Farm Bureau
Financial Services
FBL Variable Insurance
Series Fund
[LOGO]
SEMI-ANNUAL REPORT
JUNE 30, 1997
INVESTMENT MANAGER AND
PRINCIPAL UNDERWRITER
FBL INVESTMENT ADVISORY
SERVICES, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IA 50266
1-800-247-4170 (OUTSIDE IOWA)
1-800-422-3175 (IN IOWA)
225-5586 (DES MOINES)
This report is not to be distributed unless
preceded or accompanied by a prospectus.
FARM BUREAU LIFE INSURANCE COMPANY
FARM BUREAU MUTUAL FUNDS
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
[LOGO]
FARM BUREAU
FINANCIAL SERVICES
LIVING BESIDE YOU. WORKING FOR YOU.
<PAGE>
PRESIDENT'S LETTER
Dear Shareholder:
After an almost 10% correction earlier this year, the equity market resumed
its charge to new highs. Through June, the S&P 500 is up 20.6%, following
powerful 37.5% and 23.0% gains in 1995 and 1996, respectively. Such a large
first-half gain following +20% or more gains in the prior two years has only
occurred twice before during this century; 1929 and 1987. This bull market,
which began in 1990, now beats that of 1923-1929 as the longest in this century.
The bond market has nearly made a round trip in terms of yield. As of the
beginning of the year, the benchmark 30-year Treasury yield was 6.64%, by the
end of the first quarter it had risen to 7.10%, but by the end of June was back
down to 6.78%. After the Federal Reserve raised short-term interest rates
one-quarter of 1% in March, it was feared that rates would continue to rise. In
the months that have followed, economic data has pointed to softer growth and an
absence of dangerous levels of inflation. The core rate of inflation for the
first half was reported at 2.4%. Accordingly, the market is currently less
fearful of Fed rate hikes.
Even though inflation appears to be in check at present, it is possible
that an increase in global growth could fuel an increase in inflation, and as a
result financial assets may suffer. Alternatively, if disinflation were to
evolve into outright deflation, equities and non-investment grade bonds would
likely prove disappointing to investors. Perhaps we will remain on a moderate
growth / low inflation track, but as the market prices in less and less margin
for error, a thorough review of asset allocation decisions is prudent.
We remain concerned that investor's expectations for financial asset
returns may become unrealistic relative to longer-term historic norms. Risk is
the constant companion of return, but is easily forgotten in times such as
these. Asset allocation decisions should be based on investor risk tolerance and
a review of historic (50 to 100 years, rather than 5 or 10 years) patterns of
risk and reward.
For the actively managed FBL Variable Insurance Series Fund Portfolios,
(those other than the passive Blue Chip Portfolio) we constantly assess the
securities held to ensure that valuations are reasonable. In so doing, we seek
to produce attractive risk-adjusted performance and create lasting value for our
shareholders. The following paragraphs describe how we are currently striking
balance between risk and potential return for the various Fund Portfolios:
VALUE GROWTH: The market is completing a 15-year period of the best total
returns in stock history. It is doing so with a flourish as we've just witnessed
a rally of 20% in two months to a new high, a performance not seen since
November, 1928. The essential dynamic is fairly obvious and well heralded -- a
continuation of a well-balanced economic recovery that, despite its duration,
has yet to generate inflationary pressures.
<PAGE>
The Dow stocks look to be overvalued, with the components of the Dow
trading at or around their all-time high P/E ratio and yields at all time lows.
By comparison, many small caps are attractively priced: trading at relatively
low P/E ratios and selling at discounts to their true business value.
The Value Growth Portfolio has not participated in the current rally
because of this divergence between blue chip stocks and smaller companies. We
continue to believe the shareholder is well served by focusing on companies that
sell below their intrinsic business value, but currently, investors are focusing
their attention elsewhere and avoiding the value stocks. We believe in the long
run, value investing will win out over the current concept of paying any price
for a stock, no matter how high, just because it is going up. Our goal is to be
invested in stocks that have appreciation potential at an acceptable level of
risk.
HIGH GRADE BOND: U.S. Treasury yields were slightly higher at the end of
the first half of the year. For example, the 2-year, 10-year and 30-year
Treasury issues yielded 5.87%, 6.42% and 6.64%, respectively, as of 12/31/96 and
6.06%, 6.49% and 6.78% as of 6/30/97.
During the first half of the year, the Fund increased the average maturity
and effective duration of the Portfolio. This increase in effective duration
will make its total return more sensitive to overall changes in interest rates.
However, our effective duration and sensitivity to overall changes in interest
rates still remain much lower than more aggressive high grade bond funds.
Because of this, our future returns should continue to lag those of more
aggressive funds in both up and down markets.
HIGH YIELD BOND: During the past six months, the high yield bond market
outperformed the high grade corporate bond market. Fundamental and technical
factors both contributed favorably to this market's performance over the first
half of the year. On the fundamental side, an overall healthy economy and
improvement in overall market credit quality resulted in a very low rate of
actual defaults in the high yield market. On the technical side, strong demand
for high yield issues allowed the market to easily absorb new issuance, which
has resulted in a narrowing of the spread on high yield issues.
At the present time, the yield pick-up on high yield issues is near
historically low levels, which means there is little cushion to absorb any
potential negative surprises that may occur in this market. Because of this, we
feel a more aggressive stance is not prudent at this time, and the composition
of the Portfolio will probably not be dramatically altered going forward.
MANAGED: The Managed Portfolio continues to seek securities offering high
income with modest growth potential. This Portfolio uses a value philosophy, but
concentrates on securities that produce an income stream twice that of the S&P
500, which is currently yielding a mere 1.7%. We continue to achieve higher
income by investing in a mixture of high dividend-paying stocks, preferreds,
convertibles and corporate bonds.
Our current cash holdings put this Portfolio in an excellent position to
take advantage of buying opportunities that present themselves, and we continue
to focus on attractively priced convertibles when available. Major influences on
stock prices are still likely to be interest rates and the outlook for earnings.
Extreme changes in direction are not on the horizon, but we suspect that a
modest upticking in rates and a second half slowing in earnings momentum may
tarnish the investment environment a little, giving rise to a renewal of a more
selective market.
<PAGE>
MONEY MARKET: The most significant activity over the past six months was
the Fed funds rate increase from 5.25% to 5.50%. One-year Treasury bills have
traded in a range from 5.45% to 6.07% during this period, indicating some
uncertainty about the U.S. economy. However, during the last few months it
appears the Fed was preemptive in averting inflation and has successfully
maneuvered the U.S. economy through a strong growth, low inflation environment.
Since the short-term market levels are flat, we have stayed very short with
maturities because there is no incentive to extend and to capture any possible
market movement.
BLUE CHIP: True to its passive strategy, the performance of the Blue Chip
Portfolio over the past year has reflected that of the large capitalization
market sector which it represents. The Blue Chip Portfolio will, at all times,
remain substantially invested in common stocks of large companies. This
Portfolio is designed for those investors who prefer substantial exposure to
common stocks at all times or who wish to make their own market value judgments.
/s/ Edward M. Wiederstein
EDWARD M. WIEDERSTEIN
PRESIDENT
July 31, 1997
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HIGH
VALUE GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
----------- -----------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost -- $34,644,089;
$3,846,557; $7,220,657; $33,686,472; $3,858,426;
and $17,002,106, respectively) (Note 5) ........ $37,008,331 $ 3,946,882
Cash ............................................ 174,172 84,798
Receivables:
Due from FBL Investment Advisory Services, Inc. 9,171 2,749
Accrued dividends and interest ................. 71,817 64,509
Investment securities sold ..................... 3,233
Prepaid expense ................................. 663 80
----------- -----------
Total Assets .................................... $37,267,387 $ 4,099,018
=========== ===========
LIABILITIES AND NET ASSETS
Liabilities:
Investment securities purchased
Accrued expenses ............................... $ 13,629 $ 7,280
----------- -----------
Total Liabilities ............................... 13,629 7,280
Net assets applicable to shares of
beneficial interest (Note 4) ................... 37,253,758 4,091,738
----------- -----------
Total Liabilities and Net Assets ................ $37,267,387 $ 4,099,018
=========== ===========
Shares issued and outstanding as of June 30, 1997 2,706,756 416,484
NET ASSET VALUE PER SHARE ....................... $ 13.76 $ 9.82
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
(TABLE CONTINUED FROM PREVIOUS PAGE)
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ---------- -----------
$7,328,842 $35,117,660 $3,858,426 $23,986,057
76,083 289,425 295,722 219,997
6,780 13,066 3,455
139,837 205,322 7,947 26,746
6
136 651 85 386
---------- ----------- ---------- -----------
$7,551,678 $35,626,130 $4,165,635 $24,233,186
========== =========== ========== ===========
$ 350,000
8,042 $ 12,316 $ 8,402 $ 12,771
---------- ----------- ---------- -----------
358,042 12,316 8,402 12,771
7,193,636 35,613,814 4,157,233 24,220,415
---------- ----------- ---------- -----------
$7,551,678 $35,626,130 $4,165,635 $24,233,186
========== =========== ========== ===========
720,044 2,728,599 4,157,233 814,246
$ 9.99 $ 13.05 $ 1.00 $ 29.75
========== =========== ========== ===========
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HIGH
VALUE GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
----------- -----------
<S> <C> <C>
INVESTMENT INCOME
Dividends .............................................. $ 208,893
Interest ............................................... 231,740 $ 144,440
----------- -----------
Total Investment Income ................................ 440,633 144,440
EXPENSES
Paid to FBL Investment Advisory Services, Inc. (Note 3):
Investment advisory and management fees ............... 76,638 5,611
Accounting fees ....................................... 7,967 935
Custodial fees ......................................... 3,230 1,379
Legal fees ............................................. 1,901 210
Reports to shareholders ................................ 1,908 216
Trustees' fees and expenses ............................ 1,064 133
Insurance and bonds .................................... 747 88
Miscellaneous .......................................... 11,035 5,145
----------- -----------
Total Expenses ......................................... 104,490 13,717
Expense reimbursement (Note 3) ......................... (9,171) (2,749)
----------- -----------
Net Expenses ........................................... 95,319 10,968
----------- -----------
Net Investment Income .................................. 345,314 133,472
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) from investment transactions .. 1,237,774 (3,022)
Change in unrealized appreciation/depreciation of
investments ........................................... 10,321 5,433
----------- -----------
Net Gain on Investments ................................ 1,248,095 2,411
----------- -----------
Net Increase in Net Assets
Resulting from Operations ............................. $ 1,593,409 $ 135,883
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
(TABLE CONTINUED FROM PREVIOUS PAGE)
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------- ---------- ------- ----------
$ 4,930 $ 410,168 $ 158,216
270,149 433,654 $98,666 46,262
275,079 843,822 98,666 204,478
14,988 76,887 5,127 18,699
1,556 7,501 906 4,675
1,656 2,358 2,135 3,464
278 1,809 167 223
377 1,827 205 1,206
223 1,010 141 576
145 675 89 391
5,828 9,123 5,275 7,716
-------- ---------- ------- ----------
25,051 101,190 14,045 36,950
(6,780) (13,066) (3,455)
-------- ---------- ------- ----------
18,271 88,124 10,590 36,950
-------- ---------- ------- ----------
256,808 755,698 88,076 167,528
54,224 828,696 (799)
6,937 40,346 3,444,471
-------- ---------- ------- ----------
61,161 869,042 0 3,443,672
-------- ---------- ------- ----------
$317,969 $1,624,740 $88,076 $3,611,200
======== ========== ======= ==========
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VALUE GROWTH
PORTFOLIO
------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------ -----------
<S> <C> <C>
OPERATIONS
Net investment income ............................... $ 345,314 $ 561,144
Net realized gain (loss) from investment transactions 1,237,774 1,943,065
Change in unrealized appreciation/depreciation
of investments ..................................... 10,321 1,119,424
------------ -----------
Net Increase in Net Assets Resulting from Operations 1,593,409 3,623,633
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 6)
Net investment income ............................... (562,374)
Net realized gain from investment transactions ...... (1,972,997)
------------ -----------
0 (2,535,371)
CAPITAL SHARE TRANSACTIONS (NOTE 4) ................. 8,471,898 9,804,958
------------ -----------
Total Increase in Net Assets ........................ 10,065,307 10,893,220
NET ASSETS
Beginning of period ................................. 27,188,451 16,295,231
------------ -----------
End of period (including undistributed
net investment income as set forth below) .......... $ 37,253,758 $ 27,188,451
============ ===========
Undistributed Net Investment Income ................. $ 347,046 $ 1,732
============ ===========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
(TABLE CONTINUED FROM PREVIOUS PAGE)
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
---------- ---------- ---------- ----------
$ 133,472 $ 240,646 $ 256,808 $ 452,108
(3,023) 10,639 54,224 61,503
5,434 (60,696) 6,937 127,569
---------- ---------- ---------- ----------
135,883 190,589 317,969 641,180
(133,472) (240,646) (256,808) (452,108)
(67,895)
---------- ---------- ---------- ----------
(133,472) (240,646) (256,808) (520,003)
554,772 376,216 1,203,383 997,822
---------- ---------- ---------- ----------
557,183 326,159 1,264,544 1,118,999
3,534,555 3,208,396 5,929,092 4,810,093
---------- ---------- ---------- ----------
$4,091,738 $3,534,555 $7,193,636 $5,929,092
========== ========== ========== ==========
$ 0 $ 0 $ 0 $ 0
========== ========== ========== ==========
<PAGE>
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income ............................... $ 755,698 $ 948,652
Net realized gain (loss) from investment transactions 828,696 1,834,462
Change in unrealized appreciation/depreciation
of investments ..................................... 40,346 488,900
------------ ------------
Net Increase in Net Assets Resulting from Operations 1,624,740 3,272,014
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 6)
Net investment income ............................... (950,234)
Net realized gain from investment transactions ...... (1,605,895)
------------ ------------
0 (2,556,129)
CAPITAL SHARE TRANSACTIONS (NOTE 4) ................. 7,966,799 10,819,073
------------ ------------
Total Increase in Net Assets ........................ 9,591,539 11,534,958
NET ASSETS
Beginning of period ................................. 26,022,275 14,487,317
------------ ------------
End of period (including undistributed
net investment income as set forth below) .......... $ 35,613,814 $ 26,022,275
============ ============
Undistributed Net Investment Income ................. $ 757,529 $ 1,831
============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
(TABLE CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C>
$ 88,076 $ 151,720 $ 167,528 $ 198,794
(799) 69,879
3,444,471 1,709,516
---------- ---------- ----------- -----------
88,076 151,720 3,611,200 1,978,189
(88,076) (151,720) (198,208)
(69,445)
---------- ---------- ----------- -----------
(88,076) (151,720) 0 (267,653)
337,972 660,688 6,116,098 6,117,777
---------- ---------- ----------- -----------
337,972 660,688 9,727,298 7,828,313
3,819,261 3,158,573 14,493,117 6,664,804
---------- ---------- ----------- -----------
$4,157,233 $3,819,261 $24,220,415 $14,493,117
========== ========== =========== ===========
$ 0 $ 0 $ 168,855 $ 1,327
========== ========== =========== ===========
</TABLE>
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
----------- -----------
<S> <C> <C>
COMMON STOCKS (62.02%)
CHEMICALS AND ALLIED PRODUCTS (3.46%)
R.P. Scherer Corp. .................................... 25,000(1) $ 1,290,625
DEPOSITORY INSTITUTIONS (2.20%)
CU Bancorp ............................................ 48,000 732,000
Reliance Acceptance Corp. ............................. 17,400 85,912
-----------
817,912
ELECTRIC, GAS AND SANITARY SERVICES (10.24%)
Citizens Utilities Co., Class B ....................... 176,073 1,518,630
Matrix Service Co. .................................... 266,100(1) 2,295,112
-----------
3,813,742
FOOD STORES (2.57%)
Casey's General Stores, Inc. .......................... 44,500 958,143
FURNITURE AND FIXTURES (3.38%)
Ladd Furniture, Inc. .................................. 91,550(1) 1,258,812
HOLDING AND OTHER INVESTMENT OFFICES (1.62%)
General Growth Properties, Inc. ....................... 18,000 603,000
INSTRUMENTS & RELATED PRODUCTS (11.00%)
Allied Healthcare Products ............................ 107,400 698,100
Pall Corp. ............................................ 146,300 3,401,475
-----------
4,099,575
INSURANCE CARRIERS (0.55%)
Acceptance Insurance Group Companies, Inc. ............ 8,900(1) 202,475
EMC Insurance Group, Inc. ............................. 250 3,094
-----------
205,569
METAL MINING (4.23%)
Glamis Gold, Ltd. ..................................... 217,100 1,573,975
MISCELLANEOUS MANUFACTURING INDUSTRIES (7.01%)
W.H. Brady Co., Class A ............................... 90,000 2,610,000
NONDEPOSITORY INSTITUTIONS (0.63%)
Berkshire Hathaway, Inc. .............................. 5(1) 236,000
PRINTING & PUBLISHING (4.13%)
Belo (A.H.) Corp. ..................................... 37,000 1,540,125
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
SHARES
HELD VALUE
----------- -----------
TRANSPORTATION - BY AIR (2.89%)
Petroleum Helicopters, Inc. (Non-Voting) .............. 66,300 $ 1,077,375
WHOLESALE TRADE - DURABLE GOODS (3.34%)
TBC Corp. ............................................. 148,700(1) 1,245,363
WHOLESALE TRADE - NONDURABLE GOODS (4.77%)
Howell Corp. .......................................... 88,770 1,775,400
-----------
Total Common Stocks .................................... 23,105,616
PREFERRED STOCKS (7.49%)
DEPOSITORY INSTITUTIONS (3.94%)
Sterling Financial Corp. .............................. 40,176 1,466,424
WATER TRANSPORTATION (3.55%)
Sea Containers, Ltd., Convertible ..................... 26,320 1,322,580
-----------
Total Preferred Stocks ................................. 2,789,004
PRINCIPAL
AMOUNT
-----------
CORPORATE BOND (3.53%)
METAL MINING
Agnico-Eagle Mines, Ltd., Convertible Sub. Deb.,
3.50%, 1/27/04 ....................................... $ 1,600,000 1,316,000
SHORT-TERM INVESTMENTS (26.30%)
COMMERCIAL PAPER (17.31%)
Ford Motor Credit Corp., 5.56%, due 7/28/97 ........... 1,500,000 1,500,000
General Electric Capital Corp., 5.60%, due 8/27/97 .... 1,500,000 1,500,000
IBM Credit Corp., 5.57%, due 8/04/97 .................. 1,650,000 1,650,000
John Deere Capital Corp., 5.59%, due 8/12/97 .......... 1,800,000 1,800,000
-----------
6,450,000
MONEY MARKET MUTUAL FUND (2.70%)
Dreyfus Treasury Cash Management, Class A ............. 1,005,545 1,005,545
UNITED STATES GOVERNMENT AGENCIES (6.29%)
Federal Home Loan Bank, due 7/31/97 ................... 500,000 497,739
Federal National Mortgage Assoc., due 7/17/97 ......... 650,000 648,401
Federal National Mortgage Assoc., due 7/23/97 ......... 1,200,000 1,196,026
-----------
2,342,166
-----------
Total Short-Term Investments ........................... 9,797,711
-----------
Total Investments (99.34%) ............................. $37,008,331
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
VALUE
-----------
OTHER ASSETS LESS LIABILITIES (0.66%)
Cash, receivables and prepaid expense, less liabilities $ 245,427
-----------
Total Net Assets (100.00%) ............................. $37,253,758
===========
</TABLE>
(1) Non-income producing securities.
SEE ACCOMPANYING NOTES.
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
CORPORATE BONDS (61.55%)
COMMUNICATIONS (7.61%)
Comcast Cable Communications, Inc., 8.50%, due 5/01/27 $ 150,000 $ 160,296
New York Telephone Co., 7.75%, due 12/15/06 ........... 150,000 150,965
----------
311,261
DEPOSITORY INSTITUTIONS (10.18%)
J. P. Morgan & Co., 7.25%, due 10/01/10 ............... 150,000 145,140
Midland America Capital Corp., 12.75%, due 11/15/03 ... 155,000 167,936
Third National Corp., 7.50%, due 11/15/02 ............. 103,000 103,514
----------
416,590
ELECTRIC, GAS AND SANITARY SERVICES (20.98%)
MDU Resources Group, Inc., 9.125%, due 10/01/16 ....... 100,000 106,511
Narragansett Electric Co., 9.125%, due 5/01/21 ........ 300,000 325,380
New England Power Co., 8.00%, due 8/01/22 ............. 150,000 152,394
Southern California Edison Co., 8.875%, due 6/01/24 ... 125,000 129,662
Western Penn Power, 7.875%, due 12/01/04 .............. 140,000 144,624
----------
858,571
HOLDING AND OTHER INVESTMENT OFFICES (6.30%)
Federal Realty Investment Trust, 8.875%, due 1/15/00 .. 100,000 105,064
Meditrust, 7.60%, due 9/13/05 ......................... 150,000 152,721
----------
257,785
INSURANCE CARRIERS (3.10%)
Torchmark Corp., 8.625%, due 3/01/17 .................. 125,000 127,065
PRINTING AND PUBLISHING (2.61%)
Valassis Communications, Inc., 9.55%, due 12/01/03 .... 100,000 106,731
RAILROAD TRANSPORTATION (3.84%)
Union Pacific Corp., 8.50%, due 1/15/17 ............... 150,000 157,165
SECURITY AND COMMODITY BROKERS (2.53%)
Lehman Brothers Holding, Inc., 8.875%, due 11/01/98 ... 100,000 103,339
TRANSPORTATION EQUIPMENT (4.40%)
Ford Motor Credit Co., 9.50%, due 9/15/11 ............. 150,000 179,903
----------
Total Corporate Bonds .................................. 2,518,410
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO (CONTINUED)
PRINCIPAL
AMOUNT VALUE
---------- -----------
MORTGAGE-BACKED SECURITIES (16.19%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) (1.28%)
Pool # 50276, 9.50%, due 2/01/20 ...................... $ 48,629 $ 52,474
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)(14.91%)
Pool # 1512, 7.50%, due 12/20/23 ...................... 409,663 411,072
Pool # 236070, 10.00%, due 10/15/12 ................... 85,778 92,640
Pool # 276337, 10.00%, due 8/15/19 .................... 96,744 106,327
----------
610,039
----------
Total Mortgage-Backed Securities ....................... 662,513
UNITED STATES TREASURY OBLIGATION (10.19%)
U.S. Treasury Note, 7.25%, due 8/15/04 ................ 400,000 417,012
SHORT-TERM INVESTMENTS (8.53%)
UNITED STATES GOVERNMENT AGENCIES
Federal Home Loan Bank, due 7/21/97 ................... 200,000 199,399
Federal National Mortgage Assoc., due 7/21/97 ......... 150,000 149,548
----------
Total Short-Term Investments ........................... 348,947
----------
Total Investments (96.46%) ............................. 3,946,882
OTHER ASSETS LESS LIABILITIES (3.54%)
Cash, receivables and prepaid expense, less liabilities 144,856
----------
Total Net Assets (100.00%) ............................. $4,091,738
==========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
CORPORATE BONDS (86.96%)
AMUSEMENT AND RECREATION SERVICES (3.62%)
AMF Group, Inc., 10.875%, due 3/15/06 ........................ $ 240,000 $ 260,400
APPAREL AND ACCESSORY STORES (1.44%)
Genesco, Inc., 10.375%, due 2/01/03 .......................... 100,000 103,500
APPAREL AND OTHER TEXTILE PRODUCTS (5.14%)
Dan River, Inc., 10.125%, due 12/15/03 ....................... 200,000 212,000
Fieldcrest Cannon, Inc., 11.25%, due 6/15/04 ................. 150,000 157,875
-----------
369,875
AUTO REPAIR, SERVICES AND PARKING (1.26%)
Envirotest Systems Corp., 9.625%, due 4/01/03 ................ 100,000 90,500
BUSINESS SERVICES (2.14%)
Borg-Warner Corp., 9.125%, due 5/01/03 ....................... 150,000 153,750
COMMUNICATIONS (7.37%)
Comcast Cable Communications, Inc., 8.50%, due 5/01/27 ....... 300,000 320,592
PamAmSat, L.P., 9.75%, due 8/01/00 ........................... 200,000 209,624
-----------
530,216
DEPOSITORY INSTITUTIONS (3.38%)
First Bank N.A., 6.25%, due 8/15/05 .......................... 250,000 243,163
ELECTRIC, GAS AND SANITARY SERVICES (20.62%)
Montana Power Co., 7.50%, due 1/01/98 ........................ 97,000 97,256
Narragansett Electric Co., 9.125%, due 5/01/21 ............... 500,000 542,300
New England Power Co., 8.00%, due 8/01/22 .................... 200,000 203,192
Southern California Edison Co., 8.875%, due 6/01/24 .......... 280,000 290,444
Waterford 3 Nuclear Power Plant (Entergy Louisiana, Inc.),
8.09%, due 1/02/17 .......................................... 350,000 350,000
-----------
1,483,192
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (3.73%)
Advanced Micro Devices, Inc., 11.00%, due 8/01/03 ............ 240,000 268,200
FOOD STORES (4.24%)
P&C Food Markets, Inc., 11.50%, due 10/15/01 ................. 150,000 132,750
Penn Traffic Co., 10.25%, due 2/15/02 ........................ 200,000 172,500
-----------
305,250
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
PRINCIPAL
AMOUNT VALUE
----------- -----------
FURNITURE AND HOMEFURNISHINGS STORES (2.77%)
MacSaver Financial Services, Inc. (Guaranteed by Heilig-Meyers
Company), 7.40%, due 2/15/02 ................................ $ 200,000 $ 199,288
GENERAL MERCHANDISE STORES (3.05%)
Federated Department Stores, Inc., 10.00%, due 2/15/01 ....... 200,000 219,612
HOLDING AND OTHER INVESTMENT OFFICES (4.61%)
SUSA Partnership, L.P., 8.20%, due 6/01/17 ................... 325,000 331,783
INSURANCE CARRIERS (2.83%)
Torchmark Corp., 8.625%, due 3/01/17 ......................... 200,000 203,304
LUMBER AND WOOD PRODUCTS (6.34%)
Georgia-Pacific Corp., 9.875%, due 11/01/21 .................. 225,000 249,025
Pacific Lumber Co., 10.50%, due 3/01/03 ...................... 200,000 207,000
-----------
456,025
MISCELLANEOUS RETAIL (3.05%)
Eckerd Corp., 9.25%, due 2/15/04 ............................. 205,000 219,725
OIL AND GAS EXTRACTION (1.42%)
Dawson Production Services, Inc., 9.375%, due 2/01/07 ........ 100,000 102,250
PAPER AND ALLIED PRODUCTS (2.93%)
Container Corp. of America, 9.75%, due 4/01/03 ............... 200,000 211,000
PETROLEUM AND COAL PRODUCTS (1.80%)
Clark Oil & Refining Corp., 10.50%, due 12/01/01 ............. 125,000 129,531
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS
(2.99%)
Plastic Specialties & Technologies, Inc., 11.25%, due 12/01/03 200,000 215,000
STONE, CLAY AND GLASS PRODUCTS (2.23%)
USG Corp., 9.25%, due 9/15/01 ................................ 150,000 160,023
-----------
Total Corporate Bonds ......................................... 6,255,587
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
SHARES
HELD VALUE
----------- -----------
COMMON STOCK (0.70%)
TEXTILE MILL PRODUCTS
Bibb Company (The) ........................................... 7,490(1) $ 50,558
PREFERRED STOCK (1.79%)
DEPOSITORY INSTITUTIONS
CFB Capital I, 8.875% Cumulative Capital Securities .......... 5,000 128,440
PRINCIPAL
AMOUNT
-----------
SHORT-TERM INVESTMENTS (12.43%)
UNITED STATES GOVERNMENT AGENCIES
Federal Home Loan Bank, due 8/20/97 .......................... $ 400,000 396,902
Federal Home Loan Mortgage Corp., due 7/17/97 ................ 350,000 349,141
Federal Home Loan Mortgage Corp., due 9/18/97 ................ 150,000 148,214
-----------
Total Short-Term Investments .................................. 894,257
-----------
Total Investments (101.88%) ................................... 7,328,842
OTHER ASSETS LESS LIABILITIES (-1.88%)
Cash, receivables and prepaid expense, less liabilities ...... (135,206)
-----------
Total Net Assets (100.00%) .................................... $ 7,193,636
===========
</TABLE>
(1) Non-income producing security.
SEE ACCOMPANYING NOTES.
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (20.59%)
COMMUNICATIONS (1.53%)
Aliant Communications, Inc. ........................... 28,000 $ 546,000
ELECTRIC, GAS AND SANITARY SERVICES (6.61%)
Citizens Utilities Co., Class B ....................... 170,795 1,473,103
Montana Power Co. ..................................... 38,000 881,125
-----------
2,354,228
HOLDING AND OTHER INVESTMENT OFFICES (3.48%)
General Growth Properties, Inc. ....................... 37,000 1,239,500
INSTRUMENTS AND RELATED PRODUCTS (4.25%)
Pall Corp. ............................................ 65,000 1,511,250
INSURANCE CARRIERS (4.72%)
EMC Insurance Group, Inc. ............................. 135,700 1,679,288
-----------
Total Common Stocks .................................... 7,330,266
PREFERRED STOCKS (26.06%)
DEPOSITORY INSTITUTIONS (10.10%)
CFB Capital I, 8.875% Cumulative Capital Securities ... 50,000 1,284,375
Sterling Financial Corp. .............................. 22,450 819,425
Taylor Capital Group, Inc. ............................ 58,000 1,493,500
-----------
3,597,300
HOLDING AND OTHER INVESTMENT OFFICES (1.49%)
Security Capital Industrial Trust, Convertible ........ 19,000 529,625
OIL AND GAS EXTRACTION (0.93%)
Chieftain International, Inc., Convertible ............ 11,000 330,000
PAPER AND ALLIED PRODUCTS (3.79%)
James River Corp., Convertible ........................ 25,000 1,350,000
WATER TRANSPORTATION (3.81%)
Sea-Containers, Ltd., Convertible ..................... 27,000 1,356,750
WHOLESALE TRADE - DURABLE GOODS (4.09%)
Kaman Corp., Convertible .............................. 23,802 1,457,872
WHOLESALE TRADE - NONDURABLE GOODS (1.85%)
Howell Corp. .......................................... 11,000 660,000
-----------
Total Preferred Stocks ................................. 9,281,547
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO (CONTINUED)
PRINCIPAL
AMOUNT VALUE
---------- -----------
CORPORATE BONDS (19.41%)
DEPOSITORY INSTITUTIONS (0.33%)
Midland America Capital Corp., 12.75%, due 11/15/03 ... $ 110,000 $ 119,181
ELECTRIC, GAS AND SANITARY SERVICES (0.27%)
National Co-op Services Corp. (Arkansas Electric),
9.48%, due 1/01/12 ................................... 92,000 96,533
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (2.29%)
California Microwave, Inc., Convertible Sub. Deb.,
5.25%, due 12/15/03 .................................. 1,000,000 815,000
GENERAL MERCHANDISE STORES (2.42%)
DHC Trust - Series 1996, 8.50%, due 12/01/22 .......... 1,350,000 860,625
INSURANCE CARRIERS (0.43%)
Torchmark Corp., 8.625%, due 3/01/17 .................. 150,000 152,478
METAL MINING (3.46%)
Agnico-Eagle Mines, Ltd., Convertible Sub. Deb.,
3.50%, due 1/27/04 ................................... 1,500,000 1,233,750
NONDEPOSITORY INSTITUTIONS (4.02%)
Consumer Portfolio Services, Inc., 3.50%, due 1/27/04 . 1,400,000 1,431,500
PETROLEUM AND COAL PRODUCTS (6.19%)
Pride Petroleum Services, Inc., Convertible Sub. Deb.,
6.25%, due 2/15/06 ................................... 540,000 1,120,062
Trizec Hahn, Corp., 3.25%, due 12/10/18 ............... 1,400,000 1,083,796
-----------
2,203,858
-----------
Total Corporate Bonds .................................. 6,912,925
SHORT-TERM INVESTMENTS (32.55%)
COMMERCIAL PAPER (15.37%)
Ford Motor Credit Corp., 5.68%, due 7/28/97 ........... 1,475,000 1,475,000
General Electric Capital Corp., 5.61%, due 8/06/97 .... 700,000 700,000
IBM Credit Corp., 5.61%, due 8/15/97 .................. 1,300,000 1,300,000
John Deere Capital Corp., 5.60%, due 9/04/97 .......... 1,000,000 1,000,000
Norwest Financial, Inc., 5.65%, due 7/21/97 ........... 1,000,000 1,000,000
-----------
5,475,000
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO (CONTINUED)
PRINCIPAL
AMOUNT VALUE
---------- -----------
UNITED STATES GOVERNMENT AGENCIES (17.18%)
Federal National Mortgage Assoc., due 7/11/97 ......... $ 1,900,000 $ 1,897,068
Federal National Mortgage Assoc., due 7/14/97 ......... 1,700,000 1,696,665
Federal National Mortgage Assoc., due 8/25/97 ......... 1,100,000 1,090,795
Federal National Mortgage Assoc., due 9/15/97 ......... 1,450,000 1,433,394
-----------
6,117,922
-----------
Total Short-Term Investments ........................... 11,592,922
-----------
Total Investments (98.61%) ............................. 35,117,660
OTHER ASSETS LESS LIABILITIES (1.39%)
Cash, receivables and prepaid expense, less liabilities 496,154
-----------
Total Net Assets (100.00%) ............................. $35,613,814
===========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON
PURCHASE PRINCIPAL
DATE AMOUNT VALUE
------ -------- ----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (92.81%)
COMMERCIAL PAPER (21.05%)
Ford Motor Credit Corp., 5.65%, due 8/22/97 ........... 5.650% $175,000 $ 175,000
General Electric Capital Corp., 5.62%, due 8/06/97 .... 5.615 175,000 175,000
IBM Credit Corp., 5.60%, due 8/11/97 .................. 5.595 175,000 175,000
John Deere Capital Corp., 5.62%, due 8/14/97 .......... 5.618 175,000 175,000
Norwest Financial, Inc., 5.63%, due 7/30/97 ........... 5.628 175,000 175,000
----------
875,000
UNITED STATES GOVERNMENT AGENCIES (71.76%)
Federal Home Loan Bank, due 7/07/97 ................... 5.600 150,000 149,862
Federal Home Loan Bank, due 7/24/97 ................... 5.617 225,000 224,206
Federal Home Loan Bank, due 9/05/97 ................... 5.540 125,000 123,760
Federal Home Loan Mortgage Corp., due 7/03/97 ......... 5.528 150,000 149,955
Federal Home Loan Mortgage Corp., due 7/10/97 ......... 5.651 175,000 174,756
Federal Home Loan Mortgage Corp., due 7/15/97 ......... 5.498 200,000 199,579
Federal Home Loan Mortgage Corp., due 7/17/97 ......... 5.500 200,000 199,519
Federal Home Loan Mortgage Corp., due 8/01/97 ......... 5.641 200,000 199,046
Federal Home Loan Mortgage Corp., due 8/18/97 ......... 5.590 225,000 223,358
Federal Home Loan Mortgage Corp., due 9/18/97 ......... 5.567 200,000 197,619
Federal Home Loan Mortgage Corp., due 9/24/97 ......... 5.682 175,000 172,715
Federal National Mortgage Assoc., due 7/17/97 ......... 5.589 200,000 199,511
Federal National Mortgage Assoc., due 7/18/97 ......... 5.649 200,000 199,475
Federal National Mortgage Assoc., due 8/04/97 ......... 5.528 150,000 149,232
Federal National Mortgage Assoc., due 8/26/97 ......... 5.584 175,000 173,513
Federal National Mortgage Assoc., due 9/08/97 ......... 5.579 125,000 123,696
Federal National Mortgage Assoc., due 9/12/97 ......... 5.567 125,000 123,624
----------
2,983,426
----------
Total Short-Term Investments ........................... 3,858,426
OTHER ASSETS LESS LIABILITIES (7.19%)
Cash, receivables and prepaid expense, less liabilities 298,807
----------
Total Net Assets (100.00%) ............................. $4,157,233
==========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
-------- ------------
<S> <C> <C>
COMMON STOCKS (89.01%)
CHEMICALS AND ALLIED PRODUCTS (17.17%)
Bristol-Myers Squibb Co. ......................... 7,422 $ 601,182
DuPont (EI) de Nemours & Co. ..................... 8,622 542,108
Eastman Chemical Co. ............................. 5,464 346,964
Johnson & Johnson ................................ 8,301 534,377
Merck & Co., Inc. ................................ 5,707 590,675
Praxair, Inc. .................................... 10,057 563,192
Procter & Gamble Co. ............................. 3,902 551,158
Union Carbide Corp. .............................. 9,087 427,657
-----------
4,157,313
COMMUNICATIONS (2.75%)
American Telephone & Telegraph Co. ............... 7,369 258,376
Bell Atlantic Corp. .............................. 5,355 406,311
-----------
664,687
DEPOSITORY INSTITUTIONS (1.75%)
J. P. Morgan & Co., Inc. ......................... 4,059 423,658
EATING AND DRINKING PLACES (1.72%)
McDonald's Corp. ................................. 8,618 416,357
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (3.55%)
General Electric Co. ............................. 9,238 603,934
Lucent Technologies, Inc. ........................ 3,551 255,894
-----------
859,828
FOOD AND KINDRED PRODUCTS (6.56%)
Coca-Cola Co. (The) .............................. 9,353 631,328
PepsiCo, Inc. .................................... 12,667 475,804
Philip Morris Companies, Inc. .................... 10,873 482,489
-----------
1,589,621
GENERAL MERCHANDISE STORES (5.20%)
Sears, Roebuck & Co. ............................. 7,239 389,096
Wal-Mart Stores, Inc. ............................ 13,677 462,454
Woolworth (F.W.) Co., Ltd. ....................... 17,021(1) 408,504
-----------
1,260,054
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO (CONTINUED)
SHARES
HELD VALUE
-------- ------------
INDUSTRIAL MACHINERY AND EQUIPMENT (4.58%)
Caterpillar, Inc. ................................ 5,450 $ 585,194
International Business Machines Corp. ............ 5,816 524,531
-----------
1,109,725
INSTRUMENTS AND RELATED PRODUCTS (1.53%)
Eastman Kodak Co. ................................ 4,832 370,856
INSURANCE CARRIERS (4.51%)
Allstate Corp. ................................... 6,688 488,224
American International Group, Inc. ............... 4,043 603,923
-----------
1,092,147
MOTION PICTURES (1.89%)
Disney (Walt) Co. ................................ 5,689 456,542
PAPER AND ALLIED PRODUCTS (3.76%)
International Paper Co. .......................... 8,471 411,373
Minnesota Mining & Manufacturing Co. ............. 4,904 500,208
-----------
911,581
PETROLEUM AND COAL PRODUCTS (10.69%)
Amoco Corp. ...................................... 4,519 392,871
Chevron Corp. .................................... 5,871 434,087
Exxon Corp. ...................................... 8,014 492,861
Mobil Corp. ...................................... 6,182 431,967
Texaco, Inc. ..................................... 3,883 422,276
USX Corp. - Marathon Group ....................... 14,390 415,511
-----------
2,589,573
PRIMARY METAL INDUSTRIES (3.13%)
Aluminum Company of America ...................... 5,979 450,667
Bethlehem Steel Corp. ............................ 29,441(1) 307,290
-----------
757,957
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (2.45%)
Goodyear Tire & Rubber Co. ....................... 9,386 594,251
SECURITY AND COMMODITY BROKERS (6.28%)
American Express Co. ............................. 7,604 566,498
Lehman Brothers Holding, Inc. .................... 11,670 472,635
Morgan Stanley, Dean Witter, Discover & Co. ...... 11,204 482,472
-----------
1,521,605
<PAGE>
0
FBL VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO (CONTINUED)
SHARES
HELD VALUE
-------- ------------
TRANSPORTATION EQUIPMENT (9.74%)
Allied-Signal, Inc. .............................. 7,059 $ 592,956
Boeing Co. (The) ................................. 8,610 456,868
Ford Motor Co. ................................... 10,888 411,022
General Motors Corp. ............................. 6,341 353,114
United Technologies Corp. ........................ 6,573 545,559
-----------
2,359,519
WHOLESALE TRADE - DURABLE GOODS (1.75%)
Westinghouse Electric Corp. ...................... 18,367 424,737
-----------
Total Common Stocks ............................... 21,560,011
PRINCIPAL
AMOUNT
-----------
SHORT-TERM INVESTMENTS (10.02%)
UNITED STATES GOVERNMENT AGENCIES
Federal Farm Credit Bank, due 7/09/97 ............ $ 1,550,000 1,548,131
Federal Home Loan Bank, due 8/01/97 .............. 325,000 323,492
Federal National Mortgage Assoc., due 7/07/97 .... 300,000 299,729
Federal National Mortgage Assoc., due 7/09/97 .... 255,000 254,694
-----------
Total Short-Term Investments ...................... 2,426,046
-----------
Total Investments (99.03%) ........................ 23,986,057
OTHER ASSETS LESS LIABILITIES (0.97%)
Cash, receivables and prepaid expense, less
liabilities ....................................... 234,358
-----------
Total Net Assets (100.00%) ........................ $24,220,415
===========
</TABLE>
(1) Non-income producing securities.
SEE ACCOMPANYING NOTES.
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
FBL Variable Insurance Series Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a no-load, open-end diversified
management investment company and operates in the mutual fund industry.
Effective December 1, 1996, the Growth Common Stock Portfolio was renamed the
Value Growth Portfolio. The Fund currently consists of six portfolios (known as
the Value Growth, High Grade Bond, High Yield Bond, Managed, Money Market and
Blue Chip Portfolios). Shares of the Fund are sold only to certain life
insurance companies' separate accounts to fund the benefits under variable
insurance contracts issued by such life insurance companies, including Farm
Bureau Life Insurance Company (see Note 3 ).
All portfolios, other than the Money Market Portfolio, value their common
stocks, preferred stocks, corporate bonds, United States Treasury obligations
and mortgage-backed securities that are traded on any national exchange at the
last sale price on the day of valuation or, lacking any sales, at the mean
between the closing bid and asked prices. Investments traded in the
over-the-counter market are valued at the mean between the bid and asked prices
or yield equivalent as obtained from one or more dealers that make markets in
the securities. Investments for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Trustees. Short-term investments (including repurchase agreements) are valued at
market value, except that obligations maturing in 60 days or less are valued
using the amortized cost method of valuation described below with respect to the
Money Market Portfolio, which approximates market.
The Money Market Portfolio values investments at amortized cost, which
approximates market. Under the amortized cost method, a security is valued at
its cost on the date of purchase and thereafter is adjusted to reflect a
constant amortization to maturity of the difference between the principal amount
due at maturity and the cost of the investment to the portfolio.
The value of the underlying securities serving to collateralize repurchase
agreements is marked to market daily. Should the value of the underlying
securities decline, the seller would be required to provide the applicable
portfolio with additional securities, so that the aggregate value of the
underlying securities was at least equal to the repurchase price. If a seller of
a repurchase agreement were to default, the affected portfolio might experience
losses in enforcing its rights. To minimize this risk, the investment adviser
(under the supervision of the Board of Trustees) will monitor the
creditworthiness of the seller of the repurchase agreement and must find such
creditworthiness satisfactory before a portfolio may enter into the repurchase
agreement.
The Fund records investment transactions generally one day after the trade
date. The identified cost basis has been used in determining the net realized
gain or loss from investment transactions and unrealized appreciation or
depreciation on investments. Dividend income is recorded on the ex-dividend date
and interest is recognized on an accrual basis. Discounts and premiums on
investments purchased are amortized over the life of the respective investments.
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Dividends and distributions to shareholders are recorded on the record
date.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. FEDERAL INCOME TAXES
No provision for federal income taxes is considered necessary because the
Fund is qualified as a "regulated investment company" under the Internal Revenue
Code and intends to distribute each year substantially all of its net investment
income and realized capital gains to shareholders. The cost of investments is
the same for both federal income tax and financial reporting purposes.
At December 31, 1996, the High Grade Bond Portfolio had a net capital loss
carryforward of approximately $17,000, which will expire from 1998 through 2003.
During the year ended December 31, 1996, the High Grade Bond Portfolio had net
capital loss carryforwards of $3,388 that expired. As a result, $3,388 was
reclassified from accumulated undistributed net realized gain (loss) from
investment transactions to paid-in capital.
3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into agreements with FBL Investment Advisory Services,
Inc. ("FBL Investment") relating to the management of the portfolios and the
investment of their assets. Pursuant to these agreements, fees paid to FBL
Investment are as follows: (1) annual investment advisory and management fees,
which are based on each portfolio's daily net assets as follows: Value Growth
Portfolio -- 0.45%; High Grade Bond Portfolio -- 0.30%; High Yield Bond
Portfolio -- 0.45%; Managed Portfolio -- 0.45%; Money Market Portfolio -- 0.25%;
and Blue Chip Portfolio -- 0.20%; (for the period January 1, 1997, through April
30, 1997, this fee was 0.50%, 0.50%, 0.55% and 0.30% for the Value Growth, High
Yield Bond, Managed and Money Market Portfolios, respectively) and (2)
accounting fees, which are based on each portfolio's daily net assets at an
annual rate of 0.05%, with a maximum per portfolio annual expense of $30,000.
The Fund has entered into an agreement with FBL Investment whereby FBL
Investment also serves as the principal underwriter and distributor of the
Fund's shares and as the Fund's shareholder service, transfer and dividend
disbursing agent. There are no additional fees associated with these services.
FBL Investment has agreed to reimburse the portfolios annually for total
expenses, excluding brokerage, interest, taxes and extraordinary expenses in
excess of 1.50% of each portfolio's average daily net assets. The amount
reimbursed, however, shall not exceed the amount of the investment advisory and
management fee paid by the portfolio for such period. During the current period,
FBL Investment further agreed to reimburse any portfolio, to the extent that
annual operating expenses, including the investment advisory fee, exceed 0.55%
for the period January 1, 1997, through April 30, 1997, and 0.65% for the period
May 1, 1997, through June 30, 1997.
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
Certain officers and trustees of the Fund are also officers of FBL
Investment and its indirect parent, Farm Bureau Life Insurance Company. At June
30, 1997, all of the shares of each portfolio are owned by Farm Bureau Life
Insurance Company, Farm Bureau Life Variable Account and Farm Bureau Life
Annuity Account.
4. CAPITAL SHARE TRANSACTIONS
The Fund has an unlimited number of shares of beneficial interest
authorized with no par value. Net assets as of June 30, 1997, consisted of:
<TABLE>
<CAPTION>
PORTFOLIO
-----------------------------------------------------------------------------------
VALUE HIGH GRADE HIGH YIELD MONEY BLUE
GROWTH BOND BOND MANAGED MARKET CHIP
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Paid-in capital ............. $32,951,113 $ 4,011,247 $ 7,030,803 $32,100,329 $ 4,157,233 $17,067,982
Accumulated undistributed net
investment income ........... 347,046 757,529 168,855
Accumulated undistributed net
realized gain (loss) from
investment transactions ..... 1,591,357 (19,834) 54,648 1,324,768 (373)
Net unrealized appreciation
(depreciation) of investments 2,364,242 100,325 108,185 1,431,188 6,983,951
----------- ----------- ----------- ----------- ----------- -----------
Net Assets .................. $37,253,758 $ 4,091,738 $ 7,193,636 $35,613,814 $ 4,157,233 $24,220,415
=========== =========== =========== =========== =========== ============
</TABLE>
Transactions in shares of beneficial interest for each portfolio were as
follows:
<TABLE>
<CAPTION>
SHARES ISSUED IN
REINVESTMENT OF
DIVIDENDS AND
SHARES SOLD DISTRIBUTIONS SHARES REDEEMED NET INCREASE
------------------------- --------------------- ----------------------- ----------------------
PORTFOLIO SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- - - - --------- ---------- ----------- ------ ---------- --------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period ended
June 30, 1997:
Value Growth....... 663,510 $ 8,837,129 27,523 $ 365,231 635,987 $ 8,471,898
High Grade Bond.... 64,274 626,432 13,689 $ 133,472 21,081 205,132 56,882 554,772
High Yield Bond.... 178,339 1,762,598 25,144 249,094 81,852 808,309 121,631 1,203,383
Managed............ 643,069 8,139,482 13,697 172,683 629,372 7,966,799
Money Market....... 9,462,326 9,462,326 45,517 45,517 9,169,871 9,169,871 337,972 337,972
Blue Chip.......... 249,058 6,722,705 22,118 606,607 226,940 6,116,098
Year ended
December 31, 1996:
Value Growth....... 630,601 $ 8,257,518 193,097 $2,535,371 76,748 $ 987,931 746,950 $ 9,804,958
High Grade Bond.... 118,456 1,161,045 22,255 218,638 102,472 1,003,467 38,239 376,216
High Yield Bond.... 175,655 1,721,491 49,648 488,516 123,493 1,212,185 101,810 997,822
Managed............ 707,222 8,908,422 206,306 2,556,129 51,812 645,478 861,716 10,819,073
Money Market....... 10,259,993 10,259,993 56,274 56,274 9,655,579 9,655,579 660,688 660,688
Blue Chip.......... 275,107 6,334,955 10,689 267,652 20,476 484,830 265,320 6,117,777
</TABLE>
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
For the period ended June 30, 1997, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. Government securities) by portfolio, were as follows:
PORTFOLIO PURCHASES SALES
--------- ----------- -----------
Value Growth .. $18,264,720 $11,818,508
High Grade Bond 884,644 345,039
High Yield Bond 2,176,212 1,272,568
Managed ....... 17,017,471 6,114,495
Blue Chip ..... 5,036,031 39,422
At June 30, 1997, net unrealized appreciation (depreciation) of investments
by portfolio was composed of the following:
NET UNREALIZED
GROSS UNREALIZED APPRECIATION
----------------------------- (DEPRECIATION)
PORTFOLIO APPRECIATION DEPRECIATION OF INVESTMENTS
--------- ------------ ------------ --------------
Value Growth .. $3,270,006 $ (905,764) $2,364,242
High Grade Bond 111,326 (11,001) 100,325
High Yield Bond 242,974 (134,789) 108,185
Managed ....... 2,111,932 (680,744) 1,431,188
Blue Chip ..... 7,018,556 (34,605) 6,983,951
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income for the following portfolios are
declared daily and were payable on the last business day of the month as
follows:
PORTFOLIO
HIGH HIGH
GRADE YIELD MONEY
PAYABLE DATE BOND BOND MARKET
- - - - ------------ ------ ------ ------
January 31, 1997........... $.0579 $.0708 $.0041
February 28, 1997.......... .0567 .0672 .0037
March 31, 1997............. .0573 .0675 .0041
April 30, 1997............. .0585 .0702 .0040
May 30, 1997............... .0548 .0610 .0040
June 30, 1997.............. .0597 .0692 .0040
------ ------ ------
Total dividends per share.. $.3449 $.4059 $.0239
====== ====== ======
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
FINANCIAL HIGHLIGHTS
PERIOD ENDED JUNE 30, 1997 (UNAUDITED) AND
YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
VALUE GROWTH
PORTFOLIO
------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 13.13 $ 12.31 $ 10.39 $ 11.52 $ 10.05 $ 9.55
Income From Investment Operations
Net investment income ....................... 0.14 0.35 0.55 0.48 0.63 0.46
Net gains or losses on securities
(both realized and unrealized) ........... 0.49 1.82 2.13 (0.99) 2.10 0.54
------- ------- ------- ------- ------- -------
Total from investment operations ........... 0.63 2.17 2.68 (0.51) 2.73 1.00
------- ------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income) ... (0.30) (0.50) (0.36) (0.57) (0.50)
Distributions (from capital gains) ....... (1.05) (0.26) (0.11) (0.69)
Distributions in excess of net realized gains (0.15)
------- ------- ------- ------- ------- -------
Total distributions ........................ 0.00 (1.35) (0.76) (0.62) (1.26) (0.50)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $ 13.76 $ 13.13 $ 12.31 $ 10.39 $ 11.52 $ 10.05
======= ======= ======= ======= ======= =======
Total Return:
Total investment return based on
net asset value (1) ....................... 15.86%(3) 17.65% 25.87% -4.43% 27.20% 10.46%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) .. $37,254 $27,188 $16,295 $10,603 $ 4,730 $ 3,017
Ratio of net expenses to average net assets 0.60%(3) 0.55% 0.55% 0.55% 0.55% 0.55%
Ratio of net income to average net assets .. 2.18%(3) 2.68% 4.78% 4.35% 5.41% 4.54%
Portfolio turnover rate .................... 48%(3) 72% 98% 78% 81% 88%
Average commission rate per share (2) ...... $0.0512 $0.0536
Information assuming no voluntary
reimbursement or waiver by FBL Investment of
excess operating expenses (see
Note 3):
Per share net investment income ............ $ 0.14 $ 0.33 $ 0.53 $ 0.46 $ 0.59 $ 0.41
Ratio of expenses to average net assets .... 0.66% 0.69% 0.72% 0.77% 0.89% 1.09%
Amount reimbursed .......................... $ 9,171 $29,686 $22,306 $16,706 $13,353 $17,373
</TABLE>
- - - - ---------------------------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the period.
(1) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(2) Average commission rate per share disclosure is not required for fiscal
years prior to December 31, 1996.
(3) Computed on an annualized basis.
SEE ACCOMPANYING NOTES.
<PAGE>
(TABLE CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
----------------------------------------------------------- -----------------------------------------------------------
1997 1996 1995 1994 1993 1992 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.83 $ 9.98 $ 9.44 $10.23 $10.14 $10.15 $ 9.91 $ 9.69 $ 9.32 $ 10.44 $ 9.92 $ 9.65
0.35 0.72 0.77 0.76 0.77 0.83 0.41 0.84 0.87 0.91 0.95 0.98
(0.01) (0.15) 0.54 (0.79) 0.09 (0.01) 0.08 0.33 0.49 (1.01) 0.58 0.27
- - - - ------ ------ ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
0.34 0.57 1.31 (0.03) 0.86 0.82 0.49 1.17 1.36 (0.10) 1.53 1.25
- - - - ------ ------ ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
(0.35) (0.72) (0.77) (0.76) (0.77) (0.83) (0.41) (0.84) (0.87) (0.91) (0.95) (0.98)
(0.11) (0.12) (0.11) (0.06)
- - - - ------ ------ ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
(0.35) (0.72) (0.77) (0.76) (0.77) (0.83) (0.41) (0.95) (0.99) (1.02) (1.01) (0.98)
- - - - ------ ------ ------ ------ ------ ------ ------ ------- ------- ------- ------- -------
$ 9.82 $ 9.83 $ 9.98 $ 9.44 $10.23 $10.14 $ 9.99 $ 9.91 $ 9.69 $ 9.32 $ 10.44 $ 9.92
====== ====== ====== ====== ====== ====== ====== ======= ======= ======= ======= =======
7.72%(3) 5.94% 14.26% -0.26% 8.74% 8.40% 12.87%(3) 12.65% 15.15% -1.01% 15.05% 13.39%
$4,092 $3,535 $3,208 $2,452 $2,349 $3,704 $7,194 $ 5,929 $ 4,810 $ 4,172 $ 4,536 $ 4,015
0.58%(3) 0.55% 0.55% 0.55% 0.55% 0.55% 0.58%(3) 0.55% 0.55% 0.55% 0.55% 0.55%
7.10%(3) 7.22% 7.81% 7.76% 7.58% 8.19% 8.14%(3) 8.47% 8.96% 9.17% 9.25% 9.88%
10%(3) 32% 14% 15% 38% 16% 42%(3) 30% 32% 10% 58% 35%
$ 0.34 $ 0.70 $ 0.74 $ 0.73 $ 0.76 $ 0.80 $ 0.39 $ 0.81 $ 0.84 $ 0.88 $ 0.92 $ 0.88
0.73% 0.80% 0.84% 0.80% 0.72% 0.79% 0.79% 0.87% 0.88% 0.84% 0.85% 0.99%
$2,749 $8,233 $8,255 $6,207 $5,343 $9,004 $6,780 $17,094 $15,105 $12,667 $12,872 $17,310
</TABLE>
<PAGE>
FBL VARIABLE INSURANCE SERIES FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
-----------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 12.40 $ 11.71 $ 9.93 $ 11.33 $ 10.06 $ 9.27
Income From Investment Operations
Net investment income ...................... 0.31 0.60 0.65 0.66 0.72 0.69
Net gains or losses on securities
(both realized and unrealized) ........... 0.34 1.44 1.90 (1.22) 1.57 0.77
------- ------- ------- ------- ------- -------
Total from investment operations ........... 0.65 2.04 2.55 (0.56) 2.29 1.46
------- ------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income) ... (0.50) (0.59) (0.54) (0.63) (0.67)
Distributions (from capital gains) (0.85) (0.18) (0.23) (0.39)
Distributions in excess of net realized
gains ................................... (0.07)
------- ------- ------- ------- ------- -------
Total distributions ........................ 0.00 (1.35) (0.77) (0.84) (1.02) (0.67)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $ 13.05 $ 12.40 $ 11.71 $ 9.93 $ 11.33 $ 10.06
======= ======= ======= ======= ======= =======
Total Return:
Total investment return based on
net asset value (1) ....................... 14.36%(3) 17.39% 25.69% -4.96% 22.71% 15.72%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) .. $35,614 $26,022 $14,487 $ 9,758 $ 4,951 $ 3,019
Ratio of net expenses to average net assets 0.59%(3) 0.55% 0.55% 0.55% 0.55% 0.55%
Ratio of net income to average net assets .. 5.03%(3) 4.73% 5.80% 6.23% 6.23% 7.00%
Portfolio turnover rate .................... 31%(3) 82% 48% 59% 59% 60%
Average commission rate per share (2) ...... $0.0552 $0.0534
Information assuming no voluntary
reimbursement or waiver by FBL Investment of
excess operating expenses (see
Note 3):
Per share net investment income ............ $ 0.31 $ 0.57 $ 0.62 $ 0.63 $ 0.67 $ 0.64
Ratio of expenses to average net assets .... 0.68% 0.75% 0.77% 0.80% 0.91% 1.13%
Amount reimbursed .......................... $13,065 $38,874 $26,008 $19,147 $15,076 $16,480
</TABLE>
<PAGE>
(TABLE CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
- - - - ------------------------------------------------------------ -----------------------------------------------------
1997 1996 1995 1994 1993 1992 1997 1996 1995 1994 1993 1992
- - - - ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 24.68 $ 20.70 $15.82 $15.67 $13.96 $12.91
0.02 0.05 0.05 0.04 0.03 0.03 0.24 0.45 0.39 0.34 0.29 0.29
4.83 3.99 4.80 0.07 1.72 1.05
- - - - ------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------ ------
0.02 0.05 0.05 0.04 0.03 0.03 5.07 4.44 5.19 0.41 2.01 1.34
- - - - ------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------ ------
(0.02) (0.05) (0.05) (0.04) (0.03) (0.03) (0.34) (0.31) (0.26) (0.30) (0.29)
(0.12)
- - - - ------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------ ------
(0.02) (0.05) (0.05) (0.04) (0.03) (0.03) 0.00 (0.46) (0.31) (0.26) (0.30) (0.29)
- - - - ------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------ ------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 29.75 $ 24.68 $20.70 $15.82 $15.67 $13.96
====== ====== ====== ====== ====== ======= ======= ======= ====== ====== ====== ======
4.96%(3) 4.90% 5.47% 3.68% 2.68% 3.28% 32.08%(3) 21.43% 32.81% 2.65% 14.36% 10.38%
$4,157 $3,819 $3,159 $2,658 $2,300 $ 2,530 $24,220 $14,493 $6,665 $3,262 $1,654 $1,502
0.58%(3) 0.55% 0.55% 0.55% 0.55% 0.55% 0.40%(3) 0.48% 0.55% 0.55% 0.55% 0.55%
4.63%(3) 4.58% 5.27% 3.63% 2.65% 3.30% 1.79%(3) 1.92% 2.07% 2.19% 1.92% 2.13%
0%(3) 0% 0% 0% 0% 0% 0%(3) 2% 1% 0% 0% 0%
$0.0587 $0.0825
$ 0.02 $ 0.04 $ 0.05 $ 0.04 $ 0.02 $ 0.03 $ 0.38 $ 0.30 $ 0.24 $ 0.22
0.74% 0.82% 0.90% 0.82% 0.79% 0.93% 0.59% 0.81% 0.89% 1.06%
$3,455 $9.569 $9,816 $7,157 $5,838 $10,168 $1,952 $6,360 $5,495 $7,320
</TABLE>
