First Investors Life Series Fund
95 Wall Street, New York, New York 10005/(212) 858-8200
This is a Prospectus for First Investors Life Series Fund ("Life Series
Fund"), an open-end, diversified management investment company. The Fund offers
eleven separate investment series, each of which has different investment
objectives and policies: First Investors Life Blue Chip Fund ("Blue Chip Fund"),
First Investors Life Cash Management Fund ("Cash Management Fund"), First
Investors Life Discovery Fund ("Discovery Fund"), First Investors Life
Government Fund ("Government Fund"), First Investors Life Growth Fund ("Growth
Fund"), First Investors Life High Yield Fund ("High Yield Fund"), First
Investors Life International Securities Fund ("International Securities Fund"),
First Investors Life Investment Grade Fund ("Investment Grade Fund"), First
Investors Life Target Maturity 2007 Fund ("Target Maturity 2007 Fund"), First
Investors Life Target Maturity 2010 Fund ("Target Maturity 2010 Fund") and First
Investors Life Utilities Income Fund ("Utilities Income Fund") (each, a Fund,
and collectively, "Funds"). Each Fund's investment objectives are listed on the
inside cover.
Investments in a Fund are only available through purchases of the Level
Premium Variable Life Insurance Policies ("Policies") or the Individual Variable
Annuity Contracts ("Contracts") offered by First Investors Life Insurance
Company ("First Investors Life"). Policy premiums, net of certain expenses, are
paid into a unit investment trust, First Investors Life Insurance Company
Separate Account B ("Separate Account B"). Purchase payments for the Contracts,
net of certain expenses, are also paid into a unit investment trust, First
Investors Life Variable Annuity Fund C ("Separate Account C"). Separate Account
B and Separate Account C ("Separate Accounts") pool these proceeds to purchase
shares of a Fund designated by purchasers of the Policies or Contracts.
Investments in a Fund are used to fund benefits under the Policies and
Contracts. Target Maturity 2007 Fund and Target Maturity 2010 Fund are only
offered to Contractowners of Separate Account C.
An investment in Life Series Fund, including Cash Management Fund, is
neither insured nor guaranteed by the U.S. Government. There can be no assurance
that the Cash Management Fund will be able to maintain a stable net asset value
of $1.00 per share. Investments by the High Yield Fund in high-yield, high risk
securities, commonly referred to as "junk bonds," may entail risks that are
different or more pronounced than those that would result from investment in
higher-rated securities. See "High Yield Securities--Risk Factors."
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing and should be retained for
future reference. First Investors Management Company, Inc. ("FIMCO" or
"Adviser") serves as investment adviser to the Funds. A Statement of Additional
Information ("SAI"), dated October 28, 1996 (which is incorporated by reference
herein), has been filed with the Securities and Exchange Commission. The SAI is
available at no charge upon request to the Funds at the address or telephone
number indicated above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured or protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other governmental agency.
The date of this Prospectus is October 28, 1996
<PAGE>
The investment objectives of each Fund of Life Series Fund offered by this
Prospectus are as follows:
Blue Chip Fund. The investment objective of the Fund is to seek high total
investment return consistent with the preservation of capital. This goal will be
sought by investing, under normal market conditions, primarily in equity
securities of larger, well-capitalized companies with high potential earnings
growth that have shown a history of dividend payments, commonly known as "Blue
Chip" companies.
Cash Management Fund. The objective of the Fund is to seek to earn a high
rate of current income consistent with the preservation of capital and
maintenance of liquidity. The Fund will invest in money market obligations,
including high quality securities issued or guaranteed by the U.S. Government or
its agencies and instrumentalities, bank obligations and high grade corporate
instruments.
Discovery Fund. The investment objective of the Fund is to seek long-term
capital appreciation, without regard to dividend or interest income, through
investment in the common stock of companies with small to medium market
capitalization that the Adviser considers to be undervalued or less well known
in the current marketplace and to have the potential for capital growth.
Government Fund. The investment objective of the Fund is to seek to achieve
a significant level of current income which is consistent with security and
liquidity of principal by investing, under normal market conditions, primarily
in obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, including mortgage-backed
securities.
Growth Fund. The investment objective of the Fund is to seek long-term
capital appreciation. This goal will be sought by investing, under normal market
conditions, primarily in common stocks of companies and industries selected for
their growth potential.
High Yield Fund. The primary objective of the Fund is to seek to earn a
high level of current income. The Fund actively seeks to achieve its secondary
objective of capital appreciation to the extent consistent with its primary
objective. The Fund seeks to attain its objectives primarily through investments
in lower-grade, high-yielding, high risk debt securities, commonly referred to
as "junk bonds" ("High Yield Securities").
International Securities Fund. The primary objective of the Fund is to seek
long-term capital growth. As a secondary objective, the Fund seeks to earn a
reasonable level of current income. These objectives are sought, under normal
market conditions, through investment in common stocks, rights and warrants,
preferred stocks, bonds and other debt obligations issued by companies or
governments of any nation, subject to certain restrictions with respect to
concentration and diversification.
Investment Grade Fund. The investment objective of the Fund is to seek a
maximum level of income consistent with investment in investment grade debt
securities.
Target Maturity 2007 Fund. The investment objective of the Fund is to seek
a predictable compounded investment return for investors who hold their Fund
shares until the Fund's maturity, consistent with preservation of capital. The
Fund intends to terminate in the year 2007.
2
<PAGE>
Target Maturity 2010 Fund. The investment objective of the Fund is to seek
a predictable compounded investment return for investors who hold their Fund
shares until the Fund's maturity, consistent with preservation of capital. The
Fund intends to terminate in the year 2010.
Target Maturity 2007 Fund and Target Maturity 2010 Fund each will seek its
objective by investing, under normal market conditions, at least 65% of its
total assets in zero coupon securities which are issued by the U.S. Government,
its agencies or instrumentalities or created by third parties using securities
issued by the U.S. Government, its agencies or instrumentalities.
As a result of the volatile nature of the market for zero coupon
securities, the value of shares of Target Maturity 2007 Fund and Target Maturity
2010 Fund prior to each Fund's maturity may fluctuate significantly. Thus, to
achieve a predictable return, investors should hold their investments in either
of these two Funds until the Fund liquidates since the Fund's value changes
daily with market conditions. Accordingly, any investor who redeems his or her
shares prior to a Fund's maturity is likely to achieve a different investment
result than the return that was predicted on the date the investment was made,
and may even suffer a significant loss.
Utilities Income Fund. The primary investment objective of the Fund is to
seek high current income. Long-term capital appreciation is a secondary
objective. These objectives are sought, under normal market conditions, through
investment in equity and debt securities issued by companies primarily engaged
in the public utilities industry.
There can be no assurance that any Fund will achieve its investment
objectives. See "Investment Objectives and Policies" for a detailed description
of each Fund's investment objectives and policies.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth the per share operating performance data for
a share outstanding, total return, ratios to average net assets and other
supplemental data for each period indicated. The table below has been derived
from financial statements which have been examined by Tait, Weller & Baker,
independent certified public accountants, whose report thereon appears in the
Statement of Additional Information ("SAI"). This information should be read in
conjunction with the Financial Statements and Notes thereto, which also appear
in the SAI, available at no charge upon request to the Funds.
<TABLE>
<CAPTION>
PER SHARE DATA
-----------------------------------------------------------------------------------------------------------
Income from Investment Operations Less Distributions from
-------------------------------------- -----------------------
Net Asset Value Net Realized
--------------- Net and Unrealized Total from Net Net Net Asset Value
Beginning of Investment Gain (Loss) on Investment Investment Realized Total ---------------
Period Income Investments Operations Income Gains Distributions End of Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Blue Chip
- ---------
3/8/90* to 12/31/90 ..... $10.00 $.07 $(.02) $ .05 $ -- $ -- $ -- $10.05
1991 .................... 10.05 .12 2.50 2.62 .05 -- .05 12.62
1992 .................... 12.62 .16 .67 .83 .21 -- .21 13.24
1993 .................... 13.24 .15 .97 1.12 .15 -- .15 14.21
1994 .................... 14.21 .18 (.39) (.21) .08 .17 .25 13.75
1995 .................... 13.75 .26 4.11 4.37 .19 .95 1.14 16.98
1/1/96 to 6/30/96 ....... 16.98 .11 1.46 1.57 .25 .49 .74 17.81
Cash Management**
- -----------------
1988 .................... 1.00 .048 -- .048 .048 -- .048 1.00
1989 .................... 1.00 .075 -- .075 .075 -- .075 1.00
1990 .................... 1.00 .072 -- .072 .072 -- .072 1.00
1991 .................... 1.00 .054 -- .054 .054 -- .054 1.00
1992 .................... 1.00 .029 -- .029 .029 -- .029 1.00
1993 .................... 1.00 .027 -- .027 .027 -- .027 1.00
1994 .................... 1.00 .037 -- .037 .037 -- .037 1.00
1995 .................... 1.00 .054 -- .054 .054 -- .054 1.00
1/1/96 to 6/30/96 ....... 1.00 .024 -- .024 .024 -- .024 1.00
Discovery
- ---------
1988 .................... 10.02 .26 .10 .36 -- -- -- 10.38
1989 .................... 10.38 .19 2.19 2.38 .27 .09 .36 12.40
1990 .................... 12.40 .14 (.78) (.64) .15 .90 1.05 10.71
1991 .................... 10.71 .07 5.42 5.49 .18 -- .18 16.02
1992 .................... 16.02 -- 2.51 2.51 .03 .15 .18 18.35
1993 .................... 18.35 -- 3.92 3.92 -- .91 .91 21.36
1994 .................... 21.36 .06 (.62) (.56) -- .94 .94 19.86
1995 .................... 19.86 .11 4.62 4.73 .06 1.26 1.32 23.27
1/1/96 to 6/30/96 ....... 23.27 .07 1.68 1.75 .11 .89 1.00 24.02
</TABLE>
- ----------
* Commencement of operations
** Adjusted to reflect ten-for-one stock split on May 1, 1991.
+ Some or all expenses have been waived or assumed.
++ The effect of fees and charges incurred at the separate account level are
not reflected in these performance figures.
(a) Annualized
4
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets
Ratio to Average Net Assets+ Before Expenses Waived or Assumed
Net Assets ------------------------------ --------------------------------- Portfolio
Total End of Period Net Investment Net Investment Turnover
Return++(%) (in thousands) Expenses(%) Income(%) Expenses(%) Income(%) Rate(%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
.61(a) $ 3,656 -- 2.95(a) 1.92(a) 1.03(a) 15
26.17 13,142 1.00 1.88 1.55 1.34 21
6.67 23,765 .79 1.66 .86 1.60 40
8.51 34,030 .88 1.27 N/A N/A 37
(1.45) 41,424 .88 1.49 N/A N/A 82
34.00 66,900 .86 1.89 N/A N/A 26
9.47 81,307 .93(a) 1.33(a) N/A N/A 20
4.94 33 -- 4.99 7.68 (2.69) N/A
7.79 2,210 -- 7.84 1.35 6.49 N/A
7.49 8,203 .39 6.90 1.15 6.15 N/A
5.71 9,719 .57 5.39 .93 5.03 N/A
3.02 8,341 .79 2.99 .98 2.81 N/A
2.70 4,243 .60 2.67 1.05 2.22 N/A
3.77 3,929 .60 3.69 1.04 3.25 N/A
5.51 4,162 .61 5.36 1.10 4.87 N/A
2.44 3,863 .60(a) 4.83(a) 1.09(a) 4.35(a) N/A
3.59 125 -- 3.80 3.10 .70 158
23.62 283 -- 2.43 4.78 (2.35) 231
(5.47) 960 -- 2.97 2.68 .28 104
51.73 4,661 .70 .48 1.49 (.31) 93
15.74 10,527 .91 .02 1.05 (.12) 91
22.20 21,221 .87 (.03) N/A N/A 69
(2.53) 30,244 .88 .36 N/A N/A 53
25.23 50,900 .87 .60 N/A N/A 78
7.82 61,590 .85(a) .71(a) N/A N/A 56
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
-----------------------------------------------------------------------------------------------------------
Income from Investment Operations Less Distributions from
--------------------------------- -----------------------
Net Asset Value Net Realized Net Asset Value
--------------- Net and Unrealized Total from Net Net ----------------
Beginning of Investment Gain (Loss) on Investment Investment Realized Total End of
Period Income Investments Operations Income Gains Distributions Period
------ ------ ----------- ---------- ------ ----- ------------- ------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Government
- ------------------------
1/7/92* to 12/31/92 ..... $ 10.00 $ .47 $ .51 $ .98 $ .33 $ -- $ .33 $ 10.65
1993 .................... 10.65 .64 .02 .66 .70 .19 .89 10.42
1994 .................... 10.42 .79 (1.21) (.42) .25 .05 .30 9.70
1995 .................... 9.70 .66 .78 1.44 .62 -- .62 10.52
1/1/96 to 6/30/96 ....... 10.52 .34 (.42) (.08) .68 -- .68 9.76
Growth
- ------------------------
1988 .................... 10.02 .26 .51 .77 -- -- -- 10.79
1989 .................... 10.79 .02 2.51 2.53 .18 .12 .30 13.02
1990 .................... 13.02 .16 (.55) (.39) .06 -- .06 12.57
1991 .................... 12.57 .17 4.15 4.32 .18 -- .18 16.71
1992 .................... 16.71 .08 1.41 1.49 .18 1.38 1.56 16.64
1993 .................... 16.64 .07 .93 1.00 .09 .10 .19 17.45
1994 .................... 17.45 .09 (.60) (.51) -- .21 .21 16.73
1995 .................... 16.73 .18 3.94 4.12 .09 .29 .38 20.47
1/1/96 to 6/30/96 ....... 20.47 .11 2.02 2.13 .18 .59 .77 21.83
High Yield
- ------------------------
1988 .................... 10.00 .74 .82 1.56 -- -- -- 11.56
1989 .................... 11.56 .74 (.92) (.18) .56 .11 .67 10.71
1990 .................... 10.71 1.08 (1.79) (.71) .83 -- .83 9.17
1991 .................... 9.17 1.16 1.66 2.82 1.18 -- 1.18 10.81
1992 .................... 10.81 1.11 .21 1.32 1.69 -- 1.69 10.44
1993 .................... 10.44 .96 .88 1.84 1.12 -- 1.12 11.16
1994 .................... 11.16 .87 (1.14) (.27) .31 -- .31 10.58
1995 .................... 10.58 1.00 .95 1.95 .96 -- .96 11.57
1/1/96 to 6/30/96 ....... 11.57 .50 (.01) .49 1.01 -- 1.01 11.05
International Securities
- ------------------------
4/16/90* to 12/31/90 .... 10.00 .03 .34 .37 -- -- -- 10.37
1991 .................... 10.37 .09 1.49 1.58 .03 .05 .08 11.87
1992 .................... 11.87 .15 (.28) (.13) .15 .22 .37 11.37
1993 .................... 11.37 .10 2.41 2.51 .14 -- .14 13.74
1994 .................... 13.74 .14 (.32) (.18) .05 -- .05 13.51
1995 .................... 13.51 .19 2.25 2.44 .12 .25 .37 15.58
1/1/96 to 6/30/96 ....... 15.58 .13 1.08 1.21 .19 .50 .69 16.10
- ----------------
</TABLE>
* Commencement of operations
+ Some or all expenses have been waived or assumed .
++ The effect of fees and charges incurred at the separate account level are
not reflected in these performance figures. (a) Annualized
6
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
-----------------------------------------------------------------------
Ratio to Average Net Assets+
Ratio to Average Net Assets Before Expenses Waived or Assumed
Net Assets -------------------------------- --------------------------------- Portfolio
Total End of Period Net Investment Net Investment Turnover
Return++(%) (in thousands) Expenses(%) Income(%) Expenses(%) Income(%) Rate(%)
----------- -------------- ----------- --------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
9.95(a) $ 5,064 .03(a) 6.64(a) .89(a) 5.79(a) 301
6.35 8,234 .35 6.60 .84 6.11 525
(4.10) 7,878 .35 6.74 .90 6.19 457
15.63 9,500 .40 6.73 .93 6.21 198
(.79) 9,266 .60(a) 6.63(a) .98(a) 6.26(a) 86
7.68 38 -- 3.20 8.70 (5.50) 31
24.00 570 -- 2.91 5.21 (2.30) 24
(2.99) 2,366 -- 3.03 1.64 1.40 28
34.68 7,743 .69 1.21 1.34 .55 148
9.78 16,385 .76 .75 1.20 .30 45
6.00 25,658 .91 .43 N/A N/A 51
(2.87) 32,797 .90 .60 N/A N/A 40
25.12 51,171 .88 1.10 N/A N/A 64
10.62 63,075 .80(a) 1.22(a) N/A N/A 25
15.60 4,565 -- 13.22 1.32 11.90 46
(1.76) 14,354 -- 12.05 .88 11.17 22
(5.77) 18,331 -- 13.21 .91 12.30 35
33.96 23,634 .53 11.95 .89 11.60 40
13.15 24,540 .91 10.48 .96 10.43 84
18.16 30,593 .91 9.49 N/A N/A 96
(1.56) 32,285 .88 9.43 N/A N/A 50
19.82 41,894 .87 9.83 N/A N/A 57
4.25 44,367 .85(a) 9.33(a) N/A N/A 12
5.21(a) 3,946 -- .99(a) 3.43(a) (2.43)(a) 29
15.24 8,653 1.70 .75 2.27 .18 70
(1.13) 12,246 1.03 1.55 1.38 1.20 36
22.17 21,009 1.14 .97 N/A N/A 37
(1.29) 31,308 1.03 1.22 N/A N/A 36
18.70 41,012 1.02 1.42 N/A N/A 45
7.93 49,017 1.15(a) 1.82(a) N/A N/A 35
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
--------------------------------------------------------------------------------------------------------
Income from Investment Operations Less Distributions from
--------------------------------------- ------------------------
Net Asset Value Net Realized Net Asset Value
-------------- Net and Unrealized Total from Net Net ----------------
Beginning of Investment Gain (Loss) on Investment Investment Realized Total End of
Period Income Investments Operations Income Gains Distributions Period
------ ------ ----------- ---------- ------ ----- ------------- ------
Investment Grade
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/7/92* to 12/31/92 ..... $ 10.00 $ .43 $ .44 $ .87 $ .34 $ -- $ .34 $ 10.53
1993 .................... 10.53 .65 .49 1.14 .71 .01 .72 10.95
1994 .................... 10.95 .67 (1.06) (.39) .16 .09 .25 10.31
1995 .................... 10.31 .67 1.28 1.95 .53 -- .53 11.73
1/1/96 to 6/30/96 ....... 11.73 .34 (.58) (.24) .67 -- .67 10.82
Target Maturity 2007
- --------------------
4/26/95* to 12/31/95 .... 10.00 .26 2.00 2.26 -- -- -- 12.26
1/1/96 to 6/30/96 ....... 12.26 .28 (1.33) (1.05) .23 .05 .28 10.93
Utilities Income
- --------------------
11/15/93* to 12/31/93 ... 10.00 .01 (.07) (.06) -- -- -- 9.94
1994 .................... 9.94 .24 (.96) (.72) .03 -- .03 9.19
1995 .................... 9.19 .28 2.46 2.74 .19 -- .19 11.74
1/1/96 to 6/30/96 ....... 11.74 .14 .34 .48 .27 -- .27 11.95
</TABLE>
* Commencement of operations
+ Some or all expenses have been waived or assumed
++ The effect of fees and charges incurred at the separate account level are
not reflected in these performance figures.
(a) Annualized
8
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets
Net Assets Ratio to Average Net Assets+ Before Expenses Waived or Assumed Portfolio
Total End of Period ------------------------------------- ------------------------------------ Turnover
Return++(%) (in thousands) Expenses(%) Net Investment Income(%) Expenses(%) Net Investment Income(%) Rate(%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
8.91(a) $ 4,707 .23(a) 6.16(a) .93(a) 5.46(a) 72
10.93 10,210 .35 6.32 .85 5.82 64
(3.53) 11,602 .37 6.61 .92 6.06 15
19.69 16,262 .51 6.77 .91 6.37 26
(2.05) 16,175 .60(a) 6.37(a) .88(a) 6.12(a) 8
22.60 9,860 .04(a) 6.25(a) .87(a) 5.38(a) 28
(8.67) 11,838 .60(a) 6.02(a) .84(a) 5.79(a) 14
(4.66)(a) 494 -- 1.46(a) 3.99(a) (2.52)(a) 0
(7.24) 4,720 .17 4.13 .95 3.35 31
30.26 14,698 .41 4.16 .91 3.67 17
4.17 20,851 .60(a) 3.50(a) .89(a) 3.25(a) 17
</TABLE>
9
<PAGE>
Target Maturity 2010 Fund
The following table sets forth the per share operating performance for a
share of beneficial interest outstanding, total return, ratios to average net
assets and other supplemental data for the period April 30, 1996 (commencement
of operations) to August 31, 1996. The following information pertaining to
Target Maturity 2010 Fund should be read in conjunction with the Financial
Statements and Notes thereto, which appear in the Statement of Additional
Information, available at no charge upon request to the Fund.
Per Share Data
- --------------
Net Asset Value, Beginning of Period ......................... $10.00
------
Income from Investment Operations
Net investment income ................................... .20*
Net realized and unrealized loss on investments ......... (.06)*
------
Total from Investment Operations ................... .14
------
Net Asset Value, End of Period ............................... 10.14
======
Total Return** ............................................... 1.40%
- -------------- ------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (in thousands) $ 1,236.
Ratio to Average Net Assets:
Expenses ................................................ .60%(a)
Net Investment Income ................................... 5.72%(a)
Ratio to Average Net Assets Before Expenses Waived:
Expenses ................................................ 1.27%(a)
Net Investment Income ................................... 5.04%(a)
Portfolio Turnover Rate ................................. .0%
* Computed using average number of shares outstanding
** The effect of fees and charges incurred at the separate account level is
not reflected in this performance figure
(a) Annualized
10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Blue Chip Fund
Blue Chip Fund seeks to provide investors with high total investment return
consistent with the preservation of capital. The Fund seeks to achieve its
objective by investing, under normal market conditions, at least 65% of its
total assets in equity securities of "Blue Chip" companies, including common and
preferred stocks and securities convertible into common stock, that the Adviser
believes have potential earnings growth that is greater than the average company
included in the Standard & Poor's 500 Composite Stock Price Index ("S&P 500").
The Fund also may invest up to 35% of its total assets in the equity securities
of non-Blue Chip companies that the Adviser believes have significant potential
for growth of capital or future income consistent with the preservation of
capital. When market conditions warrant, or when the Adviser believes it is
necessary to achieve the Fund's objective, the Fund may invest up to 25% of its
total assets in fixed income securities.
The Fund defines Blue Chip companies as those companies that have a market
capitalization of at least $300 million, are dividend paying and are included in
the S&P 500. Market capitalization is the total market value of a company's
outstanding common stock. Blue Chip companies are considered to be of relatively
high quality and generally exhibit superior fundamental characteristics, which
may include: potential for consistent earnings growth, a history of
profitability and payment of dividends, leadership position in their industries
and markets, proprietary products or services, experienced management, high
return on equity and a strong balance sheet. Blue Chip companies usually exhibit
less investment risk and share price volatility than smaller, less established
companies. Examples of Blue Chip companies are American Telephone & Telegraph,
General Electric, Pepsico Inc. and Bristol-Myers Squibb.
The fixed income securities in which the Fund may invest include money
market instruments (including prime commercial paper, certificates of deposit of
domestic branches of U.S. banks and bankers' acceptances), obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Obligations"), including mortgage-backed
securities, and corporate debt securities. However, no more than 5% of the
Fund's net assets may be invested in corporate debt securities rated below Baa
by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group ("S&P"). The Fund may borrow money for temporary or emergency
purposes in amounts not exceeding 5% of its total assets. The Fund may also
invest up to 5% of its net assets in American Depository Receipts ("ADRs"),
enter into repurchase agreements and make loans of portfolio securities. See
"Description of Certain Securities, Other Investment Policies and Risk Factors,"
below, and the SAI for additional information concerning these securities.
Cash Management Fund
Cash Management Fund seeks to earn a high rate of current income consistent
with the preservation of capital and maintenance of liquidity. The Fund
generally can invest only in securities that mature within 397 days from the
date of purchase. In addition, the Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less.
11
<PAGE>
Cash Management Fund invests primarily in (1) high quality marketable
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, (2) bank certificates of deposit,
bankers' acceptances, time deposits and other short-term obligations issued by
banks and (3) prime commercial paper and high quality, U.S. dollar denominated
short-term corporate bonds and notes. The U.S. Government securities in which
the Fund may invest include a variety of U.S. Treasury securities that differ in
their interest rates, maturities and dates of issue. Securities issued or
guaranteed by agencies or instrumentalities of the U.S. Government may be
supported by the full faith and credit of the United States or by the right of
the issuer to borrow from the U.S. Treasury. See the SAI for additional
information on U.S. Government securities. The Fund may invest in domestic bank
certificates of deposit (insured up to $100,000) and bankers' acceptances (not
insured) issued by domestic banks and savings institutions which are insured by
the Federal Deposit Insurance Corporation ("FDIC") and that have total assets
exceeding $500 million. The Fund also may invest in certificates of deposit
issued by London branches of domestic or foreign banks ("Eurodollar CDs"). The
Fund may invest in time deposits and other short-term obligations, including
uninsured, direct obligations bearing fixed, floating or variable interest
rates, issued by domestic banks, foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches of foreign
banks. See Appendix A to the SAI for a description of commercial paper ratings
and Appendix B to the SAI for a description of municipal note ratings. The Fund
also may invest in repurchase agreements with banks that are members of the
Federal Reserve System or securities dealers that are members of a national
securities exchange or are market makers in U.S. Government securities, and, in
either case, only where the debt instrument subject to the repurchase agreement
is a U.S. Treasury or agency obligation.
Cash Management Fund also may purchase high quality, U.S. dollar
denominated short-term bonds and notes, including variable rate and master
demand notes issued by domestic and foreign corporations (including banks).
Floating and variable rate demand notes and bonds permit the Fund, as the
holder, to demand payment of principal at any time, or at specified intervals
not exceeding 397 days, in each case upon not more than 30 days' notice. The
Fund may borrow money for temporary or emergency purposes in amounts not
exceeding 5% of its total assets and make loans of portfolio securities. See
"Description of Certain Securities, Other Investment Policies and Risk Factors"
for additional information concerning these securities.
Cash Management Fund may purchase only obligations that (1) the Adviser
determines present minimal credit risks based on procedures adopted by Life
Series Fund's Board of Trustees, and (2) are either (a) rated in one of the top
two rating categories by at least two nationally recognized statistical ratings
organizations ("NRSROs") (or one, if only one rated the security) or (b) unrated
securities that the Adviser determines are of comparable quality. Securities
qualify as being in the top rating category ("First Tier Securities") if at
least two NRSROs (or one, if only one rated the security) have given it the
highest rating. The Fund's purchases of commercial paper are limited to First
Tier Securities. The Fund may not invest more than 5% of its total assets in
securities rated in the second highest rating category ("Second Tier
Securities"). Investments in Second Tier Securities of any one issuer are
limited to the greater of 1% of the Fund's total assets or $1 million. The Fund
generally may invest no more than 5% of its total assets in the securities of a
single issuer (other than securities issued by the U.S. Government, its agencies
or instrumentalities).
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Discovery Fund
Discovery Fund seeks long-term capital appreciation, without regard to
dividend or interest income. The Fund seeks to achieve its objective by
investing in the common stock of companies with small to medium market
capitalization that the Adviser considers to be undervalued or less well known
in the current marketplace and to have potential for capital growth.
The Fund seeks to invest in the common stock of companies that are
undervalued in the current market in relation to fundamental economic values
such as earnings, sales, cash flow and tangible book value; that are early in
their corporate development (i.e., before they become widely recognized and well
known and while their reputations and track records are still emerging); or that
offer the possibility of greater earnings because of revitalized management, new
products or structural changes in the economy. Such companies primarily are
those with small to medium market capitalization, which the Adviser currently
considers to be market capitalization of up to $1.5 billion, but which could be
higher under certain market conditions. The Adviser believes that, over time,
these securities are more likely to appreciate in price than securities whose
market prices have already reached their perceived economic value. In addition,
the Fund intends to diversify its holdings among as many companies and
industries as the Adviser deems appropriate.
Companies that are early in their corporate development may be dependent on
relatively few products or services, may lack adequate capital reserves, may be
dependent on one or two management individuals and may have less of a track
record or historical pattern of performance. In addition, there may be less
information available as to the issuers and their securities may not be well
known to the general public and may not yet have wide institutional ownership.
Thus, the investment risk is higher than that normally associated with larger,
older or better-known companies.
Investments in securities of companies with small to medium market
capitalization are generally considered to offer greater opportunity for
appreciation and to involve greater risk of depreciation than securities of
companies with larger market capitalization. Because the securities of most
companies with small to medium market capitalization are not as broadly traded
as those of companies with larger market capitalization, these securities are
often subject to wider and more abrupt fluctuations in market price. In the
past, there have been prolonged periods when these securities have substantially
underperformed or outperformed the securities of larger capitalization
companies. In addition, smaller capitalization companies generally have fewer
assets available to cushion an unforeseen adverse occurrence and thus such an
occurrence may have a disproportionately negative impact on these companies.
The Fund may invest up to 10% of its total assets in common stocks issued
by foreign companies which are traded on a recognized domestic or foreign
securities exchange. In addition to the fundamental analysis of companies and
their industries which it performs for U.S. issuers, the Adviser evaluates the
economic and political climate of the country in which the company is located
and the principal securities markets in which such securities are traded.
Although the foreign stocks in which the Fund invests are primarily denominated
in foreign currencies, the Fund also may invest in ADRs. The Adviser does not
attempt to time actively either short-term market trends or short-term currency
trends in any market. See "Foreign Securities--Risk Factors" and "American
Depository Receipts and Global Depository Receipts."
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The Fund may borrow money for temporary or emergency purposes in amounts
not exceeding 5% of its total assets. The Fund also may enter into repurchase
agreements and may make loans of portfolio securities. For temporary defensive
purposes, the Fund may invest all of its assets in U.S. Government Obligations,
prime commercial paper, certificates of deposit and bankers' acceptances. See
the SAI for more information regarding these securities.
Government Fund
Government Fund seeks to achieve a significant level of current income
which is consistent with security and liquidity of principal by investing, under
normal market conditions, at least 65% of its assets in U.S. Government
Obligations, including mortgage-backed securities. Securities issued or
guaranteed as to principal and interest by the U.S. Government include a variety
of Treasury securities, which differ only in their interest rates, maturities
and times of issuance. Although the payment of interest and principal on a
portfolio security may be guaranteed by the U.S. Government or one of its
agencies or instrumentalities, shares of the Fund are not insured or guaranteed
by the U.S. Government or any agency or instrumentality. The net asset value of
shares of the Fund generally will fluctuate in response to interest rate levels.
When interest rates rise, prices of fixed income securities generally decline;
when interest rates decline, prices of fixed income securities generally rise.
See "U.S. Government Obligations" and "Debt Securities-Risk Factors," below.
The Fund may invest in mortgage-backed securities, including those
involving Government National Mortgage Association ("GNMA") certificates,
Federal National Mortgage Association ("FNMA") certificates and Federal Home
Loan Mortgage Corporation ("FHLMC") certificates. The Fund also may invest in
securities issued or guaranteed by other U.S. Government agencies or
instrumentalities, including: the Federal Farm Credit System and the Federal
Home Loan Bank (each of which may not borrow from the U.S. Treasury and the
securities of which are not guaranteed by the U.S. Government); the Tennessee
Valley Authority, and the U.S. Postal Service (each of which may borrow from the
U.S. Treasury to meet its obligations); the Farmers Home Administration and the
Export-Import Bank (the securities of which are backed by the full faith and
credit of the United States). The Fund normally reinvests principal payments
(whether regular or pre-paid) in additional mortgage-backed securities. See
"Mortgage-Backed Securities," below.
The Fund may invest up to 35% of its assets in securities other than U.S.
Government Obligations and mortgage-backed securities. These may include: prime
commercial paper, certificates of deposit of domestic branches of U.S. banks,
bankers' acceptances, repurchase agreements (applicable to U.S. Government
Obligations), insured certificates of deposit and certificates representing
accrual on U.S. Treasury securities. The Fund also may make loans of portfolio
securities and invest in zero coupon securities. The Fund may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets.
See the SAI for a further discussion of these securities.
For temporary defensive purposes, the Fund may invest all of its assets in
cash, cash equivalents and money market instruments, including bank certificates
of deposit, bankers' acceptances and commercial paper issued by domestic
corporations, short-term fixed income securities or U.S. Government Obligations.
See the SAI for a description of these securities.
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Growth Fund
The investment objective of Growth Fund is long-term capital appreciation.
Current income through the receipt of interest or dividends from investments
will merely be incidental to the Fund's efforts in pursuing its goal. It is the
policy of the Fund to invest, under normal market conditions, primarily in
common stocks and it is anticipated that the Fund will usually be so invested.
It also may invest to a limited degree in convertible securities and preferred
stocks. At least 75% of the value of the Fund's total assets (excluding
securities held for defensive purposes) shall be invested in securities of
companies in industries in which the Adviser, or the Fund's investment
subadviser, Wellington Management Company, LLP ("Subadviser" or "WMC"), believes
opportunities for capital growth exist. The Fund does not intend to concentrate
its investments in a particular industry, but it may invest up to 25% of the
value of its assets in a particular industry. The Fund may invest up to 5% of
its total assets in common stocks issued by foreign companies that are
denominated in U.S. currency; provided, however, that the Fund may invest
without limit in U.S. dollar denominated foreign securities listed on the New
York Stock Exchange ("NYSE"). The Fund may also invest in ADRs and Global
Depository Receipts ("GDRs"), purchase securities on a when-issued or delayed
delivery basis and make loans of portfolio securities. The Fund may borrow money
for temporary or emergency purposes in amounts not exceeding 5% of its total
assets. For temporary defensive purposes, the Fund may invest all of its assets
in U.S. Government Obligations, investment grade bonds, prime commercial paper,
certificates of deposit, bankers' acceptances, repurchase agreements and
participation interests. See the SAI for a description of these securities.
High Yield Fund
High Yield Fund primarily seeks high current income and secondarily seeks
growth of capital. The Fund actively seeks to achieve its secondary objective to
the extent consistent with its primary objective. The Fund seeks to achieve its
objectives by investing, under normal market conditions, at least 65% of its
total assets in high risk, high yield securities, commonly referred to as "junk
bonds" ("High Yield Securities"). High Yield Securities include the following
instruments: fixed, variable or floating rate debt obligations (including bonds,
debentures and notes) which are rated below Baa by Moody's or below BBB by S&P,
or, if unrated, are deemed to be of comparable quality by the Adviser; preferred
stocks and dividend-paying common stocks that have yields comparable to those of
high yielding debt securities; any of the foregoing securities of companies that
are financially troubled, in default or undergoing bankruptcy or reorganization
("Deep Discount Securities"); and any securities convertible into any of the
foregoing. See "High Yield Securities--Risk Factors" and "Deep Discount
Securities."
The Fund may invest up to 5% of its total assets in debt securities issued
by foreign governments and companies located outside the United States and
denominated in U.S. or foreign currency. The Fund may borrow money for temporary
or emergency purposes in amounts not exceeding 5% of its total assets, make
loans of portfolio securities, enter into repurchase agreements and invest in
zero coupon and pay-in-kind securities. The Fund may also invest in securities
on a "when issued" or delayed delivery basis. See "Description of Certain
Securities, Other Investment Policies and Risk Factors," below, and the SAI for
more information concerning these securities.
The Fund may invest up to 35% of its total assets in securities other than
High Yield Securities, including: dividend-paying common stocks; securities
convertible into, or exchangeable for, common stock; debt obligations of all
types (including bonds, debentures and notes) rated A or better by
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Moody's or S&P; U.S. Government Obligations; warrants; and money market
instruments consisting of prime commercial paper, certificates of deposit of
domestic branches of U.S. banks, bankers' acceptances and repurchase agreements.
In any period of market weakness or of uncertain market or economic
conditions, the Fund may establish a temporary defensive position to preserve
capital by having all or part of its assets invested in investment grade debt
securities or retained in cash or cash equivalents, including bank certificates
of deposit, bankers' acceptances, U.S. Government Obligations and commercial
paper issued by domestic corporations. See "Description of Certain Securities,
Other Investment Policies and Risk Factors," below.
The medium- to lower-rated, and certain of the unrated securities in which
the Fund invests tend to offer higher yields than higher-rated securities with
the same maturities because the historical financial condition of the issuers of
such securities may not be as strong as that of other issuers. Debt obligations
rated lower than Baa or BBB by Moody's or S&P, respectively, are speculative and
generally involve more risk of loss of principal and income than higher-rated
securities. Also, their yields and market value tend to fluctuate more than
higher quality securities. The greater risks and fluctuations in yield and value
occur because investors generally perceive issuers of lower-rated and unrated
securities to be less creditworthy. These risks cannot be eliminated, but may be
reduced by diversifying holdings to minimize the portfolio impact of any single
investment. In addition, fluctuations in market value does not affect the cash
income from the securities, but are reflected in the Fund's net asset value.
When interest rates rise, the net asset value of the Fund tends to decrease.
When interest rates decline, the net asset value of the Fund tends to increase.
Variable or floating rate debt obligations in which the Fund may invest
periodically adjust their interest rates to reflect changing economic
conditions. Thus, changing economic conditions specified by the terms of the
security would serve to change the interest rate and the return offered to the
investor. This reduces the effect of changing market conditions on the
security's underlying market value.
A High Yield Security may itself be convertible into or exchangeable for
equity securities, or may carry with it the right to acquire equity securities
evidenced by warrants attached to the security or acquired as part of a unit
with the security. Although the Fund invests primarily in High Yield Securities,
securities received upon conversion or exercise of warrants and securities
remaining upon the break-up of units or detachment of warrants may be retained
to permit orderly disposition, to establish a long-term holding basis for
Federal income tax purposes or to seek capital appreciation.
Because of the greater number of investment considerations involved in
investing in High Yield Securities, the achievement of the Fund's investment
objectives depends more on the Adviser's research abilities than would be the
case if the Fund were investing primarily in securities in the higher rated
categories. Because medium- to lower-rated securities generally involve greater
risks of loss of income and principal than higher-rated securities, investors
should consider carefully the relative risks associated with investments in
securities that carry medium to lower ratings or, if unrated, deemed to be of
comparable quality by the Adviser. See "High Yield Securities--Risk Factors" and
Appendix A for a description of corporate bond ratings.
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The dollar weighted average of credit ratings of all bonds held by the Fund
during the 1995 fiscal year, computed on a monthly basis, is set forth below.
This information reflects the average composition of the Fund's assets during
the 1995 fiscal year and is not necessarily representative of the Fund as of the
end of its 1995 fiscal year, the current fiscal year or at any other time in the
future.
Comparable Quality of
Unrated Securities to
Rated by Moody's Bonds Rated by Moody's
---------------- ----------------------
Ba 12.16% 0.73%
B 71.29 0.20
Caa 1.92 0.22
Ca 0.73 0
---- ------
Total 86.10% 1.15%
International Securities Fund
International Securities Fund primarily seeks long-term capital growth and
secondarily seeks to earn a reasonable level of current income. The Fund may
invest in all types of securities issued by companies and government
instrumentalities of any nation approved by the Trustees, subject only to
industry concentration and issuer diversification restrictions described below
and in the SAI. This investment flexibility permits the Fund to react to rapidly
changing economic conditions among countries which cause the relative
attractiveness of investments within national markets to be subject to frequent
reappraisal. It is a fundamental policy of the Fund that no more than 35% of its
total assets will be invested in securities issued by U.S. companies and U.S.
Government Obligations or cash and cash equivalents denominated in U.S.
currency. In addition, the Fund presently does not intend to invest more than
35% of its total assets in any one particular country. Further, except for
temporary defensive purposes, the Fund's assets will be invested in securities
of at least three different countries outside the United States. See "Foreign
Securities--Risk Factors". For defensive purposes, the Fund may temporarily
invest in securities issued by U.S. companies and the U.S. Government and its
agencies and instrumentalities, or cash equivalents denominated in U.S.
currency, without limitation as to amount.
The Fund may purchase securities traded on any foreign stock exchange. The
Fund may also purchase ADRs and GDRs. See "American Depository Receipts and
Global Depository Receipts," below. The Fund also may invest up to 25% of its
total assets in unlisted securities of foreign issuers; provided, however, that
no more than 15% of the value of its net assets may be invested in unlisted
securities with a limited trading market and other illiquid investments. The
investment standards for the selection of unlisted securities are the same as
those used in the purchase of securities traded on a stock exchange.
The Fund may invest in warrants, which may or may not be listed on a
recognized United States or foreign exchange. The Fund also may enter into
repurchase agreements, purchase securities on a when-issued or delayed delivery
basis and make loans of portfolio securities. The Fund also may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets.
See the SAI for further information concerning these securities.
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Investment Grade Fund
Investment Grade Fund seeks to generate a maximum level of income
consistent with investment in investment grade debt securities. The Fund seeks
to achieve its objective by investing, under normal market conditions, at least
65% of its total assets in debt securities of U.S. issuers that are rated in the
four highest rated categories by Moody's or S&P, or in unrated securities that
are deemed to be of comparable quality by the Adviser ("investment grade
securities"). The Fund may invest up to 35% of its total assets in U.S.
Government Obligations, including mortgage-related securities, dividend-paying
common and preferred stocks, obligations convertible into common stocks,
repurchase agreements, debt securities rated below investment grade and money
market instruments. The Fund may invest up to 5% of its net assets in corporate
or government debt securities of foreign issuers which are U.S. dollar
denominated and traded in U.S. markets. The Fund may also borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets.
The Fund may purchase securities on a when-issued basis, make loans of portfolio
securities and invest in zero coupon or pay-in-kind securities. See "Description
of Certain Securities, Other Investment Policies and Risk Factors," below, and
the SAI for additional information concerning these securities.
The published reports of rating services are considered by the Adviser in
selecting rated securities for the Fund's portfolio. The Adviser also relies,
among other things, on its own credit analysis, which includes a study of the
existing debt's capital structure, the issuer's ability to service debt (or to
pay dividends, if investing in common or preferred stock) and the current trend
of earnings for the issuer. Although up to 100% of the Fund's total assets can
be invested in debt securities rated at least Baa by Moody's or at least BBB by
S&P, or unrated debt securities deemed to be of comparable quality by the
Adviser, no more than 5% of the Fund's net assets may be invested in debt
securities rated lower than Baa by Moody's or BBB by S&P (including securities
that have been downgraded), or, if unrated, deemed to be of comparable quality
by the Adviser, or in any equity securities of any issuer if a majority of the
debt securities of such issuer are rated lower than Baa by Moody's or BBB by
S&P. Securities rated BBB or Baa by S&P or Moody's, respectively, are considered
to be speculative with respect to the issuer's ability to make principal and
interest payments. The Adviser continually monitors the investments in the
Fund's portfolio and carefully evaluates on a case-by-case basis whether to
dispose of or retain a debt security which has been downgraded to a rating lower
than investment grade. See "Debt Securities--Risk Factors" and Appendix A for a
description of corporate bond ratings.
For temporary defensive purposes, the Fund may invest all of its assets in
money market instruments, short-term fixed income securities or U.S. Government
Obligations. See "Description of Certain Securities, Other Investment Policies
and Risk Factors," below, and the SAI.
Target Maturity 2007 Fund
Target Maturity 2010 Fund
Target Maturity 2007 Fund seeks to provide a predictable compounded
investment return for investors who hold their Fund shares until the Fund's
maturity, consistent with preservation of capital.
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<PAGE>
Target Maturity 2010 Fund seeks to provide a predictable compounded
investment return for investors who hold their Fund shares until the Fund's
maturity consistent with the preservation of capital.
Each Fund will seek its objective by investing, under normal market
conditions, at least 65% of its total assets in zero coupon securities which are
issued by the U.S. Government and its agencies and instrumentalities or created
by third parties using securities issued by the U.S. Government and its agencies
and instrumentalities. With respect to Target Maturity 2007 Fund, these
investments will mature no later than December 31, 2007 and, with respect to
Target Maturity 2010 Fund, these investments will mature no later than December
31, 2010. December 31, 2007 and December 31, 2010 are herein collectively
referred to as the "Maturity Date." On the Maturity Date, each Fund will be
converted to cash and distributed or reinvested in another Fund of Life Series
Fund at the investor's choice.
Each Fund seeks to provide investors with a positive total return at the
Maturity Date which, together with the reinvestment of all dividends and
distributions, exceeds their original investment in a Fund by a relatively
predictable amount. While the risk of fluctuation in the values of zero coupon
securities is greater when the period to maturity is longer, that risk tends to
diminish as the Maturity Date approaches. Although an investor can redeem shares
at the current net asset value at any time, any investor who redeems his or her
shares prior to the Maturity Date is likely to achieve a different investment
result than the return that was predicted on the date the investment was made,
and may even suffer a significant loss.
Zero coupon securities are debt obligations that do not entitle the holder
to any periodic payment of interest prior to maturity or a specified date when
the securities begin paying current interest. They are issued and traded at a
discount from their face amount or par value. This discount varies depending on
the time remaining until maturity, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. When held to maturity,
the entire return of a zero coupon security, which consists of the accretion of
the discount, comes from the difference between its issue price and its maturity
value. This difference is known at the time of purchase, so investors holding
zero coupon securities until maturity know the amount of their investment return
at the time of their investment. The market values are subject to greater market
fluctuations from changing interest rates prior to maturity than the values of
debt obligations of comparable maturities that bear interest currently. See
"Zero Coupon Securities-Risk Factors."
A portion of the total realized return from conventional interest-paying
bonds comes from the reinvestment of periodic interest. Since the rate to be
earned on these reinvestments may be higher or lower than the rate quoted on the
interest-paying bonds at the time of the original purchase, the total return of
interest-paying bonds is uncertain even for investors holding the security to
its maturity. This uncertainty is commonly referred to as reinvestment risk and
can have a significant impact on total realized investment return. With zero
coupon securities, however, there are no cash distributions to reinvest, so
investors bear no reinvestment risk if they hold the zero coupon securities to
maturity.
Each Fund primarily will purchase three types of zero coupon securities:
(1) U.S. Treasury STRIPS (Separately Traded Registered Interest and Principal
Securities), which are created when the coupon payments and the principal
payment are stripped from an outstanding Treasury security by the Federal
Reserve Bank. Bonds issued by the Resolution Funding Corporation (REFCORP) can
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<PAGE>
also be stripped in this fashion. (2) STRIPS which are created when a dealer
deposits a Treasury security or a Federal agency security with a custodian for
safekeeping and then sells the coupon payments and principal payment that will
be generated by this security. Bonds issued by the Financing Corporation (FICO)
can be stripped in this fashion. (3) Zero coupon securities of federal agencies
and instrumentalities either issued directly by an agency in the form of a zero
coupon bond or created by stripping an outstanding bond.
Each Fund may invest up to 35% of its total assets in the following
instruments: interest-bearing obligations issued by the U.S. Government and its
agencies and instrumentalities (see "U.S. Government Obligations"), including,
for Target Maturity 2007 Fund, zero coupon securities maturing beyond 2007, and,
for Target Maturity 2010 Fund, zero coupon securities maturing beyond 2010;
corporate debt securities, including corporate zero coupon securities;
repurchase agreements; and money market instruments consisting of prime
commercial paper, certificates of deposit of domestic branches of U.S. banks and
bankers' acceptances. Each Fund may only invest in debt securities rated A or
better by Moody's or S&P or in unrated securities that are deemed to be of
comparable quality by the Adviser. Debt obligations rated A or better by Moody's
or S&P comprise what are known as high-grade bonds and are regarded as having a
strong capacity to repay principal and make interest payments. See Appendix A
for a description of corporate bond ratings. Each Fund may also invest in
restricted and illiquid securities, make loans of portfolio securities and
purchase securities on a when-issued basis. See the SAI for more information
regarding these types of investments.
Utilities Income Fund
The primary investment objective of Utilities Income Fund is to seek high
current income. Long-term capital appreciation is a secondary objective. The
Fund seeks its objectives by investing, under normal market conditions, at least
65% of its total assets in equity and debt securities issued by companies
primarily engaged in the public utilities industry. Equity securities in which
the Fund may invest include common stocks, preferred stocks, securities
convertible into common stocks or preferred stocks, and warrants to purchase
common or preferred stocks. Debt securities in which the Fund may invest will be
rated at the time of investment at least A by Moody's or S&P or, if unrated,
will be deemed to be of comparable quality as determined by the Adviser. Debt
securities rated A or higher by Moody's or S&P or, if unrated, deemed to be of
comparable quality by the Adviser, are regarded as having a strong capacity to
pay principal and interest. The Fund's policy is to attempt to sell, within a
reasonable time period, a debt security in its portfolio which has been
downgraded below A, provided that such disposition is in the best interests of
the Fund and its shareholders. See Appendix A for a description of corporate
bond ratings. The portion of the Fund's assets invested in equity securities and
in debt securities will vary from time to time due to changes in interest rates
and economic and other factors.
The utility companies in which the Fund invests include companies primarily
engaged in the ownership or operation of facilities used to provide electricity,
gas, water or telecommunications (including telephone, telegraph and satellite,
but not companies engaged in public broadcasting or cable television). For these
purposes, "primarily engaged" means that (1) more than 50% of the company's
assets are devoted to the ownership or operation of one or more facilities as
described above, or (2) more than 50% of the company's operating revenues are
derived from the business or combination of any of the businesses described
above. It should be noted that based on this
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<PAGE>
definition, the Fund may invest in companies which are also involved to a
significant degree in non-public utilities activities.
Utility stocks generally offer dividend yields that exceed those of
industrial companies and their prices tend to be less volatile than stocks of
industrial companies. However, utility stocks can still be affected by the risks
of the stock of industrial companies. Because the Fund concentrates its
investments in public utilities companies, the value of its shares will be
especially affected by factors peculiar to the utilities industry, and may
fluctuate more widely than the value of shares of a fund that invests in a
broader range of industries. See "Utilities Industries--Risk Factors."
The Fund may invest up to 35% of its total assets in the following
instruments: debt securities (rated at least A by Moody's or S&P) and common and
preferred stocks of non-utility companies; U.S. Government Obligations;
mortgage-backed securities; cash; and money market instruments consisting of
prime commercial paper, bankers' acceptances, certificates of deposit and
repurchase agreements. The Fund may invest in securities on a "when-issued" or
delayed delivery basis and make loans of portfolio securities. The Fund may
invest up to 5% of its net assets in ADRs. The Fund may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its net assets.
The Fund also may invest in zero coupon and pay-in-kind securities. In addition,
in any period of market weakness or of uncertain market or economic conditions,
the Fund may establish a temporary defensive position to preserve capital by
having all of its assets invested in short-term fixed income securities or
retained in cash or cash equivalents. See the SAI for a description of these
securities.
General. Each Fund's net asset value fluctuates based mainly upon changes
in the value of its portfolio securities. Each Fund's investment objectives and
certain investment limitations set forth in the SAI are fundamental policies
that may not be changed without shareholder approval. There can be no assurance
that any Fund will achieve its investment objectives.
Description of Certain Securities, Other Investment Policies and Risk Factors
American Depository Receipts and Global Depository Receipts. Blue Chip
Fund, International Securities Fund, Growth Fund, Utilities Income Fund and
Discovery Fund may invest in sponsored and unsponsored ADRs. ADRs are receipts
typically issued by a U.S. bank or trust company evidencing ownership of the
underlying securities of foreign issuers, and other forms of depository receipts
for securities of foreign issuers. Generally, ADRs, in registered form, are
denominated in U.S. dollars and are designed for use in the U.S. securities
markets. Thus, these securities are not denominated in the same currency as the
securities into which they may be converted. In addition, the issuers of the
securities underlying unsponsored ADRs are not obligated to disclose material
information in the United States and, therefore, there may be less information
available regarding such issuers and there may not be a correlation between such
information and the market value to the ADRs. International Securities Fund and
Growth Fund may also invest in sponsored and unsponsored GDRs. GDRs are issued
globally and evidence a similar ownership arrangement. Generally, GDRs are
designed for trading in non-U.S. securities markets. ADRs and GDRs are
considered to be foreign securities by each of the above Funds, as appropriate.
See "Foreign Securities--Risk Factors."
Bankers' Acceptances. Each Fund may invest in bankers' acceptances.
Bankers' acceptancesz are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance
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is a time draft drawn on a bank by an exporter or importer to obtain a stated
amount of funds to pay for specific merchandise. The draft is then "accepted" by
a bank that, in effect, unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held by the
accepting bank as an asset or it may be sold in the secondary market at the
going rate of interest for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances have maturities of six
months or less.
Certificates of Deposit. Each Fund may invest in bank certificates of
deposit ("CDs"). The FDIC is an agency of the U.S. Government which insures the
deposits of certain banks and savings and loan associations up to $100,000 per
deposit. The interest on such deposits may not be insured if this limit is
exceeded. Current Federal regulations also permit such institutions to issue
insured negotiable CDs in amounts of $100,000 or more, without regard to the
interest rate ceilings on other deposits. To remain fully insured, these
investments currently must be limited to $100,000 per insured bank or savings
and loan association.
Commercial Paper. Commercial paper is a promissory note issued by a
corporation to finance short-term credit needs which may either be unsecured or
backed by a letter of credit. Commercial paper includes notes, drafts or similar
instruments payable on demand or having a maturity at the time of issuance not
exceeding nine months, exclusive of days of grace or any renewal thereof. See
Appendix A to the SAI for a description of commercial paper ratings.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or
dividends paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying stock because they have
fixed income characteristics, and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. See
the SAI for more information on convertible securities.
Debt Securities--Risk Factors. The market value of debt securities is
influenced primarily by changes in the level of interest rates. Generally, as
interest rates rise, the market value of debt securities decreases. Conversely,
as interest rates fall, the market value of debt securities increases. Factors
which could result in a rise in interest rates, and a decrease in the market
value of debt securities, include an increase in inflation or inflation
expectations, an increase in the rate of U.S. economic growth, an expansion in
the Federal budget deficit or an increase in the price of commodities such as
oil. In addition, the market value of debt securities is influenced by
perceptions of the credit risks associated with such securities. Sale of debt
securities prior to maturity may result in a loss and the inability to replace
the sold securities with debt securities with a similar yield. Debt obligations
rated lower than Baa by Moody's or BBB by S&P, commonly referred to as "junk
bonds," are speculative and generally involve a higher risk of loss of principal
and income than higher-rated securities. See "High Yield Securities--Risk
Factors" and Appendix A for a description of corporate bond ratings.
Deep Discount Securities. High Yield Fund may invest up to 15% of its total
assets in securities of companies that are financially troubled, in default or
undergoing bankruptcy or
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reorganization. Such securities are usually available at a deep discount from
the face value of the instrument. The Fund will invest in Deep Discount
Securities when the Adviser believes that there exist factors that are likely to
restore the company to a healthy financial condition. Such factors include a
restructuring of debt, management changes, existence of adequate assets or other
unusual circumstances. Debt instruments purchased at deep discounts may pay very
high effective yields. In addition, if the financial condition of the issuer
improves, the underlying value of the security may increase, resulting in a
capital gain. If the company defaults on its obligations or remains in default,
or if the plan of reorganization is insufficient for debtholders, the Deep
Discount Securities may stop paying interest and lose value or become worthless.
The Adviser will balance the benefits of Deep Discount Securities with their
risks. While a diversified portfolio may reduce the overall impact of a Deep
Discount Security that is in default or loses its value, the risk cannot be
eliminated. See "High Yield Securities--Risk Factors."
Eurodollar Certificates of Deposit. Cash Management Fund may invest in
Eurodollar CDs, which are issued by London branches of domestic or foreign
banks. Such securities involve risks that differ from certificates of deposit
issued by domestic branches of U.S. banks. These risks include future political
and economic developments, the possible imposition of United Kingdom withholding
taxes on interest income payable on the securities, the possible establishment
of exchange controls, the possible seizure or nationalization of foreign
deposits or the adoption of other foreign governmental restrictions that might
adversely affect the payment of principal and interest on such securities.
Foreign Securities--Risk Factors. International Securities Fund, High Yield
Fund and Discovery Fund may sell a security denominated in a foreign currency
and retain the proceeds in that foreign currency to use at a future date (to
purchase other securities denominated in that currency) or a Fund may buy
foreign currency outright to purchase securities denominated in that foreign
currency at a future date. Because none of these Funds intend to hedge their
foreign investments, the Fund will be affected by changes in exchange control
regulations and fluctuations in the relative rates of exchange between the
currencies of different nations, as well as by economic and political
developments. Growth Fund may invest in securities issued by foreign companies
that are denominated in U.S. currency. Risks involved in foreign securities
include the following: there may be less publicly available information about
foreign companies comparable to the reports and ratings that are published about
companies in the United States; foreign companies are not generally subject to
uniform accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies; some foreign stock markets
have substantially less volume than U.S. markets, and securities of some foreign
companies are less liquid and more volatile than securities of comparable U.S.
companies; there may be less government supervision and regulation of foreign
stock exchanges, brokers and listed companies than exist in the United States;
and there may be the possibility of expropriation or confiscatory taxation,
political or social instability or diplomatic developments which could affect
assets of a Fund held in foreign countries.
International Securities Fund's and Discovery Fund's investments in
emerging markets include investments in countries whose economies or securities
markets are not yet highly developed. Special considerations associated with
these emerging market investments (in addition to the considerations regarding
foreign investments generally) may include, among others, greater political
uncertainties, an economy's dependence on revenues from particular commodities
or on international aid or development assistance, currency transfer
restrictions, a limited number of potential buyers for such securities and
delays and disruptions in securities settlement procedures.
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High Yield Securities--Risk Factors. High Yield Securities are subject to
certain risks that may not be present with investments in higher grade
securities.
Effect of Interest Rate and Economic Changes. High Yield Securities rated
lower than Baa by Moody's or BBB by S&P, commonly referred to as "junk bonds,"
are speculative and generally involve a higher risk or loss of principal and
income than higher-rated securities. The prices of High Yield Securities tend to
be less sensitive to interest rate changes than higher-rated investments, but
may be more sensitive to adverse economic changes or individual corporate
developments. Periods of economic uncertainty and changes generally result in
increased volatility in the market prices and yields of High Yield Securities
and thus in a Fund's net asset value. A strong economic downturn or a
substantial period of rising interest rates could severely affect the market for
High Yield Securities. In these circumstances, highly leveraged companies might
have greater difficulty in making principal and interest payments, meeting
projected business goals, and obtaining additional financing. Thus, there could
be a higher incidence of default. This would affect the value of such securities
and thus a Fund's net asset value. Further, if the issuer of a security owned by
a Fund defaults, that Fund might incur additional expenses to seek recovery.
Generally, when interest rates rise, the value of fixed rate debt
obligations, including High Yield Securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a High Yield Security containing a redemption or call provision
exercises either provision in a declining interest rate market, a Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if a Fund experiences unexpected net redemptions in a
rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to
which Fund expenses could be allocated and in a reduced rate of return for that
Fund. While it is impossible to protect entirely against this risk,
diversification of a Fund's portfolio and the Adviser's careful analysis of
prospective portfolio securities should minimize the impact of a decrease in
value of a particular security or group of securities in a Fund's portfolio.
The High Yield Securities Market. The market for below investment grade
bonds expanded rapidly in recent years and its growth paralleled a long economic
expansion. In the past, the prices of many lower-rated debt securities declined
substantially, reflecting an expectation that many issuers of such securities
might experience financial difficulties. As a result, the yields on lower-rated
debt securities rose dramatically. However, such higher yields did not reflect
the value of the income streams that holders of such securities expected, but
rather the risk that holders of such securities could lose a substantial portion
of their value as a result of the issuers' financial restructuring or default.
There can be no assurance that such declines in the below investment grade
market will not reoccur. The market for below investment grade bonds generally
is thinner and less active than that for higher quality bonds, which may limit a
Fund's ability to sell such securities at fair value in response to changes in
the economy or the financial markets. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower rated securities, especially in a thinly traded
market.
Credit Ratings. The credit ratings issued by credit rating services may not
fully reflect the true risks of an investment. For example, credit ratings
typically evaluate the safety of principal and interest payments, not market
value risk, of High Yield Securities. Also, credit rating agencies may fail to
change on a timely basis a credit rating to reflect changes in economic or
company conditions that affect a security's market value. Although the Adviser
considers ratings of recognized
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rating services such as Moody's and S&P, the Adviser primarily relies on its own
credit analysis, which includes a study of existing debt, capital structure,
ability to service debt and to pay dividends, the issuer's sensitivity to
economic conditions, its operating history and the current trend of earnings.
High Yield Fund may invest in securities rated as low as D by S&P or C by
Moody's or, if unrated, deemed to be of comparable quality by the Adviser. Debt
obligations with these ratings either have defaulted or are in great danger of
defaulting and are considered to be highly speculative. See "Deep Discount
Securities." The Adviser continually monitors the investments in a Fund's
portfolio and carefully evaluates whether to dispose of or retain High Yield
Securities whose credit ratings have changed. See Appendix A for a description
of corporate bond ratings.
Liquidity and Valuation. Lower-rated bonds are typically traded among a
smaller number of broker-dealers than in a broad secondary market. Purchasers of
High Yield Securities tend to be institutions, rather than individuals, which is
a factor that further limits the secondary market. To the extent that no
established retail secondary market exists, many High Yield Securities may not
be as liquid as higher-grade bonds. A less active and thinner market for High
Yield Securities than that available for higher quality securities may result in
more volatile valuations of a Fund's holdings and more difficulty in executing
trades at favorable prices during unsettled market conditions.
The ability of a Fund to value or sell High Yield Securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. During such periods, there may be less reliable objective information
available and thus the responsibility of Life Series Fund's Board of Trustees to
value High Yield Securities becomes more difficult, with judgment playing a
greater role. Further, adverse publicity about the economy or a particular
issuer may adversely affect the public's perception of the value, and thus
liquidity, of a High Yield Security, whether or not such perceptions are based
on a fundamental analysis.
Legislation. Provisions of the Revenue Reconciliation Act of 1989 limit a
corporate issuer's deduction for a portion of the original issue discount on
"high yield discount" obligations (including certain pay-in-kind securities).
This limitation could have a materially adverse impact on the market for certain
High Yield Securities. From time to time, legislators and regulators have
proposed other legislation that would limit the use of high yield debt
securities in leveraged buyouts, mergers and acquisitions. It is not certain
whether such proposals, which also could adversely affect High Yield Securities,
will be enacted into law.
Market Risk. Blue Chip Fund, Discovery Fund, Growth Fund and Utilities
Income Fund are subject to market risk because they invest primarily in common
stocks. Market risk is the possibility that common stock prices will decline
over short or even extended periods. The U.S. stock market tends to be cyclical,
with periods when stock prices generally rise and periods when stock prices
generally decline.
Mortgage-Backed Securities
Mortgage loans made by banks, savings and loan institutions and other
lenders are often assembled into pools, the interests in which are issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself. Interests in such pools are referred
to herein as "mortgage-backed securities." The market value of these securities
will fluctuate as interest rates and market conditions change. In addition,
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prepayment of principal by the mortgagees, which often occurs with
mortgage-backed securities when interest rates decline, can significantly change
the realized yield of these securities.
GNMA certificates are backed as to the timely payment of principal and
interest by the full faith and credit of the U.S. Government. Payments of
principal and interest on FNMA certificates are guaranteed only by FNMA itself,
not by the full faith and credit of the U.S. Government. FHLMC certificates
represent mortgages for which FHLMC has guaranteed the timely payment of
principal and interest but, like a FNMA certificate, they are not guaranteed by
the full faith and credit of the U.S. Government.
Collateralized Mortgage Obligations and Multiclass Pass-Through Securities.
Collateralized mortgage obligations ("CMOs") are debt obligations collateralized
by mortgage loans or mortgage pass-through securities. Typically, CMOs are
collateralized by GNMA certificates or other government mortgage-backed
securities (such collateral collectively hereinafter referred to as "Mortgage
Assets"). Multiclass pass-through securities are interests in trusts that are
comprised of Mortgage Assets. Unless the context indicates otherwise, references
herein to CMOs include multiclass pass-through securities. Payments of principal
of, and interest on, the Mortgage Assets, and any reinvestment income thereon,
provide the funds to pay debt service on the CMOs or to make scheduled
distributions on the multiclass pass-through securities. CMOs in which
Government Fund may invest are issued or guaranteed by U.S. Government agencies
or instrumentalities, such as FNMA and FHLMC. See the SAI for more information
on CMOs.
Stripped Mortgage-Backed Securities. Government Fund, Target Maturity 2007
Fund and Target Maturity 2010 Fund may invest in stripped mortgage-backed
securities ("SMBS"), which are derivative multiclass mortgage securities. SMBS
are usually structured with two classes that receive different proportions of
the interest and principal distributions from a pool of mortgage assets. A
common type of SMBS will have one class receiving most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest while the other class will receive all of the principal. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, the Fund may fail to fully recoup its initial investment in these
securities. The market value of the class consisting primarily or entirely of
principal payments generally is unusually volatile in response to changes in
interest rates.
Risks of Mortgage-Backed Securities. Investments in mortgage-backed
securities entail both market and prepayment risk. Fixed-rate mortgage-backed
securities are priced to reflect, among other things, current and perceived
interest rate conditions. As conditions change, market values will fluctuate. In
addition, the mortgages underlying mortgage-backed securities generally may be
prepaid in whole or in part at the option of the individual buyer. Prepayments
of the underlying mortgages can affect the yield to maturity on mortgage-backed
securities and, if interest rates decline, the prepayment may only be invested
at the then prevailing lower interest rate. Changes in market conditions,
particularly during periods of rapid or unanticipated changes in market interest
rates, may result in volatility and reduced liquidity of the market value of
certain mortgage-backed securities. CMOs and SMBS involve similar risks,
although they may be more volatile and even less liquid.
Preferred Stock. A preferred stock is a blend of the characteristics of a
bond and common stock. It can offer the higher yield of a bond and has priority
over common stock in equity ownership, but does not have the seniority of a bond
and, unlike common stock, its participation in
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the issuer's growth may be limited. Preferred stock has preference over common
stock in the receipt of dividends and in any residual assets after payment to
creditors should the issuer be dissolved. Although the dividend is set at a
fixed annual rate, in some circumstances it can be changed or omitted by the
issuer.
Repurchase Agreements. Repurchase agreements are transactions in which a
Fund purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Each Fund's risk is limited
primarily to the ability of the seller to repurchase the securities at the
agreed-upon price upon the delivery date. See the SAI for more information
regarding repurchase agreements.
Restricted and Illiquid Securities. Each Fund, other than Cash Management
Fund, may invest up to 15% of its net assets in illiquid securities. Cash
Management Fund may invest up to 10% of its net assets in illiquid securities.
These securities include (1) securities that are illiquid due to the absence of
a readily available market or due to legal or contractual restrictions on resale
and (2) repurchase agreements maturing in more than seven days. However,
illiquid securities for purposes of this limitation do not include securities
eligible for resale to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933, as amended, which Life Series Fund's Board of
Trustees or the Adviser or the Subadviser, as applicable, has determined are
liquid under Board-approved guidelines. See the SAI for more information
regarding restricted and illiquid securities.
Under current guidelines of the staff of the SEC, interest-only and
principal-only classes of fixed-rate mortgage-backed securities in which
Government Fund may invest are considered illiquid. However, such securities
issued by the U.S. Government or one of its agencies or instrumentalities will
not be considered illiquid if the Adviser has determined that they are liquid
pursuant to guidelines established by Life Series Fund's Board of Trustees.
Government Fund, Target Maturity 2007 Fund and Target Maturity 2010 Fund may not
be able to sell illiquid securities when the Adviser considers it desirable to
do so or may have to sell such securities at a price lower than could be
obtained if they were more liquid. Also the sale of illiquid securities may
require more time and may result in higher dealer discounts and other selling
expenses than does the sale of securities that are not illiquid. Illiquid
securities may be more difficult to value due to the unavailability of reliable
market quotations for such securities, and investment in illiquid securities may
have an adverse impact on these Fund's net asset value.
Time Deposits. Cash Management Fund may invest in time deposits. Time
deposits are non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. For the most part, time
deposits which may be held by the Fund would not benefit from insurance from the
Bank Insurance Fund or the Savings Association Insurance Fund administered by
the FDIC.
U.S. Government Obligations. Securities issued or guaranteed as to
principal and interest by the U.S. Government include (1) U.S. Treasury
obligations which differ only in their interest rates, maturities and times of
issuance as follows: U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years), and U.S. Treasury bonds
(generally maturities of greater than ten years); and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are backed by
the full faith and credit of the United States, such as securities issued by the
Federal Housing Administration, GNMA, the Department of Housing and
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Urban Development, the Export-Import Bank, the General Services Administration
and the Maritime Administration and certain securities issued by the Farmers
Home Administration and the Small Business Administration. The range of
maturities of U.S. Government Obligations is usually three months to thirty
years.
Utilities Industry-Risk Factors. Stocks of utilities companies generally
offer dividend yields that exceed those of industrial companies and their prices
tend to be less volatile than stocks of industrial companies. However, utility
stocks can still be affected by the risks of the stock market in general, as
well as factors specific to public utilities companies.
Many utility companies, especially electric and gas and other
energy-related utility companies, have historically been subject to the risk of
increases in fuel and other operating costs, changes in interest rates on
borrowing for capital improvement programs, changes in applicable laws and
regulations, and costs and operating constraints associated with compliance with
environmental regulations. In particular, regulatory changes with respect to
nuclear and conventionally-fueled power generating facilities could increase
costs or impair the ability of utility companies to operate such facilities or
obtain adequate return on invested capital.
Certain utilities, especially gas and telephone utilities, have in recent
years been affected by increased competition, which could adversely affect the
profitability of such utility companies. In addition, expansion by companies
engaged in telephone communication services of their non-regulated activities
into other businesses (such as cellular telephone services, data processing,
equipment retailing, computer services and financial services) has provided the
opportunity for increases in earnings and dividends at faster rates than have
been allowed in traditional regulated businesses. However, technological
innovations and other structural changes also could adversely affect the
profitability of such companies in competition with utilities companies.
Because securities issued by utility companies are particularly sensitive
to movements in interest rates, the equity securities of such companies are more
affected by movements in interest rates than are the equity securities of other
companies.
Each of these risks could adversely affect the ability and inclination of
public utilities companies to declare or pay dividends and the ability of
holders of common stock, such as the Utilities Income Fund, to realize any value
from the assets of the company upon liquidation or bankruptcy.
Variable Rate and Floating Rate Notes. Cash Management Fund may invest in
derivative variable rate and floating rate notes. Issuers of such notes include
corporations, banks, broker-dealers and finance companies. Variable rate notes
include master demand notes which are obligations permitting the holder to
invest fluctuating amounts, which may change daily without penalty, pursuant to
direct arrangements between the Fund, as lender, and the borrower. The interest
rates on these notes fluctuate from time to time. The issuer of such obligations
normally has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. See the SAI for more information on these securities.
Zero Coupon and Pay-In-Kind Securities. Zero coupon securities are debt
obligations that do not entitle the holder to any periodic payment of interest
prior to maturity or a specified date when the securities begin paying current
interest. They are issued and traded at a discount from
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their face amount or par value, which discount varies depending on the time
remaining until cash payments begin, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. Pay-in-kind securities
are those that pay interest through the issuance of additional securities. The
market prices of zero coupon and pay-in-kind securities generally are more
volatile than the prices of securities that pay interest periodically and in
cash and are likely to respond to changes in interest rates to a greater degree
than do other types of debt securities having similar maturities and credit
quality. Original issue discount earned on zero coupon securities and the
"interest" on pay-in-kind securities must be included in a Fund's income. Thus,
to continue to qualify for tax treatment as a regulated investment company and
to avoid a certain excise tax on undistributed income, a Fund may be required to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. See "Taxes" in the SAI. These distributions must be made
from a Fund's cash assets or, if necessary, from the proceeds of sales of
portfolio securities. A Fund will not be able to purchase additional
income-producing securities with cash used to make such distributions, and its
current income ultimately could be reduced as a result.
Zero Coupon Securities-Risk Factors. Zero coupon securities are debt
securities and thus are subject to the same risk factors as all debt securities.
See "Debt Securities-Risk Factors." The market prices of zero coupon securities,
however, generally are more volatile than the prices of securities that pay
interest periodically and in cash and are likely to respond to changes in
interest rates to a greater degree than do other types of debt securities having
similar maturities and credit quality. As a result, the net asset value of
shares of the Target Maturity 2007 Fund and Target Maturity 2010 Fund may
fluctuate over a greater range than shares of the other Funds or mutual funds
that invest in debt obligations having similar maturities but that make current
distributions of interest.
Zero coupon securities can be sold prior to their due date in the secondary
market at their then prevailing market value, which depends primarily on the
time remaining to maturity, prevailing levels of interest rates and the
perceived credit quality of the issuer. The prevailing market value may be more
or less than the securities' value at the time of purchase. While the objective
of both the Target Maturity 2007 Fund and Target Maturity 2010 Fund is to seek a
predictable compounded investment return for investors who hold their Fund
shares until that Fund's maturity, a Fund cannot assure that it will be able to
achieve a certain level of return due to the possible necessity of having to
sell certain zero coupon securities to pay expenses, dividends or to meet
redemptions at times and at prices that might be disadvantageous or,
alternatively, the need to invest assets received from new purchases at
prevailing interest rates, which would expose a Fund to reinvestment risk. In
addition, no assurance can be given as to the liquidity of the market for
certain of these securities. Determination as to the liquidity of such
securities will be made in accordance with guidelines established by Life Series
Fund's Board of Trustees. In accordance with such guidelines, the Adviser will
monitor each Fund's investments in such securities with particular regard to
trading activity, availability of reliable price information and other relevant
information.
Portfolio Turnover. The sustained and substantial decrease in interest
rates during 1995 caused the Government Fund's portfolio to be restructered
several times. In particular, declining rates increased prepayments on
mortgage-backed securities, causing their durations to decrease. In order to
offset the decrease in duration, the Government Fund had to actively manage its
mortgage-backed holdings. This resulted in a portfolio turnover rate for the
fiscal year ended December 31, 1995 of 198% and 457% for the prior fiscal year.
A high rate of portfolio turnover generally leads to increased transaction costs
and may result in a greater number of taxable
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transactions. See "Allocation of Portfolio Brokerage" in the SAI. The Target
Maturity 2010 Fund currently does not expect its annual rate of portfolio
turnover to exceed 100%. See the SAI for the other Funds' portfolio turnover
rate and for more information on portfolio turnover.
HOW TO BUY SHARES
Investments in a Fund are only available through purchases of the Policies
or the Contracts offered by First Investors Life. Policy premiums, net of
certain expenses, are paid into a unit investment trust, Separate Account B.
Purchase payments for the Contracts, net of certain expenses, are also paid into
a unit investment trust, Separate Account C. The Separate Accounts pool these
proceeds to purchase shares of a Fund designated by purchasers of the Policies
or Contracts. Orders for the purchase of Fund shares received prior to the close
of regular trading on the NYSE, generally 4:00 P.M. (New York City time), on any
business day the NYSE is open for trading, will be processed and shares will be
purchased at the net asset value determined at the close of regular trading on
the NYSE on that day. Orders received after the close of regular trading on the
NYSE will be processed at the net asset value determined at the close of regular
trading on the NYSE on the next trading day. See "Determination of Net Asset
Value."
HOW TO REDEEM SHARES
Shares of a Fund may be redeemed at the direction of Policyowners or
Contractowners, in accordance with the terms of the Policies or Contracts.
Redemptions will be made at the next determined net asset value of the
respective Fund upon receipt of a proper request for redemption or repurchase.
Payment will be made by check as soon as possible but within seven days after
presentation. However, Life Series Fund's Board of Trustees may suspend the
right of redemption or postpone the date of payment during any period when (a)
trading on the NYSE is restricted as determined by the Securities and Exchange
Commission ("SEC") or the NYSE is closed for other than weekends and holidays,
(b) the SEC has by order permitted such suspension, or (c) an emergency, as
defined by rules of the SEC, exists during which time the sale or valuation of
portfolio securities held by a Fund is not reasonably practicable.
MANAGEMENT
Board of Trustees. Life Series Fund's Board of Trustees, as part of its
overall management responsibility, oversees various organizations responsible
for each Fund's day-to-day management.
Adviser. First Investors Management Company, Inc. supervises and manages
each Fund's investments, supervises all aspects of each Fund's operations and,
except for International Securities Fund and Growth Fund, determines each Fund's
portfolio transactions. The Adviser is a New York corporation located at 95 Wall
Street, New York, NY 10005. First Investors Consolidated Corporation ("FICC")
owns all of the voting common stock of the Adviser and all of the outstanding
stock of First Investors Corporation and the Transfer Agent. Mr. Glenn O. Head
controls FICC and, therefore, controls the Adviser.
As compensation for its services, the Adviser receives an annual fee from
each Fund, which is payable monthly. For the fiscal year ended December 31,
1995, the advisory fees were 0.75% of average daily net assets for each of Blue
Chip Fund, Discovery Fund, Growth Fund, High Yield Fund and International
Securities Fund, 0.35% of average daily net assets, net of waiver,
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for each of Cash Management Fund, Government Fund, Investment Grade Fund and
Utilities Income Fund. The Adviser waived Target Maturity 2007 Fund's advisory
fee in its entirety. As compensation for its services, the Adviser will receive
a fee from Target Maturity 2010 Fund at the rate of 0.75% of the average daily
net assets of that Fund. The SEC staff takes the position that fees of 0.75% or
greater are higher than those paid by most investment companies.
Subadviser. Wellington Management Company, LLP has been retained by the
Adviser and Life Series Fund, on behalf of International Securities Fund and
Growth Fund, as each of those Fund's investment subadviser. The Adviser has
delegated discretionary trading authority to WMC with respect to all the assets
of International Securities Fund and Growth Fund, subject to the continuing
oversight and supervision of the Adviser and the Board of Trustees. As
compensation for its services, WMC is paid by the Adviser, and not by either
Fund, a fee which is computed daily and paid monthly.
WMC, located at 75 State Street, Boston, MA 02109, is a Massachusetts
limited liability partnership of which Robert W. Doran, Duncan M. McFarland and
John R. Ryan are Managing Partners. WMC is a professional investment counseling
firm which provides investment services to investment companies, employee
benefit plans, endowment funds, foundations and other institutions and
individuals. As of June 30, 1996, WMC held investment management authority with
respect to approximately $118.8 billion of assets. Of that amount, WMC acted as
investment adviser or subadviser to approximately 111 registered investment
companies or series of such companies, with net assets of approximately $82.2
billion as of June 30, 1996. WMC is not affiliated with the Adviser or any of
its affiliates.
For the fiscal year ended December 31, 1995, the Subadviser's fees amounted
to 0.34% of Growth Fund's average daily net assets and 0.40% of International
Securities Fund's average daily net assets, all of which was paid by the Adviser
and not by the Funds.
Portfolio Managers. Patricia D. Poitra, Director of Equities, has been
primarily responsible for the day-to-day management of the Blue Chip Fund since
October 1994 and Discovery Fund since 1988. Ms. Poitra is assisted by a team of
portfolio analysts. Ms. Poitra has been responsible for the management of the
Special Situations Fund, the Blue Chip Fund and the equity portion of Total
Return Fund, all series of First Investors Series Fund. Ms. Poitra also is
responsible for the management of the Blue Chip Fund of Executive Investors
Trust and the U.S.A. Mid-Cap Opportunity Fund of First Investors Series Fund II,
Inc. Ms. Poitra joined FIMCO in 1985 as a Senior Equity Analyst.
George V. Ganter has been Portfolio Manager for High Yield Fund since 1989.
Mr. Ganter joined FIMCO in 1985 as a Senior Analyst. In 1986, he became
Portfolio Manager for First Investors Special Bond Fund, Inc. In 1989, he became
Portfolio Manager for First Investors High Yield Fund, Inc. and Executive
Investors High Yield Fund.
Margaret R. Haggerty is Portfolio Manager for Utilities Income Fund. Ms.
Haggerty joined FIMCO in 1990 as an analyst for several First Investors equity
funds. In addition, she monitored the management of several First Investors
funds for which WMC was the subadviser. In early 1993, she became Portfolio
Manager for First Investors Utilities Income Fund of First Investors Series Fund
II, Inc.
31
<PAGE>
Nancy Jones has been Portfolio Manager for Investment Grade Fund since its
inception in 1992. Ms. Jones joined FIMCO in 1983 as Director of Research in the
High Yield Department. In 1989, she became Portfolio Manager for First Investors
Fund For Income, Inc. Ms. Jones has been Portfolio Manager for Investment Grade
Fund of First Investors Series Fund since its inception in 1991 and has managed
the fixed income corporate securities portion of Total Return Fund of First
Investors Series Fund since 1992.
Since August 1995, WMC's Growth Investment Team, a group of equity
portfolio managers and senior investment professionals, has assumed
responsibility for managing the Growth Fund.
Since October 1995, Clark D. Wagner has been primarily responsible for the
day-to-day management of the Government Fund and the Target Maturity 2007 Fund.
Mr. Wagner has also been primarily responsible for the day-to-day management of
Target Maturity 2010 Fund since its inception in 1996. Since he joined FIMCO in
1991, Mr. Wagner has been Portfolio Manager for all of First Investors municipal
bond funds. Mr. Wagner also is responsible for the day-to-day management of
First Investors Government Fund, Inc. In 1992, he became Chief Investment
Officer of FIMCO.
Since April 1, 1994, International Securities Fund is managed by WMC's
Global Equity Strategy Group, a group of global portfolio managers and senior
investment professionals headed by Trond Skramstad. Prior to joining WMC as a
portfolio manager in 1993, Mr. Skramstad was a global portfolio manager at
Scudder, Stevens & Clark since 1990.
DETERMINATION OF NET ASSET VALUE
The net asset value of shares of each Fund is determined as of the close of
regular trading on the NYSE (generally 4:00 P.M., New York City time) on each
day the NYSE is open for trading, and at such other times as Life Series Fund's
Board of Trustees deems necessary by dividing the value of the securities held
by a Fund, plus any cash and other assets, less all liabilities, by the number
of shares outstanding. If there is no available market value, securities will be
valued at their fair value as determined in good faith pursuant to procedures
adopted by the Board of Trustees. The NYSE currently observes the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The investments in Cash Management Fund, when purchased at a discount, are
valued at amortized cost and when purchased at face value, are valued at cost
plus accrued interest.
DIVIDENDS AND OTHER DISTRIBUTIONS
For the purposes of determining dividends, the net investment income of
each Fund, other than Cash Management Fund, consists of interest and dividends,
earned discount and other income earned on portfolio securities less expenses.
Net investment income of Cash Management Fund consists of (i) accrued interest,
plus or minus (ii) all realized and unrealized gains and losses on the Fund's
securities, less (iii) accrued expenses. Dividends from net investment income
are generally declared and paid annually by each Fund, other than Cash
Management Fund. Dividends from net investment income are generally declared
daily and paid monthly by Cash Management Fund. Distributions of a Fund's net
capital gain (the excess of net long-term capital gain over net short-
32
<PAGE>
term capital loss), if any, after deducting any available capital loss
carryovers, are declared and paid annually by each Fund, other than Cash
Management Fund, which does not anticipate realizing any such gain.
International Securities Fund and High Yield Fund also distribute any net
realized gains from foreign currency transactions with their annual
distribution. All dividends and other distributions are paid in shares of the
distributing Fund at net asset value (without sales charge), generally
determined as of the close of business on the business day immediately following
the record date of such distribution.
TAXES
Each Fund has qualified, or intends to qualify, for treatment as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended ("Code"), so that it will be relieved of Federal income
tax on that part of its investment company taxable income (consisting generally
of net investment income, net short-term capital gain and, for International
Securities Fund and High Yield Fund, net gains from certain foreign currency
transactions) and net capital gain that is distributed to its shareholders.
Shares of the Funds are offered only to the Separate Accounts, which are
insurance company separate accounts that fund variable annuity and variable life
insurance contracts. Under the Code, no tax is imposed on an insurance company
with respect to income of a qualifying separate account that is properly
allocable to the value of eligible variable annuity (or variable life insurance)
contracts. Please refer to "Federal Income Tax Status" in the Prospectuses of
Separate Accounts B and C for information as to the tax status of those accounts
and the holders of the Contracts or Policies.
Each Fund intends to comply with the diversification requirements imposed
by section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements imposed
on the Fund by the Investment Company Act of 1940, as amended, and Subchapter M
of the Code, place certain limitations on the assets of Separate Accounts B and
C -- and of a Fund, because section 817(h) and those regulations treat the
assets of a Fund as assets of Separate Accounts B and C -- that may be invested
in securities of a single issuer. Specifically, the regulations provide that,
except as permitted by the "safe harbor" described below, as of the end of each
calendar quarter (or within 30 days thereafter) no more than 55% of a Fund's
total assets may be represented by any one investment, no more than 70% by any
two investments, no more than 80% by any three investments and no more than 90%
by any four investments. For this purpose, all securities of the same issuer are
considered a single investment, and while each U.S. Government agency and
instrumentality is considered a separate issuer, a particular foreign government
and its agencies, instrumentalities and political subdivisions are considered
the same issuer. Section 817(h) provides, as a safe harbor, that a separate
account will be treated as being adequately diversified if the diversification
requirements under Subchapter M are satisfied and no more than 55% of the value
of the account's total assets are cash and cash items, government securities and
securities of other RICs. Failure of a Fund to satisfy the section 817(h)
requirements would result in taxation of First Investors Life and treatment of
the Contract holders and Policyowners other than as described in the
Prospectuses of Separate Accounts B and C.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting each Fund and its shareholders; see the SAI
for a more detailed discussion. Shareholders are urged to consult their tax
advisers.
33
<PAGE>
GENERAL INFORMATION
Organization. Life Series Fund is a Massachusetts business trust organized
on June 12, 1985. The Board of Trustees of Life Series Fund has authority to
issue an unlimited number of shares of beneficial interest of separate series,
no par value, of Life Series Fund. The shares of beneficial interest of Life
Series Fund are presently divided into eleven separate and distinct series. Life
Series Fund does not hold annual shareholder meetings. If requested to do so by
the holders of at least 10% of Life Series Fund's outstanding shares, the Board
of Trustees will call a special meeting of shareholders for any purpose,
including the removal of Trustees.
Custodian. The Bank of New York, 48 Wall Street, New York, NY 10286, is
custodian of the securities and cash of each Fund, except the International
Securities Fund. Brown Brothers Harriman & Co., 40 Water Street, Boston, MA
02109, is custodian of the securities and cash of the International Securities
Fund and employs foreign sub-custodians to provide custody of the Fund's foreign
assets.
Transfer Agent. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as transfer agent
for each Fund and as redemption agent for regular redemptions.
Performance. Performance information is contained in Life Series Fund's
Annual Report which may be obtained without charge by contacting First Investors
Life at 212-858-8200.
Shareholder Inquiries. Shareholder inquiries can be made by calling First
Investors Life at 212-858-8200.
Annual and Semi-Annual Reports to Shareholders. It is Life Series Fund's
practice to mail only one copy of its annual and semi-annual reports to any
address at which more than one shareholder with the same last name has indicated
that mail is to be delivered. Additional copies of the reports will be mailed if
requested in writing or by telephone by any shareholder. Life Series Fund will
ensure that an additional copy of such reports are sent to any shareholder who
subsequently changes his or her mailing address.
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S RATINGS GROUP
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
34
<PAGE>
1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C Debt rated "BB," "B," "CCC," "CC" and "C" is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal. "BB" indicates the least degree of speculation and "C" the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
CCC Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
35
<PAGE>
CC The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat greater than the Aaa securities.
A Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
36
<PAGE>
B Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated "C" are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
37
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Financial Highlights......................................................... 4
Investment Objectives and Policies........................................... 11
How to Buy Shares............................................................ 30
How to Redeem Shares......................................................... 30
Management................................................................... 30
Determination of Net Asset Value............................................. 32
Dividends and Other Distributions............................................ 32
Taxes........................................................................ 33
General Information.......................................................... 34
Appendix A................................................................... 34
Investment Adviser Custodians
First Investors Management The Bank of New York
Company, Inc. 48 Wall Street
95 Wall Street New York, NY 10286
New York, NY 10005
Brown Brothers
Subadviser Harriman & Co.
Wellington Management 40 Water Street
Company, LLP Boston, MA 02109
75 State Street
Boston, MA 02109 Auditors
Tait, Weller & Baker
Transfer Agent Two Penn Center Plaza
Administrative Data Philadelphia, PA 19102-1707
Management Corp.
581 Main Street Legal Counsel
Woodbridge, NJ 07095-1198 Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
This Prospectus is intended to constitute an offer by Life Series Fund only of
the securities of which it is the issuer and is not intended to constitute an
offer by any Fund of the securities of any other Fund whose securities are also
offered by this Prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this Prospectus relating to any
other Fund. No dealer, salesman or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representation must not be relied upon as having been
authorized by Life Series Fund, First Investors Corporation, or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the shares offered hereby in any state to any person
to whom it is unlawful to make such offer in such state.
<PAGE>
First Investors
Life Series Fund
- ---------------
Blue Chip Fund
Cash Management Fund
Discovery Fund
Government Fund
Growth Yield
International Securities Fund
Investment Grade Fund
Target Maturity 2007 Fund
Target Maturity 2010 Fund
Utilities Income Fund
Prospectus
- ----------
October 28, 1996
First Investors Logo
Logo is described as follows: the arabic numeral one separated into seven
vertical segments followed by the words "First Investors."
Verticle line from top to bottom in center of page about 1/2 inch in thickness
The following language appears to the left of the above language in the printed
piece:
The words "BLUK RATE U.S. POSTAGE PAID PERMIT NO. 7379" in a box to the right of
a circle containing the words "MAILED FROM ZIP CODE 11201" appears on the
righthand side.
The following language appears on the lefthand side.
FIRST INVESTORS LIFE SERIES FUND
95 WALL STREET
NEW YORK, NY 10005
First Investors Logo (as described above)
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK
<PAGE>
As part of this Prospectus we attach the Prospectus of First Investors Life
Variable Annuity Fund C (File No. 33-33419) which was filed with the SEC on
October 22, 1996 as part of a 497 filing (Accession No. 0000891554-96-00715)
<PAGE>
First Investors Life Series Fund
95 Wall Street, New York, New York 10005/(212) 858-8200
This is a Prospectus for First Investors Life Series Fund ("Life Series
Fund"), an open-end, diversified management investment company. The Fund offers
eleven separate investment series, each of which has different investment
objectives and policies: First Investors Life Blue Chip Fund ("Blue Chip Fund"),
First Investors Life Cash Management Fund ("Cash Management Fund"), First
Investors Life Discovery Fund ("Discovery Fund"), First Investors Life
Government Fund ("Government Fund"), First Investors Life Growth Fund ("Growth
Fund"), First Investors Life High Yield Fund ("High Yield Fund"), First
Investors Life International Securities Fund ("International Securities Fund"),
First Investors Life Investment Grade Fund ("Investment Grade Fund"), First
Investors Life Target Maturity 2007 Fund ("Target Maturity 2007 Fund"), First
Investors Life Target Maturity 2010 Fund ("Target Maturity 2010 Fund") and First
Investors Life Utilities Income Fund ("Utilities Income Fund") (each, a Fund,
and collectively, "Funds"). Each Fund's investment objectives are listed on the
inside cover.
Investments in a Fund are only available through purchases of the Level
Premium Variable Life Insurance Policies ("Policies") or the Individual Variable
Annuity Contracts ("Contracts") offered by First Investors Life Insurance
Company ("First Investors Life"). Policy premiums, net of certain expenses, are
paid into a unit investment trust, First Investors Life Insurance Company
Separate Account B ("Separate Account B"). Purchase payments for the Contracts,
net of certain expenses, are also paid into a unit investment trust, First
Investors Life Variable Annuity Fund C ("Separate Account C"). Separate Account
B and Separate Account C ("Separate Accounts") pool these proceeds to purchase
shares of a Fund designated by purchasers of the Policies or Contracts.
Investments in a Fund are used to fund benefits under the Policies and
Contracts. Target Maturity 2007 Fund and Target Maturity 2010 Fund are only
offered to Contractowners of Separate Account C.
An investment in Life Series Fund, including Cash Management Fund, is
neither insured nor guaranteed by the U.S. Government. There can be no assurance
that the Cash Management Fund will be able to maintain a stable net asset value
of $1.00 per share. Investments by the High Yield Fund in high-yield, high risk
securities, commonly referred to as "junk bonds," may entail risks that are
different or more pronounced than those that would result from investment in
higher-rated securities. See "High Yield Securities--Risk Factors."
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing and should be retained for
future reference. First Investors Management Company, Inc. ("FIMCO" or
"Adviser") serves as investment adviser to the Funds. A Statement of Additional
Information ("SAI"), dated October 28, 1996 (which is incorporated by reference
herein), has been filed with the Securities and Exchange Commission. The SAI is
available at no charge upon request to the Funds at the address or telephone
number indicated above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured or protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other governmental agency.
The date of this Prospectus is October 28, 1996
<PAGE>
The investment objectives of each Fund of Life Series Fund offered by this
Prospectus are as follows:
Blue Chip Fund. The investment objective of the Fund is to seek high total
investment return consistent with the preservation of capital. This goal will be
sought by investing, under normal market conditions, primarily in equity
securities of larger, well-capitalized companies with high potential earnings
growth that have shown a history of dividend payments, commonly known as "Blue
Chip" companies.
Cash Management Fund. The objective of the Fund is to seek to earn a high
rate of current income consistent with the preservation of capital and
maintenance of liquidity. The Fund will invest in money market obligations,
including high quality securities issued or guaranteed by the U.S. Government or
its agencies and instrumentalities, bank obligations and high grade corporate
instruments.
Discovery Fund. The investment objective of the Fund is to seek long-term
capital appreciation, without regard to dividend or interest income, through
investment in the common stock of companies with small to medium market
capitalization that the Adviser considers to be undervalued or less well known
in the current marketplace and to have the potential for capital growth.
Government Fund. The investment objective of the Fund is to seek to achieve
a significant level of current income which is consistent with security and
liquidity of principal by investing, under normal market conditions, primarily
in obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, including mortgage-backed
securities.
Growth Fund. The investment objective of the Fund is to seek long-term
capital appreciation. This goal will be sought by investing, under normal market
conditions, primarily in common stocks of companies and industries selected for
their growth potential.
High Yield Fund. The primary objective of the Fund is to seek to earn a
high level of current income. The Fund actively seeks to achieve its secondary
objective of capital appreciation to the extent consistent with its primary
objective. The Fund seeks to attain its objectives primarily through investments
in lower-grade, high-yielding, high risk debt securities, commonly referred to
as "junk bonds" ("High Yield Securities").
International Securities Fund. The primary objective of the Fund is to seek
long-term capital growth. As a secondary objective, the Fund seeks to earn a
reasonable level of current income. These objectives are sought, under normal
market conditions, through investment in common stocks, rights and warrants,
preferred stocks, bonds and other debt obligations issued by companies or
governments of any nation, subject to certain restrictions with respect to
concentration and diversification.
Investment Grade Fund. The investment objective of the Fund is to seek a
maximum level of income consistent with investment in investment grade debt
securities.
Target Maturity 2007 Fund. The investment objective of the Fund is to seek
a predictable compounded investment return for investors who hold their Fund
shares until the Fund's maturity, consistent with preservation of capital. The
Fund intends to terminate in the year 2007.
2
<PAGE>
Target Maturity 2010 Fund. The investment objective of the Fund is to seek
a predictable compounded investment return for investors who hold their Fund
shares until the Fund's maturity, consistent with preservation of capital. The
Fund intends to terminate in the year 2010.
Target Maturity 2007 Fund and Target Maturity 2010 Fund each will seek its
objective by investing, under normal market conditions, at least 65% of its
total assets in zero coupon securities which are issued by the U.S. Government,
its agencies or instrumentalities or created by third parties using securities
issued by the U.S. Government, its agencies or instrumentalities.
As a result of the volatile nature of the market for zero coupon
securities, the value of shares of Target Maturity 2007 Fund and Target Maturity
2010 Fund prior to each Fund's maturity may fluctuate significantly. Thus, to
achieve a predictable return, investors should hold their investments in either
of these two Funds until the Fund liquidates since the Fund's value changes
daily with market conditions. Accordingly, any investor who redeems his or her
shares prior to a Fund's maturity is likely to achieve a different investment
result than the return that was predicted on the date the investment was made,
and may even suffer a significant loss.
Utilities Income Fund. The primary investment objective of the Fund is to
seek high current income. Long-term capital appreciation is a secondary
objective. These objectives are sought, under normal market conditions, through
investment in equity and debt securities issued by companies primarily engaged
in the public utilities industry.
There can be no assurance that any Fund will achieve its investment
objectives. See "Investment Objectives and Policies" for a detailed description
of each Fund's investment objectives and policies.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth the per share operating performance data for
a share outstanding, total return, ratios to average net assets and other
supplemental data for each period indicated. The table below has been derived
from financial statements which have been examined by Tait, Weller & Baker,
independent certified public accountants, whose report thereon appears in the
Statement of Additional Information ("SAI"). This information should be read in
conjunction with the Financial Statements and Notes thereto, which also appear
in the SAI, available at no charge upon request to the Funds.
<TABLE>
<CAPTION>
PER SHARE DATA
-----------------------------------------------------------------------------------------------------------
Income from Investment Operations Less Distributions from
-------------------------------------- -----------------------
Net Asset Value Net Realized
--------------- Net and Unrealized Total from Net Net Net Asset Value
Beginning of Investment Gain (Loss) on Investment Investment Realized Total ---------------
Period Income Investments Operations Income Gains Distributions End of Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Blue Chip
- ---------
3/8/90* to 12/31/90 ..... $10.00 $.07 $(.02) $ .05 $ -- $ -- $ -- $10.05
1991 .................... 10.05 .12 2.50 2.62 .05 -- .05 12.62
1992 .................... 12.62 .16 .67 .83 .21 -- .21 13.24
1993 .................... 13.24 .15 .97 1.12 .15 -- .15 14.21
1994 .................... 14.21 .18 (.39) (.21) .08 .17 .25 13.75
1995 .................... 13.75 .26 4.11 4.37 .19 .95 1.14 16.98
1/1/96 to 6/30/96 ....... 16.98 .11 1.46 1.57 .25 .49 .74 17.81
Cash Management**
- -----------------
1988 .................... 1.00 .048 -- .048 .048 -- .048 1.00
1989 .................... 1.00 .075 -- .075 .075 -- .075 1.00
1990 .................... 1.00 .072 -- .072 .072 -- .072 1.00
1991 .................... 1.00 .054 -- .054 .054 -- .054 1.00
1992 .................... 1.00 .029 -- .029 .029 -- .029 1.00
1993 .................... 1.00 .027 -- .027 .027 -- .027 1.00
1994 .................... 1.00 .037 -- .037 .037 -- .037 1.00
1995 .................... 1.00 .054 -- .054 .054 -- .054 1.00
1/1/96 to 6/30/96 ....... 1.00 .024 -- .024 .024 -- .024 1.00
Discovery
- ---------
1988 .................... 10.02 .26 .10 .36 -- -- -- 10.38
1989 .................... 10.38 .19 2.19 2.38 .27 .09 .36 12.40
1990 .................... 12.40 .14 (.78) (.64) .15 .90 1.05 10.71
1991 .................... 10.71 .07 5.42 5.49 .18 -- .18 16.02
1992 .................... 16.02 -- 2.51 2.51 .03 .15 .18 18.35
1993 .................... 18.35 -- 3.92 3.92 -- .91 .91 21.36
1994 .................... 21.36 .06 (.62) (.56) -- .94 .94 19.86
1995 .................... 19.86 .11 4.62 4.73 .06 1.26 1.32 23.27
1/1/96 to 6/30/96 ....... 23.27 .07 1.68 1.75 .11 .89 1.00 24.02
</TABLE>
- ----------
* Commencement of operations
** Adjusted to reflect ten-for-one stock split on May 1, 1991.
+ Some or all expenses have been waived or assumed.
++ The effect of fees and charges incurred at the separate account level are
not reflected in these performance figures.
(a) Annualized
4
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets
Ratio to Average Net Assets+ Before Expenses Waived or Assumed
Net Assets ------------------------------ --------------------------------- Portfolio
Total End of Period Net Investment Net Investment Turnover
Return++(%) (in thousands) Expenses(%) Income(%) Expenses(%) Income(%) Rate(%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
.61(a) $ 3,656 -- 2.95(a) 1.92(a) 1.03(a) 15
26.17 13,142 1.00 1.88 1.55 1.34 21
6.67 23,765 .79 1.66 .86 1.60 40
8.51 34,030 .88 1.27 N/A N/A 37
(1.45) 41,424 .88 1.49 N/A N/A 82
34.00 66,900 .86 1.89 N/A N/A 26
9.47 81,307 .93(a) 1.33(a) N/A N/A 20
4.94 33 -- 4.99 7.68 (2.69) N/A
7.79 2,210 -- 7.84 1.35 6.49 N/A
7.49 8,203 .39 6.90 1.15 6.15 N/A
5.71 9,719 .57 5.39 .93 5.03 N/A
3.02 8,341 .79 2.99 .98 2.81 N/A
2.70 4,243 .60 2.67 1.05 2.22 N/A
3.77 3,929 .60 3.69 1.04 3.25 N/A
5.51 4,162 .61 5.36 1.10 4.87 N/A
2.44 3,863 .60(a) 4.83(a) 1.09(a) 4.35(a) N/A
3.59 125 -- 3.80 3.10 .70 158
23.62 283 -- 2.43 4.78 (2.35) 231
(5.47) 960 -- 2.97 2.68 .28 104
51.73 4,661 .70 .48 1.49 (.31) 93
15.74 10,527 .91 .02 1.05 (.12) 91
22.20 21,221 .87 (.03) N/A N/A 69
(2.53) 30,244 .88 .36 N/A N/A 53
25.23 50,900 .87 .60 N/A N/A 78
7.82 61,590 .85(a) .71(a) N/A N/A 56
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
-----------------------------------------------------------------------------------------------------------
Income from Investment Operations Less Distributions from
--------------------------------- -----------------------
Net Asset Value Net Realized Net Asset Value
--------------- Net and Unrealized Total from Net Net ----------------
Beginning of Investment Gain (Loss) on Investment Investment Realized Total End of
Period Income Investments Operations Income Gains Distributions Period
------ ------ ----------- ---------- ------ ----- ------------- ------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Government
- ------------------------
1/7/92* to 12/31/92 ..... $ 10.00 $ .47 $ .51 $ .98 $ .33 $ -- $ .33 $ 10.65
1993 .................... 10.65 .64 .02 .66 .70 .19 .89 10.42
1994 .................... 10.42 .79 (1.21) (.42) .25 .05 .30 9.70
1995 .................... 9.70 .66 .78 1.44 .62 -- .62 10.52
1/1/96 to 6/30/96 ....... 10.52 .34 (.42) (.08) .68 -- .68 9.76
Growth
- ------------------------
1988 .................... 10.02 .26 .51 .77 -- -- -- 10.79
1989 .................... 10.79 .02 2.51 2.53 .18 .12 .30 13.02
1990 .................... 13.02 .16 (.55) (.39) .06 -- .06 12.57
1991 .................... 12.57 .17 4.15 4.32 .18 -- .18 16.71
1992 .................... 16.71 .08 1.41 1.49 .18 1.38 1.56 16.64
1993 .................... 16.64 .07 .93 1.00 .09 .10 .19 17.45
1994 .................... 17.45 .09 (.60) (.51) -- .21 .21 16.73
1995 .................... 16.73 .18 3.94 4.12 .09 .29 .38 20.47
1/1/96 to 6/30/96 ....... 20.47 .11 2.02 2.13 .18 .59 .77 21.83
High Yield
- ------------------------
1988 .................... 10.00 .74 .82 1.56 -- -- -- 11.56
1989 .................... 11.56 .74 (.92) (.18) .56 .11 .67 10.71
1990 .................... 10.71 1.08 (1.79) (.71) .83 -- .83 9.17
1991 .................... 9.17 1.16 1.66 2.82 1.18 -- 1.18 10.81
1992 .................... 10.81 1.11 .21 1.32 1.69 -- 1.69 10.44
1993 .................... 10.44 .96 .88 1.84 1.12 -- 1.12 11.16
1994 .................... 11.16 .87 (1.14) (.27) .31 -- .31 10.58
1995 .................... 10.58 1.00 .95 1.95 .96 -- .96 11.57
1/1/96 to 6/30/96 ....... 11.57 .50 (.01) .49 1.01 -- 1.01 11.05
International Securities
- ------------------------
4/16/90* to 12/31/90 .... 10.00 .03 .34 .37 -- -- -- 10.37
1991 .................... 10.37 .09 1.49 1.58 .03 .05 .08 11.87
1992 .................... 11.87 .15 (.28) (.13) .15 .22 .37 11.37
1993 .................... 11.37 .10 2.41 2.51 .14 -- .14 13.74
1994 .................... 13.74 .14 (.32) (.18) .05 -- .05 13.51
1995 .................... 13.51 .19 2.25 2.44 .12 .25 .37 15.58
1/1/96 to 6/30/96 ....... 15.58 .13 1.08 1.21 .19 .50 .69 16.10
- ----------------
</TABLE>
* Commencement of operations
+ Some or all expenses have been waived or assumed .
++ The effect of fees and charges incurred at the separate account level are
not reflected in these performance figures. (a) Annualized
6
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
-----------------------------------------------------------------------
Ratio to Average Net Assets+
Ratio to Average Net Assets Before Expenses Waived or Assumed
Net Assets -------------------------------- --------------------------------- Portfolio
Total End of Period Net Investment Net Investment Turnover
Return++(%) (in thousands) Expenses(%) Income(%) Expenses(%) Income(%) Rate(%)
----------- -------------- ----------- --------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
9.95(a) $ 5,064 .03(a) 6.64(a) .89(a) 5.79(a) 301
6.35 8,234 .35 6.60 .84 6.11 525
(4.10) 7,878 .35 6.74 .90 6.19 457
15.63 9,500 .40 6.73 .93 6.21 198
(.79) 9,266 .60(a) 6.63(a) .98(a) 6.26(a) 86
7.68 38 -- 3.20 8.70 (5.50) 31
24.00 570 -- 2.91 5.21 (2.30) 24
(2.99) 2,366 -- 3.03 1.64 1.40 28
34.68 7,743 .69 1.21 1.34 .55 148
9.78 16,385 .76 .75 1.20 .30 45
6.00 25,658 .91 .43 N/A N/A 51
(2.87) 32,797 .90 .60 N/A N/A 40
25.12 51,171 .88 1.10 N/A N/A 64
10.62 63,075 .80(a) 1.22(a) N/A N/A 25
15.60 4,565 -- 13.22 1.32 11.90 46
(1.76) 14,354 -- 12.05 .88 11.17 22
(5.77) 18,331 -- 13.21 .91 12.30 35
33.96 23,634 .53 11.95 .89 11.60 40
13.15 24,540 .91 10.48 .96 10.43 84
18.16 30,593 .91 9.49 N/A N/A 96
(1.56) 32,285 .88 9.43 N/A N/A 50
19.82 41,894 .87 9.83 N/A N/A 57
4.25 44,367 .85(a) 9.33(a) N/A N/A 12
5.21(a) 3,946 -- .99(a) 3.43(a) (2.43)(a) 29
15.24 8,653 1.70 .75 2.27 .18 70
(1.13) 12,246 1.03 1.55 1.38 1.20 36
22.17 21,009 1.14 .97 N/A N/A 37
(1.29) 31,308 1.03 1.22 N/A N/A 36
18.70 41,012 1.02 1.42 N/A N/A 45
7.93 49,017 1.15(a) 1.82(a) N/A N/A 35
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
--------------------------------------------------------------------------------------------------------
Income from Investment Operations Less Distributions from
--------------------------------------- ------------------------
Net Asset Value Net Realized Net Asset Value
-------------- Net and Unrealized Total from Net Net ----------------
Beginning of Investment Gain (Loss) on Investment Investment Realized Total End of
Period Income Investments Operations Income Gains Distributions Period
------ ------ ----------- ---------- ------ ----- ------------- ------
Investment Grade
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/7/92* to 12/31/92 ..... $ 10.00 $ .43 $ .44 $ .87 $ .34 $ -- $ .34 $ 10.53
1993 .................... 10.53 .65 .49 1.14 .71 .01 .72 10.95
1994 .................... 10.95 .67 (1.06) (.39) .16 .09 .25 10.31
1995 .................... 10.31 .67 1.28 1.95 .53 -- .53 11.73
1/1/96 to 6/30/96 ....... 11.73 .34 (.58) (.24) .67 -- .67 10.82
Target Maturity 2007
- --------------------
4/26/95* to 12/31/95 .... 10.00 .26 2.00 2.26 -- -- -- 12.26
1/1/96 to 6/30/96 ....... 12.26 .28 (1.33) (1.05) .23 .05 .28 10.93
Utilities Income
- --------------------
11/15/93* to 12/31/93 ... 10.00 .01 (.07) (.06) -- -- -- 9.94
1994 .................... 9.94 .24 (.96) (.72) .03 -- .03 9.19
1995 .................... 9.19 .28 2.46 2.74 .19 -- .19 11.74
1/1/96 to 6/30/96 ....... 11.74 .14 .34 .48 .27 -- .27 11.95
</TABLE>
* Commencement of operations
+ Some or all expenses have been waived or assumed
++ The effect of fees and charges incurred at the separate account level are
not reflected in these performance figures.
(a) Annualized
8
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets
Net Assets Ratio to Average Net Assets+ Before Expenses Waived or Assumed Portfolio
Total End of Period ------------------------------------- ------------------------------------ Turnover
Return++(%) (in thousands) Expenses(%) Net Investment Income(%) Expenses(%) Net Investment Income(%) Rate(%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
8.91(a) $ 4,707 .23(a) 6.16(a) .93(a) 5.46(a) 72
10.93 10,210 .35 6.32 .85 5.82 64
(3.53) 11,602 .37 6.61 .92 6.06 15
19.69 16,262 .51 6.77 .91 6.37 26
(2.05) 16,175 .60(a) 6.37(a) .88(a) 6.12(a) 8
22.60 9,860 .04(a) 6.25(a) .87(a) 5.38(a) 28
(8.67) 11,838 .60(a) 6.02(a) .84(a) 5.79(a) 14
(4.66)(a) 494 -- 1.46(a) 3.99(a) (2.52)(a) 0
(7.24) 4,720 .17 4.13 .95 3.35 31
30.26 14,698 .41 4.16 .91 3.67 17
4.17 20,851 .60(a) 3.50(a) .89(a) 3.25(a) 17
</TABLE>
9
<PAGE>
Target Maturity 2010 Fund
The following table sets forth the per share operating performance for a
share of beneficial interest outstanding, total return, ratios to average net
assets and other supplemental data for the period April 30, 1996 (commencement
of operations) to August 31, 1996. The following information pertaining to
Target Maturity 2010 Fund should be read in conjunction with the Financial
Statements and Notes thereto, which appear in the Statement of Additional
Information, available at no charge upon request to the Fund.
Per Share Data
- --------------
Net Asset Value, Beginning of Period ......................... $10.00
------
Income from Investment Operations
Net investment income ................................... .20*
Net realized and unrealized loss on investments ......... (.06)*
------
Total from Investment Operations ................... .14
------
Net Asset Value, End of Period ............................... 10.14
======
Total Return** ............................................... 1.40%
- -------------- ------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (in thousands) $ 1,236.
Ratio to Average Net Assets:
Expenses ................................................ .60%(a)
Net Investment Income ................................... 5.72%(a)
Ratio to Average Net Assets Before Expenses Waived:
Expenses ................................................ 1.27%(a)
Net Investment Income ................................... 5.04%(a)
Portfolio Turnover Rate ................................. .0%
* Computed using average number of shares outstanding
** The effect of fees and charges incurred at the separate account level is
not reflected in this performance figure
(a) Annualized
10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Blue Chip Fund
Blue Chip Fund seeks to provide investors with high total investment return
consistent with the preservation of capital. The Fund seeks to achieve its
objective by investing, under normal market conditions, at least 65% of its
total assets in equity securities of "Blue Chip" companies, including common and
preferred stocks and securities convertible into common stock, that the Adviser
believes have potential earnings growth that is greater than the average company
included in the Standard & Poor's 500 Composite Stock Price Index ("S&P 500").
The Fund also may invest up to 35% of its total assets in the equity securities
of non-Blue Chip companies that the Adviser believes have significant potential
for growth of capital or future income consistent with the preservation of
capital. When market conditions warrant, or when the Adviser believes it is
necessary to achieve the Fund's objective, the Fund may invest up to 25% of its
total assets in fixed income securities.
The Fund defines Blue Chip companies as those companies that have a market
capitalization of at least $300 million, are dividend paying and are included in
the S&P 500. Market capitalization is the total market value of a company's
outstanding common stock. Blue Chip companies are considered to be of relatively
high quality and generally exhibit superior fundamental characteristics, which
may include: potential for consistent earnings growth, a history of
profitability and payment of dividends, leadership position in their industries
and markets, proprietary products or services, experienced management, high
return on equity and a strong balance sheet. Blue Chip companies usually exhibit
less investment risk and share price volatility than smaller, less established
companies. Examples of Blue Chip companies are American Telephone & Telegraph,
General Electric, Pepsico Inc. and Bristol-Myers Squibb.
The fixed income securities in which the Fund may invest include money
market instruments (including prime commercial paper, certificates of deposit of
domestic branches of U.S. banks and bankers' acceptances), obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Obligations"), including mortgage-backed
securities, and corporate debt securities. However, no more than 5% of the
Fund's net assets may be invested in corporate debt securities rated below Baa
by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group ("S&P"). The Fund may borrow money for temporary or emergency
purposes in amounts not exceeding 5% of its total assets. The Fund may also
invest up to 5% of its net assets in American Depository Receipts ("ADRs"),
enter into repurchase agreements and make loans of portfolio securities. See
"Description of Certain Securities, Other Investment Policies and Risk Factors,"
below, and the SAI for additional information concerning these securities.
Cash Management Fund
Cash Management Fund seeks to earn a high rate of current income consistent
with the preservation of capital and maintenance of liquidity. The Fund
generally can invest only in securities that mature within 397 days from the
date of purchase. In addition, the Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less.
11
<PAGE>
Cash Management Fund invests primarily in (1) high quality marketable
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, (2) bank certificates of deposit,
bankers' acceptances, time deposits and other short-term obligations issued by
banks and (3) prime commercial paper and high quality, U.S. dollar denominated
short-term corporate bonds and notes. The U.S. Government securities in which
the Fund may invest include a variety of U.S. Treasury securities that differ in
their interest rates, maturities and dates of issue. Securities issued or
guaranteed by agencies or instrumentalities of the U.S. Government may be
supported by the full faith and credit of the United States or by the right of
the issuer to borrow from the U.S. Treasury. See the SAI for additional
information on U.S. Government securities. The Fund may invest in domestic bank
certificates of deposit (insured up to $100,000) and bankers' acceptances (not
insured) issued by domestic banks and savings institutions which are insured by
the Federal Deposit Insurance Corporation ("FDIC") and that have total assets
exceeding $500 million. The Fund also may invest in certificates of deposit
issued by London branches of domestic or foreign banks ("Eurodollar CDs"). The
Fund may invest in time deposits and other short-term obligations, including
uninsured, direct obligations bearing fixed, floating or variable interest
rates, issued by domestic banks, foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches of foreign
banks. See Appendix A to the SAI for a description of commercial paper ratings
and Appendix B to the SAI for a description of municipal note ratings. The Fund
also may invest in repurchase agreements with banks that are members of the
Federal Reserve System or securities dealers that are members of a national
securities exchange or are market makers in U.S. Government securities, and, in
either case, only where the debt instrument subject to the repurchase agreement
is a U.S. Treasury or agency obligation.
Cash Management Fund also may purchase high quality, U.S. dollar
denominated short-term bonds and notes, including variable rate and master
demand notes issued by domestic and foreign corporations (including banks).
Floating and variable rate demand notes and bonds permit the Fund, as the
holder, to demand payment of principal at any time, or at specified intervals
not exceeding 397 days, in each case upon not more than 30 days' notice. The
Fund may borrow money for temporary or emergency purposes in amounts not
exceeding 5% of its total assets and make loans of portfolio securities. See
"Description of Certain Securities, Other Investment Policies and Risk Factors"
for additional information concerning these securities.
Cash Management Fund may purchase only obligations that (1) the Adviser
determines present minimal credit risks based on procedures adopted by Life
Series Fund's Board of Trustees, and (2) are either (a) rated in one of the top
two rating categories by at least two nationally recognized statistical ratings
organizations ("NRSROs") (or one, if only one rated the security) or (b) unrated
securities that the Adviser determines are of comparable quality. Securities
qualify as being in the top rating category ("First Tier Securities") if at
least two NRSROs (or one, if only one rated the security) have given it the
highest rating. The Fund's purchases of commercial paper are limited to First
Tier Securities. The Fund may not invest more than 5% of its total assets in
securities rated in the second highest rating category ("Second Tier
Securities"). Investments in Second Tier Securities of any one issuer are
limited to the greater of 1% of the Fund's total assets or $1 million. The Fund
generally may invest no more than 5% of its total assets in the securities of a
single issuer (other than securities issued by the U.S. Government, its agencies
or instrumentalities).
12
<PAGE>
Discovery Fund
Discovery Fund seeks long-term capital appreciation, without regard to
dividend or interest income. The Fund seeks to achieve its objective by
investing in the common stock of companies with small to medium market
capitalization that the Adviser considers to be undervalued or less well known
in the current marketplace and to have potential for capital growth.
The Fund seeks to invest in the common stock of companies that are
undervalued in the current market in relation to fundamental economic values
such as earnings, sales, cash flow and tangible book value; that are early in
their corporate development (i.e., before they become widely recognized and well
known and while their reputations and track records are still emerging); or that
offer the possibility of greater earnings because of revitalized management, new
products or structural changes in the economy. Such companies primarily are
those with small to medium market capitalization, which the Adviser currently
considers to be market capitalization of up to $1.5 billion, but which could be
higher under certain market conditions. The Adviser believes that, over time,
these securities are more likely to appreciate in price than securities whose
market prices have already reached their perceived economic value. In addition,
the Fund intends to diversify its holdings among as many companies and
industries as the Adviser deems appropriate.
Companies that are early in their corporate development may be dependent on
relatively few products or services, may lack adequate capital reserves, may be
dependent on one or two management individuals and may have less of a track
record or historical pattern of performance. In addition, there may be less
information available as to the issuers and their securities may not be well
known to the general public and may not yet have wide institutional ownership.
Thus, the investment risk is higher than that normally associated with larger,
older or better-known companies.
Investments in securities of companies with small to medium market
capitalization are generally considered to offer greater opportunity for
appreciation and to involve greater risk of depreciation than securities of
companies with larger market capitalization. Because the securities of most
companies with small to medium market capitalization are not as broadly traded
as those of companies with larger market capitalization, these securities are
often subject to wider and more abrupt fluctuations in market price. In the
past, there have been prolonged periods when these securities have substantially
underperformed or outperformed the securities of larger capitalization
companies. In addition, smaller capitalization companies generally have fewer
assets available to cushion an unforeseen adverse occurrence and thus such an
occurrence may have a disproportionately negative impact on these companies.
The Fund may invest up to 10% of its total assets in common stocks issued
by foreign companies which are traded on a recognized domestic or foreign
securities exchange. In addition to the fundamental analysis of companies and
their industries which it performs for U.S. issuers, the Adviser evaluates the
economic and political climate of the country in which the company is located
and the principal securities markets in which such securities are traded.
Although the foreign stocks in which the Fund invests are primarily denominated
in foreign currencies, the Fund also may invest in ADRs. The Adviser does not
attempt to time actively either short-term market trends or short-term currency
trends in any market. See "Foreign Securities--Risk Factors" and "American
Depository Receipts and Global Depository Receipts."
13
<PAGE>
The Fund may borrow money for temporary or emergency purposes in amounts
not exceeding 5% of its total assets. The Fund also may enter into repurchase
agreements and may make loans of portfolio securities. For temporary defensive
purposes, the Fund may invest all of its assets in U.S. Government Obligations,
prime commercial paper, certificates of deposit and bankers' acceptances. See
the SAI for more information regarding these securities.
Government Fund
Government Fund seeks to achieve a significant level of current income
which is consistent with security and liquidity of principal by investing, under
normal market conditions, at least 65% of its assets in U.S. Government
Obligations, including mortgage-backed securities. Securities issued or
guaranteed as to principal and interest by the U.S. Government include a variety
of Treasury securities, which differ only in their interest rates, maturities
and times of issuance. Although the payment of interest and principal on a
portfolio security may be guaranteed by the U.S. Government or one of its
agencies or instrumentalities, shares of the Fund are not insured or guaranteed
by the U.S. Government or any agency or instrumentality. The net asset value of
shares of the Fund generally will fluctuate in response to interest rate levels.
When interest rates rise, prices of fixed income securities generally decline;
when interest rates decline, prices of fixed income securities generally rise.
See "U.S. Government Obligations" and "Debt Securities-Risk Factors," below.
The Fund may invest in mortgage-backed securities, including those
involving Government National Mortgage Association ("GNMA") certificates,
Federal National Mortgage Association ("FNMA") certificates and Federal Home
Loan Mortgage Corporation ("FHLMC") certificates. The Fund also may invest in
securities issued or guaranteed by other U.S. Government agencies or
instrumentalities, including: the Federal Farm Credit System and the Federal
Home Loan Bank (each of which may not borrow from the U.S. Treasury and the
securities of which are not guaranteed by the U.S. Government); the Tennessee
Valley Authority, and the U.S. Postal Service (each of which may borrow from the
U.S. Treasury to meet its obligations); the Farmers Home Administration and the
Export-Import Bank (the securities of which are backed by the full faith and
credit of the United States). The Fund normally reinvests principal payments
(whether regular or pre-paid) in additional mortgage-backed securities. See
"Mortgage-Backed Securities," below.
The Fund may invest up to 35% of its assets in securities other than U.S.
Government Obligations and mortgage-backed securities. These may include: prime
commercial paper, certificates of deposit of domestic branches of U.S. banks,
bankers' acceptances, repurchase agreements (applicable to U.S. Government
Obligations), insured certificates of deposit and certificates representing
accrual on U.S. Treasury securities. The Fund also may make loans of portfolio
securities and invest in zero coupon securities. The Fund may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets.
See the SAI for a further discussion of these securities.
For temporary defensive purposes, the Fund may invest all of its assets in
cash, cash equivalents and money market instruments, including bank certificates
of deposit, bankers' acceptances and commercial paper issued by domestic
corporations, short-term fixed income securities or U.S. Government Obligations.
See the SAI for a description of these securities.
14
<PAGE>
Growth Fund
The investment objective of Growth Fund is long-term capital appreciation.
Current income through the receipt of interest or dividends from investments
will merely be incidental to the Fund's efforts in pursuing its goal. It is the
policy of the Fund to invest, under normal market conditions, primarily in
common stocks and it is anticipated that the Fund will usually be so invested.
It also may invest to a limited degree in convertible securities and preferred
stocks. At least 75% of the value of the Fund's total assets (excluding
securities held for defensive purposes) shall be invested in securities of
companies in industries in which the Adviser, or the Fund's investment
subadviser, Wellington Management Company, LLP ("Subadviser" or "WMC"), believes
opportunities for capital growth exist. The Fund does not intend to concentrate
its investments in a particular industry, but it may invest up to 25% of the
value of its assets in a particular industry. The Fund may invest up to 5% of
its total assets in common stocks issued by foreign companies that are
denominated in U.S. currency; provided, however, that the Fund may invest
without limit in U.S. dollar denominated foreign securities listed on the New
York Stock Exchange ("NYSE"). The Fund may also invest in ADRs and Global
Depository Receipts ("GDRs"), purchase securities on a when-issued or delayed
delivery basis and make loans of portfolio securities. The Fund may borrow money
for temporary or emergency purposes in amounts not exceeding 5% of its total
assets. For temporary defensive purposes, the Fund may invest all of its assets
in U.S. Government Obligations, investment grade bonds, prime commercial paper,
certificates of deposit, bankers' acceptances, repurchase agreements and
participation interests. See the SAI for a description of these securities.
High Yield Fund
High Yield Fund primarily seeks high current income and secondarily seeks
growth of capital. The Fund actively seeks to achieve its secondary objective to
the extent consistent with its primary objective. The Fund seeks to achieve its
objectives by investing, under normal market conditions, at least 65% of its
total assets in high risk, high yield securities, commonly referred to as "junk
bonds" ("High Yield Securities"). High Yield Securities include the following
instruments: fixed, variable or floating rate debt obligations (including bonds,
debentures and notes) which are rated below Baa by Moody's or below BBB by S&P,
or, if unrated, are deemed to be of comparable quality by the Adviser; preferred
stocks and dividend-paying common stocks that have yields comparable to those of
high yielding debt securities; any of the foregoing securities of companies that
are financially troubled, in default or undergoing bankruptcy or reorganization
("Deep Discount Securities"); and any securities convertible into any of the
foregoing. See "High Yield Securities--Risk Factors" and "Deep Discount
Securities."
The Fund may invest up to 5% of its total assets in debt securities issued
by foreign governments and companies located outside the United States and
denominated in U.S. or foreign currency. The Fund may borrow money for temporary
or emergency purposes in amounts not exceeding 5% of its total assets, make
loans of portfolio securities, enter into repurchase agreements and invest in
zero coupon and pay-in-kind securities. The Fund may also invest in securities
on a "when issued" or delayed delivery basis. See "Description of Certain
Securities, Other Investment Policies and Risk Factors," below, and the SAI for
more information concerning these securities.
The Fund may invest up to 35% of its total assets in securities other than
High Yield Securities, including: dividend-paying common stocks; securities
convertible into, or exchangeable for, common stock; debt obligations of all
types (including bonds, debentures and notes) rated A or better by
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Moody's or S&P; U.S. Government Obligations; warrants; and money market
instruments consisting of prime commercial paper, certificates of deposit of
domestic branches of U.S. banks, bankers' acceptances and repurchase agreements.
In any period of market weakness or of uncertain market or economic
conditions, the Fund may establish a temporary defensive position to preserve
capital by having all or part of its assets invested in investment grade debt
securities or retained in cash or cash equivalents, including bank certificates
of deposit, bankers' acceptances, U.S. Government Obligations and commercial
paper issued by domestic corporations. See "Description of Certain Securities,
Other Investment Policies and Risk Factors," below.
The medium- to lower-rated, and certain of the unrated securities in which
the Fund invests tend to offer higher yields than higher-rated securities with
the same maturities because the historical financial condition of the issuers of
such securities may not be as strong as that of other issuers. Debt obligations
rated lower than Baa or BBB by Moody's or S&P, respectively, are speculative and
generally involve more risk of loss of principal and income than higher-rated
securities. Also, their yields and market value tend to fluctuate more than
higher quality securities. The greater risks and fluctuations in yield and value
occur because investors generally perceive issuers of lower-rated and unrated
securities to be less creditworthy. These risks cannot be eliminated, but may be
reduced by diversifying holdings to minimize the portfolio impact of any single
investment. In addition, fluctuations in market value does not affect the cash
income from the securities, but are reflected in the Fund's net asset value.
When interest rates rise, the net asset value of the Fund tends to decrease.
When interest rates decline, the net asset value of the Fund tends to increase.
Variable or floating rate debt obligations in which the Fund may invest
periodically adjust their interest rates to reflect changing economic
conditions. Thus, changing economic conditions specified by the terms of the
security would serve to change the interest rate and the return offered to the
investor. This reduces the effect of changing market conditions on the
security's underlying market value.
A High Yield Security may itself be convertible into or exchangeable for
equity securities, or may carry with it the right to acquire equity securities
evidenced by warrants attached to the security or acquired as part of a unit
with the security. Although the Fund invests primarily in High Yield Securities,
securities received upon conversion or exercise of warrants and securities
remaining upon the break-up of units or detachment of warrants may be retained
to permit orderly disposition, to establish a long-term holding basis for
Federal income tax purposes or to seek capital appreciation.
Because of the greater number of investment considerations involved in
investing in High Yield Securities, the achievement of the Fund's investment
objectives depends more on the Adviser's research abilities than would be the
case if the Fund were investing primarily in securities in the higher rated
categories. Because medium- to lower-rated securities generally involve greater
risks of loss of income and principal than higher-rated securities, investors
should consider carefully the relative risks associated with investments in
securities that carry medium to lower ratings or, if unrated, deemed to be of
comparable quality by the Adviser. See "High Yield Securities--Risk Factors" and
Appendix A for a description of corporate bond ratings.
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The dollar weighted average of credit ratings of all bonds held by the Fund
during the 1995 fiscal year, computed on a monthly basis, is set forth below.
This information reflects the average composition of the Fund's assets during
the 1995 fiscal year and is not necessarily representative of the Fund as of the
end of its 1995 fiscal year, the current fiscal year or at any other time in the
future.
Comparable Quality of
Unrated Securities to
Rated by Moody's Bonds Rated by Moody's
---------------- ----------------------
Ba 12.16% 0.73%
B 71.29 0.20
Caa 1.92 0.22
Ca 0.73 0
---- ------
Total 86.10% 1.15%
International Securities Fund
International Securities Fund primarily seeks long-term capital growth and
secondarily seeks to earn a reasonable level of current income. The Fund may
invest in all types of securities issued by companies and government
instrumentalities of any nation approved by the Trustees, subject only to
industry concentration and issuer diversification restrictions described below
and in the SAI. This investment flexibility permits the Fund to react to rapidly
changing economic conditions among countries which cause the relative
attractiveness of investments within national markets to be subject to frequent
reappraisal. It is a fundamental policy of the Fund that no more than 35% of its
total assets will be invested in securities issued by U.S. companies and U.S.
Government Obligations or cash and cash equivalents denominated in U.S.
currency. In addition, the Fund presently does not intend to invest more than
35% of its total assets in any one particular country. Further, except for
temporary defensive purposes, the Fund's assets will be invested in securities
of at least three different countries outside the United States. See "Foreign
Securities--Risk Factors". For defensive purposes, the Fund may temporarily
invest in securities issued by U.S. companies and the U.S. Government and its
agencies and instrumentalities, or cash equivalents denominated in U.S.
currency, without limitation as to amount.
The Fund may purchase securities traded on any foreign stock exchange. The
Fund may also purchase ADRs and GDRs. See "American Depository Receipts and
Global Depository Receipts," below. The Fund also may invest up to 25% of its
total assets in unlisted securities of foreign issuers; provided, however, that
no more than 15% of the value of its net assets may be invested in unlisted
securities with a limited trading market and other illiquid investments. The
investment standards for the selection of unlisted securities are the same as
those used in the purchase of securities traded on a stock exchange.
The Fund may invest in warrants, which may or may not be listed on a
recognized United States or foreign exchange. The Fund also may enter into
repurchase agreements, purchase securities on a when-issued or delayed delivery
basis and make loans of portfolio securities. The Fund also may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets.
See the SAI for further information concerning these securities.
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Investment Grade Fund
Investment Grade Fund seeks to generate a maximum level of income
consistent with investment in investment grade debt securities. The Fund seeks
to achieve its objective by investing, under normal market conditions, at least
65% of its total assets in debt securities of U.S. issuers that are rated in the
four highest rated categories by Moody's or S&P, or in unrated securities that
are deemed to be of comparable quality by the Adviser ("investment grade
securities"). The Fund may invest up to 35% of its total assets in U.S.
Government Obligations, including mortgage-related securities, dividend-paying
common and preferred stocks, obligations convertible into common stocks,
repurchase agreements, debt securities rated below investment grade and money
market instruments. The Fund may invest up to 5% of its net assets in corporate
or government debt securities of foreign issuers which are U.S. dollar
denominated and traded in U.S. markets. The Fund may also borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets.
The Fund may purchase securities on a when-issued basis, make loans of portfolio
securities and invest in zero coupon or pay-in-kind securities. See "Description
of Certain Securities, Other Investment Policies and Risk Factors," below, and
the SAI for additional information concerning these securities.
The published reports of rating services are considered by the Adviser in
selecting rated securities for the Fund's portfolio. The Adviser also relies,
among other things, on its own credit analysis, which includes a study of the
existing debt's capital structure, the issuer's ability to service debt (or to
pay dividends, if investing in common or preferred stock) and the current trend
of earnings for the issuer. Although up to 100% of the Fund's total assets can
be invested in debt securities rated at least Baa by Moody's or at least BBB by
S&P, or unrated debt securities deemed to be of comparable quality by the
Adviser, no more than 5% of the Fund's net assets may be invested in debt
securities rated lower than Baa by Moody's or BBB by S&P (including securities
that have been downgraded), or, if unrated, deemed to be of comparable quality
by the Adviser, or in any equity securities of any issuer if a majority of the
debt securities of such issuer are rated lower than Baa by Moody's or BBB by
S&P. Securities rated BBB or Baa by S&P or Moody's, respectively, are considered
to be speculative with respect to the issuer's ability to make principal and
interest payments. The Adviser continually monitors the investments in the
Fund's portfolio and carefully evaluates on a case-by-case basis whether to
dispose of or retain a debt security which has been downgraded to a rating lower
than investment grade. See "Debt Securities--Risk Factors" and Appendix A for a
description of corporate bond ratings.
For temporary defensive purposes, the Fund may invest all of its assets in
money market instruments, short-term fixed income securities or U.S. Government
Obligations. See "Description of Certain Securities, Other Investment Policies
and Risk Factors," below, and the SAI.
Target Maturity 2007 Fund
Target Maturity 2010 Fund
Target Maturity 2007 Fund seeks to provide a predictable compounded
investment return for investors who hold their Fund shares until the Fund's
maturity, consistent with preservation of capital.
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Target Maturity 2010 Fund seeks to provide a predictable compounded
investment return for investors who hold their Fund shares until the Fund's
maturity consistent with the preservation of capital.
Each Fund will seek its objective by investing, under normal market
conditions, at least 65% of its total assets in zero coupon securities which are
issued by the U.S. Government and its agencies and instrumentalities or created
by third parties using securities issued by the U.S. Government and its agencies
and instrumentalities. With respect to Target Maturity 2007 Fund, these
investments will mature no later than December 31, 2007 and, with respect to
Target Maturity 2010 Fund, these investments will mature no later than December
31, 2010. December 31, 2007 and December 31, 2010 are herein collectively
referred to as the "Maturity Date." On the Maturity Date, each Fund will be
converted to cash and distributed or reinvested in another Fund of Life Series
Fund at the investor's choice.
Each Fund seeks to provide investors with a positive total return at the
Maturity Date which, together with the reinvestment of all dividends and
distributions, exceeds their original investment in a Fund by a relatively
predictable amount. While the risk of fluctuation in the values of zero coupon
securities is greater when the period to maturity is longer, that risk tends to
diminish as the Maturity Date approaches. Although an investor can redeem shares
at the current net asset value at any time, any investor who redeems his or her
shares prior to the Maturity Date is likely to achieve a different investment
result than the return that was predicted on the date the investment was made,
and may even suffer a significant loss.
Zero coupon securities are debt obligations that do not entitle the holder
to any periodic payment of interest prior to maturity or a specified date when
the securities begin paying current interest. They are issued and traded at a
discount from their face amount or par value. This discount varies depending on
the time remaining until maturity, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. When held to maturity,
the entire return of a zero coupon security, which consists of the accretion of
the discount, comes from the difference between its issue price and its maturity
value. This difference is known at the time of purchase, so investors holding
zero coupon securities until maturity know the amount of their investment return
at the time of their investment. The market values are subject to greater market
fluctuations from changing interest rates prior to maturity than the values of
debt obligations of comparable maturities that bear interest currently. See
"Zero Coupon Securities-Risk Factors."
A portion of the total realized return from conventional interest-paying
bonds comes from the reinvestment of periodic interest. Since the rate to be
earned on these reinvestments may be higher or lower than the rate quoted on the
interest-paying bonds at the time of the original purchase, the total return of
interest-paying bonds is uncertain even for investors holding the security to
its maturity. This uncertainty is commonly referred to as reinvestment risk and
can have a significant impact on total realized investment return. With zero
coupon securities, however, there are no cash distributions to reinvest, so
investors bear no reinvestment risk if they hold the zero coupon securities to
maturity.
Each Fund primarily will purchase three types of zero coupon securities:
(1) U.S. Treasury STRIPS (Separately Traded Registered Interest and Principal
Securities), which are created when the coupon payments and the principal
payment are stripped from an outstanding Treasury security by the Federal
Reserve Bank. Bonds issued by the Resolution Funding Corporation (REFCORP) can
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<PAGE>
also be stripped in this fashion. (2) STRIPS which are created when a dealer
deposits a Treasury security or a Federal agency security with a custodian for
safekeeping and then sells the coupon payments and principal payment that will
be generated by this security. Bonds issued by the Financing Corporation (FICO)
can be stripped in this fashion. (3) Zero coupon securities of federal agencies
and instrumentalities either issued directly by an agency in the form of a zero
coupon bond or created by stripping an outstanding bond.
Each Fund may invest up to 35% of its total assets in the following
instruments: interest-bearing obligations issued by the U.S. Government and its
agencies and instrumentalities (see "U.S. Government Obligations"), including,
for Target Maturity 2007 Fund, zero coupon securities maturing beyond 2007, and,
for Target Maturity 2010 Fund, zero coupon securities maturing beyond 2010;
corporate debt securities, including corporate zero coupon securities;
repurchase agreements; and money market instruments consisting of prime
commercial paper, certificates of deposit of domestic branches of U.S. banks and
bankers' acceptances. Each Fund may only invest in debt securities rated A or
better by Moody's or S&P or in unrated securities that are deemed to be of
comparable quality by the Adviser. Debt obligations rated A or better by Moody's
or S&P comprise what are known as high-grade bonds and are regarded as having a
strong capacity to repay principal and make interest payments. See Appendix A
for a description of corporate bond ratings. Each Fund may also invest in
restricted and illiquid securities, make loans of portfolio securities and
purchase securities on a when-issued basis. See the SAI for more information
regarding these types of investments.
Utilities Income Fund
The primary investment objective of Utilities Income Fund is to seek high
current income. Long-term capital appreciation is a secondary objective. The
Fund seeks its objectives by investing, under normal market conditions, at least
65% of its total assets in equity and debt securities issued by companies
primarily engaged in the public utilities industry. Equity securities in which
the Fund may invest include common stocks, preferred stocks, securities
convertible into common stocks or preferred stocks, and warrants to purchase
common or preferred stocks. Debt securities in which the Fund may invest will be
rated at the time of investment at least A by Moody's or S&P or, if unrated,
will be deemed to be of comparable quality as determined by the Adviser. Debt
securities rated A or higher by Moody's or S&P or, if unrated, deemed to be of
comparable quality by the Adviser, are regarded as having a strong capacity to
pay principal and interest. The Fund's policy is to attempt to sell, within a
reasonable time period, a debt security in its portfolio which has been
downgraded below A, provided that such disposition is in the best interests of
the Fund and its shareholders. See Appendix A for a description of corporate
bond ratings. The portion of the Fund's assets invested in equity securities and
in debt securities will vary from time to time due to changes in interest rates
and economic and other factors.
The utility companies in which the Fund invests include companies primarily
engaged in the ownership or operation of facilities used to provide electricity,
gas, water or telecommunications (including telephone, telegraph and satellite,
but not companies engaged in public broadcasting or cable television). For these
purposes, "primarily engaged" means that (1) more than 50% of the company's
assets are devoted to the ownership or operation of one or more facilities as
described above, or (2) more than 50% of the company's operating revenues are
derived from the business or combination of any of the businesses described
above. It should be noted that based on this
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<PAGE>
definition, the Fund may invest in companies which are also involved to a
significant degree in non-public utilities activities.
Utility stocks generally offer dividend yields that exceed those of
industrial companies and their prices tend to be less volatile than stocks of
industrial companies. However, utility stocks can still be affected by the risks
of the stock of industrial companies. Because the Fund concentrates its
investments in public utilities companies, the value of its shares will be
especially affected by factors peculiar to the utilities industry, and may
fluctuate more widely than the value of shares of a fund that invests in a
broader range of industries. See "Utilities Industries--Risk Factors."
The Fund may invest up to 35% of its total assets in the following
instruments: debt securities (rated at least A by Moody's or S&P) and common and
preferred stocks of non-utility companies; U.S. Government Obligations;
mortgage-backed securities; cash; and money market instruments consisting of
prime commercial paper, bankers' acceptances, certificates of deposit and
repurchase agreements. The Fund may invest in securities on a "when-issued" or
delayed delivery basis and make loans of portfolio securities. The Fund may
invest up to 5% of its net assets in ADRs. The Fund may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its net assets.
The Fund also may invest in zero coupon and pay-in-kind securities. In addition,
in any period of market weakness or of uncertain market or economic conditions,
the Fund may establish a temporary defensive position to preserve capital by
having all of its assets invested in short-term fixed income securities or
retained in cash or cash equivalents. See the SAI for a description of these
securities.
General. Each Fund's net asset value fluctuates based mainly upon changes
in the value of its portfolio securities. Each Fund's investment objectives and
certain investment limitations set forth in the SAI are fundamental policies
that may not be changed without shareholder approval. There can be no assurance
that any Fund will achieve its investment objectives.
Description of Certain Securities, Other Investment Policies and Risk Factors
American Depository Receipts and Global Depository Receipts. Blue Chip
Fund, International Securities Fund, Growth Fund, Utilities Income Fund and
Discovery Fund may invest in sponsored and unsponsored ADRs. ADRs are receipts
typically issued by a U.S. bank or trust company evidencing ownership of the
underlying securities of foreign issuers, and other forms of depository receipts
for securities of foreign issuers. Generally, ADRs, in registered form, are
denominated in U.S. dollars and are designed for use in the U.S. securities
markets. Thus, these securities are not denominated in the same currency as the
securities into which they may be converted. In addition, the issuers of the
securities underlying unsponsored ADRs are not obligated to disclose material
information in the United States and, therefore, there may be less information
available regarding such issuers and there may not be a correlation between such
information and the market value to the ADRs. International Securities Fund and
Growth Fund may also invest in sponsored and unsponsored GDRs. GDRs are issued
globally and evidence a similar ownership arrangement. Generally, GDRs are
designed for trading in non-U.S. securities markets. ADRs and GDRs are
considered to be foreign securities by each of the above Funds, as appropriate.
See "Foreign Securities--Risk Factors."
Bankers' Acceptances. Each Fund may invest in bankers' acceptances.
Bankers' acceptancesz are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance
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is a time draft drawn on a bank by an exporter or importer to obtain a stated
amount of funds to pay for specific merchandise. The draft is then "accepted" by
a bank that, in effect, unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held by the
accepting bank as an asset or it may be sold in the secondary market at the
going rate of interest for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances have maturities of six
months or less.
Certificates of Deposit. Each Fund may invest in bank certificates of
deposit ("CDs"). The FDIC is an agency of the U.S. Government which insures the
deposits of certain banks and savings and loan associations up to $100,000 per
deposit. The interest on such deposits may not be insured if this limit is
exceeded. Current Federal regulations also permit such institutions to issue
insured negotiable CDs in amounts of $100,000 or more, without regard to the
interest rate ceilings on other deposits. To remain fully insured, these
investments currently must be limited to $100,000 per insured bank or savings
and loan association.
Commercial Paper. Commercial paper is a promissory note issued by a
corporation to finance short-term credit needs which may either be unsecured or
backed by a letter of credit. Commercial paper includes notes, drafts or similar
instruments payable on demand or having a maturity at the time of issuance not
exceeding nine months, exclusive of days of grace or any renewal thereof. See
Appendix A to the SAI for a description of commercial paper ratings.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or
dividends paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying stock because they have
fixed income characteristics, and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. See
the SAI for more information on convertible securities.
Debt Securities--Risk Factors. The market value of debt securities is
influenced primarily by changes in the level of interest rates. Generally, as
interest rates rise, the market value of debt securities decreases. Conversely,
as interest rates fall, the market value of debt securities increases. Factors
which could result in a rise in interest rates, and a decrease in the market
value of debt securities, include an increase in inflation or inflation
expectations, an increase in the rate of U.S. economic growth, an expansion in
the Federal budget deficit or an increase in the price of commodities such as
oil. In addition, the market value of debt securities is influenced by
perceptions of the credit risks associated with such securities. Sale of debt
securities prior to maturity may result in a loss and the inability to replace
the sold securities with debt securities with a similar yield. Debt obligations
rated lower than Baa by Moody's or BBB by S&P, commonly referred to as "junk
bonds," are speculative and generally involve a higher risk of loss of principal
and income than higher-rated securities. See "High Yield Securities--Risk
Factors" and Appendix A for a description of corporate bond ratings.
Deep Discount Securities. High Yield Fund may invest up to 15% of its total
assets in securities of companies that are financially troubled, in default or
undergoing bankruptcy or
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reorganization. Such securities are usually available at a deep discount from
the face value of the instrument. The Fund will invest in Deep Discount
Securities when the Adviser believes that there exist factors that are likely to
restore the company to a healthy financial condition. Such factors include a
restructuring of debt, management changes, existence of adequate assets or other
unusual circumstances. Debt instruments purchased at deep discounts may pay very
high effective yields. In addition, if the financial condition of the issuer
improves, the underlying value of the security may increase, resulting in a
capital gain. If the company defaults on its obligations or remains in default,
or if the plan of reorganization is insufficient for debtholders, the Deep
Discount Securities may stop paying interest and lose value or become worthless.
The Adviser will balance the benefits of Deep Discount Securities with their
risks. While a diversified portfolio may reduce the overall impact of a Deep
Discount Security that is in default or loses its value, the risk cannot be
eliminated. See "High Yield Securities--Risk Factors."
Eurodollar Certificates of Deposit. Cash Management Fund may invest in
Eurodollar CDs, which are issued by London branches of domestic or foreign
banks. Such securities involve risks that differ from certificates of deposit
issued by domestic branches of U.S. banks. These risks include future political
and economic developments, the possible imposition of United Kingdom withholding
taxes on interest income payable on the securities, the possible establishment
of exchange controls, the possible seizure or nationalization of foreign
deposits or the adoption of other foreign governmental restrictions that might
adversely affect the payment of principal and interest on such securities.
Foreign Securities--Risk Factors. International Securities Fund, High Yield
Fund and Discovery Fund may sell a security denominated in a foreign currency
and retain the proceeds in that foreign currency to use at a future date (to
purchase other securities denominated in that currency) or a Fund may buy
foreign currency outright to purchase securities denominated in that foreign
currency at a future date. Because none of these Funds intend to hedge their
foreign investments, the Fund will be affected by changes in exchange control
regulations and fluctuations in the relative rates of exchange between the
currencies of different nations, as well as by economic and political
developments. Growth Fund may invest in securities issued by foreign companies
that are denominated in U.S. currency. Risks involved in foreign securities
include the following: there may be less publicly available information about
foreign companies comparable to the reports and ratings that are published about
companies in the United States; foreign companies are not generally subject to
uniform accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies; some foreign stock markets
have substantially less volume than U.S. markets, and securities of some foreign
companies are less liquid and more volatile than securities of comparable U.S.
companies; there may be less government supervision and regulation of foreign
stock exchanges, brokers and listed companies than exist in the United States;
and there may be the possibility of expropriation or confiscatory taxation,
political or social instability or diplomatic developments which could affect
assets of a Fund held in foreign countries.
International Securities Fund's and Discovery Fund's investments in
emerging markets include investments in countries whose economies or securities
markets are not yet highly developed. Special considerations associated with
these emerging market investments (in addition to the considerations regarding
foreign investments generally) may include, among others, greater political
uncertainties, an economy's dependence on revenues from particular commodities
or on international aid or development assistance, currency transfer
restrictions, a limited number of potential buyers for such securities and
delays and disruptions in securities settlement procedures.
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High Yield Securities--Risk Factors. High Yield Securities are subject to
certain risks that may not be present with investments in higher grade
securities.
Effect of Interest Rate and Economic Changes. High Yield Securities rated
lower than Baa by Moody's or BBB by S&P, commonly referred to as "junk bonds,"
are speculative and generally involve a higher risk or loss of principal and
income than higher-rated securities. The prices of High Yield Securities tend to
be less sensitive to interest rate changes than higher-rated investments, but
may be more sensitive to adverse economic changes or individual corporate
developments. Periods of economic uncertainty and changes generally result in
increased volatility in the market prices and yields of High Yield Securities
and thus in a Fund's net asset value. A strong economic downturn or a
substantial period of rising interest rates could severely affect the market for
High Yield Securities. In these circumstances, highly leveraged companies might
have greater difficulty in making principal and interest payments, meeting
projected business goals, and obtaining additional financing. Thus, there could
be a higher incidence of default. This would affect the value of such securities
and thus a Fund's net asset value. Further, if the issuer of a security owned by
a Fund defaults, that Fund might incur additional expenses to seek recovery.
Generally, when interest rates rise, the value of fixed rate debt
obligations, including High Yield Securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a High Yield Security containing a redemption or call provision
exercises either provision in a declining interest rate market, a Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if a Fund experiences unexpected net redemptions in a
rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to
which Fund expenses could be allocated and in a reduced rate of return for that
Fund. While it is impossible to protect entirely against this risk,
diversification of a Fund's portfolio and the Adviser's careful analysis of
prospective portfolio securities should minimize the impact of a decrease in
value of a particular security or group of securities in a Fund's portfolio.
The High Yield Securities Market. The market for below investment grade
bonds expanded rapidly in recent years and its growth paralleled a long economic
expansion. In the past, the prices of many lower-rated debt securities declined
substantially, reflecting an expectation that many issuers of such securities
might experience financial difficulties. As a result, the yields on lower-rated
debt securities rose dramatically. However, such higher yields did not reflect
the value of the income streams that holders of such securities expected, but
rather the risk that holders of such securities could lose a substantial portion
of their value as a result of the issuers' financial restructuring or default.
There can be no assurance that such declines in the below investment grade
market will not reoccur. The market for below investment grade bonds generally
is thinner and less active than that for higher quality bonds, which may limit a
Fund's ability to sell such securities at fair value in response to changes in
the economy or the financial markets. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower rated securities, especially in a thinly traded
market.
Credit Ratings. The credit ratings issued by credit rating services may not
fully reflect the true risks of an investment. For example, credit ratings
typically evaluate the safety of principal and interest payments, not market
value risk, of High Yield Securities. Also, credit rating agencies may fail to
change on a timely basis a credit rating to reflect changes in economic or
company conditions that affect a security's market value. Although the Adviser
considers ratings of recognized
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rating services such as Moody's and S&P, the Adviser primarily relies on its own
credit analysis, which includes a study of existing debt, capital structure,
ability to service debt and to pay dividends, the issuer's sensitivity to
economic conditions, its operating history and the current trend of earnings.
High Yield Fund may invest in securities rated as low as D by S&P or C by
Moody's or, if unrated, deemed to be of comparable quality by the Adviser. Debt
obligations with these ratings either have defaulted or are in great danger of
defaulting and are considered to be highly speculative. See "Deep Discount
Securities." The Adviser continually monitors the investments in a Fund's
portfolio and carefully evaluates whether to dispose of or retain High Yield
Securities whose credit ratings have changed. See Appendix A for a description
of corporate bond ratings.
Liquidity and Valuation. Lower-rated bonds are typically traded among a
smaller number of broker-dealers than in a broad secondary market. Purchasers of
High Yield Securities tend to be institutions, rather than individuals, which is
a factor that further limits the secondary market. To the extent that no
established retail secondary market exists, many High Yield Securities may not
be as liquid as higher-grade bonds. A less active and thinner market for High
Yield Securities than that available for higher quality securities may result in
more volatile valuations of a Fund's holdings and more difficulty in executing
trades at favorable prices during unsettled market conditions.
The ability of a Fund to value or sell High Yield Securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. During such periods, there may be less reliable objective information
available and thus the responsibility of Life Series Fund's Board of Trustees to
value High Yield Securities becomes more difficult, with judgment playing a
greater role. Further, adverse publicity about the economy or a particular
issuer may adversely affect the public's perception of the value, and thus
liquidity, of a High Yield Security, whether or not such perceptions are based
on a fundamental analysis.
Legislation. Provisions of the Revenue Reconciliation Act of 1989 limit a
corporate issuer's deduction for a portion of the original issue discount on
"high yield discount" obligations (including certain pay-in-kind securities).
This limitation could have a materially adverse impact on the market for certain
High Yield Securities. From time to time, legislators and regulators have
proposed other legislation that would limit the use of high yield debt
securities in leveraged buyouts, mergers and acquisitions. It is not certain
whether such proposals, which also could adversely affect High Yield Securities,
will be enacted into law.
Market Risk. Blue Chip Fund, Discovery Fund, Growth Fund and Utilities
Income Fund are subject to market risk because they invest primarily in common
stocks. Market risk is the possibility that common stock prices will decline
over short or even extended periods. The U.S. stock market tends to be cyclical,
with periods when stock prices generally rise and periods when stock prices
generally decline.
Mortgage-Backed Securities
Mortgage loans made by banks, savings and loan institutions and other
lenders are often assembled into pools, the interests in which are issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself. Interests in such pools are referred
to herein as "mortgage-backed securities." The market value of these securities
will fluctuate as interest rates and market conditions change. In addition,
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prepayment of principal by the mortgagees, which often occurs with
mortgage-backed securities when interest rates decline, can significantly change
the realized yield of these securities.
GNMA certificates are backed as to the timely payment of principal and
interest by the full faith and credit of the U.S. Government. Payments of
principal and interest on FNMA certificates are guaranteed only by FNMA itself,
not by the full faith and credit of the U.S. Government. FHLMC certificates
represent mortgages for which FHLMC has guaranteed the timely payment of
principal and interest but, like a FNMA certificate, they are not guaranteed by
the full faith and credit of the U.S. Government.
Collateralized Mortgage Obligations and Multiclass Pass-Through Securities.
Collateralized mortgage obligations ("CMOs") are debt obligations collateralized
by mortgage loans or mortgage pass-through securities. Typically, CMOs are
collateralized by GNMA certificates or other government mortgage-backed
securities (such collateral collectively hereinafter referred to as "Mortgage
Assets"). Multiclass pass-through securities are interests in trusts that are
comprised of Mortgage Assets. Unless the context indicates otherwise, references
herein to CMOs include multiclass pass-through securities. Payments of principal
of, and interest on, the Mortgage Assets, and any reinvestment income thereon,
provide the funds to pay debt service on the CMOs or to make scheduled
distributions on the multiclass pass-through securities. CMOs in which
Government Fund may invest are issued or guaranteed by U.S. Government agencies
or instrumentalities, such as FNMA and FHLMC. See the SAI for more information
on CMOs.
Stripped Mortgage-Backed Securities. Government Fund, Target Maturity 2007
Fund and Target Maturity 2010 Fund may invest in stripped mortgage-backed
securities ("SMBS"), which are derivative multiclass mortgage securities. SMBS
are usually structured with two classes that receive different proportions of
the interest and principal distributions from a pool of mortgage assets. A
common type of SMBS will have one class receiving most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest while the other class will receive all of the principal. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, the Fund may fail to fully recoup its initial investment in these
securities. The market value of the class consisting primarily or entirely of
principal payments generally is unusually volatile in response to changes in
interest rates.
Risks of Mortgage-Backed Securities. Investments in mortgage-backed
securities entail both market and prepayment risk. Fixed-rate mortgage-backed
securities are priced to reflect, among other things, current and perceived
interest rate conditions. As conditions change, market values will fluctuate. In
addition, the mortgages underlying mortgage-backed securities generally may be
prepaid in whole or in part at the option of the individual buyer. Prepayments
of the underlying mortgages can affect the yield to maturity on mortgage-backed
securities and, if interest rates decline, the prepayment may only be invested
at the then prevailing lower interest rate. Changes in market conditions,
particularly during periods of rapid or unanticipated changes in market interest
rates, may result in volatility and reduced liquidity of the market value of
certain mortgage-backed securities. CMOs and SMBS involve similar risks,
although they may be more volatile and even less liquid.
Preferred Stock. A preferred stock is a blend of the characteristics of a
bond and common stock. It can offer the higher yield of a bond and has priority
over common stock in equity ownership, but does not have the seniority of a bond
and, unlike common stock, its participation in
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the issuer's growth may be limited. Preferred stock has preference over common
stock in the receipt of dividends and in any residual assets after payment to
creditors should the issuer be dissolved. Although the dividend is set at a
fixed annual rate, in some circumstances it can be changed or omitted by the
issuer.
Repurchase Agreements. Repurchase agreements are transactions in which a
Fund purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Each Fund's risk is limited
primarily to the ability of the seller to repurchase the securities at the
agreed-upon price upon the delivery date. See the SAI for more information
regarding repurchase agreements.
Restricted and Illiquid Securities. Each Fund, other than Cash Management
Fund, may invest up to 15% of its net assets in illiquid securities. Cash
Management Fund may invest up to 10% of its net assets in illiquid securities.
These securities include (1) securities that are illiquid due to the absence of
a readily available market or due to legal or contractual restrictions on resale
and (2) repurchase agreements maturing in more than seven days. However,
illiquid securities for purposes of this limitation do not include securities
eligible for resale to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933, as amended, which Life Series Fund's Board of
Trustees or the Adviser or the Subadviser, as applicable, has determined are
liquid under Board-approved guidelines. See the SAI for more information
regarding restricted and illiquid securities.
Under current guidelines of the staff of the SEC, interest-only and
principal-only classes of fixed-rate mortgage-backed securities in which
Government Fund may invest are considered illiquid. However, such securities
issued by the U.S. Government or one of its agencies or instrumentalities will
not be considered illiquid if the Adviser has determined that they are liquid
pursuant to guidelines established by Life Series Fund's Board of Trustees.
Government Fund, Target Maturity 2007 Fund and Target Maturity 2010 Fund may not
be able to sell illiquid securities when the Adviser considers it desirable to
do so or may have to sell such securities at a price lower than could be
obtained if they were more liquid. Also the sale of illiquid securities may
require more time and may result in higher dealer discounts and other selling
expenses than does the sale of securities that are not illiquid. Illiquid
securities may be more difficult to value due to the unavailability of reliable
market quotations for such securities, and investment in illiquid securities may
have an adverse impact on these Fund's net asset value.
Time Deposits. Cash Management Fund may invest in time deposits. Time
deposits are non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. For the most part, time
deposits which may be held by the Fund would not benefit from insurance from the
Bank Insurance Fund or the Savings Association Insurance Fund administered by
the FDIC.
U.S. Government Obligations. Securities issued or guaranteed as to
principal and interest by the U.S. Government include (1) U.S. Treasury
obligations which differ only in their interest rates, maturities and times of
issuance as follows: U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years), and U.S. Treasury bonds
(generally maturities of greater than ten years); and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are backed by
the full faith and credit of the United States, such as securities issued by the
Federal Housing Administration, GNMA, the Department of Housing and
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Urban Development, the Export-Import Bank, the General Services Administration
and the Maritime Administration and certain securities issued by the Farmers
Home Administration and the Small Business Administration. The range of
maturities of U.S. Government Obligations is usually three months to thirty
years.
Utilities Industry-Risk Factors. Stocks of utilities companies generally
offer dividend yields that exceed those of industrial companies and their prices
tend to be less volatile than stocks of industrial companies. However, utility
stocks can still be affected by the risks of the stock market in general, as
well as factors specific to public utilities companies.
Many utility companies, especially electric and gas and other
energy-related utility companies, have historically been subject to the risk of
increases in fuel and other operating costs, changes in interest rates on
borrowing for capital improvement programs, changes in applicable laws and
regulations, and costs and operating constraints associated with compliance with
environmental regulations. In particular, regulatory changes with respect to
nuclear and conventionally-fueled power generating facilities could increase
costs or impair the ability of utility companies to operate such facilities or
obtain adequate return on invested capital.
Certain utilities, especially gas and telephone utilities, have in recent
years been affected by increased competition, which could adversely affect the
profitability of such utility companies. In addition, expansion by companies
engaged in telephone communication services of their non-regulated activities
into other businesses (such as cellular telephone services, data processing,
equipment retailing, computer services and financial services) has provided the
opportunity for increases in earnings and dividends at faster rates than have
been allowed in traditional regulated businesses. However, technological
innovations and other structural changes also could adversely affect the
profitability of such companies in competition with utilities companies.
Because securities issued by utility companies are particularly sensitive
to movements in interest rates, the equity securities of such companies are more
affected by movements in interest rates than are the equity securities of other
companies.
Each of these risks could adversely affect the ability and inclination of
public utilities companies to declare or pay dividends and the ability of
holders of common stock, such as the Utilities Income Fund, to realize any value
from the assets of the company upon liquidation or bankruptcy.
Variable Rate and Floating Rate Notes. Cash Management Fund may invest in
derivative variable rate and floating rate notes. Issuers of such notes include
corporations, banks, broker-dealers and finance companies. Variable rate notes
include master demand notes which are obligations permitting the holder to
invest fluctuating amounts, which may change daily without penalty, pursuant to
direct arrangements between the Fund, as lender, and the borrower. The interest
rates on these notes fluctuate from time to time. The issuer of such obligations
normally has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. See the SAI for more information on these securities.
Zero Coupon and Pay-In-Kind Securities. Zero coupon securities are debt
obligations that do not entitle the holder to any periodic payment of interest
prior to maturity or a specified date when the securities begin paying current
interest. They are issued and traded at a discount from
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their face amount or par value, which discount varies depending on the time
remaining until cash payments begin, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. Pay-in-kind securities
are those that pay interest through the issuance of additional securities. The
market prices of zero coupon and pay-in-kind securities generally are more
volatile than the prices of securities that pay interest periodically and in
cash and are likely to respond to changes in interest rates to a greater degree
than do other types of debt securities having similar maturities and credit
quality. Original issue discount earned on zero coupon securities and the
"interest" on pay-in-kind securities must be included in a Fund's income. Thus,
to continue to qualify for tax treatment as a regulated investment company and
to avoid a certain excise tax on undistributed income, a Fund may be required to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. See "Taxes" in the SAI. These distributions must be made
from a Fund's cash assets or, if necessary, from the proceeds of sales of
portfolio securities. A Fund will not be able to purchase additional
income-producing securities with cash used to make such distributions, and its
current income ultimately could be reduced as a result.
Zero Coupon Securities-Risk Factors. Zero coupon securities are debt
securities and thus are subject to the same risk factors as all debt securities.
See "Debt Securities-Risk Factors." The market prices of zero coupon securities,
however, generally are more volatile than the prices of securities that pay
interest periodically and in cash and are likely to respond to changes in
interest rates to a greater degree than do other types of debt securities having
similar maturities and credit quality. As a result, the net asset value of
shares of the Target Maturity 2007 Fund and Target Maturity 2010 Fund may
fluctuate over a greater range than shares of the other Funds or mutual funds
that invest in debt obligations having similar maturities but that make current
distributions of interest.
Zero coupon securities can be sold prior to their due date in the secondary
market at their then prevailing market value, which depends primarily on the
time remaining to maturity, prevailing levels of interest rates and the
perceived credit quality of the issuer. The prevailing market value may be more
or less than the securities' value at the time of purchase. While the objective
of both the Target Maturity 2007 Fund and Target Maturity 2010 Fund is to seek a
predictable compounded investment return for investors who hold their Fund
shares until that Fund's maturity, a Fund cannot assure that it will be able to
achieve a certain level of return due to the possible necessity of having to
sell certain zero coupon securities to pay expenses, dividends or to meet
redemptions at times and at prices that might be disadvantageous or,
alternatively, the need to invest assets received from new purchases at
prevailing interest rates, which would expose a Fund to reinvestment risk. In
addition, no assurance can be given as to the liquidity of the market for
certain of these securities. Determination as to the liquidity of such
securities will be made in accordance with guidelines established by Life Series
Fund's Board of Trustees. In accordance with such guidelines, the Adviser will
monitor each Fund's investments in such securities with particular regard to
trading activity, availability of reliable price information and other relevant
information.
Portfolio Turnover. The sustained and substantial decrease in interest
rates during 1995 caused the Government Fund's portfolio to be restructered
several times. In particular, declining rates increased prepayments on
mortgage-backed securities, causing their durations to decrease. In order to
offset the decrease in duration, the Government Fund had to actively manage its
mortgage-backed holdings. This resulted in a portfolio turnover rate for the
fiscal year ended December 31, 1995 of 198% and 457% for the prior fiscal year.
A high rate of portfolio turnover generally leads to increased transaction costs
and may result in a greater number of taxable
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transactions. See "Allocation of Portfolio Brokerage" in the SAI. The Target
Maturity 2010 Fund currently does not expect its annual rate of portfolio
turnover to exceed 100%. See the SAI for the other Funds' portfolio turnover
rate and for more information on portfolio turnover.
HOW TO BUY SHARES
Investments in a Fund are only available through purchases of the Policies
or the Contracts offered by First Investors Life. Policy premiums, net of
certain expenses, are paid into a unit investment trust, Separate Account B.
Purchase payments for the Contracts, net of certain expenses, are also paid into
a unit investment trust, Separate Account C. The Separate Accounts pool these
proceeds to purchase shares of a Fund designated by purchasers of the Policies
or Contracts. Orders for the purchase of Fund shares received prior to the close
of regular trading on the NYSE, generally 4:00 P.M. (New York City time), on any
business day the NYSE is open for trading, will be processed and shares will be
purchased at the net asset value determined at the close of regular trading on
the NYSE on that day. Orders received after the close of regular trading on the
NYSE will be processed at the net asset value determined at the close of regular
trading on the NYSE on the next trading day. See "Determination of Net Asset
Value."
HOW TO REDEEM SHARES
Shares of a Fund may be redeemed at the direction of Policyowners or
Contractowners, in accordance with the terms of the Policies or Contracts.
Redemptions will be made at the next determined net asset value of the
respective Fund upon receipt of a proper request for redemption or repurchase.
Payment will be made by check as soon as possible but within seven days after
presentation. However, Life Series Fund's Board of Trustees may suspend the
right of redemption or postpone the date of payment during any period when (a)
trading on the NYSE is restricted as determined by the Securities and Exchange
Commission ("SEC") or the NYSE is closed for other than weekends and holidays,
(b) the SEC has by order permitted such suspension, or (c) an emergency, as
defined by rules of the SEC, exists during which time the sale or valuation of
portfolio securities held by a Fund is not reasonably practicable.
MANAGEMENT
Board of Trustees. Life Series Fund's Board of Trustees, as part of its
overall management responsibility, oversees various organizations responsible
for each Fund's day-to-day management.
Adviser. First Investors Management Company, Inc. supervises and manages
each Fund's investments, supervises all aspects of each Fund's operations and,
except for International Securities Fund and Growth Fund, determines each Fund's
portfolio transactions. The Adviser is a New York corporation located at 95 Wall
Street, New York, NY 10005. First Investors Consolidated Corporation ("FICC")
owns all of the voting common stock of the Adviser and all of the outstanding
stock of First Investors Corporation and the Transfer Agent. Mr. Glenn O. Head
controls FICC and, therefore, controls the Adviser.
As compensation for its services, the Adviser receives an annual fee from
each Fund, which is payable monthly. For the fiscal year ended December 31,
1995, the advisory fees were 0.75% of average daily net assets for each of Blue
Chip Fund, Discovery Fund, Growth Fund, High Yield Fund and International
Securities Fund, 0.35% of average daily net assets, net of waiver,
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for each of Cash Management Fund, Government Fund, Investment Grade Fund and
Utilities Income Fund. The Adviser waived Target Maturity 2007 Fund's advisory
fee in its entirety. As compensation for its services, the Adviser will receive
a fee from Target Maturity 2010 Fund at the rate of 0.75% of the average daily
net assets of that Fund. The SEC staff takes the position that fees of 0.75% or
greater are higher than those paid by most investment companies.
Subadviser. Wellington Management Company, LLP has been retained by the
Adviser and Life Series Fund, on behalf of International Securities Fund and
Growth Fund, as each of those Fund's investment subadviser. The Adviser has
delegated discretionary trading authority to WMC with respect to all the assets
of International Securities Fund and Growth Fund, subject to the continuing
oversight and supervision of the Adviser and the Board of Trustees. As
compensation for its services, WMC is paid by the Adviser, and not by either
Fund, a fee which is computed daily and paid monthly.
WMC, located at 75 State Street, Boston, MA 02109, is a Massachusetts
limited liability partnership of which Robert W. Doran, Duncan M. McFarland and
John R. Ryan are Managing Partners. WMC is a professional investment counseling
firm which provides investment services to investment companies, employee
benefit plans, endowment funds, foundations and other institutions and
individuals. As of June 30, 1996, WMC held investment management authority with
respect to approximately $118.8 billion of assets. Of that amount, WMC acted as
investment adviser or subadviser to approximately 111 registered investment
companies or series of such companies, with net assets of approximately $82.2
billion as of June 30, 1996. WMC is not affiliated with the Adviser or any of
its affiliates.
For the fiscal year ended December 31, 1995, the Subadviser's fees amounted
to 0.34% of Growth Fund's average daily net assets and 0.40% of International
Securities Fund's average daily net assets, all of which was paid by the Adviser
and not by the Funds.
Portfolio Managers. Patricia D. Poitra, Director of Equities, has been
primarily responsible for the day-to-day management of the Blue Chip Fund since
October 1994 and Discovery Fund since 1988. Ms. Poitra is assisted by a team of
portfolio analysts. Ms. Poitra has been responsible for the management of the
Special Situations Fund, the Blue Chip Fund and the equity portion of Total
Return Fund, all series of First Investors Series Fund. Ms. Poitra also is
responsible for the management of the Blue Chip Fund of Executive Investors
Trust and the U.S.A. Mid-Cap Opportunity Fund of First Investors Series Fund II,
Inc. Ms. Poitra joined FIMCO in 1985 as a Senior Equity Analyst.
George V. Ganter has been Portfolio Manager for High Yield Fund since 1989.
Mr. Ganter joined FIMCO in 1985 as a Senior Analyst. In 1986, he became
Portfolio Manager for First Investors Special Bond Fund, Inc. In 1989, he became
Portfolio Manager for First Investors High Yield Fund, Inc. and Executive
Investors High Yield Fund.
Margaret R. Haggerty is Portfolio Manager for Utilities Income Fund. Ms.
Haggerty joined FIMCO in 1990 as an analyst for several First Investors equity
funds. In addition, she monitored the management of several First Investors
funds for which WMC was the subadviser. In early 1993, she became Portfolio
Manager for First Investors Utilities Income Fund of First Investors Series Fund
II, Inc.
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Nancy Jones has been Portfolio Manager for Investment Grade Fund since its
inception in 1992. Ms. Jones joined FIMCO in 1983 as Director of Research in the
High Yield Department. In 1989, she became Portfolio Manager for First Investors
Fund For Income, Inc. Ms. Jones has been Portfolio Manager for Investment Grade
Fund of First Investors Series Fund since its inception in 1991 and has managed
the fixed income corporate securities portion of Total Return Fund of First
Investors Series Fund since 1992.
Since August 1995, WMC's Growth Investment Team, a group of equity
portfolio managers and senior investment professionals, has assumed
responsibility for managing the Growth Fund.
Since October 1995, Clark D. Wagner has been primarily responsible for the
day-to-day management of the Government Fund and the Target Maturity 2007 Fund.
Mr. Wagner has also been primarily responsible for the day-to-day management of
Target Maturity 2010 Fund since its inception in 1996. Since he joined FIMCO in
1991, Mr. Wagner has been Portfolio Manager for all of First Investors municipal
bond funds. Mr. Wagner also is responsible for the day-to-day management of
First Investors Government Fund, Inc. In 1992, he became Chief Investment
Officer of FIMCO.
Since April 1, 1994, International Securities Fund is managed by WMC's
Global Equity Strategy Group, a group of global portfolio managers and senior
investment professionals headed by Trond Skramstad. Prior to joining WMC as a
portfolio manager in 1993, Mr. Skramstad was a global portfolio manager at
Scudder, Stevens & Clark since 1990.
DETERMINATION OF NET ASSET VALUE
The net asset value of shares of each Fund is determined as of the close of
regular trading on the NYSE (generally 4:00 P.M., New York City time) on each
day the NYSE is open for trading, and at such other times as Life Series Fund's
Board of Trustees deems necessary by dividing the value of the securities held
by a Fund, plus any cash and other assets, less all liabilities, by the number
of shares outstanding. If there is no available market value, securities will be
valued at their fair value as determined in good faith pursuant to procedures
adopted by the Board of Trustees. The NYSE currently observes the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The investments in Cash Management Fund, when purchased at a discount, are
valued at amortized cost and when purchased at face value, are valued at cost
plus accrued interest.
DIVIDENDS AND OTHER DISTRIBUTIONS
For the purposes of determining dividends, the net investment income of
each Fund, other than Cash Management Fund, consists of interest and dividends,
earned discount and other income earned on portfolio securities less expenses.
Net investment income of Cash Management Fund consists of (i) accrued interest,
plus or minus (ii) all realized and unrealized gains and losses on the Fund's
securities, less (iii) accrued expenses. Dividends from net investment income
are generally declared and paid annually by each Fund, other than Cash
Management Fund. Dividends from net investment income are generally declared
daily and paid monthly by Cash Management Fund. Distributions of a Fund's net
capital gain (the excess of net long-term capital gain over net short-
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term capital loss), if any, after deducting any available capital loss
carryovers, are declared and paid annually by each Fund, other than Cash
Management Fund, which does not anticipate realizing any such gain.
International Securities Fund and High Yield Fund also distribute any net
realized gains from foreign currency transactions with their annual
distribution. All dividends and other distributions are paid in shares of the
distributing Fund at net asset value (without sales charge), generally
determined as of the close of business on the business day immediately following
the record date of such distribution.
TAXES
Each Fund has qualified, or intends to qualify, for treatment as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended ("Code"), so that it will be relieved of Federal income
tax on that part of its investment company taxable income (consisting generally
of net investment income, net short-term capital gain and, for International
Securities Fund and High Yield Fund, net gains from certain foreign currency
transactions) and net capital gain that is distributed to its shareholders.
Shares of the Funds are offered only to the Separate Accounts, which are
insurance company separate accounts that fund variable annuity and variable life
insurance contracts. Under the Code, no tax is imposed on an insurance company
with respect to income of a qualifying separate account that is properly
allocable to the value of eligible variable annuity (or variable life insurance)
contracts. Please refer to "Federal Income Tax Status" in the Prospectuses of
Separate Accounts B and C for information as to the tax status of those accounts
and the holders of the Contracts or Policies.
Each Fund intends to comply with the diversification requirements imposed
by section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements imposed
on the Fund by the Investment Company Act of 1940, as amended, and Subchapter M
of the Code, place certain limitations on the assets of Separate Accounts B and
C -- and of a Fund, because section 817(h) and those regulations treat the
assets of a Fund as assets of Separate Accounts B and C -- that may be invested
in securities of a single issuer. Specifically, the regulations provide that,
except as permitted by the "safe harbor" described below, as of the end of each
calendar quarter (or within 30 days thereafter) no more than 55% of a Fund's
total assets may be represented by any one investment, no more than 70% by any
two investments, no more than 80% by any three investments and no more than 90%
by any four investments. For this purpose, all securities of the same issuer are
considered a single investment, and while each U.S. Government agency and
instrumentality is considered a separate issuer, a particular foreign government
and its agencies, instrumentalities and political subdivisions are considered
the same issuer. Section 817(h) provides, as a safe harbor, that a separate
account will be treated as being adequately diversified if the diversification
requirements under Subchapter M are satisfied and no more than 55% of the value
of the account's total assets are cash and cash items, government securities and
securities of other RICs. Failure of a Fund to satisfy the section 817(h)
requirements would result in taxation of First Investors Life and treatment of
the Contract holders and Policyowners other than as described in the
Prospectuses of Separate Accounts B and C.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting each Fund and its shareholders; see the SAI
for a more detailed discussion. Shareholders are urged to consult their tax
advisers.
33
<PAGE>
GENERAL INFORMATION
Organization. Life Series Fund is a Massachusetts business trust organized
on June 12, 1985. The Board of Trustees of Life Series Fund has authority to
issue an unlimited number of shares of beneficial interest of separate series,
no par value, of Life Series Fund. The shares of beneficial interest of Life
Series Fund are presently divided into eleven separate and distinct series. Life
Series Fund does not hold annual shareholder meetings. If requested to do so by
the holders of at least 10% of Life Series Fund's outstanding shares, the Board
of Trustees will call a special meeting of shareholders for any purpose,
including the removal of Trustees.
Custodian. The Bank of New York, 48 Wall Street, New York, NY 10286, is
custodian of the securities and cash of each Fund, except the International
Securities Fund. Brown Brothers Harriman & Co., 40 Water Street, Boston, MA
02109, is custodian of the securities and cash of the International Securities
Fund and employs foreign sub-custodians to provide custody of the Fund's foreign
assets.
Transfer Agent. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as transfer agent
for each Fund and as redemption agent for regular redemptions.
Performance. Performance information is contained in Life Series Fund's
Annual Report which may be obtained without charge by contacting First Investors
Life at 212-858-8200.
Shareholder Inquiries. Shareholder inquiries can be made by calling First
Investors Life at 212-858-8200.
Annual and Semi-Annual Reports to Shareholders. It is Life Series Fund's
practice to mail only one copy of its annual and semi-annual reports to any
address at which more than one shareholder with the same last name has indicated
that mail is to be delivered. Additional copies of the reports will be mailed if
requested in writing or by telephone by any shareholder. Life Series Fund will
ensure that an additional copy of such reports are sent to any shareholder who
subsequently changes his or her mailing address.
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S RATINGS GROUP
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
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1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C Debt rated "BB," "B," "CCC," "CC" and "C" is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal. "BB" indicates the least degree of speculation and "C" the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
CCC Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
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<PAGE>
CC The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat greater than the Aaa securities.
A Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
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<PAGE>
B Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated "C" are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
37
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Financial Highlights......................................................... 4
Investment Objectives and Policies........................................... 11
How to Buy Shares............................................................ 30
How to Redeem Shares......................................................... 30
Management................................................................... 30
Determination of Net Asset Value............................................. 32
Dividends and Other Distributions............................................ 32
Taxes........................................................................ 33
General Information.......................................................... 34
Appendix A................................................................... 34
Investment Adviser Custodians
First Investors Management The Bank of New York
Company, Inc. 48 Wall Street
95 Wall Street New York, NY 10286
New York, NY 10005
Brown Brothers
Subadviser Harriman & Co.
Wellington Management 40 Water Street
Company, LLP Boston, MA 02109
75 State Street
Boston, MA 02109 Auditors
Tait, Weller & Baker
Transfer Agent Two Penn Center Plaza
Administrative Data Philadelphia, PA 19102-1707
Management Corp.
581 Main Street Legal Counsel
Woodbridge, NJ 07095-1198 Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
This Prospectus is intended to constitute an offer by Life Series Fund only of
the securities of which it is the issuer and is not intended to constitute an
offer by any Fund of the securities of any other Fund whose securities are also
offered by this Prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this Prospectus relating to any
other Fund. No dealer, salesman or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representation must not be relied upon as having been
authorized by Life Series Fund, First Investors Corporation, or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the shares offered hereby in any state to any person
to whom it is unlawful to make such offer in such state.
<PAGE>
First Investors
Life Series Fund
- ---------------
Blue Chip Fund
Cash Management Fund
Discovery Fund
Government Fund
Growth Yield
International Securities Fund
Investment Grade Fund
Target Maturity 2007 Fund
Target Maturity 2010 Fund
Utilities Income Fund
Prospectus
- ----------
October 28, 1996
First Investors Logo
Logo is described as follows: the arabic numeral one separated into seven
vertical segments followed by the words "First Investors."
Verticle line from top to bottom in center of page about 1/2 inch in thickness
The following language appears to the left of the above language in the printed
piece:
The words "BLUK RATE U.S. POSTAGE PAID PERMIT NO. 7379" in a box to the right of
a circle containing the words "MAILED FROM ZIP CODE 11201" appears on the
righthand side.
The following language appears on the lefthand side.
FIRST INVESTORS LIFE SERIES FUND
95 WALL STREET
NEW YORK, NY 10005
First Investors Logo (as described above)
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK
<PAGE>
As part of this Prospectus we attach the Prospectus of First Investors Life
Level Premium Variable Life Insurance (Seperate Account B) (File No. 2-98410)
which was filed with the SEC on October 22, 1996 as part of a 497 filing
(Accession No. 0000891554-96-00714)
<PAGE>
FIRST INVESTORS LIFE SERIES FUND
95 Wall Street (212) 858-8200
New York, New York 10005
Statement of Additional Information
dated October 28, 1996
This is a Statement of Additional Information for First Investors Life
Series Fund ("Life Series Fund") an open-end, diversified management investment
company consisting of eleven separate investment portfolios (each, a "Fund," and
collectively, the "Funds"). The objectives of each of the Funds is set forth in
the Prospectus. There can be no assurance that any Fund will achieve its
investment objective. Investments in the Funds are made through purchases of the
Level Premium Variable Life Insurance Policies ("Policies") or the Individual
Variable Annuity Contracts ("Contracts") offered by First Investors Life
Insurance Company ("First Investors Life"). Policy premiums net of certain
expenses are paid into a unit investment trust, First Investors Life Insurance
Company Separate Account B ("Separate Account B"). Purchase payments for the
Contracts net of certain expenses also are paid into a unit investment trust,
First Investors Life Variable Annuity Fund C ("Separate Account C"). Separate
Account B and Separate Account C pool these proceeds to purchase shares of the
Fund designated by purchasers of the Policies or Contracts. Target Maturity 2007
Fund and Target Maturity 2010 Fund are only offered to Contractowners of
Separate Account C.
This Statement of Additional Information is not a prospectus. It should be
read in connection with Life Series Fund's Prospectus dated October 28, 1996,
which may be obtained free of cost from the Funds at the address or telephone
number noted above.
TABLE OF CONTENTS
Page
Investment Policies........................................................ 2
Hedging and Option Income Strategies....................................... 6
Investment Restrictions.................................................... 15
Trustees and Officers...................................................... 16
Management................................................................. 18
Determination of Net Asset Value........................................... 20
Allocation of Portfolio Brokerage.......................................... 21
Taxes...................................................................... 22
General Information........................................................ 24
Appendix A................................................................. 25
Appendix B................................................................. 25
Financial Statements....................................................... 27
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INVESTMENT POLICIES
Certificates of Accrual on U.S. Treasury Securities. Government Fund
may purchase certificates, not issued by the U.S. Treasury, which evidence
ownership of future interest, principal or interest and principal payments on
obligations issued by the U.S. Treasury. The actual U.S. Treasury securities
will be held by a custodian on behalf of the certificate holder. These
certificates are purchased with original issue discount and are subject to
greater fluctuations in market value, based upon changes in market interest
rates, than income-producing securities.
Commercial Paper. Commercial paper is a promissory note issued by a
corporation to finance short-term credit needs which may either be unsecured or
backed by a letter of credit. Commercial paper includes notes, drafts or similar
instruments payable on demand or having a maturity at the time of issuance not
exceeding nine months, exclusive of days of grace or any renewal thereof. See
Appendix B for a description of commercial paper ratings.
Convertible Securities. Each Fund, other than Cash Management Fund, Target
Maturity 2007 Fund and Target Maturity 2010 Fund, may invest in convertible
securities. While no securities investment is without some risk, investments in
convertible securities generally entail less risk than the issuer's common
stock, although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a fixed income security. The Funds investment adviser, First Investors
Management Company, Inc. ("Adviser" or "FIMCO"), or, for Growth Fund and
International Securities Fund, their subadviser, Wellington Management Company,
LLP ("Subadviser" or "WMC") will decide to invest based upon a fundamental
analysis of the long-term attractiveness of the issuer and the underlying common
stock, the evaluation of the relative attractiveness of the current price of the
underlying common stock and the judgment of the value of the convertible
security relative to the common stock at current prices.
Loans of Portfolio Securities. Each Fund may loan securities to qualified
broker-dealers or other institutional investors provided: the borrower pledges
to a Fund and agrees to maintain at all times with that Fund collateral equal to
not less than 100% of the value of the securities loaned (plus accrued interest
or dividend, if any); the loan is terminable at will by a Fund; a Fund pays only
reasonable custodian fees in connection with the loan; and the Adviser or the
Subadviser monitors the creditworthiness of the borrower throughout the life of
the loan. Such loans may be terminated by a Fund at any time and a Fund may vote
the proxies if a material event affecting the investment is to occur. The market
risk applicable to any security loaned remains a risk of a Fund. The borrower
must add to the collateral whenever the market value of the securities rises
above the level of such collateral. A Fund could incur a loss if the borrower
should fail financially at a time when the value of the loaned securities is
greater than the collateral. Each Fund may make loans, together with illiquid
securities, not in excess of 10% of its total assets.
Mortgage-Backed Securities. Government Fund may invest in mortgage-backed
securities, including those representing an undivided ownership interest in a
pool of mortgage loans. Each of the certificates described below is
characterized by monthly payments to the security holder, reflecting the monthly
payments made by the mortgagees of the underlying mortgage loans. The payments
to the security holders (such as the Fund), like the payments on the underlying
loans, represent both principal and interest. Although the underlying mortgage
loans are for specified periods of time, such as twenty to thirty years, the
borrowers can, and typically do, repay them sooner. Thus, the security holders
frequently receive prepayments of principal, in addition to the principal which
is part of the regular monthly payments. A borrower is more likely to prepay a
mortgage which bears a relatively high rate of interest. Thus, in times of
declining interest rates, some higher yielding mortgages might be repaid
resulting in larger cash payments to the Fund, and the Fund will be forced to
accept lower interest rates when that cash is used to purchase additional
securities.
Interest rate fluctuations may significantly alter the average maturity of
mortgage-backed securities, due to the level of refinancing by homeowners. When
interest rates rise, prepayments often
2
<PAGE>
drop, which should increase the average maturity of the mortgage-backed
security. Conversely, when interest rates fall, prepayments often rise, which
should decrease the average maturity of the mortgage-backed security.
GNMA Certificates. Government National Mortgage Association ("GNMA")
certificates ("GNMA Certificates") are mortgage-backed securities, which
evidence an undivided interest in a pool of mortgage loans. GNMA Certificates
differ from bonds in that principal is paid back monthly by the borrower over
the term of the loan rather than returned in a lump sum at maturity. GNMA
Certificates that the Fund purchases are the "modified pass-through" type.
"Modified pass-through" GNMA Certificates entitle the holder to receive a share
of all interest and principal payments paid and owed on the mortgage pool net of
fees paid to the "issuer" and GNMA, regardless of whether or not the mortgagor
actually makes the payment.
GNMA Guarantee. The National Housing Act authorizes GNMA to guarantee the
timely payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or the Farmers'
Home Administration ("FMHA"), or guaranteed by the Department of Veteran Affairs
("VA"). The GNMA guarantee is backed by the full faith and credit of the U.S.
Government. GNMA also is empowered to borrow without limitation from the U.S.
Treasury if necessary to make any payments required under its guarantee.
Life of GNMA Certificates. The average life of a GNMA Certificate is likely
to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of principal
investment long before maturity of the mortgages in the pool. The Fund normally
will not distribute principal payments (whether regular or prepaid) to its
shareholders. Rather, it will invest such payments in additional mortgage-backed
securities of the types described above. Interest received by the Fund will,
however, be distributed to shareholders. Foreclosures impose no risk to
principal investment because of the GNMA guarantee. As prepayment rates of the
individual mortgage pools vary widely, it is not possible to predict accurately
the average life of a particular issue of GNMA Certificates.
Yield Characteristics of GNMA Certificates. The coupon rate of interest on
GNMA Certificates is lower than the interest rate paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates by the amount of the fees paid
to GNMA and the issuer. The coupon rate by itself, however, does not indicate
the yield which will be earned on GNMA Certificates. First, Certificates may
trade in the secondary market at a premium or discount. Second, interest is
earned monthly, rather than semi-annually as with traditional bonds; monthly
compounding raises the effective yield earned. Finally, the actual yield of a
GNMA Certificate is influenced by the prepayment experience of the mortgage pool
underlying it. For example, if the higher-yielding mortgages from the pool are
prepaid, the yield on the remaining pool will be reduced.
FHLMC Securities. The Federal Home Loan Mortgage Corporation ("FHLMC")
issues two types of mortgage pass-through securities, mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). PCs resemble
GNMA Certificates in that each PC represents a pro rata share of all interest
and principal payments made and owed on the underlying pool.
FNMA Securities. The Federal National Mortgage Association ("FNMA") issues
guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble GNMA Certificates in that each FNMA Certificate represents
a pro rata share of all interest and principal payments made and owed on the
underlying pool. FNMA guarantees timely payment of interest on FNMA Certificates
and the full return of principal.
3
<PAGE>
Risk of foreclosure of the underlying mortgages is greater with FHLMC and
FNMA securities because, unlike GNMA Certificates, FHLMC and FNMA securities are
not guaranteed by the full faith and credit of the U.S. Government.
Participation Interests. Participation interests which may be held by
Government Fund are pro rata interests in securities held either by banks which
are members of the Federal Reserve System or securities dealers who are members
of a national securities exchange or are market makers in government securities,
which are represented by an agreement in writing between the Fund and the entity
in whose name the security is issued, rather than possession by the Fund. The
Fund will purchase participation interests only in securities otherwise
permitted to be purchased by the Fund, and only when they are evidenced by
deposit, safekeeping receipts, or book-entry transfer, indicating the creation
of a security interest in favor of the Fund in the underlying security. However,
the issuer of the participation interests to the Fund will agree in writing,
among other things: to promptly remit all payments of principal, interest and
premium, if any, to the Fund once received by the issuer; to repurchase the
participation interest upon seven days' notice; and to otherwise service the
investment physically held by the issuer, a portion of which has been sold to
the Fund.
Repurchase Agreements. A repurchase agreement essentially is a short-term
collateralized loan. The lender (a Fund) agrees to purchase a security from a
borrower (typically a broker-dealer) at a specified price. The borrower
simultaneously agrees to repurchase that same security at a higher price on a
future date (which typically is the next business day). The difference between
the purchase price and the repurchase price effectively constitutes the payment
of interest. In a standard repurchase agreement, the securities which serve as
collateral are transferred to a Fund's custodian bank. In a "tri-party"
repurchase agreement, these securities would be held by a different bank for the
benefit of the Fund as buyer and the broker-dealer as seller. In a "quad-party"
repurchase agreement, the Fund's custodian bank also is made a party to the
agreement. Each Fund may enter into repurchase agreements with banks which are
members of the Federal Reserve System or securities dealers who are members of a
national securities exchange or are market makers in government securities.
Government Fund may enter into repurchase agreements only where the debt
instrument subject to the agreement is a U.S. Government Obligation (as defined
in the Prospectus). The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will a Fund invest in
repurchase agreements with more than one year in time to maturity. The
securities which are subject to repurchase agreements, however, may have
maturity dates in excess of one year from the effective date of the repurchase
agreement. Each Fund will always receive, as collateral, securities whose market
value, including accrued interest, which will at all times be at least equal to
100% of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian. If the seller defaults, a
Fund might incur a loss if the value of the collateral securing the repurchase
agreement declines, and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy or similar proceedings
are commenced with respect to the seller of the security, realization upon the
collateral by a Fund may be delayed or limited.
Restricted and Illiquid Securities. No Fund, other than Cash Management
Fund, will purchase or otherwise acquire any security if, as a result, more than
15% of its net assets (taken at current value) would be invested in securities
that are illiquid by virtue of the absence of a readily available market or
legal or contractual restrictions on resale. Cash Management Fund may invest up
to 10% of its net assets in illiquid securities. This policy includes foreign
issuers' unlisted securities with a limited trading market and repurchase
agreements maturing in more than seven days. This policy does not include
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, as amended ("1933 Act"), which Life Series Fund's Board
of Trustees or the Adviser or Subadviser has determined under Board-approved
guidelines are liquid.
Restricted securities which are illiquid may be sold only in privately
negotiated transactions or in public offerings with respect to which a
registration statement is in effect under the 1933 Act. Such securities include
those that are subject to restrictions contained in the securities laws of other
4
<PAGE>
countries. Securities that are freely marketable in the country where they are
principally traded, but would not be freely marketable in the United States,
will not be subject to each Fund's limitation on illiquid securities. Where
registration is required a Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time a Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, a Fund might obtain a less favorable price
than prevailed when it decided to sell.
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are either themselves exempt from registration or sold in
transactions not requiring registration. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by a Fund, however, could affect adversely the marketability of
such portfolio securities and the Fund might be unable to dispose of such
securities promptly or at reasonable prices.
Stripped U.S. Treasury Securities. Government Fund, Target Maturity 2007
Fund and Target Maturity 2010 Fund may invest in separated or divided U.S.
Treasury securities. These instruments represent a single interest, or
principal, payment on a U.S. Treasury bond which has been separated from all the
other interest payments as well as the bond itself. When a Fund purchases such
an instrument, it purchases the right to receive a single payment of a set sum
at a known date in the future. The interest rate on such an instrument is
determined by the price a Fund pays for the instrument when it purchases the
instrument at a discount under what the instrument entitles a Fund to receive
when the instrument matures. The amount of the discount a Fund will receive will
depend upon the length of time to maturity of the separated U.S. Treasury
security and prevailing market interest rates when the separated U.S. Treasury
security is purchased. Separated U.S. Treasury securities can be considered a
zero coupon investment because no payment is made to a Fund until maturity. The
market values of these securities are much more susceptible to change in market
interest rates than income-producing securities. These securities are purchased
with original issue discount and such discount is includable as gross income to
a Fund shareholder over the life of the security.
Warrants. International Securities Fund may purchase warrants, which are
instruments that permit the Fund to acquire, by subscription, the capital stock
of a corporation at a set price, regardless of the market price for such stock.
Warrants may be either perpetual or of limited duration. There is a greater risk
that warrants might drop in value at a faster rate than the underlying stock.
The Fund may invest up to 15% of its total assets in warrants.
When-Issued Securities. Growth Fund, High Yield Fund, International
Securities Fund, Investment Grade Fund, Target Maturity 2007 Fund, Target
Maturity 2010 Fund and Utilities Income Fund may each invest up to 5% of their
net assets in securities issued on a when- issued or delayed delivery basis. A
Fund generally would not pay for such securities or start earning interest on
them until they are issued or received. However, when a Fund purchases debt
obligations on a when-issued basis, it assumes the risks of ownership, including
the risk of price fluctuation, at
5
<PAGE>
the time of purchase, not at the time of receipt. Failure of the issuer to
deliver a security purchased by a Fund on a when-issued basis may result in such
Fund incurring a loss or missing an opportunity to make an alternative
investment. When a Fund enters into a commitment to purchase securities on a
when-issued basis, it establishes a separate account with its custodian
consisting of cash or liquid high-grade debt securities equal to the amount of
the Fund's commitment, which are valued at their fair market value. If on any
day the market value of this segregated account falls below the value of a
Fund's commitment, the Fund will be required to deposit additional cash or
qualified securities into the account until equal to the value of the Fund's
commitment. When the securities to be purchased are issued, a Fund will pay for
the securities from available cash, the sale of securities in the segregated
account, sales of other securities and, if necessary, from sale of the
when-issued securities themselves although this is not ordinarily expected.
Securities purchased on a when-issued basis are subject to the risk that yields
available in the market, when delivery takes place, may be higher than the rate
to be received on the securities a Fund is committed to purchase. Sale of
securities in the segregated account or other securities owned by a Fund and
when-issued securities may cause the realization of a capital gain or loss.
Portfolio Turnover. Although each Fund generally will not invest for
short-term trading purposes, portfolio securities may be sold from time to time
without regard to the length of time they have been held when, in the opinion of
the Adviser or the Subadviser investment considerations warrant such action.
Portfolio turnover rate is calculated by dividing (1) the lesser of purchases or
sales of portfolio securities for the fiscal year by (2) the monthly average of
the value of portfolio securities owned during the fiscal year. A 100% turnover
rate would occur if all the securities in a Fund's portfolio, with the exception
of securities whose maturities at the time of acquisition were one year or less,
were sold and either repurchased or replaced within one year. A high rate of
portfolio turnover generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Portfolio Transactions." The rate
of portfolio turnover for the fiscal year ended December 31, 1994 for the Blue
Chip Fund, Discovery Fund, Growth Fund, High Yield Fund, International
Securities Fund, Investment Grade Fund and Utilities Income Fund was 82%, 53%,
40%, 50%, 36%, 15% and 31%, respectively. The rate of portfolio turnover for the
fiscal year ended December 31, 1995 for the Blue Chip Fund, Discovery Fund,
Growth Fund, High Yield Fund, International Securities Fund, Investment Grade
Fund, Target Maturity 2007 Fund and Utilities Income Fund was 26%, 78%, 64%,
57%, 45%, 26%, 28% and 17%, respectively. See the Prospectus for the portfolio
turnover rate for the Government Fund and the expected portfolio turnover rate
for Target Maturity 2010 Fund.
HEDGING AND OPTION INCOME STRATEGIES
The Subadviser may engage in certain options and futures strategies to
hedge International Securities Fund's portfolio and in other circumstances
permitted by the Commodities Futures Trading Commission ("CFTC") and may engage
in certain options strategies to enhance income. The instruments described below
are sometimes referred to collectively as "Hedging Instruments." Certain special
characteristics of and risks associated with using Hedging Instruments are
discussed below. In addition to the non-fundamental investment guidelines
(described below) adopted by Life Series Fund's Board of Trustees to govern the
Fund's investments in Hedging Instruments, use of these instruments is subject
to the applicable regulations of the Securities and Exchange Commission ("SEC"),
the several options and futures exchanges upon which options and futures
contracts are traded, the CFTC and various state regulatory authorities. In
addition, the Fund's ability to use Hedging Instruments will be limited by tax
considerations. See "Taxes."
International Securities Fund may buy and sell put and call options on
stock indices, domestic or foreign securities and foreign currencies that are
traded on national securities exchanges or in the over-the-counter ("OTC")
market to enhance income or to hedge the Fund's portfolio. International
Securities Fund also may write put and covered call options to generate
additional income through the receipt of premiums, purchase put options in an
effort to protect the value of a security that it owns against a decline in
market value and purchase call options in an effort to protect
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against an increase in the price of securities (or currencies) it intends to
purchase. International Securities Fund also may purchase put and call options
to offset previously written put and call options of the same series.
International Securities Fund also may write put and call options to offset
previously purchased put and call options of the same series. Other than to
offset closing transactions, International Securities Fund will write only
covered call options, including options on futures contracts.
International Securities Fund may buy and sell financial futures contracts
and options thereon that are traded on a commodities exchange or board of trade
for hedging purposes. These futures contracts and related options may be on
stock indices, financial indices, debt securities or foreign currencies.
International Securities Fund also may enter into forward currency contracts.
Participation in the options or futures markets involves investment risks
and transaction costs to which International Securities Fund would not be
subject absent the use of these strategies. If the Subadviser's prediction of
movements in the direction of the securities and interest rate markets are
inaccurate, the adverse consequences to the Fund may leave the Fund in a worse
position than if such strategies were not used. The Fund might not employ any of
the strategies described below, and there can be no assurance that any strategy
will succeed. The use of these strategies involve certain special risks,
including (1) dependence on the Subadviser's ability to predict correctly
movements in the direction of interest rates and securities prices, (2)
imperfect correlation between the price of options, futures contracts and
options thereon and movements in the prices of the securities being hedged, (3)
the fact that skills needed to use these strategies are different from those
needed to select portfolio securities, (4) the possible absence of a liquid
secondary market for any particular instrument at any time, and (5) the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences.
Cover for Hedging and Option Income Strategies. The Fund will not use
leverage in its hedging and option income strategies. In the case of each
transaction entered into as a hedge, the Fund will hold securities, currencies
or other options or futures positions whose values are expected to offset
("cover") its obligations hereunder. The Fund will not enter into a hedging or
option income strategy that exposes the Fund to an obligation to another party
unless it owns either (1) an offsetting ("covered") position in securities,
currencies or other options or futures contracts or (2) cash, receivables and
short-term debt securities with a value sufficient at all times to cover its
potential obligations. The Fund will comply with guidelines established by the
SEC with respect to coverage of hedging and option income strategies by mutual
funds and, if required, will set aside cash and/or liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed amount.
Securities, currencies or other options or futures positions used for cover and
securities held in a segregated account cannot be sold or closed out while the
hedging or option income strategy is outstanding unless they are replaced with
similar assets. As a result, there is a possibility that the use of cover or
segregation involving a large percentage of the Fund's assets could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
Options Strategies. International Securities Fund may purchase call options
on securities that the Subadviser intends to include in the Fund's portfolio in
order to fix the cost of a future purchase. Call options also may be used as a
means of participating in an anticipated price increase of a security. In the
event of a decline in the price of the underlying security, use of this strategy
would serve to limit the Fund's potential loss on the option strategy to the
option premium paid; conversely, if the market price of the underlying security
increases above the exercise price and the Fund either sells or exercises the
option, any profit eventually realized will be reduced by the premium. The Fund
may purchase put options in order to hedge against a decline in the market value
of securities held in its portfolio. The put option enables the Fund to sell the
underlying security at the predetermined exercise price; thus the potential for
loss to the Fund below the exercise price is limited to the option premium paid.
If the market price of the underlying security is higher than the exercise price
of the put option, any profit the Fund realizes on the sale of the security will
be reduced by the premium paid for the put option less any amount for which the
put option may be sold.
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International Securities Fund may write covered call options on securities
to increase income in the form of premiums received from the purchasers of the
options. Because it can be expected that a call option will be exercised if the
market value of the underlying security increases to a level greater than the
exercise price, the Fund will write covered call options on securities generally
when the Subadviser believes that the premium received by the Fund, plus
anticipated appreciation in the market price of the underlying security up to
the exercise price of the option, will be greater than the total appreciation in
the price of the security. The strategy may be used to provide limited
protection against a decrease in the market price of the security in an amount
equal to the premium received for writing the call option less any transaction
costs. Thus, if the market price of the underlying security held by the Fund
declines, the amount of such decline will be offset wholly or in part by the
amount of the premium received by the Fund. If, however, there is an increase in
the market price of the underlying security and the option is exercised, the
Fund will be obligated to sell the security at less than its market value. The
Fund gives up the ability to sell the portfolio securities used to cover the
call option while the call option is outstanding. Such securities may also be
considered illiquid in the case of OTC options written by the Fund, and
therefore subject to the Fund's limitation on investments in illiquid
securities. See "Restricted and Illiquid Securities." In addition, the Fund
could lose the ability to participate in an increase in the value of such
securities above the exercise price of the call option because such an increase
would likely be offset by an increase in the cost of closing out the call option
(or could be negated if the buyer chose to exercise the call option at an
exercise price below the securities' current market value).
International Securities Fund may purchase put and call options and write
covered call options on stock indices in much the same manner as the more
traditional equity and debt options discussed above, except that stock index
options may serve as a hedge against overall fluctuations in the securities
markets (or a market sector) rather than anticipated increases or decreases in
the value of a particular security. A stock index assigns relative values to the
stock included in the index and fluctuates with changes in such values. Stock
index options operate in the same way as the more traditional equity options,
except that settlements of stock index options are effected with cash payments
and do not involve delivery of securities. Thus, upon settlement of a stock
index option, the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the closing price of the
stock index. The effectiveness of hedging techniques using stock index options
will depend on the extent to which price movements in the stock index selected
correlate with price movements of the securities in which the Fund invests.
International Securities Fund may write put options. A put option gives the
purchaser of the option the right to sell, and the writer (seller) the
obligation to buy, the underlying security at the exercise price during the
option period. So long as the obligation of the writer continues, the writer may
be assigned an exercise notice by the broker-dealer through which such option
was sold, requiring it to make payment of the exercise price against delivery of
the underlying security. The operation of put options in other respects,
including their related risks and rewards, is substantially identical to that of
call options. The Fund may write covered put options in circumstances when the
Subadviser believes that the market price of the securities will not decline
below the exercise price less the premiums received. If the put option is not
exercised, the Fund will realize income in the amount of the premium received.
This technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security would decline below the exercise price less the premiums
received, in which case the Fund would expect to suffer a loss.
Currently, many options on equity securities and options on currencies are
exchange-traded, whereas options on debt securities are primarily traded on the
OTC market. Although many options on currencies are exchange-traded, the
majority of such options are traded on the OTC market. Exchange-traded options
in the U.S. are issued by a clearing organization affiliated with the exchange
on which the option is listed which, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and the opposite party with no clearing organization guarantee.
Thus, when the Fund purchases an OTC option, it relies on the dealer
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from which it has purchased the OTC option to make or take delivery of the
securities underlying the option. Failure by the dealer to do so would result in
the loss of the premium paid by the Fund as well as the loss of the expected
benefit of the transaction.
Foreign Currency Options and Related Risks. International Securities Fund
may take positions in options on foreign currencies in order to hedge against
the risk of foreign exchange rate fluctuations on foreign securities the Fund
holds in its portfolio or intends to purchase. For example, if the Fund enters
into a contract to purchase securities denominated in a foreign currency, it
could effectively fix the maximum U.S. dollar cost of the securities by
purchasing call options on that foreign currency. Similarly, if the Fund held
securities denominated in a foreign currency, and anticipated a decline in the
value of that currency against the U.S. dollar, the Fund could hedge against
such a decline by purchasing a put option on the currency involved. The Fund's
ability to establish and close out positions in such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not purchase or
write such options unless and until, in the Subadviser's opinion, the market for
them has developed sufficiently to ensure that the risks in connection with such
options are not greater than the risks in connection with the underlying
currency, there can be no assurance that a liquid secondary market will exist
for a particular option at any specific time. In addition, options on foreign
currencies are affected by all of those factors that influence foreign exchange
rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and may have no relationship to the investment merits of a foreign security.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
where rates may be less favorable. The interbank market in foreign currencies is
a global, around-the-clock market. To the extent that the U.S. options markets
are closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that cannot be reflected in the options markets until they reopen.
Options Guidelines. In view of the risks involved in using options, Life
Series Fund's Board of Trustees has adopted non-fundamental investment
guidelines to govern the Fund's use of options that may be modified by the Board
without shareholder vote: (1) options will be purchased or written only when the
Subadviser believes that there exists a liquid secondary market in such options;
and (2) the Fund may not purchase a put or call option if the value of the
option's premium, when aggregated with the premiums on all other options held by
the Fund, exceeds 5% of the Fund's total assets. This policy does not limit risk
to 5% of the Fund's assets.
Special Characteristics and Risks of Options Trading. International
Securities Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. If the Fund wishes to terminate
its obligation to sell securities or currencies under a call option it has
written, the Fund may purchase a call option of the same series (that is, a call
option identical in its terms to the call option previously written); this is
known as a closing purchase transaction. Conversely, in order to terminate its
right to purchase or sell specified securities or currencies under a call or put
option it has purchased, the Fund may write an option of the same series, as the
option held; this is known as a closing sale transaction. Closing transactions
essentially permit the Fund to realize profits or limit losses on its options
positions prior to the exercise or expiration of the option.
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Whether a profit or loss is realized from a closing transaction depends on the
price movement of the underlying index, security or currency and the market
value of the option.
The value of an option position will reflect, among other things, the
current market price of the underlying security, stock index or currency, the
time remaining until expiration, the relationship of the exercise price to the
market price, the historical price volatility of the underlying security, stock
index or currency and general market conditions. For this reason, the successful
use of options depends upon the Subadviser's ability to forecast the direction
of price fluctuations in the underlying securities or currency markets or, in
the case of stock index options, fluctuations in the market sector represented
by the index selected.
Options normally have expiration dates of up to nine months. Unless an
option purchased by the Fund is exercised or unless a closing transaction is
effected with respect to that position, a loss will be realized in the amount of
the premium paid and any transaction costs.
A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. The ability to
establish and close out positions on the exchanges is subject to the maintenance
of a liquid secondary market. Although the Fund intends to purchase or write
only those exchange-traded options for which there appears to be a liquid
secondary market, there is no assurance that a liquid secondary market will
exist for any particular option at any particular time. Closing transactions may
be effected with respect to options traded in the OTC markets (currently the
primary markets for options on debt securities) only by negotiating directly
with the other party to the option contract or in a secondary market for the
option if such market exists. Although the Fund will enter into OTC options only
with dealers that agree to enter into, and that are expected to be capable of
entering into, closing transactions with the Fund, there is no assurance that
the Fund will be able to liquidate an OTC option at a favorable price at any
time prior to expiration. In the event of insolvency of the opposite party, the
Fund may be unable to liquidate an OTC option. Accordingly, it may not be
possible to effect closing transactions with respect to certain options, with
the result that the Fund would have to exercise those options that it has
purchased in order to realize any profit. With respect to options written by the
Fund, the inability to enter into a closing transaction may result in material
losses to the Fund. For example, because the Fund must maintain a covered
position with respect to any call option it writes, the Fund may not sell the
underlying assets used to cover an option during the period it is obligated
under the option. This requirement may impair the Fund's ability to sell a
portfolio security or make an investment at a time when such a sale or
investment might be advantageous.
Stock index options are settled exclusively in cash. If the Fund purchases
an option on a stock index, the option is settled based on the closing value of
the index on the exercise date. Thus, a holder of a stock index option who
exercises it before the closing index value for that day is available runs the
risk that the level of the underlying index may subsequently change. For
example, in the case of a call option, if such a change causes the closing index
value to fall below the exercise price of the option on the index, the
exercising holder will be required to pay the difference between the closing
index value and the exercise price of the option.
The Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs; however, the Fund also
may save on commissions by using options as a hedge rather than buying or
selling individual securities in anticipation or as a result of market
movements.
Futures Strategies. International Securities Fund may engage in futures
strategies to attempt to reduce the overall investment risk that would normally
be expected to be associated with ownership of the securities in which it
invests. The Fund may sell foreign currency futures contracts to hedge against
possible variations in the exchange rate of the foreign currency in relation to
the U.S. dollar. In addition, the Fund may sell foreign currency futures
contracts when the Subadviser anticipates a general weakening of foreign
currency exchange rates that could adversely affect the
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market value of the Fund's foreign securities holdings. In this case, the sale
of futures contracts on the underlying currency may reduce the risk to the Fund
of a reduction in market value caused by foreign currency variations and, by so
doing, provide an alternative to the liquidation of securities positions and
resulting transaction costs. When the Subadviser anticipates a significant
foreign exchange rate increase while intending to invest in a security
denominated in that currency, the Fund may purchase a foreign currency futures
contract to hedge against that increase pending completion of the anticipated
transaction. Such a purchase would serve as a temporary measure to protect the
Fund against any rise in the foreign exchange rate that may add additional costs
to acquiring the foreign security position. The Fund also may purchase call or
put options on foreign currency futures contracts to obtain a fixed foreign
exchange rate at limited risk. The Fund may purchase a call option on a foreign
currency futures contract to hedge against a rise in the foreign exchange rate
while intending to invest in a security denominated in that currency. The Fund
may purchase put options or write call options on foreign currency futures
contracts as a partial hedge against a decline in the foreign exchange rates or
the value of its foreign portfolio securities.
International Securities Fund may sell stock index futures contracts in
anticipation of a general market or market sector decline that could adversely
affect the market value of the Fund's portfolio. To the extent that a portion of
the Fund's portfolio correlates with a given stock index, the sale of futures
contracts on that index could reduce the risks associated with a market decline
and thus provide an alternative to the liquidation of securities positions. The
Fund may purchase a stock index futures contract if a significant market or
market sector advance is anticipated. Such a purchase would serve as a temporary
substitute for the purchase of individual stocks, which stocks may then be
purchased in an orderly fashion. This strategy may minimize the effect of all or
part of an increase in the market price of securities that the Fund intends to
purchase. A rise in the price of the securities should be partially or wholly
offset by gains in the futures position.
International Securities Fund may purchase a call option on a stock index
future to hedge against a market advance in equity securities that the Fund
plans to purchase at a future date. The Fund may write covered call options on
stock index futures as a partial hedge against a decline in the prices of stocks
held in the Fund's portfolio. The Fund also may purchase put options on stock
index futures contracts.
International Securities Fund may use interest rate futures contracts and
options thereon to hedge the debt portion of its portfolio against changes in
the general level of interest rates. The Fund may purchase an interest rate
futures contract when it intends to purchase debt securities but has not yet
done so. This strategy may minimize the effect of all or part of an increase in
the market price of those securities because a rise in the price of the
securities prior to their purchase may either be offset by an increase in the
value of the futures contract purchased by the Fund or avoided by taking
delivery of the debt securities under the futures contract. Conversely, a fall
in the market price of the underlying debt securities may result in a
corresponding decrease in the value of the futures position. The Fund may sell
an interest rate futures contract in order to continue to receive the income
from a debt security, while endeavoring to avoid part or all of the decline in
the market value of that security that would accompany an increase in interest
rates.
International Securities Fund may purchase a call option on an interest
rate futures contract to hedge against a market advance in debt securities that
the Fund plans to acquire at a future date. The Fund also may write covered call
options on interest rate futures contracts as a partial hedge against a decline
in the price of debt securities held in the Fund's portfolio or purchase put
options on interest rate futures contracts in order to hedge against a decline
in the value of debt securities held in the Fund's portfolio.
Special Risks Related to Foreign Currency Futures Contracts and Related
Options. Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. In addition, there
are risks associated with foreign currency futures contracts and their use as a
hedging device similar to those associated with options on foreign currencies
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described above. Further, settlement of a foreign currency futures contract must
occur within the country issuing the underlying currency. Thus, International
Securities Fund must accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign restrictions or regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery that
are assessed in the issuing country.
Options on foreign currency futures contracts may involve certain
additional risks. Trading of such options is relatively new. The ability to
establish and close out positions on such options is subject to the maintenance
of a liquid secondary market. To reduce this risk, International Securities Fund
will not purchase or write options on foreign currency futures contracts unless
and until, in the Subadviser's opinion, the market for such options has
developed sufficiently that the risks in connection with such options are not
greater than the risks in connection with transactions in the underlying futures
contracts. Compared to the purchase or sale of foreign currency futures
contracts, the purchase of call or put options thereon involves less potential
risk to International Securities Fund because the maximum amount at risk is the
premium paid for the options (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option on a foreign currency
futures contract would result in a loss, such as when there is no movement in
the price of the underlying currency or futures contract.
Futures Guidelines. In view of the risks involved in using futures
strategies described below, Life Series Fund's Board of Trustees has adopted
non-fundamental investment guidelines to govern the Fund's use of such
investments that may be modified by the Board without shareholder vote. Foreign
currency options traded on a commodities exchange are included and governed by
these guidelines. The Fund will not purchase or sell futures contracts or
related options if, immediately thereafter, the sum of the amount of initial
margin deposits on the Fund's existing futures positions and margin and premiums
paid for related options would exceed 5% of the market value of the Fund's total
assets. The value of all futures sold will not exceed the total market value of
the Fund's portfolio. This policy does not limit risk to 5% of the Fund's
assets.
Special Characteristics and Risks of Futures Trading. No price is paid upon
entering into futures contracts. Instead, upon entering into a futures contract,
International Securities Fund is required to deposit with its custodian in a
segregated account in the name of the futures broker through which the
transaction is effected an amount of cash, U.S. Government securities or other
liquid, high-grade debt instruments generally equal to 3%-5% or less of the
contract value. This amount is known as "initial margin." When writing a call or
put option on a futures contract, margin also must be deposited in accordance
with applicable exchange rules. Initial margin on futures contracts is in the
nature of a performance bond or good-faith deposit that is returned to the Fund
upon termination of the transaction, assuming all obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
Fund may be required by an exchange to increase the level of its initial margin
payment. Additionally, initial margin requirements may be increased generally in
the future by regulatory action. Subsequent payments, called "variation margin,"
to and from the broker, are made on a daily basis as the value of the futures
position varies, a process known as "marking to market." Variation margin does
not involve borrowing to finance the futures transactions, but rather represents
a daily settlement of the Fund's obligation to or from a clearing organization.
Holders and writers of futures positions and options thereon can enter into
offsetting closing transactions, similar to closing transactions on options on
securities, by selling or purchasing, respectively, a futures position or
options position with the same terms as the position or option held or written.
Positions in futures contracts and options thereon may be closed only on an
exchange or board of trade providing a secondary market for such futures or
options.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures contract or related option may vary
either up or down from the previous day's
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settlement price. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit. The daily
limit governs only price movements during a particular trading day and therefore
does not limit potential losses because prices could move to the daily limit for
several consecutive trading days with little or no trading and thereby prevent
prompt liquidation of unfavorable positions. In such event, it may not be
possible for the Fund to close a position and, in the event of adverse price
movements the Fund would have to make daily cash payments of variation margin
(except in the case of purchased options). However, in the event futures
contracts have been used to hedge portfolio securities, such securities will not
be sold until the contracts can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. However, there is no guarantee that the
price of the securities will, in fact, correlate with the price movements in the
contracts and thus provide an offset to losses on the contracts.
Successful use by International Securities Fund of futures contracts and
related options will depend upon the Subadviser's ability to predict movements
in the direction of the overall securities, currency and interest rate markets,
which requires different skills and techniques than predicting changes in the
prices of individual securities. Moreover, futures contracts relate not to the
current price level of the underlying instrument but to the anticipated levels
at some point in the future. There is, in addition, the risk that the movements
in the price of the futures contract or related option will not correlate with
the movements in prices of the securities or currencies being hedged. In
addition, if the Fund has insufficient cash, it may have to sell assets from its
portfolio to meet daily variation margin requirements. Any such sale of assets
may or may not be made at prices that reflect the rising market. Consequently,
the Fund may need to sell assets at a time when such sales are disadvantageous
to the Fund. If the price of the futures contract or related option moves more
than the price of the underlying securities or currencies, the Fund will
experience either a loss or a gain on the futures contract or related option
that may or may not be completely offset by movements in the price of the
securities or currencies that are the subject of the hedge.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between price movements in the futures or related
option position and the securities or currencies being hedged, movements in the
prices of futures contracts and related options may not correlate perfectly with
movements in the prices of the hedged securities or currencies because of price
distortions in the futures market. As a result, a correct forecast of general
market trends may not result in successful hedging through the use of futures
contracts and related options over the short term.
Positions in futures contracts and related options may be closed out only
on an exchange or board of trade that provides a secondary market for such
futures contracts or related options. Although the Fund intends to purchase or
sell futures contracts and related options only on exchanges or boards of trade
where there appears to be a liquid secondary market, there is no assurance that
such a market will exist for any particular contract or option at any particular
time. In such event, it may not be possible to close a futures or option
position and, in the event of adverse price movements, the Fund would continue
to be required to make variation margin payments.
Like options on securities and currencies, options on futures contracts
have a limited life. The ability to establish and close out options on futures
will be subject to the development and maintenance of liquid secondary markets
on the relevant exchanges or boards of trade. There can be no certainty that
liquid secondary markets for all options on futures contracts will develop.
Purchasers of options on futures contracts pay a premium in cash at the
time of purchase. This amount and the transaction costs are all that is at risk.
Sellers of options on a futures contract, however, must post initial margin and
are subject to additional margin calls that could be substantial in the event of
adverse price movements. In addition, although the maximum amount at risk when
the Fund purchases an option is the premium paid for the option and the
transaction costs, there may be circumstances when the purchase of an option on
a futures contract would result in a loss to the
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Fund when the use of a futures contract would not, such as when there is no
movement in the level of the underlying stock index or the value of the
securities or currencies being hedged.
The Fund's activities in the futures and related options markets may result
in a higher portfolio turnover rate and additional transaction costs in the form
of added brokerage commissions; however, the Fund also may save on commissions
by using futures and related options as a hedge rather than buying or selling
individual securities or currencies in anticipation or as a result of market
movements.
Forward Currency Contracts. International Securities Fund may use forward
currency contracts to protect against uncertainty in the level of future
exchange rates. The Fund will not speculate with forward currency contracts or
foreign currency exchange rates.
International Securities Fund may enter into forward currency contracts
with respect to specific transactions. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, or when the Fund anticipates the receipt in a foreign currency of
dividend or interest payments on a security that it holds, the Fund may desire
to "lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent
of such payment, as the case may be, by entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars or foreign currency, of the
amount of foreign currency involved in the underlying transaction. The Fund will
thereby be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the currency exchange rates during
the period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date of which such payments are made or
received.
International Securities Fund also may use forward currency contracts in
connection with portfolio positions to lock in the U.S. dollar value of those
positions, to increase the Fund's exposure to foreign currencies that its
Subadviser believes may rise in value relative to the U.S. dollar or to shift
the Fund's exposure to foreign currency fluctuations from one country to
another. This investment practice generally is referred to as "cross-hedging"
when another foreign currency is used.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
and bear the expense of such purchase if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transactions costs. The Fund may enter into formal
contracts or maintain a net exposure to such contracts only if the Fund
maintains cash, U.S. Government securities or liquid, high-grade debt securities
in a segregated account in an amount not less than the value of the Fund's total
assets committed to the consummation of the contract, as marked to market daily.
At or before the maturity date of a forward contract requiring
International Securities Fund to sell a currency, the Fund may either sell a
portfolio security and use the sale proceeds to make delivery of the currency or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund will obtain,
on the same maturity date, the same amount of the currency that it is obligated
to deliver. Similarly, the Fund may close out a forward contract requiring it to
purchase a specified currency by entering into a second contract entitling it to
sell the same amount of the same currency on the maturity date of the first
14
<PAGE>
contract. The Fund would realize a gain or loss as a result of entering into an
offsetting forward currency contract under either circumstance to the extent the
exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and the offsetting contract. There can be
no assurance that new forward contracts or offsets always will be available for
the Fund. Forward currency contracts also involve a risk that the other party to
the contract may fail to deliver currency when due, which could result in
substantial losses to the Fund. The cost to the Fund of engaging in forward
currency contracts varies with factors such as the currencies involved, the
length of the contract period and the market conditions then prevailing. Because
forward currency contracts are usually entered into on a principal basis, no
fees or commissions are involved.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below have been adopted by the Life
Series Fund and, unless identified as non-fundamental policies, may not be
changed without the affirmative vote of a majority of the outstanding voting
securities of Life Series Fund. As provided in the Investment Company Act of
1940, as amended ("1940 Act"), a "vote of a majority of the outstanding voting
securities of the Fund" means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares
of the Fund present at a meeting, if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. Except with respect to
borrowing, changes in values of a particular Fund's assets will not cause a
violation of the following investment restrictions so long as percentage
restrictions are observed by that Fund at the time it purchases any security.
(1) Borrow money, except as a temporary or emergency measure in an
amount not to exceed 5% of the value of its total assets.
(2) Pledge assets, except that a Fund may pledge its assets to secure
borrowings made in accordance with paragraph (1) above, provided the Fund
maintains asset coverage of at least 300% for pledged assets; provided, however,
this limitation will not prohibit escrow, collateral or margin arrangements in
connection with the International Securities Fund's use of options, futures
contracts or options on futures contracts.
(3) Make loans, except by purchase of debt obligations and through
repurchase agreements. However, Life Series Fund's Board of Trustees may, on the
request of broker-dealers or other unaffiliated institutional investors which
they deem qualified, authorize a Fund to loan securities to cover the borrower's
short position; provided, however, the borrower pledges to the Fund and agrees
to maintain at all times with the Fund cash collateral equal to not less than
100% of the value of the securities loaned, the loan is terminable at will by
the Fund, the Fund receives interest on the loan as well as any distributions
upon the securities loaned, the Fund retains voting rights associated with the
securities, the Fund pays only reasonable custodian fees in connection with the
loan, and the Adviser or Subadviser monitors the creditworthiness of the
borrower throughout the life of the loan; provided further, that such loans will
not be made if the value of all loans is greater than an amount equal to 10% of
the Fund's total assets.
(4) Purchase, with respect to only 75% of a Fund's assets, the
securities of any issuer (other than the U.S. Government) if, as a result
thereof, (a) more than 5% of the Fund's total assets (taken at current value)
would be invested in the securities of such issuer; or (b) the Fund would hold
more than 10% of any class of securities (including any class of voting
securities) of such issuer (for this purpose, all debt obligations of an issuer
maturing in less than one year are treated as a single class of securities).
(5) Purchase securities on margin (but a Fund may obtain such credits
as may be necessary for the clearance of purchases and sales of securities);
provided, however, that International
15
<PAGE>
Securities Fund may make margin deposits in connection with the use of options,
futures contracts and options on futures contracts.
(6) Make short sales of securities.
(7) Buy or sell puts, calls, straddles or spreads, except, as to
International Securities Fund, with respect to options on securities, securities
indices and foreign currencies or on futures contracts.
(8) Purchase the securities of other investment companies or
investment trusts, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.
(9) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under Federal securities laws.
(10) Buy or sell real estate, commodities, or commodity contracts
(unless acquired as a result of ownership of securities) or interests in oil,
gas or mineral explorations; provided, however, a Fund may invest in securities
secured by real estate or interests in real estate, and International Securities
Fund may purchase or sell options on securities, securities indices and foreign
currencies, stock index futures, interest rate futures and foreign currency
futures, as well as options on such futures contracts.
(11) Purchase the securities of an issuer if such purchase, at the
time thereof, would cause more than 5% of the value of a Fund's total assets to
be invested in securities of issuers which, including predecessors, have a
record of less than three years' continuous operation.
The following investment restrictions are not fundamental and can be
changed without prior shareholder approval:
1. A Fund will not invest in any securities of any issuer if, to the
knowledge of the Fund, any officer, director or trustee of Life Series Fund or
of the Adviser owns more than 1/2 of 1% of the outstanding securities of such
issuer, and such officers, directors or trustees who own more than 1/2 of 1% own
in the aggregate more than 5% of the outstanding securities of such issuer.
2. A Fund will not purchase any security if, as a result, more than 15%
(10% for Cash Management Fund) of its net assets would be invested in illiquid
securities, including repurchase agreements not entitling the holder to payment
of principal and interest within seven days and any securities that are illiquid
by virtue of legal or contractual restrictions on resale or the absence of a
readily available market. The Trustees, or the Funds' investment adviser acting
pursuant to authority delegated by the Trustees, may determine that a readily
available market exists for securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933, as amended, or any other applicable rule, and
therefore that such securities are not subject to the foregoing limitation.
3. Fundamental investment restriction (4)(a) above shall apply to 100% of
Cash Management Fund's assets.
TRUSTEES AND OFFICERS
The following table lists the Trustees and executive officers of Life
Series Fund, their age, business address and principal occupations during the
past five years. Unless otherwise noted, an individual's business address is 95
Wall Street, New York, New York 10005.
Glenn O. Head*+ (71), President and Trustee. Chairman of the Board and Director,
Administrative Data Management Corp. ("ADM"), FIMCO, Executive Investors
Management Company, Inc.
16
<PAGE>
("EIMCO"), First Investors Corporation ("FIC"), Executive Investors Corporation
("EIC") and First Investors Consolidated Corporation ("FICC").
James J. Coy (82), Trustee, 90 Buell Lane, East Hampton, NY 11937. Retired;
formerly Senior Vice President, James Talcott, Inc. (financial institution).
Roger L. Grayson* (40), Trustee. Director, FIC and FICC; President and Director,
First Investors Resources, Inc.; Commodities Portfolio Manager.
Kathryn S. Head*+ (40), Trustee, 581 Main Street, Woodbridge, NJ 07095.
President and Director, FICC; President, EIMCO, FIMCO and ADM; Vice President,
Chief Financial Officer and Director, FIC and EIC; President and Director, First
Financial Savings Bank, S.L.A.
Rex R. Reed (74), Trustee, 1381 Fairway Oaks, Kiawah Island, SC 29455. Retired;
formerly Senior Vice President, American Telephone & Telegraph Company.
Herbert Rubinstein (75), Trustee, 145 Elm Drive, Roslyn, NY 11576. Retired;
formerly President, Belvac International Industries, Ltd. and President, Central
Dental Supply.
James M. Srygley (63), Trustee, 33 Hampton Road, Chatham, NJ 07982. Principal,
Hampton Properties, Inc. (property investment company).
John T. Sullivan* (64), Trustee and Chairman of the Board; Director, FIMCO, FIC,
FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.
Robert F. Wentworth (67), Trustee, RR1, Box 2554, Upland Downs Road, Manchester
Center, VT 05255. Retired; formerly financial and planning executive with
American Telephone & Telegraph Company.
Joseph I. Benedek (39), Treasurer, 581 Main Street, Woodbridge, NJ 07095.
Treasurer, FIC FIMCO, EIMCO and EIC; Comptroller and Treasurer, FICC.
Concetta Durso (62), Vice President and Secretary. Vice President, FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary. FIC; Assistant Vice
President, EIC.
- ------------------------
* These Trustees may be deemed to be "interested persons," as defined in the
1940 Act. + Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.
All of the officers and Trustees hold identical or similar positions with
13 other registered investment companies in the First Investors Family of Funds.
Mr. Head is also an officer and/or Director of First Investors Asset Management
Company, Inc., First Investors Credit Funding Corporation, First Investors
Leverage Corporation, First Investors Realty Company, Inc., First Investors
Resources, Inc., N.A.K. Realty Corporation, Real Property Development
Corporation, Route 33 Realty Corporation, First Investors Life Insurance
Company, First Financial Savings Bank, S.L.A., First Investors Credit
Corporation and School Financial Management Services, Inc. Ms. Head is also an
officer and/or Director of First Investors Life Insurance Company, First
Investors Credit Corporation, School Financial Management Services, Inc., First
Investors Credit Funding Corporation, N.A.K. Realty Corporation, Real Property
Development Corporation, First Investors Leverage Corporation, Route 33 Realty
Corporation and Specialty Insurance Group, Inc.
The following table lists compensation paid to the Trustees by Life Series
Fund for the fiscal year ended December 31, 1995.
17
<PAGE>
<TABLE>
<CAPTION>
Pension or Estimated Total Compensation
Aggregate Retirement Benefits Annual Benefits From First Investors
Compensation Accrued as Part of Upon Family of Funds Paid
Trustee From Fund* Fund Expenses Retirement to Trustees*
- ------- ------------ -------------------- ----------------- ------------
<S> <C> <C> <C> <C>
James J. Coy $2,400 $-0- $-0- $37,200
Roger L. Grayson -0- -0- -0- -0-
Glenn O. Head -0- -0- -0- -0-
Kathryn S. Head -0- -0- -0- -0-
F. William Ortman, Jr.** 1,000 -0- -0- 15,500
Rex R. Reed 2,400 -0- -0- 37,200
Herbert Rubinstein 2,400 -0- -0- 37,200
James M. Srygley*** 2,400 -0- -0- 37,200
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth 2,400 -0- -0- 37,200
</TABLE>
* Compensation to officers and interested Trustees of the Life Series Fund
is paid by the Adviser. In addition, compensation to non-interested Trustees of
the Life Series Fund is currently voluntarily paid by the Adviser.
** For the period January 1, 1995 through September 21, 1995.
*** For the period January 19, 1995 through December 31, 1995.
MANAGEMENT
Adviser. Investment advisory services to the Funds are provided by First
Investors Management Company, Inc. pursuant to an Investment Advisory Agreement
("Advisory Agreement") dated June 13, 1994. The Advisory Agreement was approved
by the Board of Trustees of Life Series Fund, including a majority of the
Trustees who are not parties to the Advisory Agreement or "interested persons"
(as defined in the 1940 Act) of any such party ("Independent Trustees"), in
person at a meeting called for such purpose and by a majority of the
shareholders of each Fund.
Pursuant to the Advisory Agreement, FIMCO shall supervise and manage each
Fund's investments, determine each Fund's portfolio transactions and supervise
all aspects of each Fund's operations, subject to review by the Trustees. The
Advisory Agreement also provides that FIMCO shall provide Life Series Fund and
each Fund with certain executive, administrative and clerical personnel, office
facilities and supplies, conduct the business and details of the operation of
Life Series Fund and each Fund and assume certain expenses thereof, other than
obligations or liabilities of the Funds. The Advisory Agreement may be
terminated at any time without penalty by the Trustees or by a majority of the
outstanding voting securities of the applicable Fund, or by FIMCO, in each
instance on not less than 60 days' written notice, and shall automatically
terminate in the event of its assignment (as defined in the 1940 Act). The
Advisory Agreement also provides that it will continue in effect, with respect
to a Fund, for a period of over two years only if such continuance is approved
annually either by the Trustees or by a majority of the outstanding voting
securities of that Fund, and, in either case, by a vote of a majority of the
Independent Trustees voting in person at a meeting called for the purpose of
voting on such approval.
Under the Advisory Agreement, each Fund pays the Adviser an annual fee,
paid monthly, according to the following schedules:
18
<PAGE>
Annual
Average Daily Net Assets Rate
- ------------------------ ------
Up to $250 million.........................................................0.75%
In excess of $250 million up to $500 million...............................0.72
In excess of $500 million up to $750 million...............................0.69
Over $750 million..........................................................0.66
The Adviser has an Investment Committee composed of George V. Ganter,
Margaret Haggerty, Glenn O. Head, Nancy W. Jones, Patricia D. Poitra, Michael
O'Keefe, Richard Guinnessey and Clark D. Wagner. The Committee usually meets
weekly to discuss the composition of the portfolio of each Fund and to review
additions to and deletions from the portfolios.
Each Fund bears all expenses of its operations other than those incurred by
the Adviser under the terms of its advisory agreement. Fund expenses include,
but are not limited to: the advisory fee; shareholder servicing fees and
expenses; custodian fees and expenses; legal and auditing fees; expenses of
communicating to existing shareholders, including preparing, printing and
mailing prospectuses and shareholder reports to such shareholders; and proxy and
shareholder meeting expenses.
For the fiscal year ended December 31, 1993, Blue Chip Fund's advisory fees
were $214,369, Cash Management Fund's advisory fees were $19,805, net of a
waiver of $29,519, Discovery Fund's advisory fees were $114,996, Government
Fund's advisory fees were $24,232, net of a waiver of $27,694, Growth Fund's
advisory fees were $154,256, High Yield Fund's advisory fees were $205,249,
International Securities Fund's advisory fees were $112,984 and Investment Grade
Fund's advisory fees were $25,954, net of a waiver of $29,662. For the period
November 15, 1993 (commencement of operations) through December 31, 1993,
Utilities Income Fund's advisory fees in the amount of $205 were waived in their
entirety.
For the fiscal year ended December 31, 1994, Blue Chip Fund's advisory fees
were $286,413, Cash Management Fund's advisory fees were $12,024, net of a
waiver of $17,258, Discovery Fund's advisory fees were $194,546, Government
Fund's advisory fees were $27,509, net of a waiver of $31,440, Growth Fund's
advisory fees were $218, 813, High Yield Fund's advisory fees were $236,209,
International Securities Fund's advisory fees were $202,739, Investment Grade
Fund's advisory fees were $38,655, net of a waiver of $44,177 and Utilities
Income Fund's advisory fees were $4,772, net of a waiver of $16,163.
For the fiscal year ended December 31, 1995, Blue Chip Fund's advisory fees
were $399,774, Cash Management Fund's advisory fees were $14,398, net of a
waiver of $16,454, Discovery Fund's advisory fees were $301,852, Government
Fund's advisory fees were $31,084, net of a waiver of $35,526, Growth Fund's
advisory fees were $311,003, High Yield Fund's advisory fees were $279,016,
International Securities Fund's advisory fees were $262,203, Investment Grade
Fund's advisory fees were $48,182, net of a waiver of $55,066, Target Maturity
2007 Fund's advisory fees were $25,339, all of which were waived, and Utilities
Income Fund's advisory fees were $31,583, net of a waiver of $36,095.
Subadviser. Wellington Management Company, LLP has been retained by the
Adviser and Life Series Fund as the investment subadviser to International
Securities Fund and Growth Fund under a subadvisory agreement dated June 13,
1994 ("Subadvisory Agreement"). The Subadvisory Agreement was approved by the
Board of Trustees of Life Series Fund, including a majority of Independent
Trustees in person at a meeting called for such purpose and by a majority of the
shareholders of International Securities Fund and Growth Fund.
The Subadvisory Agreement provides that it will continue, with respect to a
Fund, for a period of more than two years from the date of execution only so
long as such continuance is approved
19
<PAGE>
annually by either the Board of Trustees or a majority of the outstanding voting
securities of that Fund and, in either case, by a vote of a majority of the
Independent Trustees voting in person at a meeting called for the purpose of
voting on such approval. The Subadvisory Agreement provides that it will
terminate automatically, with respect to a Fund, if assigned or upon the
termination of the Advisory Agreement, and that it may be terminated without
penalty by the Board of Trustees or a vote of a majority of the outstanding
voting securities of that Fund, upon not more than 60 days' written notice, or
by the Adviser or Subadviser on not more than 30 days' written notice. The
Subadvisory Agreement provides that WMC will not be liable for any error of
judgment or for any loss suffered by a Fund or the Adviser in connection with
the matters to which the Subadvisory Agreement relates, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation or
from willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.
Under the Subadvisory Agreement, the Adviser will pay to the Subadviser a
fee at an annual rate of 0.400% of the average daily net assets of each Fund up
to and including $50 million; 0.275% of the average daily net assets in excess
of $50 million up to and including $150 million, 0.225% of the average daily net
assets in excess of $150 million up to and including $500 million; and 0.200% of
the average daily net assets in excess of $500 million. This fee is calculated
separately for each of the Fund.
For the fiscal year ended December 31, 1993, the Subadviser received
$60,245 for its services with respect to the International Securities Fund and
$82,270 for its services with respect to the Growth Fund. For the fiscal year
ended December 31, 1994, the Subadviser received $108,127 for its services with
respect to the International Securities Fund and $116,700 for its services with
respect to the Growth Fund. For the fiscal year ended December 31, 1995, the
Subadviser received $139,842 for its service with respect to International
Securities Fund and $141,153 for its services with respect to Growth Fund.
DETERMINATION OF NET ASSET VALUE
Except as provided herein, a security listed or traded on an exchange or
the Nasdaq national market system is valued at its last sale price on the
exchange or market system where the security is primarily traded, and lacking
any sales on a particular day, the security is valued at the mean between the
closing bid and asked prices on that day. Each security traded in the OTC market
(including securities listed on exchanges whose primary market is believed to be
OTC) is valued at the mean between the closing bid and asked prices based upon
quotes furnished by a market maker for such securities. The U.S. Government
securities in which the Funds invest are traded primarily in the OTC markets. In
the absence of market quotations, a Fund will determine the value of bonds based
upon quotes furnished by market makers, if available, or in accordance with the
procedures described herein. In that connection, the Board of Trustees has
determined that a Fund may use an outside pricing service. The pricing service
uses quotations obtained from investment dealers or brokers for the particular
securities being evaluated, information with respect to market transactions in
comparable securities and other available information in determining value.
Short-term debt securities that mature in 60 days or less are valued at
amortized cost if their original term to maturity from the date of purchase was
60 days or less, or by amortizing their value on the 61st day prior to maturity
if their term to maturity from the date of purchase exceeded 60 days, unless the
Board of Trustees determines that such valuation does not represent fair value.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by the Board of Trustees.
"When-issued securities" are reflected in the assets of a Fund as of the
date the securities are purchased. Such investments are valued thereafter at the
mean between the most recent bid and asked prices obtained from recognized
dealers in such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are converted into U.S. dollar equivalents
using the foreign exchange equivalents in effect. The investments in Cash
Management Fund when purchased at a
20
<PAGE>
discount, are valued at amortized cost and when purchased at face value, are
valued at cost plus accrued interest.
ALLOCATION OF PORTFOLIO BROKERAGE
Purchases and sales of portfolio securities by Target Maturity 2007 Fund,
Target Maturity 2010 Fund, Investment Grade Fund, Government Fund and High Yield
Fund generally are principal transactions. In principal transactions, portfolio
securities are normally purchased directly from the issuer or from an
underwriter or market maker for the securities. There will usually be no
brokerage commissions paid by a Fund for such purchases. Purchases from
underwriters will include the underwriter's commission or concession and
purchases from dealers serving as market makers will include the spread between
the bid and asked price. Certain money market instruments may be purchased
directly from an issuer, in which no commissions or discounts are paid. Fixed
income securities are generally purchased on a "net" basis with dealers acting
as principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer.
A Fund may deal in securities which are not listed on a national securities
exchange or the NASDAQ national market system but are traded in the OTC market.
A Fund also may purchase listed securities through the "third market." When
transactions are executed in the OTC market, a Fund seeks to deal with the
primary market makers, but when advantageous it utilizes the services of
brokers.
In effecting portfolio transactions, the Adviser or the Subadviser seeks
best execution of trades either (1) at the most favorable and competitive rate
of commission charged by any broker or member of an exchange, or (2) with
respect to agency transactions, at a higher rate of commission if reasonable in
relation to brokerage and research services provided to a Fund or the Adviser or
the Subadviser by such member or broker. Such services may include, but are not
limited to, any one or more of the following: information as to the availability
of securities for purchase or sale, statistical or factual information or
opinions pertaining to investments. The Adviser or the Subadviser may use
research and services provided to it by brokers in servicing all the funds in
the First Investors Group of Funds; however, not all such services may be used
by the Adviser or the Subadviser in connection with a Fund. No portfolio orders
are placed with an affiliated broker, nor does any affiliated broker participate
in these commissions.
The Adviser or the Subadviser may combine transaction orders placed on
behalf of any of the Funds, any other fund in the First Investors Group of
Funds, and any Fund of Executive Investors Trust and First Investors Life, for
the purpose of negotiating brokerage commissions or obtaining a more favorable
transaction price; and where appropriate, securities purchased or sold may be
allocated, in terms of price and amount, to a Fund according to the proportion
that the size of the transaction order actually placed by a Fund bears to the
aggregate size of the transaction orders simultaneously made by other
participants in the transaction.
Brokerage commissions for the fiscal year ended December 31, 1993 are as
follows: Blue Chip Fund paid $43,811 in brokerage commissions. Of that amount,
$1,040 was paid in brokerage commissions to brokers who furnished research
services on portfolio transactions in the amount of $659,709. International
Securities Fund paid $40,600 in brokerage commissions. Of that amount, $354 was
paid in brokerage commissions to brokers who furnished research services on
portfolio transactions in the amount of $158,358. Discovery Fund paid $21,875 in
brokerage commissions. Of that amount, $8,062 was paid in brokerage commissions
to brokers who furnished research services on portfolio transactions in the
amount of $2,203,374. Growth Fund paid $27,301 in brokerage commissions. Of that
amount, $11,318 was paid in brokerage commissions to brokers who furnished
research services on portfolio transactions in the amount of $7,444,277. High
Yield Fund paid brokerage commissions of $268. Of that amount, $176 was paid in
brokerage commissions to brokers who furnished research services on portfolio
transactions in the amount of $42,600. For the same
21
<PAGE>
period, all other Fund of the Fund did not pay brokerage commissions. For the
period November 15 through December 31, 1993, Utilities Income Fund paid $1,284.
Brokerage commissions for the fiscal year ended December 31, 1994 are as
follows: Blue Chip Fund, International Securities Fund, Discovery Fund and
Utilities Income Fund paid $96,570, $69,494, $34,423 and $14,811, respectively,
in brokerage commissions. Growth Fund paid $37,740 in brokerage commissions. Of
that amount $7,571 was paid in brokerage commissions to brokers who furnished
research services on portfolio transactions in the amount of $4,437,997. High
Yield Fund paid $586 in brokerage commissions, all of which was paid to brokers
who furnished research services on portfolio transactions in the amount of
$16,600. For the same period, all other Fund of Life Series Fund did not pay
brokerage commissions.
Brokerage commissions for the fiscal year ended December 31, 1995 are as
follows: Blue Chip Fund paid $57,716 in brokerage commissions. Of that amount,
$32,661 was paid in brokerage commissions to brokers who furnished research
services on portfolio transactions in the amount of $18,258,789. International
Securities Fund paid $103,347 in brokerage commissions, none of which was paid
to brokers who furnished research services. Discovery Fund paid $58,774 in
brokerage commissions. Of that amount, $30,757 was in brokerage commissions to
brokers who furnished research services on portfolio transactions in the amount
of $12,229,787. Growth Fund paid $70,984 in brokerage commissions. Of that
amount, $51,652 was paid in brokerage commissions to brokers who furnished
research services on portfolio transactions in the amount of $31,898,514.
Utilities Income Fund paid $23,084 in brokerage commissions. Of that amount,
$11,949 was paid in brokerage commissions to brokers who furnished research
services on portfolio transactions in the amount of $4,773,646. For the same
period, all other Funds of Life Series Fund did not pay brokerage commissions.
TAXES
Each Fund is treated as a separate corporation for Federal income tax
purposes. In order to continue to qualify for treatment as a regulated
investment company ("RIC") under the Code, a Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short-term
capital gain and, for International Securities Fund and High Yield Fund, net
gains from certain foreign currency transactions) ("Distribution Requirement")
and must meet several additional requirements. For each Fund these requirements
include the following: (1) the Fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of securities or, for
International Securities Fund and High Yield Fund, foreign currencies, or other
income (including for International Securities Fund, gains from options, futures
or forward contracts) derived with respect to its business of investing in
securities or, for International Securities Fund and High Yield Fund, those
currencies ("Income Requirement"); (2) the Fund must derive less than 30% of its
gross income each taxable year from the sale or other disposition of securities
or any of the following, that were held for less than three months--options,
futures or forward contracts (other than those on foreign currencies), or, for
International Securities Fund and High Yield Fund, foreign currencies (or
options, futures or forward contracts thereon) that are not directly related to
its principal business of investing in securities (or, for International
Securities Fund, options and futures with respect thereto) ("Short-Short
Limitation"); (3) at the close of each quarter of the Fund's taxable year, at
least 50% of the value of its total assets must be represented by cash and cash
items, U.S. Government securities, securities of other RICs and other
securities, with those other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets and
that does not represent more than 10% of the issuer's outstanding voting
securities; and (4) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RICs) of any
one issuer.
22
<PAGE>
Dividends and interest received by International Securities Fund may be
subject to income, withholding or other taxes imposed by foreign countries that
would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
International Securities Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, it will be eligible to, and may,
file an election with the IRS that will enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign income
taxes paid by it. Pursuant to the election, International Securities Fund will
treat those taxes as dividends paid to its shareholders and each shareholder
will be required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that represents income from foreign sources as his
own income from those sources and (3) either deduct the taxes deemed paid by him
in computing his taxable income or, alternatively, use the foregoing information
in calculating the foreign tax credit against his Federal income tax.
International Securities Fund will report to its shareholders shortly after each
taxable year their respective shares of the income from sources within, and
taxes paid to, foreign countries if it makes this election.
International Securities Fund and Discovery Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, if a Fund holds stock of a PFIC, it will be subject to Federal
income tax on a portion of any "excess distribution" received on the stock or of
any gain on disposition of the stock (collectively "PFIC income"), plus interest
thereon, even if a Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in a Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders.
If International Securities Fund or Discovery Fund invests in a PFIC and
elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, a Fund would be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which probably would have to be distributed
to satisfy the Distribution Requirement and avoid imposition of the Excise Tax
- -- even if those earnings and gain were not received by a Fund. In most
instances it will be very difficult, if not impossible, to make this election
because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as Life Series Fund,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of such a
PFIC's stock over the adjusted basis in that stock (including mark-to-market
gain for each prior year for which an election was in effect).
For International Securities Fund, gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations)
will qualify as permissible income under the Income Requirement. However, income
from such a Fund's disposition of foreign currencies that are not directly
related to its principal business of investing in securities will be subject to
the Short-Short Limitation if they are held for less than three months.
High Yield Fund, Government Fund, Investment Grade Fund, Target Maturity
2007 Fund, Target Maturity 2010 Fund and Utilities Income Fund may acquire zero
coupon securities issued with original issue discount. As a holder of those
securities, each Fund must include in its income the original issue discount
that accrues on the securities during the taxable year, even if it receives no
corresponding payment on them during the year. Similarly, each Fund must include
in its
23
<PAGE>
gross income securities it receives as "interest" on pay-in-kind securities.
Because each Fund annually must distribute substantially all of its investment
company taxable income, including any original issue discount and other non-cash
income, to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax, each Fund may be required in a particular year to distribute as a
dividend an amount that is greater than the total amount of cash it actually
receives. Those distributions will be made from each Fund's cash assets or from
the proceeds of sales of portfolio securities, if necessary. Each Fund may
realize capital gains or losses from those sales, which would increase or
decrease its investment company taxable income and/or net capital gain. In
addition, any such gains may be realized on the disposition of securities held
for less than three months. Because of the Short-Short Limitation, any such
gains would reduce the Fund's ability to sell other securities, or options,
futures or certain forward contracts held for less than three months that it
might wish to sell in the ordinary course of its portfolio management.
The use of hedging strategies, such as selling and purchasing options and
futures contracts and entering into forward contracts, involves complex rules
that will determine for income tax purposes the character and timing of
recognition of the gains and losses International Securities Fund realizes in
connection therewith. For International Securities Fund and High Yield Fund,
income from foreign currencies (except certain gains therefrom that may be
excluded by future regulations), and income from transactions in options,
futures and forward contracts derived by such Fund with respect to its business
of investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement. However, income from the Fund's disposition
of options and futures contracts (other than those on foreign currencies) will
be subject to the Short-Short Limitation if they are held for less than three
months. Income from the Fund's disposition of foreign currencies and options,
futures and forward contracts that are not directly related to its principal
business of investing in securities (or options and futures with respect to
securities) also will be subject to the Short-Short Limitation if they are held
for less than three months.
If International Securities Fund satisfies certain requirements, then any
increase in value of a position that is part of a "designated hedge" will be
offset by any decrease in value (whether realized or not) of the offsetting
hedging position during the period of the hedge for purposes of determining
whether the Fund satisfies the Short-Short Limitation. Thus, only the net gain
(if any) from the designated hedge will be included in gross income for purposes
of that limitation. The Fund intends that, when it engages in hedging
strategies, they will qualify for this treatment, but at the present time it is
not clear whether this treatment will be available for all of the Fund's hedging
transactions. To the extent this treatment is not available, the Fund may be
forced to defer the closing out of certain options, futures or forward contracts
beyond the time when it otherwise would be advantageous to do so, in order for
the Fund to continue to qualify as a RIC.
GENERAL INFORMATION
Audits and Reports. The accounts of the Fund are audited twice a year by
Tait, Weller & Baker, independent certified public accountants. Shareholders
receive semi-annual and annual reports of the Fund, including audited financial
statements, and a list of securities owned.
Shareholder Liability. Life Series Fund is organized as an entity known as
a "Massachusetts business trust." Under Massachusetts law, shareholders of such
a trust may, under certain circumstances, be held personally liable for the
obligations of Life Series Fund. The Declaration of Trust however, contains, an
express disclaimer of shareholder liability for acts or obligations of Life
Series Fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by Life Series Fund
or the Trustees. The Declaration of Trust provides for indemnification out of
the property of Life Series Fund of any shareholder held personally liable for
the obligations of Life Series Fund. The Declaration of Trust also provides that
Life Series Fund shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of Life Series Fund and
satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which Life
24
<PAGE>
Series Fund itself would be unable to meet its obligations. The Adviser believes
that, in view of the above, the risk of personal liability to shareholders is
immaterial and extremely remote. The Declaration of Trust further provides that
the Trustees will not be liable for errors of judgment or mistakes of fact or
law, but nothing in the Declaration of Trust protects a Trustee against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. Life Series Fund may have an obligation
to indemnify Trustees and officers with respect to litigation.
APPENDIX A
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S RATINGS GROUP
Standard & Poor's Rating Group ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. Ratings are graded into several categories, ranging from
"A-1" for the highest quality obligations to "D" for the lowest.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) designation.
MOODY'S INVESTORS SERVICE, INC.
Moody's Investors Service, Inc. ("Moody's") short-term debt ratings are
opinions of the ability of issuers to repay punctually senior debt obligations
which have an original maturity not exceeding one year. Obligations relying upon
support mechanisms such as letters-of-credit and bonds of indemnity are excluded
unless explicitly rated.
Prime-1 Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
APPENDIX B
DESCRIPTION OF MUNICIPAL NOTE RATINGS
STANDARD & POOR'S
S&P's note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt rating.
The following criteria will be used in making that assessment.
25
<PAGE>
- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
- Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
MOODY'S INVESTORS SERVICE, INC.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). This distinction is in
recognition of the difference between short-term credit risk and long-term risk.
MIG-1. Loans bearing this designation are of the best quality, enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
26
<PAGE>
Financial Statements as of December 31, 1995
27
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-Blue Chip Fund
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--93.4%
Basic Industry--3.9%
6,100* Alumax, Inc. $ 186,812 $ 29
5,450 Dow Chemical Company 383,543 57
7,700 Du Pont (E.I.) DE Nemours & Company 538,037 80
8,800 Freeport McMoRan Copper & Gold, Inc. Class "B" 247,500 37
6,800 IMC Global, Inc. 277,950 42
4,000 James River Corporation of Virginia 96,500 14
3,900 Mead Corporation 203,775 30
6,100 Minnesota Mining & Manufacturing Company 404,125 60
4,400 Sigma-Aldrich Corporation 217,800 33
1,400 Temple-Inland, Inc. 61,775 9
- ------------------------------------------------------------------------------------------------------------------------------------
2,617,817 391
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Goods--7.5%
5,200 Boeing Company 407,550 61
3,000 Browning-Ferris Industries, Inc. 88,500 13
6,300 Deere & Company 222,075 33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2,100 Eaton Corporation 112,612 17
3,100 Emerson Electric Company 253,425 38
2,500 Foster Wheeler Corporation 106,250 16
23,800 General Electric Company 1,713,600 256
5,500 Grainger (W.W.), Inc. 364,375 54
6,800 Ingersoll-Rand Company 238,850 36
3,200 Lockheed Martin Corporation 252,800 38
3,900 Loral Corporation 137,962 21
7,200 Raytheon Company 340,200 51
3,600 United Technologies Corporation 341,550 51
6,000* Varity Corporation 222,750 33
8,000 WMX Technologies, Inc. 239,000 36
- ------------------------------------------------------------------------------------------------------------------------------------
5,041,499 754
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Durables--1.7%
6,800 Corning, Inc. 217,600 32
1,400 Fleetwood Enterprises, Inc. 36,050 5
14,250 Ford Motor Company 413,250 62
5,100 Goodyear Tire & Rubber Company 231,412 35
7,450 Masco Corporation 233,744 35
- ------------------------------------------------------------------------------------------------------------------------------------
1,132,056 169
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--22.1%
12,200 Abbott Laboratories 509,350 75
4,100 American Home Products Corporation 397,700 58
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6,900 Anheuser-Busch Companies, Inc. 461,438 69
6,800* Astra AB (ADR) Class "A" 272,000 41
7,400 Bristol-Myers Squibb Company 635,475 95
18,250 Coca-Cola Company 1,355,062 203
6,200 Columbia/HCA Healthcare Corporation 314,650 47
5,300 CPC International, Inc. 363,712 54
5,350 Eastman Kodak Company 358,450 54
8,400 Eli Lilly & Company 472,500 71
3,800 General Mills, Inc. 219,450 33
6,400 Gillette Company 333,600 50
9,750 Heinz (H.J.) Company 322,969 48
5,000 Hershey Foods Corporation 325,000 49
9,400 Johnson & Johnson 804,875 120
3,100 Kellogg Company 239,475 36
5,200 Kimberly-Clark Corporation 430,300 64
17,900 Merck & Company, Inc. 1,176,925 176
12,500 Newell Company 323,438 48
4,100 Nike, Inc. 285,463 43
13,300 PepsiCo, Inc. 743,138 111
9,100 Pfizer, Inc. 573,300 86
13,800 Philip Morris Companies, Inc. 1,248,900 187
10,000 Procter & Gamble Company 830,000 124
5,200* Ralcorp Holdings, Inc. 126,100 19
5,200 Schering-Plough Corporation 284,700 43
8,100 Teva Pharmaceutical Industries Ltd. (ADR) 375,638 56
3,800 Unilever N.V. 534,850 80
4,000 United Healthcare Corporation 262,000 39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2,000 Warner-Lambert Company 194,250 29
- ------------------------------------------------------------------------------------------------------------------------------------
14,774,708 2,208
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Services--11.0%
6,500 Brunswick Corporation 156,000 24
2,200 Capital Cities/ABC, Inc. 271,425 41
2,700* CUC International, Inc. 92,137 14
3,800 Darden Restaurants, Inc. 45,125 7
6,600 Gap, Inc. 277,200 41
4,500* HFS, Inc. 367,875 55
6,500 Home Depot, Inc. 311,187 47
3,900 ITT Corporation 206,700 31
3,900 ITT Hartford Group, Inc. 188,662 28
3,900 ITT Industries, Inc. 93,600 14
6,000* Kroger Company 225,000 34
4,250 Marriott International, Inc. 162,562 24
7,325 Mattel, Inc. 225,244 34
4,700 May Department Stores Company 198,576 30
10,150 McDonald's Corporation 458,019 68
2,900 McGraw-Hill Companies, Inc. 252,662 38
5,500 Nordstrom, Inc. 222,750 33
12,400* Price/Costco, Inc. 189,100 28
5,200 Sears, Roebuck and Company 202,800 30
5,900 Talbots, Inc. 169,625 25
10,625* Tele-Communications, Inc., Liberty Media Group Class "A" 285,547 43
16,100* Tele-Communications, Inc., TCI Group Class "A" 319,988 48
5,200 Time Warner, Inc. 196,950 29
6,400 US West Media Group 121,600 18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5,000* Viacom, Inc. Class "B" 236,875 35
6,400* Vons Companies, Inc. 180,800 27
39,400 Wal-Mart Stores, Inc. 881,575 132
5,000 Walgreen Company 149,375 22
7,600 Walt Disney Company 448,400 67
13,800* Woolworth Corporation 179,400 27
- ------------------------------------------------------------------------------------------------------------------------------------
7,316,759 1,094
- ------------------------------------------------------------------------------------------------------------------------------------
Energy--12.0%
3,800 Aluminum Company of America 200,925 30
7,100 Amoco Corporation 510,313 76
3,400 Atlantic Richfield Company 376,550 56
6,200 Avery Dennison Corporation 310,775 46
10,700 Baker Hughes, Inc. 260,813 39
10,300 Barrick Gold Corporation 271,663 41
2,700 Burlington Resources, Inc. 105,975 16
9,400 Chevron Corporation 493,500 74
10,100 Enron Corporation 385,062 58
18,000 Exxon Corporation 1,442,250 216
2,300 Kerr-McGee Corporation 146,050 22
5,700 Mobil Corporation 638,400 95
7,700 Morton International, Inc. 276,237 41
4,900 Pacific Enterprises 138,425 21
3,450 Phillips Petroleum Company 117,731 18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
7,900 Royal Dutch Petroleum Company 1,114,888 167
4,100 Schlumberger Ltd. 283,925 42
11,900 Sonat, Inc. 423,938 63
3,500 Texaco, Inc. 274,750 41
9,000 Unocal Corporation 262,125 39
- ------------------------------------------------------------------------------------------------------------------------------------
8,034,295 1,201
- ------------------------------------------------------------------------------------------------------------------------------------
Financial--11.4%
6,650 American Express Company 275,144 42
6,900 American International Group, Inc. 638,250 95
6,900 American Re Corporation 282,038 42
14,700 Banc One Corporation 554,925 83
4,500 Bank of New York Company, Inc. 219,375 33
6,600 BankAmerica Corporation 427,350 64
11,700 Charles Schwab Corporation 235,463 35
4,200 Chase Manhattan Corporation 254,625 38
5,100 Chemical Banking Corporation 299,625 45
2,900 Chubb Corporation 280,575 42
9,000 Citicorp 605,250 90
5,400 Dean Witter Discover and Company 253,800 38
6,300 Federal National Mortgage Association 781,987 117
4,600 First Union Corporation 255,875 38
1,900 General Re Corporation 294,500 44
30,800 Hibernia Corporation Class "A" 331,100 49
950 Marsh & McLennan Companies, Inc. 84,312 13
5,400 Mellon Bank Corporation 290,250 43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6,900 NationsBank Corporation 480,413 72
13,800 Norwest Corporation 455,400 68
8,800 Salomon, Inc. 312,400 47
- ------------------------------------------------------------------------------------------------------------------------------------
7,612,657 1,138
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--13.8%
9,100* Airtouch Communications, Inc. 257,075 39
7,200* Applied Materials, Inc. 283,500 42
4,100* Ascend Communications, Inc. 332,613 50
23,000 A T & T Corp. 1,489,250 223
1,700 Autodesk, Inc. 58,225 9
3,100 Automatic Data Processing, Inc. 230,175 34
9,500* Cisco Systems, Inc. 708,937 106
2,100 Computer Associates International, Inc. 119,438 18
16,500* EMC Corporation 253,687 38
8,300 First Data Corporation 555,062 83
7,600 Hewlett-Packard Company 636,500 95
11,600 Intel Corporation 658,300 98
8,800 International Business Machines Corporation 807,400 121
7,500* LSI Logic Corporation 245,625 37
9,900 MCI Communications Corporation 258,637 38
8,400* Microsoft Corporation 737,100 109
9,400 Motorola, Inc. 535,800 80
7,100* National Semiconductor Corporation 157,975 24
11,650* Oracle Corporation 493,669 74
8,100* Premenos Technology Corporation 213,638 32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5,100 Sprint Corporation 203,362 30
- ------------------------------------------------------------------------------------------------------------------------------------
9,235,968 1,380
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications--.3%
6,400 US West Communications Group 228,800 34
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation--1.3%
4,000* AMR Corporation 297,000 44
2,400 Burlington Northern, Inc. 187,200 28
5,700 Union Pacific Corporation 376,200 56
- ------------------------------------------------------------------------------------------------------------------------------------
860,400 128
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities--8.4%
7,400 Ameritech Corporation 436,600 64
6,300 Bell Atlantic Corporation 421,313 63
16,100 BellSouth Corporation 700,350 105
8,700 Carolina Power & Light Company 300,150 45
15,100 CINergy Corporation 462,438 69
8,700 Duke Power Company 412,162 62
10,500 FPL Group, Inc. 486,937 73
13,300 GTE Corporation 585,200 88
5,800 NYNEX Corporation 313,200 48
6,100 Pacific Telesis Group 205,112 31
9,800 PacifiCorp 208,250 31
6,000 Peco Energy Company 180,750 27
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
8,300 SBC Communications, Inc. 477,250 71
10,500 Texas Utilities Company 431,813 65
- ------------------------------------------------------------------------------------------------------------------------------------
5,621,525 842
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks ($49,784,003) 62,476,484 9,339
- ------------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS--.5%
$500M Bell Sports Corporation, 4 1U4%, 11/15/00 (cost $429,695) 350,000 52
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--5.5%
600M Hewlett Packard Company, 5.72%, 1/11/96 599,047 90
1,050M Hitachi America Ltd., 5.90%, 1/10/96 1,048,451 156
400M Idaho Power Company, 5.75%, 1/12/96 399,297 59
800M Lubrizol Corporation, 5.74%, 1/5/96 799,490 120
800M Nestle Capital Corporation, 5.67%, 1/3/96 799,748 120
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $3,646,033) 3,646,033 545
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $53,859,731) 99.4% 66,472,517 9,936
Other Assets, Less Liabilities .6 427,227 64
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $66,899,744 $10,000
</TABLE>
<PAGE>
- ----------------
* Non-income producing
See notes to financial statements
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-Cash Management Fund
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal Interest $10,000 of
Amount Security Rate* Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM CORPORATE NOTES--91.5%
$ 63M Baltimore Gas & Electric Company, 4/15/96 6.00% $63,530 $ 152
200M BellSouth Telecommunications, Inc., 2/9/96 5.63 198,780 477
200M Brown-Forman Corporation, 2/12/96 5.70 198,670 477
200M Chevron Oil Finance Company, 1/12/96 5.75 199,648 480
155M Consolidated Natural Gas Company, 1/5/96 5.72 154,902 372
189M Dresser Industries, Inc., 1/31/96 5.73 188,099 452
107M Gannett Company, 1/17/96 5.80 106,724 256
100M GTE South, Inc., 2/7/96 5.73 99,411 239
200M Hewlett Packard Company, 1/25/96 5.68 199,243 479
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
200M Hitachi America Ltd., 1/12/1996 5.55 199,660 480
200M Laclede Gas Company, 1/31/96 5.65 199,058 478
100M Lubrizol Corporation, 1/5/96 5.74 99,936 240
200M McGraw-Hill Inc., 2/21/96 5.67 198,394 477
150M Merck & Company, Inc., 8/14/96 5.59 153,787 370
150M National Rural Utilities Cooperative
Financial Corporation, 2/9/96 5.62 149,087 358
100M Pacific Bell, 1/22/96 5.65 99,670 240
200M PepsiCo, Inc., 1/30/96 5.86 206,287 496
150M Pitney Bowes Credit, Inc., 2/13/96 5.65 148,988 358
200M Southern California Edison Company, 1/19/96 5.68 199,432 479
200M TDK U.S.A. Corporation, 1/22/96 5.65 199,341 479
200M The Stanley Works, 3/6/96 5.60 197,978 476
200M U.S. Borax & Chemical Corporation, 3/21/96 5.53 197,542 475
150M Waste Management, Inc., 4/14/96 5.84 150,926 363
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $3,809,093) 3,809,093 9,153
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--7.3%
200M Federal Home Loan Bank, 12/27/96 5.55 200,152 481
100M Tennessee Valley Authority, 9/9/96 5.51 100,712 242
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agencies (cost $300,864) 300,864 723
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $4,109,957) 98.8% 4,109,957 9,876
Other Assets, Less Liabilities 1.2 51,607 124
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $4,161,564 $ 10,000
====================================================================================================================================
* The interest rate shown is the effective rate at the time of purchase.
See notes to finanical statements
</TABLE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-Discovery Fund
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--84.9%
Basic Industry--2.0%
3,800 Chesapeake Corporation $ 112,575 $ 23
26,200 Interpool, Inc. 468,325 92
29,300* Repap Enterprises, Inc. 130,018 26
8,700 Schulman (A.), Inc. 195,750 38
9,800* Universal Stainless & Alloy Products, Inc. 104,125 20
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1,010,793 199
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Goods--3.0%
10,850 Agco Corporation 553,350 109
16,400 Case Corporation 750,300 147
24,800 Owosso Corporation 220,100 43
- ------------------------------------------------------------------------------------------------------------------------------------
1,523,750 299
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Durables--1.2%
10,100 Falcon Products, Inc. 132,562 26
24,900* National R.V. Holdings, Inc. 289,463 57
3,800* Wolverine Tube, Inc. 142,500 28
- ------------------------------------------------------------------------------------------------------------------------------------
564,525 111
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--1.5%
10,200 Dreyer's Grand Ice Cream, Inc. 339,150 67
17,600* Ralcorp Holdings, Inc. 426,800 84
- ------------------------------------------------------------------------------------------------------------------------------------
765,950 151
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Services--20.1%
11,300 Advo, Inc. 293,800 58
14,700* Barnes & Noble, Inc. 426,300 84
31,200* Bell Sport Corporation 249,600 49
46,700* Cannondale Corporation 741,362 146
26,400* Cinar Films, Inc. Class "B" 399,300 78
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
18,150* CUC International, Inc. 619,369 122
19,600* Discount Auto Parts, Inc. 610,050 120
20,400 Equifax, Inc. 436,050 86
7,000* Federated Department Stores, Inc. 192,500 38
21,400* Franklin Electronic Publishers, Inc. 631,300 124
14,000 Gaylord Entertainment Class "A" 388,500 76
24,600* Home Shopping Network, Inc. 221,400 43
22,200 LA Quinta Inns, Inc. 607,725 119
16,900* Meyer (Fred), Inc. 380,250 75
19,400* Monarch Casino & Resort, Inc. 67,900 13
13,900* NHP, Inc. 257,150 51
12,100* REX Stores Corporation 214,775 42
20,000 Rite Aid Corporation 685,000 135
5,600* Studio Plus Hotels, Inc. 144,200 28
9,000 Talbots, Inc. 258,750 51
24,100* Tele-Communications, Inc., TCI Group Class "A" 478,988 94
43,200* US Office Products Company 982,800 193
35,000* USCI, Inc. 345,625 68
12,900* Viacom, Inc. Class "B" 611,138 120
- ------------------------------------------------------------------------------------------------------------------------------------
10,243,832 2,013
- ------------------------------------------------------------------------------------------------------------------------------------
Energy--.8%
8,400 Snyder Oil Company 101,850 20
2,800 Sonat, Inc. 99,750 20
4,200* Tejas Gas Corporation 222,075 43
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
423,675 83
- ------------------------------------------------------------------------------------------------------------------------------------
Financial--8.1%
14,600* American Travellers Corporation 410,625 81
25,600 Amvestors Financial Corporation 300,800 59
6,100 Boatmens Bancshares, Inc. 249,337 48
1,700 Commercial Federal Corporation 64,175 13
10,200 First USA, Inc. 452,625 89
20,400 Independent Bancorporation 150,450 30
14,700 Integon Corporation 303,187 60
6,500* Mark Twain Bancshares, Inc. 251,875 49
5,700 Mercanitle Bancorporation 262,200 52
27,300* Penn Treaty American Corporation 450,450 88
17,050 Reliance Group Holdings, Inc. 147,056 29
7,182 Southern National Corporation 188,528 37
21,000 Titan Holdings, Inc. 301,875 59
14,100* WFS Financial, Inc. 274,950 54
25,000 Willis Corroon Group PLC (ADR) 290,625 57
- ------------------------------------------------------------------------------------------------------------------------------------
4,098,758 805
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care/Miscellaneous--13.3%
8,400* AHI Healthcare Systems, Inc. 48,300 9
13,900* American Medical Response, Inc. 451,750 89
5,600* American Oncology Resources, Inc. 272,300 54
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
29,500* Applied Bioscience International, Inc. 199,125 39
11,700* Arbor Health Care Company 204,750 40
10,100* Boston Scientific Corporation 494,900 98
11,000 Dentsply International, Inc. 440,000 86
33,800* Ethical Holdings PLC (ADR) 304,200 60
15,000 Fisher Scientific International 500,625 98
10,100* Health Care and Retirement Corporation 353,500 69
13,200* Humana, Inc. 361,350 71
7,000* InStent, Inc. 105,000 21
12,200* Living Centers of America, Inc. 427,000 84
22,400* Mid Atlantic Medical Services, Inc. 543,200 107
4,200* Norland Medical Systems, Inc. 97,650 19
14,300* Noven Pharmaceuticals, Inc. 160,875 32
8,400* Orthologic Corporation 121,800 24
11,900* Pacific Physicians Services, Inc. 214,200 42
12,300* Pyxis Corporation 179,888 35
7,000* Rural/Metro Corporation 158,375 31
7,000* Tecnol Medical Products, Inc. 126,000 25
15,500 Teva Pharmaceutical Industries Ltd. (ADR) 718,813 141
29,200* Vidamed, Inc. 277,400 54
- ------------------------------------------------------------------------------------------------------------------------------------
6,761,001 1,328
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--27.3%
11,800* Adaptec, Inc. 483,800 95
7,500* Altera Corporation 373,125 73
11,300* Applied Materials, Inc. 444,937 87
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
14,300* Atmel Corporation 319,962 63
13,400* Bisys Group, Inc. 412,050 81
12,900* Broadway & Seymour, Inc. 209,625 41
14,000* Catalyst International, Inc. 161,000 32
5,600* Cerner Corporation 114,800 23
5,500* Cisco Systems, Inc. 410,437 81
6,850 Computer Associates International, Inc. 389,594 77
14,000* Cornerstone Imaging, Inc. 203,000 40
15,400* Data Works Corporation 194,425 38
14,000* Davidson & Associates, Inc. 308,000 61
9,700* Discreet Logic, Inc. 242,500 48
24,800* EMC Corporation 381,300 75
7,500* FileNet Corporation 352,500 69
20,500* Fulcrum Technologies, Inc. 666,250 131
5,600* HCIA, Inc. 261,800 51
14,000* IDX Systems Corporation 486,500 96
13,200* IMNET Systems, Inc. 316,800 62
6,700* Informix Corporation 201,000 39
14,900* Integrated Micro Products PLC (ADR) 275,650 54
23,700* Intersolv 305,137 60
5,300* Lam Research Corporation 242,475 48
17,900* LSI Logic Corporation 586,225 115
11,200* Mercury Interactive Corporation 204,400 40
12,900* Metatec Corporation 141,900 28
19,500* MySoftware Company 248,625 49
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
33,200* National Semiconductor Corporation 738,700 145
14,550* Oracle Corporation 616,556 121
54,900* Plasma-Therm, Inc. 137,250 27
21,800* Premenos Technology Corporation 574,975 113
12,500 Reynolds & Reynolds Company 485,938 95
18,200* Saville Systems Ireland (ADR) 259,350 51
11,300* Softkey International, Inc. 261,313 51
28,700* Symantec Corporation 667,275 131
22,500* System Soft Corporation 253,125 50
15,100* Tower Semiconductor Ltd. 334,088 66
5,700* Veritas Software Corporation 216,600 43
13,800* VLSI Technology, Inc. 250,126 48
5,100* Xilinx, Inc. 155,550 31
- ------------------------------------------------------------------------------------------------------------------------------------
13,888,663 2,729
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications--6.8%
6,300* Ascend Communications, Inc. 511,087 100
10,900* Boston Technology, Inc. 138,975 27
19,000 ECI Telecommunications Limited Designs 433,437 85
16,400 Ericsson (L.M.) Telephone Co. (ADR) Class "B" 319,800 63
6,000 Motorola, Inc. 342,000 67
5,300* Netcom On-Line Communication Services, Inc. 190,800 37
9,100 Nokia Corporation (ADR) Class "A" 353,763 70
14,000* Octel Communications Corporation 451,500 89
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5,100* TCSI Corporation 94,350 19
24,100* Tele-Communications, Inc., Liberty Media Group Class "A" 647,687 127
- ------------------------------------------------------------------------------------------------------------------------------------
3,483,399 684
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation--.8%
2,800* Celadon Group, Inc. 25,200 5
49,300* Transportacion Maritima Mexicana SA (ADR) 412,888 81
- ------------------------------------------------------------------------------------------------------------------------------------
438,088 86
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $36,077,157) 43,202,434 8,488
- ------------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS--.3%
Health Care/Miscellaneous
150M Pacific Physicians Services, Inc., 5 1U2%, 2003 (cost $150,000) 145,125 29
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--14.9%
650M Appalachian Power, 6%, 1/2/1996 649,892 128
1,000M Dresser Industries, 5.75%, 1/16/1996 997,604 196
250M Ford Motor, 5.70%, 1/11/1996 249,604 49
700M Idaho Power, 5.65%, 1/11/1996 698,902 138
1,000M Lubrizol Corporation, 5.74%, 1/5/1996 999,362 196
2,000M Pacific Bell, 5.65%, 1/22/96 1,993,408 392
1,600M Pearson Incorporated, 5.80%, 1/23/1996 1,594,329 313
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
400M Stanley Works, 5.72%, 1/12/1996 399,301 78
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $7,582,402) 7,582,402 1,490
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $43,809,559) 100.1% 50,929,961 10,007
Excess of Liabilities Over Other Assets (.1) (30,000) (7)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $50,899,953 10,000
====================================================================================================================================
- ----------------
* Non-income producing
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-Government Fund
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED CERTIFICATES--44.9%
$36M Federal Home Loan Mortgage Corp., 6 1/2%, 4/1/2024 $ 36,408 $ 38
133M Federal Home Loan Mortgage Corp., 6 1/2%, 6/1/2024 132,030 139
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1,066M Federal Home Loan Mortgage Corp., 6 1/2%, 9/1/2024 1,054,647 1,110
862M Federal National Mortgage Association, 9%, 10/1/2020 911,301 959
508M Government National Mortgage Association, 7 1/2%, 8/15/2025 523,017 551
999M Government National Mortgage Association, 7 1/2%, 11/15/2025 1,027,937 1,082
198M Government National Mortgage Association, 11 1/2%, 10/15/2012 222,517 234
317M Government National Mortgage Association, 11 1/2%, 5/15/2015 356,103 375
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Mortgage-Backed Certificates (cost $4,211,839) 4,263,960 4,488
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--39.3%
1,100M Federal Farm Credit, 8.65%, 10/01/2099 1,216,724 1,281
1,400M Federal Home Loan Bank, 5.92%, 6/29/2000 1,421,875 1,496
1,000M Federal National Mortgage Association, 8 1/2%, 2/1/2005 1,095,000 1,153
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Obligations (cost $3,733,054) 3,733,599 3,930
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--12.9%
1,150M U.S. Treasury Note, 6 1/2%, 8/15/2005 (cost $1,177,695) 1,226,547 1,291
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--1.4%
130M Appalachian Power 6%, 1/2/96 (cost $129,957) 129,957 137
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Value of Investments (cost $9,252,545) 98.5% 9,354,063 9,846
Other Assets, Less Liabilities 1.5 146,124 154
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $9,500,187 $10,000
====================================================================================================================================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-Blue Chip Fund
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--97.7%
Apparel/Textiles--.4%
6,000* Nine West Group, Inc. $ 225,000 $ 44
- ------------------------------------------------------------------------------------------------------------------------------------
Banks--6.6%
5,000 Associated Banc-Corp 204,687 40
8,000 Bancorp Hawaii, Inc. 287,000 56
21,900 First Bank System, Inc. 1,086,787 212
5,350 First Commercial Corporation 176,550 35
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10,000 J.P. Morgan & Company, Inc. 802,500 157
4,000 Old Kent Financial Corporation 164,500 32
15,000 State Street Boston Corporation 675,000 132
- ------------------------------------------------------------------------------------------------------------------------------------
3,397,024 664
- ------------------------------------------------------------------------------------------------------------------------------------
Business Services--2.9%
12,000 Dames & Moore, Inc. 145,500 28
7,500* DST Systems, Inc. 213,750 42
10,000 G & K Services, Inc. Class "A" 255,000 50
4,000* Ionics, Inc. 174,000 34
19,000 Sysco Corporation 617,500 121
5,000* Tetra Tech, Inc. 113,750 22
- ------------------------------------------------------------------------------------------------------------------------------------
1,519,500 297
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals--4.6%
7,600 Air Products and Chemicals, Inc. 400,900 78
21,600 Engelhard Corporation 469,800 92
20,800 Morton International, Inc. 746,200 146
13,500 Nalco Chemical Company 406,688 79
15,000 Schulman (A.), Inc. 337,500 66
- ------------------------------------------------------------------------------------------------------------------------------------
2,361,088 461
- ------------------------------------------------------------------------------------------------------------------------------------
Communication Equipment--5.1%
32,000 Ericsson (L.M.) Telephone Co. (ADR) Class "B" 624,000 122
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
20,000* General Instrument Corporation 467,500 92
10,800 Motorola, Inc. 615,600 120
7,200 Nokia Corporation (ADR) Class "A" 279,900 55
13,000* 3COM Corporation 606,125 118
- ------------------------------------------------------------------------------------------------------------------------------------
2,593,125 507
- ------------------------------------------------------------------------------------------------------------------------------------
Computers & Office Equipment--3.0%
9,000* Compaq Computer Corporation 432,000 85
10,800 Hewlett-Packard Company 904,500 177
12,800 Sensormatic Electronics Corporation 222,400 43
- ------------------------------------------------------------------------------------------------------------------------------------
1,558,900 305
- ------------------------------------------------------------------------------------------------------------------------------------
Drugs--5.3%
10,000* Alza Corporation 247,500 48
12,500 Pfizer, Inc. 787,500 154
15,000 Rhone-Poulenc Rorer Group, Inc. 798,750 156
15,000 Zeneca Group PLC (ADR) 875,625 171
- ------------------------------------------------------------------------------------------------------------------------------------
2,709,375 529
- ------------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment--2.4%
11,000 Hubbell, Inc. Class "B" 723,250 141
10,000 Juno Lighting, Inc. 160,000 31
9,000* Littlefuse, Inc. 330,750 65
- ------------------------------------------------------------------------------------------------------------------------------------
1,214,000 237
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Electronics--1.9%
15,700 AMP, Inc. 602,487 118
10,000 Dallas Semiconductor Corporation 207,500 41
6,000* Silicon Valley Group, Inc. 151,500 30
- ------------------------------------------------------------------------------------------------------------------------------------
961,487 189
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Services--1.4%
4,000* Input/Output, Inc. 231,000 45
6,600 Schlumberger Ltd. 457,050 89
- ------------------------------------------------------------------------------------------------------------------------------------
688,050 134
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Sources--5.5%
13,300 Amoco Corporation 955,937 187
9,500* Barrett Resources Corporation 279,062 55
15,500 Burlington Resources, Inc. 608,375 119
33,000 Unocal Corporation 961,125 188
- ------------------------------------------------------------------------------------------------------------------------------------
2,804,499 549
- ------------------------------------------------------------------------------------------------------------------------------------
Entertaiment Products--1.3%
6,000* Coleman Company, Inc. (New) 210,750 41
7,000 Harley-Davidson, Inc. 201,250 39
8,500* Speedway Motorsports, Inc. 255,000 50
- ------------------------------------------------------------------------------------------------------------------------------------
667,000 130
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Services--2.9%
11,500 American Express Company 475,813 93
8,320 Federal National Mortgage Association 1,032,720 202
- ------------------------------------------------------------------------------------------------------------------------------------
1,508,533 295
- ------------------------------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--4.0%
6,000* Canadaigua Wine Company, Inc. Class "A" 195,750 38
18,000 Pepsico, Inc. 1,005,750 197
3,400* Robert Mondavi Corporation Class "A" 93,925 18
22,600 Sara Lee Corporation 720,375 141
- ------------------------------------------------------------------------------------------------------------------------------------
2,015,800 394
- ------------------------------------------------------------------------------------------------------------------------------------
Health Services--1.0%
6,000* American Medical Response, Inc. 195,000 38
30,000* Beverly Enterprises 318,750 62
- ------------------------------------------------------------------------------------------------------------------------------------
513,750 100
- ------------------------------------------------------------------------------------------------------------------------------------
Household Products--4.4%
10,000 Armor All Products Corporation 181,250 35
9,000* Bush Boake Allen, Inc. 246,375 48
14,300 Kimberly-Clark Corporation 1,183,325 231
7,500 Procter & Gamble Company 622,500 122
- ------------------------------------------------------------------------------------------------------------------------------------
2,233,450 436
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance--4.0%
8,175 American International Group, Inc. 756,187 148
6,000 American Re Corporation 245,250 48
8,000 Frontier Insurance Group, Inc. 256,000 50
5,000 General Re Corporation 775,000 151
- ------------------------------------------------------------------------------------------------------------------------------------
2,032,437 397
- ------------------------------------------------------------------------------------------------------------------------------------
Machinery & Manufacturing--1.8%
10,500 Donaldson Company 263,812 52
9,100 Minnesota Mining & Manufacturing Company 602,875 118
2,300 * MSC Industrial Direct Company, Inc. Class "A" 63,250 12
- ------------------------------------------------------------------------------------------------------------------------------------
929,937 182
- ------------------------------------------------------------------------------------------------------------------------------------
Media--8.6%
7,000 ADVO, Inc. 182,000 35
54,000 Comcast Corporation Class "A" 982,127 192
12,000 Dun & Bradstreet Corporation 777,000 152
9,000 Gannett Company 552,375 108
6,500 Houghton Mifflin Company 279,500 55
21,400* Viacom, Inc. Class "B" 1,013,825 198
18,000 Vodafone Group PLC (ADR) 634,500 124
- ------------------------------------------------------------------------------------------------------------------------------------
4,421,327 864
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Medical Products--3.0%
22,000 Abbott Laboratories 918,500 179
14,500* Biomet, Inc. 259,188 51
9,000* Datascope Corporation 216,000 42
5,000 Life Technologies, Inc. 136,250 27
- ------------------------------------------------------------------------------------------------------------------------------------
1,529,938 299
- ------------------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--1.3%
8,000 Bemis Company, Inc. 205,000 40
12,000 International Paper Company 454,500 89
- ------------------------------------------------------------------------------------------------------------------------------------
659,500 129
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Companies--.5%
10,000* Doubletree Corporation 262,500 51
- ------------------------------------------------------------------------------------------------------------------------------------
Retail--9.0%
12,000 Arbor Drugs, Inc. 252,000 49
25,000* AutoZone, Inc. 721,875 141
10,000* Barnes & Noble, Inc. 290,000 57
10,000* Gymboree Corporation 206,250 40
11,000 Home Depot, Inc. 526,625 103
18,000 May Department Stores Company 760,500 149
19,000 Rite Aid Corporation 650,750 127
10,000* Sports Authority, Inc. 203,750 40
9,300 Talbots, Inc. 267,375 52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
32,600 Wal-Mart Stores, Inc. 729,425 143
- ------------------------------------------------------------------------------------------------------------------------------------
4,608,550 901
- ------------------------------------------------------------------------------------------------------------------------------------
Software & Services--8.9%
9,000* American Management Systems, Inc. 270,000 53
9,000 Automatic Data Processing, Inc. 668,250 131
9,000* Bisys Group, Inc. 276,750 54
12,000* BMC Software, Inc. 513,000 100
7,000* Cognos, Inc. 312,375 61
10,800* Computer Sciences Corporation 758,700 148
5,600 First Data Corporation 374,500 73
6,300* Microsoft Corporation 552,825 108
13,000* Policy Management Systems Corporation 619,125 121
10,700* Systems & Computer Technology Corporation 212,663 42
- ------------------------------------------------------------------------------------------------------------------------------------
4,558,188 891
- ------------------------------------------------------------------------------------------------------------------------------------
Telephone--5.1%
19,700 A T & T Corp. 1,275,575 249
7,000 Century Telephone Enterprises 222,250 43
13,900 MCI Communications Corporation 363,137 71
14,300* MFS Communications Company, Inc. 761,475 149
- ------------------------------------------------------------------------------------------------------------------------------------
2,622,437 512
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation--.9%
9,500 Air Express International Corporation 218,500 42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
4,000 Airborne Freight 106,500 21
7,000 Werner Enterprises, Inc. 141,750 28
- ------------------------------------------------------------------------------------------------------------------------------------
466,750 91
- ------------------------------------------------------------------------------------------------------------------------------------
Travel & Leisure--1.9%
10,000* Landry's Seafood Restaurants, Inc. 170,625 33
8,000 McDonald's Corporation 361,000 71
18,000 Southwest Airlines Company 418,500 82
- ------------------------------------------------------------------------------------------------------------------------------------
950,125 186
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $41,695,820) 50,012,270 9,774
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--2.0%
1,004M Morgan Stanley Securities, Inc. 5 1/2%, 1/2/96, (collateralized by
$730M U.S. Treasury Note, 9 1/4%, 2/15/16) (cost $1,004,000) 1,004,000 196
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $42,699,820) 99.7% 51,016,270 9,970
Other Assets, Less Liabilities .3 154,953 30
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $51,171,223 $10,000
====================================================================================================================================
* Non-income producing
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-High Yield Fund
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--87.8%
Aerospace/Defense--2.5%
$500M Fairchild Industries, Inc., 12 1/4%, 1999 $ 535,000 $ 127
500M Howmet Corp., 10%, 2003 (Note 4) 520,000 124
- ------------------------------------------------------------------------------------------------------------------------------------
1,055,000 251
- ------------------------------------------------------------------------------------------------------------------------------------
Apparel/Textiles--1.4%
600M Westpoint Stevens, Inc., 9 3/8%, 2005 594,000 142
- ------------------------------------------------------------------------------------------------------------------------------------
Automotive--3.7%
800M SPX Corp., 11 3/4%, 2002 852,000 204
700M Walbro Corp., 9 7/8%, 2005 (Note 4) 703,500 168
- ------------------------------------------------------------------------------------------------------------------------------------
1,555,500 372
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals--4.6%
1,000M Harris Chemical North America, Inc., 0%-10 1/4%, 2001 973,750 232
600M Rexene Corp., 11 3/4%, 2004 637,500 152
300M Synthetic Industries, Inc., 12 3/4%, 2002 295,500 71
- ------------------------------------------------------------------------------------------------------------------------------------
1,906,750 455
- ------------------------------------------------------------------------------------------------------------------------------------
Computers/Software/Business Equipment--1.2%
500M Bell & Howell Co., 10 3/4%, 2002 533,750 127
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Products--1.8%
700M Herff Jones, Inc., 11%, 2005 752,500 180
- ------------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment--3.3%
700M Essex Group, Inc., 10%, 2003 693,000 165
700M IMO Industries, Inc., 12%, 2001 714,000 171
- ------------------------------------------------------------------------------------------------------------------------------------
1,407,000 336
- ------------------------------------------------------------------------------------------------------------------------------------
Energy--9.0%
1,000M Clark R & M Holdings, Inc., 0%, 2000 667,500 159
700M Falcon Drilling Co., Inc., 12 1/2%, 2005 770,000 184
800M Giant Industries, Inc., 9 3/4%, 2003 812,000 194
800M United Meridian Corp., 10 3/8%, 2005 850,000 203
650M Vintage Petroleum, Inc., 9%, 2005 658,936 157
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
3,758,436 897
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Services--2.1%
700M American Life Holding Co., 11 1/4%, 2004 735,000 176
260M Lomas Mortgage, USA, 10 1/4%, 2002 (Defaulted) (Note 7) 131,300 31
- ------------------------------------------------------------------------------------------------------------------------------------
866,300 207
- ------------------------------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--1.5%
600M Van de Kamps, Inc., 12%, 2005 (Note 4) 624,000 149
- ------------------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging--3.0%
650M GB Property Funding, Inc., 10 7/8%, 2004 570,375 136
700M Showboat, Inc., 9 1/4%, 2008 707,000 169
- ------------------------------------------------------------------------------------------------------------------------------------
1,277,375 305
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare--9.5%
750M Abbey Healthcare Group, Inc., 9 1/2%, 2002 798,750 191
700M Genesis Healthcare, Inc., 9 3/4%, 2005 742,000 177
600M Integrated Health Services, Inc., 9 5/8%, 2002 613,500 146
400M Integrated Health Services, Inc., 10 3/4%, 2004 430,000 103
500M Mediq/PRN Life Support Services, Inc., 11 1/8%, 1999 500,000 119
800M Tenet Healthcare Corp., 10 1/8%, 2005 889,000 212
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3,973,250 948
- ------------------------------------------------------------------------------------------------------------------------------------
Media/Cable Television--16.3%
1,000M Act III Broadcasting, Inc., 10 1/4%, 2005 1,022,500 244
600M Adelphia Communications, Inc., 9 7/8%, 2005 546,000 130
1,000M Affiliated Newspaper Investments, 0%-13 1/4%, 2006 595,000 142
1,000M Bell Cablemedia PLC, 0%-11.95%, 2004 707,500 169
500M Diamond Cable Communications PLC, 0%-11 3/4%, 2005 295,625 71
1,400M Echostar Communications Corp., 0%-12 7/8%, 2004 945,000 226
500M Garden State Newspapers, Inc., 12%, 2004 507,500 121
750M Outdoor Systems, Inc., 10 3/4%, 2003 727,500 174
400M PanAmSat Capital Corp., 0%-11 3/8%, 2003 326,000 78
500M Rogers Cablesystems, Inc., 10%, 2005 539,375 129
600M World Color Press, Inc., 9 1/8%, 2003 621,000 148
- ------------------------------------------------------------------------------------------------------------------------------------
6,833,000 1,632
- ------------------------------------------------------------------------------------------------------------------------------------
Mining/Metals--6.4%
634M Carbide/Graphite Group, Inc., 11 1/2%, 2003 687,099 164
800M Gulf States Steel, Inc., 13 1/2%, 2003 (Note 4) 724,000 173
900M WCI Steel, Inc., 10 1/2%, 2002 875,250 209
400M Wheeling-Pittsburgh Steel Corp., 9 3/8%, 2003 378,000 90
- ------------------------------------------------------------------------------------------------------------------------------------
2,664,349 636
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Miscellaneous--1.8%
700M Monarch Marking Systems, Inc., 12 1/2%, 2003 735,000 175
- ------------------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--9.0%
500M Container Corp., 11 1/4%, 2004 517,500 124
500M Gaylord Container Corp., 11 1/2%, 2001 516,250 123
800M Rainy River Forest Products Co., Inc., 10 3/4%, 2001 883,000 211
800M S.D. Warren Co., Inc., 12%, 2004 884,000 211
1,000M Stone Container Corp., 9 7/8%, 2001 976,250 233
- ------------------------------------------------------------------------------------------------------------------------------------
3,777,000 902
- ------------------------------------------------------------------------------------------------------------------------------------
Retail-Food/Drug--1.9%
800M P&C Food Markets, Inc., 11 1/2%, 2001 784,000 187
- ------------------------------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--1.7%
1M Barry's Jewelers, Inc., 12 5/8%, 1996 505 --
750M General Host Co., Inc., 11 1/2%, 2002 708,750 169
- ------------------------------------------------------------------------------------------------------------------------------------
709,255 169
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications--5.9%
1,500M American Communication Services, Inc., 0%-13%, 2005 (Note 4) 825,000 197
750M CAI Wireless Systems, Inc., 12 1/4%, 2002 804,375 192
800M Metrocall, Inc., 10 3/8%, 2007 852,000 203
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2,481,375 592
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation--1.2%
500M Trism, Inc., 10 3/4%, 2000 487,500 116
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $36,067,586) 36,775,340 8,778
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--.7%
Financial Services--.2%
4,000* Olympic Financial Ltd. 65,000 16
- ------------------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging--.0%
1,620* Divi Hotels, Inc. 122 --
2,000* Goldriver Hotel & Casino Corp., Series "B" 374 --
- ------------------------------------------------------------------------------------------------------------------------------------
496 --
- ------------------------------------------------------------------------------------------------------------------------------------
Media/Cable Television--.5%
1,000* Affiliated Newspaper Investments 25,000 6
8,400* Echostar Communications Class "A" 203,700 48
- ------------------------------------------------------------------------------------------------------------------------------------
228,700 54
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $85,096) 294,196 70
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--6.1%
Financial Services--4.4%
7,000 California Federal Bank, 10 5/8%, Series "B" 759,500 181
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10,000 First Nationwide Bank, 11 1/2% 1,110,000 265
- ------------------------------------------------------------------------------------------------------------------------------------
1,869,500 446
- ------------------------------------------------------------------------------------------------------------------------------------
Media/Cable Television--.9%
318 PanAmSat Capital Corp., 12 3/4% 358,594 86
- ------------------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--.8%
10,800* S.D. Warren Co., Inc., 14% 345,600 82
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Preferred Stocks (cost $2,319,845) 2,573,694 614
- ------------------------------------------------------------------------------------------------------------------------------------
WARRANTS--.2%
Financial Services--.0%
18* Reliance Group Holdings, Inc. (expiring 1/28/97) 31 --
- ------------------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging--.1%
200* Goldriver Finance Corp., Liquidating Trust 3,000 1
4,200* President Riverboat Casinos, Inc. (expiring 9/23/96) (Note 4) 12,600 3
- ------------------------------------------------------------------------------------------------------------------------------------
15,600 4
- ------------------------------------------------------------------------------------------------------------------------------------
Mining/Metals--.0%
800 * Gulf State Steel Acquisition Corp. (expiring 4/1/03) (Note 4) 400 --
- ------------------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--.1%
10,800* S.D. Warren Co., Inc. (expiring 12/15/06) (Note 4) 54,000 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.0%
100* Payless Cashways, Inc. (expiring 11/1/96) 25 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Warrants (cost $5,375) 70,056 17
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.6%
$1,250M Appalachian Power Company, 6%, 1/2/96 1,249,792 298
250M Massachusetts Electric Company, 5.85%, 1/9/96 249,674 60
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $1,499,466) 1,499,466 358
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $39,977,368) 98.4% 41,212,752 9,837
Other Assets, Less Liabilities 1.6 681,209 163
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $41,893,961 $10,000
====================================================================================================================================
* Non-income producing
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-International Securities Fund
December 31, 1995
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--95.0%
United States--23.6%
5,625 American International Group, Inc. $ 520,313 $ 127
6,500 American Re Corporation 265,688 65
4,000 * AMR Corporation 297,000 72
8,500 A T & T Corp. 550,375 134
2,000 Capital Cities/ABC, Inc. 246,750 60
7,500 Dow Chemical Company 527,813 129
7,000 Exxon Corporation 560,875 137
2,500 Federal National Mortgage Association 310,313 76
6,000 General Electric Company 432,000 105
5,000 Gillette Company 260,625 64
4,000 Hewlett-Packard Company 335,000 82
16,000 International Paper Company 606,000 148
9,500 J.C. Penney Company 452,438 110
6,000 Johnson & Johnson 513,750 125
7,000 Kimberly Clark Corporation 579,250 141
15,000 MCI Communications 391,875 96
4,000 Minnesota Mining & Manufacturing Company 265,000 65
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5,000 Pepsico, Inc. 279,375 68
10,000 Pharmacia & Upjohn, Inc. 387,500 94
700* Schweitzer-Mauduit International, Inc. 16,188 4
21,000 Unocal Corporation 611,625 149
696* Viacom Inc., Class "A" 31,929 8
8,273* Viacom Inc., Class "B" 391,933 96
22,000 Wal-Mart Stores 492,250 120
8,300 York International Corporation 390,100 95
- ------------------------------------------------------------------------------------------------------------------------------------
9,715,965 2,370
- ------------------------------------------------------------------------------------------------------------------------------------
Japan--15.5%
8,400 Canon Sales Company Ltd. 223,941 56
50,000 Chichibu Onoda Cement Company 267,080 65
19,000 Chugai Pharmaceutical 182,168 45
17,000 Dai Nippon Printing Company Ltd. 288,410 70
5,000 Ito Yokado Company Ltd. 308,284 76
35,000 Kawasaki Heavy Industries 161,168 39
51,000 Kawasaki Steel 177,990 43
20,000 Keio Teito Railway 116,526 28
1,000 Kyocera Corporation 74,357 19
1,000 Kyoritsu Air Technology, Inc. 10,858 3
2,000 Mabuchi Motor Company Ltd. 124,477 30
10,000 Matsushita Electric Industrial Company Ltd. 162,866 40
22,000 Minebea Company Ltd. 184,699 45
6,000 Mitsubishi Bank Ltd. 141,345 34
28,000 Mitsui Petrochemical Industries 229,370 56
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2,000 Murata Manufacturing Company Ltd. 73,678 18
2,000 Nihon Jumbo Company Ltd. 69,994 17
16,000 Nippon Express 154,179 38
25 Nippon Telegraph & Telephone Corp. 202,372 49
92,000 * NKK Corporation 247,940 60
14,000 Nomura Securities Company Ltd. 305,375 74
6,000 Orix Corporation 247,208 60
2,000 Riso Kagaku Corporation 168,877 41
15,000 Sakura Bank Ltd. 190,496 46
1,000 Sankyo Company Ltd. 22,491 5
4,000 Sanwa Bank Ltd. 81,433 20
1,500 Sanyo Shinpan Finance Company Ltd. 123,604 30
5,000 Secom Company Ltd. 348,031 85
3,000 Sekisui Chemical Company 44,207 11
7,400 Shimamura Corporation 286,239 70
21,000 Showa Corporation 161,034 39
4,000 Sony Corporation 240,035 59
20,000 Sumitimo Marine & Fire 164,418 40
40,000 Sumitomo Realty & Development 283,076 69
16,000 Sumitomo Trust and Banking 226,462 55
5,000 Toda Construction Company Ltd. 43,383 11
1,000 Tsutsumi Jewelry Company Ltd. 50,120 12
- ------------------------------------------------------------------------------------------------------------------------------------
6,388,191 1,558
- ------------------------------------------------------------------------------------------------------------------------------------
France--5.7%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6,000 Banque Nationale De Paris 271,022 66
800 Canal Plus SA 150,172 37
2,430 Compagnie De Saint Gobain 269,316 66
1,301 Euro Rscg Worldwide SA 106,413 26
1,019 Groupe Danone 168,361 41
900 Peugeot Citroen SA 118,886 29
5,600 Renault SA 161,459 39
14,500 Rhone-Poulenc SA Series "A" 311,028 76
2,334 Societe Generale Paris 288,744 70
2,200 Technip SA 151,604 37
- ------------------------------------------------------------------------------------------------------------------------------------
2,343,158 571
- ------------------------------------------------------------------------------------------------------------------------------------
United Kingdom--5.4%
18,000 Associated British Foods PLC 103,122 25
26,500 Bass PLC 295,822 72
262,000 BET PLC 516,612 126
30,000 Body Shop International PLC 70,797 17
60,000 British Steel PLC 151,608 37
15,000 British Telecommunictions PLC 82,443 20
36,000 Northern Foods PLC 95,576 23
20,244 Powergen PLC 167,367 41
30,000 Royal Insurance Holdings PLC 177,927 43
60,000 Tomkins PLC 262,698 65
80,000 Vodafone Group PLC 286,920 70
- ------------------------------------------------------------------------------------------------------------------------------------
2,210,892 539
- ------------------------------------------------------------------------------------------------------------------------------------
Netherlands--4.8%
20,000 Elsevier NV CVA 267,000 66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
9,301 International Nederlanden Groep NV CVA 622,004 152
3,500 Unilever NV CVA 492,361 120
14,000 Vendex International NV (BDR) 416,597 102
1,250 Verenigd Bezit VNU 171,789 42
- ------------------------------------------------------------------------------------------------------------------------------------
1,969,751 482
- ------------------------------------------------------------------------------------------------------------------------------------
Germany--4.0%
1,400 Bayer AG 370,229 90
200 Beiersdorf AG 137,639 34
350 Daimler-Benz AG 177,045 43
500 Degussa AG 168,730 41
3,000 Deutsche Bank AG 142,740 35
300 Karstadt AG 123,246 30
850 Mannesmann AG 271,223 66
5,500 Veba AG 235,943 58
- ------------------------------------------------------------------------------------------------------------------------------------
1,626,795 397
- ------------------------------------------------------------------------------------------------------------------------------------
Spain--3.9%
2,300 Acerinox SA Regd 232,624 57
14,000 Banco Bilbao Vizcaya 504,301 123
4,000 Empresa Nacional De Electricidad SA 226,516 55
3,200 Empresa Nacional De Electricidad SA (ADR) 183,200 45
11,000 Repsol SA (ADR) 361,625 88
7,500 Telefonica De Espana 103,861 25
- ------------------------------------------------------------------------------------------------------------------------------------
1,612,127 393
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Australia--3.9%
11,205 Advance Bank of Australia 89,851 22
50,892 Amcor Ltd. 359,638 88
55,159 Australia & New Zealand Banking Group 258,905 63
44,660 Broken Hill Proprietary Ltd. 631,197 154
16,246 National Australia Bank Ltd. 146,225 35
6,200 Qantas Airways (ADR) (Note 4) 103,308 25
- ------------------------------------------------------------------------------------------------------------------------------------
1,589,124 387
- ------------------------------------------------------------------------------------------------------------------------------------
Norway--3.7%
45,200 Christiania Bank OG 105,881 26
8,378 Hafslund Nyco Series "A" Free 219,467 54
8,500 Kvaerner AS Series "A" 301,368 72
9,000 Orkla AS Class "A" 448,728 109
33,000 Saga Petroleum "A" Free 441,365 108
- ------------------------------------------------------------------------------------------------------------------------------------
1,516,809 369
- ------------------------------------------------------------------------------------------------------------------------------------
Hong Kong--3.3%
94,099 Hong Kong Telecom 167,948 41
58,000 Hutchison Whampoa Ltd. 353,313 86
42,000 Sun Hung Kai Properties 343,572 84
63,000 Swire Pacific Class "A" 488,880 119
- ------------------------------------------------------------------------------------------------------------------------------------
1,353,713 330
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Switzerland--3.0%
535 Ciba Geigy AG Regd 471,929 114
580 Nestle AG Regd 643,184 157
250 Sulzer AG PC 133,620 33
- ------------------------------------------------------------------------------------------------------------------------------------
1,248,733 304
- ------------------------------------------------------------------------------------------------------------------------------------
Singapore--2.8%
34,000 Development Bank of Singapore 423,055 104
55,000 Keppel Corporation 489,935 119
18,000 Overseas Chinese Banking Corporation Ltd. 225,243 55
- ------------------------------------------------------------------------------------------------------------------------------------
1,138,233 278
- ------------------------------------------------------------------------------------------------------------------------------------
Sweden--1.7%
8,100 Astra AB Series "A" Free 323,891 78
14,000 Avesta Sheffield AB Free 123,581 30
11,000* BT Industries AB 121,167 30
11,000 Stora Kopparbergs Bergslags Series "A" 129,466 32
- ------------------------------------------------------------------------------------------------------------------------------------
698,105 170
- ------------------------------------------------------------------------------------------------------------------------------------
Italy--1.6%
160,000 Banca Commercial Italiana 341,904 83
199,000 Telecom Italia SPA 309,823 76
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
651,727 159
- ------------------------------------------------------------------------------------------------------------------------------------
Denmark--1.6%
21,700 Tele Danmark A/S Class "B" (ADR) 599,463 146
1,000 Unidanmark A/S Class "A" Regd 49,623 12
- ------------------------------------------------------------------------------------------------------------------------------------
649,086 158
- ------------------------------------------------------------------------------------------------------------------------------------
Canada--1.6%
35,000 Canadian Pacific Ltd. 634,375 155
- ------------------------------------------------------------------------------------------------------------------------------------
New Zealand--1.3%
423,000 Brierley Investments Ltd. 334,593 82
84,000 Carter Holt Harvey Ltd. 181,213 44
- ------------------------------------------------------------------------------------------------------------------------------------
515,806 126
- ------------------------------------------------------------------------------------------------------------------------------------
Finland--1.2%
70,000* Merita Bank Ltd. 177,331 43
3,000 Metsa Serla OY Class "B" 92,584 23
5,500* Nokia Corporation Class "A" (ADR) 213,813 52
- ------------------------------------------------------------------------------------------------------------------------------------
483,728 118
- ------------------------------------------------------------------------------------------------------------------------------------
Philippines--1.1%
22,000* Philippine National Bank 243,239 59
204,600* Pilipino Telephone 206,707 50
- ------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
449,946 109
- ------------------------------------------------------------------------------------------------------------------------------------
Mexico--.9%
19,000 Cementos De Mexico SA Class "A" 62,883 15
24,000 Fomento Economico Mexicano SA Class "B" 54,013 13
13,000* Grupo Carso SA Class "A" 70,190
6,000 Kimberly Clark De Mexico SA Class "A" 90,645 22
10,700* Transportacion Maritima Mexicana SA Class "A" (ADR) 80,250 20
- ------------------------------------------------------------------------------------------------------------------------------------
357,981 87
- ------------------------------------------------------------------------------------------------------------------------------------
Thailand--.7%
5,000 Bangkok Bank Public Company Ltd. Foreign Regd 60,740 15
49,200 Bangkok Metropolitan Bank Public Company Ltd. 45,898 11
192,800 Bangkok Metropolitan Bank Public Company Ltd. Foreign Regd 183,681 45
- ------------------------------------------------------------------------------------------------------------------------------------
290,319 71
- ------------------------------------------------------------------------------------------------------------------------------------
Malaysia--.6%
98,000 Sime Darby Berhad 260,543 64
- ------------------------------------------------------------------------------------------------------------------------------------
Austria--.6%
1,800 EVN 247,560 60
- ------------------------------------------------------------------------------------------------------------------------------------
Belgium--.5%
5,000 Delhaize Le Lion 207,277 50
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Portugal--.5%
10,700* Portugal Telecom (ADR) 203,300 50
- ------------------------------------------------------------------------------------------------------------------------------------
Brazil--.4%
7,000 Electrobras ON (ADR) 94,709 23
10,000 Usiminas Siderurg Minas (ADR) 81,281 20
- ------------------------------------------------------------------------------------------------------------------------------------
175,990 43
- ------------------------------------------------------------------------------------------------------------------------------------
Indonesia--.4%
49,000 Jaya Real Property Foreign Regd 131,795 32
7,500 Semen Gresik (Note 4) 20,993 5
- ------------------------------------------------------------------------------------------------------------------------------------
152,788 37
- ------------------------------------------------------------------------------------------------------------------------------------
Chile-- .3%
1,500 Compania De Telecomunicaciones De Chile SA (ADR) 124,313 30
- ------------------------------------------------------------------------------------------------------------------------------------
Argentina--.3%
2,000 Telefonica De Argentina SA Class "B" (ADR) 54,500 13
3,000 YPF SA Class "D" (ADR) 64,875 16
- ------------------------------------------------------------------------------------------------------------------------------------
119,375 29
- ------------------------------------------------------------------------------------------------------------------------------------
India--.1%
2,000 ITC Ltd. (GDR) (Note 4) 14,276 3
1,000 Reliance Industries Ltd. (GDS) (Note 4) 14,000 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
28,276 7
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $32,506,045) 38,963,986 9,501
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--1.7%
300M United States Treasury Bill, 5.33%, 1/25/96 298,934 73
300M United States Treasury Bill, 5.34%, 1/25/96 298,933 73
100M United States Treasury Bill, 5.35%, 1/25/96 99,643 24
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Obligations (cost $697,510) 697,510 170
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--2.7%
1,116M Aubrey G. Lanston & Co., Inc., 5.90%, 1/2/96 (collateralized by $1,115M
U.S. Treasury Notes, 61/4%, 12/31/1996) (cost $1,116,000 1,116,000 272
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $34,319,555) 99.4% 40,777,496 9,943
Other Assets, Less Liabilities .6 234,066 57
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $41,011,562 $10,000
====================================================================================================================================
* Non-income producing
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-International Securities Fund
At December 31, 1995, sector diversification of the Portfolio was as follows
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage
Sector Diversification of Net Assets Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Banks 11.8% $4,820,123
Food/Beverage/Tobacco 7.2 2,943,894
Drugs 6.8 2,802,453
Telephone 6.8 2,794,608
Retail 6.0 2,452,977
Business Services 5.9 2,391,958
Energy Sources 5.8 2,386,518
Metals & Minerals 5.5 2,266,493
Media 4.5 1,855,278
Real Estate Companies 3.9 1,600,636
Paper Forest Products 3.7 1,529,540
Transportation 3.3 1,358,739
Electric Utilities 2.8 1,155,295
Insurance 2.8 1,128,346
Electrical Equipment 2.7 1,107,745
Financial Services 2.6 1,073,885
Household Products 2.6 1,048,311
Machinery & Manufacturing 2.0 826,120
Chemicals 1.9 771,183
Automotive 1.5 618,424
Computers & Office Equipment 1.2 503,877
Entertainment Products 1.0 402,901
Travel & Leisure 1.0 400,308
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Electronics .8 332,734
Communications Equipment .5 213,813
Medical Products .3 133,620
Housing .1 44,207
U.S. Government Obligations 1.7 697,510
Repurchase Agreements 2.7 1,116,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments 99.4 40,777,496
Other Assets, Less Liabilities .6 234,066
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $41,011,562
====================================================================================================================================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-Investment Fund
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--80.1%
Aerospace/Defense--5.2%
$300M Boeing Co., 6.35%, 2003 $ 308,038 $ 189
250M Lockheed Corp., 6 3/4%, 2003 261,500 161
250M Rockwell International Corp., 8 3/8%, 2001 279,481 172
- ------------------------------------------------------------------------------------------------------------------------------------
849,019 522
- ------------------------------------------------------------------------------------------------------------------------------------
Automotive--1.5%
250M Hertz Corporation, 6 3/8%, 2005 251,252 155
- ------------------------------------------------------------------------------------------------------------------------------------
Building Materials--.7%
100M Masco Corp., 9%, 2001 114,198 70
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals--2.0%
300M Lubrizol Corp., 7 1/4%, 2025 330,011 203
- ------------------------------------------------------------------------------------------------------------------------------------
Conglomerates--3.7%
300M Hanson Overseas, B.V., 7 3/8%, 2003 322,127 198
250M Tenneco, Inc., 7 7/8%, 2002 272,987 168
- ------------------------------------------------------------------------------------------------------------------------------------
595,114 366
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--2.1%
300M American Home Products Corp., 7.90%, 2005 338,058 208
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Products--1.6%
250M Mattel, Inc., 6 3/4%, 2000 256,530 158
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Electric & Gas Utilities--11.7%
250M Baltimore Gas & Electric Co., 6 1/2%, 2003 256,517 158
200M Carolina Power & Light Co., 7 3/4%, 2003 205,174 126
200M Commonwealth Edison, 8 1/4%, 2006 228,141 140
250M Duke Power Co., 5 7/8%, 2003 244,550 150
200M Kansas Gas & Electric Co., 7.60%, 2003 215,688 133
75M Old Dominion Electric Cooperative, 7.97%, 2002 81,425 50
300M Pennsylvania Power & Light Co., 6 7/8%, 2003 311,728 192
250M Philadelphia Electric Co., 8%, 2002 272,850 168
75M Southwestern Electric Power Co., 7%, 2007 80,152 49
- ------------------------------------------------------------------------------------------------------------------------------------
1,896,225 1,166
- ------------------------------------------------------------------------------------------------------------------------------------
Energy--2.2%
315M Baroid Corp., 8%, 2003 349,495 215
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Services--10.9%
75M Banc One Corp., 7 1/4%, 2002 79,896 49
40M BankAmerica Corp., 9 1/2%, 2001 46,315 28
200M Barnett Banks, Inc., 8 1/2%, 1999 215,391 132
300M Chemical Bank, Inc., 7%, 2005 316,138 194
200M Citicorp, 8%, 2003 221,008 136
150M First Union Corp., 8 1/8%, 2002 165,956 102
250M Mellon Bank N.A., 6 1/2%, 2005 254,963 157
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
50M Meridian Bancorp, 7 7/8%, 2002 54,849 34
75M Morgan Guaranty Trust Co., 7 3/8%, 2002 80,537 50
300M Nationsbank Corporation., 8 1/8%, 2002 331,500 204
- ------------------------------------------------------------------------------------------------------------------------------------
1,766,553 1,086
- ------------------------------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--5.0%
250M Anheuser Busch Companies, Inc., 7%, 2005 262,918 162
25M Coca-Cola Enterprises, Inc., 7 7/8%, 2002 27,492 17
300M Hershey Foods Corp., 6.70%, 2005 316,265 194
200M Philip Morris Cos., Inc., 7 1/8%, 2002 209,819 129
- ------------------------------------------------------------------------------------------------------------------------------------
816,494 502
- ------------------------------------------------------------------------------------------------------------------------------------
Food Services--1.6%
250M McDonalds Corporation, 6 5/8%, 2005 258,432 159
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare--2.0%
300M Columbia /HCA Healthcare, 7.69%, 2025 332,035 204
- ------------------------------------------------------------------------------------------------------------------------------------
Investment/Finance Companies--6.0%
300M Associates Corp. of North America, 7 7/8%, 2001 327,871 202
300M General Electric Capital Corp., 7 7/8%, 2006 343,325 211
300M General Motors Acceptance Corp., 7 1/8%, 1999 312,301 192
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
983,497 605
- ------------------------------------------------------------------------------------------------------------------------------------
Media/Cable Television--5.0%
300M New York Times Co., Inc., 7 5/8%, 2005 333,111 205
250M PanAmSat Capital Corp., 9 3/4%, 2000 263,750 162
200M Tele-Communications, Inc., 8 1/4%, 2003 217,718 134
- ------------------------------------------------------------------------------------------------------------------------------------
814,579 501
- ------------------------------------------------------------------------------------------------------------------------------------
Natural Gas--1.9%
300M Columbia Gas System, Inc., 6.80%, 2005 309,953 191
- ------------------------------------------------------------------------------------------------------------------------------------
Oil/Natural Gas--1.7%
250M BP America, Inc., 7 7/8%, 2002 276,599 170
- ------------------------------------------------------------------------------------------------------------------------------------
Paper/Forest Prod/cts--3.4%
100M S. D. Warren Company, 12%, 2004 110,500 67
150M Stone Container Corp., 10 3/4%, 2002 155,813 96
250M Temple Inland, Inc., 9%, 2001 285,606 176
- ------------------------------------------------------------------------------------------------------------------------------------
551,919 339
- ------------------------------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--1.5%
250M Penney J.C. & Co., 6 1/8%, 2003 250,904 154
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--3.4%
250M International Business Machines Corp., 6 3/8%, 2000 256,290 158
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
275M Xerox Corp., 7.15%, 2004 293,085 180
- ------------------------------------------------------------------------------------------------------------------------------------
549,375 338
- ------------------------------------------------------------------------------------------------------------------------------------
Telephone--7.0%
30M GTE Corp., 8.85%, 1998 31,832 20
350M MCI Communication Corp., 7 1/2%, 2004 384,448 236
250M New Jersey Bell Telephone Co., 7 3/8%, 2012 258,419 159
200M Pacific Bell Telephone Co., 7%, 2004 210,376 129
250M Southern Bell Telephone & Telegraph Co., Inc., 8 1/8%, 2017 259,348 159
- ------------------------------------------------------------------------------------------------------------------------------------
1,144,423 703
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $12,405,719) 8,015
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--1.9%
300M Federal Home Loan Mortgage Corp., 7.88%, 2004 (cost $300,000) 306,852 189
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--8.0%
1,200M U.S. Treasury Note, 7 3/4%., 2000 (cost $1,280,312) 1,303,875 802
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--8.0%
850M Gannett Company, 5.85%, 1/8/96 849,034 522
450M Home Depot, 5.70%, 1/5/96 449,714 277
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $1,298,748) 1,298,748 799
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $15,284,779) 98.0% 15,944,140 9,805
Other Assets, Less Liabilities 2.0 317,731 195
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $16,261,871 $10,000
====================================================================================================================================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-Target 2007 Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principle $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY ZERO COUPON OBLIGATIONS--84.1%
$570M Agency For International Development-Israel ("AID"), 2/15/2007 $ 294,744 $ 299
119M Agency For International Development-Israel ("AID"), 3/15/2007 61,219 62
1,513M Agency For International Development-Israel ("AID"), 8/15/2007 757,797 769
181M Agency For International Development-Israel ("AID"), 10/1/2007 89,771 91
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
980M Agency For International Development-Israel ("AID"), 2/15/2008 474,768 482
493M Federal Judiciary Office Building ("JOBS"), 2/15/2007 250,530 254
1,030M Federal National Mortgage Association, 8/1/2008 476,340 483
303M Financing Corporations ("FICOS"), 6/6/2007 150,964 153
1,404M Financing Corporations ("FICOS"), 12/6/2007 675,394 685
220M Financing Corporations ("FICOS"), 12/27/2007 105,418 107
4,070M Government Trust Certificate, 11/15/2007 1,992,981 2,021
586M International Bank For Reconstruction & Development, 8/15/2007 287,728 292
3,450M Resolution Funding Corporation, 10/15/2007 1,724,245 1,749
1,950M Tennessee Valley Authority, 11/1/2007 946,395 960
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Zero Coupon
Obligations (cost $7,658,222) 8,288,294 8,407
- ------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY ZERO COUPON OBLIGATIONS--15.0%
200M Treasury Investors Growth Receipts ("TIGERS"), 11/15/2007 98,715 100
2,750M U.S. Treasury Strips, 11/15/2007 1,384,075 1,404
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Zero Coupon Obligations
(cost $1,388,165) 1,482,790 1,504
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $9,046,387) 99.1% 9,771,084 9,911
Other Assets, Less Liabilities .9 88,663 89
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net Assets 100.0% $9,859,747 $10,000
====================================================================================================================================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Portfolio of Investments
First Investors Life Series Fund-Utilities Income Fund
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--93.2%
Electric Power--44.8%
6,000 American Electric Power Company $ 243,000 $ 165
7,600 Baltimore Gas & Electric Company 216,600 147
5,000 Bangor Hydro-Electric Company 57,500 39
5,000 Carolina Power & Light Company 172,500 117
8,000 CINergy Corporation 245,000 167
2,000 CMS Energy Corporation 59,750 41
9,900 DPL, Inc. 245,025 168
7,750 DQE, Inc. 238,312 162
5,500 DTE Energy Company 189,750 129
6,100 Duke Power Company 288,987 197
1,000 Empresa Nacional De Electricidad SA 57,250 39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
7,600 FPL Group, Inc. 352,450 240
8,500 General Public Utilities Corporation 289,000 197
12,000 Houston Industries, Inc. 291,000 198
6,000 Illinova Corporation 180,000 122
3,500 Kansas City Power & Light Company 91,437 63
4,200 New England Electric System 166,425 113
4,500 NIPSCO Industries, Inc. 172,125 117
5,800 Northeast Utilities 141,375 96
3,000 Northern States Power Company 147,375 100
5,000 Ohio Edison Company 117,500 80
10,700 PacifiCorp 227,375 155
4,000 Peco Energy Company 120,500 82
6,500 Pinnacle West Capital Corporation 186,875 127
5,500 Portland General Corporation 160,187 109
6,300 PP&L Resources, Inc. 157,500 107
7,100 Public Service Company of Colorado 251,163 171
8,000* Public Service Company of New Mexico 141,000 96
7,000 Public Service Enterprise Group, Inc. 214,375 146
3,000 Scana Corporation 85,875 57
8,800 Southern Company 216,700 147
7,800 Teco Energy, Inc. 199,875 136
6,900 Texas Utilities Company 283,763 193
3,000 TNP Enterprises, Inc. 56,250 38
5,000 Unicom Corporation 163,750 111
5,500 Wisconsin Energy Corporation 168,438 115
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
6,595,987 4,487
- ------------------------------------------------------------------------------------------------------------------------------------
Natural Gas--22.4%
8,800 Atlanta Gas Light Company 173,800 118
3,000 Atmos Energy Corporation 69,000 47
4,400 Brooklyn Union Gas Company 128,700 88
5,000* Columbia Gas System, Inc. 219,375 149
2,500 Consolidated Natural Gas Company 113,437 77
4,500 El Paso Natural Gas Company 127,687 87
5,000 Enron Corporation 190,625 130
8,000 MCN Corporation 186,000 127
4,400 National Fuel Gas Company 147,950 101
5,000 New Jersey Resources Corporation 150,625 102
4,200 NICOR, Inc. 115,500 79
7,800 Pacific Enterprises 220,350 150
4,400 Panhandle Eastern Corporation 122,650 83
5,000 Piedmont Natural Gas Company, Inc. 116,250 79
5,000 Questar Corporation 167,500 114
4,400 Sonat, Inc. 156,750 107
5,000 Southwest Gas Corporation 88,125 60
1,500* Tejas Gas Corporation 79,313 54
3,000 Tenneco, Inc. 148,875 101
6,500 UGI Corporation 134,875 92
4,500 Washington Energy Company 83,813 57
4,300 Washington Gas & Light Company 88,150 60
3,000 Wicor, Inc. 96,750 65
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3,700 Williams Companies, Inc. 162,338 110
- ------------------------------------------------------------------------------------------------------------------------------------
3,288,438 2,237
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--3.4%
5,000* Airtouch Communications, Inc. 141,250 96
3,000 A T & T Corp. 194,250 132
4,000 Sprint Corporation 159,500 109
- ------------------------------------------------------------------------------------------------------------------------------------
495,000 337
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications--5.8%
4,000 Comcast Corporation Class "A" 70,500 48
5,000 Ericsson (L.M.) Telephone Co. (ADR) Class "B" 97,500 66
3,000 * LCI International, Inc. 61,500 42
3,000 * MFS Communications Company, Inc. 159,750 109
5,000 * Mobile Telecommunication Technologies Corporation 106,875 73
500 Motorola, Inc. 28,500 19
875 * Tele-Communications, Inc., Liberty Media Group Class "A" 23,515 16
5,000 US West Communications Group 178,750 121
5,000 US West Media Group 95,000 65
1,000 Vodafone Group PLC (ADR) 35,250 24
- ------------------------------------------------------------------------------------------------------------------------------------
857,140 583
- ------------------------------------------------------------------------------------------------------------------------------------
Telephone/Utilities--16.8%
5,900 Ameritech Corporation 348,100 237
5,800 Bell Atlantic Corporation 387,875 264
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10,600 BellSouth Corporation 461,100 314
3,500 Century Telephone Enterprises 111,125 76
4,400 Frontier Corporation 132,000 90
9,600 GTE Corporation 422,400 287
3,500 NYNEX Corporation 189,000 128
6,100 SBC Communications, Inc. 350,750 239
1,500 Telefonica De Espana (ADR) 62,813 43
- ------------------------------------------------------------------------------------------------------------------------------------
2,465,163 1,678
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $11,635,880) 13,701,728 9,322
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--5.5%
200M Chevron Oil Corporation, 5.70%, 1/3/96 199,937 136
400M General Telephone Northwest, 5.82%, 1/3/96 399,871 272
200M Hitachi America, 5.90%, 1/10/96 199,705 136
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $799,513) 799,513 544
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $12,435,393) 98.7% 14,501,241 9,866
Other Assets, Less Liabilities 1.3 197,094 134
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $14,698,335 $10,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
====================================================================================================================================
* Non-income producing
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS LIFE SERIES FUND
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
CASH
BLUE CHIP MANAGEMENT DISCOVERY GOVERNMENT GROWTH
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Investments in securities:
At identified cost $53,859,731 $ 4,109,957 $43,809,559 $ 9,252,545 $42,699,820
=========== =========== =========== =========== ===========
At value (Note 1A) $66,472,517 $ 4,109,957 $50,929,961 $ 9,354,063 $51,016,270
Cash (overdraft) 244,737 65,239 241,141 16,956 1,300
Receivables:
Trust shares sold 149,102 4,164 129,155 2,075 115,621
Investment securities sold -- -- 35,000 -- 56,112
Interest and dividends 101,691 -- 10,036 134,681 66,870
Other assets 141 644 578 -- 603
----------- ----------- ----------- ----------- -----------
Total Assets 66,968,188 4,180,004 51,345,871 9,507,775 51,256,776
----------- ----------- ----------- ----------- -----------
Liabilities
Payables:
Investment securities purchased -- -- 240,178 -- --
Trust shares redeemed 10,453 15,159 161,737 4,819 41,582
Accrued advisory fee 41,528 1,224 31,614 2,760 31,580
Accrued expenses 16,463 2,057 12,389 9 12,391
----------- ----------- ----------- ----------- -----------
Total Liabilities 68,444 18,440 445,918 7,588 85,553
----------- ----------- ----------- ----------- -----------
Net Assets $66,899,744 $ 4,161,564 $50,899,953 $ 9,500,187 $51,171,223
=========== =========== =========== =========== ===========
Net Assets Consist of:
Capital paid in $51,315,635 $ 4,161,564 $41,523,140 $ 9,262,818 $40,897,473
Undistributed net investment income 1,018,903 -- 253,600 601,947 459,781
Accumulated net realized
gain (loss) on investments and
foreign currency transactions 1,952,420 -- 2,002,811 (466,096) 1,497,519
Net unrealized appreciation
of investments and translation of
assets in foreign currencies 12,612,786 -- 7,120,402 101,518 8,316,450
----------- ----------- ----------- ----------- -----------
Total $66,899,744 $ 4,161,564 $50,899,953 $ 9,500,187 $51,171,223
=========== =========== =========== =========== ===========
Shares of Beneficial
Interest Outstanding (Note 2) 3,940,249 4,161,564 2,187,245 903,314 2,499,680
=========== =========== =========== =========== ===========
Net Asset Value, Offering and
Redemption Price Per Share
(Net assets divided
by shares outstanding) $ 16.98 $ 1.00 $ 23.27 $ 10.52 $ 20.47
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS LIFE SERIES FUND
December 31, 1995
INTERNATIONAL INVESTMENT TARGET UTILITIES
HIGH YIELD SECURITIES GRADE MATURITY 2007 INCOME
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Investments in securities:
At identified cost $ 39,977,368 $ 34,319,555 $ 15,284,779 $ 9,046,387 $ 12,435,393
============ ============ ============ ============ ============
At value (Note 1A) $ 41,212,752 $ 40,777,496 $ 15,944,140 $ 9,771,084 $ 14,501,241
Cash (overdraft) (84,149) 19,547 66,404 29,874 87,522
Receivables:
Trust shares sold 37,608 159,030 15,283 84,297 69,014
Investment securities sold -- 60,322 -- 47,152 --
Interest and dividends 798,851 88,993 266,508 -- 44,681
Other assets 792 132 -- -- 35
------------ ------------ ------------ ------------ ------------
Total Assets 41,965,854 41,105,520 16,292,335 9,932,407 14,702,493
------------ ------------ ------------ ------------ ------------
Liabilities
Payables:
Investment securities purchased -- 22,243 -- 72,660 --
Trust shares redeemed 30,499 20,192 19,238 -- 48
Accrued advisory fee 25,970 25,131 4,580 -- 4,110
Accrued expenses 15,424 26,392 6,646 -- --
------------ ------------ ------------ ------------ ------------
Total Liabilities 71,893 93,958 30,464 72,660 4,158
------------ ------------ ------------ ------------ ------------
Net Assets $ 41,893,961 $ 41,011,562 $ 16,261,871 $ 9,859,747 $ 14,698,335
============ ============ ============ ============ ============
Net Assets Consist of:
Capital paid in $ 38,230,979 $ 32,724,961 $ 14,749,614 $ 8,883,571 $ 12,373,687
Undistributed net investment income 3,663,919 493,877 936,245 209,332 380,800
Accumulated net realized
gain (loss) on investments and
foreign currency transactions (1,236,321) 1,334,545 (83,349) 42,147 (122,000)
Net unrealized appreciation
of investments and translation of
assets in foreign currencies 1,235,384 6,458,179 659,361 724,697 2,065,848
------------ ------------ ------------ ------------ ------------
Total $ 41,893,961 $ 41,011,562 $ 16,261,871 $ 9,859,747 $ 14,698,335
============ ============ ============ ============ ============
Shares of Beneficial
Interest Outstanding (Note 2) 3,620,808 2,632,200 1,385,759 804,138 1,252,365
============ ============ ============ ============ ============
Net Asset Value, Offering and
Redemption Price Per Share
(Net assets divided
by shares outstanding) $ 11.57 $ 15.58 $ 11.73 $ 12.26 $ 11.74
============ ============ ============ ============ ============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations FIRST INVESTORS LIFE SERIES FUND Year Ended December 31,
1995
- ------------------------------------------------------------------------------------------------------------------------------------
CASH
BLUE CHIP MANAGEMENT DISCOVERY GOVERNMENT GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Interest $ 303,155 $ 245,440 $ 472,205 $ 633,757 $ 113,559
Dividends 1,165,452 -- 119,610 -- 707,980
Consent fees -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total income 1,468,607 245,440 591,815 633,757 821,539
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses (Notes 1 and 5):
Advisory fee 399,774 30,852 301,852 66,610 311,003
Professional fees 16,075 6,027 10,186 4,869 10,665
Reports to shareholders 16,614 1,528 13,537 3,181 14,601
Custodian fees 12,884 5,345 13,581 4,764 15,283
Other expenses 14,878 1,370 11,987 2,899 13,003
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 460,225 45,122 351,143 82,323 364,555
Less: Expenses waived or assumed -- (19,978) -- (51,238) --
Custodian fees paid indirectly (12,154) (471) (13,418) -- (2,612)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses--net 448,071 24,673 337,725 31,085 361,943
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1,020,536 220,767 254,090 602,672 459,596
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions (Note 3):
Net realized gain (loss) on investments and foreign
currency transactions 1,953,467 178 2,003,359 322,099 1,548,981
Net unrealized appreciation of investments and
translation of assets in foreign currencies 12,258,988 -- 6,147,258 344,995 6,983,358
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain on investments and foreign currency 14,212,455 178 8,150,617 667,094 8,532,339
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 15,232,991 $ 220,945 $ 8,404,707 $ 1,269,766 $ 8,991,935
====================================================================================================================================
</TABLE>
+ Net of $4,803 foreign taxes withheld
(a)Includes net realized gain of $2,862 on foreign currency transactions
(b)Includes $1,062 of net unrealized appreciation on translation of assets in
foreign currencies
<PAGE>
*From April 25, 1995 (commencement of operations) to December 31, 1995
See notes to financial statements
<TABLE>
<CAPTION>
Statement of Operations FIRST INVESTORS LIFE SERIES FUND Year Ended December 31,
1995
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL INVESTMENT TARGET UTILITIES
HIGH YIELD SECURITIES GRADE MATURITY 2007* INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Interest $3,700,593 $139,067 $979,652 $209,332 $39,389
Dividends 209,611 712,375+ -- -- 373,451
Consent fees 70,691 -- 22,113 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total income 3,980,895 851,442 1,001,765 209,332 412,840
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses (Notes 1 and 5):
Advisory fee 279,016 262,203 103,248 25,339 67,678
Professional fees 12,296 13,532 7,323 1,319 3,397
Reports to shareholders 13,122 12,521 5,280 249 2,363
Custodian fees 7,828 56,986 4,124 1,219 5,462
Other expenses 10,077 10,347 4,678 850 3,120
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses 322,339 355,589 124,653 28,976 82,020
Less: Expenses waived or assumed -- -- (55,066) (28,976) (50,437)
Custodian fees paid indirectly (7,828) -- (4,092) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses--net 314,511 355,589 65,495 -- 31,583
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 3,666,384 495,853 936,270 209,332 381,257
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions (Note 3):
Net realized gain (loss) on investments and foreign
currency transactions (147,796) 1,334,830(a) (35,809) 42,147 (21,926)
Net unrealized appreciation of investments and translation
of assets in foreign currencies 3,097,609 4,263,821(b) 1,528,072 724,697 2,200,558
- ---------------------------------------------------------------------------------------------------------------------------------
Net gain on investments and foreign currency 2,949,813 5,598,651 1,492,263 766,844 2,178,632
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $6,616,197 $6,094,504 $2,428,533 $976,176 $2,559,889
=================================================================================================================================
===
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUND
BLUE CHIP CASH MANAGEMENT
--------------------------------- ---------------------------------
Year Ended December 31 1995 1994 1995 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $1,020,536 $568,219 $220,767 $144,250
Net realized gain (loss) on investments and
foreign currency transactions 1,953,467 2,931,871 178 61
Net unrealized appreciation (depreciation)
of investments and translation of assets
in foreign currencies 12,258,988 (4,069,423) -- --
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets
resulting from operations 15,232,991 (569,333) 220,945 144,311
--------------- --------------- --------------- ---------------
Distributions to Shareholders from:
Net investment income (569,704) (204,030) (220,945) (144,311)
Net realized gain on investments (2,922,430) (416,537) -- --
--------------- --------------- --------------- ---------------
Total distributions (3,492,134) (620,567) (220,945) (144,311)
--------------- --------------- --------------- ---------------
Trust Share Transactions (a)
Proceeds from shares sold 12,100,755 9,253,157 1,802,472 828,637
Value of distributions reinvested 3,492,134 620,566 220,945 144,311
Cost of shares redeemed (1,858,303) (1,289,081) (1,790,408) (1,286,977)
--------------- --------------- --------------- ---------------
Net increase (decrease) from trust
share transactions 13,734,586 8,584,642 233,009 (314,029)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets 25,475,443 7,394,742 233,009 (314,029)
Net Assets
Beginning of year 41,424,301 34,029,559 3,928,555 4,242,584
--------------- --------------- --------------- ---------------
End of year+ $66,899,744 $41,424,301 $4,161,564 $3,928,555
=============== =============== =============== ===============
+Includes undistributed net investment income of $1,018,903 $568,071 $ -- $ --
=============== =============== =============== ===============
(a) Trust Shares Issued and Redeemed
Sold 791,231 664,327 1,802,472 828,637
Issued for distributions reinvested 261,975 45,969 220,945 144,311
Redeemed (125,241) (92,113) (1,790,408) (1,286,977)
---------------- -------------- -------------- ----------------
Net increase (decrease) in shares outstanding 927,965 618,183 233,009 (314,029)
=============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUND
DISCOVERY GOVERNMENT
------------------------------ -------------------------------
Year Ended December 31 1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 254,090 $ 93,202 $ 602,672 $ 530,105
Net realized gain (loss) on investments and
foreign currency transactions 2,003,359 1,992,419 322,099 (786,678)
Net unrealized appreciation (depreciation)
of investments and translation of assets
in foreign currencies 6,147,258 (2,687,366) 344,995 (75,120)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 8,404,707 (601,745) 1,269,766 (331,693)
------------ ------------ ------------ ------------
Distributions to Shareholders from:
Net investment income (93,692) -- (507,584) (84,143)
Net realized gain on investments (1,992,932) (1,014,247) -- (138,692)
------------ ------------ ------------ ------------
Total distributions (2,086,624) (1,014,247) (507,584) (222,835)
------------ ------------ ------------ ------------
Trust Share Transactions (a)
Proceeds from shares sold 13,530,189 10,106,014 1,678,903 1,488,126
Value of distributions reinvested 2,086,624 1,014,247 507,584 222,836
Cost of shares redeemed (1,278,557) (481,564) (1,326,445) (1,512,005)
------------ ------------ ------------ ------------
Net increase (decrease) from trust
share transactions 14,338,256 10,638,697 860,042 198,957
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 20,656,339 9,022,705 1,622,224 (355,571)
Net Assets
Beginning of year 30,243,614 21,220,909 7,877,963 8,233,534
------------ ------------ ------------ ------------
End of year+ $ 50,899,953 $ 30,243,614 $ 9,500,187 $ 7,877,963
============ ============ ============ ============
+Includes undistributed net investment income of $ 253,600 $ 93,202 $ 601,947 $ 506,859
============ ============ ============ ============
(a) Trust Shares Issued and Redeemed
Sold 617,324 501,020 170,551 151,268
Issued for distributions reinvested 109,304 51,897 53,998 22,959
Redeemed (61,853) (24,001) (133,164) (152,565)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding 664,775 528,916 91,385 21,662
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUND
GROWTH HIGH YIELD
--------------------------------- ---------------------------------
Year Ended December 31 1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 459,596 $ 176,061 $ 3,666,384 $ 2,971,391
Net realized gain (loss) on investments and
foreign currency transactions 1,548,981 555,580 (147,796) (106,914)
Net unrealized appreciation (depreciation)
of investments and translation of assets
in foreign currencies 6,983,358 (1,490,527) 3,097,609 (3,352,582)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 8,991,935 (758,886) 6,616,197 (488,105)
------------ ------------ ------------ ------------
Distributions to Shareholders from:
Net investment income (175,754) -- (2,973,759) (1,135,309)
Net realized gain on investments (591,906) (336,304) -- --
------------ ------------ ------------ ------------
Total distributions (767,660) (336,304) (2,973,759) (1,135,309)
------------ ------------ ------------ ------------
Trust Share Transactions (a)
Proceeds from shares sold 10,824,201 8,593,462 5,830,065 4,464,152
Value of distributions reinvested 767,659 336,304 2,973,759 1,135,309
Cost of shares redeemed (1,442,104) (695,724) (2,837,047) (2,284,666)
------------ ------------ ------------ ------------
Net increase (decrease) from trust
share transactions 10,149,756 8,234,042 5,966,777 3,314,795
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 18,374,031 7,138,852 9,609,215 1,691,381
Net Assets
Beginning of year 32,797,192 25,658,340 32,284,746 30,593,365
------------ ------------ ------------ ------------
End of year+ $ 51,171,223 $ 32,797,192 $ 41,893,961 $ 32,284,746
============ ============ ============ ============
+Includes undistributed net investment income of $ 459,781 $ 176,061 $ 3,663,919 $ 2,971,294
============ ============ ============ ============
(a) Trust Shares Issued and Redeemed
Sold 572,178 510,485 537,054 416,564
Issued for distributions reinvested 45,613 20,645 296,191 107,326
Redeemed (78,592) (41,089) (263,126) (214,630)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding 539,199 490,041 570,119 309,260
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUND
INTERNATIONAL INVESTMENT
SECURITIES GRADE
------------------------------ -------------------------------
1995 1994 1995 1994
Year Ended December 31 ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations $ 495,853 $ 331,106 $ 936,270 $ 729,582
Net investment income
Net realized gain (loss) on investments and 1,334,830 913,209 (35,809) (47,540)
foreign currency transactions
Net unrealized appreciation (depreciation)
of investments and translation of assets
in foreign currencies 4,263,821 (1,619,867) 1,528,072 (1,054,894)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 6,094,504 (375,552) 2,428,533 (372,852)
------------ ------------ ------------ ------------
Distributions to Shareholders from:
Net investment income (284,370) (87,059) (605,201) (154,441)
Net realized gain on investments (601,917) -- -- (90,556)
------------ ------------ ------------ ------------
Total distributions (886,287) (87,059) (605,201) (244,997)
------------ ------------ ------------ ------------
Trust Share Transactions (a)
Proceeds from shares sold 6,301,362 11,075,210 3,462,505 2,762,399
Value of distributions reinvested 886,288 87,058 605,201 244,996
Cost of shares redeemed (2,692,802) (399,664) (1,231,643) (997,487)
------------ ------------ ------------ ------------
Net increase from trust share transactions 4,494,848 10,762,604 2,836,063 2,009,908
------------ ------------ ------------ ------------
Net increase in net assets 9,703,065 10,299,993 4,659,395 1,392,059
Net Assets
Beginning of year 31,308,497 21,008,504 11,602,476 10,210,417
------------ ------------ ------------ ------------
End of year+ $ 41,011,562 $ 31,308,497 $ 16,261,871 $11,602,476
============ ============ ============ ============
+Includes undistributed net investment income of $ 493,877 $ 279,003 $ 936,245 $ 605,176
============ ============ ============ ============
(a)Trust Shares Issued and Redeemed
Sold 439,419 811,007 315,041 264,613
Issued for distributions reinvested 69,350 6,642 59,159 24,055
Redeemed (194,386) (29,290) (113,482) (96,249
------------ ------------ ------------ ------------
Net increase in shares outstanding 314,383 788,359 260,718 192,419
============ ============ ============ ============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUND
TARGET
MATURITY UTILITIES
2007 INCOME
--------------- --------------- ---------------
1995* 1995 1994
Year Ended December 31 --------------- --------------- ---------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations $ 209,332 $ 381,257 $ 115,157
Net investment income
Net realized gain (loss) on investments and 42,147 (21,926) (100,075)
foreign currency transactions
Net unrealized appreciation (depreciation)
of investments and translation of assets 724,697 2,200,558 (132,614)
in foreign currencies --------------- --------------- ---------------
Net increase (decrease) in net assets 976,176 2,559,889 (117,532)
resulting from operations. --------------- --------------- ---------------
Distributions to Shareholders from: -- (110,536) (5,535)
Net investment income -- -- --
Net realized gain on investments --------------- --------------- ---------------
-- (110,536) (5,535)
Total distributions --------------- --------------- ---------------
Trust Share Transactions (a)
Proceeds from shares sold 8,383,571 7,708,137 4,449,169
Value of distributions reinvested -- 110,535 5,534
Cost of shares redeemed -- (289,717) (105,265)
--------------- --------------- ---------------
Net increase from trust share transactions 8,383,571 7,528,955 4,349,438
--------------- --------------- ---------------
Net increase in net assets 9,359,747 9,978,308 4,226,371
Net Assets
Beginning of year 500,000** 4,720,027 493,656
--------------- --------------- ---------------
End of year+ $ 9,859,747 $ 14,698,335 $ 4,720,027
=============== =============== ===============
+Includes undistributed net investment income of $ 209,332 $ 380,800 $ 110,079
=============== =============== ===============
(a)Trust Shares Issued and Redeemed
Sold 754,138 755,204 474,683
Issued for distributions reinvested -- 11,709 600
Redeemed -- (28,182) (11,306)
--------------- --------------- ---------------
Net increase in shares outstanding 754,138 738,731 463,977
=============== =============== ===============
* From April 25, 1995 (commencement of operations) to December 31, 1995 ** See
Note 6
See notes to financial statements
</TABLE>
<PAGE>
Notes to Financial Statements
FIRST INVESTORS LIFE SERIES FUND
1. Significant Accounting Policies--The Fund, a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as a diversified, open-end
management investment company. The Fund operates as a series fund, issuing
shares of beneficial interest in the Blue Chip, Cash Management, Discovery,
Government, Growth, High Yield, International Securities, Investment Grade,
Target Maturity 2007 and Utilities Income Funds and accounts separately for the
assets, liabilities and operations of each Fund. The objective of each Fund is
as follows:
Blue Chip Fund seeks high total investment return consistent with the
preservation of capital. Cash Management Fund seeks to earn a high rate of
current income consistent with the preservation of capital and maintenance of
liquidity.
Discovery Fund seeks long-term capital appreciation.
Government Fund seeks to achieve a significant level of current income which is
consistent with security and liquidity of principal.
Growth Fund seeks long-term capital appreciation.
High Yield Fund seeks to earn a high level of current income. Consistent
<PAGE>
with that objective, the Fund will also seek growth of capital as a secondary
objective.
International Securities Fund seeks long-term capital growth. As a secondary
objective, the Fund seeks to earn a reasonable level of current income.
Investment Grade Fund seeks a maximum level of income consistent with investment
in investment grade debt securities.
Target Maturity 2007 Fund seeks a predictable compounded investment return for
investors who hold their Funds' shares until the Funds' maturity, consistent
with the preservation of capital.
Utilities Income Fund seeks high current income. Long-term capital appreciation
is a secondary objective.
A. Security Valuation--A security listed or traded on an exchange or the NASDAQ
National Market System is valued at its last sale price on the exchange or
system where the security is principally traded, and lacking any sales, the
security is valued at the mean between the closing bid and asked prices.
Securities traded in the over-the-counter markets are valued at the mean between
the last bid and asked prices. For the Government, High Yield and Investment
Grade Funds, each security traded in the over-the-counter market (including
securities listed on exchanges or systems whose primary market is believed to be
over-the-counter) is valued at the mean between the last bid and asked prices
based upon quotes furnished by a market maker for such securities. The High
Yield, International Securities, Investment Grade and Target Maturity 2007 Funds
may use prices provided by a pricing service. The pricing service uses
quotations obtained from investment dealers or brokers, information with respect
to market transactions in comparable securities and other available information
in determining value. Securities for which market quotations are not readily
available and any other assets are valued on a consistent basis at fair value as
determined in good faith by or under the supervision of the Fund's officers in
the manner specifically authorized by the trustees of the Fund.
The investments in the Cash Management Fund, when purchased at a discount, are
valued at amortized cost and when purchased at face value, are valued at cost
plus accrued interest.
B. Federal Income Taxes--No provision has been made for federal income taxes on
net income or capital gains since it is the policy of each Fund to continue to
comply with the special provisions of the Internal
<PAGE>
Revenue Code applicable to investment companies, and to make sufficient
distributions of income and capital gains (in excess of any available capital
loss carryovers) to relieve each fund from all, or substantially all, federal
income taxes. At December 31, 1995, Funds having capital loss carryovers were as
follows:
<TABLE>
<CAPTION>
Year Capital Loss Carryovers Expire
-----------------------------------------
Fund Total 1998 1999 2002 2003
- ----- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
GOVERNMENT $ 466,096 $ --- $ --- $466,096 $ ---
HIGH YIELD 1,236,321 625,684 355,926 106,914 147,797
INVESTMENT GRADE 83,349 --- --- 47,540 35,809
UTILITIES INCOME 122,000 --- --- 100,075 21,925
</TABLE>
C. Foreign Currency Translations--For valuation purposes, quotations of
foreign securities in foreign currency are translated to U.S. dollar
equivalents using the daily rate of exchange. Purchases and sales of
investment securities, dividend income and certain expenses are
translated to U.S. dollars at the rates of exchange prevailing on the
respective dates of such transactions.
The International Securities Fund does not isolate that portion of gains and
losses on investments which is due to changes in foreign exchange rates from
that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains and losses
from investments. Net realized and unrealized gain from foreign currency related
transactions includes gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends and
foreign withholding taxes.
D. Distributions to Shareholders--Distributions to shareholders from net
investment income and net realized gains are declared and paid annually on all
funds except for the Cash Management Fund which declares daily and pays monthly.
Income dividends and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions, capital loss carryforwards and deferral of wash
sales. E. Expense Allocation--Expenses directly charged or attributable to a
<PAGE>
Fund are paid from the assets of that Fund. General expenses of the Funds are
allocated among and charged to the assets of each Fund on a fair and equitable
basis, which may be based on the relative assets of each Fund or the nature of
the services performed and relative applicability to each Fund.
F. Repurchase Agreements--Securities pledged as collateral for repurchase
agreements are held by the Fund's custodian until maturity of the repurchase
agreement. Provisions of the agreement provide that the market value of the
collateral is sufficient in the event of default; however, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
G. Other--Security transactions are accounted for on the date the securities are
purchased or sold. Cost is determined and gains and losses are based, on the
identified cost basis for securities and the amortized cost basis for short-term
securities, for both financial statement and federal income tax purposes.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities are recorded on the ex-dividend date or as
soon thereafter as the Fund is informed of the dividend. Interest income and
estimated expenses are accrued daily. The Bank of New York as Custodian for all
Funds, except the International Securities Fund, has provided credits in the
amount of $52,020 against custodian charges based on the uninvested cash
balances of the Funds.
2. Trust Shares--The Declaration of Trust permits the issuance of an unlimited
number of shares of beneficial interest, of one or more Funds. Shares in the
Funds are acquired through the purchase of variable annuity or variable life
insurance contracts sold by First Investors Life Insurance Company.
3. Purchases and Sales of Securities--For the year ended December 31, 1995,
purchases and sales of securities and long-term U.S. Government obligations,
excluding foreign currencies, short-term corporate notes and repurchase
agreements were as follows:
<TABLE>
<CAPTION>
Long-Term
Securities U.S. Government Obligations
-------------------------- ---------------------------
Cost of Proceeds Cost of Proceeds
Fund Purchases of Sales Purchases of Sales
- ---- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
BLUE CHIP $24,767,189 $12,743,972 $ -- $ --
DISCOVERY 33,299,263 25,314,118 -- --
GOVERNMENT -- -- 18,814,356 15,620,984
GROWTH 35,962,901 25,421,753 -- --
HIGH YIELD 26,108,254 19,876,773 -- --
INTERNATIONAL SECURITIES 19,825,010 15,013,276 -- --
INVESTMENT GRADE 4,521,590 1,503,758 1,808,046 1,707,808
TARGET MATURITY 2007 327,670 338,977 9,895,126 879,579
UTILITIES INCOME 9,231,512 1,417,154 -- --
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1995, aggregate cost and net unrealized appreciation of
securities for federal income tax purposes were as follows:
Gross Gross
Aggregate Unrealized Unrealized Net Unrealized
Fund Cost Appreciation Depreciation Appreciation
- ------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
BLUE CHIP $ 53,860,356 $ 13,352,093 $ 739,932 $ 12,612,161
CASH MANAGEMENT 4,109,957 -- -- --
DISCOVERY 43,816,620 9,062,423 1,949,102 7,113,321
GOVERNMENT 9,252,545 146,867 45,349 101,518
GROWTH 42,706,633 9,278,167 968,530 8,309,637
HIGH YIELD 39,977,368 1,819,585 584,201 1,235,384
INTERNATIONAL SECURITIES 34,319,555 7,169,525 711,583 6,457,942
INVESTMENT GRADE 15,284,779 683,787 24,426 659,361
TARGET MATURITY 2007 9,047,030 724,054 -- 724,054
UTILITIES INCOME 12,435,393 2,110,940 45,092 2,065,848
</TABLE>
4. Rule 144A Securities--Under Rule 144A, certain restricted securities are
exempt from the registration requirements of the Securities Act of 1933 and may
only be sold to qualified institutional investors. At December 31, 1995, the
High Yield and International Securities Funds held 144A securities, with
aggregate values of $3,463,500 and $152,577, respectively. These securities
represent 8.3% and .4%, respectively, of
<PAGE>
the Funds' net assets and are valued as set forth in Note 1A.
5. Advisory Fee and Other Transactions With Affiliates--Certain officers and
trustees of the Fund are officers and directors of its investment adviser, First
Investors Management Company, Inc. ("FIMCO") and/or its transfer agent,
Administrative Data Management Corp. Officers and trustees of the Fund received
no remuneration from the Fund for serving in such capacities. Their remuneration
(together with certain other expenses of the Fund) is paid by FIMCO or First
Investors Corporation. The Investment Advisory Agreement provides as
compensation to FIMCO an annual fee, payable monthly, at the rate of .75% on the
first $250 million of each Fund's average daily net assets, declining by .03% on
each $250 million thereafter, down to .66% on average daily net assets over $750
million. For the year ended December 31, 1995, total advisory fees were
$1,847,575 of which $168,480 was waived by the investment adviser. In addition,
$25,770 of expenses were assumed by FIMCO. Pursuant to certain state
regulations, FIMCO has agreed to reimburse a Fund if and to the extent that any
Funds' aggregate operating expenses, including the advisory fee but generally
excluding interest, taxes, brokerage commissions and extraordinary expenses,
exceed any limitation on expenses applicable to the Fund in those states (unless
waivers of such limitations have been obtained). The amount of any such
reimbursement is limited to the yearly advisory fee. For the year ended December
31, 1995, no reimbursement was required pursuant to these provisions.
Wellington Management Company serves as investment subadviser to the Growth Fund
and the International Securities Fund. The subadviser is paid by FIMCO and not
by the Fund.
6. Commencement of Operations--The Target Maturity 2007 Fund commenced
operations in April 1995 following the sale of 50,000 shares of beneficial
interest to First Investors Life Insurance Company for $500,000.
7. Concentration of Credit Risk--The High Yield Fund's investment in high yield
securities, whether rated or unrated, may be considered speculative and subject
to greater market fluctuations and risk of loss of income and principal than
lower yielding, higher rated, fixed income securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At December 31, 1995, the
High Yield Fund held one defaulted security with a value of $131,300
representing less than 1/2 of 1% of the Fund's net assets.
<PAGE>
The Utilities Income Fund invests in securities issued by companies primarily
engaged in the public utilities industries. As a result, there are certain
credit risks which may subject the Fund more significantly to economic changes
occurring in the public utilities industry.
Independent Auditor's Report
To the Shareholders and Trustees of
First Investors Life Series Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of the ten funds comprising First Investors Life
Series Fund as of December 31, 1995, the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for the periods
indicated thereon. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the ten funds comprising First Investors Life Series Fund as of December 31,
1995, and the results of their operations, changes in their net assets and
financial highlights for each of the respective periods presented, in conformity
with generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1996
<PAGE>
Financial Statements as of June 30, 1996
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE BLUE CHIP FUND
June 30, 1996
- --------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--86.2%
Basic Industry--5.6%
6,300 AlliedSignal, Inc. $ 359,888 $ 44
6,100 *Alumax, Inc. 185,287 23
3,800 Aluminum Company of America 218,025 27
6,500 Avery Dennison Corporation 356,687 44
10,300 Barrick Gold Corporation 279,388 34
5,650 Dow Chemical Company 429,400 53
7,700 Du Pont (E.I.) de Nemours & Company 609,262 75
8,800 Freeport-McMoRan Copper & Gold, Inc. Class "B 34
6,800 IMC Global, Inc. 255,850 32
3,900 Mead Corporation 202,312 25
6,100 Minnesota Mining & Manufacturing Company 420,900 52
6,000 Monsanto Company 195,000 24
7,700 Morton International, Inc. 286,825 35
3,500 Nucor Corporation 177,188 22
4,600 Sigma-Aldrich Corporation 246,100 30
- --------------------------------------------------------------------------------
4,502,612 554
- --------------------------------------------------------------------------------
Capital Goods--9.3%
5,200 Boeing Company 453,050 56
2,700 Caterpillar, Inc. 182,925 22
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
4,900 Danaher Corporation 213,150 26
2,300 Eaton Corporation 134,837 18
3,100 Emerson Electric Company 280,162 34
6,100 Fluor Corporation 398,787 49
25,200 General Electric Company 2,179,800 268
4,200 General Signal Corporation 159,075 20
5,700 Grainger (W.W.), Inc. 441,750 54
8,700 Harnischfeger Industries, Inc. 289,275 36
7,100 Ingersoll-Rand Company 310,625 38
18,700 Laidlaw, Inc. Class "B" 189,337 23
3,200 Lockheed Martin Corporation 268,800 33
21,600 Loral Space & Communications 294,300 36
7,200 Raytheon Company 371,700 46
10,000 *Tyco International Ltd. 407,500 50
3,600 United Technologies Corporation 414,000 51
6,000 *Varity Corporation 288,750 36
8,800 WMX Technologies, Inc. 288,200 35
- --------------------------------------------------------------------------------
7,566,023 931
- --------------------------------------------------------------------------------
Consumer Durables--2.4%
12,300 Corning, Inc. 472,012 58
16,150 Ford Motor Company 522,856 64
9,900 General Motors Corporation 518,512 64
5,100 Goodyear Tire & Rubber Company 246,075 30
7,450 Masco Corporation 225,363 28
- --------------------------------------------------------------------------------
1,984,818 244
- --------------------------------------------------------------------------------
Consumer Non-Durables--17.6%
12,200 Abbott Laboratories 530,700 65
8,600 American Home Products Corporation 517,075 64
6,900 Anheuser-Busch Cos., Inc. 517,500 64
7,400 Bristol-Myers Squibb Company 666,000 82
38,000 Coca-Cola Company 1,857,250 228
6,200 Columbia/HCA Healthcare Corporation 330,925 41
5,300 CPC International, Inc. 381,600 47
5,350 Eastman Kodak Company 415,962 51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
8,400 Eli Lilly & Company 546,000 67
3,800 General Mills, Inc. 207,100 25
6,900 Gillette Company 430,387 53
10,050 Heinz (H.J.) Company 305,269 38
18,800 Johnson & Johnson 930,600 114
3,100 Kellogg Company 227,075 28
5,200 Kimberly-Clark Corporation 401,700 49
3,800 Medtronic, Inc. 212,800 26
12,000 Merck & Company, Inc. 775,500 95
12,500 Newell Company 382,812 47
3,900 Nike, Inc. Class "B" 400,725 49
27,700 PepsiCo, Inc. 979,887 121
8,700 Philip Morris Cos., Inc. 904,800 111
10,000 Procter & Gamble Company 906,250 112
5,400 Schering-Plough Corporation 338,850 42
8,800 *Tenet Healthcare Corporation 188,100 23
3,800 Unilever N.V. 551,475 68
4,000 United Healthcare Corporation 202,000 25
4,000 Warner-Lambert Company 220,000 27
- --------------------------------------------------------------------------------
14,328,342 1,762
- --------------------------------------------------------------------------------
Consumer Services--10.1%
24,600 *Federated Department Stores, Inc. 839,475 103
6,700 Home Depot, Inc. 361,800 44
19,650 *Infinity Broadcasting Corporation 589,500 73
3,900 ITT Corporation 258,375 32
3,900 ITT Hartford Group, Inc. 207,675 26
6,000 *Kroger Company 237,000 29
4,250 Marriott International, Inc. 228,437 28
9,356 Mattel, Inc. 267,815 33
10,150 McDonald's Corporation 474,512 58
5,800 McGraw-Hill Companies, Inc. 265,350 33
12,700 *Price/Costco, Inc. 274,637 34
5,200 Sears, Roebuck and Company 252,850 31
13,400 Talbots, Inc. 433,825 53
10,625 *Tele-Communications, Inc., Liberty Media
Group Class "A" 281,563 35
16,100 *Tele-Communications, Inc., TCI Group Class " 291,813 36
5,400 Time Warner, Inc. 211,950 26
8,100 Tribune Company 588,263 72
5,000 *Viacom, Inc. Class "B" 194,375 24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
6,400 *Vons Companies, Inc. 239,200 29
22,900 Wal-Mart Stores, Inc. 581,088 71
5,000 Walgreen Company 167,500 21
9,800 Walt Disney Company 616,175 76
13,800 *Woolworth Corporation 310,500 38
- --------------------------------------------------------------------------------
8,173,678 1,005
- --------------------------------------------------------------------------------
Energy--8.8%
7,100 Amoco Corporation 513,863 63
10,700 Baker Hughes, Inc. 351,763 43
2,700 Burlington Resources, Inc. 116,100 14
9,400 Chevron Corporation 554,600 68
6,000 Dresser Industries, Inc. 177,000 22
10,100 Enron Corporation 412,838 51
13,500 Exxon Corporation 1,172,812 144
3,200 Halliburton Company 177,600 22
4,600 Kerr-McGee Corporation 280,025 34
7,100 Mobil Corporation 796,088 98
7,900 Royal Dutch Petroleum Company 1,214,625 149
5,600 Schlumberger Ltd. 471,800 58
7,800 Sonat, Inc. 351,000 44
3,500 Texaco, Inc. 293,563 36
9,000 Unocal Corporation 303,750 38
- -------------------------------------------------------------------------------
7,187,427 884
- -------------------------------------------------------------------------------
Financial--12.1%
6,950 American Express Company 310,144 38
8,100 American International Group, Inc. 798,863 98
9,300 American Re Corporation 417,338 51
16,500 Banc One Corporation 561,000 70
8,000 Bank of Boston Corporation 396,000 50
6,600 BankAmerica Corporation 499,950 61
11,900 Charles Schwab Corporation 291,550 36
9,768 Chase Manhattan Corporation 689,865 85
5,800 Chubb Corporation 289,275 36
9,200 Citicorp 760,150 93
5,400 Dean Witter Discover & Company 309,150 38
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
25,500 Federal National Mortgage Association 854,250 105
9,800 First Union Corporation 596,575 73
2,400 General Re Corporation 365,400 45
30,800 Hibernia Corporation Class "A" 334,950 41
4,100 Merrill Lynch & Company, Inc. 267,013 33
6,900 NationsBank Corporation 570,113 70
14,000 Norwest Corporation 488,250 60
8,800 Salomon, Inc. 387,200 48
4,700 Torchmark Corporation 205,625 25
28,000 USF&G Corporation 458,500 56
- --------------------------------------------------------------------------------
9,851,161 1,212
- --------------------------------------------------------------------------------
Food Wholesalers--.5%
11,500 Sysco Corporation 393,875 48
- --------------------------------------------------------------------------------
Health Care/Miscellaneous--1.0%
38,600 *Cardiovascular Dynamics, Inc. 472,850 58
6,900 *Nellcor Puritan Bennett, Inc. 334,650 41
- --------------------------------------------------------------------------------
807,500 99
- --------------------------------------------------------------------------------
Technology--11.9%
7,600 *Adaptec, Inc. 360,050 44
9,100 *Airtouch Communications, Inc. 257,075 32
23,300 A T & T Corp. 1,444,600 178
9,800 *Cisco Systems, Inc. 554,925 68
2,100 Computer Associates International, Inc. 149,625 18
8,300 First Data Corporation 660,888 81
7,600 Hewlett-Packard Company 757,150 93
11,600 Intel Corporation 851,875 105
8,800 International Business Machines Corporation 871,200 107
7,500 *LSI Logic Corporation 195,000 24
9,900 MCI Communications Corporation 253,688 32
8,400 *Microsoft Corporation 1,009,050 124
6,000 Motorola, Inc. 377,250 46
7,100 *National Semiconductor Corporation 110,050 14
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
16,675 *Oracle Corporation 657,620 81
6,300 *Seagate Technology, Inc. 283,500 35
5,100 Sprint Corporation 214,200 26
6,510 Vishay Intertechnology, Inc. 153,799 19
10,200 Xerox Corporation 545,700 67
- --------------------------------------------------------------------------------
9,707,245 1,194
- --------------------------------------------------------------------------------
Transportation--1.7%
4,500 *AMR Corporation 409,500 50
2,400 Burlington Northern, Inc. 194,100 24
1,000 *Genesee & Wyoming, Inc. Class "A" 20,500 2
13,000 Ryder System, Inc. 365,625 45
6,000 Union Pacific Corporation 419,250 52
- --------------------------------------------------------------------------------
1,408,975 173
- --------------------------------------------------------------------------------
Utilities--5.2%
3,400 Bell Atlantic Corporation 216,750 27
8,800 BellSouth Corporation 372,900 46
8,700 Carolina Power & Light Company 330,600 41
15,100 CINergy Corporation 483,200 59
10,400 Duke Power Company 533,000 66
12,700 FPL Group, Inc. 584,200 71
13,600 GTE Corporation 608,600 75
3,600 NYNEX Corporation 171,000 21
9,800 PacifiCorp 218,050 27
4,900 SBC Communications, Inc. 241,325 30
10,500 Texas Utilities Company 448,875 55
- --------------------------------------------------------------------------------
4,208,500 518
- --------------------------------------------------------------------------------
Total Value of Common Stocks (cost $53,488,043) 70,120,156 8,624
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONVERTIBLE BONDS--.5%
$ 500M Bell Sports Corporation,
4 1/4%, 11/15/2000 (cost $435,090) 376,250 47
- --------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--9.8%
700M BellSouth Telecommunications, Inc.,
5.32%, 7/23/96 697,724 86
800M BellSouth Telecommunications, Inc.,
5.35%, 8/20/96 794,055 98
450M Du Pont (E.I.) de Nemours & Co.,
5.31%, 7/16/96 449,004 55
600M Du Pont (E.I.) de Nemours & Co.,
5.31%, 7/23/96 598,053 74
900M Ford Motor Credit Co.,
5.39%, 8/27/96 892,319 109
900M General Electric Capital Corp.,
5.37%, 8/22/96 893,019 110
1,200M National Rural Utilities Cooperative
Finance Corp., 5.35%, 8/5/96 1,193,759 147
400M Sandoz Corp., 5.33%, 7/31/96 398,223 48
800M SmithKline Beecham Corp.,
5.28%, 7/16/96 798,240 98
1,25M The Stanley Works,
5.37%, 8/19/96 1,240,864 153
- --------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $7,955,260) 7,955,260 978
- --------------------------------------------------------------------------------
Total Value of Investments (cost $61,878,393) 96.5% 78,451,666 9,649
Other Assets, Less Liabilities 3.5 2,854,949 351
- --------------------------------------------------------------------------------
Net Assets 100.0% $81,306,615 $10,000
================================================================================
</TABLE>
* Non-income producing
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE CASH MANAGEMENT FUND
June 30, 1996
- -------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal Interest $10,000 of
Amount Security Rate* Value Net Assets
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM CORPORATE NOTES--97.8%
$150M Ameritech Corporation, 8/5/96 5.26% $149,233 $386
100M Associates Corp. of North America, 2/13/97 5.11 101,244 262
180M Baltimore Gas & Electric Company, 8/16/96 5.35 178,770 463
190M Brown-Forman Corporation, 8/2/96 5.33 189,100 489
175M Central Louisiana Electric Company, 7/8/96 5.32 174,819 453
190M Dresser Industries, Inc., 7/31/96 5.37 189,149 490
150M Ford Motor Credit Company, 7/26/96 5.32 149,446 387
75M Hewlett Packard Company, 7/19/96 5.05 74,811 194
185M Hitachi America, Ltd., 7/15/96 5.28 184,620 478
150M Illinois Tool Works, Inc., 7/16/96 5.28 149,670 387
200M Massachusetts Electric Company, 7/17/96 5.11 199,546 517
175M McGraw-Hill, Inc., 9/10/96 5.30 173,171 448
150M Merck & Company, Inc., 8/14/96 5.59 150,359 389
190M MetLife Funding, Inc., 7/23/96 5.26 189,389 490
100M Nalco Chemical Company, 8/21/96 5.40 99,235 257
175M National Rural Utilities Cooperative
Financial Corporation, 7/30/96 5.27 174,257 451
175M Penney (J.C.) Funding Corporation, 7/10/96 5.32 174,767 452
150M PepsiCo, Inc., 9/20/96 5.38 148,184 384
150M Pitney Bowes Credit, Inc., 8/19/96 5.36 148,905 385
100M PPG Industries, Inc., 7/22/96 5.33 99,689 258
150M Republic New York Corporation, 7/31/96 5.23 149,346 387
175M Sandoz Corporation, 8/13/96 5.36 173,880 450
175M Schering Corporation, 9/24/96 5.38 172,777 447
184M TDK U.S.A. Corporation, 7/2/96 5.40 183,973 476
- -------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $3,778,340) 3,778,340 9,780
- -------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--2.6%
100M Tennessee Valley Authority, 9/9/96
(cost $101,331) 5.51 101,331 262
- -------------------------------------------------------------------------------------------------
Total Value of Investments (cost $3,879,671) 100.4% 3,879,671 10,042
Excess of Liabilities Over Other Assets (.4) (16,329) (42)
- -------------------------------------------------------------------------------------------------
Net Assets 100.0% $3,863,342 $10,000
=================================================================================================
</TABLE>
* The interest rate shown is the effective rate at the time of purchase.
See notes to financial statements
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE DISCOVERY FUND
June 30, 1996
- --------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--85.6%
Basic Industry--1.5%
19,500 *American Buildings Company $ 570,375 $93
29,700 *Repap Enterprises, Inc. 113,231 18
9,000 Schulman (A.), Inc. 220,500 36
- --------------------------------------------------------------------------------
904,106 147
- --------------------------------------------------------------------------------
Capital Goods--2.8%
14,200 Columbus McKinnon Corporation 221,875 36
11,200 *Jacobs Engineering Group, Inc. 295,400 48
8,400 Millipore Corporation 351,750 57
29,800 *Superior Services, Inc. 506,600 82
7,100 Tecumseh Products Company 381,625 62
- --------------------------------------------------------------------------------
1,757,250 285
- --------------------------------------------------------------------------------
Consumer Durables--2.4%
9,500 Corning, Inc. 364,563 59
56,800 *Fortress Group, Inc. 497,000 81
14,200 *Innotech, Inc. 158,863 26
12,600 The Rival Company 289,800 47
9,800 Titan Wheel International, Inc. 156,800 25
- --------------------------------------------------------------------------------
1,467,026 238
- --------------------------------------------------------------------------------
Consumer Non-Durables--1.3%
10,200 Dreyer's Grand Ice Cream, Inc. 321,300 52
15,700 Richfood Holdings, Inc. 510,250 83
- --------------------------------------------------------------------------------
831,550 135
- --------------------------------------------------------------------------------
Consumer Services--15.6%
14,700 *Barnes & Noble, Inc. 527,363 86
20,200 *Bell Sports Corporation 146,450 24
14,200 *Buffets, Inc. 173,950 28
23,000 *Cannondale Corporation 465,750 76
23,900 *Cinar Films, Inc. Class "B" 519,825 84
14,250 *CUC International, Inc. 505,875 82
20,400 Equifax, Inc. 535,500 87
5,600 *Evergreen Media Corporation Class "A" 239,400 39
10,600 *Federated Department Stores, Inc. 361,725 59
21,000 *Franklin Electronic Publishers, Inc. 420,000 68
15,000 Gaylord Entertainment Company Class "A" 423,750 69
9,700 *Gymboree Corporation 295,850 48
24,900 *Home Shopping Network, Inc. 298,800 49
18,800 *Prime Hospitality Corporation 310,200 50
20,300 Rite-Aid Corporation 603,925 98
10,500 *Scientific Games Holdings Corporation 304,500 49
9,000 Talbots, Inc. 291,375 47
24,300 *Tele-Communications, Inc.,
Liberty Media Group Class "A" 643,950 105
37,700 *Tele-Communications, Inc.,
TCI Group Class "A" 683,312 111
14,200 *Travis Boats & Motors, Inc. 129,575 21
29,400 *U.S. Office Products Company 1,234,800 200
12,900 *Viacom, Inc. Class "B" 501,487 81
- --------------------------------------------------------------------------------
9,617,362 1,561
- --------------------------------------------------------------------------------
Financial--6.8%
26,800 Ambassador Apartments, Inc. 452,250 73
26,100 *American Travellers Corporation 600,300 97
6,100 Boatmen's Bancshares, Inc. 244,762 40
16,100 *Cal Fed Bancorp, Inc. 293,825 48
2,800 HUBCO, Inc. 59,150 10
20,700 Independent Bank Corporation 160,425 26
6,500 Mark Twain Bancshares, Inc. 240,500 39
5,700 Mercantile Bancorporation, Inc. 253,650 41
25,500 *NHP, Inc. 525,937 85
6,300 Redwood Trust, Inc. 176,400 29
17,050 Reliance Group Holdings, Inc. 127,875 21
7,182 Southern National Corporation 228,028 37
22,350 Titan Holdings, Inc. 312,900 51
11,400 USF&G Corporation 186,675 30
25,300 Willis Corroon Group PLC (ADR) 300,437
49
- --------------------------------------------------------------------------------
4,163,114 676
- --------------------------------------------------------------------------------
Health Care/Miscellaneous--16.4%
5,600 *American Homepatient, Inc. 247,800 40
14,200 *American Medical Response, Inc. 500,550 81
14,200 *Anesta Corporation 173,950 28
29,700 *Applied Bioscience International, Inc. 311,850 51
11,700 *Arbor Health Care Company 318,825 52
21,200 *Atrix Laboratories, Inc. 212,000 34
800 *Biopsys Medical, Inc. 16,000 3
5,000 Cardinal Health, Inc. 360,625 60
8,500 *Cardiovascular Dynamics, Inc. 104,125 17
19,600 *CIMA Labs, Inc. 147,000 24
14,100 *Coventry Corporation 222,075 36
400 *CRA Managed Care, Inc. 17,900 3
11,000 Dentsply International, Inc. 467,500 76
4,300 *Endosonics Corporation 76,862 12
34,200 *Ethical Holdings PLC (ADR) 333,450 54
15,000 Fisher Scientific International 562,500 91
10,500 *GMIS, Inc. 126,000 20
15,150 *Health Care & Retirement Corporation 359,812 58
14,200 *HemaSure, Inc. 198,800 32
23,200 *ICU Medical, Inc. 319,000 52
14,200 *Ligand Pharmaceuticals Class "B" 236,075 38
12,400 *Living Centers of America, Inc. 426,250 70
27,100 *Noven Pharmaceuticals, Inc. 433,600 70
7,100 *Pediatric Services of America, Inc. 161,525 26
13,400 *Perrigo Company 150,750 24
22,000 *Physician Support Systems, Inc. 497,750 81
7,300 *Rural/Metro Corporation 250,025 41
18,300 *Sunquest Information Systems, Inc. 274,500 45
15,500 Teva Pharmaceutical Industries Ltd. (ADR) 587,062 95
14,200 *Vencor, Inc. 433,100 70
44,700 *VidaMed, Inc. 569,925 93
17,500 *VISX, Inc. 597,187 97
10,500 *Watson Pharmaceuticals, Inc. 397,687 65
- --------------------------------------------------------------------------------
10,092,060 1,639
- --------------------------------------------------------------------------------
Technology--28.3%
7,000 *Acxiom Corporation 238,875 39
11,800 *Adaptec, Inc. 559,025 91
28,400 *Applied Microsystems Corporation 497,000 81
7,000 *Astea International, Inc. 169,750 28
12,200 AVX Corporation 225,700 37
13,600 *BISYS Group, Inc. 513,400 82
11,200 *Catalyst International, Inc. 128,800 21
14,200 *Checkfree Corporation 282,225 46
8,500 *CHS Electronics, Inc. 114,750 19
6,850 Computer Associates International, Inc. 488,063 79
12,000 *Control Data Systems, Inc. 256,500 42
14,600 *Cylink Corporation 251,850 41
20,500 *Discreet Logic, Inc. 138,375 22
25,100 *EMC Corporation 467,488 76
15,900 *FileNet Corporation 580,350 94
7,100 *Fourth Shift Corporation 47,038 8
30,200 *Fulcrum Technologies, Inc. 388,825 62
14,200 *Gandalf Technologies, Inc. 113,600 18
16,100 *GT Interactive Software Corporation 269,675 44
9,600 HBO & Company 650,400 106
5,600 *HCIA, Inc. 352,800 57
28,400 *Health Systems Design Corporation 418,900 68
8,300 *IDX Systems Corporation 323,700 52
14,800 *Informix Corporation 333,000 54
24,000 *INTERSOLV 222,000 36
2,800 *Itron, Inc. 79,450 13
23,300 *JDA Software Group, Inc. 480,563 78
18,200 *LSI Logic Corporation 473,200 77
11,400 *MEMC Electronic Materials, Inc. 441,750 72
4,900 *Metatec Corporation 50,225 8
5,300 *Microsoft Corporation 636,663 103
6,000 Motorola, Inc. 377,250 61
33,400 *National Semiconductor Corporation 517,700 84
9,900 *Optical Data Systems, Inc. 217,800 35
22,025 *Oracle Corporation 868,611 141
187 *Radius, Inc. 514 --
12,500 Reynolds & Reynolds Company 665,625 108
9,700 *Seagate Technology, Inc. 436,500 71
11,300 *SoftKey International, Inc. 213,994 35
24,100 *Softquad International, Inc. 133,680 22
2,800 *Stanford Telecommunications, Inc. 157,500 26
5,400 *Sterling Software, Inc. 415,800 68
5,100 *Sunguard Data Systems, Inc. 204,638 33
29,000 *Symantec Corporation 362,500 59
43,500 *SystemSoft Corporation 2,044,500 332
14,100 *ULTRADATA Corporation 109,275 18
11,400 *Veritas Software Corporation 490,200 80
- --------------------------------------------------------------------------------
17,410,027 2,827
- --------------------------------------------------------------------------------
Telecommunications--5.9%
7,400 *Cisco Systems, Inc. 419,025 68
16,900 *Colonial Data Technologies Corporation 251,388 41
30,800 ECI Telecommunications Limited Designs 716,100 116
28,400 Ericsson (L.M.) Telephone Company
Class "B" (ADR) 610,600 98
28,300 *Octel Communications Corporation 558,925 91
24,000 *Saville Systems Ireland (ADR) 663,000 108
60,400 *USCI, Inc. 392,600 64
- --------------------------------------------------------------------------------
3,611,638 586
- --------------------------------------------------------------------------------
Transportation--3.5%
10,700 *Fritz Companies, Inc. 345,075 56
26,400 Interpool, Inc. 481,800 78
8,500 *Landstar System, Inc. 246,500 40
31,500 Stolt-Nielson S.A. (ADR) 586,688 95
66,100 Transportacion Maritima Mexicana, S.A.
de C.V. (ADR) 487,488 80
- --------------------------------------------------------------------------------
2,147,551 349
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amount
Invested
Shares or For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Utilities--1.1%
31,600 PacifiCorp 703,100 114
---
Total Value of Common Stocks (cost $45,440,678) 52,704,784 8,557
- --------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--10.7%
$1,000M Air Products & Chemicals, Inc.,
5.30%, 7/2/96 999,853 162
1,000M BellSouth Telecommunications, Inc.,
5.35%, 8/20/96 992,570 161
650M Dresser Industries, Inc.,
5.30%, 7/1/96 650,000 106
1,250M Du Pont (E.I.) de Nemours & Co.,
5.28%, 7/15/96 1,247,433 203
800M Ford Motor Credit Co.,
5.36%, 8/15/96 794,640 129
300M General Electric Capital Corp.,
5.37%, 8/6/96 298,389 48
600M Penney (J.C.) Funding Corp.,
5.34%, 7/29/96 597,508 97
1,000M PPG Industries, Inc.,
5.33%, 7/22/96 996,890 162
- --------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $6,577,283) 6,577,283 1,068
- --------------------------------------------------------------------------------
Total Value of Investments (cost $52,017,961) 96.3% 59,282,067 9,625
Other Assets, Less Liabilities 3.7 2,308,143 375
- --------------------------------------------------------------------------------
Net Assets 100.0% $61,590,210 $10,000
================================================================================
</TABLE>
* Non-income producing
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE GOVERNMENT FUND
June 30, 1996
- ----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED CERTIFICATES--61.3%
$ 37M Federal Home Loan Mortgage Corp., 6 1/2%, 4/1/2024 $ 34,519 $ 37
133M Federal Home Loan Mortgage Corp., 6 1/2%, 6/1/2024 124,773 135
1,027M Federal Home Loan Mortgage Corp., 6 1/2%, 9/1/2024 969,549 1,046
750M Federal National Mortgage Association, 9%, 10/1/2020 788,281 851
1,328M Government National Mortgage Association, 6 1/2%, 10/15/2008 1,296,926 1,400
565M Government National Mortgage Association, 7%, 3/15/2023 546,008 589
526M Government National Mortgage Association, 7%, 7/15/2023 507,945 548
994M Government National Mortgage Association, 7 1/2%, 11/15/2025 981,015 1,059
113M Government National Mortgage Association, 11 1/2%, 10/15/2012 127,265 137
270M Government National Mortgage Association, 11 1/2%, 5/15/2015 305,173 329
- ----------------------------------------------------------------------------------------------------------------
Total Value of Mortgage-Backed Certificates (cost $5,758,769) 5,681,454 6,131
- ----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--22.8%
1,000M Federal Farm Credit Banks, 8.65%, 10/1/1999 1,063,188 1,148
1,000M Federal National Mortgage Association, 8 1/2%, 2/1/2005 1,046,323 1,129
- ----------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Obligations (cost $2,198,984) 2,109,511 2,277
- ----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--8.1%
750M U.S. Treasury Note, 6 1/2%, 5/31/2001 (cost $742,813) 750,233 810
- ----------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.9%
130M Ford Motor Credit Co., 5.37%, 7/8/96 129,864 140
230M Walt Disney Co., 5.27%, 7/3/96 229,941 248
- ----------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $359,805) 359,805 388
- ----------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $9,060,371) 96.1% 8,901,003 9,606
Other Assets, Less Liabilities 3.9 365,221 394
- ----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $9,266,224 $10,000
================================================================================================================
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE GROWTH FUND
June 30, 1996
- --------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--97.4%
Aerospace/Defense--1.8%
5,500 Boeing Company $ 479,187 $76
5,900 United Technologies Corporation 678,500 107
- --------------------------------------------------------------------------------
1,157,687 183
- --------------------------------------------------------------------------------
Apparel/Textiles--.5%
1,100 *Donna Karan International, Inc. 30,800 5
5,500 *Nine West Group, Inc. 281,188 44
- --------------------------------------------------------------------------------
311,988 49
- --------------------------------------------------------------------------------
Banks--6.1%
6,000 Associated Banc-Corp 232,500 37
11,000 Bancorp Hawaii, Inc. 396,000 63
4,500 Citicorp 371,812 59
5,350 First Commercial Corporation 164,512 26
9,000 J.P. Morgan & Company, Inc. 761,625 121
11,300 NationsBank Corporation 933,663 148
15,000 State Street Boston Corporation 765,000 121
6,000 Wilmington Trust Corporation 194,625 31
- --------------------------------------------------------------------------------
3,819,737 606
- --------------------------------------------------------------------------------
Business Services--2.9%
15,000 Dames & Moore, Inc. 181,875 29
8,000 *DST Systems, Inc. 256,000 41
13,500 Foster Wheeler Corporation 605,812 96
9,800 G & K Services, Inc. Class "A" 279,300 44
2,500 *Ionics, Inc. 117,500 19
11,500 *Metromail Corporation 257,313 41
6,150 *Tetra Tech, Inc. 123,000 19
- --------------------------------------------------------------------------------
1,820,800 289
- --------------------------------------------------------------------------------
Chemicals--3.3%
10,600 Air Products and Chemicals, Inc. 612,150 97
5,000 Dow Chemical Company 380,000 60
21,600 Engelhard Corporation 496,800 79
6,800 Minerals Technologies, Inc. 232,900 37
15,000 Schulman (A.), Inc. 367,500 58
- --------------------------------------------------------------------------------
2,089,350 331
- --------------------------------------------------------------------------------
Communications Equipment--3.2%
2,900 *Cisco Systems, Inc. 164,213 26
20,000 *General Instrument Corporation 577,500 92
10,500 Nokia Corporation Class "A" (ADR) 388,500 62
9,400 *Teleport Communications Group, Inc. Class "A" 179,775 28
16,000 *3COM Corporation 732,000 116
- --------------------------------------------------------------------------------
2,041,988 324
- --------------------------------------------------------------------------------
Computers & Office Equipment--3.4%
3,600 *Adaptec, Inc. 170,550 27
18,000 *Compaq Computer Corporation 886,500 140
10,800 Hewlett-Packard Company 1,075,950 171
- --------------------------------------------------------------------------------
2,133,000 338
- --------------------------------------------------------------------------------
Drugs--6.6%
8,000 Merck & Company, Inc. 517,000 82
12,500 Pfizer, Inc. 892,188 141
15,000 Rhone-Poulenc Rorer Group, Inc. 1,006,875 160
14,000 Warner-Lambert Company 770,000 122
15,000 Zeneca Group PLC (ADR) 1,008,750 160
- --------------------------------------------------------------------------------
4,194,813 665
- --------------------------------------------------------------------------------
Electrical Equipment--2.9%
8,500 General Electric Company 735,250 117
11,000 Hubbell, Inc. Class "B" 728,750 116
9,000 *Littlefuse, Inc. 337,500 53
- --------------------------------------------------------------------------------
1,801,500 286
- --------------------------------------------------------------------------------
Electronics--3.6%
17,700 AMP, Inc. 710,212 113
14,000 Dallas Semiconductor Corporation 253,750 40
13,200 Intel Corporation 969,375 154
13,000 *Maxim Integrated Products, Inc. 355,063 56
- --------------------------------------------------------------------------------
2,288,400 363
- --------------------------------------------------------------------------------
Energy Services--.9%
6,600 Schlumberger Ltd. 556,050 88
- --------------------------------------------------------------------------------
Energy Sources--4.6%
13,300 Amoco Corporation 962,587 153
8,000 *Barrett Resources Corporation 238,000 38
15,500 Burlington Resources, Inc. 666,500 106
30,000 Unocal Corporation 1,012,500 160
- --------------------------------------------------------------------------------
2,879,587 457
- --------------------------------------------------------------------------------
Entertainment Products--1.6%
7,000 *Coleman Company, Inc. (New) 296,625 47
7,000 Harley-Davidson, Inc. 287,875 46
15,600 *Speedway Motorsports, Inc. 399,750 63
- --------------------------------------------------------------------------------
984,250 156
- --------------------------------------------------------------------------------
Financial Services--3.9%
20,000 American Express Company 892,500 141
33,280 Federal National Mortgage Association 1,114,880 177
9,000 Morgan Stanley Group, Inc. 442,125 70
- --------------------------------------------------------------------------------
2,449,505 388
- --------------------------------------------------------------------------------
Food/Beverage/Tobacco--4.6%
8,000 *Canandaigua Wine Company, Inc. Class "A" 240,000 38
36,000 PepsiCo, Inc. 1,273,500 202
5,500 Philip Morris Cos., Inc. 572,000 91
24,600 Sara Lee Corporation 796,425 126
- --------------------------------------------------------------------------------
2,881,925 457
- --------------------------------------------------------------------------------
Health Services--1.5%
900 *American Medical Response, Inc. 31,725 5
33,000 *Beverly Enterprises 396,000 63
5,000 Columbia/HCA Healthcare Corporation 266,875 42
8,000 *Living Centers of America, Inc. 275,000 44
- --------------------------------------------------------------------------------
969,600 154
- --------------------------------------------------------------------------------
Household Products--2.7%
11,500 *Bush Boake Allen, Inc. 250,125 40
10,000 Kimberly-Clark Corporation 772,500 122
7,500 Procter & Gamble Company 679,688 108
- --------------------------------------------------------------------------------
1,702,313 270
- --------------------------------------------------------------------------------
Housing--.3%
12,000 Juno Lighting, Inc. 204,000 32
- --------------------------------------------------------------------------------
Insurance--4.6%
15,000 Allstate Corporation 684,375 108
8,175 American International Group, Inc. 806,259 128
7,000 American Re Corporation 314,125 50
9,900 Frontier Insurance Group, Inc. 341,550 54
17,250 Travelers Group, Inc. 787,031 125
- --------------------------------------------------------------------------------
2,933,340 465
- --------------------------------------------------------------------------------
Machinery & Manufacturing--3.2%
7,000 Caterpillar, Inc. 474,250 75
11,500 Donaldson Company 296,125 47
9,100 Minnesota Mining & Manufacturing Company 627,900 100
8,000 *MSC Industrial Direct Company, Inc. Class "A" 258,000 41
4,000 Nordson Corporation 226,000 36
7,000 *Paxar Corporation 122,500 19
- --------------------------------------------------------------------------------
2,004,775 318
- --------------------------------------------------------------------------------
Media--5.2%
19,000 ADVO, Inc. 197,125 31
35,000 Comcast Corporation Class "A" 647,500 102
12,000 Dun & Bradstreet Corporation 750,000 119
8,000 Gannett Company 566,000 90
9,700 *Tele-Communications, Inc.,
Liberty Media Group Class "A" 257,050 41
21,400 *Viacom, Inc. Class "B" 831,925 132
- --------------------------------------------------------------------------------
3,249,600 515
- --------------------------------------------------------------------------------
Medical Products--2.7%
22,000 Abbott Laboratories 957,000 152
16,000 *Biomet, Inc. 230,000 37
9,500 Life Technologies, Inc. 299,250 47
5,000 *Nellcor Puritan Bennett, Inc. 242,500 38
- --------------------------------------------------------------------------------
1,728,750 274
- --------------------------------------------------------------------------------
Metals & Minerals--.4%
6,000 *UCAR International, Inc. 249,750 39
- --------------------------------------------------------------------------------
Paper/Forest Products--1.1%
8,000 Bemis Company, Inc. 280,000 45
12,000 International Paper Company 442,500 70
- --------------------------------------------------------------------------------
722,500 115
- --------------------------------------------------------------------------------
Retail--7.3%
15,500 Arbor Drugs, Inc. 323,562 51
13,000 *Barnes & Noble, Inc. 466,375 74
5,000 *Gymboree Corporation 152,500 24
11,000 Home Depot, Inc. 594,000 94
18,000 May Department Stores Company 787,500 125
7,500 *OfficeMax, Inc. 179,062 28
19,000 Rite Aid Corporation 565,250 90
11,800 *Saks Holdings, Inc. 402,675 64
9,300 Talbots, Inc. 301,088 48
32,000 Wal-Mart Stores, Inc. 812,000 129
- --------------------------------------------------------------------------------
4,584,012 727
- --------------------------------------------------------------------------------
Software & Services--8.6%
6,000 *American Management Systems, Inc. 175,500 28
18,000 Automatic Data Processing, Inc. 695,250 110
4,500 BGS Systems, Inc. 175,500 28
8,000 *Bisys Group, Inc. 302,000 48
9,600 *BMC Software, Inc. 573,600 91
900 *Check Point Software Technologies Ltd. 21,600 4
16,500 *Cognos, Inc. 379,500 60
9,800 *Computer Sciences Corporation 732,550 116
6,600 First Data Corporation 525,525 83
6,300 *Microsoft Corporation 756,788 120
10,500 *Policy Management Systems Corporation 525,000 83
4,500 *Sterling Software, Inc. 346,500 55
16,000 *Systems & Computer Technology Corporation 232,000 37
- --------------------------------------------------------------------------------
5,441,313 863
- --------------------------------------------------------------------------------
Telephone--4.4%
19,700 A T & T Corp. 1,221,400 194
7,000 Century Telephone Enterprises 223,125 35
25,500 MCI Communications Corporation 653,438 104
13,500 SBC Communications, Inc. 664,875 105
- --------------------------------------------------------------------------------
2,762,838 438
- --------------------------------------------------------------------------------
Transportation--1.9%
11,800 Air Express International Corporation 333,350 53
11,000 Airborne Freight Corporation 286,000 45
5,000 M.S. Carriers, Inc. 102,500 16
7,000 Union Pacific Corporation 489,125 78
- --------------------------------------------------------------------------------
1,210,975 192
- --------------------------------------------------------------------------------
Travel & Leisure--3.6%
6,500 *Doubletree Corporation 230,750 37
10,500 *Landry's Seafood Restaurants, Inc. 259,875 41
18,000 McDonald's Corporation 841,500 133
6,300 *Quality Dining, Inc. 206,325 33
25,000 Southwest Airlines Company 728,125 115
- --------------------------------------------------------------------------------
2,266,575 359
- --------------------------------------------------------------------------------
Total Value of Common Stocks (cost $50,421,120) 61,440,921 9,741
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--2.3%
$1,444M Lanston Aubrey Securities, Inc., 5.45%, 7/1/96,
(collateralized by U.S. Treasury Bonds,
12%, 8/15/2013, valued at $1,485M)
(cost $1,444,000) 1,444,000 229
- --------------------------------------------------------------------------------
Total Value of Investments (cost $51,865,120) 99.7% 62,884,921 9,970
Other Assets, Less Liabilities .3 189,905 30
- --------------------------------------------------------------------------------
Net Assets 100.0% $63,074,826 $10,000
================================================================================
</TABLE>
* Non-income producing
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE HIGH YIELD FUND
June 30, 1996
- --------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--83.2%
Aerospace/Defense--1.2%
$ 500M Howmet Corp., 10%, 2003 (Note 4) $527,500 $119
- --------------------------------------------------------------------------------
Apparel/Textiles--1.3%
600M Westpoint Stevens, Inc., 9 3/8%, 2005 582,000 131
- --------------------------------------------------------------------------------
Automotive--5.1%
700M Collins & Aikman Products Co., 11 1/2%, 2006 713,563 161
800M SPX Corp., 11 3/4%, 2002 849,000 191
700M Walbro Corp., 9 7/8%, 2005 691,250 156
- --------------------------------------------------------------------------------
2,253,813 508
- --------------------------------------------------------------------------------
Chemicals--3.7%
700M Harris Chemical North America, Inc.,
0%-10 1/4%, 2001 701,750 158
600M Rexene Corp., 11 3/4%, 2004 624,000 141
300M Synthetic Industries, Inc., 12 3/4%, 2002 318,750 72
- --------------------------------------------------------------------------------
1,644,500 371
- --------------------------------------------------------------------------------
Computers/Software/Business Equipment--1.2%
500M Bell & Howell Co., 10 3/4%, 2002 532,500 120
- --------------------------------------------------------------------------------
Consumer Products--1.6%
700M Herff Jones, Inc., 11%, 2005 724,500 163
- --------------------------------------------------------------------------------
Electrical Equipment--1.6%
700M Essex Group, Inc., 10%, 2003 707,000 159
- --------------------------------------------------------------------------------
Energy--8.4%
1,000M Clark R & M Holdings, Inc., 0%, 2000 690,000 156
700M Falcon Drilling Co., Inc., 12 1/2%, 2005 780,500 176
800M Giant Industries, Inc., 9 3/4%, 2003 791,000 178
800M United Meridian Corp., 10 3/8%, 2005 830,000 187
650M Vintage Petroleum, Inc., 9%, 2005 622,375 140
- --------------------------------------------------------------------------------
3,713,875 837
- --------------------------------------------------------------------------------
Financial Services--1.7%
700M American Life Holding Co., 11 1/4%, 2004 740,250 167
- --------------------------------------------------------------------------------
Food/Beverage/Tobacco--2.0%
250M Doane Products Co., 10 5/8%, 2006 251,250 57
600M Van de Kamps, Inc. 12%, 2005 640,500 144
- --------------------------------------------------------------------------------
891,750 201
- --------------------------------------------------------------------------------
Gaming/Lodging--1.6%
700M Showboat, Inc., 9 1/4%, 2008 712,250 161
- --------------------------------------------------------------------------------
Healthcare--10.4%
750M Abbey Healthcare Group, Inc., 9 1/2%, 2002 772,500 174
700M Dade International, Inc., 11 1/8%, 2006 (Note 4) 722,750 163
700M Genesis Healthcare, Inc., 9 3/4%, 2005 713,125 161
600M Integrated Health Services, Inc., 9 5/8%, 2002 597,000 135
400M Integrated Health Services, Inc., 10 3/4%, 2004 414,000 93
500M Mediq/PRN Life Support Services, Inc.,
12 1/8%, 1999 537,500 121
800M Tenet Healthcare Corp., 10 1/8%, 2005 850,000 192
- --------------------------------------------------------------------------------
4,606,875 1,039
- --------------------------------------------------------------------------------
Media/Cable Television--14.5%
1,000M Affiliated Newspaper Investments, 0%-13 1/4%, 2006 705,000 159
1,000M Bell Cablemedia PLC, 0%-11.95%, 2004 712,500 161
500M Diamond Cable Communications PLC, 0%-11 3/4%, 2005 296,250 67
1,400M Echostar Communications Corp., 0%-12 7/8%, 2004 1,032,500 232
500M Garden State Newspapers, Inc., 12%, 2004 527,500 119
750M Outdoor Systems, Inc., 10 3/4%, 2003 780,000 176
400M PanAmSat Capital Corp., 0%-11 3/8%, 2003 349,000 79
500M Rogers Cablesystems, Inc., 10%, 2005 497,500 112
1,000M Sullivan Broadcasting, 10 1/4%, 2005 950,000 213
600M World Color Press, Inc., 9 1/8%, 2003 585,000 132
- --------------------------------------------------------------------------------
6,435,250 1,450
- --------------------------------------------------------------------------------
Mining/Metals--6.0%
634M Carbide/Graphite Group, Inc., 11 1/2%, 2003 678,380 153
800M Gulf States Steel Inc., 13 1/2%, 2003 708,000 160
900M WCI Steel, Inc., 10 1/2%, 2002 918,000 206
400M Wheeling-Pittsburgh Steel Corp., 9 3/8%, 2003 372,000 84
- --------------------------------------------------------------------------------
2,676,380 603
- --------------------------------------------------------------------------------
Miscellaneous--1.7%
700M Monarch Marking Systems, Inc., 12 1/2%, 2003 742,000 167
- --------------------------------------------------------------------------------
Paper/Forest Products--10.1%
500M Container Corp., 11 1/4%, 2004 516,250 116
500M Gaylord Container Corp., 11 1/2%, 2001 515,000 116
800M Rainy River Forest Products Co., Inc.,
10 3/4%, 2001 842,000 190
800M Riverwood International, 10 1/4%, 2006 798,000 180
800M S.D. Warren Co., Inc., 12%, 2004 852,000 192
1,000M Stone Container Corp., 9 7/8%, 2001 975,000 220
- --------------------------------------------------------------------------------
4,498,250 1,014
- --------------------------------------------------------------------------------
Retail-Food/Drug--1.8%
800M P&C Food Markets, Inc., 11 1/2%, 2001 784,000 177
- --------------------------------------------------------------------------------
Retail-General Merchandise--1.5%
750M General Host Co., Inc., 11 1/2%, 2002 691,875 156
- --------------------------------------------------------------------------------
Telecommunications--6.7%
1,500M American Communication Services, Inc.,
0%-13%, 2005 (Note 4) 840,000 189
750M CAI Wireless Systems, Inc., 12 1/4%, 2002 785,625 177
1,100M InterCel, Inc., 0%-12%, 2006 600,875 135
800M Metrocall, Inc., 10 3/8%, 2007 744,000 169
- --------------------------------------------------------------------------------
2,970,500 670
- --------------------------------------------------------------------------------
Transportation--1.1%
500M Trism, Inc., 10 3/4%, 2000 471,875 106
- --------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $36,572,553) 36,906,943 8,319
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--.6%
Financial Services--.2%
4,000 *Olympic Financial Ltd. 92,000 21
- --------------------------------------------------------------------------------
Gaming/Lodging--.0%
2,000 *Goldriver Hotel & Casino Corp., Series "B" -- --
- --------------------------------------------------------------------------------
Media/Cable Television--.4%
1,000 *Affiliated Newspaper Investments 30,500 7
4,744 *Echostar Communications Corp., Class "A" 134,018 30
- --------------------------------------------------------------------------------
164,518 37
- --------------------------------------------------------------------------------
Total Value of Common Stocks (cost $49,286) 256,518 58
- --------------------------------------------------------------------------------
PREFERRED STOCKS--7.5%
Consumer Services--1.5%
700 Time Warner, Inc., Series "K" 689,500 155
- --------------------------------------------------------------------------------
Financial Services--4.2%
7,000 California Federal Bank, 10 5/8%, Series "B" 764,750 173
10,000 First Nationwide Bank, 11 1/2% 1,105,000 249
- --------------------------------------------------------------------------------
1,869,750 422
- --------------------------------------------------------------------------------
Media/Cable Television--.9%
337 PanAmSat Capital Corp., 12 3/4% 385,979 87
- --------------------------------------------------------------------------------
Paper/Forest Products--.9%
10,800 *S.D. Warren Co., Inc., 14% 383,400 86
- --------------------------------------------------------------------------------
Total Value of Preferred Stocks (cost $3,040,878) 3,328,629 750
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount
Warrants Invested
or For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
WARRANTS--.4%
Gaming/Lodging--.0%
200 *Goldriver Finance Corp., Liquidating Trust 1,400 --
4,200 *President Riverboat Casinos, Inc.
(expiring 9/23/96) (Note 4) 4,200 1
- --------------------------------------------------------------------------------
5,600 1
- --------------------------------------------------------------------------------
Mining/Metals--.0%
800 *Gulf State Steel Acquisition Corp.
(expiring 4/1/03) (Note 4) 400 --
- --------------------------------------------------------------------------------
Paper/Forest Products--.1%
10,800 *S.D. Warren Co., Inc.
(expiring 12/15/06) (Note 4) 32,400 7
- --------------------------------------------------------------------------------
Retail-General Merchandise--.0%
100 *Payless Cashways, Inc. (expiring 11/1/96) 10 --
- --------------------------------------------------------------------------------
Telecommunications--.3%
1,500 *American Communication Services, Inc.
(expiring 11/1/05) (Note 4) 157,500 36
- --------------------------------------------------------------------------------
Total Value of Warrants (cost $5,375) 195,910 44
- --------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.8%
$1,000M Florida Power Corp., 5.45%, 7/3/96 999,697 225
679M Massachusetts Electric Co., 5.37%, 7/1/96 679,000 153
- --------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $1,678,697) 1,678,697 378
- --------------------------------------------------------------------------------
Total Value of Investments (cost $41,346,789) 95.5% 42,366,697 9,549
Other Asset, Less Liabilities 4.5 1,999,858 451
- --------------------------------------------------------------------------------
Net Assets 100.0% $44,366,555 $10,000
================================================================================
</TABLE>
* Non-income producing
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE INTERNATIONAL SECURITIES FUND
June 30, 1996
- --------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--92.6%
United States--24.5%
6,000 American Express Company $ 267,750 $ 55
6,625 American International Group, Inc. 653,391 133
6,500 American Re Corporation 291,688 60
4,000 *AMR Corporation 364,000 74
8,500 A T & T Corp. 527,000 108
4,500 Boeing Company 392,063 80
7,200 Conrail, Inc. 477,900 97
7,500 Dow Chemical Company 570,000 116
7,000 Exxon Corporation 608,125 124
15,000 Federal National Mortgage Association 502,500 103
6,000 General Electric Company 519,000 105
5,000 Gillette Company 311,875 64
4,000 Hewlett-Packard Company 398,500 81
4,000 Intel Corporation 293,750 60
16,000 International Paper Company 590,000 120
12,000 Johnson & Johnson 594,000 121
7,000 Kimberly Clark Corporation 540,750 110
15,000 MCI Communications 384,375 78
10,000 Pepsico, Inc. 353,750 72
10,000 Pharmacia & Upjohn, Inc. 443,750 91
2,200 United Technologies Corporation 253,000 52
21,000 Unocal Corporation 708,750 146
696 *Viacom Inc., Class "A" 26,535 5
10,273 *Viacom Inc., Class "B" 399,363 81
22,000 Wal-Mart Stores, Inc. 558,250 114
9,500 Warner-Lambert Company 522,500 107
8,300 York International Corporation 429,525 88
- --------------------------------------------------------------------------------
11,982,090 2,445
- --------------------------------------------------------------------------------
Japan--15.1%
11,000 Aichi Machine Industry Company 77,223 16
12,000 Asahi Organic Chemicals Industry Company Ltd. 94,200 19
8,400 Canon Sales Company Ltd. 233,585 48
32,000 Chichibu Onoda Cement Company 183,510 37
2,000 Chudenko Corporation 72,574 15
24,000 Chugai Pharmaceutical Company Ltd. 234,132 48
17,000 Dai Nippon Printing Company Ltd. 328,586 67
2,000 Ito-Yokado Company Ltd. 120,531 25
1,000 Japan Associated Finance 116,702 24
12,000 JGC Corporation 157,547 32
51,000 Kawasaki Steel 183,666 37
6,000 Kyudenko Corporation 80,414 16
3,000 Mabuchi Motor Company Ltd. 190,916 39
14,000 Matsushita Electric Industrial Company Ltd. 260,390 53
26,000 Mitsubishi Heavy Industries 225,906 46
7,000 Murata Manufacturing Company Ltd. 264,858 54
3,000 Nihon Jumbo Company Ltd. 120,348 25
26,000 Nippon Express 253,643 52
10,000 Nippon Sanso Corporation 49,233 10
6,000 Nippondenso Company Ltd. 130,195 27
92,000 *NKK Corporation 278,475 57
14,000 Nomura Securities Company Ltd. 273,154 56
16,000 Onward Kashiyama 261,118 53
18,000 Sakura Bank Ltd. 200,216 41
1,000 Sankyo Company Ltd. 25,893 5
4,000 Sanwa Bank Ltd. 74,032 15
5,000 Secom Company Ltd. 330,046 67
8,400 Shimamura Corporation 369,141 75
5,000 Sony Corporation 328,678 67
30,000 Sumitomo Marine & Fire Insurance Company 261,210 53
50,000 Sumitomo Realty & Development 395,235 81
16,000 Sumitomo Trust and Banking Company Ltd. 218,814 45
15,000 Toda Construction Company Ltd. 146,332 30
6,300 Tokyo Mitsubishi Bank Ltd. 145,895 30
20,000 Toyo Ink Manufacturing Company Ltd. 114,512 23
11,000 Toyota Motor Corporation 274,795 56
16,000 Yamato Kogyo Co. Ltd. 191,098 39
7,000 Yamazaki Baking Co. Ltd. 129,557 25
- --------------------------------------------------------------------------------
7,396,360 1,508
- --------------------------------------------------------------------------------
United Kingdom--7.6%
33,800 Allied Irish Banks PLC 176,987 36
38,000 Associated British Foods PLC 228,502 47
17,000 Boots Company PLC 152,940 31
130,000 British Gas PLC 363,584 74
100,000 British Steel PLC 254,040 52
25,000 British Telecommunictions PLC 134,403 27
70,000 BTR PLC 275,177 56
23,300 De La Rue PLC 215,411 44
70,000 National Grid Holdings PLC 185,444 38
56,000 Northern Foods PLC 162,714 33
47,244 Powergen PLC 345,746 71
9,000 Reckitt & Colman PLC 94,532 19
20,000 Royal Bank of Scotland PLC 153,204 31
30,000 Royal Insurance Holdings PLC 185,523 38
40,000 Sainsbury PLC 235,556 48
30,000 *Sun Life & Provincial Holdings 103,014 21
20,000 United Biscuits(Holdings) PLC 66,502 14
100,695 Vodafone Group PLC
(695 shares restricted-Note 8) 375,502 77
- --------------------------------------------------------------------------------
3,708,781 757
- --------------------------------------------------------------------------------
France--6.5%
1,250 Accor 174,822 36
12,500 Assurance General 338,475 69
10,500 Banque Nationale De Paris 368,554 75
2,430 Compagnie De Saint Gobain 325,221 66
3,000 Compagnie Financiere D'Paribas 177,153 36
800 *Dassault Systeme (ADR) 24,800 5
1,443 Groupe Danone 218,352 45
2,000 Groupe Havas SA 163,556 33
900 Peugeot SA 120,452 25
17,969 Rhone-Poulenc SA Series "A" 472,252 96
2,615 Societe Generale Paris 287,503 59
3,000 Societe Nationale Elf Aquitaine 220,625 45
4,122 Total SA Class "B" 305,702 62
- --------------------------------------------------------------------------------
3,197,467 652
- --------------------------------------------------------------------------------
Australia--4.1%
70,892 Amcor Ltd. 482,633 98
105,159 Australian & New Zealand Banking Group 498,243 103
51,626 Boral Ltd 134,083 27
35,660 Broken Hill Proprietary Ltd. 493,124 101
122,148 Goodman Fielder Ltd. 124,005 25
26,000 Pioneer International Ltd. 75,712 15
7,300 Qantas Airways (ADR) (Note 4) 123,528 25
20,000 Westpac Banking Corporation 88,622 18
- --------------------------------------------------------------------------------
2,019,950 412
- --------------------------------------------------------------------------------
Netherlands--3.8%
1,800 Akzo-Nobel NV 215,644 44
11,000 Elsevier NV CVA 166,903 34
15,752 ING Groep NV 469,706 95
7,000 KLM Royal Dutch Airlines 223,904 46
2,500 Polygram NV 147,629 30
2,700 Unilever NV CVA 390,691 80
15,500 Verenigd Bezit VNU 240,630 49
- --------------------------------------------------------------------------------
1,855,107 378
- --------------------------------------------------------------------------------
Switzerland--3.2%
365 Ciba Geigy AG Regd 444,716 91
110 Financiere Richemont AS 174,012 36
480 Nestle SA Regd 548,016 111
350 Sulzer AG PC 209,725 42
900 Swiss Bank Corporation 177,607 36
- --------------------------------------------------------------------------------
1,554,076 316
- --------------------------------------------------------------------------------
Hong Kong--2.8%
60,000 Citic Pacific Ltd. 242,616 50
58,000 Hutchison Whampoa Ltd. 364,907 75
37,000 Sun Hung Kai Properties 374,037 76
43,000 Swire Pacific Class "A" 368,028 75
6,000 *Tingyi Holding Company 1,647 --
- --------------------------------------------------------------------------------
1,351,235 276
- --------------------------------------------------------------------------------
Germany--2.7%
600 Bayer AG 21,108 4
1,250 *Daimler-Benz AG (with Rights) 335,260 67
575 Degussa AG 195,112 40
3,300 Deutsche Bank AG 156,313 32
600 Karstadt AG 238,874 49
350 Mannesmann AG 120,948 25
15,000 *Metallgesellschaft AG 257,695 53
- --------------------------------------------------------------------------------
1,325,310 270
- --------------------------------------------------------------------------------
Sweden--2.5%
3,900 Astra AB Series "A" Free 172,211 35
14,000 Avesta Sheffield AB Free 131,866 27
14,000 BT Industries AB 215,207 45
3,000 Electrolux AB Free B 150,780 31
8,000 Nordbanken 154,322 31
30,000 Skandinaviska Enskilda Banken Series "A" 239,619 49
10,000 Stora Kopparbergs Bergslags Series "A" 131,866 27
- --------------------------------------------------------------------------------
1,195,871 245
- --------------------------------------------------------------------------------
Singapore--2.3%
32,000 Development Bank of Singapore 399,024 81
30,000 Far East-Levingston 165,786 34
55,000 Keppel Corporation 459,811 95
30,000 Straits Steamship Land Ltd. 100,320 20
- --------------------------------------------------------------------------------
1,124,941 230
- --------------------------------------------------------------------------------
Italy--2.2%
20,000 Arnaldo Mondadori Editore SPA 151,342 31
145,300 Banca Commercial Italiana 291,922 60
50,000 Fiat SPA 167,485 34
120,000 *Finanziaria Autogrill SPA 137,532 27
159,000 Telecom Italia SPA 341,755 70
- --------------------------------------------------------------------------------
1,090,036 222
- --------------------------------------------------------------------------------
Norway--2.0%
2,700 Christiania Bank OG 6,359 1
8,378 Hafslund Nyco Series "A" Free 60,613 12
3,200 Kvaerner AS Series "A" 135,215 28
8,378 *Nycomed AS Class "A" 120,582 25
6,500 Orkla AS Class "A" 342,193 70
21,000 Saga Petroleum Series "A" Free 308,713 63
- --------------------------------------------------------------------------------
973,675 199
- --------------------------------------------------------------------------------
Spain--1.9%
2,300 Acerinox SA Regd 239,488 49
2,000 Empresa Nacional De Electricidad SA 124,638 25
3,200 Empresa Nacional De Electricidad SA (ADR) 200,400 41
7,000 Repsol SA (ADR) 243,250 50
7,500 Telefonica De Espana 138,053 28
- --------------------------------------------------------------------------------
945,829 193
- --------------------------------------------------------------------------------
Canada--1.8%
32,000 Canadian Pacific Ltd. 704,000 144
6,000 *Canwest Global Communications 163,500 33
3,400 Nova Corporation 30,748 6
- --------------------------------------------------------------------------------
898,248 183
- --------------------------------------------------------------------------------
Denmark--1.7%
14,700 Tele Danmark A/S Class "B" (ADR) 373,013 76
10,000 Unidanmark A/S "A" Regd 463,744 95
- --------------------------------------------------------------------------------
836,757 171
- --------------------------------------------------------------------------------
Finland--1.5%
80,000 *Merita Bank Ltd. 167,024 34
27,500 Metsa-Serla OY Class "B" 195,332 40
7,500 Nokia Corporation Class "A" (ADR) 277,500 57
6,100 Valmet OY 103,069 21
- --------------------------------------------------------------------------------
742,925 152
- --------------------------------------------------------------------------------
Malaysia--1.1%
14,000 Aokam Perdana BHD 23,451 5
50,000 Land & General Holdings BHD 123,230 25
20,000 Resorts World BHD 114,618 23
108,000 Sime Darby Berhad 298,642 61
- --------------------------------------------------------------------------------
559,941 114
- --------------------------------------------------------------------------------
Korea--1.0%
3,060 Daewoo Securities 71,296 15
11,000 Hanil Bank 109,704 22
6,000 Hanwha Chemical Corporation 64,721 13
1,000 Korea Electric Power 40,731 8
3,000 Pohang Iron & Steel Co. Ltd. (ADR) 73,125 15
1,900 Shinhan Bank 34,666 7
1,300 Shinsegae Department Store 87,663 18
- --------------------------------------------------------------------------------
481,906 98
- --------------------------------------------------------------------------------
Argentina--.9%
4,000 BAESA (ADR) 53,000 11
6,000 *Banco Frances Del Rio La Plata SA (ADR) 172,500 35
8,000 Telefonica De Argentina SA Class "B" (ADR) 237,000 48
- --------------------------------------------------------------------------------
462,500 94
- --------------------------------------------------------------------------------
New Zealand--.6%
38,070 Air New Zealand Class "B" 121,272 25
84,000 Carter Holt Harvey Ltd. 191,621 39
- --------------------------------------------------------------------------------
312,893 64
- --------------------------------------------------------------------------------
Chile--.6%
900 Compania De Telecomunicaciones
De Chile SA (ADR) 88,313 18
7,000 Enersis SA (ADR) 217,000 44
- --------------------------------------------------------------------------------
305,313 62
- --------------------------------------------------------------------------------
Thailand--.5%
286,000 Bangkok Metropolitan Bank Public
Company Ltd. Foreign Regd. 202,660 42
4,000 Siam City Cement Co. Ltd. Foreign Regd. 50,395 10
- --------------------------------------------------------------------------------
253,055 52
- --------------------------------------------------------------------------------
Brazil--.5%
10,000 Aracruz Celulose SA (ADR) 95,000 20
10,000 Centrais Electricas Brasileiras (ADR) 138,437 28
- --------------------------------------------------------------------------------
233,437 48
- --------------------------------------------------------------------------------
Indonesia--.4%
64,000 Jaya Real Property Foreign Regd. 206,234 42
- --------------------------------------------------------------------------------
Mexico--.3%
20,743 Alfa SA Class "A" 94,595 19
8,200 Transportacion Maritima Mexicana SA
Class "A" (ADR) 52,275 11
- --------------------------------------------------------------------------------
146,870 30
- --------------------------------------------------------------------------------
Philippines--.2%
6,000 Philippine National Bank 100,193 20
- --------------------------------------------------------------------------------
Luxembourg--.2%
8,000 Quilmes Industrial (ADR) 82,000 17
- --------------------------------------------------------------------------------
India--.1%
10,000 *Arvind Mills (GDR) (Note 4) 39,739 8
1,000 Reliance Industries Ltd. (GDS) (Note 4) 13,000 3
- --------------------------------------------------------------------------------
52,739 11
- --------------------------------------------------------------------------------
Total Value of Common Stocks
(cost $38,863,429) 45,395,739 9,261
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount
Invested
Shares or For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------
PREFERRED STOCKS--.5%
Germany--.3%
<S> <C> <C> <C>
1,800 Hornbach Holdings 154,913 32
- -------------------------------------------------------------------------------
Brazil--.2%
700,000 Petrol Brasil 88,200 18
- -------------------------------------------------------------------------------
Total Value of Preferred Stocks
(cost $194,380) 243,113 50
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--6.7%
$ 550M United States Treasury Bill, 5.08%, 8/1/96 547,580 112
1,800M United States Treasury Bill, 5.11%, 8/1/96 1,792,032 365
950M United States Treasury Bill, 5.13%, 8/15/96 943,936 193
- -------------------------------------------------------------------------------
Total Value of U.S. Government Obligations
(cost $3,283,548) 3,283,548 670
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--.2%
121M Swiss Bank Capital Markets, Inc.,
5.48%, 7/1/96 (collateralized by
U.S. Treasury Bonds, 9 1/8%, 5/15/2009,
valued at $123M) (cost $121,000) 121,000 25
- -------------------------------------------------------------------------------
Total Value of Investments (cost $42,462,357) 100.0% 49,043,400 10,006
Excess of Liabilities Over Other Assets .0 (26,895) (6)
- -------------------------------------------------------------------------------
Net Assets 100.0% $49,016,505 $10,000
===============================================================================
</TABLE>
* Non-income producing
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE INTERNATIONAL SECURITIES FUND
At June 30, 1996, sector diversification of the portfolio was as follows:
- -------------------------------------------------------------------------------
Percentage
Sector Diversification of Net Assets Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Banks 11.4% $ 5,605,882
Drugs 6.4 3,111,757
Food/Beverage/Tobacco 5.9 2,874,941
Metals & Minerals 5.4 2,632,686
Energy Sources 5.2 2,559,077
Telephone 4.5 2,223,912
Business Services 4.2 2,040,636
Transportation 4.0 1,947,629
Real Estate Companies 3.9 1,931,991
Retail Trade 3.9 1,917,868
Media 3.7 1,834,960
Insurance 3.7 1,833,301
Paper/Forest Products 3.7 1,830,251
Machinery & Manufacturing 2.7 1,306,842
Automotive 2.6 1,270,803
Travel & Leisure 2.6 1,259,676
Electric Utilities 2.6 1,252,396
Financial Services 2.4 1,160,106
Electrical Equipment 2.3 1,139,441
Chemicals 2.2 1,057,858
Household Products 1.9 947,157
Aerospace/Defense 1.3 645,063
Computers & Office Equipment 1.3 613,911
Entertainment Products 1.2 589,068
Electronics 1.1 558,608
Pipeline .7 363,584
Apparel/Textiles .6 300,857
Communication Equipment .6 277,500
Medical Products .4 209,725
Energy Services .3 165,786
Housing .3 150,780
Software & Services .1 24,800
U.S. Treasury Bills 6.7 3,283,548
Repurchase Agreements .2 121,000
- -------------------------------------------------------------------------------
Total Value of Investments 100.0 49,043,400
Excess of Liabilities Over Other Assets .0 (26,895)
- -------------------------------------------------------------------------------
Net Assets 100.0% $49,016,505
===============================================================================
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE INVESTMENT GRADE FUND
June 30, 1996
- --------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--79.8%
Aerospace/Defense--5.0%
$ 300M Boeing Co., 6.35%, 2003 $ 290,323 $ 180
250M Lockheed Martin Corp., 7 1/4%, 2006 248,584 154
250M Rockwell International Corp., 8 3/8%, 2001 265,817 164
- --------------------------------------------------------------------------------
804,724 498
- --------------------------------------------------------------------------------
Automotive--1.5%
250M Hertz Corporation, 6 3/8%, 2005 235,998 146
- --------------------------------------------------------------------------------
Building Materials--.7%
100M Masco Corp., 9%, 2001 108,723 67
- --------------------------------------------------------------------------------
Chemicals--3.4%
250M DuPont, (E.I.) de Nemours & Co.,
8 1/8%, 2004 267,615 165
300M Lubrizol Corp., 7 1/4%, 2025 285,892 177
- --------------------------------------------------------------------------------
553,507 342
- --------------------------------------------------------------------------------
Conglomerates--3.4%
300M Hanson Overseas, B.V., 7 3/8%, 2003 301,140 185
250M Tenneco, Inc., 7 7/8%, 2002 257,624 159
- --------------------------------------------------------------------------------
558,764 344
- --------------------------------------------------------------------------------
Consumer Non-Durables--1.9%
300M American Home Products Corp., 7.9%, 2005 314,388 194
- --------------------------------------------------------------------------------
Consumer Products--1.5%
250M Mattel, Inc., 6 3/4%, 2000 248,577 154
- --------------------------------------------------------------------------------
Consumer Services--1.8%
300M Walt Disney Co., 6 3/4%, 2006 290,567 180
- --------------------------------------------------------------------------------
Electric & Gas Utilities--9.9%
250M Baltimore Gas & Electric Co., 6 1/2%, 2003 242,951 150
200M Commonwealth Edison, 8 1/4%, 2006 208,447 129
250M Duke Power Co., 5 7/8%, 2003 233,368 144
200M Kansas Gas & Electric Co., 7.6%, 2003 204,531 126
75M Old Dominion Electric Cooperative, 7.97%, 2002 77,387 48
300M Pennsylvania Power & Light Co., 6 7/8%, 2003 294,899 182
250M Philadelphia Electric Co., 8%, 2002 259,775 161
75M Southwestern Electric Power Co., 7%, 2007 74,041 46
- --------------------------------------------------------------------------------
1,595,399 986
- --------------------------------------------------------------------------------
Energy--2.1%
315M Baroid Corp., 8%, 2003 332,638 206
- --------------------------------------------------------------------------------
Financial Services--10.3%
75M Banc One Corp., 7 1/4%, 2002 75,989 47
40M BankAmerica Corp., 9 1/2%, 2001 44,173 27
200M Barnett Banks, Inc., 8 1/2%, 1999 209,180 130
300M Chemical Bank, Inc., 7%, 2005 293,777 182
200M Citicorp, 8%, 2003 209,327 129
150M First Union Corp., 8 1/8%, 2002 157,866 98
250M Mellon Bank N.A., 6 1/2%, 2005 236,227 146
50M Meridian Bancorp, 7 7/8%, 2002 51,848 32
75M Morgan Guaranty Trust Co., 7 3/8%, 2002 76,583 47
300M Nationsbank Corp., 8 1/8%, 2002 315,696 195
- --------------------------------------------------------------------------------
1,670,666 1,033
- --------------------------------------------------------------------------------
Food/Beverage/Tobacco--4.7%
250M Anheuser Busch Cos., Inc., 7%, 2005 246,555 152
25M Coca-Cola Enterprises, Inc., 7 7/8%, 2002 26,125 16
300M Hershey Foods Corp., 6.7%, 2005 291,200 180
200M Philip Morris Cos., Inc., 7 1/8%, 2002 199,814 124
- --------------------------------------------------------------------------------
763,694 472
- --------------------------------------------------------------------------------
Food Services--1.5%
250M McDonald's Corporation, 6 5/8%, 2005 240,021 148
- --------------------------------------------------------------------------------
Gas Transmission--1.8%
300M Enron Corp., 7 1/8%, 2007 294,055 182
- --------------------------------------------------------------------------------
Healthcare--1.8%
300M Columbia/HCA Healthcare Corp., 7.69%, 2025 298,235 184
- --------------------------------------------------------------------------------
Investment/Finance Companies--5.8%
300M Associates Corp. of North America, 7 7/8%, 2001 312,701 193
300M General Electric Capital Corp., 7 7/8%, 2006 315,424 195
300M General Motors Acceptance Corp., 7 1/8%, 1999 304,060 188
- --------------------------------------------------------------------------------
932,185 576
- --------------------------------------------------------------------------------
Media/Cable Television--5.1%
300M New York Times Co., Inc., 7 5/8%, 2005 309,071 190
250M News America, 8 1/2%, 2005 263,605 163
250M PanAmSat Capital Corp., 9 3/4%, 2000 260,000 161
- --------------------------------------------------------------------------------
832,676 514
- --------------------------------------------------------------------------------
Natural Gas--1.8%
300M Columbia Gas System, Inc., 6.8%, 2005 287,711 178
- --------------------------------------------------------------------------------
Paper/Forest Products--3.3%
100M S.D. Warren Company, 12%, 2004 106,500 66
150M Stone Container Corp., 10 3/4%, 2002 152,062 94
250M Temple Inland, Inc., 9%, 2001 270,402 167
- --------------------------------------------------------------------------------
528,964 327
- --------------------------------------------------------------------------------
Retail-General Merchandise--1.5%
250M Penney (J.C.) & Co., 6 1/8%, 2003 235,520 146
- --------------------------------------------------------------------------------
Technology--3.2%
250M International Business Machines Corp.,
6 3/8%, 2000 247,416 153
275M Xerox Corp., 7.15%, 2004 275,352 170
- --------------------------------------------------------------------------------
522,768 323
- --------------------------------------------------------------------------------
Telephone--7.8%
30M GTE Corp., 8.85%, 1998 31,134 19
350M MCI Communication Corp., 7 1/2%, 2004 357,644 221
250M MFS Communications Co., Inc., 0%-8 7/8%, 2006 153,125 95
250M New Jersey Bell Telephone Co., 7 3/8%, 2012 245,546 152
300M New York Telephone Co., 7 1/4%, 2024 280,905 174
200M Pacific Bell Telephone Co., 7%, 2004 199,196 123
- --------------------------------------------------------------------------------
1,267,550 784
- --------------------------------------------------------------------------------
Total Value of Corporate Bonds
(cost $13,104,125) 12,917,330 7,984
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--9.6%
300M Federal Home Loan Mortgage Corp., 7.88%, 2004 299,758 186
1,200M United States Treasury Note, 7 3/4%, 2000 1,250,625 774
- --------------------------------------------------------------------------------
Total Value of U.S. Government Obligations
(cost $1,580,313) 1,550,383 960
- --------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--6.2%
1,000M Home Depot, Inc., 5.35%, 7/1/96
(cost $1,000,000) 1,000,000 619
- --------------------------------------------------------------------------------
Total Value of Investments (cost $15,684,438) 95.6% 15,467,713 9,563
Other Asset, Less Liabilities 4.4 706,878 437
- --------------------------------------------------------------------------------
Net Assets 100.0% $16,174,591 $10,000
================================================================================
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE TARGET MATURITY 2007 FUND
June 30, 1996
- -------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY ZERO COUPON OBLIGATIONS--60.3%
Agency For International Development-Israel ("AID"):
$ 570M 2/15/2007 $ 272,465 $ 230
119M 3/15/2007 56,538 48
1,513M 8/15/2007 696,945 589
181M 10/1/2007 82,289 70
980M 2/15/2008 435,233 368
493M Federal Judiciary Office Building ("JOBS"), 2/15/2007 231,197 195
Federal National Mortgage Association:
215M 2/1/2008 94,258 80
1,030M 8/1/2008 434,580 367
4,070M Government Trust Certificate, 11/15/2007 1,827,202 1,543
586M International Bank For Reconstruction & Development, 8/15/2007 264,196 223
3,450M Resolution Funding Corporation, 10/15/2007 1,578,568 1,333
2,600M Tennessee Valley Authority, 11/1/2007 1,168,546 987
- -------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Zero Coupon
Obligations (cost $7,433,680) 7,142,017 6,033
- -------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY ZERO COUPON OBLIGATIONS--39.7%
200M Treasury Investors Growth Receipts ("TIGERS"), 11/15/2007 90,420 77
10,000M U.S. Treasury Strips, 11/15/2007 4,603,000 3,888
- -------------------------------------------------------------------------------------------------------------------
Total Value of United States Treasury Zero Coupon
Obligations (cost $4,861,153) 4,693,420 3,965
- -------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $12,294,833) 100.0% 11,835,437 9,998
Other Assets, Less Liabilities .0 2,630 2
- -------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $11,838,067 $10,000
===================================================================================================================
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE TARGET MATURITY 2010 FUND
June 30, 1996
- -------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY ZERO COUPON OBLIGATIONS--68.8%
$375M Agency For International Development-Israel ("AID"), 8/15/2010 $138,064 $ 2,070
100M Federal National Mortgage Association, 2/1/2011 34,630 519
200M Government Trust Certificate, 11/15/2010 71,368 1,070
400M Resolution Funding Corporation, 1/15/2011 143,305 2,148
200M Tennessee Valley Authority, 11/1/2010 71,277 1,068
- -------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Zero Coupon Obligations
(cost $445,822) 458,644 6,875
- -------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY ZERO COUPON OBLIGATIONS--24.9%
450M U.S. Treasury Strips, 11/15/2010 (cost $160,103) 166,240 2,491
- -------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $605,925) 93.7% 624,884 9,366
Other Assets, Less Liabilities 6.3 42,328 634
- -------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $667,212 $10,000
===================================================================================================================
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS LIFE UTILITIES INCOME FUND
June 30, 1996
- --------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.1%
Electric Power--42.0%
11,000 Allegheny Power Systems, Inc. $339,625 $163
10,700 American Electric Power Company 456,087 219
9,100 Baltimore Gas & Electric Company 258,212 124
1,800 Boston Edison Company 45,900 22
9,300 Carolina Power & Light Company 353,400 169
10,500 Central & South West Corporation 304,500 146
10,000 CINergy Corporation 320,000 153
5,700 CMS Energy Corporation 175,987 84
7,000 Dominion Resources, Inc. 280,000 134
11,900 DPL, Inc. 290,062 139
10,050 DQE, Inc. 276,375 133
8,800 Duke Power Company 451,000 216
1,500 Empresa Nacional De Electricidad SA (ADR) 93,937 45
6,000 Florida Progress Corporation 208,500 100
10,800 FPL Group, Inc. 496,800 239
9,000 Houston Industries, Inc. 221,625 106
9,500 Illinova Corporation 273,125 131
4,000 Kansas City Power & Light Company 110,000 53
9,500 NIPSCO Industries, Inc. 382,375 183
8,100 Ohio Edison Company 177,188 85
9,600 PacifiCorp 213,600 102
7,300 Pinnacle West Capital Corporation 221,738 106
10,900 Portland General Corporation 336,538 161
6,300 PP&L Resources, Inc. 148,838 71
9,400 Public Service Company of Colorado 345,450 166
8,000 Public Service Company of New Mexico 164,000 79
5,600 Scana Corporation 157,500 76
6,300 Sierra Pacific Resources 159,863 77
11,300 Southern Company 278,263 133
12,100 TECO Energy, Inc. 305,525 147
11,100 Texas Utilities Company 474,525 229
4,500 Western Resources, Inc. 134,438 64
10,300 Wisconsin Energy Corporation 297,413 143
- --------------------------------------------------------------------------------
8,752,389 4,198
- --------------------------------------------------------------------------------
Energy--7.5%
2,600 Burlington Resources, Inc. 111,800 54
5,000 Columbia Gas System, Inc. 260,625 125
7,700 Enron Corporation 314,737 151
1,400 Kerr-McGee Corporation 85,225 41
6,700 NICOR, Inc. 190,112 91
10,000 Pacific Enterprises 296,250 142
9,000 PanEnergy Corporation 295,875 142
- --------------------------------------------------------------------------------
1,554,624 746
- --------------------------------------------------------------------------------
Natural Gas--18.0%
11,300 AGL Resources, Inc. 213,287 102
6,600 Brooklyn Union Gas Company 179,850 86
5,000 Coastal Corporation 208,750 100
5,300 Consolidated Natural Gas Company 276,925 133
6,200 El Paso Natural Gas Company 238,700 114
12,200 MCN Corporation 297,375 143
5,400 National Fuel Gas Company 194,400 93
6,500 New Jersey Resources Corporation 186,875 90
6,900 NorAm Energy Corporation 75,038 36
3,800 Oneok, Inc. 95,000 46
5,600 Piedmont Natural Gas Company, Inc. 129,500 62
6,600 Questar Corporation 224,400 108
6,800 Sonat, Inc. 306,000 146
5,600 Southwest Gas Corporation 89,600 43
2,250 *Tejas Gas Corporation 78,188 37
7,300 UGI Corporation 160,600 77
8,500 Washington Energy Company 167,875 81
7,600 Washington Gas & Light Company 167,200 80
5,000 WICOR, Inc. 188,750 91
5,700 Williams Companies, Inc. 282,150 135
- --------------------------------------------------------------------------------
3,760,463 1,803
- --------------------------------------------------------------------------------
Telecommunications--5.1%
4,000 Comcast Corporation Class "A" 73,500 35
5,000 Ericsson (L.M.) Telephone Co. Class "B" (ADR) 107,500 52
10,000 LCI International, Inc. 313,750 150
6,000 MFS Communications Company, Inc. 225,750 108
875 *Tele-Communications, Inc.
Liberty Media Group Class "A" 23,187 11
1,000 Vodafone Group PLC (ADR) 36,875 18
5,000 WorldCom, Inc. 276,875 133
- --------------------------------------------------------------------------------
1,057,437 507
- --------------------------------------------------------------------------------
Telecommunications/Long Distance--3.8%
5,000 Airtouch Communications, Inc. 141,250 68
4,500 A T & T Corp. 279,000 133
3,500 *Intermedia Communications 112,875 54
3,000 MCI Communications Corporation 76,875 37
4,600 Sprint Corporation 193,200 93
- --------------------------------------------------------------------------------
803,200 385
- --------------------------------------------------------------------------------
Telephone--17.2%
7,600 Ameritech Corporation 451,250 216
7,600 Bell Atlantic Corporation 484,500 232
11,300 BellSouth Corporation 478,837 230
3,500 Century Telephone Enterprises 111,562 54
2,600 Cincinnati Bell, Inc. 135,525 65
8,200 Frontier Corporation 251,125 120
11,900 GTE Corporation 532,525 256
4,700 NYNEX Corporation 223,250 107
7,300 SBC Communications, Inc. 359,525 172
4,800 Southern New England Telecommunications Corporation201,600 97
2,300 Telefonica De Espana SA (ADR) 126,788 61
7,000 US West Communications Group 223,125 107
- --------------------------------------------------------------------------------
3,579,612 1,717
- --------------------------------------------------------------------------------
Water--.5%
2,700 American Water Works, Inc. 108,675 52
- --------------------------------------------------------------------------------
Total Value of Common Stocks (cost $17,083,662) 19,616,400 9,408
- --------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.1%
$ 300M Dresser Industries, Inc., 5.34%, 7/31/96 298,665 142
100M General Electric Capital Corp., 5.37%, 8/5/96 99,478 48
250M PPG Industries, Inc., 5.33%, 7/22/96 249,223 120
- --------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $647,366) 647,366 310
- --------------------------------------------------------------------------------
Total Value of Investments (cost $17,731,028) 97.2% 20,263,766 9,718
Other Assets, Less Liabilities 2.8 587,599 282
- --------------------------------------------------------------------------------
Net Assets 100.0% $20,851,365 $10,000
===============================================================================
</TABLE>
* Non-income producing
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS LIFE SERIES FUND
June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
CASH
BLUE CHIP MANAGEMENT DISCOVERY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in securities:
At identified cost $61,878,393 $3,879,671 $52,017,961
=========== ========== ===========
At value (Note 1A) $78,451,666 $3,879,671 $59,282,067
Cash 1,881,721 3,342 2,207,683
Receivables:
Investment securities sold 648,854 -- 639,318
Trust shares sold 308,560 12,324 136,272
Interest and dividends 75,809 2,577 18,943
Other assets 140 644 578
----------- ---------- -----------
Total Assets 81,366,750 3,898,558 62,284,861
----------- ---------- -----------
Liabilities
Payables:
Investment securities purchased -- -- 649,137
Trust shares redeemed -- 18,162 --
Dividend payable July 1, 1996 -- 15,061 --
Accrued advisory fee 49,892 1,925 39,119
Accrued expenses 10,243 68 6,395
----------- ---------- -----------
Total Liabilities 60,135 35,216 694,651
----------- ---------- -----------
Net Assets $81,306,615 $3,863,342 $61,590,210
=========== ========== ===========
Net Assets Consist of:
Capital paid in $62,094,374 $3,863,342 $50,314,305
Undistributed net investment income 520,452 -- 198,267
Accumulated net realized gain (loss) on
investments and foreign
currency transactions 2,118,516 -- 3,813,532
Net unrealized appreciation (depreciation) of
investments and translation of assets in
foreign currencies 16,573,273 -- 7,264,106
----------- ---------- -----------
Total $81,306,615 $3,863,342 $61,590,210
=========== ========== ===========
Shares of Beneficial Interest
Outstanding (Note 2) 4,564,964 3,863,342 2,563,986
=========== ========== ===========
Net Asset Value, Offering and
Redemption Price Per Share
(Net assets divided by shares outstanding) $ 17.81 $ 1.00 $ 24.02
=========== ========== ===========
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT GROWTH HIGH YIELD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in securities:
At identified cost $ 9,060,371 $51,865,120 $41,346,789
=========== =========== ===========
At value (Note 1A) $ 8,901,003 $62,884,921 $42,366,697
Cash 11,166 68,425 610,856
Receivables:
Investment securities sold 239,746 796,292 930,550
Trust shares sold 4,065 211,925 46,438
Interest and dividends 115,184 65,411 770,484
Other assets -- 593 792
----------- ----------- -----------
Total Assets 9,271,164 64,027,567 44,725,817
----------- ----------- -----------
Liabilities
Payables:
Investment securities purchased -- 919,464 300,000
Trust shares redeemed 360 -- 25,179
Dividend payable July 1, 1996 -- -- --
Accrued advisory fee 4,580 39,039 27,432
Accrued expenses -- (5,762) 6,651
----------- ----------- -----------
Total Liabilities 4,940 952,741 359,262
----------- ----------- -----------
Net Assets $ 9,266,224 $63,074,826 $44,366,555
=========== =========== ===========
Net Assets Consist of:
Capital paid in $ 9,690,379 $49,095,577 $42,577,701
Undistributed net investment income 314,773 346,042 2,025,373
Accumulated net realized gain (loss) on
investments and foreign
currency transactions (579,560) 2,613,406 (1,256,427)
Net unrealized appreciation (depreciation) of
investments and translation of assets in
foreign currencies (159,368) 11,019,801 1,019,908
----------- ----------- -----------
Total $ 9,266,224 $63,074,826 $44,366,555
=========== =========== ===========
Shares of Beneficial Interest
Outstanding (Note 2) 949,237 2,890,022 4,015,032
=========== ========== ===========
Net Asset Value, Offering and
Redemption Price Per Share
(Net assets divided by shares outstanding) $ 9.76 $ 21.83 $ 11.05
=========== ========== ===========
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL INVESTMENT TARGET
SECURITIES GRADE MATURITY 2007
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in securities:
At identified cost $42,462,357 $15,684,438 $12,294,833
=========== =========== ===========
At value (Note 1A) $49,043,400 $15,467,713 $11,835,437
Cash 182 315,338 8,505
Receivables:
Investment securities sold 118,416 -- --
Trust shares sold 128,022 127,810 --
Interest and dividends 205,359 273,157 --
Other assets 131 -- --
----------- ----------- -----------
Total Assets 49,495,510 16,184,018 11,843,942
----------- ----------- -----------
Liabilities
Payables:
Investment securities purchased 414,597 -- --
Trust shares redeemed -- 1,533 --
Dividend payable July 1, 1996 -- -- --
Accrued advisory fee 30,176 7,894 5,771
Accrued expenses 34,232 -- 104
----------- ----------- -----------
Total Liabilities 479,005 9,427 5,875
----------- ----------- -----------
Net Assets $49,016,505 $16,174,591 $11,838,067
=========== =========== ===========
Net Assets Consist of:
Capital paid in $39,230,680 $15,944,803 $12,068,608
Undistributed net investment income 405,031 512,156 334,126
Accumulated net realized gain (loss) on
investments and foreign
currency transactions 2,800,018 (65,643) (105,271)
Net unrealized appreciation (depreciation) of
investments and translation of assets in
foreign currencies 6,580,776 (216,725) (459,396)
----------- ----------- -----------
Total $49,016,505 $16,174,591 $11,838,067
=========== =========== ===========
Shares of Beneficial Interest
Outstanding (Note 2) 3,044,639 1,495,548 1,082,898
=========== =========== ===========
Net Asset Value, Offering and
Redemption Price Per Share
(Net assets divided by shares outstanding) $ 16.10 $ 10.82 $ 10.93
=========== =========== ===========
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
TARGET UTILITIES
MATURITY 2010 INCOME
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities:
At identified cost $605,925 $ 17,731,028
======== ============
At value (Note 1A) $624,884 $ 20,263,766
Cash 1,645 318,381
Receivables:
Investment securities sold -- 390,366
Trust shares sold 40,951 41,565
Interest and dividends -- 51,243
Other assets -- --
-------- ------------
Total Assets 667,480 21,065,321
-------- ------------
Liabilities
Payables:
Investment securities purchased -- 204,012
Trust shares redeemed -- --
Dividend payable July 1, 1996 -- --
Accrued advisory fee 268 9,944
Accrued expenses -- --
-------- ------------
Total Liabilities 268 213,956
-------- ------------
Net Assets $667,212 $ 20,851,365
======== ============
Net Assets Consist of:
Capital paid in $643,517 $ 18,078,227
Undistributed net investment income 4,736 309,297
Accumulated net realized gain (loss) on
investments and foreign
currency transactions -- (68,897)
Net unrealized appreciation (depreciation) of
investments and translation of assets in
foreign currencies 18,959 2,532,738
-------- ------------
Total $667,212 $ 20,851,365
======== ============
Shares of Beneficial Interest
Outstanding (Note 2) 64,148 1,745,259
======== ============
Net Asset Value, Offering and
Redemption Price Per Share
(Net assets divided by shares outstanding) $ 10.40 $ 11.95
======== ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
FIRST INVESTORS LIFE SERIES FUND
Six Months Ended June 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
CASH
BLUE CHIP MANAGEMENT DISCOVERY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Interest $ 167,769 $ 109,044 $ 205,894
Dividends 659,225 -- 221,841
Consent fees -- -- --
----------- --------- -----------
Total income 826,994 109,044 427,735
----------- --------- -----------
Expenses (Notes 1G and 5):
Advisory fee 276,679 15,056 209,681
Professional fees 10,971 2,370 7,427
Reports to shareholders 10,316 758 6,295
Custodian fees 6,597 2,748 9,004
Other expenses 6,939 1,001 5,511
----------- --------- -----------
Total expenses 311,502 21,933 237,918
Less: Expenses waived or assumed -- (9,683) --
Custodian fees paid indirectly (6,597) (205) (9,004)
----------- --------- -----------
Expenses--net 304,905 12,045 228,914
----------- --------- -----------
Net investment income 522,089 96,999 198,821
----------- --------- -----------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions (Note 3):
Net realized gain (loss) on investments and
foreign currency transactions 2,118,783 23 3,816,967
Net unrealized appreciation (depreciation) of
investments and translation of assets in
foreign currencies 3,960,487 -- 143,704
----------- --------- -----------
Net gain (loss) from investments and
foreign currency 6,079,270 23 3,960,671
----------- --------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 6,601,359 $ 97,022 $ 4,159,492
=========== ========= ===========
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT GROWTH HIGH YIELD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Interest $ 334,277 $ 39,771 $ 2,072,961
Dividends -- 531,831 117,590+
Consent fees -- -- 19,375
----------- ---------- -----------
Total income 334,277 571,602 2,209,926
----------- ---------- -----------
Expenses (Notes 1G and 5):
Advisory fee 34,696 213,439 162,948
Professional fees 4,216 2,463 6,960
Reports to shareholders 1,722 2,713 6,576
Custodian fees 2,735 9,577 4,075
Other expenses 1,807 69 4,853
----------- ---------- -----------
Total expenses 45,176 228,261 185,412
Less: Expenses waived or assumed (16,698) -- --
Custodian fees paid indirectly (721) (2,871) (3,257)
----------- ---------- -----------
Expenses--net 27,757 225,390 182,155
----------- ---------- -----------
Net investment income 306,520 346,212 2,027,771
----------- ---------- -----------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions (Note 3):
Net realized gain (loss) on investments and
foreign currency transactions (113,464) 2,620,219 (20,106)
Net unrealized appreciation (depreciation) of
investments and translation of assets in
foreign currencies (260,886) 2,703,351 (215,476)
----------- ---------- -----------
Net gain (loss) from investments and
foreign currency (374,350) 5,323,570 (235,582)
----------- ---------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ (67,830) $5,669,782 $ 1,792,189
=========== ========== ===========
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL INVESTMENT TARGET
SECURITIES GRADE MATURITY 2007
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Interest $ 87,124 $ 560,712 $ 367,401
Dividends 578,328(a) -- --
Consent fees -- -- --
----------- --------- -----------
Total income 665,452 560,712 367,401
----------- --------- -----------
Expenses (Notes 1G and 5):
Advisory fee 167,825 60,299 41,646
Professional fees 6,829 4,207 2,489
Reports to shareholders 5,981 1,932 612
Custodian fees 70,998 2,341 845
Other expenses 5,626 1,883 921
----------- --------- -----------
Total expenses 257,259 70,662 46,513
Less: Expenses waived or assumed -- (20,636) (12,351)
Custodian fees paid indirectly -- (1,669) (845)
----------- --------- -----------
Expenses--net 257,259 48,357 33,317
----------- --------- -----------
Net investment income 408,193 512,355 334,084
----------- --------- -----------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions (Note 3):
Net realized gain (loss) on investments and
foreign currency transactions 2,798,928(b) 17,706 (104,275)
Net unrealized appreciation (depreciation) of
investments and translation of assets in
foreign currencies 122,597(c) (876,086) (1,184,093)
----------- --------- -----------
Net gain (loss) from investments and
foreign currency 2,921,525 (858,380) (1,288,368)
----------- --------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 3,329,718 $(346,025) $ (954,284)
=========== ========= ===========
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
TARGET UTILITIES
MATURITY 2010* INCOME
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Income:
Interest $ 5,213 $ 23,081
Dividends -- 340,756
Consent fees -- --
-------- ------------
Total income 5,213 363,837
-------- ------------
Expenses (Notes 1G and 5):
Advisory fee 596 66,551
Professional fees 100 4,015
Reports to shareholders -- 1,981
Custodian fees 11 3,635
Other expenses 400 2,503
-------- ------------
Total expenses 1,107 78,685
Less: Expenses waived or assumed (619) (21,809)
Custodian fees paid indirectly (11) (3,635)
-------- ------------
Expenses--net 477 53,241
-------- ------------
Net investment income 4,736 310,596
-------- ------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions (Note 3):
Net realized gain (loss) on investments and
foreign currency transactions -- 53,103
Net unrealized appreciation (depreciation) of
investments and translation of assets in
foreign currencies 18,959 466,890
-------- ------------
Net gain (loss) from investments and
foreign currency 18,959 519,993
-------- ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 23,695 $ 830,589
======== ============
</TABLE>
(a) Net of $104,620 foreign taxes withheld
(b) Includes net realized loss of $1,665 on foreign currency transactions
(c) Includes $267 of net unrealized depreciation on translation of assets in
foreign currencies
* From April 30, 1996 (commencement of operations) to June 30, 1996
+ See Note 1G
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUND
- -----------------------------------------------------------------------------------------------------------------------------------
Blue Chip Cash Management
---------------------------- --------------------------
1/1/96 to 1/1/96 to
6/30/96 1995 6/30/96 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 522,089 $ 1,020,536 $ 96,999 $ 220,767
Net realized gain (loss) on investments 2,118,783 1,953,467 23 178
Net unrealized appreciation (depreciation)
of investments 3,960,487 12,258,988 -- --
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations 6,601,359 15,232,991 97,022 220,945
------------ ------------ ----------- -----------
Distributions to Shareholders from:
Net investment income (1,020,540) (569,704) (97,022) (220,945)
Net realized gain on investments (1,952,687) (2,922,430) -- --
------------ ------------ ----------- -----------
Total distributions (2,973,227) (3,492,134) (97,022) (220,945)
------------ ------------ ----------- -----------
Trust Share Transactions (a)
Proceeds from shares sold 8,986,328 12,100,755 1,645,522 1,802,472
Value of distributions reinvested 2,973,227 3,492,134 81,962 220,945
Cost of shares redeemed (1,180,816) (1,858,303) (2,025,706) (1,790,408)
------------ ------------ ----------- -----------
Net increase (decrease) from trust
share transactions 10,778,739 13,734,586 (298,222) 233,009
------------ ------------ ----------- -----------
Net increase (decrease) in net assets 14,406,871 25,475,443 (298,222) 233,009
Net Assets
Beginning of period 66,899,744 41,424,301 4,161,564 3,928,555
------------ ------------ ----------- -----------
End of period+ $ 81,306,615 $ 66,899,744 $ 3,863,342 $ 4,161,564
============ ============ =========== ===========
+Includes undistributed net investment income of $ 520,452 $ 1,018,903 $ -- $ --
============ ============ =========== ===========
(a) Trust Shares Issued and Redeemed
Sold 516,857 791,231 1,645,522 1,802,472
Issued for distributions reinvested 175,515 261,975 81,962 220,945
Redeemed (67,657) (125,241) (2,025,706) (1,790,408)
------------ ------------ ----------- -----------
Net increase (decrease) in shares outstanding 624,715 927,965 (298,222) 233,009
============ ============ =========== ===========
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Discovery Government
---------------------------- --------------------------
1/1/96 to 1/1/96 to
6/30/96 1995 6/30/96 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 198,821 $ 254,090 $ 306,520 $ 602,672
Net realized gain (loss) on investments 3,816,967 2,003,359 (113,464) 322,099
Net unrealized appreciation (depreciation)
of investments 143,704 6,147,258 (260,886) 344,995
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations 4,159,492 8,404,707 (67,830) 1,269,766
------------ ------------ ----------- -----------
Distributions to Shareholders from:
Net investment income (254,154) (93,692) (593,694) (507,584)
Net realized gain on investments (2,006,246) (1,992,932) -- --
------------ ------------ ----------- -----------
Total distributions (2,260,400) (2,086,624) (593,694) (507,584)
------------ ------------ ----------- -----------
Trust Share Transactions (a)
Proceeds from shares sold 7,284,377 13,530,189 704,108 1,678,903
Value of distributions reinvested 2,260,401 2,086,624 593,694 507,584
Cost of shares redeemed (753,613) (1,278,557) (870,241) (1,326,445)
------------ ------------ ----------- -----------
Net increase (decrease) from trust
share transactions 8,791,165 14,338,256 427,561 860,042
------------ ------------ ----------- -----------
Net increase (decrease) in net assets 10,690,257 20,656,339 (233,963) 1,622,224
Net Assets
Beginning of period 50,899,953 30,243,614 9,500,187 7,877,963
------------ ------------ ----------- -----------
End of period+ $ 61,590,210 $ 50,899,953 $ 9,266,224 $ 9,500,187
============ ============ =========== ===========
+Includes undistributed net investment income of $ 198,267 $ 253,600 $ 314,773 $ 601,947
============ ============ =========== ===========
(a) Trust Shares Issued and Redeemed
Sold 308,652 617,324 70,671 170,551
Issued for distributions reinvested 100,062 109,304 60,767 53,998
Redeemed (31,973) (61,853) (85,515) (133,164)
------------ ------------ ----------- -----------
Net increase (decrease) in shares outstanding 376,741 664,775 45,923 91,385
============ ============ =========== ===========
<CAPTION>
- -------------------------------------------------------------------------------------------
Growth
----------------------------
1/1/96 to
6/30/96 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 346,212 $ 459,596
Net realized gain (loss) on investments 2,620,219 1,548,981
Net unrealized appreciation (depreciation)
of investments 2,703,351 6,983,358
------------ ------------
Net increase (decrease) in net assets
resulting from operations 5,669,782 8,991,935
------------ ------------
Distributions to Shareholders from:
Net investment income (459,017) (175,754)
Net realized gain on investments (1,505,267) (591,906)
------------ ------------
Total distributions (1,964,284) (767,660)
------------ ------------
Trust Share Transactions (a)
Proceeds from shares sold 7,010,099 10,824,201
Value of distributions reinvested 1,964,285 767,659
Cost of shares redeemed (776,279) (1,442,104)
------------ ------------
Net increase (decrease) from trust
share transactions 8,198,105 10,149,756
------------ ------------
Net increase (decrease) in net assets 11,903,603 18,374,031
Net Assets
Beginning of period 51,171,223 32,797,192
------------ ------------
End of period+ $ 63,074,826 $ 51,171,223
============ ============
+Includes undistributed net investment income of $ 346,042 $ 458,847
============ ============
(a) Trust Shares Issued and Redeemed
Sold 327,330 572,178
Issued for distributions reinvested 99,585 45,613
Redeemed (36,573) (78,592)
------------ ------------
Net increase (decrease) in shares outstanding 390,342 539,199
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (continued)
FIRST INVESTORS LIFE SERIES FUND
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
HIGH YIELD SECURITIES
---------------------------- --------------------------
1/1/96 to 1/1/96 to
6/30/96 1995 6/30/96 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 2,027,771 $ 3,666,384 $ 408,193 $ 495,853
Net realized gain (loss) on investments and
foreign currency transactions (20,106) (147,796) 2,798,928 1,334,830
Net unrealized appreciation (depreciation)
of investments and translation of assets
in foreign currencies (215,476) 3,097,609 122,597 4,263,821
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations 1,792,189 6,616,197 3,329,718 6,094,504
------------ ------------ ----------- -----------
Distributions to Shareholders from:
Net investment income (3,666,317) (2,973,759) (497,039) (284,370)
Net realized gain on investments -- -- (1,333,455) (601,917)
------------ ------------ ----------- -----------
Total distributions (3,666,317) (2,973,759) (1,830,494) (886,287)
------------ ------------ ----------- -----------
Trust Share Transactions (a)
Proceeds from shares sold 2,847,989 5,830,065 5,552,491 6,301,362
Value of distributions reinvested 3,666,317 2,973,759 1,830,494 886,288
Cost of shares redeemed (2,167,584) (2,837,047) (877,266) (2,692,802)
------------ ------------ ----------- -----------
Net increase from trust share transactions 4,346,722 5,966,777 6,505,719 4,494,848
------------ ------------ ----------- -----------
Net increase (decrease) in net assets 2,472,594 9,609,215 8,004,943 9,703,065
Net Assets
Beginning of period 41,893,961 32,284,746 41,011,562 31,308,497
------------ ------------ ----------- -----------
End of period+ $ 44,366,555 $ 41,893,961 $49,016,505 $41,011,562
============ ============ =========== ===========
+Includes undistributed net investment income of $ 2,025,373 $ 3,663,919 $ 405,031 $ 493,877
============ ============ =========== ===========
(a) Trust Shares Issued and Redeemed
Sold 254,104 537,054 348,947 439,419
Issued for distributions reinvested 334,213 296,191 118,709 69,350
Redeemed (194,093) (263,126) (55,217) (194,386)
------------ ------------ ----------- -----------
Net increase in shares outstanding 394,224 570,119 412,439 314,383
============ ============ =========== ===========
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TARGET
INVESTMENT GRADE MATURITY 2007
----------------------------- -----------------------------
1/1/96 to 1/1/96 to 4/25/95* to
6/30/96 1995 6/30/96 12/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 512,355 $ 936,270 $ 334,084 $ 209,332
Net realized gain (loss) on investments and
foreign currency transactions 17,706 (35,809) (104,275) 42,147
Net unrealized appreciation (depreciation)
of investments and translation of assets
in foreign currencies (876,086) 1,528,072 (1,184,093) 724,697
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations (346,025) 2,428,533 (954,284) 976,176
------------ ------------ ----------- -----------
Distributions to Shareholders from:
Net investment income (936,444) (605,201) (209,290) --
Net realized gain on investments -- -- (43,143) --
------------ ------------ ----------- -----------
Total distributions (936,444) (605,201) (252,433) --
------------ ------------ ----------- -----------
Trust Share Transactions (a)
Proceeds from shares sold 1,250,006 3,462,505 3,370,523 8,383,571
Value of distributions reinvested 936,444 605,201 252,433 --
Cost of shares redeemed (991,261) (1,231,643) (437,919) --
------------ ------------ ----------- -----------
Net increase from trust share transactions 1,195,189 2,836,063 3,185,037 8,383,571
------------ ------------ ----------- -----------
Net increase (decrease) in net assets (87,280) 4,659,395 1,978,320 9,359,747
Net Assets
Beginning of period 16,261,871 11,602,476 9,859,747 500,000**
------------ ------------ ----------- -----------
End of period+ $ 16,174,591 $ 16,261,871 $11,838,067 $ 9,859,747
============ ============ =========== ===========
+Includes undistributed net investment income of $ 512,156 $ 936,245 $ 334,126 $ 209,332
============ ============ =========== ===========
(a) Trust Shares Issued and Redeemed
Sold 113,026 315,041 297,181 754,138
Issued for distributions reinvested 85,991 59,159 22,399 --
Redeemed (89,228) (113,482) (40,820) --
------------ ------------ ----------- -----------
Net increase in shares outstanding 109,789 260,718 278,760 754,138
============ ============ =========== ===========
</TABLE>
* Commencement of operations
** See Note 6
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (continued)
FIRST INVESTORS LIFE SERIES FUND
- -----------------------------------------------------------------------------------------------------------------------------------
TARGET UTILITIES
MATURITY 2010 INCOME
------------- --------------------------------
4/30/96* to 1/1/96 to
6/30/96 6/30/96 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 4,736 $ 310,596 $ 381,257
Net realized gain (loss) on investments -- 53,103 (21,926)
Net unrealized appreciation
of investments 18,959 466,890 2,200,558
----------- --------- -----------
Net increase in net assets
resulting from operations 23,695 830,589 2,559,889
----------- --------- -----------
Distributions to Shareholders from:
Net investment income -- (382,099) (110,536)
----------- --------- -----------
Trust Share Transactions (a)
Proceeds from shares sold 243,517 5,475,833 7,708,137
Value of distributions reinvested -- 382,099 110,535
Cost of shares redeemed -- (153,392) (289,717)
----------- --------- -----------
Net increase from trust
share transactions 243,517 5,704,540 7,528,955
----------- --------- -----------
Net increase in net assets 267,212 6,153,030 9,978,308
Net Assets
Beginning of period 400,000** 14,698,335 4,720,027
----------- --------- -----------
End of period+ $ 667,212 $20,851,365 $14,698,335
=========== ========= ===========
+Includes undistributed net investment income of $ 4,736 $ 309,297 $ 380,800
=========== ========= ===========
(a) Trust Shares Issued and Redeemed
Sold 64,148 472,613 755,204
Issued for distributions reinvested -- 33,459 11,709
Redeemed -- (13,178) (28,182)
----------- --------- -----------
Net increase in shares outstanding 64,148 492,894 738,731
=========== ========= ===========
</TABLE>
* Commencement of operations
** See Note 6
See notes to financial statements
<PAGE>
Notes to Financial Statements
FIRST INVESTORS LIFE SERIES FUND
1. Significant Accounting Policies -- The Fund, a Massachusetts business trust,
is registered under the Investment Company Act of 1940, as a diversified,
open-end management investment company. The Fund operates as a series fund,
issuing shares of beneficial interest in the Blue Chip, Cash Management,
Discovery, Government, Growth, High Yield, International Securities, Investment
Grade, Target Maturity 2007, Target Maturity 2010 and Utilities Income Funds and
accounts separately for the assets, liabilities and operations of each Fund. The
objective of each Fund is as follows:
Blue Chip Fund seeks high total investment return consistent with the
preservation of capital.
Cash Management Fund seeks to earn a high rate of current income consistent with
the preservation of capital and maintenance of liquidity.
Discovery Fund seeks long-term capital appreciation.
Government Fund seeks to achieve a significant level of current income which is
consistent with security and liquidity of principal.
Growth Fund seeks long-term capital appreciation.
High Yield Fund seeks to earn a high level of current income. Consistent with
that objective, the Fund will also seek growth of capital as a secondary
objective.
International Securities Fund seeks long-term capital growth. As a secondary
objective, the Fund seeks to earn a reasonable level of current income.
Investment Grade Fund seeks a maximum level of income consistent with investment
in investment grade debt securities.
Target Maturity 2007 Fund and Target Maturity 2010 Fund seek to provide a
predictable compounded investment return for investors who hold their Fund
shares until the Fund's maturity, consistent with the preservation of capital.
Utilities Income Fund seeks high current income. Long-term capital appreciation
is a secondary objective.
<PAGE>
A. Security Valuation -- A security listed or traded on an exchange or the
NASDAQ National Market System is valued at its last sale price on the exchange
or system where the security is principally traded, and lacking any sales, the
security is valued at the mean between the closing bid and asked prices.
Securities traded in the over-the-counter markets are valued at the mean between
the last bid and asked prices. For the High Yield and Investment Grade Funds,
each security traded in the over-the-counter market (including securities listed
on exchanges or systems whose primary market is believed to be over-the-counter)
is valued at the mean between the last bid and asked prices based upon quotes
furnished by a market maker for such securities. The Government, High Yield,
International Securities, Investment Grade, Target Maturity 2007 and Target
Maturity 2010 Funds use prices provided by a pricing service. The pricing
service uses quotations obtained from investment dealers or brokers, information
with respect to market transactions in comparable securities and other available
information in determining value. Securities for which market quotations are not
readily available and any other assets are valued on a consistent basis at fair
value as determined in good faith by or under the supervision of the Fund's
officers in the manner specifically authorized by the trustees of the Fund.
The investments in the Cash Management Fund are valued at cost plus amortization
of discount or accretion of premium.
B. Federal Income Taxes -- No provision has been made for federal income taxes
on net income or capital gains since it is the policy of each Fund to continue
to comply with the special provisions of the Internal Revenue Code applicable to
investment companies, and to make sufficient distributions of income and capital
gains (in excess of any available capital loss carryovers) to relieve them from
all, or substantially all, federal income taxes. At June 30, 1996, capital loss
carryovers were as follows:
<TABLE>
<CAPTION>
Year Capital Loss Carryovers Expire
------------------------------------------------------
Fund Total 1998 1999 2002 2003
- ------ ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
GOVERNMENT $ 466,096 $ --- $ --- $466,096 $ ---
HIGH YIELD 1,236,320 625,684 355,926 106,914 147,796
INVESTMENT GRADE 83,349 --- --- 47,540 35,809
UTILITIES INCOME 122,000 --- --- 100,075 21,925
</TABLE>
<PAGE>
C. Foreign Currency Translations -- For valuation purposes, quotations of
foreign securities in foreign currency are translated to U.S. dollar equivalents
using the daily rate of exchange. Purchases and sales of investment securities,
dividend income and certain expenses are translated to U.S. dollars at the rates
of exchange prevailing on the respective dates of such transactions.
The International Securities Fund does not isolate that portion of gains and
losses on investments which is due to changes in foreign exchange rates from
that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains and losses
from investments.
Net realized and unrealized gain from foreign currency related transactions
includes gains and losses arising from the sales of foreign currency, and gains
and losses on accrued dividends and related withholding taxes.
D. Distributions to Shareholders -- Distributions to shareholders from net
investment income and net realized gains are declared and paid annually on all
Funds except for the Cash Management Fund which declares daily and pays monthly.
Income dividends and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions, capital loss carryforwards and deferral of wash
sales.
E. Expense Allocation -- Expenses directly charged or attributable to a Fund are
paid from the assets of that Fund. General expenses of the Life Series Fund are
allocated among and charged to the assets of each Fund on a fair and equitable
basis, which may be based on the relative assets of each Fund or the nature of
the services performed and relative applicability to each Fund.
<PAGE>
F. Repurchase Agreements -- Securities pledged as collateral for repurchase
agreements are held by the Fund's custodian until maturity of the repurchase
agreement. The agreements provide that the Fund will receive, as collateral,
securities with a market value which will at all times be at least equal to 100%
of the amount invested by the Fund.
G. Other -- Security transactions are accounted for on the date the securities
are purchased or sold. Cost is determined and gains and losses are based on the
identified cost basis for securities and the amortized cost basis for short-term
securities, for both financial statement and federal income tax purposes.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities are recorded on the ex-dividend date or as
soon thereafter as the Fund is informed of the dividend. Shares of stock
received in lieu of cash dividends on certain preferred stock holdings are
recognized as dividend income and recorded at the market value of the shares
received. During the six months ended June 30, 1996, the High Yield Fund
recognized $22,902 of dividend income from these taxable "pay in kind"
distributions. Interest income and estimated expenses are accrued daily.
The Bank of New York, Custodian for all the Funds except the International
Securities Fund, has provided credits in the amount of $28,815 against custodian
charges based on the uninvested cash balances of the Funds.
2. Trust Shares -- The Declaration of Trust permits the issuance of an unlimited
number of shares of beneficial interest, of one or more Funds. Shares in the
Funds are acquired through the purchase of variable annuity or variable life
insurance contracts sold by First Investors Life Insurance Company.
3. Purchases and Sales of Securities -- For the six months ended June 30, 1996,
purchases and sales of securities and long-term U.S. Government obligations,
excluding foreign currencies, short-term corporate notes and repurchase
agreements were as follows:
<PAGE>
<TABLE>
<CAPTION>
Long-Term
Securities U.S. Government Obligations
------------------------- ---------------------------
Cost of Proceeds Cost of Proceeds
Fund Purchases of Sales Purchases of Sales
- ------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BLUE CHIP $15,040,082 $13,449,430 $ -- $ --
DISCOVERY 32,603,733 27,207,180 -- --
GOVERNMENT -- -- 7,576,716 7,885,274
GROWTH 20,103,490 13,998,409 -- --
HIGH YIELD 6,044,312 4,834,016 -- --
INTERNATIONAL SECURITIES 18,120,849 14,369,508 -- --
INVESTMENT GRADE 1,852,210 1,171,509 -- --
TARGET MATURITY 2007 -- -- 4,856,611 1,503,890
TARGET MATURITY 2010 -- -- 605,925 --
UTILITIES INCOME 8,236,114 2,841,436 -- --
</TABLE>
At June 30, 1996, aggregate cost and net unrealized appreciation (depreciation)
of securities for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Aggregate Unrealized Unrealized Appreciation
Fund Cost Appreciation Depreciation (Depreciation)
- ------ ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
BLUE CHIP $61,879,018 $17,291,655 $ 719,007 $16,572,648
CASH MANAGEMENT 3,879,671 -- -- --
DISCOVERY 52,024,165 11,031,307 3,773,405 7,257,902
GOVERNMENT 9,060,371 10,965 170,333 (159,368)
GROWTH 51,871,933 11,866,931 853,943 11,012,988
HIGH YIELD 41,346,789 1,620,765 600,857 1,019,908
INTERNATIONAL SECURITIES 42,462,357 7,424,582 843,539 6,581,043
INVESTMENT GRADE 15,684,438 132,461 349,186 (216,725)
TARGET MATURITY 2007 12,295,476 2,435 462,474 (460,039)
TARGET MATURITY 2010 605,925 19,181 222 18,959
UTILITIES INCOME 17,731,028 2,587,328 54,590 2,532,738
</TABLE>
4. Rule 144A Securities -- Under Rule 144A, certain restricted securities are
exempt from the registration requirements of the Securities Act of 1933 and may
only be sold to qualified institutional investors. At June 30, 1996, the High
Yield and International Securities Funds held seven and three 144A securities,
respectively, with aggregate values of $2,284,750 and $176,267, respectively.
These securities represent 5.1% and .4%, of the respective Fund's net assets and
are valued as set forth in Note 1A.
5. Advisory Fee and Other Transactions With Affiliates -- Certain officers and
trustees of the Fund are officers and directors of its investment adviser, First
Investors Management Company, Inc.("FIMCO") and/or its transfer agent,
Administrative Data Management Corp. Officers and trustees of the Fund received
no remuneration from the Fund for serving in such capacities. Their remuneration
(together with certain other expenses of the Fund) is paid by FIMCO or First
Investors Corporation.
The Investment Advisory Agreement provides as compensation to FIMCO an annual
fee, payable monthly, at the rate of .75% on the first $250 million of each
Fund's average daily net assets, declining by .03% on each $250 million
thereafter, down to .66% on average daily net assets over $750 million. For the
six months ended June 30, 1996, total advisory fees were $1,249,416 of which
$43,652 was waived by the investment adviser. In addition, $38,144 of expenses
were assumed by FIMCO.
Pursuant to certain state regulations, FIMCO has agreed to reimburse a Fund if
and to the extent that any Fund's aggregate operating expenses, including the
advisory fee but generally excluding interest, taxes, brokerage commissions and
extraordinary expenses, exceed any limitation on expenses applicable to the Fund
in those states (unless waivers of such limitations have been obtained). The
amount of any such reimbursement is limited to the yearly advisory fee. For the
six months ended June 30, 1996, no reimbursement was required pursuant to these
provisions.
<PAGE>
Wellington Management Company serves as investment subadviser to the Growth Fund
and the International Securities Fund. The subadviser is paid by FIMCO and not
by the Funds.
6. Commencement of Operations -- The Target Maturity 2007 Fund and the Target
Maturity 2010 Fund commenced operations in April 1995 and April 1996,
respectively, following the sale of 50,000 and 40,000 shares of beneficial
interest to First Investors Life Insurance Company for $500,000 and $400,000,
respectively.
7. Concentration of Credit Risk -- The High Yield Fund's investment in high
yield securities, whether rated or unrated, may be considered speculative and
subject to greater market fluctuations and risk of loss of income and principal
than lower yielding, higher rated, fixed income securities. The risk of loss due
to default by the issuer may be significantly greater for the holders of high
yielding securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer.
The Utilities Income Fund invests in securities issued by companies primarily
engaged in the public utilities industry. As a result, there are certain credit
risks which may subject the Fund more significantly to economic changes
occurring in the public utilities industry.
8. Restricted Securities -- On February 14, 1996, the International Securities
Fund purchased 695 shares of Vodafone Group PLC common stock at a cost of
$2,513. This security, which was acquired through a private placement, may not
be sold or transferred without prior registration under the Securities Act of
1933 or pursuant to an exemption therefrom. If and when the Fund sells this
security, additional costs for registration may be required. The security is
valued based upon the price of the unrestricted shares of common stock. At June
30, 1996, the value of the above restricted stock was $2,592.
<PAGE>
Independent Auditor's Report
To the Shareholders and Trustees of
First Investors Life Series Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of the eleven Funds comprising First Investors
Life Series Fund as of June 30, 1996, the related statement of operations for
the six months then ended, the statement of changes in net assets for the six
months ended June 30, 1996 and the year ended December 31, 1995, and financial
highlights for the periods indicated thereon. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the eleven Funds comprising First Investors Life Series Fund as of June 30,
1996, and the results of their operations, changes in their net assets and
financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
July 31, 1996
<PAGE>
First Investors Life Target Maturity 2010 Fund
Financial Statements for the Period
April 30, 1996 to August 31, 1996
<PAGE>
Portfolio of Investments (Unaudited)
FIRST INVESTORS LIFE TARGET MATURITY 2010 FUND
August 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY ZERO COUPON OBLIGATIONS--73.5%
$ 603M Agency For International Development-Israel ("AID"), 8/15/2010 $216,213 $1,749
400M Federal National Mortgage Association, 2/1/2011 135,295 1,095
200M Government Trust Certificate, 11/15/2010 69,546 563
400M Resolution Funding Corporation, 1/15/2011 139,814 1,131
1,000M Tennessee Valley Authority, 11/1/2010 347,345 2,811
------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Zero Coupon Obligations
(cost $927,329) 908,213 7,349
- ------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY OBLIGATIONS--18.9%
650M U.S. Treasury Strips, 11/15/2010 (cost $235,956) 233,891 1,893
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $1,163,285) 92.4% 1,142,104 9,242
Other Assets, Less Liabilities 7.6 93,622 758
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $1,235,726 $10,000
====================================================================================================================================
</TABLE>
See notes to financial statements
<PAGE>
Statement of Assets and Liabilities (Unaudited)
FIRST INVESTORS LIFE TARGET MATURITY 2010 FUND
August 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
<S> <C>
Investments in securities, at value (cost $1,163,285) (Note 1A) ...... $ 1,142,104
Cash ................................................................. 52,703
Receivable for trust shares sold ..................................... 41,448
-----------
Total Assets ......................................................... 1,236,255
Liabilities
Accrued advisory fee ................................................. 529
-----------
Net Assets ........................................................... $ 1,235,726
===========
Net Assets Consist of:
Capital paid in ...................................................... $ 1,242,852
Undistributed net investment income .................................. 14,055
Net unrealized depreciation in value of investments .................. (21,181)
-----------
Total ................................................................ $ 1,235,726
===========
Shares of Beneficial Interest Outstanding (Note 2) ................... 121,891
===========
Net Asset Value, Offering and Redemption Price Per Share
(Net assets divided by shares outstanding) ......................... $ 10.14
===========
</TABLE>
See notes to financial statements
<PAGE>
Statement of Operations (Unaudited)
FIRST INVESTORS LIFE TARGET MATURITY 2010 FUND
April 30, 1996 (commencement
of operations) to August 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Income
<S> <C>
Interest income ...................................................... $ 15,481
Expenses (Notes 1E and 4):
Advisory fee ....................................................... $ 1,782
Professional fees .................................................. 800
Custodian fees ..................................................... 75
Other expenses ..................................................... 500
-----------
Total expenses ....................................................... 3,157
Less: Expenses waived or assumed ..................................... (1,656)
Custodian fees paid indirectly ................................. (75)
-----------
Net expenses ......................................................... 1,426
-----------
Net investment income ................................................ 14,055
-----------
Realized and Unrealized Gain (Loss) on Investments (Note 3):
Net realized gain (loss) on investments .............................. --
Net unrealized depreciation of investments ........................... (21,181)
-----------
Net loss on investments .............................................. (21,181)
-----------
Net Decrease in Net Assets Resulting from Operations ................. $ ( 7,126)
===========
</TABLE>
See notes to financial statements
<PAGE>
Statement of Changes in Net Assets (Unaudited)
FIRST INVESTORS LIFE TARGET MATURITY 2010 FUND
April 30, 1996 (commencement of operations) to August 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets from Operations
<S> <C>
Net investment income .............................................. $ 14,055
Net realized gain (loss) on investments ............................ --
Net unrealized depreciation of investments ......................... (21,181)
-----------
Net decrease in net assets resulting from operations ............. (7,126)
Trust Shares Issued (81,891 shares) .................................. 842,852
-----------
Net increase in net assets ........................................... 835,726
Net Assets
Beginning of period (Note 5) ....................................... 400,000
-----------
End of period (including undistributed net investment income of
$14,055) ......................................................... $ 1,235,726
===========
</TABLE>
See notes to financial statements
<PAGE>
Notes to Financial Statements (Unaudited)
FIRST INVESTORS LIFE TARGET MATURITY 2010 FUND
1. Significant Accounting Policies - First Investors Life Series Fund (the
"Fund"), a Massachusetts business trust, is registered under the Investment
Company Act of 1940, as a diversified, open-end management investment company.
The Fund operates as a series fund, issuing shares of beneficial interest in the
Blue Chip, Cash Management, Discovery, Government, Growth, High Yield,
International Securities, Investment Grade, Target Maturity 2007, Target
Maturity 2010 and Utilities Income Funds and accounts separately for the assets,
liabilities and operations of each Series. This report relates only to the
Target Maturity 2010 Fund (the "Series"). As its objective, this Series seeks to
provide a predictable compounded investment return for investors who hold their
shares until the Series' maturity, consistent with the preservation of capital.
A. Security Valuation - The U.S. Government Obligations in which the Series
invests are traded primarily in the over-the- counter markets. Such securities
are valued daily at their fair value on the basis of valuations provided by a
pricing service approved by the trustees. The pricing service uses quotations
obtained from investment dealers or brokers, information with respect to market
transactions in comparable securities and other available information in
determining value. Securities for which market quotations are not readily
available and any other assets are valued on a consistent basis at fair value as
determined in good faith by or under the supervision of the Fund's officers in
the manner specifically authorized by the trustees of the Fund.
B. Federal Income Taxes - No provision has been made for federal income taxes on
net income or capital gains since it is the policy of the Series to continue to
comply with the special provisions of the Internal Revenue Code applicable to
investment companies, and to make sufficient distributions of income and capital
gains (in excess of any available capital loss carryovers) to relieve it from
all, or substantially all, federal income taxes.
C. Distributions to Shareholders - Distributions to shareholders from net
investment income and net realized gains are declared and paid annually. Income
dividends and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
capital loss carryforwards and deferral of wash sales.
D. Expense Allocation - Expenses directly charged or attributable to the Series
are paid from the assets of the Series. General expenses of the Fund are
allocated among and charged to the assets of each Series on a fair and equitable
basis, which may be based on the relative assets of each Series or the nature of
the services performed and relative applicability to each Series.
E. Other - Security transactions are accounted for on the date the securities
are purchased or sold. Cost is determined and gains and losses are based on the
identified cost basis for both financial statement and federal income tax
purposes. Interest income (consisting of accretion of bond discount) and
estimated expenses are accrued daily. The Bank of New York, Custodian for the
Series, has provided credits in the amount of $75 against custodian charges
based on the uninvested cash balances of the Series.
2. Trust Shares - The Declaration of Trust permits the issuance of an unlimited
number of shares of beneficial interest of one or more Series. Shares in the
Series are acquired through the purchase of variable annuity or variable life
insurance contracts sold by First Investors Life Insurance Company.
3. Purchases and Sales of Securities - For the period from April 30, 1996
(commencement of operations) through August 31, 1996, purchases and sales of
long-term U.S. Government obligations aggregated $1,163,285 and $0,
respectively. At August 31, 1996, the cost of investments for federal income tax
purposes was $1,163,285. Accumulated gross and net unrealized depreciation on
investments was $21,181.
4. Advisory Fee and Other Transactions With Affiliates - Certain officers and
trustees of the Fund are officers and directors of its investment adviser, First
Investors Management Company, Inc.("FIMCO") and/or its transfer agent,
Administrative Data Management Corp. Officers and trustees of the Fund received
no remuneration from the Fund for serving in such capacities. Their remuneration
(together with certain other expenses of the Fund) is paid by FIMCO or First
Investors Corporation.
The Investment Advisory Agreement provides as compensation to FIMCO an annual
fee, payable monthly, at the rate of .75% on the first $250 million of the
Series' average daily net assets, declining by .03% on each $250 million
thereafter, down to .66% on average daily net assets over $750 million. For the
period from April 30, 1996 (commencement of operations) through August 31, 1996,
total advisory fees were $1,782 of which $356 was waived by FIMCO. In addition,
$1,300 of expenses were assumed by FIMCO.
Pursuant to certain state regulations, FIMCO has agreed to reimburse the Series
if and to the extent that the Series' aggregate operating expenses, including
the advisory fee but generally excluding interest, taxes, brokerage commissions
and extraordinary expenses, exceed any limitation on expenses applicable to the
Series in those states (unless waivers of such limitations have been obtained).
The amount of any such reimbursement is limited to the yearly advisory fee. For
the period from April 30, 1996 through August 31, 1996, no reimbursement was
required pursuant to these provisions.
5. Commencement of Operations - The Target Maturity 2010 Fund commenced
operations on April 30, 1996, following the sale of 40,000 shares of beneficial
interest to First Investors Life Insurance Company for $400,000.
