<PAGE>
First Investors Logo
BLUE CHIP
CASH MANAGEMENT
DISCOVERY
GOVERNMENT
GROWTH
HIGH YIELD
INTERNATIONAL SECURITIES
INVESTMENT GRADE
TARGET MATURITY 2007
TARGET MATURITY 2010
UTILITIES INCOME
LIFE SERIES FUNDS
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
MARKET OVERVIEW
FIRST INVESTORS LIFE SERIES FUND
Dear Investor:
We are pleased to present the annual report for the First Investors Life Series
Fund for the fiscal year ending December 31, 1998. The Fund offers eleven
separate Funds ("Funds"), each of which has a different investment objective.*
1998 will be remembered for the severe dislocation caused to the financial
markets by the currency crisis that began in Southeast Asia. Exacerbated by
highly leveraged hedge funds, emerging market problems spread to Russia, Latin
America and finally the U.S., culminating in a correction in the stock market
and a tremendous bond market rally. Responding to financial market tumult, the
Federal Reserve lowered short-term interest rates three times in eight weeks
beginning in September. By year-end, financial markets had stabilized.
Despite this turbulence, the U.S. economy grew at close to 4%, completing the
seventh year of the current expansion. Unemployment fell to 4.3%, matching a
28-year low. The rate of inflation, as measured by the Consumer Price Index,
fell for the third consecutive year, to 1.6%. The consumer propelled the
economy, buoyed by low unemployment, rising wages, low interest rates and stock
market gains.
Substantial volatility meant varied returns among the financial markets. The
stock market staged a remarkable recovery from the third quarter correction,
ending the year with positive annual returns. Large-capitalization stocks were
the best performers, with growth stocks outpacing value stocks. International
markets also varied, with Europe providing the best returns, and emerging
markets the worst.
In the bond market, we saw a substantial decline in long-term Treasury yields.
This was prompted by a "flight to safety," slowing inflation and the U.S. budget
surplus. Among U.S. bond markets, the Treasury market was the best performer.
Other markets (mortgage-backed, corporate, high yield) had lower returns due to
a variety of factors that are discussed under specific Fund performance.
While we continue to believe that the fundamentals of the U.S. economy remain
sound, investors should remain aware of the risks associated with investing in
the stock market. The stock market tends to follow cycles, and the current
upward cycle or bull market is now the longest in history. Equity investors
should be aware that some valuations appear to be high at this time,
particularly in such sectors as technology, as
*THE FUNDS ARE ONLY AVAILABLE THROUGH THE PURCHASE OF CERTAIN VARIABLE LIFE
INSURANCE POLICIES AND VARIABLE ANNUITY CONTRACT SEPARATE ACCOUNTS. THE ANNUAL
REPORTS DO NOT REFLECT THE ADDITIONAL EXPENSES AND CHARGES THAT ARE APPLICABLE
TO VARIABLE LIFE INSURANCE POLICIES AND VARIABLE ANNUITY CONTRACT SEPARATE
ACCOUNTS. IN ADDITION, CHARGES WILL DIFFER AMONG VARIABLE LIFE INSURANCE
POLICYOWNERS BECAUSE OF AGE, GENDER AND RISK CLASSIFICATION AT TIME OF POLICY
ISSUE. NOT ALL FUND SUBACCOUNTS ARE AVAILABLE IN EACH SEPARATE ACCOUNT.
1
<PAGE>
MARKET OVERVIEW (continued)
FIRST INVESTORS LIFE SERIES FUND
well as with many Internet-related companies. On a technical basis, the length
of the cycle could present some pressure against continued gains in the short
term. In addition, the impact of lower global economic growth due to Asian
economic turmoil, and its possible impact on U.S. corporate profits, could also
present a risk to U.S. equity investors. And, investments in foreign markets
involve currency risks as well as country specific political and economic risks.
Investors should be aware of these risks and recognize that successful investing
generally requires a long-term commitment to the market.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Clark D. Wagner
Chief Investment Officer
and Portfolio Manager
[SIGNATURE]
Patricia D. Poitra
Director of Equities
and Portfolio Manager
January 29, 1999
2
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS LIFE BLUE CHIP FUND
Dear Investor:
For the year ended December 31, 1998, First Investors Life Blue Chip Fund
returned 18.7% on a net asset value basis compared to a 15.6% return for the
average of similar funds as reported by Lipper Inc. The Fund's positive
performance for the period was due to its investments in the technology,
telecommunications, healthcare and consumer cyclical sectors. Investments in the
energy sector, along with a number of one-time, unforeseeable events, had a
negative effect on the Fund's return.
The Fund's performance was enhanced by a number of holdings in the technology
area. In particular, the Fund's position in leading high-tech firms such as
Microsoft, Cisco Systems and Lucent Technologies all generated above average
returns for the Fund. Despite the fact that the company had to cope with the
Federal Government's anti-trust suit, Microsoft continued to outpace its
competitors in the desktop computer software business. Strong fundamentals
including revenues, earnings and margin improvements continued to drive
Microsoft's stock to new levels. Both Cisco and Lucent benefited from the
increased need for bandwidth on all levels of communication.
Driven by the "graying of America" trend, the Fund's holdings in health care
company stocks performed well in 1998. The Fund's positions in leading
pharmaceutical companies such as Pfizer and Warner-Lambert continued their solid
performance. Pfizer continues to have one of the strongest product pipelines in
the industry, as evidenced by the introduction of Viagra, a male impotence drug,
which was one of the major news events of the year.
Encouraged by a strong domestic economy, consumer demand was strong in the U.S.,
aiding the performance of leading consumer goods companies. AirTouch
Communications, a provider of wireless phone service domestically and abroad,
continued to benefit from the growth in the wireless telecommunications
industry. Time Warner, the cable television company, continued to benefit from
solid entertainment offerings and declining capital expenditures, which led to
an improved earnings outlook. The stocks of retailing giants like Home Depot and
Wal-Mart also continued to enjoy robust growth.
Most stocks in the energy sector did not keep up with the overall market for the
period. Oil companies were negatively affected by declining demand from emerging
markets and overproduction. As the major oil companies began to send signals
that they would be reducing exploration expenditures into the foreseeable
future, the stocks in companies such as Schlumberger and Kerr-McGee, both owned
by the Fund, suffered more than the general market.
With the financial and economic difficulties in Asia and Russia, many large
money center banks and international brokerage houses were hurt in the third
quarter. Their
3
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PORTFOLIO MANAGER'S LETTER (continued)
FIRST INVESTORS LIFE BLUE CHIP FUND
share prices declined sharply due to their worldwide trading and credit
exposures. However, as the equity market rallied in the fourth quarter, the
Fund's holdings in financial services companies like Merrill Lynch, Morgan
Stanley Dean Witter, AIG and Citigroup rebounded strongly.
As with many investment companies, the Fund's performance was negatively
impacted by investments in two firms that reported accounting discrepancies.
Cendant, which had been a Wall Street darling, fell on hard times when it was
discovered that the revenue numbers at CUC International, one of the companies
merged into Cendant, had been inflated. MedPartners, one of the nation's largest
physician practice management companies, was to merge with Phycor, another major
player in physician practice management. However, due to concerns regarding
MedPartners' accounting, Phycor called off the deal. Both events were unique and
difficult to foresee and had a negative impact on the Fund's performance.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Dennis T. Fitzpatrick
Portfolio Manager*
January 29, 1999
* Mr. Fitzpatrick became sole Portfolio Manager of the Fund on September 15,
1998.
4
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE BLUE CHIP FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund--Blue Chip Fund and the Standard & Poor's 500 Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
LIFE BLUE CHIP FUND S+P 500 INDEX
<S> <C> <C>
Mar-90 $9,300 $10,000
Dec-90 9,349 10,007
Dec-91 11,795 13,033
Dec-92 12,582 13,966
Dec-93 13,652 15,332
Dec-94 13,454 15,529
Dec-95 18,028 21,879
Dec-96 21,908 26,902
Dec-97 27,760 35,808
Dec-98 32,939 45,955
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
One Year 18.66% 10.37%
Five Years 19.26% 17.54%
Since Inception (3/8/90) 15.41% 14.47%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES
FUND--BLUE CHIP FUND BEGINNING 3/8/90 (INCEPTION DATE) WITH A THEORETICAL
INVESTMENT IN THE STANDARD & POOR'S 500 INDEX. THE STANDARD & POOR'S 500
INDEX IS AN UNMANAGED CAPITALIZATION-WEIGHTED INDEX OF 500 STOCKS DESIGNED TO
MEASURE PERFORMANCE OF THE BROAD DOMESTIC ECONOMY THROUGH CHANGES IN THE
AGGREGATE MARKET VALUE OF SUCH STOCKS, WHICH REPRESENT ALL MAJOR INDUSTRIES.
IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THIS INDEX. IN ADDITION, THE INDEX
DOES NOT TAKE INTO ACCOUNT FEES AND EXPENSES. FOR PURPOSES OF THE GRAPH AND
THE ACCOMPANYING TABLE, UNLESS OTHERWISE INDICATED, IT HAS BEEN ASSUMED THAT
THE MAXIMUM SALES CHARGE WAS DEDUCTED FROM THE INITIAL $10,000 INVESTMENT IN
THE FUND AND ALL DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
S.E.C. STANDARDIZED AVERAGE ANNUAL TOTAL RETURN SINCE INCEPTION WOULD HAVE
BEEN 14.32%. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE
SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THE ORIGINAL COST. STANDARD & POOR'S 500 INDEX FIGURES FROM STANDARD & POOR'S
AND ALL OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
5
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE BLUE CHIP FUND
December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--94.6%
BASIC MATERIALS--2.0%
27,600 Alcoa, Inc. $ 2,057,925 $ 100
24,300 Du Pont (E.I.) de Nemours & Company 1,289,419 63
20,100 Ecolab, Inc. 727,369 35
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4,074,713 198
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CAPITAL GOODS--8.3%
32,300 Avery Dennison Corporation 1,455,519 71
61,300 General Electric Company 6,256,431 305
49,200 Ingersoll-Rand Company 2,309,325 113
14,600 Pitney-Bowes, Inc. 964,512 47
26,100 Textron, Inc. 1,981,969 97
32,800 Tyco International, Ltd. 2,474,350 121
33,800 Waste Management, Inc. 1,575,925 77
--------------------------------------------------------------------------------------
17,018,031 831
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COMMUNICATION SERVICES--8.0%
42,600 *AirTouch Communications, Inc. 3,072,525 150
28,800 AT & T Corporation 2,167,200 106
38,200 Bell Atlantic Corporation 2,024,600 99
10,000 Century Telephone Enterprises, Inc. 675,000 33
31,400 GTE Corporation 2,117,538 103
28,631 *MCI WorldCom, Inc. 2,054,274 100
46,027 *Qwest Communications International, Inc. 2,301,350 112
38,000 SBC Communications, Inc. 2,037,750 99
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16,450,237 802
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CONSUMER CYCLICALS--7.9%
31,000 *Costco Companies, Inc. 2,237,812 109
40,200 Danaher Corporation 2,183,362 106
29,300 Home Depot, Inc. 1,792,794 87
57,600 Masco Corporation 1,656,000 81
24,400 McGraw-Hill Companies, Inc. 2,485,750 121
34,000 Tribune Company 2,244,000 109
46,000 Wal-Mart Stores, Inc. 3,746,125 183
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16,345,843 796
--------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
CONSUMER STAPLES--15.9%
30,500 Anheuser-Busch Companies, Inc. $ 2,001,562 $ 98
29,000 Bestfoods 1,544,250 75
14,400 *Chancellor Media Corporation 689,400 34
25,000 Coca-Cola Company 1,671,875 81
69,900 Coca-Cola Enterprises, Inc. 2,498,925 122
30,700 Comcast Corporation - Spec. Cl. "A" 1,801,706 88
37,200 General Mills, Inc. 2,892,300 141
41,800 Kellogg Company 1,426,425 69
55,500 PepsiCo, Inc. 2,272,031 111
49,400 Philip Morris Companies, Inc. 2,642,900 129
26,100 Procter & Gamble Company 2,383,256 116
33,400 Rite Aid Corporation 1,655,387 81
31,800 *Safeway, Inc. 1,937,812 94
60,800 *Tele-Communications, Inc. Liberty Media Group
- Ser. "A" 2,800,600 136
45,800 Time Warner, Inc. 2,842,462 138
18,400 Unilever, N.V. 1,526,050 74
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32,586,941 1,587
--------------------------------------------------------------------------------------
ENERGY--4.7%
13,200 Chevron Corporation 1,094,775 53
51,400 Exxon Corporation 3,758,625 183
5,800 Mobil Corporation 505,325 25
21,600 Royal Dutch Petroleum Company 1,034,100 50
57,400 Sunoco, Inc. 2,069,987 101
40,200 Unocal Corporation 1,173,338 57
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9,636,150 469
--------------------------------------------------------------------------------------
FINANCIAL--15.7%
9,300 American Express Company 950,925 46
31,950 American International Group, Inc. 3,087,169 150
29,889 BankAmerica Corporation 1,797,076 88
12,800 Bear Stearns Companies, Inc. 478,400 23
28,500 Charter One Financial, Inc. 790,875 39
35,100 Chase Manhattan Corporation 2,388,994 116
46,900 Citigroup, Inc. 2,321,550 113
27,200 Fannie Mae 2,012,800 98
35,300 First Union Corporation 2,146,681 105
33,700 Freddie Mac 2,171,544 106
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</TABLE>
7
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE BLUE CHIP FUND
December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
FINANCIAL (continued)
54,700 ITT Hartford Group, Inc. $ 3,001,663 $ 146
18,150 Jefferson-Pilot Corporation 1,361,250 66
66,400 MBNA Corporation 1,655,850 81
7,200 Merrill Lynch & Company, Inc. 480,600 23
7,100 Morgan Stanley, Dean Witter, Discover and Company 504,100 25
51,600 PNC Bank Corporation 2,792,850 136
10,300 Progressive Corporation 1,744,563 85
62,800 Wells Fargo Company 2,508,075 122
--------------------------------------------------------------------------------------
32,194,965 1,568
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HEALTHCARE--10.3%
26,700 Abbott Laboratories 1,308,300 64
27,600 American Home Products Corporation 1,554,225 76
37,400 Becton Dickinson & Company 1,596,513 78
21,800 Bristol-Myers Squibb Company 2,917,113 142
15,300 Guidant Corporation 1,686,825 82
86,400 *Health Management Associates, Inc. - Cl. "A" 1,868,400 91
25,400 Johnson & Johnson 2,130,425 104
25,900 Merck & Company, Inc. 3,825,106 186
16,300 Pfizer, Inc. 2,044,631 100
29,700 Warner-Lambert Company 2,233,069 109
--------------------------------------------------------------------------------------
21,164,607 1,032
--------------------------------------------------------------------------------------
TECHNOLOGY--18.0%
43,200 Adobe Systems, Inc. 2,019,600 98
21,500 *Applied Materials, Inc. 917,781 45
48,800 *ASM Lithography Holding, N.V. 1,488,400 73
32,250 *Cisco Systems, Inc. 2,993,203 146
66,100 Compaq Computer Corporation 2,772,069 135
28,900 Intel Corporation 3,426,456 167
19,000 International Business Machines Corporation 3,510,250 171
86,200 *Lam Research Corporation 1,535,438 75
23,200 Lucent Technologies, Inc. 2,552,000 124
142,500 *Micron Electronics, Inc. 2,467,031 120
20,600 *Microsoft Corporation 2,856,963 139
32,400 Motorola, Inc. 1,978,425 96
50,400 *Newbridge Networks Corporation 1,530,900 75
97,800 *Sequent Computer Systems, Inc. 1,179,713 57
- ---------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
SHARES INVESTED
OR FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
TECHNOLOGY (continued)
33,100 *Sterling Commerce, Inc. $ 1,489,500 $ 73
74,800 *Symantec Corporation 1,626,900 79
22,400 Xerox Corporation 2,643,200 129
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36,987,829 1,802
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TRANSPORTATION--1.0%
60,000 Burlington Northern Santa Fe Corporation 2,025,000 99
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UTILITIES--2.8%
17,700 Duke Energy Corporation 1,133,906 55
35,400 Enron Corporation 2,020,013 98
22,000 FPL Group, Inc. 1,355,750 66
57,500 PacifiCorp 1,211,094 59
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5,720,763 278
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194,205,079 9,462
TOTAL VALUE OF COMMON STOCKS (cost $127,330,573)
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SHORT-TERM CORPORATE NOTES--4.9%
$ 3,300M Avco Financial Services, 5.47%, 1/11/99 3,294,963 160
1,700M Chevron USA, Inc., 4.80%, 1/22/99 1,695,239 83
5,000M Texaco, Inc., 5.71%, 1/7/99 4,995,235 243
--------------------------------------------------------------------------------------
9,985,437 486
TOTAL VALUE OF SHORT-TERM CORPORATE NOTES (cost $9,985,437)
--------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $137,316,010) 99.5% 204,190,516 9,948
OTHER ASSETS, LESS LIABILITIES .5 1,061,504 52
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $205,252,020 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
See notes to financial statements
9
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS LIFE CASH MANAGEMENT FUND
Dear Investor:
For the year ended December 31, 1998, First Investors Life Cash Management Fund
returned 5.0% on a net asset value basis.
The Fund's performance was primarily the result of substantial declines in
interest rates, which occurred in an already low interest environment. The
Federal Reserve lowered short-term interest rates three times in an eight week
period that began in September.
Short-term interest rates had remained generally low through most of 1998,
before edging even lower late in the third quarter and throughout the fourth
quarter. It was during that time period that the Federal Reserve lowered
short-term interest rates in an effort to add liquidity to the market place and
stem disruption in the U.S. financial markets caused by the turmoil in several
of the world's emerging economies.
In a year in which economists continuously called for the U.S. economy to slow,
investors focused their efforts on the quality of their portfolios.
Consequently, quality spreads widened over the course of the year, with lower
rated companies having to pay higher interest rates to borrow money than did
higher rated borrowers. In addition, issuers that generated a significant
portion of their revenues from sales in foreign markets came under greater
scrutiny, and were also subject to relatively higher borrowing costs.
Investors continued to express their need to diversify their financial assets by
buying money market funds. In 1998, assets in taxable money market funds
increased by about 27% over the course of the year while assets in tax exempt
money market funds increased by about 17%. Though investors realize that returns
offered by money market funds are generally lower than potential returns offered
by other types of mutual funds, the liquidity and relatively stable net asset
value nature of a money market fund remain key attractions to investors.
According to the Investment Company Institute, money market funds accounted for
more than 50% of all new net cash flows into the mutual fund industry.
Even though the Fund is conservative, there can be no assurance that it will be
able to maintain a stable net asset value of $1.00 per share. Money market
mutual funds are not insured by the Federal Deposit Insurance Corporation and
are not guaranteed by any bank or other entity.
10
<PAGE>
Your Fund will continue to focus on credit quality and liquidity in 1999. The
Fund will continue to purchase only those securities considered at the time of
purchase to present minimal market and credit risk to its shareholders.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Michael J. O'Keefe
Portfolio Manager
January 29, 1999
11
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE CASH MANAGEMENT FUND
December 31, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL INTEREST $10,000 OF
AMOUNT SECURITY RATE* VALUE NET ASSETS
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE NOTES--90.8%
$ 100M Alabama Power Co., 8/1/99 6.38% $100,612 $ 145
210M Archer-Daniels-Midland Co., 1/13/99 5.35 209,629 303
260M Associates Corp., N.A., 9/1/99 7.25 263,340 381
142M BellSouth Telecommunications, 1/27/99 5.10 141,477 205
280M Carolina Power & Light Co., 2/3/99 5.13 278,683 403
200M Chevron USA, Inc., 1/14/99 5.25 199,621 289
150M Colgate-Palmolve Co., 5/24/99 7.21 151,068 218
125M Consolidated Natural Gas Co., 1/28/99 5.13 124,519 180
300M Eastman Kodak Co., 2/8/99 5.10 298,385 431
217M Ford Motor Credit Corp., 5/15/99 7.25 218,111 315
140M General Electric Capital Corp., 1/11/99 4.87 139,811 202
100M General Electric Capital Corp., 2/1/99 8.13 100,199 145
200M Heinz (H.J.) Co., 10/15/99 6.75 202,423 293
200M IBM Credit Corp., 1/6/99 5.19 199,856 289
125M IBM Credit Corp., 5/10/99 6.60 125,546 182
300M Kellog Co., 3/11/99 5.10 297,067 430
350M Nalco Chemical Co., 3/22/99 5.05 346,099 500
350M New York Times Co., 1/5/99 5.35 349,792 506
100M Pacific Telephone-Telegraph Co., 4/1/99 4.63 99,833 144
300M PepsiCo, Inc., 9/1/99 6.25 301,819 436
200M Pitney-Bowes, Inc., 1/6/99 5.65 199,843 289
300M Prudential Funding Corp., 1/15/99 5.24 299,389 433
250M Schering-Plough Corp., 2/17/99 5.08 248,342 359
100M Shell Oil Co., 7/1/99 5.45 100,548 145
110M Southern California Edison Co., 4/15/99 5.20 110,677 160
100M Southwestern Bell Telephone Co., 8/20/99 6.45 100,752 146
100M Texaco, Inc., 1/5/99 5.98 99,934 144
225M Texaco, Inc., 2/17/99 5.08 223,508 323
250M Walt Disney Co., 1/15/99 5.11 249,503 361
300M Washington Gas Light Co., 1/19/99 5.10 299,235 433
200M Winn Dixie Stores, Inc., 1/12/99 5.07 199,690 289
--------------------------------------------------------------------------------------
6,279,311 9,079
TOTAL VALUE OF CORPORATE NOTES (cost $6,279,311)
--------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL INTEREST $10,000 OF
AMOUNT SECURITY RATE* VALUE NET ASSETS
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
VARIABLE RATE NOTES--4.7%
$ 225M General Motors Acceptance Corp., 1/29/99 5.35% $225,020 $ 325
100M Key Bank N.A., 3/4/99 5.65 100,007 145
--------------------------------------------------------------------------------------
325,027 470
TOTAL VALUE OF VARIABLE RATE NOTES (cost $325,027)
--------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.6%
250M Federal Home Loan Bank, 10/28/99
(cost $249,967) 5.00 249,967 361
--------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $6,854,305) 99.1% 6,854,305 9,910
OTHER ASSETS, LESS LIABILITIES .9 62,086 90
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% 6,$916,391 $ 10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
*The interest rates shown for the corporate notes and the U.S. Government
obligations are the effective rates at the time of purchase by the Fund. The
interest rates shown on the variable rate notes are adjusted periodically; the
interest rates shown are the rates that were in effect at December 31, 1998.
See notes to financial statements
13
<PAGE>
PORTFOLIO MANAGERS' LETTER
FIRST INVESTORS LIFE DISCOVERY FUND
Dear Investor:
For the year ended December 31, 1998, the First Investors Life Discovery Fund
returned 3.1% on a net asset value basis compared to a -.3% return for the small
companies growth funds average as reported by Lipper Inc.
For most of 1998, the stocks of smaller-capitalized companies underperformed the
broader equity market. However, in the fourth quarter of 1998, small-caps staged
a remarkable turnaround. The Life Discovery Fund, with its focus on seeking
promising companies in the early stages of their development, benefited from the
rejuvenated small-cap marketplace.
A number of holdings helped the Fund's performance, especially long-term
holdings that were initially purchased at significantly lower prices. Several
investments in the technology sector aided returns, including EMC, a database
management company that benefited from the accelerating demand for storage space
that is necessary for new applications such as the Internet, data warehousing
and Year 2000 testing. Cisco Systems, the market leader in routers and LAN
switches, benefited from the increased need for bandwidth on all levels of
communication. The need for high performance communication routing and switching
equipment drove the stock to new highs during the period.
In the communications sector, Tele-Communications Liberty Media, a leader in
cable programming with ownership interest in the Discovery Channel, QVC, Home
Shopping Network, Encore and Fox Sports, also performed well. Among retailers,
Rite Aid, a national drugstore chain, also had strong performance.
The Fund's return was hindered by the underperformance of a number of holdings,
including Oakwood Homes, a mortgage lender and manufacturer of mobile homes, and
Imperial Credit, a diversified financial services company. These businesses were
negatively impacted by consumer refinancings and credit worries. Adaptec, a
technology firm that develops products that reduce information "bottlenecks,"
was hurt by the increased sophistication of computer hard drives.
During the reporting period, two companies in which the Fund had invested,
experienced significant problems involving alleged fraudulent accounting.
Transcrypt International, a producer of high-end communications equipment,
announced "unresolved accounting principles" relating to certain transactions in
1997. Cendant, which had been a Wall Street darling, fell on hard times when it
was discovered that the revenue numbers at CUC International, one of the
companies merged into Cendant, had been inflated. These events were unique and
difficult to foresee and had a negative impact on the Fund's performance.
14
<PAGE>
A number of the Fund's holdings benefited from merger and acquisition activity:
Brooks Fiber, which the Fund held at the beginning of year, was acquired by MCI
WorldCom; Jones Intercable, in whom Comcast increased its ownership stake; and
Eastern Environmental, which is merging with Waste Management.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
David A. Hanover
Co-Portfolio Manager*
[SIGNATURE]
Patricia D. Poitra
Director of Equities
and Co-Portfolio Manager
January 29, 1999
* Mr. Hanover assumed the position of Co-Portfolio Manager of the Fund on
September 1, 1998.
15
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE DISCOVERY FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund -- Discovery Fund and the Russell 2000 Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
LIFE DISCOVERY FUND RUSSELL 2000 INDEX
<S> <C> <C>
Jan-89 $9,300 $10,000
Dec-89 11,498 11,426
Dec-90 10,869 8,986
Dec-91 16,513 12,911
Dec-92 19,087 15,017
Dec-93 23,305 17,571
Dec-94 22,715 17,010
Dec-95 28,448 21,665
Dec-96 31,999 25,222
Dec-97 37,388 30,785
Dec-98 38,527 30,097
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
One Year 3.05% (4.17%)
Five Years 10.58% 8.98%
Ten Years 15.27% 14.44%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES FUND
- -- DISCOVERY FUND BEGINNING 1/1/89 WITH A THEORETICAL INVESTMENT IN THE RUSSELL
2000 INDEX. THE RUSSELL 2000 INDEX CONSISTS OF THE SMALLEST 2,000 COMPANIES IN
THE RUSSELL 3000 INDEX (WHICH REPRESENTS APPROXIMATELY 98% OF THE INVESTABLE
U.S. EQUITY MARKET). THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX GENERALLY
CONSIDERED AS THE PREMIER OF SMALL CAPITALIZATION STOCKS. IT IS NOT POSSIBLE TO
INVEST DIRECTLY IN THIS INDEX. IN ADDITION, THE INDEX DOES NOT TAKE INTO ACCOUNT
FEES AND EXPENSES. FOR PURPOSES OF THE GRAPH AND THE ACCOMPANYING TABLE, UNLESS
OTHERWISE INDICATED, IT HAS BEEN ASSUMED THAT THE MAXIMUM SALES CHARGE WAS
DEDUCTED FROM THE INITIAL $10,000 INVESTMENT IN THE FUND AND ALL DIVIDENDS AND
DISTRIBUTIONS WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
"S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR TEN YEARS WOULD HAVE
BEEN 14.32%. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE
SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THE ORIGINAL COST. RUSSELL 2000 INDEX FIGURES FROM FRANK RUSSELL AND COMPANY
AND ALL OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
16
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE DISCOVERY FUND
December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--93.5%
BASIC MATERIALS--1.5%
76,900 *ChiRex, Inc. $ 1,643,737 $ 144
--------------------------------------------------------------------------------------
CAPITAL GOODS--2.0%
33,100 Gleason Corporation 599,937 53
16,200 *Ionics, Inc. 484,987 43
19,424 *Sanmina Corporation 1,214,000 107
--------------------------------------------------------------------------------------
2,298,924 203
--------------------------------------------------------------------------------------
COMMUNICATION SERVICES--5.3%
87,300 *Allegiance Telecom, Inc. 1,058,512 93
45,200 *Commonwealth Telephone Enterprises, Inc. 1,514,200 133
98,700 *ICG Communications, Inc. 2,122,050 186
92,200 *US LEC Corporation - Cl. "A" 1,365,712 120
--------------------------------------------------------------------------------------
6,060,474 532
--------------------------------------------------------------------------------------
CONSUMER CYCLICALS--11.6%
31,700 Fingerhut Companies, Inc. 489,369 43
45,750 *Fossil, Inc. 1,315,312 116
52,800 Fred's, Inc. 792,000 70
104,400 Interface, Inc. 968,968 85
49,800 Kellwood Company 1,245,000 109
21,650 *NCO Group, Inc. 974,250 86
40,200 Ogden Corporation 1,007,512 89
39,602 *Saks, Inc. 1,249,938 110
22,900 *StaffMark, Inc. 512,387 45
122,700 *Stage Stores, Inc. 1,150,313 101
30,800 Talbots, Inc. 966,350 85
46,100 *Travis Boats & Motors, Inc. 945,050 83
116,600 Wolverine World Wide, Inc. 1,544,950 136
--------------------------------------------------------------------------------------
13,161,399 1,158
--------------------------------------------------------------------------------------
CONSUMER STAPLES--14.0%
53,100 *Beringer Wine Estates Holdings, Inc. - Cl. "B" 2,372,906 208
68,300 *Cinar Films, Inc. - Cl. "B" 1,733,113 152
56,500 *Citadel Communications Corporation 1,461,938 128
42,800 Earthgrains Company 1,324,125 116
157,894 *Four Media Company 1,282,889 113
48,300 *Jones Intercable, Inc. - Cl. "A" 1,720,688 151
--------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE DISCOVERY FUND
December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
CONSUMER STAPLES (continued)
35,100 *Suiza Foods Corporation $ 1,787,906 $ 157
26,374 *Tele-Communications, Inc. Liberty Media Group
- Ser. "A" 1,214,852 107
63,400 *Whole Foods Market, Inc. 3,066,975 269
--------------------------------------------------------------------------------------
15,965,392 1,401
--------------------------------------------------------------------------------------
ENERGY--1.6%
42,900 *Newfield Exploration Company 895,538 79
74,400 *Veritas DGC, Inc. 967,200 85
--------------------------------------------------------------------------------------
1,862,738 164
--------------------------------------------------------------------------------------
FINANCIAL--8.7%
35,563 Charter One Financial, Inc. 986,873 87
44,500 Chittenden Corporation 1,424,000 125
44,400 Commercial Federal Corporation 1,029,525 90
27,500 Dime Bancorp, Inc. 727,031 64
22,689 *HealthCare Financial Partners, Inc. 904,724 79
38,100 Hooper Holmes, Inc. 1,104,900 97
41,700 Manufactured Home Communities, Inc. 1,045,106 92
61,900 Sterling Bancshares, Inc. 920,763 81
25,900 TCF Financial Corporation 626,456 55
29,800 Westamerica Bancorporation 1,095,150 96
--------------------------------------------------------------------------------------
9,864,528 866
--------------------------------------------------------------------------------------
HEALTHCARE--20.6%
24,600 *Agouron Pharmaceuticals, Inc. 1,445,250 127
30,100 *Alternative Living Services, Inc. 1,023,400 90
161,600 *American Oncology Resources, Inc. 2,353,300 207
18,700 *AmeriSource Health Corp. - Cl. "A" 1,215,500 107
178,700 *Dura Pharmaceuticals, Inc. 2,714,006 238
57,500 *IDEXX Laboratories, Inc. 1,547,112 136
63,500 *IMPATH, Inc. 1,682,750 148
40,700 *Incyte Pharmaceuticals, Inc. 1,521,163 134
55,500 Jones Pharma, Inc. 2,025,750 178
138,780 *Kensey Nash Corporation 1,118,914 98
18,200 *Medicis Pharmaceutical Corporation - Cl. "A" 1,085,175 95
48,400 *Molecular Devices Corporation 1,052,700 92
20,300 *Pediatrix Medical Group, Inc. 1,216,731 107
24,200 Teva Pharmaceutical Industries, Ltd. (ADR) 984,638 86
--------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
HEALTHCARE (continued)
65,600 *TLC The Laser Center, Inc. $ 1,344,800 $ 118
29,900 *Trigon Healthcare, Inc. 1,115,644 98
--------------------------------------------------------------------------------------
23,446,833 2,059
--------------------------------------------------------------------------------------
TECHNOLOGY--28.2%
28,000 *Comverse Technology, Inc. 1,988,000 175
130,800 *Condor Technology Solutions, Inc. 1,308,000 115
13,400 *EMC Corporation 1,139,000 100
44,800 *Etec Systems, Inc. 1,792,000 157
18,300 *Exodus Communications, Inc. 1,175,775 103
19,400 *Flextronics International, Ltd. 1,661,125 146
104,150 *IMRglobal Corporation 3,065,916 269
1,700 *InfoSpace.com, Inc. 64,813 6
49,800 *Level One Communications, Inc. 1,767,900 155
14,600 *Mercury Interactive Corporation 923,450 81
24,003 National Data Corporation 1,168,646 103
58,900 *Netopia, Inc. 401,256 35
31,900 *Network Appliance, Inc. 1,435,500 126
16,700 *New Dimension Software, Ltd. 803,688 71
13,600 *New Era of Networks, Inc. 598,400 53
73,000 *NICE-Systems, Ltd. 1,578,625 139
111,100 *Orckit Communications, Ltd. 1,798,431 158
121,400 *Saville Systems Ireland PLC (ADR) 2,306,600 203
105,600 *Software AG Systems, Inc. 1,914,000 168
66,600 *Symantec Corporation 1,448,550 127
22,200 *Synopsys, Inc. 1,204,350 106
26,700 *Wind River Systems, Inc. 1,254,900 110
19,700 *Xilinx, Inc. 1,282,963 113
--------------------------------------------------------------------------------------
32,081,888 2,819
--------------------------------------------------------------------------------------
106,385,913 9,346
TOTAL VALUE OF COMMON STOCKS (cost $87,119,528)
--------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE DISCOVERY FUND
December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM CORPORATE NOTES--5.5%
$ 4,500M Chevron USA, Inc., 4.80%, 1/22/99 $ 4,487,545 $ 394
1,800M New York Times Co., 5.35%, 1/6/99 1,798,671 158
--------------------------------------------------------------------------------------
6,286,216 552
TOTAL VALUE OF SHORT-TERM CORPORATE NOTES (cost $6,286,216)
--------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $93,405,744) 99.0% 112,672,129 9,898
OTHER ASSETS, LESS LIABILITIES 1.0 1,155,798 102
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $113,827,927 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
See notes to financial statements
20
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS LIFE GOVERNMENT FUND
Dear Investor:
For the year ended December 31, 1998, the First Investors Life Government Fund
returned 7.5% on a net asset value basis compared to a 6.5% return for the
Government National Mortgage Association bond funds average as reported by
Lipper Inc.
During the year, the Fund was invested primarily in mortgage-backed securities
that are guaranteed by the Government National Mortgage Association and other
agencies. The Fund's performance was negatively affected when the
mortgage-backed market experienced two massive refinancing waves, the second of
which provided homeowners with a lifetime-best refinancing opportunity and
substantially changed the composition of the mortgage-backed market. Fixed rate
mortgage supply reached record levels due to record home sales and record
refinancing of mortgages.
The Fund's relative performance during the period was helped by the fact that,
on average, 20% - 25% of the Fund's assets were invested in U.S. Treasury or
Agency securities. Both of these types of bonds substantially outperformed
mortgage-backed securities. Ten-year Treasury yields fell 109 basis points
during 1998, reaching their lowest level since the 1960s in early October,
before backing up to 4.65% at year-end. The Fund also benefited from several
high coupon mortgage-backed pools (58% of assets at year-end), which provided
above average total returns due to slow prepayment (or refinancing) rates.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
/s/ Clark D. Wagner
Clark D. Wagner
Chief Investment Officer
and Portfolio Manager
January 29, 1999
21
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE GOVERNMENT FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund--Government Fund, the Salomon Brothers Mortgage Index and the
Salomon Brothers Government Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
LIFE GOVERNMENT SALOMON BROTHERS SALOMON BROTHERS
<S> <C> <C> <C>
Fund Mortgage Index Government Index
Jan-92 $9,300 $10,000 $10,000
Dec-92 10,213 10,848 10,893
Dec-93 10,865 11,611 12,056
Dec-94 10,419 11,445 11,650
Dec-95 12,048 13,364 13,794
Dec-96 12,480 14,080 14,200
Dec-97 13,555 15,385 15,570
Dec-98 14,577 16,459 17,102
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
One Year 7.54% (.01%)
Five Years 6.05% 4.53%
Since Inception (1-7-92) 6.64% 5.54%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES
FUND--GOVERNMENT FUND BEGINNING 1/7/92 (INCEPTION DATE) WITH THEORETICAL
INVESTMENTS IN THE SALOMON BROTHERS MORTGAGE INDEX AND THE SALOMON BROTHERS
GOVERNMENT INDEX. THE SALOMON BROTHERS MORTGAGE INDEX IS A MARKET
CAPITALIZATION-WEIGHTED INDEX THAT CONSISTS OF ALL AGENCY PASS-THROUGHS AND
FHA AND GNMA PROJECT NOTES. THE 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. EVERY ISSUE INCLUDED IN THE
INDICES IS TRADER-PRICED, AND THE INDICES FOLLOW CONSISTENT AND REALISTIC
AVAILABILITY LIMITS, INCLUDING ONLY THOSE SECURITIES WITH SUFFICIENT AMOUNTS
OUTSTANDING. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THESE INDICES. IN
ADDITION, THE INDICES DO NOT TAKE INTO ACCOUNT FEES AND EXPENSES. FOR
PURPOSES OF THE GRAPH AND THE ACCOMPANYING TABLE, UNLESS OTHERWISE INDICATED,
IT HAS BEEN ASSUMED THAT THE MAXIMUM SALES CHARGE WAS DEDUCTED FROM THE
INITIAL $10,000 INVESTMENT IN THE FUND AND ALL DIVIDENDS AND DISTRIBUTIONS
WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
"S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR, FIVE YEARS AND
SINCE INCEPTION WOULD HAVE BEEN (.22%), 4.23% AND 5.16%, RESPECTIVELY. RESULTS
REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS. INVESTMENT
RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL
COST. SALOMON BROTHERS MORTGAGE INDEX AND SALOMON BROTHERS GOVERNMENT INDEX
FIGURES FROM SALOMON BROTHERS AND ALL OTHER FIGURES FROM FIRST INVESTORS
MANAGEMENT COMPANY, INC.
22
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE GOVERNMENT FUND
December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED CERTIFICATES--71.2%
Federal Home Loan Mortgage Corporation--9.8%
$ 1,017M 8.50%, 7/1/2022-9/1/2024 $ 1,076,390 $ 980
Federal National Mortgage Association--41.4%
842M 7%, 7/1/2025 860,739 783
2,473M 9%, 6/1/2015-11/1/2026 2,618,342 2,382
955M 11%, 10/1/2015 1,071,790 975
Government National Mortgage Association I
Program--20.0%
600M 7.50%, 9/15/2026-3/15/2028 619,086 564
1,289M 8%, 7/15/2018 1,351,216 1,229
207M 11.50%, 10/15/2012-5/15/2015 234,004 213
- --------------------------------------------------------------------------------------
7,831,567 7,126
TOTAL VALUE OF MORTGAGE-BACKED CERTIFICATES (cost $7,812,923)
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--14.4%
500M Federal Home Loan Mortgage Corp., 5.75%,
4/15/2008 514,751 468
1,000M Tennessee Valley Authority Power Board, 6.375%,
6/15/2005 1,063,582 968
- --------------------------------------------------------------------------------------
1,578,333 1,436
TOTAL VALUE OF U.S. GOVERNMENT AGENCY OBLIGATIONS (cost
$1,501,726)
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--9.7%
1,000M U.S. Treasury Notes, 5.625%, 5/15/2008
(cost $1,057,656) 1,067,188 971
- --------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--2.3%
250M Texaco, Inc., 5.08%, 2/17/1999 (cost $249,834) 249,834 227
- --------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $10,622,139) 97.6% 10,726,922 9,760
OTHER ASSETS, LESS LIABILITIES 2.4 264,143 240
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $10,991,065 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
23
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS LIFE GROWTH FUND
Dear Investor:
For the twelve months ended December 31, 1998, the First Investors Life Growth
Fund outperformed the Lipper Growth Fund Average with a total return on a net
asset value basis of 27.4% for the Fund versus 22.9% for the average of funds
with similar objectives. The S&P 500 was up 28.6% in 1998, while the Russell
3000 returned 24.1%.
The U.S. equity market proved to be remarkably resilient during 1998. Investors
chose to discount the possibility of declining earnings, economic recession, and
price deflation. Instead, the market anticipated the more positive scenario of
low inflation and decelerating growth. With this outlook, investors were willing
to pay high valuations for companies able to expand earnings despite a weak
macro environment. In fact, speculative fever was alive and well with Internet
related and select biotechnology shares skyrocketing. Conversely, more
economically sensitive stocks continued to underperform the broad equity
averages. Leading sectors in the broad market were technology, pharmaceuticals,
media, telecommunications, and retail. On the other hand, weaker sectors
included energy, industrial, materials, and aerospace.
The Life Growth Fund outperformed the Lipper average of similar funds by 450
basis points in 1998. This premium was achieved despite our stable growth
approach which resulted in little to no exposure to some of the market's highest
flying stocks. From a sector point of view, holdings in retail, technology, and
healthcare contributed to the Fund's returns. Conversely, stocks in the finance,
energy, and select consumer staple sectors detracted from results. From an
individual stock perspective, top performers for the twelve months included
Wal-Mart Stores, which posted strong apparel same-store sales gains aided by
improved in-store inventory management. Cisco Systems performed well as the
company entered the consumer market, which allowed the firm to leverage its
technology and brand name to generate additional revenue. Texas Instruments
regained upward momentum as capacity and inventories declined, allowing prices
to stabilize. Weaker performers during the twelve months ended December 31, 1998
included: United Healthcare, based on weak HMO pricing, and DuPont, Diamond
Offshore, and Schlumberger as a result of being part of the weak energy and oil
field service sector.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
/s/ Matthew E. Megargel
Matthew E. Megargel
Portfolio Manager
January 29, 1999
24
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE GROWTH FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund--Growth Fund and the Standard & Poor's 500 Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
LIFE S+P
<S> <C> <C>
Growth Fund 500 Index
Jan-89 $9,300 $10,000
Dec-89 11,534 13,132
Dec-90 11,189 12,723
Dec-91 15,070 16,540
Dec-92 16,544 17,766
Dec-93 17,536 19,529
Dec-94 17,032 19,781
Dec-95 21,310 27,146
Dec-96 26,521 33,248
Dec-97 34,287 44,254
Dec-98 43,665 56,795
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
One Year 27.35% 18.44%
Five Years 20.02% 18.29%
Ten Years 16.72% 15.88%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES
FUND--GROWTH FUND BEGINNING 1/1/89 WITH A THEORETICAL INVESTMENT IN THE
STANDARD & POOR'S 500 INDEX. THE STANDARD & POOR'S 500 INDEX IS AN UNMANAGED
CAPITALIZATION-WEIGHTED INDEX OF 500 STOCKS DESIGNED TO MEASURE PERFORMANCE
OF THE BROAD DOMESTIC ECONOMY THROUGH CHANGES IN THE AGGREGATE MARKET VALUE
OF SUCH STOCKS, WHICH REPRESENT ALL MAJOR INDUSTRIES. IT IS NOT POSSIBLE TO
INVEST DIRECTLY IN THIS INDEX. IN ADDITION, THE INDEX DOES NOT TAKE INTO
ACCOUNT FEES AND EXPENSES. FOR PURPOSES OF THE GRAPH AND THE ACCOMPANYING
TABLE, UNLESS OTHERWISE INDICATED, IT HAS BEEN ASSUMED THAT THE MAXIMUM SALES
CHARGE WAS DEDUCTED FROM THE INITIAL $10,000 INVESTMENT IN THE FUND AND ALL
DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
S.E.C. STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR TEN YEARS WOULD HAVE BEEN
15.57%. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS.
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL COST. STANDARD & POOR'S 500 INDEX FIGURES FROM STANDARD & POOR'S AND
ALL OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
25
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE GROWTH FUND
December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--97.9%
AEROSPACE/DEFENSE--1.3%
26,000 Boeing Company $ 848,250 $ 45
14,000 *General Motors Corporation - Cl. "H" 555,625 30
9,000 United Technologies Corporation 978,750 52
- --------------------------------------------------------------------------------------
2,382,625 127
- --------------------------------------------------------------------------------------
BANKS--7.3%
18,950 Associated Banc-Corp. 647,853 35
24,850 BankAmerica Corporation 1,494,106 80
81,899 Citigroup, Inc. 4,054,000 217
37,200 First Union Corporation 2,262,225 121
20,000 Mercantile Bancshares Corporation 770,000 41
19,100 State Street Corporation 1,328,644 71
44,900 U.S. Bancorp 1,593,950 85
12,200 Westamerica Bancorporation 448,350 24
16,000 Wilmington Trust Corporation 986,000 53
- --------------------------------------------------------------------------------------
13,585,128 727
- --------------------------------------------------------------------------------------
BUSINESS SERVICES--2.6%
30,900 *Barnett, Inc. 424,875 23
31,000 Dames & Moore Group 399,125 21
21,000 G & K Services, Inc. - Cl. "A" 1,118,250 60
16,000 Herman Miller, Inc. 428,000 23
20,200 *Ionics, Inc. 604,737 32
24,600 *Tetra Tech, Inc. 665,737 36
34,256 *United Rentals, Inc. 1,134,730 61
- --------------------------------------------------------------------------------------
4,775,454 256
- --------------------------------------------------------------------------------------
CHEMICALS--1.4%
21,300 Du Pont (E.I.) de Nemours & Company 1,130,231 60
19,800 Minerals Technologies, Inc. 810,562 43
20,600 Praxair, Inc. 726,150 39
- --------------------------------------------------------------------------------------
2,666,943 142
- --------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.4%
13,200 *Black Box Corporation 499,950 27
36,750 *Cisco Systems, Inc. 3,410,859 182
9,268 Lucent Technologies, Inc. 1,019,480 55
- --------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMUNICATIONS EQUIPMENT (continued)
14,000 Motorola, Inc. $ 854,875 $ 46
7,600 *Tellabs, Inc. 521,075 28
- --------------------------------------------------------------------------------------
6,306,239 338
- --------------------------------------------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT--5.3%
40,700 Compaq Computer Corporation 1,706,856 91
24,800 *EMC Corporation 2,108,000 113
18,600 Hewlett-Packard Company 1,270,612 68
19,100 International Business Machines Corporation 3,528,725 189
10,300 Xerox Corporation 1,215,400 65
- --------------------------------------------------------------------------------------
9,829,593 526
- --------------------------------------------------------------------------------------
DRUGS--8.6%
45,100 American Home Products Corporation 2,539,694 136
13,100 *Genetech, Inc. 1,043,906 56
24,300 *Genzyme Corporation 1,208,925 65
17,200 Johnson & Johnson 1,442,650 77
13,800 Merck & Company, Inc. 2,038,087 109
19,700 Pfizer, Inc. 2,471,119 132
40,000 Pharmacia & Upjohn, Inc. 2,265,000 121
24,300 Warner-Lambert Company 1,827,056 98
29,100 Zeneca Group PLC (ADR) 1,305,862 70
- --------------------------------------------------------------------------------------
16,142,299 864
- --------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.9%
47,900 General Electric Company 4,888,794 262
31,000 *Littlefuse, Inc. 596,750 32
- --------------------------------------------------------------------------------------
5,485,544 294
- --------------------------------------------------------------------------------------
ELECTRONICS--4.6%
42,700 *Analog Devices, Inc. 1,339,712 72
32,000 *Applied Materials, Inc. 1,366,000 73
17,000 Dallas Semiconductor Corporation 692,750 37
25,600 Intel Corporation 3,035,200 162
16,400 Texas Instruments, Inc. 1,403,225 75
10,300 *Xilinx, Inc. 670,787 36
- --------------------------------------------------------------------------------------
8,507,674 455
- --------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE GROWTH FUND
December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
ENERGY SERVICES--.9%
17,700 Diamond Offshore Drilling, Inc. $ 419,269 $ 22
25,400 Schlumberger, Ltd. 1,171,575 63
- --------------------------------------------------------------------------------------
1,590,844 85
- --------------------------------------------------------------------------------------
ENERGY SOURCES--2.9%
6,900 *Barrett Resources Corporation 165,600 9
19,400 Chevron Corporation 1,608,987 86
24,800 Exxon Corporation 1,813,500 97
39,300 Royal Dutch Petroleum Company 1,881,487 101
- --------------------------------------------------------------------------------------
5,469,574 293
- --------------------------------------------------------------------------------------
ENTERTAINMENT PRODUCTS--.5%
30,200 *Speedway Motorsports, Inc. 860,700 46
- --------------------------------------------------------------------------------------
FINANCIAL SERVICES--5.0%
20,000 American Express Company 2,045,000 109
44,400 Associates First Capital Corporation 1,881,450 101
33,280 Fannie Mae 2,462,720 132
10,000 Finova Group, Inc. 539,375 29
19,400 Franklin Resources, Inc. 620,800 33
27,500 Merrill Lynch & Company, Inc. 1,835,625 98
- --------------------------------------------------------------------------------------
9,384,970 502
- --------------------------------------------------------------------------------------
FOOD/BEVERAGE/TOBACCO--4.0%
14,400 *Beringer Wine Estates Holdings, Inc. - Cl. "B" 643,500 34
19,500 Coca-Cola Company 1,304,062 70
39,100 PepsiCo, Inc. 1,600,656 86
43,700 Philip Morris Companies, Inc. 2,337,950 125
54,000 Sara Lee Corporation 1,522,125 81
- --------------------------------------------------------------------------------------
7,408,293 396
- --------------------------------------------------------------------------------------
HEALTH SERVICES--3.3%
49,450 Columbia/HCA Healthcare Corporation 1,223,887 65
34,000 *Covance, Inc. 990,250 53
13,700 *Henry Schein, Inc. 613,075 33
33,500 Service Corporation International 1,275,094 68
19,500 Servicemaster Company 430,219 23
- --------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
HEALTH SERVICES (continued)
21,600 Shared Medical System Corporation $ 1,077,300 $ 58
14,000 United Healthcare Corporation 602,875 32
- --------------------------------------------------------------------------------------
6,212,700 332
- --------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--3.7%
18,000 *Bush Boake Allen, Inc. 634,500 34
10,000 Colgate-Palmolive Company 928,750 50
8,900 Estee Lauder Companies, Inc. - Cl. "A" 760,950 41
23,000 Gillette Company 1,111,188 59
25,000 Kimberly-Clark Corporation 1,362,500 73
24,000 Procter & Gamble Company 2,191,500 117
- --------------------------------------------------------------------------------------
6,989,388 374
- --------------------------------------------------------------------------------------
HOUSING--.3%
14,600 Ethan Allen Interiors, Inc. 598,600 32
- --------------------------------------------------------------------------------------
INSURANCE--3.8%
45,000 Ace, Ltd. 1,549,688 83
22,593 American International Group, Inc. 2,183,049 117
35,000 Frontier Insurance Group, Inc. 450,625 24
32,400 Marsh & McLennan Companies, Inc. 1,893,375 101
16,000 Reinsurance Group of America, Inc. 1,120,000 60
- --------------------------------------------------------------------------------------
7,196,737 385
- --------------------------------------------------------------------------------------
MACHINERY & MANUFACTURING--.9%
25,000 Donaldson Company, Inc. 518,750 28
31,400 *MSC Industrial Direct Company - Cl. "A" 710,425 38
8,000 Nordson Corporation 411,000 22
- --------------------------------------------------------------------------------------
1,640,175 88
- --------------------------------------------------------------------------------------
MEDIA--7.6%
18,400 *Acxiom Corporation 570,400 31
2,400 *ADVO, Inc. 63,300 3
22,500 *AirTouch Communications, Inc. 1,622,813 87
14,200 *America Online, Inc. 2,055,450 110
2,500 *Catalina Marketing Corporation 170,938 9
25,800 CBS Corporation 844,950 45
25,700 *Cox Communications, Inc. - Cl. "A" 1,776,513 95
29,000 Gannett Company, Inc. 1,919,438 103
- --------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE GROWTH FUND
December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
MEDIA (continued)
23,500 *Tele-Communications, Inc. Liberty Media Group
- Ser. "A" $ 1,082,469 $ 58
35,000 Time Warner, Inc. 2,172,188 116
11,400 *Univision Communication, Inc. - Cl. "A" 412,538 22
52,700 Walt Disney Company 1,581,000 85
- --------------------------------------------------------------------------------------
14,271,997 764
- --------------------------------------------------------------------------------------
MEDICAL PRODUCTS--3.1%
32,000 Abbott Laboratories 1,568,000 84
26,600 Baxter International, Inc. 1,710,713 92
3,700 Biomet, Inc. 148,925 8
27,600 *Boston Scientific Corporation 740,025 40
18,100 Pall Corporation 458,156 25
12,800 Perkin-Elmer Corporation 1,248,800 67
- --------------------------------------------------------------------------------------
5,874,619 316
- --------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--.3%
13,500 Bemis Company, Inc. 512,156 27
- --------------------------------------------------------------------------------------
RETAIL--7.3%
4,000 *Bed Bath & Beyond, Inc. 136,500 7
41,300 CVS Corporation 2,271,500 122
36,000 Dayton Hudson Corporation 1,953,000 104
28,700 Dollar General Corporation 678,038 36
52,000 Home Depot, Inc. 3,181,750 170
27,500 *Staples, Inc. 1,201,406 64
31,600 *Stein Mart, Inc. 220,214 12
40,000 Wal-Mart Stores, Inc. 3,257,500 174
14,200 *Whole Foods Market, Inc. 686,925 37
- --------------------------------------------------------------------------------------
13,586,833 726
- --------------------------------------------------------------------------------------
SOFTWARE/SERVICES--8.7%
9,000 *American Management Systems, Inc. 360,000 19
26,000 Automatic Data Processing, Inc. 2,084,875 112
20,000 *BISYS Group, Inc. 1,032,500 55
30,000 *Computer Sciences Corporation 1,933,125 103
14,700 *DST Systems, Inc. 838,819 45
40,000 First Data Corporation 1,267,500 68
33,000 *Microsoft Corporation 4,576,688 245
- --------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
SOFTWARE/SERVICES (continued)
28,800 *PeopleSoft, Inc. $ 545,400 $ 29
27,500 *Policy Management Systems Corporation 1,388,750 74
41,500 *Sterling Software, Inc. 1,123,094 60
14,200 *Synopsys, Inc. 770,350 41
29,600 *Systems & Computer Technology Corporation 407,000 22
- --------------------------------------------------------------------------------------
16,328,101 873
- --------------------------------------------------------------------------------------
TELEPHONE--4.5%
45,900 Bell Atlantic Corporation 2,432,700 130
3,300 Century Telephone Enterprises, Inc. 222,750 12
40,700 *MCI WorldCom, Inc. 2,920,225 156
54,100 SBC Communications, Inc. 2,901,113 155
- --------------------------------------------------------------------------------------
8,476,788 453
- --------------------------------------------------------------------------------------
TRANSPORTATION--1.2%
25,750 Air Express International Corporation 560,063 30
27,900 C.H. Robinson Worldwide, Inc. 723,656 39
12,000 Union Pacific Corporation 540,750 29
22,500 Werner Enterprises, Inc. 397,969 21
- --------------------------------------------------------------------------------------
2,222,438 119
- --------------------------------------------------------------------------------------
TRAVEL & LEISURE--2.5%
25,000 McDonald's Corporation 1,915,625 102
25,000 *Mesaba Holdings, Inc. 515,625 28
40,000 *Mirage Resorts, Inc. 597,500 32
71,300 Southwest Airlines Company 1,599,794 86
- --------------------------------------------------------------------------------------
4,628,544 248
- --------------------------------------------------------------------------------------
182,934,956 9,788
TOTAL VALUE OF COMMON STOCKS (cost $118,448,492)
- --------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE GROWTH FUND
December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT--2.3%
$ 4,280M Paine Webber, Inc., 4.85%, 1/4/99 (collateralized
by U.S. Treasury Bonds, due 8/15/03, valued at
$4,369,121)(cost $4,280,000) $ 4,280,000 $ 229
- --------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $122,728,492) 100.2% 187,214,956 10,017
EXCESS OF LIABILITIES OVER OTHER ASSETS (.2) (311,215) (17)
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $186,903,741 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
See notes to financial statements
32
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS LIFE HIGH YIELD FUND
Dear Investor:
For the year ended December 31, 1998, the First Investors Life High Yield Fund
returned 3.2% on a net asset value basis compared to a -.4% return for the high
current yield funds average as reported by Lipper Inc. After several years of
strong returns, the high yield market provided modest returns in 1998. The
primary factors that drove the Fund's performance were a deterioration in the
high yield market as a result of the "flight to quality," and a perceived credit
squeeze. This deterioration trend abated in the fourth quarter of 1998. On the
positive side, the Fund's limited exposure to emerging market debt and its focus
on higher-rated junk bonds helped its performance, relative to its peer group.
Through the early part of 1998, the financial markets saw a continuation of the
positive characteristics exhibited in 1997. The financial system remained
supportive, despite widespread emerging markets worries. The equity market
continued its strong performance--the ultimate expression of investor
confidence. This stock market strength and the abundance of initial public
offerings brought to market provided high yield issuers with a source of
financial flexibility and contributed to the positive performance of some
issues. Concerns about Asia led the Treasury market to rally early in 1998.
Within the high yield market, its long-term historical track record and set of
positive fundamentals also encouraged investing. This, in turn, drove issuance
to a record pace. High yield bonds were, and are, a comparatively attractive
source of capital for funding merger and acquisition activity and other
aggressive business plans.
In the second quarter, fear of the Asian contagion and projections of slower
economic growth conflicted with the frenetic pace of issuance, and caused
quality spreads to widen as investors began to resist the lower yields that they
were being asked to accept. In the high yield market, performance leadership
shifted to the "upper tier" (relatively stronger junk bond issues) from the
"middle tier" bonds (those judged to rank lower--not lowest--in credit strength)
where it had been through the first quarter. Extremely aggressive deals, "lower
tier issues," deferred pay (zero coupon) bonds and emerging markets
underperformed the market.
During the third quarter, several severe shocks to the world financial system
caused risk to be both reassessed and shunned by investors. The Russian default
and wider difficulties in emerging markets also negatively impacted the domestic
high yield and investment grade bond markets, as well as the equity markets.
Temporarily, the high yield market experienced severe liquidity concerns and
stratification which caused upper tier issues to outperform lower tier issues.
However, in October, the market reopened for business as the Fed signaled its
determination to prevent a world credit crunch and the few bond deals sold
during this turbulent time rewarded their investors with especially handsome
returns.
33
<PAGE>
PORTFOLIO MANAGER'S LETTER (continued)
FIRST INVESTORS LIFE HIGH YIELD FUND
The Fund's strong relative performance reflects its long-term investment
approach, a credit and quality orientation and its positioning to avoid
dependence on perpetual bull markets. The Fund benefited from diversification
across industry and structure, low exposure to emerging markets, but especially
from its preference for stable to improving companies. While the Fund must
accept the inherent risks of the high yield market, it often shuns the more
speculative investments that carry the greatest level of risk.
As this is written, a variety of market conditions appear to make high yield
bonds attractive investments. These include buoyant domestic economic activity,
a lack of inflation, and a lull in U.S. Treasury demands for capital. To be
fair, the valuation level is--and will likely continue to be--influenced by
concerns about the eventual trade effects from recessions elsewhere. These
concerns have caused the previously mentioned flight to quality as well as a
reluctance by broker-dealers to provide liquidity for deals that they previously
sold to the market. However, 1998 has shown that a well thought out portfolio
strategy provides one with both the ability to weather market turbulence as well
as the opportunity to find undervalued investments.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
George V. Ganter
Portfolio Manager
January 29, 1999
34
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE HIGH YIELD FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund--High Yield Fund and the CS First Boston High Yield Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
CS FIRST
<S> <C> <C>
Life High Yield Fund Boston High Yield Index
Jan-89 $9,300 $10,000
Dec-89 9,136 12,319
Dec-90 8,500 14,001
Dec-91 11,377 14,054
Dec-92 12,884 13,157
Dec-93 15,224 18,914
Dec-94 14,985 22,065
Dec-95 17,956 26,237
Dec-96 20,211 25,983
Dec-97 22,731 30,498
Dec-98 23,447 34,286
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
One Year 3.15% (4.10%)
Five Years 9.02% 7.45%
Ten Years 9.69% 8.90%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES
FUND--HIGH YIELD FUND BEGINNING 1/1/89 WITH A THEORETICAL INVESTMENT IN THE CS
FIRST BOSTON HIGH YIELD INDEX. THE CS FIRST BOSTON HIGH YIELD INDEX IS DESIGNED
TO MEASURE THE PERFORMANCE OF THE HIGH YIELD BOND MARKET. THE INDEX CONSISTS OF
1,568 DIFFERENT ISSUES, 1,371 OF WHICH ARE CASH PAY, 142 ARE ZERO-COUPON, 15 ARE
STEP BONDS, 7 ARE PAY-IN-KIND BONDS AND THE REMAINING 33 ARE IN DEFAULT. THE
BONDS INCLUDED IN THE INDEX HAVE AN AVERAGE LIFE OF 8.2 YEARS, AN AVERAGE
MATURITY OF 8.2 YEARS, AN AVERAGE DURATION OF 4.8 YEARS AND AN AVERAGE COUPON OF
10.0%. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THIS INDEX. IN ADDITION, THE
INDEX DOES NOT TAKE INTO ACCOUNT FEES AND EXPENSES. FOR PURPOSES OF THE GRAPH
AND THE ACCOMPANYING TABLE, UNLESS OTHERWISE INDICATED, IT HAS BEEN ASSUMED THAT
THE MAXIMUM SALES CHARGE WAS DEDUCTED FROM THE INITIAL $10,000 INVESTMENT IN THE
FUND AND ALL DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
"S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR TEN YEARS WOULD HAVE
BEEN 8.68%. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE
SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THE ORIGINAL COST. THE UNUSUALLY HIGH CURRENT YIELDS OFFERED REFLECT THE
SUBSTANTIAL RISKS ASSOCIATED WITH INVESTMENTS IN HIGH YIELD BONDS. THE ISSUERS
OF THE BONDS PAY HIGHER INTEREST RATES BECAUSE THEY HAVE A GREATER LIKELIHOOD
OF FINANCIAL DIFFICULTY, WHICH COULD RESULT IN THEIR INABILITY TO REPAY THE
BONDS FULLY WHEN DUE. PRICES OF HIGH YIELD BONDS ARE ALSO SUBJECT TO GREATER
FLUCTUATIONS. CS FIRST BOSTON HIGH YIELD INDEX FIGURES FROM CS FIRST BOSTON
CORPORATION AND ALL OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY,
INC.
35
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE HIGH YIELD FUND
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS--89.0%
APPAREL/TEXTILES--2.6%
$ 600M Pillowtex Corp., 10%, 2006 $ 645,000 $ 99
1,100M Polymer Group, Inc., 9%, 2007 1,094,500 167
- -------------------------------------------------------------------------------------
1,739,500 266
- -------------------------------------------------------------------------------------
AUTOMOTIVE--5.3%
1,000M Collins & Aikman Products Co., 11.50%, 2006 1,037,500 159
800M Exide Corp., 10%, 2005 800,000 122
900M Special Devices, Inc., 11.375%, 2008 + 920,250 141
700M Walbro Corp., 9.875%, 2005 680,750 104
- -------------------------------------------------------------------------------------
3,438,500 526
- -------------------------------------------------------------------------------------
BUILDING MATERIALS--.7%
500M Falcon Building Products Corp., 9.50%, 2007 446,250 68
- -------------------------------------------------------------------------------------
CHEMICALS--2.5%
600M Huntsman Polymers Corp., 11.75%, 2004 645,000 99
1,025M Hydrochem Industrial Services, Inc., 10.375%,
2007 978,875 150
- -------------------------------------------------------------------------------------
1,623,875 249
- -------------------------------------------------------------------------------------
CONSUMER PRODUCTS--2.0%
700M Commemorative Brands, Inc., 11%, 2007 546,000 84
700M Herff Jones, Inc., 11%, 2005 759,500 116
- -------------------------------------------------------------------------------------
1,305,500 200
- -------------------------------------------------------------------------------------
CONTAINERS/PACKAGING--3.0%
1,000M Radnor Holdings, Inc., 10%, 2003 1,010,000 155
900M Tekni-Plex, Inc., 9.25%, 2008 943,875 144
- -------------------------------------------------------------------------------------
1,953,875 299
- -------------------------------------------------------------------------------------
DURABLE GOODS MANUFACTURING--4.1%
750M Clark Material Handling, Inc., 10.75%, 2006 776,250 119
1,000M Columbus McKinnon Corp., 8.50%, 2008 940,000 144
1,000M Numatics, Inc., 9.625%, 2008 940,000 144
- -------------------------------------------------------------------------------------
2,656,250 407
- -------------------------------------------------------------------------------------
ELECTRIC & GAS UTILITIES--1.5%
1,000M AES Corp., 8.50%, 2007 1,016,250 155
- -------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
ELECTRICAL EQUIPMENT--1.2%
$ 750M Amphenol Corp., 9.875%, 2007 $ 768,750 $ 118
- -------------------------------------------------------------------------------------
ENERGY--4.7%
800M Chesapeake Energy Corp., 9.625%, 2005 604,000 92
800M Giant Industries, Inc., 9.75%, 2003 788,000 121
1,000M Veritas DGC, Inc., 9.75%, 2003 1,020,000 156
650M Vintage Petroleum, Inc., 9%, 2005 638,625 98
- -------------------------------------------------------------------------------------
3,050,625 467
- -------------------------------------------------------------------------------------
ENTERTAINMENT/LEISURE--3.5%
1,100M Loews Cineplex Entertainment, 8.875%, 2008 1,138,500 174
1,200M Outboard Marine Corp., 10.75%, 2008 + 1,176,000 180
- -------------------------------------------------------------------------------------
2,314,500 354
- -------------------------------------------------------------------------------------
FOOD/BEVERAGE/TOBACCO--2.4%
500M Doane Products Co., 9.75%, 2007 + 517,500 79
1,000M International Home Foods, Inc., 10.375%, 2006 1,087,500 166
- -------------------------------------------------------------------------------------
1,605,000 245
- -------------------------------------------------------------------------------------
GAMING/LODGING--1.3%
750M Casino America, Inc., 12.50%, 2003 835,312 128
- -------------------------------------------------------------------------------------
HEALTHCARE--8.3%
700M Dade International, Inc., 11.125%, 2006 778,750 119
500M Fisher Scientific International, Inc., 7.125%,
2005 469,690 72
700M Fisher Scientific International, Inc., 9%, 2008 700,000 107
900M Genesis Health Ventures, Inc., 9.75%, 2005 877,500 134
1,000M Integrated Health Services, 9.50%, 2007 948,750 145
400M Packard Bioscience, Inc., 9.375%, 2007 382,000 58
1,200M Tenet Healthcare Corp., 8.625%, 2007 1,260,000 193
- -------------------------------------------------------------------------------------
5,416,690 828
- -------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--.9%
800M Corning Consumer Products, Inc., 9.625%, 2008 568,000 87
- -------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--8.0%
500M Diamond Cable Communications PLC, 0%-11.75%, 2005 415,625 64
1,100M Diva Systems Corp., 0%-12.625%, 2008 + 415,250 64
- -------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE HIGH YIELD FUND
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
MEDIA (CABLE TV/BROADCASTING) (continued)
$ 1,075M Echostar Communications Corp., 0%-12.875%, 2004 $ 1,104,562 $ 169
500M Grupo Televisa, SA, 11.875%, 2006 496,875 76
500M Rogers Cablesystems, Inc., 10%, 2005 562,500 86
1,000M Salem Communications Corp., 9.50%, 2007 1,035,000 158
500M Sinclair Broadcasting Group, Inc., 9%, 2007 510,000 78
700M Star Choice Communications, Inc., 13%, 2005 703,500 108
- -------------------------------------------------------------------------------------
5,243,312 803
- -------------------------------------------------------------------------------------
MEDIA (OTHER)--4.7%
1,500M Affiliated Newspaper Investments, Inc.,
0%-13.25%, 2006 1,548,750 237
900M Garden State Newspapers, Inc., 12%, 2004 990,000 151
500M Outdoor Systems, Inc., 8.875%, 2007 526,250 81
- -------------------------------------------------------------------------------------
3,065,000 469
- -------------------------------------------------------------------------------------
MINING/METALS--5.9%
900M Commonwealth Aluminum, Corp., 10.75%, 2006 909,000 139
1,000M CSN Iron, SA, 9.125%, 2007 + 615,000 94
750M WCI Steel, Inc., 10%, 2004 748,125 114
700M Wells Aluminum Corp., 10.125%, 2005 675,500 103
1,000M Wheeling-Pittsburgh Corp., 9.25%, 2007 945,000 145
- -------------------------------------------------------------------------------------
3,892,625 595
- -------------------------------------------------------------------------------------
MISCELLANEOUS--4.3%
1,050M Kindercare Learning Centers, Inc., 9.50%, 2009 1,050,000 161
950M Loomis Fargo & Co., 10%, 2004 940,500 144
736M Pierce-Leahy Corp., 11.125%, 2006 816,960 125
- -------------------------------------------------------------------------------------
2,807,460 430
- -------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--4.7%
500M Container Corp., 11.25%, 2004 512,500 78
650M Riverwood International Corp., 10.25%, 2006 652,438 100
800M S.D. Warren Co., Inc., 12%, 2004 874,000 134
1,000M Stone Container Corp., 10.75%, 2002 1,013,750 155
- -------------------------------------------------------------------------------------
3,052,688 467
- -------------------------------------------------------------------------------------
REAL ESTATE/CONSTRUCTION--.5%
800M Cathay International, Ltd., 13%, 2008 + 308,000 47
- -------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
PRINCIPAL INVESTED
AMOUNT FOR EACH
OR $10,000 OF
SHARES SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
RETAIL - FOOD/DRUG--2.9%
$ 1,000M Randall's Food Markets, Inc., 9.375%, 2007 $ 1,077,500 $ 165
820M Stater Brothers Holdings, Inc., 9%, 2004 795,400 122
- -------------------------------------------------------------------------------------
1,872,900 287
- -------------------------------------------------------------------------------------
TELECOMMUNICATIONS--12.5%
650M 21st Century Telecom Group, Inc., 0%-12.25%, 2008 274,625 42
1,000M Comcast Cellular Holdings, Inc., 9.50%, 2007 1,070,000 164
1,500M E. Spire Communications, Inc., 0%-13%, 2005 1,023,750 157
1,000M McCaw International, Ltd., 0%-13%, 2007 535,000 82
1,500M McLeodUSA, Inc., 0%-10.50%, 2007 1,160,625 178
1,250M Netia Holdings BV, 0%-11.25%, 2007 715,625 109
800M Nextlink Communications, Inc., 9%, 2008 759,000 116
700M Paging Network, Inc., 10%, 2008 672,875 103
1,100M Powertel, Inc., 0%-12%, 2006 803,000 123
1,000M Qwest Communications International, Inc.,
0%-9.47%, 2007 772,500 118
700M RCN Corp., 0%-11%, 2008 385,000 59
- -------------------------------------------------------------------------------------
8,172,000 1,251
- -------------------------------------------------------------------------------------
TRANSPORTATION--1.5%
1,000M American Commercial Lines, LLC, 10.25%, 2008 + 1,015,000 155
- -------------------------------------------------------------------------------------
58,167,862 8,901
TOTAL VALUE OF CORPORATE BONDS (cost $59,922,931)
- -------------------------------------------------------------------------------------
COMMON STOCKS--.3%
MEDIA (CABLE TV/BROADCASTING)--.1%
2,100 *Echostar Communications Corp. - Cl. "A" 101,587 16
- -------------------------------------------------------------------------------------
MEDIA (OTHER)--.2%
1,000 *Affiliated Newspaper Investments, Inc. 125,000 19
- -------------------------------------------------------------------------------------
226,587 35
TOTAL VALUE OF COMMON STOCKS (cost $20,963)
- -------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE HIGH YIELD FUND
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
SHARES FOR EACH
OR $10,000 OF
WARRANTS SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
PREFERRED STOCKS--1.3%
MISCELLANEOUS--.5%
327 Day International Group, Inc. $ 301,658 $ 46
- -------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--.8%
10,800 S.D. Warren Co., Inc., 14%, Series "B" 561,600 86
- -------------------------------------------------------------------------------------
863,258 132
TOTAL VALUE OF PREFERRED STOCKS (cost $624,532)
- -------------------------------------------------------------------------------------
WARRANTS--.3%
GAMING/LODGING--.0%
200 *Goldriver Finance Corp., Liquidating Trust 200 --
- -------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--.2%
3,300 *Diva Systems Corp. + 52,800 8
16,212 *Star Choice Communications, Inc. (expiring
12/15/05) + 42,557 7
- -------------------------------------------------------------------------------------
95,357 15
- -------------------------------------------------------------------------------------
MINING/METALS--.0%
800 *Gulf State Steel Acquisition Corp. (expiring
4/15/03) + 8 --
- -------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--.1%
10,800 *S.D. Warren Co., Inc. (expiring 12/15/06) + 54,000 8
- -------------------------------------------------------------------------------------
TELECOMMUNICATIONS--.0%
1,500 *E. Spire Communications, Inc. (expiring 11/1/05)
+ 22,500 4
1,000 *McCaw International, Ltd. (expiring 4/15/07) + 2,500 --
- -------------------------------------------------------------------------------------
25,000 4
- -------------------------------------------------------------------------------------
174,565 27
TOTAL VALUE OF WARRANTS (cost $2,500)
- -------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--1.7%
$ 1,000M U.S. Treasury Note, 6.125%, 2007 (cost
$1,092,969) $ 1,093,125 $ 167
- -------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--5.0%
2,000M Ford Motor Credit Corp., 5.41%, 1/6/99 1,998,497 306
1,250M Ford Motor Credit Corp., 4.96%, 1/7/99 1,248,966 191
- -------------------------------------------------------------------------------------
3,247,463 497
TOTAL VALUE OF SHORT-TERM CORPORATE NOTES (cost $3,247,463)
- -------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $64,911,358) 97.6% 63,772,860 9,759
OTHER ASSETS, LESS LIABILITIES 2.4 1,572,961 241
- -------------------------------------------------------------------------------------
NET ASSETS 100.0% $65,345,821 $10,000
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
+ See Note 5
See notes to financial statements
41
<PAGE>
PORTFOLIO MANAGERS' LETTER
FIRST INVESTORS LIFE INTERNATIONAL SECURITIES FUND
Dear Investor:
For the twelve months ending December 31, 1998, the First Investors Life
International Securities Fund returned on a net asset value basis 18.2%,
compared to a 14.3% return for the Lipper Global average. The Morgan Stanley
Capital International (MSCI) All Country World Free ex-U.S. index, which is
broadly representative of the Fund's investment universe, returned 22.0%. The
MSCI World Index, which represents only the largest markets in the world,
excluding any emerging markets, returned 24.8%.
The Fund outperformed the Lipper group average of similar funds in 1998 by 384
basis points because of the following investment decisions:
- An overweighted position in Europe relative to the competition;
- Strong stock selection and slight overweighting in the U.S.;
- An underweighted position in emerging markets; and
- A lower cash position.
While much has happened since the summer, our overall outlook has changed
relatively little since then, and in fact, since the beginning of 1998. We
continue to feel that Europe remains the most attractive region in which to
invest, as the economies and companies in the region demonstrate marked progress
toward restructuring and reorganization that we believe will unfold over the
next several years and will benefit shareholders. The official unveiling of the
euro on January 1, 1999 should be a boost to this process. Our overweighted
position in Europe relative to the competition contributed positively to
portfolio returns. We are optimistic about the Fund's European holdings going
forward. Toward the end of the summer, we moved into more defensive stocks with
stable growth characteristics, such as drug and cellular phone companies, as
well as utility stocks. Given our outlook for increased uncertainty from
Brazil's economic and currency woes, which in turn could have a ripple effect
threatening cyclical companies that are dependent on a strong global economy and
European banks exposed to Latin America, we believe this positioning will prove
beneficial over time.
The U.S. economy and market have both surprised on the upside in 1998, with
strong consumer spending driving continued strong GDP growth, despite a slowing
in manufacturing activity. The market was led for much of the year by the same
large global companies that have done well over the last several years with
technology companies performing especially well. The Fund's U.S. holdings
performed well for the year, driven by such large global companies as Cisco
Systems and Microsoft.
The Fund's shareholders were rewarded in 1998 by its decision to maintain a
consistently lower weighting in the emerging markets than that of the
competition. The emerging markets (1.1% of Portfolio assets as of 12/31/98) were
on a roller coaster
42
<PAGE>
ride in 1998, bottoming out in September and then rocketing upward towards the
end of the year. Although we missed the October/November rally to some extent by
being underweighted, we do not plan to chase these markets at this point. We
believe that there is much work that remains to be done to recapitalize and
clean up many of the emerging market economies, and that these markets are fully
priced given the risks involved.
We are comfortable, at present, with our overweighted position in Europe as we
expect the European restructuring and deregulation story to continue to unfold.
Going forward, we will look for opportunities to modestly re-deploy assets away
from North America, given our expectations for slowing economic growth and lower
corporate profits in the U.S.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Andrew S. Offit
Co-Portfolio Manager
[SIGNATURE]
Trond Skramstad
Co-Portfolio Manager
January 29, 1999
43
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE INTERNATIONAL SECURITIES FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund - International Securities Fund and the Morgan Stanley Capital
International ("MSCI") All Country World Free Index and the MSCI World Index.+
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
LIFE INTERNATIONAL MSCI MSCI ALL COUNTRY
<S> <C> <C> <C>
Securities Fund World Index World Free Index
Apr-90 $9,300 $10,000 $10,000
Dec-90 9,647 9,873 9,862
Dec-91 11,135 11,746 11,826
Dec-92 10,991 11,200 11,326
Dec-93 13,427 13,791 14,144
Dec-94 13,254 14,563 14,855
Dec-95 15,732 17,665 17,746
Dec-96 18,129 20,138 20,088
Dec-97 19,777 23,159 23,100
Dec-98 23,372 28,435 28,174
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
One Year 18.18% 9.92%
Five Years 11.72% 10.12%
Since Inception (4/16/90) 11.15% 10.23%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES
FUND - INTERNATIONAL SECURITIES FUND BEGINNING 4/16/90 (INCEPTION DATE) WITH
THEORETICAL INVESTMENTS IN THE MSCI ALL COUNTRY WORLD FREE INDEX AND THE MSCI
WORLD INDEX. THE MSCI ALL COUNTRY WORLD FREE INDEX REPRESENTS BOTH THE
DEVELOPED AND THE EMERGING MARKETS. THE INDEX INCLUDES 48 MARKETS OF WHICH
EMERGING MARKETS REPRESENT APPROXIMATELY 5.6%. THE MSCI 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. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THESE INDICES. IN
ADDITION, THE INDICES DO NOT TAKE INTO ACCOUNT FEES AND EXPENSES. FOR
PURPOSES OF THE GRAPH AND THE ACCOMPANYING TABLE, UNLESS OTHERWISE INDICATED,
IT HAS BEEN ASSUMED THAT THE MAXIMUM SALES CHARGE WAS DEDUCTED FROM THE
INITIAL $10,000 INVESTMENT IN THE FUND AND ALL DIVIDENDS AND DISTRIBUTIONS
WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
"S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN SINCE INCEPTION WOULD HAVE
BEEN 9.97%. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE
SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THE ORIGINAL COST. MSCI ALL COUNTRY WORLD FREE INDEX AND MSCI WORLD INDEX
FIGURES FROM MORGAN STANLEY & CO., INC. AND ALL OTHER FIGURES FROM FIRST
INVESTORS MANAGEMENT COMPANY, INC.
+ WE HAVE ADDED A COMPARISON TO THE MSCI ALL COUNTRY WORLD FREE INDEX THIS YEAR
BECAUSE THAT INDEX IS MORE REPRESENTATIVE OF THE FUND'S CURRENT INVESTMENT
UNIVERSE. AFTER THIS YEAR, WE WILL NOT SHOW A COMPARISON TO THE MSCI WORLD
INDEX BECAUSE IT REPRESENTS ONLY THE DEVELOPED MARKETS.
44
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE INTERNATIONAL SECURITIES FUND
December 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--94.9%
UNITED STATES--32.6%
14,250 Abbott Laboratories $ 698,250 $ 76
3,700 Alcoa, Inc. 275,881 30
6,700 AlliedSignal, Inc. 296,894 32
8,450 American Express Company 864,012 94
9,798 American International Group, Inc. 946,732 103
16,800 *Analog Devices, Inc. 527,100 57
7,500 Baxter International, Inc. 482,344 52
8,800 Chevron Corporation 729,850 79
15,600 *Cisco Systems, Inc. 1,447,875 157
15,625 Citigroup, Inc. 773,438 84
10,700 Columbia/HCA Healthcare Corporation 264,825 29
13,900 CVS Corporation 764,500 83
6,500 Du Pont (E.I.) de Nemours & Company 344,906 37
7,050 Duke Energy Corporation 451,641 49
12,200 Exxon Corporation 892,125 97
12,900 Fannie Mae 954,600 104
7,925 First Data Corporation 251,123 27
10,600 Gannett Company, Inc. 701,588 76
700 General Electric Company 71,444 8
11,160 Gillette Company 539,168 58
7,975 Hertz Corporation - Cl. "A" 363,859 39
12,070 Hewlett-Packard Company 824,532 89
19,100 Home Depot, Inc. 1,168,681 127
6,310 Intel Corporation 748,129 81
4,400 International Business Machines Corporation 812,900 88
11,550 Johnson & Johnson 968,756 105
6,750 Kimberly-Clark Corporation 367,875 40
10,350 McDonald's Corporation 793,069 86
12,917 *MCI WorldCom, Inc. 926,795 101
8,550 *Microsoft Corporation 1,185,778 129
32,200 *Mirage Resorts, Inc. 480,988 52
9,700 *PeopleSoft, Inc. 183,694 20
4,300 Pfizer, Inc. 539,381 58
14,130 Pharmacia & Upjohn, Inc. 800,111 87
7,800 Philip Morris Companies, Inc. 417,300 45
5,900 Praxair, Inc. 207,975 23
8,485 Procter & Gamble Company 774,787 84
17,180 SBC Communications, Inc. 921,278 100
8,030 Schlumberger, Ltd. 370,384 40
--------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE INTERNATIONAL SECURITIES FUND
December 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C>
UNITED STATES (continued)
12,100 Servicemaster Company $ 266,956 $ 29
26,750 Southwest Airlines Company 600,203 65
16,275 State Street Corporation 1,132,130 123
12,500 U.S. Bancorp 443,750 48
14,750 Wal-Mart Stores, Inc. 1,201,203 130
15,540 Walt Disney Company 466,200 51
11,150 Warner-Lambert Company 838,341 91
--------------------------------------------------------------------------------------
30,083,351 3,263
--------------------------------------------------------------------------------------
UNITED KINGDOM--15.7%
37,900 Allied Domecq PLC 349,654 38
64,302 Allied Irish Banks PLC 1,146,884 124
58,400 Bank of Scotland 696,677 76
29,700 BOC Group PLC 434,850 47
67,861 BP Amoco PLC 1,013,319 110
93,850 British American Tobacco PLC 825,232 90
31,600 British Telecommunications PLC 476,076 52
35,800 *Cable & Wireless PLC 327,004 35
13,200 *COLT Telecom Group PLC 196,890 21
78,700 Compass Group PLC 901,524 98
56,716 Diageo PLC 645,445 70
17,000 Glaxo Wellcome PLC 584,924 63
5,000 Granada Group PLC 88,389 10
14,400 Great Universal Stores PLC 151,777 16
18,400 HSBC Holdings PLC 458,394 50
9,500 HSBC Holdings PLC (75P) 257,639 28
20,200 National Westminster Bank PLC 389,525 42
82,000 Next PLC 673,966 73
33,900 *Orange PLC 393,972 43
11,000 PowerGen PLC 144,584 16
47,800 Rentokil Initial PLC 360,269 39
50,600 Scottish Power PLC 519,859 56
79,000 Siebe PLC 311,513 34
86,883 Smithkline Beecham PLC 1,214,268 132
52,300 Standard Chartered PLC 606,068 66
60,900 Vodafone Group PLC 988,931 107
8,300 Zeneca Group PLC 361,395 39
--------------------------------------------------------------------------------------
14,519,028 1,575
--------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C>
FRANCE--10.6%
7,830 Alcatel Alsthom $ 958,774 $ 104
4,733 Assurance Generales de France 282,827 31
6,620 Axa-Uap 959,934 104
14,622 Banque Nationale de Paris 1,204,625 131
3,280 Casino Guichard Perrachon 341,739 37
4,220 Compagnie de Saint Gobain 596,057 65
4,250 France Telecom SA 337,808 37
8,320 Paribas 723,418 78
5,880 Renault SA 264,210 29
3,829 Rhone-Poulenc SA - Ser. "A" 197,139 21
5,370 Societe Nationale Elf Aquitane SA 621,019 67
4,900 *STMicroelectronics NV - NY Shs. 382,506 41
2,320 Suez Lyonnaise des Eaux 476,791 52
7,994 Total SA - Cl. "B" 809,988 88
6,130 Vivendi SA 1,591,208 173
--------------------------------------------------------------------------------------
9,748,043 1,058
--------------------------------------------------------------------------------------
JAPAN--6.8%
4,200 Advantest Corporation 266,603 29
88,000 Asahi Bank, Ltd. 322,986 35
10,000 Bridgestone Corporation 227,400 25
29,000 Eisai Company, Ltd. 565,619 61
10,000 Fuji Photo Film 372,351 40
3,600 Mabuchi Motor Company, Ltd. 276,072 30
7,200 Matsumotokiyoshi Company, Ltd. 278,944 30
5,000 Matsushita Communication Industrial Co., Ltd. 236,265 26
37,000 NEC Corporation 341,144 37
2,900 Nichiei Co., Ltd. 231,390 25
14 NTT Mobile Communication Network, Inc. 577,145 63
37,000 Olympus Optical Company, Ltd. 426,103 46
2,000 Rohm Company, Ltd. 182,452 20
118,000 Sakura Bank, Ltd. 270,940 29
6,400 Sony Corporation 466,964 51
8,000 Takeda Chemical Industries 308,519 33
1,900 Takefuji Corporation 138,967 15
65,000 Toshiba Corporation 387,816 42
5,100 Uni-Charm Corporation 239,635 26
6,000 Yamanouchi Pharmaceutical Co., Ltd. 193,622 21
--------------------------------------------------------------------------------------
6,310,937 684
--------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE INTERNATIONAL SECURITIES FUND
December 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C>
NETHERLANDS--4.9%
5,100 Aegon NV $ 626,674 $ 68
4,800 Gucci Group NV NY Reg. Shs. 233,400 25
10,071 ING Groep NV 614,455 67
21,100 Koninklijke Ahold NV 780,286 85
9,700 Philips Electronics NV 651,260 71
5,700 Royal Dutch Petroleum Company 283,987 31
13,141 TNT Post Group NV 423,638 46
10,100 Unilever NV - CVA 863,791 94
--------------------------------------------------------------------------------------
4,477,491 487
--------------------------------------------------------------------------------------
GERMANY--4.7%
660 Allianz AG 242,122 26
13,640 Bayer AG 569,587 62
3,920 *DaimlerChrysler AG 389,523 42
21,410 Hoechst AG 888,267 96
1,160 Karstadt AG 605,935 66
8,140 Mannesmann AG 933,483 101
11,010 Siemens AG 710,632 77
--------------------------------------------------------------------------------------
4,339,549 470
--------------------------------------------------------------------------------------
SWITZERLAND--3.3%
470 Holderbank Financiere Glarus AG 556,410 60
152 Nestle AG 330,896 36
220 Novartis AG 432,477 47
40 Roche Holdings AG - Genussschein 488,102 53
2,070 *Swisscom AG 866,593 94
1,070 UBS AG 328,756 36
--------------------------------------------------------------------------------------
3,003,234 326
--------------------------------------------------------------------------------------
ITALY--3.1%
100,200 Banca Commerciale Italiana 692,753 75
90,700 ENI SpA 594,067 64
186,433 Telecom Italia SpA 1,594,207 173
--------------------------------------------------------------------------------------
2,881,027 312
--------------------------------------------------------------------------------------
AUSTRALIA--2.9%
63,990 *AMP, Ltd. 811,470 88
88,601 Australian & New Zealand Banking Group, Ltd. 580,390 63
25,568 News Corporation, Ltd. 169,056 18
--------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C>
AUSTRALIA (continued)
327,249 Pasminco, Ltd. $ 248,873 $ 27
20,339 Rio Tinto, Ltd. 241,454 26
87,610 Telstra Corporation, Ltd. I/R 410,006 44
64,411 WMC, Ltd. 194,373 21
--------------------------------------------------------------------------------------
2,655,622 287
--------------------------------------------------------------------------------------
SPAIN--2.7%
23,200 Banco Santander SA 461,736 50
33,100 Endesa SA 878,358 95
4,300 Repsol SA 229,732 25
11,200 *Telefonica SA - Bonus Rights 9,959 1
11,200 Telefonica SA 498,774 54
3,337 Telefonica SA (ADR) 451,746 49
--------------------------------------------------------------------------------------
2,530,305 274
--------------------------------------------------------------------------------------
SWEDEN--2.3%
2,090 Hennes & Mauritz AB - Cl. "B" 170,696 19
107,600 Nordbanken Holding AB 690,286 75
18,580 Pharmacia & Upjohn (Swedish Dep. Shs.) 1,040,684 113
9,230 Telefonaktiebolaget LM Ericsson - Cl. "B" 219,774 24
--------------------------------------------------------------------------------------
2,121,440 231
--------------------------------------------------------------------------------------
FINLAND--1.5%
29,120 Metsa-Serla OY - Cl. "B" 238,673 26
9,230 Nokia OYJ - Cl. "A" 1,130,213 123
--------------------------------------------------------------------------------------
1,368,886 149
--------------------------------------------------------------------------------------
HONG KONG--1.3%
86,000 Cheung Kong Holdings, Ltd. 618,882 67
168,500 *China Telecom, Ltd. 291,438 32
36,000 Sun Hung Kai Properties 262,552 28
--------------------------------------------------------------------------------------
1,172,872 127
--------------------------------------------------------------------------------------
DENMARK--.9%
9,320 Unidanmark A/S - Cl. "A" 842,034 91
--------------------------------------------------------------------------------------
CANADA--.6%
10,100 Canadian National Railway Company 523,937 57
--------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE INTERNATIONAL SECURITIES FUND
December 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT
INVESTED
SHARES FOR EACH
OR $10,000 OF
WARRANTS SECURITY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C>
TAIWAN--.5%
30,980 *Taiwan Semiconductor Manufacturing Co., (ADR) $ 439,529 $ 48
--------------------------------------------------------------------------------------
BRAZIL--.3%
9,700 *Embratel Participacoes SA (ADR) 135,194 15
5,800 *Telesp Celular Participacoes SA (ADR) 101,500 11
--------------------------------------------------------------------------------------
236,694 26
--------------------------------------------------------------------------------------
GREECE--.2%
7,800 Panafon Hellenic Telecom SA + 208,897 23
--------------------------------------------------------------------------------------
87,462,876 9,488
TOTAL VALUE OF COMMON STOCKS (cost $66,261,352)
--------------------------------------------------------------------------------------
PREFERRED STOCKS--.1%
BRAZIL
4,500,000 *Telesp Participacoes SA 102,420 11
5,000 *Vale Do Rio Doce - Cl. "B" -- --
--------------------------------------------------------------------------------------
102,420 11
TOTAL VALUE OF PREFERRED STOCKS (cost $130,980)
--------------------------------------------------------------------------------------
WARRANTS--.0%
THAILAND
1,500 *Siam Commercial Bank (exp. 12/31/02) (cost $0) -- --
--------------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C>
FOREIGN GOVERNMENT AND AGENCY SECURITIES--3.7%
GERMANY--2.8%
DM 4,200M Deutschland Treuhand, 5%, 1/14/99 $ 2,523,994 $ 274
--------------------------------------------------------------------------------------
UNITED KINGDOM--.9%
GBP 505M Exchequer, 12.25%, 3/26/99 852,906 93
--------------------------------------------------------------------------------------
3,376,900 367
TOTAL VALUE OF FOREIGN GOVERNMENT AND AGENCY SECURITIES (cost
$3,396,862)
--------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--1.2%
$1,145M Paine Webber, Inc., 4.85%, 1/4/99,
(collateralized by U.S. Treasury Bonds, due
2/15/07, valued at $1,172,427) (cost
$1,145,000) 1,145,000 124
--------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $70,934,194) 99.9% 92,087,196 9,990
OTHER ASSETS, LESS LIABILITIES .1 92,695 10
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $92,179,891 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
+ See note 5
Currency Abbreviations:
DM - German Mark
GBP - British Pound
See notes to financial statements
51
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE INTERNATIONAL SECURITIES FUND
December 31, 1998
Sector diversification of the portfolio was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
PERCENTAGE
SECTOR OF NET ASSETS VALUE
- -------------------------------------------------------------------
<S> <C> <C>
Banks.................................. 13.0% $12,022,429
Drugs.................................. 10.8 9,991,192
Telephone.............................. 7.9 7,253,830
Retail................................. 6.9 6,371,127
Energy Sources......................... 5.6 5,174,087
Media.................................. 5.0 4,624,233
Communication Equipment................ 4.6 4,201,798
Insurance.............................. 4.0 3,672,744
Electronics............................ 3.8 3,538,723
Food/Beverage/Tobacco.................. 3.7 3,432,318
Travel & Leisure....................... 3.1 2,864,173
Business Services...................... 2.8 2,578,118
Financial Services..................... 2.4 2,188,969
Metals & Minerals...................... 2.3 2,113,048
Pipeline............................... 2.2 2,067,999
Computers & Office Equipment........... 2.2 2,025,248
Electric Utilities..................... 2.2 1,994,442
Household Products..................... 2.1 1,921,465
Software Services...................... 1.8 1,620,595
Medical Products....................... 1.7 1,606,697
Electrical Equipment................... 1.5 1,369,661
Chemicals.............................. 1.1 987,731
Automotive............................. .9 881,133
Entertainment Products................. .9 839,315
Health Services........................ .6 531,781
Transportation......................... .6 523,937
Energy Services........................ .4 370,384
Aerospace/Defense...................... .3 296,894
Real Estate Companies.................. .3 262,552
Paper/Forest Products.................. .3 238,673
Foreign Government and Agency
Securities........................... 3.7 3,376,900
Repurchase Agreement................... 1.2 1,145,000
- -------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS 99.9 92,087,196
OTHER ASSETS, LESS LIABILITIES .1 92,695
- -------------------------------------------------------------------
NET ASSETS 100.0% $92,179,891
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
See notes to financial statements
52
<PAGE>
PORTFOLIO MANAGERS' LETTER
FIRST INVESTORS LIFE INVESTMENT GRADE FUND
Dear Investor:
For the year ended December 31, 1998, the First Investors Life Investment Grade
Fund returned 9.2% on a net asset value basis compared to a 6.3% return for the
BBB investment grade bond funds average as reported by Lipper Inc.
The Fund's superior performance relative to its peer group was primarily the
result of its focus on the credit quality of issuers in a marketplace that
changed dramatically during the year.
In the first half of 1998, corporations took advantage of low yields by bringing
a record number of new bond issues to market, causing the yield spread between
Treasuries and corporate bonds to widen. However, merger and acquisition
activity in the banking and telecommunications sectors enabled these spreads to
recover somewhat from their wider trading levels. As a result, investment grade
bonds generally performed in line with government securities.
The overall economic landscape changed as the second part of the year
approached. Overseas economic turmoil caused spreads to widen dramatically. This
in turn led corporate bonds to lag Treasuries. More yield was required to
compensate investors for the perceived deterioration in the economic outlook.
Investors became more attuned to the potential risks to U.S. multi-national
corporations' profits and concerns grew that weakening global demand would
pressure the profitability of commodity-based cyclicals. These uncertainties
prompted a "flight to quality" as investors sought the relative safety of
Treasury securities and, to a lesser extent, the highly rated, highly liquid
debt issues of well-known companies. The situation worsened as broker/dealers
attempted to lighten their bond inventories, which had been inflated by the
large number of new issues brought to market earlier in the year. Bonds of lower
quality and riskier sectors underperformed, and the new issue market was almost
non-existent.
The successive rate cuts by the Fed in the fall seemed to breathe life into the
market as stability and liquidity began to re-emerge. These cuts helped the
bonds of many companies, particularly those in the financial services sector,
which had suffered during the third quarter due to overseas economic turmoil.
New issuance dominated the fourth quarter, as issues were priced at deep
concessions to where secondary issues were trading. Not only did these cheaply
priced new issues perform well, but secondary issues followed suit tightening
throughout the remainder of the year.
During the earlier part of the year, the Fund's exposure to money center banks
and telecommunications companies helped performance as merger and acquisition
activity caused these sectors to outperform. For example, the
Travelers/Citibank, BankAmerica/ NationsBank and AT&T/Teleport and AT&T/TCI
deals helped enhance credit ratings and boost returns. However, the Fund's
underweighted position in Yankee bonds (U.S. dollar denominated bonds issued by
foreign entities that are registered with the
53
<PAGE>
PORTFOLIO MANAGERS' LETTER (continued)
FIRST INVESTORS LIFE INVESTMENT GRADE FUND
Securities and Exchange Commission) negatively impacted returns early in the
year, as Yankee bonds staged a recovery from a dismal fourth quarter of 1997. In
addition, the Fund's duration tended to be shorter than its peers which was a
negative factor as long-term Treasuries rallied.
During the latter part of the year, the situation was largely reversed. Holdings
of money center banks hindered performance during this period, as their
performance lagged amid concerns about their exposure to Asia and hedge funds.
However, in this same period, the Fund's underweighted position in Yankee bonds
helped performance significantly as the sector was hard hit by overseas turmoil
precipitated by the devaluation of the Russian currency. The Fund also benefited
from its focus on two sectors that are viewed as "safe havens": utilities and
defensive industrials. These sectors performed well due to their stability and
non-cyclical nature. In addition, credit quality and liquidity were also key
determinants of performance. The Fund's focus on highly rated, highly liquid
issues of large, well-known companies with strong balance sheets aided returns,
as these benchmark issues outperformed.
Going forward, we will continue to focus on the strategies that have served the
Fund well in the past.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
/s/ Nancy W. Jones
Nancy W. Jones
Co-Portfolio Manager
/s/ Nancy W. Jones
Clark. D. Wagner
Chief Investment Officer
and Co-Portfolio Manager
January 29, 1999
54
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE INVESTMENT GRADE FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund--Investment Grade Fund and the Lehman Brothers Corporate Bond Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
LIFE LEHMAN BROTHERS CORPORATE
INVESTMENT GRADE FUND BOND INDEX
<S> <C> <C>
Jan-92 $9,300 $10,000
Dec-92 10,120 10,869
Dec-93 11,215 12,190
Dec-94 10,819 11,711
Dec-95 12,949 14,317
Dec-96 13,317 14,787
Dec-97 14,624 16,300
Dec-98 15,962 17,697
Average Annual Total Return* S.E.C. Standardized
N.A.V. Only
One Year 9.15% 1.50%
Five Years 7.31% 5.78%
Since Inception (1/7/92) 8.03% 6.92%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES
FUND--INVESTMENT GRADE FUND BEGINNING 1/7/92 (INCEPTION DATE) WITH A THEORETICAL
INVESTMENT IN THE LEHMAN BROTHERS CORPORATE BOND INDEX. THE LEHMAN BROTHERS
CORPORATE BOND INDEX INCLUDES ALL PUBLICLY ISSUED, FIXED RATE, NONCONVERTIBLE
INVESTMENT GRADE DOLLAR-DENOMINATED, S.E.C.-REGISTERED CORPORATE DEBT. ALL
ISSUES HAVE AT LEAST ONE YEAR TO MATURITY AND AN OUTSTANDING PAR VALUE OF AT
LEAST $100 MILLION. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THIS INDEX. IN
ADDITION, THE INDEX DOES NOT TAKE INTO ACCOUNT FEES AND EXPENSES. FOR PURPOSES
OF THE GRAPH AND THE ACCOMPANYING TABLE, UNLESS OTHERWISE INDICATED, IT HAS BEEN
ASSUMED THAT THE MAXIMUM SALES CHARGE WAS DEDUCTED FROM THE INITIAL $10,000
INVESTMENT IN THE FUND AND ALL DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
"S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR, FIVE YEARS AND
SINCE INCEPTION WOULD HAVE BEEN 1.32%, 5.40% AND 6.42%, RESPECTIVELY. RESULTS
REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS. INVESTMENT
RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL
COST. LEHMAN BROTHERS CORPORATE BOND INDEX FIGURES FROM LEHMAN BROTHERS, INC.
AND ALL OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
55
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE INVESTMENT GRADE FUND
December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS--85.9%
AEROSPACE/DEFENSE--5.8%
$ 250M Lockheed Martin Corp., 7.25%, 2006 $ 271,580 $ 126
300M Raytheon Co., 6.15%, 2008 306,442 142
100M Raytheon Co., 6.55%, 2010 105,032 49
250M Rockwell International Corp., 8.375%, 2001 265,064 123
300M Thiokol Corp., 6.625%, 2008 308,011 143
- --------------------------------------------------------------------------------------
1,256,129 583
- --------------------------------------------------------------------------------------
APPAREL/TEXTILES--1.2%
260M Westpoint Stevens, Inc., 7.875%, 2008 265,525 123
- --------------------------------------------------------------------------------------
BASIC MATERIALS--1.3%
270M Navistar International Corp., 8%, 2008 276,075 128
- --------------------------------------------------------------------------------------
CHEMICALS--2.8%
250M Du Pont (E.I.) de Nemours & Co., 8.125%, 2004 281,235 131
300M Lubrizol Corp., 7.25%, 2025 326,028 152
- --------------------------------------------------------------------------------------
607,263 283
- --------------------------------------------------------------------------------------
CONGLOMERATES--2.7%
300M Hanson Overseas B.V., 7.375%, 2003 317,179 147
250M Tenneco, Inc., 7.875%, 2027 259,789 121
- --------------------------------------------------------------------------------------
576,968 268
- --------------------------------------------------------------------------------------
CONSUMER PRODUCTS--2.4%
250M Dial Corp., 6.50%, 2008 251,041 117
265M Mattel, Inc., 6%, 2003 267,836 125
- --------------------------------------------------------------------------------------
518,877 242
- --------------------------------------------------------------------------------------
CONSUMER STAPLES--1.4%
300M Kroger Co., 7%, 2018 307,742 143
- --------------------------------------------------------------------------------------
ELECTRIC & GAS UTILITIES--7.8%
250M Baltimore Gas and Electric Co., 6.50%, 2003 260,827 121
265M Consumers Energy Co., 6.375%, 2008 267,648 124
350M Duke Energy Corp., 5.875%, 2003 352,033 164
200M Kansas Gas & Electric Co., 7.60%, 2003 215,976 100
150M Niagara Mohawk Power Corp., 7.625%, 2005 157,235 73
62M Old Dominion Electric Cooperative, 7.97%, 2002 64,950 30
- --------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
ELECTRIC & GAS UTILITIES (continued)
$ 250M Philadelphia Electric Co., 8%, 2002 $ 268,997 $ 125
75M Southwestern Electric Power Co., 7%, 2007 82,992 39
- --------------------------------------------------------------------------------------
1,670,658 776
- --------------------------------------------------------------------------------------
ENERGY--4.1%
315M Baroid Corp., 8%, 2003 346,864 161
275M Occidental Petroleum Corp., 6.50%, 2005 272,920 127
250M Phillips Petroleum Co., 7.20%, 2023 254,674 118
- --------------------------------------------------------------------------------------
874,458 406
- --------------------------------------------------------------------------------------
ENTERTAINMENT/LEISURE--2.3%
150M Time Warner, Inc., 6.875%, 2018 157,799 73
300M Walt Disney Co., 6.75%, 2006 325,723 151
- --------------------------------------------------------------------------------------
483,522 224
- --------------------------------------------------------------------------------------
FINANCIAL SERVICES--11.1%
200M BankAmerica Corp., 8.50%, 1999 200,765 93
300M Chemical Bank, Inc., 7%, 2005 320,194 149
200M Citicorp, 8%, 2003 216,920 101
300M First Union Corp., 8.125%, 2002 323,490 150
250M Fleet Capital Trust II, 7.92%, 2026 276,376 129
300M KeyCorp, 7.50%, 2006 329,947 153
250M Mellon Bank NA, 6.50%, 2005 260,441 121
50M Meridian Bancorp, 7.875%, 2002 53,659 25
75M Morgan Guaranty Trust Co., 7.375%, 2002 79,042 37
300M NationsBank Corp., 8.125%, 2002 323,436 150
- --------------------------------------------------------------------------------------
2,384,270 1,108
- --------------------------------------------------------------------------------------
FOOD SERVICE--1.2%
250M McDonald's Corp., 6.625%, 2005 259,431 121
- --------------------------------------------------------------------------------------
FOOD/BEVERAGE/TOBACCO--4.8%
250M Anheuser-Busch Cos., Inc., 7%, 2005 261,327 122
225M Coca-Cola Enterprises, Inc., 7.875%, 2002 240,208 112
300M Hershey Foods Corp., 6.70%, 2005 321,650 150
200M Philip Morris Cos., Inc., 7.125%, 2002 209,865 98
- --------------------------------------------------------------------------------------
1,033,050 482
- --------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE INVESTMENT GRADE FUND
December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
GAS TRANSMISSION--2.9%
$ 300M Columbia Energy Group, 6.80%, 2005 $ 317,180 $ 147
300M Enron Corp., 7.125%, 2007 316,115 147
- --------------------------------------------------------------------------------------
633,295 294
- --------------------------------------------------------------------------------------
HEALTHCARE--2.8%
275M Merck & Co., Inc., 5.95%, 2028 276,924 129
300M Warner-Lambert Co., 6%, 2008 316,645 147
- --------------------------------------------------------------------------------------
593,569 276
- --------------------------------------------------------------------------------------
INSURANCE--1.2%
250M First Colony Corp., 6.625%, 2003 261,337 122
- --------------------------------------------------------------------------------------
INVESTMENT/FINANCE COMPANIES--4.6%
300M Associates Corp. of North America, 7.875%, 2001 318,128 148
300M General Electric Capital Corp., 7.875%, 2006 347,466 162
300M General Motors Acceptance Corp., 6.625%, 2005 316,821 147
- --------------------------------------------------------------------------------------
982,415 457
- --------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--4.2%
300M New York Times Co., Inc., 7.625%, 2005 333,900 155
250M News America Holdings, Inc., 8.50%, 2005 281,126 131
300M PanAmSat Corp., 6.375%, 2008 294,074 137
- --------------------------------------------------------------------------------------
909,100 423
- --------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--1.3%
250M Temple Inland, Inc., 9%, 2001 268,421 125
- --------------------------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISE--3.2%
300M Federated Department Stores, Inc., 7.45%, 2017 328,424 153
300M Wal-Mart Stores, Inc., 8%, 2006 351,308 163
- --------------------------------------------------------------------------------------
679,732 316
- --------------------------------------------------------------------------------------
TECHNOLOGY--2.7%
250M International Business Machines Corp., 7%, 2025 278,118 129
275M Xerox Corp., 7.20%, 2016 304,769 142
- --------------------------------------------------------------------------------------
582,887 271
- --------------------------------------------------------------------------------------
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
TELECOMMUNICATIONS--11.1%
$ 300M Cable & Wireless Communications, PLC, 6.75%, 2008 $ 305,822 $ 142
350M MCI Communication Corp., 7.50%, 2004 380,392 177
250M New Jersey Bell Telephone Co., 7.375%, 2012 254,511 118
300M New York Telephone Co., 7.25%, 2024 315,028 146
200M Pacific Bell Telephone Co., 7%, 2004 216,113 101
275M Sprint Capital Corp., 6.125%, 2008 281,114 131
300M TCI Communications, Inc., 6.375%, 2003 310,664 144
305M WorldCom, Inc., 8.875%, 2006 332,414 155
- --------------------------------------------------------------------------------------
2,396,058 1,114
- --------------------------------------------------------------------------------------
TRANSPORTATION--1.5%
300M Norfolk Southern Corp., 7.35%, 2007 331,076 154
- --------------------------------------------------------------------------------------
UTILITIES--1.5%
300M Pennsylvania Power & Light Co., 6.875%, 2003 315,344 147
- --------------------------------------------------------------------------------------
18,467,202 8,586
TOTAL VALUE OF CORPORATE BONDS (cost $17,670,738)
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--7.7%
1,600M U.S. Treasury Note, 5.50%, 2003 (cost $1,622,933) 1,651,500 768
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--2.4%
500M Federal National Mortgage Association, 5.75%,
2008 (cost $500,654) 518,997 241
- --------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--1.8%
400M Ford Motor Credit Corp., 4.96%, 1/7/99
(cost $399,699) 399,699 186
- --------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $20,194,024) 97.8% 21,037,398 9,781
OTHER ASSETS, LESS LIABILITIES 2.2 471,206 219
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $21,508,604 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
59
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS LIFE TARGET MATURITY 2007 FUND
FIRST INVESTORS LIFE TARGET MATURITY 2010 FUND
Dear Investor:
For the year ended December 31, 1998, the First Investors Life Target Maturity
2007 Fund and the First Investors Life Target Maturity 2010 Fund ("the Funds")
returned 15.0% and 14.4%, respectively, on a net asset value basis.
The Funds' investment objective is to seek a predictable compounded return for
investors who hold the Funds until maturity. In order to meet this objective,
the Funds are fully invested in high-quality zero coupon bonds. These bonds are
very sensitive to the changes in interest rates. Consequently, with long-term
interest rates falling in 1998, zero coupon bonds provided higher returns than
did the bond market in general. The Target Maturity 2010 Fund had a higher
return than that of the Target Maturity 2007 Fund because the former has a
longer average maturity.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Clark D. Wagner
Chief Investment Officer
and Portfolio Manager
January 29, 1999
60
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE TARGET MATURITY 2007 FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund--Target Maturity 2007 Fund and the Salomon Brothers Government
Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
Life Target Maturity Salomon Brothers
<S> <C> <C>
2007 Fund Government Index
Apr-95 $9,300 $10,000
Dec-95 11,405 11,162
Dec-96 11,159 11,490
Dec-97 12,652 12,599
Dec-98 14,546 13,839
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
One Year 14.97% 6.93%
Since Inception (4/26/95) 12.90% 10.70%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES
FUND--TARGET MATURITY 2007 FUND BEGINNING 4/26/95 (INCEPTION DATE) WITH A
THEORETICAL INVESTMENT IN THE SALOMON BROTHERS GOVERNMENT INDEX. THE 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. EVERY ISSUE INCLUDED IN THE INDEX IS TRADER-PRICED, AND THE INDEX
FOLLOWS CONSISTENT AND REALISTIC AVAILABILITY LIMITS, INCLUDING ONLY THOSE
SECURITIES WITH SUFFICIENT AMOUNTS OUTSTANDING. IT IS NOT POSSIBLE TO INVEST
DIRECTLY IN THIS INDEX. IN ADDITION, THE INDEX DOES NOT TAKE INTO ACCOUNT
FEES AND EXPENSES. FOR PURPOSES OF THE GRAPH AND THE ACCOMPANYING TABLE,
UNLESS OTHERWISE INDICATED, IT HAS BEEN ASSUMED THAT THE MAXIMUM SALES CHARGE
WAS DEDUCTED FROM THE INITIAL $10,000 INVESTMENT IN THE FUND AND ALL
DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
"S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR AND SINCE
INCEPTION WOULD HAVE BEEN 6.76% AND 10.55%, RESPECTIVELY. RESULTS REPRESENT
PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. SALOMON
BROTHERS GOVERNMENT INDEX FIGURES FROM SALOMON BROTHERS AND ALL OTHER FIGURES
FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
61
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE TARGET MATURITY 2007 FUND
December 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL EFFECTIVE $10,000 OF
AMOUNT SECURITY YIELD* VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY ZERO COUPON
OBLIGATIONS--55.4%
Agency For International Development - Israel:
$ 570M 2/15/2007 5.06% $380,000 $ 144
119M 3/15/2007 5.06 78,999 30
1,513M 8/15/2007 5.04 985,426 372
1,000M 11/15/2007 5.00 644,997 244
980M 2/15/2008 5.13 617,634 233
493M Federal Judiciary Office Building, 2/15/2007 5.23 324,211 123
Federal National Mortgage Association:
719M 11/29/2007 5.14 455,364 172
215M 2/1/2008 5.25 134,309 51
1,030M 8/1/2008 5.28 625,319 236
Government Trust Certificate - Israel Trust:
181M 10/1/2007 5.04 117,056 44
2,741M 11/15/2007 5.08 1,755,756 663
3,304M 11/15/2007 5.08 2,116,387 800
Government Trust Certificate - Turkey Trust:
584M 11/15/2007 5.08 374,083 141
182M 11/15/2007 5.08 116,581 44
586M International Bank for Reconstruction &
Development, 8/15/2007 5.70 360,920 136
5,070M Resolution Funding Corporation, 10/15/2007 4.96 3,295,632 1,245
Tennessee Valley Authority:
2,600M 11/1/2007 5.20 1,652,550 624
1,000M 4/15/2008 5.32 614,024 232
--------------------------------------------------------------------------------------
14,649,248 5,534
TOTAL VALUE OF U.S. GOVERNMENT AGENCY ZERO
COUPON OBLIGATIONS (cost $12,873,696)
--------------------------------------------------------------------------------------
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL EFFECTIVE $10,000 OF
AMOUNT SECURITY YIELD* VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. TREASURY ZERO COUPON
OBLIGATIONS--44.3%
$ 200M Treasury Investors Growth Receipts, 11/15/2007 4.91% $130,006 $ 49
17,700M U.S. Treasury Strips, 11/15/2007 4.91 11,605,660 4,384
--------------------------------------------------------------------------------------
11,735,666 4,433
TOTAL VALUE OF U.S. TREASURY ZERO COUPON OBLIGATIONS (cost $10,146,267)
--------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $23,019,963) 99.7% 26,384,914 9,967
OTHER ASSETS, LESS LIABILITIES .3 87,679 33
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% 26,$472,593 $ 10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* The effective yields shown for the zero coupon obligations are the effective
yields at December 31, 1998.
See notes to financial statements
63
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE TARGET MATURITY 2010 FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund--Target Maturity 2010 Fund and the Salomon Brothers Government
Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
Life Target Maturity Salomon Brothers
<S> <C> <C>
2010 Fund Government Index
Apr-96 $9,300 $10,000
Dec-96 10,381 10,596
Dec-97 12,028 11,619
Dec-98 13,755 12,762
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
One Year 14.36% 6.32%
Since Inception (4/30/96) 15.77% 12.68%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES
FUND--TARGET MATURITY 2010 FUND BEGINNING 4/30/96 (INCEPTION DATE) WITH A
THEORETICAL INVESTMENT IN THE SALOMON BROTHERS GOVERNMENT INDEX. THE 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. EVERY ISSUE INCLUDED IN THE INDEX IS TRADER-PRICED, AND THE INDEX
FOLLOWS CONSISTENT AND REALISTIC AVAILABILITY LIMITS, INCLUDING ONLY THOSE
SECURITIES WITH SUFFICIENT AMOUNTS OUTSTANDING. IT IS NOT POSSIBLE TO INVEST
DIRECTLY IN THIS INDEX. IN ADDITION, THE INDEX DOES NOT TAKE INTO ACCOUNT
FEES AND EXPENSES. FOR PURPOSES OF THE GRAPH AND THE ACCOMPANYING TABLE,
UNLESS OTHERWISE INDICATED, IT HAS BEEN ASSUMED THAT THE MAXIMUM SALES CHARGE
WAS DEDUCTED FROM THE INITIAL $10,000 INVESTMENT IN THE FUND AND ALL
DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
"S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR AND SINCE
INCEPTION WOULD HAVE BEEN 6.14% AND 12.54%, RESPECTIVELY. RESULTS REPRESENT
PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. SALOMON
BROTHERS GOVERNMENT INDEX FIGURES FROM SALOMON BROTHERS AND ALL OTHER FIGURES
FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
64
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE TARGET MATURITY 2010 FUND
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL EFFECTIVE $10,000 OF
AMOUNT SECURITY YIELD* VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY ZERO COUPON
OBLIGATIONS--53.5%
Agency For International Development - Israel:
$ 603M 8/15/2010 5.41% $324,159 $ 359
495M 9/15/2010 5.42 264,750 293
Federal National Mortgage Association:
700M 10/8/2010 5.60 365,572 405
600M 11/29/2010 5.61 310,433 344
693M 2/1/2011 5.59 355,885 394
200M Government Trust Certificate - Israel Trust,
11/15/2010 5.51 104,959 116
1,700M Government Trust Certificate - Turkey Trust,
11/15/2010 5.51 892,151 988
Resolution Funding Corporation:
250M 10/15/2010 5.39 133,610 148
2,718M 1/15/2011 5.42 1,428,404 1,582
1,250M Tennessee Valley Authority, 11/1/2010 5.63 647,969 717
--------------------------------------------------------------------------------------
4,827,892 5,346
TOTAL VALUE OF U.S. GOVERNMENT AGENCY ZERO COUPON OBLIGATIONS
(cost $4,227,702)
--------------------------------------------------------------------------------------
U.S. TREASURY ZERO COUPON OBLIGATIONS--46.3%
7,730M U.S. Treasury Strips, 11/15/2010 (cost
$3,667,723) 5.24 4,185,138 4,635
--------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $7,895,425) 99.8% 9,013,030 9,981
OTHER ASSETS, LESS LIABILITIES .2 17,369 19
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% 9,$030,399 $ 10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* The effective yields shown for the zero coupon obligations are the effective
yields at December 31, 1998.
See notes to financial statements
65
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS LIFE UTILITIES INCOME FUND
Dear Investor:
For the year ended December 31, 1998, First Investors Life Utilities Income Fund
returned 12.6% on a net asset value basis compared to a 18.3% return for the
utilities funds average as reported by Lipper Inc.
The Fund's positive performance is attributable in part to the strong
performance of the telephone and electric sectors, which were relatively
unscathed by the economic malaise in Asia. The increased demand for data and
wireless services benefited the telephone sector and helped to offset the
effects of increased competition. A number of the Fund's telephone sector
holdings fared well, such as Century Telephone Enterprises, the nation's tenth
largest local exchange carrier and cellular company providing services in rural
areas including the Pacific Northwest and Midwest. MCI WorldCom, the second
largest long distance company formed by WorldCom's acquisition of MCI, also
performed well.
The electric utility sector showed moderate gains as regulatory concerns
lessened. States that passed regulatory legislation allowed for industry
restructuring plans that were generally reasonable from the utilities'
perspective. One example is Consolidated Edison, the best performing electric
company in the Fund. A restructuring agreement with New York regulators called
for rate reductions for customers, but allowed Con Ed to cut costs, sell its
generating assets and recapitalize in order to enhance shareholder value.
The Fund was hampered by the fact that its weighting in the two best performing
sectors -- telecommunications and electric utilities -- was at times not in-sync
with their performance. Energy stocks hurt performance, primarily reflecting
weak commodity prices. Oil and gas holdings were impacted by decreasing prices
brought on by weak Asian demand and abnormally warm weather in the U.S. during
the 1997-1998 winter heating season. Also, the Fund maintained a relatively
modest corporate bond position during a period of time when the bond market
rallied amid declining interest rates.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Matthew S. Wright
Portfolio Manager*
January 29, 1999
*Mr. Wright assumed the position of Portfolio Manager on September 28, 1998.
66
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS LIFE UTILITIES INCOME FUND
Comparison of change in value of $10,000 investment in the First Investors Life
Series Fund -- Utilities Income Fund, the Standard & Poor's 500 Index and the
Standard & Poor's Utilities Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
LIFE UTILITIES S+P S+P
<S> <C> <C> <C>
Income Fund 500 Index Utilities Index
Nov-93 $9,300 $10,000 $10,000
Dec-93 9,247 10,121 9,906
Dec-94 8,577 10,251 8,617
Dec-95 11,172 14,443 11,815
Dec-96 12,242 17,759 12,133
Dec-97 15,312 23,638 15,138
Dec-98 17,237 25,964 17,375
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
One Year 12.58% 4.66%
Five Years 13.27% 11.63%
Since Inception (11/15/93) 12.78% 11.20%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS LIFE SERIES
FUND -- UTILITIES INCOME FUND BEGINNING 11/15/93 (INCEPTION DATE) WITH
THEORETICAL INVESTMENTS IN THE STANDARD & POOR'S 500 INDEX AND THE STANDARD &
POOR'S UTILITIES INDEX. THE STANDARD & POOR'S 500 INDEX IS AN UNMANAGED
CAPITALIZATION-WEIGHTED INDEX OF 500 STOCKS DESIGNED TO MEASURE PERFORMANCE
OF THE BROAD DOMESTIC ECONOMY THROUGH CHANGES IN THE AGGREGATE MARKET VALUE
OF SUCH STOCKS, WHICH REPRESENT ALL MAJOR INDUSTRIES. THE STANDARD & POOR'S
UTILITIES INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF 37 STOCKS DESIGNED TO
MEASURE THE PERFORMANCE OF THE UTILITY SECTOR OF THE STANDARD & POOR'S 500
INDEX. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THESE INDICES. IN ADDITION,
THE INDICES DO NOT TAKE INTO ACCOUNT FEES AND EXPENSES. FOR PURPOSES OF THE
GRAPH AND THE ACCOMPANYING TABLE, UNLESS OTHERWISE INDICATED, IT HAS BEEN
ASSUMED THAT THE MAXIMUM SALES CHARGE WAS DEDUCTED FROM THE INITIAL $10,000
INVESTMENT IN THE FUND AND ALL DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/98) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE "S.E.C. STANDARDIZED" RETURNS SHOWN ARE
BASED ON THE MAXIMUM SALES CHARGE OF 7%. SOME OR ALL OF THE EXPENSES OF THE
FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND, THE
S.E.C. STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR, FIVE YEARS AND
SINCE INCEPTION WOULD HAVE BEEN 4.51%, 11.43% AND 11.02%, RESPECTIVELY.
RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS.
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL COST. STANDARD & POOR'S 500 INDEX AND STANDARD & POOR'S UTILITIES
INDEX FIGURES FROM STANDARD & POOR'S AND ALL OTHER FIGURES FROM FIRST
INVESTORS MANAGEMENT COMPANY, INC.
67
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS LIFE UTILITIES INCOME FUND
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--91.9%
CAPITAL GOODS--1.1%
5,300 General Electric Company $ 540,931 $ 107
- -------------------------------------------------------------------------------------
COMMUNICATION SERVICES--29.2%
9,100 *AirTouch Communications, Inc. 656,337 130
8,400 AT & T Corporation 632,100 125
27,700 Bell Atlantic Corporation 1,468,100 291
27,000 BellSouth Corporation 1,346,625 267
1,300 British Telecommunication PLC (ADR) 197,194 39
23,450 Century Telephone Enterprises, Inc. 1,582,875 314
17,400 Compania Anonima Nacional Telefonos de Venezuela
(ADR) 309,937 61
2,200 France Telecom SA (ADR) 173,662 34
6,000 GTE Corporation 404,625 80
21,500 *ICG Communications, Inc. 462,250 92
33,200 *Intermedia Communications, Inc. 572,700 114
22,453 *MCI WorldCom, Inc. 1,611,003 319
15,000 *MetroNet Communications Corporation - Cl. "B" 502,500 100
18,061 *Qwest Communications International, Inc. 903,050 179
29,800 SBC Communications, Inc. 1,598,025 317
5,100 Telecom Italia SpA (ADR) 443,700 88
5,200 Telecomunicacoes Brasileiras SA - Telebras (ADR) 377,975 75
6,100 Telephone and Data Systems, Inc. 274,119 54
18,500 US West, Inc. 1,195,562 237
- -------------------------------------------------------------------------------------
14,712,339 2,916
- -------------------------------------------------------------------------------------
CONSUMER STAPLES--1.1%
12,400 *MediaOne Group, Inc. 582,800 116
- -------------------------------------------------------------------------------------
ENERGY--3.1%
4,100 Elf Aquitaine SA (ADR) 232,162 46
9,400 Murphy Oil Corporation 387,750 77
36,700 *Seagull Energy Corporation 231,669 46
19,900 Valero Energy Corporation 422,875 84
10,900 YPF Sociedad Anonima (ADR) 304,519 60
- -------------------------------------------------------------------------------------
1,578,975 313
- -------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
UTILITIES--57.4%
5,900 AGL Resources, Inc. $ 136,069 $ 27
9,700 American Water Works Company, Inc. 327,375 65
18,600 BEC Energy 766,087 152
19,800 Coastal Corporation 691,762 137
4,000 Columbia Energy Group 231,000 46
18,100 Consolidated Edison, Inc. 957,037 190
15,400 Dominion Resources, Inc. 719,950 143
32,550 DQE, Inc. 1,430,166 284
12,700 DTE Energy Company 544,512 108
12,400 Duke Energy Corporation 794,375 158
47,400 Dynegy, Inc. 518,438 103
12,300 El Paso Energy Corporation 428,194 85
14,100 Endesa SA (ADR) 380,700 75
1,100 Energen Corporation 21,450 4
11,400 Enersis SA (ADR) 294,262 58
15,200 Enron Corporation 867,350 172
14,500 FirstEnergy Corporation 472,156 94
21,800 Florida Progress Corporation 976,912 194
19,700 FPL Group, Inc. 1,214,013 241
19,100 GPU, Inc. 843,981 167
21,800 Houston Industries, Inc. 700,325 139
30,800 Illinova Corporation 770,000 153
21,300 MDU Resources Group, Inc. 560,456 111
6,000 Montana Power Company 339,375 67
20,500 New Century Energies, Inc. 999,375 198
9,400 New Jersey Resources Corporation 371,300 74
30,700 *Niagara Mohawk Power Corporation 495,038 98
6,300 NICOR, Inc. 266,175 53
22,500 NIPSCO Industries, Inc. 684,844 136
19,000 Northern States Power Company 527,250 105
40,900 OGE Energy Corporation 1,186,100 235
8,700 Oneok, Inc. 314,288 62
12,700 PacifiCorp 267,494 53
7,800 Piedmont Natural Gas Company, Inc. 281,775 56
17,900 Pinnacle West Capital Corporation 758,513 150
20,300 Public Service Company of New Mexico 414,881 82
17,000 Public Service Enterprise Group, Inc. 680,000 135
17,800 Questar Corporation 344,875 68
13,600 SCANA Corporation 438,600 87
30,000 Sempra Energy 761,250 151
- -------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS LIFE UTILITIES INCOME FUND
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
SHARES INVESTED
OR FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
UTILITIES (continued)
16,500 Sierra Pacific Resources $ 627,000 $ 124
22,600 Texas Utilities Company 1,055,138 209
25,700 Unicom Corporation 991,056 197
13,800 UtiliCorp United, Inc. 506,288 100
2,000 Washington Gas Light Company 54,250 11
23,000 Western Resources, Inc. 764,750 152
37,800 Williams Companies, Inc. 1,178,888 234
- -------------------------------------------------------------------------------------
28,955,073 5,743
- -------------------------------------------------------------------------------------
46,370,118 9,195
TOTAL VALUE OF COMMON STOCKS (cost $36,618,414)
- -------------------------------------------------------------------------------------
PREFERRED STOCKS--.5%
UTILITIES
4,800 Lakehead Pipe Line Partners, L.P., $2.72
(cost $230,169) 232,800 46
- -------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS--2.4%
UTILITIES
61,400 Avista Corporation, $1.24, 11/1/2001 (cost
$1,166,952) 1,189,625 236
- -------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--4.7%
$ 2,400M Ford Motor Credit Corp., 4.96%, 1/7/99
(cost $2,398,016) 2,398,016 475
- -------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $40,413,551) 99.5% 50,190,559 9,952
OTHER ASSETS, LESS LIABILITIES .5 241,190 48
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $50,431,749 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
See notes to financial statements
70
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
FIRST INVESTORS LIFE SERIES FUND
December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CASH
BLUE CHIP MANAGEMENT DISCOVERY
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in securities:
At identified cost................... $137,316,010 $6,854,305 $ 93,405,744
------------ ---------- ------------
------------ ---------- ------------
At value (Note 1A)................... $204,190,516 $6,854,305 $112,672,129
Cash................................... (103,699) 48,647 646,047
Receivables:
Investment securities sold........... 1,852,059 -- 3,255,090
Interest and dividends............... 140,503 38,816 20,614
Trust shares sold.................... 71,621 1,643 31,750
------------ ---------- ------------
Total Assets........................... 206,151,000 6,943,411 116,625,630
------------ ---------- ------------
LIABILITIES
Payables:
Investment securities purchased...... 742,518 -- 2,676,959
Trust shares redeemed................ 22,377 15,417 50,417
Accrued advisory fee................... 123,502 3,424 66,847
Accrued expenses....................... 10,583 8,179 3,480
------------ ---------- ------------
Total Liabilities...................... 898,980 27,020 2,797,703
------------ ---------- ------------
NET ASSETS............................. $205,252,020 $6,916,391 $113,827,927
------------ ---------- ------------
------------ ---------- ------------
NET ASSETS CONSIST OF:
Capital paid in........................ $133,648,912 $6,916,391 $ 93,972,964
Undistributed net investment income.... 1,399,370 -- 371,841
Accumulated net realized gain on
investments.......................... 3,329,232 -- 216,737
Net unrealized appreciation of
investments.......................... 66,874,506 -- 19,266,385
------------ ---------- ------------
Total.................................. $205,252,020 $6,916,391 $113,827,927
------------ ---------- ------------
------------ ---------- ------------
SHARES OF BENEFICIAL INTEREST
OUTSTANDING (Note 2)................. 7,819,510 6,916,391 4,256,883
------------ ---------- ------------
------------ ---------- ------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE (Net
assets divided by shares
outstanding)......................... $ 26.25 $ 1.00 $ 26.74
------ ----- ------
------ ----- ------
</TABLE>
See notes to financial statements
71
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (continued)
FIRST INVESTORS LIFE SERIES FUND
December 31, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
GOVERNMENT GROWTH HIGH YIELD
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in securities:
At identified cost................... $10,622,139 $122,728,492 $64,911,358
---------- ------------ ----------
---------- ------------ ----------
At value (Note 1A)................... $10,726,922 $187,214,956 $63,772,860
Cash................................... 196,320 198,769 425,333
Receivables:
Investment securities sold........... -- 14,014 --
Interest and dividends............... 70,046 127,604 1,213,396
Trust shares sold.................... 6,589 62,851 18,562
---------- ------------ ----------
Total Assets........................... 10,999,877 187,618,194 65,430,151
---------- ------------ ----------
LIABILITIES
Payables:
Investment securities purchased...... -- 563,231 --
Trust shares redeemed................ 1,074 35,928 27,462
Accrued advisory fee................... 5,480 112,040 40,673
Accrued expenses....................... 2,258 3,254 16,195
---------- ------------ ----------
Total Liabilities...................... 8,812 714,453 84,330
---------- ------------ ----------
NET ASSETS............................. $10,991,065 $186,903,741 $65,345,821
---------- ------------ ----------
---------- ------------ ----------
NET ASSETS CONSIST OF:
Capital paid in........................ $10,747,649 $113,214,470 $60,726,828
Undistributed net investment income.... 630,758 515,027 5,670,120
Accumulated net realized gain (loss) on
investments and foreign currency
transactions......................... (492,125) 8,687,780 87,371
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions........ 104,783 64,486,464 (1,138,498)
---------- ------------ ----------
Total.................................. $10,991,065 $186,903,741 $65,345,821
---------- ------------ ----------
---------- ------------ ----------
SHARES OF BENEFICIAL INTEREST
OUTSTANDING (Note 2)................. 1,055,898 5,224,012 5,584,876
---------- ------------ ----------
---------- ------------ ----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE (Net
assets divided by shares
outstanding)......................... $ 10.41 $ 35.78 $ 11.70
---------- ------ ----------
---------- ------ ----------
</TABLE>
See notes to financial statements
72
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
INTERNATIONAL INVESTMENT TARGET TARGET UTILITIES
SECURITIES GRADE MATURITY 2007 MATURITY 2010 INCOME
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in securities:
At identified cost................... $ 70,934,194 $20,194,024 $ 23,019,963 $ 7,895,425 $40,413,551
------------- ---------- ------------- ------------- -----------
------------- ---------- ------------- ------------- -----------
At value (Note 1A)................... $ 92,087,196 $21,037,398 $ 26,384,914 $ 9,013,030 $50,190,559
Cash................................... 10,885 137,814 109,247 38,640 383,542
Receivables:
Investment securities sold........... -- -- -- -- 30,303
Interest and dividends............... 234,682 340,524 -- -- 104,059
Trust shares sold.................... 30,172 13,106 -- 195 41,938
------------- ---------- ------------- ------------- -----------
Total Assets........................... 92,362,935 21,528,842 26,494,161 9,051,865 50,750,401
------------- ---------- ------------- ------------- -----------
LIABILITIES
Payables:
Investment securities purchased...... -- -- -- -- 266,111
Trust shares redeemed................ 56,887 4,483 2,899 14,994 9,041
Accrued advisory fee................... 56,436 10,736 13,237 4,523 24,390
Accrued expenses....................... 69,721 5,019 5,432 1,949 19,110
------------- ---------- ------------- ------------- -----------
Total Liabilities...................... 183,044 20,238 21,568 21,466 318,652
------------- ---------- ------------- ------------- -----------
NET ASSETS............................. $ 92,179,891 $21,508,604 $ 26,472,593 $ 9,030,399 $50,431,749
------------- ---------- ------------- ------------- -----------
------------- ---------- ------------- ------------- -----------
NET ASSETS CONSIST OF:
Capital paid in........................ $ 70,289,898 $19,396,852 $ 22,020,854 $ 7,562,392 $37,979,149
Undistributed net investment income.... 587,940 1,146,283 1,196,519 350,402 1,069,638
Accumulated net realized gain (loss) on
investments and foreign currency
transactions......................... 144,902 122,095 (109,731) -- 1,605,954
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions........ 21,157,151 843,374 3,364,951 1,117,605 9,777,008
------------- ---------- ------------- ------------- -----------
Total.................................. $ 92,179,891 $21,508,604 $ 26,472,593 $ 9,030,399 $50,431,749
------------- ---------- ------------- ------------- -----------
------------- ---------- ------------- ------------- -----------
SHARES OF BENEFICIAL INTEREST
OUTSTANDING (Note 2)................. 4,881,640 1,797,385 1,914,091 646,289 3,185,385
------------- ---------- ------------- ------------- -----------
------------- ---------- ------------- ------------- -----------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE (Net
assets divided by shares
outstanding)......................... $ 18.88 $ 11.97 $ 13.83 $ 13.97 $ 15.83
------ ---------- ------ ------ -----------
------ ---------- ------ ------ -----------
</TABLE>
See notes to financial statements
73
<PAGE>
STATEMENT OF OPERATIONS
FIRST INVESTORS LIFE SERIES FUND
Year Ended December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
CASH
BLUE CHIP MANAGEMENT DISCOVERY
- -------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest............................. $ 786,949 $ 288,450 $ 697,636
Dividends............................ 2,038,818 -- 512,189
Miscellaneous income................. -- -- --
--------- ---------- ---------
Total income........................... 2,825,767 288,450 1,209,825
--------- ---------- ---------
Expenses (Notes 1 & 4):
Advisory fee......................... 1,332,265 38,716 775,442
Reports and notices to
shareholders....................... 22,726 661 13,736
Professional fees.................... 28,882 5,486 16,198
Custodian fees....................... 23,371 4,864 29,430
Other expenses....................... 42,724 1,779 21,776
--------- ---------- ---------
Total expenses......................... 1,449,968 51,506 856,582
Less: Expenses waived or assumed....... -- (15,134) --
Custodian fees paid indirectly.... (23,371) (208) (21,082)
--------- ---------- ---------
Expenses - net......................... 1,426,597 36,164 835,500
--------- ---------- ---------
Net investment income.................. 1,399,170 252,286 374,325
--------- ---------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS (Note 3):
Net realized gain on investments and
foreign currency transactions........ 3,330,401 -- 220,000
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions........ 25,976,750 -- 2,686,924
--------- ---------- ---------
Net gain (loss) from investments and
foreign currency transactions........ 29,307,151 -- 2,906,924
--------- ---------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $30,706,321 $ 252,286 $3,281,249
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
(a) See note 1H
(b) Net of $21,548 foreign taxes witheld
See notes to financial statements
74
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
INTERNATIONAL INVESTMENT
GOVERNMENT GROWTH HIGH YIELD SECURITIES GRADE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest............................. $ 725,302 $ 299,887 $6,005,131 $ 312,200 $1,274,654
Dividends............................ -- 1,474,454 90,374(a) 1,281,817(b) --
Miscellaneous income................. -- -- 100,250 -- --
---------- ----------- ---------- ------------- ----------
Total income........................... 725,302 1,774,341 6,195,755 1,594,017 1,274,654
---------- ----------- ---------- ------------- ----------
Expenses (Notes 1 & 4):
Advisory fee......................... 75,121 1,156,103 476,199 630,772 143,956
Reports and notices to
shareholders....................... 810 19,183 8,582 9,713 4,179
Professional fees.................... 2,271 21,804 13,941 15,473 4,966
Custodian fees....................... 4,806 29,571 10,870 290,452 6,026
Other expenses....................... 4,140 33,582 18,783 19,850 3,973
---------- ----------- ---------- ------------- ----------
Total expenses......................... 87,148 1,260,243 528,375 966,260 163,100
Less: Expenses waived or assumed....... (17,449) -- -- -- (32,416)
Custodian fees paid indirectly.... (4,173) (4,066) (5,375) -- (2,543)
---------- ----------- ---------- ------------- ----------
Expenses - net......................... 65,526 1,256,177 523,000 966,260 128,141
---------- ----------- ---------- ------------- ----------
Net investment income.................. 659,776 518,164 5,672,755 627,757 1,146,513
---------- ----------- ---------- ------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS (Note 3):
Net realized gain on investments and
foreign currency transactions........ 100,859 8,688,575 611,559 111,518 126,011
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions........ (39,867) 28,691,762 (4,441,350) 12,766,600 390,278
---------- ----------- ---------- ------------- ----------
Net gain (loss) from investments and
foreign currency transactions........ 60,992 37,380,337 (3,829,791) 12,878,118 516,289
---------- ----------- ---------- ------------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $ 720,768 $37,898,501 $1,842,964 $ 13,505,875 $1,662,802
---------- ----------- ---------- ------------- ----------
---------- ----------- ---------- ------------- ----------
</TABLE>
(a) See note 1H
(b) Net of $21,548 foreign taxes witheld
See notes to financial statements
75
<PAGE>
STATEMENT OF OPERATIONS (continued)
FIRST INVESTORS LIFE SERIES FUND
Year Ended December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TARGET TARGET UTILITIES
MATURITY 2007 MATURITY 2010 INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest............................. $ 1,347,812 $ 397,833 $ 157,593
Dividends............................ -- -- 1,199,749
------------- ------------- ---------
Total income........................... 1,347,812 397,833 1,357,342
------------- ------------- ---------
Expenses (Notes 1 & 4):
Advisory fee......................... 173,263 53,691 307,656
Reports and notices to
shareholders....................... 3,071 827 6,008
Professional fees.................... 5,547 1,694 12,385
Custodian fees....................... 3,161 1,131 14,015
Other expenses....................... 9,253 2,531 20,317
------------- ------------- ---------
Total expenses......................... 194,295 59,874 360,381
Less: Expenses waived or assumed....... (40,022) (11,780) (61,531)
Custodian fees paid indirectly.... (3,123) (1,120) (12,001)
------------- ------------- ---------
Expenses - net......................... 151,150 46,974 286,849
------------- ------------- ---------
Net investment income.................. 1,196,662 350,859 1,070,493
------------- ------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments....... 6,102 -- 1,605,884
Net unrealized appreciation of
investments.......................... 2,018,771 611,313 2,566,807
------------- ------------- ---------
Net gain from investments.............. 2,024,873 611,313 4,172,691
------------- ------------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $ 3,221,535 $ 962,172 $5,243,184
------------- ------------- ---------
------------- ------------- ---------
</TABLE>
See notes to financial statements
76
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FIRST INVESTORS LIFE SERIES FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
BLUE CHIP CASH MANAGEMENT
-------------------------- ------------------------
YEAR ENDED DECEMBER 31 1998 1997 1998 1997
- --------------------------------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................ $ 1,399,170 $ 1,276,800 $ 252,286 $ 226,647
Net realized gain on investments..... 3,330,401 9,946,550 -- --
Net unrealized appreciation of
investments........................ 25,976,750 17,961,543 -- --
------------ ------------ ----------- -----------
Net increase in net assets
resulting from operations........ 30,706,321 29,184,893 252,286 226,647
------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income................ (1,263,751) (1,146,250) (252,286) (226,647)
Net realized gains................... (9,930,417) (4,741,304) -- --
------------ ------------ ----------- -----------
Total distributions................ (11,194,168) (5,887,554) (252,286) (226,647)
------------ ------------ ----------- -----------
TRUST SHARE TRANSACTIONS*
Proceeds from shares sold............ 25,456,684 26,984,341 4,428,716 3,084,309
Reinvestment of distributions........ 11,194,168 5,887,554 252,286 226,647
Cost of shares redeemed.............. (5,036,856) (2,121,391) (2,524,501) (2,847,598)
------------ ------------ ----------- -----------
Net increase from trust share
transactions....................... 31,613,996 30,750,504 2,156,501 463,358
------------ ------------ ----------- -----------
Net increase in net assets......... 51,126,149 54,047,843 2,156,501 463,358
NET ASSETS
Beginning of year.................... 154,125,871 100,078,028 4,759,890 4,296,532
------------ ------------ ----------- -----------
End of year+......................... $205,252,020 $154,125,871 $ 6,916,391 $ 4,759,890
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
+Includes undistributed net investment
income of............................. $ 1,399,370 $ 1,263,951 -- --
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
*TRUST SHARES ISSUED AND REDEEMED
Sold................................. 1,058,051 1,238,452 4,428,719 3,084,309
Issued for distributions reinvested.. 477,160 294,820 252,283 226,647
Redeemed............................. (216,433) (94,839) (2,524,501) (2,847,598)
------------ ------------ ----------- -----------
Net increase in trust shares
outstanding........................ 1,318,778 1,438,433 2,156,501 463,358
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
See notes to financial statements
77
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (continued)
FIRST INVESTORS LIFE SERIES FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DISCOVERY GOVERNMENT
------------------------- ------------------------
YEAR ENDED DECEMBER 31 1998 1997 1998 1997
- --------------------------------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................ $ 374,325 $ 293,544 $ 659,776 $ 627,424
Net realized gain on investments and
foreign currency transactions...... 220,000 6,771,658 100,859 29,320
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions...... 2,686,924 5,866,659 (39,867) 87,654
------------ ----------- ----------- -----------
Net increase in net assets
resulting from operations........ 3,281,249 12,931,861 720,768 744,398
------------ ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income................ (282,385) (392,698) (591,713) (596,590)
Net realized gains................... (6,711,235) (3,359,761) -- --
------------ ----------- ----------- -----------
Total distributions................ (6,993,620) (3,752,459) (591,713) (596,590)
------------ ----------- ----------- -----------
TRUST SHARE TRANSACTIONS*
Proceeds from shares sold............ 14,683,013 17,633,092 2,561,318 933,756
Reinvestment of distributions........ 6,993,620 3,752,459 591,713 596,590
Cost of shares redeemed.............. (3,666,264) (1,934,034) (1,410,754) (1,582,844)
------------ ----------- ----------- -----------
Net increase (decrease) from trust
share transactions................. 18,010,369 19,451,517 1,742,277 (52,498)
------------ ----------- ----------- -----------
Net increase in net assets......... 14,297,998 28,630,919 1,871,332 95,310
NET ASSETS
Beginning of year.................... 99,529,929 70,899,010 9,119,733 9,024,423
------------ ----------- ----------- -----------
End of year+......................... $113,827,927 $99,529,929 $10,991,065 $ 9,119,733
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
+Includes undistributed net investment
income of............................. $ 371,841 $ 279,901 $ 630,758 $ 591,364
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
*TRUST SHARES ISSUED AND REDEEMED
Sold................................. 565,739 670,839 251,092 93,360
Issued for distributions reinvested.. 257,308 158,198 60,564 62,210
Redeemed............................. (149,789) (74,661) (138,579) (158,149)
------------ ----------- ----------- -----------
Net increase(decrease) in trust
shares outstanding................. 673,258 754,376 173,077 (2,579)
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
</TABLE>
See notes to financial statements
78
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
GROWTH HIGH YIELD SECURITIES
-------------------------- ------------------------ ------------------------
1998 1997 1998 1997 1998 1997
- --------------------------------------- ------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................ $ 518,164 $ 662,530 $ 5,672,755 $ 4,828,181 $ 627,757 $ 789,144
Net realized gain on investments and
foreign currency transactions...... 8,688,575 4,950,237 611,559 1,155,537 111,518 3,702,768
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions...... 28,691,762 20,037,061 (4,441,350) 488,433 12,766,600 832,056
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations........ 37,898,501 25,649,828 1,842,964 6,472,151 13,505,875 5,323,968
------------ ------------ ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income................ (654,070) (596,375) (4,824,396) (4,259,486) (705,531) (671,803)
Net realized gains................... (4,932,402) (6,162,537) -- -- (3,773,054) (5,219,395)
------------ ------------ ----------- ----------- ----------- -----------
Total distributions................ (5,586,472) (6,758,912) (4,824,396) (4,259,486) (4,478,585) (5,891,198)
------------ ------------ ----------- ----------- ----------- -----------
TRUST SHARE TRANSACTIONS*
Proceeds from shares sold............ 24,961,026 24,410,876 7,629,469 7,042,988 9,229,799 13,088,361
Reinvestment of distributions........ 5,586,472 6,758,912 4,824,396 4,259,486 4,478,585 5,891,198
Cost of shares redeemed.............. (3,540,336) (1,282,464) (3,745,407) (3,369,888) (5,018,471) (1,904,255)
------------ ------------ ----------- ----------- ----------- -----------
Net increase from trust share
transactions....................... 27,007,162 29,887,324 8,708,458 7,932,586 8,689,913 17,075,304
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net assets......... 59,319,191 48,778,240 5,727,026 10,145,251 17,717,203 16,508,074
NET ASSETS
Beginning of year.................... 127,584,550 78,806,310 59,618,795 49,473,544 74,462,688 57,954,614
------------ ------------ ----------- ----------- ----------- -----------
End of year+......................... $186,903,741 $127,584,550 $65,345,821 $59,618,795 $92,179,891 $74,462,688
------------ ------------ ----------- ----------- ----------- -----------
------------ ------------ ----------- ----------- ----------- -----------
+Includes undistributed net investment
income of............................ $ 515,027 $ 650,933 $ 5,670,120 $ 4,821,761 $ 587,940 $ 701,594
------------ ------------ ----------- ----------- ----------- -----------
------------ ------------ ----------- ----------- ----------- -----------
*TRUST SHARES ISSUED AND REDEEMED
Sold................................. 794,414 917,303 645,767 606,213 512,858 767,110
Issued for distributions
reinvested......................... 182,445 284,586 414,467 381,333 256,212 375,475
Redeemed............................. (116,212) (47,245) (320,790) (287,780) (289,842) (111,951)
------------ ------------ ----------- ----------- ----------- -----------
Net increase in trust shares
outstanding........................ 860,647 1,154,644 739,444 699,766 479,228 1,030,634
------------ ------------ ----------- ----------- ----------- -----------
------------ ------------ ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
79
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (continued)
FIRST INVESTORS LIFE SERIES FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
TARGET
INVESTMENT GRADE MATURITY 2007
------------------------ ------------------------
YEAR ENDED DECEMBER 31 1998 1997 1998 1997
- --------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................ $ 1,146,513 $ 1,076,444 $ 1,196,662 $ 1,000,543
Net realized gain (loss) on
investments........................ 126,011 60,576 6,102 (4,036)
Net unrealized appreciation of
investments........................ 390,278 417,171 2,018,771 1,286,771
----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations........ 1,662,802 1,554,191 3,221,535 2,283,278
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income................ (1,073,498) (1,040,936) (996,667) (745,063)
Net realized gains................... -- -- -- --
----------- ----------- ----------- -----------
Total distributions................ (1,073,498) (1,040,936) (996,667) (745,063)
----------- ----------- ----------- -----------
TRUST SHARE TRANSACTIONS*
Proceeds from shares sold............ 4,619,860 1,562,904 5,123,567 4,604,910
Reinvestment of distributions........ 1,073,498 1,040,936 996,667 745,063
Cost of shares redeemed.............. (1,993,575) (2,287,154) (2,172,225) (1,235,132)
----------- ----------- ----------- -----------
Net increase from trust share
transactions....................... 3,699,783 316,686 3,948,009 4,114,841
----------- ----------- ----------- -----------
Net increase in net assets......... 4,289,087 829,941 6,172,877 5,653,056
NET ASSETS
Beginning of year.................... 17,219,517 16,389,576 20,299,716 14,646,660
----------- ----------- ----------- -----------
End of year+......................... $21,508,604 $17,219,517 $26,472,593 $20,299,716
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
+Includes undistributed net investment
income of............................ $ 1,146,283 $ 1,073,268 $ 1,196,519 $ 996,524
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
*TRUST SHARES ISSUED AND REDEEMED
Sold................................. 396,824 140,313 392,375 395,345
Issued for distributions
reinvested......................... 96,974 97,649 82,165 67,549
Redeemed............................. (172,079) (205,347) (167,391) (106,979)
----------- ----------- ----------- -----------
Net increase in trust shares
outstanding........................ 321,719 32,615 307,149 355,915
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
80
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
TARGET UTILITIES
MATURITY 2010 INCOME
---------------------- ------------------------
1998 1997 1998 1997
- --------------------------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................ $ 350,859 $ 210,000 $ 1,070,493 $ 847,751
Net realized gain (loss) on
investments........................ -- 3,786 1,605,884 1,309,881
Net unrealized appreciation of
investments........................ 611,313 414,843 2,566,807 4,449,509
---------- ---------- ----------- -----------
Net increase in net assets
resulting from operations........ 962,172 628,629 5,243,184 6,607,141
---------- ---------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income................ (209,527) (51,234) (847,985) (692,647)
Net realized gains................... (3,786) -- (1,305,515) (517,046)
---------- ---------- ----------- -----------
Total distributions................ (213,313) (51,234) (2,153,500) (1,209,693)
---------- ---------- ----------- -----------
TRUST SHARE TRANSACTIONS*
Proceeds from shares sold............ 3,140,304 3,021,064 12,377,174 4,789,797
Reinvestment of distributions........ 213,313 51,234 2,153,500 1,209,693
Cost of shares redeemed.............. (280,737) (635,808) (1,165,173) (1,528,352)
---------- ---------- ----------- -----------
Net increase from trust share
transactions....................... 3,072,880 2,436,490 13,365,501 4,471,138
---------- ---------- ----------- -----------
Net increase in net assets......... 3,821,739 3,013,885 16,455,185 9,868,586
NET ASSETS
Beginning of year.................... 5,208,660 2,194,775 33,976,564 24,107,978
---------- ---------- ----------- -----------
End of year+......................... $9,030,399 $5,208,660 $50,431,749 $33,976,564
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
+Includes undistributed net investment
income of............................ $ 350,402 $ 209,070 $ 1,069,638 $ 847,130
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
*TRUST SHARES ISSUED AND REDEEMED
Sold................................. 239,826 266,975 841,969 374,184
Issued for distributions
reinvested......................... 17,385 4,766 151,335 100,724
Redeemed............................. (21,133) (58,264) (79,873) (120,432)
---------- ---------- ----------- -----------
Net increase in trust shares
outstanding........................ 236,078 213,477 913,431 354,476
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
See notes to financial statements
81
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FIRST INVESTORS LIFE SERIES FUND
1. SIGNIFICANT ACCOUNTING POLICIES--First Investors Life Series Fund (the "Life
Series Fund"), a Massachusetts business trust, is registered under the
Investment Company Act of 1940, as a diversified, open-end management investment
company. The Life Series Fund operates as a series fund, issuing shares of
beneficial interest in the Blue Chip, Cash Management, Discovery, Government,
Growth, High Yield, International Securities, Investment Grade, Target Maturity
2007, Target Maturity 2010, and Utilities Income Funds (each a "Fund") and
accounts separately for its assets, liabilities and operations. The objective of
each Fund is as follows:
BLUE CHIP FUND seeks high total investment return consistent with the
preservation of capital.
CASH MANAGEMENT FUND seeks to earn a high rate of current income consistent with
the preservation of capital and maintenance of liquidity.
DISCOVERY FUND seeks long-term capital appreciation without regard to dividend
or interest income.
GOVERNMENT FUND seeks to achieve a significant level of current income which is
consistent with the security and liquidity of principal.
GROWTH FUND seeks long-term capital appreciation.
HIGH YIELD FUND seeks to earn high current income and secondarily seeks capital
appreciation.
INTERNATIONAL SECURITIES FUND seeks long-term capital growth and secondarily to
earn a reasonable level of current income.
INVESTMENT GRADE FUND seeks to generate a maximum level of income consistent
with investment in investment grade debt securities.
TARGET MATURITY 2007 FUND AND TARGET MATURITY 2010 FUND seek a predictable
compounded investment return for investors who hold their Fund shares until the
Fund's maturity, consistent with the preservation of capital.
UTILITIES INCOME FUND primarily seeks high current income. Long-term capital
appreciation is a secondary objective.
A. Security Valuation--Except as provided below, 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, the security is valued at the mean between the closing bid and asked
prices. Securities traded in the over-the-counter ("OTC") market (including
securities
82
<PAGE>
listed on exchanges whose primary market is believed to be OTC) are valued at
the mean between the last bid and asked prices based upon quotes furnished by a
market maker for such securities. Securities may also be priced by a pricing
service. The pricing service uses quotations obtained from investment dealers or
brokers, information with respect to market transactions in comparable
securities and other available information in determining value. 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 and any other
assets are valued on a consistent basis at fair value as determined in good
faith by or under the supervision of the Life Series Fund's officers in the
manner specifically authorized by the Board of Trustees of the Life Series Fund.
For valuation purposes, quotations of foreign securities in foreign currencies
are translated to U.S. dollar equivalents using the foreign exchange quotation
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. 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.
B. Federal Income Taxes--No provision has been made for federal income taxes on
net income or capital gains since it is the policy of each Fund to continue to
comply with the special provisions of the Internal Revenue Code applicable to
investment companies, and to make sufficient distributions of income and capital
gains (in excess of any available capital loss carryovers), to relieve each Fund
from all, or substantially all, federal income taxes. At December 31, 1998,
capital loss carryovers were as follows:
<TABLE>
<CAPTION>
Year Capital Loss Carryovers
Expire
----------------------------
<S> <C> <C> <C>
Fund Total 2002 2004
- --------------------------------------- -------- -------- --------
Government............................. $492,125 $264,105 $228,020
Target Maturity 2007................... 82,126 -- 82,126
</TABLE>
C. Foreign Currency Translations--The accounting records of International
Securities Fund are maintained in U.S. dollars. Portfolio securities and other
assets and liabilities denominated in foreign currencies are translated into
U.S.
83
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
FIRST INVESTORS LIFE SERIES FUND
dollars at the date of valuation. Purchases and sales of investment securities,
dividend income and certain expenses are translated to U.S. dollars at the rates
of exchange prevailing on the respective dates of such transactions.
The International Securities Fund does not isolate that portion of gains and
losses on investments which is due to changes in foreign exchange rates from
that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains and losses
from investments.
Net realized and unrealized gains and losses on investments and foreign currency
transactions includes gains and losses from the sales of foreign currency and
gains and losses on accrued foreign dividends and related withholding taxes.
D. Distributions to Shareholders--Distributions to shareholders from net
investment income and net realized capital gains are declared and paid annually
on all Funds except for the Cash Management Fund which declares dividends from
net investment income daily and pays monthly. Income dividends and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for foreign currency transactions, capital
loss carryforwards and deferral of wash sales.
E. Expense Allocation--Expenses directly charged or attributable to a Fund are
paid from the assets of that Fund. General expenses of the Life Series Fund are
allocated among and charged to the assets of each Fund on a fair and equitable
basis, which may be based on the relative assets of each Fund or the nature of
the services performed and relative applicability to each Fund.
F. Repurchase Agreements--Securities pledged as collateral for repurchase
agreements are held by the Fund's custodian until maturity of the repurchase
agreement. The agreements provide that the Fund will receive, as collateral,
securities with a market value which will at all times be at least equal to 100%
of the amount invested by the Fund.
G. Use of Estimates--The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
H. Other--Security transactions are accounted for on the date the securities are
purchased or sold. Cost is determined and gains and losses are based, on the
84
<PAGE>
identified cost basis for securities and the amortized cost basis for short-term
securities, for both financial statement and federal income tax purposes.
Dividend income is recorded on the ex-dividend date. Shares of stock received in
lieu of cash dividends on certain preferred stock holdings of the High Yield
Fund are recognized as dividend income and recorded at the market value of the
shares received. For the year ended December 31, 1998, the High Yield Fund
recognized $90,374 from these taxable "pay-in-kind" distributions. Interest
income and estimated expenses are accrued daily. For the year ended December 31,
1998, The Bank of New York, custodian for all the Funds, except the
International Securities Fund, has provided credits in the amount of $77,062
against custodian charges based on the uninvested cash balances of the Funds.
2. TRUST SHARES--The Declaration of Trust permits the issuance of an unlimited
number of shares of beneficial interest, of one or more Funds. Shares in the
Funds are acquired through the purchase of variable annuity or variable life
insurance contracts sold by First Investors Life Insurance Company.
3. SECURITY TRANSACTIONS--For the year ended December 31, 1998, purchases and
sales of securities and long-term U.S. Government obligations, excluding foreign
currencies and short-term securities were as follows:
<TABLE>
<CAPTION>
Long-Term U.S.
Securities Government Obligations
-------------------------- ------------------------
<S> <C> <C> <C> <C>
Cost of Proceeds Cost of Proceeds
Fund Purchases from Sales Purchases from Sales
- --------------------------------------- ------------ ------------ ----------- -----------
Blue Chip.............................. $169,081,720 $146,959,687 $ -- $ --
Discovery.............................. 126,199,063 109,388,204 -- --
Government............................. -- -- 11,686,212 10,225,529
Growth................................. 62,674,595 38,150,050 -- --
High Yield............................. 31,891,486 25,322,231 -- --
International Securities............... 95,519,785 87,237,111 -- --
Investment Grade....................... 10,505,478 7,241,057 3,795,224 3,579,906
Target Maturity 2007................... -- -- 4,319,787 182,550
Target Maturity 2010................... -- -- 3,253,807 --
Utilities Income....................... 50,730,613 39,739,724 -- --
</TABLE>
85
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
FIRST INVESTORS LIFE SERIES FUND
At December 31, 1998, aggregate cost and net unrealized appreciation
(depreciation) of securities for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Aggregate Unrealized Unrealized Appreciation
Fund Cost Appreciation Depreciation (Depreciation)
- --------------------------------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Blue Chip.............................. $137,344,512 $ 67,689,865 $ 843,861 $ 66,846,004
Cash Management........................ 6,854,305 -- -- --
Discovery.............................. 93,629,637 22,816,247 3,773,755 19,042,492
Government............................. 10,622,139 120,691 15,908 104,783
Growth................................. 122,733,872 68,257,122 3,776,038 64,481,084
High Yield............................. 64,911,358 2,081,801 3,220,299 (1,138,498)
International Securities............... 70,934,194 22,693,898 1,540,896 21,153,002
Investment Grade....................... 20,194,024 886,038 42,664 843,374
Target Maturity 2007................... 23,047,569 3,345,008 7,663 3,337,345
Target Maturity 2010................... 7,895,425 1,117,605 -- 1,117,605
Utilities Income....................... 40,492,952 10,382,434 684,827 9,697,607
</TABLE>
4. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES--Certain officers and
trustees of the Life Series Fund are officers and directors of its investment
adviser, First Investors Management Company, Inc. ("FIMCO") and/or its transfer
agent, Administrative Data Management Corp. Trustees of the Life Series Fund who
are not "interested persons" of the Life Series Fund as defined in the 1940 Act
are remunerated by the Funds. For the year ended December 31, 1998, total
trustees fees accrued by the Funds amounted to $43,145.
The Investment Advisory Agreement provides as compensation to FIMCO an annual
fee, payable monthly, at the rate of .75% on the first $250 million of each
Fund's average daily net assets, declining by .03% on each $250 million
thereafter, down to .66% on average daily net assets over $750 million. For the
year ended December 31, 1998, total advisory fees were $5,163,184 of which
$158,480 was waived by the investment adviser. In addition, $19,852 of expenses
were assumed by FIMCO.
Wellington Management Company, LLP serves as investment subadviser to the Growth
Fund and the International Securities Fund. The subadviser is paid by FIMCO and
not by the Funds.
5. RULE 144A SECURITIES--Under Rule 144A, certain restricted securities are
exempt from the registration requirements of the Securities Act of 1933 and may
only be resold to qualified institutional investors. At December 31, 1998, the
High
86
<PAGE>
Yield Fund and International Securities Fund held thirteen and one 144A
securities, respectively, with aggregate values of $5,141,365 and $208,897,
respectively. The securities represent 7.9% and .2%, respectively, of the Funds'
net assets and are valued as set forth in Note 1A.
6. FORWARD CURRENCY CONTRACTS--A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future date.
When the International Securities Fund purchases or sells foreign securities, it
customarily enters into a forward currency contract to minimize foreign exchange
risk between the trade date and the settlement date of such transactions. The
International Securities Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value of the
foreign currency changes unfavorably. The International Securities Fund had no
forward currency contracts outstanding at December 31, 1998.
7. CONCENTRATION OF CREDIT RISK--The High Yield Fund's investment in high yield
securities, whether rated or unrated, may be considered speculative and subject
to greater market fluctuations and risks of loss of income and principal than
lower yielding, higher rated, fixed income securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer.
87
<PAGE>
FINANCIAL HIGHLIGHTS
FIRST INVESTORS LIFE SERIES FUND
The following table sets forth the per share operating performance data for a
trust share outstanding, total return, ratios to average net assets and other
supplemental data for each period indicated.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
P E R S H A R E D A T A
----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------
NET REALIZED
NET ASSET AND LESS DISTRIBUTIONS FROM
VALUE UNREALIZED -----------------------
--------- NET GAIN (LOSS) TOTAL FROM NET NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BLUE CHIP
1994........... $ 14.21 $ .18 $ (.39) $ (.21) $ .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
- ---------------------------------------------------------------------------------------------------------------
GOVERNMENT
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........... 29.24 .10 7.69 7.79 .15 1.10 1.25
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
88
<PAGE>
The following table sets forth the per share operating performance data for a
trust share outstanding, total return, ratios to average net assets and other
supplemental data for each period indicated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
--------------------------------------------------------------------------------------
---------
RATIO TO AVERAGE NET
RATIO TO AVERAGE ASSETS BEFORE EXPENSES
NET NET ASSETS+ WAIVED OR ASSUMED
NET ASSET ASSETS ---------------------- ----------------------
VALUE TOTAL END OF NET NET PORTFOLIO
--------- RETURN PERIOD INVESTMENT INVESTMENT TURNOVER
END ++ (IN EXPENSES INCOME EXPENSES INCOME RATE
OF PERIOD (%) MILLIONS) (%) (%) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BLUE CHIP
1994........... $ 13.75 (1.45) $ 41 .88 1.49 N/A N/A 82
1995........... 16.98 34.00 67 .86 1.91 N/A N/A 26
1996........... 19.77 21.52 100 .84 1.39 N/A N/A 45
1997........... 23.71 26.72 154 .81 .99 N/A N/A 63
1998........... 26.25 18.66 205 .82 .79 N/A N/A 91
- ------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT
1994........... $ 1.00 3.77 $ 4 .60 3.69 1.04 3.25 N/A
1995........... 1.00 5.51 4 .60 5.36 1.10 4.87 N/A
1996........... 1.00 5.00 4 .60 4.89 1.11 4.38 N/A
1997........... 1.00 5.08 5 .70 4.97 1.06 4.61 N/A
1998........... 1.00 5.02 7 .70 4.89 .99 4.60 N/A
- ------------------------------------------------------------------------------------------------------------------
DISCOVERY
1994........... $ 19.86 (2.53) $ 30 .88 .36 N/A N/A 53
1995........... 23.27 25.23 51 .87 .63 N/A N/A 78
1996........... 25.06 12.48 71 .85 .63 N/A N/A 98
1997........... 27.77 16.84 100 .82 .34 N/A N/A 85
1998........... 26.74 3.05 114 .83 .36 N/A N/A 121
- ------------------------------------------------------------------------------------------------------------------
GOVERNMENT
1994........... $ 9.70 (4.10) $ 8 .35 6.74 .90 6.19 457
1995........... 10.52 15.63 10 .40 6.79 .93 6.26 198
1996........... 10.19 3.59 9 .60 6.75 .94 6.41 199
1997........... 10.33 8.61 9 .60 6.95 .92 6.63 134
1998........... 10.41 7.54 11 .70 6.59 .87 6.42 107
- ------------------------------------------------------------------------------------------------------------------
GROWTH
1994........... $ 16.73 (2.87) $ 33 .90 .60 N/A N/A 40
1995........... 20.47 25.12 51 .88 1.11 N/A N/A 64
1996........... 24.56 24.45 79 .85 .92 N/A N/A 49
1997........... 29.24 29.28 128 .82 .64 N/A N/A 27
1998........... 35.78 27.35 187 .82 .34 N/A N/A 26
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
89
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
FIRST INVESTORS LIFE SERIES FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
P E R S H A R E D A T A
----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------
NET REALIZED
NET ASSET AND LESS DISTRIBUTIONS FROM
VALUE UNREALIZED -----------------------
--------- NET GAIN (LOSS) TOTAL FROM NET NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------
INTERNATIONAL SECURITIES
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
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
90
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
------------------------------------------------------------------------------------------
--------
RATIO TO AVERAGE NET
NET RATIO TO AVERAGE ASSETS BEFORE EXPENSES
ASSET NET NET ASSETS+ WAIVED OR ASSUMED
VALUE ASSETS -------------------------- ---------------------------
-------- TOTAL END OF NET NET PORTFOLIO
END RETURN PERIOD INVESTMENT INVESTMENT TURNOVER
OF ++ (IN EXPENSES INCOME EXPENSES INCOME RATE
PERIOD (%) MILLIONS) (%) (%) (%) (%) (%)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HIGH YIELD
1994........... $ 10.58 (1.56) $ 32 .88 9.43 N/A N/A 50
1995........... 11.57 19.82 42 .87 9.86 N/A N/A 57
1996........... 11.93 12.56 49 .85 9.43 N/A N/A 34
1997........... 12.30 12.47 60 .83 8.88 N/A N/A 40
1998........... 11.70 3.15 65 .83 8.93 N/A N/A 42
- ---------------------------------------------------------------------------------------------------------------------
INTERNATIONAL SECURITIES
1994........... $ 13.51 (1.29) $ 31 1.03 1.22 N/A N/A 36
1995........... 15.58 18.70 41 1.02 1.42 N/A N/A 45
1996........... 17.19 15.23 58 1.12 1.25 N/A N/A 67
1997........... 16.91 9.09 74 1.13 1.15 N/A N/A 71
1998........... 18.88 18.18 92 1.15 .75 N/A N/A 109
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE
1994........... $ 10.31 (3.53) $ 12 .37 6.61 .92 6.06 15
1995........... 11.73 19.69 16 .51 6.80 .91 6.40 26
1996........... 11.36 2.84 16 .60 6.47 .88 6.19 19
1997........... 11.67 9.81 17 .60 6.54 .87 6.27 41
1998........... 11.97 9.15 22 .68 5.97 .84 5.81 60
- ---------------------------------------------------------------------------------------------------------------------
TARGET MATURITY 2007
4/26/95* to
12/31/95..... $ 12.26 22.60 $ 10 .04(a) 6.25(a) .87(a) 5.42(a) 28
1996........... 11.71 (2.16) 15 .60 6.05 .82 5.83 13
1997........... 12.63 13.38 20 .60 5.91 .82 5.69 1
1998........... 13.83 14.97 26 .67 5.18 .83 5.02 1
- ---------------------------------------------------------------------------------------------------------------------
TARGET MATURITY 2010
4/30/96* to
12/31/96..... $ 11.16 11.60 $ 2 .60(a) 6.05(a) .98(a) 5.67(a) 0
1997........... 12.70 15.86 5 .60 5.88 .87 5.61 13
1998........... 13.97 14.36 9 .67 4.90 .82 4.75 0
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
91
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
FIRST INVESTORS LIFE SERIES FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
P E R S H A R E D A T A
----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------
NET REALIZED
NET ASSET AND LESS DISTRIBUTIONS FROM
VALUE UNREALIZED -----------------------
--------- NET GAIN (LOSS) TOTAL FROM NET NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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>
(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 (Note 4)
++The effect of fees and charges incurred at the separate account level are not
reflected in
these performance figures
See notes to financial statements
92
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
--------------------------------------------------------------------------------------
---------
RATIO TO AVERAGE NET
RATIO TO AVERAGE ASSETS BEFORE EXPENSES
NET NET ASSETS+ WAIVED OR ASSUMED
NET ASSET ASSETS ---------------------- ----------------------
VALUE TOTAL END OF NET NET PORTFOLIO
--------- RETURN PERIOD INVESTMENT INVESTMENT TURNOVER
END ++ (IN EXPENSES INCOME EXPENSES INCOME RATE
OF PERIOD (%) MILLIONS) (%) (%) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UTILITIES INCOME
1994........... $ 9.19 (7.24) $ 5 .17 4.13 .95 3.35 31
1995........... 11.74 30.26 15 .41 4.23 .91 3.73 17
1996........... 12.57 9.57 24 .60 3.48 .86 3.22 45
1997........... 14.95 25.07 34 .67 3.12 .85 2.94 64
1998........... 15.83 12.58 50 .73 2.61 .85 2.49 105
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 (Note 4)
++The effect of fees and charges incurred at the separate account level are not
reflected in
these performance figures
See notes to financial statements
93
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees of
First Investors Life Series Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of the eleven Funds comprising First Investors
Life Series Fund as of December 31, 1998, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and financial highlights for each
of the periods indicated thereon. These financial statements and financial
highlights are the responsibility of the Life Series Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian and brokers. Where
brokers have not replied to our confirmation requests, we have carried out other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the eleven Funds comprising First Investors Life Series Fund as of December
31, 1998, and the results of their operations for the year then ended, changes
in their net assets for each of the two years in the period then ended and
financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 29, 1999
94
<PAGE>
FIRST INVESTORS LIFE SERIES FUND
TRUSTEES
- -------------------------------
JAMES J. COY (Emeritus)
GLENN O. HEAD
KATHRYN S. HEAD
LARRY R. LAVOIE
REX R. REED
HERBERT RUBINSTEIN
NANCY S. SCHAENEN
JAMES M. SRYGLEY
JOHN T. SULLIVAN
ROBERT F. WENTWORTH
OFFICERS
- -------------------------------
GLENN O. HEAD
President
CONCETTA DURSO
Vice President and Secretary
JOSEPH I. BENEDEK
Treasurer
CAROL LERNER BROWN
Assistant Secretary
GREGORY R. KINGSTON
Assistant Treasurer
MARK S. SPENCER
Assistant Treasurer
THE CASH MANAGEMENT FUND IS A MONEY MARKET FUND AND SEEKS TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO DO SO OR ACHIEVE ITS INVESTMENT OBJECTIVE. AN INVESTMENT IN
THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
95
<PAGE>
FIRST INVESTORS LIFE SERIES FUND
SHAREHOLDER INFORMATION
- ---------------------------------------
INVESTMENT ADVISER
FIRST INVESTORS MANAGEMENT COMPANY, INC.
95 Wall Street
New York, NY 10005
SUBADVISER (Growth Fund and International Securities Fund Only)
WELLINGTON MANAGEMENT COMPANY, LLP
75 State Street
Boston, MA 02109
CUSTODIAN
THE BANK OF NEW YORK
48 Wall Street
New York, NY 10286
CUSTODIAN (International Securities Fund Only)
BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
TRANSFER AGENT
ADMINISTRATIVE DATA MANAGEMENT CORP.
581 Main Street
Woodbridge, NJ 07095-1198
LEGAL COUNSEL
KIRKPATRICK & LOCKHART LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036
AUDITORS
TAIT, WELLER & BAKER
Eight Penn Center Plaza
Philadelphia, PA 19103
It is the Fund's practice to mail only one copy of its annual and semi-annual
reports to any address at which more than one shareholder with the same last
name has indicated that mail is to be delivered. Additional copies of the
reports will be mailed if requested by any shareholder in writing or by calling
800-423-4026. The Fund will ensure that separate reports are sent to any
shareholder who subsequently changes his or her mailing address.
This report is authorized for distribution only to existing shareholders, and,
if given to prospective shareholders, must be accompanied or preceded by the
Fund's prospectus.
96
