<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1997
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. 14 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 15 /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, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
------------------------
It is proposed that this filing become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 1997 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on December 1, 1996 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, 1996 ON FEBRUARY 25, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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.
Value Growth 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, 1997, 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, 1997.
<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>
Value Growth 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...................................................... 19
</TABLE>
<TABLE>
<S> <C> <C>
Foreign Securities................................................... 19
</TABLE>
<TABLE>
<S> <C> <C>
When-Issued and Delayed Delivery Transactions........................ 19
</TABLE>
<TABLE>
<S> <C> <C>
Loans of Portfolio Securities........................................ 20
</TABLE>
<TABLE>
<S> <C> <C>
Covered Call Options................................................. 20
</TABLE>
<TABLE>
<S> <C> <C>
Repurchase Agreements................................................ 20
</TABLE>
<TABLE>
<S> <C> <C>
Investments in Capital Securities.................................... 21
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PURCHASE OF SHARES................................................................................ 21
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
REDEMPTION OF SHARES.............................................................................. 22
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET ASSET VALUE INFORMATION....................................................................... 22
</TABLE>
<TABLE>
<S> <C> <C>
Money Market Portfolio............................................... 22
</TABLE>
<TABLE>
<S> <C> <C>
Other Portfolios..................................................... 22
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PERFORMANCE INFORMATION........................................................................... 23
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
MANAGEMENT OF THE FUND............................................................................ 24
</TABLE>
<TABLE>
<S> <C> <C>
Board of Trustees.................................................... 24
</TABLE>
<TABLE>
<S> <C> <C>
Investment Adviser................................................... 24
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PORTFOLIO TRANSACTIONS............................................................................ 25
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TAXES AND DISTRIBUTIONS........................................................................... 26
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ORGANIZATION OF THE FUND.......................................................................... 26
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
GENERAL INFORMATION............................................................................... 27
</TABLE>
<TABLE>
<S> <C> <C>
Reports to Policyowners and Contract Holders......................... 27
</TABLE>
<TABLE>
<S> <C> <C>
Shareholder Inquiries................................................ 27
</TABLE>
<TABLE>
<S> <C> <C>
Shareholder Voting Rights............................................ 27
</TABLE>
<TABLE>
<S> <C> <C>
Distributor and Dividend Disbursing and Transfer Agent............... 28
</TABLE>
<TABLE>
<S> <C> <C>
Accounting Services.................................................. 28
</TABLE>
<TABLE>
<S> <C> <C>
Registration Statement............................................... 28
</TABLE>
<TABLE>
<S> <C> <C>
Legal Matters........................................................ 28
</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 Value Growth Portfolio
(formerly known as 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:
VALUE GROWTH PORTFOLIO. This Portfolio seeks long-term
capital appreciation. The Portfolio pursues this
objective by investing primarily in equity securities of
companies that the investment adviser believes have a
potential to earn a high return on capital and/or in
equity securities that the investment adviser believes
are undervalued by the market place. Such equity
securities may include common stock, preferred stock and
securities convertible or exchangeable into common stock.
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as high
a level of current income as is consistent with
investment in a high grade 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
3
<PAGE>
lower by Standard & Poor's Corporation, or unrated
securities of comparable quality. AN INVESTMENT IN THIS
PORTFOLIO MAY ENTAIL GREATER THAN ORDINARY FINANCIAL
RISK.
MANAGED PORTFOLIO. This Portfolio seeks the highest
total investment return of income and capital
appreciation. The Portfolio will pursue this objective
through a fully managed investment policy consisting of
investment in the following three market sectors: (i)
growth common stocks and securities convertible or
exchangeable into growth common stocks, including
warrants and rights; (ii) high grade debt securities 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 Value Growth 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>
VALUE GROWTH PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of
year.............................. $ 12.31 $ 10.39 $ 11.52 $ 10.05 $ 9.55 $ 8.65 $ 8.76 $ 8.34
Income from Investment Operations
Net investment income........... 0.35 0.55 0.48 0.63 0.46 0.51 0.52 0.50
Net gains or losses on
securities (both realized and
unrealized).................... 1.82 2.13 (0.99) 2.10 0.54 0.75 (0.11) 0.42
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations....................... 2.17 2.68 (0.51) 2.73 1.00 1.26 0.41 0.92
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment
income)........................ (0.30) (0.50) (0.36) (0.57) (0.50) (0.36) (0.52) (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) (0.36) (0.52) (0.50)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year........ $ 13.13 $ 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).............. 17.65% 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)......................... $ 27,188 $ 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 % 0.55 % 0.58 % 0.96 % 1.09%
Ratio of net income to average net
assets........................... 2.68 % 4.78 % 4.35 % 5.41 % 4.54 % 5.23 % 5.91 % 5.69%
Portfolio turnover rate........... 72 % 98 % 78 % 81 % 88 % 117 % 115 % 89%
Average commission rate per share
(3).............................. $ 0.0536
Information assuming no voluntary
reimbursement or waiver by FBL
Investment Advisory Services, Inc.
of excess operating expenses:
Per share net investment income... $ 0.33 $ 0.53 $ 0.46 $ 0.59 $ 0.41 $ 0.46
Ratio of expenses to average net
assets........................... 0.69 % 0.72 % 0.77 % 0.89 % 1.09 % 1.07 %
Amount reimbursed................. $ 29,686 $ 22,306 $ 16,706 $ 13,353 $ 17,373 $ 12,733
<CAPTION>
VALUE GROWTH 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%(4)
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 %(4)
Ratio of net income to average net
assets........................... 4.36 % 2.00 %(4)
Portfolio turnover rate........... 109 % 215 %(4)
Average commission rate per share
(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) Average commission rate per share disclosure is not required for fiscal
years prior to December 31, 1996.
(4) 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),
----------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year....... $ 9.98 $ 9.44 $ 10.23 $ 10.14 $ 10.15 $ 9.52 $ 9.56
Income from Investment Operations
Net investment income................ 0.72 0.77 0.76 0.77 0.83 0.86 0.84
Net gains or losses on securities
(both realized and
unrealized)......................... (0.15) 0.54 (0.79) 0.09 (0.01) 0.63 (0.04)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations....... 0.57 1.31 (0.03) 0.86 0.82 1.49 0.80
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment
income)............................. (0.72) (0.77) (0.76) (0.77) (0.83) (0.86) (0.84)
Distributions (from capital gains)...
Distributions in excess of net
realized gains......................
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions.................... (0.72) (0.77) (0.76) (0.77) (0.83) (0.86) (0.84)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year............. $ 9.83 $ 9.98 $ 9.44 $ 10.23 $ 10.14 $ 10.15 $ 9.52
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net
asset value (2)....................... 5.94% 14.26% -0.26% 8.74% 8.40% 16.42% 8.85%
Ratios/Supplemental Data:
Net assets, end of year (000's
omitted).............................. $ 3,535 $ 3,208 $ 2,452 $ 2,349 $ 3,704 $ 3,659 $ 3,287
Ratio of net expenses to average net
assets................................ 0.55 % 0.55 % 0.55 % 0.55 % 0.55 % 0.43 % 0.71%
Ratio of net income to average net
assets................................ 7.22 % 7.81 % 7.76 % 7.58 % 8.19 % 8.82 % 8.88%
Portfolio turnover rate................ 32 % 14 % 15 % 38 % 16 % 38 % 69%
Information assuming no voluntary
reimbursement or waiver by FBL Investment
Advisory Services, Inc. of excess
operating expenses:
Per share net investment income........ $ 0.70 $ 0.74 $ 0.73 $ 0.76 $ 0.80 $ 0.83
Ratio of expenses to average net
assets................................ 0.80 % 0.84 % 0.80 % 0.72 % 0.79 % 0.73 %
Amount reimbursed...................... $ 8,233 $ 8,255 $ 6,207 $ 5,343 $ 9,004 $ 10,458
<CAPTION>
HIGH GRADE BOND PORTFOLIO
<S> <C> <C> <C>
1989 1988 1987(1)
---------- ---------- ----------
Net asset value, beginning of year....... $ 9.23 $ 9.41 $ 9.35
Income from Investment Operations
Net investment income................ 0.84 0.84 0.18
Net gains or losses on securities
(both realized and
unrealized)......................... 0.33 (0.18) 0.41
---------- ---------- ----------
Total from investment operations....... 1.17 0.66 0.59
---------- ---------- ----------
Less Distributions
Dividends (from net investment
income)............................. (0.84) (0.84) (0.53)
Distributions (from capital gains)...
Distributions in excess of net
realized gains......................
---------- ---------- ----------
Total distributions.................... (0.84) (0.84) (0.53)
---------- ---------- ----------
Net asset value, end of year............. $ 9.56 $ 9.23 $ 9.41
---------- ---------- ----------
---------- ---------- ----------
Total Return:
Total investment return based on net
asset value (2)....................... 12.74% 13.87% 38.56%(3)
Ratios/Supplemental Data:
Net assets, end of year (000's
omitted).............................. $ 3,014 $ 2,672 $ 2,497
Ratio of net expenses to average net
assets................................ 0.71 % 0.71 % 0.75 %(3)
Ratio of net income to average net
assets................................ 8.56 % 8.62 % 7.26 %(3)
Portfolio turnover rate................ 70 % 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),
----------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year... $ 9.69 $ 9.32 $ 10.44 $ 9.92 $ 9.65 $ 8.47 $ 9.44
Income from Investment Operations
Net investment income............ 0.84 0.87 0.91 0.95 0.98 1.04 1.03
Net gains or losses on securities
(both realized and
unrealized)..................... 0.33 0.49 (1.01) 0.58 0.27 1.18 (0.97)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations... 1.17 1.36 (0.10) 1.53 1.25 2.22 0.06
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment
income)......................... (0.84) (0.87) (0.91) (0.95) (0.98) (1.04) (1.03)
Distributions (from capital
gains).......................... (0.11) (0.12) (0.11) (0.06)
Distributions in excess of net
realized gains..................
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions................ (0.95) (0.99) (1.02) (1.01) (0.98) (1.04) (1.03)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year......... $ 9.91 $ 9.69 $ 9.32 $ 10.44 $ 9.92 $ 9.65 $ 8.47
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on
net asset value (2)............... 12.65% 15.15% -1.01% 15.05% 13.39% 27.49% 0.67%
Ratios/Supplemental Data:
Net assets, end of year (000's
omitted).......................... $ 5,929 $ 4,810 $ 4,172 $ 4,536 $ 4,015 $ 3,965 $ 3,165
Ratio of net expenses to average
net assets........................ 0.55 % 0.55 % 0.55 % 0.55 % 0.55 % 0.43 % 0.91%
Ratio of net income to average net
assets............................ 8.47 % 8.96 % 9.17 % 9.25 % 9.88 % 11.32 % 11.40%
Portfolio turnover rate............ 30 % 32 % 10 % 58 % 35 % 76 % 49%
Information assuming no voluntary
reimbursement or waiver by FBL
Investment Advisory Services, Inc. of
excess operating expenses:
Per share net investment income.... $ 0.81 $ 0.84 $ 0.88 $ 0.92 $ 0.88 $ 0.99
Ratio of expenses to average net
assets............................ 0.87 % 0.88 % 0.84 % 0.85 % 0.99 % 0.93 %
Amount reimbursed.................. $ 17,094 $ 15,105 $ 12,667 $ 12,872 $ 17,310 $ 18,111
<CAPTION>
HIGH YIELD BOND PORTFOLIO
<S> <C> <C> <C>
1989 1988 1987(1)
---------- ---------- ----------
Net asset value, beginning of year... $ 9.81 $ 9.76 $ 9.95
Income from Investment Operations
Net investment income............ 1.14 1.13 0.21
Net gains or losses on securities
(both realized and
unrealized)..................... (0.35) 0.03 0.20
---------- ---------- ----------
Total from investment operations... 0.79 1.16 0.41
---------- ---------- ----------
Less Distributions
Dividends (from net investment
income)......................... (1.16) (1.11) (0.59)
Distributions (from capital
gains)..........................
Distributions in excess of net
realized gains.................. (0.01)
---------- ---------- ----------
Total distributions................ (1.16) (1.11) (0.60)
---------- ---------- ----------
Net asset value, end of year......... $ 9.44 $ 9.81 $ 9.76
---------- ---------- ----------
---------- ---------- ----------
Total Return:
Total investment return based on
net asset value (2)............... 8.08% 11.93% 21.55%(3)
Ratios/Supplemental Data:
Net assets, end of year (000's
omitted).......................... $ 3,134 $ 2,900 $ 2,591
Ratio of net expenses to average
net assets........................ 0.94 % 0.96 % 0.88 %(3)
Ratio of net income to average net
assets............................ 11.18 % 10.89 % 8.45 %(3)
Portfolio turnover rate............ 98 % 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> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of
year.............................. $ 11.71 $ 9.93 $ 11.33 $ 10.06 $ 9.27 $ 8.99 $ 8.97 $ 8.87
Income from Investment Operations
Net investment income........... 0.60 0.65 0.66 0.72 0.69 0.75 0.71 0.68
Net gains or losses on
securities (both realized and
unrealized).................... 1.44 1.90 (1.22) 1.57 0.77 0.39 0.02 0.10
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations....................... 2.04 2.55 (0.56) 2.29 1.46 1.14 0.73 0.78
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment
income)........................ (0.50) (0.59) (0.54) (0.63) (0.67) (0.86) (0.71) (0.68)
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) (0.86) (0.71) (0.68)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year........ $ 12.40 $ 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).............. 17.39% 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)......................... $ 26,022 $ 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 % 0.55 % 0.47 % 0.97 % 0.96%
Ratio of net income to average net
assets........................... 4.73 % 5.80 % 6.23 % 6.23 % 7.00 % 7.97 % 7.68 % 7.36%
Portfolio turnover rate........... 82 % 48 % 59 % 59 % 60 % 40 % 83 % 44%
Average commission rate per share
(3).............................. $ 0.0534
Information assuming no voluntary
reimbursement or waiver by FBL
Investment Advisory Services, Inc.
of excess operating expenses:
Per share net investment income... $ 0.57 $ 0.62 $ 0.63 $ 0.67 $ 0.64 $ 0.69
Ratio of expenses to average net
assets........................... 0.75 % 0.77 % 0.80 % 0.91 % 1.13 % 1.03%
Amount reimbursed................. $ 38,874 $ 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%(4)
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 %(4)
Ratio of net income to average net
assets........................... 7.02 % 5.55 %(4)
Portfolio turnover rate........... 101 % 95 %(4)
Average commission rate per share
(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) Average commission rate per share disclosure is not required for fiscal
years prior to December 31, 1996.
(4) Computed on an annualized basis.
8
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations
Net investment income......................... 0.05 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 0.05 0.04 0.03 0.03 0.05
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)........ (0.05) (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) (0.05) (0.04) (0.03) (0.03) (0.05)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset value
(2)............................................ 4.90% 5.47% 3.68% 2.68% 3.28% 5.77%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)......... $ 3,819 $ 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 % 0.55 % 0.48%
Ratio of net income to average net assets....... 4.58 % 5.27 % 3.63 % 2.65 % 3.30 % 5.60%
Portfolio turnover rate......................... 0 % 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................. $ 0.04 $ 0.05 $ 0.04 $ 0.02 $ 0.03 $ 0.05
Ratio of expenses to average net assets......... 0.82 % 0.90 % 0.82 % 0.79 % 0.93 % 0.78%
Amount reimbursed............................... $ 9,569 $ 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> <C>
YEAR ENDED DECEMBER 31 (EXCEPT AS INDICATED),
----------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year................ $ 20.70 $ 15.82 $ 15.67 $ 13.96 $ 12.91 $ 10.51
Income from Investment Operations
Net investment income......................... 0.45 0.39 0.34 0.29 0.29 0.31
Net gains or losses on securities (both
realized and unrealized)..................... 3.99 4.80 0.07 1.72 1.05 2.65
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations................ 4.44 5.19 0.41 2.01 1.34 2.96
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net investment income)........ (0.34) (0.31) (0.26) (0.30) (0.29) (0.31)
Distributions (from capital gains)............ (0.12) (0.25)
Distributions in excess of net realized
gains........................................
---------- ---------- ---------- ---------- ---------- ----------
Total distributions............................. (0.46) (0.31) (0.26) (0.30) (0.29) (0.56)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year...................... $ 24.68 $ 20.70 $ 15.82 $ 15.67 $ 13.96 $ 12.91
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total Return:
Total investment return based on net asset value
(2)............................................ 21.43% 32.81% 2.65% 14.36% 10.38% 28.20%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)......... $ 14,493 $ 6,665 $ 3,262 $ 1,654 $ 1,502 $ 1,352
Ratio of net expenses to average net assets..... 0.48 % 0.55 % 0.55 % 0.55 % 0.55 % 0.71%
Ratio of net income to average net assets....... 1.92 % 2.07 % 2.19 % 1.92 % 2.13 % 2.57%
Portfolio turnover rate......................... 2 % 1 % 0 % 0 % 0 % 7%
Average commission rate per share (3)........... $ 0.0825
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%(4)
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)......... $ 1,061
Ratio of net expenses to average net assets..... 0.54 %(4)
Ratio of net income to average net assets....... 4.22 %(4)
Portfolio turnover rate......................... 0 %(4)
Average commission rate per share (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) Average commission rate per share disclosure is not required for fiscal
years prior to December 31, 1996.
(4) 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."
- --------------------------------------------------------------------------------
VALUE GROWTH
The investment objective of the Value Growth Portfolio is
long-term capital
PORTFOLIO
appreciation. The Portfolio pursues its investment
objective by investing primarily in equity securities of
companies that the investment adviser believes have a
potential to earn a high return on capital and/or in
equity securities that the investment adviser believes
are undervalued by the market place. Such equity
securities may include common stock, preferred stock and
securities convertible or exchangeable into common stock.
The Value Growth Portfolio may invest in securities of
companies in cyclical industries during periods when such
securities appear to the investment adviser to have
strong potential for capital appreciation. The Portfolio
may also invest in "special situation" companies. A
"special situation" company is one that, in the opinion
of the Fund's
11
<PAGE>
investment adviser, has potential for significant future
earnings growth but has not performed well in the recent
past. These situations may include companies with
management turnaround, corporate or asset restructuring
or significantly undervalued assets.
The investment adviser's strategy for the Value Growth
Portfolio is based upon a value-oriented analysis of
common stocks. Such an analysis focuses upon evaluations
of key financial ratios such as stock price-to-book
value, stock price-to-earnings, stock price-to-cash flow
and debt-to-total capital. The investment adviser
attempts to determine the fundamental value of an
enterprise using the foregoing ratios and by evaluating
an enterprise's balance sheet (e.g., comparing the
enterprise's assets with the purchase price of similar
recently acquired assets) as well as by using dividend
discounting models.
The investment adviser's emphasis on fundamental analysis
of each company's prospects and the inherent value of its
securities may result in a portion of the Portfolio being
invested in medium- or smaller-sized companies that are
less readily identifiable than larger, better-known
companies or in companies that are not perceived as being
popular investments at a given time. The Adviser believes
that opportunities can be found at all size levels and,
therefore, the Portfolio may invest in companies of all
sizes.
When warranted, in the opinion of the investment adviser,
by prevailing market or economic conditions, the
Portfolio, for temporary defensive purposes, may invest
up to 100% of its assets in other types of securities,
including investment-grade commercial paper, corporate
bonds, debentures, preferred stocks, obligations of banks
and savings institutions, U.S. Government securities,
government agency securities and repurchase agreements,
or it may retain funds in cash. "Investment-grade
commercial paper" is commercial paper rated A-2 or better
by Standard & Poor's or Prime-2 or better by Moody's.
Through careful selection of individual securities,
diversification of investments by industry and 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 grade 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.
12
<PAGE>
The Portfolio will not directly purchase common stocks.
However, it may retain up to 10% of the value of its
assets in common stocks acquired either by conversion of
debt securities or by the exercise of warrants attached
to debt securities.
When warranted, in the opinion of the investment adviser,
by prevailing market or economic conditions, the
Portfolio for temporary defensive purposes may invest up
to 100% of its assets in other types of securities,
including investment-grade commercial paper, obligations
of banks and savings institutions, U.S. Government
securities, government agency securities and repurchase
agreements, or it may retain funds in cash.
Although in the opinion of the Fund's investment adviser,
the risk of loss of principal should be minimized by the
quality of the investments in which the Portfolio will
invest primarily, the long maturities that typically
provide the best yields may subject the Portfolio to
substantial price changes resulting from market yield
fluctuations. The market price of fixed-income securities
such as those purchased by the Portfolio is affected by
changes in interest rates; generally, the market value of
fixed income securities 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 (Ba or lower by Moody's and BB or lower
by Standard & Poor's), or in unrated securities of
comparable quality. Such securities are commonly known as
"junk bonds."
Securities rated Ba or lower by Moody's and BB or lower
by Standard & Poor's are considered by those rating
services to have varying degrees of speculative
characteristics. Consequently, although they can be
expected to provide higher yields, such securities may be
subject to greater market fluctuations and risk of loss
of income and principal than lower-yielding,
higher-rated, fixed-income securities. See "Principal
Risk Factors -- Special Considerations -- High Yield
Bonds" for 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
13
<PAGE>
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.
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.
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MANAGED PORTFOLIO
This Portfolio seeks the highest total investment return
of income and capital appreciation. The Portfolio pursues
this objective through a fully managed investment policy
consisting of investment in the following three market
sectors: (i) growth common stocks and securities
convertible or exchangeable into growth common stocks,
including warrants and rights; (ii) high grade debt
securities 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 policy for the stock market
sector is to invest in those securities that appear to
the investment adviser to possess above average potential
for appreciation in market value, usually as a result of
the issuer's relatively favorable prospects for
improvement in earnings, which generally include those of
companies with established records of growth in sales or
earnings, and companies with promising new products,
services or processes. The Portfolio's investment
policies for the debt and money market sectors are
substantially identical to those of the High Grade Bond
Portfolio and Money Market Portfolio, respectively. The
Managed Portfolio will, from time to time, adjust the mix
of investments among the three market sectors to
capitalize on perceived variations in return potential
produced by the interaction of changing financial markets
and economic conditions. There are no restrictions as to
the proportion of one or another type of security which
the Portfolio may hold. Accordingly, the Portfolio may,
at any given time, be substantially invested in equity
securities, in high grade debt securities or in high
quality short-term money market instruments. Major
changes in the investment mix may occur over several
years or during a single year or shorter period depending
upon market and economic conditions. The fact that the
investment mix may be adjusted from time to time may
result in high portfolio turnover 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
14
<PAGE>
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.
- --------------------------------------------------------------------------------
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
15
<PAGE>
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 VALUE GROWTH 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.
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
16
<PAGE>
fixed-income securities have a claim on the assets of the
issuer prior to the holders of common stock. Therefore,
an investment in fixed-income securities generally
entails less risk than an investment in common stock of
the same issuer.
The investment philosophy of the High Yield Bond
Portfolio with respect to high yield bonds is based on
the premise that over the long-term a broadly diversified
portfolio of high yield fixed-income securities should,
even taking into account possible losses, provide a
higher net return than that achievable on a portfolio of
higher-rated securities. The High Yield Bond Portfolio
seeks to achieve the highest yields possible while
reducing relative risks through:
(a) broad diversification;
(b) credit analysis by the investment adviser of the
issuers in which the Portfolio invests;
(c) monitoring and seeking to anticipate changes and
trends in the economy and financial markets that
might affect the prices of portfolio securities.
The investment adviser's judgment as to the
"reasonableness" of the risk involved in any particular
investment will be a function of its experience in
managing fixed-income investments and its evaluation of
general economic and financial conditions of a specific
issuer.
In some circumstances, defensive strategies may be
implemented to preserve or enhance capital even at the
sacrifice of current yield. Defensive strategies, which
may be used singly or in any combination, may include,
but are not limited to, investments in discount
securities or investments in money market instruments.
High yielding securities may be issued by corporations in
the growth stage of their development. They may also be
issued in connection with a corporate reorganization or
as part of a corporate takeover. Companies that issue
such high yielding securities are often highly leveraged
and may not have available to them more traditional
methods of financing. Therefore, the risk associated with
acquiring the securities of such issuers generally is
greater than is the case with higher-rated securities.
For example, during an economic downturn or a sustained
period of rising interest rates, highly leveraged issuers
of high yielding securities may experience financial
stress. During such periods, such 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
17
<PAGE>
as a deterioration in the creditworthiness of the issuer.
The lack of a liquid secondary market for certain
securities may also make it more difficult for the Fund
to obtain accurate market quotations for purposes of
valuing a Portfolio's assets. Market quotations are
generally available on many high yield issues only from a
limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual
sales.
It is likely that a major economic recession could
severely affect the market for and the values of high
yielding securities, as well as the ability of the
issuers of such securities to repay principal and pay
interest thereon.
A Portfolio may acquire high yielding securities that are
sold without registration under the federal securities
laws and therefore carry restrictions on resale. While
many recent high yielding securities have been sold with
registration rights, covenants and penalty provisions for
delayed registration, if a Portfolio is required to sell
such restricted securities before the securities have
been registered, it may be deemed an underwriter of such
securities as defined in the Securities Act of 1933,
which entails special responsibilities and liabilities. A
Portfolio may incur special costs in disposing of such
securities, but will generally incur no costs when the
issuer is responsible for registering the securities.
A Portfolio may acquire high yielding securities during
an initial underwriting. Such securities involve special
risks because they are new issues. The Fund has no
arrangement with any person concerning the acquisition of
such securities and the investment adviser will carefully
review the credit and other characteristics pertinent to
such new issues.
From time to time, there have been proposals for
legislation designed to limit the use of certain high
yielding securities in connection with leveraged
buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities.
Such proposals, if enacted into law, could reduce the
market for such securities generally, could negatively
affect the financial condition of issuers of high 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
18
<PAGE>
income accrued with respect to these securities and may
have to dispose of portfolio securities under
disadvantageous circumstances in order to generate cash
to satisfy these distribution requirements.
Additional information concerning high yielding
securities appears under "Appendix C -- Description of
Corporate Bond Ratings."
- --------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN INVESTMENT TECHNIQUES
- --------------------------------------------------------------------------------
Except as otherwise noted below, the following investment
strategies and techniques may be used by all Portfolios.
- --------------------------------------------------------------------------------
FOREIGN SECURITIES
The Value Growth Portfolio and Managed Portfolio each may
invest up to 25% of its net assets in equity and debt
securities of foreign issuers, and the High Grade Bond
Portfolio and High Yield Bond Portfolio each may invest
up to 25% of its net assets in debt securities of foreign
issuers, to the extent the purchase of such foreign
securities is otherwise consistent with the Portfolio's
investment objectives. Investments will be made only in
foreign securities which are publicly traded on U.S.
exchanges and payable in U.S. dollars. The investment
adviser will apply standards for evaluating quality and
risk of investments in foreign securities comparable to
those it applies to investments in domestic securities
while also taking into consideration the opportunities
and special risks in connection with foreign securities.
Investments in foreign securities can provide a Portfolio
with more opportunities for attractive returns, but they
may also involve some special risks such as exposure to
potentially adverse local political and economic
developments; nationalization and exchange controls;
potentially lower liquidity and high volatility; and
possible problems arising from accounting, disclosure,
settlement, and regulatory practices that differ from
U.S. standards. Fluctuations in exchange rates may affect
the earning power and asset value of the foreign entity
issuing the security and can either increase or decrease
the investment's value. Dividend and interest payments
may be repatriated based upon the exchange rate at the
time of disbursement or payments, and such restrictions
on capital flows may be imposed. The characteristics of
the securities in the Portfolios, such as the maturity
and the type of issuer, will affect yields and yield
differentials, which may vary over time.
- --------------------------------------------------------------------------------
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.
19
<PAGE>
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.
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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.
- --------------------------------------------------------------------------------
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
20
<PAGE>
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.
- --------------------------------------------------------------------------------
INVESTMENTS IN
CAPITAL
Each Portfolio (other than the Blue Chip and Money Market
Portfolios) may invest in
SECURITIES
capital (trust-preferred) securities. These securities
are issued by trusts or other special purpose entities
created for the purpose of investing in junior
subordinated debentures. Capital securities, which have
no voting rights, have a final stated maturity date and a
fixed schedule for periodic payments. In addition,
capital securities have provisions which provide
preference over common and preferred stock upon
liquidation, although the securities are subordinated to
other, more senior debt. The issuers of these securities
may defer interest payments for a number of years (up to
five years), although interest continues to accrue
cumulatively. In addition, the trust may be terminated
and the debentures distributed in liquidation. Because of
the structure of these securities, they have the
characteristics, and involve the associated risks, of
both fixed income and preferred equity securities. At the
present time, the Internal Revenue Service treats capital
securities as debt. Proposed tax legislation may cause
this tax treatment to be modified in the future. In the
event that the tax treatment of interest payments of
these types of securities is modified, the Portfolio will
reconsider the appropriateness of continued investment in
these securities. For purposes of percentage limitations
applicable to the Portfolio, these securities will be
treated as debt securities.
- --------------------------------------------------------------------------------
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.
21
<PAGE>
- --------------------------------------------------------------------------------
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 Friday after
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
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.
22
<PAGE>
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 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
23
<PAGE>
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. ("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., an Iowa corporation. At December 31, 1996,
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 Value Growth 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.
24
<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>
Value Growth................................................... 0.45 % 0.45 % 0.40 %
High Grade Bond................................................ 0.30 % 0.275 % 0.25 %
High Yield Bond................................................ 0.45 % 0.45 % 0.40 %
Managed........................................................ 0.45 % 0.45 % 0.45 %
Money Market................................................... 0.25 % 0.25 % 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;
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 to the extent that
annual operating expenses, including the investment
advisory fee, exceed .55% for the period January 1, 1997
through April 30, 1997, and .65% for the period May 1,
1997 through December 31, 1997. There can be no assurance
that the Adviser will continue to limit expenses beyond
December 31, 1997.
- --------------------------------------------------------------------------------
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.
25
<PAGE>
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 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
VALUE GROWTH, 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
26
<PAGE>
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 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.
As of the date of this prospectus, Farm Bureau Life
Insurance Company owned more than 25% of the Money Market
Portfolio and will be deemed to control the Portfolio.
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 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
27
<PAGE>
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 the Adviser pursuant to which the Adviser
performs accounting services for the Fund. In addition,
the agreement provides that the Adviser 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 the Adviser 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, L.L.P. 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, L.L.P.
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
28
<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 rating of the investment securities of the High
Yield Bond Portfolio and the High Grade Bond Portfolio
for the fiscal year ended December 31, 1996. Percentages
are weighted averages based upon the portfolio
composition at the end of each month during the year. The
percentage of total assets represented by bonds rated by
Moody's and Standard & Poor's ("S&P") is shown. The
percentage of total assets represented by unrated bonds
is also shown. Although not specifically rated by Moody's
or Standard & Poor's, U.S. Government securities are
reflected as Aaa and AAA (highest quality) for purposes
of 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........................ 8.58% A........................ 9.23%
Baa...................... 10.59 BBB...................... 11.20
Ba....................... 35.41 BB....................... 33.91
B........................ 33.30 B........................ 35.72
Caa...................... 2.18 CCC......................
Ca....................... 0.85 D........................ 0.85
Cash and Other Cash and Other
Assets.................. 9.09 Assets................... 9.09
------- -------
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...................... 13.49% AAA...................... 9.39%
Aa....................... 9.22 AA....................... 10.50
A........................ 42.03 A........................ 44.70
Baa...................... 18.29 BBB...................... 14.07
Ba....................... 2.95 BB....................... 3.23
Not rated................ 3.45 Not Rated................ 7.54
Cash and Other Cash and Other
Assets.................. 10.57 Assets................... 10.57
------- -------
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.
<TABLE>
<S> <C> <C>
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.
</TABLE>
STANDARD & POOR'S CORPORATION
<TABLE>
<S> <C> <C>
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.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C> <C>
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.
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.
BB-B-CCC-CC:
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.
<TABLE>
<S> <C> <C>
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.
</TABLE>
STANDARD & POOR'S CORPORATION
<TABLE>
<S> <C> <C>
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."
</TABLE>
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, 1997
FBL Variable Insurance Series Fund (the "Fund") is an open-end diversified
management investment company which consists of six Portfolios: Value Growth
Portfolio (formerly known as 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, 1997. 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
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES............................................................. 3
Loans of Portfolio Securities............................................................................ 3
Covered Call Options..................................................................................... 3
Ginnie Mae Certificates.................................................................................. 4
INVESTMENT RESTRICTIONS.................................................................................... 5
Fundamental Policies..................................................................................... 5
Non-Fundamental (Operating) Policies..................................................................... 6
OFFICERS AND TRUSTEES...................................................................................... 7
INVESTMENT ADVISER......................................................................................... 11
UNDERWRITING AND DISTRIBUTION EXPENSES..................................................................... 13
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS........................................................... 14
PURCHASES AND REDEMPTIONS.................................................................................. 15
NET ASSET VALUE............................................................................................ 15
Money Market Portfolio................................................................................... 15
Other Portfolios......................................................................................... 16
TAXES...................................................................................................... 16
DIVIDENDS AND DISTRIBUTIONS................................................................................ 17
Money Market Portfolio................................................................................... 17
High Grade Bond and High Yield Bond Portfolios........................................................... 17
Other Portfolios......................................................................................... 17
PERFORMANCE INFORMATION.................................................................................... 17
SHAREHOLDER VOTING RIGHTS.................................................................................. 20
CONTROL PERSONS............................................................................................ 21
OTHER INFORMATION.......................................................................................... 21
Custodian................................................................................................ 21
Independent Auditors..................................................................................... 21
Accounting Services...................................................................................... 21
Dividend Disbursing and Transfer Agent................................................................... 21
Legal Matters............................................................................................ 21
Registration Statement................................................................................... 22
FINANCIAL STATEMENTS....................................................................................... 22
</TABLE>
<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 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
3
<PAGE>
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.
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 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
4
<PAGE>
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 Portfolio may be
effected by a majority vote of the outstanding shares of such Portfolio.
Except as noted below, each Portfolio may not:
1. As to 75% of the value of each Portfolio's total assets (with the
exception of the Money Market Portfolio which is subject to 100% of the value of
its total assets), purchase securities of any issuer (other than U.S. Government
securities or government agency securities) if, as a result, more than 5% of the
value of the Portfolio's assets (taken at the time of investment) would be
invested in securities of that issuer.
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.
5
<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 as follows: the Value Growth and
Managed Portfolios may invest up to 25% of its net assets in foreign equity and
debt securities traded on U.S. exchanges and payable in U.S. dollars, and the
High Grade Bond and High Yield Bond Portfolios may each invest up to 25% of its
net assets in foreign debt securities traded on U.S. exchanges and payable in
U.S. dollars.
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 15% of its total net assets in
"illiquid" securities (except 10% for the Money Market and Blue Chip
Portfolios).
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.
6
<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 (49)
5400 University Avenue
West Des Moines, Iowa 50266
Farmer; Chairman and Director, FBL Financial Group, Inc.; President and
Director, 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
Agricultural Insurance Company, Western Ag Insurance Agency, Inc., Western
Farm Bureau Life Insurance Company and American Ag Insurance Company.
RICHARD D. HARRIS*, SENIOR VICE PRESIDENT, SECRETARY-TREASURER AND TRUSTEE (53)
5400 University Avenue
West Des Moines, Iowa 50266
Senior Vice President, Secretary-Treasurer and Director, FBL Financial
Group, Inc.; Senior Vice President and Secretary-Treasurer, Farm Bureau Life
Insurance Company and other affiliates of the foregoing. He holds other
positions with various affiliates of the foregoing. Former Director, Public
Policy Division, Iowa Farm Bureau Federation; Director, Iowa FFA Foundation
and Iowa Make-A-Wish Foundation.
STEPHEN M. MORAIN*, SENIOR VICE PRESIDENT, GENERAL COUNSEL, ASSISTANT SECRETARY
AND TRUSTEE (51)
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, General Counsel and Director, FBL Financial Group,
Inc., FBL Investment Advisory Services, Inc. and FBL Marketing Services,
Inc.; Senior Vice President and General Counsel, Farm Bureau Life Insurance
Company, FBL Insurance Brokerage, Inc. and other affiliates of the
foregoing; Director, Computer Aided Design Software, Inc. and Iowa Business
Development Finance Corporation; Chairman, Edge Technologies, Inc.
- ------------------------
(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.
7
<PAGE>
THOMAS R. GIBSON, CHIEF EXECUTIVE OFFICER (52)
5400 University Avenue
West Des Moines, Iowa 50266
Chief Executive Officer and Director, FBL Financial Group, Inc., FBL
Investment Advisory Services, Inc. and FBL Marketing Services, Inc.; Chief
Executive Officer, Farm Bureau Life Insurance Company, Western Farm Bureau
Life Insurance Company, FBL Insurance Brokerage, Inc. and other affiliates
of the foregoing.
TIMOTHY J. HOFFMAN, VICE PRESIDENT (46)
5400 University Avenue
West Des Monies, Iowa 50266
Chief Property/Casualty Officer, FBL Financial Group, Inc.; Executive Vice
President and General Manager, Farm Bureau Mutual Insurance Company and
other affiliates of the foregoing; Vice President, Farm Bureau Life
Insurance Company, Western Farm Bureau Life Insurance Company and other
affiliates of the foregoing; Vice President and Director, FBL Investment
Advisory Services, Inc. and FBL Marketing Services, Inc.
WILLIAM J. ODDY, CHIEF OPERATING OFFICER (53)
5400 University Avenue
West Des Moines, Iowa 50266
Chief Operating Officer, FBL Financial Group, Inc. and FBL Financial
Services, Inc.; Executive Vice President and General Manager, Farm Bureau
Life Insurance Company, Western Farm Bureau Life Insurance Company and other
affiliates of the foregoing; Vice President, Farm Bureau Mutual Insurance
Company and other affiliates of the foregoing; President, Treasurer and
Director, Communications Providers, Inc.; Chief Operating Officer and
Director, FBL Marketing Services, Inc. and FBL Investment Advisory Services,
Inc.; President and Director, FBL Real Estate Ventures, Ltd. and RIK, Inc.;
Chief Executive Officer, Western Computer Services, Inc.
RICHARD D. WARMING, CHIEF INVESTMENT OFFICER (63)
5400 University Avenue
West Des Moines, Iowa 50266
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, CHIEF FINANCIAL OFFICER (41)
5400 University Avenue
West Des Moines, Iowa 50266
Chief Financial Officer, 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.
8
<PAGE>
DENNIS M. MARKER, INVESTMENT VICE PRESIDENT, ADMINISTRATION AND ASSISTANT
SECRETARY (45)
5400 University Avenue
West Des Moines, Iowa 50266
Investment Vice President, Administration, FBL Financial Group, Inc. and
Farm Bureau Life Insurance Company. He holds other positions with various
affiliates of the foregoing.
SUE A. CORNICK, MARKET CONDUCT AND MUTUAL FUNDS VICE PRESIDENT AND ASSISTANT
SECRETARY (36)
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.
KRISTI ROJOHN, ASSISTANT SECRETARY (34)
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 (26)
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 (69)
Box 104
Herman, Nebraska 68029
Farmer; Partner, Bartling Brothers Partnership (farming business); Director,
Papio Missouri River Natural Resources District.
JOHN R. GRAHAM*, TRUSTEE (51)
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 and Farm Bureau Mutual Insurance Agency of
Kansas; Partner, Arthur-Graham Rental Properties, CM Brass and G&H Real
Estate Investments; Trustee, Master Teacher Employee Benefit Pension Trust.
9
<PAGE>
ERWIN H. JOHNSON, TRUSTEE (54)
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; Financial and Farm Management
Consultant; Iowa State University Overseas Projects.
ANN JORGENSEN, TRUSTEE (56)
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.
KENNETH KAY, TRUSTEE (53)
R.R. 2, Box 75
Atlantic, Iowa 50022
Farmer; Salesman, Pioneer Seed Corn; Voting Delegate, Vice President and
former President, Cass County Farm Bureau; Director, First Whitney Bank &
Trust; Board Member, Transportation Committee Chairman, Cass Atlantic
Development Corporation.
CURTIS C. PIETZ, TRUSTEE (65)
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.
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, 1996, trustees fees paid by the Fund totaled $2,530.
10
<PAGE>
TABLE OF TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE PENSION AND RETIREMENT TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS PART FROM ALL FUNDS IN
NAME OF TRUSTEE FROM THE FUND OF FUND EXPENSES THE FBL FAMILY
- ----------------------------- --------------- ----------------------------- -------------------
<S> <C> <C> <C>
Mr. Bartling $ 460.00 $ 0 $ 1,380.00
Mr. Graham 230.00 0 690.00
Mr. Johnson 460.00 0 1,380.00
Ms. Jorgensen 460.00 0 1,380.00
Mr. Kay 115.00 0 345.00
Mr. Nelson* 345.00 0 1,035.00
Mr. Pietz 460.00 0 1,380.00
Mr. Wiederstein 0 0 0
Mr. Morain 0 0 0
Mr. Maahs* 0 0 0
Mr. Harris 0 0 0
</TABLE>
- ------------------------
* Mr. Nelson and Mr. Maahs resigned as trustees of the Fund on August 15, 1996
and August 31, 1996, respectively.
Trustees 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 FBL Financial Group, 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.
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.
11
<PAGE>
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; 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 prospectuses 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 Value Growth 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, 1997. 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 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.
12
<PAGE>
For the fiscal years ended December 31, 1996, 1995 and 1994, the advisory
and management fee expense was $104,228, $65,647 and $39,952, respectively, for
the Value Growth Portfolio; $9,973, $8,481 and $7,489, respectively, for the
High Grade Bond Portfolio; $26,585, $23,073 and $21,507, respectively, for the
High Yield Bond Portfolio; $109,830, $65,457 and $43,500, respectively for the
Managed Portfolio; $9,579, $8,050 and $8,173, respectively, for the Money Market
Portfolio; and $20,647, $9,533 and $4,895, 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 to reimburse any Portfolio to the
extent that annual operating expenses, including the investment advisory fee,
exceed .55% for the period January 1, 1997 through April 30, 1997, and .65% for
the period May 1, 1997 through December 31, 1997. There can be no assurance that
the Adviser will continue to limit expenses beyond December 31, 1997. The
agreement to reimburse any Portfolio to the extent any operating expenses exceed
.55% also applied to fiscal years ended 1996 and 1995.
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, 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.
13
<PAGE>
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. 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. The Fund paid brokerage commissions during the fiscal
years ended December 31, 1996, 1995, and 1994 of $74,514, $45,472 and $41,247,
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
14
<PAGE>
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."
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.
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
15
<PAGE>
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
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
16
<PAGE>
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 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 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.
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 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 Value Growth, 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
17
<PAGE>
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 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, 1996 the High Grade Bond Portfolio's yield was
6.76% and the High Yield Bond Portfolio's yield was 8.27%. 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:
<TABLE>
<S> <C> <C> <C>
[(a-b +1)(6) -1]
Yield = 2 -------------
cd
</TABLE>
<TABLE>
<C> <S>
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.
</TABLE>
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.
18
<PAGE>
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, 1996 were 4.88% and 5.00%, 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, 1996. 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.
AVERAGE ANNUAL TOTAL RETURN TABLE
FOR PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
STANDARDIZED
AVERAGE ANNUAL
PORTFOLIO TOTAL RETURN
- --------------------------------------------------------------------------------------------------- ---------------
<S> <C>
Value Growth
Life of Portfolio (1)............................................................................ 9.53%
Five-Year........................................................................................ 14.74%
One-Year......................................................................................... 17.65%
High Grade Bond
Life of Portfolio (1)............................................................................ 9.54%
Five-Year........................................................................................ 7.31%
One-Year......................................................................................... 5.94%
High Yield Bond
Life of Portfolio (1)............................................................................ 11.53%
Five-Year........................................................................................ 11.05%
One-Year......................................................................................... 12.65%
Managed
Life of Portfolio (1)............................................................................ 11.69%
Five-Year........................................................................................ 14.77%
One-Year......................................................................................... 17.39%
Blue Chip (2)
Life of Portfolio................................................................................ 18.31%
Five-Year........................................................................................ 15.88%
One-Year......................................................................................... 21.43%
</TABLE>
19
<PAGE>
TOTAL RETURN TABLE
FOR PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PORTFOLIO TOTAL RETURN
- ---------------------------------------------------------------------------------------------------- -------------
<S> <C>
Value Growth
Life of Portfolio (1)............................................................................. 131.18%
Five-Year......................................................................................... 98.85%
One-Year.......................................................................................... 17.65%
High Grade Bond
Life of Portfolio (1)............................................................................. 131.53%
Five-Year......................................................................................... 42.31%
One-Year.......................................................................................... 5.94%
High Yield Bond
Life of Portfolio (1)............................................................................. 173.16%
Five-Year......................................................................................... 68.88%
One-Year.......................................................................................... 12.65%
Managed
Life of Portfolio (1)............................................................................. 176.80%
Five-Year......................................................................................... 99.12%
One-Year.......................................................................................... 17.39%
Blue Chip (2)
Life of Portfolio................................................................................. 184.17%
Five-Year......................................................................................... 108.96%
One-Year.......................................................................................... 21.43%
</TABLE>
- ------------------------
(1) The Value Growth, 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.
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
20
<PAGE>
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.
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 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 a Portfolio not to exceed $30,000. During the fiscal year ended
December 31, 1996, the aggregate amount of such fees paid to FBL was $31,486.
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, L.L.P., 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, L.L.P.
21
<PAGE>
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, 1996 were filed with the Securities
and Exchange Commission on February 28, 1997 and are incorporated by reference.
Additional copies of such Annual Report to Shareholders may be obtained without
charge by contacting the Fund.
22
<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
Incorporated by reference in Part B -- Statement of Additional
Information:
Annual Report to Shareholders
Report of Independent Auditors
Statements of Assets and Liabilities as of December 31, 1996
Schedules of Investments as of December 31, 1996
Statements of Operations for the year ended December 31, 1996
Statements of Changes in Net Assets for the year ended December
31, 1996
Statements of Changes in Net Assets for the year ended December
31, 1995
Notes to Financial Statements, December 31, 1996
(b) Exhibits:
<TABLE>
<C> <S>
1. (a) Declaration of Trust. (1)
(b) Amendment to Declaration of Trust. (2)
(c) Amendment to Declaration of Trust. (3)
(d) Amendments to Declaration of Trust. (4)
*(e) Amendment to Declaration of Trust
2. By-Laws of Registrant.
3. None.
4. None.
5. (a) Investment Advisory and Management Services Agreement. (3)
(b) Amendment to Investment Advisory Management Services Agreement. (3)
*(c) Amendment to Investment Advisory Management Services Agreement.
6. Underwriting Agreement between Registrant and FBL Investment Advisory
Services, Inc. (3)
7. None.
8. Custodian Agreement between Registrant and Bankers Trust Company Des
Moines, N.A. (5)
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S>
9. (a) Dividend Disbursing and Transfer Agent Agreement between Registrant
and FBL Investment Advisory Services, Inc. (3)
(b) Fidelity Bond Joint Insureds Agreement.
*(c) Joint Insureds DO & EO Agreement.
(d) (i) Subscription Agreement. (3)
(ii) Additional Subscription Agreement. (3)
(iii) Subscription Agreement for the Money Market Portfolio. (3)
(iv) Subscription Agreement for the Blue Chip Portfolio. (3)
(e) Participation Agreement. (6)
(f) Accounting Services Agreement. (3)
*10. Consent of Sutherland, Asbill & Brennan, L.L.P.
*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. (6)
*27.1 Value Growth 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
</TABLE>
- ------------------------
* Attached as an exhibit.
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
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
C-2
<PAGE>
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., 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 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 4 to the Form N-4 registration statement filed
with the Commission by Farm Bureau on May 1, 1997.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF RECORD
HOLDERS
AS OF MAY 1,
TITLE OF CLASS 1997
- -------------------------------------------------------- ----------------
<S> <C>
Money Market Portfolio 2
Value Growth 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 proceeding) 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,
C-3
<PAGE>
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.
<TABLE>
<CAPTION>
NAME AND POSITION(S)
WITH ADVISER PRINCIPAL OCCUPATIONS
- --------------------------------- -----------------------------------------------------------------------------
<S> <C>
Stephen M. Morain Incorporated herein by reference to the Statement of Additional Information
Senior Vice President, (Part B) of this Registration Statement.
General Counsel and Director
William J. Oddy Incorporated herein by reference to the Statement of Additional Information
Chief Operating Officer and (Part B) of this Registration Statement.
Director
Dennis M. Marker Incorporated herein by reference to the Statement of Additional Information
Investment Vice President, (Part B) of this Registration Statement.
Administration, Secretary and
Director
Richard D. Warming Incorporated herein by reference to the Statement of Additional Information
President and Director (Part B) of this Registration Statement.
Thomas R. Gibson Incorporated herein by reference to the Statement of Additional Information
Chief Executive Officer and (Part B) of this Registration Statement.
Director
Timothy J. Hoffman Incorporated herein by reference to the Statement of Additional Information
Vice President and Director (Part B) of this Registration Statement.
James W. Noyce Incorporated herein by reference to the Statement of Additional Information
Chief Financial Officer, (Part B) of this Registration Statement.
Treasurer and Director
Thomas E. Burlingame Incorporated herein by reference to the Statement of Additional Information
Vice President, Associate General (Part B) of this Registration Statement.
Counsel and Director
F. Walter Tomenga Incorporated herein by reference to the Statement of Additional Information
Vice President and Director (Part B) of this Registration Statement.
Lynn E. Wilson Incorporated herein by reference to the Statement of Additional Information
Vice President and Director (Part B) of this Registration Statement.
Sue A. Cornick Incorporated herein by reference to the Statement of Additional Information
Market Conduct and Mutual Funds (Part B) of this Registration Statement.
Vice President and Assistant
Secretary
Kristi Rojohn Incorporated herein by reference to the Statement of Additional Information
Senior Compliance Assistant and (Part B) of this Registration Statement.
Assistant Secretary
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION(S)
WITH ADVISER PRINCIPAL OCCUPATIONS
- --------------------------------- -----------------------------------------------------------------------------
<S> <C>
Elaine A. Followwill Incorporated herein by reference to the Statement of Additional Information
Compliance Assistant and (Part B) of this Registration Statement.
Assistant Secretary
Roger F. Grefe, Investment Management Vice President, FBL Financial Group, Inc.
Investment Management Vice
President
Lou Ann Sandburg, Investment Vice President, Securities, FBL Financial Group, Inc.
Investment Vice President,
Securities
Robert Rummelhart, Fixed-Income Vice President, FBL Financial Group, Inc.
Fixed-Income Vice President
Joel H. Klisart Investment Vice President, Real Estate, FBL Financial Group, Inc. He holds
Investment Vice President, Real other positions with various affiliates of the foregoing.
Estate
Roger PJ Soener Real Estate Vice President, FBL Financial Group, Inc. He holds other
Real Estate Vice President positions with various affiliates of the foregoing.
James P. Brannen Tax and Investment Accounting Vice President, FBL Financial Group, Inc. and
Tax and Investment Accounting various affiliates of the foregoing.
Vice President
Kathleen E. Kruidenier Manager, Private Investor Services, FBL Investment Advisory Services, Inc.
Manager, Private Investor
Services
Sharon M. Jerdee Investment Accounting Manager, FBL Investment Advisory Services, Inc.
Investment Accounting Manager
Charles T. Happel Portfolio Manager, FBL Marketing Services, Inc.
Portfolio Manager
Laura Kellen Beebe Portfolio Manager, FBL Marketing Services, Inc.
Portfolio Manager
</TABLE>
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.
C-5
<PAGE>
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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and 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 29th day of April, 1997.
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
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ EDWARD M. WIEDERSTEIN President and Trustee April 29, 1997
- ------------------------------ (Principal Executive ------------
Edward M. Wiederstein Officer) (dated)
Senior Vice President
/s/ RICHARD D. HARRIS Secretary-Treasurer and April 29, 1997
- ------------------------------ Trustee (Principal ------------
Richard D. Harris Financial and Accounting (dated)
Officer)
Senior Vice President
/s/ STEPHEN M. MORAIN General Counsel, April 29, 1997
- ------------------------------ Assistant Secretary and ------------
Stephen M. Morain Trustee (dated)
/s/ DONALD G. BARTLING April 29, 1997
- ------------------------------ Trustee ------------
Donald G. Bartling* (dated)
/s/ JOHN R. GRAHAM April 29, 1997
- ------------------------------ Trustee ------------
John R. Graham* (dated)
/s/ ERWIN H. JOHNSON April 29, 1997
- ------------------------------ Trustee ------------
Erwin H. Johnson* (dated)
/s/ ANN JORGENSEN April 29, 1997
- ------------------------------ Trustee ------------
Ann Jorgensen* (dated)
/s/ KENNETH KAY April 29, 1997
- ------------------------------ Trustee ------------
Kenneth Kay* (dated)
/s/ CURTIS C. PIETZ April 29, 1997
- ------------------------------ Trustee ------------
Curtis C. Pietz* (dated)
*By: /s/ STEPHEN M. MORAIN
------------------------- Attorney-in-Fact, pursuant to Power of
Stephen M. Morain Attorney.
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
EX-1(E) Amendment to Declaration of Trust
EX-5(c) Amendment to Investment Advisory Management Services Agreement
EX-9(c) Joint Insured DO & EO Agreement
EX-10 Consent of Sutherland, Asbill & Brennan, L.L.P
EX-11 Consent of Ernst & Young LLP
EX-27.1 Financial Data Schedule -- Value Growth Portfolio
EX-27.3 Financial Data Schedule -- High Grade Bond Portfolio
EX-27.4 Financial Data Schedule -- High Yield Bond Portfolio
EX-27.5 Financial Data Schedule -- Managed Portfolio
EX-27.6 Financial Data Schedule -- Money Market Portfolio
EX-27.7 Financial Data Schedule -- Blue Chip Portfolio
</TABLE>
<PAGE>
EXHIBIT 1(E)
Amendment to Declaration of Trust
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
AMENDMENT TO DECLARATION OF TRUST
WHEREAS, the Trust was established by Declaration of Trust on November
3, 1986, under the laws of the Commonwealth of Massachusetts;
WHEREAS, the Declaration of Trust was executed by the three Trustees
named in the Declaration of Trust who, at the first meeting of the Board of
Trustees held on March 3, 1987, fixed the number of Trustees to constitute
the initial Board of Trustees at eight, and, to fill the five vacancies
created thereby, appointed five additional individuals to serve as Trustees,
and the Trustees later fixed the number of Trustees at nine, and, to fill the
vacancy created thereby, appointed an additional individual to serve as
Trustee;
WHEREAS, the Declaration of Trust as amended April 1, 1987, provided
for the establishment of six series of shares, to wit: the Money Market
Portfolio, Growth Common Stock Portfolio, Aggressive Growth Common Stock
Portfolio, High Quality Bond Portfolio, High Yield Bond Portfolio, and
Managed Portfolio;
WHEREAS, the Declaration of Trust as amended August 21, 1990,
established a new seventh series of shares designated Blue Chip Portfolio;
WHEREAS, the Declaration of Trust as amended November 25, 1991,
eliminated the Aggressive Growth Common Stock Portfolio;
WHEREAS, the Declaration of Trust as amended May 1, 1992, changed the
designation of a series of shares to High Grade Bond Portfolio; and
WHEREAS, the Trustees now want to change the designation of a series of
shares to Value Growth Portfolio, effective December 1, 1996;
NOW, THEREFORE, pursuant to Section 7 of Article XII of the Declaration
of Trust, the Trustees of the Trust hereby amend the Declaration of Trust,
effective, December 1, 1996, as set forth below:
1. Section 7 of Article III of the Declaration of Trust is hereby
amended by deleting the first paragraph thereof and substitution in its
place, the following:
Section 7. ESTABLISHMENT AND DESIGNATION OF SERIES. Without
limiting the authority of the Trustees as set forth in Section 6, INTER
ALIA, to establish and designate any further series or to modify the
rights and preferences of any series, the Money Market Portfolio, Value
Growth Portfolio, High Yield Bond Portfolio, High Grade Bond Portfolio,
Managed Portfolio and Blue Chip Portfolio shall be, and each is, hereby
established and designated. Shares of a series shall be preferred over
shares of all other series in respect of the assets of that series.
<PAGE>
2. The Trustees of the Trust hereby reaffirm the Declaration of Trust,
as amended, in all respects.
3. This Amendment may be executed in more than one counterpart, each
of which shall be deemed an original, but all of which together shall
constitute one and the same document.
IN WITNESS WHEREOF, the undersigned, the Trustees of the Trust, have
executed this instrument as of December 1, 1996.
/s/ Edward M. Wiederstein
- ------------------------------------ ---------------------------------------
Edward M. Wiederstein, as Trustee John R. Graham, as Trustee
and not individually and not individually
/s/ Richard D. Harris /s/ Erwin H. Johnson
- ------------------------------------ ---------------------------------------
Richard D. Harris, as Trustee Erwin H. Johnson, as Trustee
and not individually and not individually
/s/ Stephen M. Morain /s/ Ann Jorgenson
- ------------------------------------ ---------------------------------------
Stephen M. Morain, as Trustee Ann Jorgenson, as Trustee
and not individually and not individually
/s/ Donald G. Bartling /s/ Kenneth Kay
- ------------------------------------ ---------------------------------------
Donald G. Bartling, as Trustee Kenneth Kay, as Trustee
and not individually and not individually
/s/ Curtis C. Pietz
- ------------------------------------
Curtis C. Pietz, as Trustee
and not individually
State of Iowa ) Notary signature is:
) /s/ Sue A. Cornick
County of Polk ) ---------------------------------------
On this 7th day of November, 1996, before me, the undersigned, a Notary
Public in and for the State of Iowa, personally appeared the persons to me
known to be the persons who executed the foregoing instrument and they
acknowledged that they executed the same as their voluntary act and deed.
/s/ Sue A. Cornick
- ------------------------------------
Notary Public
<PAGE>
EXHIBIT 5(C)
AMENDMENT TO INVESTMENT ADVISORY MANAGEMENT SERVICES AGREEMENT
<PAGE>
INVESTMENT ADVISORY AND MANAGEMENT
SERVICES AGREEMENT
FBL VARIABLE INSURANCE SERIES FUND
AMENDMENT TO MANAGEMENT FEE SCHEDULE
EFFECTIVE MAY 1, 1997
Amendment effective May 1, 1997 to the Investment Advisory and Management
Services Agreement dated April 6, 1987 between FBL Variable Insurance Series
Fund and FBL Investment Advisory Services, Inc. ("FBLIAS"). Pursuant to a
resolution adopted by the Board of Trustees on November 7, 1996, FBLIAS
wishes to reduce the management fee rate for the Value Growth, High Yield
Bond, Managed and Money Market Portfolios of the Fund.
The fee schedule in paragraph 7 is hereby amended to reflect the reduction in
management fees as follows:
AVERAGE DAILY NET ASSETS
FIRST SECOND OVER
$200 $200 $400
PORTFOLIO MILLION MILLION MILLION
--------- ------- ------- -------
Managed 0.45% 0.45% 0.45%
Value Growth 0.45% 0.45% 0.40%
High Yield Bond 0.45% 0.45% 0.40%
High Grade Bond 0.30% 0.275% 0.25%
Money Market 0.25% 0.25% 0.25%
Blue Chip 0.20% 0.20% 0.20%
The parties hereto have caused this amendment to be executed and delivered
by the persons designated below on November 7, 1996 to become effective as of
the day and year first written above.
FBL INVESTMENT ADVISORY FBL VARIABLE INSURANCE
SERVICES, INC. SERIES FUND
By: /s/ Richard D. Warming By: /s/ Edward M. Wiederstein
--------------------------- ---------------------------
President President
Attest: /s/ Dennis M. Marker Attest: /s/ Richard D. Harris
----------------------- -----------------------
Secretary Secretary
<PAGE>
FEBRUARY 15, 1997
EXHIBIT A
TO THE
DO&EO JOINT INSUREDS AGREEMENT DATED DECEMBER 31, 1995
For Policy Period, 12:01 a.m., February 15, 1997, through 12:01 a.m.,
February 15, 1998.
PARTY PREMIUM %
- ----- ---------- ------
FBL Investment Advisory Services, Inc. .. $ 8,826.00 50.62
FBL Marketing Services, Inc. ............ 2,943.00 16.88
FBL Variable Insurance Series Fund ...... 1,645.70 9.44
FBL Series Fund, Inc. ................... 3,480.67 19.96
FBL Money Market Fund, Inc. ............. 540.63 3.10
---------- ------
$17,436.00 100.00
---------- ------
---------- ------
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/ Richard D. Harris By: /s/ Edward M. Wiederstein
- ------------------------------- ----------------------------------
Secretary: Richard D. Harris Edward M. Wiederstein
Attest: FBL SERIES FUND, INC.
/s/ Richard D. Harris By: /s/ Edward M. Wiederstein
- ------------------------------- ----------------------------------
Secretary: Richard D. Harris Edward M. Wiederstein
Attest: FBL MONEY MARKET FUND, INC.
/s/ Richard D. Harris By: /s/ Edward M. Wiederstein
- ------------------------------- ----------------------------------
Secretary: Richard D. Harris Edward M. Wiederstein
<PAGE>
EXHIBIT 10
Consent of Sutherland, Asbill & Brennan
<PAGE>
[SUTHERLAND, ASBILL & BRENNAN L.L.P. LETTERHEAD]
April 21, 1997
Board of Trustees
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 as legal counsel
in the Prospectus and the Statement of Additional Information, filed as part
of the Post-Effective Amendment No. 14 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, L.L.P.
BY: /s/ Stephen E. Roth
-------------------------------------------
Stephen E. Roth
<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 January 31, 1997 on the financial statements of
FBL Variable Insurance Series Fund, in the Post-Effective Amendment No. 14 to
Form N-1A Registration Statement under the Securities Act of 1933 (No.
33-12791) and in this Amendment No. 15 to the Registration Statement under
the Investment Company Act of 1940 (No. 811-5069).
/s/ Ernst & Young LLP
Des Moines, Iowa
April 25, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> VUL VALUE GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 24655467
<INVESTMENTS-AT-VALUE> 27009388
<RECEIVABLES> 67391
<ASSETS-OTHER> 118322
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27195101
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6650
<TOTAL-LIABILITIES> 650
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24479215
<SHARES-COMMON-STOCK> 2070769
<SHARES-COMMON-PRIOR> 1323819
<ACCUMULATED-NII-CURRENT> 1732
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 353583
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2353921
<NET-ASSETS> 27188451
<DIVIDEND-INCOME> 397945
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<OTHER-INCOME> 0
<EXPENSES-NET> 114651
<NET-INVESTMENT-INCOME> 561144
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<DISTRIBUTIONS-OF-INCOME> 562374
<DISTRIBUTIONS-OF-GAINS> 1972997
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<SHARES-REINVESTED> 193097
<NET-CHANGE-IN-ASSETS> 10893220
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<PER-SHARE-NAV-BEGIN> 12.31
<PER-SHARE-NII> 0.35
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<PER-SHARE-DIVIDEND> 0.30
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<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.13
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> VUL HIGH GRADE BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3336263
<INVESTMENTS-AT-VALUE> 3431155
<RECEIVABLES> 60066
<ASSETS-OTHER> 48506
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3539727
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5172
<TOTAL-LIABILITIES> 5172
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3456475
<SHARES-COMMON-STOCK> 359602
<SHARES-COMMON-PRIOR> 321363
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16812)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 94892
<NET-ASSETS> 3534555
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 259125
<OTHER-INCOME> 0
<EXPENSES-NET> 18479
<NET-INVESTMENT-INCOME> 240646
<REALIZED-GAINS-CURRENT> 10639
<APPREC-INCREASE-CURRENT> (60696)
<NET-CHANGE-FROM-OPS> 190589
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 240646
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 118456
<NUMBER-OF-SHARES-REDEEMED> 102472
<SHARES-REINVESTED> 22255
<NET-CHANGE-IN-ASSETS> 326159
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (30839)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9973
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26712
<AVERAGE-NET-ASSETS> 3304177
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.72
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.83
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> VUL HIGH YIELD BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5864383
<INVESTMENTS-AT-VALUE> 5965631
<RECEIVABLES> 134433
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6100064
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 170972
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5827420
<SHARES-COMMON-STOCK> 598413
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<ACCUMULATED-NET-GAINS> 424
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 101248
<NET-ASSETS> 5929092
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<INTEREST-INCOME> 481351
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<EXPENSES-NET> 29243
<NET-INVESTMENT-INCOME> 452108
<REALIZED-GAINS-CURRENT> 61503
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<NET-CHANGE-FROM-OPS> 641180
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<DISTRIBUTIONS-OF-INCOME> 452108
<DISTRIBUTIONS-OF-GAINS> 67895
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<NUMBER-OF-SHARES-SOLD> 175655
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<SHARES-REINVESTED> 49648
<NET-CHANGE-IN-ASSETS> 1118999
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 9.69
<PER-SHARE-NII> 0.84
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<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.91
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> VUL MANAGED
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<PERIOD-END> DEC-31-1996
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<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 497489
<INTEREST-INCOME> 560992
<OTHER-INCOME> 0
<EXPENSES-NET> 109829
<NET-INVESTMENT-INCOME> 948652
<REALIZED-GAINS-CURRENT> 1834462
<APPREC-INCREASE-CURRENT> 488900
<NET-CHANGE-FROM-OPS> 3272014
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<DISTRIBUTIONS-OF-INCOME> 950234
<DISTRIBUTIONS-OF-GAINS> 1605895
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 707222
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<SHARES-REINVESTED> 206306
<NET-CHANGE-IN-ASSETS> 11534958
<ACCUMULATED-NII-PRIOR> 3413
<ACCUMULATED-GAINS-PRIOR> 267505
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 109830
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 148703
<AVERAGE-NET-ASSETS> 19886029
<PER-SHARE-NAV-BEGIN> 11.71
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> 1.44
<PER-SHARE-DIVIDEND> 0.50
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<PER-SHARE-NAV-END> 12.40
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> VUL MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3518021
<INVESTMENTS-AT-VALUE> 3518021
<RECEIVABLES> 2852
<ASSETS-OTHER> 303867
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3824740
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5479
<TOTAL-LIABILITIES> 5479
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3819261
<SHARES-COMMON-STOCK> 3819261
<SHARES-COMMON-PRIOR> 3158573
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3819261
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 169465
<OTHER-INCOME> 0
<EXPENSES-NET> 17745
<NET-INVESTMENT-INCOME> 151720
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 151720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 151720
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
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<NAME> VUL BLUE CHIP
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