EQUITRUST VARIABLE INSURANCE SERIES FUND, 485APOS, 1999-02-09

EQUITRUST VARIABLE INSURANCE SERIES FUND
485APOS, 1999-02-09

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 1999

Registration Nos. 33-12791
811-05069

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /

Pre-Effective Amendment No. / /
Post-Effective Amendment No. 16 /X/

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 17 /X/

EQUITRUST 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 LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415

---------

It is proposed that this filing become effective (check appropriate box):

/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on May 1, 1998 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/X/ on May 1, 1999 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

---------

Title of Securities Being Registered: Shares of Beneficial Interest

<PAGE>

EQUITRUST VARIABLE INSURANCE SERIES FUND

MONEY MARKET PORTFOLIO
HIGH GRADE BOND PORTFOLIO
MANAGED PORTFOLIO
HIGH YIELD BOND PORTFOLIO
VALUE GROWTH PORTFOLIO
BLUE CHIP PORTFOLIO

PROSPECTUS

May 1, 1999

Shares of each Portfolio are offered exclusively to certain registered separate
accounts of Farm Bureau Life Insurance Company and other affiliated and
non-affiliated companies as funding vehicles for certain variable annuity and
variable life insurance contracts issued by Farm Bureau Life Insurance
Company and other affiliated and non-affiliated companies and are not offered
directly to the public.

An investment in a Portfolio of the Fund is not a bank deposit and is not
insured, guaranteed, or endorsed by the Federal Deposit Insurance Corporation,
or any other government agency. An investment in a Portfolio of the Fund
involves investment risks, including possible loss of principal.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED SHARES OF
THE FUND OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

EquiTrust Mutual Funds
5400 University Avenue
West Des Moines, Iowa 50266
<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 5

High Grade Bond Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . 6

Managed Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

High Yield Bond Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . 10

Value Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Blue Chip Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

HIGH YIELD BOND PORTFOLIO STRATEGY . . . . . . . . . . . . . . . . . . . . 16

PRINCIPAL RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 16
General Discussion of Risks . . . . . . . . . . . . . . . . . . . . . 16
Types of Investment Risk. . . . . . . . . . . . . . . . . . . . . . . 17
Higher-Risk Securities and Practices. . . . . . . . . . . . . . . . . 19
Higher Risk Securities and Practices Table. . . . . . . . . . . . . . 21

HIGHER RISK SECURITIES AND INVESTMENT STRATEGIES . . . . . . . . . . . . . 22
Securities of Foreign Issuers . . . . . . . . . . . . . . . . . . . . 22
Lower Rated Debt Securities . . . . . . . . . . . . . . . . . . . . . 22
When-issued and Delayed Delivery Transactions . . . . . . . . . . . . 23
Covered Call Options. . . . . . . . . . . . . . . . . . . . . . . . . 24

PORTFOLIO MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . . . 27
Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

APPENDIX - FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . 29

Back Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Annual/Semi-annual Reports to Shareholders. . . . . . . . . . . . . . 30
Statement of Additional Information . . . . . . . . . . . . . . . . . 30
</TABLE>

i
<PAGE>

INTRODUCTION

Welcome to the EquiTrust Variable Insurance Series Fund, a group of open-end
investment companies, typically called mutual funds. Each Portfolio is a
separate investment portfolio with its own investment objective, investment
policies, restrictions, and attendant risks. This prospectus describes each
Portfolio in some detail -- please read it and retain it for future reference.

The risk/return curve below demonstrates that for diversified portfolios of
securities of the various types, as short-term risk increases, the potential for
long-term gains also increases. "Short-term risk" refers to the likely
volatility of a portfolio's total return and its potential for gain or loss over
a relatively short time period. "Long-term potential gains" means the expected
average annual total return over a relatively long time period, such as 20
years.

[CHART]

THIS CURVE DOES NOT INDICATE FUTURE VOLATILITY OR PERFORMANCE. It merely
demonstrates the relationship between the on-going short-term risk and the
long-term potential for gain of each Portfolio relative to the other Portfolios
and other types of investments.

2
<PAGE>

Each Portfolio has its own investment objective, investment policies,
restrictions, and attendant risks. An investor should consider each Portfolio
separately to determine if it is an appropriate investment. NO ONE CAN ASSURE
THAT A PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE(S) AND INVESTORS SHOULD
NOT CONSIDER ANY ONE PORTFOLIO ALONE TO BE A COMPLETE INVESTMENT PROGRAM. AS
WITH ALL MUTUAL FUNDS, THERE IS A RISK THAT AN INVESTOR COULD LOSE MONEY BY
INVESTING IN A PORTFOLIO. The investment objective(s) of each Portfolio and
those investment restrictions of a Portfolio that are designated as fundamental
cannot be changed without approval of a majority of the outstanding shares of
that Portfolio as defined in the Statement of Additional Information. However,
each Portfolio's investment policies and the strategies by which it seeks its
objective(s), and those investment restrictions not specifically designated as
fundamental, are nonfundamental and may be changed by the Fund's board of
trustees without shareholder approval.

Notwithstanding their investment objective(s), each Portfolio may, for temporary
defensive purposes, invest all (15% for the Blue Chip Portfolio) of its assets
in cash and/or money market instruments of the type in which the Money Market
Portfolio invests.

TERMS USED IN THIS PROSPECTUS

ADVISER: The Fund's investment adviser, EquiTrust Investment Management
Services, Inc.

EQUITY SECURITIES: Equity securities include common stock, preferred stock,
securities convertible or exchangeable into common stock, including convertible
debt securities, convertible preferred stock and warrants or rights to acquire
common stock.

FOREIGN ISSUERS: Companies organized outside the United States whose
securities are traded on U.S. exchanges and payable or denominated in U.S.
dollars.

HIGH GRADE: Securities rated, at the time of purchase, in the three highest
categories by a nationally-recognized statistical rating organization ("NRSRO")
(E.G., A or higher by either Moody's Investors Service ("Moody's") or Standard &
Poor's ("S&P")) or unrated securities that the Adviser determines are of
comparable quality. (See Appendix A to the statement of additional information
for an explanation of ratings.)

INVESTMENT GRADE: Securities rated, at the time of purchase, in the four
highest categories by an NRSRO (E.G., Baa or higher by Moody's or BBB or higher
by S&P) or unrated securities that the Adviser determines are of comparable
quality. (See Appendix A to the statement of additional information for an
explanation of ratings.)

PRIMARILY: Where the description of a Portfolio indicates that it invests
primarily in certain types of securities, this means that, under normal
circumstances, it invests at least 65% of its total assets in such securities.

SAI: The Fund's statement of additional information, or SAI, contains
additional information about the Fund and the Portfolios. Investors may obtain
a free copy of the SAI by contacting the Fund at the toll-free number or address
shown on the back cover page of this prospectus.

3
<PAGE>

MONEY MARKET PORTFOLIO

- --------------------------------------------------------------------------------

INVESTOR PROFILE WHO SHOULD CONSIDER INVESTING IN THIS PORTFOLIO?

You may want to invest more of your assets in this Portfolio if you:

- - require stability of principal

- - are seeking a mutual fund for the cash portion of an asset allocation program

- - need to "park" your money temporarily

- - consider yourself a saver rather than an investor

You may want to invest fewer of your assets in this Portfolio if you:

- - are seeking an investment that is likely to outpace inflation

- - are investing for retirement or other goals that are many years in the future

- - are investing for growth or maximum current income

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
WHAT IS THIS PORTFOLIO'S GOAL?

The MONEY MARKET PORTFOLIO seeks maximum current income consistent with
liquidity and stability of principal. The Portfolio intends to maintain a
stable value of $1.00 per share.

PRINCIPAL RISKS
WHAT ARE THE MAIN RISKS OF INVESTING IN THIS PORTFOLIO?

As with any money market fund, the yield paid by the Portfolio will vary with
changes in interest rates. Also, there is a remote possibility that the
Portfolio's share value could fall below $1.00, which could reduce the value of
your investment.

To the extent that it invests in certain securities, the Portfolio may be
affected by additional risks relating to REPURCHASE AGREEMENTS (credit risk),
SHORT-TERM TRADING (market risk, as well as potentially higher transaction
costs), and WHEN-ISSUED SECURITIES (market, opportunity, and leverage risks).
However, these risks are lessened by the high quality of the securities in which
the Portfolio invests.

These risks, and the risks associated with other higher-risk securities and
practices that the Portfolio may utilize, are described in more detail later in
this prospectus. SHARES OF THIS PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, A BANK OR OTHER FINANCIAL INSTITUTION ACCOUNT AND
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER FINANCIAL INSTITUTION OR GOVERNMENT BODY.
Before you invest, please carefully read the section on "Risks."

PRIMARY INVESTMENT STRATEGIES
HOW DOES THIS PORTFOLIO PURSUE ITS OBJECTIVE?

This Portfolio invests exclusively in U.S. dollar-denominated money market
securities maturing in thirteen months or less from the date of purchase,
including those issued by U.S. financial institutions, corporate issuers, the
U.S. Government and its agencies and instrumentalities and municipalities. At
least 95% of the Portfolio's assets must be rated in the highest short-term
category (or its unrated equivalent), and 100% of the Portfolio's assets must be
invested in securities rated in the two highest rating categories. A more
detailed description of the rating categories and the types of permissible
issuers is contained in the SAI. The Portfolio maintains a dollar-weighted
average portfolio maturity of 90 days or less. The Portfolio may also:
- - Lend securities to financial institutions, enter into repurchase agreements,
engage in short-term trading and purchase securities on a when-issued or
forward commitment basis;
- - Invest up to 10% of its assets in illiquid securities, although it will not
generally invest in such securities.

4
<PAGE>

HIGH GRADE BOND PORTFOLIO

- --------------------------------------------------------------------------------

INVESTOR PROFILE
WHO SHOULD CONSIDER INVESTING IN THIS PORTFOLIO?

You may want to invest more of your assets in this Portfolio if you:

- - are seeking an investment that generates a regular stream of income

- - are seeking higher potential returns than money market funds and are willing
to accept moderate risk of volatility

- - want to diversify your investments

- - are seeking a mutual fund for the income portion of an asset allocation
program

- - are retired or nearing retirement

You may want to invest fewer of your assets in this Portfolio if you:

- - are investing for maximum return over a long time horizon

- - require absolute stability of your principal

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
WHAT IS THIS PORTFOLIO'S GOAL?

The Portfolio seeks to generate as high a level of current income as is
consistent with investment in a diversified portfolio of high grade income
bearing debt securities.

- --------------------------------------------------------------------------------

PRINCIPAL RISKS
WHAT ARE THE MAIN RISKS OF INVESTING IN THIS PORTFOLIO?

As with most income mutual funds, the Portfolio is subject to INTEREST RATE
RISK, the risk that the value of an investment will fluctuate with changes in
interest rates. Typically, a rise in interest rates causes a decline in the
market value of income bearing securities. Other factors may affect the market
price and yield of the Portfolio's securities, including investor demand and
domestic and worldwide economic conditions. In addition, the Portfolio is
subject to CREDIT RISK, the risk that issuers of debt securities may not be able
to meet their interest or principal payment obligations when due. The ability
of the Portfolio to realize interest under repurchase agreements and pursuant to
loans of the Portfolio's securities is dependent on the ability of the seller or
borrower, as the case may be, to perform its obligation to the Portfolio. To
the extent that the Portfolio invests in NON-HIGH GRADE SECURITIES, it is also
subject to above-average credit, market and other risks.

These risks, and the risks associated with other higher-risk securities and
practices that the Portfolio may utilize, are described in more detail later in
this prospectus and in the SAI. Before you invest, please carefully read the
section on "Risks."

PRIMARY INVESTMENT STRATEGIES
HOW DOES THIS PORTFOLIO PURSUE ITS OBJECTIVE?

To keep current income relatively stable and to limit share price volatility,
the Portfolio invests primarily in high grade securities and maintains an
intermediate (typically 3-6 year) average portfolio duration. Under normal
circumstances, the Portfolio invests at least 80% of its assets in high grade
securities. The Portfolio may invest the rest of its assets in securities that
are not high grade. The Portfolio may invest in the following instruments:

- - CORPORATE DEBT SECURITIES: securities issued by domestic and foreign
corporations
- - U.S. GOVERNMENT DEBT SECURITIES: securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities;

- - OTHER DEBT SECURITIES: securities issued or guaranteed by corporations,
financial institutions, and others which, although not rated by a national
rating service, are considered by the Portfolio's investment adviser to have
an investment quality equivalent to the three highest categories; and
- - OTHER SECURITIES: convertible debt securities and convertible and
nonconvertible preferred stocks rated in the three highest categories by an
NRSRO.

A detailed description of the rating categories is contained in the SAI. To the
extent permitted by law and available in the market, the Portfolio may also
invest in mortgage-backed securities and may invest up to 25% of its net
assets in debt securities of foreign issuers.

5
<PAGE>

PERFORMANCE RECORD

The following bar chart provides an illustration of the performance of the High
Grade Bond Portfolio during each of the last ten years. The bar chart indicates
the degree of variability that the Portfolio experienced in its performance from
year to year. This reflects the degree of risk of an investment in the
Portfolio. Please remember that past performance is no indicator or guarantee
of the results that the High Grade Bond Portfolio may achieve in the future.
Future annual returns may be greater or less than the returns shown in the
chart.

ANNUAL RETURNS

[GRAPH]

<TABLE>
<CAPTION>
PERCENT
-----------
<S> <C>
1989 12.74
1990 8.85
1991 16.42
1992 8.40
1993 8.74
1994 (0.26)
1995 14.26
1996 5.94
1997 10.24
1998 ?
</TABLE>

- -----------------------------
Best Quarter: __________%
Worst Quarter: __________%
- -----------------------------

The following table compares the average annual total returns of the High Grade
Bond Portfolio to those of the Lehman Brothers Mutual Fund Aggregate Index
("Lehman Index") over the periods shown. The Lehman Index is a widely
recognized, unmanaged index of fixed income performance. The Lehman Index
figures do not reflect any fees or expenses and one cannot invest directly in
the Lehman Index.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS
(for periods ending -------- ---------- ---------
December 31, 1998)
<S> <C> <C> <C>
HIGH GRADE BOND PORTFOLIO ______% ______% ______%

LEHMAN BROTHERS MUTUAL FUND
AGGREGATE INDEX ______% ______% ______%
- --------------------------------------------------------------------------------
</TABLE>

The performance data was calculated after deducting all fees and charges
actually incurred by the High Grade Bond Portfolio. During the periods shown,
the Adviser waived portions of its advisory fee thereby lowering expenses for
the High Grade Bond Portfolio. If these expenses had been paid by the High
Grade Bond Portfolio, the performance shown would have been less favorable.

6
<PAGE>

MANAGED PORTFOLIO

- --------------------------------------------------------------------------------

INVESTOR PROFILE
WHO SHOULD CONSIDER INVESTING IN THIS PORTFOLIO?

You may want to invest more of your assets in this Portfolio if you:

- - are looking for a more conservative alternative to a growth-oriented mutual
fund

- - want a well-diversified and relatively stable investment allocation

- - need a core investment

- - seek above-average total return over the long term irrespective of its source

- - are retired or nearing retirement

You may want to invest fewer of your assets in this Portfolio if you:

- - are investing for maximum return over a long time horizon

- - require a high degree of stability of your principal

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
WHAT IS THIS PORTFOLIO'S GOAL?

The Managed Portfolio seeks the highest total return through income and capital
appreciation.

- --------------------------------------------------------------------------------

PRINCIPAL RISKS
WHAT ARE THE MAIN RISKS OF INVESTING IN THIS PORTFOLIO?

As with any mutual fund that invests in stocks and bonds, the Portfolio is
subject to MARKET and INTEREST RATE RISKS, the risks that the value of an
investment will fluctuate in response to stock and bond market movements and
changes in interest rates. Loss of money is a risk of investing in this
Portfolio.

To the extent that it invests in certain securities, the Portfolio may be
affected by additional risks relating to NON-INVESTMENT GRADE SECURITIES
(above-average credit, market and other risks), securities of FOREIGN ISSUERS
(currency, information, natural event and political risks), and MORTGAGE-BACKED
SECURITIES (credit, extension, prepayment and interest rate risks). These
risks, and the risks associated with other higher-risk securities and practices
that the Portfolio may utilize, are described in more detail later in this
prospectus and in the SAI. Before you invest, please carefully read the section
on "Risks."

PRIMARY INVESTMENT STRATEGIES
HOW DOES THIS PORTFOLIO PURSUE ITS OBJECTIVE?

The Managed Portfolio pursues its objective through a fully managed investment
policy consisting of investment in the following three market sectors: (1)
growth common stocks and other equity securities, (2) high grade debt securities
and preferred stocks of the types in which the High Grade Bond Portfolio may
invest, and (3) money market instruments of the types in which the Money Market
Portfolio may invest.

The Managed Portfolio's investment policy for the equity sector is to invest in
both value-oriented securities of the type in which the Value Growth Portfolio
invests as well as those that display more traditional growth characteristics
such as established records of growth in sales and earnings. The Portfolio's
policies for the debt and money market sectors are substantially identical to
those of the High Grade Bond Portfolio and Money Market Portfolio, respectively.
There are no restrictions as to the proportions of one or another type of
security which the Portfolio may hold. Accordingly, the Portfolio may be
substantially invested in equity securities, debt securities or money market
instruments. The Portfolio may invest up to 25% of its net assets in securities
of foreign issuers.

7
<PAGE>

PERFORMANCE RECORD

The following bar chart provides an illustration of the performance of the
Managed Portfolio during each of the last ten years. The bar chart indicates
the degree of variability that the Portfolio experienced in its performance from
year to year. This reflects the degree of risk of an investment in the
Portfolio. Please remember that past performance is no indicator or guarantee
of the results that the Managed Portfolio may achieve in the future. Future
annual returns may be greater or less than the returns shown in the chart.

ANNUAL RETURNS

[GRAPH]

<TABLE>
<CAPTION>
PERCENT
-----------
<S> <C>
1989 8.86
1990 8.15
1991 12.69
1992 15.72
1993 22.71
1994 (4.96)
1995 25.69
1996 17.39
1997 10.67
1998 ?
</TABLE>

- -----------------------------
Best Quarter: __________%
Worst Quarter: __________%
- -----------------------------

The following table compares the average annual total returns of the Managed
Portfolio to those of the Standard & Poor's Corporation's Composite Index of 500
Common Stocks ("S&P 500 Index") over the periods shown. The S&P 500 Index is a
widely recognized, unmanaged index of common stock prices. The S&P 500 Index
figures do not reflect any fees or expenses and one cannot invest directly in
the Index.

S&P 500 INDEX _______% _______% _______%
- --------------------------------------------------------------------------------
</TABLE>

The performance data was calculated after deducting all fees and charges
actually incurred by the Managed Portfolio. During the periods shown, the
Adviser waived portions of its advisory fee thereby lowering expenses for the
Managed Portfolio. If these expenses had been paid by the Portfolio, the
performance shown would have been less favorable.

8
<PAGE>

HIGH YIELD BOND PORTFOLIO

- --------------------------------------------------------------------------------

INVESTOR PROFILE
WHO SHOULD CONSIDER INVESTING IN THIS PORTFOLIO?

You may want to invest more of your assets in this Portfolio if you:

- - are seeking higher potential returns than most bond mutual funds and are
willing to accept significant risk of volatility

- - want to diversify your investments

- - are seeking a mutual fund for the income portion of an asset allocation
program

- - are retired or nearing retirement

You may want to invest fewer of your assets in this Portfolio if you:

- - desire relative stability of your principal

- - are investing for maximum return over a long time horizon

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
WHAT IS THIS PORTFOLIO'S GOAL?

The Portfolio seeks as high a level of current income as is consistent with
investment in a diversified portfolio of lower-rated, higher-yielding income
bearing securities. The Portfolio also seeks capital appreciation, but only
when consistent with its primary goal.

- --------------------------------------------------------------------------------

PRINCIPAL RISKS
WHAT ARE THE MAIN RISKS OF INVESTING IN THIS PORTFOLIO?

This Portfolio is subject to above-average INTEREST RATE and CREDIT RISKS.
Investors should expect greater fluctuations in share price, yield and total
return compared to mutual funds holding bonds and other income bearing
securities with higher credit ratings and/or shorter maturities. These
fluctuations, whether positive or negative, may be sharp and unanticipated.
Loss of money is a significant risk of investing in this Portfolio.

Issuers of NON-INVESTMENT GRADE SECURITIES (I.E., "junk" bonds) are typically in
weak financial health and their ability to pay interest and principal is
uncertain. Compared to issuers of investment-grade bonds, they are more likely
to encounter financial difficulties and to be materially affected by these
difficulties when they do encounter them. "Junk" bond markets may react
strongly to adverse news about an issuer or the economy, or to the perception or
expectation of adverse news.

The fund may also invest in MORTGAGE-BACKED SECURITIES that are subject to
extension and prepayment risks.

These risks, and the risks associated with other higher-risk securities and
practices that the fund may utilize, are described in more detail later in this
prospectus. Before you invest, please carefully read the section on "Risks."

PRIMARY INVESTMENT STRATEGIES
HOW DOES THIS PORTFOLIO PURSUE ITS OBJECTIVE?

The Portfolio invests primarily in lower-rated, higher-yielding income bearing
debt securities, such as "junk" bonds. Under normal market conditions, the
Portfolio invests more than 80% of its assets in debt and other income bearing
securities rated lower than investment grade (and their unrated equivalents) or
other high-yielding securities. The Portfolio generally does not invest in
bonds rated CC/Ca or lower unless the Adviser believes that the financial
condition of the issuer or the protection afforded to the security is stronger
than the rating would otherwise indicate. Types of debt and other income
bearing securities include, but are not limited to, domestic and foreign
corporate bonds, debentures, notes, convertible securities, preferred stocks,
municipal obligations and government obligations. The Portfolio may invest in
mortgage-backed securities.

The Portfolio also may invest up to 25% of its net assets in debt securities
of foreign issuers.

9
<PAGE>

PERFORMANCE RECORD

The following bar chart provides an illustration of the performance of the High
Yield Bond Portfolio during each of the last ten years. The bar chart indicates
the degree of variability that the Portfolio experienced in its performance from
year to year. This reflects the degree of risk of an investment in the
Portfolio. Please remember that past performance is no indicator or guarantee
of the results that the High Yield Bond Portfolio may achieve in the future.
Future annual returns may be greater or less than the returns shown in the
chart.

ANNUAL RETURNS

[GRAPH]

<TABLE>
<CAPTION>
PERCENT
-----------
<S> <C>
1989 8.08
1990 0.67
1991 27.49
1992 13.39
1993 15.05
1994 (1.01)
1995 15.15
1996 12.65
1997 12.07
1998 ?
</TABLE>

- -----------------------------
Best Quarter: __________%
Worst Quarter: __________%
- -----------------------------

The following table compares the average annual total returns of the High Yield
Bond Portfolio to those of the Lehman Brothers Mutual Fund Corporate/High Yield
Index ("Lehman Index") over the periods shown. The Lehman Index is a widely
recognized, unmanaged index of corporate and high yield bond market performance.
The Lehman Index figures do not reflect any fees or expenses and one cannot
invest directly in the Lehman Index.

LEHMAN BROTHERS MUTUAL FUND
CORPORATE/HIGH YIELD INDEX ________% ________% ________%
- --------------------------------------------------------------------------------
</TABLE>

The performance data was calculated after deducting all fees and charges
actually incurred by the High Yield Bond Portfolio. During the periods shown,
the Adviser waived portions of its advisory fee thereby lowering expenses for
the Portfolio. If these expenses had been paid by the High Yield Bond
Portfolio, the performance shown would have been less favorable.

10
<PAGE>

VALUE GROWTH PORTFOLIO

- --------------------------------------------------------------------------------

INVESTOR PROFILE
WHO SHOULD CONSIDER INVESTING IN THIS PORTFOLIO?

You may want to invest more of your assets in this Portfolio if you:

- - have longer investment time horizons

- - are willing to accept higher on-going short-term risk for the potential of
higher long-term returns

- - want to diversify your investments

- - are seeking mutual funds for the growth portion of an asset allocation
program

- - are investing for retirement or other goals that are many years in the future

You may want to invest fewer of your assets in this Portfolio if you:

- - are investing with a shorter investment time horizon in mind

- - are uncomfortable with an investment whose value may vary substantially

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
WHAT IS THIS PORTFOLIO'S GOAL?

The Portfolio seeks long-term capital appreciation.

- --------------------------------------------------------------------------------

PRINCIPAL RISKS
WHAT ARE THE MAIN RISKS OF INVESTING IN THIS PORTFOLIO?

As with any mutual fund that invests in equity securities, this Portfolio is
subject to MARKET RISK, the risk that the value of your investment will
fluctuate in response to stock market movements. Loss of money is a significant
risk of investing in this Portfolio. Due to its focus on equity securities that
may appreciate in value and lack of emphasis on those that provide income, this
Portfolio will typically experience greater volatility over time than the other
Portfolios.

To the extent that the Portfolio invests in higher-risk securities, it takes on
additional risks that could adversely affect its performance. For example, to
the extent that the Portfolio invests in SECURITIES OF FOREIGN ISSUERS, it will
be subject to the risks related to such securities.

These risks, and the risks associated with other higher-risk securities and
practices that the fund may utilize, are described in more detail later in this
prospectus and in the SAI. Before you invest, please carefully read the section
on "Risks."

PRIMARY INVESTMENT STRATEGIES
HOW DOES THIS PORTFOLIO PURSUE ITS OBJECTIVE?

The Portfolio pursues its investment objective by investing primarily in equity
securities of companies that the Adviser believes have a potential to earn a
high return on capital and/or are undervalued by the market. The Portfolio may
invest in securities of companies in cyclical industries during periods when
such securities appear to the Adviser to have strong potential for capital
appreciation. It also may invest in "special situation" companies. Special
situation companies are ones that, in the Adviser's opinion, have potential for
significant future earnings growth but have not performed well in the recent
past. These companies may include ones with management changes, corporate or
asset restructuring or significantly undervalued assets.

The Adviser's strategy with the Portfolio is based on a value-oriented
analysis of equity securities. 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
Adviser attempts to determine the fundamental value of an enterprise using
the foregoing ratios and by evaluating the 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
Adviser's use of a value-oriented analysis may often result in the
acquisition of equity securities of medium- and smaller-size companies or in
securities of companies that are out of favor in the market.

The Portfolio also may invest up to 25% of its net assets in securities of
foreign issuers.

11
<PAGE>

PERFORMANCE RECORD

The following bar chart provides an illustration of the performance of the Value
Growth Portfolio during each of the last ten years. The bar chart indicates the
degree of variability that the Portfolio experienced in its performance from
year to year. This reflects the degree of risk of an investment in the
Portfolio. Please remember that past performance is no indicator or guarantee
of the results that the Value Growth Portfolio may achieve in the future.
Future annual returns may be greater or less than the returns shown in the
chart.

ANNUAL RETURNS

[GRAPH]

<TABLE>
<CAPTION>
PERCENT
-----------
<S> <C>
1989 11.13
1990 4.65
1991 14.53
1992 10.46
1993 27.20
1994 (4.43)
1995 25.87
1996 17.65
1997 6.30
1998 ?
</TABLE>

- -----------------------------
Best Quarter: __________%
Worst Quarter: __________%
- -----------------------------

The following table compares the average annual total returns of the Value
Growth Portfolio to those of the S&P 500 Index over the periods shown. The S&P
500 Index is a widely recognized, unmanaged index of common stock prices. The
S&P 500 Index figures do not reflect any fees or expenses and one cannot invest
directly in the Index.

S&P 500 INDEX ________% ________% ________%
- --------------------------------------------------------------------------------
</TABLE>

The performance data was calculated after deducting all fees and charges
actually incurred by the Value Growth Portfolio. During the periods shown, the
Adviser waived portions of its advisory fee thereby lowering expenses for the
Portfolio. If these expenses had been paid by the Value Growth Portfolio, the
performance shown would have been less favorable.

12
<PAGE>

BLUE CHIP PORTFOLIO

- --------------------------------------------------------------------------------

INVESTOR PROFILE
WHO SHOULD CONSIDER INVESTING IN THIS PORTFOLIO?

You may want to invest more of your assets in this Portfolio if you:

- - are looking for a stock fund that has both growth and income components

- - are looking for a more conservative alternative to a growth-oriented fund

- - need a core investment

- - seek above-average long-term total return

- - are investing for a higher return over a long time horizon

- - are retired or nearing retirement

You may want to invest fewer of your assets in this Portfolio if you:

- - are investing with a shorter time horizon in mind

- - require a high degree of stability of your principal

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE
WHAT IS THIS PORTFOLIO'S GOAL?

The Portfolio seeks long-term growth of capital and income.

- --------------------------------------------------------------------------------

PRINCIPAL RISKS
WHAT ARE THE MAIN RISKS OF INVESTING IN THIS PORTFOLIO?

As with any mutual fund that invests in stocks and also seeks income, this
Portfolio is subject to MARKET and INTEREST RATE RISKS, and the value of your
investment will fluctuate in response to stock market and interest rate
movements. Loss of money is a risk of investing in this Portfolio.

To the extent that it invests in certain securities, the Portfolio may be
affected by additional risks relating to SECURITIES OF FOREIGN ISSUERS
(currency, information, natural event and political risks) and NON-INVESTMENT
GRADE SECURITIES (credit, market, interest rate, liquidity, valuation, and
information risks).

PRIMARY INVESTMENT STRATEGIES
HOW DOES THIS PORTFOLIO PURSUE ITS OBJECTIVE?

The Portfolio pursues its objective by investing primarily in equity securities
of well-capitalized, established companies. The Portfolio focuses on common
stocks of approximately 50 large, well-known companies that the 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 or earnings and superior management structure. The Adviser
selects particular issuers on the basis of whether they, taken together,
reasonably represent a cross-section of major industries and not on the basis of
any analysis of their economic or financial strength or the relative value of
the securities. Within the limits of its investment restrictions (found in the
SAI), the Portfolio may, from time to time, hold more than 5% of its assets in
one or more such companies.

The Portfolio also may invest in other equity securities and debt or other
income bearing securities.

13
<PAGE>

PERFORMANCE RECORD

The following bar chart provides an illustration of the performance of the Blue
Chip Portfolio during each of the last ten years. The bar chart indicates the
degree of variability that the Portfolio experienced in its performance from
year to year. This reflects the degree of risk of an investment in the
Portfolio. Please remember that past performance is no indicator or guarantee
of the results that the Blue Chip Portfolio may achieve in the future. Future
annual returns may be greater or less than the returns shown in the chart.

ANNUAL RETURNS

[GRAPH]

<TABLE>
<CAPTION>
PERCENT
-----------
<S> <C>
1990 56.93
1991 28.20
1992 10.38
1993 14.36
1994 2.65
1995 32.81
1996 21.43
1997 27.41
1998 ?
</TABLE>

- -----------------------------
Best Quarter: __________%
Worst Quarter: __________%
- -----------------------------

The following table compares the average annual total returns of the Blue Chip
Portfolio to those of the S&P 500 Index over the periods shown. The S&P 500
Index is a widely recognized, unmanaged index of common stock prices. The S&P
500 Index figures do not reflect any fees or expenses and one cannot invest
directly in the Index.

S&P 500 INDEX ________% ________% ________%
- --------------------------------------------------------------------------------
</TABLE>

14
<PAGE>

HIGH YIELD BOND PORTFOLIO STRATEGY

The premise of the High Yield Bond Portfolio is that over long periods of time,
a broadly diversified portfolio of lower rated, higher yielding debt securities
should, net of capital losses, provide a higher net return than a similarly
diversified portfolio of higher rated lower yielding debt securities. The
Adviser attempts to minimize the risks of lower rated debt securities by:

- constructing a portfolio of such securities diversified by
industry, geography, maturity, duration and credit quality

- performing credit analysis independent of rating agencies and
attempting to acquire securities of issuers whose financial
position is more sound than ratings would indicate

- acquiring or disposing of particular securities to take advantage
of anticipated changes and trends in the economy and financial
markets

The Adviser's judgment of the risk of any particular security is a function of
its experience with lower rated debt securities, its evaluation of general
economic and securities market conditions, and the financial position of a
security's issuer. Under certain market conditions, the Adviser may sacrifice
yield in order to adopt a defensive posture designed to preserve capital. A
defensive posture could include, among other strategies, acquiring discount
securities.

PRINCIPAL RISK FACTORS

GENERAL DISCUSSION OF RISKS

EQUITY SECURITIES. To the extent that a Portfolio invests in equity securities,
it is subject to market risk. In general, stock values fluctuate in response
to the fortunes of individual companies and in response to general market and
economic conditions. Accordingly, the value of the equity securities that a
Portfolio holds may decline over short or extended periods. The risk of such a
decline is known as market risk. The U.S. equity markets tend to be cyclical,
with periods when prices generally rise and periods when prices generally
decline. Therefore, the value of an investment in those Portfolios that hold
equity securities may increase or decrease. As of the date of this Prospectus,
domestic stock markets were at, or close to, record high levels and no one can
guarantee that such levels will continue. Equity securities are also subject to
financial risk, which is the risk that the issuer's earnings prospects and
overall financial position will deteriorate causing a decline in the security's
value.

INCOME BEARING SECURITIES. To the extent that a Portfolio invests in income
bearing securities, it is subject to the risk of income volatility, market risk
(interest rate risk), financial risk (credit risk) and, as to some portfolio
holdings, prepayment/extension risk. Income volatility refers to the degree and
rapidity with which changes in overall market interest rates diminish the level
of current income from a portfolio of income bearing securities. Financial risk
relates to the ability of an issuer of a debt security to pay principal and
interest on such security on a timely basis and is the risk that the issuer
could default on its obligations and a Portfolio will lose its investment. In
general, interest rate risk is the risk that when prevailing interest rates
decline, the market value of income bearing securities (particularly
fixed-income securities) tends to increase. Conversely, when interest rates
increase, the market value of income bearing securities (particularly
fixed-income securities) tends to decline. Prepayment risk and extension risk
are normally present in adjustable rate mortgage loans, mortgage-backed
securities and other asset-backed securities. For example, homeowners have the
option to prepay their mortgages. Therefore, the duration of a security backed
by home mortgages can either shorten (prepayment risk) or lengthen (extension
risk).

In general, if interest rates on new mortgage loans fall sufficiently below the
interest rates on existing outstanding mortgage loans, the rate of prepayment
would be expected to increase. Conversely, if mortgage loan interest rates rise
above the interest rates on existing outstanding mortgage loans, the rate of
prepayment would be expected to decrease. In either case, a change in the
prepayment rate can result in losses to investors.

15
<PAGE>

The VALUE GROWTH PORTFOLIO and BLUE CHIP PORTFOLIO are subject to moderate
levels of both market and financial risk.

The HIGH GRADE BOND PORTFOLIO is subject to moderate levels of market risk and
relatively low levels of financial risk and current income volatility.

The HIGH YIELD BOND PORTFOLIO is subject to relatively high levels of financial
risk, moderate levels of market risk and relatively low levels of current income
volatility.

The MANAGED PORTFOLIO is 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 is subject to little market or financial risk because
it invests in high quality short-term investments that reflect current market
interest rates. The Portfolio could experience a high level of current income
volatility because the level of its current income directly reflects short-term
interest rates.

TYPES OF INVESTMENT RISK

CORRELATION RISK. The risk that changes in the value of a hedging instrument or
hedging technique will not match those of the asset being hedged (hedging is the
use of one investment to offset the possible adverse effects of another
investment).

CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise not honor a financial obligation.

EXTENSION RISK. The risk that a rise in prevailing interest rates will extend
the life of an outstanding mortgage-backed security by reducing the expected
number of mortgage prepayments, typically reducing the security's value.

FINANCIAL RISK. For income bearing securities, credit risk. For equity
securities, the risk that the issuer's earning prospects and overall financial
position will deteriorate causing a decline in the security's value.

INFORMATION RISK. The risk that key information about a security or market is
inaccurate or unavailable.

INTEREST RATE RISK. The risk of declines in market value of an income bearing
investment due to changes in prevailing interest rates. With fixed-rate
securities, a rise in interest rates typically causes a decline in market
values, while a fall in interest rates typically causes an increase in market
values.

LEVERAGE RISK. The risks associated with securities or investment practices
that enhance return (or loss) without increasing the amount of investment, such
as buying securities on margin or using certain derivative contracts or
derivative securities. A fund's gain or loss on a leveraged position may be
greater than the actual market gain or loss in the underlying security or
instrument. A fund may also incur additional costs in taking a leveraged
position (such as interest on borrowings) that may not be incurred in taking a
non-leveraged position.

LIQUIDITY RISK. The risk that certain securities or other investments may be
difficult or impossible to sell at the time the fund would like to sell them or
at the price the fund values them.

MARKET RISK. The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably, due to factors that have nothing to do with
the issuer. This risk is common to all income bearing and equity securities and
mutual funds that invest in them.

NATURAL EVENT RISK. The risk of losses attributable to natural disasters, crop
failures and similar events.

16
<PAGE>

OPPORTUNITY RISK. The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.

POLITICAL RISK. The risk of losses directly attributable to government actions
or political events of any sort.

PREPAYMENT RISK. The risk that a decline in prevailing interest rates will
shorten the life of an outstanding mortgage-backed security by increasing the
expected number of mortgage prepayments, thereby reducing the security's return.

VALUATION RISK. The risk that the market value of an investment falls
substantially below the fund's valuation of the investment.

17
<PAGE>

HIGHER-RISK SECURITIES AND PRACTICES

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
American Depository ADRs are receipts typically issued by a U.S. Market, currency,
Receipts (ADRs) financial institution which evidence ownership of information, natural event,
underlying securities of foreign corporate issuers. and political risks (I.E., the
Generally, ADRs are in registered form and are risks of foreign securities).
designed for trading in U.S. markets.
- ------------------------------------------------------------------------------------------------------------------------

Capital Securities Securities issued by trusts or other special Credit, liquidity and
purpose entities created to invest in junior interest rate risks.
subordinated debt securities. Junior subordinated
debt ranks before equity securities, but after
more senior debt in the event of the issuer's
liquidation and usually pays a fixed rate of
interest.
- ------------------------------------------------------------------------------------------------------------------------

Illiquid Securities Any investment that may be difficult or Liquidity, valuation and
impossible to sell at the time the fund would like market risks.
to sell it for the price at which the fund values it.

- ------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities backed by pools of mortgages, Credit, extension,
Securities including passthrough certificates, PACs, TACs, prepayment, and interest
collateralized mortgage obligations (CMOs), and rate risks.
when available, pools of mortgage loans
generated by credit unions.
- ------------------------------------------------------------------------------------------------------------------------

Non-Investment Grade Investing in debt securities rated below BBB/Baa Credit, market, interest
Securities (I.E., "junk" bonds). rate, liquidity, valuation,
and information risks.
- ------------------------------------------------------------------------------------------------------------------------

Repurchase Agreements The purchase of a security that the issuer agrees Credit risk.
to buy back later at the same price plus interest.
- ------------------------------------------------------------------------------------------------------------------------

Restricted Securities Securities originally issued in a private placement Liquidity, valuation, and
rather than a public offering. These securities market risks.
often cannot be freely traded on the open market.
- ------------------------------------------------------------------------------------------------------------------------

Reverse Repurchase The lending of short-term debt securities; often Leverage and credit risks.
Agreements used to facilitate borrowing.
- -----------------------------------------------------------------------------------------------------------------------

Securities Lending The lending of securities to financial institutions, Credit risk.
which provide cash or government securities as
collateral.
- ------------------------------------------------------------------------------------------------------------------------

Shares of Other Investment The purchase of shares issued by other Market risks and the
Companies investment companies. These investments are layering of fees and
subject to the fees and expenses of both the expenses.
Portfolios and the other investment company.
- ------------------------------------------------------------------------------------------------------------------------

Short-Term Trading Selling a security soon after purchase or Market risk.
purchasing it soon after it was sold (a fund
engaging in short-term trading will have higher
turnover and transaction expenses).
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Smaller Capitalization The purchase of securities issued by a company Market risk.
Companies with a market capitalization (I.E., the price per
share of its common stock multiplied by the
number of shares of common stock outstanding)
of less than $1 billion.
- ------------------------------------------------------------------------------------------------------------------------

When-Issued and Delayed The purchase or sale of securities for delivery at Market, opportunity, and
Delivery Securities a future date; market value may change before leverage risks.
delivery.
- ------------------------------------------------------------------------------------------------------------------------

Writing Covered Call A call option is the right to purchase a security Interest rate, market,
Option Contracts on for an agreed-upon price at any time prior to an correlation, liquidity, credit
Securities expiration date. By writing (selling) a call and opportunity risks.
option, a Portfolio gives this right to a buyer for
a fee. A "covered" call option contract is one
where the Portfolio owns the security subject to
the option for as long as the option remains
outstanding.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

19
<PAGE>

HIGHER RISK SECURITIES AND PRACTICES TABLE The following table shows each
Portfolio's investment limitations with respect to certain higher risk
securities and practices as a percentage of Portfolio assets.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
VALUE BLUE
MONEY HIGH HIGH GROWTH CHIP
MARKET GRADE MANAGED YIELD
BOND BOND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reverse Repurchase Agreements Y Y Y Y Y Y
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements Y Y Y Y Y Y
- ------------------------------------------------------------------------------------------------------------------------------------
Securities Lending 20 20 20 20 20 20
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term Trading Y Y Y Y Y Y
- ------------------------------------------------------------------------------------------------------------------------------------
When-Issued and Delayed Delivery Securities Z Z Z Z Z Z
- ------------------------------------------------------------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Other Investment Companies 5 5 5 5 5 5
- ------------------------------------------------------------------------------------------------------------------------------------
Non-Investment Grade Securities X Y Y Z X X
- ------------------------------------------------------------------------------------------------------------------------------------
Securities of Foreign Issuers(1) X 25 25 25 25 X
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid Securities(2) 10 15 15 15 15 10
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted Securities Z Z Z Z Z Z
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Securities X Z Z Z Z X
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed Securities X Z Z Z X X
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION CONTRACTS
- ------------------------------------------------------------------------------------------------------------------------------------
Writing Covered Call Options on Securities X Y Y Y Y Y
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) U.S. dollar-denominated securities only.
(2) Percentages refer to net, rather than total, assets.

LEGEND

30 A number indicates the maximum percentage of total assets (but see note
2) that the Portfolio is permitted to invest in that practice or type of
security. Numbers in this table show allowable usage only; for actual
usage, consult the Portfolio's annual and semi-annual reports.

Z A solid check mark means that there is no policy limitation on the
Portfolio's usage of that practice or type of security, and that the
Portfolio may be currently using that practice or investing in that type
of security.

Y A hollow check mark means that the Portfolio is permitted to use that
practice or invest in that type of security, but is not expected to do
so on a regular basis.

X An "x" mark means that the Portfolio is not permitted to use that
practice or invest in that type of security.

20
<PAGE>

HIGHER RISK SECURITIES AND INVESTMENT STRATEGIES

SECURITIES OF FOREIGN ISSUERS

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 are made only in securities of foreign
issuers that are traded on U.S. exchanges and payable or denominated in U.S.
dollars.

Investments in securities of foreign issuers (including ADRs) may offer
potential benefits not available from investments solely in securities of
domestic issuers. Investing in securities of foreign issuers involves
significant risks that are not typically associated with investing in domestic
securities. Such investments may be affected by changes in currency rates,
changes in foreign or U.S. laws, or restrictions applicable to such investments
and in exchange control regulations.

Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies, and there may be less publicly available information about a foreign
issuer than about a domestic one. In addition, there is generally less
government regulation of stock exchanges, brokers, and listed and unlisted
issuers in foreign countries than in the U.S. Furthermore, with respect to
certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, imposition of withholding taxes on dividend or interest
payments, limitations on the removal of cash or other assets of a Portfolio, or
political or social instability or diplomatic developments which could affect
investments in those countries. Individual foreign economies also may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.

Although ADRs acquired by the Portfolios are traded on domestic exchanges, their
values largely reflect the value(s) of the underlying security on foreign
securities markets. The values of such underlying securities are a function of
a number of factors, including the following. Some foreign stock markets (and
other securities markets) may have substantially less volume than, for example,
the New York Stock Exchange (or other domestic markets) and securities of some
foreign issuers may be less liquid than securities of comparable domestic
issuers. Commissions and dealer mark-ups on transactions in foreign investments
may be higher than for similar transactions in the U.S. In addition, clearance
and settlement procedures may be different in foreign countries and, in certain
markets, on certain occasions, such procedures have been unable to keep pace
with the volume of securities transactions, thus making it difficult to conduct
such transactions.

LOWER RATED DEBT SECURITIES

The High Yield Bond Portfolio invests a substantial portion of its assets in
income bearing securities offering high current income. Additionally, the High
Grade Bond Portfolio may invest a portion of its assets in such securities.
Such high yielding income bearing securities often do not meet the High Grade or
Investment Grade quality level. Securities falling short of Investment Grade
are commonly known as "junk bonds." These lower rated securities are, on
balance, predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with their terms and generally entail more credit
risk than higher rated securities. 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 higher rated securities. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, regarding
lower rated securities may depress prices and diminish liquidity for such
securities. Factors adversely affecting the market value of lower rated
securities adversely affects 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 income
bearing securities. Although some risk is inherent in all securities, holders
of income bearing debt securities have a claim on the assets of the issuer prior
to the holders of common stock. Therefore, an investment in such securities
generally entails less financial risk than an investment in equity securities of
the same issuer.

21
<PAGE>

Lower rated securities may be issued by corporations in the early stages 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 lower rated 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 Investment Grade securities. For example, during an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower rated 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 lower rated income bearing
securities because such securities are generally unsecured and are often
subordinated to other creditors of the issuer.

Lower rated income bearing 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 lower rated 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 lower rated securities for
which there is a thin trading market. Because not all dealers maintain markets
in all lower rated 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 lower rated securities, it is generally
not so liquid as that for Investment Grade securities. The lack of a liquid
secondary market may have an adverse impact on market value of such securities
and a Portfolio's ability to dispose of them when necessary to meet the
Portfolio's liquidity needs or in response to a specific economic event such as
a deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities may also make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing a Portfolio's
assets. Market quotations are generally available on many high yield issues
only from a limited number of dealers and may not necessarily represent firm
bids of such dealers or prices for actual sales.

It is likely that a major economic recession could severely affect the market
for and the values of lower rated securities, as well as the ability of the
issuers of such securities to repay principal and pay interest thereon.

A Portfolio may acquire lower rated securities that are sold without
registration under the federal securities laws and therefore carry restrictions
on resale. The SAI contains more information about the risks of restricted
securities. A Portfolio may acquire lower rated securities during an initial
offering. Such securities involve special risks because they are new issues.

Additional information regarding the rating categories for income bearing debt
securities appears in the appendices of the SAI.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

Any of the Portfolios may purchase newly-issued securities on a "when-issued"
basis and may purchase or sell securities 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.

22
<PAGE>

At the time a Portfolio makes the commitment to purchase a security on a
when-issued or delayed delivery basis, it will segregate the security on the
Fund's accounting records, 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 segregate the security on the Fund's accounting records,
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 not reflected in the net
asset value so long as the commitment remains in effect.

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.

CAPITAL SECURITIES

Each Portfolio (other than the Money Market and Blue Chip Portfolios) may invest
in capital (trust-preferred) securities. Capital securities are issued by
trusts or other special purpose entities created to invest in (or pool) junior
subordinated debentures. Capital securities pay interest on a fixed schedule
(although issuers often may defer interest payments for up to five years) and
have a maturity date. Capital securities have no voting rights and have a
preference over common and preferred stock, but stand behind senior debt
securities in the event of the issuer's liquidation. The trust or other special
purpose entity may terminate and distribute the debentures to holders of the
capital securities. Generally, capital securities exhibit characteristics, and
entail associated risks, of both debt securities and preferred stock. For
purposes of investment limits applicable to a Portfolio, the Fund treats capital
securities as debt. For tax purposes, the Internal Revenue Service currently
treats them as debt securities as well. In the past, legislation has been
proposed that would have change the tax treatment of capital securities and if
this treatment changes in the future, the Adviser would reconsider the
appropriateness of continued investment in them.

23
<PAGE>

PORTFOLIO MANAGEMENT

EquiTrust Investment Management Services, Inc. (formerly known as FBL Investment
Advisory Services, Inc.), 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, 1998, 54.30% of the outstanding voting shares of
FBL Financial Group, Inc. was 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, Lou Ann
Sandburg, 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: EquiTrust Money Market Fund, Inc. and EquiTrust 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 EquiTrust 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.

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>
- --------------------------------------------------------------------------------
PORTFOLIO MAXIMUM MANAGEMENT FEE AGGREGATE MANAGEMENT
FEES PAID TO THE ADVISER
DURING THE FISCAL YEAR
ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Money Market 0.25%

High Grade Bond 0.30%

Managed 0.45%

High Yield Bond 0.45%

Value Growth 0.45%

Blue Chip 0.20%
- --------------------------------------------------------------------------------
</TABLE>

24
<PAGE>

The Adviser, at its expense, furnishes the Fund with office space and
facilities, 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, and transfer and dividend disbursing agents.

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 voluntarily agreed to reimburse any Portfolio to
the extent that annual operating expenses, including the investment advisory
fee, exceed .65%. However, the Adviser is not obligated to continue to
reimburse the Portfolios for such expenses beyond December 31, 1999.

OTHER INFORMATION

YEAR 2000

Preparing for Year 2000. Many data processing systems were designed using only
two digits to signify the year (for example, "98" for "1998"). On January 1,
2000, if these data processing systems are not corrected, they may incorrectly
interpret "00" as the year "1900" rather than the year "2,000", leading to
computer shutdowns and errors (commonly known as "year 2000 problems"). To the
extent that these systems conduct forward-looking calculations, such problems
may occur prior to January 1, 2000. In providing investment advisory services
to the Portfolios and other services to the Fund, the Adviser utilizes data
processing systems that may be affected by year 2000 problems. The Adviser and
the Fund also rely on service providers, including banks, custodians and
transfer agents that also may be affected. Like other mutual funds and
financial and business organizations, the Adviser and other service providers
could be adversely affected in their ability to process securities trades, price
securities, provide shareholder account services and otherwise conduct the
Fund's normal business operations if data processing systems that they use
experience year 2000 problems. The Adviser has developed, and is in the process
of implementing, a Year 2000 transition plan with respect to systems that it
operates, and is confirming that the Fund's other service providers are also so
engaged. The resources that are being devoted to this effort are substantial.
It is difficult to predict with precision whether the amount of resources
ultimately devoted, or the outcome of these efforts, will have any negative
impact on the Adviser and the Fund. As of the date of this prospectus, the
Adviser does not anticipate that contract holders and policyowners will
experience negative effects on investments in the Portfolios, or on the services
provided to them on behalf of the Fund, as a result of year 2000 problems.
However, there can be no assurance that the Adviser will be successful, or that
interaction with other service proviers will not impair the Adviser's and the
Fund's services on or before January 1, 2000.

DISTRIBUTOR

The Adviser also is the distributor and principal underwriter of the Fund's
shares.

NET ASSET VALUE

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 day before Christmas (in 1999) 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

25
<PAGE>

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.

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.

SHAREHOLDERS

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.

The Shareholders of the Portfolios are the separate accounts of Participating
Insurance Companies. Under current law, owners of variable life insurance
policies and variable annuity contracts which have invested in a Portfolio
are not subject to federal income tax on Portfolio distribution or on gains
realized upon the sale or redemption of Portfolio shares until they are
withdrawn from the policies or contracts. For information concerning the
federal tax consequences to the purchasers of the VLI policies and VA
contracts, see the attached prospectus for such policy or contract.

For more information about the tax status of the Portfolios, see "Taxes" in
the SAI.

DISTRIBUTIONS AND TAXES

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.

TAXES

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. Further, each Portfolio intends to
meet certain diversification requirements applicable to mutual funds
underlying variable life insurance policies and variable annuity contracts.

26
<PAGE>

27
<PAGE>

APPENDIX - FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand each
Portfolio's financial performance for the past five years. Certain information
reflects financial results for a single share of a Portfolio. The total returns
in the table represent the rate that an investment in the Portfolio would have
earned assuming reinvestment of all dividends and distributions. This
information has been audited by Ernst & Young LLP, independent accountants,
whose report, along with the Fund's financial statements, are included in the
SAI.

[Tables to be Added]

28
<PAGE>

BACK COVER

ANNUAL/SEMI-ANNUAL REPORTS TO SHAREHOLDERS:

Additional information about each Portfolio's investments is available in the
Fund's annual and semi-annual reports to shareholders. The Fund's annual report
to shareholders contains a discussion of the market conditions and investment
strategies that significantly affected each Portfolio's performance during the
fiscal year covered by the report.

STATEMENT OF ADDITIONAL INFORMATION:

The SAI, which contains additional information about the Fund, has been filed
with SEC and is incorporated herein by reference. Information about the Fund
(including the SAI) can be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. Information about the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. Reports and other information
about the Fund are available on the SEC's Internet site at http://www.sec.gov.
and copies of this information is available, upon paying a duplication fee, by
writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009.

A free copy of the Fund's SAI and annual report may be obtained and further
inquiries may be made by calling the Fund at 1-800-247-4170 or by writing the
Fund at 5400 University Avenue, West Des Moines, Iowa 50266.

<PAGE>

EQUITRUST MUTUAL FUNDS

5400 University Avenue
West Des Moines, Iowa 50266
(800) 247-4170

EQUITRUST VARIABLE INSURANCE SERIES FUND

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1999

EquiTrust Variable Insurance Series Fund (the "Fund") is an open-end
diversified management investment company which consists of six Portfolios: the
Money Market Portfolio, High Grade Bond Portfolio, Managed Portfolio, High Yield
Bond Portfolio, Value Growth 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 ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus of the Fund dated May 1, 1999.
The audited financial statements of the Fund, including the notes thereto,
contained in the Annual Report to Shareholders of EquiTrust Variable Insurance
Series Fund for the fiscal year ended December 31, 1998 were filed with the
Securities and Exchange Commission (the "Commission") on February 9, 1999
and are incorporated by reference.

A copy of the Prospectus or Annual Report 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. Terms not defined herein shall
have the meanings given them in the Prospectus.

<PAGE>

TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES . . . . . . . . . . . . . . . 1
The Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Strategies and Techniques. . . . . . . . . . . . . . . . . . 2
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .12
Fundamental Policies. . . . . . . . . . . . . . . . . . . . . . . . . .12
Non-Fundamental (Operating) Policies. . . . . . . . . . . . . . . . . .14
OFFICERS AND TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
UNDERWRITING AND DISTRIBUTION EXPENSES . . . . . . . . . . . . . . . . . . .22
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS . . . . . . . . . . . . . .23
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
PURCHASES AND REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . .25
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .25
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . . . .25
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Money Market Portfolio. . . . . . . . . . . . . . . . . . . . . . . . .26
Other Portfolios. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . .29
Money Market Portfolio. . . . . . . . . . . . . . . . . . . . . . . . .29
High Grade Bond and High Yield Bond Portfolios. . . . . . . . . . . . .30
Other Portfolios. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .30
Performance Calculation . . . . . . . . . . . . . . . . . . . . . . . .31
ORGANIZATION OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . .34
SHAREHOLDER VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . .35
CONTROL PERSONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . . .37
Accounting Services . . . . . . . . . . . . . . . . . . . . . . . . . .37
Dividend Disbursing and Transfer Agent. . . . . . . . . . . . . . . . .37
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . .38
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>

ii
<PAGE>

INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES

THE FUND

EquiTrust Variable Insurance Series Fund (formerly known as 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, as amended (the "Investment Company Act"). It
is a series-type investment company consisting of the Money Market Portfolio,
High Grade Bond Portfolio, Managed Portfolio, High Yield Bond Portfolio, Blue
Chip Portfolio and Value Growth 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.

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.

<PAGE>

INVESTMENT OBJECTIVES

The investment objective or objectives of each Portfolio is set forth
below.

Money Market Portfolio Seeks maximum current income consistent with
liquidity and stability of principal.

High Grade Bond Portfolio Seeks to generate as high a level of current
income as is consistent with investment in a
diversified portfolio of high grade income bearing
debt securities.

Managed Portfolio Seeks the highest total return through income and
capital appreciation.

High Yield Bond Portfolio Seeks as high a level of current income as is
consistent with investment in a diversified
portfolio of lower-rated, higher-yielding income
bearing securities. The Portfolio also seeks
capital appreciation, but only when consistent
with its primary goal.

Value Growth Portfolio Seeks long-term capital appreciation.

Blue Chip Portfolio Seeks growth of capital and income.

INVESTMENT STRATEGIES AND TECHNIQUES

A description of certain investment strategies and techniques applicable to
some or all of the Portfolios is set forth in the Prospectus under the headings
"Principal Risk Factors" and "Higher Risk Securities and Investment Strategies."
A description of the money market instruments in which the Money Market
Portfolio may invest is contained in Appendix A to this SAI. A description of
the corporate bond and commercial paper ratings of Moody's Investors Services,
Inc. ("Moody's") and Standard Poor's Corporation ("S&P") is contained in
Appendix C to this SAI.

The following is intended to augment the explanation in the Prospectus of
certain strategies and techniques that 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 investment adviser (under the

2
<PAGE>

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 of 1986, as amended (the
"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 Code.

WRITING 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 risks
associated with investments. 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. One way for an option to
be "covered" is for the writer to own the optioned security.

A Portfolio may write covered call options on debt securities that are
traded over-the-counter. When a Portfolio writes an over-the-counter option,
there is no assurance that the Portfolio will be able to enter into a closing
purchase transaction. It may not always be possible for the Portfolio to
negotiate a closing purchase transaction with the same dealer for the same
exercise price and expiration date as the option which the Portfolio previously
had written. Although the Portfolio may choose to purchase an option from a
different dealer, the Portfolio would then be subject to the additional credit
risk of such dealer. If the Portfolio is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or until it delivers the underlying security upon exercise.

A Portfolio will write covered call options both to reduce the risks
associated with certain of its investments and to increase total investment
return. In return for the premium income, the Portfolio will forgo the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price so long as its obligations under the contract
continue, except insofar as the premium represents a profit. Moreover, in
writing the option, the Portfolio will retain the risk of loss should the price
of the security decline, which loss the premium is intended to offset in whole
or in part. A Portfolio, in writing call options, must assume that the call may
be exercised at any time prior to the expiration of its obligations as a writer
and, that in such circumstances, the net proceeds realized from the sale of the
underlying securities pursuant to the call may be substantially below the
prevailing market price. Covered

3
<PAGE>

call options and the securities underlying options will be listed on national
securities exchanges, except that certain transactions in debt securities and
related options need not be so listed.

A Portfolio may write options that are traded on U.S. and foreign exchanges
and options traded over-the-counter with broker-dealers who make markets in
these options. The ability to terminate over-the counter-options is more
limited than with exchange-traded options and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. Until such time as the staff of the Commission changes its
position, the Portfolios will treat purchased over-the-counter options and all
assets used to cover written over-the-counter options as illiquid securities,
except that with respect to options written with primary dealers in U.S.
Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid securities may be
calculated with reference to the formula.

Transactions by a Portfolio in options on securities is subject to
limitations established by each of the exchanges, boards of trade or other
trading facilities governing the maximum number of options in each class which
may be written or purchased by a single investor or group of investors acting in
concert. Thus, the number of options which a Portfolio may write may be
affected by options written or purchased by other investment advisory clients of
the investment adviser. An exchange, board of trade or other trading facility
may order the liquidations of positions found to be in excess of these limits,
and it may impose certain other sanctions.

The writing of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions.

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.

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<PAGE>

delayed delivery basis, it will segregate the security on the Fund's accounting
records, record the transaction and include the proceeds to be received in
determining its net asset value. Accordingly, any fluctuations in the value of
the security sold pursuant to a delayed delivery commitment are ignored in
calculating net asset value so long as the commitment remains in effect.

The market value of the when-issued or delayed delivery securities at any
time may be more or less than the purchase price to be paid or the sale price to
be received at the settlement date. To the extent that a Portfolio engages in
when-issued or delayed delivery transactions, it will do so for the purpose of
acquiring or selling Portfolio securities consistent with the Portfolio's
investment objectives and policies and not for the purpose of investment
leverage or to speculate on interest rate changes. The investment adviser does
not believe that a Portfolio's net asset value or income will be adversely
affected by the purchase of securities on a when-issued or delayed delivery
basis or the sale of securities on a delayed delivery basis.

Each Portfolio will establish a segregated account with the Fund's
custodian bank in which it will maintain cash or U.S. Government securities or
other high-grade debt obligations at least equal in value to commitments to
purchase securities on a when-issued or delayed delivery basis; subject to this
requirement, a Portfolio may purchase securities on a when-issued or delayed
delivery basis without limit. To the extent that assets of a Portfolio are held
in cash pending the settlement of a purchase of securities, that Portfolio would
earn no income; however, it is the investment advisers 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.

GINNIE MAE CERTIFICATES

The Managed Portfolio, High Grade Bond Portfolio and High Yield Bond
Portfolio each may 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, either are 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

5
<PAGE>

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 GNMA's
guarantee of Ginnie Maes, 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 typically are quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average-life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. Prepayments generally occur when interest rates have
fallen. Reinvestment of prepayments at such times will be at lower rates, which
would lower the return to the Portfolios. The actual yield of each Ginnie Mae
is influenced by the prepayment experience of the mortgage pool underlying the
certificates and may differ from the yield based on the assumed average life.
Interest on Ginnie Maes is paid monthly rather than semi-annually as for
traditional bonds.

REPURCHASE AGREEMENTS

Each Portfolio may enter into repurchase agreements as a means of earning
income for periods as short as overnight. A repurchase agreement is an
agreement under which the Portfolio purchases a security and the seller agrees,
at the time of sale, to repurchase the security at a specified time and price,
thereby determining the yield during the Portfolio's holding period.

6
<PAGE>

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 also may 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.

REVERSE REPURCHASE AGREEMENTS

Each Portfolio may enter into reverse repurchase agreements with banks and
broker-dealers. These agreements have the characteristics of borrowing and
involve the sale of securities held by a Portfolio with an agreement to
repurchase the securities at an agreed upon price that reflects a rate of
interest paid for the use of the funds for the period. Such transactions are
advantageous only if the Portfolios have the opportunity to earn a greater rate
of interest on the cash derived from the transaction than the interest cost of
obtaining that cash. The Portfolios may be unable to realize a rate of return
on from the use of the proceeds equal to or greater than the interest expense of
the repurchase agreement. Thus, the Portfolios only enter into such agreements
when it appears advantageous to do so. The use of reverse repurchase agreements
may magnify any increase or decrease in the value of a Portfolio's investments.
The Fund's custodian maintains, in a segregated account, liquid securities of
each Portfolio that have a value equal to or greater than the respective
Portfolio's commitments under reverse repurchase agreements. The value of
securities subject to reverse repurchase agreements will not exceed 30% of a
Portfolio's total assets.

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<PAGE>

OTHER INVESTMENT COMPANIES

All of the Portfolios reserve the right to invest up to 10% of their total
assets, calculated at the time of purchase, in securities issued by other
investment companies, including business development companies and small
business investment companies. No Portfolio may invest more than 5% of its
total assets in the securities of any one investment company or in more than 3%
of the voting securities of any other investment company.

ILLIQUID INVESTMENTS AND RESTRICTED SECURITIES

No Portfolio may invest more than 15% of its net assets (10% for the Money
Market and Blue Chip Portfolios) in illiquid investments. Illiquid investments
are ones that a Portfolio cannot sell within seven days at approximately the
price at which it values the investment. Illiquid investments include most
repurchase agreements maturing in more than seven days, time deposits with a
notice or demand period of more than seven days, certain mortgage-backed
securities, certain over-the-counter options contracts (and segregated assets
used to cover such options), and many restricted securities. Restricted
securities are ones that have a contractual restriction on resale or otherwise
cannot be resold publicly until registered under the Securities Act of 1933 (the
"1933 Act").

Each of the Portfolios may invest in restricted securities. If restricted
securities are illiquid, they are subject to the liquidity limitations described
above. Restricted securities are not, however, considered illiquid if they are
eligible for sale to qualified institutional purchasers in reliance upon Rule
144A under the 1933 Act and that are determined to be liquid by the Trust's
board of trustees or by the Adviser pursuant to board approved procedures. Such
procedures take into account trading activity for such securities and the
availability of reliable pricing information, among other factors. To the
extent that qualified institutional purchasers become for a time uninterested in
purchasing certain restricted securities, a Portfolio's holding of such
securities may become illiquid. Even when determined to be liquid, restricted
securities are less liquid than they would be if they were not restricted.
Therefore the purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which they would trade if they
were not restricted.

EURO CONVERSION

On January 1, 1999, eleven participating countries in the European Economic
Monetary Union (Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, and Spain) adopted the EURO as their
official currency. On January 1, 1999, governments of these countries began
issuing new debt and redenominating existing debt in EUROS, although
corporations may choose to issue securities in either EUROS or in the national
currency of a participating country. Also, on January 1, the new European
Central Bank (the "ECB") assumed responsibility for monetary policy in
participating countries. Currency conversion is occurring through a
"triangulation" process whereby an amount denominated in one national currency
is converted to EUROS, which then is converted to the second national currency.
For investors, such as several of the Portfolios, in securities of issuers
located or doing substantial business in the participating countries, the EURO
conversion presents unique risks

8
<PAGE>

arising from various uncertainties, including: (1) the readiness of EURO
payment, clearing, and other operating systems, (2) the legal treatment of debt
instruments and financial contracts denominated in or referring to existing
national currencies rather than the EURO, (3) exchange rate fluctuations between
the EURO and other currencies during the transition period of January 1, 1999
through December 31, 20001 and beyond, (4) potential U.S. tax issues with
respect to securities held by the Portfolios, and (5) the ECB's ability to
manage monetary policy for the participating countries. Three other European
Community countries (Denmark, Greece and the United Kingdom) may convert to the
EURO at a later date. These and other uncertainties may adversely affect the
general economy and/or financial systems in Europe as well as the fortunes of
individual issuers located or doing business there.

INVESTMENTS IN CAPITAL SECURITIES

Each Portfolio (other than the Blue Chip and Money Market Portfolios) may
invest in 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.

LOWER RATED DEBT SECURITIES

The High Yield Bond Portfolio invests a substantial portion of its assets in
income bearing securities offering high current income. Additionally, the High
Grade Bond Portfolio may invest a portion of its assets in such securities.
Such high yielding income bearing securities often do not meet the High Grade or
Investment Grade quality level. Securities falling short of Investment Grade
are commonly known as "junk bonds." These lower rated securities are, on
balance, predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with their terms and generally entail more credit
risk higher rated securities. 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 higher rated securities. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, regarding
lower rated securities may depress prices and diminish liquidity for such
securities. Factors adversely affecting the market value of lower rated
securities adversely affects a Portfolio's net asset value. In addition, a
Portfolio may incur additional

9
<PAGE>

expenses to the extent it were required to seek recovery upon a default in the
payment of principal or interest on its income bearing securities. Although
some risk is inherent in all securities, holders of income bearing debt
securities have a claim on the assets of the issuer prior to the holders of
common stock. Therefore, an investment in such securities generally entails
less financial risk than an investment in equity securities of the same issuer.

10
<PAGE>

From time to time, there have been proposals for legislation designed to limit
the use of certain high yielding securities in connection with leveraged
buy-outs, mergers and acquisitions, or to limit the deductibility of interest
payments on such securities. Such proposals, if enacted into law, could reduce
the market for such securities generally, could negatively affect the financial
condition of issuers of high yield securities by removing or reducing a source
of future financing and could negatively affect the value of specific high yield
issues. However, the likelihood of any such legislation or the effect thereof
is uncertain.

Zero coupon securities and pay-in-kind bonds involve additional special
obligations. Zero coupon securities are debt obligations that do not entitle
the holder to any periodic payments of interest prior to maturity or to a
specified cash payment date when the securities begin paying current interest
(the "cash payment date"), and therefore are issued and traded at a discount
from their face amount or par value. The discount varies depending upon the
time remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer. The
discount, absent financial difficulties of the issuer, decreases as the final
maturity or cash payment date of the security approaches. The market prices of
zero coupon securities are generally more volatile than those of securities that
pay interest periodically, and they are more likely to respond to changes in
interest rates than non-zero coupon securities having similar maturities and
credit quality. The credit risk factors pertaining to lower-rated securities
generally also apply to lower-rated zero coupon bonds and pay-in-kind bonds.
Such zero coupon, pay-in-kind or delayed interest bonds carry an additional risk
in that, unlike bonds that pay interest throughout the period to maturity, a
Portfolio will realize no cash until the cash payment date unless a portion of
such securities is sold and, if the issuer defaults, a Portfolio may obtain no
return at all on its investment.

Current federal income tax law requires the holder of zero coupon securities or
of certain pay-in-kind bonds (bonds that pay interest through the issuance of
additional bonds) to accrue income with respect to these securities prior to the
receipt of cash payments. To maintain its qualification as a registered
investment company and avoid liability for federal income and excise taxes, a
Portfolio will be required to distribute income accrued with respect to these
securities and may have to dispose of portfolio securities under disadvantageous
circumstances in order to generate cash to satisfy these distribution
requirements.

TEMPORARY DEFENSIVE POSITIONS

Notwithstanding their investment objective(s), each Portfolio may, for
temporary defensive purposes, invest all (15% for the Blue Chip Portfolio) of
its assets in cash and/or money market instruments of the type which the Money
Market Portfolio invests.

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<PAGE>

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

12
<PAGE>

right to obtain securities equivalent in kind and amount to the securities sold
and, if the right is conditional, the sale is made upon the same condition.

7. 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 assets, or pledge or mortgage more
than 15% of its total 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
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 "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.

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<PAGE>

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.

OFFICERS AND TRUSTEES

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. The officers and trustees of the Fund and
their principal occupations for the past five years are set forth below.
Corporate positions may, in some instances, have changed during this period.
The four Trustees listed with an asterisk are "interested persons" as defined in
the Investment Company Act.

EDWARD M. WIEDERSTEIN*, PRESIDENT AND TRUSTEE (51)

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, American Ag Insurance Company, and
WellMark Blue Cross/Blue Shield of Iowa.

RICHARD D. HARRIS*, SENIOR VICE PRESIDENT, SECRETARY-TREASURER AND TRUSTEE (55)

5400 University Avenue
West Des Moines, Iowa 50266

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<PAGE>

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 AND ASSISTANT
SECRETARY (53)

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., EquiTrust Investment Management Services, Inc. and
EquiTrust Marketing Services, LLC; Senior Vice President and General
Counsel, Farm Bureau Life Insurance Company, FBL Insurance Brokerage, Inc.
and other affiliates of the foregoing; Director, Iowa Agricultural Finance
Corporation and Iowa Business Development Finance Corporation; Chairman,
Edge Technologies, Inc.

THOMAS R. GIBSON, CHIEF EXECUTIVE OFFICER (54)

5400 University Avenue
West Des Moines, Iowa 50266

Chief Executive Officer and Director, FBL Financial Group, Inc., EquiTrust
Investment Management Services, Inc. and EquiTrust Marketing Services, LLC;
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 (48)

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, EquiTrust
Investment Management Services, Inc. and EquiTrust Marketing Services, LLC.

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<PAGE>

WILLIAM J. ODDY, CHIEF OPERATING OFFICER (55)

5400 University Avenue
West Des Moines, Iowa 50266

Chief Operating Officer, FBL Financial Group, 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, EquiTrust Marketing
Services, LLC; President and Director, EquiTrust Investment Management
Services, Inc., FBL Real Estate Ventures, Ltd. and RIK, Inc.; Chief
Executive Officer, Western Computer Services, Inc.

JAMES W. NOYCE, CHIEF FINANCIAL OFFICER (43)

5400 University Avenue
West Des Moines, Iowa 50266

Chief Financial Officer, FBL Financial Group, Inc., Farm Bureau Life
Insurance Company, Western Farm Bureau Life Insurance Company and other
affiliates of the foregoing. Chief Financial Officer, Treasurer and
Director, EquiTrust Investment Management Services, Inc. and EquiTrust
Marketing Services, LLC. He holds other positions with various affiliates
of the foregoing.

LOU ANN SANDBURG, VICE PRESIDENT-INVESTMENTS AND ASSISTANT TREASURER (51)

5400 University Avenue
West Des Moines, Iowa 50266

Vice President-Investments and Assistant Treasurer, FBL Financial Group,
Inc., Farm Bureau Life Insurance Company, Western Farm Bureau Life
Insurance Company and other affiliates of the foregoing. Vice
President-Investments, EquiTrust Investment Management Services, Inc. and
EquiTrust Marketing Services, LLC. She holds other positions with various
affiliates of the foregoing.

DENNIS M. MARKER, INVESTMENT VICE PRESIDENT, ADMINISTRATION AND ASSISTANT
SECRETARY (47)

5400 University Avenue
West Des Moines, Iowa 50266

Investment Vice President, Administration, FBL Financial Group, Inc. and
Farm Bureau Life Insurance Company; Investment Vice
President-Administration, Secretary and Director, EquiTrust Investment
Management Services, Inc. and EquiTrust Marketing Services, LLC. He holds
other positions with various affiliates of the foregoing.

<PAGE>

SUE A. CORNICK, MARKET CONDUCT AND MUTUAL FUNDS VICE PRESIDENT AND ASSISTANT
SECRETARY (38)

5400 University Avenue
West Des Moines, Iowa 50266

Market Conduct and Mutual Funds Vice President and Assistant Secretary,
EquiTrust Investment Management Services, Inc. and EquiTrust Marketing
Services, LLC.

KRISTI ROJOHN, ASSISTANT SECRETARY (36)

5400 University Avenue
West Des Moines, Iowa 50266

Assistant Mutual Funds Manager and Assistant Secretary, EquiTrust
Investment Management Services, Inc. and EquiTrust Marketing Services, LLC.

ELAINE A. FOLLOWWILL, ASSISTANT SECRETARY (28)

5400 University Avenue
West Des Moines, Iowa 50266

Compliance Assistant and Assistant Secretary, EquiTrust Investment
Management Services, Inc. and EquiTrust Marketing Services, LLC.

DONALD G. BARTLING, TRUSTEE (71)

Box 104
Herman, Nebraska 68029

Farmer; Partner, Bartling Brothers Partnership (farming business).

JOHN R. GRAHAM*, TRUSTEE (53)

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, Farm Bureau Mutual Insurance
Company, Inc., and KFB Insurance Company, Inc.; Chairman, Chief Executive
Officer and Director, FB Capital Management, Inc. of Kansas and Graham
Capital Management, Inc.; 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.

17
<PAGE>

ERWIN H. JOHNSON, TRUSTEE (56)

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 Financial Planner, Iowa State
University Cooperative Extension Service; Financial and Farm Management
Consultant; Iowa State University Overseas Projects.

KENNETH KAY, TRUSTEE (55)

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 (67)

R.R. 3 Box 79
Lakefield, Minnesota 65150

Retired Farmer; Investor and Co-Owner, Storden Seed and Chemical Service,
Inc.; Director, Minnesota Rural Finance Authority and Minnesota Farm Bureau
Federation; previous Farm Bureau leadership; active in Farm Management.

The officers and trustees of the Fund also serve in similar capacities as
officers and directors of EquiTrust Money Market Fund, Inc. and EquiTrust Series
Fund, Inc. Several of the officers and trustees also are officers and directors
of the Adviser. The Fund pays no direct remuneration to any officer of the
Fund. Each of the trustees 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, 1998, the Fund paid trustees' fees totaling $[______].

18
<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 EQUITRUST FAMILY
--------------- ------------- ---------------- --------------------
<S> <C> <C> <C>
Mr. Bartling $[_____] $0 $[_____]
Mr. Graham 0 0 0
Mr. Johnson [_____] 0 [_____]
Mr. Kay [_____] 0 [_____]
Mr. Pietz [_____] 0 [_____]
Mr. Wiederstein 0 0 0
Mr. Harris 0 0 0
</TABLE>

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.

COMMITTEES OF BOARD OF TRUSTEES

The Board of Trustees has established an Audit Committee. The Audit Committee
of the Fund recommends the selection of independent auditors for the Fund,
reviews with such independent public accountants the planning, scope and results
of their audit of the Fund's financial statements and the fees for service
performed, reviews the financial statements of the Fund and receives audit
reports. The Audit Committee consists of four members, including Messrs.
Bartling, Johnson, Kay and Pietz. The Audit Committee met two times in 1998.

INVESTMENT ADVISER

The following information supplements the information set forth in the
Prospectus under the heading "Portfolio Management." Pursuant to an Investment
Advisory and Management Services Agreement dated April 6, 1987 ("Agreement"),
EquiTrust Investment Management 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,
54% 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: EquiTrust Money
Market Fund, Inc. and EquiTrust 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.

19
<PAGE>

Under the Agreement, the Adviser regularly provides the Fund with
investment research, advice and supervision, and furnishes an investment program
consistent with the investment objective(s) 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 and applicable requirements of the Code; (ii) the
Portfolio's investment objective(s), policies and restrictions; and (iii) such
policies and instructions as the Board of Trustees may from time to time
establish. The Adviser also advises and assists the officers of the Fund in
taking such steps as are necessary or appropriate to carry out the decisions of
the Board of Trustees (and any committees thereof) regarding the conduct of the
business of the Fund. The Adviser has agreed to arrange for any of its officers
or directors to serve without salary as trustees, officers or agents of the Fund
if duly elected to such positions.

The Adviser, at its expense, furnishes the Fund with office space and
facilities, simple business equipment, advisory, research and statistical
facilities and clerical services and personnel to administer the business
affairs of the Fund. As compensation for the Adviser's investment advisory,
management and clerical services, as well as the facilities it provides and
the expenses it assumes, the Agreement provides for the payment of a monthly
fee as described below.

<TABLE>
<CAPTION>
PORTFOLIO AVERAGE DAILY NET ASSETS
--------- ------------------------
FIRST SECOND OVER
$200 $200 $400
MILLION MILLION MILLION
------- ------- -------
<S> <C> <C> <C>
MONEY MARKET 0.25% 0.25% 0.25%
HIGH GRADE BOND 0.30% 0.275% 0.25%
MANAGED 0.45% 0.45% 0.40%
HIGH YIELD BOND 0.45% 0.45% 0.40%
VALUE GROWTH 0.45% 0.45% 0.40%
BLUE CHIP 0.20% 0.20% 0.20%
</TABLE>

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

20
<PAGE>

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 extending 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.

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 a 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.

21
<PAGE>

For the fiscal years ended December 31, 1998, 1997, and 1996, the advisory
and management fee expense was as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Portfolio $[_____] $10,533 $9,579
- --------------------------------------------------------------------------------
High Grade Bond Portfolio $[_____] $12,594 $9,973
- --------------------------------------------------------------------------------
Managed Portfolio $[_____] $168,689 $109,830
- --------------------------------------------------------------------------------
High Yield Bond Portfolio $[_____] $32,916 $26,585
- --------------------------------------------------------------------------------
Value Growth Portfolio $[_____] $168,315 $104,228
- --------------------------------------------------------------------------------
Blue Chip Portfolio $[_____] $47,121 $20,647
- --------------------------------------------------------------------------------
</TABLE>

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 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 .65%.
There can be no assurance that the Adviser will continue to time limit expenses
beyond December 31, 1999. The agreement to reimburse any Portfolio to the
extent any operating expenses exceed .65% also applied to the period May 1, 1997
through December 31, 1997. For the period January 1, 1997 through April 30,
1997 and for the fiscal year ended 1996 expenses were limited to .55%.

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.

22
<PAGE>

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 pays all fees and expenses in
connection with its qualification and registration as a broker or dealer under
federal and state laws. The Adviser also pays for any activity which is
primarily intended to result in the sale of shares of the Fund.

The Adviser intends to enter into agreements with Participating Insurance
Companies pursuant to which the Participating Insurance Companies will assume
the Adviser's obligation to pay for the printing and distribution of
prospectuses of the Fund in connection with the Participating Insurance
Companies' sale 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 are sold at their respective net
asset values and involve no sales charge.

The Adviser also acts as principal underwriter and sole distributor of the
shares of EquiTrust Money Market Fund, Inc. and EquiTrust 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. 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.

23
<PAGE>

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
benefited 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 and each Portfolio paid brokerage
commissions during the fiscal years ended December 31, 1998, 1997 and 1996 as
follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
The Fund $[_____] $156,687 $74,514
- --------------------------------------------------------------------------------
Money Market Portfolio [_____] -0- -0-
- --------------------------------------------------------------------------------
High Grade Bond Portfolio [_____] -0- -0-
- --------------------------------------------------------------------------------
Managed Portfolio [_____] $35,480 $72,610
- --------------------------------------------------------------------------------
High Yield Bond Portfolio [_____] -0- -0-
- --------------------------------------------------------------------------------
Value Growth Portfolio [_____] $109,507 $42,359
- --------------------------------------------------------------------------------
Blue Chip Portfolio [_____] $11,700 $9,545
- --------------------------------------------------------------------------------
</TABLE>

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 generally are 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
the Adviser's other clients. Investment decisions for the Portfolios and the
such other clients are made with a view to achieving their respective investment
objectives and after consideration of factors such as their current respective
holdings, availability of cash for investment and the size of their respective
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

24
<PAGE>

other clients are selling the security. In addition, purchases or sales of the
same security may be made for two or more Portfolios or other clients on the
same day. In such event, such transactions will be allocated among the
Portfolios or other clients in a manner believed by the Adviser to be equitable
to each. In some cases, this procedure could have an adverse effect on the
price or amount of the securities purchased or sold by a Portfolio. It is the
opinion of the Board of Trustees that the benefits available, because of the
Adviser's organization, outweigh any disadvantages that may arise from exposure
to simultaneous transactions. Purchase and sale orders for a Portfolio may be
combined with those of other clients of the Adviser in the interest of the most
favorable net results to the Portfolio.

PORTFOLIO TURNOVER

The portfolio turnover rates for the Portfolios are set forth under
"Financial Highlights" in the Prospectus. 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."

PURCHASES AND REDEMPTIONS
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
under "Net Asset Value." Shares of the Fund may be purchased only by the
separate accounts of Participating Insurance Companies, which are investment
mediums for the VA contracts or VLI policies issued by the 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 without a sales charge at 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.

REDEMPTION OF SHARES

The Fund ordinarily redeems full and fractional shares of a Portfolio for
cash at the net asset value next determined after a request for redemption is
received in proper form. The Fund charges no redemption fee. Except as
described below, the Fund is required to pay redemption

25
<PAGE>

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
Commission or such exchange is closed for trading other than customary weekend
and holiday closings; (b) an emergency exists, as determined by the 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 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.

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

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 day before Christmas (in 1999) and any day on
which the Fund's 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's
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.

The following supplements the discussion in the Prospectus under the
heading "Other Information - Net Asset Value."

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

26
<PAGE>

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 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 fund holding higher yielding securities can be expected to increase;
when yields increase, the market value of a fund invested at lower yields can be
expected to decline. In addition, if the Money Market 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.

27
<PAGE>

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

INSERT FOR STATEMENT OF ADDITIONAL INFORMATION

The Fund intends that each of the Portfolios will qualify each year as a
regulated investment company under Subchapter M of Chapter 1 of the Code. If,
as intended, each Portfolio continues to qualify as a regulated investment
company and distributes substantially all of its net investment income and net
capital gains to its shareholders, then, under the provisions of Subchapter M,
there should be little or no income or gains taxable to it. In addition, each
Portfolio intends to comply with other distribution rules specified in Code so
that it will not incur a 4% nondeductible federal excise tax that otherwise
would apply.

Each Portfolio of the Fund must meet several requirements to maintain its status
as a regulated investment company. These requirements include the following:
(1) at least 90% of the Portfolio's gross income must be derived from dividends,
interest, payments with respect to securities loaned, and gains from the sale or
disposition of securities; and (2) at the close of each quarter of the
Portfolio's taxable year, (a) at least 50% of the value of the Portfolio's total
assets must consist of cash, U.S. Government securities and other securities (no
more than 5% of the value of the Portfolio may consist of such other securities
of any one issuer, and the Portfolio must not hold more than 10% of the
outstanding voting stock of any issuer), and (b) the Portfolio must not invest
more than 25% of the value of its total assets in the securities of any one
issuer (other than U.S. Government securities).

Each of the Portfolios also intends to comply with section 817(h) of the Code
and the regulations issued thereunder, which impose certain investment
diversification requirements on separate accounts of Participating Insurance
Companies that are used to support VA contracts and VLI policies. In general,
these requirements are that no more than 55% of the value of the assets of a
Portfolio may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these purposes, all securities of the same issuer are
treated as a single investment and each United States government agency or
instrumentality is treated as a separate issuer. These diversification
requirements are in addition to the requirements of subchapter M and of the
Investment Company Act, and may affect the securities in which a Portfolio may
invest. In order to comply with the current or future requirements of section
817(h) (or related provisions of the Code), the Fund may be required, for
example, to alter the investment objectives of one or more of the Portfolios.
(To the extent required by law, approval of owners of VA contracts or VLI
policies or of the Commission will be obtained before changing investment
objectives.)

28
<PAGE>

If a Portfolio fails to qualify as a regulated investment company, it will be
subject to federal, and possibly state, corporate taxes on its taxable income
and gains (without any deduction for its distributions to its shareholders) and
distributions to its shareholders will constitute ordinary income to the extent
of such Portfolio's available earnings and profits. Owners of VA contracts and
VLI policies indirectly invested in such a Portfolio might be taxed currently on
the investment earnings under their contracts or policies and thereby lose the
benefit of tax deferral. In addition, if a Portfolio fails to comply with the
diversification requirements of section 817(h) of the Code and the regulations
thereunder, owners of VA contracts and VLI policies indirectly invested in the
Portfolio would be taxed on the investment earnings under their contracts or
policies and thereby lose the benefit of tax deferral. Accordingly, compliance
with the above rules is carefully monitored by the Adviser and the Fund intends
that each Portfolio comply with these rules as they exist or as they may be
modified from time to time. Compliance with the tax requirements described above
may result in a reduction in the return under a Portfolio, since, to comply with
the above rules, the investments utilized (and the time at which such
investments are entered into and closed out) may be different from what the
Adviser might otherwise believe desirable.

The foregoing discussion of federal income tax consequences is a general and
abbreviated summary based on tax laws and regulations in effect on the date of
this SAI. Tax law is subject to change by legislative, administrative or
judicial action. Each prospective investor should consult his or her own tax
adviser as to the tax consequences of investments in the Portfolios. For
information concerning the federal income tax consequences to the owners of VA
contracts and VLI policies, see the prospectuses for such contracts or policies.

DIVIDENDS AND DISTRIBUTIONS

The following supplements the discussion of dividends and distributions in
the Prospectus under the headings "Other Information - Distributions."

MONEY MARKET PORTFOLIO

The Money Market 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 (i) accrued
interest income, plus or minus (ii) amortized purchase discount or premium, plus
or minus (iii) all short-term realized gains or losses and unrealized
appreciation or depreciation on portfolio assets, minus (iv) all accrued
expenses of the Portfolio. Expenses of the Portfolio are accrued daily. So
long as portfolio securities are valued at amortized cost, there will be no
unrealized appreciation or depreciation on such securities.

29
<PAGE>

HIGH GRADE BOND AND HIGH YIELD BOND PORTFOLIOS

Each of these Portfolios declares dividends of all its 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 each of the Managed, Blue Chip and Value Growth
Portfolios to distribute at least annually substantially all its net investment
income, if any, and any net realized capital gains.

Both dividend and capital gain distributions will be made in shares of a
Portfolio unless a Shareholder requests payment in cash.

PERFORMANCE INFORMATION

From time to time, the Fund may advertise several types of performance
information for a Portfolio. Each Portfolio, 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 the relevant
VA contract or VLI policy.

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 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

30
<PAGE>

used). Yield is an annualized figure, meaning 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 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.

PERFORMANCE CALCULATION

A Portfolio's standardized average annual total return quotation is
computed in accordance with a method prescribed by rules of the 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

31
<PAGE>

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 Commission. Based upon the 30-day period ended
December 31, 1998 the High Grade Bond Portfolio's yield was [_____]% and the
High Yield Bond Portfolio's yield was [_____]%. A Portfolio's yield is computed
by dividing the net investment income per share earned during the specific
one-month or 30-day period by the offering price per share on the last day of
the period, according to the following formula:

6
Yield = 2 [(a-b +1) -1]

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.

In computing yield, the Fund follows certain standardized accounting
practices specified by Commission rules. These practices are not necessarily
consistent with those that the Fund uses to prepare its annual and interim
financial statements in accordance with generally accepted accounting
principles.

The Money Market Portfolio's yield is computed in accordance with a
standard method prescribed by rules of the 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, 1998 were [_____]% and [_____]%, respectively.

32
<PAGE>

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, 1998. 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 PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PORTFOLIO STANDARD
- --------- AVERAGE
ANNUAL
TOTAL RETURN
------------
<S> <C>
Value Growth
Life of Portfolio (1). . . . . . . . . . . . . . . . . . . . . [_____]
Ten-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
High Grade Bond
Life of Portfolio (1). . . . . . . . . . . . . . . . . . . . . [_____]
Ten-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
High Yield Bond
Life of Portfolio (1). . . . . . . . . . . . . . . . . . . . . [_____]
Ten-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Managed
Life of Portfolio (1). . . . . . . . . . . . . . . . . . . . . [_____]
Ten-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Blue Chip (2)
Life of Portfolio. . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
</TABLE>

33
<PAGE>

TOTAL RETURN TABLE
FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PORTFOLIO TOTAL RETURN
- --------- ------------
<S> <C>
Value Growth
Life of Portfolio (1). . . . . . . . . . . . . . . . . . . . . [_____]
Ten-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
High Grade Bond
Life of Portfolio (1). . . . . . . . . . . . . . . . . . . . . [_____]
Ten-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
High Yield Bond
Life of Portfolio (1). . . . . . . . . . . . . . . . . . . . . [_____]
Ten-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Managed
Life of Portfolio (1). . . . . . . . . . . . . . . . . . . . . [_____]
Ten-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
Blue Chip (2)
Life of Portfolio. . . . . . . . . . . . . . . . . . . . . . . [_____]
Five-Year. . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
One-Year . . . . . . . . . . . . . . . . . . . . . . . . . . . [_____]
</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.

ORGANIZATION OF THE FUND

The Fund was organized as a business trust under the laws of the
Commonwealth of Massachusetts on November 3, 1986.

The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of the Portfolios and to divide or combine the
shares of any Portfolio into a greater or lesser number of shares of that
Portfolio without thereby changing the proportionate beneficial interests in the
Portfolio. The shares of the Fund are divided into six separate series (I.E.,
Portfolios), and the shares of each Portfolio have equal rights and privileges
and represent an equal proportionate interest with all 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

34
<PAGE>

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.

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).

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.
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
shareholders of the Fund. As permitted by Massachusetts law, there normally
will 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% 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.

35
<PAGE>

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 Code, or to designate and establish additional Portfolios, may be made by
the Trustees without the vote or consent of the Shareholders. If not terminated
by the vote or written consent of a majority of its outstanding shares, the Fund
will continue indefinitely.

In matters which only affect a particular Portfolio, the matter shall have
been effectively acted upon by a majority vote of that Portfolio even though:
(i) the matter has not been approved by a majority vote of any other Portfolio;
or (ii) the matter has not been approved by a majority vote of the Fund.

To the extent required by law, the Participating Insurance Companies will
vote Fund shares held in their separate accounts in accordance with
instructions received from the VLI policyowners or VA contract holders having
voting interests in the separate accounts. In addition, to the extent required
by law, Farm Bureau Life Insurance Company will vote Fund shares held in its
general account in proportion to voting instructions received from its VLI
policyowners and its VA contract holders. Each share will have one vote and
fractional shares will be counted. On any matters affecting an individual
Portfolio, only the Shareholders of that Portfolio will be entitled to vote. On
matters relating to all the Portfolios, but affecting the Portfolios
differently, separate votes by Portfolio will be required. Shares for which no
voting instructions are received shall be voted by the Participating Insurance
Companies in proportion to the shares for which voting instructions are
received.

As used in this SAI, 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).

CONTROL PERSONS

Farm Bureau Life Insurance Company ("Farm Bureau"), an Iowa corporation,
and subsidiary of FBL Financial Group, Inc., through its Variable Accounts owns
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. The organizational expenses
of the Fund were paid by Farm Bureau.

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

36
<PAGE>

instructions received from Farm Bureau's VLI policyholders. Under certain
circumstances, however, Farm Bureau may disregard voting instructions received
from VLI policyholders.

[AS OF THE DATE OF THIS SAI, FARM BUREAU OWNED MORE THAN 25% OF THE OUTSTANDING
VOTING SECURITIES OF THE MONEY MARKET PORTFOLIO THROUGH ITS GENERAL ACCOUNT.
SUCH SHARES WERE ACQUIRED FOR INVESTMENT AND CAN ONLY BE DISPOSED OF BY
REDEMPTION OR TRANSFER TO AN AFFILIATE. OFFICERS AND TRUSTEES OF THE FUND OWNED
LESS THAN 1% OF THE OUTSTANDING VOTING SECURITIES OF EACH PORTFOLIO.]

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 EquiTrust
Investment Management Services, Inc. ("EquiTrust"), pursuant to which EquiTrust
performs accounting services for the Fund. In addition, the agreement provides
that EquiTrust 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 EquiTrust 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, 1998, the aggregate amount of such fees paid
to EquiTrust was $[_____].

DIVIDEND DISBURSING AND TRANSFER AGENT

EquiTrust Investment Management Services, Inc., serves as the Fund's
dividend disbursing and transfer agent.

LEGAL MATTERS

The firm of Sutherland Asbill & Brennan LLP, Washington, D.C., is counsel
for the Fund.

37
<PAGE>

REGISTRATION STATEMENT

This SAI 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 Commission in Washington, D.C., under the Securities Act of 1933
and the Investment Company Act, 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 EquiTrust Variable Insurance
Series Fund for the fiscal year ended December 31, 1998 were filed with the
Commission on February [_____], 1999 and are incorporated by reference.
Additional copies of such Annual Report to Shareholders may be obtained without
charge by contacting the Fund.

38
<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 Portfolios may 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 Portfolios, 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. A
Portfolio's investment adviser considers the legally restricted but readily
saleable Section 4(2) paper to be liquid;

A-1
<PAGE>

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
Portfolios' 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 "Repurchase Agreements," above under
"Investment Objectives, Policies and Techniques."

As to obligations of banks or savings institutions, commercial paper, other
corporate debt securities and repurchase agreements, a Portfolio only will
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 ("NRSROs"); 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 ordinarily is 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

A-2
<PAGE>

determines the maturity of Variable Rate Securities in accordance with
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-3
<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, 1998. 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 S&P is shown. The percentage of total assets represented by unrated bonds is
also shown. Although not specifically rated by Moody's or S&P, 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>
Aa. . . . . . . . . [_____]% AA . . . . . . . . . . . [_____]%
A . . . . . . . . . [_____] A. . . . . . . . . . . . [_____]
Baa . . . . . . . . [_____] BBB. . . . . . . . . . . [_____]
Ba. . . . . . . . . [_____] BB . . . . . . . . . . . [_____]
B . . . . . . . . . [_____] B. . . . . . . . . . . . [_____]
Caa . . . . . . . . [_____] CCC. . . . . . . . . . . [_____]
Cash and Other. . . Cash and Other
Assets. . . . . . . [_____] Assets . . . . . . . . . [_____]

100.00% 100.00%
</TABLE>

B-1
<PAGE>

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>
Aaa . . . . . . . . [_____]% AAA. . . . . . . . . . . [_____]%
A . . . . . . . . . [_____] A. . . . . . . . . . . . [_____]
A . . . . . . . . . [_____] A. . . . . . . . . . . . [_____]
Baa . . . . . . . . [_____] BBB. . . . . . . . . . . [_____]
Ba. . . . . . . . . [_____] BB . . . . . . . . . . . [_____]
Not rated . . . . . [_____] Not Rated. . . . . . . . [_____]
Cash and Other Cash and Other
Assets. . . . . . . [_____] Assets. . . . . . . . . . [_____]

100.00% 100.00%
</TABLE>

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 S&P 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 S&P 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 than rated issues.

B-2
<PAGE>

APPENDIX C - DESCRIPTION OF CORPORATE BOND RATINGS

MOODY'S INVESTORS SERVICE, INC.

Aaa: Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be anticipated are most
unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high-grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in "Aaa" securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than with
"Aaa" securities.
A: Bonds that are rated A possess many favorable investment
attributes and may be considered as upper medium-grade
obligations. This rating indicates an extremely strong capacity
to pay principal and interest which is considered adequate but
elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa: Bonds rated Baa are considered medium-grade obligations, I.E.,
they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate and thereby not well-safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period
of time may be small.
Caa: Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect
to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other
market shortcomings.

A-1
<PAGE>

S&P

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.
BB: Bonds rated BBB are regarded as having an adequate capacity
B: to pay principal and interest. Whereas they normally
CCC: exhibit protection parameters, adverse economic conditions
CC: 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.
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.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

MOODY'S

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.

A-2
<PAGE>

S&P

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."

A-3
<PAGE>

PART C
OTHER INFORMATION

ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS.

(a) FINANCIAL STATEMENTS:

The following financial statements are filed as part of this
Registration Statement.(1)

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, 1998

Schedules of Investments as of December 31, 1998

Statements of Operations for the year ended December 31, 1998

Statements of Changes in Net Assets for the year ended
December 31, 1998

Statements of Changes in Net Assets for the year ended
December 31, 1997

Notes to Financial Statements, December 31, 1998

(1) To be filed by amendment.

(b) EXHIBITS:

a. (i) Declaration of Trust.(1)
(ii) Amendment to Declaration of Trust.(1)
(iii) Amendment to Declaration of Trust.(1)
(iv) Amendments to Declaration of Trust.(1)
(v) Amendment to Declaration of Trust.(1)
(vi) Amendment to Declaration of Trust.(1)

b. By-Laws of Registrant.(1)
c. None.
d. (i) Investment Advisory and Management Services Agreement.(1)

C-1
<PAGE>

(ii) Amendment to Investment Advisory Management Services Agreement.(1)
(iii) Amendment to Investment Advisory Management Services Agreement.(1)
e. Underwriting Agreement between Registrant and EquiTrust Investment
Management Services, Inc.(1)
f. None.
g. Custodian Agreement between Registrant and Bankers Trust Company Des
Moines, N.A.(1)
h. (i) Dividend Disbursing and Transfer Agent Agreement between Registrant
and EquiTrust Investment Management Services, Inc.(1)
(ii) Fidelity Bond Joint Insureds Agreement.(1)
(iii) Joint Insureds DO & EO Agreement.(1)
(iv) (A) Subscription Agreement.(1)
(B) Additional Subscription Agreement.(1)
(C) Subscription Agreement for the Money Market Portfolio.(1)
(D) Subscription Agreement for the Blue Chip Portfolio.(1)
(v) Participation Agreement.(1)
(vi) Accounting Services Agreement.(1)
i. Consent of Sutherland Asbill & Brennan LLP to be filed by amendment.
j. Consent of Ernst & Young LLP to be filed by amendment.
k. None.
l. See Exhibits h(iv)(A) and h(iv)(B).
m. None.
n. Financial Data Schedules to be filed by amendment.
o. None.

----------
(1) Incorporated by reference to Post Effective Amendment No. 15 to the
Registration Statement, filed with the Commission on May 1, 1998.

ITEM 24. 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 owned by Farm Bureau Life Insurance Company ("Farm
Bureau"), an Iowa life insurance corporation, Farm Bureau Life Variable Account
and Farm Bureau Life Annuity Account, separate accounts of Farm Bureau which are
registered as unit investment trusts under the Investment Company Act of 1940,
as amended (File Nos. 811-5068/33-12789 and 811-7974/33-67538). Farm Bureau is
owned by FBL Financial Group, Inc., an Iowa corporation. 54.30% of the
outstanding voting shares of FBL Financial Group, Inc. are 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 6 to the Form
N-4 registration statement filed with the Commission by Farm Bureau on May 1,
1999.

C-2
<PAGE>

ITEM 25. 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. 15 filed on May 1, 1998.

The Investment Advisory and Management Services Agreement between the
Registrant and the EquiTrust Investment Management 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Registrant's investment adviser is EquiTrust Investment Management
Services, Inc. In addition to its services to Registrant as investment adviser,
underwriter and transfer and dividend disbursing agent, all as set forth in
parts A and B of this Registration Statement, the Adviser acts as adviser,
underwriter, and shareholder service, transfer and dividend disbursing agent for
EquiTrust Money Market Fund, Inc., a diversified open-end management investment
company, and EquiTrust 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.

C-3
<PAGE>

NAME AND POSITION(S) PRINCIPAL OCCUPATIONS
WITH ADVISER ---------------------
------------

Stephen M. Morain Incorporated herein by reference to the
Senior Vice President, Statement of Additional Information (Part B) of
General Counsel and Director this Registration Statement.

William J. Oddy Incorporated herein by reference to the
President and Director Statement of Additional Information (Part B) of
this Registration Statement.

Dennis M. Marker Incorporated herein by reference to the
Investment Vice President, Statement of Additional Information (Part B) of
Administration, Secretary this Registration Statement.
and Director

Thomas R. Gibson Incorporated herein by reference to the
Chief Executive Officer and Statement of Additional Information (Part B) of
Director this Registration Statement.

Timothy J. Hoffman Incorporated herein by reference to the
Vice President and Director Statement of Additional Information (Part B) of
this Registration Statement.

James W. Noyce Incorporated herein by reference to the
Chief Financial Officer, Statement of Additional Information (Part B) of
Treasurer and Director this Registration Statement.

Thomas E. Burlingame Vice President, Associate General Counsel, FBL
Director Financial Group, Inc.

F. Walter Tomenga Vice President, Corporate Affairs and Marketing
Director Services, FBL Financial Group, Inc.

Lynn E. Wilson Vice President, Life Sales, FBL Financial Group,
Director Inc.

Lou Ann Sandburg, Incorporated herein by reference to the
Vice President Investments, Statement of Additional Information (Part B) of
Secretary and Director this Registration Statement.

Sue A. Cornick Incorporated herein by reference to the
Market Conduct and Mutual Statement of Additional Information (Part B) of
Funds Vice President and this Registration Statement.
Assistant Secretary

C-4
<PAGE>

Kristi Rojohn Incorporated herein by reference to the
Assistant Mutual Funds Statement of Additional Information (Part B) of
Manager and Assistant this Registration Statement.
Secretary

Elaine A. Followwill Incorporated herein by reference to the
Compliance Assistant and Statement of Additional Information (Part B) of
Assistant Secretary this Registration Statement.

Roger F. Grefe, Investment Management Vice President, FBL
Investment Management Vice Financial Group, Inc.
President

Robert Rummelhart, Fixed-Income Vice President, FBL Financial
Fixed-Income Vice President Group, Inc.

Roger PJ Soener Real Estate Vice President, FBL Financial Group,
Real Estate Vice President Inc. He holds other positions with various
affiliates of the foregoing.

James P. Brannen Controller and Vice President, FBL Financial
Controller and Vice Group, Inc. and various affiliates of the
President foregoing.

Kathleen E. Kruidenier Manager, Private Investor Services, EquiTrust
Manager, Private Investor Investment Management Services, Inc.
Services

Sharon M. Jerdee Investment Accounting Director, EquiTrust
Investment Accounting Investment Management Services, Inc.
Director

Charles T. Happel Portfolio Manager, EquiTrust Marketing Services,
Portfolio Manager Inc.

Laura Kellen Beebe Portfolio Manager, EquiTrust Marketing Services,
Portfolio Manager Inc.

Robert A. Simons Senior Counsel - Investments, FBL Financial
Senior Counsel - Investments Group, Inc.

ITEM 27. PRINCIPAL UNDERWRITERS.

(a) EquiTrust Investment Management Services, Inc., the principal
underwriter for Registrant, also acts as the investment adviser, principal
underwriter and transfer and dividend disbursing agent for EquiTrust Money
Market Fund, Inc. and EquiTrust 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 EquiTrust Investment Management
Services, Inc.

C-5
<PAGE>

ITEM 28. 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, EquiTrust Investment Management Services, Inc., 5400 University Avenue,
West Des Moines, Iowa 50266.

ITEM 29. MANAGEMENT SERVICES.

Inapplicable.

ITEM 30. UNDERTAKINGS.

Inapplicable.

C-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of West Des Moines and State of Iowa, on the 5th day of February, 1999.

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 February 5, 1999
- --------------------------- (Principal Executive Officer) (dated)
Edward M. Wiederstein
Senior Vice President,
/s/ Richard D. Harris Secretary-Treasurer February 5, 1999
- --------------------------- and Trustee (dated)
Richard D. Harris (Principal Financial and
Accounting Officer)

Donald G. Bartling* Trustee February 5, 1999
(dated)

John R. Graham* Trustee February 5, 1999
(dated)

Erwin H. Johnson* Trustee February 5, 1999
(dated)

Kenneth Kay* Trustee February 5, 1999
(dated)

Curtis C. Pietz* Trustee February 5, 1999
(dated)

*By: /s/ Stephen M. Morain
---------------------
Stephen M. Morain Attorney-in-Fact, pursuant to Power of Attorney.

C-7