FIRST INVESTORS LIFE SERIES FUND, 485BPOS, 1999-04-29

FIRST INVESTORS LIFE SERIES FUND
485BPOS, 1999-04-29

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As filed with the Securities and Exchange Commission on April 29, 1999
1933 Act File No. 2-98409
1940 Act File No. 811-4325

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 24 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 24 [X]
FIRST INVESTORS LIFE SERIES FUND
(Exact name of Registrant as specified in charter)

95 Wall Street
New York, New York 10005
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code): (212) 858-8000

Ms. Concetta Durso
Secretary and Vice President
First Investors Series Fund
95 Wall Street
New York, New York 10005
(Name and Address of Agent for Service)

Copy to:
Robert J. Zutz, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, D.C. 20036

It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on April 30, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE>

FIRST INVESTORS LIFE SERIES FUND

CONTENTS OF REGISTRATION STATEMENT

This registration document is comprised of the following:

Cover Sheet

Contents of Registration Statement

Prospectus for the First Investors Life Series Fund

Statement of Additional Information for the First Investors Life Series
Fund

Part C of Form N-1A

Signature Page

Exhibits

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[FIRST INVESTORS LOGO]

LIFE SERIES FUND
BLUE CHIP
CASH MANAGEMENT
DISCOVERY
GOVERNMENT
GROWTH
HIGH YIELD
INTERNATIONAL SECURITIES
INVESTMENT GRADE
TARGET MATURITY 2007
TARGET MATURITY 2010
UTILITIES INCOME

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

THE DATE OF THIS PROSPECTUS IS APRIL 30, 1999

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CONTENTS
INTRODUCTION

FUND DESCRIPTIONS

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
Utilities Income Fund

FUND MANAGEMENT

BUYING AND SELLING SHARES

How and when do the Funds price their shares?
How do I buy and sell shares?

ACCOUNT POLICIES

What about dividends and capital gain distributions?
What about taxes?

FINANCIAL HIGHLIGHTS

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INTRODUCTION

This prospectus describes the First Investors Funds that are used solely as the
underlying investment options for variable annuity contracts or variable life
insurance policies offered by First Investors Life Insurance Company ("FIL").
This means that you cannot purchase shares of the Funds directly, but only
through such a contract or policy as offered by FIL. Each individual Fund
description in this prospectus has an "Overview" which provides a brief
explanation of the Fund's objectives, its primary strategies and primary risks,
how it has performed, and its fees and expenses. Each Fund description also
contains a "Fund in Detail" section with more information on the strategies and
risks of the Fund.

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BLUE CHIP FUND

OVERVIEW

OBJECTIVE: The Fund seeks high total investment return consistent with
the preservation of capital.

PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in the common stocks of large,
well-established companies that are included in the Standard
and Poor's 500 Composite Stock Price Index ("S&P 500 Index").
These are defined by the Fund as "Blue Chip" stocks. The Fund
selects stocks that it believes will have earnings growth in
excess of the average company in the S&P 500 Index. While the
Fund attempts to diversify its investments so that its
weightings in different industries are similar to those of the
S&P 500 Index, it is not an index fund and therefore will not
necessarily mirror the S&P 500 Index. The Fund generally stays
fully invested in stocks under all market conditions.

PRIMARY
RISKS: While Blue Chip stocks are regarded as among the most
conservative stocks, like all stocks they fluctuate in price
in response to movements in the overall securities markets,
general economic conditions, and changes in interest rates or
investor sentiment. Fluctuations in the prices of Blue Chip
stocks at times can be substantial. Accordingly, the value of
an investment in the Fund will go up and down, which means
that you could lose money.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

How has the Blue Chip Fund performed?

The bar chart and table below show you how the Fund's performance has varied
from year to year and in comparison with a broad-based index. This information
gives you some indication of the risks of investing in the Fund.

The bar chart shows changes in the performance of the Fund's shares from year to
year over the life of the Fund. The bar chart does not reflect fees and expenses
that may be deducted by the variable annuity contract or variable life insurance
policy through which you invest. If they were included, the returns would be
less than those shown.

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[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 20.03% (for the
quarter ended September 30, 1998), and the lowest quarterly return was -13.16%
(for the quarter ended September 30, 1990). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for the Blue Chip
Fund's shares compare to those of the S&P 500 Index. The S&P 500 Index is an
unmanaged index generally representative of the market for the stocks of
large-sized U.S. companies. The S&P 500 Index does not take into account fees
and expenses that an investor would incur in holding the securities in the S&P
500 Index. If it did so, the returns would be lower than those shown.

Inception
1 Year* 5 Years* (3/8/90)

Blue Chip Fund 10.37% 17.54% 14.47%
S&P 500 Index 28.34 24.55 18.87
* The annual returns are based upon calendar years.

THE FUND IN DETAIL

What are the Blue Chip Fund's objective, principal investment strategies,
and risks?

OBJECTIVE: The Fund seeks high total investment return consistent with the
preservation of capital.

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PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in common stocks of large, well-established companies that are included
in the S&P 500 Index. These are defined by the Fund as "Blue Chip" stocks. The
S&P 500 Index consists of both U.S. and foreign corporations.

The Fund uses fundamental research to select stocks of companies with strong
balance sheets, relatively consistent records of achievement, and potential
earnings growth that is greater than that of the average company included in the
S&P 500 Index. The Fund attempts to stay broadly diversified and sector neutral
relative to the S&P 500 Index, but it may emphasize certain industry sectors
based on economic and market conditions. The Fund intends to remain relatively
fully invested in stocks under all market conditions rather than attempt to time
the market by maintaining large cash or fixed income securities positions when
market declines are anticipated. The Fund usually will sell a stock when the
reason for holding it is no longer valid, it shows deteriorating fundamentals,
or it falls short of the Fund's expectations. Information on the Fund's recent
strategies and holdings can be found in the most recent annual report (see back
cover).

PRINCIPAL RISKS: Any investment carries with it some level of risk. In general,
the greater the potential reward of an investment, the greater the risk. Here
are the principal risks of investing in the Blue Chip Fund:

MARKET RISK: Because the Fund primarily invests in common stocks, it is subject
to market risk. Stock prices in general may decline over short or even extended
periods not only because of company-specific developments but also due to an
economic downturn, a change in interest rates or a change in investor sentiment,
regardless of the success or failure of an individual company's operations.
Stock markets tend to run in cycles with periods when prices generally go up,
known as "bull" markets, and periods when stock prices generally go down,
referred to as "bear" markets. While Blue Chip stocks have historically been the
least risky and most liquid stocks, like all stocks they fluctuate in value.
Fluctuations of Blue Chip stocks can be sudden and substantial. Accordingly, the
value of an investment in the Fund will go up and down, which means that you
could lose money.

OTHER RISKS: While the Fund generally attempts to remain sector neutral relative
to the S&P 500 Index, it is not an index fund. The Fund may hold securities
other than those in the S&P 500 Index, may hold fewer securities than the index,
and may have sector or industry allocations different from the index, each of
which could cause the Fund to underperform the index.

YEAR 2000 RISKS: The values of securities owned by the Fund may be negatively
affected by Year 2000 problems. Many computer systems are not designed to
process correctly date-related information after January 1, 2000. The issuers of
securities held by the Fund may incur substantial costs in ensuring that
computer systems on which they rely are Year 2000 ready and may face business
and legal problems if these systems are not ready. If computer systems used by
exchanges, broker-dealers, and other market participants are not Year 2000
ready, valuing and trading securities could be difficult. These problems could
have a negative effect on the Fund's investments and returns.

ALTERNATIVE STRATEGIES: At times the Fund may judge that market, economic or
political conditions make pursuing the Fund's investment strategies inconsistent

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with the best interests of its shareholders. The Fund then may temporarily use
alternative strategies that are mainly designed to limit the Fund's losses by
investing up to 100% of its assets in short-term money market instruments. If
the Fund does so, it may not achieve its investment objective.

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CASH MANAGEMENT FUND

OVERVIEW

OBJECTIVE: The Fund seeks to earn a high rate of current income
consistent with the preservation of capital and maintenance of
liquidity.

PRIMARY
INVESTMENT
STRATEGIES: The Fund invests in high-quality money market instruments that
the Fund determines present minimal credit risk. These
instruments include prime commercial paper, variable and
floating rate corporate notes, and short term U.S. agency
obligations. The Fund's portfolio is managed to meet
regulatory requirements that permit the Fund to maintain a
stable net asset value ("NAV") of $1.00 per share. These
regulatory requirements include stringent credit quality
standards on investments, limits on the maturity of individual
investments and the dollar weighted average maturity of the
entire portfolio, and diversification requirements.

PRIMARY
RISKS: While money market funds are designed to be relatively low
risk investments, they are not entirely free of risk. Like all
money market funds, these are the risks of investing in the
Fund:

. The Fund's NAV could decline (below $1.00 per share) if
there is a default by an issuer of one of the Fund's
investments, a credit downgrade of one of the Fund's
investments, or an unexpected change in interest rates.

. The Fund's yield will change daily based upon changes in
interest rates and other market conditions.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND
SEEKS TO PRESERVE THE VALUE OF AN INVESTMENT AT $1.00 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.

How has the Cash Management Fund performed?

The bar chart shows changes in the performance of the Fund's shares from year to
year over the last ten years. The bar chart does not reflect fees and expenses
that may be deducted by the variable annuity contract or variable life insurance
policy through which you invest. If they were included, the returns would be
less than those shown.

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[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 2.00% (for the
quarter ended June 30, 1990), and the lowest quarterly return was 0.65% (for the
quarter ended June 30, 1993. THE FUND'S PAST PERFORMANCE DOES NOT NECESSARILY
INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows the average annual total returns for the Cash
Management Fund's shares.

1 Year* 5 Years* 10 Years*

Cash Management Fund 5.02% 4.88% 5.08%
* The annual returns are based upon calendar years.

THE FUND IN DETAIL

What are the Cash Management Fund's objective, principal investment
strategies, and risks?

OBJECTIVE: The Fund seeks to earn a high rate of current income consistent
with the preservation of capital and maintenance of liquidity.

PRINCIPAL INVESTMENT STRATEGIES: The Fund invests primarily in high-quality
money market instruments that are determined by the Fund's Adviser to present
minimal credit risk. Some common types of money market instruments are Treasury
bills and notes, which are securities issued by the U.S. government; commercial

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paper, which are promissory notes issued by large companies or financial firms;
banker's acceptances, which are credit instruments guaranteed by a bank;
negotiable certificates of deposit, which are issued by banks in large
denominations; and floating rate notes. The interest rate of a floating rate
instrument is generally based on a known lending rate, such as a bank's prime
rate, and is reset whenever the underlying rate is adjusted.

The Fund's portfolio is managed to meet regulatory requirements that permit the
Fund to maintain a stable NAV of $1.00 per share. These include requirements
relating to the credit quality, maturity, and diversification of the Fund's
investments. For example, to be an eligible investment for the Fund, a security
must have a remaining maturity of 397 calendar days or less. The security must
be rated in one of the two highest credit ratings categories for short-term
securities by at least two nationally recognized rating services organizations
(or by one, if only one rating service has rated the security), or if unrated,
be determined by the Fund's Adviser to be of quality equivalent to those in the
two highest credit ratings categories. The Fund must also maintain a
dollar-weighted average portfolio maturity of 90 days or less.

In buying and selling securities, the Fund will consider ratings assigned by
ratings services as well as its own credit analysis. The Fund considers, among
other things, the issuer's earnings and cash flow generating capabilities, the
security's yield and relative value, and the outlook for interest rates and the
economy. In the case of instruments with demand features or credit enhancements,
the Fund considers the financial strength of the party providing the demand
feature or credit enhancement, including any ratings assigned to such party.
Information on the Fund's recent holdings can be found in the most recent annual
report (see back cover).

INTEREST RATE RISK: Like the values of other debt instruments, the market values
of money market instruments are affected by changes in interest rates. When
interest rates rise, the market values of money market instruments decline; when
interest rates decline, the market values of money market instruments increase.
The price volatility of money market instruments also depends on their
maturities and durations. Generally, the shorter the maturity and duration of a
money market instrument, the lesser its sensitivity to interest rates.

Interest rate risk also includes the risk that in a declining interest rate
environment the Fund will have to invest the proceeds of maturing investments in
lower-yielding investments. The yields received by the Fund on some of its
investments will also decline as interest rates decline. For example, the Fund
invests in floating rate bonds and notes. When interest rates decline, the
yields paid on these securities may decline.

CREDIT RISK: A money market instrument's credit quality depends upon the
issuer's ability to pay interest on the security and, ultimately, to repay the
principal. The lower the rating by one of the independent bond-rating agencies
(for example, Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group), the greater the chance (in the rating agency's opinion) the security's
issuer will default, or fail to meet its repayment obligations. Direct U.S.
Treasury obligations (securities backed by the U.S. government) carry the
highest credit ratings. All things being equal, money market instruments with
greater credit risk offer higher yields.

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DISCOVERY FUND

OVERVIEW

OBJECTIVE: The Fund seeks long-term growth of capital, without regard to
dividend or interest income.

PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in common stocks of companies with
small market capitalizations ("small-cap stocks") which have the
potential for substantial long-term growth. The Fund looks for
companies that are in the early stages of their development, have
a new product or service, are in a position to benefit from some
change in the economy, have new management, or are experiencing
some other "special situation" which makes their stocks
undervalued. Because these companies tend to be smaller, their
growth potential is often greater.

PRIMARY
RISKS: While the potential long-term rewards of investing in small-cap
stocks are substantial, there are also substantial risks.
Small-cap stocks carry more risk because they are often in the
early stages of development, dependent on a small number of
products or services, lack substantial financial resources, and
have less predictable earnings. Small-cap stocks also tend to be
less liquid, and experience sharper price fluctuations than
stocks of companies with large capitalizations. These
fluctuations can be substantial. Accordingly, the value of an
investment in the Fund will go up and down, which means that you
could lose money.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

How has the Discovery Fund performed?

The bar chart shows changes in the performance of the Discovery Fund's shares
from year to year over the last ten years. The bar chart does not reflect fees
and expenses that may be deducted by the variable annuity contract or variable
life insurance policy through which you invest. If they were included, the
returns would be less than those shown.

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[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 26.55% (for the
quarter ended December 31,1998), and lowest quarterly return was -22.34% (for
the quarter ended September 30,1998). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for Discovery
Fund's shares compare to those of the Russell 2000 Index. The Russell 2000 Index
is an unmanaged index generally representative of the U.S. market for small-cap
stocks. The Russell 2000 Index does not take into account fees and expenses that
an investor would incur in holding the securities in the Russell 2000 Index. If
it did so, the returns would be lower than those shown.

1 Year* 5 Years* 10 Years*
Discovery Fund (4.17)% 8.98% 14.44%
Russell 2000 Index (2.24) 12.31 11.65
*The annual returns are based upon calendar years.

THE FUND IN DETAIL

What are the Discovery Fund's objective, principal investment strategies, and
risks?

OBJECTIVE: The Fund seeks long-term growth of capital, without regard to
dividend or interest income.

PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in common stocks of companies with small market capitalizations, which

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have the potential for substantial long-term growth. The Fund defines small-cap
stocks as those with market capitalizations of less than 90% of the weighted
market capitalization of the Standard & Poor's 600 Smallcap Index ("S&P 600
Index") (currently $1.8 billion). The weighted market capitalization of the S&P
600 Index will change with market conditions. The Fund looks for companies that
are in the early stages of their development, have a new product or service, are
in a position to benefit from some change in the economy, have new management,
or are experiencing some other "special situation" which makes their stocks
undervalued. Because these companies tend to be smaller, their growth potential
is often greater.

In selecting stocks, the Fund relies on fundamental research. It considers,
among other things, earnings growth potential, revenue growth potential, cash
flow and tangible book value. The Fund attempts to stay broadly diversified but
it may emphasize certain industry sectors based on economic and market
conditions. The Fund usually will sell a stock when it shows deteriorating
fundamentals or falls short of the portfolio manager's expectations. Information
on the Fund's recent strategies and holdings can be found in the most recent
annual report (see back cover).

MARKET RISK. Because this Fund invests in stocks, an investment in the Fund is
subject to stock market risk. Stock prices in general may decline over short or
even extended periods not only because of company-specific developments but also
due to an economic downturn, a change in interest rates, or a change in investor
sentiment, regardless of the success or failure of an individual company's
operations. Stock markets tend to run in cycles with periods when prices
generally go up, known as "bull" markets and periods when stock prices generally
go down, referred to as "bear" markets. The market risk associated with
small-cap stocks is greater than that associated with larger-cap stocks because
small-cap stocks tend to experience sharper price fluctuations than larger-cap
stocks, particularly during bear markets.

Small-cap companies are generally dependent on a small number of products or
services, their earnings are less predictable, and their share prices more
volatile. These companies are also more likely to have limited markets or
financial resources, and may depend on a small, inexperienced management group.

LIQUIDITY: Stocks of small-cap companies often are not as broadly traded as
those of larger-cap companies and are often subject to wider price fluctuations.
As a result, at times it may be difficult for the Fund to sell these securities
at a reasonable price.

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ALTERNATIVE STRATEGIES: At times the Fund may judge that market, economic or
political conditions make pursuing the Fund's investment strategies inconsistent
with the best interests of its shareholders. The Fund then temporarily may use
alternative strategies that are mainly designed to limit the Fund's losses by
investing up to 100% of its assets in short-term money market instruments. If
the Fund does so, it may not achieve its investment objective.

15
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GOVERNMENT FUND

OVERVIEW

OBJECTIVE: The Fund seeks to achieve a significant level of current income
which is consistent with security and liquidity of principal.

PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in obligations issued or guaranteed as
to payment of principal and interest by the U.S. Government, its
agencies or instrumentalities. The majority of the Fund's
investments consist of mortgage-backed securities issued or
guaranteed by the Government National Mortgage Association,
Federal National Mortgage Association, and Federal Home Loan
Mortgage Corporation. Mortgage-backed securities represent
interests in "pools" of mortgage loans. Because the
mortgage-backed securities purchased by the Fund are generally
guaranteed as to the timely payment of principal and interest to
investors in the pools, the Fund's primary strategies revolve
around managing interest rate risk, prepayment risk, and
extension risk. The Fund attempts to manage these risks by
adjusting the duration of its portfolio and the average coupon
rate of its mortgage-backed securities holdings.

PRIMARY
RISKS: While mortgage-backed securities are guaranteed in varying
degrees as to payment of principal and interest, this guarantee
does not apply in any way to the market prices of these
securities or the Fund's share price, both of which will
fluctuate. There are three main risks of investing in the Fund:
interest rate risk, prepayment risk, and extension risk. When
interest rates rise, the mortgage-backed securities held by the
Fund tend to decline in price, and when interest rates fall, they
tend to increase in price. This is interest rate risk. When
interest rates fall, homeowners also tend to refinance their
mortgages. When this occurs, the Fund loses the benefit of higher
yielding mortgages and must reinvest in lower interest rate
mortgages. This is prepayment risk. Extension risk is the flip
side of prepayment risk. Rising interest rates can cause the
Fund's average maturity to lengthen unexpectedly due to a drop in
mortgage prepayments. This will increase both the Fund's
sensitivity to rising interest rates and its potential for price
declines. The Fund may, at times, engage in short-term trading,
which could produce higher brokerage costs and taxable
distributions and may result in a lower total return for the
Fund. Accordingly, the value of an investment in the Fund as well
as the dividends you receive will go up and down, which means
that you could lose money.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

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How has the Government Fund performed?

The bar chart shows changes in the performance of the Government Fund's shares
from year to year over the life of the Fund. The bar chart does not reflect fees
and expenses that may be deducted by the variable annuity contract or variable
life insurance policy through which you invest. If they were included, the
returns would be less than those shown.

[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 6.05% (for the
quarter ended September 30,1992), and the lowest quarterly return was -3.21%
(for the quarter ended March 31,1994). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for Government
Fund's shares compare to those of the Salomon Brothers Mortgage Index ("Mortgage
Index") and the Salomon Brothers Government Index ("Government Index"). The
Mortgage Index is a market capitalization-weighted index that consists of all
agency pass-throughs and Federal Housing Administration ("FHA") and Government
National Mortgage Association project notes. The Government Index is a market
capitalization-weighted index that consists of debt issued by the U.S. Treasury
and U.S. Government sponsored agencies. The indices do not take into account
fees and expenses that an investor would incur in holding the securities in the
indices. If they did so, the returns would be lower than those shown.

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Inception
1 Year* 5 Years* (1/7/92)

Government Fund (0.01)% 4.53% 5.54%
Mortgage Index 6.98 7.27 7.39**
Government Index 9.84 7.24 7.98**
*The annual returns are based upon calendar years.
**The average annual total return shown is for the period 12/31/91 to 12/31/98.

THE FUND IN DETAIL

What are the Government Fund's objective, principal investment strategies,and
risks?

OBJECTIVE: The Fund seeks to achieve a significant level of current income which
is consistent with security and liquidity of principal.

PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in obligations issued or guaranteed as to payment of principal and
interest by the U.S. Government, its agencies or instrumentalities. The majority
of the Fund's investments consist of mortgage-backed securities. Mortgage-backed
securities represent interests in pools of mortgages. The principal and interest
from the underlying mortgages are passed through to investors in the pools. Some
pools are supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association pass-through mortgage certificates
(called "Ginnie Maes"). Some pools are supported by the right of the issuer to
borrow from the U.S. Treasury under certain circumstances, such as Federal
National Mortgage Association bonds (called "Fannie Maes"). Other pools are
supported only by the credit of the entity that issued them, such as Federal
Home Loan Mortgage Corporation obligations (called "Freddie Macs"). The Fund
also invests in U.S. Treasury securities and securities issued by U.S. agencies,
such as the Tennessee Valley Authority.

The Fund's primary investment strategies revolve around managing interest rate
risk, prepayment risk, and extension risk. Interest rate risk is managed by
adjusting the duration of the securities owned by the Fund. Duration is a
measurement of a bond's sensitivity to changes in interest rates that takes into
consideration not only the maturity of the bond but also the time value of money
that will be received from the bond over its life. The Fund will generally
adjust duration by buying or selling U.S. Treasury securities. For example, if
the Fund believes that interest rates are likely to rise, it will generally
attempt to reduce its duration by purchasing U.S. Treasury securities with
shorter maturities or selling U.S. Treasury securities with longer maturities.
Prepayment risk and extension risk are managed by adjusting the composition of
the Fund's holdings. For example, if interest rates appear likely to decline,
the Fund may attempt to reduce prepayment risk by buying new mortgage-backed
securities with lower coupons. Conversely, if interest rates appear likely to
increase, the Fund may reduce extension risk by purchasing mortgage-backed
securities with higher coupons.

The Fund uses a "top-down" approach in making investment decisions based on
interest rate, economic and market conditions. In selecting investments, the
Fund considers coupon and yield, relative value and weighted average maturity of

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the pool. The Fund will usually sell an investment when there are changes in the
interest rate environment that are adverse to the investment or if it fails to
meet the expectations of the portfolio manager. Information on the Fund's recent
strategies and holdings can be found in the most recent annual report (see back
cover).

INTEREST RATE RISK: All of the securities held by the Fund are subject to
interest rate risk. In general, the market prices of bonds rise when interest
rates fall, and fall when interest rates rise. Short-term interest rates and
long-term interest rates do not necessarily move in the same direction or in the
same amounts. Bonds with longer maturities tend to be more sensitive to interest
rate changes than those with shorter maturities.

PREPAYMENT RISK: Because the Fund invests primarily in mortgage-backed
securities, it is subject to prepayment risk. When interest rates decline,
homeowners tend to refinance their mortgages. When this occurs, investors in
pools suffer a higher rate of prepayment. As a result, investors in pools not
only lose the benefit of the higher yielding underlying mortgages that are being
prepaid but they must reinvest the proceeds at lower interest rates. This could
cause a decrease in the Fund's income and share price.

EXTENSION RISK: Extension risk is the flip side of prepayment risk. Rising
interest rates can cause the Fund's average maturity to lengthen unexpectedly
due to a drop in mortgage prepayments. This will increase both the Fund's
sensitivity to rising interest rates and its potential for price declines.

CREDIT RISK: This is the risk that an issuer of bonds will be unable to pay
interest or principal when due. There is some credit risk associated with the
Funds investments; however, it is perceived to be minimal. Most of the
securities owned by the Fund are backed by the full faith and credit of the U.S.
Government, the ability to borrow from the U.S. Treasury, or the perceived moral
obligation of the U.S. Government.

FREQUENT TRADING: The Fund may, at times, engage in short-term trading, which
could produce higher brokerage costs and taxable distributions and may result in
a lower total return for the Fund.

19
<PAGE>

20
<PAGE>

GROWTH FUND

OVERVIEW

OBJECTIVE: The Fund seeks long-term capital appreciation.

PRIMARY
INVESTMENT
STRATEGIES: Under normal circumstances, the Fund will remain fully
invested in equity securities, with most of its holdings in
U.S. common stocks. The Fund seeks to invest in seasoned
companies with proven track records and above-average earnings
growth. The Fund invests predominantly in larger companies,
but will also attempt to enhance its return by investing in
mid-sized and smaller companies that the Fund's investment
subadviser believes have attractive growth potential.

PRIMARY
RISKS: Like all stocks, growth stocks fluctuate in price in response
to movements in the overall securities markets, general
economic conditions, changes in interest rates,
company-specific developments and other factors. Mid-cap
stocks tend to experience sharper price fluctuations than
stocks of large-cap companies. To the extent that the Fund
decides to invest in small-cap companies, the risk of price
fluctuations is even greater. Fluctuations in the prices of
the stocks held by the Fund at times can be substantial.
Accordingly, the value of an investment in the Fund will go up
and down, which means that you could lose money.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

How has the Growth Fund performed?

The bar chart shows changes in the performance of the Growth Fund's shares for
each of the last ten calendar years. The bar chart does not reflect fees and
expenses that may be deducted by the variable annuity contract or variable life
insurance policy through which you invest. If they were included, the returns
would be less than those shown.

21
<PAGE>

[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 23.98% (for the
quarter ended December 31, 1998), and the lowest quarterly return was -15.45%
(for the quarter ended September 30, 1990). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for the Fund's
shares compare to those of the S&P 500 Index. The S&P 500 Index is an unmanaged
index generally representative of the market for the stocks of large-sized U.S.
companies. The S&P 500 Index does not take into account fees and expenses that
an investor would incur in holding the securities in the S&P 500 Index. If it
did so, the returns would be lower than those shown.

1 Year* 5 Years* 10 Years*

Growth Fund 18.44% 18.29% 15.88%
S&P 500 Index 28.34 24.55 18.95
*The annual returns are based upon calendar years.

THE FUND IN DETAIL

What are the Growth Fund's objectives, principal investment strategies,
and risks?

OBJECTIVE: The Fund seeks long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES: Under normal circumstances, the Fund will
remain fully invested in equity securities, with most of its holdings in U.S.

22
<PAGE>

common stocks. The Fund will also invest in foreign companies whose stocks are
denominated in U.S. dollars and listed and traded on a U.S. securities exchange,
either directly or through Depository Receipts. The Fund favors stocks of
seasoned companies with proven records and above-average earnings growth, and
stocks of companies with outstanding growth records and potential. The Fund
invests predominantly in larger companies, but will also attempt to enhance its
return by investing in mid-sized and smaller companies that the investment
subadviser believes have attractive growth potential. The Fund will typically
invest in most major sectors of the economy and therefore the Fund's investments
will be widely diversified by company and industry. The Fund may invest up to
25% of its assets in certain industry sectors based on economic and market
conditions.

The Fund uses fundamental research and analysis to identify prospective
investments. The Fund looks to identify industry leaders and those companies
which are leaders in industry niches. Research is focused on companies with a
proven record of sales and earnings growth, profitability, and cash flow
generation. Security selection is based on any one or more of the following
characteristics: (1) accelerating earnings growth and the possibility of
positive earnings surprises; (2) strong possibility of price to earnings
multiple expansion (or increases in other similar valuation measures); (3)
hidden or unappreciated value; or (4) improving company and/or industry outlook.

Every company in the portfolio is monitored to ensure its fundamental
attractiveness. A stock may be sold if (1) its downside risk equals or exceeds
its upside potential; (2) it suffers from a decreasing trend of earnings growth
or suffers an earnings disappointment; (3) it experiences excessive valuations;
or (4) there is a deteriorating company and/or industry outlook.

Information on the Fund's recent strategies and holdings can be found in the
most recent annual report (see back cover).

MARKET RISK: Because the Fund invests in stocks, an investment in the Fund is
subject to stock market risk. Stock prices in general may decline over short or
even extended periods not only because of company-specific developments but also
due to an economic downturn, a change in interest rates, or a change in investor
sentiment, regardless of the success or failure of an individual company's
operations. Stock markets tend to run in cycles with periods when prices
generally go up, known as "bull" markets and periods when stock prices generally
go down, referred to as "bear" markets.

The market risk associated with mid-cap and small-cap stocks is generally
greater than that associated with large-cap stocks because mid-cap and small-cap
stocks tend to experience sharper price fluctuations than large-cap stocks,
particularly during bear markets. Their earnings tend to be less predictable
than those of larger, more established companies. The prices of these stocks can
also be influenced by the anticipation of future products and services which, if
delayed, could cause the prices to drop. Fluctuation in prices of stocks can be
sudden and substantial. Accordingly, the value of your investment in the Fund
will go up and down, which means that you could lose money.

23
<PAGE>

LIQUIDITY RISK: The risk that certain securities may be difficult or impossible
to sell at the same time and the price that the seller would like. Stocks of
small-cap companies often are not as broadly traded as those of larger-cap
companies and are often subject to wider price fluctuations. As a result, at
times it may be difficult for the Fund to sell these securities at a reasonable
price.

ALTERNATIVE STRATEGIES: At times the Fund's investment subadviser may judge that
market, economic or political conditions make pursuing the Fund's investment
strategies inconsistent with the best interests of its shareholders. The Fund
then may temporarily use alternative strategies that are mainly designed to
limit the Fund's losses by investing up to 100% of its assets in short-term
money market instruments. If the Fund does so, it may not achieve its investment
objective.

24
<PAGE>

HIGH YIELD FUND

OVERVIEW

OBJECTIVES: The Fund primarily seeks high current income and secondarily
seeks capital appreciation.

PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in a diversified portfolio of
high-yield, below-investment grade corporate bonds (commonly
known as "junk bonds"). These bonds provide a higher level of
income than investment grade bonds because they have a higher
risk of default. The Fund seeks to reduce the risk of a
default by selecting bonds through careful credit research and
analysis. The Fund seeks to reduce the impact of a potential
default by diversifying its investments among bonds of many
different companies and industries. While the Fund invests
primarily in domestic companies, it also invests in securities
of issuers domiciled in foreign countries. These securities
will generally be dollar-denominated and traded in the U.S.
The Fund seeks to achieve capital appreciation by investing in
high-yield bonds with stable to improving credit conditions.

PRIMARY
RISKS: There are four primary risks of investing in the Fund. First,
the value of the Fund's shares could decline as a result of a
deterioration of the financial condition of an issuer of bonds
owned by the Fund or as a result of a default by the issuer.
This is known as credit risk. High-yield bonds carry higher
credit risks than investment grade bonds because the companies
that issue them are not as strong financially as companies
with investment grade credit ratings. High-yield bonds issued
by foreign companies are subject to additional risks including
political instability, government regulation, and differences
in financial reporting standards. Second, the value of the
Fund's shares could decline if the entire high-yield bond
market were to decline, even if none of the Fund's bond
holdings were at risk of a default. The high-yield market can
experience sharp declines at times as the result of a
deterioration in the overall economy, declines in the stock
market, a change of investor tolerance for risk, or other
factors. Third, high-yield bonds tend to be less liquid than
other bonds, which means that they are more difficult to sell.
Fourth, while high-yield bonds are generally less interest
rate sensitive than higher-quality bonds, their values
generally will decline when interest rates rise. Fluctuations
in the prices of high-yield bonds can be substantial.
Accordingly, the value of an investment in the Fund will go up
and down, which means that you could lose money.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

25
<PAGE>

How has the High Yield Fund performed?

The bar chart shows changes in the performance of the High Yield Fund's shares
for each of the last ten calendar years. The bar chart does not reflect fees and
expenses that may be deducted by the variable annuity contract or variable life
insurance policy through which you invest. If they were included, the returns
would be less than those shown.

[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 11.16% (for the
quarter ended March 31, 1991), and the lowest quarterly return was -8.11% (for
the quarter ended September 30, 1990). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for the High
Yield Fund's shares compare to those of the Credit Suisse First Boston High
Yield Index ("High Yield Index"). The High Yield Index is designed to measure
the performance of the high yield bond market. The High Yield Index does not
take into account fees and expenses that an investor would incur in holding the
securities in the Index. If it did so, the returns would be lower than those
shown.

1 Year* 5 Years* 10 Years*

High Yield Fund (4.10)% 7.45% 8.90%
High Yield Index 0.58 8.16 10.74
*The annual returns are based upon calendar years.

26
<PAGE>

THE FUND IN DETAIL

What are the High Yield Fund's objectives, principal investment strategies, and
risks?

OBJECTIVES: The Fund primarily seeks high current income and secondarily seeks
capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in a diversified portfolio of high-yield, below-investment grade
corporate bonds commonly known as "junk bonds" (those rated below Baa by Moody's
Investors Service, Inc. or below BBB by Standard & Poor's Ratings Group).
High-yield bonds generally provide higher income than investment grade bonds to
compensate investors for their higher risk of default (i.e., failure to make
required interest or principal payments). High-yield bond issuers include small
or relatively new companies lacking the history or capital to merit investment
grade status, former Blue Chip companies downgraded because of financial
problems, companies using debt rather than equity to fund capital investment or
spending programs, companies electing to borrow heavily to finance or avoid a
takeover or buyout, and firms with heavy debt loads. The Fund's portfolio may
include zero coupon bonds and pay in kind bonds. While the Fund invests
primarily in domestic companies, it also invests in securities of issuers
domiciled in foreign countries. These securities will generally be
dollar-denominated and traded in the U.S. The Fund seeks to reduce the risk of a
default by selecting bonds through careful credit research and analysis. The
Fund seeks to reduce the impact of a potential default by diversifying its
investments among bonds of many different companies and industries.

To achieve its secondary objective of capital appreciation, the Fund attempts to
invest in bonds that have stable to improving credit quality that could
appreciate in value because of a credit rating upgrade or an improvement in the
outlook for a particular company, industry or the economy as a whole.

Although the Fund will consider ratings assigned by ratings agencies in
selecting high-yield bonds, it relies principally on its own research and
investment analysis. The Fund considers a variety of factors, including the
issuer's managerial strength, anticipated cash flow, debt maturity schedules,
borrowing requirements, interest or dividend coverage, asset coverage and
earnings prospects. The Fund will usually sell a bond when it shows
deteriorating fundamentals or falls short of the portfolio manager's
expectations. Information on the Fund's recent strategies and holdings can be
found in the most recent annual report (see back cover).

PRINCIPAL RISKS: Any investment carries with it some level of risk. In general,
the greater the potential reward of the investment, the greater the risk. Here
are the principal risks of investing in the High Yield Fund:

CREDIT RISK: This is the risk that an issuer of bonds will be unable to pay
interest or principal when due. The prices of bonds are affected by the credit
quality of the issuer. High-yield bonds are subject to greater credit risk than
higher quality bonds because the companies that issue them are not as
financially strong as companies with investment grade ratings. Changes in the
financial condition of an issuer, changes in general economic conditions, and
changes in specific economic conditions that affect a particular type of issuer

27
<PAGE>

can impact the credit quality of an issuer. Such changes may weaken an issuer's
ability to make payments of principal or interest, or cause an issuer of bonds
to fail to make timely payments of interest or principal. Lower quality bonds
generally tend to be more sensitive to these changes than higher quality bonds.
While credit ratings may be available to assist in evaluating an issuer's credit
quality, they may not accurately predict an issuer's ability to make timely
payments of principal and interest.

MARKET RISK: The entire junk bond market can experience sharp price swings due
to a variety of factors, including changes in economic forecasts, stock market
volatility, large sustained sales of junk bonds by major investors, high-profile
defaults, or changes in the market's psychology. This degree of volatility in
the high-yield market is usually associated more with stocks than bonds. The
prices of high-yield bonds held by the Fund could therefore decline, regardless
of the financial condition of the issuers of such bonds. Markets tend to run in
cycles with periods when prices generally go up, known as "bull" markets, and
periods when prices generally go down, referred to as "bear" markets.

LIQUIDITY: High-yield bonds tend to be less liquid than higher quality bonds,
meaning that it may be difficult to sell high-yield bonds at a reasonable price,
particularly if there is a deterioration in the economy or in the financial
prospects of their issuers. As a result, the prices of high-yield bonds may be
subject to wide price fluctuations due to liquidity concerns.

INTEREST RATE RISK: The market value of a bond is affected by changes in
interest rates. When interest rates rise, the market value of a bond declines;
when interest rates decline, the market value of a bond increases. The price
volatility of a bond also depends on its maturity and duration. Generally, the
longer the maturity and duration of a bond, the greater its sensitivity to
interest rates. To compensate investors for this higher risk, bonds with longer
maturities and durations generally offer higher yields than bonds with shorter
maturities and durations.

FOREIGN ISSUERS: Foreign investments involve additional risks, including
political instability, government regulation, differences in financial reporting
standards, and less stringent regulation of foreign securities markets.

28
<PAGE>

INTERNATIONAL SECURITIES FUND

OVERVIEW

OBJECTIVES: The Fund primarily seeks long-term capital growth and
secondarily a reasonable level of current income.

PRIMARY
INVESTMENT
STRATEGIES: The Fund invests in a diversified portfolio of common stocks
(and other equity securities) of companies which are located
throughout the world, including the United States. The Fund
primarily invests in large or medium capitalization stocks
which are traded in larger or more established markets
throughout the world. The Fund also invests opportunistically
in small capitalization stocks and stocks of smaller,
less-developed or emerging markets. The Fund generally does not
attempt to hedge its foreign securities investments against
currency rate fluctuations. To a limited extent, the Fund uses
stock index futures contracts and options thereon as temporary
substitutes for purchases of foreign stocks and to adjust
country weightings.

PRIMARY
RISKS: All stocks fluctuate in price in response to movements in the
overall securities markets, general economic conditions, and
changes in interest rates or investor sentiment. The risks of
investing in a stock fund that invests in foreign stocks are
accentuated because investments in foreign stocks, particularly
emerging markets, can decline in value because of declines in
the values of local currencies, irrespective of how well the
companies that issue such stocks are doing; there is less
supervision and regulation of foreign securities markets;
foreign securities markets are generally less liquid than U.S.
markets; there may be less financial information available on
certain foreign companies; and there may be political
instability in some countries in which the Fund may invest.
Fluctuations in the prices of foreign stocks can be especially
sudden and substantial. Stocks with smaller market
capitalizations tend to experience sharper price fluctuations.
Using stock index futures and options thereon as temporary
substitutes for foreign stocks carries the same risks as direct
ownership of all of the stocks in the index. Accordingly, the
value of an investment in the Fund will go up and down, which
means that you could lose money.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

How has the International Securities Fund performed?

29
<PAGE>

The bar chart shows changes in the performance of the International Securities
Fund's shares from year to year over the life of the Fund. The bar chart does
not reflect fees and expenses that may be deducted by the variable annuity
contract or variable life insurance policy through which you invest. If they
were included, the returns would be less than those shown.

[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 18.22% (for the
quarter ended December 31, 1998), and the lowest quarterly return was -14.92%
(for the quarter ended September 30, 1998). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for the
International Securities Fund's shares compare to those of the Morgan Stanley
All Country World Free Index ("All Country Index"). The All Country Index is
designed to measure the performance of stock markets in the United States,
Europe, Canada, Australia, New Zealand and the developed and emerging markets of
Eastern Europe, Latin America, Asia and the Far East. The index consists of
approximately 60% of the aggregate market value of the covered stock exchanges
and is calculated to exclude companies and share classes which cannot be freely
purchased by foreigners. The All Country Index does not take into account fees
and expenses that an investor would incur in holding the securities in the
index. If it did so, the returns would be lower than those shown.

Inception
1 Year* 5 Years* (4/16/90)

International Securities
Fund 9.92% 10.12% 10.23%
All Country Index 21.96 7.13 12.62**
*The annual returns are based upon calendar years.
**The average annual total return shown is for the period 4/30/90 to 12/31/98.

30
<PAGE>

THE FUND IN DETAIL

What are the International Securities Fund's objectives, principal investment
strategies, and risks?

OBJECTIVES: The Fund primarily seeks long-term capital growth and secondarily a
reasonable level of current income.

PRINCIPAL INVESTMENT STRATEGIES: The Fund invests in a diversified portfolio of
common stocks of companies which are located throughout the world, including the
United States ("U.S.") Under normal market conditions, the Fund attempts to
maintain broad country diversification. The Fund has a fundamental policy (which
may only be changed by shareholder vote) to invest no more than 35% of its total
assets in securities of U.S. companies, obligations of the U.S. government, its
agencies and instrumentalities, and cash or cash equivalents denominated in U.S.
dollars. The foreign stocks that the Fund purchases are typically denominated in
foreign currencies. The Fund generally does not hedge against fluctuations in
the value of foreign currencies.

The Fund invests primarily in stocks of companies which are considered large to
medium in size (as measured by market capitalization). The Fund may also invest
in smaller companies when management views them as attractive alternatives to
the stocks of larger or more established companies. The Fund will make direct
investments in foreign issuers by purchasing securities traded in a foreign
market, as well as indirect investments through purchases of Depositary
Receipts, such as American Depository Receipts and Global Depository Receipts.

The Fund invests primarily in stocks which trade in larger or more established
markets, but also may invest (to a lesser degree) in smaller, less-developed or
emerging markets where management believes there is significant opportunity for
growth of capital. The status of markets as less-developed or emerging may
change over time as a result of developments in national or regional economies
and capital markets. Within emerging markets, the Fund seeks to participate in
the more established markets which management believes provide sufficient
liquidity.

The Fund also uses stock index futures contracts and options thereon as
temporary substitutes for purchases of foreign stocks. This practice can afford
a hedge against not participating in an advance in a country at a time when the
Fund is not fully invested in the country. Stock index futures contracts and
options thereon are also used to maintain desired country exposures. The Fund
will not invest more than 5% of its assets in stock index futures or options
thereon.

The Fund uses fundamental research and analysis to identify prospective
investments. Security selection is based on any one or more of the following
characteristics: (1) accelerating earnings growth or the possibility of positive
earnings surprises; (2) strong possibility of price-to-earnings multiple
expansion (or increases in other similar valuation measures); (3) hidden or
unappreciated value; or (4) improving local market and/or industry outlook.

31
<PAGE>

Once the best purchase candidates for the Fund are identified, the portfolio
construction process begins. In this phase, many factors are considered in
creating a total portfolio of securities for the Fund, including: (1) regional
and country weightings; (2) currency exposure; (3) industry and sector
allocation; and (4) exposure to a number of other factors, such as interest
rates or company size.

Every company in the portfolio is monitored to ensure its fundamental
attractiveness. A stock may be sold if: (1) its downside risk equals or exceeds
its upside potential; (2) it suffers from a decreasing trend of earnings growth
or suffers an earnings disappointment; (3) it experiences excessive valuations;
or (4) there is a deteriorating local market and/or industry outlook.

Information on the Fund's recent strategies and holdings can be found in the
most recent annual report (see back cover).

While the Fund's strategy of being globally diversified may help to reduce the
volatility or variability of the Fund's returns relative to another global fund
which invests in fewer stocks or whose investments are focused in fewer
countries or industry sectors, this strategy may not prevent a loss if stock
markets worldwide were to decline at the same time. Fluctuations of stock prices
can be sudden and substantial. Accordingly, the value of an investment in the
Fund will go up and down, which means that you could lose money.

FOREIGN SECURITIES RISK: Investments in foreign markets involve special risks
and considerations. Some of these factors are also present when investing in the
United States but are heightened issues when investing in non-U.S. markets and
especially emerging markets. For example, such risks and considerations may
include political and economic instability, nationalization, confiscatory
taxation, differing accounting and financial reporting standards, the inability
to obtain reliable financial information regarding a company's balance sheet and
operations. Risks such as these are common to all investments but are
exacerbated when investing in international markets. In addition, international
investors may experience higher commission rates on foreign portfolio
transactions, potential adverse changes in tax and exchange control regulations,
and the potential for restrictions on the flow of international capital. Many
foreign countries impose withholding taxes on income from investments in such
countries, which a portfolio may not recover. Also, fluctuations in the exchange
rates between the US dollar and foreign currencies may have a negative impact on
investments denominated in foreign currencies, for example, by eroding or
reversing gains or widening losses from those investments. These risks are
common to all mutual funds investing in international securities. Using stock

32
<PAGE>

index futures and options thereon as temporary substitutes for foreign stocks
carries the same risks as direct ownership of all of the stocks in the index.

LIQUIDITY RISK: Liquidity risk is the risk that certain securities may be
difficult or impossible to sell at the time and the price that the seller would
like. In such a situation, the seller may have to lower the price, sell other
securities instead, or forego an investment opportunity, any of which could have
a negative effect on fund management or performance.

SMALL-CAP RISK: The market risk associated with small-to mid-cap stocks is
greater than that associated with larger-cap stocks because small-to mid-cap
stocks tend to experience sharper price fluctuations than larger-cap stocks,
particularly during bear markets. Small-to mid-cap companies are generally
dependent on a smaller number of products or services, their earnings are less
predictable, and their share prices more volatile. These companies are also more
likely to have limited markets or financial resources, or to depend on a small,
inexperienced management group.

YEAR 2000 RISKS: The values of securities owned by the Fund may be negatively
affected by Year 2000 problems. Many computer systems are not designed to
process correctly date-related information after January 1, 2000. The issuers of
securities held by the Fund may incur substantial costs in ensuring that
computer systems on which they rely are Year 2000 ready and may face business
and legal problems if these systems are not ready. If computer systems used by
exchanges, broker-dealers, and other market participants are not Year 2000
ready, valuing and trading securities could be difficult. These problems could
be particularly acute in the case of the Fund's holdings in foreign securities
since foreign issuers and foreign markets may be more likely to experience Year
2000 problems. These problems could have a negative effect on the Fund's
investments and returns.

33
<PAGE>

INVESTMENT GRADE FUND

OVERVIEW

OBJECTIVE: The Fund seeks to generate a maximum level of income
consistent with investment in investment grade debt
securities.

PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in corporate bonds of U.S.
companies that are rated in one of the four highest ratings
categories by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("S&P"). Such bonds are
generally called "investment grade bonds." Investment grade
bonds offer higher yields than Treasury securities of
comparable maturities to compensate investors for the risk of
default. The Fund selects bonds primarily on the basis of its
own research and investment analysis. The Fund also takes
economic and interest rate outlooks into consideration when
selecting investments.

PRIMARY
RISKS: There are two main risks of investing in the Fund: credit risk
and interest rate risk. The Fund's share price will decline if
one or more of its bond holdings is downgraded in rating, or
one or more issuers suffers a default, or there is a concern
about credit downgrades or defaults in general as a result of
a deterioration in the economy as a whole. Also the Fund's
share price will decline as interest rates rise. Like all
bonds, investment grade bonds tend to rise in price when
interest rates decline, and decline in price when interest
rates rise. Accordingly, the value of an investment in the
Fund will go up and down, which means that you could lose
money.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

How has the Investment Grade Fund performed?

The bar chart shows changes in the performance of the Investment Grade Fund's
shares from year to year over the life of the Fund. The bar chart does not
reflect fees and expenses that may be deducted by the variable annuity contract
or variable life insurance policy through which you invest. If they were
included, the returns would be less than those shown.

34
<PAGE>

[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 6.50% (for the
quarter ended June 30, 1995), and the lowest quarterly return was -3.57% (for
the quarter ended March 31, 1994). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for the
Investment Grade Fund's shares compare to those of the Lehman Brothers Corporate
Bond Index ("Corporate Bond Index"). The Corporate Bond Index includes all
publicly issued, fixed rate, nonconvertible investment grade dollar-denominated,
corporate debt which have at least one year to maturity and an outstanding par
value of at least $100 million. The Corporate Bond Index does not take into
account fees and expenses that an investor would incur in holding the securities
in the Corporate Bond Index. If it did so, the returns would be lower than those
shown.

Inception
1 Year* 5 Years* (1/7/92)

Investment Grade Fund 1.50% 5.78% 6.92%
Corporate Bond Index 8.57 7.74 8.51**
*The annual returns are based upon calendar years.
**The average annual total return shown is for the period 12/31/91 to 12/31/98.

35
<PAGE>

THE FUND IN DETAIL

What are the Investment Grade Fund's objective, principal investment
strategies, and risks?

OBJECTIVE: The Fund seeks to generate a maximum level of income consistent with
investment in investment grade debt securities.

PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in corporate bonds of companies that are rated investment grade by
Moody's or S&P ("investment grade bonds"). These are bonds that are rated among
the four highest ratings categories by Moody's or S&P. Investment grade bonds
generally offer higher yields than Treasury securities of comparable maturities
to compensate investors for the risk of default.

Although the Fund may diversify among the four investment grade ratings, it may
emphasize bonds with higher ratings at times when the economy appears to be
weakening and bonds with lower ratings when the economy appears to be improving.
The Fund adjusts the average weighted maturity of the bonds in its portfolio
based on its interest rate outlook. If it believes that interest rates are
likely to fall, it will attempt to buy bonds with longer maturities or sell
bonds with shorter maturities. By contrast, if it believes interest rates are
likely to rise, it will attempt to buy bonds with shorter maturities or sell
bonds with longer maturities. The Fund also attempts to stay broadly
diversified, but it may emphasize certain industries within a sector based on
the outlook for interest rates, economic forecasts, and market conditions. The
Fund may buy or sell Treasury securities instead of investment grade corporate
bonds to adjust the Fund's average weighted maturity.

Although the Fund will consider ratings assigned by ratings services in
selecting investments, it relies principally on its own research and investment
analysis. The Fund considers, among other things, the issuer's earnings and cash
flow generating capabilities, asset quality, debt levels, and management
strength. The Fund will not necessarily sell an investment if its rating is
reduced. The Fund usually will sell a bond when it shows deteriorating
fundamentals or falls short of the portfolio manager's expectations. Information
on the Fund's recent strategies and holdings can be found in the most recent
annual report (see back cover).

CREDIT RISK: This is the risk that an issuer of bonds will be unable to pay
interest or principal when due. The prices of bonds are affected by the credit
quality of the issuer. Changes in the financial condition of an issuer, changes
in general economic conditions, and changes in specific economic conditions that
affect a particular type of issuer can impact the credit quality of an issuer.
Such changes may weaken an issuer's ability to make payments of principal or
interest, or cause an issuer of bonds to fail to make timely payments of
interest or principal. Lower quality bonds generally tend to be more sensitive
to these changes than higher quality bonds, but BBB-rated bonds may have
speculative characteristics as well. While credit ratings may be available to
assist in evaluating an issuer's credit quality, they may not accurately predict
an issuer's ability to make timely payment of principal and interest.

36
<PAGE>

INTEREST RATE RISK: The market value of a bond is affected by changes in
interest rates. When interest rates rise, the market value of a bond declines,
when interest rates decline, the market value of a bond increases. The price
volatility of a bond also depends on its maturity and duration. Generally, the
longer the maturity and duration of a bond, the greater its sensitivity to
interest rates. To compensate investors for this higher risk, bonds with longer
maturities and durations generally offer higher yields than bonds with shorter
maturities and durations.

37
<PAGE>

TARGET MATURITY 2007 FUND

OVERVIEW

OBJECTIVE: The Fund seeks a predictable compounded investment return for
investments held until the Fund's maturity, consistent with
preservation of capital.

PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in non-callable zero coupon bonds
issued or guaranteed by the U.S. government, its agencies or
instrumentalities, that mature on or around the maturity date
of the Fund. The Fund will mature and terminate at the end of
the year 2007. The Fund generally follows a buy and hold
strategy, but may sell an investment when the Fund identifies
an opportunity to increase its yield or it needs cash to meet
redemptions.

PRIMARY
RISKS: If an investment in the Fund is sold prior to the Fund's
maturity, there is substantial interest rate risk. Like other
bonds, zero coupon bonds are sensitive to changes in interest
rates. When interest rates rise, they tend to decline in
price, and when interest rates fall, they tend to increase in
price. Zero coupon bonds are more interest rate sensitive than
other bonds because zero coupon bonds pay no interest to their
holders until their maturities. This means that the market
prices of zero coupon bonds will fluctuate far more than those
of bonds that pay interest periodically. Accordingly, the
value of an investment in the Fund will go up and down, which
means that you could lose money if you liquidate your
investment in the Fund prior to the Fund's maturity.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

How has the Target Maturity 2007 Fund performed?

38
<PAGE>

[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 9.99% (for the
quarter ended September 30, 1998), and the lowest quarterly return was -7.84%
(for the quarter ended March 31, 1996). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for the Target
Maturity 2007 Fund's shares compare to those of the Salomon Brothers Government
Index ("SB Government Index"). The SB Government Index is a market
capitalization-weighted index that consists of debt issued by the U.S. Treasury
and U.S. Government sponsored agencies. The SB Government Index does not take
into account fees and expenses that an investor would incur in holding the
securities in the SB Government Index. If it did so, the returns would be lower
than those shown.

Inception
1 Year* (4/26/95)

Target Maturity 2007 Fund 6.93% 10.70%
SB Government Index 9.84 9.22**
* The annual returns are based upon calendar years.
** The average annual total return shown is for the period 4/30/95 to 12/31/98.

THE FUND IN DETAIL

What are the Target Maturity 2007 Fund's objective, principal investment
strategies, and risks?

OBJECTIVE: The Fund seeks a predictable compounded investment return for
investments held until the Fund's maturity, consistent with
preservation of capital.

39
<PAGE>

PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in zero coupon securities. The vast majority of the Fund's investments
consists of non-callable, zero coupon bonds issued or guaranteed by the U.S.
government, its agencies or instrumentalities that mature on or around the
maturity date of the Fund (December 31, 2007). Zero coupon securities are debt
obligations that do not entitle holders to any periodic payments of interest
prior to maturity and therefore are issued and traded at discounts from their
face values. Zero coupon securities may be created by separating the interest
and principal components of securities issued or guaranteed by the U.S.
government or one of its agencies or instrumentalities, or issued by private
corporate issuers. The discounts from face values at which zero coupon
securities are purchased varies depending on the time remaining until maturity,
prevailing interest rates, and the liquidity of the security. Because the
discounts from face values are known at the time of investment, investors
intending to hold zero coupon securities until maturity know the value of their
investment return at the time of investment, assuming full payment is made by
the issuer upon maturity.

The Fund seeks zero coupon bonds that will mature on or about the Fund's
maturity date. As the Fund's zero coupon bonds mature, the proceeds will be
invested in short-term U.S. government securities. The Fund generally follows a
buy and hold strategy consistent with attempting to provide a predictable
compounded investment return for investors who hold their Fund shares until the
Fund's maturity.

Although the Fund generally follows a buy and hold strategy, the Fund may sell
an investment when the Fund identifies an opportunity to increase its yield or
it needs cash to meet redemptions. Information on the Fund's recent strategies
and holdings can be found in the most recent annual report (see back cover).

The market prices of zero coupon securities are generally more volatile than the
market prices of securities paying interest periodically and, accordingly, will
fluctuate far more in response to changes in interest rates than those of
non-zero coupon securities having similar maturities and yields. As a result,
the net asset value of shares of the Fund may fluctuate over a greater range
than shares of other funds that invest in securities that have similar
maturities and yields but that make current distributions of interest.

40
<PAGE>

exchanges, broker-dealers, and other market participants are not Year 2000
ready, valuing and trading securities could be difficult. These problems could
have a negative effect on the Fund's investments and returns.

41
<PAGE>
TARGET MATURITY 2010 FUND

OVERVIEW

OBJECTIVE: The Fund seeks a predictable compounded investment return for
investors who hold their Fund shares until the Fund's
maturity, consistent with preservation of capital.

PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in non-callable zero coupon bonds
that mature on or around the maturity date of the Fund and are
issued or guaranteed by the U.S. government, its agencies and
instrumentalities. The Fund will mature and terminate at the
end of the year 2010. The Fund generally follows a buy and
hold strategy, but may sell an investment when the Fund
identifies an opportunity to increase its yield or to meet
redemptions.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

How has the Target Maturity 2010 Fund performed?

42
<PAGE>

[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 10.25% (for the
quarter ended September 30, 1998), and the lowest quarterly return was -7.84%
(for the quarter ended March 31, 1996). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for the Target
Maturity 2010 Fund's shares compare to those of the Salomon Brothers Government
Index ("SB Government Index"). The SB Government Index is a market
capitalization-weighted index that consists of debt issued by the U.S. Treasury
and U.S. Government sponsored agencies. The SB Government Index does not take
into account fees and expenses that an investor would incur in holding the
securities in the SB Government Index. If it did so, the returns would be lower
than those shown.

Inception
1 Year* (4/30/96)

Target Maturity 2010 Fund 6.32% 12.68%
SB Government Index 9.84 9.56**
* The annual returns are based upon calendar years.
** The average annual total return shown is for the period 4/30/96 to 12/31/98.

43
<PAGE>

THE FUND IN DETAIL

What are the Target Maturity 2010 Fund's objective, principal investment
strategies, and risks?

OBJECTIVE: The Fund seeks a predictable compounded investment return for
investors who hold their Fund shares until the Fund's maturity,
consistent with preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in zero coupon securities. The vast majority of the Fund's investments
consists of non-callable, zero coupon bonds that mature on or around the
maturity date of the Fund and are direct obligations of the U.S. Treasury. Zero
coupon securities are debt obligations that do not entitle holders to any
periodic payments of interest prior to maturity and therefore are issued and
traded at discounts from their face values. Zero coupon securities may be
created by separating the interest and principal components of securities issued
or guaranteed by the U.S. government or one of its agencies or
instrumentalities, or issued by private corporate issuers. The discounts from
face values at which zero coupon securities are purchased varies depending on
the time remaining until maturity, prevailing interest rates, and the liquidity
of the security. Because the discounts from face values are known at the time of
investment, investors intending to hold zero coupon securities until maturity
know the value of their investment return at the time of investment, assuming
full payment is made by the issuer upon maturity.

The Fund seeks zero coupon bonds that will mature on or about the Fund's
maturity date. As the Fund's zero coupon bonds mature, the proceeds will be
invested in short term U.S. government securities. The Fund generally follows a
buy and hold strategy consistent with attempting to provide a predictable
compounded investment return for investors who hold their Fund shares until the
Fund's maturity.

44
<PAGE>

the net asset value of shares of the Fund may fluctuate over a greater range
than shares of other funds that invest in securities that have similar
maturities and yields but that make current distributions of interest.

45
<PAGE>

UTILITIES INCOME FUND

OVERVIEW

OBJECTIVES: The Fund primarily seeks high current income and secondarily
long-term capital appreciation.

PRIMARY
INVESTMENT
STRATEGIES: The Fund concentrates its investments in stocks of public
utilities companies ("utilities stocks"). The Fund attempts to
diversify across all sectors of the utilities industry (i.e.,
electric, gas, telecommunications and water), but from time to
time it will emphasize one or more sectors based on the
outlook for the various sectors. While the Fund emphasizes
investments in U.S. companies, it may invest in stocks of
foreign utilities companies.

PRIMARY
RISKS: While utilities stocks tend to be regarded as less volatile
than other stocks, like all stocks they fluctuate in value in
response to movements in the overall securities markets,
general economic conditions, and changes in interest rates or
investor sentiment. Because the Fund concentrates its
investments in public utilities stocks, the value of its
shares will be particularly affected by events that impact on
the utilities industry, such as changes in public utilities
regulation, changes in weather, and changes in interest rates.
Stocks of foreign utilities companies carry additional risks
including political instability, government regulation and
differences in financial reporting standards. An investment in
the Fund could decline in value even if the market as a whole
does well. Accordingly, the value of an investment in the Fund
will go up and down, which means that you could lose money.

AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

How has the Utilities Income Fund performed?

The bar chart shows changes in the performance of the Utilities Income Fund's
shares from year to year over the life of the Fund. The bar chart does not
reflect fees and expenses that may be deducted by the variable annuity contract
or variable life insurance policy through which you invest. If they were
included, the returns would be less than those shown.

46
<PAGE>

[BAR CHART OMITTED]

During the periods shown, the highest quarterly return was 11.73% (for the
quarter ended December 31, 1997), and the lowest quarterly return was -6.74%
(for the quarter ended March 31, 1994). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

The following table shows how the average annual total returns for the Utilities
Income Fund's shares compare to those of the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500 Index") and the Standard and Poor's Utilities Index
("S&P Utilities Index"). The S&P 500 Index is an unmanaged index generally
representative of the market for the stocks of large-sized U.S. companies. The
S&P Utilities Index is a capitalization-weighted index of 37 stocks designed to
measure the performance of the utilities sector of the S&P 500 Index. The
indices do not take into account fees and expenses that an investor would incur
in holding the securities in the indices. If they did so, the returns would be
lower than those shown.

Inception
1 Year* 5 Years* (11/15/93)

Utilities Income
Fund 4.66% 11.63% 11.20%
S&P 500 Index 28.34 24.55 20.45
S&P Utilities Index** 14.36 13.50 11.37
*The annual returns are based upon calendar years.
**This Index is used to show how the Fund's performance compares with the
returns of an index of stocks in market sectors in which the Fund may invest.

47
<PAGE>

THE FUND IN DETAIL

What are the Utilities Income Fund's objectives, principal investment
strategies, and risks?

OBJECTIVES: The Fund primarily seeks high current income and secondarily
long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in stocks (including not only common stocks, but also preferred stocks
and securities convertible into common or preferred stocks) of companies in the
utilities industry. These are securities of companies which are primarily
engaged in owning or operating facilities used to provide electricity, gas,
water or telecommunications (including telephone, telegraph and satellite, but
not public broadcasting or cable television). While the Fund emphasizes
investments in U.S. companies, it may invest in stocks of foreign utilities
companies. The Fund's investments in foreign utilities companies are generally
limited to stocks that are dollar-denominated and traded in the U.S.

While the Fund attempts to diversify across all utilities sectors, it may
emphasize a particular sector based on that sector's yield, price to earnings
ratio, economic trends, and the regulatory environment. The Fund uses a
"top-down" approach to selecting investments. This means that it first decides
on how much of its assets to allocate to each sector of the utilities market and
then identifies potential investments for each sector through fundamental
research and analysis.

In selecting securities, the Fund will consider a stock's dividend potential,
its price to earnings ratio, the company's management, the company's ratio of
international to domestic earnings, the company's future strategies, and
external factors such as demographics and mergers and acquisitions prospects.
The Fund typically sells a security when its issuer shows deteriorating
fundamentals, it falls short of the manager's expectations or there is a change
in economic trends. Information on the Fund's recent strategies and holdings can
be found in the most recent annual report (see back cover).

MARKET RISK: Because this Fund invests in stocks, it is subject to stock market
risk. Stock prices in general may decline over short or even extended periods
not only because of company-specific developments, but also due to an economic
downturn, a change in interest rates, or a change in investor sentiment,
regardless of the success or failure of an individual company's operations.
Stock markets tend to run in cycles with periods when prices generally go up,
known as "bull" markets, and periods when stock prices generally go down,
referred to as "bear" markets. While utilities stocks have long been thought of
as being less volatile than other stocks, like all stocks they fluctuate in
value. As the utilities industry has begun to deregulate and earnings have
become less predictable, utilities stocks have begun to have price fluctuations
which are more like other stocks. Stocks of foreign utilities companies carry
additional risks including political instability, government regulation and
differences in financial reporting standards.

48
<PAGE>

INDUSTRY CONCENTRATION RISK: Because the Fund concentrates its investments in
public utilities companies, the value of its shares will be especially affected
by events that are peculiar to or have a greater impact on the utilities
industry. Utilities companies, especially electric and gas and other
energy-related utilities companies, have historically been subject to the risk
of increases in fuel and other operating costs, changes in weather patterns,
changes in interest rates, changes in applicable laws and regulations, and costs
and operating constraints associated with compliance with environmental
regulations. Utilities stocks therefore may decline in value even if the overall
market is doing well.

SECTOR CONCENTRATION RISK: Because the Fund may concentrate its portfolio in one
sector of the utilities industry, its share value could decline if one sector of
the utilities industry does poorly even if the industry does well as a whole.

DEREGULATION/COMPETITION: Regulatory changes in the United States have
increasingly allowed utilities companies to provide services and products
outside their traditional geographical areas and lines of business, creating
competitors and new areas of competition. As a result, certain utilities
companies earn more than their traditional, regulated rates of return, while
others are forced to defend their core business from competition and are less
profitable. Some utilities companies may not be able to recover the costs of
facilities built or acquired prior to the date of deregulation. This is known as
the "stranded assets" problem.

INTEREST RATE RISK: Utilities stocks tend to be more interest rate sensitive
than other stocks. As interest rates increase, utilities stocks tend to decline
in value.

OTHER RISKS: Changes in weather patterns or regional weather circumstances may
affect the ability of the utilities industry, a sector of the industry, or
certain utilities companies to meet supply and demand.

ALTERNATIVE STRATEGIES: At times the Fund may judge that market, economic or
political conditions make pursuing the Fund's investment strategies inconsistent
with the best interests of its shareholders. The Fund then may temporarily use
alternative strategies that are mainly designed to limit the Fund's losses by
investing up to 100% of its assets in short-term money market instruments. If
the Fund does so, it may not achieve its investment objective.

49
<PAGE>

FUND MANAGEMENT

First Investors Management Company, Inc. ("FIMCO") is the investment adviser to
each of the Funds in the Life Series Fund. Its address is 95 Wall Street, New
York, NY 10005. It currently is investment adviser to 51 mutual funds or series
of funds with total net assets of approximately $5 billion. Except as noted
below, FIMCO supervises all aspects of each Fund's operations and determines
each Fund's portfolio transactions. For the fiscal year ended December 31, 1998,
FIMCO received advisory fees as follows: 0.75% of average daily net assets for
Blue Chip Fund; 0.60% of average daily net assets, net of waiver, for Cash
Management Fund; 0.75% of average daily net assets for Discovery Fund; 0.60% of
average daily net assets, net of waiver, for Government Fund; 0.75% of average
daily net assets for Growth Fund; 0.75% of average daily net assets for High
Yield Fund; 0.75% of average daily net assets for International Securities Fund;
0.60% of average daily net assets, net of waiver, for Investment Grade Fund;
0.60% of average daily net assets, net of waiver, for Target Maturity 2007 Fund;
0.60% of average daily net assets, net of waiver, for Target Maturity 2010 Fund;
and 0.60% of average daily net assets, net of waiver, for Utilities Income Fund.
The gross advisory fees (fees before any applicable waivers) are set forth in
the Separate Account prospectus which is attached to this prospectus.

Dennis T. Fitzpatrick serves as Portfolio Manager of the Blue Chip Fund. Mr.
Fitzpatrick also serves as Portfolio Manager to certain other First Investors
Funds. Mr. Fitzpatrick has been a member of FIMCO's investment management team
since 1995. During 1995, Mr. Fitzpatrick was a Regional Surety Manager at United
States Fidelity & Guaranty Co. From 1988 to 1995, he was Northeast Surety
Manager at American International Group.

Clark D. Wagner serves as Portfolio Manager of Government Fund, Target Maturity
2007 Fund, and Target Maturity 2010 Fund, and Co-Portfolio Manager of Investment
Grade Fund. Mr. Wagner also serves as Portfolio Manager of certain other First
Investors Funds. Mr. Wagner has been Chief Investment Officer of FIMCO since
1992.

Patricia D. Poitra, Director of Equities, and David A. Hanover serve as
Co-Portfolio Managers of the Discovery Fund. Ms. Poitra and Mr. Hanover also
serve as Portfolio Managers of certain other First Investors Funds. Ms. Poitra
joined FIMCO in 1985 as a Senior Equity Analyst. From 1997 to August 1998, Mr.
Hanover was a Portfolio Manager and Analyst at Heritage Investors Management
Corporation. From 1994 to 1996, Mr. Hanover was Co-Portfolio Manager and Analyst
at Psagot Mutual Funds and in 1993 he was an International Equity Investments
Summer Associate at Howard Hughes Medical Institute.

George V. Ganter serves as Portfolio Manager of the High Yield Fund. Mr. Ganter
also serves as Portfolio Manager of certain other First Investors Funds. Mr.
Ganter joined FIMCO in 1985 as a Senior Investment Analyst.

Nancy W. Jones serves as Co-Portfolio Manager of the Investment Grade Fund. Ms.
Jones also serves as Portfolio Manager of certain other First Investors Funds.
Ms. Jones joined FIMCO in 1983 as Director of Research in the High Yield
Department.

Matthew S. Wright serves as Portfolio Manager of the Utilities Income Fund. Mr.
Wright also serves as Portfolio Manager of certain other First Investors Funds.
Mr. Wright joined FIMCO in February 1996 as an Equity Analyst. From May 1995 to

50
<PAGE>

January 1996, Mr. Wright was an Analyst at Fuji Bank. From June 1994 to April
1995, he was Market Editor of BLOOMBERG MAGAZINE and from September 1991 to June
1994, he was Editor/Reporter for BLOOMBERG BUSINESS NEWS.

FIMCO and Life Series Fund have retained Wellington Management Company, LLP
("WMC") as investment subadviser to the Growth Fund and the International
Securities Fund. Subject to continuing oversight and supervision by FIMCO and
the Board of Directors, WMC has discretionary trading authority over all of the
assets of the Growth Fund and the International Securities Fund. WMC is located
at 75 State Street, Boston, MA 02109. 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, 1998, WMC held investment management authority
with respect to $211 billion of assets. Of that amount, WMC acted as investment
adviser or subadviser to approximately 146 investment companies or series of
such companies, with net assets of approximately $147 billion as of December 31,
1998. The Growth Fund is managed by WMC's Growth Investment Team, a group of
equity portfolio managers and senior investment professionals. The International
Securities Fund is managed by Trond Skramstad, Senior Vice President of WMC and
Chairman of the firm's Global Equity Strategy Group. Mr. Skramstad joined WMC in
1993.

In addition to the investment risks of the Year 2000 which are disclosed above,
the ability of FIMCO, WMC and their affiliates to price the Funds' shares,
process purchase and redemption orders, and render other services could be
adversely affected if the computers or other systems on which they rely are not
properly programmed to operate after January 1, 2000. Additionally, because the
services provided by FIMCO, WMC and their affiliates depend on the interaction
of their computer systems with the computer systems of brokers, information
services and other parties, any failure on the part of such third party computer
systems to deal with the Year 2000 may have a negative effect on the services
provided to the Funds. FIMCO, WMC and their affiliates are taking steps that
they believe are reasonably designed to address the Year 2000 problem for
computer and other systems used by them and are obtaining assurances that
comparable steps are being taken by the Funds' other service providers. However,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Funds. Nor can the Funds estimate the extent of any
impact.

BUYING AND SELLING SHARES

How and when do the Funds price their shares?

The share price (which is called "net asset value" or "NAV" per share) for each
Fund is calculated once each day as of 4 p.m., Eastern Time ("ET"), on each day
the New York Stock Exchange ("NYSE") is open for regular trading. In the event
that the NYSE closes early, the share price will be determined as of the time of
the closing.

To calculate the NAV, each Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding.

In valuing its assets, each Fund other than Cash Management Fund uses the market
value of securities for which market quotations or last sale prices are readily
available. If there are no readily available quotations or last sale prices for

51
<PAGE>

an investment or the available quotations are considered to be unreliable, the
securities will be valued at their fair value as determined in good faith
pursuant to procedures adopted by the Board of Directors of the Funds. The Cash
Management Fund values its assets using the amortized cost method which is
intended to permit the Fund to maintain a stable $1.00 per share. Because the
International Securities Fund invests in securities that are primarily listed on
foreign exchanges that trade on days when the Fund is not open, the NAV of the
Fund's shares may change on days on which you are not able to purchase or redeem
the Fund's shares.

How do I buy and sell shares?

Investments in each of the Funds may only be made through purchases of variable
annuity contracts or variable life insurance policies offered by FIL. Purchase
payments for variable annuity contracts, less applicable charges or expenses,
are paid into specified unit investment trusts, Separate Account C or Separate
Account D. Variable life insurance policy premiums, less certain expenses, are
paid into a unit investment trust, Separate Account B. The Separate Accounts
pool these proceeds to purchase shares of a Fund designated by purchases of the
variable annuity contracts or variable life insurance policies.

For information about how to buy or sell the variable annuity contracts and
variable life insurance policies, see the Separate Account prospectus which is
attached to this prospectus. It will describe not only the process for buying
and selling contracts and policies but also the fees and charges involved. This
prospectus is not valid unless a Separate Account prospectus is attached hereto.

ACCOUNT POLICIES

What about dividends and capital gain distributions?

The Separate Accounts which own the shares of the Funds' will receive all
dividends and distributions. As described in the attached Separate Account
prospectus, all dividends and distributions are then reinvested by the
appropriate Separate Account in additional shares of the Fund.

Except for Cash Management Fund, to the extent that they have net investment
income, each Fund will declare and pay, on an annual basis, dividends from net
investment income. To the extent that the Cash Management Fund has net
investment income, the Fund will declare daily and pay monthly dividends from
net investment income. Each Fund will declare and distribute any net realized
capital gains, on an annual basis, usually after the end of each Fund's fiscal
year. Each Fund may make an additional distribution in any year if necessary to
avoid a Federal excise tax on certain undistributed income and capital gain.

What about taxes?

You will not be subject to taxes as the result of purchases or sales of Fund
shares by the Separate Account, or Fund dividends, or distributions to the
Separate Accounts. There are tax consequences associated with investing in the
variable annuity contracts and variable life insurance policies. These are
discussed on the attached Separate Account prospectus.

52
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the financial
performance of each Fund for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the tables
represent the rate that an investor would have earned (or lost) on an investment
in each Fund (assuming reinvestment of all dividends and distributions). The
information has been audited by Tait, Weller & Baker, whose report, along with
the Funds' financial statements, are included in the SAI, which is available
upon request.

53
<PAGE>

- -------------------- ------------------------------------------------------------------------------------------------
PER SHARE DATA
------------------------------------------------------------------------------------------------

INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM
--------------------------------- -----------------------

NET
NET ASSET REALIZED AND
VALUE NET UNREALIZED TOTAL FROM NET NET
YEAR ENDED BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENTS REALIZED TOTAL
DECEMBER 31 OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------------------------------

BLUE CHIP
- ---------
<S> <C> <C> <C> <C> <C> <C> <C>

1994.............. $14.21 $.18 $(.39) $(.39) $.08 $.17 $.25
1995.............. 13.75 .26 4.11 4.37 .19 .95 1.14
1996.............. 16.98 .22 3.31 3.53 .25 .49 .74
1997.............. 19.77 .19 4.88 5.07 .22 .91 1.13
1998.............. 23.71 .17 4.05 4.22 .19 1.49 1.68

CASH MANAGEMENT
- ---------------
1994.............. $1.00 $.037 $ -- $.037 $.037 $-- $.037
1995.............. 1.00 .054 -- .054 .054 -- .054
1996.............. 1.00 .049 -- .049 .049 -- .049
1997.............. 1.00 .050 -- .050 .050 -- .050
1998.............. 1.00 .049 -- .049 .049 -- .049

DISCOVERY
- ---------
1994.............. $21.36 $.06 $(.62) $(.56) $ -- $.94 $.94
1995.............. 19.86 .11 4.62 4.73 .06 1.26 1.32
1996.............. 23.27 .13 2.66 2.79 .11 .89 1.00
1997.............. 25.06 .08 3.93 4.01 .14 1.16 1.30
1998.............. 27.77 .09 .79 .88 .08 1.83 1.91

(a) Annualized.
* Commencement of operations.
** Based on average shares outstanding during the year.
+ Some or all expenses have been waived or assumed by the investment adviser from commencement of operations
through December 31, 1998.
++ The effect of fees and charges incurred at the separate account level are not reflected in these performance
figures.

</TABLE>

54
<PAGE>

- -------------------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------

RATIO TO AVERAGE NET
RATIO TO AVERAGE ASSETS BEFORE EXPENSES
NET ASSETS + WAIVED OR ASSUMED
---------------- ----------------------

NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO
END OF RETURN ++ PERIOD INVESTMENT INVESTMENT TURNOVER
PERIOD (%) (IN MILLIONS) EXPENSES(%) INCOME (%) EXPENSES(%) INCOME (%) RATE (%)
- -------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C>
$13.75 (1.45) $41 .88 1.49 N/A N/A 82
16.98 34.00 67 .86 1.91 N/A N/A 26
19.77 21.52 100 .84 1.39 N/A N/A 45
23.71 26.72 154 .81 .99 N/A N/A 63
26.25 18.66 205 .82 .79 N/A N/A 91

$1.00 3.77 $4 .60 3.69 1.04 3.25 N/A
1.00 5.51 4 .60 5.36 1.10 4.87 N/A
1.00 5.00 4 .60 4.89 1.11 4.38 N/A
1.00 5.08 5 .70 4.97 1.06 4.61 N/A
1.00 5.02 7 .70 4.89 .99 4.60 N/A

$19.86 (2.53) $30 .88 .36 N/A N/A 53
23.27 25.23 51 .87 .63 N/A N/A 78
25.06 12.48 71 .85 .63 N/A N/A 98
27.77 16.84 100 .82 .34 N/A N/A 85
26.74 3.05 114 .83 .36 N/A N/A 121

</TABLE>

55
<PAGE>

INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM
--------------------------------- -----------------------

GOVERNMENT
<S> <C> <C> <C> <C> <C> <C> <C>
1994............. $10.42 $.79 $(1.21) $(.42) $.25 $.05 $.30
1995............. 9.70 .66 .78 1.44 .62 -- .62
1996............. 10.52 .68 (.33) .35 .68 -- .68
1997............. 10.19 .72 .11 .83 .69 -- .69
1998............. 10.33 .66** .08** .74** .66 -- .66

GROWTH
1994............. $17.45 $.09 $(.60) $(.51) $-- $.21 $.21
1995............. 16.73 .18 3.94 4.12 .09 .29 .38
1996............. 20.47 .18 4.68 4.86 .18 .59 .77
1997............. 24.56 .15 6.57 6.72 .18 1.86 2.04
1998............. .24 .10 7.69 7.79 .15 1.10 1.25

HIGH YIELD
1994............. $11.16 $.87 $(1.14) $(.27) $.31 $-- $.31
1995............. 10.58 1.00 .95 1.95 .96 -- .96
1996............. 11.57 1.02 .35 1.37 1.01 -- 1.01
1997............. 11.93 .98 .41 1.39 1.02 -- 1.02
1998............. 12.30 1.00 (.62) .38 .98 -- .98

(a) Annualized.
* Commencement of operations.
** Based on average shares outstanding during the year.
+ Some or all expenses have been waived or assumed by the investment adviser from commencement of
operations through December 31, 1998.
++ The effect of fees and charges incurred at the separate account level are not reflected in these
performance figures.

</TABLE>

56
<PAGE>

RATIO TO AVERAGE NET
RATIO TO AVERAGE ASSETS BEFORE EXPENSES
NET ASSETS + WAIVED OR ASSUMED
---------------- ----------------------

<S> <C> <C> <C> <C> <C> <C> <C>
$9.70 (4.10) $8 .35 6.74 .90 6.19 457
10.52 15.63 10 .40 6.79 .93 6.26 198
10.19 3.59 9 .60 6.75 .94 6.41 199
10.33 8.61 9 .60 6.95 .92 6.63 134
10.41 7.54 11 .70 6.59 .87 6.42 107

$16.73 (2.87) $33 .90 .60 N/A N/A 40
20.47 25.12 51 .88 1.11 N/A N/A 64
24.56 24.45 79 .85 .92 N/A N/A 49
29.24 29.28 128 .82 .64 N/A N/A 27
35.78 27.35 187 .82 .34 N/A N/A 26

$10.58 (1.56) $32 .88 9.43 N/A N/A 50
11.57 19.82 42 .87 9.86 N/A N/A 57
11.93 12.56 49 .85 9.43 N/A N/A 34
12.30 12.47 60 .83 8.88 N/A N/A 40
11.70 3.15 65 .83 8.93 N/A N/A 42

</TABLE>

57
<PAGE>

INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM
--------------------------------- -----------------------

INTERNATIONAL SECURITIES
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994................ $13.74 $.14 $(.32) $(.18) $.05 $ -- $.05
1995................ 13.51 .19 2.25 2.44 .12 .25 .37
1996................ 15.58 .18 2.12 2.30 .19 .50 .69
1997................ 17.19 .18 1.26 1.44 .20 1.52 1.72
1998................ 16.91 .12 2.87 2.99 .16 .86 1.02

INVESTMENT GRADE
- ----------------
1994................ $10.95 $.67 $(1.06) $(.39) $.16 $.09 $.25
1995................ 10.31 .67 1.28 1.95 .53 -- .53
1996................ 11.73 .72 (.42) .30 .67 -- .67
1997................ 11.36 .74 .31 1.05 .74 -- .74
1998................ 11.67 .68** .33** 1.01** .71 -- .71

TARGET MATURITY 2007
- --------------------
4/26/95* to 12/31/95 $10.00 $ .26 $ 2.00 $2.26 $-- $-- $--
1996................ 12.26 .56 (.83) (.27) .23 .05 .28
1997................ 11.71 .59 .90 1.49 .57 -- .57
1998................ 12.63 .61 1.20 1.81 .61 -- .61

TARGET MATURITY 2010
- --------------------
4/30/96* to 12/31/96 $10.00 $ .26 $ .90 $1.16 $-- $-- --
1997................ 11.16 .45 1.29 1.74 .20 -- .20
1998................ 12.70 .51 1.25 1.76 .48 .01 .49

UTILITIES INCOME
- ----------------
1994................ $9.94 $.24 $(.96) $(.72) $.03 $-- $.03
1995................ 9.19 .28 2.46 2.74 .19 -- .19
1996................ 11.74 .32 .78 1.10 .27 -- .27
1997................ 12.57 .37 2.64 3.01 .36 .27 .63
1998................ 14.95 .32 1.46 1.78 .35 .55 .90

</TABLE>

58
<PAGE>

RATIO TO AVERAGE NET
RATIO TO AVERAGE ASSETS BEFORE EXPENSES
NET ASSETS + WAIVED OR ASSUMED
---------------- ----------------------

<S> <C> <C> <C> <C> <C> <C> <C>
$13.51 (1.29) $31 1.03 1.22 N/A N/A 36
15.58 18.70 41 1.02 1.42 N/A N/A 45
17.19 15.23 58 1.12 1.25 N/A N/A 67
16.91 9.09 74 1.13 1.15 N/A N/A 71
18.88 18.18 92 1.15 .75 N/A N/A 109

$10.31 (3.53) $12 .37 6.61 .92 6.06 15
11.73 19.69 16 .51 6.80 .91 6.40 26
11.36 2.84 16 .60 6.47 .88 6.19 19
11.67 9.81 17 .60 6.54 .87 6.27 41
11.97 9.15 22 .68 5.97 .84 5.81 60

$12.26 22.60 $10 .04(a) 6.25(a) .87(a) 5.42(a) 28
11.71 (2.16) 15 .60 6.05 .82 5.83 13
12.63 13.38 20 .60 5.91 .82 5.69 1
13.83 14.97 26 .67 5.18 .83 5.02 1

$11.16 11.60 $2 .60(a) 6.05(a) .98(a) 5.67(a) 0
12.70 15.86 5 .60 5.88 .87 5.61 13
13.97 14.36 9 .67 4.90 .82 4.75 0

$9.19 (7.24) $5 .17 4.13 .95 3.35 31
11.74 30.26 15 .41 4.23 .91 3.73 17
12.57 9.57 24 .60 3.48 .86 3.22 45
14.95 25.07 34 .67 3.12 .85 2.94 64
15.83 12.58 50 .73 2.61 .85 2.49 105

</TABLE>
59

<PAGE>

[FIRST INVESTORS LOGO]

LIFE SERIES FUND
BLUE CHIP
CASH MANAGEMENT
DISCOVERY
GOVERNMENT
GROWTH
HIGH YIELD
INTERNATIONAL SECURITIES
INVESTMENT GRADE
TARGET MATURITY 2007
TARGET MATURITY 2010
UTILITIES INCOME

For investors who want more information about the Funds, the following documents
are available free upon request:

ANNUAL/SEMI-ANNUAL REPORTS: Additional information about each Fund's investments
is available in the Funds' annual and semi-annual reports to shareholders. In
the Funds' annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected each Fund's performance
during its last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds and is incorporated by reference into this
prospectus.

You can get free copies of reports and the SAI, request other information and
discuss your questions about the Funds by contacting the Funds at:

Administrative Data Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198
Telephone: 1-800-423-4026

You can review and copy information about the Funds (including the Funds'
reports and SAI) at the Public Reference Room of the Securities and Exchange
Commission ("SEC") in Washington, D.C. You can also send your request for copies
and a duplicating fee to the Public Reference Room of the SEC, Washington, DC
20549-6009. You can obtain information on the operation of the Public Reference
Room by calling 1-800-SEC-0330. Text-only versions of Fund documents can be
viewed online or downloaded from the SEC's Internet website at
http://www.sec.gov.

(Investment Company Act File No. 811-4325 First
First Investors Life Series Fund)

<PAGE>

FIRST INVESTORS LIFE SERIES FUND

95 WALL STREET (800) 342-7963
NEW YORK, NEW YORK 10005

STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 30, 1999

This is a Statement of Additional Information ("SAI") 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 objective(s) of each Fund are set
forth in the Life Series Fund's Prospectus. There can be no assurance that any
Fund will achieve its investment objective(s). 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, are paid into
either of two unit investment trusts, First Investors Life Variable Annuity Fund
C ("Separate Account C") and First Investors Life Variable Annuity Fund D
("Separate Account D"). Separate Account B, Separate Account C and Separate
Account D (the "Separate Accounts") pool these proceeds to purchase shares of
the Funds 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 and Separate Account D.

This SAI is not a prospectus. It should be read in connection with Life
Series Fund's Prospectus dated April 30, 1999, which may be obtained free of
cost from the Funds at the address or telephone number noted above.

TABLE OF CONTENTS
-----------------

Page
----

Investment Strategies and Risks................................ 2
Investment Policies............................................ 11
Portfolio Turnover............................................. 23
Futures and Options Strategies................................. 24
Investment Restrictions........................................ 33
Trustees and Officers.......................................... 34
Management..................................................... 36
Determination of Net Asset Value............................... 39
Allocation of Portfolio Brokerage.............................. 40
Taxes.......................................................... 42
Performance Information........................................ 45
General Information............................................ 49
Appendix A..................................................... 51
Appendix B..................................................... 52
Appendix C..................................................... 53
Appendix D..................................................... 56
Financial Statements........................................... 62

<PAGE>

INVESTMENT STRATEGIES AND RISKS

BLUE CHIP FUND

BLUE CHIP FUND seeks to provide investors with high total investment return
consistent with the preservation of capital. The Fund seeks to achieve its
objective by investing, under normal market conditions, at least 65% of its
total assets in equity securities of "Blue Chip" companies, including common and
preferred stocks and securities convertible into common stock, that First
Investors Management Company, Inc. ("FIMCO" or "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. It is the Fund's policy to remain relatively fully
invested in equity securities under all market conditions rather than to attempt
to time the market by maintaining large cash or fixed-income securities
positions when market declines are anticipated. The Fund is appropriate for
investors who are comfortable with a fully invested stock portfolio.

The Fund defines Blue Chip companies as those companies that are included in
the S&P 500. 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 Microsoft Corp., General Electric Co., Pepsico Inc. and
Bristol-Myers Squibb Co.

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 10% of its total assets in American Depository Receipts ("ADRs"),
enter into repurchase agreements and make loans of portfolio securities. See
"Investment Policies" 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 or are deemed to 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. In managing the
Fund's investment portfolio, the Adviser may employ various professional money
management techniques in order to respond to changing economic and money market
conditions and to shifts in fiscal and monetary policy. These techniques include
varying the composition and the average-weighted maturity of the Fund's
portfolio based upon the Adviser's assessment of the relative values of various
money market instruments and future interest rate patterns. The Adviser also may

2
<PAGE>

seek to improve the Fund's yield by purchasing or selling securities to take
advantage of yield disparities among money market instruments that regularly
occur in the money market.

The Fund invests primarily in (1) high quality marketable securities issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities, (2) bank certificates of deposit, bankers' acceptances,
time deposits and other short-term obligations issued by banks and (3) prime
commercial paper and high quality, U.S. dollar-denominated short-term corporate
bonds and notes. The U.S. Government securities in which the Fund may invest
include a variety of U.S. Treasury securities that differ in their interest
rates, maturities and dates of issue. Securities issued or guaranteed by
agencies or instrumentalities of the U.S. Government may be supported by the
full faith and credit of the United States or by the right of the issuer to
borrow from the U.S. Treasury. See the SAI for additional information on U.S.
Government securities. The Fund may invest in domestic bank certificates of
deposit (insured up to $100,000) and bankers' acceptances (not insured) issued
by domestic banks and savings institutions which are insured by the Federal
Deposit Insurance Corporation ("FDIC") and that have total assets exceeding $500
million. The Fund also may invest in certificates of deposit issued by London
branches of domestic or foreign banks ("Eurodollar CDs"). The Fund may invest in
time deposits and other short-term obligations, including uninsured, direct
obligations bearing fixed, floating or variable interest rates, issued by
domestic banks, foreign branches of domestic banks, foreign subsidiaries of
domestic banks and domestic and foreign branches of foreign banks. 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. Repurchase agreements maturing in over 7
days are deemed illiquid securities, and can constitute no more than 10% of the
Fund's net assets.

The 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). The Fund may invest in
floating and variable rate demand notes and bonds that 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. When market conditions warrant, the Fund may
purchase short-term, high quality fixed and variable rate instruments issued by
state and municipal governments and by public authorities. See "Investment
Policies" for additional information concerning these securities.

The Fund may purchase only obligations that (1) the Adviser determines
present minimal credit risks based on procedures adopted by the Life Series
Fund's Board of Trustees (the "Board"), and (2) are either (a) rated in one of
the top two rating categories by any two nationally recognized statistical
rating 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, or unrated securities that the Adviser determines are of
comparable quality. 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).

In periods of declining interest rates, the Fund's yield will tend to be
somewhat higher than prevailing market rates, and in periods of rising interest
rates the opposite will be true. Also, when interest rates are falling, net cash

3
<PAGE>

inflows from the continuous sale of the Fund's shares likely will be invested in
portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the Fund's yield. In periods of rising interest
rates, the opposite may be true.

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, under normal market conditions, 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 the Adviser
believes 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 Fund considers to be market capitalization of less than 90% of the weighted
market capitalization of the S&P 600 Smallcap Index (currently $1.5 billion).
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.
Securities of these companies may have more potential for growth but also
greater risk 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. These include the equity securities
of companies which represent new or changing industries and those which, in the
opinion of the Adviser, represent special situations, the potential future value
of which has not been fully recognized. Growth securities of companies with
small to medium market capitalization which represent a special situation bear
the risk that the special situation will not develop as favorably as expected,
or the situation may deteriorate. For example, a merger with favorable
implications may be blocked, an industrial development may not enjoy anticipated
market acceptance or a bankruptcy may not be as profitably resolved as had been
expected. 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 majority of the Fund's investments are expected to be securities listed
on the New York Stock Exchange ("NYSE") or other national securities exchanges,
or securities that have an established over-the-counter ("OTC") market, although
the depth and liquidity of the OTC market may vary from time to time and from
security to security.

4
<PAGE>

The Fund may invest up to 15% 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" and "American Depository Receipts
and Global Depository Receipts."

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 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
"Investment Policies" 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). The Fund has no fixed policy
with respect to the duration of U.S. Government Obligations it purchases.
Securities issued or guaranteed as to principal and interest (but not market
value) 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."

The Fund may invest in mortgage-backed securities, including 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 (which may not borrow from the U.S. Treasury and
the securities of which are not guaranteed by the U.S. Government); the Federal
Home Loan Bank (which may borrow from the U.S. Treasury to meet its obligations
but 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 it obligations); and 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 may invest in
collateralized mortgage obligations ("CMOs") and stripped mortgage-backed
securities issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities. See "Mortgage-Backed Securities."

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

5
<PAGE>

and may invest up to 35% of its net assets in securities issued on when-issued
or delayed delivery basis. See "Investment Policies" 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.

GROWTH FUND

The investment objective of GROWTH FUND is long-term capital appreciation.
Current income through the receipt of interest or dividends from investments
will merely be incidental to the Fund's efforts in pursuing its goal. It is the
policy of the Fund to invest, under normal market conditions, primarily in
common stocks and it is anticipated that the Fund will usually be so invested.
It also may invest to a limited degree in convertible securities and preferred
stocks. At least 75% of the value of the Fund's total assets (excluding
securities held for defensive purposes) shall be invested in securities of
companies in industries in which the Adviser, or the Fund's investment
subadviser, Wellington Management Company, LLP ("Subadviser" or "WMC"), believes
opportunities for capital growth exist. The Fund does not intend to concentrate
its investments in a particular industry, but it may invest up to 25% of the
value of its assets in a particular industry. The Fund may invest up to 5% of
its total assets in common stocks issued by foreign companies that are
denominated in U.S. currency; provided, however, that the Fund may invest
without limit in U.S. dollar denominated foreign securities listed on the NYSE.
The Fund may also invest in ADRs and Global Depository Receipts ("GDRs"),
purchase securities on a when-issued or delayed delivery basis and make loans of
portfolio securities. The Fund may borrow money for temporary or emergency
purposes in amounts not exceeding 5% of its total assets and may invest up to 5%
of its net assets in securities issued on a when-issued or delayed delivery
basis. 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.

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" and "Deep Discount Securities."

The Fund may invest in debt securities issued by foreign governments and
companies and in foreign currencies for the purpose of purchasing such
securities. However, the Fund may not invest more than 5% of its total assets in
debt securities issued by foreign governments and companies that are denominated
in foreign currencies. 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 up to 5% of its net assets
in securities issued on a when-issued or delayed delivery basis. See "Investment
Policies" for more information concerning these securities.

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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. The
Adviser continually monitors the investments in the Fund's portfolio and
carefully calculates on a case-by-case basis whether to dispose of or retain a
debt obligation that has been downgraded.

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.

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 period 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" and Appendix C
for a description of corporate bond ratings.

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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 Board, 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".
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." 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 also purchase stock index futures contracts and options thereon to maintain
a desired percentage of the Fund invested in stocks in the event of a large cash
flow into the Fund, or to generate additional income from cash held by the Fund.
Stock index futures and options thereon may also be used to adjust country
exposure. When the Fund purchases a stock index futures contract on foreign
stocks, a corresponding foreign currency forward or foreign currency futures
contract is executed to provide the same currency exposure that would result
from directly owning the underlying foreign stocks. Failure to obtain such
currency exposure would constitute a hedge back into U.S. dollars with respect
to such index futures positions. The value of the Fund's futures positions shall
not exceed 5% of the total assets in the Fund's portfolio.

The Fund may invest in warrants, which may or may not be listed on a
recognized U. S. or foreign exchange. The Fund also may enter into repurchase
agreements, invest up to 5% of its net assets in securities issued 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. In addition, the Fund can engage in
hedging and options strategies.

INVESTMENT GRADE FUND

INVESTMENT GRADE FUND seeks to generate a maximum level of income consistent
with investment in investment grade debt securities. The Fund seeks to achieve
its objective by investing, under normal market conditions, at least 65% of its
total assets in debt securities of U.S. issuers that are rated in the four
highest rated categories by Moody's or S&P, or in unrated securities that are
deemed to be of comparable quality by the Adviser ("investment grade
securities"). The Fund may invest up to 35% of its total assets in U.S.
Government Obligations (including mortgage-backed 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

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<PAGE>

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 invest up to 5% of its net assets in securities issued on a
when-issued or delayed delivery basis, make loans of portfolio securities and
invest in zero coupon or pay-in-kind securities. See "Investment Policies" for
additional information concerning these securities. 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.

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" and Appendix C for a description of
corporate bond ratings.

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 seeks its objective by investing, under normal market conditions,
at least 65% of its total assets in zero coupon securities that are issued, or
created by third parties using securities issued, by the U.S. Government and its
agencies and instrumentalities. With respect to TARGET MATURITY 2007 FUND, these
investments will mature no later than December 31, 2007 and, with respect to
TARGET MATURITY 2010 FUND, these investments will mature no later than December
31, 2010 (such dates being herein collectively referred to as the "Maturity
Date"). On its Maturity Date, a Fund's assets will be converted to cash and the
cash will be distributed or reinvested in another 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 other
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

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discount from their face amount or par value. This discount varies depending on
the time remaining until maturity, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. When held to maturity,
the entire return of a zero coupon security, which consists of the accretion of
the discount, comes from the difference between its issue price and its maturity
value. This difference is known at the time of purchase, so investors holding
zero coupon securities until maturity know the amount of their investment return
at the time of their investment. The market values are subject to greater market
fluctuations from changing interest rates prior to maturity than the values of
debt obligations of comparable maturities that bear interest currently. See
"Zero Coupon Securities-Risk Factors."

A portion of the total realized return from conventional interest-paying
bonds comes from the reinvestment of periodic interest. Since the rate to be
earned on these reinvestments may be higher or lower than the rate quoted on the
interest-paying bonds at the time of the original purchase, the total return of
interest-paying bonds is uncertain even for investors holding the security to
its maturity. This uncertainty is commonly referred to as reinvestment risk and
can have a significant impact on total realized investment return. With zero
coupon securities, however, there are no cash distributions to reinvest, so
investors bear no reinvestment risk if they hold the zero coupon securities to
maturity.

Each Fund primarily will purchase three types of zero coupon securities: (1)
U.S. Treasury STRIPS (Separately Traded Registered Interest and Principal
Securities), which are created when the coupon payments and the principal
payment are stripped from an outstanding Treasury security by the Federal
Reserve Bank. Bonds issued by the Resolution Funding Corporation (REFCORP) can
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 a federal agency
and instrumentality either issued directly by an agency in the form of a zero
coupon bond or created by stripping an outstanding security issued thereby.

Each Fund may invest up to 35% of its total assets in the following
instruments: interest- bearing obligations issued by the U.S. Government and its
agencies and instrumentalities (see "U.S. Government Obligations"), including,
for Target Maturity 2007 Fund, zero coupon securities maturing beyond 2007, and,
for Target Maturity 2010 Fund, zero coupon securities maturing beyond 2010;
corporate debt securities, including corporate zero coupon securities;
repurchase agreements; and money market instruments consisting of prime
commercial paper, certificates of deposit of domestic branches of U.S. banks and
bankers' acceptances. Each Fund may only invest in debt securities rated A or
better by Moody's or S&P or in unrated securities that are deemed to be of
comparable quality by the Adviser. Debt obligations rated A or better by Moody's
or S&P comprise what are known as high-grade bonds and are regarded as having a
strong capacity to repay principal and make interest payments. See Appendix A
for a description of corporate bond ratings. Each Fund may also invest in
restricted and illiquid securities, make loans of portfolio securities and
invest up to 5% of its net assets in securities issued on a when-issued or
delayed delivery basis. See "Investment Policies" 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

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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 utilities companies in which the Fund invests include companies
primarily engaged in the ownership or operation of facilities used to provide
electricity, gas, water or telecommunications (including telephone, telegraph
and satellite, but not companies engaged in public broadcasting or cable
television). For these purposes, "primarily engaged" means that (1) more than
50% of the company's assets are devoted to the ownership or operation of one or
more facilities as described above, or (2) more than 50% of the company's
operating revenues are derived from the business or combination of any of the
businesses described above. It should be noted that based on this definition,
the Fund may invest in companies which are also involved to a significant degree
in non-public utilities activities.

Utilities 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, utilities 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."

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-utilities companies; U.S. Government Obligations
(including mortgage-backed securities); cash; and money market instruments
consisting of prime commercial paper, bankers' acceptances, certificates of
deposit and repurchase agreements. The Fund may make loans of portfolio
securities and invest up to 5% of its net assets in securities issued on a
when-issued or delayed delivery basis. The Fund may invest up to 10% of its
total 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.

INVESTMENT POLICIES

AMERICAN DEPOSITORY RECEIPTS AND GLOBAL DEPOSITORY RECEIPTS. BLUE CHIP FUND,
INTERNATIONAL SECURITIES FUND, GROWTH FUND, UTILITIES INCOME FUND and DISCOVERY
FUND may invest in sponsored and unsponsored ADRs. ADRs are receipts typically
issued by a U.S. bank or trust company evidencing ownership of the underlying
securities of foreign issuers, and other forms of depository receipts for
securities of foreign issuers. Generally, ADRs, in registered form, are
denominated in U.S. dollars and are designed for use in the U.S. securities
markets. Thus, these securities are not denominated in the same currency as the
securities into which they may be converted. In addition, the issuers of the
securities underlying unsponsored ADRs are not obligated to disclose material
information in the United States and, therefore, there may be less information
available regarding such issuers and there may not be a correlation between such
information and the market value to the ADRs. ADRs may be purchased through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the underlying security and a depository, whereas a
depository may establish an unsponsored facility without participation by the
issuer of the depository security. Holders of unsponsored depository receipts

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generally bear all the costs of such facilities and the depository of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts of the deposited
securities. ADRs are not necessarily denominated in the same currency as the
underlying securities to which they may be connected. Generally, ADRs in
registered form are designed for use in the U.S. securities market and ADRs in
bearer form are designed for use outside the United States.

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. GDRs are considered to be foreign securities by INTERNATIONAL
SECURITIES FUND and GROWTH FUND.

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 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.

CERTIFICATES OF DEPOSIT. Each Fund may invest in bank certificates of
deposit. The FDIC is an agency of the U.S. Government which insures the deposits
of certain banks and savings and loan associations up to $100,000 per deposit.
The interest on such deposits may not be insured if this limit is exceeded.
Current Federal regulations also permit such institutions to issue insured
negotiable CDs in amounts of $100,000 or more, without regard to the interest
rate ceilings on other deposits. To remain fully insured, these investments
currently must be limited to $100,000 per insured bank or savings and loan
association.

COMMERCIAL PAPER. Commercial paper is a promissory note issued by a
corporation to finance short-term credit needs which may either be unsecured or
backed by a letter of credit. Commercial paper includes notes, drafts or similar
instruments payable on demand or having a maturity at the time of issuance not
exceeding nine months, exclusive of days of grace or any renewal thereof. See
Appendix A 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. 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. While no securities
investment is without some risk, investments in convertible securities generally

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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
Adviser or, for GROWTH FUND and INTERNATIONAL SECURITIES FUND, the Subadviser
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.

DEBT SECURITIES. 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. Credit risk is the risk that adverse changes in
economic conditions can affect an issuer's ability to pay principal and
interest. 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 debt securities. See "High
Yield Securities" and Appendix C 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 attempt to balance
the benefits of investing in Deep Discount Securities with their risks. While a
diversified portfolio may reduce the overall impact of a Deep Discount Security
that is in default or loses its value, the risk cannot be eliminated. See "High
Yield Securities," below. High Yield Securities are subject to certain risks
that may not be present with investments in higher grade debt securities.

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 GOVERNMENT OBLIGATIONS. HIGH YIELD FUND may invest in foreign
government obligations, which generally consist of obligations supported by
national, state or provincial governments or similar political subdivisions.
Investments in foreign government debt obligations involve special risks. The
issuer of the debt may be unable or unwilling to pay interest or repay principal
when due in accordance with the terms of such debt, and the Fund may have

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limited legal resources in the event of default. Political conditions,
especially a sovereign entity's willingness to meet the terms of its debt
obligations, are of considerable significance.

FOREIGN SECURITIES. 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 such a Fund may buy foreign
currency outright to purchase securities denominated in that foreign currency at
a future date. GROWTH FUND may invest in securities issued by foreign companies
that are denominated in U.S. currency. The Funds currently do not intend to
hedge their foreign investments against the risk of foreign currency
fluctuations. Changes in the value of foreign currencies can therefore
significantly affect a Fund's share price. Investing in foreign securities
involves more risk than investing in securities of U.S. companies. A Fund can be
affected by changes in exchange control regulations, as well as by economic and
political developments. There may be less publicly available information about
foreign companies than comparable U.S. companies; foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards that are comparable to those applied to U.S. companies; some foreign
trading 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. 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 significant economic downturn or a
substantial period of rising interest rates could severely affect the market for
High Yield Securities. In these circumstances, highly leveraged companies might
have greater difficulty in making principal and interest payments, meeting
projected business goals, and obtaining additional financing. Thus, there could
be a higher incidence of default. This would affect the value of such securities
and thus a Fund's net asset value. Further, if the issuer of a security owned by
a Fund defaults, that Fund might incur additional expenses to seek recovery.

Generally, when interest rates rise, the value of fixed rate debt
obligations, including High Yield Securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a High Yield Security containing a redemption or call provision
exercises either provision in a declining interest rate market, a Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if a Fund experiences unexpected net redemptions in a
rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to

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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 helps to 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. HIGH YIELD FUND may
invest in securities rated as low as D by S&P or C by Moody's or, if unrated,
deemed to be of comparable quality by the Adviser. Debt obligations with these
ratings either have defaulted or are in great danger of defaulting and are
considered to be highly speculative. See "Deep Discount Securities." The Adviser
continually monitors the investments in a Fund's portfolio and carefully
evaluates whether to dispose of or retain High Yield Securities whose credit
ratings have changed. See Appendix C for a description of corporate bond
ratings.

LIQUIDITY AND VALUATION. Lower-rated bonds are typically traded among a
smaller number of broker-dealers than in a broad secondary market. Purchasers of
High Yield Securities tend to be institutions, rather than individuals, which is
a factor that further limits the secondary market. To the extent that no
established retail secondary market exists, many High Yield Securities may not
be as liquid as higher-grade bonds. A less active and thinner market for High
Yield Securities than that available for higher quality securities may result in
more volatile valuations of a Fund's holdings and more difficulty in executing
trades at favorable prices during unsettled market conditions.

The ability of a Fund to value or sell High Yield Securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. During such periods, there may be less reliable objective information
available and thus the responsibility of Life Series Fund's Board of Trustees to
value High Yield Securities becomes more difficult, with judgment playing a
greater role. Further, adverse publicity about the economy or a particular
issuer may adversely affect the public's perception of the value, and thus
liquidity, of a High Yield Security, whether or not such perceptions are based
on a fundamental analysis.

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

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<PAGE>

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. BLUE CHIP FUND, GOVERNMENT FUND, HIGH YIELD
FUND, INVESTMENT GRADE FUND and UTILITIES INCOME FUND may invest in
mortgage-backed securities, including those representing an undivided ownership
interest in a pool of mortgage loans. 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.

Each of the certificates described below is characterized by monthly
payments to the security holder, reflecting the monthly payments made by the
mortgagees of the underlying mortgage loans. The payments to the security
holders (such as the Fund), like the payments on the underlying loans, represent
both principal and interest. Although the underlying mortgage loans are for
specified periods of time, such as twenty to thirty years, the borrowers can,
and typically do, repay them sooner. Thus, the security holders frequently
receive prepayments of principal, in addition to the principal which is part of
the regular monthly payments. A borrower is more likely to prepay a mortgage
which bears a relatively high rate of interest. Thus, in times of declining
interest rates, some higher yielding mortgages might be repaid, resulting in
larger cash payments to a Fund, and a 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. 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

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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. FHLMC issues two types of mortgage pass-through
securities, mortgage participation certificates ("PCs") and guaranteed mortgage
certificates ("GMCs"). PCs resemble GNMA Certificates in that each PC represents
a pro rata share of all interest and principal payments made and owed on the
underlying pool.

FNMA SECURITIES. 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.

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. 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.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH
SECURITIES. CMOs are debt obligations collateralized by mortgage loans or
mortgage pass-through securities. Typically, CMOs are collateralized by GNMA
certificates or other government mortgage-backed securities (such collateral
collectively hereinafter referred to as "Mortgage Assets"). Multiclass
pass-through securities are interests in trusts that are comprised of Mortgage
Assets. Unless the context indicates otherwise, references herein to CMOs
include multiclass pass-through securities. Payments of principal of, and
interest on, the Mortgage Assets, and any reinvestment income thereon, provide
the funds to pay debt service on the CMOs or to make scheduled distributions on
the multiclass pass-through securities. CMOs in which Government Fund may invest
are issued or guaranteed by U.S. Government agencies or instrumentalities, such
as FNMA and FHLMC. See the SAI for more information on CMOs.

STRIPPED MORTGAGE-BACKED SECURITIES. GOVERNMENT FUND, TARGET MATURITY 2007
FUND AND TARGET MATURITY 2010 FUND may invest in stripped mortgage-backed
securities ("SMBS"), which are derivative multiclass mortgage securities. SMBS
are usually structured with two classes that receive different proportions of
the interest and principal distributions from a pool of mortgage assets. A
common type of SMBS will have one class receiving most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all

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<PAGE>

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 market, prepayment and extension 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. Prepayment generally increases when interest rates decline. 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. As a result, mortgage-backed
securities may have less potential for capital appreciation during periods of
declining interest rates as compared with other U.S. Government securities with
comparable stated maturities. Conversely, rising interest rates may cause
prepayment rates to occur at a slower than expected rate. This may effectively
lengthen the life of a security, which is known as extension risk. Longer term
securities generally fluctuate more widely in response to changes in interest
rates than shorter term securities. 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.

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.

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.

REPURCHASE AGREEMENTS. A repurchase agreement essentially is a short-term
collateralized loan. The lender (a Fund) agrees to purchase a security from a
borrower (typically a broker-dealer) at a specified price. The borrower
simultaneously agrees to repurchase that same security at a higher price on a
future date (which typically is the next business day). The difference between
the purchase price and the repurchase price effectively constitutes the payment
of interest. In a standard repurchase agreement, the securities which serve as
collateral are transferred to a Fund's custodian bank. In a "tri-party"
repurchase agreement, these securities would be held by a different bank for the
benefit of the Fund as buyer and the broker-dealer as seller. In a "quad-party"
repurchase agreement, the Fund's custodian bank also is made a party to the
agreement. Each Fund may enter into repurchase agreements with banks which are
members of the Federal Reserve System or securities dealers who are members of a
national securities exchange or are market makers in government securities.

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<PAGE>

GOVERNMENT FUND may enter into repurchase agreements only where the debt
instrument subject to the agreement is a U.S. Government Obligation (as defined
in the Prospectus). The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will a Fund invest in
repurchase agreements with more than one year in time to maturity. The
securities which are subject to repurchase agreements, however, may have
maturity dates in excess of one year from the effective date of the repurchase
agreement. Each Fund will always receive, as collateral, securities whose market
value, including accrued interest, which will at all times be at least equal to
100% of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian. If the seller defaults, a
Fund might incur a loss if the value of the collateral securing the repurchase
agreement declines, and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy or similar proceedings
are commenced with respect to the seller of the security, realization upon the
collateral by a Fund may be delayed or limited.

RESTRICTED SECURITIES AND ILLIQUID INVESTMENTS. 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.

Under current guidelines of the staff of the Securities and Exchange
Commission ("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.

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 this 15% limit. 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 the 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

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<PAGE>

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 a Fund might be unable to dispose of such
securities promptly or at reasonable prices.

OTC options and their underlying collateral are also considered illiquid
investments. INSURED TAX EXEMPT FUND may not invest in options. While BLUE CHIP
FUND and HIGH YIELD FUND have no intention of investing in options in the coming
year, if either of those Funds did so, the assets used as cover for OTC options
written by the Fund would not be considered illiquid unless the OTC options were
sold to qualified dealers who agreed that the Fund may repurchase any OTC option
it wrote at a maximum price to be calculated by a formula set forth in the
option agreement. The cover for an OTC option written subject to this procedure
would be considered illiquid only to the extent that the maximum repurchase
price under the formula exceeded the intrinsic value of the option.

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.

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 that 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
or 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

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<PAGE>

and the Small Business Administration. The range of maturities of U.S.
Government Obligations is usually three months to thirty years.

UTILITIES INDUSTRIES. Many utilities companies, especially electric and gas
and other energy-related utilities companies, have historically been subject to
the risk of increases in fund 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 recent years, regulatory changes in the United States have increasingly
allowed utilities companies to provide services and products outside their
traditional geographical areas and line of business, creating new areas of
competition with the utilities industries. This trend towards deregulation and
the emergence of new entrants have caused non-regulated providers of utilities
services to become a significant part of the utilities industries. The Adviser
believes that the emergence of competition and deregulation will result in
certain utilities companies being able to earn more than their traditional
regulated rates of return, while others may be forced to defend their core
business from increased competition and may be less profitable.

Certain utilities, especially gas and telephone utilities, have in recent
years been affected by increased competition, which could adversely affect the
profitability of such utilities companies. In addition, expansion by companies
engaged in telephone communication services of their non-regulated activities
into other businesses (such as cellular telephone services, data processing
equipment retailing, computer services and financial services) has provided the
opportunity for increases in earnings and dividends at faster rates than have
been allowed in traditional regulated businesses. However, technological
innovations and other structural changes also could adversely affect the
profitability of such companies. Although the Adviser seeks to take advantage of
favorable investment opportunities that may arise from these structural changes
there can be no assurance that the Fund will benefit from any such changes.

Foreign utilities companies may be more heavily regulated than U.S.
utilities companies, which may result in increased costs or otherwise adversely
affect the operations of such companies. The securities of foreign utilities
companies also have lower dividend yields than U.S. utilities companies. The
Fund's investments in foreign issuers may include recently privatized
enterprises, in which the Fund's participation may be limited or otherwise
affected by local law. There can be no assurance that governments with
privatization programs will continue such programs or that privatization will
succeed in such countries.

Because securities issued by utilities companies are particularly sensitive
to movement 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 UTILITIES INCOME FUND, to realize any value
from the assets of the company upon liquidation or bankruptcy.

VARIABLE RATE AND FLOATING RATE NOTES. CASH MANAGEMENT FUND may invest in
derivative variable rate and floating rate notes. Issuers of such notes include
corporations, banks, broker-dealers and finance companies. Variable rate notes
include master demand notes which are obligations permitting the holder to
invest fluctuating amounts, that 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.

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The interest rate on a floating rate obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate obligation is adjusted
automatically at specified intervals. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by banks.
Because these obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments generally will be traded,
and there is generally no established secondary market for these obligations,
although they are redeemable at face value. Accordingly, where these obligations
are not secured by letters of credit or other credit support arrangements, the
right of the Fund to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. Such obligations frequently are not rated by
credit rating agencies. The Fund will invest in obligations that are unrated
only if the Adviser determines that, at the time of investment, the obligations
are of comparable quality to the other obligations in which the Fund may invest.
The Adviser, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuers of the floating and variable rate obligations in
the Fund's portfolio.

VARIABLE RATE DEMAND INSTRUMENTS. CASH MANAGEMENT FUND may invest in
variable rate demand instruments ("VRDIs"). VRDIs generally are revenue bonds,
issued primarily by or on behalf of public authorities, and are not backed by
the taxing power of the issuing authority. The interest on VRDIs is adjusted
periodically, and the holder of a VRDI can demand payment of all unpaid
principal plus accrued interest from the issuer on not more than seven calendar
days' notice. An unrated VRDI purchased by the Fund must be backed by a standby
letter of credit of a creditworthy financial institution or a similar obligation
of at least equal quality. The Fund periodically reevaluates the credit risks of
such unrated instruments. There is a recognized after-market for VRDIs. VRDIs
may include instruments where adjustments to interest rates are limited either
by state law or the instruments themselves. As a result, these instruments may
experience greater changes in value than would otherwise be the case. The
maturity of VRDIs is deemed to be the longer of the (a) demand period or (b)
time remaining until the next adjustment to the interest rate thereon,
regardless of the stated maturity on the instrument. Benefits of investing in
VRDIs may include reduced risk of capital depreciation and increased yield when
market interest rates rise. However, owners of such instruments forego the
opportunity for capital appreciation when market interest rates fall.

WARRANTS. HIGH YIELD FUND, INTERNATIONAL SECURITIES FUND and UTILITIES
INCOME 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. HIGH YIELD FUND may invest up
to 35% of its total assets in warrants. International Securities Fund may invest
up to 15% of its total assets in warrants. UTILITIES INCOME FUND may invest up
to 65% of its total assets in warrants.

WHEN-ISSUED SECURITIES. GROWTH FUND, HIGH YIELD FUND, INTERNATIONAL
SECURITIES FUND, INVESTMENT GRADE FUND, TARGET MATURITY 2007 FUND, TARGET
MATURITY 2010 FUND and UTILITIES INCOME FUND may each invest up to 5%, and
GOVERNMENT FUND may invest up to 25%, of its 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 on its books and records or with its
custodian consisting of cash or liquid high-grade debt securities equal to the

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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 sale of the when-issued securities may
cause the realization of a capital gain or loss.

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. Original issue discount earned
each year on zero coupon securities and the "interest" on pay-in-kind securities
must be accounted for by the Fund that holds the securities for purposes of
determining the amount it must distribute that year to continue to qualify for
tax treatment as a regulated investment company. Thus, 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." These distributions must be made from a
Fund's cash assets or, if necessary, from the proceeds of sales of portfolio
securities. A Fund will not be able to purchase additional income-producing
securities with cash used to make such distributions, and its current income
ultimately could be reduced as a result.

ZERO COUPON SECURITIES-RISK FACTORS. Zero coupon securities are debt
securities and thus are subject to the same risk factors as all debt securities.
See "Debt Securities-Risk Factors." The market prices of zero coupon securities,
however, generally are more volatile than the prices of securities that pay
interest periodically and in cash and are likely to respond to changes in
interest rates to a greater degree than do other types of debt securities having
similar maturities and credit quality. As a result, the net asset value of
shares of the TARGET MATURITY 2007 FUND and TARGET MATURITY 2010 FUND may
fluctuate over a greater range than shares of the other Funds or mutual funds
that invest in debt obligations having similar maturities but that make current
distributions of interest.

Zero coupon securities can be sold prior to their due date in the
secondary market at their then prevailing market value, which depends primarily
on the time remaining to maturity, prevailing levels of interest rates and the
perceived credit quality of the issuer. The prevailing market value may be more
or less than the securities' value at the time of purchase. While the objective
of both the TARGET MATURITY 2007 FUND and TARGET MATURITY 2010 FUND is to seek a
predictable compounded investment return for investors who hold their Fund
shares until that Fund's maturity, a Fund cannot assure that it will be able to
achieve a certain level of return due to the possible necessity of having to
sell certain zero coupon securities to pay expenses, dividends or to meet
redemptions at times and at prices that might be disadvantageous or,
alternatively, the need to invest assets received from new purchases at
prevailing interest rates, which would expose a Fund to reinvestment risk. In
addition, no assurance can be given as to the liquidity of the market for
certain of these securities. Determination as to the liquidity of such
securities will be made in accordance with guidelines established by Life Series
Fund's Board of Trustees. In accordance with such guidelines, the Adviser will
monitor each Fund's investments in such securities with particular regard to
trading activity, availability of reliable price information and other relevant
information.

PORTFOLIO TURNOVER

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

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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 (100% or more) generally leads to transaction costs and may
result in a greater number of taxable transactions. See "Allocation of Portfolio
Brokerage."

The rate of portfolio turnover for the fiscal year ended December 31, 1997
for the BLUE CHIP FUND, DISCOVERY FUND, GROWTH FUND, HIGH YIELD FUND,
INTERNATIONAL SECURITIES FUND, INVESTMENT GRADE FUND, TARGET MATURITY 2007 FUND,
TARGET MATURITY 2010 FUND And UTILITIES INCOME FUND was 63%, 85%, 27%. 40%. 71%,
41%, 1%, 13% and 64%, respectively. The GOVERNMENT FUND was substantially
restructured during 1997 to improve its total return. In particular, the Fund
purchased seasoned, high coupon mortgage-backed bonds with very low prepayments;
and the Fund purchased U.S. Treasury and Agency securities to extend its
duration. In addition, the Fund occasionally bought or sold Treasury and Agency
securities to make incremental changes in the Fund's duration. This resulted in
a portfolio turnover rate for the fiscal year ended December 31, 1997 of 134%.
The rate of portfolio turnover for the fiscal year ended December 31, 1998 for
the BLUE CHIP FUND, DISCOVERY FUND, GROWTH FUND, HIGH YIELD FUND, INTERNATIONAL
SECURITIES FUND, INVESTMENT GRADE FUND, TARGET MATURITY 2007 FUND, TARGET
MATURITY 2010 FUND, UTILITIES INCOME FUND AND GOVERNMENT FUND was 91%, 121%,
26%, 42%, 109%, 60%, 1%, 0%, 105% and 107%, respectively.

FUTURES AND OPTIONS STRATEGIES

None of the Funds other than the INTERNATIONAL SECURITIES FUND currently
intends to engage in futures and options trading. The Subadviser of the
INTERNATIONAL SECURITIES FUND has been authorized by the Board to engage to a
limited degree in futures and options strategies. Although the following
discussion describes all of the strategies that the Fund could legally engage
in, the Fund's Subadviser has only been authorized to buy futures contracts on
foreign securities exchanges to gain exposure to a foreign securities market in
advance of making purchases of equity securities in that market, to put cash at
work while seeking equity securities to purchase, and to adjust country
weightings by gaining exposure to a country. The Subadviser has not been
authorized to take short positions in futures contracts to hedge against a
decline in a foreign securities market. The Subadviser will only engage in
strategies that are also permitted by the Commodities Futures Trading Commission
("CFTC").

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 the Board to
govern the Fund's investments in Hedging Instruments, use of these instruments
is subject to the applicable regulations of the SEC, the several options and
futures exchanges upon which options and futures contracts are traded and the
CFTC. The discussion of these strategies does not imply that the Fund will use
them to hedge against risks or for any other purpose.

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 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

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<PAGE>

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, and (4) the possible absence of a liquid
secondary market for any particular instrument at any time.

COVER FOR HEDGING AND OPTION INCOME STRATEGIES. The Fund will not use
leverage in its hedging and option income strategies. 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 and/or
liquid assets 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 assets in a segregated account
with its custodian in the prescribed amount. Securities, currencies or other
options or futures positions used for cover and securities held in a segregated
account cannot be sold or closed out while the hedging or option income strategy
is outstanding unless they are replaced with similar assets. As a result, there
is a possibility that the use of cover or segregation involving a large
percentage of the Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.

OPTIONS STRATEGIES. INTERNATIONAL SECURITIES FUND may purchase call options
on securities that the Subadviser intends to include in the Fund's portfolio in
order to fix the cost of a future purchase. Call options also may be used as a
means of participating in an anticipated price increase of a security. In the
event of a decline in the price of the underlying security, use of this strategy
would serve to limit the Fund's potential loss on the option strategy to the
option premium paid; conversely, if the market price of the underlying security
increases above the exercise price and the Fund either sells or exercises the
option, any profit eventually realized will be reduced by the premium. The Fund
may purchase put options in order to hedge against a decline in the market value
of securities held in its portfolio. The put option enables the Fund to sell the
underlying security at the predetermined exercise price; thus the potential for
loss to the Fund below the exercise price is limited to the option premium paid.
If the market price of the underlying security is higher than the exercise price
of the put option, any profit the Fund realizes on the sale of the security will
be reduced by the premium paid for the put option less any amount for which the
put option may be sold.

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

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<PAGE>

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 Securities and Illiquid Investments." In addition,
the Fund could lose the ability to participate in an increase in the value of
such securities above the exercise price of the call option because such an
increase would likely be offset by an increase in the cost of closing out the
call option (or could be negated if the buyer chose to exercise the call option
at an exercise price below the securities' current market value).

INTERNATIONAL SECURITIES FUND may purchase put and call options and write
covered call options on stock indices in much the same manner as the more
traditional equity and debt options discussed above, except that stock index
options may serve as a hedge against overall fluctuations in the securities
markets (or a market sector) rather than anticipated increases or decreases in
the value of a particular security. A stock index assigns relative values to the
stock included in the index and fluctuates with changes in such values. Stock
index options operate in the same way as the more traditional equity options,
except that settlements of stock index options are effected with cash payments
and do not involve delivery of securities. Thus, upon settlement of a stock
index option, the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the closing price of the
stock index. The effectiveness of hedging techniques using stock index options
will depend on the extent to which price movements in the stock index selected
correlate with price movements of the securities in which the Fund invests.

INTERNATIONAL SECURITIES FUND may write put options. A put option gives the
purchaser of the option the right to sell, and the writer (seller) the
obligation to buy, the underlying security at the exercise price during the
option period. So long as the obligation of the writer continues, the writer may
be assigned an exercise notice by the broker-dealer through which such option
was sold, requiring it to make payment of the exercise price against delivery of
the underlying security. The operation of put options in other respects,
including their related risks and rewards, is substantially identical to that of
call options. The Fund may write covered put options in circumstances when the
Subadviser believes that the market price of the securities will not decline
below the exercise price less the premiums received. If the put option is not
exercised, the Fund will realize income in the amount of the premium received.
This technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security would decline below the exercise price less the premiums
received, in which case the Fund would expect to suffer a loss.

Currently, many options on equity securities and options on currencies are
exchange-traded, whereas options on debt securities are primarily traded on the
OTC market. Although many options on currencies are exchange-traded, the
majority of such options are traded on the OTC market. Exchange-traded options
in the U.S. are issued by a clearing organization affiliated with the exchange
on which the option is listed which, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and the opposite party with no clearing organization guarantee.
Thus, when the Fund purchases an OTC option, it relies on the dealer 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.

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<PAGE>

FOREIGN CURRENCY OPTIONS AND RELATED RISKS. INTERNATIONAL SECURITIES Fund
may take positions in options on foreign currencies in order to hedge against
the risk of foreign exchange rate fluctuations on foreign securities the Fund
holds in its portfolio or intends to purchase. For example, if the Fund enters
into a contract to purchase securities denominated in a foreign currency, it
could effectively fix the maximum U.S. dollar cost of the securities by
purchasing call options on that foreign currency. Similarly, if the Fund held
securities denominated in a foreign currency, and anticipated a decline in the
value of that currency against the U.S. dollar, the Fund could hedge against
such a decline by purchasing a put option on the currency involved. The Fund's
ability to establish and close out positions in such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not purchase or
write such options unless and until, in the Subadviser's opinion, the market for
them has developed sufficiently to ensure that the risks in connection with such
options are not greater than the risks in connection with the underlying
currency, there can be no assurance that a liquid secondary market will exist
for a particular option at any specific time. In addition, options on foreign
currencies are affected by all of those factors that influence foreign exchange
rates and investments generally.

The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and may have no relationship to the investment merits of a foreign security.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market for the underlying foreign currencies at prices that are less
favorable than for round lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
where rates may be less favorable. The interbank market in foreign currencies is
a global, around-the-clock market. To the extent that the U.S. options markets
are closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that cannot be reflected in the options markets until they reopen.

OPTIONS GUIDELINES. In view of the risks involved in using options, the
Board may adopt the following 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 put or call option it
has written, the Fund may purchase a put or call option of the same series (that
is, an option identical in its terms to the put or 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.

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<PAGE>

The value of an option position will reflect, among other things, the
current market price of the underlying security, stock index or currency, the
time remaining until expiration, the relationship of the exercise price to the
market price, the historical price volatility of the underlying security, stock
index or currency and general market conditions. For this reason, the successful
use of options depends upon the Subadviser's ability to forecast the direction
of price fluctuations in the underlying securities or currency markets or, in
the case of stock index options, fluctuations in the market sector represented
by the index selected.

Options normally have expiration dates of up to nine months. Unless an
option purchased by the Fund is exercised or unless a closing transaction is
effected with respect to that position, a loss will be realized in the amount of
the premium paid and any transaction costs.

A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. The ability to
establish and close out positions on the exchanges is subject to the maintenance
of a liquid secondary market. Although the Fund intends to purchase or write
only those exchange-traded options for which there appears to be a liquid
secondary market, there is no assurance that a liquid secondary market will
exist for any particular option at any particular time. Closing transactions may
be effected with respect to options traded in the OTC markets (currently the
primary markets for options on debt securities) only by negotiating directly
with the other party to the option contract or in a secondary market for the
option if such market exists. Although the Fund will enter into OTC options only
with dealers that agree to enter into, and that are expected to be capable of
entering into, closing transactions with the Fund, there is no assurance that
the Fund will be able to liquidate an OTC option at a favorable price at any
time prior to expiration. In the event of insolvency of the opposite party, the
Fund may be unable to liquidate an OTC option. Accordingly, it may not be
possible to effect closing transactions with respect to certain options, with
the result that the Fund would have to exercise those options that it has
purchased in order to realize any profit. With respect to options written by the
Fund, the inability to enter into a closing transaction may result in material
losses to the Fund. For example, because the Fund must maintain a covered
position with respect to any call option it writes, the Fund may not sell the
underlying assets used to cover an option during the period it is obligated
under the option. This requirement may impair the Fund's ability to sell a
portfolio security or make an investment at a time when such a sale or
investment might be advantageous.

Stock index options are settled exclusively in cash. If the Fund purchases
an option on a stock index, the option is settled based on the closing value of
the index on the exercise date. Thus, a holder of a stock index option who
exercises it before the closing index value for that day is available runs the
risk that the level of the underlying index may subsequently change. For
example, in the case of a call option, if such a change causes the closing index
value to fall below the exercise price of the option on the index, the
exercising holder will be required to pay the difference between the closing
index value and the exercise price of the option.

The Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs; however, the Fund also
may save on commissions by using options as a hedge rather than buying or
selling individual securities in anticipation or as a result of market
movements.

FUTURES STRATEGIES. INTERNATIONAL SECURITIES FUND may engage in futures
strategies to attempt to reduce the overall investment risk that would normally
be expected to be associated with ownership of the securities in which it
invests. The Fund may sell foreign currency futures contracts to hedge against
possible variations in the exchange rate of the foreign currency in relation to
the U.S. dollar. In addition, the Fund may sell foreign currency futures
contracts when the Subadviser anticipates a general weakening of foreign
currency exchange rates that could adversely affect the market value of the
Fund's foreign securities holdings. In this case, the sale of futures contracts

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<PAGE>

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 call options on stock index
futures to hedge against a market advance in equity securities that the Fund
plans to purchase at a future date. The Fund may write covered call options on
stock index futures as a partial hedge against a decline in the prices of stocks
held in the Fund's portfolio. The Fund also may purchase put options on stock
index futures contracts.

INTERNATIONAL SECURITIES FUND may use interest rate futures contracts and
options thereon to hedge the debt portion of its portfolio against changes in
the general level of interest rates. The Fund may purchase an interest rate
futures contract when it intends to purchase debt securities but has not yet
done so. This strategy may minimize the effect of all or part of an increase in
the market price of those securities because a rise in the price of the
securities prior to their purchase may either be offset by an increase in the
value of the futures contract purchased by the Fund or avoided by taking
delivery of the debt securities under the futures contract. Conversely, a fall
in the market price of the underlying debt securities may result in a
corresponding decrease in the value of the futures position. The Fund may sell
an interest rate futures contract in order to continue to receive the income
from a debt security, while endeavoring to avoid part or all of the decline in
the market value of that security that would accompany an increase in interest
rates.

INTERNATIONAL SECURITIES FUND may purchase a call option on an interest rate
futures contract to hedge against a market advance in debt securities that the
Fund plans to acquire at a future date. The Fund also may write covered call
options on interest rate futures contracts as a partial hedge against a decline
in the price of debt securities held in the Fund's portfolio or purchase put
options on interest rate futures contracts in order to hedge against a decline
in the value of debt securities held in the Fund's portfolio.

SPECIAL RISKS RELATED TO FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED
OPTIONS. Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. In addition, there
are risks associated with foreign currency futures contracts and their use as a
hedging device similar to those associated with options on foreign currencies
described above. Further, settlement of a foreign currency futures contract must

29
<PAGE>

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. To the extent that the Fund enters into futures
contracts or options thereon other than for bona fide hedging purposes (as
defined by the CFTC), the aggregate initial margin and premiums required to
establish these positions (excluding the in-the-money amount for options that
are in-the-money at the time of purchase) will not exceed 5% of the Fund's
liquidation value, after taking into account unrealized profits and losses on
any contracts into which the Fund has entered. This does not limit the Fund's
assets at risk to 5%. The value of all futures sold will not exceed the total
market value of the Fund's portfolio.

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.
The Fund is also obligated to make initial and variation margin payments when it
writes options on futures contracts.

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

30
<PAGE>

has been reached in a particular contract, no trades may be made that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because
prices could move to the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation of unfavorable
positions. In such event, it may not be possible for the Fund to close a
position and, in the event of adverse price movements the Fund would have to
make daily cash payments of variation margin (except in the case of purchased
options). However, in the event futures contracts have been used to hedge
portfolio securities, such securities will not be sold until the contracts can
be terminated. In such circumstances, an increase in the price of the
securities, if any, may partially or completely offset losses on the futures
contract. However, there is no guarantee that the price of the securities will,
in fact, correlate with the price movements in the contracts and thus provide an
offset to losses on the contracts.

Successful use by INTERNATIONAL SECURITIES FUND of futures contracts and
related options will depend upon the Subadviser's ability to predict movements
in the direction of the overall securities, currency and interest rate markets,
which requires different skills and techniques than predicting changes in the
prices of individual securities. Moreover, futures contracts relate not to the
current price level of the underlying instrument but to the anticipated levels
at some point in the future. There is, in addition, the risk that the movements
in the price of the futures contract or related option will not correlate with
the movements in prices of the securities or currencies being hedged. In
addition, if the Fund has insufficient cash, it may have to sell assets from its
portfolio to meet daily variation margin requirements. Any such sale of assets
may or may not be made at prices that reflect the rising market. Consequently,
the Fund may need to sell assets at a time when such sales are disadvantageous
to the Fund. If the price of the futures contract or related option moves more
than the price of the underlying securities or currencies, the Fund will
experience either a loss or a gain on the futures contract or related option
that may or may not be completely offset by movements in the price of the
securities or currencies that are the subject of the hedge.

In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between price movements in the futures or related
option position and the securities or currencies being hedged, movements in the
prices of futures contracts and related options may not correlate perfectly with
movements in the prices of the hedged securities or currencies because of price
distortions in the futures market. As a result, a correct forecast of general
market trends may not result in successful hedging through the use of futures
contracts and related options over the short term.

Positions in futures contracts and related options may be closed out only on
an exchange or board of trade that provides a secondary market for such futures
contracts or related options. Although the Fund intends to purchase or sell
futures contracts and related options only on exchanges or boards of trade where
there appears to be a liquid secondary market, there is no assurance that such a
market will exist for any particular contract or option at any particular time.
In such event, it may not be possible to close a futures or option position and,
in the event of adverse price movements, the Fund would continue to be required
to make variation margin payments.

Like options on securities and currencies, options on futures contracts have
a limited life. The ability to establish and close out options on futures will
be subject to the development and maintenance of liquid secondary markets on the
relevant exchanges or boards of trade. There can be no certainty that liquid
secondary markets for all options on futures contracts will develop.

Purchasers of options on futures contracts pay a premium in cash at the time
of purchase. This amount and the transaction costs are all that is at risk.
Sellers of options on a futures contract, however, must post initial margin and
are subject to additional margin calls that could be substantial in the event of
adverse price movements. In addition, although the maximum amount at risk when
the Fund purchases an option is the premium paid for the option and the
transaction costs, there may be circumstances when the purchase of an option on
a futures contract would result in a loss to the Fund when the use of a futures
contract would not, such as when there is no movement in the level of the

31
<PAGE>

underlying stock index or the value of the securities or currencies being
hedged.

The Fund's activities in the futures and related options markets may result
in a higher portfolio turnover rate and additional transaction costs in the form
of added brokerage commissions; however, the Fund also may save on commissions
by using futures and related options as a hedge rather than buying or selling
individual securities or currencies in anticipation or as a result of market
movements.

FORWARD CURRENCY CONTRACTS. INTERNATIONAL SECURITIES FUND may use forward
currency contracts to protect against uncertainty in the level of future
exchange rates. The Fund will not speculate with forward currency contracts or
foreign currency exchange rates.

INTERNATIONAL SECURITIES FUND may enter into forward currency contracts with
respect to specific transactions. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, or when the Fund anticipates the receipt in a foreign currency of
dividend or interest payments on a security that it holds, the Fund may desire
to "lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent
of such payment, as the case may be, by entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars or foreign currency, of the
amount of foreign currency involved in the underlying transaction. The Fund will
thereby be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the currency exchange rates during
the period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date of which such payments are made or
received.

INTERNATIONAL SECURITIES FUND also may use forward currency contracts in
connection with portfolio positions to lock in the U.S. dollar value of those
positions, to increase the Fund's exposure to foreign currencies that its
Subadviser believes may rise in value relative to the U.S. dollar or to shift
the Fund's exposure to foreign currency fluctuations from one country to
another. This investment practice generally is referred to as "cross-hedging"
when another foreign currency is used.

The precise matching of the forward currency 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 currency 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. Unless the Fund's obligations
under a forward contract are covered, the Fund will enter into a forward
contract only if the Fund maintains cash assets 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.

32
<PAGE>

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 or pay for currency when due, which could
result in substantial losses to the Fund. The cost to the Fund of engaging in
forward currency contracts varies with factors such as the currencies involved,
the length of the contract period and the market conditions then prevailing.
Because forward currency contracts are usually entered into on a principal
basis, no fees or commissions are involved.

INVESTMENT RESTRICTIONS

The investment restrictions set forth below have been adopted by the Life
Series Fund and, unless identified as non-fundamental policies, may not be
changed without the affirmative vote of a majority of the outstanding voting
securities of Life Series Fund. As provided in the Investment Company Act of
1940, as amended ("1940 Act"), a "vote of a majority of the outstanding voting
securities of the Fund" means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares
of the Fund present at a meeting, if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. Except with respect to
borrowing, changes in values of a particular Fund's assets will not cause a
violation of the following investment restrictions so long as percentage
restrictions are observed by that Fund at the time it purchases any security.

The investment restrictions provide that, among other things, the Funds 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 is greater than an amount equal to 10% of
the Fund's total assets.

(4) Purchase, with respect to only 75% of a Fund's assets, the securities of
any issuer (other than the U.S. Government) if, as a result thereof, (a) more
than 5% of the Fund's total assets (taken at current value) would be invested in
the securities of such issuer; or (b) the Fund would hold more than 10% of any
class of securities (including any class of voting securities) of such issuer
(for this purpose, all debt obligations of an issuer maturing in less than one
year are treated as a single class of securities).

33
<PAGE>

(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.

(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.

(12) Concentrate investments in any particular industry, except that
Utilities Income Fund may concentrate its investments in securities of companies
in the public utilities industry.

The following investment restriction is not fundamental and can be changed
without prior shareholder approval:

1. 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.

TRUSTEES AND OFFICERS

The following table lists the Trustees and executive officers of 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.

JAMES J. COY (84), Emeritus Trustee, 90 Buell Land, East Hampton, NY 11937.
Retired; formerly Senior Vice President, James Talcott, Inc. (financial
institution).

GLENN O. HEAD*+ (73), President and Trustee. Chairman of the Board and
Director, Administrative Data Management Corp. ("ADM"), FIMCO, Executive

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<PAGE>

Investors Management Company, Inc. ("EIMCO"), First Investors Corporation
("FIC"), Executive Investors Corporation ("EIC") and First Investors
Consolidated Corporation ("FICC").

KATHRYN S. HEAD*+ (43), Trustee, 581 Main Street, Woodbridge, NJ 07095.
President and Director, FICC, ADM and FIMCO; Vice President and Director, FIC
and EIC; President EIMCO; Chairman, President and Director, First Financial
Savings Bank, S.L.A.

LARRY R. LAVOIE* (51), Trustee. Assistant Secretary, ADM, EIC, EIMCO, FICC, and
FIMCO; Secretary and General Counsel, FIC.

REX R. REED** (76), Trustee, 259 Governors Drive, Kiawah Island, SC 29455.
Retired; formerly Senior Vice President, American Telephone & Telegraph Company.

HERBERT RUBINSTEIN** (77), Trustee, 695 Charolais Circle, Edwards, CO
81632-1136. Retired; formerly President, Belvac International Industries,
Ltd. and President, Central Dental Supply.

NANCY SCHAENEN** (67), Trustee, 56 Midwood Terrace, Madison, NJ 07940. Trustee,
Drew University and DePauw University.

JAMES M. SRYGLEY** (66), Trustee, 33 Hampton Road, Chatham, NJ 07982.
Principal, Hampton Properties, Inc. (property investment company).

JOHN T. SULLIVAN* (66), Trustee and Chairman of the Board; Director, FIMCO, FIC,
FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.

ROBERT F. WENTWORTH** (69), Trustee, RR1, Box 217, Upland Downs Road, Manchester
Center, VT 05255. Retired; formerly financial and planning executive with
American Telephone & Telegraph Company.

JOSEPH I. BENEDEK (41), Treasurer and Principal Accounting Officer, 581 Main
Street, Woodbridge, NJ 07095. Treasurer, FIC, FIMCO, EIMCO and EIC;
Comptroller and Treasurer, FICC.

CONCETTA DURSO (63), Vice President and Secretary. Vice President, FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary, FIC and EIC.

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

* These Trustees may be deemed to be "interested persons," as defined in the
1940 Act.
** These Trustees are members of the Board's Audit Committee.
+ Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.

The Trustees and officers, as a group, owned less than 1% of shares of any Fund.

All of the officers and Trustees hold identical or similar positions with 14
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.

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<PAGE>

The following table lists compensation paid to the Trustees of Life Series
Fund for the fiscal year ended December 31, 1998.

TOTAL
COMPENSATION
FROM FIRST
AGGREGATE INVESTORS FAMILY
COMPENSATION OF FUNDS PAID TO
TRUSTEE FROM FUND TRUSTEE*+
------- --------- ----------------

James J. Coy** $-0- $-0-
Roger L. Grayson*** $-0- $-0-
Glenn O. Head $-0- $-0-
Kathryn S. Head $-0- $-0-
Larry R. Lavoie**** $-0- $-0-
Rex R. Reed $8,885 $20,045
Herbert Rubinstein $8,885 $20,045
James M. Srygley $8,885 $20,045
John T. Sullivan $-0- $-0-
Robert F. Wentworth $8,885 $20,045
Nancy Schaenen(1) $8,120 $18,350

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

* Compensation to officers and interested Trustees of Life Series Fund is paid
by the Adviser.
** On March 27, 1997, Mr. Coy resigned as a Trustee of Life Series Fund. Mr.
Coy currently serves as an Emeritus Trustee. Mr. Coy is paid by the Adviser.
*** ON August 20, 1998, Mr. Grayson resigned as a Trustee of the Fund.
****On September 17, 1998, Mr. Lavoie was elected by the Board of Trustees to
serve as a Trustee.
+ The First Investors Family of Funds consists of 15 separate registered
investment companies.
(1) The dollar compensation shown for Ms. Schaenen is lower than that for the
other Trustees because Ms. Schaenen was absent from one Board Meeting and
did not receive compensation for that Board Meeting.

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. The Board of Trustees is responsible for overseeing
the management of the Funds.

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

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<PAGE>

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:

Annual
Average Daily Net Assets Rate
- ------------------------ ----

Up to $250 million.......................................... 0.75%
In excess of $250 million up to $500 million................ 0.72
In excess of $500 million up to $750 million................ 0.69
Over $750 million........................................... 0.66

The Adviser has an Investment Committee composed of Dennis T. Fitzpatrick,
George V. Ganter, Richard Guinnessey, David Hanover, Glenn O. Head, Kathryn S.
Head, Nancy W. Jones, Michael O'Keefe, Patricia D. Poitra, Clark D. Wagner, and
Matthew Wright. 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.

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 Funds' transfer agent. Mr. Glenn O. Head controls FICC and,
therefore, controls the Adviser.

Each Fund bears all expenses of its operations other than those incurred by
the Adviser under the terms of its advisory agreement. Fund expenses include,
but are not limited to: the advisory fee; shareholder servicing fees and
expenses; custodian fees and expenses; legal and auditing fees; expenses of
communicating to existing shareholders, including preparing, printing and
mailing prospectuses and shareholder reports to such shareholders; and proxy and
shareholder meeting expenses.

For the fiscal year ended December 31, 1996, BLUE CHIP FUND's advisory fees
were $611,681, CASH MANAGEMENT FUND's advisory fees were $23,439, net of a
waiver of $5,860, DISCOVERY FUND's advisory fees were $450,910, GOVERNMENT
FUND's advisory fees were $54,997, net of a waiver of $13,749, GROWTH FUND's
advisory fees were $475,966, HIGH YIELD FUND's advisory fees were $338,303,
INTERNATIONAL SECURITIES FUND's advisory fees were $364,115, INVESTMENT GRADE
FUND's advisory fees were $96,305, net of a waiver of $24,076, TARGET MATURITY
2007 FUND's advisory fees were $73,502, net of a waiver of $18,376; TARGET
MATURITY 2010 FUND's advisory fees were $5,014, net of a waiver of $1,254 and
UTILITIES INCOME FUND's advisory fees were $119,506, net of a waiver of $29,876.

For the fiscal year ended December 31, 1997, BLUE CHIP FUND's advisory fees
were $965,995, CASH MANAGEMENT FUND's advisory fees were $27,384, net of a
waiver of $6,846, DISCOVERY FUND's advisory fees were $640,895, GOVERNMENT
FUND's advisory fees were $54,162, net of a waiver of $13,541, GROWTH FUND's
advisory fees were $777,312, HIGH YIELD FUND's advisory fees were $407,953,
INTERNATIONAL SECURITIES FUND's advisory fees were $512,589, INVESTMENT GRADE
FUND's advisory fees were $98,694, net of a waiver of $24,674, TARGET MATURITY
2007 FUND's advisory fees were $101,588, net of a waiver of $25,397; TARGET
MATURITY 2010 FUND's advisory fees were $21,425, net of a waiver of $5,356 and
UTILITIES INCOME FUND's advisory fees were $162,992, net of a waiver of $40,748.
For the fiscal year ended December 31, 1997, the Adviser voluntarily reimbursed
expenses for CASH MANAGEMENT FUND, GOVERNMENT FUND, INVESTMENT GRADE FUND,
TARGET MATURITY 2007 FUND, TARGET MATURITY 2010 FUND and UTILITIES INCOME FUND
in the amounts of $10,586, $12,100, $15,884, $10,255, $3,617 and $7,919,
respectively.

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<PAGE>

For the fiscal year ended December 31, 1998, BLUE CHIP FUND's advisory fees
were $1,332,265, CASH MANAGEMENT FUND's advisory fees were $30,973, net of a
waiver of $7,743, DISCOVERY FUND's advisory fees were $775,442, GOVERNMENT
FUND's advisory fees were $60,097, net of a waiver of $15,024, GROWTH FUND's
advisory fees were $1,156,103, HIGH YIELD FUND's advisory fees were $476,199,
INTERNATIONAL SECURITIES FUND's advisory fees were $630,772, INVESTMENT GRADE
FUND's advisory fees were $115,165, net of a waiver of $28,791, TARGET MATURITY
2007 FUND's advisory fees were $138,611, net of a waiver of $34,652; TARGET
MATURITY 2010 FUND's advisory fees were $42,953, net of a waiver of $10,738 and
UTILITIES INCOME FUND's advisory fees were $246,125, net of a waiver of $61,531.
For the fiscal year ended December 31, 1997, the Adviser voluntarily reimbursed
expenses for CASH MANAGEMENT FUND, GOVERNMENT FUND, INVESTMENT GRADE FUND,
TARGET MATURITY 2007 FUND, and TARGET MATURITY 2010 FUND in the amounts of
$7,391, $2,425, $3,625, $5,370, and $1,042 respectively.

SUBADVISER. Wellington Management Company, LLP has been retained by the
Adviser and Life Series Fund as the investment subadviser to INTERNATIONAL
SECURITIES FUND and GROWTH FUND under a subadvisory agreement dated June 13,
1994 ("Subadvisory Agreement"). The Subadvisory Agreement was approved by the
Board of Trustees of Life Series Fund, including a majority of Independent
Trustees in person at a meeting called for such purpose and by a majority of the
shareholders of INTERNATIONAL SECURITIES FUND and GROWTH FUND.

The Subadvisory Agreement provides that it will continue, with respect to a
Fund, for a period of more than two years from the date of execution only so
long as such continuance is approved annually by either the Board of Trustees or
a majority of the outstanding voting securities of that Fund and, in either
case, by a vote of a majority of the Independent Trustees voting in person at a
meeting called for the purpose of voting on such approval. The Subadvisory
Agreement provides that it will terminate automatically, with respect to a Fund,
if assigned or upon the termination of the Advisory Agreement, and that it may
be terminated without penalty by the Board of Trustees or a vote of a majority
of the outstanding voting securities of that Fund, upon not more than 60 days'
written notice, or by the Adviser or Subadviser on not more than 30 days'
written notice. The Subadvisory Agreement provides that WMC will not be liable
for any error of judgment or for any loss suffered by a Fund or the Adviser in
connection with the matters to which the Subadvisory Agreement relates, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation or from willful misfeasance, bad faith, gross negligence or
reckless disregard of duty.

Under the Subadvisory Agreement, the Adviser will pay to the Subadviser a
fee at an annual rate of 0.400% of the average daily net assets of each Fund up
to and including $50 million; 0.275% of the average daily net assets in excess
of $50 million up to and including $150 million, 0.225% of the average daily net
assets in excess of $150 million up to and including $500 million; and 0.200% of
the average daily net assets in excess of $500 million. This fee is calculated
separately for each Fund. The Subadviser voluntarily has agreed to waive its
fees on the first $50 million of the daily net assets of GROWTH FUND to an
annual rate of 0.325%. The Adviser will retain the portion of those fees waived
by the Subadviser.

For the fiscal year ended December 31, 1996, the Subadviser received
$192,042 for its services with respect to INTERNATIONAL SECURITIES FUND and
$199,147 for its services with respect to GROWTH FUND. For the fiscal year ended
December 31, 1997, the Subadviser received $250,449 for its services with
respect to the INTERNATIONAL SECURITIES FUND and $310,010 for its services with
respect to GROWTH FUND. For the fiscal year ended December 31, 1998, the
Subadviser received $293,747 for its services with respect to the INTERNATIONAL
SECURITIES FUND and $449,133 for its services with respect to GROWTH FUND.

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DETERMINATION OF NET ASSET VALUE

Except as provided herein, a security listed or traded on an exchange or the
Nasdaq Stock Market is valued at its last sale price on the exchange or market
where the security is principally traded, and lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices. Securities traded in the OTC market (including securities listed on
exchanges whose primary market is believed to be OTC) are valued at the mean
between the last bid and asked prices prior to the time when assets are valued
based upon quotes furnished by market makers for such securities. However, a
Fund may determine the value of debt securities based upon prices furnished by
an outside pricing service. The pricing services use quotations obtained from
investment dealers or brokers for the particular securities being evaluated,
information with respect to market transactions in comparable securities and
consider security type, rating, market condition, yield data and other available
information in determining value. Interactive Data Corporation provides pricing
services for corporate debt securities and foreign equity securities. Short-term
debt securities that mature in 60 days or less are valued at amortized cost.
Securities for which market quotations are not readily available are valued on
at fair value as determined in good faith by or under the supervision of Life
Series Fund's officers in a manner specifically authorized 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 or by the pricing service. 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 CASH MANAGEMENT FUND values its portfolio securities in accordance with
the amortized cost method of valuation under Rule 2a-7 under the 1940 Act. To
use amortized cost to value its portfolio securities, a Fund must adhere to
certain conditions under that Rule relating to the Fund's investments, some of
which are discussed in the Prospectus. Amortized cost is an approximation of
market value of an instrument, whereby the difference between its acquisition
cost and value at maturity is amortized on a straight-line basis over the
remaining life of the instrument. The effect of changes in the market value of a
security as a result of fluctuating interest rates is not taken into account and
thus the amortized cost method of valuation may result in the value of a
security being higher or lower than its actual market value. In the event that a
large number of redemptions take place at a time when interest rates have
increased, a Fund might have to sell portfolio securities prior to maturity and
at a price that might not be desirable.

The Board of Trustees of Life Series Fund has established procedures for the
purpose of maintaining a constant net asset value of $1.00 per share, which
include a review of the extent of any deviation of net asset value per share,
based on available market quotations, from the $1.00 amortized cost per share.
Should that deviation exceed 1/2 of 1%, the Board of Trustees will promptly
consider whether any action should be initiated to eliminate or reduce material
dilution or other unfair results to shareholders. Such action may include
selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Fund maintains a dollar weighted average
portfolio maturity of 90 days or less and does not purchase any instrument with
a remaining maturity greater than 13 months, limits portfolio investments,
including repurchase agreements, to those U.S. dollar-denominated instruments
that are of high quality and that the Trustees determine present minimal credit
risks as advised by the Adviser, and complies with certain reporting and
recordkeeping procedures. There is no assurance that a constant net asset value
per share will be maintained. In the event amortized cost ceases to represent
fair value per share, the Board will take appropriate action.

EMERGENCY PRICING PROCEDURES. In the event that the Funds must halt
operations during any day that they would normally be required to price under
Rule 22c-1 under the 1940 Act due to an emergency ("Emergency Closed Day"), the
Funds will apply the following procedures:

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1. The Funds will make every reasonable effort to segregate orders
received on the Emergency Closed Day and give them the price that they would
have received but for the closing. The Emergency Closed Day price will be
calculated as soon as practicable after operations have resumed and will be
applied equally to sales, redemptions and repurchases that were in fact received
in the mail or otherwise on the Emergency Closed Day.

2. For purposes of paragraph 1, an order will be deemed to have been
received by the Funds on an Emergency Closed Day, even if neither the Funds nor
the Transfer Agent is able to perform the mechanical processing of pricing on
that day, under the following circumstances:

(a) In the case of a mail order the order will be considered
received by a Fund when the postal service has delivered it to FIC's offices in
Woodbridge, New Jersey prior to the close of regular trading on the NYSE, or at
such other time as may be prescribed in its prospectus; and

(b) In the case of a wire order, including a Fund/SERV order, the
order will be considered received when it is received in good form by a FIC
branch office or an authorized dealer prior to the close of regular trading on
the NYSE, or such other time as may be prescribed in its prospectus.

3. If the Funds are unable to segregate orders received on the Emergency
Closed Day from those received on the next day the Funds are open for business,
the Funds may give all orders the next price calculated after operations resume.

4. Notwithstanding the foregoing, on business days in which the NYSE is
not open for regular trading, the Funds may determine not to price their
portfolio securities if such prices would lead to a distortion of the net asset
value for the Funds and their shareholders.

ALLOCATION OF PORTFOLIO BROKERAGE

The Adviser of Subadviser, as applicable, may purchase or sell portfolio
securities on behalf of the Fund in agency or principal transactions. In agency
transactions, the Fund generally pays brokerage commissions. In principal
transactions, the Fund generally does not pay commissions, however the price
paid for the security may include an undisclosed dealer commission or "mark-up"
or selling concessions. The Adviser or Subadviser normally purchases
fixed-income securities on a net basis from primary market makers acting as
principals for the securities. The Adviser or Subadviser may purchase certain
money market instruments directly from an issuer without paying commissions or
discounts. The Adviser or Subadviser may also purchase securities traded in the
OTC market. As a general practice, OTC securities are usually purchased from
market makers without paying commissions, although the price of the security
usually will include undisclosed compensation. However, when it is advantageous
to the Fund the Adviser or Subadviser may utilize a broker to purchase OTC
securities and pay a commission.

In purchasing and selling portfolio securities on behalf of the Fund, the
Adviser or Subadviser will seek to obtain best execution. The Fund may pay more
than the lowest available commission in return for brokerage and research
services. Additionally, upon instruction by the Board, the Adviser or Subadviser
may use dealer concessions available in fixed-priced underwritings to pay for
research and other services. Research and other services may include information
as to the availability of securities for purchase or sale, statistical or
factual information or opinions pertaining to securities, reports and analysis
concerning issuers and their creditworthiness, and Lipper's Directors'
Analytical Data concerning Fund performance and fees. The Adviser or Subadviser
generally uses the research and other services to service all the funds in the
First Investors Family of Funds, rather than the particular Funds whose
commissions may pay for research or other services. In other words, a Fund's
brokerage may be used to pay for a research service that is used in managing

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<PAGE>

another Fund within the First Investor Fund Family. The Lipper's Directors'
Analytical Data is used by the Adviser or Subadviser and the Fund's Board to
analyze a fund's performance relative to other comparable funds.

In selecting the broker-dealers to execute the Fund's portfolio
transactions, the Adviser or Subadviser may consider such factors as the price
of the security, the rate of the commission, the size and difficulty of the
order, the trading characteristics of the security involved, the difficulty in
executing the order, the research and other services provided, the expertise,
reputation and reliability of the broker-dealer, access to new offerings, and
other factors bearing upon the quality of the execution. The Adviser or
Subadviser does not place portfolio orders with an affiliated broker, or
allocate brokerage commission business to any broker-dealer for distributing
fund shares. Moreover, no broker-dealer affiliated with the Adviser or
Subadviser participates in commissions generated by portfolio orders placed on
behalf of the Fund.

The Adviser 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
accordance with written procedures approved by the Board of Trustees. In
addition, some securities considered for investment by a Fund may also be
appropriate for other Funds and/or clients served by the Subadviser. If the
purchase or sale of securities consistent with the investment policies of a Fund
and one or more of these other funds or clients serviced by the Subadviser are
considered at or about the same time, transactions in such securities will be
allocated among the several funds and clients in a manner deemed equitable by
the Subadviser.

Brokerage commissions for the fiscal year ended December 31, 1996 are as
follows: BLUE CHIP FUND paid $107,473 in brokerage commissions. Of that amount,
$46,425 was paid in brokerage commissions to brokers who furnished research
services on portfolio transactions in the amount of $26,460,832. INTERNATIONAL
SECURITIES FUND paid $192,286 in brokerage commissions. Of that amount, $4,302
was paid in brokerage commissions to brokers who furnished research services on
portfolio transactions in the amount of $2,972,468. DISCOVERY FUND paid $98,732
in brokerage commissions. Of that amount, $50,064 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $19,630,693. GROWTH FUND paid $70,083 in brokerage commissions.
Of that amount, $10,277 was paid in brokerage commissions to brokers who
furnished research services on portfolio transactions in the amount of
$8,999,871. HIGH YIELD FUND paid $418 in brokerage commissions, all of which was
in brokerage commissions to brokers who furnished research services on portfolio
transactions in the amount of $125,354. UTILITIES INCOME FUND paid $55,051 in
brokerage commissions. Of that amount, $13,900 was paid in brokerage commissions
to brokers who furnished research services on portfolio transactions in the
amount of $5,966,660. For the same period, all other Funds of Life Series Fund
did not pay brokerage commissions.

Brokerage commissions for the fiscal year ended December 31, 1997 are as
follows: BLUE CHIP FUND paid $194,635 in brokerage commissions. Of that amount,
$108,092 was paid in brokerage commissions to brokers who furnished research
services on portfolio transactions in the amount of $87,860,801. INTERNATIONAL
SECURITIES FUND paid $231,957 in brokerage commissions. Of that amount, $10,203
was paid in brokerage commissions to brokers who furnished research services on
portfolio transactions in the amount of $10,445,470. DISCOVERY FUND paid
$136,562 in brokerage commissions. Of that amount, $60,163 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $23,951,040. GROWTH FUND paid $68,509 in brokerage commissions.
Of that amount, $11,029 was paid in brokerage commissions to brokers who
furnished research services on portfolio transactions in the amount of
$9,446,682. HIGH YIELD FUND paid $158 in brokerage commissions. Of that amount,
$44 was paid in brokerage commissions to brokers who furnished research services
on portfolio transactions in the amount of $10,929. UTILITIES INCOME FUND paid

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$68,591 in brokerage commissions. Of that amount, $8,562 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $3,767,423. For the same period, all other Funds of Life Series
Fund did not pay brokerage commissions.

Brokerage commissions for the fiscal year ended December 31, 1998 are as
follows: BLUE CHIP FUND paid $379,563 in brokerage commissions. Of that amount,
$22,481 was paid in brokerage commissions to brokers who furnished research
services on portfolio transactions in the amount of $20,830,218. INTERNATIONAL
SECURITIES FUND paid $392,248 in brokerage commissions. Of that amount, $7,375
was paid in brokerage commissions to brokers who furnished research services on
portfolio transactions in the amount of $7,052,426. DISCOVERY FUND paid $232,266
in brokerage commissions. Of that amount, $13,667 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $5,380,076. GROWTH FUND paid $89,395 in brokerage commissions.
Of that amount, $17,916 was paid in brokerage commissions to brokers who
furnished research services on portfolio transactions in the amount of
$14,375,011. UTILITIES INCOME Fund paid $125,967 in brokerage commissions. Of
that amount, $12,540 was paid in brokerage commissions to brokers who furnished
research services on portfolio transactions in the amount of $9,302,550. For the
same period, all other Funds of Life Series Fund did not pay brokerage
commissions.

TAXES

Shares of the Funds are offered only to the Separate Accounts that fund the
Policies and Contracts. See the applicable Separate Account Prospectus for a
discussion of the special taxation of First Investors Life with respect to those
accounts and of the Policyowners and Contractholders.

To continue to qualify for treatment as a registered investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), a Fund
- - each Fund being treated as a separate corporation 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,
DISCOVERY FUND and HIGH YIELD FUND (each a "Foreign 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 a Foreign
Fund, foreign currencies, or other income (including, for gains from options,
futures or forward currency contracts) derived with respect to its business of
investing in securities or, for a Foreign Fund, those currencies ("Income
Requirement"); (2) 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 (3) 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.

If any Fund failed to qualify for treatment as a RIC for any taxable year,
(1) it would be taxed at corporate rates on the full amount of its taxable
income for that year without being able to deduct the distributions it makes to
its shareholders, (2) the shareholders would treat all those distributions,
including distributions of net capital gain (I.E., the excess of net long-term
capital gain over net short-term capital loss), as dividends (that is, ordinary
income) to the extent of the Fund's earnings and profits, and (3) most
importantly, each Separate Account invested therein would fail to satisfy the
diversification requirements of section 817(h) of the Code (see below), with the
result that the Contracts and Policies supported by those accounts would no

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longer be eligible for tax deferral. In addition, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying for RIC treatment.

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 1940 Act and Subchapter M of the Code (described above), place certain
limitations on the assets of each Separate Account -- and of each Fund, because
section 817(h) and those regulations treat the assets of a Fund as assets of the
related Separate Account -- 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 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, U.S. 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 Contractholders and Policyowners other than as described in the Prospectuses
of the Separate Accounts.

Dividends and interest received by a Foreign Fund, and gains realized by a
Foreign Fund, may be subject to income, withholding or other taxes imposed by
foreign countries that would reduce the yield and/or total return 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.

Each of INTERNATIONAL SECURITIES FUND and DISCOVERY FUND may invest in the
stock of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation - other than a "controlled foreign corporation" (i.e., a foreign
corporation in which, on any day during its taxable year, more than 50% of the
total voting power of all voting stock therein or the total value of all stock
therein is owned, directly, indirectly, or constructively, by "U.S.
shareholders," defined as U.S. persons that individually own, directly,
indirectly, or constructively, at least 10% of that voting power) as to which
such a Fund is a U.S. shareholder -- that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, if either Fund holds stock of a
PFIC, it will be subject to Federal income tax on a portion of any "excess
distribution" received on the stock or of any gain on disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if 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 it
distributes that income 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" ("QEF"), 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 QEF's annual ordinary earnings and
net capital gain -- which the Fund probably would have to distribute to satisfy
the Distribution Requirement -- even if those earnings and gain were not
distributed to the Fund by the QEF. In most instances it will be very difficult,
if not impossible, to make this election because of certain requirements
thereof.

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Each of INTERNATIONAL SECURITIES FUND and DISCOVERY FUND may elect to
"mark-to-market" its stock in any PFICs. "Marking-to-market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the PFIC's stock over a Fund's adjusted basis in that stock
as of the end of that year. Pursuant to the election, a Fund also would be
allowed to deduct (as an ordinary, not capital, loss) the excess, if any, of its
adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net mark-to-market gains with
respect to that stock included by the Fund for prior taxable years. A Fund's
adjusted basis in each PFIC's stock with respect to which it makes this election
would be adjusted to reflect the amounts of income included and deductions taken
under the election (and under regulations proposed in 1992 that provided a
similar election with respect to the stock of certain PFICs).

HIGH YIELD FUND, GOVERNMENT FUND, INVESTMENT GRADE FUND, TARGET MATURITY
2007 FUND, TARGET MATURITY 2010 FUND and UTILITIES INCOME FUND may acquire zero
coupon or other securities issued with original issue discount. As a holder of
those securities, each such Fund must include in its income the portion of the
original issue discount that accrues on the securities during the taxable year,
even if the Fund receives no corresponding payment on them 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, to satisfy the
Distribution Requirement, a 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.

INTERNATIONAL SECURITIES FUND'S use of hedging strategies, such as writing
(selling) and purchasing options and futures contracts and entering into forward
currency contracts, involves complex rules that will determine for income tax
purposes the amount, character and timing of recognition of the gains and losses
the Fund will realize in connection therewith. Gains from a Foreign Fund's
disposition of foreign currencies (except gains that may be excluded by future
regulations), and in the case of the INTERNATIONAL SECURITIES FUND gains from
options, futures and forward currency contracts it derives with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement.

If a Fund has an "appreciated financial position" - generally, an interest
(including an interest through an option, futures or forward currency contract
or short sale) with respect to any stock, debt instrument (other than "straight
debt") or partnership interest the fair market value of which exceeds its
adjusted basis - and enters into a "constructive sale" of the same or
substantially similar property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract or futures or forward currency contract entered into by a
Fund or a related person with respect to the same or substantially similar
property. In addition, if the appreciated financial position is itself a short
sale or such a contract, acquisition of the underlying property or substantially
similar property will be deemed a constructive sale. The foregoing will not
apply, however, to any transaction during any taxable year that otherwise would
be treated as a constructive sale by a Fund if the transaction is closed within
30 days after the end of that year and the Fund holds the appreciated financial
position unhedged for 60 days after that closing (I.E., at no time during that
60-day period is the Fund's risk of loss regarding that position reduced by
reason of certain specified transactions with respect to substantially similar
or related property, such as having an option to sell, being contractually
obligated to sell, making a short sale, or granting an option to buy
substantially identical stock or securities).

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PERFORMANCE INFORMATION

A Fund may advertise its top holdings from time to time. A Fund may
advertise its performance in various ways.

Each Fund's "average annual total return" ("T") is an average annual
compounded rate of return. The calculation produces an average annual total
return for the number of years measured. It is the rate of return based on
factors which include a hypothetical initial investment of $1,000 ("P") over a
number of years ("n") with an Ending Redeemable Value ("ERV") of that
investment, according to the following formula:

T=[(ERV/P)(1/n)]-1

The "total return" uses the same factors, but does not average the rate of
return on an annual basis. Total return is determined as follows:

(ERV-P)/P = TOTAL RETURN

Total return is calculated by finding the average annual change in the value
of an initial $1,000 investment over the period. In calculating the ending
redeemable value for Class A shares, each Fund will deduct the maximum sales
charge of 6.25% (as a percentage of the offering price) from the initial $1,000
payment and, for Class B shares, the applicable CDSC imposed on a redemption of
Class B shares held for the period is deducted. All dividends and other
distributions are assumed to have been reinvested at net asset value on the
initial investment ("P").

Return information may be useful to investors in reviewing a Fund's
performance. However, certain factors should be taken into account before using
this information as a basis for comparison with alternative investments. No
adjustment is made for taxes payable on distributions. Return will fluctuate
over time and return for any given past period is not an indication or
representation by a Fund of future rates of return on its shares. At times, the
Adviser may reduce its compensation or assume expenses of a Fund in order to
reduce the Fund's expenses. Any such waiver or reimbursement would increase the
Fund's return during the period of the waiver or reimbursement.

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Average annual total return and total return computed at net asset value for
the periods ended December 31, 1998 are set forth in the following tables:

AVERAGE ANNUAL TOTAL RETURN(1)

ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND(2)
-------- ---------- --------- ---------------

BLUE CHIP 18.66% 19.26% N/A 15.41%
DISCOVERY 3.05% 10.58% N/A 15.27%
GOVERNMENT 7.54% 6.05% N/A 6.64%
GROWTH 27.35% 20.02% N/A 16.72%
HIGH YIELD 3.15% 9.02% N/A 9.69%
INTERNATIONAL 18.18% 11.72% N/A 11.15%
INVESTMENT GRADE 9.15% 7.31% N/A 8.03%
TARGET 2007 14.97% N/A N/A 12.90%
TARGET 2010 14.36% N/A N/A 15.77%
UTILITIES INCOME 12.58% 13.27% N/A 12.78%

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

(1) Certain expenses of the Funds have been waived or reimbursed from
commencement of operations through December 31, 1998. Accordingly, return
figures are higher than they would have been had such expenses not been
waived or reimbursed.

(2) The inception dates for the Funds are as follows: BLUE CHIP - March 8, 1990;
DISCOVERY - November 9, 1987; GOVERNMENT - January 7, 1992; GROWTH -
November 9, 1987; HIGH YIELD - November 9, 1987; INTERNATIONAL SECURITIES -
April 16, 1990; INVESTMENT GRADE - January 7, 1992; TARGET 2007 - April 26,
1995; TARGET 2010 - April 30, 1996; and UTILITIES INCOME - November 15,1993.

TOTAL RETURN(1)
ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND(2)
-------- ---------- --------- ---------------

BLUE CHIP 18.66% 141.27% N/A 254.09%
DISCOVERY 3.05% 65.32% N/A 314.22%
GOVERNMENT 7.54% 34.16% N/A 56.71%
GROWTH 27.35% 149.00% N/A 369.43%
HIGH YIELD 3.15% 54.01% N/A 152.11%
INTERNATIONAL 18.18% 74.06% N/A 151.25%
INVESTMENT GRADE 9.15% 42.33% N/A 71.59%
TARGET 2007 14.97% N/A N/A 56.37%
TARGET 2010 14.36% N/A N/A 47.87%
UTILITIES INCOME 12.58% 86.42% N/A 85.30%

46
<PAGE>

Each Fund may include in advertisements and sales literature, information,
examples and statistics to illustrate the effect of compounding income at a
fixed rate of return to demonstrate the growth of an investment over a stated
period of time resulting from the payment of dividends and capital gain
distributions in additional shares. These examples may also include hypothetical
returns comparing taxable versus tax-deferred growth which would pertain to an
IRA, section 403(b)(7) Custodial Account or other qualified retirement program.
The examples used will be for illustrative purposes only and are not
representations by the Funds of past or future yield or return. Examples of
typical graphs and charts depicting such historical performances, compounding
and hypothetical returns are included in Appendix D.

From time to time, in reports and promotional literature, the Funds may
compare their performance to, or cite the historical performance of, Overnight
Government repurchase agreements, U.S. Treasury bills, notes and bonds,
certificates of deposit, and six-month money market certificates or indices of
broad groups of unmanaged securities considered to be representative of, or
similar to, a Fund's portfolio holdings, such as:

Lipper Analytical Services, Inc. ("Lipper") is a widely-recognized
independent service that monitors and ranks the performance of regulated
investment companies. The Lipper performance analysis includes the
reinvestment of capital gain distributions and income dividends but does not
take sales charges into consideration. The method of calculating total
return data on indices utilizes actual dividends on ex-dividend dates
accumulated for the quarter and reinvested at quarter end.

Morningstar Mutual Funds ("Morningstar"), a semi-monthly publication of
Morningstar, Inc. Morningstar proprietary ratings reflect historical
risk-adjusted performance and are subject to change every month. Funds with
at least three years of performance history are assigned ratings from one
star (lowest) to five stars (highest). Morningstar ratings are calculated
from the Fund's three-, five-, and ten-year average annual returns (when
available) and a risk factor that reflects fund performance relative to
three-month Treasury bill monthly returns. Fund's returns are adjusted for
fees and sales loads. Ten percent of the funds in an investment category
receive five stars, 22.5% receive four stars, 35% receive three stars, 22.5%
receive two stars, and the bottom 10% receive one star.

Salomon Brothers Inc., "Market Performance," a monthly publication which
tracks principal return, total return and yield on the Salomon Brothers
Broad Investment-Grade Bond Index and the components of the Index.

Telerate Systems, Inc., a computer system to which the Adviser subscribes
which daily tracks the rates on money market instruments, public
corporate debt obligations and public obligations of the U.S. Treasury
and agencies of the U.S. Government.

THE WALL STREET JOURNAL, a daily newspaper publication which lists the
yields and current market values on money market instruments, public
corporate debt obligations, public obligations of the U.S. Treasury and
agencies of the U.S. Government as well as common stocks, preferred stocks,
convertible preferred stocks, options and commodities; in addition to
indices prepared by the research departments of such financial organizations
as Lehman Bros., Merrill Lynch, Pierce, Fenner and Smith, Inc., First
Boston, Salomon Brothers, Morgan Stanley, Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette, Value Line, Datastream International, James Capel, S.G.
Warburg Securities, County Natwest and UBS UK Limited, including information
provided by the Federal Reserve Board, Moody's, and the Federal Reserve
Bank.

Merrill Lynch, Pierce, Fenner & Smith, Inc., "Taxable Bond Indices," a
monthly corporate government index publication which lists principal, coupon

47
<PAGE>

and total return on over 100 different taxable bond indices which Merrill
Lynch tracks. They also list the par weighted characteristics of each Index.

Lehman Brothers, Inc., "The Bond Market Report," a monthly publication which
tracks principal, coupon and total return on the Lehman Govt./Corp. Index
and Lehman Aggregate Bond Index, as well as all the components of these
Indices.

Standard & Poor's 500 Composite Stock Price Index and the Dow Jones
Industrial Average of 30 stocks are unmanaged lists of common stocks
frequently used as general measures of stock market performance. Their
performance figures reflect changes of market prices and quarterly
reinvestment of all distributions but are not adjusted for commissions or
other costs.

The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics,
is a commonly used measure of inflation. The Index shows changes in the cost
of selected consumer goods and does not represent a return on an investment
vehicle.

Credit Suisse First Boston High Yield Index is designed to measure the
performance of the high yield bond market.

Lehman Brothers Aggregate Index is an unmanaged index which generally covers
the U.S. investment grade fixed rate bond market, including government and
corporate securities, agency mortgage pass-through securities, and
asset-backed securities.

Lehman Brothers Corporate Bond Index includes all publicly issued, fixed
rate, non-convertible investment grade dollar-denominated, corporate debt
which have at least one year to maturity and an outstanding par value of at
least $100 million.

The NYSE composite of component indices--unmanaged indices of all
industrial, utilities, transportation, and finance stocks listed on the
NYSE.

Moody's Stock Index, an unmanaged index of utility stock performance.

Morgan Stanley All Country World Free Index is designed to measure the
performance of stock markets in the United States, Europe, Canada,
Australia, New Zealand and the developed and emerging markets of Eastern
Europe, Latin America, Asia and the Far East. The index consists of
approximately 60% of the aggregate market value of the covered stock
exchanges and is calculated to exclude companies and share classes which
cannot be freely purchased by foreigners.

Morgan Stanley World Index is designed to measure the performance of stock
markets in the United States, Europe, Canada, Australia, New Zealand and the
Far East. The index consists of approximately 60% of the aggregate market
value of the covered stock exchanges.

Reuters, a wire service that frequently reports on global business.

Russell 2000 Index, prepared by the Frank Russell Company, consists of U.S.
publicly traded stocks of domestic companies that rank from 1000 to 3000 by
market capitalization. The Russell 2000 tracks the return on these stocks

48
<PAGE>

based on price appreciation or depreciation and does not include dividends
and income or changes in market values caused by other kinds of corporate
changes.

Russell 2500 Index, prepared by the Frank Russell Company, consists of U.S.
publicly traded stocks of domestic companies that rank from 500 to 3000 by
market capitalization. The Russell 2500 tracks the return on these stocks
based on price appreciation or depreciation and does not include dividends
and income or changes in market values caused by other kinds of corporate
changes.

Salomon Brothers Government Index is a market capitalization-weighted index
that consists of debt issued by the U.S. Treasury and U.S.
Government sponsored agencies.

Salomon Brothers Mortgage Index is a market capitalization-weighted index
that consists of all agency pass-throughs and FHA and GNMA project notes.

Standard & Poor's 400 Midcap Index is an unmanaged capitalization-weighted
index that is generally representative of the U.S. market for medium cap
stocks.

Standard & Poor's Smallcap 600 Index is a capitalization-weighted index that
measures the performance of selected U.S. stocks with a small market
capitalization.

Standard & Poor's Utilities Index is an unmanaged capitalization weighted
index comprising common stock in approximately 40 electric, natural gas
distributors and pipelines, and telephone companies. The Index assumes the
reinvestment of dividends.

From time to time, in reports and promotional literature, performance
rankings and ratings reported periodically in national financial publications
such as MONEY, FORBES, BUSINESS WEEK, BARRON'S, FINANCIAL TIMES and FORTUNE may
also be used. In addition, quotations from articles and performance ratings and
ratings appearing in daily newspaper publications such as THE WALL STREET
JOURNAL, THE NEW YORK TIMES and NEW YORK DAILY NEWS may be cited.

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.

AUDITS AND REPORTS. The accounts of the Fund are audited twice a year by
Tait, Weller & Baker, independent certified public accountants, 8 Penn Center
Plaza, Philadelphia, PA, 19103. Shareholders receive semi-annual and annual
reports of the Fund, including audited financial statements, and a list of
securities owned.

LEGAL COUNSEL. Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue
N.W., Washington, D.C. 20036 serves as counsel to the Fund.

49
<PAGE>

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.

5% SHAREHOLDERS. As of March 31, 1999 the following owned of record or
beneficially 5% or more of the outstanding shares of the Fund listed below:

FUND % OF SHARES SHAREHOLDER
- ---- ----------- -----------

CASH MANAGEMENT 8.0 Valerie Pleva
George Washington
Rm. 1718
23 Lexington Ave.
New York, NY 10010

TRADING BY PORTFOLIO MANAGERS AND OTHER ACCESS PERSONS. Pursuant to Section
17(j) of the 1940 Act and Rule 17j-1 thereunder, the Life Series Fund and the
Adviser have adopted Codes of Ethics restricting personal securities trading by
portfolio managers and other access persons of the Funds. Among other things,
such persons, except the Trustees: (a) must have all non-exempt trades
pre-cleared; (b) are restricted from short-term trading; (c) must provide
duplicate statements and transactions confirmations to a compliance officer; and
(d) are prohibited from purchasing securities of initial public offerings.

50
<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.

51
<PAGE>

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).

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.

52
<PAGE>

APPENDIX C
DESCRIPTION OF CORPORATE BOND RATINGS

STANDARD & POOR'S RATINGS GROUP
- -------------------------------

The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.

The ratings are based, in varying degrees, on the following considerations:

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

53
<PAGE>

used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.

CCC Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

CC The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.

C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

CI The rating "CI" is reserved for income bonds on which no interest is
being paid.

D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.

MOODY'S INVESTORS SERVICE, INC.
- -------------------------------

Aaa Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat greater than the Aaa securities.

A Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.

Baa Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest

54
<PAGE>

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.

55
<PAGE>

APPENDIX D

[The following tables are represented as graphs in the printed document.]

The following graphs and chart illustrate hypothetical returns:

INCREASE RETURNS

This graph shows over a period of time even a small increase in returns can make
a significant difference. This assumes a hypothetical investment of $10,000.

Years 10% 8% 6% 4%
----- ------- ------ ------ ------
5 16,453 14,898 13,489 12,210
10 27,070 22,196 18,194 14,908
15 44,539 33,069 24,541 18,203
20 73,281 49,268 33,102 22,226
25 120,569 73,402 44,650 27,138

INCREASE INVESTMENT

This graph shows the more you invest on a regular basis over time, the more you
can accumulate. this assumes monthly installment with a constant hypothetical
return rate of 8%.

Years $100 $250 $500 $1,000
----- ------ ------- ------- -------
5 7,348 18,369 36,738 73,476
10 18,295 43,736 91,473 182,946
15 34,604 86,509 173,019 346,038
20 58,902 147,255 294,510 589,020
25 95,103 237,757 475,513 951,026

56
<PAGE>

[The following table is represented as a graph in the printed document.]

This chart illustrates the time value of money based upon the following
assumptions:

If you invested $2,000 each year for 20 years, starting at 25, assuming a 9%
investment return, you would accumulate $573,443 by the time you reach age 65.
However, had you invested the same $2,000 each year for 20 years, at that rate,
but waited until age 35, you would accumulate only $242,228 - a difference of
$331,215.

25 years old .............. 573,443
35 years old .............. 242,228
45 years old .............. 103,320

For each of the above graphs and chart it should be noted that systematic
investment plans do not assume a profit or protect against loss in declining
markets. Investors should consider their financial ability to continue purchases
through periods of both high and low price levels. Figures are hypothetical and
for illustrative purposes only and do not represent any actual investment or
performance. The value of a shareholder's investment and return may vary.

57
<PAGE>

[The following table is represented as a chart in the printed document.]

The following chart illustrates the historical performance of the Dow Jones
Industrial Average from 1928 through 1996.

1928 .................. 300.00
1929 .................. 248.48
1930 .................. 164.58
1931 .................. 77.90
1932 .................. 59.93
1933 .................. 99.90
1934 .................. 104.04
1935 .................. 144.13
1936 .................. 179.90
1937 .................. 120.85
1938 .................. 154.76
1939 .................. 150.24
1940 .................. 131.13
1941 .................. 110.96
1942 .................. 119.40
1943 .................. 136.20
1944 .................. 152.32
1945 .................. 192.91
1946 .................. 177.20
1947 .................. 181.16
1948 .................. 177.30
1949 .................. 200.10
1950 .................. 235.40
1951 .................. 269.22
1952 .................. 291.89
1953 .................. 280.89
1954 .................. 404.38
1955 .................. 488.39
1956 .................. 499.46
1957 .................. 435.68
1958 .................. 583.64
1959 .................. 679.35
1960 .................. 615.88
1961 .................. 731.13
1962 .................. 652.10
1963 .................. 762.94
1964 .................. 874.12
1965 .................. 969.25
1966 .................. 785.68
1967 .................. 905.10
1968 .................. 943.75
1969 .................. 800.35
1970 .................. 838.91
1971 .................. 890.19
1972 .................. 1,020.01
1973 .................. 850.85
1974 .................. 616.24
1975 .................. 858.71
1976 .................. 1,004.65
1977 .................. 831.17
1978 .................. 805.01
1979 .................. 838.74
1980 .................. 963.98
1981 .................. 875.00
1982 .................. 1,046.55
1983 .................. 1,258.64
1984 .................. 1,211.56
1985 .................. 1,546.67
1986 .................. 1,895.95
1987 .................. 1,938.80
1988 .................. 2,168.60
1989 .................. 2,753.20
1990 .................. 2,633.66
1991 .................. 3,168.83
1992 .................. 3,301.11
1993 .................. 3,754.09
1994 .................. 3,834.44
1995 .................. 5,000.00
1996 .................. 6,000.00

The performance of the Dow Jones Industrial Average is not indicative of
the performance of any particular investment. It does not take into account fees
and expenses associated with purchasing mutual fund shares. Individuals cannot
invest directly in any index. Please note that past performance does not
guarantee future results.

58
<PAGE>

[The following table is represented as a chart in the printed document.]

The following chart shows that inflation is constantly eroding the value of your
money.

THE EFFECTS OF INFLATION OVER TIME

1966 ....................... 96.61836
1967 ....................... 93.80423
1968 ....................... 89.59334
1969 ....................... 84.36285
1970 ....................... 79.88906
1971 ....................... 77.33694
1972 ....................... 74.79395
1973 ....................... 68.80768
1974 ....................... 61.27131
1975 ....................... 57.31647
1976 ....................... 54.63915
1977 ....................... 51.20820
1978 ....................... 46.98000
1979 ....................... 41.46514
1980 ....................... 36.85790
1981 ....................... 33.84564
1982 ....................... 32.60659
1983 ....................... 31.41290
1984 ....................... 30.23378
1985 ....................... 29.12696
1986 ....................... 28.81005
1987 ....................... 27.59583
1988 ....................... 26.43279
1989 ....................... 25.27035
1990 ....................... 23.81748
1991 ....................... 23.10134
1992 ....................... 22.45028
1993 ....................... 21.86006
1994 ....................... 21.28536
1995 ....................... 20.76620
1996 ....................... 20.16135

1996 ....................... 100.00
1997 ....................... 103.00
1998 ....................... 106.00
1999 ....................... 109.00
2000 ....................... 113.00
2001 ....................... 116.00
2002 ....................... 119.00
2003 ....................... 123.00
2004 ....................... 127.00
2005 ....................... 130.00
2006 ....................... 134.00
2007 ....................... 138.00
2008 ....................... 143.00
2009 ....................... 147.00
2010 ....................... 151.00
2011 ....................... 156.00
2012 ....................... 160.00
2013 ....................... 165.00
2014 ....................... 170.00
2015 ....................... 175.00
2016 ....................... 181.00
2017 ....................... 186.00
2018 ....................... 192.00
2019 ....................... 197.00
2020 ....................... 203.00
2021 ....................... 209.00
2022 ....................... 216.00
2023 ....................... 222.00
2024 ....................... 229.00
2025 ....................... 236.00
2026 ....................... 243.00

Inflation erodes your buying power. $100 in 1966, could purchase five times the
goods and service as in 1996 ($100 vs. $20).* Projecting inflation at 3%, goods
and services costing $100 today will cost $243 in the year 2026.

* Source: Consumer Price Index, U.S. Bureau of Labor Statistics.

59
<PAGE>

[The following tables are represented as graphs in the printed document.]

This chart illustrates that historically, the longer you hold onto stocks, the
greater chance that you will have a positive return.

1926 through 1996*

Total Number of Percentage of
Number of Positive Positive
Rolling Period Periods Periods Periods
-------------- ------- ------- -------
1-Year 71 51 72%
5-Year 67 60 90%
10-Year 62 60 97%
15-Year 57 57 100%
20-Year 52 52 100%

The following chart shows the compounded annual return of large company stocks
compared to U.S. Treasury Bills and inflation over the most recent 15 year
period. **

Compound Annual Return from 1982 -- 1996*

Inflation ..................... 3.55
U.S. Treasury Bills ........... 6.50
Large Company Stocks .......... 16.79

The following chart illustrates for the period shown that long-term corporate
bonds have outpaced U.S. Treasury Bills and inflation.

Compound Annual Return from 1982 -- 1996*

Inflation ..................... 3.55
U.S. Treasury Bills ........... 6.50
Long-Term Corp. bonds ......... 13.66

** Please note that U.S. Treasury bills are guaranteed as to principal and
interest payments (although the funds that invest in them are not), while
stocks will fluctuate in share price. Although past performance cannot
guarantee future results, returns of U.S. Treasury bills historically have
not outpaced inflation by as great a margin as stocks.

60
<PAGE>

The accompanying table illustrates that if you are in the 36% tax bracket, a
tax-free yield of 3% is actually equivalent to a taxable investment earning
4.69%.

Your Taxable Equivalent Yield

Your Federal Tax Bracket
---------------------------------------------

28.0% 31.0% 36.0% 39.6%
your tax-free yield
3.00% 4.17% 4.35% 4.69% 4.97%
3.50% 4.86% 5.07% 5.47% 5.79%
4.00% 5.56% 5.80% 6.25% 6.62%
4.50% 6.25% 6.52% 7.03% 7.45%
5.00% 6.94% 7.25% 7.81% 8.25%
5.50% 7.64% 7.97% 8.59% 9.11%

This information is general in nature and should not be construed as tax advice.
Please consult a tax or financial adviser as to how this information affects
your particular circumstances.

61
<PAGE>

[The following table is represented as a graph in the printed document.]

The following graph illustrates how income has affected the gains from stock
investments since 1965.

S&P 500 Dividends Reinvested S&P 500 Principal Only

12/31/64 10,000 10,000
12/31/65 11,269 10,906
12/31/66 10,115 9,478
12/31/67 12,550 11,383
12/31/68 13,948 12,255
12/31/69 12,795 10,863
12/31/70 13,299 10,873
12/31/71 15,200 12,046
12/31/72 18,088 13,929
12/31/73 15,431 11,510
12/31/74 11,346 8,090
12/31/75 15,570 10,642
12/31/76 19,296 12,680
12/31/77 17,915 11,221
12/31/78 19,092 11,340
12/31/79 22,645 12,736
12/31/80 30,004 16,019
12/31/81 28,528 14,460
12/31/82 34,674 16,595
12/31/83 42,496 19,461
12/31/84 45,161 19,733
12/31/85 59,489 24,930
12/31/86 70,594 28,575
12/31/87 74,301 29,154
12/31/88 86,641 32,769
12/31/89 114,093 41,699
12/31/90 110,549 38,964
12/31/91 144,230 49,214
12/31/92 155,218 51,411
12/31/93 170,863 55,039
12/31/94 173,120 54,191
12/31/95 238,175 72,676
12/31/96 292,863 87,403
11/30/97 383,977 112,732

Source: First Investors Management Company, Inc. Standard & Poor's is a
registered trademark. The S&P 500 is an unmanaged index comprising 500 common
stocks spread across a variety of industries. The total returns represented
above compare the impact of reinvestment of dividends and illustrates past
performance of the index. The performance of any index is not indicative of the
performance of a particular investment and does not take into account the
effects of inflation or the fees and expenses associated with purchasing mutual
fund shares. Individuals cannot invest directly in any index. Mutual fund shares
will fluctuate in value, therefore, the value of your original investment and
your return may vary. Moreover, past performance is no guarantee of future
results.

<PAGE>

Financial Statements
as of December 31, 1998

Registrant incorporates by reference the financial statements and report of
independent auditors contained in the Annual Report to shareholders for the
fiscal year ended December 31, 1998 electronically filed with the Securities and
Exchange Commission on March 8, 1999 (Accession Number:
0001047469-99-008850).

<PAGE>

PART C. OTHER INFORMATION
-------------------------

Item 23. Exhibits
--------

(a) Declaration of Trust(2)

(b) By-laws(2)

(c) Shareholders' rights are contained in (a) Articles III, VIII, X, XI
and XII of Registrant's Declaration of Trust dated June 12, 1985,
previously filed as Exhibit 99.B1 to Registrant's Registration
Statement and (b) Articles III and V of Registrant's By-laws,
previously filed as Exhibit 99.B2 to Registrant's Registration
Statement.

(d)(i) Investment Advisory Agreement between Registrant and First
Investors Management Company, Inc., including form of Schedule A
relating to Zero Coupon 2007 Series(1)

(d)(ii) Subadvisory Agreement relating to International Securities Fund and
Growth Fund(1)

(e) Underwriting Agreement - none

(f) Bonus, profit sharing or pension plans - none

(g)(i) Custodian Agreement between Registrant and Irving Trust Company(3)

(ii) Custodian Agreement between Registrant and Brown Brothers Harriman
& Co. relating to International Securities Fund(3)

(iii) Supplement to Custodian Agreement between Registrant and The Bank
of New York(3)

(h)(i) Administration Agreement between Registrant, First Investors
Management Company, Inc., First Investors Corporation and
Administrative Data Management Corp.(3)

(i) Opinion and Consent of Counsel - filed herewith

(j)(i) Consent of Independent Accountants - filed herewith

(ii) Powers of Attorney(2)

(k) Financial statements omitted from prospectus -none

(l) Initial capital agreements(4)

(m) Distribution Plan - none

(n) Financial Data Schedules - filed herewith

(o) 18f-3 Plan - none

- ---------------
(1) Incorporated by reference from Post-Effective Amendment No. 15 to
Registrant's Registration Statement (File No. 2-98409) filed on February
15, 1995.

(2) Incorporated by reference from Post-Effective Amendment No. 17 to
Registrant's Registration Statement (File No. 2-98409) filed on October 2,
1995.

<PAGE>

(3) Incorporated by reference from Post-Effective Amendment No. 18 to
Registrant's Registration Statement (File No. 2-98409) filed on February
14, 1996.

(4) Incorporated by reference from Post-Effective Amendment No. 20 to
Registrant's Registration Statement (File No. 2-98409) filed on October 21,
1996.

Item 24. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------

There are no persons controlled by or under common control with the
Registrant.

Item 25. 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 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

<PAGE>

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 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 26. (a) Business and Other Connections of Investment Adviser
----------------------------------------------------

First Investors Management Company, Inc. offers investment
management services and is a registered investment adviser. Affiliations of the
officers and directors of the Investment Adviser are set forth in Part B,
Statement of Additional Information, under "Directors or Trustees and Officers."

(b) Business and Other Connections of Subadviser
--------------------------------------------

Wellington Management Company, LLP ("Wellington Management") is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"). The list required by this Item 26 of officers and

<PAGE>

partners of Wellington Management, together with any information as to any
business profession, vocation or employment of a substantial nature engaged in
by such officers and partners during the past two years, is incorporated herein
by reference to Schedules A and D of Form ADV filed by Wellington Management
pursuant to the Advisers Act (SEC File No. 801-159089).

Item 27. Not applicable.

Item 28. 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, NJ 07095, except
for those maintained by the Registrant's Custodian, The Bank of New York, 48
Wall Street, New York, NY 10286.

Item 29. Management Services
-------------------

Not Applicable.

Item 30. Undertakings
------------

The Registrant undertakes to carry out all indemnification provisions
of its Declaration of Trust, Advisory 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.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant represents
that this Post-Effective Amendment No. 24 meets all the requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act of 1933, and has
duly caused this Post-Effective Amendment No. 24 to its 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 20th day of April, 1999.

FIRST INVESTORS LIFE SERIES FUND

By: /s/ Glenn O. Head
-----------------
Glenn O. Head
President and Trustee

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 24 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 April 20, 1999
- --------------------- Officer and Trustee
Glenn O. Head

/s/ Joseph I. Benedek Principal Financial April 20, 1999
- --------------------- and Accounting Officer
Joseph I. Benedek

Kathryn S. Head* Trustee April 20, 1999
- ---------------------
Kathryn S. Head

/s/ Larry R. Lavoie Trustee April 20, 1999
- ----------------------
Larry R. Lavoie

Herbert Rubinstein* Trustee April 20, 1999
- ----------------------
Herbert Rubinstein

Nancy Schaenen* Trustee April 20, 1999
- -----------------------
Nancy Schaenen

James M. Srygley* Trustee April 20, 1999
- -----------------------
James M. Srygley

John T. Sullivan* Trustee April 20, 1999
- -----------------------
John T. Sullivan

<PAGE>

Rex R. Reed* Trustee April 20, 1999
- -----------------------
Rex R. Reed

Robert F. Wentworth* Trustee April 20, 1999
- -----------------------
Robert F. Wentworth

*By: /s/ Larry R. Lavoie
-------------------
Larry R. Lavoie
Attorney-in-fact

<PAGE>

INDEX TO EXHIBITS

Exhibit
Number Description
- ------ -----------

23(a) Declaration of Trust(2)

23(b) By-laws(2)

23(c) Shareholders' rights are contained in (a) Articles III,
VIII, X, XI and XII of Registrant's Declaration of Trust
dated June 12, 1985, previously filed as Exhibit 99.B1 to
Registrant's Registration Statement and (b) Articles III
and V of Registrant's By-laws, previously filed as
Exhibit 99.B2 to Registrant's Registration Statement.

23(d)(i) Investment Advisory Agreement between Registrant and
First Investors Management Company, Inc., including form
of Schedule A relating to Zero Coupon 2007 Series(1)

23(d)(ii) Subadvisory Agreement relating to International
Securities Fund and Growth Fund(1)

23(e) Underwriting Agreement - none

23(f) Bonus or Profit Sharing Contracts--None

23(g)(i) Custodian Agreement between Registrant and Irving Trust
Company(3)

23(g)(ii) Custodian Agreement between Registrant and Brown Brothers
Harriman & Co. relating to International Securities
Fund(3)

23(g)(iii) Supplement to Custodian Agreement between Registrant and
The Bank of New York(3)

23(h)(i) Administration Agreement between Registrant, First
Investors Management Company, Inc., First Investors
Corporation and Administrative Data Management Corp.(1)

23(i) Opinion and Consent of Counsel - filed herewith

23(j)(i) Consent of independent accountants - filed herewith

23(j)(ii) Powers of Attorney(2)

23(k) Omitted Financial Statements -- None

23(l) Initial Capital Agreements(4)

<PAGE>

23(m) Distribution Plan - none

23(n) Financial Data Schedules- filed herewith

23(o) Rule 18f-3 Plan - none

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

(1) Incorporated by reference from Post-Effective Amendment No. 15 to
Registrant's Registration Statement (File No. 2-98409) filed on February
15, 1995.

(2) Incorporated by reference from Post-Effective Amendment No. 17 to
Registrant's Registration Statement (File No. 2-98409) filed on October 2,
1995.

(3) Incorporated by reference from Post-Effective Amendment No. 18 to
Registrant's Registration Statement (File No. 2-98409) filed on February
14, 1996.

(4) Incorporated by reference from Post-Effective Amendment No. 20 to
Registrant's Registration Statement (File No. 2-98409) filed on October 21,
1996.

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<GROSS-EXPENSE> (857)
<AVERAGE-NET-ASSETS> 103392
<PER-SHARE-NAV-BEGIN> 27.77
<PER-SHARE-NII> .090
<PER-SHARE-GAIN-APPREC> .790
<PER-SHARE-DIVIDEND> (.080)
<PER-SHARE-DISTRIBUTIONS> (1.830)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 26.74
<EXPENSE-RATIO> .83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

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<ARTICLE> 6
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<SHARES-COMMON-PRIOR> 6501
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<INTEREST-INCOME> 787
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<NET-INVESTMENT-INCOME> 1399
<REALIZED-GAINS-CURRENT> 3330
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</TABLE>

<ARTICLE> 6
<CIK> 0000770906
<NAME> FIRST INVESTORS LIFE SERIES FUND
<SERIES>
<NUMBER> 04
<NAME> GROWTH FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
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<SHARES-COMMON-PRIOR> 4363
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 64486
<NET-ASSETS> 186904
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<EXPENSES-NET> (1256)
<NET-INVESTMENT-INCOME> 518
<REALIZED-GAINS-CURRENT> 8689
<APPREC-INCREASE-CURRENT> 28692
<NET-CHANGE-FROM-OPS> 37899
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<EXPENSE-RATIO> .82
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</TABLE>

<ARTICLE> 6
<CIK> 0000770906
<NAME> FIRST INVESTORS LIFE SERIES FUND
<SERIES>
<NUMBER> 05
<NAME> CASH MANAGEMENT FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>

<ARTICLE> 6
<CIK> 0000770906
<NAME> FIRST INVESTORS LIFE SERIES FUND
<SERIES>
<NUMBER> 06
<NAME> INTERNATIONAL FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
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<OVERDISTRIBUTION-GAINS> 0
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<EXPENSES-NET> (966)
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</TABLE>

<ARTICLE> 6
<CIK> 0000770906
<NAME> FIRST INVESTORS LIFE SERIES FUND
<SERIES>
<NUMBER> 07
<NAME> GOVERNMENT FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (465)
<ACCUM-APPREC-OR-DEPREC> 105
<NET-ASSETS> 10991
<DIVIDEND-INCOME> 0
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<OTHER-INCOME> 0
<EXPENSES-NET> (66)
<NET-INVESTMENT-INCOME> 604
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<APPREC-INCREASE-CURRENT> (40)
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 251
<NUMBER-OF-SHARES-REDEEMED> 139
<SHARES-REINVESTED> 61
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> (87)
<AVERAGE-NET-ASSETS> 10016
<PER-SHARE-NAV-BEGIN> 10.33
<PER-SHARE-NII> .560
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<EXPENSE-RATIO> .70
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</TABLE>

<ARTICLE> 6
<CIK> 0000770906
<NAME> FIRST INVESTORS LIFE SERIES FUND
<SERIES>
<NUMBER> 08
<NAME> INVESTMENT GRADE FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
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<EXPENSES-NET> (128)
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<NUMBER-OF-SHARES-SOLD> 397
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<SHARES-REINVESTED> 97
<NET-CHANGE-IN-ASSETS> 4284
<ACCUMULATED-NII-PRIOR> 1073
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<GROSS-EXPENSE> (163)
<AVERAGE-NET-ASSETS> 19194
<PER-SHARE-NAV-BEGIN> 11.67
<PER-SHARE-NII> .620
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</TABLE>

<ARTICLE> 6
<CIK> 0000770906
<NAME> FIRST INVESTORS LIFE SERIES FUND
<SERIES>
<NUMBER> 09
<NAME> UTILITIES INCOME
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
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<TOTAL-ASSETS> 50751
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37919
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<ACCUMULATED-NII-CURRENT> 1076
<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9777
<NET-ASSETS> 50432
<DIVIDEND-INCOME> 1201
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<OTHER-INCOME> (1)
<EXPENSES-NET> (287)
<NET-INVESTMENT-INCOME> 1071
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<DISTRIBUTIONS-OF-INCOME> (842)
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<NUMBER-OF-SHARES-SOLD> 842
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<NET-CHANGE-IN-ASSETS> 16451
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> (360)
<AVERAGE-NET-ASSETS> 41021
<PER-SHARE-NAV-BEGIN> 14.95
<PER-SHARE-NII> .320
<PER-SHARE-GAIN-APPREC> 1.460
<PER-SHARE-DIVIDEND> (.350)
<PER-SHARE-DISTRIBUTIONS> (.550)
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<PER-SHARE-NAV-END> 15.83
<EXPENSE-RATIO> .73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000770906
<NAME> FIRST INVESTORS LIFE SERIES FUND
<SERIES>
<NUMBER> 10
<NAME> TARGET MATURITY 2007 FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
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<INVESTMENTS-AT-VALUE> 26385
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<SHARES-COMMON-STOCK> 1914
<SHARES-COMMON-PRIOR> 1607
<ACCUMULATED-NII-CURRENT> 1197
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (110)
<ACCUM-APPREC-OR-DEPREC> 3365
<NET-ASSETS> 26473
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1348
<OTHER-INCOME> 0
<EXPENSES-NET> (151)
<NET-INVESTMENT-INCOME> 1197
<REALIZED-GAINS-CURRENT> 6
<APPREC-INCREASE-CURRENT> 2019
<NET-CHANGE-FROM-OPS> 3222
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<ACCUMULATED-NII-PRIOR> 997
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<EXPENSE-RATIO> .67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000770906
<NAME> FIRST INVESTORS LIFE SERIES FUND
<SERIES>
<NUMBER> 11
<NAME> TARGET MATURITY 2010 FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
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<PAID-IN-CAPITAL-COMMON> 7562
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<SHARES-COMMON-PRIOR> 410
<ACCUMULATED-NII-CURRENT> 351
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1112
<NET-ASSETS> 9030
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<OTHER-INCOME> 0
<EXPENSES-NET> (47)
<NET-INVESTMENT-INCOME> 351
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 605
<NET-CHANGE-FROM-OPS> 956
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<SHARES-REINVESTED> 17
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<ACCUMULATED-GAINS-PRIOR> 4
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<GROSS-EXPENSE> (60)
<AVERAGE-NET-ASSETS> 7159
<PER-SHARE-NAV-BEGIN> 12.70
<PER-SHARE-NII> .510
<PER-SHARE-GAIN-APPREC> 1.250
<PER-SHARE-DIVIDEND> (.480)
<PER-SHARE-DISTRIBUTIONS> (.010)
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<PER-SHARE-NAV-END> 13.97
<EXPENSE-RATIO> .67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800

April 29, 1999

First Investors Life Series Fund
95 Wall Street
New York, New York 10005

Ladies and Gentlemen:

You have requested our opinion, as counsel to First Investors Life
Series Fund (the "Trust"), as to certain matters regarding the issuance of
Shares of the Trust. As used in this letter, the term "Shares" means the Class A
shares of beneficial interest of the Blue Chip Fund, Cash Management Fund,
Discovery Fund, Government Fund, Growth Fund, High Yield Fund, International
Securities Fund, Target Maturity 2007 Fund, Target Maturity 2010 Fund and
Utilities Income Fund, all series of the Trust.

As such counsel, we have examined certified or other copies, believed by
us to be genuine, of the Trust's Declaration of Trust and by-laws and such
resolutions and minutes of meetings of the Trust's Board of Trustees as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) in the Commonwealth of
Massachusetts that in our experience are normally applicable to the issuance of
shares by unincorporated voluntary associations and to the Securities Act of
1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.

Based on present laws and facts, we are of the opinion that the issuance
of the Shares has been duly authorized by the Trust and that, when sold in
accordance with the terms contemplated by the Post-Effective Amendment No. 24 to
the Trust's Registration Statement on Form N-1A ("PEA"), including receipt by
the Trust of full payment for the Shares and compliance with the 1933 Act and
the 1940 Act, the Shares will have been validly issued, fully paid and
non-assessable.

We note, however, that the Trust is an entity of the type commonly known
as a "Massachusetts business trust." Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Trust. The Declaration of Trust states that all persons
extending credit to, contracting with or having any claim against the Trust or
the Trustees shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees, nor
any of their agents, whether past, present or future, shall be personally liable
therefor. It also requires that every note, bond, contract or other undertaking
issued by or on behalf of the Trust or the Trustees relating to the Trust shall
include a recitation limiting the obligation represented thereby to the Trust
and its assets. The Declaration of Trust further provides: (1) for
indemnification from the assets of the Trust for all loss and expense of any
shareholder held personally liable for the obligations of the Trust by virtue of

<PAGE>

First Investors Life Series Fund
April 29, 1999
Page 2

ownership of shares of the Trust; and (2) for the Trust to assume the defense of
any claim against the shareholder for any act or obligation of the Trust. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust or series would be
unable to meet its obligations.

We hereby consent to this opinion accompanying the PEA when it is filed
with the SEC and to the reference to our firm in the PEA.

Very truly yours,

KIRKPATRICK & LOCKHART LLP

By /s/ Robert J. Zutz
---------------------
Robert J. Zutz

Consent of Independent Certified Public Accountants

First Investors Life Series Fund
95 Wall Street
New York, New York 10005

We consent to the use in Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A (File No. 2-98409) of our report dated
January 29, 1999 relating to the December 31, 1998 financial statements of First
Investors Life Series Fund, which are included in said Registration Statement.

/s/ TAIT, WELLER & BAKER

TAIT, WELLER & BAKER

Philadelphia, Pennsylvania
April 14, 1999