<PAGE>
-----------------
Farm Bureau
Financial Services
FBL Variable Insurance
Series Fund
[LOGO]
ANNUAL REPORT
DECEMBER 31, 1996
INVESTMENT MANAGER AND
PRINCIPAL UNDERWRITER
FBL INVESTMENT ADVISORY
SERVICES, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IA 50266
1-800-247-4170 (OUTSIDE IOWA)
1-800-422-3175 (IN IOWA)
225-5586 (DES MOINES)
FARM BUREAU LIFE
INSURANCE COMPANY
FARM BUREAU
MUTUAL FUNDS
5400 UNIVERSITY
AVENUE [LOGO]
WEST DES MOINES, This report is not to be distributed unless
IOWA 50266 [LOGO] preceded or accompanied by a prospectus.
737-525 (96)
<PAGE>
PRESIDENT'S LETTER
Dear Shareholder,
1996 was a good year - better than expected on almost every front: inflation
surprises were on the downside, unemployment was very low and bond yields rose
substantially (even though well off the yearly highs). All seems to be well, but
we do wonder why personal bankruptcies are at record levels.
The equity markets continue to confound the few remaining bears, reaching
unprecedented levels by most valuation markers. The month of November witnessed
the most remarkable stock market action in the memory of mankind as the Dow
Jones Industrial Average (DJIA) gained 8.2% in valuation. This surge capped-off
an otherwise strong year, which also came on the heels of a powerful (+37.4%)
1995 performance. Consecutive years of such strong equity market performance
have been historically infrequent, and subsequent years have tended to be
subpar. But as this market cycle has broken every other rule, who would bet
against it in 1997?
Our greatest concern is, and has been, related to the expectations of this
bull market's participants. That the average mutual fund investor is
anticipating a continuation of returns in excess of long-term norms is well
documented. It's not that these folks shouldn't own equity funds, they should.
However, they should own equities with an awareness of how market performance
tends to regress toward its long-term mean and what that may imply for them.
The S&P 500 produced a total return of over 16% per year for the 15-year
period ended December 31, 1964. Expectations then, like now, ran high. For the
subsequent 15 years ending December 31, 1979, the S&P generated only a 5.6%
compounded annual return. Even that performance didn't make you a fool to own
stocks; stocks still outperformed bonds over the 15-year period. But such weak
results probably spoiled some plans for early retirement.
At the beginning of 1965, the "long-term" (dating back to 1926) performance
record for stocks was 10.4%, today it is 10.7%. By underperforming (at times
painfully) in the late '60s and through the '70s, the market regressed from 16%
back toward the "roughly 10%" mean.
Today, stocks still make sense for the true long-term investor, but if you
are counting on a continuation of the 16%+ average over the past fifteen years
to make your retirement plan work, you may want to review your budget and look
for ways to increase your annual contributions. If returns stay strong, that's
great. But it may be safer to plan for a more tepid pace of growth.
We urge you to make your asset allocation decisions based on long-term
market averages, not on recent history (contact your registered representative
for a copy of our "Keys to Investing" brochure). Mutual fund investors have
largely ignored bonds over the past few years. Perhaps, you should also consider
the risk reduction benefits utilizing fixed-income securities, including high
yield bonds, which offer unique diversification characteristics (relatively low
correlation with either stocks or high quality bonds).
For the actively managed FBL Variable Insurance Series Fund portfolios
(other than the passive Blue Chip Portfolio) we constantly assess the securities
held to ensure that valuations are reasonable. In
2
<PAGE>
so doing, we seek to produce attractive risk-adjusted performance and create
lasting value for our shareholders. The following paragraphs describe how we are
currently striking a balance between risk and potential return for the various
portfolios:
VALUE GROWTH: The Value Growth Portfolio benefitted from its above-average
exposure to the financial sector. Portfolio gains were led by many of our
financial holdings such as General Growth Properties, a real estate investment
trust, and our overweighted positions in the following bank stocks: Centennial
Bancorp, CU Bancorp and Community First Bankshares. These stocks represented
approximately 15% of the portfolio assets. We continue to favor smaller bank
holding companies that are likely to benefit from the merger and consolidation
activity in this industry. Also, we have added to our positions in healthcare
(R.P. Scherer) and convenience stores (Casey's General Stores). Our goal is to
be invested in stocks which have appreciation potential at an acceptable level
of risk.
HIGH GRADE BOND: U.S. Treasury yields increased dramatically over the past
year. For example, the 2-year, 10-year and 30-year Treasury issues yielded
5.15%, 5.57% and 5.95%, respectively, as of December 29, 1995, but as of
December 31, 1996, were 5.87%, 6.42% and 6.64%.
In addition, corporate spreads remain at historically low levels, suggesting
that investors are not being well compensated for taking on the credit and
market risk inherent in corporate bonds. Because of this, we will probably look
to reduce the Portfolio's overall exposure to corporate bonds and increase its
holdings in mortgage-backed and/or Treasury issues.
The Portfolio continues to hold a significant portion of its assets in
high-coupon, callable bonds that offer attractive, incremental yields relative
to similar non-callable issues. Due to their call features, these types of
corporate issues tend to go up in price less than non-callable issues when
interest rates drop; and conversely, due to their incremental yield, tend to go
down less than non-callable issues when interest rates rise. Portfolio returns
should continue to lag other, more aggressive funds in both up and down markets.
HIGH YIELD BOND: During the past year, the high yield bond market
outperformed the high grade corporate bond market.
Fundamental and technical factors both worked in favor of the high yield
bond market over the course of the year. On the fundamental side, an overall
healthy economy and improvement in overall market credit quality resulted in a
very low rate of actual defaults in the high yield bond market during 1996. On
the technical side, an increased demand for high yield issues allowed the market
to easily absorb new issuance, which has resulted in a narrowing of the spread
on high yield issues.
At the present time, the yield pick-up on high yield issues is near
historically low levels, which means there is little cushion to absorb any
potential negative surprises that may occur in this market. Because of this, we
feel a more aggressive stance is not prudent at this time, and the composition
of the Portfolio will probably not be dramatically altered going forward.
MANAGED: The Managed Portfolio continues to seek securities offering high
income with modest growth potential. This Portfolio uses a value philosophy, but
concentrates on securities which produce an income stream twice that of the S&P
500. Currently, the S&P 500 is yielding a minuscule 1.9%. We achieve higher
income by investing in a mixture of high dividend-paying stocks, preferreds,
convertibles and corporate bonds.
We have added to our convertible securities in the banking sector. We
continue to find value in owning the convertible securities of smaller bank
holding companies, as these securities are available
3
<PAGE>
with current yields ranging from 4% - 6%, in addition to their attractive upside
potential. Our overweighted positions in General Growth Properties (REIT) and
U.S. Surgical (healthcare) have aided portfolio performance as these stocks have
recently made new highs. We continue to seek out lower-risk, high-return
investment opportunities.
MONEY MARKET: During 1996, the money markets played out a number of
scenarios based on expectations of what the Fed would do. In January, the
Federal Reserve eased the Fed funds rate 25 basis points, and it was anticipated
we would see another easing in the spring. However, as strong employment numbers
were released, the markets expected the Fed to increase rates at its August
meeting. The Fed held firm in August and has continued to hold steady throughout
the fall. Apparently, the Fed feels the U.S. economy is doing fine, despite the
markets' gyrations over expectations.
BLUE CHIP: True to its passive strategy, the performance of the Blue Chip
Portfolio over the past year has reflected that of the large capitalization
market sector which it represents. The Blue Chip Portfolio will, at all times,
remain substantially invested in common stocks of large companies. This
Portfolio is designed for those investors who prefer substantial exposure to
common stocks at all times, or who wish to make their own market value
judgments.
[INSERT "SPECIMAN SIGNATURE"]
EDWARD M. WIEDERSTEIN
PRESIDENT
February 18, 1997
4
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
VALUE GROWTH PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE VALUE GROWTH PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE GROWTH PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
<S> <C> <C>
11/01/87 $ 10,000 $ 10,000
12/31/87 $ 9,768 $ 9,859
12/31/88 $ 11,102 $ 11,516
12/31/89 $ 12,337 $ 15,142
12/31/90 $ 12,911 $ 14,662
12/31/91 $ 14,787 $ 19,141
12/31/92 $ 16,333 $ 20,608
12/31/93 $ 20,775 $ 22,687
12/31/94 $ 19,855 $ 22,982
12/31/95 $ 24,992 $ 31,609
12/31/96 $ 29,403 $ 38,872
*The Portfolio commenced operations October 15, 1987.
Past performance is not predictive of future performace.
Average Annual Total Return
1 year 5 year Life of Portfolio*
17.65% 14.74% 9.53%
</TABLE>
For the twelve-month period ended December 31, 1996, the total return for
the Value Growth Portfolio was 17.65% compared to the 22.98% total return
(income and price appreciation) produced by the S&P 500 Stock Composite Index.
While we are pleased with the absolute performance of the Portfolio, we are
disappointed about the relative performance as compared to the S&P 500. We
presume this difference is largely due to the stellar year of the large
capitalization sector, which is unsustainably high and could be vulnerable to
substantial setbacks. The Value Growth Portfolio is heavily weighted to smaller
capitalization stocks which have been somewhat left behind by the recent market
advance. The Portfolio achieved its returns in the energy, banking and
technology sectors, and remains committed to the undervalued sectors of the
market. Long-term, we believe value investing (buying the stocks of companies at
a discount to their true business value) will be attractive at a reduced risk
level. Cash is likely to accumulate as we sell those positions that are at or
above those intrinsic business values. We are patiently awaiting further
investment opportunities brought about by the markets' myopic behavior.
5
<PAGE>
HIGH GRADE BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE HIGH GRADE
BOND PORTFOLIO AND LEHMAN BROTHERS MUTUAL FUND AGGREGATE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH GRADE BOND PORTFOLIO
<S> <C> <C>
11/01/87 $ 10,000
12/31/87 $ 10,251
12/31/88 $ 10,976
12/31/89 $ 12,375
12/31/90 $ 13,471
12/31/91 $ 15,682
12/31/92 $ 16,999
12/31/93 $ 18,485
12/31/94 $ 18,438
12/31/95 $ 21,066
12/31/96 $ 22,317
*The Portfolio commenced operations October 15, 1987.
Past performance is not predictive of future performance.
Average Annual Total Return
1 year 5 year
5.94% 7.31%
<CAPTION>
LEHMAN BROTHERS MUTUAL FUND AGGREGATE INDEX
<S> <C>
11/01/87 $ 10,000
12/31/87 $ 10,217
12/31/88 $ 11,022
12/31/89 $ 12,623
12/31/90 $ 13,753
12/31/91 $ 15,953
12/31/92 $ 17,136
12/31/93 $ 18,807
12/31/94 $ 18,258
12/31/95 $ 21,630
12/31/96 $ 22,415
*The Portfolio commenced operations October 15, 1987.
Past performance is not predictive of future performance.
Average Annual Total Return
1 year Life of Portfolio*
5.94% 9.54%
</TABLE>
During the twelve-month period ended December 31, 1996, the High Grade Bond
Portfolio outperformed the Lehman Brothers Mutual Fund Aggregate Index, as
reflected by the 5.94% total return produced by the Portfolio versus the 3.63%
return produced by the Lehman Brothers Aggregate Index. The Portfolio continued
to pursue an investment strategy of holding a large position in high-coupon,
callable bonds. These bonds generally offer additional yield for taking on call
risk and allow for a more stable return to the Portfolio. Because these
securities have a call feature, they tend to underperform similar non-callable
issues when interest rates go down, and conversely, outperform similar
non-callable issues when interest rates rise.
6
<PAGE>
HIGH YIELD BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO AND LEHMAN BROTHERS MUTUAL FUND CORPORATE/HIGH YIELD INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD BOND PORTFOLIO
<S> <C> <C>
11/01/87 $ 10,000
12/31/87 $ 10,545
12/31/88 $ 11,803
12/31/89 $ 12,757
12/31/90 $ 12,842
12/31/91 $ 16,372
12/31/92 $ 18,565
12/31/93 $ 21,533
12/31/94 $ 21,316
12/31/95 $ 24,544
12/31/96 $ 27,649
*The Portfolio commenced operations October 15, 1987.
Past performance is not predictive of future performance.
Average Annual Total Return
1 year 5 year
12.65% 11.05%
<CAPTION>
LEHMAN BROTHERS MUTUAL CORPORATE/HIGH YIELD INDEX
<S> <C>
11/01/87 $ 10,000
12/31/87 $ 10,322
12/31/88 $ 11,308
12/31/89 $ 12,724
12/31/90 $ 13,423
12/31/91 $ 16,195
12/31/92 $ 17,708
12/31/93 $ 19,981
12/31/94 $ 19,292
12/31/95 $ 23,484
12/31/96 $ 24,588
*The Portfolio commenced operations October 15, 1987.
Past performance is not predictive of future performance.
Average Annual Total Return
1 year Life of Portfolio*
12.65% 11.53%
</TABLE>
For the twelve-month period ended December 31, 1996, the 12.65% total return
produced by the High Yield Bond Portfolio was greater than the 4.70% return
produced by the Lehman Brothers Mutual Fund Corporate/High Yield Index. The
Portfolio maintains a larger percentage of its investments in high yield bonds
than the Lehman Brothers Corporate/High Yield Index and during the year, the
high yield market tended to outperform the high grade corporate bond market. In
addition, the Portfolio continued to hold a substantial portion of its assets in
high-coupon, premium-priced callable bonds, which generally offer additional
yield for taking on call risk and allow for a more stable return to the
Portfolio. Because these securities have a call feature, they tend to
underperform similar non-callable issues when interest rates go down, and
conversely, outperform similar non-callable issues when interest rates rise.
7
<PAGE>
MANAGED PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE MANAGED PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MANAGED PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
<S> <C> <C>
11/01/87 $ 10,000 $ 10,000
12/31/87 $ 9,992 $ 9,859
12/31/88 $ 10,785 $ 11,516
12/31/89 $ 11,740 $ 15,142
12/31/90 $ 12,696 $ 14,662
12/31/91 $ 14,308 $ 19,141
12/31/92 $ 16,556 $ 20,608
12/31/93 $ 20,316 $ 22,687
12/31/94 $ 19,309 $ 22,982
12/31/95 $ 24,270 $ 31,609
12/31/96 $ 28,490 $ 38,872
*The Portfolio commenced operations October 15, 1987.
Past performance is not predictive of future performance.
Average Annual Total Return
1 year 5 year Life of Portfolio*
17.39% 14.77% 11.69%
</TABLE>
The Managed Portfolio is an asset allocation portfolio, with an emphasis on
income, and will not likely mirror any particular index (equity or fixed-income)
over time. During the twelve-month period ended December 31, 1996, the Portfolio
produced a total return of 17.39% compared to the 22.98% total return (income
and price appreciation) produced by the S&P 500 Stock Composite Index. The
Managed Portfolio has emphasized securities producing current income and
moderate growth potential, maintaining a majority of its assets in convertible
bonds and convertible preferred stocks. The Portfolio is largely represented by
high-income common stocks and convertibles of the following industry groups:
banking, energy and utilities. The Managed Portfolio will continue to seek out
high income, concentrating on convertible issues of smaller banking situations.
We believe this is a fertile investment area where we are paid to wait for the
profitable experience created by ongoing mergers and consolidations in the
banking industry. This is a lower risk strategy that takes advantage of a
distinct long-term financial trend.
The Managed Portfolio benefitted from the good performance of General Growth
Properties (shopping mall REIT), U.S. Surgical Conv. Pfd. (healthcare),
Centennial Bancorp (banking), Pride Petroleum (oil services) and Community First
Bankshares (banking).
8
<PAGE>
BLUE CHIP PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE BLUE CHIP PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BLUE CHIP PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
<S> <C> <C>
11/01/90 $ 10,000 $ 10,000
12/31/90 $ 10,902 $ 10,936
12/31/91 $ 13,976 $ 14,276
12/31/92 $ 15,427 $ 15,371
12/31/93 $ 17,643 $ 16,922
12/31/94 $ 18,110 $ 17,142
12/31/95 $ 24,052 $ 23,577
12/31/96 $ 29,206 $ 28,995
*The Portfolio commenced operations October 15, 1990.
Past performance is not predictive of future performance.
Average Annual Total Return
1 year 5 year Life of Portfolio*
21.43% 15.88% 18.31%
</TABLE>
The Blue Chip Portfolio is designed to represent the large capitalization
sector of the domestic equity market and remains substantially invested in
approximately 40 such common stock issues at all times. Accordingly, the
performance of this Portfolio will roughly parallel that of the Dow Jones
Industrial Average and S&P 500 Stock Composite Index. As is apparent from the
line graph, the performance of the Blue Chip Portfolio, adjusted for expenses,
was similar to that of the S&P 500 for the twelve-month period ended December
31, 1996.
9
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
HIGH
VALUE GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
--------------- -------------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost -- $24,655,467; $3,336,263; $ 27,009,388 $ 3,431,155
$5,864,383; $24,392,613; $3,518,021; and $10,947,538, respectively) (NOTE
5).......................................................................
Cash....................................................................... 118,322 48,506
Accrued dividends and interest receivable.................................. 67,391 60,066
--------------- -------------
Total Assets............................................................... $ 27,195,101 $ 3,539,727
--------------- -------------
--------------- -------------
LIABILITIES AND NET ASSETS
Liabilities:
Net outstanding redemptions in excess of bank balances...................
Accrued expenses......................................................... $ 6,650 $ 5,172
--------------- -------------
Total Liabilities.......................................................... 6,650 5,172
Net assets applicable to shares of beneficial interest (NOTE 4)............ 27,188,451 3,534,555
--------------- -------------
Total Liabilities and Net Assets........................................... $ 27,195,101 $ 3,539,727
--------------- -------------
--------------- -------------
Shares issued and outstanding as of December 31, 1996...................... 2,070,769 359,602
NET ASSET VALUE PER SHARE.................................................. $ 13.13 $ 9.83
--------------- -------------
--------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
10
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 5,965,631 $ 25,783,455 $ 3,518,021 $ 14,487,018
160,597 303,867
134,433 84,681 2,852 22,757
- ------------- -------------- -------------- --------------
$ 6,100,064 $ 26,028,733 $ 3,824,740 $ 14,509,775
- ------------- -------------- -------------- --------------
- ------------- -------------- -------------- --------------
$ 165,719 $ 9,439
5,253 $ 6,458 $ 5,479 7,219
- ------------- -------------- -------------- --------------
170,972 6,458 5,479 16,658
5,929,092 26,022,275 3,819,261 14,493,117
- ------------- -------------- -------------- --------------
$ 6,100,064 $ 26,028,733 $ 3,824,740 $ 14,509,775
- ------------- -------------- -------------- --------------
- ------------- -------------- -------------- --------------
598,413 2,099,227 3,819,261 587,306
$ 9.91 $ 12.40 $ 1.00 $ 24.68
- ------------- -------------- -------------- --------------
- ------------- -------------- -------------- --------------
</TABLE>
11
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE HIGH
GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
--------------- ------------
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................................. $ 397,945
Interest.............................................................. 277,850 $ 259,125
--------------- ------------
Total Investment Income............................................... 675,795 259,125
EXPENSES
Paid to FBL Investment Advisory Services, Inc. (NOTE 3):
Investment advisory and management fees............................. 104,228 9,973
Accounting fees..................................................... 10,423 1,662
Custodial fees........................................................ 5,482 3,380
Legal fees............................................................ 11,188 1,610
Audit fees............................................................ 5,500 5,100
Reports to shareholders............................................... 4,169 4,169
Trustees' fees and expenses........................................... 2,120 365
Insurance and bonds................................................... 1,040 421
Miscellaneous......................................................... 187 32
--------------- ------------
Total Expenses........................................................ 144,337 26,712
Expense reimbursement (NOTE 3)........................................ (29,686) (8,233)
--------------- ------------
Net Expenses.......................................................... 114,651 18,479
--------------- ------------
Net Investment Income................................................. 561,144 240,646
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investment transactions........................ 1,943,065 10,639
Change in unrealized appreciation/depreciation of investments......... 1,119,424 (60,696)
--------------- ------------
Net Gain (Loss) on Investments........................................ 3,062,489 (50,057)
--------------- ------------
Net Increase in Net Assets Resulting from Operations.................. $ 3,623,633 $ 190,589
--------------- ------------
--------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ------------- -------------- -------------
<S> <C> <C> <C>
$ 497,489 $ 199,461
$ 481,351 560,992 $ 169,465 49,388
- ----------- ------------- -------------- -------------
481,351 1,058,481 169,465 248,849
26,585 109,830 9,579 20,647
2,658 9,984 1,597 5,162
3,875 5,306 4,484 6,573
2,787 10,821 1,583 6,696
5,100 5,500 5,100 5,100
4,169 4,169 4,169 4,169
581 2,003 343 1,010
531 955 416 613
51 135 43 85
- ----------- ------------- -------------- -------------
46,337 148,703 27,314 50,055
(17,094) (38,874) (9,569)
- ----------- ------------- -------------- -------------
29,243 109,829 17,745 50,055
- ----------- ------------- -------------- -------------
452,108 948,652 151,720 198,794
61,503 1,834,462 69,879
127,569 488,900 1,709,516
- ----------- ------------- -------------- -------------
189,072 2,323,362 1,779,395
- ----------- ------------- -------------- -------------
$ 641,180 $ 3,272,014 $ 151,720 $ 1,978,189
- ----------- ------------- -------------- -------------
- ----------- ------------- -------------- -------------
</TABLE>
13
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VALUE
GROWTH
PORTFOLIO
------------------------------
YEAR ENDED DECEMBER 31,
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income...................................................... $ 561,144 $ 628,640
Net realized gain (loss) from investment transactions...................... 1,943,065 858,654
Change in unrealized appreciation/depreciation of investments.............. 1,119,424 1,599,431
-------------- --------------
Net Increase in Net Assets Resulting from Operations....................... 3,623,633 3,086,725
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 6)
Net investment income...................................................... (562,374) (629,398)
Net realized gain from investment transactions............................. (1,972,997) (331,104)
-------------- --------------
(2,535,371) (960,502)
CAPITAL SHARE TRANSACTIONS (NOTE 4)........................................ 9,804,958 3,565,672
-------------- --------------
Total Increase in Net Assets............................................... 10,893,220 5,691,895
NET ASSETS
Beginning of year.......................................................... 16,295,231 10,603,336
-------------- --------------
End of year (including undistributed net investment income as set forth
below)................................................................... $ 27,188,451 $ 16,295,231
-------------- --------------
-------------- --------------
Undistributed Net Investment Income........................................ $ 1,732 $ 2,962
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
14
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
- ---------------------------- ----------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996 1995 1996 1995
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 240,646 $ 221,221 $ 452,108 $ 413,823
10,639 (1,090) 61,503 66,905
(60,696) 150,916 127,569 167,210
- ------------- ------------- ------------- -------------
190,589 371,047 641,180 647,938
(240,646) (221,221) (452,108) (413,823)
(67,895) (61,458)
- ------------- ------------- ------------- -------------
(240,646) (221,221) (520,003) (475,281)
376,216 606,696 997,822 465,130
- ------------- ------------- ------------- -------------
326,159 756,522 1,118,999 637,787
3,208,396 2,451,874 4,810,093 4,172,306
- ------------- ------------- ------------- -------------
$ 3,534,555 $ 3,208,396 $ 5,929,092 $ 4,810,093
- ------------- ------------- ------------- -------------
- ------------- ------------- ------------- -------------
$ 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,
1996 1995
-------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income...................................................... $ 948,652 $ 691,938
Net realized gain (loss) from investment transactions...................... 1,834,462 543,441
Change in unrealized appreciation/depreciation of investments.............. 488,900 1,503,900
-------------- --------------
Net Increase in Net Assets Resulting from Operations....................... 3,272,014 2,739,279
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 6)
Net investment income...................................................... (950,234) (690,665)
Net realized gain from investment transactions............................. (1,605,895) (206,978)
-------------- --------------
(2,556,129) (897,643)
CAPITAL SHARE TRANSACTIONS (NOTE 4)........................................ 10,819,073 2,887,288
-------------- --------------
Total Increase in Net Assets............................................... 11,534,958 4,728,924
NET ASSETS
Beginning of year.......................................................... 14,487,317 9,758,393
-------------- --------------
End of year (including undistributed net investment income as set forth
below)................................................................... $ 26,022,275 $ 14,487,317
-------------- --------------
-------------- --------------
Undistributed Net Investment Income........................................ $ 1,831 $ 3,413
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
16
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
- ---------------------------- -----------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996 1995 1996 1995
- ------------- ------------- -------------- -------------
<S> <C> <C> <C>
$ 151,720 $ 143,652 $ 198,794 $ 98,853
69,879 (9)
1,709,516 1,221,621
- ------------- ------------- -------------- -------------
151,720 143,652 1,978,189 1,320,465
(151,720) (143,652) (198,208) (98,331)
(69,445)
- ------------- ------------- -------------- -------------
(151,720) (143,652) (267,653) (98,331)
660,688 500,759 6,117,777 2,180,879
- ------------- ------------- -------------- -------------
660,688 500,759 7,828,313 3,403,013
3,158,573 2,657,814 6,664,804 3,261,791
- ------------- ------------- -------------- -------------
$ 3,819,261 $ 3,158,573 $ 14,493,117 $ 6,664,804
- ------------- ------------- -------------- -------------
- ------------- ------------- -------------- -------------
$ 0 $ 0 $ 1,327 $ 741
- ------------- ------------- -------------- -------------
- ------------- ------------- -------------- -------------
</TABLE>
17
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- -----------
<S> <C> <C>
COMMON STOCKS (59.90%)
CHEMICALS AND ALLIED PRODUCTS (5.17%)
R.P. Scherer Corp. ......................................... 28,000(1) $ 1,407,000
COMMUNICATIONS (3.71%)
Aliant Communications....................................... 59,400 1,009,800
DEPOSITORY INSTITUTIONS (4.82%)
Cole Taylor Financial Group, Inc. .......................... 28,400 752,600
CU Bancorp.................................................. 48,000 558,000
-----------
1,310,600
ELECTRIC, GAS AND SANITARY SERVICES (6.14%)
Citizens Utilities Co., Class B............................. 111,517 1,240,626
Montana Power Co............................................ 20,000 427,500
-----------
1,668,126
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (5.82%)
Applied Materials, Inc. .................................... 44,000(1) 1,581,250
FOOD STORES (5.14%)
Casey's General Stores, Inc. ............................... 74,500 1,396,875
FURNITURE AND FIXTURES (4.20%)
Ladd Furniture, Inc. ....................................... 78,150(1) 1,142,944
HOLDING AND OTHER INVESTMENT OFFICES (5.56%)
Centennial Bancorp.......................................... 17,828 285,248
General Growth Properties, Inc. ............................ 38,000 1,225,500
-----------
1,510,748
INSTRUMENTS & RELATED PRODUCTS (4.06%)
Pall Corp. ................................................. 43,300 1,104,150
INSURANCE CARRIERS (2.43%)
EMC Insurance Group, Inc. .................................. 55,000 660,000
METAL MINING (0.52%)
Glamis Gold, Ltd............................................ 20,100(1) 140,700
MOTION PICTURES (3.07%)
Disney (Walt) Co............................................ 12,000 835,500
NONDEPOSITORY INSTITUTIONS (0.63%)
Berkshire Hathaway, Inc. ................................... 5(1) 170,500
PRINTING & PUBLISHING (1.54%)
Belo (A.H.) Corp. .......................................... 12,000 418,500
</TABLE>
18
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
VALUE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- -----------
TRANSPORTATION -- BY AIR (3.03%)
<S> <C> <C>
Petroleum Helicopters, Inc. (Non-Voting).................... 52,300 $ 823,725
WHOLESALE TRADE -- DURABLE GOODS (0.27%)
TBC Corporation............................................. 10,000(1) 75,000
WHOLESALE TRADE -- NONDURABLE GOODS (3.79%)
Howell Corp. ............................................... 59,440 887,885
Super Valu Stores, Inc. .................................... 5,000 141,875
-----------
1,029,760
-----------
Total Common Stocks........................................... 16,285,178
PREFERRED STOCKS (9.89%)
DEPOSITORY INSTITUTIONS (5.97%)
Community First Bankshares, Inc., Convertible............... 23,800 1,053,150
Sterling Financial Corp..................................... 18,500 568,875
-----------
1,622,025
INSTRUMENTS & RELATED PRODUCTS (1.19%)
US Surgical Corp., Convertible.............................. 8,500 325,125
WATER TRANSPORTATION (2.73%)
Sea Containers, Ltd., Convertible........................... 16,320 742,560
-----------
Total Preferred Stocks........................................ 2,689,710
</TABLE>
19
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
VALUE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
CORPORATE BOND (1.95%)
ELECTRONIC & OTHER ELECTRIC EQUIPMENT
California Microwave, Convertible Sub. Deb., 5.25%, 12/15/03... $ 650,000 $ 531,375
SHORT-TERM INVESTMENTS (27.60%)
COMMERCIAL PAPER (11.50%)
American General Finance Corp., 6.15%, due 1/06/97............. 175,000 175,000
Ford Motor Credit Corp., 5.74%, due 1/09/97.................... 1,300,000 1,300,000
General Electric Capital Corp., 5.42%, due 1/15/97............. 650,000 650,000
Norwest Financial Inc., 5.45%, due 2/26/97..................... 1,000,000 1,000,000
-----------
3,125,000
MONEY MARKET MUTUAL FUND (2.94%)
Dreyfus Treasury Cash Management, Class A...................... 799,506 799,506
UNITED STATES GOVERNMENT AGENCIES (13.16%)
Federal Home Loan Mortgage Corp., due 1/31/97.................. 1,700,000 1,692,446
Federal National Mortgage Assoc., due 2/18/97.................. 1,600,000 1,588,588
Federal National Mortgage Assoc., due 2/24/97.................. 300,000 297,585
-----------
3,578,619
-----------
Total Short-Term Investments..................................... 7,503,125
-----------
Total Investments (99.34%)....................................... 27,009,388
OTHER ASSETS LESS LIABILITIES (0.66%)
Cash and receivables, less liabilities......................... 179,063
-----------
Total Net Assets (100.00%)....................................... $27,188,451
-----------
-----------
</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, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
CORPORATE BONDS (66.69%)
APPAREL AND ACCESSORY STORES (0.31%)
TJX Companies, Inc., 9.50%, due 5/01/16.......................... $ 11,000 $ 11,069
COMMUNICATIONS (7.11%)
New York Telephone Co., 7.75%, due 12/15/06...................... 150,000 152,025
Pacific Telephone & Telegraph Co, 7.25%, due 2/01/08............. 100,000 99,339
----------
251,364
DEPOSITORY INSTITUTIONS (14.86%)
J. P. Morgan & Co., 7.25%, due 10/01/10.......................... 150,000 148,182
Midland America Capital Corp., 12.75%, due 11/15/03.............. 155,000 172,180
Norwest Corp., 9.25%, due 5/01/97................................ 100,000 101,226
Third National Corp., 7.50%, due 11/15/02........................ 103,000 103,650
----------
525,238
ELECTRIC, GAS AND SANITARY SERVICES (15.11%)
MDU Resources Group, Inc., 9.125%, due 10/01/16.................. 100,000 106,525
New England Power Co., 8.00%, due 8/01/22........................ 150,000 151,356
Southern California Edison Co., 8.875%, due 6/01/24.............. 125,000 130,158
Western Penn Power, 7.875%, due 12/01/04......................... 140,000 145,821
----------
533,860
HOLDING AND OTHER INVESTMENT OFFICES (7.34%)
Federal Realty Investment Trust, 8.875%, due 1/15/00............. 100,000 105,894
Meditrust, 7.60%, due 9/13/05.................................... 150,000 153,502
----------
259,396
INSURANCE CARRIERS (3.64%)
Torchmark Corporation, 8.625%, due 3/01/17....................... 125,000 128,750
NONDEPOSITORY INSTITUTIONS (2.86%)
Dillard Investment Co., 9.25%, due 5/01/97....................... 100,000 101,204
PRINTING AND PUBLISHING (2.96%)
Valassis Communications, Inc., 9.55%, due 12/01/03............... 100,000 104,590
RAILROAD TRANSPORTATION (4.45%)
Union Pacific Corp., 8.50%, due 1/15/17.......................... 150,000 157,142
SECURITY AND COMMODITY BROKERS (2.95%)
Lehman Brothers Holding, Inc., 8.875%, due 11/01/98.............. 100,000 104,249
</TABLE>
21
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH GRADE BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
TRANSPORTATION EQUIPMENT (5.10%)
<S> <C> <C>
Ford Motor Credit Co., 9.50%, due 9/15/11........................ $ 150,000 $ 180,237
----------
Total Corporate Bonds.............................................. 2,357,099
MORTGAGE-BACKED SECURITIES (7.91%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (1.61%)
Pool # 50276, 9.50%, due 2/01/20................................. 52,536 56,821
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (6.30%)
Pool # 236070, 10.00%, due 10/15/12.............................. 86,906 93,832
Pool # 276337, 10.00%, due 8/15/19............................... 117,379 128,934
----------
222,766
----------
Total Mortgage-Backed Securities................................... 279,587
UNITED STATES TREASURY OBLIGATION (11.90%)
U.S. Treasury Note, 7.25%, due 8/15/04........................... 400,000 420,676
SHORT-TERM INVESTMENTS (10.58%)
UNITED STATES GOVERNMENT AGENCIES
Federal Farm Credit Bank, due 1/06/97............................ 150,000 149,891
Federal National Mortgage Assoc., due 2/03/97.................... 225,000 223,902
----------
Total Short-Term Investments....................................... 373,793
----------
Total Investments (97.08%)......................................... 3,431,155
OTHER ASSETS LESS LIABILITIES (2.92%)
Cash and receivables, less liabilities........................... 103,400
----------
Total Net Assets (100.00%)......................................... $3,534,555
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
22
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ----------
<S> <C> <C>
CORPORATE BONDS (91.44%)
AMUSEMENT AND RECREATION SERVICES (4.29%)
AMF Group, Inc., 10.875%, due 3/15/06........................... $ 240,000 $ 253,800
APPAREL AND ACCESSORY STORES (2.00%)
Genesco, Inc., 10.375%, due 2/01/03............................. 100,000 102,375
TJX Companies, Inc., 9.50%, due 5/01/16......................... 16,000 16,100
----------
118,475
APPAREL AND OTHER TEXTILE PRODUCTS (6.09%)
Dan River, Inc., 10.125%, due 12/15/03.......................... 200,000 203,000
Fieldcrest Cannon, Inc., 11.25%, due 6/15/04.................... 150,000 157,875
----------
360,875
AUTO REPAIR, SERVICES AND PARKING (1.40%)
Envirotest Systems Corp., 9.625%, due 4/01/03................... 100,000 82,625
BUSINESS SERVICES (2.52%)
Borg-Warner Corp., 9.125%, due 5/01/03.......................... 150,000 149,250
COMMUNICATIONS (8.19%)
PanAmSat, L.P., 9.75%, due 8/01/00.............................. 200,000 213,500
Tele-Communications, Inc., 9.80%, due 2/01/12................... 250,000 271,358
----------
484,858
DEPOSITORY INSTITUTIONS (4.09%)
First Bank N.A., 6.25%, due 8/15/05............................. 250,000 242,450
ELECTRIC, GAS AND SANITARY SERVICES (12.50%)
Montana Power Co., 7.50%, due 1/01/98........................... 97,000 97,238
New England Power Co., 8.00%, due 8/01/22....................... 200,000 201,808
Public Service Company of New Mexico, 5.875%, due 5/01/97....... 150,000 149,941
Southern California Edison Co., 8.875%, due 6/01/24............. 280,000 291,553
----------
740,540
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (8.13%)
Advanced Micro Devices, Inc., 11.00%, due 8/01/03............... 240,000 261,600
Amphenol Corp., 12.75%, due 12/15/02............................ 200,000 220,250
----------
481,850
FABRICATED METAL PRODUCTS (3.56%)
Ryerson Tull, Inc., 9.125%, due 7/15/06......................... 200,000 211,000
</TABLE>
23
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ----------
FOOD STORES (5.17%)
<S> <C> <C>
P&C Food Markets, Inc., 11.50%, due 10/15/01.................... $ 150,000 $ 133,500
Penn Traffic Co., 10.25%, due 2/15/02........................... 200,000 173,000
----------
306,500
GENERAL MERCHANDISE STORES (3.70%)
Federated Department Stores, Inc., 10.00%, due 2/15/01.......... 200,000 219,244
INSURANCE CARRIERS (3.48%)
Torchmark Corp., 8.625%, due 3/01/17............................ 200,000 206,000
LUMBER AND WOOD PRODUCTS (7.68%)
Georgia-Pacific Corp., 9.875%, due 11/01/21..................... 225,000 251,858
Pacific Lumber Co., 10.50%, due 3/01/03......................... 200,000 203,250
----------
455,108
MISCELLANEOUS RETAIL (3.78%)
Eckerd Corp., 9.25%, due 2/15/04................................ 205,000 223,963
PAPER AND ALLIED PRODUCTS (3.56%)
Container Corp. of America, 9.75%, due 4/01/03.................. 200,000 211,000
PETROLEUM AND COAL PRODUCTS (2.20%)
Clark Oil & Refining Corp., 10.50%, due 12/01/01................ 125,000 130,312
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (3.56%)
Plastic Specialties & Technologies, Inc., 11.25%, due
12/01/03....................................................... 200,000 211,000
STONE, CLAY AND GLASS PRODUCTS (5.54%)
Owens-Illinois, Inc., 11.00%, due 12/01/03...................... 150,000 167,625
USG Corp., 9.25%, due 9/15/01................................... 150,000 160,500
----------
328,125
----------
Total Corporate Bonds............................................. 5,416,975
<CAPTION>
SHARES
HELD
----------
<S> <C> <C>
COMMON STOCK (0.85%)
TEXTILE MILL PRODUCTS
Bibb Company (The).............................................. 7,490 50,557
</TABLE>
24
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (8.41%)
UNITED STATES GOVERNMENT AGENCIES
Federal Home Loan Mortgage Corp., due 1/16/97................... $ 200,000 $ 199,562
Federal National Mortgage Corp., due 2/03/97.................... 300,000 298,537
----------
Total Short-Term Investments...................................... 498,099
----------
Total Investments (100.70%)....................................... 5,965,631
OTHER ASSETS LESS LIABILITIES (-0.70%)
Receivables less liabilities.................................... (36,539)
----------
Total Net Assets (100.00%)........................................ $5,929,092
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
25
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHARES
HELD VALUE
----------- -----------
<S> <C> <C>
COMMON STOCKS (18.09%)
COMMUNICATIONS (1.83%)
Aliant Communications, Inc..................................... 28,000 $ 476,000
ELECTRIC, GAS AND SANITARY SERVICES (6.83%)
Citizens Utilities Co., Class B................................ 86,719 964,749
Montana Power Co............................................... 38,000 812,250
-----------
1,776,999
HOLDING AND OTHER INVESTMENT OFFICES (7.23%)
Centennial Bancorp............................................. 43,092 689,472
General Growth Properties, Inc................................. 37,000 1,193,250
-----------
1,882,722
INSURANCE CARRIERS (2.20%)
EMC Insurance Group, Inc....................................... 47,700 572,400
-----------
Total Common Stocks.............................................. 4,708,121
PREFERRED STOCKS (22.05%)
DEPOSITORY INSTITUTIONS (6.90%)
Community First Bankshares, Inc., Convertible.................. 25,000 1,106,250
Sterling Financial Corp........................................ 22,450 690,337
-----------
1,796,587
HOLDING AND OTHER INVESTMENT OFFICES (1.99%)
Security Capital Industrial Trust, Convertible................. 19,000 517,750
INSTRUMENTS AND RELATED PRODUCTS (1.16%)
US Surgical Corp., Convertible................................. 7,900 302,175
OIL AND GAS EXTRACTION (1.38%)
Chieftain International, Inc., Convertible..................... 11,000 360,250
PETROLEUM AND COAL PRODUCTS (3.17%)
Ashland Oil Co................................................. 12,000 823,500
WATER TRANSPORTATION (2.10%)
Sea-Containers, Ltd., Convertible.............................. 12,000 546,000
WHOLESALE TRADE -- DURABLE GOODS (3.16%)
Kaman Corp., Convertible....................................... 15,000 821,250
WHOLESALE TRADE -- NONDURABLE GOODS (2.19%)
Howell Corp.................................................... 11,000 569,250
-----------
Total Preferred Stocks........................................... 5,736,762
</TABLE>
26
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
CORPORATE BONDS (4.89%)
DEPOSITORY INSTITUTIONS (0.47%)
Midland America Capital Corp., 12.75%, due 11/15/03........... $ 110,000 $ 122,192
ELECTRIC, GAS AND SANITARY SERVICES (0.38%)
National Co-op Services Corp. (Arkansas Electric), 9.48%, due
1/01/12...................................................... 92,000 97,672
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (3.14%)
California Microwave, Convertible Sub. Deb., 5.25%, due
12/15/03..................................................... 1,000,000 817,500
INSURANCE CARRIERS (0.59%)
Torchmark Corp., 8.625%, due 3/01/17.......................... 150,000 154,500
PETROLEUM AND COAL PRODUCTS (0.31%)
Pennzoil Co., 9.00%, due 4/01/17.............................. 77,000 81,158
-----------
Total Corporate Bonds........................................... 1,273,022
</TABLE>
27
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
SHORT-TERM INVESTMENTS (54.05%)
<S> <C> <C>
COMMERCIAL PAPER (24.78%)
American General Finance Corp., 5.43%, due 1/28/97............ $1,000,000 $ 1,000,000
General Electric Capital Corp., 6.00%, due 1/03/97............ 650,000 650,000
IBM Credit Corp., 5.48%, due 1/24/97.......................... 1,250,000 1,250,000
John Deere Capital Corp., 5.42%, due 1/07/97.................. 1,100,000 1,100,000
Norwest Financial, Inc., 5.43%, due 1/22/97................... 1,200,000 1,200,000
Texaco, Inc., 5.61%, due 1/10/97.............................. 1,250,000 1,250,000
-----------
6,450,000
MONEY MARKET MUTUAL FUND (3.87%)
Dreyfus Treasury Cash Management, Class A..................... 1,006,285 1,006,285
UNITED STATES GOVERNMENT AGENCIES (25.40%)
Federal Home Loan Mortgage Corp., due 2/24/97................. 1,250,000 1,239,970
Federal National Mortgage Assoc., due 1/14/97................. 1,600,000 1,596,940
Federal National Mortgage Assoc., due 2/03/97................. 1,300,000 1,293,670
Federal National Mortgage Assoc., due 2/18/97................. 1,300,000 1,290,793
Federal National Mortgage Assoc., due 2/24/97................. 225,000 223,189
Federal National Mortgage Assoc., due 3/13/97................. 975,000 964,703
-----------
6,609,265
-----------
Total Short-Term Investments.................................... 14,065,550
-----------
Total Investments (99.08%)...................................... 25,783,455
OTHER ASSETS LESS LIABILITIES (0.92%)
Cash and receivables, less liabilities........................ 238,820
-----------
Total Net Assets (100.00%)...................................... $26,022,275
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES.
28
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON
PURCHASE PRINCIPAL
DATE AMOUNT VALUE
------------- ----------- ----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (92.11%)
COMMERCIAL PAPER (25.00%)
NONDEPOSITORY INSTITUTIONS (21.07%)
American General Finance Corp., 5.46%, due
2/10/97.......................................... 5.458% $ 100,000 $ 100,000
Ford Motor Credit Corp., 5.39%, due 1/21/97....... 5.395 155,000 155,000
General Electric Capital Corp., 5.53%, due
1/24/97.......................................... 5.530 150,000 150,000
IBM Credit Corp., 5.42%, due 1/03/97.............. 5.416 125,000 125,000
John Deere Capital Corp., 5.51%, due 1/15/97...... 5.513 150,000 150,000
Norwest Financial, Inc., 5.61%, due 1/09/97....... 5.615 125,000 125,000
----------
805,000
PETROLEUM & COAL PRODUCTS (3.93%)
Texaco, Inc., 5.53%, due 1/28/97.................. 5.528 150,000 150,000
----------
Total Commercial Paper.............................. 955,000
UNITED STATES GOVERNMENT AGENCIES (67.11%)
Federal Farm Credit Bank, due 2/19/97............. 5.496 100,000 99,268
Federal Farm Credit Bank, due 2/24/97............. 5.500 100,000 99,193
Federal Home Loan Bank, due 1/10/97............... 5.367 275,000 274,636
Federal Home Loan Bank, due 1/15/97............... 5.401 275,000 274,432
Federal Home Loan Bank, due 1/23/97............... 5.524 250,000 249,170
Federal Home Loan Bank, due 2/21/97............... 5.480 175,000 173,670
Federal Home Loan Mortgage Corp., due 1/07/97..... 5.424 250,000 249,777
Federal Home Loan Mortgage Corp., due 1/31/97..... 5.384 250,000 248,899
Federal Home Loan Mortgage Corp., due 2/07/97..... 5.425 350,000 348,086
Federal National Mortgage Assoc., due 2/03/97..... 5.412 350,000 348,296
Federal National Mortgage Assoc., due 3/24/97..... 5.419 200,000 197,594
----------
Total United States Government Agencies............. 2,563,021
----------
Total Short-Term Investments.......................... 3,518,021
OTHER ASSETS LESS LIABILITIES (7.89%)
Cash and receivables, less liabilities.............. 301,240
----------
Total Net Assets (100.00%)............................ $3,819,261
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
29
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- --------------------
<S> <C> <C>
COMMON STOCKS (90.57%)
CHEMICALS AND ALLIED PRODUCTS (16.89%)
Bristol-Myers Squibb Co. ................................ 2,859 $ 310,916
DuPont (EI) de Nemours & Co. ............................ 3,302 311,626
Eastman Chemical Co. .................................... 3,450 190,613
Johnson & Johnson........................................ 6,427 319,743
Merck & Co., Inc. ....................................... 4,476 354,723
Praxair, Inc. ........................................... 7,815 360,467
Procter & Gamble Co. .................................... 3,005 323,038
Union Carbide Corp. ..................................... 6,748 275,824
--------------------
2,446,950
COMMUNICATIONS (2.94%)
American Telephone & Telegraph Co. ...................... 4,289 186,572
Bell Atlantic Corp. ..................................... 3,703 239,769
--------------------
426,341
DEPOSITORY INSTITUTIONS (2.03%)
J. P. Morgan & Co., Inc. ................................ 3,012 294,046
EATING AND DRINKING PLACES (2.00%)
McDonald's Corp. ........................................ 6,402 289,691
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (2.97%)
General Electric Co. .................................... 3,605 356,444
Lucent Technologies, Inc. ............................... 1,602 74,109
--------------------
430,553
FOOD AND KINDRED PRODUCTS (6.90%)
Coca-Cola Co. (The)...................................... 7,565 398,108
PepsiCo, Inc. ........................................... 9,458 276,647
Philip Morris Companies, Inc. ........................... 2,877 324,022
--------------------
998,777
GENERAL MERCHANDISE STORES (4.95%)
Sears, Roebuck & Co. .................................... 5,106 235,514
Wal-Mart Stores, Inc. ................................... 9,627 220,218
Woolworth (F.W.) Co., Ltd. .............................. 11,930(1) 260,969
--------------------
716,701
</TABLE>
30
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- --------------------
INDUSTRIAL MACHINERY AND EQUIPMENT (4.42%)
<S> <C> <C>
Caterpillar, Inc. ....................................... 4,136 $ 311,234
International Business Machines Corp. ................... 2,180 329,180
--------------------
640,414
INSTRUMENTS AND RELATED PRODUCTS (1.96%)
Eastman Kodak Co. ....................................... 3,540 284,085
INSURANCE CARRIERS (4.37%)
Allstate Corp. .......................................... 5,029 291,053
American International Group, Inc. ...................... 3,164 342,503
--------------------
633,556
MOTION PICTURES (2.05%)
Disney (Walt) Co. ....................................... 4,263 296,811
NONDEPOSITORY INSTITUTIONS (1.92%)
Dean Witter, Discover & Co............................... 4,196 277,985
PAPER AND ALLIED PRODUCTS (3.74%)
International Paper Co. ................................. 5,926 239,262
Minnesota Mining & Manufacturing Co...................... 3,649 302,411
--------------------
541,673
PETROLEUM AND COAL PRODUCTS (11.29%)
Amoco Corp. ............................................. 3,250 261,625
Chevron Corp. ........................................... 4,247 276,055
Exxon Corp. ............................................. 2,983 292,334
Mobil Corp. ............................................. 2,252 275,307
Texaco, Inc. ............................................ 2,859 280,539
USX Corp. -- Marathon Group.............................. 10,427 248,945
--------------------
1,634,805
PRIMARY METAL INDUSTRIES (3.00%)
Aluminum Company of America.............................. 4,426 282,158
Bethlehem Steel Corp. ................................... 16,956(1) 152,604
--------------------
434,762
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (2.60%)
Goodyear Tire & Rubber Co................................ 7,338 376,990
</TABLE>
31
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------- --------------------
SECURITY AND COMMODITY BROKERS (4.13%)
<S> <C> <C>
American Express Co. .................................... 5,918 $ 334,367
Lehman Brothers Holding, Inc............................. 8,390 263,236
--------------------
597,603
TRANSPORTATION EQUIPMENT (10.70%)
Allied-Signal, Inc. ..................................... 5,552 371,984
Boeing Co. (The)......................................... 3,259 346,676
Ford Motor Co. .......................................... 7,667 244,386
General Motors Corp. .................................... 4,464 248,868
United Technologies Corp. ............................... 5,130 338,580
--------------------
1,550,494
WHOLESALE TRADE -- DURABLE GOODS (1.71%)
Westinghouse Electric Corp............................... 12,453 247,503
--------------------
Total Common Stocks........................................ 13,119,740
<CAPTION>
PRINCIPAL
AMOUNT
-------
<S> <C> <C>
SHORT-TERM INVESTMENTS (9.44%)
UNITED STATES GOVERNMENT AGENCIES
Federal Home Loan Bank, due 1/27/97...................... $500,000 498,107
Federal Home Loan Mortgage Corp., due 2/07/97............ 650,000 646,445
Federal Home Loan Mortgage Corp., due 3/10/97............ 225,000 222,726
--------------------
Total Short-Term Investments............................... 1,367,278
--------------------
Total Investments (100.01%)................................ 14,487,018
OTHER ASSETS LESS LIABILITIES (-0.01%)
Receivables less liabilities............................. 6,099
--------------------
Total Net Assets (100.00%)................................. $ 14,493,117
--------------------
--------------------
</TABLE>
(1) Non-income producing security.
SEE ACCOMPANYING NOTES.
32
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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.
Effective December 1, 1996, the Growth Common Stock Portfolio was renamed the
Value Growth Portfolio. The Fund currently consists of six portfolios (known as
the Value Growth, High Grade Bond, High Yield Bond, Managed, Money Market and
Blue Chip Portfolios). 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
33
<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, 1996, the High Grade Bond Portfolio had a net capital loss
carryforward of approximately $17,000, which will expire from 1998 through 2003.
During the year ended December 31, 1996, the High Grade Bond Portfolio had net
capital loss carryforwards of $3,388 that expired. As a result, $3,388 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: Value Growth
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, 1996, 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, 1996, 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.
34
<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, 1996 consisted of:
<TABLE>
<CAPTION>
PORTFOLIO
-------------------------------------------------------------------------
HIGH
VALUE HIGH GRADE YIELD MONEY BLUE
GROWTH BOND BOND MANAGED MARKET CHIP
----------- ---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Paid-in capital............................... $24,479,215 $3,456,475 $5,827,420 $24,133,530 $3,819,261 $10,951,884
Accumulated undistributed net investment
income....................................... 1,732 1,831 1,327
Accumulated undistributed net realized gain
(loss) from investment transactions.......... 353,583 (16,812) 424 496,072 426
Net unrealized appreciation (depreciation) of
investments.................................. 2,353,921 94,892 101,248 1,390,842 3,539,480
----------- ---------- ---------- ----------- ---------- -----------
Net Assets.................................... $27,188,451 $3,534,555 $5,929,092 $26,022,275 $3,819,261 $14,493,117
----------- ---------- ---------- ----------- ---------- -----------
----------- ---------- ---------- ----------- ---------- -----------
</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,
1996:
Value Growth.............. 630,601 $ 8,257,518 193,097 $2,535,371 76,748 $ 987,931 746,950 $ 9,804,958
High Grade Bond........... 118,456 1,161,045 22,255 218,638 102,472 1,003,467 38,239 376,216
High Yield Bond........... 175,655 1,721,491 49,648 488,516 123,493 1,212,185 101,810 997,822
Managed................... 707,222 8,908,422 206,306 2,556,129 51,812 645,478 861,716 10,819,073
Money Market.............. 10,259,993 10,259,993 56,274 56,274 9,655,579 9,655,579 660,688 660,688
Blue Chip................. 275,107 6,334,955 10,689 267,652 20,476 484,830 265,320 6,117,777
Year ended December 31,
1995:
Value Growth.............. 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
</TABLE>
35
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
For the year ended December 31, 1996, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. Government securities) by portfolio, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- ----------------------------------------------- ----------- -----------
<S> <C> <C>
Value Growth................................... $15,149,979 $11,690,469
High Grade Bond................................ 993,058 890,313
High Yield Bond................................ 2,518,414 1,403,395
Managed........................................ 9,970,884 10,035,710
Blue Chip...................................... 5,508,806 231,339
</TABLE>
At December 31, 1996, net unrealized appreciation (depreciation) of
investments by portfolio was composed of the following:
<TABLE>
<CAPTION>
NET UNREALIZED
GROSS UNREALIZED APPRECIATION
---------------------------- (DEPRECIATION)
PORTFOLIO APPRECIATION DEPRECIATION OF INVESTMENTS
- ---------------------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C>
Value Growth.................................. $ 2,583,173 $ (229,252) $ 2,353,921
High Grade Bond............................... 102,798 (7,906) 94,892
High Yield Bond............................... 239,160 (137,912) 101,248
Managed....................................... 1,545,832 (154,990) 1,390,842
Blue Chip..................................... 3,610,371 (70,891) 3,539,480
</TABLE>
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income for the following portfolios are
declared daily and were payable on the last business day of the month as
follows:
<TABLE>
<CAPTION>
PORTFOLIO
---------------------------------
HIGH HIGH
GRADE YIELD MONEY
PAYABLE DATE BOND BOND MARKET
- ----------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
January 31, 1996................................................. $ .0646 $ .0728 $ .0045
February 29, 1996................................................ .0617 .0694 .0038
March 29, 1996................................................... .0600 .0682 .0037
April 30, 1996................................................... .0612 .0732 .0041
May 31, 1996..................................................... .0610 .0708 .0040
June 28, 1996.................................................... .0553 .0654 .0035
July 31, 1996.................................................... .0614 .0751 .0043
August 30, 1996.................................................. .0598 .0698 .0040
September 30, 1996............................................... .0591 .0725 .0040
October 31, 1996................................................. .0577 .0682 .0041
November 29, 1996................................................ .0563 .0665 .0039
December 31, 1996................................................ .0599 .0708 .0042
--------- --------- -----------
Total dividends per share........................................ $ .7180 $ .8427 $ .0481
--------- --------- -----------
--------- --------- -----------
</TABLE>
36
<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, 1996, 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>
Value Growth.......................... 12/23/96 12/30/96 12/30/96 $ 0.3000 58%
Managed............................... 12/23/96 12/30/96 12/30/96 0.5000 47
Blue Chip............................. 12/23/96 12/30/96 12/30/96 0.3425 80
</TABLE>
CAPITAL GAINS DISTRIBUTIONS:
<TABLE>
<CAPTION>
DIVIDEND
DECLARATION RECORD PAYABLE AMOUNT PER
PORTFOLIO DATE DATE DATE SHARE
- -------------------------------------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Value Growth.......................... 12/23/96 12/30/96 12/30/96 $ 1.0525
High Yield Bond....................... 12/23/96 12/30/96 12/30/96 0.1113
Managed............................... 12/23/96 12/30/96 12/30/96 0.8450
Blue Chip............................. 12/23/96 12/30/96 12/30/96 0.1200
</TABLE>
The capital gains distributions related to the Value Growth, High Yield
Bond, Managed and Blue Chip Portfolios include net short-term realized gains of
$1,785,538 ($0.9525 per share), $9,333 ($0.0153 per share), $940,732 ($0.4950
per share) and $7,234 ($0.0125 per share), respectively, that are taxable to
shareholders as ordinary income dividends.
37
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
VALUE
GROWTH
PORTFOLIO
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................................... $ 12.31 $ 10.39 $ 11.52 $ 10.05 $ 9.55
Income From Investment Operations
Net investment income............................................. 0.35 0.55 0.48 0.63 0.46
Net gains or losses on securities (both realized and unrealized).. 1.82 2.13 (0.99) 2.10 0.54
---------- ---------- ---------- ---------- ----------
Total from investment operations.................................... 2.17 2.68 (0.51) 2.73 1.00
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)............................ (0.30) (0.50) (0.36) (0.57) (0.50)
Distributions (from capital gains)................................ (1.05) (0.26) (0.11) (0.69)
Distributions in excess of net realized gains..................... (0.15)
---------- ---------- ---------- ---------- ----------
Total distributions................................................. (1.35) (0.76) (0.62) (1.26) (0.50)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.......................................... $ 13.13 $ 12.31 $ 10.39 $ 11.52 $ 10.05
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset value (1)................ 17.65% 25.87% -4.43% 27.20% 10.46%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)............................. $ 27,188 $ 16,295 $ 10,603 $ 4,730 $ 3,017
Ratio of net expenses to average net assets......................... 0.55% 0.55% 0.55% 0.55% 0.55%
Ratio of net income to average net assets........................... 2.68% 4.78% 4.35% 5.41% 4.54%
Portfolio turnover rate............................................. 72% 98% 78% 81% 88%
Average commission rate per share (2)............................... $ 0.0536
Information assuming no voluntary reimbursement or
waiver by FBL Investment of excess operating expenses
(see NOTE 3):
Per share net investment income..................................... $ 0.33 $ 0.53 $ 0.46 $ 0.59 $ 0.41
Ratio of expenses to average net assets............................. 0.69% 0.72% 0.77% 0.89% 1.09%
Amount reimbursed................................................... $ 29,686 $ 22,306 $ 16,706 $ 13,353 $ 17,373
</TABLE>
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(2) Average commission rate per share disclosure is not required for fiscal
years prior to December 31, 1996.
See accompanying notes.
38
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------- ----------------------------------------------------------
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.98 $ 9.44 $ 10.23 $ 10.14 $ 10.15 $ 9.69 $ 9.32 $ 10.44 $ 9.92 $ 9.65
0.72 0.77 0.76 0.77 0.83 0.84 0.87 0.91 0.95 0.98
(0.15) 0.54 (0.79) 0.09 (0.01) 0.33 0.49 (1.01) 0.58 0.27
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
0.57 1.31 (0.03) 0.86 0.82 1.17 1.36 (0.10) 1.53 1.25
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
)
(0.72 (0.77) (0.76) (0.77) (0.83) (0.84) (0.87) (0.91) (0.95) (0.98)
(0.11) (0.12) (0.11) (0.06)
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(0.72) (0.77) (0.76) (0.77) (0.83) (0.95) (0.99) (1.02) (1.01) (0.98)
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 9.83 $ 9.98 $ 9.44 $ 10.23 $ 10.14 $ 9.91 $ 9.69 $ 9.32 $ 10.44 $ 9.92
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
%
5.94 14.26% -0.26% 8.74% 8.40% 12.65% 15.15% -1.01% 15.05% 13.39%
3,535
$ $ 3,208 $ 2,452 $ 2,349 $ 3,704 $ 5,929 $ 4,810 $ 4,172 $ 4,536 $ 4,015
0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55%
7.22% 7.81% 7.76% 7.58% 8.19% 8.47% 8.96% 9.17% 9.25% 9.88%
32% 14% 15% 38% 16% 30% 32% 10% 58% 35%
0.70
$ $ 0.74 $ 0.73 $ 0.76 $ 0.80 $ 0.81 $ 0.84 $ 0.88 $ 0.92 $ 0.88
0.80% 0.84% 0.80% 0.72% 0.79% 0.87% 0.88% 0.84% 0.85% 0.99%
$ 8,233 $ 8,255 $ 6,207 $ 5,343 $ 9,004 $ 17,094 $ 15,105 $ 12,667 $ 12,872 $ 17,310
</TABLE>
39
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................................... $ 11.71 $ 9.93 $ 11.33 $ 10.06 $ 9.27
Income From Investment Operations
Net investment income............................................. 0.60 0.65 0.66 0.72 0.69
Net gains or losses on securities (both realized and unrealized).. 1.44 1.90 (1.22) 1.57 0.77
---------- ---------- ---------- ---------- ----------
Total from investment operations.................................... 2.04 2.55 (0.56) 2.29 1.46
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)............................ (0.50) (0.59) (0.54) (0.63) (0.67)
Distributions (from capital gains)................................ (0.85) (0.18) (0.23) (0.39)
Distributions in excess of net realized gains..................... (0.07)
---------- ---------- ---------- ---------- ----------
Total distributions................................................. (1.35) (0.77) (0.84) (1.02) (0.67)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.......................................... $ 12.40 $ 11.71 $ 9.93 $ 11.33 $ 10.06
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset value (1)................ 17.39% 25.69% (4.96)% 22.71% 15.72%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)............................. $ 26,022 $ 14,487 $ 9,758 $ 4,951 $ 3,019
Ratio of net expenses to average net assets......................... 0.55% 0.55% 0.55% 0.55% 0.55%
Ratio of net income to average net assets........................... 4.73% 5.80% 6.23% 6.23% 7.00%
Portfolio turnover rate............................................. 82% 48% 59% 59% 60%
Average commission rate per share (2)............................... $ 0.0534
Information assuming no voluntary reimbursement or waiver by FBL
Investment of excess operating expenses (see NOTE 3):
Per share net investment income..................................... $ 0.57 $ 0.62 $ 0.63 $ 0.67 $ 0.64
Ratio of expenses to average net assets............................. 0.75% 0.77% 0.80% 0.91% 1.13%
Amount reimbursed................................................... $ 38,874 $ 26,008 $ 19,147 $ 15,076 $ 16,480
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------- ----------------------------------------------------------
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 20.70 $ 15.82 $ 15.67 $ 13.96 $ 12.91
0.05 0.05 0.04 0.03 0.03 0.45 0.39 0.34 0.29 0.29
3.99 4.80 0.07 1.72 1.05
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
0.05 0.05 0.04 0.03 0.03 4.44 5.19 0.41 2.01 1.34
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(0.05) (0.05) (0.04) (0.03) (0.03) (0.34) (0.31) (0.26) (0.30) (0.29)
(0.12)
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(0.05) (0.05) (0.04) (0.03) (0.03) (0.46) (0.31) (0.26) (0.30) (0.29)
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 24.68 $ 20.70 $ 15.82 $ 15.67 $ 13.96
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
4.90% 5.47% 3.68% 2.68% 3.28% 21.43% 32.81% 2.65% 14.36% 10.38%
$ 3,819 $ 3,159 $ 2,658 $ 2,300 $ 2,530 $ 14,493 $ 6,665 $ 3,262 $ 1,654 $ 1,502
0.55% 0.55% 0.55% 0.55% 0.55% 0.48% 0.55% 0.55% 0.55% 0.55%
4.58% 5.27% 3.63% 2.65% 3.30% 1.92% 2.07% 2.19% 1.92% 2.13%
0% 0% 0% 0% 0% 2% 1% 0% 0% 0%
$ 0.0825
$ 0.04 $ 0.05 $ 0.04 $ 0.02 $ 0.03 $ 0.38 $ 0.30 $ 0.24 $ 0.22
0.82% 0.90% 0.82% 0.79% 0.93% 0.59% 0.81% 0.89% 1.06%
$ 9,569 $ 9,816 $ 7,157 $ 5,838 $ 10,168 $ 1,952 $ 6,360 $ 5,495 $ 7,320
</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 Value Growth, High Grade Bond, High Yield Bond,
Managed, Money Market and Blue Chip Portfolios) as of December 31, 1996, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1996, 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, 1996, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
Des Moines, Iowa /s/ Ernst & Young LLP
January 31, 1997
