm Bureau Mutual Insurance Company and other affiliates of the
foregoing; Director, Multi-Pig Corporation, Western Farm Bureau Management
Corporation, Western Agricultural Insurance Company, Western Farm Bureau
Life Insurance Company and American Ag Insurance Company.
EUGENE R. MAAHS*, SENIOR VICE PRESIDENT, SECRETARY-TREASURER AND
TRUSTEE (64)
5400 University Avenue
West Des Moines, Iowa 50266
Senior Vice President and Secretary-Treasurer, FBL Financial Group, Inc.,
Farm Bureau Life Insurance Company and other affiliates of the foregoing.
He holds other positions with various affiliates of the foregoing. Former
Executive Vice President and Director, Communications Providers Inc.;
Co-Owner, Country Gardens.
- ---------------------
(1) The four Trustees listed with an asterisk are "interested persons" as
defined in the Investment Company Act of 1940.
(2) The officers and trustees of the Fund also serve in similar capacities as
officers and directors of FBL Money Market Fund, Inc. and FBL Series Fund, Inc.
(3) The principal occupation shown reflects the principal employment of each
individual during the past five years. Corporate positions may, in some
instances, have changed during this period.
- 10 -
<PAGE>
STEPHEN M. MORAIN*, SENIOR VICE PRESIDENT, GENERAL COUNSEL,
ASSISTANT SECRETARY AND TRUSTEE (50)
5400 University Avenue
West Des Moines, Iowa 50266
General Counsel and Assistant Secretary, Iowa Farm Bureau Federation;
General Counsel, Secretary and Director, Farm Bureau Management
Corporation; Senior Vice President and General Counsel, Farm Bureau Life
Insurance Company, FBL Financial Group, Inc., FBL Insurance Brokerage, Inc.
and other affiliates of the foregoing; Senior Vice President, General
Counsel and Director, FBL Investment Advisory Services, Inc. and FBL
Marketing Services, Inc.; Director, Computer Aided Design Software, Inc.
and Iowa Business Development Finance Corporation; Chairman, Edge
Technologies, Inc.
THOMAS R. GIBSON, EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER (51)
5400 University Avenue
West Des Moines, Iowa 50266
Executive Vice President and General Manager, Farm Bureau Life Insurance
Company, FBL Financial Group, Inc., Western Farm Bureau Life Insurance
Company, FBL Insurance Brokerage, Inc. and other affiliates of the
foregoing; Executive Vice President, General Manager and Director, FBL
Investment Advisory Services, Inc. and FBL Marketing Services, Inc.
TIMOTHY J. HOFFMAN, VICE PRESIDENT, CHIEF MARKETING OFFICER (45)
5400 University Avenue
West Des Monies, Iowa 50266
Vice President, Chief Marketing Officer, Farm Bureau Life Insurance
Company, FBL Financial Group, Inc., Western Farm Bureau Life Insurance
Company, and other affiliates of the foregoing; President and Director, FBL
Marketing Services, Inc. and FBL Educational Services, Inc.; Vice
President, Chief Marketing Officer and Director, FBL Investment Advisory
Services, Inc.
- 11 -
<PAGE>
WILLIAM J. ODDY, VICE PRESIDENT, CHIEF OPERATING OFFICER AND ASSISTANT GENERAL
MANAGER (52)
5400 University Avenue
West Des Moines, Iowa 50266
Vice President, Chief Operating Officer and Assistant General Manager, FBL
Financial Group, Inc., Farm Bureau Life Insurance Company, Western Farm
Bureau Life Insurance Company and other affiliates of the foregoing;
President, Treasurer and Director, Communications Providers, Inc.; Vice
President, Chief Operating Officer, Assistant General Manager
and Director, FBL Marketing Services, Inc. and FBL Investment Advisory
Services, Inc.; President and Director, FBL Real Estate Ventures, Ltd. and
RIK, Inc.
RICHARD D. WARMING, VICE PRESIDENT, CHIEF INVESTMENT OFFICER (62)
5400 University Avenue
West Des Moines, Iowa 50266
Vice President, Chief Investment Officer and Assistant Treasurer, Farm
Bureau Life Insurance Company, FBL Financial Group, Inc., Western Farm
Bureau Life Insurance Company and other affiliates of the foregoing. He
holds other positions with various affiliates of the foregoing.
JAMES W. NOYCE, VICE PRESIDENT, CHIEF FINANCIAL OFFICER (40)
5400 University Avenue
West Des Moines, Iowa 50266
Vice President, Chief Financial Officer, Farm Bureau Life Insurance
Company, FBL Financial Group, Inc., Western Farm Bureau Life Insurance
Company. He holds other positions with various affiliates of the
foregoing.
DENNIS M. MARKER, INVESTMENT VICE PRESIDENT, ADMINISTRATION AND
ASSISTANT SECRETARY (44)
5400 University Avenue
West Des Moines, Iowa 50266
Investment Vice President, Administration, Farm Bureau Life Insurance
Company, Western Farm Bureau Life Insurance Company and other affiliates of
the foregoing; holds other positions with various affiliates of the
foregoing.
SUE A. CORNICK, MARKET CONDUCT AND MUTUAL FUNDS MANAGER AND ASSISTANT SECRETARY
(35)
5400 University Avenue
West Des Moines, Iowa 50266
Market Conduct and Mutual Funds Vice President and Assistant Secretary,
FBL Investment Advisory Services, Inc. and FBL Marketing Services, Inc.
- 12 -
<PAGE>
KRISTI ROJOHN, ASSISTANT SECRETARY (33)
5400 University Avenue
West Des Moines, Iowa 50266
Senior Compliance Assistant and Assistant Secretary, FBL Investment
Advisory Services, Inc. and FBL Marketing Services, Inc.
ELAINE A. FOLLOWWILL, ASSISTANT SECRETARY (25)
5400 University Avenue
West Des Moines, Iowa 50266
Compliance Assistant and Assistant Secretary, FBL Investment Advisory
Services, Inc. and FBL Marketing Services, Inc.
DONALD G. BARTLING, TRUSTEE (68)
Box 104
Herman, Nebraska 68029
Farmer; Partner, Bartling Brothers Partnership (farming business) and BBK
(farming partnership); Director, Papio Missouri River Natural Resources
District.
JOHN R. GRAHAM*, TRUSTEE (50)
1512 Country Club Place
Manhattan, Kansas 66502
Executive Vice President, Kansas Farm Bureau, Kansas Farm Bureau Services,
Kansas Agricultural Marketing Association, FB Services Insurance Agency,
Kansas Farm Bureau Life Insurance Company, The Farm Bureau Mutual Insurance
Company, Inc., Kansas Farm Bureau Reinsurance Company and KFB Insurance
Company, Inc.; Chairman, Chief Executive Officer and Director, FB Capital
Management, Inc. of Kansas; Director, National Association of Independent
Insurers, Didde Corporation, Farm Bureau Mutual Insurance Agency of Kansas
and Kansas State Travel Agency, Inc., Partner, Arthur-Graham Rental
Properties, CM Brass and G&H Real Estate Investments; Trustee, Master
Teacher Employee Benefit Pension Trust.
- 13 -
<PAGE>
ERWIN H. JOHNSON, TRUSTEE (53)
1841 March Avenue
Charles City, Iowa 50616
Farmer; Owner and Manager, Center View Farms, Co.; Director, First Security
Bank and Trust Co., Charles City, Iowa; Farm Associate, Iowa State
University Cooperative Extension Service; Voting Delegate, Former President
and Director, Floyd County Farm Bureau.
ANN JORGENSEN, TRUSTEE (55)
R.R. 1, Box 43
Garrison, Iowa 52229
Private Investor; Farm and Business Management; Partner, Jorg-Anna Farms;
President and Founder, Farm Home Offices; Vice President, Timberlane Hogs
Ltd.; Director, Iowa Department of Economic Development; Chairperson, Rural
Development Council; Member, Iowa Agriculture Products Advisory Council;
Secretary, Iowa Public Television Foundation; Iowa Freedom International
Foundation, Friends of the U.I.H.C.; Former Director and Chairperson,
Iowa's Alcoholic Beverage Control Commission; Former Regent, State of Iowa
Board of Regents; Former Director, Iowa Public Television and University of
Iowa Hospitals and Clinics.
DALE W. NELSON, TRUSTEE (76)
4216 Patricia Drive
Des Moines, Iowa 50322
Retired, Former Executive Director and Secretary-Treasurer, Iowa Farm
Bureau Federation and affiliated companies; Former Senior Vice President,
Secretary-Treasurer and Director, FBL Money Market Fund, Inc. and FBL
Series Fund, Inc.
CURTIS C. PIETZ, TRUSTEE (64)
R. R. 3 Box 79
Lakefield, Minnesota 65150
Farmer; Director and Part Owner, Storden Seed and Chemical Service, Inc.;
Director, Minnesota Rural Finance Authority; Former President, Jackson
County Farm Bureau; Former Chairman and Director, Southwest Farm Management
Association; Director, F.C.S.; Former Program Evaluator, Minnesota
Department of Vocational Education.
- 14 -
<PAGE>
The officers and trustees of the Fund also serve in similar capacities as
officers and directors of FBL Money Market Fund, Inc. and FBL Series Fund, Inc.
Several of the officers and trustees are also officers and directors of the
Adviser. The Fund pays no direct remuneration to any officer of the Fund. Each
of the trustees who is not affiliated with the Adviser will be compensated by
the Fund. Each of these unaffiliated trustees will receive a fee of $115 plus
expenses for each trustees' meeting attended. For the fiscal year ended
December 31, 1995, trustees fees paid by the Fund totaled $2,760.
TABLE OF TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
Pension and
Retirement Benefits Total Compensation
Aggregate Compensation Accrued as Part of from all funds in
Name of Trustee From the Fund Fund Expenses the FBL Family
- --------------- ---------------------- ------------------- ------------------
<S> <C> <C> <C>
Mr. Bartling $ 460.00 $0 $1,380.00
Mr. Graham 460.00 0 1,380.00
Mr. Johnson 460.00 0 1,380.00
Ms. Jorgensen 460.00 0 1,380.00
Mr. Nelson 460.00 0 1,380.00
Mr. Pietz 460.00 0 1,380.00
Mr. Wiederstein 0 0 0
Mr. Morain 0 0 0
Mr. Maahs 0 0 0
</TABLE>
Directors and officers of the Fund do not receive any benefits from the Fund
upon retirement nor does the Fund accrue any expenses for pension or retirement
benefits.
INVESTMENT ADVISER
The following information supplements the information set forth in the
Prospectus under the heading "Management of the Fund -- Investment Adviser."
Pursuant to an Investment Advisory and Management Services Agreement dated April
6, 1987 ("Agreement"), FBL Investment Advisory Services, Inc. ("Adviser") acts
as the Fund's investment adviser and manager, subject to the review of the Board
of Trustees. The Adviser is a wholly-owned subsidiary of FBL Financial
Services, Inc., which is a wholly-owned subsidiary of Farm Bureau Life Insurance
Company, an Iowa insurance company, 100% of whose outstanding shares are in turn
owned by FBL Financial Group, Inc. (formerly Farm Bureau Multi-State Services,
Inc.), an Iowa corporation, 64% of whose outstanding voting stock is owned by
Iowa Farm Bureau Federation, an Iowa not-for-profit corporation. The Adviser
also acts as the investment adviser to individuals, institutions and two other
mutual funds: FBL Money Market Fund, Inc. and FBL Series Fund, Inc. Personnel
of the Adviser also manage investments for the portfolios of insurance
companies.
- 15 -
<PAGE>
The Adviser subscribes to leading bond information services and
receives published reports and statistical compilations from the issuers
themselves, as well as analyses from brokers and dealers who may execute
portfolio transactions for the Fund or the Adviser's other clients. The Adviser
regards this information and material, however, as an adjunct to its own
research activities.
Under the Agreement, the Adviser regularly provides the Fund with
investment research, advice and supervision, and furnishes an investment program
consistent with the investment objectives and policies of each Portfolio,
determining, for each Portfolio, what securities shall be purchased and sold and
what portion of the Portfolio's assets shall be held uninvested, subject always
to: (i) the provisions of the Declaration of Trust, the Fund's by-laws, the
Investment Company Act of 1940 and applicable requirements of the Internal
Revenue Code; (ii) the Portfolio's investment objectives, policies and
restrictions; and (iii) such policies and instructions as the Board of Trustees
may from time to time establish. The Adviser also advises and assists the
officers of the Fund in taking such steps as are necessary or appropriate to
carry out the decisions of the Board of Trustees (and any committees thereof)
regarding the conduct of the business of the Fund. The Adviser has agreed to
arrange for any of its officers or directors to serve without salary as
trustees, officers or agents of the Fund if duly elected to such positions.
The Adviser, at its expense, furnishes the Fund with office space and
facilities, simple business equipment, advisory, research and statistical
facilities and clerical services and personnel to administer the business
affairs of the Fund. As compensation for the Adviser's investment advisory,
management and clerical services, as well as the facilities it provides and the
expenses it assumes, the Agreement provides for the payment of a monthly fee as
described in the Prospectus.
The Adviser is not required to pay expenses of the Fund other than
those set forth above. Each Portfolio will pay all other expenses incurred in
its operation, including a portion of the Fund's general administrative
expenses, allocated on the basis of the Portfolio's net assets. Expenses that
will be borne directly by the Portfolios include, but are not limited to, the
following: net asset value calculations; portfolio transaction costs; interest
on Fund obligations; stock certificates; miscellaneous reports; membership dues;
all expenses of shareholders' and trustees' meetings and of preparing, printing
and mailing proxy statements, reports and notices to shareholders; all expenses
of registering the Fund's shares under federal and state securities laws; the
typesetting costs of printing Fund prospec-
- 16 -
<PAGE>
tuses and supplements thereto; investor services (including allocable telephone
and personnel expenses); all taxes and fees payable to federal, state or other
governmental authorities; the fees and expenses of independent public auditors,
legal counsel, custodian, transfer and dividend disbursing agent and any
registrar; fees of trustees who are not affiliated with the Adviser; insurance
premiums for fidelity bond and other coverage of the Fund's operations; and such
non-recurring expenses as may arise including actions, suits or proceedings
affecting the Fund and the legal obligation the Fund may have to indemnify its
officers and trustees with respect thereto. See "Underwriting and Distribution
Expenses" and "Other Information -- Accounting Services" for a description of
certain other Fund expenses.
The Agreement was approved on March 13, 1987, by the Board of
Trustees, and on August 21, 1990, by Farm Bureau Life Insurance Company,
pursuant to voting instructions of policyowners, as sole Shareholder of the
Growth Common Stock Portfolio, High Grade Bond Portfolio, High Yield Bond
Portfolio, Managed Portfolio and the Money Market Portfolio. An amendment to the
Agreement to extend the Agreement to the Blue Chip Portfolio was approved by the
Board of Trustees on August 21, 1990, reapproved on August 15, 1991 and approved
by Shareholders of that Portfolio on November 13, 1991 pursuant to instructions
from variable life insurance policyowners indirectly invested in the Portfolio.
Unless earlier terminated as described below, the Agreement will continue in
effect until October 15, 1996. Thereafter, the Agreement will continue in
effect, with respect to a Portfolio, from year to year so long as its
continuation is approved at least annually by (a) the vote of a majority of
those Trustees who are not parties to the Agreement or "interested persons" of
either party to the Agreement cast in person at a meeting called for the purpose
of voting on such approval, and (b) either (i) the vote of a majority of the
Trustees or (ii) the vote of a majority of the outstanding shares of such
Portfolio.
The Agreement will be deemed to have been approved or disapproved by
the Shareholders of any Portfolio, if a majority of the outstanding shares of
such Portfolio vote for or against approval of the Agreement, notwithstanding
(a) that the Agreement has not been approved or disapproved by a majority of the
outstanding shares of any other Portfolio, and (b) that the Agreement has not
been approved or disapproved by a vote of a majority of the outstanding shares
of the Fund. The Agreement may be terminated without penalty at any time upon
60 days' notice by either party, and will terminate automatically upon
assignment.
The Agreement provides that the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the
- 17 -
<PAGE>
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Adviser in the performance of its duties,
or from reckless disregard by the Adviser of its obligations and duties under
the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of such transactions will not be
influenced by existing or potential custodial or other Fund relationships.
For the fiscal years ended December 31, 1995, 1994 and 1993, the
advisory and management fee expense was $65,647, $39,952 and 20,057
respectively, for the Growth Common Stock Portfolio; $8,481, $7,489 and $9,580
respectively, for the High Grade Bond Portfolio; $23,073, $21,507 and $21,702
respectively, for the High Yield Bond Portfolio; $65,457, $43,500 and $23,012
respectively for the Managed Portfolio; $8,050, $8,173, and $7,359 respectively,
for the Money Market Portfolio; and $9,533, $4,895 and $3,229 respectively, for
the Blue Chip Portfolio.
The Adviser has also agreed to reimburse any Portfolio of the Fund to
the extent that the annual operating expenses (including the investment advisory
fee but excluding brokerage, interest, taxes and extraordinary expenses) of that
Portfolio exceed 1.50% of the average daily net assets of that Portfolio for any
fiscal year of the Portfolio. However, the amount reimbursed shall not exceed
the amount of the advisory fee paid by the Portfolio for such period. This
reimbursement agreement will remain in effect for as long as the Investment
Advisory Agreement remains in effect and cannot be changed without a shareholder
vote. In addition, the Adviser has agreed for the 1996 fiscal year to reimburse
any Portfolio to the extent that annual operating expenses, including the
investment advisory fee, exceed .55%. There can be no assurance that the
Adviser will continue to limit expenses beyond December 31, 1996. The agreement
to reimburse any Portfolio to the extent any operating expenses exceed .55% also
applied to fiscal years ended 1995 and 1994.
UNDERWRITING AND DISTRIBUTION EXPENSES
Pursuant to an Underwriting Agreement ("Underwriting Agreement"), the
Adviser also serves, without compensation from the Fund, as the principal
underwriter and sole distributor of the Fund's shares. Under the terms of the
Underwriting Agreement, the Adviser is not obligated to sell any specific number
of shares. The Agreement was approved on August 12, 1987, by the Board of
Trustees, including a vote of a majority of the trustees who are not "interested
persons" of either party to the Underwriting Agreement. Unless terminated
earlier as described below,
- 18 -
<PAGE>
the Underwriting Agreement will continue in effect from year to year so long as
its continuance is approved annually by (a) the vote of a majority of the
trustees who are not parties to the Underwriting Agreement or "interested
persons" of either party to the Underwriting Agreement cast in person at a
meeting called for the purpose of voting on such approval, and (b) either (i)
the vote of a majority of the Trustees or (ii) the vote of a majority of the
outstanding shares of the Fund. The Underwriting Agreement may be terminated
without penalty at any time upon six months' notice by either party, and will
terminate automatically upon assignment. The Adviser has authority, pursuant to
the Underwriting Agreement, to enter into similar contracts with other
investment companies.
Pursuant to the Underwriting Agreement, the Fund is responsible for
the payment of all fees and expenses of registering its shares under federal and
state securities laws. The Fund will also pay the fees and expenses incurred in
connection with: (i) the preparation, printing and mailing of annual
prospectuses to existing Shareholders; (ii) the preparation, printing and
mailing of any notice, proxy statement, report, supplemental prospectus or other
communications to Shareholders; and (iii) the printing and mailing of
confirmations of purchases of shares. The Fund will also pay for certain other
items, including, but not limited to, the following: any issue or initial
transfer taxes; the wiring of funds for share purchases and redemptions (unless
paid by the Shareholder who initiates the transaction); and the printing and
postage of business reply envelopes. The above-described expenses will be
allocated among the Portfolios on the basis of their respective net assets.
The Adviser is obligated to pay for the printing (but not the
typesetting) and distribution of prospectuses and statements of additional
information to prospective VA contract and VLI policyholders, and the
preparation, printing and distribution of any reports or other literature or
advertising in connection with the offering of the shares. The Adviser will pay
all fees and expenses in connection with its qualification and registration as a
broker or dealer under federal and state laws. The Adviser will also pay for
any activity which is primarily intended to result in the sale of shares of the
Fund.
The Adviser intends to enter into agreements with Participating
Insurance Companies pursuant to which the Participating Insurance Companies will
assume the Adviser's obligation to pay for the printing and distribution of
prospectuses of the Fund in connection with the sale by the Participating
Insurance Companies of VA contracts and VLI policies.
- 19 -
<PAGE>
The Adviser continuously offers shares of each Portfolio of the Fund to the
separate accounts of Participating Insurance Companies. Such shares will be
sold at their respective net asset values and therefore will involve no sales
charge.
The Adviser also acts as principal underwriter and sole distributor of
the shares of FBL Money Market Fund, Inc. and FBL Series Fund, Inc.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
With respect to transactions in portfolio securities, whether through
a broker as agent or with a dealer as principal, the Adviser endeavors to obtain
for the Fund the most favorable prices and efficient execution of orders.
Subject to this primary consideration, the Adviser may place a Portfolio's
transactions with firms that furnish research, statistical and other services.
In particular, the Adviser may direct brokerage transactions to a specific
broker in return for certain data and research-oriented software. Certain
affiliates of the Adviser also place portfolio transactions with these brokerage
firms, and such affiliates share the benefits of the research and other services
obtained from these brokers.
Brokerage research services, as provided in Section 28(e) of the
Securities Exchange Act of 1934, include: advice as to the value of securities;
the advisability of investing in, purchasing or selling securities; the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issues, industries, securities, economic factors
and trends; portfolio strategy and performance of accounts; and the execution of
securities transactions and performance of functions incidental thereto (such as
clearance and settlement).
If, in the judgment of the Adviser, the Fund or any Portfolio will be
benefitted by such supplemental research services, the Adviser is authorized to
pay greater spreads or commissions than another broker or dealer may charge for
the same transaction. Accordingly, while the Adviser generally seeks reasonably
competitive spreads or commissions, the Portfolios will not necessarily be
paying the lowest spread or commission available in every case. Information
received from brokerage research will be in addition to and not in lieu of the
services required to be performed by the Adviser under the Agreement. The
expenses of the Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information. Neither the Adviser nor any of its
affiliates will receive any brokerage business arising out of portfolio
transactions for the Fund.
- 20 -
<PAGE>
The Fund paid brokerage commissions during the fiscal years ended December 31,
1995, 1994, and 1993 of $45,472, $41,247 and $10,200, respectively.
The Portfolios may deal in some instances in securities which are not
listed on a national securities exchange but rather are traded in the
over-the-counter market. The Portfolios may also purchase listed securities
through the "third market." Where transactions are executed in the
over-the-counter or "third market," the Adviser will seek to deal with primary
market makers but, when necessary, will utilize the services of brokers. In all
such cases, the Adviser will attempt to negotiate the best price and execution.
Money market instruments are generally traded directly with the issuer. On
occasion, other securities may be purchased directly from the issuer. The cost
of a Portfolio's securities transactions will consist primarily of brokerage
commissions or dealer or underwriter spreads.
Certain investments may be appropriate for certain of the Portfolios
and for other clients advised by the Adviser. Investment decisions for the
Portfolios and other clients are made with a view to achieving their respective
investment objectives and after consideration of factors such as their current
holdings, availability of cash for investment and the size of their investments
in general. Frequently, a particular security may be bought or sold for only
one client, or in different amounts and at different times for more than one but
less than all clients. Likewise, a particular security may be bought for one or
more clients when one or more other clients are selling the security. In
addition, purchases or sales of the same security may be made for two or more
Portfolios or other clients on the same day. In such event, such transactions
will be allocated among the Portfolios or other clients in a manner believed by
the Adviser to be equitable to each. In some cases, this procedure could have
an adverse effect on the price or amount of the securities purchased or sold by
a Portfolio. It is the opinion of the Board of Trustees that the benefits
available, because of the Adviser's organization, outweigh any disadvantages
that may arise from exposure to simultaneous transactions. Purchase and sale
orders for a Portfolio may be combined with those of other clients of the
Adviser in the interest of the most favorable net results to the Portfolio.
PURCHASES AND REDEMPTIONS
The following discussion supplements the discussion in the Prospectus
under the headings "Purchase of Shares" and "Redemption of Shares."
- 21 -
<PAGE>
Shares of the Fund may be purchased only by the separate accounts of
Participating Insurance Companies. (Please refer to the prospectuses for the VA
contracts and the VLI policies for a description of how to purchase a contract
or policy.)
Shares of each Portfolio are sold at their respective net asset value
next determined after an order for purchase and payment in proper form are
received. Payment for shares is made in federal funds transmitted by wire on
the next business day following the order for purchase.
Shares of each Portfolio are redeemed at their respective net asset
value next determined after a request for redemption is received in proper form.
The Fund may suspend the right of redemption or postpone the date of payment,
with respect to the shares of a Portfolio, during any period when (a) trading on
the New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission or such exchange is closed for trading other than customary
weekend and holiday closings; (b) an emergency exists, as determined by the
Securities and Exchange Commission, as a result of which disposal of such
Portfolio's securities, or determination of the net asset value of such
Portfolio, is not reasonably practicable; or (c) the Securities and Exchange
Commission by order permits such suspension for the protection of Shareholders.
In such event, redemption will be effected at the net asset value next
determined after the suspension has been terminated unless the Shareholder has
withdrawn the redemption request in writing and the request has been received
prior to the day of such determination of net asset value.
NET ASSET VALUE
The following supplements the discussion in the Prospectus under the
heading "Net Asset Value Information."
MONEY MARKET PORTFOLIO
The net asset value per share of the Money Market Portfolio is
computed by dividing the total value of the Portfolio's securities and other
assets, less liabilities (including dividends payable), by the number of shares
outstanding. The assets are determined by valuing the portfolio securities at
amortized cost, pursuant to Rule 2a-7 under the Investment Company Act. The
amortized cost method of valuation involves valuing a security at cost at the
time of purchase and thereafter assuming a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the instrument.
- 22 -
<PAGE>
The purpose of the amortized cost method of valuation is to attempt
to maintain a constant net asset value per share of $1.00. While this method
provides certainty in valuation, it may result in periods during which value,
as determined by amortized cost, is higher or lower than the price the
Portfolio would receive if it sold its portfolio securities. Under the
direction of the Board of Trustees, certain procedures have been adopted to
monitor and stabilize the price per share. Calculations are made to compare
the value of the portfolio securities, valued at amortized cost, with market
based values. Market values are obtained by using actual quotations provided
by market makers, estimates of market value (provided the Board of Trustees
has reviewed and approved the method of making such estimates), or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices
for those instruments. If a deviation of 1/2 of 1% or more between the
Portfolio's $1.00 per share net asset value and the net asset value
calculated by reference to market based valuations were to occur, or if there
were other deviations which the Board of Trustees believed would result in
dilution or other unfair results material to Shareholders, the Board of
Trustees would consider what action, if any, should be initiated.
The market value of debt securities usually reflects yields generally
available on securities of similar quality. When yields decline, the market
value of a Portfolio holding higher yielding securities can be expected to
increase; when yields increase, the market value of a Portfolio invested at
lower yields can be expected to decline. In addition, if the Portfolio has net
redemptions at a time when interest rates have increased, the Portfolio may be
forced to sell portfolio securities prior to maturity at a price below the
Portfolio's carrying value. Also, because the Portfolio generally will be
valued at amortized cost rather than market value, any yield quoted may be
different from the yield that would result if the entire Portfolio were valued
at market value, since the amortized cost method does not take market
fluctuation into consideration.
OTHER PORTFOLIOS
The net asset value per share of each Portfolio other than the Money
Market Portfolio is computed by dividing the total value of the Portfolio's
securities and other assets, less liabilities, by the number of Portfolio shares
then outstanding. Securities traded on a national exchange are valued at the
last sale price as of the close of business on the day the securities are being
valued, or, lacking any sales, at the mean between closing bid and asked prices.
Securities other than money market instruments traded in the over-the-counter
market are valued at the mean between closing bid and asked prices or at yield
- 23 -
<PAGE>
equivalent as obtained from one or more dealers that make markets in the
securities. Securities traded both in the over-the-counter market and on a
national exchange are valued according to the broadest and most representative
market, and it is expected that for debt securities this ordinarily will be the
over-the-counter market. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees. Money market instruments are
valued at market value, except that debt instruments maturing in 60 days or less
are valued using the amortized cost method of valuation.
The proceeds received by each Portfolio for each issue or sale of its
shares, and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are allocated specifically to such Portfolio, and
constitute the underlying assets of such Portfolio. The underlying assets of
each Portfolio are segregated on the Fund's books of account, and are charged
with the liabilities of such Portfolio and with a share of the general
liabilities of the Fund. Expenses with respect to any two or more Portfolios
are allocated in proportion to the net assets of the respective Portfolios
except where allocations of direct expenses can otherwise be fairly made.
TAXES
For federal income tax purposes, each Portfolio is treated as a
separate entity. Each Portfolio intends to qualify and elects to be taxed as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended ("Code"). If a Portfolio qualifies as a "regulated
investment company" and complies with the provisions of the Code, such Portfolio
will be relieved from federal income tax and the four percent deductible federal
excise tax, on the part of its net ordinary income and net realized capital gain
which it distributes to Shareholders. To qualify for treatment as a "regulated
investment company," each Portfolio must, among other things, derive in each
taxable year at least 90 percent of its gross income from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of stock or securities or foreign currencies (subject to the
authority of the Secretary of the Treasury to exclude foreign currency gains
that are not ancillary to the Portfolio's principal business of investing in
stock or securities or options and futures with respect to such stock or
securities), or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its business of investing
in such stocks, securities, or currencies. In addition, to qualify for
treatment as a "regulated investment company," each Portfolio must derive less
than 30 percent of its gross income in each
- 24 -
<PAGE>
taxable year from gains (without deduction for losses) from the sale or other
disposition of securities held for less than three months. In order to meet the
30 percent requirement, a Portfolio may be required to defer disposing of
certain futures contracts and underlying securities beyond the time when it
might otherwise be advantageous to do so.
Since the Shareholders of the Fund will be the separate accounts of
the Participating Insurance Companies, no discussion is included herein as to
the federal income tax consequences at the shareholder level. For information
concerning the federal income tax consequences to the holders of VA contracts or
VLI policies, see the prospectuses for such contracts or policies.
The discussion under "Taxes and Distributions" in the Prospectus, in
conjunction with the foregoing, is a general summary of applicable provisions of
the Code and Treasury Regulations now in effect as currently interpreted by the
courts and the Internal Revenue Service. The Code and these Regulations, as
well as the current interpretations thereof, may be changed at any time by
legislative, judicial, or administrative action. The above discussion covers
only Federal tax considerations with respect to the Fund. State and local taxes
vary.
DIVIDENDS AND DISTRIBUTIONS
The following supplements the discussion of dividends and
distributions in the Prospectus under the heading "Taxes and Distributions."
MONEY MARKET PORTFOLIO
The Portfolio declares dividends of all its daily net investment
income on each day the Portfolio's net asset value per share is determined.
Dividends are payable monthly and are automatically reinvested and distributed
monthly on the last business day of each month in full and fractional shares of
the Portfolio at the then-current net asset value unless a Shareholder requests
payment in cash.
Net investment income, for dividend purposes consists of (1) accrued
interest income, plus or minus (2) amortized purchase discount or premium, plus
or minus (3) all short-term realized gains or losses and unrealized appreciation
or depreciation on portfolio assets, minus (4) all accrued expenses of the
Portfolio. Expenses of the Portfolio are accrued daily. So long as the
portfolio securities are valued at amortized cost, there will be no unrealized
appreciation or depreciation on such securities.
- 25 -
<PAGE>
HIGH GRADE BOND AND HIGH YIELD BOND PORTFOLIOS
The Portfolios declare dividends of all their investment income on
each day the Portfolio's Net Asset Value is determined. Dividends are
automatically reinvested and distributed monthly on the last business day of
each month. Any short-term and long-term gains will be declared and distributed
periodically, but in no event less frequently than annually.
OTHER PORTFOLIOS
It is the policy of the Growth Common Stock, Blue Chip and Managed
Portfolios to distribute at least annually substantially all their net
investment income, if any, and any net realized capital gains.
Both dividend and capital gain distributions will be made in shares of
such Portfolio unless a Shareholder requests payment in cash.
PERFORMANCE INFORMATION
As described in the Prospectus, a Portfolio's historical performance
or return may be shown in the form of "average annual total return" and "total
return" in the case of all Portfolios except the Money Market Portfolio; "yield"
in the case of the High Yield Bond and High Grade Bond Portfolios; and "yield"
and "effective yield" in the case of the Money Market Portfolio. These various
measures of performance are described below.
Average annual total return and total return measure both the net
income generated by, and the effect of any realized and unrealized appreciation
or depreciation of, the underlying investments of a Portfolio over the specified
period. Yield is a measure of the net investment income per share earned over a
specific one-month or 30-day period (seven-day period for the Money Market
Portfolio) expressed as a percentage of the net asset value.
A Portfolio's standardized average annual total return quotation is
computed in accordance with a method prescribed by rules of the Securities and
Exchange Commission. The standardized average annual total return for a
Portfolio for a specified period is determined by assuming a hypothetical
$10,000 investment in the Portfolio's shares on the first day of the period at
the then effective net asset value per share ("initial investment"), and
computing the ending redeemable value ("redeemable value") of that investment at
the end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to the Nth root (N representing the
- 26 -
<PAGE>
number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends by the Portfolio have been reinvested at net asset value
on the reinvestment dates during the period. Standardized average annual total
return figures for various periods are set forth in the tables below.
Calculation of a Portfolio's total return is not subject to a
standardized formula. Total return performance for a specific period is
calculated by first taking an investment (assumed to be $10,000) in the
Portfolio's shares on the first day of the period at the then effective net
asset value per share ("initial investment") and computing the ending value
("ending value") of that investment at the end of the period. The total return
percentage is then determined by subtracting the initial investment from the
ending value and dividing the difference by the initial investment and
expressing the result as a percentage. This calculation assumes that all income
and capital gains dividends by the Portfolio have been reinvested at net asset
value on the reinvestment dates during the period. Total return may also be
shown as the increased dollar value of the hypothetical investment over the
period. Total return figures for various periods are set forth in the tables
below.
The yield for a Portfolio other than the Money Market Portfolio is
computed in accordance with the formula set forth below, which is a standardized
method prescribed by rules of the Securities and Exchange Commission. Based
upon the 30-day period ended December 31, 1995 the High Grade Bond Portfolio's
yield was 7.44% and the High Yield Bond Portfolio's yield was 9.68%. A
Portfolio's yield is computed by dividing the net investment income per share
earned during the specific one-month or 30-day period by the offering price per
share on the last day of the period, according to the following formula:
6
Yield = 2[(a-b + 1) -1]
---
cd
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the offering price per share on the last day of the period.
- 27 -
<PAGE>
In computing yield, the Fund follows certain standardized accounting
practices specified by Securities and Exchange Commission rules. These
practices are not necessarily consistent with those that the Fund uses to
prepare its annual and interim financial statements in accordance with generally
accepted accounting principles.
The Money Market Portfolio's yield is computed in accordance with a
standard method prescribed by rules of the Securities and Exchange Commission.
Under that method, the yield quotation is based on a seven-day period and is
computed as follows. The net investment income per share (accrued interest on
portfolio securities, plus or minus amortized premium or discount, less accrued
expenses) for the period is divided by the price per share (expected to remain
constant at $1.00) at the beginning of the period ("base period return") and the
result is divided by seven and multiplied by 365 and the resulting yield figure
is carried to the nearest one hundredth of one percent. Realized capital gains
or losses and unrealized appreciation or depreciation of investments are not
included in the calculation.
The Money Market Portfolio's effective yield is determined by taking
the base period return (computed as described above) and calculating the effect
of assumed compounding. The formula for the effective yield is [(base period
return +1) raised to the power of 365/7] -1.
The Money Market Portfolio's yield and effective yield for the
seven-day period ending December 31, 1995 were 5.60% and 5.76%, respectively.
A Portfolio's performance quotations are based upon historical results
and are not necessarily representative of future performance. The Fund's shares
are sold at net asset value, and return and net asset value will fluctuate
except that the Money Market Portfolio seeks to maintain a $1.00 net asset value
per share. Factors affecting a Portfolio's performance include general market
conditions, operating expenses and investment management. Shares of a Portfolio
are redeemable at net asset value, which may be more or less than original cost.
The figures below show performance information for various periods
ended December 31, 1995. The rate of return for a Portfolio should be
distinguished from the rate of return of a corresponding subaccount of a
separate account of a Participating Insurance Company, whose rate will reflect
the deduction of additional charges, including a mortality and expense risk
charge, and, if calculated for corresponding periods, would be lower. VA
contract and VLI policyowners should consult the prospectus for such contract or
policy.
- 28 -
<PAGE>
AVERAGE ANNUAL TOTAL RETURN TABLE
FOR PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Standardized Average
Portfolio Annual Total Return
- --------- --------------------
<S> <C>
Growth Common Stock
Life of Portfolio (1) 8.58%
Five-Year 14.12%
One-Year 25.87%
High Grade Bond
Life of Portfolio (1) 9.99%
Five-Year 9.36%
One-Year 14.26%
High Yield Bond
Life of Portfolio (1) 11.39%
Five-Year 13.83%
One-Year 15.15%
Managed
Life of Portfolio (1) 11.01%
Five-Year 13.84%
One-Year 25.69%
Blue Chip (2)
Life of Portfolio 17.72%
Five-Year 17.15%
One-Year 32.81%
</TABLE>
TOTAL RETURN TABLE
FOR PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Portfolio Total Return
- --------- ------------
<S> <C>
Growth Common Stock
Life of Portfolio (1) 96.50%
Five-Year 93.58%
One-Year 25.87%
High Grade Bond
Life of Portfolio (1) 118.55%
Five-Year 56.39%
One-Year 14.26%
</TABLE>
- ---------------------
(1) The Growth Common Stock, High Grade Bond, High Yield Bond and Managed
Portfolios commenced operations on October 15, 1987
(2) The Blue Chip Portfolio commenced operations on October 15, 1990.
- 29 -
<PAGE>
<TABLE>
<S> <C>
High Yield Bond
Life of Portfolio (1) 142.48%
Five-Year 91.12%
One-Year 15.15%
Managed
Life of Portfolio (1) 135.80%
Five-Year 91.16%
One-Year 25.69%
Blue Chip (2)
Life of Portfolio 134.02%
Five-Year 120.61%
One-Year 32.81%
</TABLE>
- ---------------------
(1) The Growth Common Stock, High Grade Bond, High Yield Bond and Managed
Portfolios commenced operations on October 15, 1987
(2) The Blue Chip Portfolio commenced operations on October 15, 1990.
- 30 -
<PAGE>
SHAREHOLDER VOTING RIGHTS
All shares of the Fund have equal voting rights and may be voted in
the election of Trustees and on other matters submitted to the vote of
Shareholders. As permitted by Massachusetts law, there will normally be no
meetings of Shareholders for the purposes of electing trustees unless and until
such time as fewer than a majority of the trustees holding office have been
elected by Shareholders. At that time, the Trustees then in office will call a
Shareholders' meeting for the election of Trustees. The Trustees must call a
meeting of Shareholders for the purpose of voting upon the question of removal
of any Trustee when requested to do so by the record holders of 10 percent of
the outstanding shares of the Fund. At such a meeting, a Trustee may be removed
after the holders of record of not less than two-thirds of the outstanding
shares of the Fund have declared that the Trustee be removed either by
declaration in writing or by votes cast in person or by proxy. Except as set
forth above, the Trustees shall continue to hold office and may appoint
successor Trustees, provided that immediately after the appointment of any
successor Trustee, at least two-thirds of the Trustees have been elected by the
Shareholders. The shares do not have cumulative voting rights, which means that
the holders of a majority of the shares voting for the election of Trustees can
elect all the Trustees. No amendment may be made to the Declaration of Trust
without the affirmative vote of a majority of the outstanding shares of the
Fund, except that amendments to conform the Declaration to the requirements of
applicable federal laws or regulations, or to the regulated investment company
provisions of the Internal Revenue Code, or to designate and establish
additional Portfolios, may be made by the Trustees without the vote or consent
of the Shareholders. If not terminated by the vote or written consent of a
majority of its outstanding shares, the Fund will continue indefinitely.
In matters which only affect a particular Portfolio, the matter shall
have been effectively acted upon by a majority vote of that Portfolio even
though: (i) the matter has not been approved by a majority vote of any other
Portfolio; or (ii) the matter has not been approved by a majority vote of the
Fund.
CONTROL PERSONS
Farm Bureau Life Insurance Company ("Farm Bureau"), an Iowa
corporation, through its Variable Accounts will own all of the Fund's
outstanding shares, other than the shares of the Fund purchased for investment
by Farm Bureau through its general account to get the Portfolios of the Fund
started and any additional shares acquired by Farm Bureau through reinvestment
of dividends on those shares.
- 31 -
<PAGE>
Because Farm Bureau owns the shares of the Fund, the Fund is deemed to
be controlled by Farm Bureau by nature of the definitions contained in the
Investment Company Act of 1940. However, Farm Bureau will generally vote the
shares of the Fund held by the Variable Account in accordance with instructions
received from its VLI policyholders and VA contractholders. The shares held in
Farm Bureau's general account will generally be voted in proportion to voting
instructions received from Farm Bureau's VLI policyholders. Under certain
circumstances, however, Farm Bureau may disregard voting instructions received
from VLI policyholders.
OTHER INFORMATION
CUSTODIAN
Bankers Trust Company, Global Assets-Insurance Group, 16 Wall Street,
New York, N.Y., 10005, is the custodian of all cash and securities owned by the
Fund. The custodian performs no managerial or policy-making functions for the
Fund.
INDEPENDENT AUDITORS
The Fund's independent auditors for the current fiscal year are Ernst
& Young LLP, 801 Grand Avenue, Suite 3400, Des Moines, Iowa 50309. The
independent auditors audit and report on the Fund's annual financial statements,
review certain regulatory reports and the Fund's federal income tax return, and
perform other professional accounting, auditing, tax and advisory services when
engaged to do so by the Fund.
ACCOUNTING SERVICES
The Fund has entered into an accounting services agreement with FBL
Investment Advisory Services, Inc. ("FBL"), pursuant to which FBL performs
accounting services for the Fund. In addition, the agreement provides that FBL
shall calculate the Fund's net asset value in accordance with the Fund's current
Prospectus and prepare for Fund approval and use various tax returns and other
reports. For such services, each Portfolio pays FBL an annual fee, payable
monthly, of 0.05% of the Portfolio's average daily net assets, with the annual
fee payable by
- 32 -
<PAGE>
a Portfolio not to exceed $30,000. During the fiscal year ended December 31,
1995, the aggregate amount of such fees paid to FBL was $19,961.
DIVIDEND DISBURSING AND TRANSFER AGENT
FBL Investment Advisory Services, Inc., serves as the Fund's dividend
disbursing and transfer agent.
LEGAL MATTERS
The firm of Sutherland, Asbill & Brennan, Washington, D.C., is counsel
for the Fund. The legal validity of the shares described in the Prospectus and
this Statement of Additional Information and certain matters pertaining to
federal securities laws have been passed upon by Sutherland, Asbill & Brennan.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not
contain all the information set forth in the registration statement and exhibits
relating thereto which the Fund has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.
FINANCIAL STATEMENTS
The audited financial statements of the Fund, including the notes
thereto, contained in the Annual Report to Shareholders of FBL Variable
Insurance Series Fund for the fiscal year ended December 31, 1995 are included.
Additional copies of such Annual Report to Shareholders may be obtained without
charge by contacting the Fund.
- 33 -
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
GROWTH HIGH
COMMON STOCK GRADE BOND
PORTFOLIO PORTFOLIO
--------------- -------------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost -- $14,845,260; $3,000,641; $ 16,079,757 $ 3,156,229
$4,833,875; $13,520,382; $3,091,161; and $4,779,340, respectively) (NOTE
5).......................................................................
Cash....................................................................... 21,902 4,302
Receivables:
Accrued dividends and interest........................................... 69,459 53,244
Investment securities sold............................................... 183,477
Prepaid expense............................................................ 618 342
--------------- -------------
Total Assets............................................................... $ 16,355,213 $ 3,214,117
--------------- -------------
--------------- -------------
LIABILITIES AND NET ASSETS
Liabilities:
Investment securities purchased.......................................... $ 53,138
Accrued expenses......................................................... 6,844 $ 5,721
--------------- -------------
Total Liabilities.......................................................... 59,982 5,721
Net assets applicable to shares of beneficial interest (NOTE 4)............ 16,295,231 3,208,396
--------------- -------------
Total Liabilities and Net Assets........................................... $ 16,355,213 $ 3,214,117
--------------- -------------
--------------- -------------
Shares issued and outstanding as of December 31, 1995...................... 1,323,819 321,363
NET ASSET VALUE PER SHARE.................................................. $ 12.31 $ 9.98
--------------- -------------
--------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
10
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------- -------------- -------------- -------------
<S> <C> <C> <C>
$ 4,807,554 $ 14,422,324 $ 3,091,161 $ 6,609,304
10,430 68,979 51,510
97,818 87,552 4,033 10,609
412 547 341 412
- ------------- -------------- -------------- -------------
$ 4,916,214 $ 14,510,423 $ 3,164,514 $ 6,671,835
- ------------- -------------- -------------- -------------
- ------------- -------------- -------------- -------------
$ 100,415
5,706 $ 23,106 $ 5,941 $ 7,031
- ------------- -------------- -------------- -------------
106,121 23,106 5,941 7,031
4,810,093 14,487,317 3,158,573 6,664,804
- ------------- -------------- -------------- -------------
$ 4,916,214 $ 14,510,423 $ 3,164,514 $ 6,671,835
- ------------- -------------- -------------- -------------
- ------------- -------------- -------------- -------------
496,603 1,237,511 3,158,573 321,986
$ 9.69 $ 11.71 $ 1.00 $ 20.70
- ------------- -------------- -------------- -------------
- ------------- -------------- -------------- -------------
</TABLE>
11
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
GROWTH HIGH
COMMON STOCK GRADE BOND
PORTFOLIO PORTFOLIO
--------------- ------------
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................................. $ 425,724
Interest.............................................................. 275,272 $ 236,768
--------------- ------------
Total Investment Income............................................... 700,996 236,768
EXPENSES
Paid to FBL Investment Advisory Services, Inc. (NOTE 3):
Investment advisory and management fees............................. 65,647 8,481
Accounting fees..................................................... 6,565 1,413
Custodial fees........................................................ 7,393 4,342
Legal fees............................................................ 2,894 610
Audit fees............................................................ 5,100 5,100
Reports to shareholders............................................... 2,867 2,867
Trustees' fees and expenses........................................... 2,262 495
Insurance and bonds................................................... 1,683 463
Miscellaneous......................................................... 251 31
--------------- ------------
Total Expenses........................................................ 94,662 23,802
Expense reimbursement (NOTE 3)........................................ (22,306) (8,255)
--------------- ------------
Net Expenses.......................................................... 72,356 15,547
--------------- ------------
Net Investment Income................................................. 628,640 221,221
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investment transactions................. 858,654 (1,090)
Change in unrealized appreciation/depreciation of investments......... 1,599,431 150,916
--------------- ------------
Net Gain on Investments............................................... 2,458,085 149,826
--------------- ------------
Net Increase in Net Assets Resulting from Operations.................. $ 3,086,725 $ 371,047
--------------- ------------
--------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ------------- -------------- -------------
<S> <C> <C> <C>
$ 453,506 $ 99,681
$ 439,229 303,889 $ 158,411 25,388
- ----------- ------------- -------------- -------------
439,229 757,395 158,411 125,069
23,073 65,457 8,050 9,533
2,307 5,951 1,342 2,383
4,593 5,524 5,632 6,043
972 2,833 617 1,125
5,100 5,100 5,100 4,800
2,867 2,867 2,867 2,867
822 2,049 478 774
724 1,558 459 597
53 126 30 46
- ----------- ------------- -------------- -------------
40,511 91,465 24,575 28,168
(15,105) (26,008) (9,816) (1,952)
- ----------- ------------- -------------- -------------
25,406 65,457 14,759 26,216
- ----------- ------------- -------------- -------------
413,823 691,938 143,652 98,853
66,905 543,441 (9)
167,210 1,503,900 1,221,621
- ----------- ------------- -------------- -------------
234,115 2,047,341 1,221,612
- ----------- ------------- -------------- -------------
$ 647,938 $ 2,739,279 $ 143,652 $ 1,320,465
- ----------- ------------- -------------- -------------
- ----------- ------------- -------------- -------------
</TABLE>
13
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH
COMMON STOCK
PORTFOLIO
------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income...................................................... $ 628,640 $ 347,743
Net realized gain (loss) from investment transactions...................... 858,654 94,588
Change in unrealized appreciation/depreciation of investments.............. 1,599,431 (740,889)
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations............ 3,086,725 (298,558)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 6)
Net investment income...................................................... (629,398) (344,259)
Net realized gain from investment transactions............................. (331,104) (109,783)
Distributions in excess of net realized gain from investment
transactions............................................................. (144,035)
-------------- --------------
(960,502) (598,077)
CAPITAL SHARE TRANSACTIONS (NOTE 4)........................................ 3,565,672 6,769,691
-------------- --------------
Total Increase (Decrease) in Net Assets.................................... 5,691,895 5,873,056
NET ASSETS
Beginning of year.......................................................... 10,603,336 4,730,280
-------------- --------------
End of year (including undistributed net investment income as set forth
below)................................................................... $ 16,295,231 $ 10,603,336
-------------- --------------
-------------- --------------
Undistributed net investment income........................................ $ 2,962 $ 3,720
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
14
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
- ---------------------------- ----------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 221,221 $ 194,700 $ 413,823 $ 395,160
(1,090) (10,026) 66,905 46,030
150,916 (192,944) 167,210 (482,152)
- ------------- ------------- ------------- -------------
371,047 (8,270) 647,938 (40,962)
(221,221) (194,700) (413,823) (395,160)
(61,458) (47,664)
- ------------- ------------- ------------- -------------
(221,221) (194,700) (475,281) (442,824)
606,696 305,534 465,130 120,492
- ------------- ------------- ------------- -------------
756,522 102,564 637,787 (363,294)
2,451,874 2,349,310 4,172,306 4,535,600
- ------------- ------------- ------------- -------------
$ 3,208,396 $ 2,451,874 $ 4,810,093 $ 4,172,306
- ------------- ------------- ------------- -------------
- ------------- ------------- ------------- -------------
$ 0 $ 0 $ 0 $ 0
- ------------- ------------- ------------- -------------
- ------------- ------------- ------------- -------------
</TABLE>
15
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income....................................................... $ 691,938 $ 489,449
Net realized gain (loss) from investment transactions....................... 543,441 197,608
Change in unrealized appreciation/depreciation of investments............... 1,503,900 (1,051,125)
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations............. 2,739,279 (364,068)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 6)
Net investment income....................................................... (690,665) (490,192)
Net realized gain from investment transactions.............................. (206,978) (204,880)
Distributions in excess of net realized gain from investment transactions... (68,958)
-------------- --------------
(897,643) (764,030)
CAPITAL SHARE TRANSACTIONS (NOTE 4)......................................... 2,887,288 5,935,082
-------------- --------------
Total Increase (Decrease) in Net Assets..................................... 4,728,924 4,806,984
NET ASSETS
Beginning of year........................................................... 9,758,393 4,951,409
-------------- --------------
End of year (including undistributed net investment income as
set forth below).......................................................... $ 14,487,317 $ 9,758,393
-------------- --------------
-------------- --------------
Undistributed net investment income......................................... $ 3,413 $ 2,140
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
16
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
- ---------------------------- ----------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 143,652 $ 98,125 $ 98,853 $ 53,678
(9) (10)
1,221,621 20,752
- ------------- ------------- ------------- -------------
143,652 98,125 1,320,465 74,420
(143,652) (98,125) (98,331) (53,782)
- ------------- ------------- ------------- -------------
(143,652) (98,125) (98,331) (53,782)
500,759 358,160 2,180,879 1,587,198
- ------------- ------------- ------------- -------------
500,759 358,160 3,403,013 1,607,836
2,657,814 2,299,654 3,261,791 1,653,955
- ------------- ------------- ------------- -------------
$ 3,158,573 $ 2,657,814 $ 6,664,804 $ 3,261,791
- ------------- ------------- ------------- -------------
- ------------- ------------- ------------- -------------
$ 0 $ 0 $ 741 $ 219
- ------------- ------------- ------------- -------------
- ------------- ------------- ------------- -------------
</TABLE>
17
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
GROWTH COMMON STOCK PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- -----------
<S> <C> <C>
COMMON STOCKS (57.93%)
CHEMICALS AND ALLIED PRODUCTS (3.25%)
Crompton & Knowles Corp. ................................... 40,000 $ 530,000
COMMUNICATIONS (0.78%)
Lincoln Telecommunications Co. ............................. 6,000 126,750
DEPOSITORY INSTITUTIONS (3.02%)
CU Bancorp.................................................. 48,000 492,000
ELECTRIC, GAS AND SANITARY SERVICES (8.61%)
Citizens Utilities Co. ..................................... 57,352 724,069
Montana Power Co. .......................................... 30,000 678,750
-----------
1,402,819
FURNITURE AND FIXTURES (4.27%)
Ladd Furniture, Inc. ....................................... 52,950 694,969
HOLDING AND OTHER INVESTMENT OFFICES (4.84%)
General Growth Properties, Inc. ............................ 38,000 788,500
INSURANCE CARRIERS (4.64%)
EMC Insurance Group, Inc. .................................. 55,000 756,250
METAL MINING (1.06%)
Echo Bay Mines, Ltd. ....................................... 16,680 173,055
MISCELLANEOUS RETAIL (3.29%)
Ferrellgas Partners, L.P. .................................. 23,200 536,500
NONDEPOSITORY INSTITUTIONS (0.98%)
Berkshire Hathaway, Inc. ................................... 5(1) 160,525
OIL AND GAS EXTRACTION (14.08%)
Apache Corp. ............................................... 28,000 826,000
Global Marine, Inc. ........................................ 100,000 875,000
Noble Drilling Corp. ....................................... 66,000 594,000
-----------
2,295,000
STONE, CLAY AND GLASS PRODUCTS (3.03%)
Lafarge Corp. .............................................. 26,300 493,125
TRANSPORTATION -- BY AIR (2.78%)
Petroleum Helicopters, Inc. (Voting)........................ 4,250 60,562
Petroleum Helicopters, Inc. (Non-Voting).................... 27,500 391,875
-----------
452,437
</TABLE>
18
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH COMMON STOCK PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- -----------
WHOLESALE TRADE -- NONDURABLE GOODS (3.30%)
<S> <C> <C>
Howell Corp. ............................................... 26,500 $ 380,938
Super Valu Stores, Inc. .................................... 5,000 157,500
-----------
538,438
-----------
Total Common Stocks........................................... 9,440,368
PREFERRED STOCKS (20.55%)
DEPOSITORY INSTITUTIONS (8.24%)
Community First Bankshares, Inc. ........................... 21,800 790,250
Conservative Savings Corp., Convertible..................... 12,926 420,095
Sterling Financial Corp. ................................... 4,500 131,625
-----------
1,341,970
GAS PRODUCTION AND DISTRIBUTION (1.07%)
Western Gas Resources, Inc., Convertible.................... 5,000 175,000
OIL AND GAS EXTRACTION (5.98%)
Chieftain International, Inc., Convertible.................. 15,000 378,750
Noble Drilling Corp., Convertible........................... 9,000 231,750
Reading & Bates Corp., Convertible.......................... 8,070 363,150
-----------
973,650
WATER TRANSPORTATION (4.38%)
Sea Containers, Ltd., Convertible........................... 16,320 714,000
WHOLESALE TRADE -- NONDURABLE GOODS (0.88%)
Howell Corp. ............................................... 3,000 144,000
-----------
Total Preferred Stocks........................................ 3,348,620
</TABLE>
19
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH COMMON STOCK PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
CORPORATE BONDS (1.22%)
HOLDING AND OTHER INVESTMENT OFFICES (1.22%)
Centennial Bancorp, 7.00%, due 5/01/04......................... $ 175,000 $ 198,296
SHORT-TERM INVESTMENTS (18.98%)
UNITED STATES GOVERNMENT AGENCIES
Federal Farm Credit Bank, due 1/11/96.......................... 1,100,000 1,097,976
Federal Home Loan Mortgage Corp., due 2/01/96.................. 400,000 398,021
Federal National Mortgage Assn., due 1/08/96................... 600,000 599,149
Federal National Mortgage Assn., due 1/16/96................... 1,000,000 997,327
-----------
Total Short-Term Investments..................................... 3,092,473
-----------
Total Investments (98.68%)....................................... 16,079,757
OTHER ASSETS LESS LIABILITIES (1.32%)
Cash, receivables and prepaid expense, less liabilities........ 215,474
-----------
Total Net Assets (100.00%)....................................... $16,295,231
-----------
-----------
</TABLE>
(1) Non-income producing security.
SEE ACCOMPANYING NOTES.
20
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
CORPORATE BONDS (83.08%)
APPAREL AND ACCESSORY STORES (3.30%)
TJX Companies, Inc., 9.50%, due 5/01/16.......................... $ 100,000 $ 105,864
COMMUNICATIONS (7.96%)
New York Telephone Co., 7.75%, due 12/15/06...................... 150,000 153,270
Pacific Telephone & Telegraph Co., 7.25%, due 2/01/08............ 100,000 101,971
----------
255,241
DEPOSITORY INSTITUTIONS (24.06%)
Midland America Capital Corp., 12.75%, due 11/15/03.............. 155,000 183,018
Morgan, J. P. & Co., 7.25%, due 10/01/10......................... 150,000 155,932
National Westminster Bancorp, Inc., 9.45%, due 5/01/01........... 100,000 115,678
Norwest Corp., 9.25%, due 5/01/97................................ 100,000 104,796
Third National Bank, 7.50%, due 11/15/02......................... 111,000 112,041
UnionBancorp, Inc., (Defeased), 8.50%, due 4/01/96............... 100,000 100,380
----------
771,845
ELECTRIC, GAS AND SANITARY SERVICES (16.25%)
MDU Resources Group, Inc., 9.125%, due 10/01/16.................. 100,000 107,159
National Rural Utilities Cooperative Finance Corp., 9.00%, due
3/15/16......................................................... 154,000 158,537
Texas Eastern Transmission, 10.00%, due 10/01/11................. 100,000 105,644
Western Penn Power, 7.875%, due 12/01/04......................... 140,000 150,107
----------
521,447
HOLDING AND OTHER INVESTMENT OFFICES (3.39%)
Federal Realty Investment Trust, 8.875%, due 1/15/00............. 100,000 108,726
INSURANCE (7.42%)
Old Republic International, 10.00%, due 2/01/18.................. 100,000 106,628
Torchmark Corp., 8.625%, due 3/01/17............................. 125,000 131,412
----------
238,040
NONDEPOSITORY INSTITUTIONS (3.26%)
Dillard Investment Co., 9.25%, due 5/01/97....................... 100,000 104,587
PRINTING AND PUBLISHING (3.22%)
Valassis Communications, Inc., 9.55%, due 12/01/03............... 100,000 103,190
RAILROAD TRANSPORTATION (4.91%)
Union Pacific Corp., 8.50%, due 1/15/17.......................... 150,000 157,635
SECURITY AND COMMODITY BROKERS (3.34%)
Lehman Brothers Holding, Inc., 8.875%, due 11/01/98.............. 100,000 107,225
</TABLE>
21
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH GRADE BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
TRANSPORTATION EQUIPMENT (5.97%)
<S> <C> <C>
Ford Motor Credit Co., 9.50%, due 9/15/11........................ $ 150,000 $ 191,577
----------
Total Corporate Bonds.............................................. 2,665,377
MORTGAGE-BACKED SECURITIES (10.62%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (2.24%)
Pool # 50276, 9.50%, due 2/01/20................................. 67,422 71,867
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (5.40%)
Pool # 276337, 10.00%, due 8/15/19............................... 157,421 173,259
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (2.98%)
Pool # 236070, 10.00%, due 10/15/12.............................. 88,997 95,726
----------
Total Mortgage-Backed Securities................................... 340,852
SHORT-TERM INVESTMENT (4.67%)
COMMERCIAL PAPER
General Electric Capital Corp., 5.79%, due 1/11/96............... 150,000 150,000
----------
Total Investments (98.37%)......................................... 3,156,229
OTHER ASSETS LESS LIABILITIES (1.63%)
Cash, receivables and prepaid expense, less liabilities.......... 52,167
----------
Total Net Assets (100.00%)......................................... $3,208,396
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
22
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
CORPORATE BONDS (86.44%)
APPAREL AND ACCESSORY STORES (5.14%)
Genesco, Inc., 10.375%, due 2/01/03.............................. $ 100,000 $ 88,500
TJX Companies, Inc., 9.50%, due 5/01/16.......................... 150,000 158,796
----------
247,296
APPAREL AND OTHER TEXTILE PRODUCTS (6.74%)
Dan River, Inc., 10.125%, due 12/15/03........................... 200,000 185,500
Fieldcrest Cannon, Inc., 11.25%, due 6/15/04..................... 150,000 138,750
----------
324,250
AUTO REPAIR, SERVICES AND PARKING (1.53%)
Envirotest Systems Corp., 9.625%, due 4/01/03.................... 100,000 73,500
BUSINESS SERVICES (2.85%)
Borg-Warner Corp., 9.125%, due 5/01/03........................... 150,000 137,250
CHEMICALS AND ALLIED PRODUCTS (2.39%)
Huntsman Corp., 11.00%, due 4/15/04.............................. 100,000 115,125
COMMUNICATIONS (4.45%)
Panamsat, L.P., 9.75%, due 8/01/00............................... 200,000 214,000
ELECTRIC, GAS AND SANITARY SERVICES (8.47%)
Montana Power Co., 7.50%, due 1/01/98............................ 100,000 100,596
Public Service Company of New Mexico, 5.875%, due 5/01/97........ 150,000 148,362
Texas Eastern Transmission Corp., 10.00%, due 10/01/11........... 150,000 158,466
----------
407,424
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (4.76%)
Amphenol Corp., 12.75%, due 12/15/02............................. 200,000 229,000
FOOD STORES (7.04%)
P&C Food Markets, Inc., 11.50%, due 10/15/01..................... 150,000 146,625
Penn Traffic Co., 10.25%, due 2/15/02............................ 200,000 192,000
----------
338,625
GENERAL MERCHANDISE STORES (4.56%)
Federated Department Stores, Inc., 10.00%, due 2/15/01........... 200,000 219,500
INSURANCE CARRIERS (4.37%)
Torchmark Corp., 8.625%, due 3/01/17............................. 200,000 210,260
LUMBER AND WOOD PRODUCTS (7.24%)
Georgia-Pacific Corp., 9.25%, due 3/15/16........................ 150,000 158,283
Pacific Lumber Co., 10.50%, due 3/01/03.......................... 200,000 189,750
----------
348,033
</TABLE>
23
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
MISCELLANEOUS RETAIL (4.54%)
<S> <C> <C>
Eckerd Corp., 9.25%, due 2/15/04................................. $ 205,000 $ 218,325
PAPER AND ALLIED PRODUCTS (4.06%)
Container Corp. of America, 9.75%, due 4/01/03................... 200,000 195,500
PETROLEUM AND COAL PRODUCTS (2.76%)
Clark Oil & Refining Corp., 10.50%, due 12/01/01................. 125,000 132,500
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (3.78%)
Plastic Specialties & Technologies, Inc., 11.25%, due 12/01/03... 200,000 182,000
STONE, CLAY AND GLASS PRODUCTS (6.87%)
Owens-Illinois, Inc., 11.00%, due 12/01/03....................... 150,000 170,250
USG Corp., 9.25%, due 9/15/01.................................... 150,000 160,125
----------
330,375
TEXTILE MILL PRODUCTS (0.94%)
Bibb Co. (The), 14.00%, due 10/01/99............................. 125,000 45,000
WATER TRANSPORTATION (3.95%)
Moran Transportation Co., 11.75%, due 7/15/04.................... 200,000 190,000
----------
Total Corporate Bonds.............................................. 4,157,963
SHORT-TERM INVESTMENTS (13.51%)
COMMERCIAL PAPER (9.36%)
American General Finance Corp., 5.98%, due 1/25/96............... 240,000 240,000
Ford Motor Credit Corp., 5.99%, due 1/18/96...................... 210,000 210,000
----------
450,000
UNITED STATES GOVERNMENT AGENCY (4.15%)
Federal National Mortgage Assn., due 1/12/96..................... 200,000 199,591
----------
Total Short-Term Investments....................................... 649,591
----------
Total Investments (99.95%)......................................... 4,807,554
OTHER ASSETS LESS LIABILITIES (0.05%)
Cash, receivables and prepaid expense, less liabilities.......... 2,539
----------
Total Net Assets (100.00%)......................................... $4,810,093
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
24
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES
HELD VALUE
----------- ----------
<S> <C> <C>
COMMON STOCKS (20.69%)
ELECTRIC, GAS AND SANITARY SERVICES (6.56%)
Montana Power Co................................................ 28,000 $ 633,500
Peoples Energy Corp............................................. 10,000 317,500
----------
951,000
HOLDING AND OTHER INVESTMENT OFFICES (5.30%)
General Growth Properties, Inc. ................................ 37,000 767,750
INSURANCE CARRIERS (4.53%)
EMC Insurance Group, Inc........................................ 47,700 655,875
METAL MINING (0.95%)
Echo Bay Mines, Ltd. ........................................... 13,187 136,815
MISCELLANEOUS RETAIL (3.35%)
Ferrellgas Partners, L.P. ...................................... 21,000 485,625
----------
Total Common Stocks............................................... 2,997,065
PREFERRED STOCKS (36.08%)
DEPOSITORY INSTITUTIONS (10.35%)
Community First Bankshares, Inc., Convertible................... 20,000 725,000
Conservative Savings Corp., Convertible......................... 18,000 585,000
Sterling Financial Corp. ....................................... 6,450 188,663
----------
1,498,663
ELECTRIC GAS & SANITARY SERVICES (1.43%)
Empire District Electric Co. ................................... 20,000 207,500
GAS PRODUCTION AND DISTRIBUTION (2.90%)
Western Gas Resources, Inc., Convertible........................ 12,000 420,000
OIL AND GAS EXTRACTION (14.14%)
Chieftain International, Inc., Convertible...................... 11,000 277,750
ICO, Inc........................................................ 20,000 420,000
Noble Drilling Corp., Convertible............................... 25,000 643,750
Reading & Bates Corp., Convertible.............................. 15,700 706,500
----------
2,048,000
WATER TRANSPORTATION (3.62%)
Sea Containers, Ltd., Convertible............................... 12,000 525,000
WHOLESALE TRADE -- NON-DURABLE GOODS (3.64%)
Howell Corp. ................................................... 11,000 528,000
----------
Total Preferred Stocks............................................ 5,227,163
</TABLE>
25
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
CORPORATE BONDS (8.52%)
DEPOSITORY INSTITUTIONS (2.87%)
Columbia Banking System, Inc., Convertible Sub. Deb., 7.85%,
due 6/30/02................................................... $ 130,000 $ 141,050
Midland America Capital Corp., 12.75%, due 11/15/03............ 110,000 129,884
National Westminster Bancorp, Inc., 9.45%, due 5/01/01......... 125,000 144,597
-----------
415,531
ELECTRIC, GAS AND SANITARY SERVICES (0.69%)
National Co-op Services Corp. (Arkansas Electric), 9.48%, due
1/01/12....................................................... 93,000 100,453
HOLDING AND OTHER INVESTMENT OFFICES (3.31%)
Centennial Bancorp, 7.00%, due 5/01/04......................... 423,000 479,310
INSURANCE CARRIERS (1.09%)
Torchmark Corp., 8.625%, due 3/01/17........................... 150,000 157,695
PETROLEUM AND COAL PRODUCTS (0.56%)
Pennzoil Co., 9.00%, due 4/01/17............................... 77,000 81,474
-----------
Total Corporate Bonds............................................ 1,234,463
</TABLE>
26
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
SHORT-TERM INVESTMENTS (34.26%)
<S> <C> <C>
COMMERCIAL PAPER (9.15%)
Ford Motor Credit Corp., 5.59%, due 1/12/96.................... $ 700,000 $ 700,000
General Electric Capital Corp., 5.54%, due 2/15/96............. 625,000 625,000
-----------
1,325,000
UNITED STATES GOVERNMENT AGENCIES (25.11%)
Federal Farm Credit Bank, due 1/25/96.......................... 900,000 896,452
Federal Farm Credit Bank, due 2/09/96.......................... 500,000 496,837
Federal Home Loan Bank, due 1/16/96............................ 600,000 598,399
Federal Home Loan Bank, due 2/05/96............................ 100,000 99,428
Federal Home Loan Mortgage Assn., due 1/04/96.................. 800,000 799,378
Federal National Mortgage Assn., due 1/12/96................... 400,000 399,181
Federal National Mortgage Assn., due 1/18/96................... 350,000 348,958
-----------
3,638,633
-----------
Total Short-Term Investments..................................... 4,963,633
-----------
Total Investments (99.55%)....................................... 14,422,324
OTHER ASSETS LESS LIABILITIES (0.45%)
Receivables and prepaid expense, less liabilities.............. 64,993
-----------
Total Net Assets (100.00%)....................................... $14,487,317
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES.
27
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON
PURCHASE PRINCIPAL
DATE AMOUNT VALUE
------------- ----------- ----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (97.87%)
COMMERCIAL PAPER (18.84%)
NONDEPOSITORY INSTITUTIONS
Ford Motor Credit Corp., due 1/24/96.............. 5.800% $ 155,000 $ 155,000
IBM Credit Corp., due 1/25/96..................... 5.819 150,000 150,000
John Deere Capital Corp., due 3/12/96............. 5.471 140,000 140,000
Norwest Financial, Inc., due 1/04/96.............. 5.820 150,000 150,000
----------
Total Commercial Paper.............................. 595,000
UNITED STATES GOVERNMENT AGENCIES (79.03%)
Federal Farm Credit Bank, due 2/02/96............. 5.511 500,000 497,447
Federal Farm Credit Bank, due 3/04/96............. 5.479 250,000 247,584
Federal Home Loan Bank, due 2/16/96............... 5.655 300,000 297,785
Federal Home Loan Bank, due 2/29/96............... 5.673 260,000 257,558
Federal Home Loan Mortgage Corp., due 1/19/96..... 5.756 300,000 299,057
Federal Home Loan Mortgage Corp., due 1/22/96..... 5.531 400,000 398,611
Federal National Mortgage Assn., due 1/12/96...... 5.761 300,000 299,386
Federal National Mortgage Assn., due 2/09/96...... 5.673 200,000 198,733
----------
Total United States Government Agencies............. 2,496,161
----------
Total Short-Term Investments (97.87%)................. 3,091,161
OTHER ASSETS LESS LIABILITIES (2.13%)
Cash, receivables and prepaid expense, less
liabilities........................................ 67,412
----------
Total Net Assets (100.00%)............................ $3,158,573
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
28
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- -----------
<S> <C> <C>
COMMON STOCKS (90.97%)
CHEMICALS AND ALLIED PRODUCTS (17.39%)
Bristol-Myers Squibb Co. ................................. 1,543 $ 132,505
DuPont (EI) de Nemours & Co. ............................. 1,863 130,177
Eastman Chemical Co. ..................................... 1,471 92,121
Johnson & Johnson......................................... 1,989 170,308
Merck & Co., Inc.......................................... 2,710 178,183
Praxair, Inc. ............................................ 4,863 163,518
Procter & Gamble Co. ..................................... 1,692 140,436
Union Carbide Corp. ...................................... 4,044 151,650
-----------
1,158,898
COMMUNICATIONS (6.16%)
American Telephone & Telegraph Co. ....................... 2,048 132,608
Bell Atlantic Corp. ...................................... 1,784 119,305
Capital Cities/ABC, Inc. ................................. 1,286 158,660
-----------
410,573
DEPOSITORY INSTITUTIONS (1.94%)
Morgan JP & Co., Inc. .................................... 1,610 129,203
EATING AND DRINKING PLACES (2.65%)
McDonald's Corp. ......................................... 3,913 176,574
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (2.37%)
General Electric Co. ..................................... 2,192 157,824
FOOD AND KINDRED PRODUCTS (7.28%)
Coca-Cola Co. (The)....................................... 2,465 183,026
PepsiCo, Inc. ............................................ 2,780 155,333
Philip Morris Companies, Inc. ............................ 1,621 146,700
-----------
485,059
GENERAL MERCHANDISE STORES (4.16%)
Sears, Roebuck & Co. ..................................... 2,556 99,684
Wal-Mart Stores, Inc. .................................... 4,724 105,700
Woolworth (F.W.) Co., Ltd. ............................... 5,541 72,033
-----------
277,417
INDUSTRIAL MACHINERY AND EQUIPMENT (3.72%)
Caterpillar, Inc. ........................................ 2,424 142,410
International Business Machines Corp. .................... 1,150 105,513
-----------
247,923
</TABLE>
29
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- -----------
INSTRUMENTS AND RELATED PRODUCTS (1.97%)
<S> <C> <C>
Eastman Kodak Co. ........................................ 1,963 $ 131,521
INSURANCE CARRIERS (4.18%)
Allstate Corp. ........................................... 2,404 98,864
American International Group, Inc. ....................... 1,944 179,820
-----------
278,684
MOTION PICTURES (2.11%)
Disney (Walt) Co. ........................................ 2,388 140,892
NONDEPOSITORY INSTITUTIONS (1.45%)
Dean Witter, Discover & Co. .............................. 2,047 96,209
PAPER AND ALLIED PRODUCTS (3.56%)
International Paper Co. .................................. 2,938 111,277
Minnesota Mining & Manufacturing Co. ..................... 1,902 126,008
-----------
237,285
PETROLEUM AND COAL PRODUCTS (10.40%)
Amoco Corp. .............................................. 1,577 113,347
Chevron Corp. ............................................ 2,208 115,920
Exxon Corp. .............................................. 1,547 123,953
Mobil Corp. .............................................. 1,194 133,728
Texaco, Inc. ............................................. 1,477 115,944
USX Corp. - Marathon Group................................ 4,626 90,207
-----------
693,099
PRIMARY METAL INDUSTRIES (3.28%)
Aluminum Company of America............................... 2,420 127,958
Bethlehem Steel Corp. .................................... 6,463(1) 90,482
-----------
218,440
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (3.31%)
Goodyear Tire & Rubber Co. ............................... 4,864 220,704
SECURITY AND COMMODITY BROKERS (3.20%)
American Express Co. ..................................... 3,334 137,944
Lehman Brothers Holding, Inc. ............................ 3,541 75,246
-----------
213,190
</TABLE>
30
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- -----------
TRANSPORTATION EQUIPMENT (10.37%)
<S> <C> <C>
Allied-Signal, Inc. ...................................... 3,535 $ 167,913
Boeing Co. (The).......................................... 1,890 148,129
Ford Motor Co. ........................................... 3,987 115,623
General Motors Corp. ..................................... 2,183 115,426
United Technologies Corp. ................................ 1,521 144,305
-----------
691,396
WHOLESALE TRADE -- DURABLE GOODS (1.47%)
Westinghouse Electric Corp. .............................. 5,938 97,977
-----------
Total Common Stocks......................................... 6,062,868
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------
<S> <C> <C>
SHORT-TERM INVESTMENTS (8.20%)
UNITED STATES GOVERNMENT AGENCIES
Federal Home Loan Mortgage Corp., due 2/05/96............. $150,000 149,142
Federal National Mortgage Assn., due 2/13/96.............. 400,000 397,294
-----------
Total Short-Term Investments................................ 546,436
-----------
Total Investments (99.17%).................................. 6,609,304
OTHER ASSETS LESS LIABILITIES (0.83%)
Cash, receivables and prepaid expense, less liabilities... 55,500
-----------
Total Net Assets (100.00%).................................. $ 6,664,804
-----------
-----------
</TABLE>
(1) Non-income producing security.
SEE ACCOMPANYING NOTES.
31
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
FBL Variable Insurance Series Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a no-load, open-end diversified
management investment company and operates in the mutual fund industry. The Fund
currently consists of six portfolios (known as the Growth Common Stock, High
Grade Bond, High Yield Bond, Managed, Money Market and Blue Chip Portfolios).
Shares of the Fund are sold only to certain life insurance companies' separate
accounts to fund the benefits under variable insurance contracts issued by such
life insurance companies, including Farm Bureau Life Insurance Company (see NOTE
3).
All portfolios, other than the Money Market Portfolio, value their common
stocks, preferred stocks, corporate bonds, United States Treasury obligations
and mortgage-backed securities that are traded on any national exchange at the
last sale price on the day of valuation or, lacking any sales, at the mean
between the closing bid and asked prices. Investments traded in the
over-the-counter market are valued at the mean between the bid and asked prices
or yield equivalent as obtained from one or more dealers that make markets in
the securities. Investments for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Trustees. Short-term investments (including repurchase agreements) are valued at
market value, except that obligations maturing in 60 days or less are valued
using the amortized cost method of valuation described below with respect to the
Money Market Portfolio, which approximates market.
The Money Market Portfolio values investments at amortized cost, which
approximates market. Under the amortized cost method, a security is valued at
its cost on the date of purchase and thereafter is adjusted to reflect a
constant amortization to maturity of the difference between the principal amount
due at maturity and the cost of the investment to the portfolio.
The value of the underlying securities serving to collateralize repurchase
agreements is marked to market daily. Should the value of the underlying
securities decline, the seller would be required to provide the applicable
portfolio with additional securities so that the aggregate value of the
underlying securities was at least equal to the repurchase price. If a seller of
a repurchase agreement were to default, the affected portfolio might experience
losses in enforcing its rights. To minimize this risk, the investment adviser
(under the supervision of the Board of Trustees) will monitor the
creditworthiness of the seller of the repurchase agreement and must find such
creditworthiness satisfactory before a portfolio may enter into the repurchase
agreement.
The Fund records investment transactions generally one day after the trade
date. The identified cost basis has been used in determining the net realized
gain or loss from investment transactions and unrealized appreciation or
depreciation on investments. Dividend income is recorded on the ex-dividend date
and interest is recognized on an accrual basis. Discounts and premiums on
investments purchased are amortized over the life of the respective investments.
Dividends and distributions to shareholders are recorded on the record date.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets
32
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 December 31, 1995, the High Grade Bond Portfolio had net capital loss
carryforwards of approximately $31,000, which will expire from 1996 through
2003. During the year ended December 31, 1995, the High Grade Bond Portfolio had
net capital loss carryforwards of $8,355 that expired. As a result, $8,355 was
reclassified from accumulated undistributed net realized gain (loss) from
investment transactions to paid-in capital.
3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into agreements with FBL Investment Advisory Services,
Inc. ("FBL Investment") relating to the management of the portfolios and the
investment of their assets. Pursuant to these agreements, fees paid to FBL
Investment are as follows: (1) annual investment advisory and management fees,
which are based on each portfolio's daily net assets as follows: Growth Common
Stock Portfolio - 0.50%; High Grade Bond Portfolio - 0.30%; High Yield Bond
Portfolio - 0.50%; Managed Portfolio - 0.55%; Money Market Portfolio - 0.30%;
and Blue Chip Portfolio - 0.20%; and (2) 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.
The Fund has entered into an agreement with FBL Investment whereby FBL
Investment also serves as the principal underwriter and distributor of the
Fund's shares and as the Fund's shareholder service, transfer and dividend
disbursing agent. There are no additional fees associated with these services.
FBL Investment has agreed to reimburse the portfolios annually for total
expenses, excluding brokerage, interest, taxes and extraordinary expenses in
excess of 1.50% of each portfolio's average daily net assets. The amount
reimbursed, however, shall not exceed the amount of the investment advisory and
management fee paid by the portfolio for such period. During the year ended
December 31, 1995, FBL Investment further agreed to reimburse any portfolio, to
the extent that annual operating expenses, including the investment advisory
fee, exceed 0.55%.
Certain officers and trustees of the Fund are also officers of FBL
Investment and its indirect parent, Farm Bureau Life Insurance Company. At
December 31, 1995, all of the shares of each portfolio are owned by Farm Bureau
Life Insurance Company, Farm Bureau Life Variable Account and Farm Bureau Life
Annuity Account.
33
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS
The Fund has an unlimited number of shares of beneficial interest authorized
with no par value. Net assets as of December 31, 1995 consisted of:
<TABLE>
<CAPTION>
PORTFOLIO
------------------------------------------------------------------------
GROWTH HIGH
COMMON HIGH GRADE YIELD MONEY BLUE
STOCK BOND BOND MANAGED MARKET CHIP
----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paid-in capital................................ $14,674,257 $3,083,647 $4,829,597 $13,314,457 $3,158,573 $4,834,107
Accumulated undistributed net investment
income........................................ 2,962 3,413 741
Accumulated undistributed net realized gain
(loss) from investment transactions........... 383,515 (30,839) 6,817 267,505 (8)
Net unrealized appreciation (depreciation) of
investments................................... 1,234,497 155,588 (26,321) 901,942 1,829,964
----------- ---------- ---------- ----------- ---------- ----------
Net Assets..................................... $16,295,231 $3,208,396 $4,810,093 $14,487,317 $3,158,573 $6,664,804
----------- ---------- ---------- ----------- ---------- ----------
----------- ---------- ---------- ----------- ---------- ----------
</TABLE>
Transactions in shares of beneficial interest for each portfolio were as
follows:
<TABLE>
<CAPTION>
SHARES ISSUED IN
REINVESTMENT OF
DIVIDENDS AND
SHARES SOLD DISTRIBUTIONS SHARES REDEEMED NET INCREASE
--------------------- ---------------------- --------------------- ---------------------
PORTFOLIO SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------- --------- ---------- ----------- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Growth Common Stock.......... 281,715 $3,253,282 78,153 $ 960,501 56,399 $ 648,111 303,469 $3,565,672
High Grade Bond.............. 67,261 661,381 16,525 162,663 22,105 217,348 61,681 606,696
High Yield Bond.............. 151,202 1,473,718 33,048 321,812 135,449 1,330,400 48,801 465,130
Managed...................... 249,343 2,771,019 76,919 897,643 71,102 781,374 255,160 2,887,288
Money Market................. 4,079,456 4,079,456 22,654 22,654 3,601,351 3,601,351 500,759 500,759
Blue Chip.................... 126,819 2,376,704 4,762 98,331 15,781 294,156 115,800 2,180,879
Year ended December 31, 1994:
Growth Common Stock.......... 711,870 $7,979,985 57,563 $ 598,077 159,782 $1,808,371 609,651 $6,769,691
High Grade Bond.............. 119,560 1,179,789 10,697 103,559 100,157 977,814 30,100 305,534
High Yield Bond.............. 177,347 1,758,710 17,703 170,840 181,544 1,809,058 13,506 120,492
Managed...................... 660,426 7,285,225 76,787 764,030 191,953 2,114,173 545,260 5,935,082
Money Market................. 7,474,248 7,474,248 15,994 15,994 7,132,082 7,132,082 358,160 358,160
Blue Chip.................... 116,204 1,835,336 3,395 53,782 18,937 301,920 100,662 1,587,198
</TABLE>
34
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
For the period ended December 31, 1995, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. Government securities) by portfolio, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- ------------------------------------------------- ----------- ----------
<S> <C> <C>
Growth Common Stock.............................. $9,880,437 $9,563,949
High Grade Bond.................................. 1,103,737 366,867
High Yield Bond.................................. 1,567,644 1,275,180
Managed.......................................... 4,641,135 5,886,708
Blue Chip........................................ 1,910,900 23,429
</TABLE>
At December 31, 1995, 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>
Growth Common Stock........................... $ 1,436,242 $ (201,745) $ 1,234,497
High Grade Bond............................... 157,699 (2,111) 155,588
High Yield Bond............................... 164,977 (191,298) (26,321)
Managed....................................... 1,024,149 (122,207) 901,942
Blue Chip..................................... 1,861,858 (31,894) 1,829,964
</TABLE>
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income for the following portfolios are
declared daily and are payable on the last business day of the month as follows:
<TABLE>
<CAPTION>
HIGH GRADE HIGH YIELD MONEY
PAYABLE DATE BOND BOND MARKET
- ------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
January 31, 1995............................................ $ .0629 $ .0763 $ .0046
February 28, 1995........................................... .0633 .0775 .0040
March 31, 1995.............................................. .0636 .0774 .0047
April 28, 1995.............................................. .0591 .0673 .0042
May 31, 1995................................................ .0692 .0767 .0047
June 30, 1995............................................... .0651 .0716 .0045
July 31, 1995............................................... .0644 .0709 .0045
August 31, 1995............................................. .0639 .0700 .0044
September 29, 1995.......................................... .0616 .0661 .0041
October 31, 1995............................................ .0657 .0739 .0045
November 30, 1995........................................... .0638 .0717 .0043
December 29, 1995........................................... .0631 .0692 .0045
----------- ----------- -----------
Total dividends per share................................... $ .7657 $ .8686 $ .0530
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
35
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (CONTINUED)
In addition, dividends and distributions to shareholders from net investment
income and net realized gain on investment transactions were paid during the
year ended December 31, 1995, for the following portfolios:
ORDINARY INCOME DIVIDENDS:
<TABLE>
<CAPTION>
PERCENT
DIVIDEND QUALIFYING FOR
DECLARATION RECORD PAYABLE AMOUNT PER DEDUCTION BY
PORTFOLIO DATE DATE DATE SHARE CORPORATIONS
- -------------------------------------- ----------- --------- --------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Growth Common Stock................... 12/21/95 12/28/95 12/28/95 $ 0.5026 60%
Managed............................... 12/21/95 12/28/95 12/28/95 0.5913 60
Blue Chip............................. 12/21/95 12/28/95 12/28/95 0.3100 80
</TABLE>
CAPITAL GAINS DISTRIBUTIONS:
<TABLE>
<CAPTION>
DIVIDEND
DECLARATION RECORD PAYABLE AMOUNT PER
PORTFOLIO DATE DATE DATE SHARE
- -------------------------------------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Growth Common Stock................... 12/21/95 12/28/95 12/28/95 $ 0.2644
High Yield Bond....................... 12/21/95 12/28/95 12/28/95 0.1252
Managed............................... 12/21/95 12/28/95 12/28/95 0.1772
</TABLE>
The capital gains distributions related to the Growth Common Stock, High
Yield Bond and Managed Portfolios include net short-term realized gains of
$306,684 ($0.2449 per share), $55,202 ($0.1125 per share) and $179,529 ($0.1537
per share), respectively, that are taxable to shareholders as ordinary income
dividends.
36
<PAGE>
(This page has been left blank intentionally.)
37
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH
COMMON STOCK
PORTFOLIO
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................................... $ 10.39 $ 11.52 $ 10.05 $ 9.55 $ 8.65
Income from Investment Operations
Net investment income............................................. 0.55 0.48 0.63 0.46 0.51
Net gains or losses on securities (both realized and unrealized).. 2.13 (0.99) 2.10 0.54 0.75
---------- ---------- ---------- ---------- ----------
Total from investment operations.................................... 2.68 (0.51) 2.73 1.00 1.26
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)............................ (0.50) (0.36) (0.57) (0.50) (0.36)
Distributions (from capital gains)................................ (0.26) (0.11) (0.69)
Distributions in excess of net realized gains..................... (0.15)
---------- ---------- ---------- ---------- ----------
Total distributions................................................. (0.76) (0.62) (1.26) (0.50) (0.36)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.......................................... $ 12.31 $ 10.39 $ 11.52 $ 10.05 $ 9.55
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset value (1)................ 25.87% -4.43% 27.20% 10.46% 14.53%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)............................. $ 16,295 $ 10,603 $ 4,730 $ 3,017 $ 3,663
Ratio of net expenses to average net assets......................... 0.55% 0.55% 0.55% 0.55% 0.58%
Ratio of net income to average net assets........................... 4.78% 4.35% 5.41% 4.54% 5.23%
Portfolio turnover rate............................................. 98% 78% 81% 88% 117%
Information assuming no voluntary reimbursement or
waiver by FBL Investment of excess operating expenses
(see NOTE 3):
Per share net investment income..................................... $ 0.53 $ 0.46 $ 0.59 $ 0.41 $ 0.46
Ratio of expenses to average net assets............................. 0.72% 0.77% 0.89% 1.09% 1.07%
Amount reimbursed................................................... $ 22,306 $ 16,706 $ 13,353 $ 17,373 $ 12,733
</TABLE>
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
year.
(1) Total investment return is calculated assuming an intial investment made at
the net asset value at the beginning of the year, reinvestment of all
dividends and distributions at net asset value during the year, and
redemption on the last day of the year.
38
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO
YEAR ENDED DECEMBER 31, ----------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------- YEAR ENDED DECEMBER 31,
- ---------------------------------------------------------- ----------------------------------------------------------
1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.44 $ 10.23 $ 10.14 $ 10.15 $ 9.52 $ 9.32 $ 10.44 $ 9.92 $ 9.65 $ 8.47
0.77 0.76 0.77 0.83 0.86 0.87 0.91 0.95 0.98 1.04
0.54 (0.79) 0.09 (0.01) 0.63 0.49 (1.01) 0.58 0.27 1.18
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1.31 (0.03) 0.86 0.82 1.49 1.36 (0.10) 1.53 1.25 2.22
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(0.77) (0.76) (0.77) (0.83) (0.86) (0.87) (0.91) (0.95) (0.98) (1.04)
(0.12) (0.11) (0.06)
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(0.77) (0.76) (0.77) (0.83) (0.86) (0.99) (1.02) (1.01) (0.98) (1.04)
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 9.98 $ 9.44 $ 10.23 $ 10.14 $ 10.15 $ 9.69 $ 9.32 $ 10.44 $ 9.92 $ 9.65
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
14.26% -0.26% 8.74% 8.40% 16.42% 15.15% -1.01% 15.05% 13.39% 27.49%
$ 3,208 $ 2,452 $ 2,349 $ 3,704 $ 3,659 $ 4,810 $ 4,172 $ 4,536 $ 4,015 $ 3,965
0.55% 0.55% 0.55% 0.55% 0.43% 0.55% 0.55% 0.55% 0.55% 0.43%
7.81% 7.76% 7.58% 8.19% 8.82% 8.96% 9.17% 9.25% 9.88% 11.32%
14% 15% 38% 16% 38% 32% 10% 58% 35% 76%
$ 0.74 $ 0.73 $ 0.76 $ 0.80 $ 0.83 $ 0.84 $ 0.88 $ 0.92 $ 0.88 $ 0.99
0.84% 0.80% 0.72% 0.79% 0.73% 0.88% 0.84% 0.85% 0.99% 0.93%
$ 8,255 $ 6,207 $ 5,343 $ 9,004 $ 10,458 $ 15,105 $ 12,667 $ 12,872 $ 17,310 $ 18,111
</TABLE>
39
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................................... $ 9.93 $ 11.33 $ 10.06 $ 9.27 $ 8.99
Income from Investment Operations
Net investment income............................................. 0.65 0.66 0.72 0.69 0.75
Net gains or losses on securities (both realized and unrealized).. 1.90 (1.22) 1.57 0.77 0.39
---------- ---------- ---------- ---------- ----------
Total from investment operations.................................... 2.55 (0.56) 2.29 1.46 1.14
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)............................ (0.59) (0.54) (0.63) (0.67) (0.86)
Distributions (from capital gains)................................ (0.18) (0.23) (0.39)
Distributions in excess of net realized gains.....................
(0.07)
---------- ---------- ---------- ---------- ----------
Total distributions................................................. (0.77) (0.84) (1.02) (0.67) (0.86)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.......................................... $ 11.71 $ 9.93 $ 11.33 $ 10.06 $ 9.27
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset value (1)................ 25.69% -4.96% 22.71% 15.72% 12.69%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)............................. $ 14,487 $ 9,758 $ 4,951 $ 3,019 $ 2,633
Ratio of net expenses to average net assets......................... 0.55% 0.55% 0.55% 0.55% 0.47%
Ratio of net income to average net assets........................... 5.80% 6.23% 6.23% 7.00% 7.97%
Portfolio turnover rate............................................. 48% 59% 59% 60% 40%
Information assuming no voluntary reimbursement or waiver by FBL
Investment of excess operating expenses (see NOTE 3):
Per share net investment income..................................... $ 0.62 $ 0.63 $ 0.67 $ 0.64 $ 0.69
Ratio of expenses to average net assets............................. 0.77% 0.80% 0.91% 1.13% 1.03%
Amount reimbursed................................................... $ 26,008 $ 19,147 $ 15,076 $ 16,480 $ 17,024
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO
YEAR ENDED DECEMBER 31, ----------------------------------------------------------
PORTFOLIO
- ---------------------------------------------------------- YEAR ENDED DECEMBER 31,
- ---------------------------------------------------------- ----------------------------------------------------------
1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 15.82 $ 15.67 $ 13.96 $ 12.91 $ 10.51
0.05 0.04 0.03 0.03 0.05 0.39 0.34 0.29 0.29 0.31
4.80 0.07 1.72 1.05 2.65
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
0.05 0.04 0.03 0.03 0.05 5.19 0.41 2.01 1.34 2.96
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(0.05) (0.04) (0.03) (0.03) (0.05) (0.31) (0.26) (0.30) (0.29) (0.31)
(.25)
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(0.05) (0.04) (0.03) (0.03) (0.05) (0.31) (0.26) (0.30) (0.29) (0.56)
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 20.70 $ 15.82 $ 15.67 $ 13.96 $ 12.91
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
5.47% 3.68% 2.68% 3.28% 5.77% 32.81% 2.65% 14.36% 10.38% 28.20%
$ 3,159 $ 2,658 $ 2,300 $ 2,530 $ 2,798 $ 6,665 $ 3,262 $ 1,654 $ 1,502 $ 1,352
0.55% 0.55% 0.55% 0.55% 0.48% 0.55% 0.55% 0.55% 0.55% 0.71%
5.27% 3.63% 2.65% 3.30% 5.60% 2.07% 2.19% 1.92% 2.13% 2.57%
0% 0% 0% 0% 0% 1% 0% 0% 0% 7%
$ 0.05 $ 0.04 $ 0.02 $ 0.03 $ 0.05 $ 0.38 $ 0.30 $ 0.24 $ 0.22 $ 0.29
0.90% 0.82% 0.79% 0.93% 0.78% 0.59% 0.81% 0.89% 1.06% 0.91%
$ 9,816 $ 7,157 $ 5,838 $ 10,168 $ 8,232 $ 1,952 $ 6,360 $ 5,495 $ 7,320 $ 2,556
</TABLE>
41
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
FBL Variable Insurance Series Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of FBL Variable Insurance Series Fund
(comprising, respectively, the Growth Common Stock, High Grade Bond, High Yield
Bond, Managed, Money Market and Blue Chip Portfolios) as of December 31, 1995,
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
December 31, 1995, 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 FBL Variable Insurance Series
Fund at December 31, 1995, 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
February 2, 1996
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The following financial statements are filed as part of this
Registration Statement.
Included in Part A - Prospectus:
Financial Highlights
Included in Part B - Statement of Additional Information:
Report of Independent Auditors
Statements of Assets and Liabilities as of
December 31, 1995
Schedules of Investments as of December 31, 1995
Statements of Operations for the year ended
December 31, 1995
Statements of Changes in Net Assets for the year ended
December 31, 1995
Statements of Changes in Net Assets for the year ended
December 31, 1994
Notes to Financial Statements, December 31, 1995
(b) Exhibits:
1. (a) Declaration of Trust.*/
(b) Amendment to Declaration of Trust.**/
(c) Amendment to Declaration of Trust.***/
- --------------------
*/ Incorporated herein by reference to the initial Form N-1A Registration
Statement (File No. 33-12791) filed with the Securities and Exchange Commission
on March 20, 1987.
**/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Registration Statement (File No. 33-12791) filed with the Securities and
Exchange Commission on August 28, 1987.
***/ Incorporated herein by reference to Post-Effective Amendment No. 6 to the
N-1A Registration Statement (File No. 33-12791) filed with the Securities and
Exchange Commission on April 29, 1991.
C-1
<PAGE>
(d) Amendments to Declaration of Trust.****/
2. By-Laws of Registrant.*/
3. None.
4. None.
5. (a) Investment Advisory and Management Services Agreement.***/
(b) Amendment to Investment Advisory Management Services
Agreement.***/
6. Underwriting Agreement between Registrant and FBL Investment Advisory
Services, Inc.***/
7. None.
8. Custodian Agreement between Registrant and Bankers Trust Company Des
Moines, N.A.*****/
9. (a) Dividend Disbursing and Transfer Agent Agreement between
Registrant and FBL Investment Advisory Services, Inc.***/
(b) Fidelity Bond Joint Insureds Agreement.***/
(c) Joint Insureds DO & EO Agreement.
(d) (i) Subscription Agreement.***/
(ii) Additional Subscription Agreement.***/
(iii) Subscription Agreement for the Money Market
Portfolio.***/
(iv) Subscription Agreement for the Blue Chip Portfolio. ***/
- ------------------------
****/ Incorporated herein by reference to Post-Effective Amendment No. 7 to
the N-1A Registration Statement (File No. 33-12791) filed with the Securities
and Exchange Commission on April 29, 1992.
*****/ Incorporated herein by reference to Post-Effective Amendment No. 9 to
the N-1A Registration Statement (File No. 33-12791) filed with the Securities
and Exchange Commission on April 28, 1994.
C-2
<PAGE>
(e) Participation Agreement.******/
(f) Accounting Services Agreement.***/
10. Consent of Sutherland, Asbill & Brennan.
11. Consent of Ernst & Young LLP.
12. None.
13. See Exhibits 9(d)(i) and 9(d)(ii).
14. None.
15. None.
16. Schedule for Computation of Performance Calculations.******/
27.1 Growth Common Stock Portfolio Financial Data Schedule
27.3 High Grade Bond Portfolio Financial Data Schedule
27.4 High Yield Bond Portfolio Financial Data Schedule
27.5 Managed Portfolio Financial Data Schedule
27.6 Money Market Portfolio Financial Data Schedule
27.7 Blue Chip Portfolio Financial Data Schedule
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
No person is controlled by the Registrant. All of the outstanding
common stock of the Registrant is, or will be, owned by Farm Bureau Life
Insurance Company ("Farm Bureau"), an Iowa life insurance corporation, Farm
Bureau Life Variable Account and Farm Bureau Life Annuity Account, separate
accounts of Farm Bureau which are registered as unit investment trusts under the
Investment Company Act of 1940 (File Nos. 811-5068/33-12789 and
811-7974/33-67538). Farm Bureau is owned by FBL Financial Group, Inc. (formerly
Farm Bureau Multi-State Services, Inc.), an Iowa corporation. 63.86% of the
outstanding voting shares of FBL Financial Group, Inc. is owned by Iowa Farm
Bureau Federation. Iowa Farm Bureau Federation is an Iowa not-for-profit
corporation, the members of which are county farm bureau organizations and their
individual members. Therefore, various companies controlled by Iowa Farm Bureau
Federation or otherwise affiliated with Farm Bureau, may be deemed to be under
common control with the
- ------------------------
******/ Incorporated herein by reference to Post-Effective Amendment No. 3 to
the N-1A Registration Statement (File No. 33-12791) filed with the Securities
and Exchange Commission on April 30, 1990.
***/ Incorporated herein by reference to Post-Effective Amendment No. 6 to
the N-1A Registration Statement (File No. 33-12791) filed with the Securities
and Exchange Commission on April 29, 1991.
C-3
<PAGE>
Registrant. These companies, together with the identity of the owners of their
common stock, are set forth on a diagram incorporated herein by reference to
item 26 of post-effective amendment number 3 to the Form N-4 registration
statement filed with the Commission by Farm Bureau on May 1, 1996.
Item 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class As of May 1, 1996
---------------- ------------------------
<S> <C>
Money Market Portfolio 2
Growth Common Stock Portfolio 2
High Grade Bond Portfolio 2
Managed Portfolio 2
High Yield Bond Portfolio 2
Blue Chip Portfolio 2
</TABLE>
Item 27. INDEMNIFICATION.
See Article XI, Section 2 of the Registrant's Declaration of Trust,
filed as Exhibit 1 to this Registration Statement, which provision is
incorporated herein by reference to post-effective amendment No. 1 filed on
August 28, 1987.
The Investment Advisory and Management Services Agreement between the
Registrant and the FBL Investment Advisory Services, Inc. ("Adviser") provides
that, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties thereunder on the part of the
Adviser, the Adviser shall not be liable for any error of judgment or mistake of
law, or for any loss suffered by the Fund in connection with the matters to
which such Agreement relates.
In addition, the Registrant maintains a directors and officers "errors
and omissions" liability insurance policy under which the Registrant and its
trustees and officers are named insureds.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceed
C-4
<PAGE>
ing) is asserted by such trustee, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act, and Registrant will be
governed by the final adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Registrant's investment adviser is FBL Investment Advisory Services,
Inc. ("Adviser"). In addition to its services to Registrant as investment
adviser, underwriter and transfer and dividend disbursing agent, all as set
forth in parts A and B of this Registration Statement, the Adviser acts as
adviser, underwriter, and shareholder service, transfer and dividend disbursing
agent for FBL Money Market Fund, Inc., a diversified open-end management
investment company, and FBL Series Fund, Inc., a diversified open-end series
management investment company.
The principal occupations of the principal executive officers and
directors of the Adviser are their services as officers, directors and/or
employees of FBL Financial Group, Inc. and the Iowa Farm Bureau
Federation and/or its affiliates as disclosed below. The address of FBL
Financial Group, Inc. and the Federation and its affiliates is 5400
University Avenue, West Des Moines, Iowa 50266.
Name and Position(s)
With Adviser
Principal Occupations
- --------------------- ---------------------
Stephen M. Morain Incorporated herein by reference to the Statement
Senior Vice President of Additional Information (Part B) of this Registration
General Counsel Statement.
and Director
William J. Oddy Incorporated herein by reference to the Statement
Vice President, Chief of Additional Information (Part B) of this Registration
Operating Officer, Statement.
Assistant General
Manager and Director
Dennis M. Marker Incorporated herein by reference to the Statement
Investment Vice of Additional Information (Part B) of this Registration
President, Statement.
Administration,
Secretary and Director
C-5
<PAGE>
Richard D. Warming Incorporated herein by reference to the Statement of
President and Director Additional Information (Part B) of this Registration
Statement.
Thomas R. Gibson Incorporated herein by reference to the Statement of
Executive Vice Additional Information (Part B) of this Registration
President, General Statement.
Manager and Director
Timothy J. Hoffman Incorporated herein by reference to the Statement of
Vice President, Chief Additional Information (Part B) of this Registration
Marketing Officer and Statement.
Director
James W. Noyce Incorporated herein by reference to the Statement of
Vice President, Chief Additional Information (Part B) of this Registration
Financial Officer, Statement.
Treasurer and Director
Sue A. Cornick Incorporated herein by reference to the Statement of
Market Conduct and Additional Information (Part B) of this Registration
Mutual Funds Vice Statement.
President and Assistant
Secretary
Kristi Rojohn Incorporated herein by reference to the Statement of
Senior Compliance Additional Information (Part B) of this Registration
Assistant and Assistant Statement.
Secretary
Elaine A. Followwill Incorporated herein by reference to the Statement of
Compliance Assistant Additional Information (Part B) of this Registration
and Assistant Secretary Statement.
Roger Grefe, Investment Management Vice President, Farm Bureau
Investment Management Mutual Insurance Company, FBL Insurance Brokerage,
Vice President Inc., Farm Bureau Life Insurance Company and Western
Farm Bureau Life Insurance Company. He holds other
positions with various affiliates of the foregoing.
Lou Ann Sandburg, Investment Vice President, Securities, Farm Bureau
Investment Vice Mutual Insurance Company, FBL Insurance Brokerage,
President, Securities Inc., Farm Bureau Life Insurance Company and Western
Farm Bureau Life Insurance Company. She holds other
positions with various affiliates of the foregoing.
C-6
<PAGE>
Robert Rummelhart, Fixed-Income Vice President, Farm Bureau Mutual
Fixed-Income Vice Insurance Company, FBL Insurance Brokerage, Inc., Farm
President Bureau Life Insurance Company and Western Farm Bureau
Life Insurance Company. He holds other positions with
various affiliates of the foregoing.
Joel H. Klisart Investment Vice President, Real Estate, Farm Bureau
Investment Vice Mutual Insurance Company, FBL Insurance Brokerage,
President, Real Estate Inc., Farm Bureau Life Insurance Company and Western
Farm Bureau Life Insurance Company. He holds other
positions with various affiliates of the foregoing.
Roger PJ Soener Real Estate Vice President, Farm Bureau Mutual
Real Estate Vice Insurance Company, FBL Insurance Brokerage, Inc., Farm
President Bureau Life Insurance Company and Western Farm Bureau
Life Insurance Company. He holds other positions with
various affiliates of the foregoing.
Stephen G. Hunter Alternative Investment Manager, FBL Investment
Alternative Advisory Services, Inc.
Investment Manager
Kathleen E. Kruidenier Manager, Investment Services, FBL Investment Advisory
Manager, Investment Services, Inc.
Services
Sharon M. Jerdee Investment Accounting Manager, FBL Investment Advisory
Investment Accounting Service, Inc.
Manager
Charles T. Happel Portfolio Manager, FBL Marketing Services, Inc.
Portfolio Manager
Laura Kellen Beebe Portfolio Manager, FBL Marketing Services, Inc.
Portfolio Manager
C-7
<PAGE>
Item 29. PRINCIPAL UNDERWRITERS.
(a) FBL Investment Advisory Services, Inc., the principal underwriter
for Registrant, also acts as the investment adviser, principal
underwriter and transfer and dividend disbursing agent for FBL
Money Market Fund, Inc., and FBL Series Fund, Inc., both
diversified open-end management investment companies.
(b) The principal business address of each director and officer of
the principal underwriter is 5400 University Avenue, West Des
Moines, Iowa 50266. See Item 28 for information on the officers
of FBL Investment Advisory Services, Inc.
(c) Inapplicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules thereunder
will be maintained at the offices of the Registrant and the offices of the
Adviser, FBL Investment Advisory Services, Inc., 5400 University Avenue, West
Des Moines, Iowa 50266.
Item 31. MANAGEMENT SERVICES.
Inapplicable.
Item 32. UNDERTAKINGS.
The Registrant undertakes to furnish, upon request and without charge,
to each person to whom a prospectus is delivered a copy of the Registrant's
latest annual report to shareholders.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that this amendment to its
Registration Statement meets all of the requirements for effectiveness of
paragraph (b) of Rule 485, and the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of West Des Moines and State of Iowa, on the 26th day of
April 1, 1996.
FBL VARIABLE INSURANCE SERIES FUND
By /s/ Edward M. Wiederstein
-----------------------------------
Edward M. Wiederstein
President
Pursuant to the requirements of the Securities Act of 1933, this Post-effective
Amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
/s/ Edward M. Wiederstein April 26, 1996
- --------------------------- President and Trustee ---------------
Edward M. Wiederstein (Principal Executive Officer) (dated)
/s/ Eugene R. Maahs Senior Vice President April 26, 1996
- --------------------------- Secretary-Treasurer and ---------------
Eugene R. Maahs Trustee (Principal Financial (dated)
and Accounting Officer)
/s/ Stephen M. Morain Senior Vice President General April 26, 1996
- --------------------------- Counsel, Assistant Secretary ---------------
Stephen M. Morain and Trustee (dated)
Trustee April 26, 1996
- --------------------------- ---------------
Donald G. Bartling* (dated)
<PAGE>
Trustee April 26, 1996
- --------------------------- ---------------
John R. Graham* (dated)
Trustee April 26, 1996
- --------------------------- ---------------
Erwin H. Johnson* (dated)
Trustee April 26, 1996
- --------------------------- ---------------
Ann Jorgenson* (dated)
Trustee April 26, 1996
- --------------------------- ---------------
Dale W. Nelson* (dated)
Trustee April 26, 1996
- ---------------------- ---------------
Curtis C. Pietz* (dated)
*By /s/ Stephen M. Morain Attorney-in-Fact, pursuant to Power of Attorney.
---------------------
Stephen M. Morain
<PAGE>
DECEMBER 31, 1995
EXHIBIT A
TO THE
DO&EO JOINT INSUREDS AGREEMENT DATED DECEMBER 31, 1995
For Policy Period, 12:01 a.m., December 31, 1995, through 12:01 a.m., December
31, 1996.
<TABLE>
<CAPTION>
PARTY PREMIUM %
- ------------------------------------------------------------ ---------- -------
<S> <C> <C>
FBL Investment Advisory Services, Inc....................... $12,899.62 66.59
FBL Marketing Services, Inc................................. 1,039.25 5.36
FBL Variable Insurance Series Fund.......................... 1,304.19 6.73
FBL Series Fund, Inc........................................ 3,477.84 17.95
FBL Money Market Fund, Inc.................................. 652.10 3.37
---------- -------
$19,373.00 100.00
---------- -------
---------- -------
</TABLE>
Attest: FBL INVESTMENT ADVISORY SERVICES,
INC.
/s/ Dennis M. Marker By: /s/ Richard D. Warming
- ----------------------------------- -----------------------------------
Secretary: Dennis M. Marker Richard D. Warming
Attest: FBL MARKETING SERVICES, INC.
/s/ Dennis M. Marker By: /s/ Timothy J. Hoffman
- ----------------------------------- -----------------------------------
Secretary: Dennis M. Marker Timothy J. Hoffman
Attest: FBL VARIABLE INSURANCE FUND
/s/ Eugene R. Maahs By: /s/ Edward M. Wiederstein
- ----------------------------------- -----------------------------------
Secretary: Eugene R. Maahs Edward M. Wiederstein
Attest: FBL SERIES FUND, INC.
/s/ Eugene R. Maahs By: /s/ Edward M. Wiederstein
- ----------------------------------- -----------------------------------
Secretary: Eugene R. Maahs Edward M. Wiederstein
Attest: FBL MONEY MARKET FUND, INC.
/s/ Eugene R. Maahs By: /s/ Edward M. Wiederstein
- ----------------------------------- -----------------------------------
Secretary: Eugene R. Maahs Edward M. Wiederstein
<PAGE>
EXHIBIT 10
Consent of Sutherland, Asbill & Brennan
<PAGE>
[SUTHERLAND, ASBILL & BRENNAN LETTERHEAD]
April 22, 1996
FBL Variable Insurance Series Fund
5400 University Avenue
West Des Moines, Iowa 50266
RE: FBL VARIABLE INSURANCE SERIES FUND
FILE NO. 33-12791
Gentlemen:
We hereby consent to the reference to our name under the caption
"Legal Matters" in the Prospectus and the Statement of Additional Information,
filed as part of the Post-Effective Amendment No. 11 to the N-1A Registration
Statement for the FBL Variable Insurance Series Fund. In giving this consent,
we do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ Stephen E. Roth
---------------------------------------
Stephen E. Roth
<PAGE>
EXHIBIT 11
Consent of Ernst & Young LLP
<PAGE>
[Letterhead]
Consent of Independent Auditors
The Board of Trustees and Shareholders
FBL Variable Insurance Series Fund
We consent to the references to our firm under the captions "Financial
Highlights" and "General Information -- Independent Auditors" in the
Prospectus for FBL Variable Insurance Series Fund in Part A and "Other
Information -- Independent Auditors" in Part B and to the incorporation by
reference of our report dated February 3, 1995 on the financial statements of
FBL Variable Insurance Series Fund, in the Post-Effective Amendment No. 11 to
Form N-1A Registration Statement under the Securities Act of 1933 (No.
33-12791) and in this Amendment No. 12 to the Registration Statement under
the Investment Company Act of 1940 (No. 811-5069).
/s/ Ernst & Young LLP
Des Moines, Iowa
April 24, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> VUL GROWTH COMMON STOCK
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 14845260
<INVESTMENTS-AT-VALUE> 16079757
<RECEIVABLES> 252936
<ASSETS-OTHER> 22520
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16355213
<PAYABLE-FOR-SECURITIES> 53138
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6844
<TOTAL-LIABILITIES> 59982
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14674257
<SHARES-COMMON-STOCK> 1323819
<SHARES-COMMON-PRIOR> 1020350
<ACCUMULATED-NII-CURRENT> 2962
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 383515
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1234497
<NET-ASSETS> 16295231
<DIVIDEND-INCOME> 425724
<INTEREST-INCOME> 275272
<OTHER-INCOME> 0
<EXPENSES-NET> 72356
<NET-INVESTMENT-INCOME> 628640
<REALIZED-GAINS-CURRENT> 858654
<APPREC-INCREASE-CURRENT> 1599431
<NET-CHANGE-FROM-OPS> 3086725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 281715
<NUMBER-OF-SHARES-REDEEMED> 56399
<SHARES-REINVESTED> 78153
<NET-CHANGE-IN-ASSETS> 5691895
<ACCUMULATED-NII-PRIOR> 3720
<ACCUMULATED-GAINS-PRIOR> 144035
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 65647
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 94662
<AVERAGE-NET-ASSETS> 13165402
<PER-SHARE-NAV-BEGIN> 10.39
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 2.13
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> (0.26)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.31
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> VUL HIGH GRADE BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3000641
<INVESTMENTS-AT-VALUE> 3156229
<RECEIVABLES> 53244
<ASSETS-OTHER> 4644
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3214117
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5721
<TOTAL-LIABILITIES> 5721
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3083647
<SHARES-COMMON-STOCK> 321363
<SHARES-COMMON-PRIOR> 259682
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (30839)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 155588
<NET-ASSETS> 3208396
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 236768
<OTHER-INCOME> 0
<EXPENSES-NET> 15547
<NET-INVESTMENT-INCOME> 221221
<REALIZED-GAINS-CURRENT> (1090)
<APPREC-INCREASE-CURRENT> 150916
<NET-CHANGE-FROM-OPS> 371047
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 221221
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 67261
<NUMBER-OF-SHARES-REDEEMED> 22105
<SHARES-REINVESTED> 16525
<NET-CHANGE-IN-ASSETS> 756522
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (38104)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8481
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23802
<AVERAGE-NET-ASSETS> 2834640
<PER-SHARE-NAV-BEGIN> 9.44
<PER-SHARE-NII> 0.77
<PER-SHARE-GAIN-APPREC> 0.54
<PER-SHARE-DIVIDEND> (0.77)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.98
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> VUL HIGH YIELD BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4833875
<INVESTMENTS-AT-VALUE> 4807554
<RECEIVABLES> 97818
<ASSETS-OTHER> 10842
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4916214
<PAYABLE-FOR-SECURITIES> 100415
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5706
<TOTAL-LIABILITIES> 106121
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4829597
<SHARES-COMMON-STOCK> 496603
<SHARES-COMMON-PRIOR> 447802
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6817
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (26321)
<NET-ASSETS> 4810093
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 439229
<OTHER-INCOME> 0
<EXPENSES-NET> 25406
<NET-INVESTMENT-INCOME> 413823
<REALIZED-GAINS-CURRENT> 66905
<APPREC-INCREASE-CURRENT> 167210
<NET-CHANGE-FROM-OPS> 647938
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (413823)
<DISTRIBUTIONS-OF-GAINS> (61458)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 151202
<NUMBER-OF-SHARES-REDEEMED> 135449
<SHARES-REINVESTED> 33048
<NET-CHANGE-IN-ASSETS> 637787
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1370
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23073
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 40511
<AVERAGE-NET-ASSETS> 4627293
<PER-SHARE-NAV-BEGIN> 9.32
<PER-SHARE-NII> 0.87
<PER-SHARE-GAIN-APPREC> 0.49
<PER-SHARE-DIVIDEND> (0.87)
<PER-SHARE-DISTRIBUTIONS> (0.12)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.69
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> VUL MANAGED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 13520382
<INVESTMENTS-AT-VALUE> 14422324
<RECEIVABLES> 87552
<ASSETS-OTHER> 547
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14510423
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23106
<TOTAL-LIABILITIES> 23106
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13314457
<SHARES-COMMON-STOCK> 1237511
<SHARES-COMMON-PRIOR> 982351
<ACCUMULATED-NII-CURRENT> 3413
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 267505
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 901942
<NET-ASSETS> 14487317
<DIVIDEND-INCOME> 453506
<INTEREST-INCOME> 303889
<OTHER-INCOME> 0
<EXPENSES-NET> 65457
<NET-INVESTMENT-INCOME> 691938
<REALIZED-GAINS-CURRENT> 543441
<APPREC-INCREASE-CURRENT> 1503900
<NET-CHANGE-FROM-OPS> 2739279
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 249343
<NUMBER-OF-SHARES-REDEEMED> 71102
<SHARES-REINVESTED> 76919
<NET-CHANGE-IN-ASSETS> 4728924
<ACCUMULATED-NII-PRIOR> 2140
<ACCUMULATED-GAINS-PRIOR> (68958)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 65457
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 91465
<AVERAGE-NET-ASSETS> 11933929
<PER-SHARE-NAV-BEGIN> 9.93
<PER-SHARE-NII> 0.65
<PER-SHARE-GAIN-APPREC> 1.90
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> (0.18)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.71
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> VUL MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3091161
<INVESTMENTS-AT-VALUE> 3091161
<RECEIVABLES> 4033
<ASSETS-OTHER> 69320
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3164514
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5941
<TOTAL-LIABILITIES> 5941
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3158573
<SHARES-COMMON-STOCK> 3158573
<SHARES-COMMON-PRIOR> 2657814
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3158573
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 158411
<OTHER-INCOME> 0
<EXPENSES-NET> 14759
<NET-INVESTMENT-INCOME> 143652
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 143652
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 143652
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4079456
<NUMBER-OF-SHARES-REDEEMED> 3601351
<SHARES-REINVESTED> 22654
<NET-CHANGE-IN-ASSETS> 500759
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8050
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24575
<AVERAGE-NET-ASSETS> 2690823
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> VUL BLUE CHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4779340
<INVESTMENTS-AT-VALUE> 6609304
<RECEIVABLES> 10609
<ASSETS-OTHER> 51922
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6671835
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7031
<TOTAL-LIABILITIES> 7031
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4834107
<SHARES-COMMON-STOCK> 321986
<SHARES-COMMON-PRIOR> 206186
<ACCUMULATED-NII-CURRENT> 741
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1829964
<NET-ASSETS> 6664804
<DIVIDEND-INCOME> 99681
<INTEREST-INCOME> 25388
<OTHER-INCOME> 0
<EXPENSES-NET> 26216
<NET-INVESTMENT-INCOME> 98853
<REALIZED-GAINS-CURRENT> (9)
<APPREC-INCREASE-CURRENT> 1221621
<NET-CHANGE-FROM-OPS> 1320465
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 126819
<NUMBER-OF-SHARES-REDEEMED> 15781
<SHARES-REINVESTED> 4762
<NET-CHANGE-IN-ASSETS> 3403013
<ACCUMULATED-NII-PRIOR> 219
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9533
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28168
<AVERAGE-NET-ASSETS> 4779588
<PER-SHARE-NAV-BEGIN> 15.82
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> 4.80
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.70
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
