<PAGE>
[LOGO]
EquiTrust Variable Insurance
Series Fund
ANNUAL REPORT
DECEMBER 31, 1999
INVESTMENT MANAGER AND
PRINCIPAL UNDERWRITER
EQUITRUST INVESTMENT
MANAGEMENT SERVICES, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IA 50266
1-800-247-4170 (OUTSIDE IOWA)
1-800-422-3175 (IN IOWA)
225-5586 (DES MOINES)
This report is not to be distributed
unless preceded or accompanied
by a prospectus.
<PAGE>
PRESIDENT'S LETTER
Dear Shareholder:
For the year ended December 31, 1999, the Standard & Poor's 500 Stock
Composite Index (S&P 500) was up 21.05% on a total return basis, and the Dow
Jones Industrial Average (DJIA) was up 27.28%. The NASDAQ Composite Index was up
a remarkable 86.09% during the same twelve-month period, while the Russell 2000
Small Cap Index rose 21.26%. The fixed income markets did not fare as well
during 1999. The benchmark 30-year Treasury bond lost 15.13% on a total return
basis after gaining 17.6% during 1998. High-grade corporate bonds as measured by
the Lehman Investment Grade Corporate Index returned -1.96% and the Lehman U.S.
Corporate High Yield Index total return was 2.39%.
The fixed income market sector performance was almost the exact opposite of
1998's performance. As the Asian financial crisis developed, a "flight to
quality" ensued and long-term U.S. Treasury bonds outperformed almost every
other fixed income security. In 1999, however, rising rates and a rebounding
global economy led to extreme underperformance by Treasury issues relative to
other fixed income sectors.
Higher oil prices, a recovering global economy, a weaker U.S. dollar, a
robust U.S. economy and a surging stock market combined to create an environment
of steadily rising interest rates during 1999. In response to continued economic
strength and declining unemployment, the Fed chose to reverse the three rate
cuts that took place during the 1998 Asian financial crisis. By year-end, fears
of further rate hikes appear to have been priced into the market as well.
Even though rates have been rising rapidly, other obvious signs of inflation
remain absent. During 1999, the consumer price index (CPI) rose 2.7% from 1998
mainly due to rising energy prices. The producer price index (PPI) rose a
comparable 3.0% during the year. Commodity prices as measured by the Commodities
Research Bureau (CRB) Bridge Index are up only slightly for the year and gold
prices are also virtually unchanged on a year-over-year basis.
The Fed Chairman remains concerned that the overall pace of economic growth
and particularly the low level of unemployment may lead to growing inflationary
pressures. He has also expressed concern over some of the dramatic equity market
price gains and the effect they may have on the broader economy. So far, his
comments regarding stock prices have had little lasting effect on investor
behavior.
Rate hikes notwithstanding, the Fed has provided the market with a great
deal of liquidity over the past few years. The broad money supply (M3) is up
48.1% over the past five years, and over the past three months has been soaring
at a 13.4% annual rate. November saw the third largest percentage increase for
any month in over 40 years of data. At least a portion of the late 1999 surge
was intended to smooth any Y2K-related dislocations, but how does the Fed now
drain that excess liquidity without harsh economic effects?
Achieving a "soft landing" will likely prove no small task for the Fed, but
it may be possible. If growth in the most interest rate-sensitive sectors of our
economy begins to slow slightly, some breathing room may be restored without
severe dislocations. Certainly, the stock market-related stimulus to our economy
makes Fed Chairman Greenspan's task more difficult than ever.
The following paragraphs describe how the various EquiTrust Variable
Insurance Series Fund Portfolios are being positioned and where we see value
that has developed as a result of recent financial market activity.
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The Value Growth and Managed comments are from Roger F. Grefe, CFA,
Investment Management Vice President. The High Grade Bond and High Yield Bond
comments are from Robert J. Rummelhart, CFA, Fixed Income Vice President.
VALUE GROWTH: The past year will go down as one of the most sharply divided
years in stock market history. As value wobbled, technology took off. This
divergence reflects investors' continued preference for growth stocks, but only
those with perceived earnings momentum. Investors have been more than willing to
bet on unprofitable companies with rapid growth rates; they show no mercy in
their treatment of those suffering earnings disappointments. Excluding the 75%
gain of the S&P 500 technology sector, the index declined 1% in 1999.
While technology stocks stumbled in early 2000, they have yet to suffer a
meaningful correction. The influence of the technology sector over the S&P 500
can quickly become a liability if valuation standards ever change. Still more
important, the disadvantages multiply if managers should decide to stabilize
their equity weightings, or raise a fraction more in cash. This level of
concentration of equity portfolio assets has almost always provoked investor
doubts, irrespective of the specific sector in the limelight.
According to a recent Salomon Smith Barney Research report, results indicate
that declines in the equity market are broad-based across the whole spectrum of
stocks. On a calendar year basis, through the nine months ended September 30,
1999, the S&P 500 Index would have been down were it not for technology stocks.
90% of the NASDAQ stocks for this period were down 10% or more, 87% of the New
York Stock Exchange stocks were down 10% or more, and 87.2% of the S&P 500 were
down 10% or more. Many fine companies have disappointed investors and declined
anywhere from one to ten years or more of prior price appreciation. The research
pointed out that the capitalization-weighted construction methodologies used to
calculate these benchmarks (with the exception of the Dow) could tend to hide
the overall state of their constituent universe. While most stocks continued to
decline, the major averages, particularly the NASDAQ Composite, remained strong
in 1999. The average stock seemed to be in its own bear market.
It is now recognized that most stocks have been declining in price since
April of 1998. This sounds distinctly different than the "market" portrayed on
the evening news. This demonstrates the unprecedented volatility that is
extending to some of America's finest companies. The "official" reason given for
these severe declines is often "earnings disappointments". We would suggest to
all of those who invest, sooner or later, every single company may have a
disappointing earnings announcement and resultant fall off. Has it ever been
proven that investing in stocks with no earnings and no assets has been a long-
term winning investment strategy? New ideas come and go and when they go, a lot
of money is usually lost. History tells us that investing in new paradigms at
sky high prices eventually leads to big portfolio losses. Most current
investment successes are being derived from whatever has worked well in the
recent past. What else could explain the euphoria surrounding Internet and
technology stocks? However, what has worked best most recently may not always
work well. As Ben Graham (Warren Buffett's mentor) said, "In the short run, the
stock market is a voting machine. In the long run, it is a weighing machine."
The last eighteen months have been frustrating from an investment
perspective. However, it is a fact of life that certain stocks that did not
perform well in a given time measurement period are not necessarily bad
investments. In markets where only a few segments get all the attention,
perfectly good stocks may do nothing or even decline. Our experience has been
that if a company has value, it will ultimately be recognized.
For the twelve-month period ending December 31, 1999, the total return for
the Value Growth Portfolio was -6.34%, compared to the 21.05% total return
(income and price appreciation) produced by the S&P 500 Stock Composite Index.
The wide difference in performance is due to two main
3
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factors: the huge disparity in returns of large companies and small companies,
and the strong performance of technology, which now comprises approximately 30%
of the S&P 500.
To put it simply, any portfolio which didn't own the top 50 stocks or
technology stocks, had a disappointing year when nine out of every ten stocks
were down over 10%, and 60% of all stocks on the NASDAQ, NYSE, and S&P 500 were
down over 20%. The smaller the company (in terms of market capitalization), the
greater the loss.
The Value Growth Portfolio has approximately 50% in large cap stocks (market
capitalizations over $5 billion), 20% in mid cap (market caps of $1 billion to
$5 billion), and 27% in small cap (market caps under $1 billion). Our returns
are disappointing, but certainly understandable when the average stock seems to
be in a bear market not reflected by the various indexes.
Our holdings have already suffered a fair amount of price-earnings ratio
(PE) compression due to the rotation out of traditional equity investments into
technology. We are beginning to see some signs that this trend is reversing, and
we look forward to the positive PE expansion and earnings growth that lie ahead
for our holdings. It is entirely possible that we may experience the reverse of
the trend of the last three years and see the stocks of some of America's finest
companies perform well, while selected technology stocks, selling at
unsustainable high valuations, stumble.
Contrary to contemporary wisdom, we believe that earnings per share, free
cash flow, and balance sheet still matter. Morningstar, a mutual fund observer,
stated, "There's a large (and growing) amount of academic literature that
suggests the market is often guilty of overreacting, punishing unloved companies
far too severely and viewing the prospects of the most popular firms much too
optimistically. That means bargain hunting among the markets' least expensive
stocks should prove a fruitful exercise for those with the patience to wait
through some lean periods. Given the faddish nature of the current market, this
a particularly good time to consider value."
HIGH GRADE BOND: Treasury yields rose about 140 to 180 basis points
depending on maturity during the twelve-month period ended December 31, 1999.
For example, the 2-, 10-, and 30-year Treasury issues yielded 6.24%, 6.44% and
6.48%, respectively, as of December 31, 1999 compared to 4.53%, 4.65%, and 5.09%
as of December 31, 1998.
The market has become concerned about the potential of future inflation as
the U.S. economy has continued to exhibit strong growth and the world economy
has started to show signs that it may grow at a higher rate. While future
inflation may be higher, the current rate of core inflation is running at a very
low rate of around 2%, which translates into relatively high real yields
(interest rate minus core inflation rate) of 4% (6% minus 2%) on short-term
Treasury issues and 4.75% (6.75% minus 2%) on long-term issues. Given these
higher Treasury yields and our ability to find attractive spreads on corporate
issues, we have increased the duration of the Portfolio so that it is currently
only slightly less than that of the Lehman Brothers Aggregate Index. If we can
continue to find what we view as attractively priced issues, our duration will
probably continue to increase so that it slightly exceeds that of the Aggregate
Index. As a result, our future returns may tend to be more volatile than in the
past.
HIGH YIELD BOND: During the past year, the high yield bond market
outperformed the high grade bond market. The greater yield and dramatic spread
narrowing from the historically wide levels prevalent at the start of the year
aided the performance of the high yield sector. According to the DLJ High Yield
Index, the average high yield spread was 631 basis points as of December 29,
1998 compared to 554 basis points as of December 31, 1999.
We attempted to take advantage of these wider spreads by increasing our
exposure to pure high yield issues and away from investment grade corporates.
While our exposure to high yield issues increased during this period, we
continued to be underweighted toward high yield issues relative to most funds
and indexes and thus underperformed relative to these benchmarks. Based on
current market
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conditions, we plan to continue to increase our exposure to pure high yield
issues as attractive opportunities continue to be available.
MANAGED: The Managed Portfolio emphasizes income with moderate growth
potential. Our goal is to produce income at twice the rate of the dividend yield
of the S&P 500 which continues to be a paltry 1.18%, the lowest in history. We
continue to find excellent investments that should easily equal or better our
hurdle rate of 2.4%. We have invested in some attractive convertible securities
(those exchangeable into common stock), hybrid securities with both bond and
equity characteristics. Convertibles provide more income and usually more
downside protection than the underlying common stock. We consider this to be an
attractive asset class for the Managed Portfolio as the income stream provides a
"paid to wait" investment strategy. Ultimately, we would like every underlying
common stock to perform well, thus enhancing the total return of the Managed
Portfolio.
As of November 20, 1999, the Managed Portfolio had the following asset
allocation: Corporate Bonds (1%), Common Stocks (10.4%), Convertible Securities
(63.5%), Preferred Stock (20.7%) and Cash Equivalents (3.8%).
Our results for the year were constrained due to the rise in interest rates.
The rate increase caused declines in those securities that are sensitive to
changes in interest rates, which comprise the majority of the Managed Portfolio.
We do expect that over the next few years, interest rates may vary from highs of
7% on Treasury issues to as low as 4%. The Managed Portfolio is uniquely
positioned for this type of investment environment. We own many attractive
convertible securities which pay us a solid income to wait.
MONEY MARKET: As mentioned previously, the FOMC raised the Fed Funds rate
three times during the fall of 1999 to preempt any inflation pressures from a
strong labor market and consumer confidence. Currently, the Federal Funds rate
is 5.5% and additional increases are expected to occur in the spring of 2000 due
to the remaining tightening bias. We are happy to report that Y2K came and went
with barely a hiccup in the money markets, which is comforting for the mutual
fund industry. Portfolio maturities were shorter than usual in order to remain
liquid, which proved beneficial in a rising interest rate environment. Going
forward, we look for spreads to remain stable, but yields to rise in relation to
movements by the Fed.
BLUE CHIP: True to its passive strategy, the performance of the Blue Chip
Portfolio over the past year has reflected that of the large capitalization
market sector which it represents. The Blue Chip Portfolio will remain
substantially invested in common stocks of large companies and is designed for
those investors who prefer substantial exposure to common stocks at all times or
who wish to make their own market value judgments.
/s/ Edward M. Wiederstein
EDWARD M. WIEDERSTEIN
PRESIDENT
February 2, 2000
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
VALUE GROWTH PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE VALUE GROWTH PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE GROWTH PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
<S> <C> <C>
1989 $10,000 $10,000
1990 $10,465 $9,683
1991 $11,986 $12,641
1992 $13,239 $13,611
1993 $16,839 $14,971
1994 $16,094 $15,167
1995 $20,258 $20,845
1996 $23,833 $25,654
1997 $25,335 $34,222
1998 $19,147 $44,005
1999 $17,932 $53,268
AVERAGE ANNUAL TOTAL RETURN
1 Year -6.34%
5 Year 2.19%
10 Year 6.01%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
</TABLE>
Why is the Value Growth Portfolio in minus territory for the year? One word
sums it up: divergence. The share prices of "value stocks," those defined as
relatively inexpensive, or cheaper than the market as measured by the S&P 500,
have eroded over the last 18 months. April of 1998 is considered the high water
mark for the average stock. Most stocks, according to market researchers, have
suffered tremendously, relative to the major indexes, like the S&P 500, which
are weighted by size and price and dominated by the 30 or 40 largest market
values, largely technology stocks. The dramatic run up in technology stocks has
been a fairly recent phenomenon. The fact is that the largest market
capitalization technology stocks have generated the bulk of the returns for the
S&P 500. This is called "skewing," which means that portfolio or even stock
index returns can come from a small percentage of the issues.
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HIGH GRADE BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
HIGH GRADE BOND PORTFOLIO AND LEHMAN BROTHERS MUTUAL FUND AGGREGATE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH GRADE BOND PORTFOLIO LEHMAN BROTHERS MUTUAL FUND AGGREGATE INDEX
<S> <C> <C>
1989 $10,000 $10,000
1990 $10,886 $10,895
1991 $12,672 $12,639
1992 $13,737 $13,576
1993 $14,938 $14,900
1994 $14,899 $14,464
1995 $17,023 $17,136
1996 $18,035 $17,759
1997 $19,882 $19,472
1998 $21,376 $21,164
1999 $21,278 $20,990
AVERAGE ANNUAL TOTAL RETURN
1 Year -0.46%
5 Year 7.39%
10 Year 7.84%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
</TABLE>
During the twelve-month period ended December 31, 1999, the High Grade Bond
Portfolio outperformed the Lehman Brothers Mutual Fund Aggregate Index, as
reflected by the -0.46% total return produced by the Portfolio versus the -0.82%
total return produced by the Lehman Brothers Aggregate Index. The main factors
that caused this divergence were the shorter duration of the Portfolio (a
positive factor in a rising yield environment) and its lower exposure to U.S.
Government Treasury issues which tended to underperform other sectors of the
fixed income market. These factors more than offset portfolio expenses.
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HIGH YIELD BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO
AND LEHMAN BROTHERS MUTUAL FUND CORPORATE /HIGH YIELD INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD LEHMAN BROTHERS
BOND PORTFOLIO MUTUAL FUND CORPORATE/
HIGH YIELD INDEX
<S> <C> <C>
1989 $10,000 $10,000
1990 $10,067 $10,549
1991 $12,834 $12,728
1992 $14,553 $13,916
1993 $16,880 $15,703
1994 $16,710 $15,161
1995 $19,240 $18,455
1996 $21,675 $19,323
1997 $24,291 $21,398
1998 $25,961 $22,887
1999 $25,767 $22,649
AVERAGE ANNUAL TOTAL RETURN
1 Year -0.75%
5 Year 9.05%
10 Year 9.93%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
</TABLE>
During the twelve-month period ended December 31, 1999, the -0.75% total
return produced by the High Yield Bond Portfolio surpassed the -1.04% total
return produced by the Lehman Brothers Mutual Fund Corporate/High Yield Index.
The Portfolio was aided by having a larger exposure to high yield issues and a
shorter duration than the Index and this more than offset portfolio expenses.
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MANAGED PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE MANAGED PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MANAGED PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
<S> <C> <C>
1989 $10,000 $10,000
1990 $10,815 $9,683
1991 $12,187 $12,641
1992 $14,103 $13,611
1993 $17,306 $14,971
1994 $16,448 $15,167
1995 $20,673 $20,845
1996 $24,268 $25,654
1997 $26,858 $34,222
1998 $24,518 $44,005
1999 $23,672 $53,268
AVERAGE ANNUAL TOTAL RETURN
1 Year -3.45%
5 Year 7.55%
10 Year 9.00%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
</TABLE>
The Managed Portfolio seeks income at twice the level of the S&P 500, which
is yielding 1.17%. Currently, the Portfolio is producing a gross income yield of
approximately 5%, or 5 times the S&P 500. Over the past 70 years, the
reinvestment of income has been a major part of common stocks' total return
(income + price appreciation). An article in the April 19, 1999 BARRONS brought
the point home with some interesting statistics (compiled by Ibbotson
Associates) showing that "$1 invested in the S&P at the end of 1925 grew to
about $2,350 by the end of 1998. This $2,350 assumes that all dividends were
reinvested. If we break down the results, we discover that the original $1
invested actually grew to about $96.45. The remaining $2,253.55, or 96%, came
from reinvesting the dividends and the capital gains on the shares bought with
those reinvested dividends. For every dollar of return generated by capital gain
on the original $1, the effect of compounding and reinvesting of dividends
generated almost $24."
We believe that from these lofty market levels, income will take on a larger
role in producing attractive total returns. The Managed Portfolio is uniquely
positioned for this type of environment.
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BLUE CHIP PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE BLUE CHIP PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BLUE CHIP PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
<S> <C> <C>
11/1/90 $10,000 $10,000
12/31/90 $10,902 $10,936
12/31/91 $13,976 $14,276
12/31/92 $15,427 $15,371
12/31/93 $17,643 $16,906
12/31/94 $18,110 $17,128
12/31/95 $24,052 $23,539
12/31/96 $29,206 $28,969
12/31/97 $37,211 $38,645
12/31/98 $44,247 $49,693
12/31/99 $53,474 $60,153
AVERAGE ANNUAL TOTAL RETURN
1 Year 20.85%
5 Year 24.18%
Life of Portfolio* 19.60%
*THE PORTFOLIO COMMENCED OPERATIONS OCTOBER 15, 1990.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
</TABLE>
The Blue Chip Portfolio is designed to represent the large capitalization
sector of the domestic equity market and remains substantially invested in
approximately 50 such common stock issues at all times. Accordingly, the
performance of this Portfolio will roughly parallel that of the Dow Jones
Industrial Average and S&P 500 Stock Composite Index. As is apparent from the
line graph, the performance of the Blue Chip Portfolio, adjusted for expenses,
was similar to that of the S&P 500 for the twelve-month period ended
December 31, 1999.
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(This page has been left blank intentionally.)
11
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
HIGH
VALUE GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
------------ -----------
<S> <C> <C>
ASSETS
Investments in
securities, at value
(cost -- $46,042,431;
$14,112,169;
$18,607,599;
$54,220,094; $6,273,984;
and $60,311,045,
respectively)........... $40,825,208 $13,488,579
Cash.....................
Accrued dividends and
interest receivable..... 149,858 213,876
Prepaid expense.......... 616 81
----------- -----------
Total Assets............. $40,975,682 $13,702,536
=========== ===========
LIABILITIES AND NET
ASSETS
Liabilities:
Net outstanding
redemptions in excess
of bank balance....... $ 121,295 $ 58,908
Accrued expenses....... 6,812 5,473
----------- -----------
Total Liabilities........ 128,107 64,381
Net assets applicable to
shares of beneficial
interest................ 40,847,575 13,638,155
----------- -----------
Total Liabilities and Net
Assets.................. $40,975,682 $13,702,536
=========== ===========
Shares issued and
outstanding as of
December 31, 1999....... 4,699,649 1,437,287
NET ASSET VALUE PER
SHARE................... $ 8.69 $ 9.49
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Investments in
securities, at value
(cost -- $46,042,431;
$14,112,169;
$18,607,599;
$54,220,094; $6,273,984;
and $60,311,045,
respectively)........... $17,415,455 $47,505,047 $6,273,984 $87,043,560
Cash..................... 336,318
Accrued dividends and
interest receivable..... 391,966 521,066 4,852 79,489
Prepaid expense.......... 136 661 75 531
----------- ----------- ---------- -----------
Total Assets............. $17,807,557 $48,026,774 $6,615,229 $87,123,580
=========== =========== ========== ===========
LIABILITIES AND NET
ASSETS
Liabilities:
Net outstanding
redemptions in excess
of bank balance....... $ 50,201 $ 190,414 $ 268,291
Accrued expenses....... 5,438 7,017 $ 5,782 6,409
----------- ----------- ---------- -----------
Total Liabilities........ 55,639 197,431 5,782 274,700
Net assets applicable to
shares of beneficial
interest................ 17,751,918 47,829,343 6,609,447 86,848,880
----------- ----------- ---------- -----------
Total Liabilities and Net
Assets.................. $17,807,557 $48,026,774 $6,615,229 $87,123,580
=========== =========== ========== ===========
Shares issued and
outstanding as of
December 31, 1999....... 1,908,034 4,539,787 6,609,447 1,974,662
NET ASSET VALUE PER
SHARE................... $ 9.30 $ 10.54 $ 1.00 $ 43.98
=========== =========== ========== ===========
</TABLE>
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EQUITRUST VARIABLE INSURANCE SERIES FUND
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HIGH
VALUE GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
------------ ----------
<S> <C> <C>
INVESTMENT INCOME
Dividends................ $ 841,375 $ 18,850
Interest................. 269,818 833,009
----------- ---------
Total Investment
Income.................. 1,111,193 851,859
EXPENSES
Paid to EquiTrust
Investment Management
Services, Inc.:
Investment advisory and
management fees........ 200,704 37,433
Accounting fees......... 22,301 6,239
Custodial fees........... 8,040 5,980
Professional fees........ 12,087 6,828
Reports to
shareholders............ 11,289 2,813
Trustees' fees and
expenses................ 1,154 319
Insurance and bonds...... 867 147
Miscellaneous............ 141 35
----------- ---------
Total Expenses........... 256,583 59,794
Fees paid indirectly..... (683) (817)
----------- ---------
Net Expenses............. 255,900 58,977
----------- ---------
Net Investment Income.... 855,293 792,882
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss)
from investment
transactions............ 766,209 18,112
Change in unrealized
appreciation/depreciation
of investments.......... (4,469,838) (857,578)
----------- ---------
Net Gain (Loss) on
Investments............. (3,703,629) (839,466)
----------- ---------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... $(2,848,336) $ (46,584)
=========== =========
</TABLE>
SEE ACCOMPANYING NOTES.
14
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................ $ 122,833 $ 2,122,447 $ 977,677
Interest................. 1,323,567 1,097,734 $305,250 314,906
----------- ----------- -------- -----------
Total Investment
Income.................. 1,446,400 3,220,181 305,250 1,292,583
EXPENSES
Paid to EquiTrust
Investment Management
Services, Inc.:
Investment advisory and
management fees........ 79,008 247,572 15,120 149,754
Accounting fees......... 8,779 27,508 3,024 30,000
Custodial fees........... 5,122 4,889 7,285 9,227
Professional fees........ 7,671 13,922 6,319 14,404
Reports to
shareholders............ 4,044 13,133 1,449 16,335
Trustees' fees and
expenses................ 451 1,427 165 1,921
Insurance and bonds...... 235 995 106 918
Miscellaneous............ 23 32 34 44
----------- ----------- -------- -----------
Total Expenses........... 105,333 309,478 33,502 222,603
Fees paid indirectly..... (625) (834) (726) (677)
----------- ----------- -------- -----------
Net Expenses............. 104,708 308,644 32,776 221,926
----------- ----------- -------- -----------
Net Investment Income.... 1,341,692 2,911,537 272,474 1,070,657
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss)
from investment
transactions............ (104,066) (627,679) 1,153,608
Change in unrealized
appreciation/depreciation
of investments.......... (1,364,981) (3,923,204) 11,661,537
----------- ----------- -------- -----------
Net Gain (Loss) on
Investments............. (1,469,047) (4,550,883) 12,815,145
----------- ----------- -------- -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... $ (127,355) $(1,639,346) $272,474 $13,885,802
=========== =========== ======== ===========
</TABLE>
15
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VALUE GROWTH
PORTFOLIO
-------------------------
YEAR ENDED DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
OPERATIONS
Net investment income.... $ 855,293 $ 976,830
Net realized gain (loss)
from investment
transactions............ 766,209 (12,222,329)
Change in unrealized
appreciation/depreciation
of investments.......... (4,469,838) (1,659,408)
----------- ------------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... (2,848,336) (12,904,907)
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income.... (976,831) (6,577)
Net realized gain from
investment
transactions............
Distributions in excess
of net realized gain
from investment
transactions............ (26,956)
----------- ------------
(976,831) (33,533)
CAPITAL SHARE
TRANSACTIONS............ 2,008,325 12,136,936
----------- ------------
Total Increase (Decrease)
in Net Assets........... (1,816,842) (801,504)
NET ASSETS
Beginning of year........ 42,664,417 43,465,921
----------- ------------
End of year (including
undistributed net
investment income as set
forth below)............ $40,847,575 $ 42,664,417
=========== ============
Undistributed Net
Investment Income....... $ 855,293 $ 978,563
=========== ============
</TABLE>
SEE ACCOMPANYING NOTES.
16
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
------------------------ ------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income.... $ 792,882 $ 495,896 $ 1,341,692 $ 863,295
Net realized gain (loss)
from investment
transactions............ 18,112 42,339 (104,066) 92,105
Change in unrealized
appreciation/depreciation
of investments.......... (857,578) 16,979 (1,364,981) (137,099)
----------- ----------- ----------- -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... (46,584) 555,214 (127,355) 818,301
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income.... (792,882) (495,896) (1,341,692) (863,295)
Net realized gain from
investment
transactions............ (35,447) (12,471)
Distributions in excess
of net realized gain
from investment
transactions............ (92,105)
----------- ----------- ----------- -----------
(828,329) (495,896) (1,433,797) (875,766)
CAPITAL SHARE
TRANSACTIONS............ 4,257,599 4,821,771 3,633,230 7,114,059
----------- ----------- ----------- -----------
Total Increase (Decrease)
in Net Assets........... 3,382,686 4,881,089 2,072,078 7,056,594
NET ASSETS
Beginning of year........ 10,255,469 5,374,380 15,679,840 8,623,246
----------- ----------- ----------- -----------
End of year (including
undistributed net
investment income as set
forth below)............ $13,638,155 $10,255,469 $17,751,918 $15,679,840
=========== =========== =========== ===========
Undistributed Net
Investment Income....... $ 0 $ 0 $ 0 $ 0
=========== =========== =========== ===========
</TABLE>
17
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
------------------------
YEAR ENDED DECEMBER 31,
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS
Net investment income.... $ 2,911,537 $ 2,635,770
Net realized gain (loss)
from investment
transactions............ (627,679) (3,607,983)
Change in unrealized
appreciation/depreciation
of investments.......... (3,923,204) (4,288,730)
----------- -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... (1,639,346) (5,260,943)
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income.... (2,634,990) (19,731)
Net realized gain from
investment
transactions............ (11,609)
----------- -----------
(2,634,990) (31,340)
CAPITAL SHARE
TRANSACTIONS............ (4,330,475) 16,777,676
----------- -----------
Total Increase (Decrease)
in Net Assets........... (8,604,811) 11,485,393
NET ASSETS
Beginning of year........ 56,434,154 44,948,761
----------- -----------
End of year (including
undistributed net
investment income as set
forth below)............ $47,829,343 $56,434,154
=========== ===========
Undistributed Net
Investment Income....... $ 2,911,537 $ 2,634,990
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
18
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
------------------------ ------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income.... $ 272,474 $ 281,943 $ 1,070,657 $ 816,315
Net realized gain (loss)
from investment
transactions............ 1,153,608 (236,791)
Change in unrealized
appreciation/depreciation
of investments.......... 11,661,537 6,904,202
---------- ---------- ----------- -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... 272,474 281,943 13,885,802 7,483,726
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income.... (272,474) (281,943) (816,323) (2,137)
Net realized gain from
investment
transactions............ (3,441)
---------- ---------- ----------- -----------
(272,474) (281,943) (816,323) (5,578)
CAPITAL SHARE
TRANSACTIONS............ 567,273 (35,343) 12,929,326 21,507,002
---------- ---------- ----------- -----------
Total Increase (Decrease)
in Net Assets........... 567,273 (35,343) 25,998,805 28,985,150
NET ASSETS
Beginning of year........ 6,042,174 6,077,517 60,850,075 31,864,925
---------- ---------- ----------- -----------
End of year (including
undistributed net
investment income as set
forth below)............ $6,609,447 $6,042,174 $86,848,880 $60,850,075
========== ========== =========== ===========
Undistributed Net
Investment Income....... $ 0 $ 0 $ 1,070,657 $ 816,323
========== ========== =========== ===========
</TABLE>
19
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
COMMON STOCKS (78.45%)
- ---------------------------
AGRICULTURAL SERVICES (1.15%)
Rayonier, Inc......................... 10,000 $ 470,625
APPAREL & ACCESSORY STORES (1.06%)
Wolverine World Wide, Inc............. 40,000 432,500
CHEMICALS AND ALLIED PRODUCTS (2.56%)
Avon Products, Inc.................... 20,000 673,750
RPM, Inc.............................. 36,370 370,519
-----------
1,044,269
COMMUNICATIONS (3.18%)
AT & T Corporation.................... 10,000 503,125
MCI Worldcom, Inc..................... 10,000(1) 793,750
-----------
1,296,875
DEPOSITORY INSTITUTIONS (1.52%)
Bank of America....................... 6,175 312,995
Glacier Bancorp, Inc.................. 4,396 70,886
U.S. Bancorp.......................... 10,000 236,875
-----------
620,756
EATING AND DRINKING PLACES (0.97%)
McDonald's Corporation................ 10,000 398,125
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT (1.68%)
ECI Telecom, Ltd...................... 10,000 311,250
National Service Industries........... 12,600 374,063
-----------
685,313
FABRICATED METAL PRODUCTS (2.03%)
Gillette Company...................... 20,000 828,750
FOOD AND KINDRED PRODUCTS (6.80%)
Coca-Cola Company..................... 10,000 588,125
ConAgra, Inc.......................... 5,000 113,437
Hershey Foods......................... 10,000 476,875
Interstate Bakeries................... 5,000 89,687
PepsiCo, Inc.......................... 20,000 711,250
Philip Morris Companies, Inc.......... 15,000 355,313
Sara Lee Corp......................... 20,000 445,000
-----------
2,779,687
FOOD STORES (7.07%)
Albertson's, Inc...................... 8,000 257,500
Casey's General Stores, Inc........... 130,750 1,372,875
7-Eleven, Inc......................... 694,400(1) 1,258,600
-----------
2,888,975
</TABLE>
20
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
FURNITURE AND FIXTURES (0.73%)
Newell Rubbermaid, Inc................ 10,000 $ 297,500
GENERAL MERCHANDISE STORES (0.98%)
Harcourt General, Inc................. 10,000 398,750
HEALTH SERVICES (5.13%)
Abbott Laboratories................... 20,000 733,750
Cardinal Health, Inc.................. 10,000 480,625
Johnson & Johnson..................... 5,000 467,500
Schering-Plough Corp.................. 10,000 415,625
-----------
2,097,500
HOLDING AND OTHER INVESTMENT OFFICES (2.04%)
MBIA, Inc............................. 10,000 527,500
Wintrust Financial Corp............... 20,550(1) 305,681
-----------
833,181
INDUSTRIAL MACHINERY AND EQUIPMENT (2.67%)
Ingersoll-Rand Co..................... 10,000 542,500
NCR Corporation....................... 15,000(1) 546,562
-----------
1,089,062
INSTRUMENTS & RELATED PRODUCTS (1.32%)
Becton Dickinson & Co................. 20,000 538,750
INSURANCE CARRIERS (7.56%)
Allstate Corp......................... 11,600 278,400
Chubb Corp............................ 10,000 565,000
Jefferson Pilot Corp.................. 10,000 672,500
MONY Group, Inc....................... 25,000 720,313
Progressive Corp...................... 5,000 370,625
Transatlantic Holdings, Inc........... 2,850 221,231
United Fire & Casualty Co............. 12,250 260,312
-----------
3,088,381
MISCELLANEOUS MANUFACTURING INDUSTRIES (1.41%)
Emerson Electric...................... 10,000 575,000
MOTION PICTURES (1.07%)
Disney (Walt) Co...................... 15,000 436,875
NONDEPOSITORY INSTITUTIONS (4.80%)
Berkshire Hathaway, Inc............... 15(1) 789,000
Federal Home Loan Mortgage Corp....... 25,000 1,171,875
-----------
1,960,875
</TABLE>
21
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
OIL AND GAS EXTRACTION (7.32%)
Apache Corp........................... 10,000 $ 363,750
Burlington Resources, Inc............. 10,000 327,500
Offshore Logistics.................... 30,000(1) 271,875
Pride International, Inc.............. 106,122 1,445,912
Schlumberger LTD...................... 10,000 582,500
-----------
2,991,537
PETROLEUM AND COAL PRODUCTS (1.45%)
Ashland Oil Co........................ 5,000 164,688
Chevron Corporation................... 5,000 427,500
-----------
592,188
PRIMARY METAL INDUSTRIES (1.86%)
Northwest Pipe Company................ 54,200(1) 758,800
PRINTING & PUBLISHING (1.00%)
Belo (A.H.) Corp...................... 22,000 408,375
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (1.61%)
Illinois Tool Works................... 10,000 655,625
SERVICES (0.34%)
Service Corporation International..... 20,000 141,250
TRANSPORTATION - BY AIR (1.77%)
Petroleum Helicopters, Inc.
(Non-Voting)......................... 66,900 635,550
Petroleum Helicopters, Inc.
(Voting)............................. 9,300 86,025
-----------
721,575
TRANSPORTATION EQUIPMENT (0.78%)
United Technologies Corp.............. 5,000 320,625
TRANSPORTATION SERVICES (0.82%)
GATX Corp............................. 10,000 333,125
TRUCKING AND WAREHOUSING (2.57%)
Heartland Express, Inc................ 45,580(1) 706,490
United Parcel Services, Class B....... 5,000 345,313
-----------
1,051,803
WATER TRANSPORTATION (1.30%)
American Water Works, Inc............. 25,000 532,813
WHOLESALE TRADE - NONDURABLE GOODS (1.90%)
Super Valu Stores, Inc................ 25,000 500,000
Unilever N V.......................... 5,000 275,313
-----------
775,313
-----------
Total Common Stocks..................... 32,044,778
PREFERRED STOCKS (5.59%)
- -----------------------------
COMMUNICATIONS (0.27%)
Cellnet Funding, LLC.................. 48,500 112,156
</TABLE>
22
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
HOLDING AND OTHER INVESTMENT OFFICES (2.92%)
General Growth Properties, Inc........ 59,960 $ 1,191,705
OIL AND GAS EXTRACTION (2.40%)
Unocal Capital Trust.................. 20,000 980,000
-----------
Total Preferred Stocks.................. 2,283,861
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C>
CORPORATE BONDS (14.60%)
- -----------------------------
CHEMICALS AND ALLIED PRODUCTS (1.65%)
Centocor, Inc., 4.75%, due 2/15/05.... $ 500,000 674,375
HEALTH SERVICES (2.62%)
Athena Neurosciences, Inc., 4.75%, due
11/15/04............................. 1,060,000 1,069,847
PRIMARY METAL INDUSTRIES (4.97%)
Quanex Corp., 6.88%, due 6/30/07...... 2,050,000 2,029,500
PRINTING AND PUBLISHING (5.36%)
Mail-Well, Inc., 5.00%, due
11/01/02............................. 2,300,000 2,190,681
-----------
Total Bonds............................. 5,964,403
</TABLE>
<TABLE>
<CAPTION>
SHARES
HELD
-------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (1.31%)
- -----------------------------------
MONEY MARKET MUTUAL FUND
Provident Treasury Fund, Class A...... 532,166 532,166
-----------
Total Investments (99.95%).............. 40,825,208
OTHER ASSETS LESS LIABILITIES (0.05%)
- -----------------------------------------
Cash, receivables and prepaid expense,
less liabilities..................... 22,367
-----------
Total Net Assets (100.00%).............. $40,847,575
===========
</TABLE>
(1) Non-income producing securities.
SEE ACCOMPANYING NOTES.
23
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
PREFERRED STOCKS (1.30%)
- -----------------------------
HOLDING & OTHER INVESTMENT OFFICES
New Plan Excel Realty Trust........... 4,000 $ 176,750
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
CORPORATE BONDS (45.51%)
- -----------------------------
DEPOSITORY INSTITUTIONS (1.04%)
J. P. Morgan & Co., 7.25%, due
10/01/10............................. $ 150,000 141,537
ELECTRIC, GAS AND SANITARY SERVICES (5.36%)
National Co-op Services Corp.
(Arkansas Electric), 9.48%, due
1/01/12.............................. 344,000 360,749
Oglethorpe Power (OPC Scherer),
6.974%, due 6/30/11.................. 388,000 370,509
-----------
731,258
GENERAL MERCHANDISE STORES (2.11%)
J.C. Penney & Co., 8.25%, due
8/15/22.............................. 300,000 287,406
HOLDING AND OTHER INVESTMENT OFFICES (5.50%)
Federal Realty Investment Trust,
8.875%, due 1/15/00.................. 100,000 100,166
Glenborough Properties, 7.625%, due
3/15/05.............................. 250,000 214,730
Meditrust, 7.60%, due 9/13/05......... 150,000 114,539
Washington REIT, 6.898%, due
2/15/18.............................. 350,000 320,716
-----------
750,151
INDUSTRIAL MACHINERY AND EQUIPMENT (3.54%)
Thermo Fibertek, 4.50%, due 7/15/04... 600,000 482,856
NONDEPOSITORY INSTITUTIONS (3.18%)
Household Finance Co., 7.30%, due
7/30/12.............................. 200,000 190,366
Security Capital Pacific, 7.20%, due
3/01/13.............................. 275,000 243,512
-----------
433,878
PAPER AND ALLIED PRODUCTS (1.09%)
Union Camp Corp., 8.625%, due
4/15/16.............................. 144,000 149,483
RAILROAD TRANSPORTATION (0.17%)
Union Pacific Corp., 8.50%, due
1/15/17.............................. 24,000 23,373
TEXTILE MILL PRODUCTS (1.92%)
Unifi, 6.50%, due 2/01/08............. 280,000 261,565
TOBACCO PRODUCTS (5.14%)
UST, Inc., 7.25%, due 6/01/09......... 750,000 701,670
TRANSPORTATION EQUIPMENT (1.25%)
Ford Motor Credit Co., 9.215%, due
9/15/21.............................. 150,000 170,460
TRANSPORTATION BY AIR (13.61%)
Continental Airlines, 6.545%, due
8/02/20.............................. 499,786 445,289
Northwest Airlines, 7.575%, due
9/01/20.............................. 800,000 722,552
US Air, Inc., 8.36%, due 1/20/19...... 700,000 687,708
-----------
1,855,549
</TABLE>
24
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
TRUCKING AND WAREHOUSING (1.60%)
Federal Express, 7.50%, due 1/15/18... $ 226,621 $ 217,622
-----------
Total Corporate Bonds................... 6,206,808
MORTGAGE-BACKED SECURITIES (23.19%)
- ------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
(0.13%)
Pool # 50276, 9.50%, due 2/01/20...... 16,970 17,962
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) (23.06%)
Pool # 1512, 7.50%, due 12/20/23...... 242,764 240,640
Pool # 22630, 6.50%, due 8/01/28...... 464,864 436,972
Pool # 2631, 7.00%, due 8/01/28....... 674,906 652,337
Pool # 2658, 6.50%, due 10/01/28...... 839,189 788,837
Pool # 2701, 6.50%, due 1/20/29....... 955,627 898,290
Pool # 236070, 10.00%, due 10/15/12... 79,186 85,942
Pool # 276337, 10.00%, due 8/15/19.... 37,885 41,259
-----------
3,144,277
-----------
Total Mortgage-Backed Securities........ 3,162,239
UNITED STATES TREASURY OBLIGATION (3.03%)
- ------------------------------------------------
U.S. Treasury Note, 7.25%, due
8/15/04.............................. 400,000 413,844
SHORT-TERM INVESTMENTS (25.87%)
- ------------------------------------
UNITED STATES GOVERNMENT AGENCIES (21.90%)
Federal Home Loan Mortgage Corp., due
1/19/00.............................. 750,000 747,782
Federal Home Loan Mortgage Corp., due
1/27/00.............................. 1,500,000 1,493,688
Federal Home Loan Mortgage Corp., due
2/08/00.............................. 750,000 745,361
-----------
2,986,831
</TABLE>
<TABLE>
<CAPTION>
SHARES
HELD
----------
<S> <C> <C>
MONEY MARKET MUTUAL FUND (3.97%)
Provident Treasury Fund, Class A...... 542,107 542,107
-----------
Total Short-Term Investments............ 3,528,938
-----------
Total Investments (98.90%).............. 13,488,579
OTHER ASSETS LESS LIABILITIES (1.10%)
- -----------------------------------------
Cash, receivables and prepaid expense,
less liabilities..................... 149,576
-----------
Total Net Assets (100.00%).............. $13,638,155
===========
</TABLE>
SEE ACCOMPANYING NOTES.
25
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
COMMON STOCKS (0.47%)
- --------------------------
FOOD STORES
Penn Traffic Co....................... 9,092(1) $ 84,101
PREFERRED STOCKS (6.37%)
- -----------------------------
DEPOSITORY INSTITUTIONS (0.63%)
CFB Capital I......................... 5,000 111,250
HOLDING AND OTHER INVESTMENT OFFICES (1.74%)
New Plan Excel Realty Trust........... 7,000 309,313
METAL MINING (4.00%)
Cameco Corp........................... 36,000 711,000
-----------
Total Preferred Stocks.................. 1,131,563
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C>
CORPORATE BONDS (86.52%)
- -----------------------------
AMUSEMENT AND RECREATION SERVICES (0.57%)
AMF Bowling Worldwide, Inc., 10.875%,
due 3/15/06.......................... $ 240,000 102,000
APPAREL AND OTHER TEXTILE PRODUCTS (1.11%)
Dan River, Inc., 10.125%, due
12/15/03............................. 200,000 197,000
AUTO REPAIR, SERVICES AND PARKING (3.69%)
Budget Group, Inc., 9.125%, due
4/01/06.............................. 700,000 654,500
BUSINESS SERVICES (3.35%)
Cendant Corporation, 7.75%, due
12/01/03............................. 600,000 594,630
CHEMICALS AND ALLIED PRODUCTS (6.45%)
Lyondell Chemical Co., 9.625%, due
5/01/07.............................. 900,000 927,000
Terra Industries, Inc., 10.50%, due
6/15/05.............................. 300,000 217,500
-----------
1,144,500
COMMUNICATIONS (5.15%)
Savoy Pictures, 7.00%, due 7/01/03.... 450,000 425,250
Telephone & Data Systems, Inc., 7.00%,
due 8/01/06.......................... 500,000 489,005
-----------
914,255
DEPOSITORY INSTITUTIONS (1.39%)
First Bank N.A., 6.25%, due 8/15/05... 250,000 245,980
ELECTRIC, GAS AND SANITARY SERVICES (11.45%)
Allied Waste North America, 10.00%,
due 8/01/09.......................... 800,000 716,000
ESI Tractebel, 7.99%, due 12/30/11.... 340,000 305,393
Gulf States Utilities, 8.94%, due
1/01/22.............................. 700,000 705,838
Waterford 3 Nuclear Power Plant,
8.09%, due 1/02/17................... 321,282 305,947
-----------
2,033,178
</TABLE>
26
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------- -----------
<S> <C> <C>
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (1.35%)
Advanced Micro Devices, Inc., 11.00%,
due 8/01/03.......................... $ 240,000 $ 239,700
FOOD STORES (0.24%)
Penn Traffic Co., 11.00%, due
6/29/09.............................. 47,850 41,630
GENERAL MERCHANDISE STORES (4.34%)
J.C. Penney & Co., 8.25%, due
8/15/22.............................. 300,000 287,406
Woolworth F.W., 7.00%, due 6/01/00.... 500,000 482,500
-----------
769,906
HEALTH SERVICES (2.63%)
Tenet Healthcare, 7.625%, due
6/01/08.............................. 500,000 466,250
HOLDING AND OTHER INVESTMENT OFFICES (11.37%)
Bradley Operating LP, 7.20%, due
1/15/08.............................. 450,000 407,227
Federal Realty Investment Trust,
7.48%, due 8/15/26................... 600,000 556,283
Glenborough Properties, 7.625%, due
3/15/05.............................. 400,000 343,568
Price Development Company, 7.29%, due
3/11/08.............................. 450,000 416,241
SUSA Partnership LP, 8.20%, due
6/01/17.............................. 325,000 294,551
-----------
2,017,870
INDUSTRIAL MACHINERY AND EQUIPMENT (4.69%)
AGCO Corp., 8.50%, due 3/15/06........ 900,000 832,500
INSTRUMENTS AND RELATED PRODUCTS (4.29%)
Thermo Electron Corp., 4.25%, due
1/01/03.............................. 900,000 761,913
LUMBER AND WOOD PRODUCTS (2.22%)
Georgia-Pacific Corp., 9.875%, due
11/01/21............................. 225,000 239,272
Georgia-Pacific Corp., 9.125%, due
7/01/22.............................. 150,000 154,119
-----------
393,391
METAL MINING (2.73%)
INCO Ltd., 9.875%, due 6/15/19........ 500,000 485,065
NONDEPOSITORY INSTITUTIONS (0.70%)
Macsaver Financial, 7.40%, due
2/15/02.............................. 200,000 125,000
OIL AND GAS EXTRACTION (7.31%)
Occidental Petroleum Co., 7.375%, due
11/15/08............................. 400,000 391,536
Pool Energy Services, 8.625%, due
4/01/08.............................. 900,000 906,750
-----------
1,298,286
PAPER AND ALLIED PRODUCTS (1.17%)
Container Corp. of America, 9.75%, due
4/01/03.............................. 200,000 208,500
REAL ESTATE (3.38%)
United Dominion Realty Trust, 8.125%,
due 11/15/00......................... 600,000 600,732
TRANSPORTATION SERVICES (2.63%)
Federal Mogul Co., 7.75%, due
7/01/06.............................. 500,000 466,820
</TABLE>
27
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------- -----------
<S> <C> <C>
WATER TRANSPORTATION (4.31%)
Windsor Petroleum Transport, 7.84%,
due 1/15/21.......................... $1,000,000 $ 765,000
-----------
Total Corporate Bonds................... 15,358,606
SHORT-TERM INVESTMENTS (4.74%)
- -----------------------------------
UNITED STATES GOVERNMENT AGENCIES (4.21%)
Federal Home Loan Mortgage Corp., due
1/27/00.............................. 750,000 746,844
</TABLE>
<TABLE>
<CAPTION>
SHARES
HELD
-------------
<S> <C> <C>
MONEY MARKET MUTUAL FUND (0.53%)
Provident Treasury Fund, Class A...... 94,341 94,341
-----------
Total Short-Term Investments............ 841,185
-----------
Total Investments (98.10%).............. 17,415,455
OTHER ASSETS LESS LIABILITIES (1.90%)
- -----------------------------------------
Cash, receivables and prepaid expense,
less liabilities..................... 336,463
-----------
Total Net Assets (100.00%).............. $17,751,918
===========
</TABLE>
(1) Non-income producing securities.
SEE ACCOMPANYING NOTES.
28
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
COMMON STOCKS (10.71%)
- ---------------------------
CHEMICALS AND ALLIED PRODUCTS (1.07%)
RPM, Inc.............................. 50,000 $ 509,375
DEPOSITORY INSTITUTIONS (0.65%)
Bank of America....................... 6,175 312,995
ELECTRIC, GAS AND SANITARY SERVICES (3.13%)
Idacorp, Inc.......................... 36,000 960,750
Northern States Power Co.............. 27,000 538,313
-----------
1,499,063
FOOD AND KINDRED PRODUCTS (2.35%)
ConAgra, Inc.......................... 18,800 426,525
Philip Morris Companies, Inc.......... 20,000 473,750
Sara Lee Corp......................... 10,000 222,500
-----------
1,122,775
OIL AND GAS EXTRACTION (3.51%)
Offshore Logistics.................... 62,700(1) 568,219
Pride International, Inc.............. 81,633(1) 1,112,249
-----------
1,680,468
-----------
Total Common Stocks..................... 5,124,676
PREFERRED STOCKS (48.73%)
- ------------------------------
COMMUNICATIONS (0.12%)
Cellnet Funding, LLP.................. 25,000 57,813
DEPOSITORY INSTITUTIONS (6.82%)
CFB Capital I......................... 57,500 1,279,375
CFB Capital II........................ 5,940 119,542
Harris Capital........................ 20,000 412,500
Taylor Capital Group, Inc............. 58,000 1,450,000
-----------
3,261,417
EATING AND DRINKING PLACES (1.42%)
Wendy's Financing..................... 14,300 679,250
ELECTRIC, GAS AND SANITARY SERVICES (5.09%)
Equitable Resources................... 50,000 937,500
Nisource, Inc......................... 28,000 1,008,000
Northwestern Capital Finance, Inc..... 24,500 490,000
-----------
2,435,500
FOOD STORES (5.35%)
Suiza Capital Trust II................ 72,500 2,555,625
HEALTH SERVICES (1.19%)
McKesson Financing Trust.............. 14,700 567,788
</TABLE>
29
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
HOLDING AND OTHER INVESTMENT OFFICES (6.06%)
General Growth Properties, Inc........ 100,000 $ 1,987,500
Wintrust Capital Trust................ 37,500 909,375
-----------
2,896,875
INDUSTRIAL MACHINERY AND EQUIPMENT (1.52%)
Coltec Capital Trust.................. 20,000 727,500
INSURANCE CARRIERS (2.34%)
Equitable of Iowa Capital............. 43,747 1,118,283
NONDEPOSITORY INSTITUTIONS (4.39%)
Mediaone Finance Trust................ 25,000 631,250
Newell Financial Trust I.............. 38,000 1,467,750
-----------
2,099,000
OIL AND GAS EXTRACTION (5.78%)
EVI, Inc.............................. 40,000 1,510,000
El Paso Energy Capital Trust, Inc..... 15,000 765,000
Unocal Capital Trust.................. 10,000 490,000
-----------
2,765,000
PETROLEUM AND COAL PRODUCTS (4.48%)
Canadian Occidental Petroleum......... 56,000 1,204,000
Tosco Financial Trust................. 20,000 940,000
-----------
2,144,000
PIPELINES EXCEPT NATURAL GAS (2.33%)
Enron Capital......................... 47,200 1,115,100
RAILROAD TRANSPORTATION (0.34%)
Union Pacific Capital Trust........... 4,000 164,000
TRANSPORTATION EQUIPMENT (1.50%)
Fleetwood Capital Trust............... 20,000 717,500
-----------
Total Preferred Stocks.................. 23,304,651
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C>
CORPORATE BONDS (37.87%)
- -----------------------------
AMUSEMENT AND RECREATION SERVICES (2.16%)
Acclaim Entertainment, Inc., 10.00%,
due 3/01/02.......................... $1,000,000 1,034,380
CHEMICALS AND ALLIED PRODUCTS (4.28%)
Centocor, Inc., 4.75%, due 2/15/05.... 500,000 674,375
Cetus Corp., 5.25%, due 5/21/02....... 1,000,000 1,372,100
-----------
2,046,475
ELECTRIC, GAS AND SANITARY SERVICES (0.18%)
National Co-op Services Corp.
(Arkansas Electric), 9.48%,
due 1/01/12.......................... 84,000 88,090
</TABLE>
30
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------- -----------
<S> <C> <C>
HEALTH SERVICES (10.40%)
Alza Corp., 5.00%, due 5/01/06........ $1,000,000 $ 1,051,140
Athena Neurosciences, Inc., 4.75%,
due 11/15/04......................... 1,700,000 1,715,793
Dura Pharmaceuticals, 3.50%,
due 7/15/02.......................... 2,000,000 1,625,000
Healthsouth Corp., 3.25%,
due 4/01/03.......................... 750,000 583,185
-----------
4,975,118
METAL MINING (2.64%)
Teck Corp., 3.75%, due 7/15/06........ 1,500,000 1,263,750
MISCELLANEOUS RETAIL (1.44%)
Rite Aid Corp., 5.25%, due 9/15/02.... 1,000,000 687,890
NONDEPOSITORY INSTITUTIONS (1.62%)
Consumer Portfolio Services, Inc.,
10.50%, due 4/15/04.................. 1,400,000 777,000
OIL AND GAS EXTRACTION (6.09%)
Diamond Offshore Drilling, 3.75%,
due 2/15/07.......................... 1,700,000 1,690,633
Offshore Logistics, 6.00%,
due 12/15/03......................... 1,500,000 1,220,580
-----------
2,911,213
PRIMARY METAL INDUSTRIES (4.60%)
Quanex Corp., 6.88%, due 6/30/07...... 2,220,000 2,197,800
PRINTING AND PUBLISHING (4.46%)
Mail Well, Inc., 5.00%,
due 11/01/02......................... 2,240,000 2,133,533
-----------
Total Corporate Bonds................. 18,115,249
<CAPTION>
SHARES
HELD
-------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (2.01%)
- -----------------------------------
MONEY MARKET MUTUAL FUND
Provident Treasury Fund, Class A...... 960,471 960,471
-----------
Total Investments (99.32%).............. 47,505,047
OTHER ASSETS LESS LIABILITIES (0.68%)
- -----------------------------------------
Cash, receivables and prepaid expense,
less liabilities..................... 324,296
-----------
Total Net Assets (100.00%).............. $47,829,343
===========
</TABLE>
(1) Non-income producing securities.
SEE ACCOMPANYING NOTES.
31
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON
PURCHASE PRINCIPAL
DATE AMOUNT VALUE
---------- --------- ----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (94.92%)
- ------------------------------------
COMMERCIAL PAPER (23.00%)
NONDEPOSITORY INSTITUTIONS
American General Finance Co.,
6.44%, due 1/26/00............ 6.440% $300,000 $ 300,000
Ford Motor Credit Corp., 5.74%,
due 1/03/00................... 5.738 225,000 225,000
General Electric Capital,
5.29%, due 2/14/00............ 5.285 325,000 325,000
IBM Credit Corp., 6.03%, due
2/01/00....................... 6.029 320,000 320,000
Texaco, Inc., 5.86%, due
1/13/00....................... 5.863 350,000 350,000
----------
Total Commercial Paper........... 1,520,000
UNITED STATES GOVERNMENT AGENCIES (71.92%)
Federal Farm Credit Bank, due
1/11/00....................... 5.683 205,000 204,650
Federal Farm Credit Bank, due
1/20/00....................... 5.637 270,000 269,169
Federal Home Loan Bank, due
1/05/00....................... 5.456 420,000 419,686
Federal Home Loan Bank, due
1/10/00....................... 5.577 475,000 474,275
Federal Home Loan Bank, due
1/14/00....................... 5.525 210,000 209,556
Federal Home Loan Mortgage
Corp., due 1/12/00............ 5.694 205,000 204,617
Federal Home Loan Mortgage
Corp., due 1/18/00............ 5.684 400,000 398,882
Federal Home Loan Mortgage
Corp., due 1/19/00............ 5.699 250,000 249,261
Federal Home Loan Mortgage
Corp., due 1/25/00............ 5.675 495,000 493,083
Federal Home Loan Mortgage
Corp., due 1/27/00............ 5.712 150,000 149,369
Federal Home Loan Mortgage
Corp., due 2/02/00............ 5.921 290,000 288,456
Federal National Mortgage
Assoc., due 1/24/00........... 5.794 215,000 214,184
Federal National Mortgage
Assoc., due 1/28/00........... 5.798 445,000 443,029
Federal National Mortgage
Assoc., due 2/03/00........... 5.859 515,000 512,205
Federal National Mortgage
Assoc., due 2/09/00........... 5.867 225,000 223,562
----------
Total United States Government
Agencies........................ 4,753,984
----------
Total Short-Term Investments....... 6,273,984
OTHER ASSETS LESS LIABILITIES (5.08%)
- -----------------------------------------
Cash, receivables and prepaid
expense, less liabilities....... 335,463
----------
Total Net Assets (100.00%)......... $6,609,447
==========
</TABLE>
SEE ACCOMPANYING NOTES.
32
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- ------------
<S> <C> <C>
COMMON STOCKS (91.72%)
- ---------------------------
CHEMICALS AND ALLIED PRODUCTS (11.58%)
Bristol-Myers Squibb Co............... 28,824 $ 1,880,766
DuPont (EI) de Nemours & Co........... 20,156 1,312,660
Lilly & Company....................... 13,208 888,238
Merck & Co., Inc...................... 24,028 1,630,901
Pfizer, Inc........................... 28,600 934,863
Procter & Gamble Co................... 16,830 1,844,989
Union Carbide Corp.................... 24,489 1,561,174
-----------
10,053,591
COMMUNICATIONS (8.12%)
AT & T Corp........................... 31,414 1,580,517
Bell Atlantic Corp.................... 26,287 1,618,294
CBS Corp.............................. 41,346(1) 2,573,789
MCI Worldcom, Inc..................... 16,152(1) 1,282,065
-----------
7,054,665
COMPUTER PROGRAMMING & SOFTWARE (2.12%)
Microsoft Corp........................ 15,696(1) 1,846,242
DEPOSITORY INSTITUTIONS (2.54%)
BankAmerica Corp...................... 17,395 881,709
J. P. Morgan & Co..................... 10,458 1,323,591
-----------
2,205,300
EATING AND DRINKING PLACES (1.90%)
McDonald's Corp....................... 41,465 1,650,825
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (11.89%)
Cisco Systems, Inc.................... 24,762(1) 2,629,415
General Electric Co................... 17,950 2,781,128
Intel Corporation..................... 17,786 1,488,466
Lucent Technologies, Inc.............. 39,289 2,941,764
Raytheon Company...................... 19,854 488,905
-----------
10,329,678
FOOD AND KINDRED PRODUCTS (3.61%)
Coca-Cola Co. (The)................... 20,776 1,221,889
PepsiCo, Inc.......................... 34,028 1,210,121
Philip Morris Companies, Inc.......... 29,629 701,837
-----------
3,133,847
GENERAL MERCHANDISE STORES (5.09%)
Sears, Roebuck & Co................... 23,690 728,467
Wal-Mart Stores, Inc.................. 54,393 3,688,525
-----------
4,416,992
</TABLE>
33
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- ------------
<S> <C> <C>
HEALTH SERVICES (1.98%)
Johnson & Johnson..................... 18,428 $ 1,723,018
INDUSTRIAL MACHINERY AND EQUIPMENT (6.24%)
Caterpillar, Inc...................... 25,076 1,153,496
Hewlett-Packard Co.................... 14,902 1,718,387
International Business Machines
Corp................................. 23,368 2,547,112
-----------
5,418,995
INSTRUMENTS AND RELATED PRODUCTS (1.19%)
Eastman Kodak Co...................... 15,816 1,035,948
INSURANCE CARRIERS (3.71%)
Allstate Corp......................... 33,349 800,376
American International Group, Inc..... 22,329 2,419,905
-----------
3,220,281
MOTION PICTURES (1.38%)
Disney (Walt) Co...................... 41,239 1,201,086
NONDEPOSITORY INSTITUTIONS (2.01%)
Citigroup, Inc........................ 31,540 1,744,556
PAPER AND ALLIED PRODUCTS (3.04%)
International Paper Co................ 24,210 1,319,445
Minnesota Mining & Manufacturing
Co................................... 13,607 1,324,131
-----------
2,643,576
PETROLEUM AND COAL PRODUCTS (6.39%)
Chevron Corp.......................... 14,917 1,275,404
Exxon Mobil Corporation............... 39,396 3,173,840
Texaco, Inc........................... 20,430 1,099,389
-----------
5,548,633
PRIMARY METAL INDUSTRIES (2.85%)
Aluminum Company of America........... 30,788 2,474,585
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (0.70%)
Goodyear Tire & Rubber Co............. 22,126 607,082
SECURITY AND COMMODITY BROKERS (6.51%)
American Express Co................... 15,182 2,516,416
Morgan Stanley, Dean Witter,
Discover & Co........................ 22,191 3,134,479
-----------
5,650,895
</TABLE>
34
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- ------------
<S> <C> <C>
TRANSPORTATION EQUIPMENT (8.87%)
Boeing Co. (The)...................... 25,420 $ 1,050,164
Ford Motor Co......................... 28,706 1,533,977
General Motors Corp................... 20,336 1,476,902
Honeywell International, Inc.......... 30,799 1,747,843
United Technologies Corp.............. 29,532 1,893,740
-----------
7,702,626
-----------
Total Common Stocks..................... 79,662,421
SHORT-TERM INVESTMENTS (8.50%)
- -----------------------------------
MONEY MARKET MUTUAL FUND (1.04%)
Provident Treasury Fund, Class A...... 898,926 898,926
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C>
UNITED STATES GOVERNMENT AGENCIES (7.46%)
Federal Home Loan Bank, due 1/10/00... $ 500,000 499,237
Federal National Mortgage Association,
due 1/18/00.......................... 750,000 747,893
Federal Home Loan Mortgage Corp., due
1/05/00.............................. 500,000 499,614
Federal Home Loan Mortgage Corp., due
1/12/00.............................. 500,000 499,069
Federal Home Loan Mortgage Corp., due
1/13/00.............................. 2,000,000 1,995,868
Federal Home Loan Mortgage Corp., due
1/27/00.............................. 2,250,000 2,240,532
-----------
6,482,213
-----------
Total Short-Term Investments............ 7,381,139
-----------
Total Investments (100.22%)............. 87,043,560
OTHER ASSETS LESS LIABILITIES (-0.22%)
- ------------------------------------------
Cash, receivables and prepaid expense,
less liabilities..................... (194,680)
-----------
Total Net Assets (100.00%).............. $86,848,880
===========
</TABLE>
(1) Non-income producing securities.
SEE ACCOMPANYING NOTES.
35
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
EquiTrust Variable Insurance Series Fund (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a no-load, open-end
diversified management investment company and operates in the mutual fund
industry. The Fund currently consists of six portfolios (known as the Value
Growth, High Grade Bond, High Yield Bond, Managed, Money Market and Blue Chip
Portfolios). Shares of the Fund are sold only to certain life insurance
companies' separate accounts to fund the benefits under variable insurance
contracts issued by such life insurance companies, including Farm Bureau Life
Insurance Company (see NOTE 3).
All portfolios, other than the Money Market Portfolio, value their common
stocks, preferred stocks, corporate bonds, United States Treasury obligations
and mortgage-backed securities that are traded on any national exchange at the
last sale price on the day of valuation or, lacking any sales, at the mean
between the closing bid and asked prices. If the mean is not available, exchange
traded securities are valued using the prior day's closing prices. Investments
traded in the over-the-counter market are valued at the mean between the bid and
asked prices or yield equivalent as obtained from one or more dealers that make
markets in the securities. Investments for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Fund's Board of Trustees. Short-term investments (including repurchase
agreements) are valued at market value, except that obligations maturing in 60
days or less are valued using the amortized cost method of valuation described
below.
The Money Market Portfolio values investments at amortized cost, which
approximates market value. Under the amortized cost method, a security is valued
at its cost on the date of purchase and thereafter is adjusted to reflect a
constant amortization to maturity of the difference between the principal amount
due at maturity and the cost of the investment to the portfolio.
The value of the underlying securities serving to collateralize repurchase
agreements is marked to market daily. Should the value of the underlying
securities decline, the seller would be required to provide the applicable
portfolio with additional securities, so that the aggregate value of the
underlying securities was at least equal to the repurchase price. If a seller of
a repurchase agreement were to default, the affected portfolio might experience
losses in enforcing its rights. To minimize this risk, the investment adviser
(under the supervision of the Board of Trustees) will monitor the
creditworthiness of the seller of the repurchase agreement and must find such
creditworthiness satisfactory before a portfolio may enter into the repurchase
agreement.
The Fund records investment transactions generally one day after the trade
date. The identified cost basis has been used in determining the net realized
gain or loss from investment transactions and unrealized appreciation or
depreciation on investments. Dividend income is recorded on the ex-dividend date
and interest is recognized on an accrual basis. Discounts and premiums on
investments purchased are amortized over the life of the respective investments.
Dividends and distributions to shareholders are recorded on the record date.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
36
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. FEDERAL INCOME TAXES
No provision for federal income taxes is considered necessary because the
Fund is qualified as a "regulated investment company" under the Internal Revenue
Code and intends to distribute each year substantially all of its net investment
income and realized capital gains to shareholders. The cost of investments is
the same for both federal income tax and financial reporting purposes.
At December 31, 1999, the Value Growth and Managed Portfolios had net
capital loss carryforwards of $10,702,000 and $3,188,000, respectively, which
expire in 2006. In addition, the High Yield Bond and Managed Portfolios had net
capital loss carryforwards of $104,000 and $691,000, respectively, which expire
in 2007.
3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into agreements with EquiTrust Investment Management
Services, Inc. ("EquiTrust Investment") relating to the management of the
portfolios and the investment of its assets. Pursuant to these agreements, fees
paid to EquiTrust Investment are as follows: (1) annual investment advisory and
management fees, which are based on each portfolio's daily net assets as
follows: Value Growth Portfolio -- 0.45%; High Grade Bond Portfolio -- 0.30%;
High Yield Bond Portfolio -- 0.45%; Managed Portfolio -- 0.45%; Money Market
Portfolio -- 0.25%; and Blue Chip Portfolio -- 0.20%, and (2) accounting fees,
which are based on each portfolio's daily net assets at an annual rate of 0.05%,
with a maximum per portfolio annual expense of $30,000.
The Fund has entered into an agreement with EquiTrust Investment whereby
EquiTrust Investment also serves as the principal underwriter and distributor of
the Fund's shares and as the Fund's shareholder service, transfer and dividend
disbursing agent. There are no additional fees associated with these services.
EquiTrust Investment has agreed to reimburse the portfolios annually for
total expenses, excluding brokerage, interest, taxes and extraordinary expenses
in excess of 1.50% of each portfolio's average daily net assets. The amount
reimbursed, however, shall not exceed the amount of the investment advisory and
management fee paid by the portfolio for such period. During the year ended
December 31, 1999, EquiTrust Investment further agreed to reimburse any
portfolio, to the extent that annual operating expenses, including the
investment advisory fee, exceed 0.65%. For the year ended December 31, 1999, the
Fund's net expenses did not exceed the reimbursement thresholds and accordingly,
no expenses were reimbursed by EquiTrust Investment.
Certain officers and trustees of the Fund are also officers of EquiTrust
Investment and its affiliate, Farm Bureau Life Insurance Company and other
affiliated entities. At December 31, 1999, the total number of the shares of
each portfolio owned by Farm Bureau Life Insurance Company, EquiTrust Life
Insurance Company (an affiliate), and related separate accounts are as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES
- --------- ---------
<S> <C>
Value Growth...................................... 4,698,714
High Grade Bond................................... 1,431,846
High Yield Bond................................... 1,902,689
Managed........................................... 4,539,787
Money Market...................................... 6,609,447
Blue Chip......................................... 1,973,463
</TABLE>
37
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. EXPENSE OFFSET ARRANGEMENTS
The Fund and other mutual funds managed by EquiTrust Investment have an
agreement with the custodian bank to indirectly pay a portion of the custodian's
fees through credits earned by the Funds' cash on deposit with the bank. This
deposit agreement is an alternative to overnight investments.
5. CAPITAL SHARE TRANSACTIONS
The Fund has an unlimited number of shares of beneficial interest authorized
with no par value. Net assets as of December 31, 1999, consisted of:
<TABLE>
<CAPTION>
PORTFOLIO
----------------------------------------------------------------------------
VALUE HIGH GRADE HIGH YIELD MONEY BLUE
GROWTH BOND BOND MANAGED MARKET CHIP
------------ ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Paid-in capital.......... $ 57,149,560 $14,243,635 $19,048,129 $55,868,514 $6,609,447 $58,128,894
Accumulated undistributed
net
investment income....... 855,293 2,911,537 1,070,657
Accumulated undistributed
net
realized gain (loss)
from
investment
transactions............ (11,940,055) 18,110 (104,067) (4,235,661) 916,814
Net unrealized
appreciation
(depreciation) of
investments............. (5,217,223) (623,590) (1,192,144) (6,715,047) 26,732,515
------------ ----------- ----------- ----------- ---------- -----------
Net Assets........... $ 40,847,575 $13,638,155 $17,751,918 $47,829,343 $6,609,447 $86,848,880
============ =========== =========== =========== ========== ===========
</TABLE>
Transactions in shares of beneficial interest for each portfolio were as
follows:
<TABLE>
<CAPTION>
SHARES ISSUED IN
REINVESTMENT OF
DIVIDENDS AND NET INCREASE
SHARES SOLD DISTRIBUTIONS SHARES REDEEMED (DECREASE)
----------------------- ------------------- ----------------------- ----------------------
PORTFOLIO SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------- ---------- ----------- ------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Value Growth............. 627,488 $ 5,858,468 108,176 $ 976,830 525,556 $ 4,826,973 210,108 $ 2,008,325
High Grade Bond.......... 526,191 5,159,899 83,419 828,359 178,662 1,730,659 430,948 4,257,599
High Yield Bond.......... 470,766 4,628,710 146,656 1,422,137 251,178 2,417,617 366,244 3,633,230
Managed.................. 295,358 3,261,397 241,742 2,634,990 927,759 10,226,862 (390,659) (4,330,475)
Money Market............. 20,514,197 20,514,197 193,244 193,244 20,140,168 20,140,168 567,273 567,273
Blue Chip................ 409,813 16,501,862 21,903 816,323 107,309 4,388,859 324,407 12,929,326
Year ended December 31, 1998:
Value Growth............. 1,248,568 $14,421,953 3,209 $ 33,533 218,101 $ 2,318,550 1,033,676 $12,136,936
High Grade Bond.......... 481,508 4,946,472 48,672 494,606 55,393 619,307 474,787 4,821,771
High Yield Bond.......... 705,166 7,191,220 83,377 863,126 91,576 940,287 696,967 7,114,059
Managed.................. 1,561,330 19,307,046 2,618 31,340 215,024 2,560,710 1,348,924 16,777,676
Money Market............. 25,209,142 25,209,142 195,767 195,767 25,440,252 25,440,252 (35,343) (35,343)
Blue Chip................ 667,935 23,052,633 160 5,578 45,543 1,551,209 622,552 21,507,002
</TABLE>
38
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INVESTMENT TRANSACTIONS
For the year ended December 31, 1999, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. Government securities) by portfolio, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- --------- ----------- -----------
<S> <C> <C>
Value Growth............................ $70,360,676 $64,763,065
High Grade Bond......................... 4,197,874 2,035,826
High Yield Bond......................... 8,985,192 4,283,043
Managed................................. 43,355,093 20,829,822
Blue Chip............................... 15,796,728 3,207,471
</TABLE>
At December 31, 1999, net unrealized appreciation (depreciation) of
investments by portfolio was composed of the following:
<TABLE>
<CAPTION>
GROSS UNREALIZED NET UNREALIZED
-------------------------- APPRECIATION (DEPRECIATION)
PORTFOLIO APPRECIATION DEPRECIATION OF INVESTMENTS
- --------- ------------ ------------ ---------------------------
<S> <C> <C> <C>
Value Growth....................... $ 997,896 $(6,215,119) $(5,217,223)
High Grade Bond.................... 34,531 (658,121) (623,590)
High Yield Bond.................... 50,071 (1,242,215) (1,192,144)
Managed............................ 937,554 (7,652,601) (6,715,047)
Blue Chip.......................... 29,426,187 (2,693,672) 26,732,515
</TABLE>
7. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income for the following portfolios are
declared daily and were payable on the last business day of the month as
follows:
<TABLE>
<CAPTION>
PORTFOLIO
-------------------------------
HIGH HIGH
GRADE YIELD MONEY
PAYABLE DATE BOND BOND MARKET
- ------------ ---------- ---------- -------
<S> <C> <C> <C>
January 30, 1999................... $.0506 $.0516 $.0038
February 27, 1999.................. .0470 .0471 .0029
March 31, 1999..................... .0603 .0745 .0037
April 30, 1999..................... .0499 .0562 .0035
May 29, 1999....................... .0425 .0509 .0033
June 30, 1999...................... .0541 .0722 .0035
July 31, 1999...................... .0517 .0604 .0036
August 31, 1999.................... .0531 .0610 .0039
September 30, 1999................. .0549 .0733 .0038
October 31, 1999................... .0512 .0569 .0037
November 30, 1999.................. .0518 .0626 .0039
December 31, 1999.................. .0515 .0708 .0041
------ ------ ------
Total dividends per share.......... $.6186 $.7375 $.0437
====== ====== ======
</TABLE>
39
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (CONTINUED)
The percentage of income dividends qualifying for deduction by corporate
shareholders for the High Yield Bond Portfolio is 6%.
In addition, dividends and distributions to shareholders from net investment
income and net realized gain on investment transactions were paid during the
year ended December 31, 1999, for the following portfolios:
ORDINARY INCOME DIVIDENDS:
<TABLE>
<CAPTION>
DIVIDEND PERCENT
AMOUNT QUALIFYING FOR
DECLARATION RECORD PAYABLE PER DEDUCTIONS BY
PORTFOLIO DATE DATE DATE SHARE CORPORATIONS
- --------- ----------- --------- --------- -------- --------------
<S> <C> <C> <C> <C> <C>
Value Growth............. 01/20/99 01/20/99 01/20/99 $.2154 31%
Managed.................. 01/20/99 01/20/99 01/20/99 .5329 23%
Blue Chip................ 01/20/99 01/20/99 01/20/99 .4902 87%
</TABLE>
CAPITAL GAINS DISTRIBUTIONS:
<TABLE>
<CAPTION>
DECLARATION RECORD PAYABLE AMOUNT
PORTFOLIO DATE DATE DATE PER SHARE
- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C>
High Grade Bond............... 01/20/99 01/20/99 01/20/99 $0.0343
High Yield Bond............... 01/20/99 01/20/99 01/20/99 0.0589
</TABLE>
The capital gains distributions related to the High Yield Bond Portfolio
include net short-term realized gains of $3,729 ($0.0024 per share), that are
taxable to shareholders as ordinary income dividends.
40
<PAGE>
(This page has been left blank intentionally.)
41
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31, 1999, 1998, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
VALUE GROWTH
PORTFOLIO
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year....... $ 9.50 $ 12.58 $ 13.13 $ 12.31 $ 10.39
Income From Investment
Operations
Net investment
income.............. 0.18 0.22 0.28 0.35 0.55
Net gains (losses) on
securities
(both realized and
unrealized)......... (0.77) (3.29) 0.55 1.82 2.13
------- ------- ------- ------- -------
Total from investment
operations............ (0.59) (3.07) 0.83 2.17 2.68
------- ------- ------- ------- -------
Less Distributions
Dividends (from net
investment
income)............. (0.22) (0.01) (0.28) (0.30) (0.50)
Distributions (from
capital gains)...... (0.95) (1.05) (0.26)
Distributions in
excess of net
realized gains...... (0.15)
------- ------- ------- ------- -------
Total distributions.... (0.22) (0.01) (1.38) (1.35) (0.76)
------- ------- ------- ------- -------
Net asset value, end of
year.................... $ 8.69 $ 9.50 $ 12.58 $ 13.13 $ 12.31
======= ======= ======= ======= =======
Total Return:
Total investment return
based on net asset
value (1)............. (6.34)% (24.43)% 6.30% 17.65% 25.87%
Ratios/Supplemental Data:
Net assets, end of
period (000's
omitted).............. $40,848 $42,664 $43,466 $27,188 $16,295
Ratio of total expenses
to average net
assets................ 0.63% 0.56% 0.55% 0.55% 0.55%
Ratio of net expenses
to average net
assets................ 0.63% 0.55%
Ratio of net investment
income to average net
assets................ 2.09% 2.17% 2.43% 2.68% 4.78%
Portfolio turnover
rate.................. 152% 230% 118% 72% 98%
Information assuming no
voluntary reimbursement
or waiver by EquiTrust
Investment of excess
operating
expenses (see NOTE 3):
Per share net
investment income..... $ 0.27 $ 0.33 $ 0.53
Ratio of expenses to
average net assets.... 0.58% 0.69% 0.72%
Amount reimbursed...... $14,093 $29,686 $22,306
</TABLE>
- ------------------------------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
SEE ACCOMPANYING NOTES.
42
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
------------------------------------------------ ------------------------------------------------
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year....... $ 10.19 $ 10.11 $ 9.83 $ 9.98 $ 9.44 $ 10.17 $ 10.21 $ 9.91 $ 9.69 $ 9.32
Income From Investment
Operations
Net investment
income.............. 0.62 0.66 0.69 0.72 0.77 0.74 0.71 0.79 0.84 0.87
Net gains (losses) on
securities
(both realized and
unrealized)......... (0.67) 0.08 0.28 (0.15) 0.54 (0.81) (0.03) 0.36 0.33 0.49
------- ------- ------ ------ ------ ------- ------- ------ ------- -------
Total from investment
operations............ (0.05) 0.74 0.97 0.57 1.31 (0.07) 0.68 1.15 1.17 1.36
------- ------- ------ ------ ------ ------- ------- ------ ------- -------
Less Distributions
Dividends (from net
investment
income)............. (0.62) (0.66) (0.69) (0.72) (0.77) (0.74) (0.71) (0.79) (0.84) (0.87)
Distributions (from
capital gains)...... (0.03) (0.01) (0.06) (0.11) (0.12)
Distributions in
excess of net
realized gains...... (0.06)
------- ------- ------ ------ ------ ------- ------- ------ ------- -------
Total distributions.... (0.65) (0.66) (0.69) (0.72) (0.77) (0.80) (0.72) (0.85) (0.95) (0.99)
------- ------- ------ ------ ------ ------- ------- ------ ------- -------
Net asset value, end of
year.................... $ 9.49 $ 10.19 $10.11 $ 9.83 $ 9.98 $ 9.30 $ 10.17 $10.21 $ 9.91 $ 9.69
======= ======= ====== ====== ====== ======= ======= ====== ======= =======
Total Return:
Total investment return
based on net asset
value (1)............. (0.46)% 7.51% 10.24% 5.94% 14.26% (0.75)% 6.88% 12.07% 12.65% 15.15%
Ratios/Supplemental Data:
Net assets, end of
period (000's
omitted).............. $13,638 $10,255 $5,374 $3,535 $3,208 $17,752 $15,680 $8,623 $ 5,929 $ 4,810
Ratio of total expenses
to average net
assets................ 0.48% 0.50% 0.52% 0.55% 0.55% 0.60% 0.61% 0.57% 0.55% 0.55%
Ratio of net expenses
to average net
assets................ 0.47% 0.46% 0.59% 0.58%
Ratio of net investment
income to average net
assets................ 6.34% 6.44% 6.94% 7.22% 7.81% 7.62% 6.92% 7.74% 8.47% 8.96%
Portfolio turnover
rate.................. 24% 46% 31% 32% 14% 27% 43% 35% 30% 32%
Information assuming no
voluntary reimbursement
or waiver by EquiTrust
Investment of excess
operating
expenses (see NOTE 3):
Per share net
investment income..... $ 0.68 $ 0.70 $ 0.74 $ 0.78 $ 0.81 $ 0.84
Ratio of expenses to
average net assets.... 0.57% 0.80% 0.84% 0.65% 0.87% 0.88%
Amount reimbursed...... $2,294 $8,233 $8,255 $5,819 $17,094 $15,105
</TABLE>
43
<PAGE>
EQUITRUST VARIABLE INSURANCE SERIES FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year....... $ 11.45 $ 12.55 $ 12.40 $ 11.71 $ 9.93
Income From Investment
Operations
Net investment
income.............. 0.64 0.53 0.53 0.60 0.65
Net gains (losses) on
securities
(both realized and
unrealized)......... (1.02) (1.63) 0.79 1.44 1.90
------- ------- ------- ------- -------
Total from investment
operations............ (0.38) (1.10) 1.32 2.04 2.55
------- ------- ------- ------- -------
Less Distributions
Dividends (from net
investment
income)............. (0.53) (0.52) (0.50) (0.59)
Distributions (from
capital gains)...... (0.65) (0.85) (0.18)
Distributions in
excess of net
realized gains......
------- ------- ------- ------- -------
Total distributions.... (0.53) (1.17) (1.35) (0.77)
------- ------- ------- ------- -------
Net asset value, end of
year.................... $ 10.54 $ 11.45 $ 12.55 $ 12.40 $ 11.71
======= ======= ======= ======= =======
Total Return:
Total investment return
based on net asset
value (1)............. (3.45)% (8.71)% 10.67% 17.39% 25.69%
Ratios/Supplemental Data:
Net assets, end of
period (000's
omitted).............. $47,829 $56,434 $44,949 $26,022 $14,487
Ratio of total expenses
to average net
assets................ 0.56% 0.55% 0.54% 0.55% 0.55%
Ratio of net expenses
to average net
assets................ 0.56% 0.54%
Ratio of net investment
income to average net
assets................ 5.28% 4.97% 4.94% 4.73% 5.80%
Portfolio turnover
rate.................. 43% 74% 52% 82% 48%
Information assuming no
voluntary reimbursement
or waiver by EquiTrust
Investment of excess
operating
expenses (see NOTE 3):
Per share net
investment income..... $ 0.52 $ 0.57 $ 0.62
Ratio of expenses to
average net assets.... 0.60% 0.75% 0.77%
Amount reimbursed...... $17,771 $38,874 $26,008
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
------------------------------------------- -----------------------------------------------
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 36.87 $ 31.01 $ 24.68 $ 20.70 $15.82
Income From Investment
Operations
Net investment
income.............. 0.04 0.05 0.05 0.05 0.05 0.54 0.49 0.42 0.45 0.39
Net gains (losses) on
securities
(both realized and
unrealized)......... 7.06 5.37 6.34 3.99 4.80
------ ------ ------ ------ ------ ------- ------- ------- ------- ------
Total from investment
operations............ 0.04 0.05 0.05 0.05 0.05 7.60 5.86 6.76 4.44 5.19
------ ------ ------ ------ ------ ------- ------- ------- ------- ------
Less Distributions
Dividends (from net
investment
income)............. (0.04) (0.05) (0.05) (0.05) (0.05) (0.49) (0.42) (0.34) (0.31)
Distributions (from
capital gains)...... (0.01) (0.12)
Distributions in
excess of net
realized gains......
------ ------ ------ ------ ------ ------- ------- ------- ------- ------
Total distributions.... (0.04) (0.05) (0.05) (0.05) (0.05) (0.49) (0.43) (0.46) (0.31)
------ ------ ------ ------ ------ ------- ------- ------- ------- ------
Net asset value, end of
year.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 43.98 $ 36.87 $ 31.01 $ 24.68 $20.70
====== ====== ====== ====== ====== ======= ======= ======= ======= ======
Total Return:
Total investment return
based on net asset
value (1)............. 4.53% 5.00% 5.07% 4.90% 5.47% 20.85% 18.91% 27.41% 21.43% 32.81%
Ratios/Supplemental Data:
Net assets, end of
period (000's
omitted).............. $6,609 $6,042 $6,078 $3,819 $3,159 $86,849 $60,850 $31,865 $14,493 $6,665
Ratio of total expenses
to average net
assets................ 0.55% 0.52% 0.48% 0.55% 0.55% 0.30% 0.30% 0.33% 0.48% 0.55%
Ratio of net expenses
to average net
assets................ 0.54% 0.45% 0.30% 0.29%
Ratio of net investment
income to average net
assets................ 4.49% 4.67% 4.65% 4.58% 5.27% 1.43% 1.72% 1.83% 1.92% 2.07%
Portfolio turnover
rate.................. 0% 0% 0% 0% 0% 5% 12% 3% 2% 1%
Information assuming no
voluntary reimbursement
or waiver by EquiTrust
Investment of excess
operating
expenses (see NOTE 3):
Per share net
investment income..... $ 0.05 $ 0.04 $ 0.05 $ 0.38
Ratio of expenses to
average net assets.... 0.55% 0.82% 0.90% 0.59%
Amount reimbursed...... $2,912 $9,569 $9,816 $1,952
</TABLE>
45
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
EquiTrust Variable Insurance Series Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of EquiTrust Variable Insurance
Series Fund (comprised of the Value Growth, High Grade Bond, High Yield Bond,
Managed, Money Market and Blue Chip Portfolios) as of December 31, 1999, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the EquiTrust Variable Insurance
Series Fund at December 31, 1999, and the results of their operations for the
year then ended, the changes in their net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Des Moines, Iowa
January 24, 2000
46
