As filed with the Securities and Exchange Commission on February 14, 1996.
Registration No. 2-98409
811-4325
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 18 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 18 X
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FIRST INVESTORS LIFE SERIES FUND
(Exact name of Registrant as specified in charter)
Ms. Concetta Durso
Secretary and Vice President
First Investors Life Series Fund
95 Wall Street
New York, New York 10005
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement
It is proposed that this filing will become effective on April 29, 1996 pursuant
to paragraph (a) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously elected to register an indefinite number of shares of beneficial
interest, no par value, under the Securities Act of 1933. Registrant hereby
undertakes to file a Rule 24f-2 Notice for its fiscal year ending December 31,
1995 on or before February 29, 1996.
<PAGE>
FIRST INVESTORS LIFE SERIES FUND
CROSS-REFERENCE SHEET
N-1A Item No. Location
- ------------- --------
PART A: PROSPECTUS
1. Cover Page.................................... Cover Page
2. Synopsis...................................... Not Applicable
3. Condensed Financial Information............... Financial Highlights
4. General Description of Registrant............. Investment Objectives and
Policies; General
Information
5. Management of the Fund........................ Management
5A. Management's Discussion of
Fund Performance.........................
6. Capital Stock and Other Securities............ Dividends and Other
Distributions; Taxes;
Determination of Net
Asset Value
7. Purchase of Securities Being Offered.......... How to Buy Shares
8. Redemption or Repurchase...................... How to Redeem Shares
9. Pending Legal Proceedings..................... Management
PART B: STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page.................................... Cover Page
11. Table of Contents............................. Table of Contents
12. General Information and History............... General Information
13. Investment Objectives and Policies............ Investment Policies;
Investment Restrictions
14. Management of the Fund........................ Trustees and Officers
15. Control Persons and Principal
Holders of Securities......................... Not Applicable
16. Investment Advisory and Other Services........ Management
17. Brokerage Allocation.......................... Allocation of Portfolio
Brokerage
18. Capital Stock and Other Securities............ Determination of Net
Asset Value
19. Purchase, Redemption and Pricing
of Securities Being Offered................... Determination of Net
Asset Value
20. Tax Status.................................... Taxes
21. Underwriters.................................. Not Applicable
22. Performance Data.............................. Performance Information
23. Financial Statements.......................... Statement of Net Assets
PART C: OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item so numbered, in Part C hereof.
<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: Blue Chip Fund, Cash Management Fund, Discovery Fund,
Government Fund, Growth Fund, High Yield Fund, International Securities Fund,
Investment Grade Fund, Target Maturity 2007 Fund, Target Maturity 2010 Fund and
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 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, 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 April 29, 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 April 29, 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 Cash Management 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-related 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.
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.
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.
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
[to be updated]
The following table sets forth the per share operating performance data
for a share of beneficial interest outstanding, total return, ratios to average
net assets and other supplemental data for each period indicated. Financial
highlights are not presented for Target Maturity 2010 Fund since the Fund did
not commence operations until February 1996. 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) Investment Investment Realized Total ---------------
Period Income on Investments Operations Income Gains Distribution 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
1/1/95 to 6/30/95 ......... 13.75 .13 2.20 2.33 .19 .95 1.14 14.94
Cash Management
- ---------------
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
1/1/95 to 6/30/95 ......... 1.00 .027 -- .027 .027 -- .027 1.00
Discovery
- ---------
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
1/1/95 to 6/30/95 ......... 19.86 .05 2.78 2.83 .06 1.26 1.32 21.37
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
1/1/95 to 6/30/95 ......... 9.70 .32 .57 .89 .62 -- .62 9.97
</TABLE>
<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> <C>
Blue Chip
- ---------
3/8/90* to 12/31/90 ....... .61(a) $3,656 -- 2.95(a) 1.92(a) 1.03(a) 15
1991 ...................... 26.17 13,142 1.00 1.88 1.55 1.34 21
1992 ...................... 6.67 23,765 .79 1.66 .86 1.60 40
1993 ...................... 8.51 34,030 .88 1.27 N/A N/A 37
1994 ...................... (1.45) 41,424 .88 1.49 N/A N/A 82
1/1/95 to 6/30/95 ......... 17.90 52,232 .85(a) 2.10(a) N/A N/A 10
Cash Management
- ---------------
1990 ...................... 7.49 8,203 .39 6.90 1.15 6.15 N/A
1991 ...................... 5.71 9,719 .57 5.39 .93 5.03 N/A
1992 ...................... 3.02 8,341 .79 2.99 .98 2.81 N/A
1993 ...................... 2.70 4,243 .60 2.67 1.05 2.22 N/A
1994 ...................... 3.77 3,929 .60 3.69 1.04 3.25 N/A
1/1/95 to 6/30/95 ......... 2.73 4,082 .59(a) 5.40(a) 1.04(a) 4.95(a) N/A
Discovery
- ---------
1990 ...................... (5.47) 960 -- 2.97 2.68 .28 104
1991 ...................... 51.73 4,661 .70 .48 1.49 (.31) 93
1992 ...................... 15.74 10,527 .91 .02 1.05 (.12) 91
1993 ...................... 22.20 21,221 .87 (.03) N/A N/A 69
1994 ...................... (2.53) 30,244 .88 .36 N/A N/A 53
1/1/95 to 6/30/95 ......... 15.01 39,099 .85(a) .62(a) N/A N/A 31
Government
- ----------
1/7/92* to 12/31/92 ....... 9.95(a) 5,064 .03(a) 6.64(a) .89(a) 5.79(a) 301
1993 ...................... 6.35 8,234 .35 6.60 .84 6.11 525
1994 ...................... (4.10) 7,878 .35 6.74 .90 6.19 457
1/1/95 to 6/30/95 ......... 9.58 9,121 .35(a) 6.98(a) .91(a) 6.42(a) 106
</TABLE>
- ----------------
* Commencement of operations
+ Some or all expenses have been waived or assumed by the investment adviser
from commencement of operations through June 30, 1995.
++ The effect of fees and charges incurred at the separate account level are
not reflected in these performance figures.
(a) Annualized
4-5
<PAGE>
<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) Investment Investment Realized Total ---------------
Period Income on Investments Operations Income Gains Distribution End of Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth
- ------
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
1/1/95 to 6/30/95......... 16.73 .09 2.45 2.54 .09 .29 .38 18.89
High Yield
- ----------
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
1/1/95 to 6/30/95......... 10.58 .50 .64 1.14 .96 -- .96 10.76
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
1/1/95 to 6/30/95......... 13.51 .14 .88 1.02 .12 .25 .37 14.16
Investment Grade
- ----------------
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
1/1/95 to 6/30/95......... 10.31 .34 .86 1.20 .53 -- .53 10.98
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
1/1/95 to 6/30/95......... 9.19 .14 0.89 1.03 .19 -- .19 10.03
</TABLE>
<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> <C>
Growth
- ------
1990...................... (2.99) 2,366 -- 3.03 1.64 1.40 28
1991...................... 34.68 7,743 .69 1.21 1.34 .55 148
1992...................... 9.78 16,385 .76 .75 1.20 .30 45
1993...................... 6.00 25,658 .91 .43 N/A N/A 51
1994...................... (2.87) 32,797 .90 .60 N/A N/A 40
1/1/95 to 6/30/95......... 15.46 41,232 .89(a) 1.09(a) N/A N/A 30
High Yield
- ----------
1990...................... (5.77) 18,331 -- 13.21 .91 12.30 35
1991...................... 33.96 23,634 .53 11.95 .89 11.60 40
1992...................... 13.15 24,540 .91 10.48 .96 10.43 84
1993...................... 18.16 30,593 .91 9.49 N/A N/A 96
1994...................... (1.56) 32,285 .88 9.43 N/A N/A 50
1/1/95 to 6/30/95......... 11.44 37,132 .85(a) 10.12(a) N/A N/A 34
International Securities
- ------------------------
4/16/90* to 12/31/90...... 5.21(a) 3,946 -- .99(a) 3.43(a) (2.43)(a) 29
1991...................... 15.24 8,653 1.70 .75 2.27 .18 70
1992...................... (1.13) 12,246 1.03 1.55 1.38 1.20 36
1993...................... 22.17 21,009 1.14 .97 N/A N/A 37
1994...................... (1.29) 31,308 1.03 1.22 N/A N/A 36
1/1/95 to 6/30/95......... 7.88 34,358 1.01(a) 2.09(a) N/A N/A 20
Investment Grade
- ----------------
1/7/92* to 12/31/92....... 8.91(a) 4,707 .23(a) 6.16(a) .93(a) 5.46(a) 72
1993...................... 10.93 10,210 .35 6.32 .85 5.82 64
1994...................... (3.53) 11,602 .37 6.61 .92 6.06 15
1/1/95 to 6/30/95......... 12.04 13,543 .50(a) 6.78(a) .90(a) 6.38(a) 19
Utilities Income
- ----------------
11/15/93* to 12/31/93..... (4.66)(a) 494 -- 1.46(a) 3.99(a) (2.52)(a) 0
1994...................... (7.24) 4,720 .17 4.13 .95 3.35 31
1/1/95 to 6/30/95......... 11.29 8,647 .34(a) 4.50(a) .85(a) 3.99(a) 9
</TABLE>
- ----------
* Commencement of operations
+ Some or all expenses have been waived or assumed by the investment adviser
from commencement of operations through June 30, 1995.
++ The effect of fees and charges incurred at the separate account level are
not reflected in these performance figures.
(a) Annualized
6-7
<PAGE>
Target Maturity 2007 Fund
April 25, 1995 to August 31, 1995
(Unaudited)
Per Share Data
Net Asset Value, Beginning of Period ......................... $10.00
------
Income from Investment Operations
Net investment income .................................... .09
Net realized and unrealized gain on investments .......... .92
------
Total from Investment Operations ...................... 1.01
------
Net Asset Value, End of Period ............................... $11.01
======
Total Return++ ............................................... 28.80%(a)
Ratio/Supplemental Data
Net Assets, End of Period (in thousands) ..................... $5,467
Ratios to Average Net Assets:
Expenses ................................................. --
Net Investment Income .................................... 5.39(a)
Ratio to Average Net Assets Before
Expenses Waived
Expenses ................................................. .75%(a)
Net Investment Income .................................... 4.64%(a)
Portfolio Turnover Rate ...................................... 5%
+ All expenses have been waived or assumed by the investment adviser from
commencement of operations through August 31, 1995.
++ The effect of fees and charges incurred at the separate account level are
not reflected in these performance figures.
(a) Annualized
8
<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 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.
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,
9
<PAGE>
(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. If only one NRSRO has rated a security, or it is unrated, the
acquisition of that security must be approved or ratified by Life Series Fund's
Board of Trustees. 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 ("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 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 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 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.
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<PAGE>
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.
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.
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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.
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
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<PAGE>
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.
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,
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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 (Separate Trading of 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
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.
17
<PAGE>
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 will invest 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 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."
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<PAGE>
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. 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' acceptances are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance 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
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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 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
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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 a Fund does not 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. Other 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.
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
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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 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 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.
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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.
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,
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
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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 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.
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.
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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 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,
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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
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 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
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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 decline in interest rates in 1993 and 1994 had an
impact on the mortgage-backed securities market, where a large volume of
prepayments of mortgages occurred. As a result of these prepayments, among other
things, Government Fund liquidated many of its positions in premium
mortgage-backed securities. This resulted in a portfolio turnover rate for the
fiscal years ended 1993 and 1994 of 525% and 457%, respectively. A high rate of
portfolio turnover generally leads to increased transaction costs and may result
in a greater number of taxable 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.
[Portfolio turnover to be updated]
HOW TO BUY SHARES
Investments in a Fund are made 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 New York Stock Exchange ("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."
Due to emergency conditions, such as snowstorms, the offices of
Administrative Data Management Corp. (the "Transfer Agent") may not be open for
business on a day when the NYSE is open for regular trading and, therefore,
would be unable to execute purchase orders received from FIL. Should this occur,
purchase orders will be executed at the public offering price determined at
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the close of regular trading on the NYSE on the next business day that the
Transfer Agent's offices are open for business.
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.
Due to emergency conditions, such as snowstorms, the Transfer Agent's
offices may not be open for business on a day when the NYSE is open for regular
trading and, therefore, would be unable to execute redemption requests received
from FIL. Should this occur, redemption requests will be executed at the public
offering price determined at the close of regular trading on the NYSE on the
next business day that the Transfer Agent's offices are open for business.
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
(or members of his family) and Mrs. Julie W. Grayson (as executrix of the estate
of her deceased husband, David D. Grayson) each control more than 25% of the
voting stock of FICC and, therefore, jointly control the Adviser.
[Advisory fees to be updated]
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,
1994, 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, for each of
Government Fund and Investment Grade Fund, 0.31% of average daily net assets,
net of waiver, for Cash Management Fund and 0.17% average daily net assets, net
of waiver, for Utilities Income Fund. 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.
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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.
Subadviser. Wellington Management Company 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
general 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 December 31, 1995, WMC held investment management authority with respect to
approximately $109.2 billion of assets. Of that amount, WMC acted as investment
adviser or subadviser to approximately 110 registered investment companies or
series of such companies, with net assets of approximately $76.1 billion as of
December 31, 1995. 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 % of Growth Fund's average daily net assets and % 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 Series, the Blue Chip Series and the small capitalization
equity portion of Total Return Series, 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
Series of First Investors Series Fund since its inception in 1991 and has
managed the fixed income corporate securities portion of Total Return Series 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 will have the primary responsibility for the day-to-day management of
Target Maturity 2010 Fund. 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. Prior to
joining FIMCO, Mr. Wagner was a Vice President at General Electric Investment
Corporation from 1988-1991, where he managed a tax-exempt portfolio.
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 Skramstead. Prior to joining WMC as a
portfolio manager in 1993, Mr. Skramstead 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.
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Distributions of a Fund's net capital gain (the excess of net long-term capital
gain over net short-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.
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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.
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.
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The ratings are based, in varying degrees, on the following
considerations:
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
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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.
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.
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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.
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.
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TABLE OF CONTENTS
================================================================================
Financial Highlights...................................................
Investment Objectives and Policies.....................................
How to Buy Shares......................................................
How to Redeem Shares...................................................
Management.............................................................
Determination of Net Asset Value.......................................
Dividends and Other Distributions......................................
Taxes..................................................................
General Information....................................................
Appendix A.............................................................
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 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
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 the Fund 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
95 Wall Street (212) 858-8200
New York, New York 10005
Statement of Additional Information
dated April 29, 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 April 29, 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......................................................
Hedging and Option Income Strategies.....................................
Investment Restrictions..................................................
Trustees and Officers....................................................
Management...............................................................
Determination of Net Asset Value.........................................
Allocation of Portfolio Brokerage........................................
Taxes....................................................................
General Information......................................................
Appendix A...............................................................
Appendix B...............................................................
Financial Statements.....................................................
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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 ("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
2
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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 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.
3
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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.
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. 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 repurchase 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 a 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. Repurchase
agreements maturing in greater than seven days are considered illiquid.
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.
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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
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.
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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 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, 1993 for the Blue
Chip Fund, Discovery Fund, Growth Fund, High Yield Fund, International
Securities Fund and Investment Grade Fund was 37%, 69%, 51%, 96%, 37% and 64%,
respectively. 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. See the Prospectus for
the portfolio turnover rate for the Government Fund and the expected portfolio
turnover rate for Target Maturity 2010 Fund.
[Will be updated]
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
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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 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.
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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.
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
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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 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,
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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. 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
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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 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
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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
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
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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 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,
13
<PAGE>
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 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
14
<PAGE>
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
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
Life Series Fund has adopted the investment restrictions set forth
below, which cannot be changed without the approval of a vote of a majority of
the outstanding shares of Life Series Fund. As provided
15
<PAGE>
in the Investment Company Act of 1940, as amended ("1940 Act"), a "vote of a
majority of the outstanding shares of the Fund" means the affirmative vote of
the lesser of (i) more than 50% of the outstanding shares of the Fund or (ii)
67% or more of the shares present at a meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy. The
investment restrictions provide that each Fund of Life Series Fund will not:
(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, repurchase
agreements with more than seven days to maturity, and other illiquid assets is
greater than an amount equal to 10% of the Fund's total assets; provided,
however, securities that have legal or contractual restrictions as to resale but
have a readily available market are not deemed illiquid for purposes of this
limitation.
(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 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.
16
<PAGE>
(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*+ (70), President and Trustee. Chairman of the Board and Director,
Administrative Data Management Corp. ("ADM"), FIMCO, Executive Investors
Management Company, Inc. ("EIMCO"), First Investors Corporation ("FIC"),
Executive Investors Corporation ("EIC") and First Investors Consolidated
Corporation ("FICC").
James J. Coy (81), Trustee, 90 Buell Lane, East Hampton, NY 11937. Retired;
formerly Senior Vice President, James Talcott, Inc. (financial institution).
Roger L. Grayson* (39), Trustee. Director, FIC and FICC; President and Director,
First Investors Resources, Inc.; Commodities Portfolio Manager.
17
<PAGE>
Kathryn S. Head*+ (40), Trustee, 581 Main Street, Woodbridge, NJ 07095.
President, FICC, EIMCO and FIMCO; President, ADM; Vice President, Chief
Financial Officer and Director, FIC and EIC; President and Director, First
Financial Savings Bank, S.L.A.
Rex R. Reed (83), Trustee, 1381 Fairway Oaks, Kiawah Island, SC 29455. Retired;
formerly Senior Vice President, American Telephone & Telegraph Company.
Herbert Rubinstein (84), 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* (63), Trustee and Chairman of the Board; Director, FIMCO, FIC,
FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.
Robert F. Wentworth (66), 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 (38), Treasurer, 581 Main Street, Woodbridge, NJ 07095.
Treasurer, FIC FIMCO, EIMCO and EIC; Comptroller and Treasurer, FICC.
Concetta Durso (61), Vice President and Secretary. Vice President, FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary, FIC and EIC.
Carol Lerner Brown (41), Assistant Secretary. Secretary, FIMCO, EIMCO, FICC, EIC
and ADM; Assistant Secretary, FIC.
- ----------
* 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 Executive Investors Trust and 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 and Route 33 Realty Corporation.
The following table lists compensation paid to the Trustees by Life
Series Fund for the fiscal year ended December 31, 1995.
[ To be updated ]
18
<PAGE>
<TABLE>
<CAPTION>
Total
Compensation
Pension or Estimated From First
Aggregate Retirement Benefits Annual Benefits Investors Family
Compensation Accrued as Part of Upon of Funds
Director From Fund* Fund Expenses Retirement Paid to Trustees*
- -------- ------------ -------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
James J. Coy $-0- $-0- $-0- $-0-
Roger L. Grayson -0- -0- -0- -0-
Glenn O. Head -0- -0- -0- -0-
Kathryn S. Head -0- -0- -0- -0-
Rex R. Reed -0- -0- -0- -0-
Herbert Rubinstein -0- -0- -0- -0-
James M. Srygley -0- -0- -0- -0-
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth -0- -0- -0- -0-
</TABLE>
*Compensation to officers and interested Trustees of Life Series Fund
is paid by the Adviser. In addition, compensation to non-interested Trustees of
Life Series Fund is currently voluntarily paid by the Adviser.
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:
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<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 SEC staff takes the position that fees of 0.75% or greater are higher than
those paid by most investment companies.
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.
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.
[Fees for 1995 to be updated]
Subadviser. Wellington Management Company 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 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
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<PAGE>
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. [Fees for 1995 to be updated]
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 discount, are valued at amortized cost and
when purchased at face value, are valued at cost plus accrued interest.
21
<PAGE>
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
period, all other Fund of the
22
<PAGE>
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 series of Life Series Fund did not pay
brokerage commissions.
[Brokerage commissions for 1995 to be updated]
TAXES
In order to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), a Fund --
each Fund being treated as a separate entity for these purposes -- 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 the Fund's 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.
Dividends and interest received by International Securities Fund,
Utilities Income Fund, High Yield Fund and Discovery 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.
23
<PAGE>
International Securities Fund and Discovery Fund each 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, such a Fund that holds stock of a PFIC 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 the Fund distributes the PFIC income as a taxable dividend to
its shareholders. The balance of the PFIC income will be included in the 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, the 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 would have to be distributed to
satisfy the Distribution Requirement -- even if those earnings and gain were not
received by the Fund. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
Proposed regulations have been published pursuant to which open-end
RICs, such as International Securities Fund and Discovery 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).
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.
24
<PAGE>
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 such Fund must include in its income the original
issue discount that accrues on the securities for the taxable year, even if the
Fund receives no corresponding payment on the securities during the year.
Similarly, each such Fund must include in its 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, in order to
satisfy the Distribution Requirement, 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 a Fund's
cash assets or from the proceeds of sales of portfolio securities, if necessary.
A 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 (the excess of net long-term capital gain over net short-term capital
loss). 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.
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 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.
25
<PAGE>
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.
- 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).
26
<PAGE>
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.
27
<PAGE>
Financial Statements as of December 31, 1995
[To be supplied]
28
<PAGE>
Target Maturity 2010 Fund
A series of First Investors Life Series Fund
Statement of Net Assets
as of February 5, 1996
29
<PAGE>
ZERO COUPON 2010 FUND
(A Series of First Investors
Life Series Fund)
STATEMENT OF NET ASSETS
February 5, 1996
Cash on deposit with Custodian....................... $100
Liabilities.......................................... None
Net Assets........................................... $100
Net Asset Value, Offering Price and Redemption Price
Per Share ($100 divided by 10 shares of beneficial
interest outstanding).............................. $10.00
======
NOTES TO STATEMENT OF NET ASSETS
Note 1 -- Zero Coupon 2010 Fund (the "Fund"), a separate designated series
of First Investors Life Series Fund ("Life Series Fund"), raised
its initial capital through a private offering in which First
Investors Life Insurance Company purchased 10 shares, at $10.00
per share.
Note 2 -- Life Series Fund was organized under the laws of the Commonwealth
of Massachusetts on June 12, 1985 and presently contains ten
other operating series. Except for the outstanding shares of
beneficial interest reflected in the Statement of Net Assets,
Zero Coupon 2010 Fund has not commenced operations.
Note 3 -- Organizational expenses of the Fund will be borne by First
Investors Management Company, Inc.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Trustees of First Investors
Life Series Fund and the
Shareholder of
Zero Coupon 2010 Fund
We have audited the accompanying Statement of Net Assets of Zero Coupon
2010 Fund (a series of First Investors Life Series Fund) as of February 5, 1996.
This financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit 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 statement is free of material
misstatements. An audit includes examining evidence supporting the amounts and
disclosures in the financial statements. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the accompanying Statement of Net Assets presents
fairly the financial position of Zero Coupon 2010 Fund at February 5, 1996 in
conformity with generally accepted accounting principles.
/s/ Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 7, 1996
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements are set forth in Part B, Statement of Additional
Information.
(b) Exhibits:
(1)7 Declaration of Trust
(2)7 By-laws
(3) Not Applicable
(4)1 Specimen Certificate
(5)a.5 Investment Advisory Agreement between Registrant and First
Investors Management Company, Inc., including form of Schedule
A for Zero Coupon 2007 Series
b.5 Subadvisory Agreement relating to International Securities
Series and Growth Series
(6) Not Applicable
(7) Not Applicable
(8)a. Custodian Agreement between Registrant and Irving Trust
Company
b. Custodian Agreement between Registrant and Brown Brothers
Harriman & Co. relating to International Securities Fund
c. Custodian Agreement between Registrant and Brown Brothers
Harriman & Co. relating to Total Return Fund
d. Supplement to Custodian Agreement between Registrant and The
Bank of New York
(9) Administration Agreement between Registrant, First Investors
Management Company, Inc., First Investors Corporation and
Administrative Data Management Corp.
(10) Opinion of Counsel
(11)a. Consent of independent accountants
b.7 Powers of Attorney
<PAGE>
(12) Not Applicable
(13)2,4 Undertakings
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
(17) Not Applicable
(18) Not Applicable
- ----------
1 Incorporated by reference from Pre-Effective Amendment No. 2 to
Registrant's Registration Statement (File No. 2-98409).
2 Incorporated by reference from Post-Effective Amendment No. 10 to
Registrant's Registration Statement (File No. 2-98409) filed with the
Commission on October 31, 1991.
3 Incorporated by reference from Post-Effective Amendment No. 11 to
Registrant's Registration Statement (File No. 2-98409) filed with the
Commission on April 30, 1992.
4 Incorporated by reference from Post-Effective Amendment No. 13 to
Registrant's Registration Statement (File No. 2-98409) filed with the
Commission on September 16, 1993.
5 Incorporated by reference from Post-Effective Amendment No. 15 to
Registrant's Registration Statement (File No. 2-98409) filed with the
Commission on February 15, 1995.
6 Incorporated by reference from Registrant's Rule 24f-2 Notice for its
fiscal year ending December 31, 1994 filed with the Commission on February
21, 1995.
7 Incorporated by reference from Post-Effective Amendment No. 17 to
Registrant's Registration Statement (File No. 2-98409) filed with the
Commission on October 2, 1995.
Item 25. Persons Controlled by or under common control with Registrant
There are no persons controlled by or under common control with the
Registrant.
C-2
<PAGE>
Item 26. Number of Holders of Securities
Number of
Record Holders as of
Title of Class February 13, 1996
-------------- -----------------
Shares of
Beneficial Interest,
no par value
Investment Grade Fund 2
Government Fund 2
Cash Management Fund 2
Discovery Fund 2
Growth Fund 2
High Yield Fund 2
Blue Chip Fund 2
International Securities Fund 2
Utilities Income Fund 2
Zero Coupon 2007 Fund 1
Zero Coupon 2010 Fund 1
Item 27. Indemnification
Article XI, Section 2 of Registrant's Declaration of Trust provides as
follows:
"Section 2.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(i) every person who is, or has been, a Trustee or officer of the Trust (a
"Covered Person") shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding which he
becomes involved as a party or otherwise by virtue of his being or having been a
Trustee or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) Who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of
C-3
<PAGE>
his office or (B) not to have acted in good faith in the reasonable belief that
his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office,
(A) by the court or other body approving the settlement; or
(B) by at least a majority or those Trustees who are neither
interested persons of the Trust nor are parties to the matter
based upon a review of readily available facts (as opposed to a
full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full
trial-type inquiry); provided, however, that any Shareholder may,
by appropriate legal proceedings, challenge any such
determination by the Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under the
law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 2 may be paid by the Trust from time to time prior
to final disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the Trust if it
is ultimately determined that he is not entitled to indemnification under this
Section 2; provided, however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (b) the Trust is insured
against losses arising out of any such advance payments or (c) either a majority
of the Trustees who are neither interested persons of the Trust nor are parties
to the matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is a reason to believe that such Covered Person
will be found entitled to indemnification under this Section 2."
The general effect of this Indemnification will be to indemnify the
officers and Trustees of the Registrant from costs and expenses arising from any
action, suit or proceeding to which they may be made a party by reason of their
being or having been a Trustee or officer of the Registrant, except where such
action is determined to have arisen out of
C-4
<PAGE>
the willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the Trustee's or officer's office.
The Registrant's Investment Advisory Agreement provides as follows:
The Manager shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Company or any Series in connection with the
matters to which this Agreement relate except a loss resulting from the willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement. Any person, even though also an officer, partner, employee, or agent
of the Manager, who may be or become an officer, Board member, employee or agent
of the Company shall be deemed, when rendering services to the Company or acting
in any business of the Company, to be rendering such services to or acting
solely for the Company and not as an officer, partner, employee, or agent or one
under the control or direction of the Manager even though paid by it.
Item 28. Business and Other Connections of Investment Adviser
First Investors Management Company, Inc., the Registrant's Investment
Adviser, also serves as Investment Adviser to:
First Investors Cash Management Fund, Inc.
First Investors Series Fund
First Investors Fund For Income, Inc.
First Investors Government Fund, Inc.
First Investors High Yield Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Global Fund, Inc.
First Investors Multi-State Insured Tax Free Fund
First Investors New York Insured Tax Free Fund, Inc.
First Investors Special Bond Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
First Investors Series Fund II, Inc.
Affiliations of the officers and directors of the Investment Adviser are
set forth in Part B, Statement of Additional Information, under "Trustees and
Officers."
Item 29. Principal Underwriters
Not applicable
Item 30. Location of Accounts and Records
Physical possession of the books, accounts and records of the Registrant
are held by First Investors Management Company, Inc. and its affiliated
companies, First Investors Corporation and Administrative Data Management Corp.,
at their corporate headquarters, 95 Wall Street, New York, NY 10005 and
administrative offices, 581 Main Street, Woodbridge,
C-5
<PAGE>
NJ 07095, except for those maintained by the Registrant's Custodians, The Bank
of New York, 48 Wall Street, New York, NY 10286, and Brown Brothers Harriman &
Co., 40 Water Street, Boston, MA 02109.
Item 31. Management Services
Inapplicable
Item 32. Undertakings
The Registrant undertakes to carry out all indemnification provisions of
its Declaration of Trust, Advisory Agreement, Subadvisory Agreement and
Underwriting Agreement in accordance with Investment Company Act Release No.
11330 (September 4, 1980) and successor releases.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the provisions under Item 27 herein, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Registrant hereby undertakes to furnish a copy of its latest annual
report to shareholders, upon request and without charge, to each person to whom
a prospectus is delivered.
The Registrant hereby undertakes to file a Post-Effective Amendment
containing financial statements for First Investors Target Maturity 2010 Fund
that need not be certified, within four to six months from the effective date of
the Post-Effective Amendment to Registrant's Registration Statement filed
herewith, or from the date of its commencement of operations.
C-6
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
99.B8.1 Custodian Agreement
99.B8.2 Supplement to Custodian Agreement
99.B8.3 Custodian Agreement
99.B8.4 Custodian Agreement
99.B.9 Administration Agreement
99.B11 Consent of independent accountants
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 8th day of February, 1996.
FIRST INVESTORS LIFE
SERIES FUND
(Registrant)
By:/s/Glenn O. Head
----------------------------
Glenn O. Head
President and Trustee
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/Glenn O. Head Principal Executive February 8, 1996
- --------------------------- Officer and Trustee
Glenn O. Head
/s/Joseph I. Benedek Principal Financial February 8, 1996
- --------------------------- and Accounting Officer
Joseph I. Benedek
* Trustee February 8, 1996
- ---------------------------
Kathryn S. Head
* Trustee February 8, 1996
- ---------------------------
James J. Coy
* Trustee February 8, 1996
- ---------------------------
Roger L. Grayson
C-7
<PAGE>
* Trustee February 8, 1996
- ---------------------------
Herbert Rubinstein
* Trustee February 8, 1996
- ---------------------------
James M. Srygley
* Trustee February 8, 1996
- ---------------------------
John T. Sullivan
* Trustee February 8, 1996
- ---------------------------
Rex R. Reed
* Trustee February 8, 1996
- ---------------------------
Robert F. Wentworth
*By: /s/Larry R. Lavoie
-----------------------
Larry R. Lavoie
Attorney-in-fact
CUSTODIAN AGREEMENT
BETWEEN
IRVING TRUST COMPANY
AND
FIRST INVESTORS LIFE SERIES FUND
CUSTODIAN AGREEMENT, made this 7th day of July, 1986, between FIRST
INVESTORS LIFE SERIES FUND, a Massachusetts business trust, having its office
and place of business at 120 Wall Street, New York, New York 10005 (hereinafter
called the "Fund") and Irving Trust Company, a banking corporation organized and
existing under the laws of the State of New York, having its principal office
and place of business at One Wall Street, New York, New York 10015 (hereinafter
called the "Custodian").
WITNESSETH:
That for and in consideration of the mutual promises hereinafter set forth
the Fund and the Custodian agree as follows:
I
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
all the securities and monies at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees to
perform the duties thereof as hereinafter set forth.
II
CUSTODY OF CASH AND SECURITIES
1. The Fund will deliver or cause to be delivered to the Custodian all
securities and all monies owned by it, including cash received for the issuance
of its shares, at any time during the period of this Agreement. The Custodian
will not be responsible for such securities and such monies until actually
received by it.
2. The Custodian shall credit to a separate account in the name of the Fund
all monies received by it for the account of the Fund, and shall disburse the
same only:
(a) In payment for securities purchased, as provided in Article III
hereof;
(b) In payment of dividends or distributions as provided in Article V
hereof;
<PAGE>
(c) In payment of original issue or other taxes, as provided in
Article VI hereof;
(d) In payment for capital stock of the Fund redeemed by it, as
provided in Article VI hereof;
(e) Pursuant to an officers certificate, or with respect to money
market securities, as defined in Article IX, the oral instructions of an
authorized person, as defined in Article IX, setting forth the name and address
of the person to whom payment is to be made, the amount to be paid, and the
corporate purpose for which payment is to be made; and
(f) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian, as provided in Article VII hereof.
3. The Custodian shall provide the Fund promptly after the close of
business on each day with a statement summarizing all transactions and entries
for the account of the Fund during said day, and it shall, at least monthly and
from time to time, at the reasonable request of the Fund, render a detailed
statement of the securities and monies held for the Fund under this Agreement.
4. All securities held for the Fund, which are issued or issuable only in
bearer form, shall be held by the Custodian in that form; all other securities
held for the Fund may be registered in the name of the Fund or in the name of
any duly appointed and registered nominee of the Custodian, as the Custodian may
from time to time determine. The Fund agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee, any
securities which it may held for the account of the Fund and which may from time
to time be registered in the name of the Fund. The Custodian shall hold all
securities in a separate account in the name of the Fund physically segregated
at all times from those of any person or persons. Notwithstanding the foregoing,
to the extent authorized by the Board of Trustees of the Fund, the Custodian may
deposit securities in a clearing agency or the book entry system of the Federal
Reserve Banks, as provided in Rule 17f-4 of the Investment Company Act of 1940,
as amended, and securities deposited in such agency may be registered in the
name of such agency or its nominee.
5. Unless otherwise instructed to the contrary by an officers certificate,
the Custodian shall, with respect to all securities held for the Fund:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed, or retired, or otherwise
become payable;
<PAGE>
(c) Surrender securities in temporary form for definitive securities;
(d) Execute, as custodian, any necessary declarations or certificates
of ownership under the Federal Income Tax laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
(e) Hold for the account of the Fund all stock dividends, rights and
similar securities issued with respect to any securities held by it hereunder.
6. Upon receipt of an officers certificate and not otherwise, the Custodian
shall:
(a) Execute and deliver to such persons as may be designated in such
officers certificate, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) Deliver any securities held for the Fund in exchange for other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation or the exercise of any conversion privilege;
(c) Deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold under the terms of this
Agreement, such certificates of deposit, interim receipts or other instruments
or documents as may be issued to it to evidence such delivery;
(d) Take such other action as may be authorized in such officers
certificate.
III
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
1. Promptly after each purchase of securities by the Fund, the Fund shall
deliver to the Custodian (i) with respect to each purchase of securities which
are not money market securities an officers certificate and (ii) with respect to
each purchase of money market securities such an officers certificate or oral
instructions from an authorized person, specifying with respect to each such
purchase: (a) the name of the issuer and the title of the securities, (b) the
number of shares or the principal amount purchased, and accrued interest, if
any, (c) the date of purchase and settlement, (d) the purchase price per unit,
(e) the total amount payable upon such purchase, (f) the name of the person from
whom or the broker through whom the purchase was made and (g) such
<PAGE>
other information as shall be necessary for the issuance by the Custodian or a
depository of escrow receipts relating to options purchased by the Fund, if the
issuance of escrow receipts is requested by the officers certificate. The
Custodian shall receive all securities purchased by or for the Fund from the
persons through or from whom the same were purchased, and shall pay out the
monies held for the account of the Fund, the total amount payable upon such
purchase as set forth in such officers certificate or such oral instruments, as
the case may be, provided that the same conforms to the total amount payable as
set forth on such officers certificate or in such oral instructions. The
Custodian may make payment in such forms as shall be satisfactory to it and may
accept securities in accordance with the customs prevailing among dealers.
2. Promptly after each sale of securities by the Fund, the Fund shall
deliver to the Custodian, (i) with respect to each sale of securities which are
not money market securities an officers certificate and (ii) with respect to
each sale of money market securities such an officers certificate or oral
instructions from an authorized person specifying with respect to each such
sale: (a) the name of the issuer and the title of the securities, (b) the number
of shares or principal amount sold, and accrued interest, if any, (c) the date
of sale, (d) the sale price per unit, (e) the total amount payable to the Fund
upon such sale and (f) the name of the broker through whom or the person to whom
the sale was made. The Custodian shall deliver the securities thus designated to
the broker or other person named in such officers certificate upon receipt of
the total amount payable to the Fund as set forth in such officers certificate
or such oral instructions as the case may be, with respect to such sale. The
Custodian may accept payment in such form as shall be satisfactory to it, and
may deliver securities and arrange for payment in accordance with the customs
prevailing among dealers in securities.
IV
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Where the Fund is permitted to lend its portfolio securities and wishes
to lend its portfolio securities, the Fund shall deliver to the Custodian an
officers certificate specifying with respect to each such loan: (a) the name of
the issuer and the title of the securities, (b) the number of shares or the
principal amount loaned, (c) the date of the loan and delivery, (d) the total
amount to be delivered to the Custodian against the loan of the securities
including the amount of cash collateral and the premium, if any, separately
identified and (e) the name of the broker to whom the loan was made. The
Custodian shall deliver the securities thus designated to the broker to whom the
loan was made upon receipt of the total amount designated as to be delivered
against the loan of securities. The Custodian may accept payment only in the
form of immediately available funds or a certified or bank cashier's check
payable to the order of the Fund or the Custodian
<PAGE>
drawn on New York Clearing House funds and may deliver securities in accordance
with the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of securities by the Fund,
the Fund shall deliver to the Custodian an officers certificate specifying with
respect to each such loan termination and return of securities: (a) the name of
the issuer and the title of the securities to be returned, (b) the number of
shares or the principal amount to be returned, (c) the date of termination, (d)
the total amount to be delivered by the Custodian (including the cash collateral
for such securities minus any offsetting credits as described in said officers
certificate) and (e) the name of the broker from whom the securities will be
returned. The Custodian shall receive all securities returned from the broker to
whom such securities were loaned and upon receipt thereof shall pay, out of the
monies held for the account of the Fund, the total amount payable upon such
return of securities as set forth in the officers certificate.
V
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of any resolution of its
Board of Trustees, authorizing the declaration of dividends on a monthly,
quarterly, semi-annual, annual or other basis, and authorizing the Custodian to
rely on the oral instructions from an authorized officer of the Fund, setting
forth the date of the declaration of such dividend or distribution, the date of
payment thereof, the record date as of which stockholders entitled to payment
shall be determined, and the amount payable per share to the stockholders of
record as of that date and the total amount payable to the Dividend Agent on the
payment date.
2. Upon the payment date specified in such officers certificate or oral
instructions, the Custodian shall pay out of the monies held for the account of
the Fund the total amount payable to the Dividend Agent for the Fund.
VI
SALE AND REDEMPTION OF CAPITAL STOCK OF THE FUND
1. Whenever the Fund shall sell any shares of its capital stock, it shall
cause to be delivered to the Custodian an officers certificate duly specifying:
(a) The number of shares sold, trade date, and price; and
<PAGE>
(b) The amount of money to be received by the Custodian for the sale
of such shares.
2. Upon receipt of such money the Custodian shall credit such money into
the account of the Fund.
3. Upon the issuance of any of the capital stock of the Fund in accordance
with the foregoing provisions of this Article, the Custodian shall pay, out of
the money held for the account of the Fund, all original issue or other taxes
required to be paid by the Fund in connection with such issuance upon the
receipt of an officers certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund shall hereafter redeem
any shares of its capital stock, it shall furnish to the Custodian an officers
certificate specifying:
(a) The number of shares of capital stock redeemed; and
(b) The amount to be paid for the shares redeemed.
5. Upon receipt from the Transfer Agent of an advice setting forth the
number of shares received by the Transfer Agent for redemption and that such
shares are valid and in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the monies held for the account of the
Fund, of the total amount specified in the officers certificate issued pursuant
to the foregoing paragraph 4 of this Article.
VII
CONCERNING THE CUSTODIAN
1. Neither the Custodian nor its nominee shall be liable for any loss or
damage including counsel fees, resulting from its action or omission to act or
otherwise, except for any such loss or damage arising out of its own negligence
or willful misconduct. The Custodian may, with respect to questions of law,
apply for and obtain the advice and opinion of counsel to the Fund or of its own
counsel, at the expense of the Fund, and shall be fully protected with respect
to anything done or omitted by it in good faith in conformity with such advice
or opinion.
2. Without limiting the generality of the foregoing, the Custodian shall be
under no duty or obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any securities purchased by or for
the Fund, the legality of the purchase thereof, or the propriety of the amount
paid therefor;
<PAGE>
(b) The legality of the sale of any securities by or for the Fund or
the propriety of the amount for which the same are sold;
(c) The legality of the issue or sale of any shares of the capital
stock of the Fund, or the sufficiency of the amount to be received therefor;
(d) The legality of the redemption of any shares of the capital stock
of the Fund, or the propriety of the amount to be paid therefor;
(e) The legality of the declaration of any dividend by the Fund or the
legality of the issue of any shares of the Fund's capital stock in payment of
any stock dividend;
(f) The legality of any loan of portfolio securities pursuant to
Article IV of this Agreement, nor shall the Custodian be under any duty or
obligation to see to it that any cash collateral delivered to it by a brokerage
firm or held by it at any time as a result of such loan of the portfolio
securities of the Fund is adequate collateral for the Fund against any loss it
might sustain as a result of such loan. The Custodian specifically, but not by
way of limitation, shall not be under any duty or obligation to periodically
check or notify the Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty or obligation
shall be the sole responsibility of the Fund. In addition, the Custodian shall
be under no duty or obligation to see that any brokerage firm to whom portfolio
securities of the Fund are lent pursuant to Article IV of this Agreement makes
payment to it of any dividends or interest which are payable to or for the
account of the Fund during the period of such loan or at the termination of such
loan, provided however, that the Custodian shall promptly notify the Fund in the
event that such dividends or interest are not paid and received when due;
(g) The legality of a payment made pursuant to an officers certificate
or, in the case of money market securities, pursuant to oral instructions of any
authorized person.
3. The Custodian shall not be liable for, or considered to be the Custodian
of, any money represented by any check, draft, or other instrument for the
payment of money received by it on behalf of the Fund, until the Custodian
actually receives such money.
4. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
<PAGE>
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount, if the securities upon which such amount is
payable are in default or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by
an officers certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such action.
6. The Custodian may appoint one or more banking institutions, including,
but not limited to, banking institutions located in foreign countries, as
Depository or Depositories or as a Sub-Custodian of securities and monies at any
time owned by the Fund, upon terms and conditions approved in written
instructions from two officers of the Fund.
7. The Custodian shall not be under any duty or obligation to ascertain
whether any securities at any time delivered to or held by it for the account of
the Fund are such as may properly be held by the Fund under the provisions of
its Articles of Incorporation.
8. The Custodian shall be entitled to receive and the Fund agrees to pay to
the Custodian, such compensation as may be agreed upon from time to time between
the Custodian and the Fund. The Custodian may charge such compensation and any
expenses incurred by the Custodian in the performance of its duties pursuant to
such agreement against any money held by it for the account of the Fund. The
Custodian shall also be entitled to charge against any money held by it for the
account of the Fund the amount of any loss, damage, liability or expense,
including counsel fees, for which it shall be entitled to reimbursement under
the provisions of this Agreement. The expenses which the Custodian may charge
against the account of the Fund include, but are not limited to, the expenses of
Sub-Custodians and foreign branches of the Custodian incurred in settling
transactions involving the purchase and sale of securities of the Fund.
9. The Custodian shall be entitled to rely upon any officers certificate,
notice or other instrument in writing received by the Custodian and believed by
the Custodian to be genuine and to be signed by two officers of the Fund as
defined in Article IX. The Custodian shall be entitled to rely upon any oral
instructions received by the Custodian pursuant to Article III or V hereof and
believed by the Custodian to be genuine and to be given by an authorized person.
The Fund agrees to forward to the Custodian written instructions from an
authorized person confirming such oral instructions in such manner so that such
written instructions are received by the Custodian, whether by hand delivery,
telex or otherwise, by the close of business of the same day that such oral
instructions are given to the Custodian. The Custodian's understanding of any
oral instructions on which it has acted shall be binding on the Fund
notwithstanding receipt by the Custodian of written confirmation of such oral
instructions which is inconsistent with the Custodian's understanding thereof.
The Fund agrees that the fact that such confirming written instructions are
<PAGE>
not received by the Custodian shall in no way affect the validity of
transactions or enforceability of the transactions hereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no liability to the Fund in
acting upon oral instructions given to the Custodian hereunder concerning such
transactions provided such instructions reasonably appear to have been received
from a duly authorized person.
VIII
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be no less than 60 days after the date of the giving of such notice.
In the event such notice is given by the Fund, it shall be accompanied by a copy
of a resolution of the Board of Trustees of the Fund, certified by the Secretary
or any Assistant Secretary, electing to terminate this Agreement and designating
a successor custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus and undivided
profits. In the event such notice is given by the Custodian, the Fund shall, on
or before the termination date, deliver to the Custodian a copy of resolution of
its Board of Trustees, certified by the Secretary or any Assistant Secretary,
designating a successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may apply to any court of competent
jurisdiction for the appointment of a successor custodian which shall be a bank
or a trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. If the Fund fails to designate a successor custodian, the
Fund shall, upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of all securities and monies
then owned by the Fund be deemed to be its own custodian and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement.
2. Upon the date set forth in such notice, this Agreement shall terminate
and the Custodian shall, upon receipt of a notice of acceptance by the successor
custodian, on that date deliver directly to the successor custodian all
securities and monies then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall be entitled.
IX
MISCELLANEOUS
1. The term "officers certificate" shall mean any notice, instructions or
other instrument in writing, authorized or required by this Agreement to be
given to the Custodian signed by two officers on behalf of the Fund.
<PAGE>
2. The term "Officers" shall be deemed to include the President,
Vice-President, the Secretary, the Treasurer, any Assistant Secretary, any
Assistant Treasurer, or any other person or persons duly authorized by the Board
of Trustees to execute any certificate, instruction, notice or other instrument
on behalf of the Fund. The term "securities" shall include, but shall not be
limited to, stocks, bonds, debentures, notices, bankers' acceptances,
certificates of deposit, options, securities covered by options, and money
market instruments.
3. Annexed hereto as Appendix A, is a certificate signed by two of the
present officers of the Fund under its corporate seal, setting forth the names
and the signatures of the present officers of the Fund. The Fund agrees to
notify the Custodian promptly if any such present officer ceases to be an
officer of the Fund, and to furnish the Custodian a new certificate in similar
form in the event other or additional officers as defined in Article IX are
elected or appointed. Until such new certificate shall be received, the
Custodian shall be fully protected in acting under the provisions of this
Agreement upon the signatures of the present officers as set forth in said
annexed certificate or upon the signatures of the present officers as set forth
in subsequently issued certificates.
4. The term "authorized person" shall be deemed to include the Treasurer,
the Secretary or any other persons, whether or not any such person is an officer
or employee of the Fund, duly authorized by the Board of Trustees to execute any
certificate, instruction, notice or other instrument or to deliver oral
instructions on behalf of the Fund.
5. Annexed hereto as Appendix B is a certificate signed by two of the
present officers of the Fund under its corporate seal, setting forth the names
and signatures of the present authorized persons. The Fund agrees to notify the
Custodian promptly if any such present authorized person ceases to be an
authorized person and to furnish to the Custodian a new certificate in similar
form in the event that other or additional authorized persons are elected or
appointed. Until such new certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement upon oral
instructions or signatures of the present authorized persons as set forth in
said annexed certificate or upon oral instructions or the signatures of the
present authorized persons as set forth in a subsequently issued certificate.
6. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at One
Wall Street, New York, New York 10015, Attn: Institutional Custody
Administration Department or at such other place as the Custodian may from time
to time designate in writing.
<PAGE>
7. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office, at 120 Wall Street, New
York, New York 10005, or at such other place as the Fund may from time to time
designate in writing.
8. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement, and authorized and approved by a resolution of the Board of Trustees
of the Fund.
9. The term "money market security" shall be deemed to include, but not be
limited to, debt obligations issued or guaranteed as to interest and principal
by the Government of the United States or agencies or instrumentalities thereof,
bank deposits, certificates of deposit, commercial paper and bankers'
acceptances, where the purchase or sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale.
10. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian and shall not be assignable by the Custodian without the
written consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
11. This Agreement shall be construed in accordance with the laws of the
State of New York.
12. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original but such counterparts shall, together,
constitute only one instrument.
13. The term "written instructions" shall mean written communications by
telex or any other such system whereby the receiver of such communications is
able to verify by codes or otherwise with a reasonable degree of certainty the
authenticity of the sender of such communications.
14. Notwithstanding any provision of law to the contrary, the Custodian
hereby waives any right to enforce this agreement against the individual and
separate assets of any shareholder of the Fund, or of any series of the Fund.
15. This agreement shall apply separately to each series of First Investors
Life Series Fund (now existing or hereafter established) and the assets of each
such series shall be kept separate and apart from the assets of every other
series to the same extent as if a separate agreement had been executed on behalf
of each series.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers, thereunder duly authorized and
their respective corporate seals to be hereunto affixed as of the day and year
first above written.
FIRST INVESTORS LIFE SERIES FUND
By: /s/ Andrew J. Donohue
--------------------------------
Andrew J. Donohue, President
ATTEST:
/s/ C. Durso
- ------------------------------
Concetta Durso, Secretary
IRVING TRUST COMPANY
By: /s/ Michael A. Mertz
--------------------------------
Michael A. Mertz
Vice President
ATTEST:
/s/ Maria P. Fernandes
- ------------------------------
Maria P. Fernandes
Assistant Secretary
<PAGE>
APPENDIX A
I, Andrew J. Donohue, President and I, Concetta Durso, Secretary of First
Investors Life Series Fund, a Massachusetts business trust (the "Fund"), do
hereby certify that:
The following individuals serve in the following positions with the Fund
and each individual has been duly elected or appointed to each such position and
qualified therefor in conformity with the Fund's Articles of Incorporation and
By-Laws and the signatures set forth opposite their respective names are true
and correct signatures:
NAME POSITION SIGNATURE
- ---- -------- ---------
Andrew J. Donohue President /s/ Andrew J. Donohue
----------------------
David D. Grayson Vice President /s/ David D. Grayson
----------------------
Glenn O Head. Vice President /s/ Glenn O. Head
----------------------
Concetta Durso Secretary /s/ C. Durso
----------------------
Nicholas Orros Treasurer /s/ Nicholas Orros
----------------------
Joseph P. Abbamount Assistant Treasurer /s/ Joseph P. Abbamont
----------------------
Anthony Gentile Authorized Signer /s/ Anthony Gentile
----------------------
Jay G. Baris Authorized Signer /s/ Jay G. Baris
----------------------
Robert J. Grosso Authorized Signer /s/ Robert J. Grosso
----------------------
Regina D. Tenzer Authorized Signer /s/ Regina D. Tenzer
----------------------
I, Andrew J. Donohue, in my official capacity as President of First Investors
Life Series Fund, hereby certify that Concetta Durso is currently the duly
elected and appointed Secretary of First Investors Life Series Fund and that the
above named individuals have been duly elected and appointed to each such
position and that the signatures appearing opposite their names are true and
correct signatures.
/s/ Andrew J. Donohue
-------------------------------
Andrew J. Donohue, President
Dated:
13
<PAGE>
I, Concetta Durso, Secretary of First Investors Life Series Fund hereby certify
that the above named individuals have been duly elected and appointed to each
position and that the signature appearing opposite their names are true and
correct signatures.
/s/ C. Durso
-------------------------------
Concetta Durso, Secretary
Dated:
14
<PAGE>
APPENDIX B
I, Andrew J. Donohue, President, and I, Concetta Durso, Secretary of First
Investors Life Series Fund, a Massachusetts business trust (the "Fund"), do
hereby certify that:
The following individuals have been duly authorized in conformity with the
Fund's Articles of Incorporation and By-laws to execute any certificate,
instruction, notice or other instrument or to give oral instructions on behalf
of the Fund, and the signatures set forth opposite their respective names are
their true and correct signatures:
NAME SIGNATURE
- ---- ---------
Andrew J. Donohue /s/ Andrew J. Donohue
------------------------------------
David D. Grayson /s/ David D. Grayson
------------------------------------
Glenn O. Head /s/ Glenn O. Head
------------------------------------
Concetta Durso /s/ C. Durso
------------------------------------
Nicholas Orros /s/ Nicholas Orros
------------------------------------
Joseph P. Abbamont /s/ Joseph P. Abbamont
------------------------------------
Anthony Gentile /s/ Anthony Gentile
------------------------------------
Jay G. Baris /s/ Jay G. Baris
------------------------------------
Robert J. Grosso /s/ Robert J. Grosso
------------------------------------
Regina D. Tenzer /s/ Regina D. Tenzer
------------------------------------
I, Andrew J. Donohue, in my official capacity as President of First Investors
Life Series Fund, hereby certify that Concetta Durso is currently the duly
elected and appointed Secretary of First Investors Life Series Fund and that the
above named individuals have been duly authorized to execute any certificate,
instruction, notice or other instrument or to give oral instructions on behalf
of the Fund and the signatures set forth opposite their names are true and
correct signatures.
/s/ Andrew J. Donohue
-------------------------------
Andrew J. Donohue, President
Dated:
I, Concetta Durso, Secretary of First Investors Life Series Fund, hereby certify
that the above named individuals have been duly authorized to execute any
certificate, instruction, notice, or
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other instrument or to give oral instructions on behalf of the Fund and the
signatures set forth opposite their names are true and correct signatures.
/s/ C. Durso,
-------------------------------
Concetta Durso, Secretary
Dated:
16
SUPPLEMENT
TO
CUSTODIAN AGREEMENT
This Supplement is added to and forms a part of the Custodian Agreement
between First Investors Life Series Fund (the "Fund") and The Bank of New York,
as successor-in-interest to Irving Trust Company (the "Custodian") dated July 7,
1986 (the "Agreement"). All defined terms used herein shall have the meanings
ascribed to them in the Agreement.
1. If the Custodian in its sole discretion advances Funds on behalf of the
Fund or any series thereof which results in an overdraft because the moneys held
by the Custodian in the separate account for the Fund or such series shall be
insufficient to pay the total amount payable upon a purchase of securities
specifically allocated to the Fund or such series, as set forth in an officer's
certificate, oral instructions or written instructions, or which results in an
overdraft in the separate account of the Fund or such series for some other
reason, or if the Fund or such series is indebted to The Bank of New York as the
issuer of any letter of credit on behalf of the Fund or such series, such
overdraft or indebtedness shall be deemed to be a loan made by the Custodian to
the Fund (allocated to the appropriate series, if any) payable on demand and
shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to the Federal Funds
Rate in effect from time to time plus 1%, such rate to be adjusted on the
effective date of any change in the Federal Funds Rate, but in no event to be
less than 6% per annum. Promptly upon the occurrence of any overdraft, the
Custodian will notify the Fund of the amount of such overdraft and the series to
which it relates. In addition, the Fund hereby agrees that the Custodian shall
have a continuing lien and security interest in and to any property of the Fund
or specifically allocated the Fund's series (if applicable) at any time held by
it for the benefit of the Fund or such series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or control of any third party acting in the Custodian's behalf. If, one business
day after the Custodian has demanded repayment of any overdraft or indebtedness,
the Fund fails to pay the same in full, the Custodian shall be entitled, in its
sole discretion, at any time to charge any outstanding overdraft or indebtedness
together with interest due thereon against any balance of account standing to
the Fund's or the appropriate series' credit on the Custodian's books.
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2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
for which it borrows money for investment or for temporary or emergency purposes
using securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian an officer's certificate specifying with respect to each such
borrowing: (a) the series to which such borrowing relates (if applicable); (b)
the name of the bank, (c) the amount and terms of the borrowing, which may be
set forth by incorporating by reference an attached promissory note, duly
endorsed by the Fund, or other loan agreement, (d) the time and date, if known,
on which the loan is to be entered into, (e) the date on which the loan becomes
due and payable, (f) the total amount payable to the Fund on the borrowing date,
(g) the market value of securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in an officer's certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the officer's certificate. The Custodian may, at
the option of the lending bank, keep such collateral in its possession, but such
collateral shall be subject to all rights therein given the lending bank by
virtue of any promissory note or loan agreement. The Custodian shall deliver
such securities as additional collateral as may be specified in an officer's
certificate to collateralize further any transaction described in this
paragraph. If the Custodian keeps the collateral in its possession, it shall
release such collateral as may be specified in a notice or undertaking in the
form currently used by the lending bank, provided that the same conforms to the
total amount set forth in an officer's certificate. The Fund shall cause all
securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in an officer's certificate the series (if applicable), the name of the issuer,
the title and number of shares or the principal amount of any particular
securities to be delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any securities.
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3. This Supplement shall be effective as of the date hereof upon execution
by the parties hereto, and any reference to the Agreement shall be a reference
to the Agreement as supplemented hereby.
4. In the event of any conflict between the provisions of the Agreement and
the provisions of this Supplement, the provisions of this Supplement shall
control.
5. With respect to any obligations of the Fund on behalf of a series
arising out of this agreement, including, without limitation, the obligations
arising under this Supplement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the series
to which such obligation relates as though the Fund had separately contracted
with the Custodian by separate written instrument with respect to each series.
6. Notwithstanding the provisions of any applicable law, including without
limitation the Uniform Commercial Code, the remedy set forth in this Section 1
shall be the only right or remedy to which the Custodian is entitled with
respect to the lien and security interest granted pursuant to this Section 1.
Without limiting the foregoing, the Custodian hereby waives and relinquishes all
contractual and common law rights of set off to which it may now or hereafter be
or become entitled with respect to any obligations of the Fund to the Custodian
arising under the Supplement.
IN WITNESS WHEREOF, the parties hereto have executed this SUPPLEMENT as of
the date first above written.
First Investors Life Series Fund
By: /s/ C. Durso
-----------------------------
Title: Vice President & Secretary
ATTEST:
/s/ Susan I. Grant
- ----------------------------
THE BANK OF NEW YORK
By: /s/ S. Grunston
-----------------------------
Title: Vice President
ATTEST:
/s/ Octavio Cabrero
- ----------------------------
3
CUSTODIAN AGREEMENT
AGREEMENT made this 8th day of March, 1990, between First Investors
Life Series Fund on behalf of International Securities Series (such series is
hereafter referred to as (the "Fund") and Brown Brothers Harriman & Co. (the
"Custodian").
WITNESSETH: That in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. The Fund hereby employs and appoints the Custodian as a custodian
for the term and subject to the provisions of this Agreement. The Custodian
shall not be under any duty or obligation to require the Fund to deliver to it
any securities or funds owned by the Fund and shall have no responsibility or
liability for or on account of securities or funds not so delivered. The Fund
will deposit with the Custodian copies of the Certificate of Incorporation and
By-Laws (or comparable documents) of the Fund and all amendments thereto, and
copies of such votes and other proceedings of the Fund as may be necessary for
or convenient to the Custodian in the performance of its duties.
2. Except for securities and funds held by subcustodians appointed
pursuant to the provisions of Section 3 hereof, the Custodian shall have and
perform the following powers and duties:
A. Safekeeping - To keep safely the securities of the Fund that have
been delivered to the Custodian and from time to time to receive delivery of
securities for safekeeping.
B. Manner of Holding Securities - To hold securities of the Fund (1) by
physical possession of the share certificates or other instruments representing
such securities in registered or bearer form, or (2) in book-entry form by a
Securities System (as said term is defined in Section 2T).
C. Registered Name; Nominee - To hold registered securities of the Fund
(1) in the name or any nominee name of the Custodian or the Fund, or in the name
or any nominee name of any agent appointed pursuant to Section 5E, or (2) in
street certificate form, so-called, and in any case with or without any
indication of fiduciary capacity.
D. Purchases - Upon receipt of proper instructions, and insofar as
funds are available for the purpose, to pay for and receive securities purchased
for the account of the Fund, payment being made only upon receipt of the
securities (1) by the Custodian, or (2) by a clearing corporation of a national
securities exchange of which the Custodian is a member, or (3) by
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a Securities System. However, (i) in the case of repurchase agreements entered
into by the Fund, the Custodian (as well as a Subcustodian or an Agent, as
defined in Section 2G) may release funds to a Securities System prior to the
receipt of advice from the Securities System that the securities underlying such
repurchase agreement have been transferred by book entry into the Account (as
defined in Section 2T) of the Custodian (or such Subcustodian or Agent)
maintained with such Securities System, and (ii) in the case of time deposits,
call account deposits, currency deposits, and other deposits pursuant to
Sections 2K, 2L and 2M, the Custodian may make payment therefore without
receiving an instrument evidencing said deposit.
E. Exchanges - Upon receipt of proper instructions, to exchange
securities held by it for the account of the Fund for other securities in
connection with any reorganization, recapitalization, split-up of shares, change
of par value, conversion or other event, and to deposit any such securities in
accordance with the terms of any reorganization or protective plan. Without such
instructions, the Custodian may surrender securities in temporary form for
definitive securities, may surrender securities for transfer into a name or
nominee name as permitted in Section 2C, and may surrender securities for a
different number of certificates or instruments representing the same number of
shares or same principal amount of indebtedness, provided the securities to be
issued are to be delivered to the Custodian.
F. Sales of Securities - Upon receipt of proper instructions, to make
delivery of securities which have been sold for the account of the Fund, but
only against payment therefor (1) in cash, by a certified check, bank cashier's
check, bank credit, or bank wire transfer, or (2) by credit to the account of
the Custodian with a clearing corporation of a national securities exchange of
which the Custodian is a member, or (3) by credit to the account of the
Custodian or an Agent of the Custodian with a Securities System.
G. Depositary Receipts - Upon receipt of proper instructions, to
instruct a subcustodian appointed pursuant to Section 3 hereof (a
"Subcustodian") or an agent of the Custodian appointed pursuant to Section 5E
hereof (an "Agent") to surrender securities to the depositary used by an issuer
of American Depositary Receipts or International Depositary Receipts
(hereinafter collectively referred to as "ADRs") for such securities against a
written receipt therefor adequately describing such securities and written
evidence satisfactory to the Subcustodian or Agent that the depositary has
acknowledged receipt of instructions to issue with respect to such securities
ADRs in the name of the Custodian, or a nominee of the Custodian, for delivery
to the Custodian in Boston, Massachusetts, or at such other place as the
Custodian may from time to time designate.
Upon receipt of proper instructions, to surrender ADRs to
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<PAGE>
the issuer thereof against a written receipt therefor adequately describing the
ADRs surrendered and written evidence satisfactory to the Custodian that the
issuer of the ADRs has acknowledged receipt of instructions to cause its
depositary to deliver the securities underlying such ADRs to a Subcustodian or
an Agent.
H. Exercise of Rights; Tender Offers - Upon receipt of proper
instructions, to deliver to the issuer or trustee thereof, or to the agent of
either, warrants, puts, calls, rights or similar securities for the purpose of
being exercised or sold, provided that the new securities and cash, if any,
acquired by such action are to be delivered to the Custodian, and, upon receipt
of proper instructions, to deposit securities upon invitations for tenders of
securities, provided that the consideration is to be paid or delivered or the
tendered securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and collect all stock
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
J. Borrowings - Upon receipt of proper instructions, to deliver
securities of the Fund to lenders or their agents as collateral for borrowings
effected by the Fund, provided that such borrowed money is payable to or upon
the Custodian's order as Custodian for the Fund.
K. Demand Deposit Bank Accounts - To open and operate an account or
accounts in the name of the Fund on the Custodian's books subject only to draft
or order by the Custodian. All funds received by the Custodian from or for the
account of the Fund shall be deposited in said account(s). The responsibilities
of the Custodian to the Fund for deposits accepted on the Custodian's books
shall be that of a U. S. bank for a similar deposit.
If and when authorized by proper instructions, the Custodian may open
and operate an additional account(s) in such other banks or trust companies as
may be designated by the Fund in such instructions (any such bank or trust
company so designated by the Fund being referred to hereafter as a "Banking
Institution"), provided that such account(s) shall be in the name of the
Custodian for account of the Fund and subject only to the Custodian's draft or
order. Such accounts may be opened with Banking Institutions in the United
States and in other countries and may be denominated in either U.S. Dollars or
other currencies as the Fund may determine. All such deposits shall be deemed to
be portfolio securities of the Fund and accordingly the responsibility of the
Custodian therefore shall be the same as and no greater than the Custodian's
responsibility in respect of other portfolio securities of the Fund.
L. Interest Bearing Call or Time Deposits - To place interest
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<PAGE>
bearing fixed term and call deposits with such banks and in such amounts as the
Fund may authorize pursuant to proper instructions. Such deposits may be placed
with the Custodian or with Subcustodians or other Banking Institutions as the
Fund may determine. Deposits may be denominated in U.S. Dollars or other
currencies and need not be evidenced by the issuance or delivery of a
certificate to the Custodian, provided that the Custodian shall include in its
records with respect to the assets of the Fund, appropriate notation as to the
amount and currency of each such deposit, the accepting Banking Institution, and
other appropriate details. Such deposits, other than those placed with the
Custodian, shall be deemed portfolio securities of the Fund and the
responsibilities of the Custodian therefor shall be the same as those for demand
deposit bank accounts placed with other banks, as described in Section K of this
agreement. The responsibility of the Custodian for such deposits accepted on the
Custodian's books shall be that of a U. S. bank for a similar deposit.
M. Foreign Exchange Transactions - Pursuant to proper instructions, to
enter into foreign exchange contracts, to purchase and sell foreign currencies
for spot and future delivery on behalf and for the account of the Fund. Such
transactions may be undertaken by the Custodian with such Banking Institutions,
including the Custodian and Subcustodian(s) as principals, as approved and
authorized by the Fund. Foreign exchange contracts, other than those executed
with the Custodian, shall be deemed to be portfolio securities of the Fund and
the responsibilities of the Custodian therefore shall be the same as those for
demand deposit bank accounts placed with other banks as described in Section K
of this agreement.
N. Stock Loans - Upon receipt of proper instructions, to deliver
securities of the Fund, in connection with loans of securities by the Fund, to
the borrower thereof prior to receipt of the collateral, if any, for such
borrowings.
O. Collections - To collect, receive and deposit in said account or
accounts all income and other payments with respect to the securities held
hereunder, and to execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund or in connection with transfer
of securities, and pursuant to proper instructions to take such other actions
with respect to collection or receipt of funds or transfer of securities which
involve an investment decision.
P. Dividends, Distributions and Redemptions - Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the "Shareholder
Servicing Agent") (given by such person or persons and in such manner on behalf
of the Shareholder Servicing Agent as the Fund shall have authorized), the
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<PAGE>
Custodian shall release funds or securities to the Shareholder Servicing Agent
or otherwise apply funds or securities, insofar as available, for the payment of
dividends or other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Shareholder
Servicing Agent (given by such person or persons and in such manner on behalf of
the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities, insofar as available, to the
Shareholder Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a request for
repurchase or redemption of their shares of capital stock of the Fund.
Q. Proxies, Notices, Etc. - Promptly to deliver or mail to the Fund all
forms of proxies and all notices of meetings and any other notices or
announcements affecting or relating to securities owned by the Fund that are
received by the Custodian, and upon receipt of proper instructions, to execute
and deliver or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its nominee shall
vote upon any of such securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except as otherwise
herein provided) unless ordered to do so by proper instructions.
R. Bills - Upon receipt of proper instructions, to pay or cause to be
paid, insofar as funds are available for the purpose, bills, statements, or
other obligations of the Fund.
S. Nondiscretionary Details - Without the necessity of express
authorization from the Fund, (1) to attend to all nondiscretionary details in
connection with the sale, exchange, substitution, purchase, transfer or other
dealings with securities, funds or other property of the Fund held by the
Custodian except as otherwise directed from time to time by the Directors of the
Fund, and (2) to make payments to itself or others for minor expenses of
handling securities or other similar items relating to the Custodian's duties
under this Agreement, provided that all such payments shall be accounted for to
the Fund.
T. Deposit of Fund Assets in Securities Systems - The Custodian may
deposit and/or maintain securities owned by the Fund in (i) The Depository Trust
Company, (ii) any book-entry system as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of Subpart O, or (iii)
any other domestic clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which acts
as a securities depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this Agreement as a
"Securities System"). Utilization of a Securities System shall be in
5
<PAGE>
accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1. The Custodian may deposit and/or maintain Fund securities, either
directly or through one or more Agents appointed by the Custodian (provided that
any such agent shall be qualified to act as a custodian of the Fund pursuant to
the Investment Company Act of 1940 and the rules and regulations thereunder), in
a Securities System provided that such securities are represented in an account
("Account") of the Custodian or such Agent in the Securities System which shall
not include any assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2. The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by book-entry those
securities belonging to the Fund;
3. The Custodian shall pay for securities purchased for the account of
the Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall Transfer securities sold for the
account of the Fund upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all advices from the Securities
System of transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Custodian or an Agent as referred to
above, and be provided to the Fund at its request. The Custodian shall furnish
the Fund confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the account of the Fund on the next business day;
4. The Custodian shall provide the Fund with any report obtained by the
Custodian or any Agent as referred to above on the Securities System's
accounting system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System; and the Custodian and such Agents
shall send to the Fund such reports on their own systems of internal accounting
control as the Fund may reasonably request from time to time.
5. At the written request of the Fund, the Custodian will terminate the
use of any such Securities System on behalf of the Fund as promptly as
practicable.
U. Other Transfers - To deliver securities, funds and other
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<PAGE>
property of the Fund to a Subcustodian or another custodian of the Fund; and,
upon receipt of proper instructions, to make such other disposition of
securities, funds or other property of the Fund in a manner other than or for
purposes other than as enumerated elsewhere in this Agreement, provided that the
instructions relating to such disposition shall include a statement of the
purpose for which the delivery is to be made, the amount of securities to be
delivered and the name of the person or persons to whom delivery is to be made.
V. Investment Limitations - In performing its duties generally, and
more particularly in connection with the purchase, sale and exchange of
securities made by or for the Fund, the Custodian may assume unless and until
notified in writing to the contrary that proper instructions received by it are
not in conflict with or in any way contrary to any provisions of the Fund's
Certificate of Incorporation or By-Laws (or comparable documents) or votes or
proceedings of the shareholders or Directors of the Fund. The Custodian shall in
no event be liable to the Fund and shall be indemnified by the Fund for any
violation of any investment limitations to which the Fund is subject or other
limitations with respect to the Fund's powers to make expenditures, encumber
securities, borrow or take similar actions affecting its portfolio.
W. Proper Instructions - Proper instructions shall mean a tested telex
from the Fund or a written request, direction, instruction or certification
signed or initialled on behalf of the Fund by one or more person or persons as
the Board of Directors of the Fund shall have from time to time authorized,
provided, however, that no such instructions directing the delivery of
securities or the payment of funds to an authorized signatory of the Fund shall
be signed by such person. Those persons authorized to give proper instructions
may be identified by the Board of Directors by name, title or position and will
include at least one officer empowered by the Board to name other individuals
who are authorized to give proper instructions on behalf of the Fund. Telephonic
or other oral instructions given by any one of the above persons will be
considered proper instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. Oral instructions will be confirmed by tested telex or in
writing in the manner set forth above but the lack of such confirmation shall in
no way affect any action taken by the Custodian in reliance upon such oral
instructions. Proper instructions may relate to specific transactions or to
types or classes of transactions, and may be in the form of standing
instructions.
Proper instructions may include communications effected directly
between electro-mechanical or electronic devices or systems, in addition to
tested telex, provided that the Fund and the Custodian agree to the use of such
device or system,
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<PAGE>
3. Securities, funds and other property of the Fund may be held by
subcustodians appointed pursuant to the provisions of this Section 3 (a
"Subcustodian"). The Custodian may, at any time and from time to time, appoint
any bank or trust company (meeting the requirements of a custodian or a foreign
custodian under the Investment Company Act of 1940 and the rules and regulations
thereunder) to act as a Subcustodian for the Fund, provided that the Fund shall
have approved in writing (1) any such bank or trust company and the subcustodian
agreement to be entered into between such bank or trust company and the
Custodian, and (2) the Subcustodian's offices or branches at which the
Subcustodian is authorized to hold securities, cash and other property of the
Fund. Upon such approval by the Fund, the Custodian is authorized on behalf of
the Fund to notify each Subcustodian of its appointment as such. The Custodiain
may, at any time in its discretion, remove any bank or trust company that has
been appointed as a Subcustodian.
Those Subcustodian, their offices or branches which the Fund has
approved to date are set forth on Appendix A hereto. Such Appendix shall be
amended from time to time as Subcustodians, branches or offices are changed,
added or deleted. The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be held at a
location not listed on Appendix A, in order that there shall be sufficient time
for the Fund to give the approval required by the preceding paragraph and for
the Custodian to put the appropriate arrangements in place with such
Subcustodian pursuant to such subcustodian agreement.
If the fund shall have invested in a security to be held in a location
before the foregoing procedures have been completed, such security shall be held
by such agent as the Custodian may appoint unless and until the Fund shall
instruct the Custodian to move the security into the possession of the Custodian
or a Subcustodian. In any event, the Custodian shall be liable to the Fund for
the actions of such agent if and only to the extent the Custodian shall have
recovered from such agent for any damages caused the Fund by such agent.
With respect to the securities and funds held by a Subcustodian, either
directly or indirectly, including demand and interest bearing deposits,
currencies or other deposits and foreign exchange contracts as referred to in
Sections 2K, 2L or 2M, the Custodian shall be liable to the Fund if and only to
the extent that such Subcustodian is liable to the Custodian and the Custodian
recovers under the applicable subcustodian agreement. The Custodian shall
nevertheless be liable to the Fund for its own negligence in transmitting any
instructions received by it from the Fund and for its own negligence in
connection with the delivery of any securities or funds held by it to any such
Subcustodian.
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<PAGE>
In the event that any Subcustodian appointed pursuant to the provisions
of this Section 3 fails to perform any of its obligations under the terms and
conditions of the applicable subcustodian agreement, the Custodian shall use its
best efforts to cause such Subcustodian to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to perform fully
its obligations thereunder, the Custodian shall forthwith upon the Fund's
request terminate such Subcustodian and, if necessary or desirable, appoint
another subcustodian in accordance with the provisions of this Section 3. At the
election of the Fund, it shall have the right to enforce, to the extent
permitted by the subcustodian agreement and applicable law, the Custodian's
rights against any such Subcustodian for loss or damage caused the Fund by such
Subcustodian.
At the written request of the Fund, the Custodian will terminate any
subcustodian appointed pursuant to the provisions of this Section 3 in
accordance with the termination provisions under the applicable subcustodian
agreement. The Custodian will not amend any subcustodian agreement or agree to
change or permit any changes thereunder except upon the prior written approval
of the Fund.
In the event the Custodian makes any payment to a Subcustodian under
the indemnification provisions of any subcustodian agreement, no more than
thirty days after written notice to the Fund of the Custodian's intention to
make such payment, the Fund will reimburse the Custodian the amount of such
payment except in respect of any negligence or misconduct of the Custodian.
4. The Custodian may assist generally in the preparation of reports to
Fund shareholders and others, audits of accounts, and other ministerial matters
of like nature.
5. A. The Custodian shall not be liable for any action taken or omitted
in reliance upon proper instructions believed by it to be geniune or upon any
other written notice, request, direction, instruction, certificate or other
instrument believed by it to be genuine and signed by the proper party or
parties.
The Secretary or Assistant Secretary of the Fund shall certify to the
Custodian the names, signatures and scope of authority of all persons authorized
to given proper instructions or any other such notice, request, direction,
instruction, certificate or instrument on behalf of the Fund, the names and
signatures of the officers of the Fund, the name and address of the Shareholder
Servicing Agent, and any resolutions, votes, instructions or directions of the
Fund's Board of Directors or shareholders. Such certificate may be accepted and
relied upon by the Custodian as conclusive in full force and effect until
receipt of a similar certificate to the contrary.
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So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement.
The Custodian shall be entitled, at the expense of the Fund, to receive
and act upon advice of counsel (who may be counsel for the Fund) on all matters,
and the Custodian shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
B. With respect to the portfoliio securities, cash and other property
of the Fund held by a Securities System, the Custodian shall be liable to the
Fund only for any loss or damage to the Fund resulting from use of the
Securities System if caused by any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their employees or from any
failure of the Custodian or any such agent to enforce effectively such rights as
it may have against the Securities System.
C. Except as may otherwise be set forth in this Agreement with respect
to particular matters, the Custodian shall be held only to the exercise of
reasonable care and diligence in carrying out the provisions of this Agreement,
provided that the Custodian shall not thereby be required to take any action
which is in contravention of any applicable law. The Fund agrees to indemnify
and hold harmless the Custodian and its nominees from all claims and liabilities
(including counsel fees) incurred or assessed against it or its nominees in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's breach of the relevant standard of conduct set forth in
this Agreement. Without limiting the foregoing indemnification obligation of the
Fund, the Fund agrees to indemnify the Custodian and its nominees against any
liability the Custodian or such nominee may incur by reason of taxes assessed to
the Custodian or such nominee or other costs, liability or expense incurred by
the Custodian or such nominee resulting directly or indirectly from the fact
that portfolio securities or other property of the Fund is registered in the
name of the Custodian or such nominee.
It is also understood that the Custodian shall not be liable for any
loss involving any securities, currencies, deposits or other property of the
Fund, whether maintained by it, a Subcustodian, an agent of the Custodian or a
Subcustodian, a Securities System, or a Banking Institution, or a loss arising
from a foreign currency transaction or contract, resulting from a Sovereign
Risk. A "Sovereign Risk" shall mean nationalization, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or similar action
by any governmental authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of
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currency restrictions, exchange controls, taxes, levies or other charges
affecting the Fund's property; or acts of war, terrorism, insurrection or
revolution; or any other similar act or event beyond the Custodian's control.
D. The Custodian shall be entitled to receive reimbursement from the
Fund on demand, in the manner provided in Section 6, for its cash disbursements,
expenses and charges (including the fees and expenses of any Subcustodian or any
Agent) in connection with this Agreement, but excluding salaries and usual
overhead expenses.
E. The Custodian may at any time or times in its discretion appoint
(and may at any time remove) any other bank or trust company as its agent (an
"Agent") to carry out such of the provisions of this Agreement as the Custodian
may from time to time direct, provided, however, that the appointment of such
Agent (other than an Agent appointment pursuant to the third paragraph of
Section 3) shall not relieve the Custodian of any of its responsibilities under
this agreement.
F. Upon request, the Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
6. The fund shall pay the Custodian a custody fee based on such fee
schedule as may from time to time be agreed upon in writing by the Custodian and
the Fund. Such fee, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 5D, shall be billed to the Fund in such a
manner as to permit payment either by a direct cash payment to the Custodian or
by placing Fund portfolio transactions with the Custodian resulting in an
agreed-upon amount of commissions being paid to the Custodian within an
agreed-upon period of time.
7. This Agreement shall continue in full force and effect until
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid, to the other party, such termination to take effect no sooner
than sixty (60) days after the date of such delivery or mailing. In the event of
termination the Custodian shall be entitled to receive prior to delivery of the
securities, funds and other property held by it all accrued fees and
unreimbursed expenses the payment of which is contemplated by Sections 5D and 6,
upon receipt by the Fund of a statement setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it is agreed
that the funds and securities owned by the Fund and held by the Custodian or any
Subcustodian shall be delivered to the successor custodian, and the Custodian
agrees to cooperate with the
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Fund in execution of documents and performance of other actions necessary or
desirable in order to substitute the successor custodian for the Custodian under
this Agreement.
8. This Agreement constitutes the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof. No provision of
this Agreement may be amended or terminated except by a statement in writing
signed by the party against which enforcement of the amendment or termination is
sought.
In connection with the operation of this Agreement, the Custodian and
the Fund may agree in writing from time to time on such provisions
interpretative of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement. No
interpretative or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
9. This instrument is executed and delivered in The Commonwealth of
Massachusetts and shall be governed by and construed according to the laws of
said Commonwealth.
10. Notices and other writing delivered or mailed postage prepaid to
the Fund addressed to the Fund at 120 Wall Street, New York, New York 10005,
Attention: Secretary, or to such other address as the Fund may have designated
to the Custodian in writing, or to the Custodian at 40 Water Street, Boston,
Massachusetts 02109, Attention: Manager, Securities Department, or to such other
address as the Custodian may have designated to the Fund in writing, shall be
deemed to have been properly delivered or given hereunder to the respective
addressee.
11. This Agreement shall be binding on and shall inure to the benefit
of the Fund and the Custodian and their respective successors and assigns,
provided that neither party hereto may assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the other
party.
12. The Custodian understands and agrees that the Fund is a Series of a
Massachusetts Business Trust and that the Custodian shall look solely to the
assets of the Fund for satisfaction of any liabilities or other obligations and
not to the assets of any shareholder, officer, trustee or employee of the Fund.
13. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original. This Agreement shall become effective when
one or more counterparts have been signed and delivered by each of the parties.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
FIRST INVESTORS LIFE SERIES FUND BROWN BROTHERS HARRIMAN &
ON BEHALF OF INTERNATIONAL CO.
SECURITIES SERIES
By /s/ David D. Grayson /s/ Douglas A. Donohue
------------------------------ -------------------------
David D. Grayson, President
13
CUSTODIAN AGREEMENT
AGREEMENT made this 8th day of March, 1990, between First Investors Life
Series Fund on behalf of Total Return Series (such series is hereafter referred
to as (the "Fund") and Brown Brothers Harriman & Co. (the "Custodian").
WITNESSETH: That in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. The Fund hereby employs and appoints the Custodian as a custodian for
the term and subject to the provisions of this Agreement. The Custodian shall
not be under any duty or obligation to require the Fund to deliver to it any
securities or funds owned by the Fund and shall have no responsibility or
liability for or on account of securities or funds not so delivered. The Fund
will deposit with the Custodian copies of the Certificate of Incorporation and
By-Laws (or comparable documents) of the Fund and all amendments thereto, and
copies of such votes and other proceedings of the Fund as may be necessary for
or convenient to the Custodian in the performance of its duties.
2. Except for securities and funds held by subcustodians appointed pursuant
to the provisions of Section 3 hereof, the Custodian shall have and perform the
following powers and duties:
A. Safekeeping - To keep safely the securities of the Fund that have been
delivered to the Custodian and from time to time to receive delivery of
securities for safekeeping.
B. Manner of Holding Securities - To hold securities of the Fund (1) by
physical possession of the share certificates or other instruments representing
such securities in registered or bearer form, or (2) in book-entry form by a
Securities System (as said term is defined in Section 2T).
C. Registered Name; Nominee - To hold registered securities of the Fund (1)
in the name or any nominee name of the Custodian or the Fund, or in the name or
any nominee name of any agent appointed pursuant to Section 5E, or (2) in street
certificate form, so-called, and in any case with or without any indication of
fiduciary capacity.
D. Purchases - Upon receipt of proper instructions, and insofar as funds
are available for the purpose, to pay for and receive securities purchased for
the account of the Fund, payment being made only upon receipt of the securities
(1) by the Custodian, or (2) by a clearing corporation of a national securities
exchange of which the Custodian is a member, or (3) by a securities exchange of
which the Custodian is a member or (4) by
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<PAGE>
a Securities System. However, (i) in the case of repurchase agreements entered
into by the Fund, the Custodian (as well as a Subcustodian or an Agent, as
defined in Section 2G) may release funds to a Securities System prior to the
receipt of advice from the Securities System that the securities underlying such
repurchase agreement have been transferred by book entry into the Account (as
defined in Section 2T) of the Custodian (or such Subcustodian or Agent)
maintained with such Securities System, and (ii) in the case of time deposits,
call account deposits, currency deposits, and other deposits pursuant to
Sections 2K, 2L and 2M, the Custodian may make payment therefore without
receiving an instrument evidencing said deposit.
E. Exchanges - Upon receipt of proper instructions, to exchange securities
held by it for the account of the Fund for other securities in connection with
any reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event, and to deposit any such securities in accordance with
the terms of any reorganization or protective plan. Without such instructions,
the Custodian may surrender securities in temporary form for definitive
securities, may surrender securities for transfer into a name or nominee name as
permitted in Section 2C, and may surrender securities for a different number of
certificates or instruments representing the same number of shares or same
principal amount of indebtedness, provided the securities to be issued are to be
delivered to the Custodian.
F. Sales of Securities - Upon receipt of proper instructions, to make
delivery of securities which have been sold for the account of the Fund, but
only against payment therefor (1) in cash, by a certified check, bank cashier's
check, bank credit, or bank wire transfer, or (2) by credit to the account of
the Custodian with a clearing corporation of a national securities exchange of
which the Custodian is a member, or (3) by credit to the account of the
Custodian or an Agent of the Custodian with a Securities System.
G. Depositary Receipts - Upon receipt of proper instructions, to instruct a
subcustodian appointed pursuant to Section 3 hereof (a "Subcustodian") or an
agent of the Custodian appointed pursuant to Section 5E hereof (an "Agent") to
surrender securities to the depositary used by an issuer of American Depositary
Receipts or International Depositary Receipts (hereinafter collectively referred
to as "ADRs") for such securities against a written receipt therefor adequately
describing such securities and written evidence satisfactory to the Subcustodian
or Agent that the depositary has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of the Custodian, or a nominee
of the Custodian, for delivery to the Custodian in Boston, Massachusetts, or at
such other place as the Custodian may from time to time designate.
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<PAGE>
Upon receipt of proper instructions, to surrender ADRs to the issuer
thereof against a written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian that the issuer
of the ADRs has acknowledged receipt of instructions to cause its depositary to
deliver the securities underlying such ADRs to a Subcustodian or an Agent.
H. Exercise of Rights; Tender Offers - Upon receipt of proper instructions,
to deliver to the issuer or trustee thereof, or to the agent of either,
warrants, puts, calls, rights or similar securities for the purpose of being
exercised or sold, provided that the new securities and cash, if any, acquired
by such action are to be delivered to the Custodian, and, upon receipt of proper
instructions, to deposit securities upon invitations for tenders of securities,
provided that the consideration is to be paid or delivered or the tendered
securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and collect all stock
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
J. Borrowings - Upon receipt of proper instructions, to deliver securities
of the Fund to lenders or their agents as collateral for borrowings effected by
the Fund, provided that such borrowed money is payable to or upon the
Custodian's order as Custodian for the Fund.
K. Demand Deposit Bank Accounts - To open and operate an account or
accounts in the name of the Fund on the Custodian's books subject only to draft
or order by the Custodian. All funds received by the Custodian from or for the
account of the Fund shall be deposited in said account(s). The responsibilities
of the Custodian to the Fund for deposits accepted on the Custodian's books
shall be that of a U. S. bank for a similar deposit.
If and when authorized by proper instructions, the Custodian may open and
operate an additional account(s) in such other banks or trust companies as may
be designated by the Fund in such instructions (any such bank or trust company
so designated by the Fund being referred to hereafter as a "Banking
Institution"), provided that such account(s) shall be in the name of the
Custodian for account of the Fund and subject only to the Custodian's draft or
order. Such accounts may be opened with Banking Institutions in the United
States and in other countries and may be denominated in either U.S. Dollars or
other currencies as the Fund may determine. All such deposits shall be deemed to
be portfolio securities of the Fund and accordingly the responsibility of the
Custodian therefore shall be the same as and no greater than the Custodian's
responsibility in respect of other portfolio securities of the Fund.
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<PAGE>
L. Interest Bearing Call or Time Deposits - To place interest bearing fixed
term and call deposits with such banks and in such amounts as the Fund may
authorize pursuant to proper instructions. Such deposits may be placed with the
Custodian or with Subcustodians or other Banking Institutions as the Fund may
determine. Deposits may be denominated in U. S.Dollars or other currencies and
need not be evidenced by the issuance or delivery of a certificate to the
Custodian, provided that the Custodian shall include in its records with respect
to the assets of the Fund, appropriate notation as to the amount and currency of
each such deposit, the accepting Banking Institution, and other appropriate
details. Such deposits, other than those placed with the Custodian, shall be
deemed portfolio securities of the Fund and the responsibilities of the
Custodian therefor shall be the same as those for demand deposit bank accounts
placed with other banks, as described in Section K of this agreement. The
responsibility of the Custodian for such deposits accepted on the Custodian's
books shall be that of a U. S. bank for a similar deposit.
M. Foreign Exchange Transactions - Pursuant to proper instructions, to
enter into foreign exchange contracts, to purchase and sell foreign currencies
for spot and future delivery on behalf and for the account of the Fund. Such
transactions may be undertaken by the Custodian with such Banking Institutions,
including the Custodian and Subcustodian(s) as principals, as approved and
authorized by the Fund. Foreign exchange contracts, other than those executed
with the Custodian, shall be deemed to be portfolio securities of the Fund and
the responsibilities of the Custodian therefore shall be the same as those for
demand deposit bank accounts placed with other banks as described in Section K
of this agreement.
N. Stock Loans - Upon receipt of proper instructions, to deliver securities
of the Fund, in connection with loans of securities by the Fund, to the borrower
thereof prior to receipt of the collateral, if any, for such borrowings.
O. Collections - To collect, receive and deposit in said account or
accounts all income and other payments with respect to the securities held
hereunder, and to execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund or in connection with transfer
of securities, and pursuant to proper instructions to take such other actions
with respect to collection or receipt of funds or transfer of securities which
involve an investment decision.
P. Dividends, Distributions and Redemptions - Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the "Shareholder
Servicing Agent") (given by such person or persons and in such manner on behalf
of the
4
<PAGE>
Shareholder Servicing Agent as the Fund shall have authorized), the Custodian
shall release funds or securities to the Shareholder Servicing Agent or
otherwise apply funds or securities, insofar as available, for the payment of
dividends or other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Shareholder
Servicing Agent (given by such person or persons and in such manner on behalf of
the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities, insofar as available, to the
Shareholder Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a request for
repurchase or redemption of their shares of capital stock of the Fund.
Q. Proxies, Notices, Etc. - Promptly to deliver or mail to the Fund all
forms of proxies and all notices of meetings and any other notices or
announcements affecting or relating to securities owned by the Fund that are
received by the Custodian, and upon receipt of proper instructions, to execute
and deliver or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its nominee shall
vote upon any of such securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except as otherwise
herein provided) unless ordered to do so by proper instructions.
R. Bills - Upon receipt of proper instructions, to pay or cause to be paid,
insofar as funds are available for the purpose, bills, statements, or other
obligations of the Fund.
S. Nondiscretionary Details - Without the necessity of express
authorization from the Fund, (1) to attend to all nondiscretionary details in
connection with the sale, exchange, substitution, purchase, transfer or other
dealings with securities, funds or other property of the Fund held by the
Custodian except as otherwise directed from time to time by the Directors of the
Fund, and (2) to make payments to itself or others for minor expenses of
handling securities or other similar items relating to the Custodian's duties
under this Agreement, provided that all such payments shall be accounted for to
the Fund.
T. Deposit of Fund Assets in Securities Systems - The Custodian may deposit
and/or maintain securities owned by the Fund in (i) The Depository Trust
Company, (ii) any book-entry system as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of Subpart O, or (iii)
any other domestic clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which acts
as a securities depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this Agreement as a
"Securities
5
<PAGE>
System"). Utilization of a Securities System shall be in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission rules
and regulations, if any, and subject to the following provisions:
1. The Custodian may deposit and/or maintain Fund securities, either
directly or through one or more Agents appointed by the Custodian (provided that
any such agent shall be qualified to act as a custodian of the Fund pursuant to
the Investment Company Act of 1940 and the rules and regulations thereunder), in
a Securities System provided that such securities are represented in an account
("Account") of the Custodian or such Agent in the Securities System which shall
not include any assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2. The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by book-entry those
securities belonging to the Fund;
3. The Custodian shall pay for securities purchased for the account of the
Fund upon (i) receipt of advice from the Securities System that such securities
have been transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
the Fund. The Custodian shall Transfer securities sold for the account of the
Fund upon (i) receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian or an Agent as referred to above, and
be provided to the Fund at its request. The Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund in the form of
a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the account of the Fund on the next business day;
4. The Custodian shall provide the Fund with any report obtained by the
Custodian or any Agent as referred to above on the Securities System's
accounting system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System; and the Custodian and such Agents
shall send to the Fund such reports on their own systems of internal accounting
control as the Fund may reasonably request from time to time.
5. At the written request of the Fund, the Custodian will terminate the use
of any such Securities System on behalf of the Fund as promptly as practicable.
6
<PAGE>
U. Other Transfers - To deliver securities, funds and other property of the
Fund to a Subcustodian or another custodian of the Fund; and, upon receipt of
proper instructions, to make such other disposition of securities, funds or
other property of the Fund in a manner other than or for purposes other than as
enumerated elsewhere in this Agreement, provided that the instructions relating
to such disposition shall include a statement of the purpose for which the
delivery is to be made, the amount of securities to be delivered and the name of
the person or persons to whom delivery is to be made.
V. Investment Limitations - In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of securities
made by or for the Fund, the Custodian may assume unless and until notified in
writing to the contrary that proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the Fund's Certificate
of Incorporation or By-Laws (or comparable documents) or votes or proceedings of
the shareholders or Directors of the Fund. The Custodian shall in no event be
liable to the Fund and shall be indemnified by the Fund for any violation of any
investment limitations to which the Fund is subject or other limitations with
respect to the Fund's powers to make expenditures, encumber securities, borrow
or take similar actions affecting its portfolio.
W. Proper Instructions - Proper instructions shall mean a tested telex from
the Fund or a written request, direction, instruction or certification signed or
initialled on behalf of the Fund by one or more person or persons as the Board
of Directors of the Fund shall have from time to time authorized, provided,
however, that no such instructions directing the delivery of securities or the
payment of funds to an authorized signatory of the Fund shall be signed by such
person. Those persons authorized to give proper instructions may be identified
by the Board of Directors by name, title or position and will include at least
one officer empowered by the Board to name other individuals who are authorized
to give proper instructions on behalf of the Fund. Telephonic or other oral
instructions given by any one of the above persons will be considered proper
instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. Oral instructions will be confirmed by tested telex or in writing in
the manner set forth above but the lack of such confirmation shall in no way
affect any action taken by the Custodian in reliance upon such oral
instructions. Proper instructions may relate to specific transactions or to
types or classes of transactions, and may be in the form of standing
instructions.
Proper instructions may include communications effected directly between
electro-mechanical or electronic devices or systems, in addition to tested
telex, provided that the Fund and
7
<PAGE>
the Custodian agree to the use of such device or system,
3. Securities, funds and other property of the Fund may be held by
subcustodians appointed pursuant to the provisions of this Section 3 (a
"Subcustodian"). The Custodian may, at any time and from time to time, appoint
any bank or trust company (meeting the requirements of a custodian or a foreign
custodian under the Investment Company Act of 1940 and the rules and regulations
thereunder) to act as a Subcustodian for the Fund, provided that the Fund shall
have approved in writing (1) any such bank or trust company and the subcustodian
agreement to be entered into between such bank or trust company and the
Custodian, and (2) the Subcustodian's offices or branches at which the
Subcustodian is authorized to hold securities, cash and other property of the
Fund. Upon such approval by the Fund, the Custodian is authorized on behalf of
the Fund to notify each Subcustodian of its appointment as such. The Custodiain
may, at any time in its discretion, remove any bank or trust company that has
been appointed as a Subcustodian.
Those Subcustodian, their offices or branches which the Fund has approved
to date are set forth on Appendix A hereto. Such Appendix shall be amended from
time to time as Subcustodians, branches or offices are changed, added or
deleted. The Fund shall be responsible for informing the Custodian sufficiently
in advance of a proposed investment which is to be held at a location not listed
on Appendix A, in order that there shall be sufficient time for the Fund to give
the approval required by the preceding paragraph and for the Custodian to put
the appropriate arrangements in place with such Subcustodian pursuant to such
subcustodian agreement.
If the fund shall have invested in a security to be held in a location
before the foregoing procedures have been completed, such security shall be held
by such agent as the Custodian may appoint unless and until the Fund shall
instruct the Custodian to move the security into the possession of the Custodian
or a Subcustodian. In any event, the Custodian shall be liable to the Fund for
the actions of such agent if and only to the extent the Custodian shall have
recovered from such agent for any damages caused the Fund by such agent.
With respect to the securities and funds held by a Subcustodian, either
directly or indirectly, including demand and interest bearing deposits,
currencies or other deposits and foreign exchange contracts as referred to in
Sections 2K, 2L or 2M, the Custodian shall be liable to the Fund if and only to
the extent that such Subcustodian is liable to the Custodian and the Custodian
recovers under the applicable subcustodian agreement. The Custodian shall
nevertheless be liable to the Fund for its own negligence in transmitting any
instructions received by it from the Fund and for its own negligence in
connection with the delivery of
8
<PAGE>
any securities or funds held by it to any such Subcustodian.
In the event that any Subcustodian appointed pursuant to the provisions of
this Section 3 fails to perform any of its obligations under the terms and
conditions of the applicable subcustodian agreement, the Custodian shall use its
best efforts to cause such Subcustodian to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to perform fully
its obligations thereunder, the Custodian shall forthwith upon the Fund's
request terminate such Subcustodian and, if necessary or desirable, appoint
another subcustodian in accordance with the provisions of this Section 3. At the
election of the Fund, it shall have the right to enforce, to the extent
permitted by the subcustodian agreement and applicable law, the Custodian's
rights against any such Subcustodian for loss or damage caused the Fund by such
Subcustodian.
At the written request of the Fund, the Custodian will terminate any
subcustodian appointed pursuant to the provisions of this Section 3 in
accordance with the termination provisions under the applicable subcustodian
agreement. The Custodian will not amend any subcustodian agreement or agree to
change or permit any changes thereunder except upon the prior written approval
of the Fund.
In the event the Custodian makes any payment to a Subcustodian under the
indemnification provisions of any subcustodian agreement, no more than thirty
days after written notice to the Fund of the Custodian's intention to make such
payment, the Fund will reimburse the Custodian the amount of such payment except
in respect of any negligence or misconduct of the Custodian.
4. The Custodian may assist generally in the preparation of reports to Fund
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
5. A. The Custodian shall not be liable for any action taken or omitted in
reliance upon proper instructions believed by it to be geniune or upon any other
written notice, request, direction, instruction, certificate or other instrument
believed by it to be genuine and signed by the proper party or parties.
The Secretary or Assistant Secretary of the Fund shall certify to the
Custodian the names, signatures and scope of authority of all persons authorized
to given proper instructions or any other such notice, request, direction,
instruction, certificate or instrument on behalf of the Fund, the names and
signatures of the officers of the Fund, the name and address of the Shareholder
Servicing Agent, and any resolutions, votes, instructions or directions of the
Fund's Board of Directors or shareholders. Such certificate may be accepted and
relied upon by the Custodian as conclusive in full force and effect until
receipt of a similar
9
<PAGE>
certificate to the contrary.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement.
The Custodian shall be entitled, at the expense of the Fund, to receive and
act upon advice of counsel (who may be counsel for the Fund) on all matters, and
the Custodian shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
B. With respect to the portfoliio securities, cash and other property of
the Fund held by a Securities System, the Custodian shall be liable to the Fund
only for any loss or damage to the Fund resulting from use of the Securities
System if caused by any negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees or from any failure of
the Custodian or any such agent to enforce effectively such rights as it may
have against the Securities System.
C. Except as may otherwise be set forth in this Agreement with respect to
particular matters, the Custodian shall be held only to the exercise of
reasonable care and diligence in carrying out the provisions of this Agreement,
provided that the Custodian shall not thereby be required to take any action
which is in contravention of any applicable law. The Fund agrees to indemnify
and hold harmless the Custodian and its nominees from all claims and liabilities
(including counsel fees) incurred or assessed against it or its nominees in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's breach of the relevant standard of conduct set forth in
this Agreement. Without limiting the foregoing indemnification obligation of the
Fund, the Fund agrees to indemnify the Custodian and its nominees against any
liability the Custodian or such nominee may incur by reason of taxes assessed to
the Custodian or such nominee or other costs, liability or expense incurred by
the Custodian or such nominee resulting directly or indirectly from the fact
that portfolio securities or other property of the Fund is registered in the
name of the Custodian or such nominee.
It is also understood that the Custodian shall not be liable for any loss
involving any securities, currencies, deposits or other property of the Fund,
whether maintained by it, a Subcustodian, an agent of the Custodian or a
Subcustodian, a Securities System, or a Banking Institution, or a loss arising
from a foreign currency transaction or contract, resulting from a Sovereign
Risk. A "Sovereign Risk" shall mean nationalization, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or similar action
by any governmental
10
<PAGE>
authority, de facto or de jure; or enactment, promulgation, imposition or
enforcement by any such governmental authority of currency restrictions,
exchange controls, taxes, levies or other charges affecting the Fund's property;
or acts of war, terrorism, insurrection or revolution; or any other similar act
or event beyond the Custodian's control.
D. The Custodian shall be entitled to receive reimbursement from the Fund
on demand, in the manner provided in Section 6, for its cash disbursements,
expenses and charges (including the fees and expenses of any Subcustodian or any
Agent) in connection with this Agreement, but excluding salaries and usual
overhead expenses.
E. The Custodian may at any time or times in its discretion appoint (and
may at any time remove) any other bank or trust company as its agent (an
"Agent") to carry out such of the provisions of this Agreement as the Custodian
may from time to time direct, provided, however, that the appointment of such
Agent (other than an Agent appointment pursuant to the third paragraph of
Section 3) shall not relieve the Custodian of any of its responsibilities under
this agreement.
F. Upon request, the Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
6. The fund shall pay the Custodian a custody fee based on such fee
schedule as may from time to time be agreed upon in writing by the Custodian and
the Fund. Such fee, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 5D, shall be billed to the Fund in such a
manner as to permit payment either by a direct cash payment to the Custodian or
by placing Fund portfolio transactions with the Custodian resulting in an
agreed-upon amount of commissions being paid to the Custodian within an
agreed-upon period of time.
7. This Agreement shall continue in full force and effect until terminated
by either party by an instrument in writing delivered or mailed, postage
prepaid, to the other party, such termination to take effect no sooner than
sixty (60) days after the date of such delivery or mailing. In the event of
termination the Custodian shall be entitled to receive prior to delivery of the
securities, funds and other property held by it all accrued fees and
unreimbursed expenses the payment of which is contemplated by Sections 5D and 6,
upon receipt by the Fund of a statement setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it is agreed that
the funds and securities owned by the Fund and held
11
<PAGE>
by the Custodian or any Subcustodian shall be delivered to the successor
custodian, and the Custodian agrees to cooperate with the Fund in execution of
documents and performance of other actions necessary or desirable in order to
substitute the successor custodian for the Custodian under this Agreement.
8. This Agreement constitutes the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof. No provision of this
Agreement may be amended or terminated except by a statement in writing signed
by the party against which enforcement of the amendment or termination is
sought.
In connection with the operation of this Agreement, the Custodian and the
Fund may agree in writing from time to time on such provisions interpretative of
or in addition to the provisions of this Agreement as may in their joint opinion
be consistent with the general tenor of this Agreement. No interpretative or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Agreement.
9. This instrument is executed and delivered in The Commonwealth of
Massachusetts and shall be governed by and construed according to the laws of
said Commonwealth.
10. Notices and other writing delivered or mailed postage prepaid to the
Fund addressed to the Fund at 120 Wall Street, New York, New York 10005,
Attention: Secretary, or to such other address as the Fund may have designated
to the Custodian in writing, or to the Custodian at 40 Water Street, Boston,
Massachusetts 02109, Attention: Manager, Securities Department, or to such other
address as the Custodian may have designated to the Fund in writing, shall be
deemed to have been properly delivered or given hereunder to the respective
addressee.
11. This Agreement shall be binding on and shall inure to the benefit of
the Fund and the Custodian and their respective successors and assigns, provided
that neither party hereto may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other party.
12. The Custodian understands and agrees that the Fund is a Series of a
Massachusetts Business Trust and that the Custodian shall look solely to the
assets of the Fund for satisfaction of any liabilities or other obligations and
not to the assets of any shareholder, officer, trustee or employee of the Fund.
13. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original. This Agreement shall become effective when
one or more counterparts have been signed and delivered by each of the parties.
12
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
FIRST INVESTORS SERIES FUND BROWN BROTHERS HARRIMAN &
ON BEHALF OF TOTAL RETURN SERIES CO.
By /s/ David D. Grayson /s/ Douglas A. Donohue
------------------------------- -----------------------------------
David D. Grayson, President
13
ADMINISTRATION AGREEMENT
This Agreement, dated as of the 7th of July, 1986, made by and between
FIRST INVESTORS LIFE SERIES FUND (the Fund), a Massachusetts business trust;
FIRST INVESTORS MANAGEMENT COMPANY, INC. (FIMCO), a corporation duly organized
and existing under the laws of the State of New York; FIRST INVESTORS
CORPORATION (FIC), a corporation duly organized and existing under the laws of
the State of New York; ADMINISTRATIVE DATA MANAGEMENT CORP. (ADM), a corporation
duly organized and existing under the laws of the State of New York.
WITNESSETH THAT:
WHEREAS, FIMCO and FIC are the national distributors of the
shares of the Fund; and
WHEREAS, ADM has agreed to act as transfer agent of the Fund, as its
dividend disbursing agent, and as administrator of the Dividend Reinvestment,
Share Accumulation and Systematic Withdrawal Accounts of the Fund, and ADM also
agreed to act for the Fund in other respects as hereinafter stated; and
WHEREAS, the parties hereto desire to set forth certain terms relating
to the activities of ADM under this Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
THE TRANSFER AGENCY
Section 1. The Fund hereby appoints ADM as its transfer agent, and ADM
accepts such appointment and agrees to act in such capacity upon the terms set
forth in this Agreement.
Section 2. ADM will maintain stock registry records in the usual form
in which it will note the issuance and redemption of Shares and the issuance and
transfer of Share Certificates, and is also authorized to maintain an account
entitled Unissued Share Certificate Account in which it will record the Shares
and fractions issued and outstanding from time to time for which issuance of
Share Certificates is deferred. ADM is also authorized to keep records, which
will be part of the stock transfer records, as well as its records of the Plans,
in which it will note the names and registered addresses of Planholders, and the
number of shares and fractions from time to time owned by them for which no
Share Certificates are outstanding. Each Shareholder or Planholder whether he
holds one or more Share Certificates or owns Shares held under one or more
Plans, or
-1-
<PAGE>
whether he holds or owns Shares by both methods, will be assigned a single
account number.
Section 3. Whenever Shares are purchased for Planholders, the Fund
authorizes ADM to dispense with the issuance and countersignature of Share
Certificates. In such case ADM, as transfer agent, shall merely note on its
stock registry records the issuance of the Shares and fractions, (if any), shall
credit the Unissued Share Certificate Account with the Shares and fractions to
the respective Planholders. Likewise, whenever ADM has occasion to surrender for
redemption Shares and fractions owned by Planholders, it shall be unnecessary to
issue Share Certificates for redemption purposes. The Fund authorizes ADM in
such cases to process the transactions by appropriate entries in its stock
transfer records, and debiting of the Unissued Share Certificate Account and the
record of issued Shares outstanding. Whenever Planholders are entitled to the
issuance of Share Certificates for Shares held under Plans, the Fund authorizes
ADM as transfer agent, to countersign Share Certificates for issuance and
delivery, and to debit the Unissued Certificate Account.
Section 4. ADM in its capacity as transfer agent will, in addition to
the duties and functions above-mentioned, perform the usual duties and functions
of a stock transfer agent for a corporation. It will countersign for issuance or
reissuance of Share Certificates representing original issue or reissued
treasury Shares as directed by the Written Instructions of the Fund, and will
transfer Share Certificates registered in the name of Shareholders from one
Shareholder to another in the usual manner. ADM may rely conclusively and act
without further investigation upon any list, instruction, certification,
authorization, Share Certificate or other instrument or paper believed by it in
good faith to be genuine and unaltered, and to have been signed, countersigned,
or executed by a duly authorized person or persons, or upon the instructions of
any Officer of the Fund, or upon the advice of counsel for the Fund or for ADM.
ADM may record any transfer of Share Certificates which is believed by it in
good faith to have been duly authorized or may refuse to record any transfer of
Share Certificates if in good faith ADM in its capacity as transfer agent deems
such refusal necessary in order to avoid any liability either to the Fund or
ADM. The Fund agrees to indemnify and hold harmless ADM from and against any and
all losses, costs, claims and liability which it may suffer or incur by reason
of so relying or acting or refusing to act in good faith.
THE DIVIDEND DISBURSEMENT AGENCY
-2-
<PAGE>
Section 5. Upon declaration of each dividend and each capital gains
distribution by the Board of Trustees of the Fund, the Fund shall notify ADM of
the date of such declaration, the amount payable per share, the record date for
determining the Shareholders entitled to payment, the payment date, and the
reinvestment date, the price for which is to be used to purchase Shares for
reinvestment.
Section 6. On or before each payment date, the Fund will transfer, or
cause the Custodian to transfer, to ADM in its capacity as dividend disbursing
agent, the total amount of the dividend or distribution currently payable and
ADM in such capacity will on the designated payment date mail distribution
checks to the Shareholders for the proper amounts payable to them except as
follows:
Dividends and capital gains distributions directed to be reinvested
under Plans will be transferred to ADM in its capacity as administrator for
application as provided in Section 11.
ADMINISTRATION OF THE PLANS
Section 7. The Fund, FIMCO and FIC hereby appoint ADM as administrator
of the Plans, and ADM accepts such appointment and agrees to act in such
capacity upon the terms set forth in this Agreement. As provided Section 2, ADM
will maintain records, which will be part of the stock registry records as well
as its records of the administration of the Plans, in which it will note the
transactions effected for the respective Planholders and the number of Shares
and fractions from time to time owned by them for which no Share Certificates
are outstanding.
Section 8. FIMCO, FIC and the Fund will from time to time keep ADM
fully informed of the names of all Planholders who are entitled to purchase
Shares at reduced offering prices and of the respective prices which are
applicable to each of such Planholders. ADM may conclusively rely on such
information in placing orders for Shares on behalf of Planholders.
Section 9. It will be the practice of ADM to process payments by
planholders received by its mutual funds department in acceptable form until the
time of the closing of the New York Stock Exchange on each day on which said
exchange is open since the same time on the prior business day in which said
exchange was open, and to obtain from FIMCO, FIC or the Fund a quotation (on
which it may conclusively rely) as of the close of the said exchange. ADM will
proceed to calculate the amount available for investment in Shares at the public
offering price so quoted, (and, if applicable), the amounts to be invested as
between commissions of dealers, shares of FIMCO, or FIC and net asset value to
be deposited with the Custodian. ADM while the public
-3-
<PAGE>
offering price so quoted is still in effect, will, as agent for sundry
Planholders, place an order with FIMCO or FIC for the proper number of Shares
and fractions, will advise FIMCO or FIC of the breakdown of the total purchase
price as between discount of dealers, shares of FIMCO or FIC and net asset value
and will confirm said figures to FIMCO or FIC in writing.
Section 10. ADM will thereupon set aside the commissions of dealers,
and share of FIMCO and FIC and will pay over the balance available (net asset
value) to the custodian and will furnish said custodian with the Statements
required by the Custodian Agreement. Said Custodian will deposit the net asset
value in the Principal Account under the Custodian Agreement. ADM will credit
the Bank's account of FIMCO or FIC for its share. The proper number of Shares
and fractions will then be issued and credited to the Unissued Certificate
Account, and the Shares and fractions purchased for each Planholder will be
credited to his separate account. ADM will thereupon mail to each Planholder a
confirmation of the purchase, with copies to the Fund and the proper dealers, if
the Fund so requests. Such confirmation will show the prior and new share
balance, the Shares held under the Plans and Shares (if any) for which Stock
Certificates are outstanding, the amount invested, the price paid and other
data.
ADM will remit commissions to the proper dealers weekly or at other
convenient intervals, as agreed upon between the Fund and ADM.
Section 11. As and when the Fund declares dividends or capital gains
distributions, it will promptly quote to ADM the net asset value per share at
the close of business in the reinvestment date, whereupon as soon as it can
calculate the total of such dividend or distributions it will receive for
reinvestment, ADM will advise the Fund of the amount which will be available for
reinvestment on the payment date and the number of Shares and fractions to be
issued. Upon receipt of the amount of the dividends or distributions to be
reinvested under Plans, ADM will pay over such amount to the Custodian for
deposit in the Principal Account under the Custodian Agreement, whereupon the
Shares and fractions purchased for the Plans will be issued pursuant to a
Statement of ADM and will be credited to the Unissued Certificate Account. ADM
will credit the Shares and fractions so purchased to the separate accounts
maintained for the respective Planholders, and will promptly mail to each
Planholder a confirmation of the purchase, with a copy to the Fund, showing the
prior and new share balance.
Section 12. Whenever a Shareholder shall deposit Shares represented by
Share Certificates in an investment plan or systematic withdrawal plan or other
plan permitting deposit of
-4-
<PAGE>
Shares thereunder, ADM as transfer agent is authorized upon receipt of Share
Certificates registered in the name of the Shareholder, or if not so registered
in due form for transfer, to cancel such Share Certificates, to debit the
individual stock accounts and to credit the Shares to the Unissued Certificate
Account. ADM as plan administrator will credit the Shares to be deposited to the
proper plan accounts. In the event that a Planholder shall desire to deposit
under a systematic withdrawal plan Shares held in an investment plan or other
like plan, ADM will accomplish such deposit by proper debiting and crediting of
plan accounts.
Section 13. ADM will administer the systematic withdrawal plans for the
Planholders. ADM will note in such accounts the share balances from time to
time, the additional Shares purchased with the reinvested dividends and
distributions, and the Shares redeemed to provide the withdrawal payments.
Confirmations will be mailed to the Planholders reflecting each transaction,
with copies to the Fund.
Section 14. Whenever ADM shall have received requests from Planholders
to redeem Shares and remit proceeds, or whenever ADM is required to redeem
Shares to make withdrawal payments under systematic withdrawal plans or the
like, ADM will advise the Fund that it has Shares for redemption, stating the
number of Shares and fractions to be redeemed. The Fund will then quote to ADM
the applicable net asset value of redemption price, whereupon ADM will furnish
the Fund with an appropriate confirmation of the redemption and will process the
redemption by filing with the Custodian an appropriate statement of ADM as may
be required by the Custodian Agreement. The Custodian shall be authorized to pay
over to ADM as administrator, the total redemption price stated in the Statement
of ADM for proper distribution and application. The stock registry books
recording outstanding Shares, the Unissued Certificate Account and the
individual accounts of the Shareholders shall be properly debited.
Section 15. The practices and procedures of ADM and the Fund above
outlined in Sections 7 to 14, inclusive, may be altered or modified from time to
time as may be mutually agreed by the parties to this Agreement, so long as the
intent and purposes of the Plans, as stated from time to time in the prospectus
of the Fund, are observed. For special cases, the parties hereto may adopt such
procedures as may be appropriate or practical under the circumstances and ADM
may conclusively assume that any special procedure which has been approved by
the Fund, does not conflict with or violate any requirements of its Declaration
of Trust, By-Laws or prospectus, or any rule, regulation or requirement of any
regulatory body.
Section 16. ADM in acting for Planholders, or in any
-5-
<PAGE>
other capacity set forth in this Agreement, shall incur no liability for any
actions taken or omitted in good faith, nor shall ADM be personally liable for
any taxes, assessments or governmental charges which may be levied or assessed
on any basis whatsoever in connection with the administration of the Plans,
excepting only for taxes assessed against it in its corporate capacity out of
its compensation hereunder.
MISCELLANEOUS
Section 17. In addition to the services as transfer agent, dividend
disbursing agent and administrator as above set forth, ADM will perform other
services for the Fund as agreed from time to time, including but not limited to
preparation of Federal 1099 forms, mailing of quarterly and semi-annual reports
of the Fund, preparation of one annual list of Shareholders, and preparing
notices of Shareholders meeting, proxies and proxy statements.
Section 18. The Fund, FIMCO and FIC agree to pay ADM compensation for
its services and to reimburse it for expenses, as set forth in Schedule A
attached hereto, or as shall be set forth in amendments to such schedule
approved by the Fund, FIMCO FIC and ADM. Said payments and reimbursements shall
be allocated between the Fund, FIMCO and FIC as they may agree.
Section 19. ADM may from time to time in its sole discretion delegate
some or all of its duties hereunto to any affiliate(s) which shall perform such
functions as the agent of ADM. To the extent of such delegation, the term "ADM"
in this Agreement shall be deemed to refer to both ADM and such affiliate(s) or
either of them, as the context may indicate.
Section 20. Nothing contained in this Agreement is intended to or shall
require ADM, in any capacity hereunder to perform any functions or duties on any
holiday or other day of special observance on which ADM is closed. Functions or
duties normally scheduled to be performed on such days shall be performed on,
and as of, the next business day on which both the New York Stock Exchange and
the Bank are open.
Section 21. All terms used herein, which are defined in the Custodian
Agreement, shall have the same meanings as set forth therein. In addition, the
following terms as used in this Agreement shall have the meaning set forth below
unless the context otherwise requires:
Plan: The term "Plan" shall include such Dividend Reinvestment
Accounts, Share Accumulation Accounts, Systematic Withdrawal Plans and other
types of plans or accounts in form acceptable to ADM, which the Fund may from
time to time adopt and
-6-
<PAGE>
make available to its Shareholders, including plans or accounts adopted for
pension and profit sharing plans established by self-employed individuals,
partnerships, individuals, corporations and not for profit organizations.
Planholder: The term "Planholder" shall mean a Shareholder who at the
time of reference is participating in a Plan.
Section 22. This Agreement may be terminated by any party to this
Agreement by giving at least sixty (60) days advance written notice stating when
thereafter such termination shall be effective. Such termination shall only be
effective with respect to the rights, obligations and duties as between the non-
terminating parties. In case such notice of termination is given by either ADM
or the Fund, the Board of Trustee of the Fund shall, by resolution duly adopted,
promptly appoint a successor to ADM, to serve upon the terms set forth in this
Agreement as then amended and supplemented. Unless and until a successor to ADM
has been appointed as above, provided ADM shall continue to perform according to
the terms of this Agreement and shall be entitled to receive all the payments
and reimbursement to which it is entitled under this Agreement.
Section 23. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 24. This Agreement shall extend to and shall be binding upon
the parties hereto and their respective successors and assigns; provided however
that this Agreement shall not be assignable by the Fund without the written
consent of the Fund, authorized or approved by a resolution of its Board of
Trustees.
Section 25. This Agreement shall be governed by the laws of the State
of New York.
Section 26. Notwithstanding any provision of law to the contrary,
FIMCO, FIC and ADM hereby severally waive any right to enforce this Agreement
against the individual and separate assets of any shareholders of the Fund, or
of any other series of the Fund.
Section 27. This Agreement shall apply separately to each series of the
Fund (now existing or hereafter established) and the assets and records of each
such series shall be kept separate and apart from the assets and records of
every other series to the same extent as if a separate agreement had been
executed on behalf of each series.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and the year first above written.
ATTEST: FIRST INVESTORS LIFE SERIES FUND
/s/ C. Durso BY: Andrew J. Donohue
- --------------------------------------- -----------------------------------
Concetta Durso, Secretary Andrew J. Donohue, President
[Seal]
ATTEST: FIRST INVESTORS MANAGEMENT COMPANY,
INC.
/s/ Andrew J. Donohue BY: /s/ Glenn O. Head
- --------------------------------------- -----------------------------------
Andrew J. Donohue, Secretary Glenn O. Head, Chairman
and Counsel
[Seal]
ATTEST: FIRST INVESTORS CORPORATION
/s/ Andrew J. Donohue BY: /s/ Glenn O. Head
- --------------------------------------- -----------------------------------
Andrew J. Donohue, Secretary Glenn O. Head, Chairman
and Counsel
[Seal]
ATTEST: ADMINISTRATIVE DATA MANAGEMENT
CORP.
/s/ Andrew J. Donohue BY: /s/ Glenn O. Head
- --------------------------------------- -----------------------------------
Andrew J. Donohue, Secretary Glenn O. Head, Chairman
and Counsel
[Seal]
-8-
<PAGE>
ADM TRANSFER AGENT FEE SCHEDULE
-------------------------------
Monthly Account Maintenance $0.65 per account
New Accounts $5.00 per account
Payments $0.75 per payment
Exchanges $5.00 per transaction
Liquidations $5.00 per transaction
Transfers $10.00 per transaction
Certificates Issued $3.00 per certificate
Systematic Withdrawal Checks $1.00 per check
Dividend Processing $0.45 per dividend
Reports requested by a Government $1.00 per account
Agency
Minimum Monthly Income: If the minimum monthly income from the above transaction
charges does not equal $500.00, the Fund, FIMCO or FIC will promptly pay the
deficiency to ADM.
Out-of-Pocket Expenses: In addition to the above charges, the Fund, FIMCO or FIC
shall reimburse ADM for all out-of-pocket costs including but not limited to
postage, insurance, forms relating to Shareholders or the Fund, envelopes and
other similar items, and will also reimburse ADM for counsel fees, including
fees for the preparation of the Administration Agreement and review of
prospectus and application form.
-9-
Consent of Independent Certified Public Accountants
First Investors Life Series Fund
95 Wall Street
New York, New York 10005
We consent to the use of our name in connection with the opinion dated
February 7, 1996 and accompanying Statement of Net Assets of First Investors
Zero Coupon 2010 Fund, a separate designated series of First Investors Life
Series Fund, to be included in Post-Effective Amendment No. 18 to the
Registration Statement on Form N-1A (File No. 2-98409) which will be filed with
the United States securities and Exchange Commission, Washington, DC.
/s/ Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 8, 1996
