-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CWEl86seRNRK6ahCvNvtfKLyace7JJvfcAHSNPsQQKCja5SITsq2LMpfxM9yuRP+ fUFdmaqTSlcm46HEoWxPzw== 0001047469-03-029638.txt : 20030904 0001047469-03-029638.hdr.sgml : 20030904 20030903193603 ACCESSION NUMBER: 0001047469-03-029638 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030904 EFFECTIVENESS DATE: 20030904 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITRUST VARIABLE INSURANCE SERIES FUND CENTRAL INDEX KEY: 0000811707 IRS NUMBER: 426407453 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05069 FILM NUMBER: 03880144 BUSINESS ADDRESS: STREET 1: 5400 UNIVERSITY AVE CITY: WEST DES MOINES STATE: IA ZIP: 50266-5997 BUSINESS PHONE: 5152255400 MAIL ADDRESS: STREET 1: 5400 UNIVERSITY AVENUE CITY: WEST DES MOINES STATE: IA ZIP: 50266-5997 FORMER COMPANY: FORMER CONFORMED NAME: FBL VARIABLE INSURANCE SERIES FUND DATE OF NAME CHANGE: 19920703 N-CSRS 1 a2116612zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5069 --------------------------------------------- EquiTrust Variable Insurance Series Fund - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 5400 University Ave., West Des Moines Ia 50266-5997 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Kristi Rojohn, 5400 University Avenue, West Des Moines Ia 50266-5997 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 515/225-5400 ---------------------------- Date of fiscal year end: Dec 31, 2003 -------------------------- Date of reporting period: June 30, 2003 ------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. [LOGO]EquiTrust Financial Services EquiTrust Variable Insurance Series Fund SEMI-ANNUAL REPORT JUNE 30, 2003 INVESTMENT MANAGER AND PRINCIPAL UNDERWRITER EQUITRUST INVESTMENT MANAGEMENT SERVICES, INC. 5400 UNIVERSITY AVENUE WEST DES MOINES, IA 50266 1-877-860-2904 225-5586 (DES MOINES) This report is not to be distributed unless preceded or accompanied by a current prospectus. PRESIDENT'S LETTER Dear Shareholder: After three full years of negative equity returns, we are pleased to be able to report on a period in which the equity markets provided substantial gains to investors. A weak first quarter left the S&P 500 Stock Composite (the "S&P 500") and the Dow Jones Industrial Average (the "Dow") down and the NASDAQ Composite (the "NASDAQ") with only a meager positive return. However, spurred by an early end to the Iraq war and additional fiscal and monetary stimulus, all three indices rebounded substantially in the second quarter. For the six-month period ended June 30, 2003, the S&P 500 returned 11.76%, the Dow climbed 9.01%, and the NASDAQ led both with a return of 21.82%. Six-month returns for investment grade and high yield (junk) corporate bonds rivaled returns in areas of the equity markets, but returns for government issues and mortgage-backed securities lagged for the same period. The Lehman Brothers Treasury Index returned 3.75%, while Lehman's Fixed Rate Mortgage Backed Securities Index returned 1.60%. Due to its heavy weighting in government issues and mortgage-backed securities, Lehman's Aggregate Index also lagged, returning 3.93% for the period. Both investment grade and non-investment grade corporate issues benefited from declining credit spreads, while returns on high yield bonds were also boosted by increased popularity with investors. The Lehman Brothers U.S. Corporate Investment Grade Index returned 7.72%, while the Lehman Brothers U.S. Corporate High Yield Index returned 18.49%. A run in the equity markets and improvements in credit spreads typically portend improving economic fundamentals. Currently, though, few indicators unambiguously support that forecast. According to the government's most recent assessment of economic growth, the nation's gross domestic product expanded at an annual rate of just 1.4% in the first quarter of the year. Most economists expect the same for the second quarter, but also that growth will return to the long-term average of 3.5% in the second half of the year. Corporate earnings have improved slightly even with inconsistent and slow economic growth, primarily due to cost cutting rather than improving sales. Consequently, equity prices relative to earnings and expected growth potential have increased rapidly, keeping valuation measures above their long-term averages. While the nation's unemployment rate typically lags as an indicator of the health of the underlying economy, the most recent official measurement of the unemployment rate increased to 6.4% from 6.1%. This increase indicates that, even if the economy continues to expand, it has yet to regenerate the millions of jobs lost in the past several years. This stagnant state of the labor market continues to wear on consumer confidence, which suffered a sharp decline early in the year and has improved only modestly since. In the last several months, the Federal Reserve (the "Fed") has indicated that it sees moderate signs of economic growth, but it has also expressed increased concern about deflation and the potential hazards it poses to both corporations and consumers. As insurance against deflation, the Fed recently cut the Federal Funds rate target for the 13th consecutive time, to 1.00% from 1.25%. At one time, the Fed also indicated a willingness to move out on the yield curve to keep interest rates low by purchasing longer-term government securities. The dollar declined for much of this half of the year, most notably losing ground against the Euro. Its decline has been symptomatic of the domestic economy's trade and current account deficits, as well as the attractiveness of U.S. financial assets relative to those around the world. U.S. demand for foreign-made goods has led to trade imbalances whereby imports exceed exports, while a duet of declining 2 equity markets and interest rates has forced foreign investors to look elsewhere for returns. The weak dollar makes U.S.-made goods more attractive to foreign purchasers and also benefits U.S. multinationals when they translate overseas profits into dollars. At the same time, though, the weak dollar threatens the recovery of other developed market economies, such as that of the European Union. Many had argued the dollar had become modestly overvalued, and the decline only a normal correction. The dollar has recently recovered somewhat. So long as these currency adjustments remain orderly, they should not pose a substantial threat to the economy. In spite of substantial fiscal and monetary stimuli, the U.S. economy has yet to show convincing signs of improvement. The equity and fixed income markets, though, have responded positively to expectations that the economy will soon return to a sustainable long-term trend. Since it would appear that greatly improved second-half performance is reflected in current valuations, the economy will need to start showing more vigor if this rally is to be sustained. VALUE GROWTH: The Portfolio performed well relative to its benchmark, the S&P 500 Stock Composite Index. It did so despite being underweight in two of the benchmark's best performing sectors for the period: information technology and consumer discretionary. The Portfolio's energy holdings outperformed the S&P 500's energy constituents, contributing to the good relative performance. Given the equity market's substantial price gains, our bias is shifting back to a slightly more defensive posture. We continue to favor the health care, energy and consumer staples sectors. HIGH GRADE BOND: Treasury yields finished the first half of 2003 lower than where they started the year, with the two-year yield dropping 30 basis points (0.30%) to 1.30%, the ten-year dropping 30 basis points (0.30%) to 3.51% and the thirty-year dropping 22 basis points (0.22%) to 4.56%. As corporate spreads continued to narrow due to strong technical factors, as well as fundamental improvement in the overall credit quality of the investment grade corporate bond market, the best performing sector of the Lehman Brothers Aggregate Index for the first half of 2003 was the Investment Grade Credit Index. The Portfolio's performance slightly exceeded that of the Lehman Brothers Aggregate Index despite having a lower duration than the Aggregate Index during a period of declining interest rates. Given the historically low level of interest rates we continue to feel that it is not an appropriate time to take on a larger amount of interest rate risk than the Aggregate Index. However, given the very steep yield curve, it is extremely costly to remain in cash so we will continue to keep the majority of the Portfolio invested in intermediate maturity securities. STRATEGIC YIELD: The Lehman Brothers High Yield Index had an excellent first half with a return of 18.49%, outperforming duration-neutral Treasuries by 1,505 basis points (15.05%). The option-adjusted spread on the Lehman Brothers High Yield Index finished the first half of the year at 584 basis points (5.84%), which was 267 basis points (2.67%) lower than at the start of the year. On a fundamental basis, a continued decline in defaults and improvement in the upgrade-to-downgrade ratio helped the high yield market. Technically, the market has been helped by very strong cash inflows into high yield funds during the first half of 2003. According to AMG Data Services, $16.3 billion has been invested in high yield mutual funds year-to-date. The market is on pace to smash the annual record of $17.3 billion set in 1997. The Portfolio's performance has lagged the Lehman Brothers High Yield Index. Its performance was hindered by having less exposure to both high yield issues and lower rated issues relative to the Index; in general, the lowest rated issues were the best performers during the period. The high yield market may have gotten ahead of the fundamentals. Given that it has dramatically outperformed the broader market, we may be more inclined to lean toward lower investment grade issues when making new acquisitions. 3 MANAGED: The Portfolio's performance lagged the S&P 500, largely due to its mixed allocation of fixed income securities and yield-oriented equities. It continues to perform well relative to its peers. The recently rising yield on the 10-year Treasury has made fixed income securities such as GNMAs stronger competition even for yield-oriented equities. If equities and interest rates continue to rise, we may increase the Portfolio's cash balance or add to its GNMA positions. MONEY MARKET*: During the first six months of the year, the Fed cut the Federal Funds rate by 0.25% to 1.00%. It appears that any upward movement in rates continues to be months away. Federal Reserve Chairman Alan Greenspan has commented that he plans on keeping the Federal Funds rate low as long as it takes to return to "satisfactory economic performance." He also said he would cut the Federal Funds rate further before he would buy bonds to boost the economy. The focus has returned to economic factors. Geopolitical factors have waned since Bush declared in May that major combat was over in Iraq. Meanwhile, money market funds continue to be an attractive investment during this period of historically low interest rates and high volatility. Our strategy has been, and will continue to be, minimizing risk while maintaining liquidity. We limit purchases to top-tier commercial paper and agency discount notes to maximize yield yet minimize credit risk. BLUE CHIP: True to its passive strategy, the performance of the Blue Chip Portfolio over the past six months has reflected that of the large capitalization market sector it represents. The 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/ Craig A. Lang CRAIG A. LANG PRESIDENT July 30, 2003 * An investment in the Money Market Portfolio is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Portfolio seeks to preserve the net asset value of $1.00 per share, it is possible to lose money by investing in the Portfolio. Past performance is not a guarantee of future results. 4 (This page has been left blank intentionally.) 5 EQUITRUST VARIABLE INSURANCE SERIES FUND STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED)
HIGH VALUE GROWTH GRADE BOND PORTFOLIO PORTFOLIO ------------- ------------- ASSETS Investments in securities, at value (cost -- $46,294,730; $27,540,423; $23,458,457; $54,291,700; $6,535,338; and $67,384,688, respectively)......... $ 45,028,337 $ 28,780,455 Cash.................................... -- 41,959 Accrued dividends and interest receivable............................. 59,629 216,012 Prepaid expense and other assets........ 603 399 ------------ ------------ Total Assets............................ $ 45,088,569 $ 29,038,825 ============ ============ LIABILITIES AND NET ASSETS Liabilities: Investment securities purchased....... $ -- $ 2,015,188 Net outstanding redemptions in excess of bank balance...................... 39,574 -- Accrued expenses...................... 3,798 3,898 ------------ ------------ Total Liabilities....................... 43,372 2,019,086 Net assets applicable to shares of beneficial interest.................... 45,045,197 27,019,739 ------------ ------------ Total Liabilities and Net Assets........ $ 45,088,569 $ 29,038,825 ============ ============ Shares issued and outstanding as of June 30, 2003.......................... 4,490,357 2,568,356 NET ASSET VALUE PER SHARE............... $ 10.03 $ 10.52 ============ ============
SEE ACCOMPANYING NOTES. 6
STRATEGIC YIELD MANAGED MONEY MARKET BLUE CHIP PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------- ------------- ------------- ------------- ASSETS Investments in securities, at value (cost -- $46,294,730; $27,540,423; $23,458,457; $54,291,700; $6,535,338; and $67,384,688, respectively)......... $ 23,515,388 $ 58,522,532 $ 6,535,338 $ 69,825,072 Cash.................................... 45,464 62,838 112,161 -- Accrued dividends and interest receivable............................. 528,505 145,587 878 84,427 Prepaid expense and other assets........ 1,210 811 114 935 ------------ ------------ ------------ ------------ Total Assets............................ $ 24,090,567 $ 58,731,768 $ 6,648,491 $ 69,910,434 ============ ============ ============ ============ LIABILITIES AND NET ASSETS Liabilities: Investment securities purchased....... $ -- $ -- $ -- $ -- Net outstanding redemptions in excess of bank balance...................... -- -- -- 94,121 Accrued expenses...................... 3,612 5,118 3,846 4,956 ------------ ------------ ------------ ------------ Total Liabilities....................... 3,612 5,118 3,846 99,077 Net assets applicable to shares of beneficial interest.................... 24,086,955 58,726,650 6,644,645 69,811,357 ------------ ------------ ------------ ------------ Total Liabilities and Net Assets........ $ 24,090,567 $ 58,731,768 $ 6,648,491 $ 69,910,434 ============ ============ ============ ============ Shares issued and outstanding as of June 30, 2003.......................... 2,663,262 4,459,346 6,644,645 2,349,522 NET ASSET VALUE PER SHARE............... $ 9.04 $ 13.17 $ 1.00 $ 29.71 ============ ============ ============ ============
7 EQUITRUST VARIABLE INSURANCE SERIES FUND STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
HIGH GRADE VALUE GROWTH BOND PORTFOLIO PORTFOLIO ------------- ------------- INVESTMENT INCOME Dividends............................... $ 345,081 $ 49,963 Interest................................ 36,810 594,610 Foreign tax withholding................. (2,172) -- ------------ ------------ Total Investment Income................. 379,719 644,573 EXPENSES Paid to EquiTrust Investment Management Services, Inc.: Investment advisory and management fees.................................. 92,128 38,910 Accounting fees........................ 10,236 6,485 Custodial fees.......................... 4,463 3,909 Professional fees....................... 8,138 5,253 Proxy expense........................... 9,836 4,007 Reports to shareholders................. 1,960 1,250 Trustees' fees and expenses............. 1,694 1,053 Insurance and bonds..................... 459 286 Miscellaneous........................... 2,970 3,328 ------------ ------------ Total Expenses.......................... 131,884 64,481 Expense reimbursement................... -- -- Fees paid indirectly.................... (193) (184) ------------ ------------ Net Expenses............................ 131,691 64,297 ------------ ------------ Net Investment Income................... 248,028 580,276 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) from investment transactions........................... (195,023) 3,506 Change in unrealized appreciation/depreciation of investments............................ 4,579,909 462,731 ------------ ------------ Net Gain (Loss) on Investments.......... 4,384,886 466,237 ------------ ------------ Net Increase (Decrease) in Net Assets Resulting from Operations.............. $ 4,632,914 $ 1,046,513 ============ ============
SEE ACCOMPANYING NOTES. 8
STRATEGIC YIELD MANAGED MONEY MARKET BLUE CHIP PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividends............................... $ 52,229 $ 597,419 $ -- $ 639,321 Interest................................ 909,988 241,646 42,499 18,900 Foreign tax withholding................. -- (3,335) -- -- ------------ ------------ ------------ ------------ Total Investment Income................. 962,217 835,730 42,499 658,221 EXPENSES Paid to EquiTrust Investment Management Services, Inc.: Investment advisory and management fees.................................. 51,421 122,500 8,840 64,129 Accounting fees........................ 5,713 13,611 1,768 15,012 Custodial fees.......................... 3,356 4,454 3,607 3,429 Professional fees....................... 4,715 10,491 1,961 12,237 Proxy expense........................... 4,574 9,954 643 14,460 Reports to shareholders................. 1,096 2,595 331 3,114 Trustees' fees and expenses............. 921 2,231 282 2,621 Insurance and bonds..................... 256 606 85 725 Miscellaneous........................... 3,116 4,565 3,203 4,378 ------------ ------------ ------------ ------------ Total Expenses.......................... 75,168 171,007 20,720 120,105 Expense reimbursement................... (866) -- -- -- Fees paid indirectly.................... (242) (174) (250) (229) ------------ ------------ ------------ ------------ Net Expenses............................ 74,060 170,833 20,470 119,876 ------------ ------------ ------------ ------------ Net Investment Income................... 888,157 664,897 22,029 538,345 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) from investment transactions........................... 53,671 27,853 -- (4,690,809) Change in unrealized appreciation/depreciation of investments............................ 722,286 4,490,226 -- 11,000,379 ------------ ------------ ------------ ------------ Net Gain (Loss) on Investments.......... 775,957 4,518,079 -- 6,309,570 ------------ ------------ ------------ ------------ Net Increase (Decrease) in Net Assets Resulting from Operations.............. $ 1,664,114 $ 5,182,976 $ 22,029 $ 6,847,915 ============ ============ ============ ============
9 EQUITRUST VARIABLE INSURANCE SERIES FUND STATEMENTS OF CHANGES IN NET ASSETS
VALUE GROWTH PORTFOLIO ----------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, (UNAUDITED) 2002 -------------- ------------- OPERATIONS Net investment income................... $ 248,028 $ 632,800 Net realized gain (loss) from investment transactions........................... (195,023) 1,208,684 Change in unrealized appreciation/depreciation of investments............................ 4,579,909 (6,690,817) ------------ ------------ Net Increase (Decrease) in Net Assets Resulting from Operations.............. 4,632,914 (4,849,333) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income................... (632,800) (815,691) Net realized gain from investment transactions........................... -- -- ------------ ------------ Total Dividends and Distributions....... (632,800) (815,691) CAPITAL SHARE TRANSACTIONS.............. 91,978 1,095,790 ------------ ------------ Total Increase (Decrease) in Net Assets................................. 4,092,092 (4,569,234) NET ASSETS Beginning of period..................... 40,953,105 45,522,339 ------------ ------------ End of period (including undistributed net investment income as set forth below)................................. $ 45,045,197 $ 40,953,105 ============ ============ Undistributed Net Investment Income..... $ 248,028 $ 632,800 ============ ============
SEE ACCOMPANYING NOTES. 10
HIGH STRATEGIC GRADE BOND YIELD PORTFOLIO PORTFOLIO ----------------------------- ----------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, JUNE 30, 2003 DECEMBER 31, (UNAUDITED) 2002 (UNAUDITED) 2002 -------------- ------------- -------------- ------------- OPERATIONS Net investment income................... $ 580,276 $ 1,099,597 $ 888,157 $ 1,537,019 Net realized gain (loss) from investment transactions........................... 3,506 126,083 53,671 (227,764) Change in unrealized appreciation/depreciation of investments............................ 462,731 558,780 722,286 (151,342) ------------ ------------ ------------ ------------ Net Increase (Decrease) in Net Assets Resulting from Operations.............. 1,046,513 1,784,460 1,664,114 1,157,913 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income................... (580,276) (1,099,597) (888,157) (1,537,019) Net realized gain from investment transactions........................... (126,083) (19,864) -- -- ------------ ------------ ------------ ------------ Total Dividends and Distributions....... (706,359) (1,119,461) (888,157) (1,537,019) CAPITAL SHARE TRANSACTIONS.............. 1,695,112 5,411,928 915,567 2,592,491 ------------ ------------ ------------ ------------ Total Increase (Decrease) in Net Assets................................. 2,035,266 6,076,927 1,691,524 2,213,385 NET ASSETS Beginning of period..................... 24,984,473 18,907,546 22,395,431 20,182,046 ------------ ------------ ------------ ------------ End of period (including undistributed net investment income as set forth below)................................. $ 27,019,739 $ 24,984,473 $ 24,086,955 $ 22,395,431 ============ ============ ============ ============ Undistributed Net Investment Income..... $ -- $ -- $ -- $ -- ============ ============ ============ ============
11 EQUITRUST VARIABLE INSURANCE SERIES FUND STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MANAGED PORTFOLIO ----------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, (UNAUDITED) 2002 -------------- ------------- OPERATIONS Net investment income................... $ 664,897 $ 1,494,900 Net realized gain (loss) from investment transactions........................... 27,853 1,015,684 Change in unrealized appreciation/depreciation of investments............................ 4,490,226 (3,624,741) ------------ ------------ Net Increase (Decrease) in Net Assets Resulting from Operations.............. 5,182,976 (1,114,157) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income................... (1,494,900) (1,801,236) Net realized gain from investment transactions........................... -- -- ------------ ------------ Total Dividends and Distributions....... (1,494,900) (1,801,236) CAPITAL SHARE TRANSACTIONS.............. 610,771 3,548,291 ------------ ------------ Total Increase (Decrease) in Net Assets................................. 4,298,847 632,898 NET ASSETS Beginning of period..................... 54,427,803 53,794,905 ------------ ------------ End of period (including undistributed net investment income as set forth below)................................. $ 58,726,650 $ 54,427,803 ============ ============ Undistributed Net Investment Income..... $ 664,897 $ 1,494,900 ============ ============
SEE ACCOMPANYING NOTES. 12
MONEY MARKET BLUE CHIP PORTFOLIO PORTFOLIO ----------------------------- ----------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, JUNE 30, 2003 DECEMBER 31, (UNAUDITED) 2002 (UNAUDITED) 2002 -------------- ------------- -------------- ------------- OPERATIONS Net investment income................... $ 22,029 $ 95,445 $ 538,345 $ 1,066,311 Net realized gain (loss) from investment transactions........................... -- -- (4,690,809) (1,786,208) Change in unrealized appreciation/depreciation of investments............................ -- -- 11,000,379 (14,510,432) ------------ ------------ ------------ ------------ Net Increase (Decrease) in Net Assets Resulting from Operations.............. 22,029 95,445 6,847,915 (15,230,329) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income................... (22,029) (95,445) (1,066,311) (1,156,568) Net realized gain from investment transactions........................... -- -- -- -- ------------ ------------ ------------ ------------ Total Dividends and Distributions....... (22,029) (95,445) (1,066,311) (1,156,568) CAPITAL SHARE TRANSACTIONS.............. (1,504,896) (1,170,621) 331,135 961,297 ------------ ------------ ------------ ------------ Total Increase (Decrease) in Net Assets................................. (1,504,896) (1,170,621) 6,112,739 (15,425,600) NET ASSETS Beginning of period..................... 8,149,541 9,320,162 63,698,618 79,124,218 ------------ ------------ ------------ ------------ End of period (including undistributed net investment income as set forth below)................................. $ 6,644,645 $ 8,149,541 $ 69,811,357 $ 63,698,618 ============ ============ ============ ============ Undistributed Net Investment Income..... $ -- $ -- $ 538,345 $ 1,066,311 ============ ============ ============ ============
13 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS VALUE GROWTH PORTFOLIO JUNE 30, 2003 (UNAUDITED)
SHARES HELD VALUE ------------- -------------- COMMON STOCKS (88.11%) - --------------------------- BUSINESS SERVICES (2.98%) AOL Time Warner, Inc............................................ 9,600(1) $ 154,465 Computer Associates International, Inc.......................... 12,055 268,585 Compuware Corp.................................................. 16,050(1) 92,609 Microsoft Corp.................................................. 14,800 379,028 Oracle Corp..................................................... 12,300(1) 147,846 Symantec Corp................................................... 6,800(1) 298,248 ------------- 1,340,781 CHEMICALS AND ALLIED PRODUCTS (9.38%) Abbott Laboratories............................................. 8,000 350,080 Bristol-Myers Squibb Co......................................... 12,540 340,461 E.I. du Pont de Nemours & Co.................................... 6,400 266,496 GlaxoSmithKline plc............................................. 5,500 222,970 IVAX Corp....................................................... 17,800(1) 317,730 Johnson & Johnson............................................... 5,400 279,180 KV Pharmaceutical Co.-Class A................................... 12,800(1) 355,840 Lyondell Chemical Co............................................ 9,800 132,594 Merck & Co., Inc................................................ 6,850 414,768 Mylan Laboratories, Inc......................................... 14,550 505,904 Olin Corp....................................................... 6,400 109,440 Pfizer, Inc..................................................... 19,449 664,183 Wyeth........................................................... 5,835 265,784 ------------- 4,225,430 COMMUNICATIONS (2.09%) ADC Telecommunications, Inc..................................... 67,700(1) 157,606 Centurytel, Inc................................................. 14,200 494,870 Comcast Corp.-Class A........................................... 3,235(1) 97,632 SBC Communications, Inc......................................... 7,500 191,625 ------------- 941,733 DEPOSITORY INSTITUTIONS (6.71%) Associated Banc-Corp............................................ 8,627 318,164 Astoria Financial Corp.......................................... 7,700 215,061 Citigroup, Inc.................................................. 7,430 318,004 Community Bank Systems, Inc..................................... 4,710 178,980 FleetBoston Financial Corp...................................... 18,760 557,359 U. S. Bancorp................................................... 34,796 852,502 Wachovia Corp................................................... 7,650 305,694 Wilmington Trust Corp........................................... 9,500 278,825 ------------- 3,024,589
14 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS VALUE GROWTH PORTFOLIO (CONTINUED)
SHARES HELD VALUE ------------- -------------- EATING & DRINKING PLACES (0.54%) Wendy's International, Inc...................................... 8,400 $ 243,348 ELECTRIC, GAS AND SANITARY SERVICES (6.87%) Alliant Energy Corp............................................. 8,660 164,800 Atmos Energy Corp............................................... 21,912 543,418 Black Hills Corp................................................ 8,920 273,844 Laclede Group, Inc.............................................. 15,675 420,090 Nisource, Inc................................................... 24,800 471,200 Northwest Natural Gas Co........................................ 21,000 572,250 Puget Energy, Inc............................................... 14,330 342,057 Xcel Energy, Inc................................................ 20,305 305,387 ------------- 3,093,046 ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT (2.22%) Acuity Brands, Inc.............................................. 18,500 336,145 Adaptec, Inc.................................................... 23,150(1) 180,107 ECI Telecom, Ltd................................................ 10,000(1) 29,400 Electronic Data Systems Corp.................................... 11,445 245,495 Intel Corp...................................................... 8,900 184,978 Roxio, Inc...................................................... 3,810(1) 25,489 ------------- 1,001,614 ENGINEERING & MANAGEMENT SERVICES (0.28%) Affymetrix, Inc................................................. 3,400(1) 67,014 Monsanto Co..................................................... 2,778 60,116 ------------- 127,130 FABRICATED METAL PRODUCTS (1.18%) Cooper Industries, Ltd.......................................... 6,738 278,279 Shaw Group, Inc................................................. 10,400(1) 125,320 Stanley Works (The)............................................. 4,600 126,960 ------------- 530,559 FOOD AND KINDRED PRODUCTS (5.90%) ConAgra Foods, Inc.............................................. 46,616 1,100,137 Dean Foods Co................................................... 16,986(1) 535,059 Sara Lee Corp................................................... 23,400 440,154 Sensient Technologies Corp...................................... 25,405 584,061 ------------- 2,659,411 FOOD STORES (4.29%) 7-Eleven, Inc................................................... 72,380(1) 763,609 Casey's General Stores, Inc..................................... 39,632 560,396 Kroger Co....................................................... 10,900(1) 181,812 Safeway, Inc.................................................... 20,730(1) 424,136 ------------- 1,929,953
15 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS VALUE GROWTH PORTFOLIO (CONTINUED)
SHARES HELD VALUE ------------- -------------- GENERAL MERCHANDISE STORES (1.15%) Federated Department Stores, Inc................................ 8,608 $ 317,205 Target Corp..................................................... 5,300 200,552 ------------- 517,757 HEALTH SERVICES (6.07%) Laboratory Corp. of America Holdings............................ 18,500(1) 557,775 Province Healthcare Co.......................................... 35,900(1) 397,413 Schering-Plough Corp............................................ 23,200 431,520 Select Medical Corp............................................. 24,700(1) 613,301 Taro Pharmaceutical Industries, Ltd............................. 6,600(1) 362,208 Universal Health Services, Inc.-Class B......................... 9,420(1) 373,220 ------------- 2,735,437 HOLDING AND OTHER INVESTMENT OFFICES (3.74%) Highwoods Properties, Inc....................................... 17,500 390,250 MBIA, Inc....................................................... 18,700 911,625 Reckson Assoc. Realty Corp.-Class A............................. 9,125 190,348 Reckson Assoc. Realty Corp.-Class B............................. 9,125 194,362 ------------- 1,686,585 INDUSTRIAL MACHINERY AND EQUIPMENT (2.65%) Cisco Systems, Inc.............................................. 6,500(1) 108,485 EMC Corp........................................................ 22,500(1) 235,575 Hewlett-Packard Co.............................................. 6,000 127,800 Ingersoll-Rand Co. Ltd.-Class A................................. 13,450 636,454 Solectron Corp.................................................. 22,500(1) 84,150 ------------- 1,192,464 INSTRUMENTS AND RELATED PRODUCTS (4.56%) Agilent Technologies, Inc....................................... 7,000(1) 136,850 Becton Dickinson & Co........................................... 22,800 885,780 JDS Uniphase Corp............................................... 16,400(1) 57,564 Pall Corp....................................................... 35,980 809,550 Perkinelmer, Inc................................................ 11,900 164,339 ------------- 2,054,083 INSURANCE CARRIERS (2.93%) Allstate Corp................................................... 18,100 645,265 American International Group, Inc............................... 7,450 411,091 Protective Life Corp............................................ 9,300 248,775 Travelers Property Casualty Corp.-Class A....................... 321 5,104 Travelers Property Casualty Corp.-Class B....................... 659 10,392 ------------- 1,320,627 METAL MINING (0.80%) Barrick Gold Corp............................................... 20,000 358,000
16 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS VALUE GROWTH PORTFOLIO (CONTINUED)
SHARES HELD VALUE ------------- -------------- MISCELLANEOUS MANUFACTURING INDUSTRY (0.76%) Emerson Electric Co............................................. 2,300 $ 117,530 Hasbro, Inc..................................................... 12,900 225,621 ------------- 343,151 NONDEPOSITORY INSTITUTIONS (0.74%) Federal Home Loan Mortgage Corp................................. 6,500 330,005 OIL AND GAS EXTRACTION (4.60%) Burlington Resources, Inc....................................... 10,000 540,700 EOG Resources, Inc.............................................. 5,800 242,672 Occidental Petroleum Co......................................... 10,400 348,920 Offshore Logistics, Inc......................................... 18,500(1) 402,375 Rowan Companies, Inc............................................ 16,900(1) 378,560 Veritas DGC, Inc................................................ 13,800(1) 158,700 ------------- 2,071,927 PAPER AND ALLIED PRODUCTS (1.90%) Abitibi Consolidated, Inc....................................... 92,600 593,566 Sonoco Products Co.............................................. 10,900 261,818 ------------- 855,384 PETROLEUM AND COAL PRODUCTS (4.58%) BP Amoco........................................................ 6,000 252,120 ChevronTexaco Corp.............................................. 7,050 509,010 ConocoPhillips.................................................. 16,833 922,448 Marathon Oil Corp............................................... 14,400 379,440 ------------- 2,063,018 PRIMARY METAL INDUSTRIES (0.82%) Northwest Pipe Co............................................... 26,100(1) 370,359 PRINTING AND PUBLISHING (2.30%) Belo Corp....................................................... 26,400 590,304 Mail-Well, Inc.................................................. 79,200(1) 199,584 R.R. Donnelley & Sons Co........................................ 9,400 245,716 ------------- 1,035,604 TOBACCO PRODUCTS (1.49%) Altria Group, Inc............................................... 14,800 672,512 TRANSPORTATION -- BY AIR (0.98%) Petroleum Helicopters, Inc. (Non-Voting)........................ 14,690(1) 442,904 TRANSPORTATION EQUIPMENT (3.17%) Genuine Parts Co................................................ 3,300 105,633 Honeywell International, Inc.................................... 23,500 630,975 ITT Industries, Inc............................................. 4,185 273,950 SPX Corp........................................................ 9,514(1) 419,187 ------------- 1,429,745
17 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS VALUE GROWTH PORTFOLIO (CONTINUED)
SHARES HELD VALUE ------------- -------------- WHOLESALE -- DURABLE GOODS (0.65%) Apogent Technologies, Inc....................................... 14,600(1) $ 292,000 MISCELLANEOUS EQUITIES (1.78%) H & Q Life Sciences Investors................................... 21,424 320,717 NASDAQ-100 Trust................................................ 16,100(1) 482,195 ------------- 802,912 ------------- Total Common Stocks............................................... 39,692,068 SHORT-TERM INVESTMENTS (11.85%) - ------------------------------------ MONEY MARKET MUTUAL FUND (1.64%) Blackrock Provident Institutional Funds, T-Fund Portfolio....... 736,649 736,649 PRINCIPAL AMOUNT ------------- COMMERCIAL PAPER (7.55%) DEPOSITORY INSTITUTIONS (2.22%) Wells Fargo Corp., 1.01%, due 7/07/03......................... $1,000,000 1,000,000 NONDEPOSITORY INSTITUTIONS (5.33%) American General Finance Corp., 1.00%, due 7/03/03............ 1,400,000 1,400,000 General Electric Capital Corp., 1.05%, due 7/01/03............ 1,000,000 1,000,000 ------------- 2,400,000 ------------- Total Commercial Paper.......................................... 3,400,000 UNITED STATES GOVERNMENT AGENCIES (2.66%) Federal Home Loan Bank, due 7/11/03............................. 750,000 749,802 Federal National Mortgage Assoc., due 7/17/03................... 450,000 449,818 ------------- 1,199,620 ------------- Total Short-Term Investments...................................... 5,336,269 ------------- Total Investments (99.96%)........................................ 45,028,337 OTHER ASSETS LESS LIABILITIES (0.04%) - ----------------------------------------- Cash, receivables, prepaid expense and other assets, less liabilities.................................................... 16,860 ------------- Total Net Assets (100.00%)........................................ $ 45,045,197 =============
(1) Non-income producing securities. SEE ACCOMPANYING NOTES. 18 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS HIGH GRADE BOND PORTFOLIO JUNE 30, 2003 (UNAUDITED)
SHARES HELD VALUE ------------- -------------- PREFERRED STOCKS (5.48%) - ----------------------------- DEPOSITORY INSTITUTIONS (1.68%) Chase Capital V, 7.03%, due 3/31/28............................. 18,000 $ 452,880 ELECTRIC, GAS AND SANITARY SERVICES (3.04%) Virginia Electric & Power-Series A, 6.70%, due 6/30/09.......... 32,000 822,080 HOLDING AND OTHER INVESTMENT OFFICES (0.76%) New Plan Excel Realty Trust-Series D, 7.80%..................... 4,000 204,625 ------------- Total Preferred Stocks............................................ 1,479,585 PRINCIPAL AMOUNT ------------- CORPORATE BONDS (26.40%) - ----------------------------- ELECTRIC, GAS AND SANITARY SERVICES (7.80%) Maritime & NE Pipeline, 144A, 7.70%, due 11/30/19............... $ 700,000 872,823 Oglethorpe Power (OPC Scherer), 6.974%, due 6/30/11............. 300,000 332,820 PacifiCorp, 6.90%, due 11/15/11................................. 750,000 902,467 ------------- 2,108,110 FOOD STORES (2.29%) Ahold Finance USA, Inc., 8.25%, due 7/15/10..................... 600,000 618,000 GENERAL MERCHANDISE STORES (1.08%) J.C. Penney & Co., 8.25%, due 8/15/22........................... 300,000 291,000 HOLDING AND OTHER INVESTMENT OFFICES (3.11%) Meditrust, 7.60%, due 9/13/05................................... 150,000 156,375 Security Capital Pacific, 7.20%, due 3/01/13.................... 275,000 318,824 Washington REIT, 6.898%, due 2/15/18............................ 350,000 365,568 ------------- 840,767 TEXTILE MILL PRODUCTS (0.88%) Unifi, 6.50%, due 2/01/08....................................... 280,000 238,000 TOBACCO PRODUCTS (3.29%) UST, Inc., 7.25%, due 6/01/09................................... 750,000 888,128 TRANSPORTATION -- BY AIR (7.36%) Continental Airlines, Inc., 6.545%, due 8/02/20................. 435,525 419,193 Federal Express, 7.50%, due 1/15/18............................. 207,691 249,215 Northwest Airlines, 7.575%, due 3/01/19......................... 718,258 720,054 US Air, Inc., 8.36%, due 1/20/19................................ 636,268 599,683 ------------- 1,988,145 TRANSPORTATION EQUIPMENT (0.59%) Ford Motor Co., 9.215%, due 9/15/21............................. 150,000 160,433 ------------- Total Corporate Bonds............................................. 7,132,583
19 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS HIGH GRADE BOND PORTFOLIO (CONTINUED)
PRINCIPAL AMOUNT VALUE ------------- -------------- MORTGAGE-BACKED SECURITIES (47.23%) - ------------------------------------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (0.02%) Pool #50276, 9.50%, due 2/01/20................................. $ 3,839 $ 4,273 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (47.21%) Pool #1512, 7.50%, due 12/20/23................................. 78,887 84,009 Pool #2631, 7.00%, due 8/01/28.................................. 165,100 174,017 Pool #2658, 6.50%, due 10/01/28................................. 260,472 272,694 Pool #2701, 6.50%, due 1/20/29.................................. 297,091 310,949 Pool #2796, 7.00%, due 8/01/29.................................. 287,912 303,233 Pool #3039, 6.50%, due 2/01/31.................................. 133,833 139,909 Pool #3040, 7.00%, due 2/01/31.................................. 255,496 268,891 Pool #3188, 6.50%, due 2/20/32.................................. 785,312 820,923 Pool #3239, 6.50%, due 5/01/32.................................. 714,212(2) 746,599 Pool #3261, 6.50%, due 7/20/32.................................. 1,336,609(2) 1,397,219 Pool #3320, 5.50%, due 12/01/32................................. 2,372,789 2,466,642 Pool #3333, 5.50%, due 1/01/33.................................. 1,902,502 1,977,714 Pool #3375, 5.50%, due 4/01/33.................................. 282,823 294,003 Pool #3390, 5.50%, due 5/01/33.................................. 1,204,997 1,252,634 Pool #4567, 5.50%, due 6/20/33.................................. 2,000,000(1) 2,080,625 Pool #22630, 6.50%, due 8/01/28................................. 142,289 148,965 Pool #276337, 10.00%, due 8/15/19............................... 15,817 18,233 ------------- 12,757,259 ------------- Total Mortgage-Backed Securities.................................. 12,761,532 UNITED STATES TREASURY OBLIGATION (1.58%) - ------------------------------------------------ U.S. Treasury Note, 7.25%, due 8/15/04.......................... 400,000 427,752 SHORT-TERM INVESTMENTS (25.83%) - ------------------------------------ COMMERCIAL PAPER (8.51%) DEPOSITORY INSTITUTIONS (1.85%) Wells Fargo Corp., 1.01%, due 7/21/03......................... 500,000 500,000 NONDEPOSITORY INSTITUTIONS (5.18%) American General Finance Corp., 1.00%, due 7/01/03............ 900,000 900,000 General Electric Capital Corp., 1.10%, due 7/10/03............ 500,000 500,000 ------------- 1,400,000 PETROLEUM AND COAL PRODUCTS (1.48%) ChevronTexaco Corp., 1.20%, due 7/07/03....................... 400,000 400,000 ------------- Total Commercial Paper.......................................... 2,300,000
20 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS HIGH GRADE BOND PORTFOLIO (CONTINUED)
PRINCIPAL AMOUNT VALUE ------------- -------------- UNITED STATES GOVERNMENT AGENCIES (15.73%) Federal Home Loan Bank, due 7/01/03............................. $1,900,000 $ 1,900,000 Federal Home Loan Bank, due 7/14/03............................. 500,000 499,809 Federal National Mortgage Assoc., due 7/07/03................... 350,000 349,932 Federal National Mortgage Assoc., due 7/11/03................... 500,000 499,872 Federal National Mortgage Assoc., due 7/17/03................... 1,000,000 999,595 ------------- 4,249,208 SHARES HELD ------------- MONEY MARKET MUTUAL FUND (1.59%) Blackrock Provident Institutional Funds, T-Fund Portfolio ...... 429,795 429,795 ------------- Total Short-Term Investments...................................... 6,479,003 ------------- Total Investments (106.52%)....................................... 28,780,455 OTHER ASSETS LESS LIABILITIES (-6.52%) - ------------------------------------------ Cash, receivables, prepaid expense and other assets, less liabilities.................................................... (1,760,716) ------------- Total Net Assets (100.00%)........................................ $ 27,019,739 =============
(1) Firm commitment to purchase on July 22, 2003. (2) Trade restricted and held in a segregated account to cover firm commitment. SEE ACCOMPANYING NOTES. 21 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS STRATEGIC YIELD PORTFOLIO JUNE 30, 2003 (UNAUDITED)
SHARES HELD VALUE ------------- -------------- PREFERRED STOCKS (5.31%) - ----------------------------- HOLDING AND OTHER INVESTMENT OFFICES (1.49%) New Plan Excel Realty Trust -- Series D, 7.80%.................. 7,000 $ 358,094 METAL MINING (3.82%) Cameco Corp., 8.75%, due 9/30/47................................ 36,000 919,800 ------------- Total Preferred Stocks............................................ 1,277,894 PRINCIPAL AMOUNT ------------- CORPORATE BONDS (83.43%) - ----------------------------- CHEMICALS AND ALLIED PRODUCTS (9.67%) Lyondell Chemical Co., 9.625%, due 5/01/07...................... $ 900,000 891,000 Nova Chemicals, Ltd., 7.875%, due 9/15/25....................... 800,000 731,040 Polyone Corp., 8.875%, due 5/01/12.............................. 750,000 708,000 ------------- 2,330,040 COMMUNICATIONS (2.33%) Telephone & Data Systems, Inc., 7.00%, due 8/01/06.............. 500,000 560,075 ELECTRIC, GAS AND SANITARY SERVICES (25.82%) Alliant Energy Resources, Inc., 9.75%, due 1/15/13.............. 1,000,000 1,320,630 Allied Waste North America, 10.00%, due 8/01/09................. 800,000 856,000 Cleveland Electric Illuminating Co., 9.00%, due 7/01/23......... 1,000,000 1,039,840 ESI Tractebel, 7.99%, due 12/30/11.............................. 320,000 322,000 Gulf States Utilities, 8.94%, due 1/01/22....................... 700,000 731,192 Northwestern Corp., 8.75%, due 3/15/12.......................... 1,000,000 775,000 Semco Energy, Inc., 144A, 7.125%, due 5/15/08................... 900,000 940,500 Waterford 3 Nuclear Power Plant, 8.09%, due 1/02/17............. 213,225 235,121 ------------- 6,220,283 FOOD STORES (0.12%) Penn Traffic Co., 11.00%, due 6/29/09........................... 47,850 28,949 GENERAL MERCHANDISE STORES (1.76%) DR Structured Finance, 8.35%, due 2/15/04....................... 376,794 131,878 J.C. Penney & Co., 8.25%, due 8/15/22........................... 300,000 291,000 ------------- 422,878 HOLDING AND OTHER INVESTMENT OFFICES (9.31%) Bradley Operating, L.P., 7.20%, due 1/15/08..................... 450,000 450,581 Federal Realty Investment Trust, 7.48%, due 8/15/26............. 600,000 679,549 iStar Financial Inc., 7.00%, due 3/15/08........................ 300,000 316,500 Price Development Company, 7.29%, due 3/11/08................... 450,000 474,786 Trinet Corp. Realty, 6.75%, due 3/01/13......................... 300,000 322,002 ------------- 2,243,418
22 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS STRATEGIC YIELD PORTFOLIO (CONTINUED)
PRINCIPAL AMOUNT VALUE ------------- -------------- INDUSTRIAL MACHINERY AND EQUIPMENT (3.77%) AGCO Corp., 8.50%, due 3/15/06.................................. $ 900,000 $ 906,750 LUMBER AND WOOD PRODUCTS (1.55%) Georgia-Pacific Corp., 9.875%, due 11/01/21..................... 225,000 227,250 Georgia-Pacific Corp., 9.125%, due 7/01/22...................... 150,000 146,250 ------------- 373,500 METAL MINING (4.88%) Great Central Mining Corp., 8.875%, due 4/01/08................. 900,000 454,500 Teck Cominco Ltd., 3.75%, due 7/15/06........................... 800,000 721,000 ------------- 1,175,500 PAPER AND ALLIED PRODUCTS (8.74%) Bowater Inc., 9.375%, due 12/15/21.............................. 900,000 984,591 Potlatch Corp., 12.5%, due 12/01/09............................. 900,000 1,121,031 ------------- 2,105,622 TRANSPORTATION -- BY AIR (11.53%) Continental Airlines, Inc., 7.461%, due 4/01/15................. 1,294,914 1,196,177 Northwest Airlines, 7.575%, due 3/01/19......................... 210,988 211,516 United Airlines, 7.783%, due 1/01/14............................ 1,692,636 1,368,919 ------------- 2,776,612 WATER TRANSPORTATION (3.95%) Windsor Petroleum Transportation, 144A, 7.84%, due 1/15/21...... 1,000,000 951,390 ------------- Total Corporate Bonds............................................. 20,095,017 SHORT-TERM INVESTMENTS (8.89%) - ----------------------------------- COMMERCIAL PAPER (4.15%) NONDEPOSITORY INSTITUTIONS American General Finance Corp., 1.03%, due 7/03/03............ 450,000 450,000 General Electric Capital Corp., 1.21%, due 7/09/03............ 550,000 550,000 ------------- 1,000,000 UNITED STATES GOVERNMENT AGENCIES (3.11%) Federal National Mortgage Assoc., due 7/11/03................... 750,000 749,808 SHARES HELD ------------- MONEY MARKET MUTUAL FUND (1.63%) Blackrock Provident Institutional Funds, T-Fund Portfolio....... 392,669 392,669 ------------- Total Short-Term Investments...................................... 2,142,477 ------------- Total Investments (97.63%)........................................ 23,515,388
23 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS STRATEGIC YIELD PORTFOLIO (CONTINUED)
VALUE -------------- OTHER ASSETS LESS LIABILITIES (2.37%) - ----------------------------------------- Cash, receivables, prepaid expense and other assets, less liabilities.................................................... $ 571,567 ------------- Total Net Assets (100.00%)........................................ $ 24,086,955 =============
SEE ACCOMPANYING NOTES. 24 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS MANAGED PORTFOLIO JUNE 30, 2003 (UNAUDITED)
SHARES HELD VALUE ------------- -------------- COMMON STOCKS (67.69%) - --------------------------- BUSINESS SERVICES (1.33%) Computer Associates International, Inc.......................... 7,100 $ 158,188 Compuware Corp.................................................. 17,000(1) 98,090 Microsoft Corp.................................................. 7,400 189,514 Symantec Corp................................................... 7,600(1) 333,336 ------------- 779,128 CHEMICALS AND ALLIED PRODUCTS (6.79%) Bristol-Myers Squibb Co......................................... 12,300 333,945 GlaxoSmithKline plc............................................. 4,700 190,538 IVAX Corp....................................................... 21,500(1) 383,775 Johnson & Johnson............................................... 7,200 372,240 KV Pharmaceutical Co.-Class A................................... 8,400(1) 233,520 Lyondell Chemical Co............................................ 21,300 288,189 Merck & Co., Inc................................................ 11,450 693,297 Mylan Laboratories, Inc......................................... 17,550 610,214 Olin Corp....................................................... 17,100 292,410 Pfizer, Inc..................................................... 17,310 591,136 ------------- 3,989,264 COMMUNICATIONS (1.37%) ADC Telecommunications.......................................... 39,900(1) 92,887 Centurytel, Inc................................................. 17,040 593,844 Comcast Corp.-Class A........................................... 3,930(1) 118,608 ------------- 805,339 DEPOSITORY INSTITUTIONS (6.38%) Associated Banc Corp............................................ 15,222 561,387 Astoria Financial Corp.......................................... 10,100 282,093 Community Bank Systems, Inc..................................... 10,685 406,030 FleetBoston Financial Corp...................................... 20,055 595,834 U. S. Bancorp................................................... 49,082 1,202,509 Wachovia Corp................................................... 8,328 332,787 Wilmington Trust Corp........................................... 12,500 366,875 ------------- 3,747,515
25 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS MANAGED PORTFOLIO (CONTINUED)
SHARES HELD VALUE ------------- -------------- ELECTRIC, GAS AND SANITARY SERVICES (10.70%) Alliant Energy Corp............................................. 22,115 $ 420,848 Atmos Energy Corp............................................... 44,552 1,104,890 Black Hills Corp................................................ 15,955 489,818 Laclede Group, Inc.............................................. 32,842 880,166 Nisource, Inc................................................... 32,000 608,000 Northwest Natural Gas Co........................................ 46,400 1,264,400 Puget Energy, Inc............................................... 32,360 772,433 Xcel Energy, Inc................................................ 49,290 741,322 ------------- 6,281,877 ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (2.17%) Acuity Brands, Inc.............................................. 33,850 615,055 Adaptec, Inc.................................................... 24,850(1) 193,333 Electronic Data Systems Corp.................................... 15,000 321,750 Intel Corp...................................................... 5,800 120,547 Roxio, Inc...................................................... 4,090(1) 27,362 ------------- 1,278,047 ENGINEERING & MANAGEMENT SERVICES (0.08%) Monsanto Co..................................................... 2,243 48,539 FABRICATED METAL PRODUCTS (1.30%) Cooper Industries, Ltd.......................................... 10,121 417,997 Stanley Works (The)............................................. 12,500 345,000 ------------- 762,997 FOOD AND KINDRED PRODUCTS (4.78%) ConAgra Foods, Inc.............................................. 49,530 1,168,908 Dean Foods Co................................................... 19,069(1) 600,674 Sara Lee Corp................................................... 24,100 453,321 Sensient Technologies Corp...................................... 25,465 585,440 ------------- 2,808,343 FOOD STORES (1.67%) 7-Eleven, Inc................................................... 29,440(1) 310,592 Kroger Co....................................................... 14,350(1) 239,358 Safeway, Inc.................................................... 21,080(1) 431,297 ------------- 981,247 GENERAL MERCHANDISE STORES (0.64%) Federated Department Stores, Inc................................ 10,281 378,855 HEALTH SERVICES (2.51%) Province Healthcare Co.......................................... 26,400(1) 292,248 Schering-Plough Corp............................................ 15,700 292,020 Select Medical Corp............................................. 12,500(1) 310,375 Taro Pharmaceutical Industries, Ltd............................. 6,030(1) 330,926 Universal Health Services, Inc.-Class B......................... 6,350(1) 251,587 ------------- 1,477,156
26 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS MANAGED PORTFOLIO (CONTINUED)
SHARES HELD VALUE ------------- -------------- HOLDING AND OTHER INVESTMENT OFFICES (2.76%) Highwoods Properties, Inc....................................... 21,500 $ 479,450 MBIA, Inc....................................................... 13,081 637,699 Reckson Associates Realty Corp.................................. 24,260 506,063 ------------- 1,623,212 INDUSTRIAL MACHINERY & EQUIPMENT (1.35%) EMC Corp........................................................ 13,800(1) 144,486 Hewlett-Packard Co.............................................. 6,900 146,970 Ingersoll-Rand Co. Ltd.-Class A................................. 10,622 502,633 ------------- 794,089 INSTRUMENTS AND RELATED PRODUCTS (2.92%) Becton Dickinson & Co........................................... 23,500 912,975 Pall Corp....................................................... 35,650 802,125 ------------- 1,715,100 INSURANCE CARRIERS (1.32%) Allstate Corp................................................... 17,100 609,615 Protective Life................................................. 6,200 165,850 ------------- 775,465 METAL MINING (1.26%) Barrick Gold Corp............................................... 41,200 737,480 MISCELLANEOUS MANUFACTURING INDUSTRY (0.27%) Emerson Electric Co............................................. 3,100 158,410 OIL AND GAS EXTRACTION (4.21%) Burlington Resources, Inc....................................... 7,500 405,525 Occidental Petroleum Co......................................... 21,500 721,325 Offshore Logistics.............................................. 35,850(1) 779,737 Rowan Companies, Inc............................................ 16,700(1) 374,080 Veritas DGC, Inc................................................ 16,400(1) 188,600 ------------- 2,469,267 PAPER AND ALLIED PRODUCTS (3.11%) Abitibi Consolidated, Inc....................................... 133,500 855,735 Glatfelter...................................................... 31,300 461,675 Sonoco Products Co.............................................. 21,200 509,224 ------------- 1,826,634 PETROLEUM AND COAL PRODUCTS (3.52%) BP Amoco........................................................ 8,100 340,362 ConocoPhillips.................................................. 21,012 1,151,458 Marathon Oil Corp............................................... 21,800 574,430 ------------- 2,066,250 PRIMARY METAL INDUSTRIES (0.11%) Wolverine Tube, Inc............................................. 11,400(1) 65,208
27 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS MANAGED PORTFOLIO (CONTINUED)
SHARES HELD VALUE ------------- -------------- PRINTING AND PUBLISHING (2.09%) Belo Corp.-Series A............................................. 33,600 $ 751,296 R.R. Donnelley & Sons Co........................................ 18,100 473,134 ------------- 1,224,430 TOBACCO PRODUCTS (1.66%) Altria Group, Inc............................................... 21,400 972,416 TRANSPORTATION EQUIPMENT (3.15%) Genuine Parts Co................................................ 8,900 284,889 Honeywell International, Inc.................................... 27,400 735,690 ITT Industries, Inc............................................. 5,095 333,519 SPX Corp........................................................ 11,228(1) 494,705 ------------- 1,848,803 WHOLESALE-DURABLE GOODS (0.24%) Apogent Technologies, Inc....................................... 7,000(1) 140,000 ------------- Total Common Stocks............................................... 39,755,071 PREFERRED STOCKS (4.76%) - ----------------------------- DEPOSITORY INSTITUTIONS (1.12%) Taylor Capital Group, Inc.-Series A, 9.00%,..................... 26,000 658,125 ELECTRIC, GAS AND SANITARY SERVICES (1.19%) Virginia Electric & Power-Series A, 6.70%, due 6/30/09.......... 27,100 696,199 PETROLEUM AND COAL PRODUCTS (2.45%) Nexen, Inc.-Series 1, 9.375%, due 3/31/48....................... 56,000 1,439,200 ------------- Total Preferred Stocks............................................ 2,793,524 PRINCIPAL AMOUNT ------------- CORPORATE BONDS (2.30%) - ---------------------------- METAL MINING Teck Cominco Ltd., 3.75%, due 7/15/06........................... $ 1,500,000 1,351,875 MORTGAGE-BACKED SECURITIES (6.35%) - ----------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (6.35%) Pool #2796, 7.00%, due 8/01/29.................................. 431,868 454,850 Pool #3040, 7.00%, due 2/01/31.................................. 319,371 336,114 Pool #3188, 6.50%, due 2/20/32.................................. 785,312 820,923 Pool #3239, 6.50%, due 5/01/32.................................. 1,196,146 1,250,387 Pool #3333, 5.50%, due 1/01/33.................................. 832,345 865,250 ------------- Total Mortgage-Backed Securities.................................. 3,727,524
28 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS MANAGED PORTFOLIO (CONTINUED)
PRINCIPAL AMOUNT VALUE ------------- -------------- SHORT-TERM INVESTMENTS (18.55%) - ------------------------------------ COMMERCIAL PAPER (13.11%) DEPOSITORY INSTITUTIONS (3.58%) Wells Fargo Corp., 1.01%, due 7/21/03......................... $ 1,000,000 $ 1,000,000 Citigroup, 0.95%, due 7/14/03................................. 1,100,000 1,100,000 ------------- 2,100,000 NONDEPOSITORY INSTITUTIONS (7.83%) American General Finance Corp., 1.16%, due 7/01/03............ 1,100,000 1,100,000 American General Finance Corp., 1.18%, due 7/07/03............ 800,000 800,000 General Electric Capital Corp., 1.21%, due 7/09/03............ 1,000,000 1,000,000 General Electric Capital Corp., 1.14%, due 7/11/03............ 800,000 800,000 General Electric Capital Corp., 0.96%, due 7/17/03............ 900,000 900,000 ------------- 4,600,000 PETROLEUM AND COAL PRODUCTS (1.70%) ChevronTexaco Corp., 1.00%, due 7/03/03....................... 1,000,000 1,000,000 ------------- Total Commercial Paper.......................................... 7,700,000 UNITED STATES GOVERNMENT AGENCIES (3.81%) Federal Farm Credit Bank, due 8/01/03........................... 750,000 749,380 Federal Home Loan Bank, due 7/25/03............................. 640,000 639,513 Federal Home Loan Mortgage Corp., due 7/15/03................... 850,000 849,699 ------------- Total United States Government Agencies......................... 2,238,592 SHARES HELD ------------- MONEY MARKET MUTUAL FUND (1.63%) Blackrock Provident Institutional Funds, T-Fund Portfolio....... 955,946 955,946 ------------- Total Short-Term Investments...................................... 10,894,538 ------------- Total Investments (99.65%)........................................ 58,522,532 OTHER ASSETS LESS LIABILITIES (0.35%) - ----------------------------------------- Cash, receivables, prepaid expense and other assets, less liabilities.................................................... 204,118 ------------- Total Net Assets (100.00%)........................................ $ 58,726,650 =============
(1) Non-income producing securities. SEE ACCOMPANYING NOTES. 29 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS MONEY MARKET PORTFOLIO JUNE 30, 2003 (UNAUDITED)
ANNUALIZED YIELD ON PURCHASE PRINCIPAL DATE AMOUNT VALUE ---------- ----------- -------------- SHORT-TERM INVESTMENTS (98.35%) - ------------------------------------ COMMERCIAL PAPER (11.89%) NONDEPOSITORY INSTITUTIONS (9.03%) American General Finance Corp., 1.21%, due 7/25/03............ 1.213% $ 300,000 $ 300,000 General Electric Capital Corp., 0.95%, due 8/04/03............ 0.951 150,000 150,000 General Electric Capital Corp., 1.13%, due 8/12/03............ 1.132 150,000 150,000 ------------- 600,000 PETROLEUM AND COAL PRODUCTS (2.86%) ChevronTexaco, Corp., 1.18%, due 8/01/03...................... 1.182 190,000 190,000 ------------- Total Commercial Paper.......................................... 790,000 UNITED STATES GOVERNMENT AGENCIES (86.46%) Federal Farm Credit Bank, due 7/11/03......................... 1.179 200,000 199,936 Federal Farm Credit Bank, due 7/22/03......................... 1.117 250,000 249,839 Federal Farm Credit Bank, due 8/06/03......................... 1.138 270,000 269,697 Federal Home Loan Bank, due 7/07/03........................... 1.106 250,000 249,955 Federal Home Loan Bank, due 7/09/03........................... 1.164 175,000 174,955 Federal Home Loan Bank, due 7/14/03........................... 1.076 300,000 299,885 Federal Home Loan Bank, due 7/16/03........................... 1.180 200,000 199,903 Federal Home Loan Bank, due 7/25/03........................... 1.158 370,000 369,718 Federal Home Loan Bank, due 7/28/03........................... 1.159 270,000 269,769 Federal Home Loan Bank, due 8/08/03........................... 0.964 150,000 149,850 Federal Home Loan Bank, due 8/20/03........................... 1.128 200,000 199,691 Federal Home Loan Mortgage Corp., due 7/03/03................. 1.169 200,000 199,987 Federal Home Loan Mortgage Corp., due 7/17/03................. 1.005 200,000 199,912 Federal Home Loan Mortgage Corp., due 7/24/03................. 1.184 125,000 124,907 Federal Home Loan Mortgage Corp., due 7/31/03................. 1.149 150,000 149,859 Federal Home Loan Mortgage Corp., due 8/21/03................. 0.904 250,000 249,685 Federal Home Loan Mortgage Corp., due 8/29/03................. 0.975 275,000 274,567 Federal Home Loan Mortgage Corp., due 9/02/03................. 1.057 190,000 189,654 Federal Home Loan Mortgage Corp., due 9/04/03................. 0.965 100,000 99,829 Federal National Mortgage Assoc., due 7/02/03................. 1.159 300,000 299,991 Federal National Mortgage Assoc., due 7/21/03................. 0.923 350,000 349,823 Federal National Mortgage Assoc., due 7/23/03................. 1.147 200,000 199,862 Federal National Mortgage Assoc., due 8/06/03................. 1.159 175,000 174,800 Federal National Mortgage Assoc., due 8/13/03................. 0.954 200,000 199,775 Federal National Mortgage Assoc., due 8/14/03................. 0.883 200,000 199,787 Federal National Mortgage Assoc., due 8/27/03................. 0.955 200,000 199,702 ------------- 5,745,338 ------------- Total Short-Term Investments...................................... 6,535,338 OTHER ASSETS LESS LIABILITIES (1.65%) - ----------------------------------------- Cash, receivables, prepaid expense and other assets, less liabilities.................................................... 109,307 ------------- Total Net Assets (100.00%)........................................ $ 6,644,645 =============
SEE ACCOMPANYING NOTES. 30 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS BLUE CHIP PORTFOLIO JUNE 30, 2003 (UNAUDITED)
SHARES HELD VALUE ------------- -------------- COMMON STOCKS (94.97%) - --------------------------- BUSINESS SERVICES (5.27%) AOL Time Warner, Inc............................................ 50,502(1) $ 812,577 Microsoft Corp.................................................. 84,480 2,163,533 Oracle Corp..................................................... 58,314(1) 700,934 ------------- 3,677,044 CHEMICALS AND ALLIED PRODUCTS (18.09%) Abbott Laboratories............................................. 25,260 1,105,378 Amgen, Inc...................................................... 18,200(1) 1,209,208 Bristol-Myers Squibb Co......................................... 36,063 979,110 Dow Chemical Co................................................. 10,720 331,891 E.I. du Pont de Nemours & Co.................................... 16,081 669,613 Johnson & Johnson............................................... 43,580 2,253,086 Eli Lilly & Co.................................................. 18,022 1,242,977 Merck & Co., Inc................................................ 28,928 1,751,590 Pfizer, Inc..................................................... 36,882 1,259,520 Procter & Gamble Co............................................. 20,521 1,830,063 ------------- 12,632,436 COMMUNICATIONS (5.94%) AT&T Corp....................................................... 9,732 187,341 Comcast Corp.-Class A........................................... 22,486(1) 678,627 SBC Communications, Inc......................................... 35,565 908,686 Verizon Communications.......................................... 32,907 1,298,181 Viacom, Inc.-Class B............................................ 24,668(1) 1,077,005 ------------- 4,149,840 DEPOSITORY INSTITUTIONS (10.90%) Bank of America................................................. 23,298 1,841,241 Citigroup, Inc.................................................. 49,326 2,111,153 J. P. Morgan Chase & Co......................................... 47,270 1,615,689 Wachovia Corp................................................... 25,980 1,038,161 Wells Fargo Co.................................................. 19,900 1,002,960 ------------- 7,609,204 EATING AND DRINKING PLACES (1.64%) McDonald's Corp................................................. 51,752 1,141,649 ELECTRIC, GAS AND SANITARY SERVICES (3.09%) Dominion Resources, Inc......................................... 11,600 745,532 Exelon Corp..................................................... 12,300 735,663 Southern Co..................................................... 21,650 674,614 ------------- 2,155,809
31 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS BLUE CHIP PORTFOLIO (CONTINUED)
SHARES HELD VALUE ------------- -------------- ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (6.49%) Applied Materials, Inc.......................................... 24,000(1) $ 380,640 General Electric Co............................................. 73,576 2,110,160 Intel Corp...................................................... 58,206 1,209,754 Motorola, Inc................................................... 37,949 357,859 Texas Instruments, Inc.......................................... 27,001 475,218 ------------- 4,533,631 FOOD AND KINDRED PRODUCTS (3.58%) Anheuser Busch Companies, Inc................................... 11,432 583,604 Coca-Cola Co. (The)............................................. 26,389 1,224,713 PepsiCo, Inc.................................................... 15,518 690,551 ------------- 2,498,868 FORESTRY (0.50%) Weyerhaeuser Co................................................. 6,400 345,600 GENERAL MERCHANDISE STORES (3.28%) Wal-Mart Stores, Inc............................................ 42,623 2,287,576 INDUSTRIAL MACHINERY AND EQUIPMENT (9.28%) 3M Co........................................................... 8,904 1,148,438 Caterpillar, Inc................................................ 14,307 796,328 Cisco Systems, Inc.............................................. 62,268(1) 1,039,253 Dell Computer Corp.............................................. 31,210(1) 997,472 EMC Corp........................................................ 38,068(1) 398,572 Hewlett-Packard Co.............................................. 41,279 879,243 International Business Machines Corp............................ 14,821 1,222,732 ------------- 6,482,038 INSTRUMENTS AND RELATED PRODUCTS (0.60%) Eastman Kodak Co................................................ 15,278 417,853 INSURANCE CARRIERS (3.00%) American International Group, Inc............................... 37,964 2,094,854 LUMBER AND WOOD PRODUCTS (1.23%) Home Depot, Inc................................................. 25,913 858,239 MOTION PICTURES (1.04%) Disney (Walt) Co................................................ 36,832 727,432 NONDEPOSITORY INSTITUTIONS (1.39%) Federal National Mortgage Assoc................................. 14,400 971,136 PAPER AND ALLIED PRODUCTS (0.89%) International Paper Co.......................................... 17,317 618,736 PETROLEUM AND COAL PRODUCTS (5.62%) ChevronTexaco Corp.............................................. 19,700 1,422,340 Exxon Mobil Corp................................................ 69,771 2,505,477 ------------- 3,927,817
32 EQUITRUST VARIABLE INSURANCE SERIES FUND SCHEDULE OF INVESTMENTS BLUE CHIP PORTFOLIO (CONTINUED)
SHARES HELD VALUE ------------- -------------- PRIMARY METAL INDUSTRIES (1.13%) Alcoa, Inc...................................................... 30,898 $ 787,899 SECURITY AND COMMODITY BROKERS (3.16%) American Express Co............................................. 52,797 2,207,443 TOBACCO PRODUCTS (2.54%) Altria Group, Inc............................................... 38,965 1,770,570 TRANSPORTATION EQUIPMENT (6.31%) Boeing Co. (The)................................................ 32,082 1,101,054 General Motors Corp............................................. 16,700 601,200 Honeywell International, Inc.................................... 38,024 1,020,944 United Technologies Corp........................................ 23,701 1,678,741 ------------- 4,401,939 ------------- Total Common Stocks............................................... 66,297,613 PRINCIPAL AMOUNT ------------- SHORT-TERM INVESTMENTS (5.05%) - ----------------------------------- COMMERCIAL PAPER (1.43%) NONDEPOSITORY INSTITUTIONS American General Finance Corp., 1.02%, due 7/25/03............ $ 1,000,000 1,000,000 UNITED STATES GOVERNMENT AGENCIES (1.79%) Federal Home Loan Bank, due 7/07/03............................. 1,250,000 1,249,760 SHARES HELD ------------- MONEY MARKET MUTUAL FUND (1.83%) Blackrock Provident Institutional Funds, T-Fund Portfolio....... 1,277,699 1,277,699 ------------- Total Short-Term Investments...................................... 3,527,459 ------------- Total Investments (100.02%)....................................... 69,825,072 OTHER ASSETS LESS LIABILITIES (-0.02%) - ------------------------------------------ Cash, receivables, prepaid expense and other assets, less liabilities.................................................... (13,715) ------------- Total Net Assets (100.00%)........................................ $ 69,811,357 =============
(1) Non-income producing securities. SEE ACCOMPANYING NOTES. 33 EQUITRUST VARIABLE INSURANCE SERIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2003 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION 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, Strategic Yield, 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 and EquiTrust Life Insurance Company (see NOTE 3). SECURITY VALUATION All portfolios, other than the Money Market Portfolio, value their investment 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, or in situations when liquidation of the holdings at quoted market prices is questionable, are valued at fair value as determined in good faith by the Fund's Board of Trustees. Short-term investments are valued at market value, except that obligations maturing in 90 days or less are valued using the amortized cost method of valuation described below with respect to the Money Market Portfolio, which approximates market. The Money Market Portfolio values investments at amortized cost, which approximates market 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. INCOME AND INVESTMENT TRANSACTIONS 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 With respect to the Money Market Portfolio, all net investment income and any realized gains and losses from investment transactions are declared as dividends daily to shareholders of record as of that day. Dividends and distributions of the other portfolios are recorded on the ex-dividend date. Dividends and distributions from net investment income and net realized gain from investments are determined in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States. These differences are primarily due to differing treatments for certain defaulted 34 EQUITRUST VARIABLE INSURANCE SERIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) securities, and basis adjustments resulting from corporate reorganizations. Permanent book and tax basis differences are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. During the period ended June 30, 2003, there were no permanent adjustments reflected in the statement of assets and liabilities. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes, but not for tax purposes, are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as a non-taxable return of capital distributions. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. FEDERAL INCOME TAXES No provision for federal income taxes is considered necessary because the Fund is qualified as a "regulated investment company" under the Internal Revenue Code and intends to distribute each year substantially all of its net investment income and realized capital gains to shareholders. As of June 30, 2003, the following Portfolios had approximate net capital loss carryforwards set forth below:
PORTFOLIO ----------------------------------------------- VALUE STRATEGIC BLUE NET CAPITAL LOSS CARRYFORWARDS EXPIRE IN: GROWTH YIELD MANAGED CHIP - ----------------------------------------- ----------- ---------- ---------- ---------- 2006............................... $ 7,077,000 $ -- $ -- $ -- 2008............................... 2,848,000 -- $2,626,000 2010............................... -- 1,784,000 -- 1,786,000 2011............................... 195,000 -- -- 4,691,000 ----------- ---------- ---------- ---------- $10,120,000 $1,784,000 $2,626,000 $6,477,000 =========== ========== ========== ==========
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 their 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 average daily net assets as follows: Value Growth Portfolio -- 0.45%; High Grade Bond Portfolio -- 0.30%; Strategic Yield 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. 35 EQUITRUST VARIABLE INSURANCE SERIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES (CONTINUED) 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 period ended June 30, 2003, EquiTrust Investment further agreed to reimburse any portfolio, to the extent that annual operating expenses, including the investment advisory fee, exceed 0.65%. As of June 30, 2003, the Strategic Yield Portfolio had $866 due from EquiTrust Investment for the reimbursement of expenses. Certain officers and trustees of the Fund are also officers of EquiTrust Investment, its affiliate, Farm Bureau Life Insurance Company and other affiliated entities. As of June 30, 2003, 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:
PORTFOLIO SHARES - --------- --------- Value Growth...................................... 4,488,803 High Grade Bond................................... 2,541,546 Strategic Yield................................... 2,644,039 Managed........................................... 4,450,422 Money Market...................................... 6,466,433 Blue Chip......................................... 2,345,026
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. Custodial fees have been adjusted to reflect amounts that would have been paid without this agreement, with a corresponding adjustment reflected as fees paid indirectly in the statement of operations. 36 EQUITRUST VARIABLE INSURANCE SERIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL SHARE TRANSACTIONS The Fund has an unlimited number of shares of beneficial interest authorized with no par value. Net assets as of June 30, 2003, consisted of the following for financial reporting purposes:
PORTFOLIO ---------------------------------------------------------------------------- VALUE HIGH GRADE STRATEGIC MONEY BLUE GROWTH BOND YIELD MANAGED MARKET CHIP ------------ ----------- ----------- ----------- ---------- ----------- Paid-in capital.......... $ 56,244,007 $25,776,201 $25,813,573 $56,581,247 $6,644,645 $73,309,702 Accumulated undistributed net investment income... 248,028 -- -- 664,897 -- 538,345 Accumulated undistributed net realized gain (loss) from investment transactions............ (10,180,445) 3,506 (1,783,549) (2,750,326) -- (6,477,074) Net unrealized appreciation (depreciation) of investments............. (1,266,393) 1,240,032 56,931 4,230,832 -- 2,440,384 ------------ ----------- ----------- ----------- ---------- ----------- Net Assets............... $ 45,045,197 $27,019,739 $24,086,955 $58,726,650 $6,644,645 $69,811,357 ============ =========== =========== =========== ========== ===========
As of June 30, 2003, the components of accumulated earnings (deficit) and capital gains (losses) on a tax basis were identical to those reported in the statements of assets and liabilities, except as follows:
PORTFOLIO -------------------------------------- VALUE STRATEGIC GROWTH YIELD MANAGED ------------ ----------- ----------- Undistributed ordinary income...... $ 248,028 $ 14,430 $ 664,897 ------------ ----------- ----------- Accumulated earnings............... 248,028 14,430 664,897 Accumulated capital and other losses............................ (10,120,011) (1,783,549) (2,626,358) Net unrealized appreciation (depreciation) of investments..... (1,326,827) 58,931 4,106,865 ------------ ----------- ----------- Total accumulated earnings (deficit)......................... $(11,198,810) $(1,710,188) $ 2,145,404 ============ =========== ===========
During 2002, certain investees of the Value Growth and Managed Portfolios reincorporated in Bermuda. Upon reincorporation, unrealized capital gains on these investments were recognized for tax purposes, creating taxable capital gains for their shareholders. As of June 30, 2003, unrealized depreciation and accumulated capital gains book and tax differences related to reincorporation were $60,434 for the Value Growth Portfolio and $123,967 for the Managed Portfolio. Additionally, the Strategic Yield Portfolio held defaulted securities which had accrued interest ($14,430) for tax purposes and not for financial reporting purposes. 37 EQUITRUST VARIABLE INSURANCE SERIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL SHARE TRANSACTIONS (CONTINUED) Transactions in shares of beneficial interest for each portfolio were as follows:
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS AND NET INCREASE SHARES SOLD DISTRIBUTIONS SHARES REDEEMED (DECREASE) ----------------------- ------------------- ----------------------- ----------------------- PORTFOLIO SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - --------- ---------- ----------- ------- ---------- ---------- ----------- ---------- ----------- Period ended June 30, 2003: Value Growth........... 124,025 $ 1,141,430 70,077 $ 632,800 185,452 $ 1,682,252 8,650 $ 91,978 High Grade Bond........ 316,200 3,273,347 68,052 706,358 220,512 2,284,593 163,740 1,695,112 Strategic Yield........ 140,782 1,240,059 99,592 881,691 136,960 1,206,183 103,414 915,567 Managed................ 135,115 1,659,213 124,058 1,494,900 209,893 2,543,342 49,280 610,771 Money Market........... 8,288,881 8,288,881 16,587 16,587 9,810,364 9,810,364 (1,504,896) (1,504,896) Blue Chip.............. 83,729 2,314,601 39,362 1,066,311 113,529 3,049,777 9,562 331,135 Year ended December 31, 2002: Value Growth........... 313,599 $ 3,060,299 79,813 $ 815,691 293,302 $ 2,780,200 100,110 $ 1,095,790 High Grade Bond........ 629,420 6,433,056 109,184 1,119,460 209,026 2,140,588 529,578 5,411,928 Strategic Yield........ 387,871 3,430,716 173,173 1,525,246 270,103 2,363,471 290,941 2,592,491 Managed................ 446,596 5,652,393 143,639 1,801,236 317,632 3,905,338 272,603 3,548,291 Money Market........... 23,190,009 23,190,009 74,993 74,993 24,435,623 24,435,623 (1,170,621) (1,170,621) Blue Chip.............. 193,377 5,860,594 34,889 1,156,568 205,739 6,055,865 22,527 961,297
6. INVESTMENT TRANSACTIONS For the period ended June 30, 2003, the cost of investment securities purchased and proceeds from investment securities sold (not including short-term investments and U.S. Government securities) by portfolio, were as follows:
PORTFOLIO PURCHASES SALES - --------- ----------- ----------- Value Growth............................ $ 3,729,571 $ 1,992,356 High Grade Bond......................... -- 39,802 Strategic Yield......................... 4,506,760 5,494,381 Managed................................. 3,949,103 2,438,934 Blue Chip............................... 10,955,297 11,346,827
The basis for federal income tax purposes and financial reporting purposes for investments in the Money Market Portfolio is the same and is equal to the underlying investments' carrying value. Any of the portfolios may purchase newly issued securities on a "when-issued" basis and may purchase or sell securities on a "delayed delivery" basis. When-issued or delayed delivery transactions involve a commitment by a portfolio to purchase or sell particular securities with payment and delivery to take place at a future date. As of June 30, 2003, the High Grade Bond Portfolio had a purchase commitment on a mortgage-backed security issued by the Government National Mortgage Association (security pool # 4567) with a face amount of $2,000,000, cost of $2,009,688, and a market value of $2,080,625. The transaction is subject to market fluctuations and the current value is determined in the same manner as for other portfolio securities. The transaction settled on July 22, 2003. 38 EQUITRUST VARIABLE INSURANCE SERIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. INVESTMENT TRANSACTIONS (CONTINUED) The basis of the Fund's investments in securities and the net unrealized appreciation (depreciation) of investments for U.S. federal income tax purposes as of June 30, 2003, by portfolio, were composed of the following:
TAX COST OF GROSS UNREALIZED NET UNREALIZED INVESTMENTS -------------------------- APPRECIATION (DEPRECIATION) PORTFOLIO IN SECURITIES APPRECIATION DEPRECIATION OF INVESTMENTS - --------- ------------- ------------ ------------ --------------------------- Value Growth.................. $46,335,164 $ 4,993,648 $ (6,320,475) $(1,326,827) High Grade Bond............... 27,540,423 1,351,837 (111,805) 1,240,032 Strategic Yield............... 23,458,457 1,187,104 (1,130,173) 56,931 Managed....................... 54,415,668 7,255,124 (3,148,259) 4,106,865 Blue Chip..................... 66,384,688 12,920,606 (10,480,222) 2,440,384
The basis for U.S. federal income tax purposes and financial reporting purposes for investments in the Money Market Portfolio is the same and is equal to the underlying investments' carrying value. 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:
PORTFOLIO ------------------------------ HIGH GRADE STRATEGIC MONEY PAYABLE DATE BOND YIELD MARKET - ------------ ---------- --------- ------- January 31, 2003................... $0.0356 $0.0553 $0.0006 February 28, 2003.................. 0.0357 0.0616 0.0005 March 31, 2003..................... 0.0451 0.0623 0.0005 April 30, 2003..................... 0.0342 0.0487 0.0005 May 30, 2003....................... 0.0323 0.0490 0.0005 June 30, 2003...................... 0.0471 0.0633 0.0005 ------- ------- ------- Total dividends per share.......... $0.2300 $0.3402 $0.0031 ======= ======= =======
39 EQUITRUST VARIABLE INSURANCE SERIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (CONTINUED) In addition, dividends and distributions to shareholders from net investment income and net realized gain on investment transactions were paid during the period ended June 30, 2003 for the following portfolios: ORDINARY INCOME DIVIDENDS:
DIVIDEND PERCENT DECLARATION RECORD PAYABLE PER PORTFOLIO DATE DATE DATE SHARE - --------- ----------- ---------- ---------- -------- Value Growth.................. 1/22/03 1/22/03 1/23/03 $0.1411 Managed....................... 1/22/03 1/22/03 1/23/03 0.3387 Blue Chip..................... 1/22/03 1/22/03 1/23/03 0.4549
For federal income tax purposes, the portfolio designates capital gain dividends as follows: CAPITAL GAINS DISTRIBUTIONS:
DECLARATION RECORD PAYABLE AMOUNT PORTFOLIO DATE DATE DATE PER SHARE - --------- ----------- ---------- ---------- --------- High Grade.................... 1/22/03 1/22/03 1/23/03 $0.0521
The federal income tax character of dividends and distributions to shareholders during 2003 and 2002 was the same for financial reporting purposes. 8. PROXY VOTING RESULTS A special meeting of the fund's shareholders was held on May 21, 2003. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one share held on the record date for the meeting. PROPOSAL 1 To elect Board of Trustees:
NUMBER OF VOTES -------------------------------- FOR WITHHELD TOTAL ---------- -------- ---------- Craig A. Lang...................... 22,324,342 699,248 23,023,590 William J. Oddy.................... 22,087,280 936,310 23,023,590 Erwin H. Johnson................... 22,196,521 827,068 23,023,590 Kenneth Kay........................ 22,194,410 829,180 23,023,590 Paul E. Larson..................... 22,030,367 993,222 23,023,590 Steven W. Plate.................... 22,050,418 973,172 23,023,590 Erlin J. Weness.................... 22,027,588 996,002 23,023,590
40 EQUITRUST VARIABLE INSURANCE SERIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. PROXY VOTING RESULTS (CONTINUED) PROPOSAL 2 Approval of the amended and restated investment advisory and management services agreement:
NUMBER OF VOTES ----------------------------------------- FOR AGAINST ABSTAIN TOTAL --------- ------- --------- ---------- Value Growth Portfolio........ 4,030,573 93,007 224,091 4,347,671 High Grade Bond Portfolio..... 2,105,499 159,343 193,138 2,457,980 Strategic Yield Portfolio..... 2,179,848 73,303 238,911 2,492,062 Managed Portfolio............. 3,884,603 110,993 316,567 4,312,163 Money Market Portfolio........ 5,575,128 326,764 1,225,927 7,127,819 Blue Chip Portfolio........... 2,042,266 103,556 140,073 2,285,895 ---------- Total..................... 23,023,590 ==========
PROPOSAL 3
NUMBER OF VOTES ------------------------------------------ FOR AGAINST ABSTAIN TOTAL ---------- ------- --------- ---------- Ratification of the selection of Ernst & Young LLP as independent auditors......... 21,213,656 490,460 1,319,474 23,023,590
41 EQUITRUST VARIABLE INSURANCE SERIES FUND FINANCIAL HIGHLIGHTS PERIOD ENDED JUNE 30, 2003 (UNAUDITED) AND YEARS ENDED DECEMBER 31, 2002, 2001, 2000 AND 1999
VALUE GROWTH PORTFOLIO ------------------------------------------- 2003 2002 2001 2000 1999 ------- ------- ------- ------- ------- Net asset value, beginning of period..... $ 9.14 $ 10.39 $ 9.92 $ 8.69 $ 9.50 Income From Investment Operations Net investment income.............. 0.05 0.14 0.18 0.22 0.18 Net gains (losses) on securities (both realized and unrealized)......... 0.98 (1.20) 0.50 1.20 (0.77) ------- ------- ------- ------- ------- Total from investment operations............ 1.03 (1.06) 0.68 1.42 (0.59) ------- ------- ------- ------- ------- Less Distributions Dividends (from net investment income)............. (0.14) (0.19) (0.21) (0.19) (0.22) Distributions (from capital gains)...... -- -- -- -- -- Distributions in excess of net realized gains...... -- -- -- -- -- ------- ------- ------- ------- ------- Total distributions.... (0.14) (0.19) (0.21) (0.19) (0.22) ------- ------- ------- ------- ------- Net asset value, end of period.................. $ 10.03 $ 9.14 $ 10.39 $ 9.92 $ 8.69 ======= ======= ======= ======= ======= Total Return: Total investment return based on net asset value (1)............. 11.45% (10.43)% 6.98% 16.71% (6.34)% Ratios/Supplemental Data: Net assets, end of period (000's omitted).............. $45,045 $40,953 $45,522 $40,173 $40,848 Ratio of total expenses to average net assets................ 0.64%(2) 0.59% 0.57% 0.57% 0.57% Ratio of net expenses to average net assets................ 0.64%(2) 0.59% 0.57% 0.56% 0.57% Ratio of net investment income to average net assets................ 1.21%(2) 1.46% 1.89% 2.34% 1.91% Portfolio turnover rate.................. 6%(3) 15% 40% 78% 152%
- ------------------------------ 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, and is not annualized for periods less than one year. (2) Computed on an annualized basis. (3) Not annualized. SEE ACCOMPANYING NOTES. 42
HIGH GRADE BOND STRATEGIC YIELD PORTFOLIO PORTFOLIO ------------------------------------------- ------------------------------------------- 2003 2002 2001 2000 1999 2003 2002 2001 2000 1999 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net asset value, beginning of period..... $ 10.39 $ 10.08 $ 9.82 $ 9.49 $ 10.19 $ 8.75 $ 8.90 $ 8.82 $ 9.30 $ 10.17 Income From Investment Operations Net investment income.............. 0.23 0.50 0.62 0.67 0.62 0.34 0.62 0.73 0.75 0.74 Net gains (losses) on securities (both realized and unrealized)......... 0.18 0.32 0.26 0.34 (0.67) 0.29 (0.15) 0.08 (0.48) (0.81) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total from investment operations............ 0.41 0.82 0.88 1.01 (0.05) 0.63 0.47 0.81 0.27 (0.07) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Less Distributions Dividends (from net investment income)............. (0.23) (0.50) (0.62) (0.67) (0.62) (0.34) (0.62) (0.73) (0.75) (0.74) Distributions (from capital gains)...... (0.05) (0.01) -- (0.01) (0.03) -- -- -- -- -- Distributions in excess of net realized gains...... -- -- -- -- -- -- -- -- -- (0.06) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total distributions.... (0.28) (0.51) (0.62) (0.68) (0.65) (0.34) (0.62) (0.73) (0.75) (0.80) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period.................. $ 10.52 $ 10.39 $ 10.08 $ 9.82 $ 9.49 $ 9.04 $ 8.75 $ 8.90 $ 8.82 $ 9.30 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= Total Return: Total investment return based on net asset value (1)............. 4.04% 8.37% 9.10% 11.14% (0.46)% 7.35% 5.43% 9.22% 3.05% (0.75)% Ratios/Supplemental Data: Net assets, end of period (000's omitted).............. $27,020 $24,984 $18,908 $13,934 $13,638 $24,087 $22,395 $20,182 $16,410 $17,752 Ratio of total expenses to average net assets................ 0.50%(2) 0.46% 0.45% 0.45% 0.48% 0.66%(2) 0.61% 0.59% 0.59% 0.60% Ratio of net expenses to average net assets................ 0.50%(2) 0.46% 0.45% 0.45% 0.47% 0.65%(2) 0.61% 0.59% 0.58% 0.59% Ratio of net investment income to average net assets................ 4.47%(2) 4.92% 6.10% 7.03% 6.34% 7.77%(2) 7.04% 7.93% 8.30% 7.62% Portfolio turnover rate.................. 11%(3) 22% 17% 7% 24% 22%(3) 34% 33% 3% 27%
43 EQUITRUST VARIABLE INSURANCE SERIES FUND FINANCIAL HIGHLIGHTS (CONTINUED)
MANAGED PORTFOLIO ------------------------------------------- 2003 2002 2001 2000 1999 ------- ------- ------- ------- ------- Net asset value, beginning of period..... $ 12.34 $ 13.00 $ 12.58 $ 10.54 $ 11.45 Income From Investment Operations Net investment income.............. 0.15 0.34 0.44 0.59 0.64 Net gains (losses) on securities (both realized and unrealized)......... 1.02 (0.57) 0.55 2.11 (1.02) ------- ------- ------- ------- ------- Total from investment operations............ 1.17 (0.23) 0.99 2.70 (0.38) ------- ------- ------- ------- ------- Less Distributions Dividends (from net investment income)............. (0.34) (0.43) (0.57) (0.66) (0.53) Distributions (from capital gains)...... -- -- -- -- -- Distributions in excess of net realized gains...... -- -- -- -- -- ------- ------- ------- ------- ------- Total distributions.... (0.34) (0.43) (0.57) (0.66) (0.53) ------- ------- ------- ------- ------- Net asset value, end of period.................. $ 13.17 $ 12.34 $ 13.00 $ 12.58 $ 10.54 ======= ======= ======= ======= ======= Total Return: Total investment return based on net asset value (1)............. 9.73% (1.80)% 8.12% 27.39% (3.45)% Ratios/Supplemental Data: Net assets, end of period (000's omitted).............. $58,727 $54,428 $53,795 $48,012 $47,829 Ratio of total expenses to average net assets ...................... 0.63%(2) 0.58% 0.56% 0.56% 0.56% Ratio of net expenses to average net assets ...................... 0.63%(2) 0.58% 0.56% 0.55% 0.56% Ratio of net investment income to average net assets................ 2.44%(2) 2.73% 3.47% 4.96% 5.28% Portfolio turnover rate.................. 6%(3) 18% 40% 85% 43%
44
MONEY MARKET BLUE CHIP PORTFOLIO PORTFOLIO -------------------------------------- ------------------------------------------- 2003 2002 2001 2000 1999 2003 2002 2001 2000 1999 ------ ------ ------ ------ ------ ------- ------- ------- ------- ------- Net asset value, beginning of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 27.22 $ 34.14 $ 39.29 $ 43.98 $ 36.87 Income From Investment Operations Net investment income.............. -- 0.01 0.03 0.06 0.04 0.23 0.46 0.50 0.56 0.54 Net gains (losses) on securities (both realized and unrealized)......... -- -- -- -- -- 2.72 (6.88) (4.83) (4.26) 7.06 ------ ------ ------ ------ ------ ------- ------- ------- ------- ------- Total from investment operations............ -- 0.01 0.03 0.06 0.04 2.95 (6.42) (4.33) (3.70) 7.60 ------ ------ ------ ------ ------ ------- ------- ------- ------- ------- Less Distributions Dividends (from net investment income)............. -- (0.01) (0.03) (0.06) (0.04) (0.46) (0.50) (0.56) (0.53) (0.49) Distributions (from capital gains)...... -- -- -- -- -- -- -- (0.26) (0.46) -- Distributions in excess of net realized gains...... -- -- -- -- -- -- -- -- -- -- ------ ------ ------ ------ ------ ------- ------- ------- ------- ------- Total distributions.... -- (0.01) (0.03) (0.06) (0.04) (0.46) (0.50) (0.82) (0.99) (0.49) ------ ------ ------ ------ ------ ------- ------- ------- ------- ------- Net asset value, end of period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 29.71 $ 27.22 $ 34.14 $ 39.29 $ 43.98 ====== ====== ====== ====== ====== ======= ======= ======= ======= ======= Total Return: Total investment return based on net asset value (1)............. 0.31% 1.16% 3.51% 5.85% 4.53% 10.98% (19.07)% (11.28)% (8.52)% 20.85% Ratios/Supplemental Data: Net assets, end of period (000's omitted).............. $6,645 $8,150 $9,320 $7,233 $6,609 $69,811 $63,699 $79,124 $87,118 $86,849 Ratio of total expenses to average net assets ...................... 0.59%(2) 0.52% 0.50% 0.50% 0.55% 0.37%(2) 0.31% 0.28% 0.27% 0.30% Ratio of net expenses to average net assets ...................... 0.58%(2) 0.52% 0.48% 0.48% 0.54% 0.37%(2) 0.31% 0.28% 0.27% 0.30% Ratio of net investment income to average net assets................ 0.62%(2) 1.16% 3.41% 5.74% 4.49% 1.68%(2) 1.50% 1.42% 1.39% 1.43% Portfolio turnover rate.................. --%(3) --% --% --% --% 18%(3) --% --% 13% 5%
45 ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There has been no change to the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. EX-99.CERT 3 a2116612zex-99_cert.txt EX-99.CERT EXHIBIT 99.CERT N-CSR FORM OF CERTIFICATION I, Dennis M. Marker, certify that: 1. I have reviewed this report on Form N-CSR of EquiTrust Variable Insurance Series Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 8/27/2003 /s/ Dennis M. Marker ------------------------------------- Dennis M. Marker Chief Executive Officer N-CSR FORM OF CERTIFICATION I, James W. Noyce, certify that: 1. I have reviewed this report on Form N-CSR of EquiTrust Variable Insurance Series Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 8/26/2003 /s/ James W. Noyce ------------------------------------- James W. Noyce Chief Financial Officer EX-99.906CERT 4 a2116612zex-99_906cert.txt EX-99.906CERT EXHIBIT 99.906CERT N-CSR FORM OF SECTION 906 CERTIFICATION THE FOLLOWING CERTIFICATION IS PROVIDED BY THE UNDERSIGNED CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF EQUITRUST VARIABLE INSURANCE SERIES FUND ON THE BASIS OF SUCH OFFICERS' KNOWLEDGE AND BELIEF FOR THE SOLE PURPOSE OF COMPLYING WITH 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. CERTIFICATION In connection with the Semi-Annual Report of EquiTrust Variable Insurance Series Fund (the "Company") on Form N-CSR for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on Form N-CSR (the "Report"), we, Dennis M. Marker and James W. Noyce, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Dennis M. Marker ------------------------------------- Name: Dennis M. Marker Title: Chief Executive Officer Date: 8/27/2003 /s/ James W. Noyce ------------------------------------- Name: James W. Noyce Title: Chief Financial Officer Date: 8/26/2003 -----END PRIVACY-ENHANCED MESSAGE-----