UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-4325
FIRST INVESTORS LIFE SERIES FUNDS
(Exact name of registrant as specified in charter)
95 Wall Street
New York, NY 10005
(Address of principal executive offices) (Zip code)
Joseph I. Benedek
First Investors Management Company, Inc.
Raritan Plaza I
Edison, NJ 08837-3620
1-732-855-2712
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
1-212-858-8000
DATE OF FISCAL YEAR END: DECEMBER 31, 2006
DATE OF REPORTING PERIOD: JUNE 30, 2006
Item 1. Reports to Stockholders
The Semi-Annual Report to Stockholders follows
[Logo: "FIRST INVESTORS"]
The words "LIFE SERIES FUND" in a rectangular blue box
across the top of the page.
BLUE CHIP
CASH MANAGEMENT
DISCOVERY
FOCUSED EQUITY
GOVERNMENT
GROWTH
HIGH YIELD
INTERNATIONAL SECURITIES
INVESTMENT GRADE
TARGET MATURITY 2007
TARGET MATURITY 2010
TARGET MATURITY 2015
VALUE
SPECIAL BOND
SEMI-ANNUAL REPORT
JUNE 30, 2006
Equity and Bond Markets Overview
FIRST INVESTORS LIFE SERIES FUNDS
Dear Investor:
The Economy
The U.S. economy grew at a very strong 5.6% annual rate in the first
quarter, then slowed to a more sustainable level in the second quarter.
The unemployment rate fell to a cycle low of 4.6%. The housing market
slowed in response to higher interest rates, but did not collapse.
Inflation accelerated, reflecting high energy prices, strong global
economic growth and a U.S. economy that has expanded for 19 consecutive
quarters. Core consumer prices-- which exclude the volatile food and
energy components-- rose 2.6% year-over-year in June, the highest reading
since February 2002. Inflation, including the food and energy sectors,
accelerated to a rate of 4.3%.
In response to the elevated inflation readings, the Federal Reserve ("the
Fed") raised the benchmark federal funds rate four times during the review
period to 5.25%. Short-term interest rates, as measured by the two-year U.S.
Treasury note, rose from 4.40% to 5.15%, the highest level since 2000.
Long-term interest rates also rose to multi-year highs as the 10-year U.S.
Treasury note yield increased from 4.39% to 5.14%.
The Equity Market
Despite sharp volatility, the stock market posted positive results for the
first half of 2006. Stocks surged forward in early 2006, posting their best
first quarter since 1999. The rally was driven by the strong economy, solid
corporate profits, increased mergers and acquisition activity and investors'
anticipation that the Fed was nearly finished with its rate tightening
campaign. However, fears of the re-emergence of inflationary pressures put
investors in a defensive mood, and the market sagged for much of the second
quarter. Negative issues such as the effects of sustained high energy prices
and rising interest rates came to the forefront. For the six-month period,
smaller stocks outpaced their larger brethren, largely due to the strong
first quarter.
The Bond Market
The bond market struggled during the first half of 2006 as the Fed continued
to raise interest rates, investors became concerned about inflation, and
foreign participation in the U.S. Treasury market decreased. Bond market
returns were negative for the reporting period, with the exception of the
high yield sector. High yield bonds benefited from very low default rates
and the strong economy. In contrast, the worst performing sector of the bond
market was investment grade corporate debt which is much more sensitive to
changes in interest rates than debt which is below investment grade.
Mortgage-backed bonds outperformed both investment grade corporate and U.S.
government bonds but had negative returns nonetheless as higher interest
rates overwhelmed the benefit of tighter spreads.
Equity and Bond Markets Overview (continued)
FIRST INVESTORS LIFE SERIES FUNDS
Thank you for placing your trust in First Investors. As always, we
appreciate the opportunity to serve your investment needs.
/s/ EDWIN D. MISKA /s/ CLARK D. WAGNER
Edwin D. Miska Clark D. Wagner
Director of Equities Director of Fixed Income
First Investors Management First Investors Management
Company, Inc. Company, Inc.
August 1, 2006
The Funds are only available through the purchase of variable life insurance
policies and variable annuity contracts issued by First Investors Life
Insurance Company. The reports do not reflect the additional expenses and
charges that are applicable to variable life insurance policies and variable
annuity contracts.
This Market Overview is not part of the Funds' financial report and is
submitted for the general information of the shareholders of the Funds. It
is not authorized for distribution to prospective investors in the Funds,
unless preceded or accompanied by an effective prospectus. The Market
Overview reflects conditions through the end of the period as stated on the
cover. Market conditions are subject to change. This Market Overview may not
be relied upon as investment advice or an indication of current or future
trading intent on behalf of any Fund.
There are a variety of risks associated with investing in variable life and
annuity subaccounts. For stock subaccounts, the risks include market risk
(the risk that the entire stock market will decline because of an event such
as a deterioration in the economy or a rise in interest rates), as well as
special risks associated with investing in certain types of stock
subaccounts, such as small-cap, global and international funds. For bond
subaccounts, the risks include interest rate risk and credit risk. Interest
rate risk is the risk that bonds will decrease in value as interest rates
rise. As a general matter, longer-term bonds fluctuate more than
shorter-term bonds in reaction to changes in interest rates. Credit risk is
the risk that bonds will decline in value as the result of a decline in the
credit rating of the bonds or the economy as a whole, or that the issuer
will be unable to pay interest and/or principal when due. You should consult
your prospectus for a precise explanation of the risks associated with your
subaccounts.
Understanding Your Fund's Expenses
FIRST INVESTORS LIFE SERIES FUNDS
As a mutual fund shareholder, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory fees and other expenses.
This example is intended to help you understand your ongoing costs (in
dollars) of investing in the Funds and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 in each Fund at the
beginning of the period, January 1, 2006, and held for the entire six-month
period ended June 30, 2006. The calculations assume that no shares were
bought or sold during the period. Your actual costs may have been higher or
lower, depending on the amount of your investment and the timing of any
purchases or redemptions.
Actual Expenses Example:
These amounts help you to estimate the actual expenses that you paid over
the period. The "Ending Account Value" shown is derived from the Fund's
actual return, and the "Expenses Paid During Period" shows the dollar amount
that would have been paid by an investor who started with $1,000 in each
Fund. You may use the information here, together with the amount you
invested, to estimate the expenses that you paid over the period.
To estimate the expenses you paid on your account during this period, simply
divide your ending account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.60), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period".
Hypothetical Expenses Example:
These amounts provide information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight and
help you compare your ongoing costs only and do not reflect any transaction
costs. Therefore, the hypothetical expense example is useful in comparing
ongoing costs only and will not help you determine the relative total costs
of owning different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Board Considerations of Advisory Contracts and Fees
FIRST INVESTORS LIFE SERIES FUNDS
Annual Consideration of the Investment Advisory Agreements and the
Sub-Advisory Agreements with Wellington Management Company, LLP and
Paradigm Capital Management, Inc.
At a meeting held on May 18, 2006 ("May Meeting"), the Board of Trustees
("Board"), including a majority of the non-interested or independent
Trustees (hereinafter, "Trustees"), approved the renewal of the investment
advisory agreements (each an "Advisory Agreement") between First Investors
Management Company, Inc. ("FIMCO") and each of the following funds (each a
"Fund" and collectively the "Funds"): Blue Chip Fund, Value Fund, Discovery
Fund, Growth Fund, Focused Equity Fund, International Fund, Government Fund,
Investment Grade Fund, High Yield Fund, Special Bond Fund, Cash Management
Fund, Target Maturity 2007 Fund, Target Maturity 2010 Fund and Target
Maturity 2015 Fund. In addition, at the May Meeting, the Board, including a
majority of non-interested Trustees, approved the renewal of the
sub-advisory agreements (each a "Sub-Advisory Agreement" and collectively
the "Sub-Advisory Agreements") between: (1) FIMCO and Wellington Management
Company, LLP ("WMC") with respect to the Growth Fund and Focused Equity
Fund; and (2) FIMCO and Paradigm Capital Management, Inc. ("Paradigm") with
respect to the Discovery Fund. The Growth Fund, Focused Equity Fund and
Discovery Fund are collectively referred to as the "Sub-Advised Funds." In
reaching its decisions, the Board considered information furnished and
discussed throughout the year at regularly scheduled Board meetings as well
as information provided specifically in relation to the renewal of the
Advisory Agreements and Sub-Advisory Agreements for the May Meeting.
Information furnished at Board meetings throughout the year included FIMCO's
analysis of each Fund's investment performance, presentations given by
FIMCO's Director of Equities and Director of Fixed Income and
representatives of WMC and Paradigm and various reports on compliance and
other services provided by FIMCO. In preparation for the May Meeting, the
independent Trustees requested and received information compiled by Lipper,
Inc. ("Lipper"), an independent provider of investment company data, on the
investment performance over various time periods and the fees and expenses
of each Fund as compared to a comparable group of funds as determined by
Lipper ("Peer Group"). Additionally, in response to specific requests from
the independent Trustees in connection with the May Meeting, FIMCO
furnished, and the Board considered, information concerning aspects of its
operations, including: (1) the nature, extent and quality of services
provided by FIMCO to the Funds, including investment advisory and
administrative services to the Funds; (2) supplemental investment
performance information relating to certain Funds; (3) the actual management
fees paid by each Fund to FIMCO; (4) the costs of providing
services to each Fund and the profitability of FIMCO from the relationship
with each Fund and, with respect to the Sub-Advised Funds, the fact that
FIMCO pays WMC or Paradigm, as the case may be, a sub-advisory fee for their
services to those Funds out of the advisory fee received by FIMCO; and (5)
any "fall out" or ancillary benefits accruing to FIMCO as a result of the
relationship with each Fund. FIMCO also provided, and the Board considered,
an analysis of the overall profitability of the First Investors mutual fund
business that included various entities affiliated with FIMCO. In addition
to evaluating, among other things, the written information provided by
FIMCO, the Board also evaluated the answers to questions posed by the Board
to representatives of FIMCO at the May Meeting.
In addition, in response to specific requests from the independent Trustees
in connection with the May Meeting, WMC and Paradigm furnished, and the
Board reviewed, information concerning aspects of their respective
operations, including: (1) the nature, extent and quality of services
provided by WMC and Paradigm to the applicable Sub-Advised Funds; (2) the
sub-advisory fee rates charged by WMC and Paradigm and a comparison of those
fee rates to the fee rates charged by WMC and Paradigm for providing
sub-advisory services to other investment companies or accounts, as
applicable, with objectives similar to the applicable Sub-Advised Funds; (3)
the profitability information provided by WMC and Paradigm; and (4) any
"fall out" or ancillary benefits accruing to WMC and Paradigm as a result of
the relationship with each applicable Sub-Advised Fund. In addition, WMC
provided, and the Board reviewed, a comparison of the fee rates charged by
other sub-advisers to investment companies in the same Peer Group as the
applicable Sub-Advised Funds managed by WMC.
In considering the information and materials described above, the
independent Trustees received assistance from and met separately with
independent legal counsel and were provided with a written description of
their statutory responsibilities and the legal standards that are applicable
to approvals of advisory agreements. Although the Advisory Agreements for
all of the Funds and the Sub-Advisory Agreements for the Sub-Advised Funds
were considered at the same Board meeting, the Trustees addressed each Fund
separately during the May Meeting. In view of the broad scope and variety of
factors and information, the Trustees did not find it practicable to, and
did not, assign relative weights to the specific factors considered in
reaching their conclusions and determinations to approve the continuance of
the Advisory Agreements and Sub-Advisory Agreements. Rather, the approval
determinations were made on the basis of each Trustee's business judgment
after consideration of all of the factors taken in their entirety. Although
not meant to be all-inclusive, the following discusses some of the factors
relevant to the Board's decisions to approve the continuance of the Advisory
Agreements and Sub-Advisory Agreements.
Board Considerations of Advisory Contracts and Fees (continued)
FIRST INVESTORS LIFE SERIES FUNDS
Nature, Extent and Quality of Services
In examining the nature, extent and quality of the services provided by
FIMCO, the Board recognized that FIMCO is dedicated to providing investment
management services exclusively to the Funds and the other funds in the
First Investors fund complex and that, unlike many other mutual fund
managers, FIMCO is not in the business of providing management services to
hedge funds, pension funds or separately managed accounts. As a result, the
Trustees considered that FIMCO's personnel devote substantially all of their
time to serving the funds in the First Investors fund complex.
The Board also recognized that it is FIMCO's philosophy to provide a high
level of personal service to the shareholders of the Funds, that FIMCO
strives to service the needs of a customer base that includes many investors
who have modest incomes and net worths, that the fund complex is small in
size relative to many other fund complexes, that many of the individual
funds in the First Investors fund complex are small in asset size relative
to other funds in the industry, and that the average account size of many of
the First Investors funds is small by comparison to the industry averages.
The Board also considered management's representations that there are
significant costs involved in providing the level of personal service that
the First Investors fund complex attempts to deliver to its customers.
The Board noted that FIMCO has undertaken extensive responsibilities as
manager of the Funds, including: (1) the provision of investment advice to
the Funds; (2) implementing policies and procedures designed to ensure
compliance with each Fund's investment objectives and policies; (3) the
review of brokerage arrangements; (4) oversight of general portfolio
compliance with applicable laws; (5) the provision of certain administrative
services to the Funds, including fund accounting; (6) the implementation of
Board directives as they relate to the Funds; and (7) evaluating and
monitoring sub-advisers. The Trustees noted that under the Advisory
Agreements with FIMCO, FIMCO provides not only advisory services but certain
administrative services, such as fund accounting services, that many other
advisers do not provide under their advisory agreements. The Board also
noted the steps that FIMCO has taken to encourage strong performance,
including making changes to portfolio managers, adding to its in-house
research and analytical capabilities, increasing potential performance
bonuses for portfolio managers and analysts, and changing sub-advisers.
Furthermore, the Board considered the nature, extent and quality of the
investment management services provided by WMC and Paradigm to the
applicable Sub-Advised Funds. The Trustees considered WMC's and Paradigm's
investment management process in managing the applicable Sub-Advised Funds
and the experience and capability of their respective personnel responsible
for the portfolio management of the applicable Sub-Advised Funds.
Based on the totality of the information considered, the Trustees concluded
that the Funds were likely to benefit from the nature, extent and quality of
FIMCO's, WMC's and Paradigm's services, as applicable, and that FIMCO as
well as WMC and Paradigm have the ability to continue to provide these
services based on their respective experience, operations and resources.
Investment Performance
The Board placed significant emphasis on the investment performance of each
of the Funds. While consideration was given to performance reports and
discussions held at prior Board meetings, particular attention was given to
the performance information compiled by Lipper as well as the supplemental
performance information relating to certain Funds provided by FIMCO for the
May Meeting. In particular, the Trustees reviewed the performance of the
Funds over the most recent calendar year ("1-year period") and annualized
performance over the most recent three calendar year period ("3-year
period") and five calendar year period ("5-year period"). In this regard,
the Board considered the performance of each Fund on a percentile and
quintile basis as compared to its Peer Group. For purposes of the
performance data provided by Lipper, the first quintile is defined as 20% of
the funds in the applicable Peer Group with the highest performance and the
fifth quintile is defined as 20% of the funds in the applicable Peer Group
with the lowest performance. In reviewing this data, the Board focused
primarily on the 1- to 3-year periods with the greatest weight being on
whether a Fund's performance was in the top three quintiles versus the
Fund's Peer Group for the 3-year period. On a Fund-by-Fund basis, the
performance reports indicated, and the Board noted, that:
* Value Fund was in the second highest quintile of its Peer Group for the
1-year period and the highest quintile for the 3-year period. The Board
also noted that Lipper did not provide performance information for the
5-year period because the Fund's investment objective changed during that
period.
* Government Fund was in the second highest quintile of its Peer Group for
both the 1-year period and 3-year period.
* High Yield Fund was in the third quintile of its Peer Group for the
3-year period, although its more recent 1-year period performance was not
as favorable.
* Special Bond Fund was in the second highest quintile of its Peer Group
for the 3-year period, although its more recent 1-year period performance
was not as favorable.
* Target Maturity 2010 Fund was in the second highest quintile of its Peer
Group for both the 1-year period and 3-year period.
Board Considerations of Advisory Contracts and Fees (continued)
FIRST INVESTORS LIFE SERIES FUNDS
* Target Maturity 2015 Fund was in the highest quintile of its Peer Group
for both the 1-year period and 3-year period.
With regard to the Discovery Fund, the performance report showed that the
Fund was in the third quintile for the 1-year period and the Board noted
that Lipper did not provide performance information for the 3-year period
and 5-year period because the Fund's investment objective changed during
those periods. The Board considered the fact that Paradigm was retained as
sub-adviser for the Discovery Fund in 2005 at a significant additional cost
to FIMCO in an effort to improve the Fund's performance to be a favorable
development.
With regard to the Blue Chip Fund, the performance report showed that the
Fund was in the fourth quintile of its Peer Group for both the 1-year period
and 3-year period. The Board considered the fact that FIMCO assigned a new
portfolio manager to the Blue Chip Fund in May of 2005 in an effort to
improve the Fund's performance to be a positive development. The Board
expressed its intention to continue to closely monitor the Fund's
performance in concert with FIMCO.
With regard to the Growth Fund and Focused Equity Fund, the performance
report showed that each Fund was in the third quintile of its respective
Peer Group for the 1-year period and the fourth quintile for the 3-year
period. The Board noted that Lipper did not provide performance information
for the 5-year period for the Growth Fund because the Fund's investment
objective changed during that period. Although the Board was encouraged by
each Fund's performance over the most recent 1-year period, the Board
expressed its intention to continue to closely monitor the Fund's
performance in concert with FIMCO.
With regard to the International Fund, the performance report showed that
the Fund was in the fifth quintile of its Peer Group for both the 1-year
period and 3-year period. The Board considered FIMCO's explanation that the
Fund's current approach of investing approximately one-third of its assets
in U.S. securities has contributed to the Fund's underperformance relative
to its Peer Group. The Board also considered that FIMCO recommended
replacing the Fund's current sub-adviser, WMC, with Vontobel Asset
Management, Inc. ("Vontobel"). In this regard, the Board considered that
FIMCO believes that Vontobel has a good long-term track record managing
international portfolios and that Vontobel's investment approach will
improve the relative performance of the Fund. See discussion below regarding
the approval of the sub-advisory agreement with Vontobel.
With regard to the Investment Grade Fund, the performance report showed that
the Fund was in the fifth quintile of its Peer Group for the 1-year period
and the fourth quintile for the 3-year period. The Board considered that
FIMCO assigned a new
portfolio manager to the Investment Grade Fund in April of 2006 in an effort
to improve the Fund's performance and that FIMCO has confidence in the new
portfolio manager's ability to manage the Investment Grade Fund. The Board
expressed its intention to continue to closely monitor the Fund's
performance in concert with FIMCO.
With regard to the Cash Management Fund, the performance report showed that
the Fund was in the fifth quintile of its Peer Group for both the 1-year
period and 3-year period. The Board considered FIMCO's explanation regarding
the impact of the Cash Management Fund's investment parameters, which FIMCO
described as generally more conservative than those employed by advisers to
money market mutual funds, on relative performance. For example, FIMCO
explained that, unlike other money market funds, the Cash Management Fund
holds a significant portion of its assets in U.S. Government securities in
an effort to mitigate credit risk.
With regard to the Target Maturity 2007 Fund, the performance report showed
that the Fund was in the fourth quintile of its Peer Group for both the
1-year period and 3-year period. The Board considered FIMCO's explanation
that the Fund's comparative performance is a function of its Peer Group,
which is comprised primarily of target 2010 funds and that 2010 funds have
outperformed target 2007 funds in each of the last three years.
Fund Expenses, Costs of Services, Economies of Scale and Related Benefits
Management Fees and Expenses. The Board also gave substantial consideration
to the fees payable under each Fund's Advisory Agreement as well as under
the Sub-Advisory Agreements for the Sub-Advised Funds. The Board reviewed
the information compiled by Lipper comparing each Fund's contractual
management fee rate (at common asset levels) and actual management fee rate
(which included the effect of any fee waivers) as a percentage of average
net assets-- these fee rates include advisory and administrative service
fees-- to other funds in its Peer Group. In this regard, the Board
considered the management fees of each Fund (other than the Target Maturity
2007 Fund, Target Maturity 2010 Fund and Target Maturity 2015 Fund) on a
quintile basis as compared to its Peer Group. For purposes of the management
fee data provided by Lipper, the first quintile is defined as 20% of the
funds in the applicable Peer Group with the lowest management fee and the
fifth quintile is defined as 20% of the funds in the applicable Peer Group
with the highest management fee. In reviewing this data, the Board generally
focused on whether a Fund's management fee (actual and contractual) was in
the top three quintiles versus the Fund's Peer Group.
Based on the quintile data provided on management fee rates, on a
Fund-by-Fund basis, the Board noted that: (1) the contractual management fee
rate for each Fund, except the Government Fund, Investment Grade Fund and
Cash Management Fund,
Board Considerations of Advisory Contracts and Fees (continued)
FIRST INVESTORS LIFE SERIES FUNDS
was in the first three quintiles of its respective Peer Group; and (2) the
actual management fee rate (after taking into account any applicable fee
waivers) for each Fund, except the Value Fund, Government Fund, Investment
Grade Fund, High Yield Fund and Special Bond Fund, was in the first three
quintiles of its respective Peer Group.
With regard to the Target Maturity 2007 Fund, Target Maturity 2010 Fund and
Target Maturity 2015 Fund, the Board noted that Lipper did not provide data
comparing each Fund's management fee to other funds in its Peer Group on a
quintile and percentile basis due to the limited number of funds in the
Target Maturity underlying variable insurance products classification.
However, the Board reviewed data provided by Lipper showing each Target
Maturity Fund's rank among the other funds in its Peer Group as it relates
to management fees. Based on this information, the Board noted that although
each Target Maturity Fund was ranked last in its Peer Group for contractual
management fees, it ranked first (i.e., lowest management fee) for actual
management fees due to fee waivers.
The Board also considered that the fee schedule for each Fund was amended
effective April 30, 2006 to incorporate additional "breakpoints" (i.e.,
reductions in the management fee rate as assets increase), although none of
the Funds are currently at an asset level to benefit from such additional
breakpoints.
In considering the sub-advisory fee rates charged by and costs and
profitability of WMC and Paradigm with regard to the respective Sub-Advised
Funds, the Board noted that FIMCO pays WMC or Paradigm, as the case may be,
a sub-advisory fee from its own advisory fee rather than each Fund paying
WMC or Paradigm a fee directly. WMC and Paradigm provided, and the Board
reviewed, information comparing the fees charged by WMC and Paradigm for
services to the respective Sub-Advised Funds versus the fees charged by WMC
and Paradigm to other comparable investment companies or accounts, as
applicable. In addition, WMC provided, and the Board reviewed, information
comparing the fees charged by other sub-advisers to investment companies in
the same Peer Group as the Sub-Advised Funds managed by WMC. Based on a
review of this information, the Board noted that the fees charged by WMC and
Paradigm, as the case may be, for services to each applicable Sub-Advised
Fund appeared comparable to the fees WMC and Paradigm charge to such other
comparable investment companies or accounts. Furthermore, the Board noted
that the fees charged by WMC appeared comparable to fees charged by other
sub-advisers to investment companies in the same Peer Group as the
Sub-Advised Funds managed by WMC.
The Board also reviewed the information compiled by Lipper comparing each
Fund's total expense ratio to other funds in its Peer Group. For each Fund,
other than the
Target Maturity 2007 Fund, Target Maturity 2010 Fund and Target Maturity
2015 Fund, the information reviewed by the Board included quintile
information. For purposes of the expense ratio data provided by Lipper, the
first quintile is defined as 20% of the funds in the applicable Peer Group
with the lowest actual total expense ratio and the fifth quintile is defined
as 20% of the funds in the applicable Peer Group with the highest actual
total expense ratio. With regard to overall expense ratios, the Board noted
that the total expense ratio for the most recent calendar year, taking into
account FIMCO's expense waivers (as applicable), for the Blue Chip Fund,
Value Fund, Discovery Fund, Growth Fund, International Fund and High Yield
Fund, was in the first three quintiles of its respective Peer Group. The
Board noted that the total expense ratio, taking into account FIMCO's
expense waivers (as applicable), for each of the Focused Equity Fund,
Investment Grade Fund, Special Bond Fund and Cash Management Fund was in the
fourth quintile and, for the Government Fund, was in the fifth quintile, of
its respective Peer Group.
With regard to the Target Maturity 2007 Fund, Target Maturity 2010 Fund and
Target Maturity 2015 Fund, the Board noted that Lipper did not provide data
comparing each Fund's expense ratio to other funds in its Peer Group on a
quintile and percentile basis. However, the Board reviewed data provided by
Lipper showing each Target Maturity Fund's rank among the other funds in its
Peer Group as it relates to total expense ratio. Based on this information,
the Board noted that each Target Maturity Fund was ranked in the middle of
its Peer Group for total expense ratio.
With regard to Fund expenses, the Board recognized management's ongoing
efforts to reduce Fund expenses and encouraged management to continue to
seek additional ways to reduce Fund expenses.
The foregoing comparisons assisted the Trustees by providing them with a
basis for evaluating each Fund's management fee and expense ratio on a
relative basis.
Profitability. The Board reviewed the materials it received
from FIMCO regarding its revenues and costs in providing investment
management and certain administrative services to the Funds. In particular,
the Board considered the detailed analysis of FIMCO's profitability with
respect to each Fund, calculated for the year ended December 31, 2005, as
well as profitability information relating to the past five calendar years.
The Board also considered FIMCO's expectation that there are a number of
significant regulatory changes on the horizon that may impose additional
responsibilities and costs on FIMCO and its affiliates in the upcoming year.
In reviewing the profitability information, the Trustees also considered the
"fall-out" or ancillary benefits that may accrue to FIMCO as a result of its
relationship with the Funds, which are discussed below. The Trustees
acknowledged that, as a business matter, FIMCO was entitled to
earn reasonable profits for its services to the Funds.
Board Considerations of Advisory Contracts and Fees (continued)
FIRST INVESTORS LIFE SERIES FUNDS
Economies of Scale. With respect to whether economies of scale are realized
by FIMCO as a Fund's assets increase and the extent to which any economies
of scale are reflected in the level of management fee rates charged, the
Board considered that the Advisory Agreement fee schedule for each Fund
includes breakpoints to account for management economies of scale. The Board
recognized that, although these Funds have not reached a size at which they
can take advantage of the breakpoints contained in their fee schedule, each
schedule is structured so that when the assets of these Funds grow,
economies of scale may be shared for the benefit of shareholders.
"Fall Out" or Ancillary Benefits. The Board considered the "fall-out" or
ancillary benefits that may accrue to FIMCO, WMC and Paradigm as a result of
their relationship with the Funds. In that regard, the Board considered the
fact that FIMCO and WMC receive proprietary and third-party research from
broker-dealers that execute brokerage transactions for the funds in the
First Investors fund complex. However, the Board noted that FIMCO and WMC
must select brokers based on each Fund's requirements for seeking best
execution. The Board also considered that Paradigm will begin executing
brokerage transactions for the Discovery Fund through the use of an
affiliated broker-dealer and that this will also provide a source of
fall-out benefits to Paradigm. After review of this information, the Board
concluded that the benefits accruing to FIMCO as well as WMC and Paradigm by
virtue of their relationship to the applicable Funds are fair and
reasonable.
After evaluation of the comparative performance, fee and expense information
and the profitability, ancillary benefits and other considerations as
described above, and in light of the nature, extent and quality of services
to be provided by FIMCO, WMC and Paradigm, the Board concluded that the
level of fees paid to FIMCO with respect to each Fund, and WMC and Paradigm
with respect to each applicable Sub-Advised Fund, is reasonable.
* * *
In summary, based on the various considerations discussed above, the Board
determined that approval of the Advisory Agreement with respect to each Fund
and the Sub-Advisory Agreement with respect to each Sub-Advised Fund was
in the best interests of the applicable Fund. As a result, the Board, including
a majority of the independent Trustees, approved each Advisory Agreement and
Sub-Advisory Agreement.
Initial Consideration of the Sub-Advisory Agreement with Vontobel Asset
Management, Inc. for the International Fund
At the May Meeting, the Board, including a majority of the non-interested or
independent Trustees, approved an initial sub-advisory agreement, subject to
shareholder approval, between FIMCO and Vontobel with respect to the
International Fund (the "Proposed Agreement"). (Shareholders approved
Vontobel on June 26, 2006 and Vontobel took over management of the
International Fund on June 27, 2006.)
With respect to the Board's consideration of the Proposed Agreement, the
Trustees received information in advance of the May Meeting from FIMCO or
Vontobel, which included: (1) the nature, extent and quality of services to
be provided by Vontobel to the International Fund; (2) Vontobel's
experience, reputation, investment management business, personnel and
operations; (3) Vontobel's brokerage and trading policies and practices; (4)
the level of the sub-advisory fees to be charged to the International Fund
and a comparison of those fees to the fees charged by Vontobel to other
clients with a similar investment mandate as the International Fund; (5)
Vontobel's compliance program; (6) Vontobel's historical investment
performance record in managing assets utilizing an international equity
mandate; and (7) Vontobel's financial condition. In addition, FIMCO
discussed with the Board and the Board considered the process by which FIMCO
selected and recommended Vontobel as sub-adviser to the International Fund.
In considering the information and materials described above, the
independent Trustees received assistance from and met separately with
independent legal counsel and were provided with a written description of
their statutory responsibilities and the legal standards that are applicable
to approvals of advisory agreements. In view of the broad scope and variety
of factors and information, the Trustees did not find it practicable to, and
did not, assign relative weights to the specific factors considered in
reaching their conclusions and determinations to approve the Proposed
Agreement. Rather, the approval determination was made on the basis of each
Trustee's business judgment after consideration of all of the factors taken
in their entirety.
The Board considered several factors when evaluating Vontobel and in
approving the Proposed Agreement, including Vontobel's experience in
managing international securities, its reputation, the past performance of
similar accounts managed by Vontobel, its overall capabilities to perform
the services under the Proposed Agreement and its willingness to perform
those services for the International Fund. A discussion of the factors
relating to the Board's selection of Vontobel and approval of the Proposed
Agreement and sub-advisory fee to be paid by FIMCO to Vontobel follows.
Board Considerations of Advisory Contracts and Fees (continued)
FIRST INVESTORS LIFE SERIES FUNDS
Nature, extent and quality of the services to be provided by Vontobel
The Board considered Vontobel's investment process as well as the background
and experience of the portfolio management team in implementing an
international equity strategy. The Board noted that Vontobel specializes in
investing in international equities, including emerging markets. In
addition, the Board considered the differences between Vontobel's investment
strategies compared to those of the previous sub-adviser to the Fund, and,
in particular, the fact that Vontobel plans to increase the Fund's exposure
to foreign securities and foreign markets by investing more of the Fund's
assets outside of the U.S. The Board also considered FIMCO's belief that
such an approach would be beneficial to shareholders who want greater
exposure to foreign markets and those who want to control their own
allocations among U.S. and foreign stocks. Furthermore, the Board considered
the fact that Vontobel plans on investing a greater percentage of the Fund's
assets in smaller companies and less developed markets. The Board also took
into consideration FIMCO's belief that Vontobel's approach to investing in
foreign securities may increase the potential for positive returns for Fund
shareholders. In addition, the Board considered Vontobel's investment
resources, infrastructure and the adequacy of its compliance program. Based
on this information, the Board concluded that the nature, extent and quality
of the sub-advisory services to be provided by Vontobel were appropriate for
the Fund in light of its investment objective, and, thus, supported a
decision to approve the Proposed Agreement.
Performance of the Fund and Vontobel
The Board evaluated Vontobel's historical investment performance record in
managing assets utilizing an international equity mandate. In particular,
the Board evaluated the performance of the Vontobel International Equity
Composite, the Phoenix Foreign Opportunities Fund, the Penn Series
International Equity Fund, and the Vontobel Global Value Equity (ex US) Fund
for the one, three, five and ten-year periods ended March 31, 2006 versus
the Morgan Stanley Capital International EAFE Index. The Board noted that
the performance of the Vontobel International Equity Composite, the Phoenix
Foreign Opportunities Fund and the Penn Series International Equity Fund was
better than the performance of the Morgan Stanley Capital International EAFE
Index (Net) for the one-, three-, five- and ten-year periods ended March 31,
2006. The Board noted that the performance of the Vontobel Global Value
Equity (ex US) Fund was better than the performance of the Morgan Stanley
Capital International EAFE Index (Net) for most of the time periods
presented. The Trustees concluded that the historical investment performance
record of Vontobel supported approval of the Proposed Agreement.
Comparisons of the amounts to be paid under the Proposed Agreement with
those under contracts between Vontobel and its other clients
In evaluating the Proposed Agreement, the Board reviewed Vontobel's
sub-advisory fee schedule and breakpoints for the Fund. The Board also
considered comparisons of the proposed sub-advisory fees to be charged by
Vontobel under the Proposed Agreement versus the fees charged by Vontobel to
other clients with a similar investment mandate. The Board noted that
Vontobel's fees for sub-advising the Fund, at current asset levels, under
the Proposed Agreement will be lower than the fees charged by Vontobel for
managing its two other U.S. registered investment companies and five series
of a Luxembourg investment fund, each of which has a similar investment
mandate to the Fund. The comparative data regarding the fees Vontobel
charges to other clients with a similar investment mandate assisted the
Trustees in concluding that Vontobel's sub-advisory fees under the Proposed
Agreement appeared to be within a reasonable range for the services to be
provided to the Fund.
Costs of the services to be provided and profits to be realized by Vontobel
and its affiliates from the relationship with the Fund
Since the sub-advisory relationship with Vontobel is new, the Board did not
consider the costs of the services to be provided and profitability of
Vontobel and its affiliates from the relationship with the Fund. However,
the Board noted that, at current asset levels, Vontobel's fees for
sub-advising the Fund under the Proposed Agreement will be lower than the
fees charged by Vontobel for managing its two other U.S. registered
investment companies and five series of a Luxembourg investment fund, each
of which has a similar investment mandate to the Fund.
Extent to which economies of scale would be realized as the Fund grows and
whether fee levels reflect these economies of scale for the benefit of Fund
investors
The Board considered that the fees paid to Vontobel are paid by FIMCO and
not the Fund. However, the Board noted that FIMCO negotiated "breakpoints"
in Vontobel's fees based on the levels of assets in the Fund as well as any
other funds in the First Investors fund complex managed by Vontobel. FIMCO
also represented that it would not benefit economically from the proposed
fee arrangement as compared to the arrangement with the Fund's previous
sub-adviser. Moreover, FIMCO will be paying more in sub-advisory fees.
Benefits to be derived by Vontobel from the relationship with the Fund
The Board considered the "fall-out" or ancillary benefits that may accrue to
Vontobel as a result of the sub-advisory relationship with the Fund,
including greater exposure
Board Considerations of Advisory Contracts and Fees (continued)
FIRST INVESTORS LIFE SERIES FUNDS
in the marketplace with respect to the sub-adviser's investment process,
expanding the level of assets under management by Vontobel and potentially
increased opportunities for soft dollar arrangements. With regard to these
arrangements, the Board noted that Vontobel may direct the Fund's brokerage
transactions to certain brokers to obtain research and other services, which
may be used in servicing other clients of Vontobel. However, the Board noted
that Vontobel must select brokers based on the Fund's requirements for
seeking best execution. After review of this information, the Trustees
concluded that the potential benefits accruing to Vontobel by virtue of its
relationship with the Fund are fair and reasonable.
* * *
The Board did not identify any single factor as being of paramount
importance. In summary, based on the various considerations described above,
the Trustees, including a majority of the independent Trustees, concluded
that the proposed sub-advisory fee is reasonable and that the approval of
the Proposed Agreement is in the best interests of the Fund and its
shareholders, and as a result approved the Proposed Agreement.
Fund Expenses
BLUE CHIP FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ---------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ---------------------------------------------------------------------------------
Actual $1,000.00 $1,020.95 $4.13
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,020.84 $4.13
- ---------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .82%, multiplied by
the average account value over the period multiplied by 182/365 (to reflect
the one-half year period).
Portfolio Composition
TOP TEN SECTORS
(BAR CHART DATA:)
Financials 19.6%
Information Technology 15.0%
Industrials 12.8%
Health Care 12.8%
Consumer Staples 12.0%
Consumer Discretionary 11.3%
Energy 9.8%
Materials 2.8%
Telecommunication Services 2.6%
Utilities 1.3%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
BLUE CHIP FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--99.7%
Consumer Discretionary--11.3%
13,300 Best Buy Company, Inc. $729,372 $43
14,900 Carnival Corporation 621,926 37
29,700 CBS Corporation - Class "B" 803,385 48
18,600 Clear Channel Communications, Inc. 575,670 34
25,914 Comcast Corporation - Class "A" 848,424 50
18,100 Comcast Corporation - Special Class "A" 593,318 35
13,500 eBay, Inc. 395,415 23
35,800 Gap, Inc. 622,920 37
20,800 H&R Block, Inc. 496,288 29
25,200 Hilton Hotels Corporation 712,656 42
49,900 Home Depot, Inc. 1,785,921 106
10,900 Kohl's Corporation 644,408 38
16,300 Lowe's Companies, Inc. 988,921 59
36,700 McDonald's Corporation 1,233,120 73
53,600 News Corporation, Inc. - Class "A" 1,028,048 61
11,900 NIKE, Inc.- Class "B" 963,900 57
26,200 Target Corporation 1,280,394 76
89,700 Time Warner, Inc. 1,551,810 92
19,200 TJX Companies, Inc. 438,912 26
18,200 Tribune Company 590,226 35
22,400 Viacom, Inc. - Class "B" 802,816 47
48,300 Walt Disney Company 1,449,000 86
- -----------------------------------------------------------------------------------------------------------------
19,156,850 1,134
- -----------------------------------------------------------------------------------------------------------------
Consumer Staples--11.9%
27,400 Altria Group, Inc. 2,011,982 119
25,200 Anheuser-Busch Companies, Inc. 1,148,868 68
32,400 Avon Products, Inc. 1,004,400 59
50,900 Coca-Cola Company 2,189,718 130
26,600 Coca-Cola Enterprises, Inc. 541,842 32
10,000 Colgate-Palmolive Company 599,000 35
13,200 Costco Wholesale Corporation 754,116 45
34,400 CVS Corporation 1,056,080 63
9,400 Estee Lauder Companies, Inc. - Class "A" 363,498 22
12,100 General Mills, Inc. 625,086 37
9,200 Hershey Foods Corporation 506,644 30
19,900 Kimberly-Clark Corporation 1,227,830 73
35,000 PepsiCo, Inc. 2,101,400 124
46,335 Procter & Gamble Company 2,576,226 152
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Consumer Staples (continued)
19,700 Walgreen Company $883,348 $52
52,900 Wal-Mart Stores, Inc. 2,548,193 151
- -----------------------------------------------------------------------------------------------------------------
20,138,231 1,192
- -----------------------------------------------------------------------------------------------------------------
Energy--9.7%
14,400 BP PLC (ADR) 1,002,384 59
52,900 Chevron Corporation 3,282,974 194
25,771 ConocoPhillips 1,688,774 100
84,500 ExxonMobil Corporation 5,184,075 307
13,700 Halliburton Company 1,016,677 60
29,800 Schlumberger, Ltd. 1,940,278 115
19,900 Transocean, Inc. 1,598,368 95
10,800 Valero Energy Corporation 718,416 42
- -----------------------------------------------------------------------------------------------------------------
16,431,946 972
- -----------------------------------------------------------------------------------------------------------------
Financials--19.5%
16,000 ACE, Ltd. 809,440 48
10,100 Allstate Corporation 552,773 33
32,500 American Express Company 1,729,650 102
44,400 American International Group, Inc. 2,621,820 155
6,500 Ameriprise Financial, Inc. 290,355 17
66,514 Bank of America Corporation 3,199,323 189
42,300 Bank of New York Company, Inc. 1,362,060 81
250 Berkshire Hathaway, Inc. - Class "B" 760,750 45
15,900 Capital One Financial Corporation 1,358,655 80
12,200 Chubb Corporation 608,780 36
89,500 Citigroup, Inc. 4,317,480 255
10,400 Fannie Mae 500,240 30
14,500 Freddie Mac 826,645 49
5,300 Goldman Sachs Group, Inc. 797,279 47
60,132 JPMorgan Chase & Company 2,525,544 149
7,000 Lehman Brothers Holdings, Inc. 456,050 27
14,500 Marsh & McLennan Companies, Inc. 389,905 23
13,400 Mellon Financial Corporation 461,362 27
17,400 Merrill Lynch & Company, Inc. 1,210,344 72
29,000 Morgan Stanley 1,833,090 108
15,000 St. Paul Travelers Companies, Inc. 668,700 40
7,500 SunTrust Banks, Inc. 571,950 34
20,500 U.S. Bancorp 633,040 38
27,400 Wachovia Corporation 1,481,792 88
- ------------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
BLUE CHIP FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Financials (continued)
24,000 Washington Mutual, Inc. $1,093,920 $65
25,000 Wells Fargo & Company 1,677,000 99
6,600 Willis Group Holdings, Ltd. 211,860 13
- -----------------------------------------------------------------------------------------------------------------
32,949,807 1,950
- -----------------------------------------------------------------------------------------------------------------
Health Care--12.8%
33,500 Abbott Laboratories 1,460,935 86
29,200 Aetna, Inc. 1,165,956 69
27,700 Amgen, Inc. 1,806,871 107
14,500 Baxter International, Inc. 533,020 32
34,300 Boston Scientific Corporation 577,612 34
46,200 Bristol-Myers Squibb Company 1,194,732 71
60,800 Johnson & Johnson 3,643,136 216
29,300 Medtronic, Inc. 1,374,756 81
25,400 Merck & Company, Inc. 925,322 55
30,500 Novartis AG (ADR) 1,644,560 97
144,140 Pfizer, Inc. 3,382,966 200
3,900 Sanofi-Aventis (ADR) 189,930 11
12,800 St. Jude Medical, Inc. 414,976 25
4,000 Stryker Corporation 168,440 10
13,200 Teva Pharmaceutical Industries, Ltd. (ADR) 416,988 25
9,600 Triad Hospitals, Inc. 379,968 22
29,200 UnitedHealth Group, Inc. 1,307,576 77
21,900 Wyeth 972,579 58
- -----------------------------------------------------------------------------------------------------------------
21,560,323 1,276
- -----------------------------------------------------------------------------------------------------------------
Industrials--12.8%
18,500 3M Company 1,494,245 88
13,400 Boeing Company 1,097,594 65
16,300 Caterpillar, Inc. 1,214,024 72
56,400 Cendant Corporation 918,756 54
12,000 Dover Corporation 593,160 35
13,600 Emerson Electric Company 1,139,816 67
145,500 General Electric Company 4,795,680 284
19,700 Honeywell International, Inc. 793,910 47
10,600 Illinois Tool Works, Inc. 503,500 30
9,200 ITT Industries, Inc. 455,400 27
19,000 Lockheed Martin Corporation 1,363,060 81
28,700 Masco Corporation 850,668 50
13,300 Northrop Grumman Corporation 851,998 50
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Industrials (continued)
60,100 Tyco International, Ltd. $1,652,750 $98
7,000 Union Pacific Corporation 650,720 38
13,500 United Parcel Service, Inc. - Class "B" 1,111,455 66
33,700 United Technologies Corporation 2,137,254 127
- -----------------------------------------------------------------------------------------------------------------
21,623,990 1,279
- -----------------------------------------------------------------------------------------------------------------
Information Technology--14.9%
13,600 Accenture, Ltd. - Class "A" 385,152 23
12,500 Analog Devices, Inc. 401,750 24
5,600 Apple Computer, Inc. 319,872 19
27,900 Applied Materials, Inc. 454,212 27
10,000 Automatic Data Processing, Inc. 453,500 27
84,800 Cisco Systems, Inc. 1,656,144 98
46,800 Corning, Inc. 1,132,092 67
60,800 Dell, Inc. 1,484,128 88
121,400 EMC Corporation 1,331,758 79
33,800 First Data Corporation 1,522,352 90
40,100 Hewlett-Packard Company 1,270,368 75
114,800 Intel Corporation 2,175,460 129
26,300 International Business Machines Corporation 2,020,366 120
13,400 Maxim Integrated Products, Inc. 430,274 25
180,600 Microsoft Corporation 4,207,980 249
37,900 Motorola, Inc. 763,685 45
72,800 Nokia Corporation - Class "A" (ADR) 1,474,928 87
79,500 Oracle Corporation 1,151,955 68
14,500 QUALCOMM, Inc. 581,015 34
36,020 Symantec Corporation 559,751 33
39,300 Texas Instruments, Inc. 1,190,397 70
19,700 Xerox Corporation 274,027 16
- -----------------------------------------------------------------------------------------------------------------
25,241,166 1,493
- -----------------------------------------------------------------------------------------------------------------
Materials--2.8%
19,400 Alcoa, Inc. 627,784 37
15,338 Cemex SA de CV (ADR) 873,806 52
32,100 Dow Chemical Company 1,252,863 74
21,100 DuPont (E.I.) de Nemours & Company 877,760 52
23,800 International Paper Company 768,740 45
6,700 Newmont Mining Corporation 354,631 21
- -----------------------------------------------------------------------------------------------------------------
4,755,584 281
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
BLUE CHIP FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Telecommunication Services--2.7%
53,200 AT&T, Inc. $1,483,748 $88
74,222 Sprint Corporation 1,483,698 88
44,500 Verizon Communications, Inc. 1,490,305 88
- -----------------------------------------------------------------------------------------------------------------
4,457,751 264
- -----------------------------------------------------------------------------------------------------------------
Utilities--1.3%
58,300 Duke Energy Corporation 1,712,271 101
11,200 FPL Group, Inc. 463,456 27
- -----------------------------------------------------------------------------------------------------------------
2,175,727 128
- -----------------------------------------------------------------------------------------------------------------
Total Value of Investments 99.7% 168,491,375 9,969
Other Assets, Less Liabilities .3 528,011 31
- -----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $169,019,386 $10,000
=================================================================================================================
* Non-income producing
Summary of Abbreviations:
ADR American Depositary Receipts
See notes to financial statements
Fund Expenses
CASH MANAGEMENT FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,019.75 $3.52
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,021.44 $3.53
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .70%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period). Expenses paid during the period are net of
expenses waived.
Portfolio Composition
BY SECTOR
(BAR CHART DATA:)
Corporate Notes 60.6%
U.S. Government Agency Obligations 23.0%
Floating Rate Notes 9.2%
Bankers' Acceptances 3.9%
Certificates of Deposit 3.3%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
CASH MANAGEMENT FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal Interest $10,000 of
Amount Security Rate* Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
CORPORATE NOTES--59.8%
$250M Brown Forman Corp., 7/6/06+ 5.08% $249,823 $324
300M Chevron Funding Corp., 8/3/06 5.22 298,564 387
300M Coca-Cola Co., 8/17/06 5.22 297,955 386
300M Concentrate Manufacturing Company
of Ireland, 7/13/06+ 5.10 299,489 388
275M Dupont (E.I.) de Nemours & Co., 7/10/06+ 5.01 274,655 356
250M Florida Power & Light Co., 7/27/06 5.27 249,048 323
250M Gannett Co., Inc., 7/21/06+ 5.21 249,275 323
300M General Electric Capital Corp., 7/18/06 5.13 299,271 388
300M Hershey Foods Corp., 7/14/06+ 5.09 299,448 388
250M IBM Capital, Inc., 7/26/06+ 5.21 249,095 323
250M McGraw-Hill Cos., Inc., 7/12/06 5.02 249,615 324
200M Merrill Lynch & Co., Inc., 7/6/06 5.01 199,860 259
300M National Rural Utilities Cooperative
Finance Corp., 7/11/06 5.10 299,574 388
300M Paccar Financial Corp., 7/7/06 5.25 299,737 389
300M Prudential Funding Corp., 7/19/06 5.14 299,228 388
250M Toyota Motor Credit Corp., 7/31/06 5.23 248,909 323
250M Wal-Mart Stores, Inc., 8/8/06+ 5.22 248,622 322
- -----------------------------------------------------------------------------------------------------------------
Total Value of Corporate Notes (cost $4,612,168) 4,612,168 5,979
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--22.8%
Fannie Mae:
100M 10/6/06 4.83 99,442 129
150M 2/12/07 5.00 148,646 193
Federal Home Loan Bank:
250M 7/7/06 5.06 249,789 324
375M 8/25/06 5.30 373,427 484
200M 3/16/07 5.07 198,551 257
Freddie Mac:
200M 11/3/06 4.51 199,997 259
195M 11/9/06 4.67 194,877 253
140M 5/11/07 5.30 140,000 181
150M 6/22/07 5.42 150,000 195
- -----------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Obligations
(cost $1,754,729) 1,754,729 2,275
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal Interest $10,000 of
Amount Security Rate* Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
FLOATING RATE NOTES--9.1%
$250M US Bank, NA, 1/25/07 5.06% $250,000 $324
250M Wachovia Bank, NA, 12/4/06 5.22 250,000 324
200M Wells Fargo & Co., 9/15/06 5.42 200,046 259
- -----------------------------------------------------------------------------------------------------------------
Total Value of Floating Rate Notes (cost $700,046) 700,046 907
- -----------------------------------------------------------------------------------------------------------------
BANKERS' ACCEPTANCES--3.8%
298M JPMorgan Chase & Co., 8/1/06
(cost $296,690) 5.08 296,690 385
- -----------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--3.2%
250M Citibank, NA, 8/22/06 (cost $250,000) 5.15 250,000 324
- -----------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $7,613,633) 98.7% 7,613,633 9,870
Other Assets, Less Liabilities 1.3 100,060 130
- -----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $7,713,693 $10,000
=================================================================================================================
* The interest rates shown are the effective rates at the time of purchase by the Fund. The interest rates
shown on the floating rate notes are adjusted periodically; the rates shown are the rates in effect
on June 30, 2006.
+ Security exempt from registration under Section 4(2) of the Securities Act of 1933 (see Note 5).
++ Aggregate cost for federal income tax purposes is the same.
See notes to financial statements
Fund Expenses
DISCOVERY FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,081.03 $4.20
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,020.89 $4.08
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .81%, multiplied by
the average account value over the period, multiplied by 182/365 (to
reflect the one-half year period).
Portfolio Composition
TOP TEN SECTORS
(BAR CHART DATA:)
Information Technology 23.0%
Industrials 20.3%
Consumer Discretionary 12.3%
Consumer Staples 8.8%
Health Care 7.6%
Utilities 6.3%
Materials 6.1%
Energy 4.6%
Telecommunication Services 4.4%
Financials 4.0%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
DISCOVERY FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--97.3%
Consumer Discretionary--12.3%
90,100 Catalina Marketing Corporation $2,564,246 $178
77,900 Dillard's, Inc. - Class "A" 2,481,115 172
67,200 Jackson Hewitt Tax Service, Inc. 2,106,720 146
175,200 Journal Communications, Inc. 1,969,248 137
46,600 Media General, Inc. - Class "A" 1,952,074 135
51,200 * Payless ShoeSource, Inc. 1,391,104 97
95,775 RadioShack Corporation 1,340,850 93
72,100 * Scholastic Corporation 1,872,437 130
147,700 * Tempur-Pedic International, Inc. 1,995,427 138
- -----------------------------------------------------------------------------------------------------------------
17,673,221 1,226
- -----------------------------------------------------------------------------------------------------------------
Consumer Staples--8.8%
127,300 Chiquita Brands International, Inc. 1,754,194 122
62,575 Church & Dwight Co., Inc. 2,278,981 158
76,500 Flowers Foods, Inc. 2,190,960 152
65,200 Hormel Foods Corporation 2,421,528 168
49,500 Lancaster Colony Corporation 1,953,765 136
71,989 Tootsie Roll Industries, Inc. 2,097,040 145
- -----------------------------------------------------------------------------------------------------------------
12,696,468 881
- -----------------------------------------------------------------------------------------------------------------
Energy--4.6%
61,400 * Denbury Resources, Inc. 1,944,538 135
119,500 * Parker Drilling Company 858,010 59
30,400 * Swift Energy Company 1,305,072 91
33,800 Tesoro Corporation 2,513,368 174
- -----------------------------------------------------------------------------------------------------------------
6,620,988 459
- -----------------------------------------------------------------------------------------------------------------
Financials--4.0%
7,900 * Alleghany Corporation 2,183,244 151
58,100 Calamos Asset Management, Inc. - Class "A" 1,684,319 117
65,550 HCC Insurance Holdings, Inc. 1,929,792 134
- -----------------------------------------------------------------------------------------------------------------
5,797,355 402
- -----------------------------------------------------------------------------------------------------------------
Health Care--7.6%
110,800 * AMN Healthcare Services, Inc. 2,249,240 156
85,600 * AmSurg Corporation 1,947,400 135
42,500 * Humana, Inc. 2,282,250 158
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
DISCOVERY FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Health Care (continued)
56,700 * Magellan Health Services, Inc. - Class "A" $2,569,077 $178
52,800 West Pharmaceutical Services, Inc. 1,915,584 133
- -----------------------------------------------------------------------------------------------------------------
10,963,551 760
- -----------------------------------------------------------------------------------------------------------------
Industrials--20.2%
59,800 * Aviall, Inc. 2,841,696 197
33,250 Carlisle Companies, Inc. 2,636,725 183
67,300 CLARCOR, Inc. 2,004,867 139
63,600 Curtiss-Wright Corporation 1,963,968 136
38,800 HNI Corporation 1,759,580 122
25,500 * Jacobs Engineering Group, Inc. 2,030,820 141
54,900 John H. Harland Company 2,388,150 166
74,600 * Kansas City Southern, Inc. 2,066,420 143
45,300 * NCI Building Systems, Inc. 2,408,601 167
48,000 United Industrial Corporation 2,172,000 151
48,200 Wabtec Corporation 1,802,680 125
75,250 Watson Wyatt & Company Holdings - Class "A" 2,644,285 183
79,800 Woodward Governor Company 2,434,698 169
- -----------------------------------------------------------------------------------------------------------------
29,154,490 2,022
- -----------------------------------------------------------------------------------------------------------------
Information Technology--23.0%
89,600 * Avnet, Inc. 1,793,792 124
132,600 AVX Corporation 2,093,754 145
70,400 * Cabot Microelectronics Corporation 2,133,824 148
40,700 CDW Corporation 2,224,255 154
96,600 * Checkpoint Systems, Inc. 2,145,486 149
148,500 * Convergys Corporation 2,895,750 201
46,400 Imation Corporation 1,904,720 132
64,700 * Intergraph Corporation 2,037,403 141
69,200 * MEMC Electronic Materials, Inc. 2,595,000 180
84,100 MoneyGram International, Inc. 2,855,195 198
170,750 * Overland Storage, Inc. 1,144,025 80
78,400 Reynolds and Reynolds Company - Class "A" 2,404,528 167
49,000 * Rogers Corporation 2,760,660 192
206,800 * Tyler Technologies, Inc. 2,316,160 161
56,250 * Varian Semiconductor Equipment Associates, Inc. 1,834,313 127
- -----------------------------------------------------------------------------------------------------------------
33,138,865 2,299
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
Shares or For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Materials--6.1%
40,600 AptarGroup, Inc. $2,014,166 $140
73,800 Bowater, Inc. 1,678,950 116
109,200 Commercial Metals Company 2,806,440 195
49,200 Eagle Materials, Inc. 2,337,000 162
- -----------------------------------------------------------------------------------------------------------------
8,836,556 613
- -----------------------------------------------------------------------------------------------------------------
Telecommunication Services--4.4%
58,400 CenturyTel, Inc. 2,169,560 150
249,300 * Premiere Global Services, Inc. 1,882,215 131
59,775 Telephone & Data Systems, Inc. - Special Shares 2,325,247 161
- -----------------------------------------------------------------------------------------------------------------
6,377,022 442
- -----------------------------------------------------------------------------------------------------------------
Utilities--6.3%
69,000 Atmos Energy Corporation 1,925,790 134
145,100 * CMS Energy Corporation 1,877,594 130
99,200 Duquesne Light Holdings, Inc. 1,630,848 113
281,200 * Dynegy, Inc. - Class "A" 1,538,164 107
88,700 Pepco Holdings, Inc. 2,091,546 145
- -----------------------------------------------------------------------------------------------------------------
9,063,942 629
- -----------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $122,505,483) 140,322,458 9,733
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM U.S. GOVERNMENT AGENCY
OBLIGATIONS--2.6%
$3,700M Federal Home Loan Bank, 4.95%, 7/3/06
(cost $3,698,982) 3,698,982 257
- -----------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $126,204,465) 99.9% 144,021,440 9,990
Other Assets, Less Liabilities .1 144,701 10
- -----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $144,166,141 $10,000
=================================================================================================================
* Non-income producing
See notes to financial statements
Fund Expenses
FOCUSED EQUITY FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,004.51 $4.55
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,020.39 $4.58
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .91%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period).
Portfolio Composition
TOP SECTORS
(BAR CHART DATA:)
Health Care 18.0%
Information Technology 17.3%
Financials 17.0%
Industrials 14.5%
Energy 10.7%
Consumer Discretionary 9.3%
Consumer Staples 7.9%
Telecommunication Services 2.2%
Utilities 1.5%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
FOCUSED EQUITY FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--98.7%
Consumer Discretionary--9.3%
8,200 CBS Corporation - Class "B" $221,810 $201
4,600 Federated Department Stores, Inc. 168,360 153
2,200 Lowe's Companies, Inc. 133,474 121
2,000 NIKE, Inc. - Class "B" 162,000 147
10,700 Time Warner, Inc. 185,110 168
4,450 * Viacom, Inc. - Class "B" 159,488 144
- -----------------------------------------------------------------------------------------------------------------
1,030,242 934
- -----------------------------------------------------------------------------------------------------------------
Consumer Staples--7.9%
3,700 Altria Group, Inc. 271,691 246
4,800 PepsiCo, Inc. 288,192 261
5,600 Procter & Gamble Company 311,360 282
- -----------------------------------------------------------------------------------------------------------------
871,243 789
- -----------------------------------------------------------------------------------------------------------------
Energy--10.8%
4,500 Chesapeake Energy Corporation 136,125 123
7,000 ConocoPhillips 458,710 416
4,700 Noble Energy, Inc. 220,242 200
2,300 Petro-Canada 109,043 99
4,100 Schlumberger, Ltd. 266,951 242
- -----------------------------------------------------------------------------------------------------------------
1,191,071 1,080
- -----------------------------------------------------------------------------------------------------------------
Financials--17.0%
4,500 ACE, Ltd. 227,655 206
9,000 Bank of America Corporation 432,900 392
7,000 Citigroup, Inc. 337,680 306
2,300 Golden West Financial Corporation 170,660 155
2,900 Merrill Lynch & Company, Inc. 201,724 183
2,400 MetLife, Inc. 122,904 111
3,100 State Street Corporation 180,079 163
1,900 UBS AG 208,430 189
- -----------------------------------------------------------------------------------------------------------------
1,882,032 1,705
- -----------------------------------------------------------------------------------------------------------------
Health Care--18.1%
3,900 Abbott Laboratories 170,079 154
600 Alcon, Inc. 59,130 54
4,300 Amgen, Inc. 280,489 254
3,800 Eli Lilly & Company 210,026 190
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
FOCUSED EQUITY FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
Health Care (continued)
4,100 * Medco Health Solutions, Inc. $234,848 $213
7,000 Medtronic, Inc. 328,440 298
5,900 Sanofi-Aventis (ADR) 287,330 260
12,600 Schering-Plough Corporation 239,778 217
2,500 * WellPoint, Inc. 181,925 165
- -----------------------------------------------------------------------------------------------------------------
1,992,045 1,805
- -----------------------------------------------------------------------------------------------------------------
Industrials--14.5%
2,400 Boeing Company 196,584 178
1,300 Fluor Corporation 120,809 109
8,700 General Electric Company 286,752 260
3,400 Lockheed Martin Corporation 243,916 221
3,200 Textron, Inc. 294,976 267
3,600 United Technologies Corporation 228,312 207
6,500 Waste Management, Inc. 233,220 211
- -----------------------------------------------------------------------------------------------------------------
1,604,569 1,453
- -----------------------------------------------------------------------------------------------------------------
Information Technology--17.4%
4,000 Accenture, Ltd. - Class "A" 113,280 103
5,800 * Adobe Systems, Inc. 176,088 160
4,100 Automatic Data Processing, Inc. 185,935 168
9,900 * Cisco Systems, Inc. 193,347 175
9,200 * Corning, Inc. 222,548 202
15,500 * EMC Corporation 170,035 154
4,700 First Data Corporation 211,688 192
460 * Google, Inc. - Class "A" 192,892 175
3,100 * Marvell Technology Group, Ltd. 137,423 124
13,400 Microsoft Corporation 312,220 283
- -----------------------------------------------------------------------------------------------------------------
1,915,456 1,736
- -----------------------------------------------------------------------------------------------------------------
Telecommunication Services--2.2%
12,140 Sprint Nextel Corporation 242,678 220
- -----------------------------------------------------------------------------------------------------------------
Utilities--1.5%
2,200 Dominion Resources, Inc. 164,538 149
- -----------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $9,843,652) 10,893,874 9,871
- -----------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--1.7%
$183M Banc of America Securities, 4.25%, dated 6/30/06,
to be repurchased at $183,065 on 7/3/06
(collateralized by U.S. Treasury Notes, 5.125%,
6/30/11, valued at $190,237) (cost $183,000) $183,000 $166
- -----------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $10,026,652) 100.4% 11,076,874 10,037
Other Assets, Less Liabilities (0.4) (41,079) (37)
- -----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $11,035,795 $10,000
=================================================================================================================
* Non-income producing
Summary of Abbreviations:
ADR American Depositary Receipts
See notes to financial statements
Fund Expenses
GOVERNMENT FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $996.32 $3.88
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,021.04 $3.93
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .78%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period). Expenses paid during the period are net of
expenses waived.
Portfolio Composition
BY SECTOR
(BAR CHART DATA:)
Government National Mortgage Association 55.1%
Fannie Mae 12.9%
Freddie Mac 11.8%
U.S. Government Agency Obligations 10.0%
U.S. Government Obligations 5.2%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
GOVERNMENT FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED CERTIFICATES--79.2%
Fannie Mae--12.8%
$1,260M 5.5%, 10/1/2032-7/1/2034 $1,223,764 $632
159M 7%, 5/1/2031 165,042 85
612M 9%, 6/1/2015-11/1/2026 661,489 342
382M 11%, 10/1/2015 424,515 219
- -----------------------------------------------------------------------------------------------------------------
2,474,810 1,278
- -----------------------------------------------------------------------------------------------------------------
Freddie Mac--11.8%
1,774M 6%, 8/1/2032-10/1/2035 1,749,794 903
323M 6.5%, 7/1/2032-12/1/2032 326,009 168
189M 8.5%, 7/1/2016-9/1/2024 202,773 105
- -----------------------------------------------------------------------------------------------------------------
2,278,576 1,176
- -----------------------------------------------------------------------------------------------------------------
Government National Mortgage Association I Program--54.6%
1,281M 5%, 6/15/2033-5/15/2034 1,214,015 627
3,724M 5.5%, 2/15/2033-1/15/2036 3,613,446 1,866
2,680M 6%, 11/15/2032-5/15/2036 2,663,002 1,375
1,285M 6.5%, 7/15/2032-8/15/2034 1,306,698 674
1,407M 7%, 1/15/2030-10/15/2032 1,464,116 756
292M 10%, 5/15/2019-8/15/2019 325,829 168
- -----------------------------------------------------------------------------------------------------------------
10,587,106 5,466
- -----------------------------------------------------------------------------------------------------------------
Total Value of Mortgage-Backed Certificates (cost $15,830,636) 15,340,492 7,920
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--9.9%
1,000M Federal Farm Credit Bank, 4.55%, 2011 956,338 494
1,000M Federal Home Loan Bank, 5%, 2012 968,127 500
- -----------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Obligations (cost $1,991,985) 1,924,465 994
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--5.0%
911M FDA Queens LP, 6.99%, 2017 (cost $1,036,018)+ 966,080 499
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
GOVERNMENT FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--5.2%
$1,000M U.S. Treasury Bills, 4.52%, 7/6/06 (cost $999,371) $999,371 $516
- -----------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $19,858,010) 99.3% 19,230,408 9,929
Other Assets, Less Liabilities .7 138,432 71
- -----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $19,368,840 $10,000
=================================================================================================================
+ Security exempt from registration under Rule 144A of the Securities Act of 1933 (See Note 5).
See notes to financial statements
Fund Expenses
GROWTH FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,024.83 $4.19
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,020.79 $4.18
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .83%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period).
Portfolio Composition
TOP TEN SECTORS
(BAR CHART DATA:)
Information Technology 18.4%
Financials 17.4%
Health Care 15.7%
Consumer Discretionary 12.7%
Industrials 12.2%
Energy 10.4%
Consumer Staples 5.7%
Materials 2.1%
Telecommunication Services 1.9%
Utilities 1.0%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
GROWTH FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
For Each
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--98.1%
Consumer Discretionary--12.6%
31,300 Abercrombie & Fitch Company - Class "A" $1,734,959 $70
34,400 * Career Education Corporation 1,028,216 41
149,650 CBS Corporation - Class "B" 4,048,033 164
41,150 * Coldwater Creek, Inc. 1,101,174 44
41,366 D.R. Horton, Inc. 985,338 40
54,600 Federated Department Stores, Inc. 1,998,360 81
800 Garmin, Ltd. 84,352 3
11,300 * ITT Educational Services, Inc. 743,653 30
44,525 * Jos. A. Bank Clothiers, Inc. 1,066,819 43
26,000 Lowe's Companies, Inc. 1,577,420 64
87,700 Michaels Stores, Inc. 3,616,748 146
41,500 * O'Reilly Automotive, Inc. 1,294,385 52
91,600 * Penn National Gaming, Inc. 3,552,248 144
22,700 * Priceline.com, Inc. 677,822 27
41,900 * RARE Hospitality International, Inc. 1,205,044 49
24,700 * Scientific Games Corporation - Class "A" 879,814 36
15,400 * Shuffle Master, Inc. 504,812 20
128,100 Time Warner, Inc. 2,216,130 90
49,900 * Univision Communications, Inc. - Class "A" 1,671,650 68
36,450 Viacom, Inc. - Class "B" 1,306,368 53
- -----------------------------------------------------------------------------------------------------------------
31,293,345 1,265
- -----------------------------------------------------------------------------------------------------------------
Consumer Staples--5.7%
55,900 Altria Group, Inc. 4,104,737 166
27,000 General Mills, Inc. 1,394,820 56
17,000 Loews Corporation-Carolina Group 873,290 35
60,500 PepsiCo, Inc. 3,632,420 147
73,200 Procter & Gamble Company 4,069,920 165
- -----------------------------------------------------------------------------------------------------------------
14,075,187 569
- -----------------------------------------------------------------------------------------------------------------
Energy--10.4%
21,600 Cameco Corporation 863,352 35
112,400 Chesapeake Energy Corporation 3,400,100 137
64,900 ConocoPhillips 4,252,897 172
79,000 ExxonMobil Corporation 4,846,650 196
144,000 Noble Energy, Inc. 6,747,840 273
76,400 Patterson-UTI Energy, Inc. 2,162,884 88
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Energy (continued)
42,400 Schlumberger, Ltd. $2,760,664 $112
19,100 Woodside Petroleum, Ltd. (ADR) 624,373 25
- -----------------------------------------------------------------------------------------------------------------
25,658,760 1,038
- -----------------------------------------------------------------------------------------------------------------
Financials--17.4%
52,100 * ACE, Ltd. 2,635,739 107
21,400 Affiliated Managers Group, Inc. 1,859,446 75
33,074 American International Group, Inc. 1,953,020 79
122,800 Bank of America Corporation 5,906,680 239
32,500 Chubb Corporation 1,621,750 66
94,852 Citigroup, Inc. 4,575,660 185
127,300 * E*TRADE Financial Corporation 2,904,986 117
3,300 First Marblehead Corporation 187,902 8
21,900 Golden West Financial Corporation 1,624,980 66
31,600 IndyMac Bancorp, Inc. 1,448,860 59
30,900 Merrill Lynch & Company, Inc. 2,149,404 87
62,400 * NASDAQ Stock Market, Inc. 1,865,760 75
68,100 Nuveen Investments - Class "A" 2,931,705 119
41,400 PNC Financial Services Group, Inc. 2,905,038 117
19,600 Simon Property Group, Inc. (REIT) 1,625,624 66
37,400 State Street Corporation 2,172,566 88
23,500 UBS AG-Registered 2,577,950 104
58,900 W.R. Berkley Corporation 2,010,257 81
- -----------------------------------------------------------------------------------------------------------------
42,957,327 1,738
- -----------------------------------------------------------------------------------------------------------------
Health Care--15.6%
45,200 Abbott Laboratories 1,971,172 80
28,300 Aetna, Inc. 1,130,019 46
61,000 * Alkermes, Inc. 1,154,120 47
30,700 * Amedisys, Inc. 1,163,530 47
50,800 * Amgen, Inc. 3,313,684 134
24,600 Biomet, Inc. 769,734 31
15,400 Biovail Corporation 360,514 15
27,400 * Coventry Health Care, Inc. 1,505,356 61
39,600 Eisai Co., Ltd. (ADR) 1,784,020 72
25,100 * Elan Corporation PLC (ADR) 419,170 17
42,500 Eli Lilly & Company 2,348,975 95
10,400 * Fisher Scientific International, Inc. 759,720 31
37,300 * Health Net, Inc. 1,684,841 68
27,400 * Kinetic Concepts, Inc. 1,209,710 49
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
GROWTH FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Health Care (continued)
50,200 * Medco Health Solutions, Inc. $2,875,456 $116
83,900 Medtronic, Inc. 3,936,588 159
29,200 Omnicare, Inc. 1,384,664 56
28,900 * Patterson Companies, Inc. 1,009,477 41
69,200 Sanofi-Aventis (ADR) 3,370,040 136
156,700 Schering-Plough Corporation 2,982,001 121
30,200 * Waters Corporation 1,340,880 54
29,400 * WellPoint, Inc. 2,139,438 86
- -----------------------------------------------------------------------------------------------------------------
38,613,109 1,562
- -----------------------------------------------------------------------------------------------------------------
Industrials--12.2%
29,300 Boeing Company 2,399,963 97
8,500 Con-way, Inc. 492,405 20
22,800 Fastenal Company 918,612 37
35,800 Fluor Corporation 3,326,894 134
137,000 General Electric Company 4,515,520 183
41,100 Lockheed Martin Corporation 2,948,514 119
12,400 * Monster Worldwide, Inc. 528,984 21
30,000 Oshkosh Truck Corporation 1,425,600 58
28,800 Precision Castparts Corporation 1,721,088 70
16,800 * Terex Corporation 1,658,160 67
39,200 Textron, Inc. 3,613,456 146
52,600 United Technologies Corporation 3,335,892 135
91,500 Waste Management, Inc. 3,283,020 133
- -----------------------------------------------------------------------------------------------------------------
30,168,108 1,220
- -----------------------------------------------------------------------------------------------------------------
Information Technology--18.3%
49,100 Accenture, Ltd. - Class "A" 1,390,512 56
109,300 Adobe Systems, Inc. 3,318,348 134
8,300 * Akamai Technologies, Inc. 300,377 12
51,800 * Alliance Data Systems Corporation 3,046,876 123
46,100 * Amdocs, Ltd. 1,687,260 68
33,900 Amphenol Corporation - Class "A" 1,897,044 77
33,100 Autodesk, Inc. 1,140,626 46
33,300 * Avid Technology, Inc. 1,109,889 45
32,700 * Benchmark Electronics, Inc. 788,724 32
13,000 CDW Corporation 710,450 29
135,200 * Cisco Systems, Inc. 2,640,456 107
131,300 * Corning, Inc. 3,176,147 129
20,100 * DST Systems, Inc. 1,195,950 48
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Information Technology (continued)
160,700 * EMC Corporation $1,762,879 $71
41,400 First Data Corporation 1,864,656 75
53,200 * Foundry Networks, Inc. 567,112 23
6,900 * Google, Inc. - Class "A" 2,893,377 117
23,000 * Intuit, Inc. 1,388,970 56
24,300 * Lam Research Corporation 1,132,866 46
37,700 * Marvell Technology Group, Ltd. 1,671,241 68
16,700 * MEMC Electronic Materials, Inc. 626,250 25
46,700 Microchip Technology, Inc. 1,566,785 63
167,700 Microsoft Corporation 3,907,410 158
68,700 * QLogic Corporation 1,184,388 48
35,500 QUALCOMM, Inc. 1,422,485 58
9,800 * SanDisk Corporation 499,604 20
75,800 * Varian Semiconductor Equipment Associates, Inc. 2,471,838 100
- -----------------------------------------------------------------------------------------------------------------
45,362,520 1,834
- -----------------------------------------------------------------------------------------------------------------
Materials--2.1%
83,600 Companhia Vale Do Rio Doce (ADR) 2,009,744 81
13,300 Freeport-McMoRan Copper & Gold, Inc. - Class "B" 736,953 30
10,600 Martin Marietta Materials, Inc. 966,190 39
8,200 Newmont Mining Corporation 434,026 18
4,900 Rio Tinto PLC--(ADR) 1,027,579 42
- -----------------------------------------------------------------------------------------------------------------
5,174,492 210
- -----------------------------------------------------------------------------------------------------------------
Other--.8%
34,900 Market 2000+ HOLDRs Trust 1,903,795 77
- -----------------------------------------------------------------------------------------------------------------
Telecommunication Services--1.9%
25,900 AT&T, Inc. 722,351 29
27,500 * NeuStar, Inc. - Class "A" 928,125 37
146,752 Sprint Nextel Corporation 2,933,572 119
13,200 * Syniverse Holdings, Inc. 194,040 8
- -----------------------------------------------------------------------------------------------------------------
4,778,088 193
- -----------------------------------------------------------------------------------------------------------------
Utilities--1.1%
34,600 Dominion Resources, Inc. 2,587,734 105
- -----------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $200,602,834) 242,572,465 9,811
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
GROWTH FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--1.6%
$4,031M Banc of America Securities, 4.25%, dated 6/30/06,
to be repurchased at $4,032,428 on 7/3/06
(collateralized by U.S. Treasury Notes, 5.125%,
6/30/11, valued at $4,125,150) (cost $4,031,000) $4,031,000 $163
- -----------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $204,633,834) 99.7% 246,603,465 9,974
Other Assets, Less Liabilities .3 658,979 26
- -----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $247,262,444 $10,000
=================================================================================================================
* Non-income producing
Summary of Abbreviations:
ADR American Depositary Receipts
REIT Real Estate Investment Trust
See notes to financial statements
Fund Expenses
HIGH YIELD FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,023.50 $4.29
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,020.69 $4.28
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .85%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period).
Portfolio Composition
TOP TEN SECTORS
(BAR CHART DATA:)
Consumer Discretionary 28.6%
Consumer Staples 19.9%
Energy 12.0%
Materials 12.0%
Industrials 8.6%
Health Care 8.3%
Telecommunication Services 2.1%
Information Technology 1.8%
Financials 1.7%
U.S. Government Obligations 1.6%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
HIGH YIELD FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS--91.4%
Aerospace/Defense--3.2%
$550M Alliant Techsystems, Inc., 6.75%, 2016 $530,750 $80
600M DRS Technologies, Inc., 6.875%, 2013 580,500 88
374M Dyncorp International, LLC, 9.5%, 2013 390,830 59
190M GenCorp, Inc., 9.5%, 2013 202,825 31
400M L-3 Communications Corp., 7.625%, 2012 408,000 62
- -----------------------------------------------------------------------------------------------------------------
2,112,905 320
- -----------------------------------------------------------------------------------------------------------------
Automotive--8.7%
200M Accuride Corp., 8.5%, 2015 193,000 29
Asbury Automotive Group, Inc.:
175M 9%, 2012 174,125 26
600M 8%, 2014 585,000 88
750M Cooper Standard Automotive, Inc., 8.375%, 2014 595,312 90
250M Cummins, Inc., 9.5%, 2010 264,606 40
375M Dana Corp., 9%, 2011++ 322,500 49
Delco Remy International, Inc.:
500M 11%, 2009 295,000 45
250M 9.375%, 2012 141,250 21
General Motors Acceptance Corp.:
350M 4.5%, 2006 349,839 53
500M 6.75%, 2014 465,133 70
1,000M Special Devices, Inc., 11.375%, 2008** 750,000 113
750M Tenneco Automotive, Inc., 8.625%, 2014 751,875 114
448M TRW Automotive, Inc., 9.375%, 2013 478,240 72
400M United Components, Inc., 9.375%, 2013 396,000 60
- -----------------------------------------------------------------------------------------------------------------
5,761,880 870
- -----------------------------------------------------------------------------------------------------------------
Chemicals--9.0%
225M BCP Crystal US Holdings Corp., 9.625%, 2014 245,250 37
350M Equistar Chemicals LP, 10.625%, 2011 377,562 57
235M Ethyl Corp., 8.875%, 2010 239,112 36
200M Huntsman International, LLC, 7.375%, 2015+ 188,500 29
Huntsman, LLC:
183M 11.625%, 2010 203,130 31
319M 11.5%, 2012 358,078 54
900M IMC Global, Inc., 10.875%, 2013 1,005,750 152
700M Innophos, Inc., 8.875%, 2014 693,000 105
Lyondell Chemical Co.:
650M 9.625%, 2007 663,000 100
213M 9.5%, 2008 219,923 33
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Chemicals (continued)
$425M Millennium America, Inc., 9.25%, 2008 $437,750 $66
400M Nell AF Sarl, 8.375%, 2015+ 386,500 58
100M Omnova Solutions, Inc., 11.25%, 2010 106,500 16
337M Terra Capital, Inc., 11.5%, 2010 369,015 56
450M Tronox Worldwide, LLC, 9.5%, 2012+ 465,750 70
- -----------------------------------------------------------------------------------------------------------------
5,958,820 900
- -----------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--4.0%
200M Broder Brothers Co., 11.25%, 2010 187,000 28
500M GFSI, Inc., 11%, 2011+ 475,000 72
Levi Strauss & Co.:
500M 9.74%, 2012*** 511,250 77
400M 9.75%, 2015 402,000 61
800M Playtex Products, Inc., 9.375%, 2011 837,000 127
250M Remington Arms Co., 10.5%, 2011 216,250 33
- -----------------------------------------------------------------------------------------------------------------
2,628,500 398
- -----------------------------------------------------------------------------------------------------------------
Energy--11.7%
600M Basic Energy Services, Inc., 7.125%, 2016+ 561,000 85
700M Bluewater Finance, Ltd., 10.25%, 2012 712,250 108
Chesapeake Energy Corp.:
200M 7.5%, 2014 200,500 30
1,000M 6.625%, 2016 935,000 141
Compagnie Generale de Geophysique:
350M 7.5%, 2015+ 343,875 52
150M 7.5%, 2015 147,375 22
250M Delta Petroleum Corp., 7%, 2015 233,750 35
300M Dresser, Inc., 9.375%, 2011 305,250 46
1,000M El Paso Production Holding Co., 7.75%, 2013 1,012,500 153
200M Energy Partners, Ltd., 8.75%, 2010 193,500 29
Giant Industries, Inc.:
650M 11%, 2012 708,500 107
450M 8%, 2014 446,625 68
150M Hilcorp Energy, 9%, 2016+ 151,875 23
750M POGO Producing Co., 6.875%, 2017 698,438 106
Stone Energy Corp.:
600M 8.24%, 2010+*** 600,000 91
100M 6.75%, 2014 100,875 15
400M Tesoro Corp., 6.25%, 2012+ 382,000 58
- -----------------------------------------------------------------------------------------------------------------
7,733,313 1,169
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
HIGH YIELD FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
Financial Services--.8%
$250M Saxon Capital, Inc., 12%, 2014+ $253,125 $38
300M Targeted Return Index Securities Trust, 7.548%, 2016+ 294,501 45
- -----------------------------------------------------------------------------------------------------------------
547,626 83
- -----------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--1.1%
Land O'Lakes, Inc.:
200M 9%, 2010 209,000 32
33M 8.75%, 2011 34,155 5
200M Pierre Foods, Inc., 9.875%, 2012 204,500 31
250M Southern States Cooperative, Inc., 10.5%, 2010+ 262,500 40
- -----------------------------------------------------------------------------------------------------------------
710,155 108
- -----------------------------------------------------------------------------------------------------------------
Food/Drug--1.2%
750M Ingles Markets, Inc., 8.875%, 2011 788,438 119
- -----------------------------------------------------------------------------------------------------------------
Forest Products/Containers--1.2%
250M Packaging Dynamics, 10%, 2016+ 251,250 38
215M Stone Container Corp., 9.75%, 2011 221,988 34
370M Tekni-Plex, Inc., 8.75%, 2013+ 353,350 53
- -----------------------------------------------------------------------------------------------------------------
826,588 125
- -----------------------------------------------------------------------------------------------------------------
Gaming/Leisure--7.2%
500M Circus & Eldorado/Silver Legacy, 10.125%, 2012 530,625 80
250M Herbst Gaming, Inc., 8.125%, 2012 253,125 38
500M Isle of Capri Casinos, Inc., 7%, 2014 474,375 72
600M Mandalay Resort Group, 6.375%, 2011 573,750 87
800M MGM Mirage, Inc., 6.625%, 2015 750,000 114
Park Place Entertainment Corp.:
700M 9.375%, 2007 714,000 108
500M 7%, 2013 509,600 77
1,000M Speedway Motorsports, Inc., 6.75%, 2013 975,000 147
- -----------------------------------------------------------------------------------------------------------------
4,780,475 723
- -----------------------------------------------------------------------------------------------------------------
Health Care--8.1%
260M Alliance Imaging, Inc., 7.25%, 2012 232,700 35
500M Encore Medical IHC, Inc., 9.75%, 2012 505,000 76
400M Fisher Scientific International, Inc., 6.125%, 2015 387,500 59
600M Genesis Health Ventures, Inc., 9.75%, 2008++** 375 --
- -----------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
Health Care (continued)
HCA, Inc.:
$700M 6.75%, 2013 $671,950 $102
485M 6.5%, 2016 450,869 68
350M Insight Health Services Corp., 9.875%, 2011 155,750 24
140M MedQuest, Inc., 11.875%, 2012 130,550 20
1,000M Omnicare, Inc., 6.875%, 2015 955,000 144
100M Res-Care, Inc., 7.75%, 2013 99,750 15
Tenet Healthcare Corp.:
1,050M 6.375%, 2011 942,375 142
250M 9.25%, 2015+ 246,250 37
600M Triad Hospitals, Inc., 7%, 2013 586,500 89
- -----------------------------------------------------------------------------------------------------------------
5,364,569 811
- -----------------------------------------------------------------------------------------------------------------
Housing--3.7%
500M Beazer Homes USA, Inc., 6.875%, 2015 457,500 69
700M Builders First Source, Inc., 9.42%, 2012*** 721,000 109
100M NTK Holdings, Inc., 0%-10.75%, 2014# 72,875 11
500M Ply Gem Industries, Inc., 9%, 2012 457,500 69
William Lyon Homes, Inc.:
500M 7.625%, 2012 417,500 63
300M 10.75%, 2013 289,500 44
- -----------------------------------------------------------------------------------------------------------------
2,415,875 365
- -----------------------------------------------------------------------------------------------------------------
Information Technology--1.7%
350M Exodus Communications, Inc., 10.75%, 2009++** 219 --
1,000M Iron Mountain, Inc., 8.25%, 2011 1,000,400 152
150M Sanmina - SCI Corporation, 8.125%, 2016 147,000 22
- -----------------------------------------------------------------------------------------------------------------
1,147,619 174
- -----------------------------------------------------------------------------------------------------------------
Investment/Finance Companies--.8%
500M LaBranche & Co., Inc., 11%, 2012 550,000 83
- -----------------------------------------------------------------------------------------------------------------
Manufacturing--2.0%
200M Case New Holland, Inc., 7.125%, 2014+ 192,000 29
300M Stewart & Stevenson, LLC, 10%, 2014+ 302,625 46
1,000M Wolverine Tube, Inc., 7.375%, 2008+ 815,000 123
- -----------------------------------------------------------------------------------------------------------------
1,309,625 198
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
HIGH YIELD FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
Media-Broadcasting--4.9%
$1,250M Block Communications, Inc., 8.25%, 2015+ $1,206,250 $182
Clear Channel Communications, Inc.:
320M 5.5%, 2014 290,160 44
700M 4.9%, 2015 598,543 90
50M Nexstar Finance, Inc., 7%, 2014 45,750 7
350M Sinclair Broadcasting Group, Inc., 8%, 2012 357,000 54
Young Broadcasting, Inc.:
340M 10%, 2011 304,300 46
500M 8.75%, 2014 420,000 64
- -----------------------------------------------------------------------------------------------------------------
3,222,003 487
- -----------------------------------------------------------------------------------------------------------------
Media-Cable TV--7.7%
900M Adelphia Communications Corp. , 10.25%, 2011++ 522,000 79
715M Atlantic Broadband Finance, LLC, 9.375%, 2014 675,675 102
400M Cablevision Systems Corp., 8%, 2012 396,500 60
Charter Communications Holdings, LLC :
1,500M 10%, 2009 1,185,000 179
250M 0%-11.75%, 2011# 156,250 24
250M CSC Holdings, Inc., 8.125%, 2009 255,625 39
1,000M Echostar DBS Corp., 6.375%, 2011 960,000 145
1,000M Mediacom LLC/Mediacom Capital Corp., 7.875%, 2011 955,000 144
- -----------------------------------------------------------------------------------------------------------------
5,106,050 772
- -----------------------------------------------------------------------------------------------------------------
Media-Diversified--2.8%
500M Cenveo, Inc., 7.875%, 2013 490,000 74
MediaNews Group, Inc.:
300M 6.875%, 2013 274,500 41
200M 6.375%, 2014 176,000 27
Six Flags, Inc.:
350M 8.875%, 2010 334,250 51
150M 9.625%, 2014 137,250 21
400M Universal City Development Partners, Ltd., 11.75%, 2010 437,500 66
- -----------------------------------------------------------------------------------------------------------------
1,849,500 280
- -----------------------------------------------------------------------------------------------------------------
Metals/Mining--1.0%
200M Metals USA, Inc., 11.125%, 2015+ 220,000 33
450M Russell Metals, Inc., 6.375%, 2014 418,500 63
- -----------------------------------------------------------------------------------------------------------------
638,500 96
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
Principal For Each
Amount $10,000 of
or Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--3.2%
$1,000M Gregg Appliances, Inc., 9%, 2013 $927,500 $140
GSC Holdings Corp.:
200M 8.865%, 2011*** 206,500 31
200M 8%, 2012 201,000 31
700M Neiman Marcus Group, Inc., 10.375%, 2015+ 747,250 113
- -----------------------------------------------------------------------------------------------------------------
2,082,250 315
- -----------------------------------------------------------------------------------------------------------------
Services--5.2%
Allied Waste NA, Inc.:
400M 5.75%, 2011 375,000 57
206M 9.25%, 2012 219,390 33
200M 7.875%, 2013 201,000 30
700M 7.375%, 2014 668,500 101
220M Hydrochem Industrial Services, Inc., 9.25%, 2013+ 213,400 32
United Rentals, Inc.:
300M 6.5%, 2012 285,000 43
500M 7%, 2014 459,375 70
1,000M Waste Services, Inc., 9.5%, 2014 1,015,000 154
- -----------------------------------------------------------------------------------------------------------------
3,436,665 520
- -----------------------------------------------------------------------------------------------------------------
Telecommunications--.0%
950M E. Spire Communications, Inc., 13%, 2010++** 95 --
- -----------------------------------------------------------------------------------------------------------------
Transportation--.2%
137M American Commercial Lines, LLC, 9.5%, 2015 150,700 23
- -----------------------------------------------------------------------------------------------------------------
Wireless Communications--2.0%
800M Nextel Communications, Inc., 5.95%, 2014 769,679 116
600M Rogers Wireless, Inc., 6.375%, 2014 574,500 87
- -----------------------------------------------------------------------------------------------------------------
1,344,179 203
- -----------------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $64,608,571) 60,466,330 9,142
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--1.5%
1,000M U.S. Treasury Notes, 6.125%, 2007
(cost $1,014,374) 1,009,336 153
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--.7%
Food/Drug--.3%
12,800 Ingles Markets, Inc. 217,600 33
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
HIGH YIELD FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
Shares or For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Media-Diversified--.4%
1,000 MediaNews Group, Inc. - Class "A"** $225,000 $34
- -----------------------------------------------------------------------------------------------------------------
Telecommunications--.0%
1,200 RCN Corporation** 12 --
690 Viatel Holding (Bermuda), Ltd.** 48 --
4,399 World Access, Inc. 8 --
- -----------------------------------------------------------------------------------------------------------------
68 --
- -----------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $248,589) 442,668 67
- -----------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--.5%
Manufacturing
427 Day International Group, Inc., 12.25%, 2010, PIK
(cost $404,418) 331,860 50
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.3%
$700M General Electric Capital Corp., 5.18%, 7/17/06 698,385 106
Prudential Funding Corp.:
500M 5.14%, 7/6/06 499,642 75
1,000M 5.14%, 7/10/06 998,714 151
- -----------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $2,196,741) 2,196,741 332
- -----------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $68,472,693) 97.4% 64,446,935 9,744
Other Assets, Less Liabilities 2.6 1,693,658 256
- -----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $66,140,593 $10,000
=================================================================================================================
+ Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 5).
++ In default as to principal and/or interest payment
* Non-income producing
** Security valued at fair value (see Note 1A)
*** Interest rates on adjustable rate bonds are determined and reset quarterly by the indentures. The interest
rates shown are the rates in effect on June 30, 2006.
# Denotes a step bond (a zero-coupon bond that converts to a fixed interest rate at a designated future
date).
See notes to financial statements
Fund Expenses
INTERNATIONAL FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,080.40 $5.19
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,019.94 $5.04
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 1.00%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period).
Portfolio Composition
TOP TEN COUNTRIES
(BAR CHART DATA:)
United Kingdom 26.0%
Switzerland 11.9%
Spain 10.7%
Japan 7.0%
Australia 6.7%
Ireland 5.6%
Mexico 4.7%
South Korea 4.5%
France 3.5%
Belguim 2.9%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
INTERNATIONAL FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--90.2%
United Kingdom--23.5%
61,907 Barratt Developments PLC $1,085,465 $98
91,857 BP PLC 1,071,186 96
7,700 BP PLC (ADR) 535,997 48
187,807 British American Tobacco PLC 4,731,040 425
169,590 Cadbury Schweppes PLC 1,635,770 147
193,497 Diageo PLC 3,254,953 293
112,590 Imperial Tobacco Group PLC 3,475,553 313
66,323 Kensington Group PLC 1,263,482 114
43,344 Reckitt Benckiser PLC 1,619,377 146
65,749 Royal Bank of Scotland Group PLC 2,162,164 194
865,282 Tesco PLC 5,345,297 481
- -----------------------------------------------------------------------------------------------------------------
26,180,284 2,355
- -----------------------------------------------------------------------------------------------------------------
Switzerland--10.7%
38,079 Kuehne & Nagel International AG-Registered 2,766,556 249
277 Lindt & Spruengli AG 546,990 49
8,575 Nestle SA-Registered 2,688,000 242
33,300 Novartis AG (ADR) 1,795,536 162
20,160 Roche Holding AG-Genusscheine 3,325,989 299
7,342 UBS AG-Registered 803,125 73
- -----------------------------------------------------------------------------------------------------------------
11,926,196 1,074
- -----------------------------------------------------------------------------------------------------------------
Spain--9.7%
124,629 Banco Bilbao Vizcaya Argentaria SA 2,562,474 231
209,692 Enagas 4,472,314 403
108,861 Red Electrica de Espana 3,756,900 338
- -----------------------------------------------------------------------------------------------------------------
10,791,688 972
- -----------------------------------------------------------------------------------------------------------------
Japan--6.3%
26,500 Daito Trust Construction Company., Ltd. 1,469,711 132
171 Millea Holdings, Inc. 3,192,354 288
45,600 Toyota Motor Corporation 2,389,398 215
- -----------------------------------------------------------------------------------------------------------------
7,051,463 635
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Australia--6.0%
112,728 Aristocrat Leisure, Ltd. $1,078,713 $97
26,597 Australia & New Zealand Banking Group, Ltd. 525,423 47
106,067 News Corporation - Class "B" 2,143,420 193
110,228 Westfield Group 1,419,217 128
101,898 Woolworths, Ltd. 1,525,453 138
- -----------------------------------------------------------------------------------------------------------------
6,692,226 603
- -----------------------------------------------------------------------------------------------------------------
Ireland--5.1%
34,033 Allied Irish Banks PLC 820,287 74
309,798 Anglo Irish Bank Corporation PLC 4,832,733 435
- -----------------------------------------------------------------------------------------------------------------
5,653,020 509
- -----------------------------------------------------------------------------------------------------------------
Mexico--4.2%
31,500 America Movil SA de CV (ADR) - Series "L" 1,047,690 94
46,900 America Telecom SA de CV - Series "A1" 277,137 25
589,300 Grupo Modelo SA de CV - Series "C" 2,263,195 204
395,700 Wal-Mart de Mexico SA de CV - Series "V" 1,111,276 100
- -----------------------------------------------------------------------------------------------------------------
4,699,298 423
- -----------------------------------------------------------------------------------------------------------------
South Korea--4.1%
80,900 Kangwon Land, Inc. 1,381,448 124
19,005 KT&G Corporation 1,109,810 100
348 Lotte Confectionary Company, Ltd. 438,347 40
35,930 S1 Corporation 1,613,385 145
- -----------------------------------------------------------------------------------------------------------------
4,542,990 409
- -----------------------------------------------------------------------------------------------------------------
France--3.2%
5,784 L'Oreal SA 546,208 49
35,182 M6 Metropole Television 1,100,801 99
28,849 Total SA 1,897,888 171
- -----------------------------------------------------------------------------------------------------------------
3,544,897 319
- -----------------------------------------------------------------------------------------------------------------
Belgium--2.7%
8,222 Colruyt NV 1,283,653 116
34,080 InBev NV 1,671,165 150
- -----------------------------------------------------------------------------------------------------------------
2,954,818 266
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
INTERNATIONAL FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Netherlands--2.6%
14,787 Aalberts Industries NV $1,086,237 $98
49,543 TNT NV 1,772,492 160
- -----------------------------------------------------------------------------------------------------------------
2,858,729 258
- -----------------------------------------------------------------------------------------------------------------
Brazil--2.3%
40,500 Banco Itau Holding Financeira SA (ADR) 1,180,980 106
91,100 Souza Cruz SA 1,343,753 121
- -----------------------------------------------------------------------------------------------------------------
2,524,733 227
- -----------------------------------------------------------------------------------------------------------------
India--2.2%
44,600 HDFC Bank, Ltd. (ADR) 2,432,930 219
- -----------------------------------------------------------------------------------------------------------------
South Africa--1.8%
108,121 Remgro, Ltd. 2,046,821 184
- -----------------------------------------------------------------------------------------------------------------
Hong Kong--1.7%
107,200 HSBC Holdings PLC 1,878,450 169
- -----------------------------------------------------------------------------------------------------------------
Sweden--1.5%
42,800 Atlas Copco AB - "B" Shares 1,111,079 100
39,800 Indutrade AB 548,369 49
- -----------------------------------------------------------------------------------------------------------------
1,659,448 149
- -----------------------------------------------------------------------------------------------------------------
Taiwan--1.4%
165,800 Taiwan Semiconductor Manufacturing Company, Ltd. (ADR) 1,522,044 137
- -----------------------------------------------------------------------------------------------------------------
Italy--1.2%
44,102 Eni SpA 1,298,693 117
- -----------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $94,720,581) 100,258,728 9,025
- -----------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--.3%
$325M U.S. Treasury Bills, Zero Coupon, 8/3/06
(cost $323,593) $323,593 $29
- ------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $95,044,174) 90.5% 100,582,321 9,054
Other Assets, Less Liabilities 9.5 10,505,889 946
- ------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $111,088,210 $10,000
==================================================================================================================
* Non-income producing
Summary of Abbreviations:
ADR American Depositary Receipts
See notes to financial statements
Portfolio of Investments (continued)
INTERNATIONAL FUND
June 30, 2006
Sector diversification of the portfolio was as follows:
- ---------------------------------------------------------------
Percentage
Sector of Net Assets Value
- ---------------------------------------------------------------
Banks 16.6% $18,468,206
Tobacco 9.6 10,660,156
Oil & Gas 8.3 9,276,078
Food & Drug Retailing 7.3 8,154,403
Beverages 6.5 7,189,313
Food Products 4.8 5,309,107
Pharmaceuticals 4.6 5,121,525
Air Freight & Couriers 4.1 4,539,048
Electric Utilities 3.4 3,756,900
Media 2.9 3,244,221
Insurance 2.9 3,186,196
Hotels, Restaurants & Leisure 2.2 2,460,161
Automobiles 2.1 2,389,398
Diversified Financials 1.8 2,046,821
Commercial Services & Supplies 1.7 1,890,522
Machinery 1.5 1,659,479
Household Products 1.5 1,619,377
Semiconductor Equipment & Products 1.4 1,522,044
Construction & Engineering 1.3 1,469,711
Real Estate 1.3 1,419,217
Multiline Retail 1.0 1,111,276
Industrial Conglomerates 1.0 1,086,237
Household Durables 1.0 1,085,465
Wireless Telecommunication Services 0.9 1,047,690
Personal Products 0.5 546,177
Short-Term U.S. Government Obligations 0.3 323,593
- ---------------------------------------------------------------
Total Value of Investments 90.5 100,582,321
Other Assets, Less Liabilities 9.5 10,505,889
- ---------------------------------------------------------------
Net Assets 100.0% $111,088,210
===============================================================
See notes to financial statements
Fund Expenses
INVESTMENT GRADE FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $990.49 $3.57
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,021.34 $3.63
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .72%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period). Expenses paid during the period are net of
expenses waived.
Portfolio Composition
TOP TEN SECTORS
(BAR CHART DATA:)
Financials 23.2%
U.S. Government Agency Obligations 13.4%
Industrials 11.3%
Mortgage-Backed Securities 9.8%
U.S. Government Obligations 8.7%
Consumer Discretionary 7.9%
Utilities 6.9%
Materials 6.6%
Consumer Staples 6.0%
Telecommunication Services 3.5%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
INVESTMENT GRADE FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
CORPORATE BONDS--63.9%
Aerospace/Defense--2.1%
$300M Boeing Co., 7.25%, 2025 $338,966 $94
Honeywell International, Inc.:
100M 7.5%, 2010 106,047 29
125M 6.125%, 2011 127,444 35
100M Precision Castparts Corp., 5.6%, 2013 96,668 27
100M TRW, Inc., 7.125%, 2009 103,395 29
- -----------------------------------------------------------------------------------------------------------------
772,520 214
- -----------------------------------------------------------------------------------------------------------------
Automotive--.8%
300M Daimler Chrysler NA Holdings Corp., 5.75%, 2009 297,317 82
- -----------------------------------------------------------------------------------------------------------------
Chemicals--1.6%
300M Air Products & Chemicals, Inc., 4.125%, 2010 281,982 78
300M Cabot Corp., 5.25%, 2013+ 284,008 79
- -----------------------------------------------------------------------------------------------------------------
565,990 157
- -----------------------------------------------------------------------------------------------------------------
Consumer Durables--.9%
350M Black & Decker Corp., 4.75%, 2014 315,362 87
- -----------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--2.6%
100M Avon Products, Inc., 4.2%, 2018 83,483 23
Colgate-Palmolive Co.:
200M 7.84%, 2007 203,473 56
200M 5.98%, 2012 203,472 56
300M Newell Rubbermaid, Inc., 6.75%, 2012 309,254 86
150M Procter & Gamble Co., 4.85%, 2015 140,372 39
- -----------------------------------------------------------------------------------------------------------------
940,054 260
- -----------------------------------------------------------------------------------------------------------------
Energy--.6%
200M Texaco Capital, Inc., 8.25%, 2006 201,141 56
- -----------------------------------------------------------------------------------------------------------------
Financial--6.9%
125M American General Finance Corp., 8.125%, 2009 133,344 37
100M Caterpillar Financial Services Corp., 4.6%, 2014 92,370 26
300M CIT Group, Inc., 7.75%, 2012 325,588 90
ERAC USA Finance Enterprise Co.:
100M 7.35%, 2008+ 102,684 28
355M 8%, 2011+ 383,911 106
152M Ford Motor Credit Co., 9.75%, 2010+ 148,231 41
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Financial (continued)
$144M General Electric Capital Corp., 8.5%, 2008 $151,593 $42
375M General Motors Acceptance Corp., 6.125%, 2007 373,506 103
300M Goldman Sachs Group, Inc., 6.45%, 2036 288,332 80
200M Household Finance Corp., 6.5%, 2008 203,645 56
300M Lehman Brothers Holdings, Inc., 5.75%, 2011 299,444 83
- -----------------------------------------------------------------------------------------------------------------
2,502,648 692
- -----------------------------------------------------------------------------------------------------------------
Financial Services--12.9%
200M American Express Co., 4.875%, 2013 190,105 52
300M Bank of America Corp., 7.4%, 2011 319,511 88
300M Citigroup, Inc., 6%, 2033 285,127 79
150M Comerica, 7.125%, 2013 151,264 42
250M First Union National Bank, 7.8%, 2010 267,799 74
300M Fleet Capital Trust II, 7.92%, 2026 313,958 87
250M Florida Windstorm Underwriting Assoc., 7.125%, 2019+ 270,613 75
300M Hibernia Corp., 5.35%, 2014 283,500 78
300M JPMorgan Chase & Co., 5.6%, 2011 298,140 82
375M MetLife, Inc., 5.7%, 2035 335,631 93
100M National City Bank of Pennsylvania, 7.25%, 2011 107,032 30
350M Nationsbank Corp., 7.8%, 2016 396,193 110
384M Republic NY Corp., 7.75%, 2009 404,894 112
400M Royal Bank of Scotland Group PLC, 5%, 2014 378,549 105
200M Wachovia Bank NA, 4.875%, 2015 185,403 51
Washington Mutual, Inc.:
350M 8.25%, 2010 375,596 104
100M 5.95%, 2013 98,978 27
- -----------------------------------------------------------------------------------------------------------------
4,662,293 1,289
- -----------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--2.4%
300M Altria Group, Inc., 7%, 2013 316,954 87
190M Bottling Group, LLC, 5%, 2013 180,958 50
150M ConAgra Foods, Inc., 6.75%, 2011 154,783 43
200M Pepsi Bottling Group, Inc., 7%, 2029 216,113 60
- -----------------------------------------------------------------------------------------------------------------
868,808 240
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Food/Drug--1.7%
$200M Delhaize America, Inc., 8.125%, 2011 $211,337 $58
Safeway, Inc.:
200M 7%, 2007 202,786 56
200M 6.5%, 2011 202,332 56
- -----------------------------------------------------------------------------------------------------------------
616,455 170
- -----------------------------------------------------------------------------------------------------------------
Forest Products/Containers--2.9%
International Paper Co.:
350M 6.75%, 2011 362,026 100
450M 5.85%, 2012 443,628 123
275M Sappi Papier Holding AG, 6.75%, 2012+ 257,571 71
- -----------------------------------------------------------------------------------------------------------------
1,063,225 294
- -----------------------------------------------------------------------------------------------------------------
Gaming/Leisure--1.6%
250M MGM Mirage, Inc., 8.5%, 2010 260,938 72
300M Starwood Hotels & Resorts, 7.375%, 2007 303,375 84
- -----------------------------------------------------------------------------------------------------------------
564,313 156
- -----------------------------------------------------------------------------------------------------------------
Health Care--1.7%
200M Becton, Dickinson & Co., 7.15%, 2009 208,883 58
200M Tenet Healthcare Corp., 6.375%, 2011 179,500 49
200M Wyeth, 6.95%, 2011 208,848 58
- -----------------------------------------------------------------------------------------------------------------
597,231 165
- -----------------------------------------------------------------------------------------------------------------
Manufacturing--3.2%
123M Hanson Australia Funding, Ltd., 5.25%, 2013 116,448 32
100M Hanson PLC, 7.875%, 2010 106,996 30
Ingersoll-Rand Co.:
300M 4.75%, 2015 276,928 77
125M 9%, 2021 162,951 45
United Technologies Corp.:
100M 6.5%, 2009 102,465 28
200M 7.125%, 2010 211,197 58
180M 6.1%, 2012 182,701 51
- -----------------------------------------------------------------------------------------------------------------
1,159,686 321
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Media-Broadcasting--1.6%
$250M Comcast Cable Communications, Inc., 7.125%, 2013 $262,241 $73
300M PanAmSat Corp., 6.375%, 2008 300,000 83
- -----------------------------------------------------------------------------------------------------------------
562,241 156
- -----------------------------------------------------------------------------------------------------------------
Media-Diversified--1.8%
225M AOL Time Warner, Inc., 6.875%, 2012 232,808 64
330M Cox Enterprises, Inc., 8%, 2007+ 332,811 92
75M Viacom, Inc., 8.875%, 2014 84,843 24
- -----------------------------------------------------------------------------------------------------------------
650,462 180
- -----------------------------------------------------------------------------------------------------------------
Metals/Mining--1.4%
200M Alcoa, Inc., 6%, 2012 201,587 56
300M Thiokol Corp., 6.625%, 2008 303,968 84
- -----------------------------------------------------------------------------------------------------------------
505,555 140
- -----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--2.9%
142M Archstone-Smith Trust, 7.9%, 2016 154,000 43
270M AvalonBay Communities, Inc., 7.5%, 2010 286,502 79
185M Duke Weeks Realty Corp., 7.75%, 2009 195,139 54
400M Mack-Cali Realty LP, 7.75%, 2011 425,737 118
- -----------------------------------------------------------------------------------------------------------------
1,061,378 294
- -----------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.3%
100M Lowe's Cos., Inc., 8.25%, 2010 109,168 30
- -----------------------------------------------------------------------------------------------------------------
Telecommunications--3.4%
300M Deutsche Telekom AG, 8%, 2010 322,343 89
200M SBC Communications, Inc., 6.25%, 2011 202,281 56
250M Sprint Capital Corp., 6.375%, 2009 254,079 70
200M Verizon New York, Inc., 6.875%, 2012 202,896 56
250M Vodafone AirTouch PLC, 7.75%, 2010 264,439 73
- -----------------------------------------------------------------------------------------------------------------
1,246,038 344
- -----------------------------------------------------------------------------------------------------------------
Transportation--3.3%
300M Burlington Northern Santa Fe Corp., 4.3%, 2013 274,690 76
Canadian National Railway Co.:
150M 7.375%, 2031 173,096 48
300M 6.25%, 2034 304,615 84
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Transportation (continued)
$100M Norfolk Southern Corp., 7.7%, 2017 $113,293 $31
300M Union Pacific Corp., 7.375%, 2009 313,619 87
- -----------------------------------------------------------------------------------------------------------------
1,179,313 326
- -----------------------------------------------------------------------------------------------------------------
Utilities--6.8%
150M Carolina Power & Light, Inc., 5.15%, 2015 141,472 39
265M Consumers Energy Co., 6.375%, 2008 266,814 74
250M Dominion Resources, Inc., 5%, 2013 234,216 64
144M DPL, Inc., 6.875%, 2011 149,191 41
125M Eastern Energy, Ltd., 6.75%, 2006+ 125,569 35
250M Florida Power & Light Co., 5.85%, 2033 237,912 66
300M Georgia Power Co., 5.8%, 2035 273,726 76
75M Jersey Central Power & Light Co., 5.625%, 2016 72,154 20
100M OGE Energy Corp., 5%, 2014 92,848 26
250M PP&L Capital Funding, Inc., 8.375%, 2007 254,210 70
305M Public Service Electric & Gas Co., 6.75%, 2016 322,400 89
100M South Carolina Electric & Gas Co., 6.7%, 2011 104,233 29
178M Wisconsin Power & Light Co., 7%, 2007 179,697 50
- -----------------------------------------------------------------------------------------------------------------
2,454,442 679
- -----------------------------------------------------------------------------------------------------------------
Waste Management--.5%
100M Allied Waste NA, Inc., 5.75%, 2011 93,750 26
100M Waste Management, Inc., 6.875%, 2009 102,884 28
- -----------------------------------------------------------------------------------------------------------------
196,634 54
- -----------------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $23,488,262) 23,092,274 6,386
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--13.1%
Fannie Mae:
400M 5.25%, 2008 397,970 110
400M 5.4%, 2009 398,046 110
300M 5%, 2016 282,957 78
300M 5%, 2017 280,402 78
Federal Home Loan Bank:
700M 4.43%, 2008 688,011 190
400M 5.1%, 2008 397,557 110
300M 4.91%, 2012 286,769 79
500M 5.35%, 2018 472,923 131
- -----------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (continued)
Freddie Mac:
$700M 5.2%, 2019 $658,154 $182
250M 6.5%, 2020 246,605 68
600M Tennessee Valley Authority, 6.25%, 2017 634,990 176
- ------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Obligations (cost $4,849,424) 4,744,384 1,312
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--8.5%
292M FDA Queens LP, 6.99%, 2017+ 309,145 85
300M U.S. Treasury Bonds, 5.375%, 2031 305,274 84
U.S. Treasury Notes:
600M 4.875%, 2008 596,930 165
500M 4.875%, 2009 496,758 137
880M 4.875%, 2011 871,304 241
500M 5.125%, 2016 499,570 138
- ------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Obligations (cost $3,103,547) 3,078,981 850
- ------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED CERTIFICATES--9.6%
Fannie Mae--7.3%
965M 6%, 1/1/2036 952,621 263
882M 6.5%, 5/1/2036 886,935 245
800M 6.5%, 6/1/2036 804,525 223
- ------------------------------------------------------------------------------------------------------------------
2,644,081 731
- ------------------------------------------------------------------------------------------------------------------
Freddie Mac--2.3%
847M 6%, 2/1/2036 833,934 231
- ------------------------------------------------------------------------------------------------------------------
Total Value of Mortgage-Backed Certificates (cost $3,524,750) 3,478,015 962
- ------------------------------------------------------------------------------------------------------------------
PASS THROUGH CERTIFICATES--1.9%
Transportation
64M American Airlines, Inc., 7.377%, 2019 58,780 16
351M Continental Airlines, Inc., 8.388%, 2020 342,410 95
206M FedEx Corp., 7.5%, 2018 222,762 62
75M Southwest Airlines Co., 6.126%, 2006 75,135 21
- ------------------------------------------------------------------------------------------------------------------
Total Value of Pass Through Certificates (cost $719,078) 699,087 194
- ------------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS--1.0%
Housing
$335M Virginia State Housing Development Authority,
Series "A", 6.51%, 2019 (cost $296,937) $343,362 $95
- ------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $35,981,998) 98.0% 35,436,103 9,799
Other Assets, Less Liabilities 2.0 725,130 201
- ------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $36,161,233 $10,000
==================================================================================================================
+ Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 5).
See notes to financial statements
Fund Expenses
TARGET MATURITY 2007 FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,008.98 $3.86
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,021.09 $3.88
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .77%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period). Expenses paid during the period are net of
expenses waived.
Portfolio Composition
BY SECTOR
(BAR CHART DATA:)
U.S. Government Agency Zero Coupon Obligations 68.7%
U.S. Government Zero Coupon Obligations 31.3%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
TARGET MATURITY 2007 FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal Effective $10,000 of
Amount Security Yield+ Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY ZERO
COUPON OBLIGATIONS--68.8%
Agency For International Development-Israel:
$913M 8/15/2007 5.29% $860,916 $461
750M 11/15/2007 5.28 698,161 374
3,304M Government Trust Certificate-
Israel Trust, 11/15/2007 5.31 3,074,260 1,646
586M International Bank for Reconstruction
& Development, 8/15/2007 5.62 550,592 295
5,466M Resolution Funding Corporation,
10/15/07 5.13 5,119,631 2,742
2,600M Tennessee Valley Authority, 11/1/2007 5.43 2,420,535 1,296
- -------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Zero Coupon
Obligations (cost $12,479,935) 12,724,095 6,814
- -------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT ZERO COUPON OBLIGATIONS--30.9%
6,210M U.S. Treasury Strips, 11/15/2007
(cost $5,661,277) 5.10 5,794,650 3,103
- -------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $18,141,212) 99.7% 18,518,745 9,917
Other Assets, Less Liabilities .3 155,279 83
- -------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $18,674,024 $10,000
===================================================================================================================
+ The effective yields shown for the zero coupon obligations are the effective yields at June 30, 2006.
See notes to financial statements
Fund Expenses
TARGET MATURITY 2010 FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $984.58 $3.81
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,021.09 $3.88
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .77%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period). Expenses paid during the period are net of
expenses waived.
Portfolio Composition
BY SECTOR
(BAR CHART DATA:)
U.S. Government Agency Zero Coupon Obligations 58.4%
U.S. Government Zero Coupon Obligations 41.6%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
TARGET MATURITY 2010 FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal Effective $10,000 of
Amount Security Yield+ Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY ZERO
COUPON OBLIGATIONS--58.7%
Agency For International Development-Israel:
$1,303M 8/15/2010 5.20% $1,054,487 $737
495M 9/15/2010 5.19 398,929 279
Fannie Mae:
1,260M 8/7/2010 5.29 1,017,061 711
700M 10/8/2010 5.31 559,600 391
600M 11/29/2010 5.31 476,004 333
1,100M Freddie Mac, 9/15/2010 5.29 883,105 617
200M Government Trust Certificate-
Israel Trust, 11/15/2010 5.25 159,445 112
1,990M Government Trust Certificate-
Turkey Trust, 11/15/2010 5.25 1,586,484 1,109
1,600M Resolution Funding Corporation, 1/15/2011 5.08 1,273,995 891
1,250M Tennessee Valley Authority, 11/1/2010 5.37 993,389 695
- ------------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Zero Coupon
Obligations (cost $7,913,378) 8,402,499 5,875
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT ZERO COUPON
OBLIGATIONS--41.9%
7,435M U.S. Treasury Strips, 11/15/2010
(cost $5,718,749) 5.00 5,990,194 4,189
- ------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $13,632,127) 100.6% 14,392,693 10,064
Excess of Liabilities Over Other Assets (.6) (90,947) (64)
- ------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $14,301,746 $10,000
==================================================================================================================
+ The effective yields shown for the zero coupon obligations are the effective yields at June 30, 2006.
See notes to financial statements
Fund Expenses
TARGET MATURITY 2015 FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $957.50 $3.47
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,021.39 $3.58
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .71%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period). Expenses paid during the period are net of
expenses waived.
Portfolio Composition
BY SECTOR
U.S. Government Agency Zero Coupon Obligations 51.1%
U.S. Government Zero Coupon Obligations 48.9%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
TARGET MATURITY 2015 FUND
June 30, 2006
- ----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal Effective $10,000 of
Amount Security Yield+ Value Net Assets
- ----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY ZERO
COUPON OBLIGATIONS--50.9%
Agency For International Development-Israel:
$698M 9/15/2015 5.40% $427,196 $198
1,150M 11/1/2015 5.42 698,062 323
2,784M 11/15/2015 5.42 1,685,690 781
300M 3/15/2016 5.44 178,199 83
Fannie Mae:
243M 8/12/2015 5.44 148,908 69
600M 9/23/2015 5.56 361,716 168
2,818M 11/15/2015 5.51 1,693,683 785
650M Federal Judiciary Office Building,
2/15/15 5.40 410,692 190
Freddie Mac:
550M 3/15/2015 5.48 343,632 159
1,760M 9/15/2015 5.49 1,069,297 496
625M 1/15/2016 5.51 372,023 172
210M Government Trust Certificate-
Turkey Trust, 5/15/2015 5.48 129,930 60
200M International Bank for Reconstruction
& Development, 2/15/2015 5.70 123,125 57
Resolution Funding Corporation:
3,177M 10/15/2015 5.33 1,949,598 904
320M 1/15/2016 5.34 193,505 90
2,000M Tennessee Valley Authority, 11/1/2015 5.63 1,190,590 552
- ----------------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Agency Zero Coupon
Obligations (cost $10,923,062) 10,975,846 5,087
- ----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT ZERO COUPON
OBLIGATIONS--48.7%
16,975M U.S. Treasury Strips, 11/15/2015
(cost $10,435,530) 5.19 10,504,588 4,869
- ----------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $21,358,592) 99.6% 21,480,434 9,956
Other Assets, Less Liabilities .4 93,926 44
- ----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $21,574,360 $10,000
================================================================================================================
+ The effective yields shown for the zero coupon obligations are the effective yields at June 30, 2006.
See notes to financial statements
Fund Expenses
VALUE FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,075.67 $4.30
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,020.79 $4.18
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .83%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period).
Portfolio Composition
TOP TEN SECTORS
(BAR CHART DATA:)
Financials 25.8%
Consumer Discretionary 17.7%
Consumer Staples 10.5%
Energy 9.2%
Industrials 8.2%
Materials 7.5%
Health Care 5.1%
Utilities 5.1%
Information Technology 5.1%
Telecommunication Services 4.6%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
VALUE FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--97.6%
Consumer Discretionary--17.7%
7,200 Autoliv, Inc. $407,304 $48
16,800 Bob Evans Farms, Inc. 504,168 60
11,100 Carnival Corporation 463,314 55
8,700 CBS Corporation - Class "B" 235,335 28
23,500 Clear Channel Communications, Inc. 727,325 86
41,700 Dollar General Corporation 582,966 69
28,600 Family Dollar Stores, Inc. 698,698 83
12,700 Genuine Parts Company 529,082 63
13,900 H&R Block, Inc. 331,654 39
16,700 Home Depot, Inc. 597,693 71
6,100 J.C. Penney Company, Inc. (Holding Co.) 411,811 49
13,100 Jones Apparel Group, Inc. 416,449 49
12,100 Kenneth Cole Productions, Inc. - Class "A" 270,193 32
16,300 Kimball International, Inc. - Class "B" 321,273 38
22,100 Lee Enterprises, Inc. 595,595 70
26,600 Leggett & Platt, Inc. 664,468 79
5,900 Liz Claiborne, Inc. 218,654 26
7,200 Magna International, Inc. -- Class "A" 518,184 61
27,800 McDonald's Corporation 934,080 110
21,500 Modine Manufacturing Company 502,240 59
20,300 Natuzzi SpA (ADR) 145,145 17
22,300 New York Times Company - Class "A" 547,242 65
11,000 Newell Rubbermaid, Inc. 284,130 34
17,200 OSI Restaurant Partners, Inc. 595,120 70
36,700 Pearson PLC (ADR) 500,955 59
26,900 Talbots, Inc. 496,305 59
5,800 Tiffany & Company 191,516 23
33,700 Time Warner, Inc. 583,010 69
22,500 Tribune Company 729,675 86
30,800 Walt Disney Company 924,000 109
- ------------------------------------------------------------------------------------------------------------------
14,927,584 1,766
- ------------------------------------------------------------------------------------------------------------------
Consumer Staples--10.4%
20,200 Anheuser-Busch Companies, Inc. 920,918 109
18,600 Avon Products, Inc. 576,600 68
20,000 Coca-Cola Company 860,400 102
15,400 ConAgra Foods, Inc. 340,494 40
7,195 Del Monte Foods Company 80,800 10
12,200 Diageo PLC (ADR) 824,110 97
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
Consumer Staples (continued)
10,800 Estee Lauder Companies, Inc. - Class "A" $417,636 $49
4,100 Fomento Economico Mexicano SA de CV (ADR) 343,252 41
13,900 H.J. Heinz Company 572,958 68
10,600 Kimberly-Clark Corporation 654,020 77
22,400 Kraft Foods, Inc. - Class "A" 692,160 82
13,600 Ruddick Corporation 333,336 39
37,000 Sara Lee Corporation 592,740 70
14,200 Tasty Baking Company 133,480 16
27,300 Topps Company, Inc. 224,406 27
10,000 UST, Inc. 451,900 53
16,700 Wal-Mart Stores, Inc. 804,439 95
- ------------------------------------------------------------------------------------------------------------------
8,823,649 1,043
- ------------------------------------------------------------------------------------------------------------------
Energy--9.1%
12,800 Anadarko Petroleum Corporation 610,432 72
11,100 BP PLC (ADR) 772,671 91
18,112 Chevron Corporation 1,124,031 133
13,800 ConocoPhillips 904,314 107
9,900 Diamond Offshore Drilling, Inc. 830,907 98
11,606 Kerr-McGee Corporation 804,876 95
14,100 Marathon Oil Corporation 1,174,530 139
12,600 Royal Dutch Shell PLC - Class "A" (ADR) 843,948 100
13,900 Tidewater, Inc. 683,880 81
- ------------------------------------------------------------------------------------------------------------------
7,749,589 916
- ------------------------------------------------------------------------------------------------------------------
Financials--25.3%
11,000 A.G. Edwards, Inc. 608,520 72
4,400 ACE, Ltd. 222,596 26
4,100 Allstate Corporation 224,393 26
2,800 American International Group, Inc. 165,340 20
12,200 AmSouth Bancorporation 322,690 38
27,900 Amvescap PLC (ADR) 515,871 61
15,200 Aon Corporation 529,264 63
24,700 Aspen Insurance Holdings, Ltd. 575,263 68
9,900 Assured Guaranty, Ltd. 251,163 30
35,600 Bank Mutual Corporation 435,032 51
23,655 Bank of America Corporation 1,137,805 135
25,200 Bank of New York Company, Inc. 811,440 96
24,975 Brookfield Asset Management, Inc. - Class "A" 1,014,485 120
18,600 Brookline Bancorp, Inc. 256,122 30
9,622 Chubb Corporation 480,138 57
- ------------------------------------------------------------------------------------------------------------------
Portfolio of Investments
VALUE FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
Financials (continued)
12,422 Cincinnati Financial Corporation $583,958 $69
17,900 Citigroup, Inc. 863,496 102
9,800 Comerica, Inc. 509,502 60
43,100 Eagle Hospitality Properties Trust, Inc. 415,053 49
10,100 Erie Indemnity Company - Class "A" 525,200 62
6,400 FBL Financial Group, Inc. - Class "A" 207,360 24
21,600 Hudson City Bancorp, Inc. 287,928 34
7,800 IPC Holdings, Ltd. 192,348 23
22,900 JPMorgan Chase & Company 961,800 114
13,300 KeyCorp 474,544 56
12,632 Lincoln National Corporation 712,950 84
10,800 Merrill Lynch & Company, Inc. 751,248 89
13,400 Morgan Stanley 847,014 100
29,800 NewAlliance Bancshares, Inc. 426,438 50
13,800 North Fork Bancorporation, Inc. 416,346 49
7,700 One Liberty Properties, Inc. (REIT) 146,300 17
13,800 Plum Creek Timber Company, Inc. (REIT) 489,900 58
6,600 PMI Group, Inc. 294,228 35
7,700 PNC Financial Services Group, Inc. 540,309 64
13,700 Protective Life Corporation 638,694 76
21,900 Regions Financial Corporation 725,328 86
4,700 St. Joe Company 218,738 26
4,200 State National Bancshares, Inc. 160,062 19
9,582 State Street Corporation 556,618 66
8,500 SunTrust Banks, Inc. 648,210 77
7,503 TD Banknorth, Inc. 220,963 26
14,000 Waddell & Reed Financial, Inc. - Class "A" 287,840 34
10,700 Wells Fargo & Company 717,756 85
- ------------------------------------------------------------------------------------------------------------------
21,370,253 2,527
- ------------------------------------------------------------------------------------------------------------------
Health Care--5.1%
17,700 Abbott Laboratories 771,897 91
9,700 Biomet, Inc. 303,513 36
10,900 GlaxoSmithKline PLC (ADR) 608,220 72
14,100 Johnson & Johnson 844,872 100
8,100 Novartis AG (ADR) 436,752 52
34,600 Pfizer, Inc. 812,062 96
1,800 Sanofi-Aventis (ADR) 87,660 10
23,500 Schering-Plough Corporation 447,205 53
- ------------------------------------------------------------------------------------------------------------------
4,312,181 510
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
Industrials--8.2%
8,200 Adesa, Inc. $182,368 $22
900 Alexander & Baldwin, Inc. 39,843 5
7,200 Avery Dennison Corporation 418,032 49
28,500 Cendant Corporation 464,265 55
13,100 Dover Corporation 647,533 77
16,700 Federal Signal Corporation 252,838 30
12,400 General Dynamics Corporation 811,704 96
18,500 Honeywell International, Inc. 745,550 88
19,300 Masco Corporation 572,052 68
11,400 Norfolk Southern Corporation 606,708 72
5,700 Pall Corporation 159,600 19
13,800 Pitney Bowes, Inc. 569,940 67
3,200 SPX Corporation 179,040 21
24,500 Tyco International, Ltd. 673,750 80
28,700 Werner Enterprises, Inc. 581,749 69
- ------------------------------------------------------------------------------------------------------------------
6,904,972 818
- ------------------------------------------------------------------------------------------------------------------
Information Technology--5.0%
25,600 * Agile Software Corporation 162,304 19
12,000 Automatic Data Processing, Inc. 544,200 64
13,200 AVX Corporation 208,428 25
25,900 Hewlett-Packard Company 820,512 97
14,100 Intel Corporation 267,195 32
2,200 International Business Machines Corporation 169,004 20
30,600 Methode Electronics, Inc. - Class "A" 321,606 38
26,400 Microsoft Corporation 615,120 73
14,900 Motorola, Inc. 300,235 36
23,100 Nokia Corporation - Class "A" (ADR) 468,006 55
7,600 * Planar Systems, Inc. 91,504 11
15,600 Woodhead Industries, Inc. 298,584 35
- ------------------------------------------------------------------------------------------------------------------
4,266,698 505
- ------------------------------------------------------------------------------------------------------------------
Materials--7.5%
9,000 Air Products & Chemicals, Inc. 575,280 68
10,900 Albemarle Corporation 521,892 62
13,300 Alcoa, Inc. 430,388 51
27,667 Chemtura Corporation 258,410 31
16,500 Compass Minerals International, Inc. 411,675 49
21,700 Dow Chemical Company 846,951 100
18,800 Du Pont (E.I.) de Nemours & Company 782,080 93
- ------------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
VALUE FUND
June 30, 2006
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
Materials (continued)
15,800 Lubrizol Corporation $629,630 $74
14,500 MeadWestvaco Corporation 404,985 48
20,270 Myers Industries, Inc. 348,441 41
38,000 Sappi, Ltd. (ADR) 474,620 56
19,200 Sonoco Products Company 607,680 72
1,311 Tronox, Inc. - Class "B" 17,266 2
- ------------------------------------------------------------------------------------------------------------------
6,309,298 747
- ------------------------------------------------------------------------------------------------------------------
Telecommunication Services--4.4%
2,745 ALLTEL Corporation 175,213 21
19,700 AT&T, Inc. 549,433 65
15,700 BellSouth Corporation 568,340 67
14,300 CT Communications, Inc. 327,041 39
12,732 D&E Communications, Inc. 138,015 16
1,030 * Embarq Corporation 42,220 5
10,400 Nippon Telegraph and Telephone Corporation (ADR) 254,488 30
24,700 Sprint Nextel Corporation 493,753 58
6,600 Telephone & Data Systems, Inc. 273,240 32
6,600 Telephone & Data Systems, Inc. - Special Shares 256,740 30
19,118 Verizon Communications, Inc. 640,262 76
- ------------------------------------------------------------------------------------------------------------------
3,718,745 439
- ------------------------------------------------------------------------------------------------------------------
Utilities--4.9%
9,350 American States Water Company 333,328 39
10,900 FPL Group, Inc. 451,042 53
9,300 KeySpan Corporation 375,720 44
12,800 MDU Resources Group, Inc. 468,608 55
22,000 NiSource, Inc. 480,480 57
12,300 Northwest Natural Gas Company 455,469 54
11,100 ONEOK, Inc. 377,844 45
14,800 Southwest Gas Corporation 463,832 55
14,100 United Utilities PLC (ADR) 334,311 40
13,700 Vectren Corporation 373,325 44
- -----------------------------------------------------------------------------------------------------------------
4,113,959 486
- ------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $64,328,471) 82,496,928 9,757
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Amount
Invested
Shares or For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS--.4%
Financials
15,100 Lehman Brothers Holdings, Inc., 6.25%,
2007 - Series "GIS" (cost $383,537) $398,262 $47
- ------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--.4%
Telecommunication Services--.2%
7,500 Verizon South, Inc., 7%, 2041 - Series "F" 182,775 22
- ------------------------------------------------------------------------------------------------------------------
Utilities--.2%
6,800 Entergy Louisiana, Inc., 7.6%, 2032 170,000 20
- ------------------------------------------------------------------------------------------------------------------
Total Value of Preferred Stocks (cost $356,067) 352,775 42
- ------------------------------------------------------------------------------------------------------------------
SHORT-TERM U.S. GOVERNMENT AGENCY
OBLIGATIONS--1.2%
$1,000M Federal Home Loan Bank, 5.1%, 7/12/06
(cost $998,438) 998,438 118
- ------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $66,066,513) 99.6% 84,246,403 9,964
Other Assets, Less Liabilities .4 308,916 36
- ------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $84,555,319 $10,000
==================================================================================================================
* Non-income producing
Summary of Abbreviations:
ADR American Depositary Receipts
REIT Real Estate Investment Trust
See notes to financial statements
Fund Expenses
SPECIAL BOND FUND
The examples below show the ongoing costs (in dollars) of investing in your
Fund and will help you in comparing these costs with costs of other mutual
funds. Please refer to page 3 for a detailed explanation of the information
presented in these examples.
- ----------------------------------------------------------------------------------------------
Beginning Ending
Account Account Expenses Paid
Value Value During Period
Expense Examples (1/1/06) (6/30/06) (1/1/06-6/30/06)*
- ----------------------------------------------------------------------------------------------
Actual $1,000.00 $1,012.64 $4.82
Hypothetical
(5% annual return
before expenses) $1,000.00 $1,020.14 $4.84
- ----------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of .96%, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period).
Portfolio Composition
TOP SECTORS
(BAR CHART DATA:)
Consumer Staples 20.9%
Consumer Discretionary 20.8%
Energy 16.8%
Materials 14.7%
Health Care 9.5%
Industrials 9.1%
U.S. Government Obligations 4.5%
Telecommunication Services 2.3%
Financials 1.1%
Portfolio holdings and allocations are subject to change. Percentages are as
of June 30, 2006, and are based on the total value of investments.
Portfolio of Investments
SPECIAL BOND FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
CORPORATE BONDS--88.5%
Aerospace/Defense--2.4%
$175M Alliant Techsystems, Inc., 6.75%, 2016 $168,875 $99
150M DRS Technologies, Inc., 6.875%, 2013 145,125 85
86M DynCorp International, LLC, 9.5%, 2013 89,870 53
- -----------------------------------------------------------------------------------------------------------------
403,870 237
- -----------------------------------------------------------------------------------------------------------------
Automotive--7.5%
100M Accuride Corp., 8.5%, 2015 96,500 57
75M Asbury Automotive Group, Inc., 9%, 2012 74,625 44
594M Cambridge Industries Liquidating Trust, 2007++** 371 --
250M Cooper Standard Automotive, Inc., 8.375%, 2014 198,438 116
175M Dana Corp., 9%, 2011++ 150,500 88
150M General Motors Acceptance Corp., 6.75%, 2014 139,540 82
500M Special Devices, Inc., 11.375%, 2008** 375,000 220
228M TRW Automotive, Inc., 9.375%, 2013 243,390 142
- -----------------------------------------------------------------------------------------------------------------
1,278,364 749
- -----------------------------------------------------------------------------------------------------------------
Chemicals--10.4%
15M BCP Crystal US Holdings Corp., 9.625%, 2014 16,350 9
150M Equistar Chemicals LP, 10.625%, 2011 161,812 95
250M Huntsman International, LLC, 7.375%, 2015+ 235,625 138
67M Huntsman, LLC, 11.625%, 2010 74,370 43
100M IMC Global, Inc., 10.875%, 2013 111,750 65
300M Innophos, Inc., 8.875%, 2014 297,000 174
Lyondell Chemical Co. :
350M 9.625%, 2007 357,000 209
91M 9.5%, 2008 93,957 55
200M Millennium America, Inc., 9.25%, 2008 206,000 121
100M Nell AF Sarl, 8.375%, 2015+ 96,625 57
125M Tronox Worldwide, LLC, 9.5%, 2012+ 129,375 76
- -----------------------------------------------------------------------------------------------------------------
1,779,864 1,042
- -----------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--2.0%
100M Broder Brothers Co., 11.25%, 2010 93,500 54
Levi Strauss & Co.:
150M 9.74%, 2012*** 153,375 90
100M 9.75%, 2015 100,500 59
- -----------------------------------------------------------------------------------------------------------------
347,375 203
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
SPECIAL BOND FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Energy--16.2%
$125M Basic Energy Services, Inc., 7.125%, 2016+ $116,875 $68
250M Belden & Blake Corp., 8.75%, 2012 255,000 149
300M Bluewater Finance, Ltd., 10.25%, 2012 305,250 179
Chesapeake Energy Corp.:
500M 6.375%, 2015 466,250 273
150M 6.625%, 2016 140,250 82
Compagnie Generale de Geophysique:
100M 7.5%, 2015 98,250 58
50M 7.5%, 2015+ 49,125 29
125M Dresser, Inc., 9.375%, 2011 127,187 74
250M El Paso Production Holding Co., 7.75%, 2013 253,125 148
644M Giant Industries, Inc., 11%, 2012 701,960 411
100M POGO Producing Co., 6.875%, 2017 93,125 55
60M Stone Energy Corp., 8.24%, 2010+*** 60,000 35
110M Tesoro Corp., 6.25%, 2012+ 105,050 62
- -----------------------------------------------------------------------------------------------------------------
2,771,447 1,623
- -----------------------------------------------------------------------------------------------------------------
Financial Services--1.0%
75M Saxon Capital, Inc., 12%, 2014+ 75,938 45
100M Targeted Return Index Securities Trust, 7.548%, 2016+ 98,167 57
- -----------------------------------------------------------------------------------------------------------------
174,105 102
- -----------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--.1%
9M Land O'Lakes, Inc., 8.75%, 2011 9,315 5
- -----------------------------------------------------------------------------------------------------------------
Forest Products/Containers--2.7%
250M Packaging Dynamics, 10%, 2016+ 251,250 147
86M Stone Container Corp., 9.75%, 2011 88,795 52
130M Tekni-Plex, Inc., 8.75%, 2013+ 124,150 73
- -----------------------------------------------------------------------------------------------------------------
464,195 272
- -----------------------------------------------------------------------------------------------------------------
Gaming/Leisure--7.4%
250M Circus & Eldorado/Silver Legacy, 10.125%, 2012 265,313 155
50M Herbst Gaming, Inc., 8.125%, 2012 50,625 30
180M Mandalay Resort Group, 6.375%, 2011 172,125 101
240M MGM Mirage, Inc., 6.625%, 2015 225,000 132
300M Park Place Entertainment Corp., 9.375%, 2007 306,000 179
255M Speedway Motorsports, Inc., 6.75%, 2013 248,625 145
- -----------------------------------------------------------------------------------------------------------------
1,267,688 742
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Health Care--9.2%
$90M Alliance Imaging, Inc., 7.25%, 2012 $80,550 $47
250M DaVita, Inc., 7.25%, 2015 241,250 141
120M Fisher Scientific International, Inc., 6.125%, 2015 116,250 68
HCA, Inc.:
200M 6.75%, 2013 191,986 112
165M 6.5%, 2016 153,388 90
150M Insight Health Services Corp., 9.875%, 2011 66,750 39
60M MedQuest, Inc., 11.875%, 2012 55,950 33
550M Tenet Healthcare Corp., 6.375%, 2011 493,625 289
180M Triad Hospitals, Inc., 7%, 2013 175,950 103
- -----------------------------------------------------------------------------------------------------------------
1,575,699 922
- -----------------------------------------------------------------------------------------------------------------
Housing--2.0%
140M Beazer Homes USA, Inc., 6.875%, 2015 128,100 75
200M Builders FirstSource, Inc., 9.42%, 2012*** 206,000 121
- -----------------------------------------------------------------------------------------------------------------
334,100 196
- -----------------------------------------------------------------------------------------------------------------
Information Technology--.3%
150M Exodus Communications, Inc., 10.75%, 2009++** 94 --
50M Sanmina - SCI Corp., 8.125%, 2016 49,000 29
- -----------------------------------------------------------------------------------------------------------------
49,094 29
- -----------------------------------------------------------------------------------------------------------------
Manufacturing--1.9%
60M Case New Holland, Inc., 7.125%, 2014+ 57,600 34
100M Stewart & Stevenson, LLC, 10%, 2014+ 100,875 59
200M Wolverine Tube, Inc., 7.375%, 2008+ 163,000 95
- -----------------------------------------------------------------------------------------------------------------
321,475 188
- -----------------------------------------------------------------------------------------------------------------
Media-Broadcasting--3.5%
Clear Channel Communications, Inc.:
80M 5.5%, 2014 72,540 43
200M 4.9%, 2015 171,012 100
150M Sinclair Broadcasting Group, Inc., 8%, 2012 153,000 90
Young Broadcasting, Inc.:
136M 10%, 2011 121,720 71
100M 8.75%, 2014 84,000 49
- -----------------------------------------------------------------------------------------------------------------
602,272 353
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
SPECIAL BOND FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Media-Cable TV--7.9%
$355M Adelphia Communications Corp., 10.25%, 2011++ $205,900 $121
135M Atlantic Broadband Finance, LLC, 9.375%, 2014 127,575 75
200M Cablevision Systems Corp., 8%, 2012 198,250 116
500M Charter Communications Holdings, LLC, 10%, 2009 395,000 231
125M CSC Holdings, Inc., 8.125%, 2009 127,812 75
310M Echostar DBS Corp., 6.375%, 2011 297,600 174
- -----------------------------------------------------------------------------------------------------------------
1,352,137 792
- -----------------------------------------------------------------------------------------------------------------
Media-Diversified--4.8%
300M Cenveo, Inc., 7.875%, 2013 294,000 172
MediaNews Group, Inc.:
75M 6.875%, 2013 68,625 40
50M 6.375%, 2014 44,000 26
Six Flags, Inc.:
150M 8.875%, 2010 143,250 84
50M 9.625%, 2014 45,750 27
200M Universal City Development Partners, Ltd., 11.75%, 2010 218,750 128
- -----------------------------------------------------------------------------------------------------------------
814,375 477
- -----------------------------------------------------------------------------------------------------------------
Metals/Mining--1.0%
50M Metals USA, Inc., 11.125%, 2015+ 55,000 32
130M Russell Metals, Inc., 6.375%, 2014 120,900 71
- -----------------------------------------------------------------------------------------------------------------
175,900 103
- -----------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--1.8%
100M GSC Holdings Corp., 8%, 2012 100,500 59
200M Neiman Marcus Group, Inc., 10.375%, 2015+ 213,500 125
- -----------------------------------------------------------------------------------------------------------------
314,000 184
- -----------------------------------------------------------------------------------------------------------------
Services--3.9%
Allied Waste NA, Inc.:
150M 5.75%, 2011 140,625 82
300M 7.375%, 2014 286,500 168
100M Hydrochem Industrial Services, Inc., 9.25%, 2013+ 97,000 57
150M United Rentals, Inc., 7%, 2014 137,813 81
- -----------------------------------------------------------------------------------------------------------------
661,938 388
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
Principal For Each
Amount $10,000 of
or Shares Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
Telecommunications--.0%
$600M ICG Services, Inc., 10%, 2008++** $375 $--
- -----------------------------------------------------------------------------------------------------------------
Transportation--.2%
29M American Commercial Lines, LLC, 9.5%, 2015 31,900 19
- -----------------------------------------------------------------------------------------------------------------
Wireless Communications--2.3%
200M Nextel Communications, Inc., 5.95%, 2014 192,420 113
200M Rogers Wireless, Inc., 6.375%, 2014 191,500 112
- -----------------------------------------------------------------------------------------------------------------
383,920 225
- -----------------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $16,483,946) 15,113,408 8,851
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--4.4%
750M U.S. Treasury Notes, 7%, 2006 (cost $750,379) 750,528 440
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCKS--2.5%
Food/Drug--.5%
5,500 Ingles Markets, Inc. 93,500 55
- -----------------------------------------------------------------------------------------------------------------
Media-Diversified--2.0%
1,500 MediaNews Group, Inc. - Class "A"** 337,500 197
- -----------------------------------------------------------------------------------------------------------------
Telecommunications--.0%
500 RCN Corporation** 5 --
230 Viatel Holding (Bermuda), Ltd.** 16 --
1,571 World Access, Inc. 3 --
- -----------------------------------------------------------------------------------------------------------------
24 --
- -----------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $130,695) 431,024 252
- -----------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--1.3%
Manufacturing
288 Day International Group, Inc., 12.25%, 2010, PIK
(cost $271,922) 223,601 131
- -----------------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
SPECIAL BOND FUND
June 30, 2006
- -----------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Warrants Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------
WARRANTS--.0%
Telecommunications
250 GT Group Telecom, Inc. (expiring 2/1/10)
(cost $22,587)+** -- --
- -----------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $17,659,529) 96.7% $16,518,561 $9,674
Other Assets, Less Liabilities 3.3 557,362 326
- -----------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $17,075,923 $10,000
=================================================================================================================
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933 (see Note 5).
++ In default as to principal and/or interest payment
* Non-income producing
** Security valued at fair value (see Note 1A)
*** Interest rates on adjustable rate bonds are determined and reset
quarterly by the indentures. The interest rates shown are the rates in
effect on June 30, 2006.
# Denotes a step bond (a zero-coupon bond that coverts to a fixed interest
rate at a designated future date).
See notes to financial statements
This page intentionally left blank.
Statements of Assets and Liabilities
FIRST INVESTORS LIFE SERIES FUNDS
June 30, 2006
- -----------------------------------------------------------------------------------------------------------
CASH FOCUSED
BLUE CHIP MANAGEMENT DISCOVERY EQUITY
- -----------------------------------------------------------------------------------------------------------
Assets
Investments in securities:
At identified cost $127,735,730 $7,613,633 $126,204,465 $10,026,652
============ ============ ============ ============
At value (Note 1A) $168,491,375 $7,613,633 $144,021,440 $11,076,874
Cash (overdraft) 303,291 89,741 198,006 (4,617)
Receivables:
Investment securities sold 267,936 -- -- 24,156
Interest and dividends 170,234 17,025 93,157 17,734
Trust shares sold 20,935 11,927 13,820 4,203
Other assets 16,821 1,837 14,481 1,119
------------ ------------ ------------ ------------
Total Assets 169,270,592 7,734,163 144,340,904 11,119,469
------------ ------------ ------------ ------------
Liabilities
Payables:
Investment securities purchased -- -- -- 53,796
Trust shares redeemed 124,661 15,062 66,458 20,144
Accrued advisory fees 103,471 2,167 87,045 6,734
Accrued expenses 23,074 3,241 21,260 3,000
------------ ------------ ------------ ------------
Total Liabilities 251,206 20,470 174,763 83,674
------------ ------------ ------------ ------------
Net Assets $169,019,386 $7,713,693 $144,166,141 $11,035,795
============ ============ ============ ============
Net Assets Consist of:
Capital paid in $163,095,393 $7,713,693 $124,472,626 $11,744,640
Undistributed net investment income 982,720 -- 120,549 45,869
Accumulated net realized gain (loss) on
Investments (35,814,372) -- 1,755,991 (1,804,936)
Net unrealized appreciation (depreciation)
of investments 40,755,645 -- 17,816,975 1,050,222
------------ ------------ ------------ ------------
Total $169,019,386 $7,713,693 $144,166,141 $11,035,795
============ ============ ============ ============
Shares of beneficial interest outstanding (Note 2) 8,015,467 7,713,693 5,178,207 1,269,692
============ ============ ============ ============
Net asset value, offering and redemption price
per share
(Net assets divided by shares outstanding) $21.09 $1.00 $27.84 $8.69
============ ============ ============ ============
Statements of Assets and Liabilities
FIRST INVESTORS LIFE SERIES FUNDS (Continued)
June 30, 2006
- -------------------------------------------------------------------------------------------
GOVERNMENT GROWTH HIGH YIELD
- -------------------------------------------------------------------------------------------
Assets
Investments in securities:
At identified cost $19,858,010 $204,633,834 $68,472,693
============ ============ ============
At value (Note 1A) $19,230,408 $246,603,465 $64,446,935
Cash 26,471 2,520 832,607
Receivables:
Investment securities sold 1,700 1,773,845 --
Interest and dividends 116,725 240,577 1,245,077
Trust shares sold 8,289 33,950 23,293
Other assets 2,308 25,308 7,543
------------ ------------- ------------
Total Assets 19,385,901 248,679,665 66,555,455
------------ ------------- ------------
Liabilities
Payables:
Investment securities purchased -- 883,818 300,000
Trust shares redeemed 4,184 347,193 57,455
Accrued advisory fees 9,602 149,836 40,961
Accrued expenses 3,275 36,374 16,446
----------- ------------- ------------
Total Liabilities 17,061 1,417,221 414,862
----------- ------------- ------------
Net Assets $19,368,840 $247,262,444 $66,140,593
============ ============= ============
Net Assets Consist of:
Capital paid in $20,391,292 $193,081,694 $85,566,896
Undistributed net investment income 459,403 720,539 2,487,388
Accumulated net realized gain (loss) on
Investments (854,253) 11,490,580 (17,887,933)
Net unrealized appreciation (depreciation)
of investments (627,602) 41,969,631 (4,025,758)
----------- ------------- ------------
Total $19,368,840 $247,262,444 $66,140,593
============ ============ ============
Shares of beneficial interest outstanding (Note 2) 2,026,356 7,192,225 8,715,154
============ ============ ============
Net asset value, offering and redemption price
per share
(Net assets divided by shares outstanding) $9.96 $34.88 $7.59
============ ============ ============
See notes to financial statements
Statements of Assets and Liabilities
FIRST INVESTORS LIFE SERIES FUNDS
June 30, 2006
- -----------------------------------------------------------------------------------------------------------
TARGET TARGET
INVESTMENT MATURITY MATURITY
INTERNATIONAL GRADE 2007 2010
- -----------------------------------------------------------------------------------------------------------
Assets
Investments in securities:
At identified cost $95,044,174 $35,981,998 $18,141,212 $13,632,127
============ ============ ============ ============
At value (Note 1A) $100,582,321 $35,436,103 $18,518,745 $14,392,693
Cash 9,601,662 368,909 167,185 67,372
Receivables:
Investment securities sold 6,424,600 -- -- --
Interest and dividends 176,099 475,759 -- --
Trust shares sold 41,894 10,220 -- --
Other assets 11,899 3,671 2,407 1,589
------------ ------------ ------------ ------------
Total Assets 116,838,475 36,294,662 18,688,337 14,461,654
------------ ------------ ------------ ------------
Liabilities
Payables:
Investment securities purchased 5,565,242 -- -- --
Trust shares redeemed 61,646 109,058 249 148,349
Accrued advisory fees 66,735 17,955 9,229 7,175
Accrued expenses 56,642 6,416 4,835 4,384
------------ ------------ ------------ ------------
Total Liabilities 5,750,265 133,429 14,313 159,908
------------ ------------ ------------ ------------
Net Assets $111,088,210 $36,161,233 $18,674,024 $14,301,746
============ ============ ============ ============
Net Assets Consist of:
Capital paid in $87,184,263 $37,985,199 $17,711,913 $13,132,324
Undistributed net investment income 815,970 171,178 561,890 388,944
Accumulated net realized gain (loss) on investments,
futures contracts and foreign currency transactions 17,573,080 (1,449,249) 22,688 19,912
Net unrealized appreciation (depreciation) of
investments, futures contracts and foreign currency
transactions 5,514,897 (545,895) 377,533 760,566
------------ ------------ ------------ ------------
Total $111,088,210 $36,161,233 $18,674,024 $14,301,746
============ ============ ============ ============
Shares of beneficial interest outstanding (Note 2) 5,346,508 3,471,392 1,640,899 1,076,644
============ ============ ============ ============
Net asset value, offering and redemption price
per share
(Net assets divided by shares outstanding) $20.78 $10.42 $11.38 $13.28
============ ============ ============ ============
Statements of Assets and Liabilities
FIRST INVESTORS LIFE SERIES FUNDS (Continued)
June 30, 2006
- -----------------------------------------------------------------------------------------------
TARGET
MATURITY SPECIAL
2015 VALUE BOND
- -----------------------------------------------------------------------------------------------
Assets
Investments in securities:
At identified cost $21,358,592 $66,066,513 $17,659,529
============ ============= ============
At value (Note 1A) $21,480,434 $84,246,403 $16,518,561
Cash 134,108 92,928 364,516
Receivables:
Investment securities sold -- 160,152 --
Interest and dividends -- 150,956 327,961
Trust shares sold -- 12,687 --
Other assets 2,011 7,452 6,285
------------ ------------- ------------
Total Assets 21,616,553 84,670,578 17,217,323
------------ ------------- ------------
Liabilities
Payables:
Investment securities purchased -- 15,839 100,000
Trust shares redeemed 21,759 39,318 17,099
Accrued advisory fees 10,646 51,258 10,637
Accrued expenses 9,788 8,844 13,664
------------ ------------- ------------
Total Liabilities 42,193 115,259 141,400
------------ ------------- ------------
Net Assets $21,574,360 $84,555,319 $17,075,923
============ ============= ============
Net Assets Consist of:
Capital paid in $21,036,989 $77,716,881 $25,556,846
Undistributed net investment income 477,659 746,241 155,240
Accumulated net realized gain (loss) on investment
futures contracts and foreign currency transaction (62,130) (12,087,693) (7,495,195)
Net unrealized appreciation (depreciation) of
investments, futures contracts and foreign currency
transactions 121,842 18,179,890 (1,140,968)
------------ ------------- ------------
Total $21,574,360 $84,555,319 $17,075,923
============ ============= ============
Shares of beneficial interest outstanding (Note 2) 1,617,263 5,587,519 1,934,341
============ ============= ============
Net asset value, offering and redemption price
per share
(Net assets divided by shares outstanding) $13.34 $15.13 $8.83
============ ============= ============
See notes to financial statements
Statements of Operations
FIRST INVESTORS LIFE SERIES FUNDS
Six Months Ended June 30, 2006
- -------------------------------------------------------------------------------------------------------------
BLUE CASH FOCUSED
CHIP MANAGEMENT DISCOVERY EQUITY
- -------------------------------------------------------------------------------------------------------------
Investment Income
Income:
Interest $52,985 $148,093 $97,115 $5,360
Dividends 1,638,681(a) -- 611,177 91,844
------------ ------------ ------------ ------------
Total income 1,691,666 148,093 708,292 97,204
------------ ------------ ------------ ------------
Expenses (Notes 1 and 4):
Advisory fees 654,743 23,976 544,780 42,528
Professional fees 15,692 5,321 9,340 5,455
Custodian fees and expenses 7,466 2,826 11,071 409
Reports and notices to shareholders 7,705 2,592 6,540 411
Registration fees 666 579 790 761
Trustees' fees 4,704 173 3,930 311
Other expenses 20,778 607 13,824 1,689
------------ ------------ ------------ ------------
Total expenses 711,754 36,074 590,275 51,564
Less: Expenses waived -- (12,546) -- --
Expenses paid indirectly (2,823) (1,300) (2,562) (244)
------------ ------------ ------------ ------------
Net expenses 708,931 22,228 587,713 51,320
------------ ------------ ------------ ------------
Net investment income 982,735 125,865 120,579 45,884
------------ ------------ ------------ ------------
Realized and Unrealized Gain (Loss) on Investments
(Note 3):
Net realized gain (loss) on investments 2,306,810 -- 5,043,483 258,433
Net unrealized appreciation (depreciation) of
investments 425,604 -- 5,887,315 (240,670)
------------ ------------ ------------ ------------
Net gain (loss) on investments 2,732,414 -- 10,930,798 17,763
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $3,715,149 $125,865 $11,051,377 $63,647
============ ============ ============ ============
Statements of Operations
FIRST INVESTORS LIFE SERIES FUNDS (Continued)
Six Months Ended June 30, 2006
- ---------------------------------------------------------------------------------------------
GOVERNMENT GROWTH HIGH YIELD
- ---------------------------------------------------------------------------------------------
Investment Income
Income:
Interest $533,501 $125,289 $2,913,125
Dividends -- 1,639,836(b) 15,531
----------- ------------ ------------
Total income 533,501 1,765,125 2,928,656
----------- ------------ ------------
Expenses (Notes 1 and 4):
Advisory fees 74,734 947,677 254,523
Professional fees 7,247 12,887 11,457
Custodian fees and expenses 4,709 29,923 5,101
Reports and notices to shareholders 1,774 16,370 4,295
Registration fees 652 896 596
Trustees' fees 523 6,945 1,932
Other expenses 3,021 31,892 9,975
----------- ------------ ------------
Total expenses 92,660 1,046,590 287,879
Less: Expenses waived (14,947) -- --
Expenses paid indirectly (3,633) (2,012) (5,364)
----------- ------------ ------------
Net expenses 74,080 1,044,578 282,515
----------- ------------ ------------
Net investment income 459,421 720,547 2,646,141
----------- ------------ ------------
Realized and Unrealized Gain (Loss) on Investments
(Note 3):
Net realized gain (loss) on investments (40,409) 12,585,315 (1,614,031)
Net unrealized appreciation (depreciation) of
investments (497,104) (7,064,006) 520,666
----------- ------------ ------------
Net gain (loss) on investments (537,513) 5,521,309 (1,093,365)
----------- ------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $(78,092) $6,241,856 $1,552,776
=========== ============ ============
(a) Net of $310 foreign taxes withheld
(b) Net of $4,045 foreign taxes withheld
See notes to financial statements
Statements of Operations
FIRST INVESTORS LIFE SERIES FUNDS
Six Months Ended June 30, 2006
- -----------------------------------------------------------------------------------------------------------
TARGET TARGET
INVESTMENT MATURITY MATURITY
INTERNATIONAL GRADE 2007 2010
- ------------------------------------------------------------------------------------------------------------
Investment Income
Income:
Interest $152,634 $1,011,145 $635,566 $446,703
Dividends 1,370,714(c) -- -- --
------------ ------------ ------------ ------------
Total income 1,523,348 1,011,145 635,566 446,703
------------ ------------ ------------ ------------
Expenses (Notes 1 and 4):
Advisory fees 413,916 139,337 72,781 57,224
Professional fees 29,147 9,601 7,691 6,095
Custodian fees and expenses 66,016 4,021 1,600 1,377
Reports and notices to shareholders 22,601 4,356 2,943 1,586
Registration fees 671 746 631 774
Trustees' fees 2,695 1,088 532 418
Other expenses 16,053 3,357 2,987 2,771
------------ ------------ ------------ ------------
Total expenses 551,099 162,506 89,165 70,245
Less: Expenses waived -- (27,867) (14,556) (11,445)
Expenses paid indirectly (581) (4,163) (940) (1,047)
------------ ------------ ------------ ------------
Net expenses 550,518 130,476 73,669 57,753
------------ ------------ ------------ ------------
Net investment income 972,830 880,669 561,897 388,950
------------ ------------ ------------ ------------
Realized and Unrealized Gain (Loss) on Investments,
Futures Contracts and Foreign Currency
Transactions (Note 3):
Net realized gain (loss) on:
Investments and futures contracts 17,589,494 (311,433) 44,373 20,502
Foreign currency transactions 99,725 -- -- --
------------ ------------ ------------ ------------
Net realized gain (loss) on investments, futures
contracts and foreign currency transactions 17,689,219 (311,433) 44,373 20,502
------------ ------------ ------------ ------------
Net unrealized apprection (depreciation) of:
Investments and futures contracts (10,411,119) (953,504) (441,975) (650,064)
Foreign currency transactions 65,756 -- -- --
------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation) on
investments, futures contracts and foreign
currency transactions (10,345,363) (953,504) (441,975) (650,064)
------------ ------------ ------------ ------------
Net gain (loss) on investments, futures
contracts and foreign currency transactions 7,343,856 (1,264,937) (397,602) (629,562)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $8,316,686 $(384,268) $164,295 $(240,612)
============ ============ ============ ============
Statements of Operations
FIRST INVESTORS LIFE SERIES FUNDS (Continued)
Six Months Ended June 30, 2006
- ---------------------------------------------------------------------------------------------
TARGET
MATURITY SPECIAL
2015 VALUE BOND
- ---------------------------------------------------------------------------------------------
Investment Income
Income:
Interest $553,784 $49,890 $681,503
Dividends -- 1,036,122(d) 9,471
------------ ------------- ------------
Total income 553,784 1,086,012 690,974
------------ ------------- ------------
Expenses (Notes 1 and 4):
Advisory fees 81,148 312,627 68,703
Professional fees 4,022 8,352 8,960
Custodian fees and expenses 650 7,052 1,989
Reports and notices to shareholders 1,573 5,680 1,898
Registration fees 776 719 646
Trustees' fees 584 2,242 463
Other expenses 4,301 8,413 5,012
------------ ------------- ------------
Total expenses 93,054 345,085 87,671
Less: Expenses waived (16,230) -- --
Expenses paid indirectly (714) (5,363) (2,069)
------------ ------------- ------------
Net expenses 76,110 339,722 85,602
------------ ------------- ------------
Net investment income 477,674 746,290 605,372
------------ ------------- ------------
Realized and Unrealized Gain (Loss) on Investments
Futures Contracts and Foreign Currency
Transactions (Note 3):
Net realized gain (loss) on:
Investments and futures contracts -- 1,708,609 (364,058)
Foreign currency transactions -- -- --
------------ ------------ ------------
Net realized gain (loss) on investments, futures
contracts and foreign currency transactions -- 1,708,609 (364,058)
------------ ------------ ------------
Net unrealized apprection (depreciation) of:
Investments and futures contracts (1,430,510) 3,557,701 2,870
Foreign currency transactions -- -- --
------------ ------------ ------------
Net unrealized appreciation (depreciation) on
investments, futures contracts and foreign
currency transactions (1,430,510) 3,557,701 2,870
------------ ------------ ------------
Net gain (loss) on investments, futures
contracts and foreign currency transactions (1,430,510) 5,266,310 (361,188)
------------ ------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $(952,836) $6,012,600 $244,184
============ ============ ============
(c) Net of $196,994 foreign taxes withheld
(d) Net of $775 foreign taxes withheld
See notes to financial statements
Statements of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUNDS
- -----------------------------------------------------------------------------------------------------------
BLUE CHIP CASH MANAGEMENT
-------------------------- --------------------------
1/1/06 to 1/1/05 to 1/1/06 to 1/1/05 to
6/30/06 12/31/05 6/30/06 12/31/05
- -----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations
Net investment income $982,735 $1,631,756 $125,865 $157,155
Net realized gain on investments 2,306,810 8,784,579 -- --
Net unrealized appreciation (depreciation)
of investments 425,604 (3,150,784) -- --
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 3,715,149 7,265,551 125,865 157,155
------------ ------------ ------------ ------------
Dividends to Shareholders
Net investment income (1,631,699) (1,741,327) (125,865) (157,155)
------------ ------------ ------------ ------------
Trust Share Transactions *
Proceeds from shares sold 2,183,326 4,054,340 4,874,278 1,500,795
Reinvestment of dividends 1,631,699 1,741,327 125,865 157,155
Cost of shares redeemed (11,084,291) (18,025,872) (3,662,962) (2,639,443)
------------ ------------ ------------ ------------
Net increase (decrease) from trust share
transactions (7,269,266) (12,230,205) 1,337,181 (981,493)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets (5,185,816) (6,705,981) 1,337,181 (981,493)
Net Assets
Beginning of period 174,205,202 180,911,183 6,376,512 7,358,005
------------ ------------ ------------ ------------
End of period+ $169,019,386 $174,205,202 $7,713,693 $6,376,512
============ ============ ============ ============
+Includes undistributed net investment income of $982,720 $1,631,684 $-- $--
============ ============ ============ ============
*Trust Shares Issued and Redeemed
Sold 102,167 200,743 4,874,278 1,500,795
Issued for dividends reinvested 76,894 86,936 125,865 157,155
Redeemed (517,333) (899,406) (3,662,962) (2,639,443)
------------ ------------ ------------ ------------
Net increase (decrease) in trust shares
outstanding (338,272) (611,727) 1,337,181 (981,493)
============ ============ ============ ============
Statements of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUNDS (Continued)
- ---------------------------------------------------------------------------------------------------------
DISCOVERY FOCUSED EQUITY
--------------------------- -------------------------
1/1/06 to 1/1/05 to 1/1/06 to 1/1/05 to
6/30/06 12/31/05 6/30/06 12/31/05
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations
Net investment income $120,579 $208,573 $45,884 $63,592
Net realized gain on investments 5,043,483 30,477,144 258,433 394,437
Net unrealized appreciation (depreciation)
of investments 5,887,315 (23,989,048) (240,670) 138,093
------------ ------------- ----------- ------------
Net increase in net assets resulting
from operations 11,051,377 6,696,669 63,647 596,122
------------ ------------- ----------- ------------
Dividends to Shareholders
Net investment income (208,603) -- (63,598) (127,392)
------------ ------------- ----------- ------------
Trust Share Transactions *
Proceeds from shares sold 2,403,044 5,269,573 549,476 1,073,308
Reinvestment of dividends 208,603 -- 63,598 127,392
Cost of shares redeemed (5,961,548) (9,153,290) (931,991) (1,271,203)
------------ ------------- ----------- ------------
Net increase (decrease) from trust share
transactions (3,349,901) (3,883,717) (318,917) (70,503)
------------ ------------- ----------- ------------
Net increase (decrease) in net assets 7,492,873 2,812,952 (318,868) 398,227
Net Assets
Beginning of period 136,673,268 133,860,316 11,354,663 10,956,436
------------ ------------- ----------- ------------
End of period+ $144,166,141 $136,673,268 $11,035,795 $11,354,663
============ ============ ============ ============
+Includes undistributed net investment income of $120,549 $208,573 $45,869 $63,583
============ ============ ============ ============
*Trust Shares Issued and Redeemed
Sold 85,864 215,423 62,131 128,261
Issued for dividends reinvested 7,501 -- 7,227 15,423
Redeemed (213,798) (374,172) (105,029) (152,055)
------------ ------------- ----------- ------------
Net increase (decrease) in trust shares
outstanding (120,433) (158,749) (35,671) (8,371)
============ ============ =========== ===========
See notes to financial statements
Statements of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUNDS
- -----------------------------------------------------------------------------------------------------------
GOVERNMENT GROWTH
-------------------------- --------------------------
1/1/06 to 1/1/05 to 1/1/06 to 1/1/05 to
6/30/06 12/31/05 6/30/06 12/31/05
- -----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations
Net investment income $459,421 $863,876 $720,547 $1,106,519
Net realized gain (loss) on investments, futures
contracts and foreign currency transactions (40,409) (37,768) 12,585,315 17,727,603
Net unrealized appreciation (depreciation)
of investments, futures contracts and foreign
currency transactions (497,104) (292,020) (7,064,006) (1,989,130)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations (78,092) 534,088 6,241,856 16,844,992
------------ ------------ ------------ ------------
Distributions to Shareholders
Net investment income (1,018,037) (1,077,184) (1,106,509) (1,767,273)
Net realized gains -- -- (15,617,669) --
------------ ------------ ------------ ------------
Total distributions (1,018,037) (1,077,184) (16,724,178) (1,767,273)
------------ ------------ ------------ ------------
Trust Share Transactions*
Proceeds from shares sold 766,375 1,767,268 4,513,506 9,492,500
Reinvestment of distributions 1,018,037 1,077,184 16,724,178 1,767,273
Cost of shares redeemed (1,776,673) (3,295,380) (12,444,872) (16,337,476)
------------ ------------ ------------ ------------
Net increase (decrease) from trust share
transactions 7,739 (450,928) 8,792,812 (5,077,703)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets (1,088,390) (994,024) (1,689,510) 10,000,016
Net Assets
Beginning of period 20,457,230 21,451,254 248,951,954 238,951,938
------------ ------------ ------------ ------------
End of period+ $19,368,840 $20,457,230 $247,262,444 $248,951,954
============ ============ ============ ============
+Includes undistributed net investment income of $459,403 $863,859 $720,539 $1,106,501
============ ============ ============ ============
*Trust Shares Issued and Redeemed
Sold 78,607 176,435 126,654 279,764
Issued for distributions reinvested 105,605 109,137 484,900 52,912
Redeemed (183,130) (327,698) (351,169) (480,263)
------------ ------------ ------------ ------------
Net increase (decrease) in trust shares
outstanding 1,082 (42,126) 260,385 (147,587)
============ ============ ============ ============
Statements of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUNDS (Continued)
- ---------------------------------------------------------------------------------------------------------
HIGH YIELD INTERNATIONAL
-------------------------- --------------------------
1/1/06 to 1/1/05 to 1/1/06 to 1/1/05 to
6/30/06 12/31/05 6/30/06 12/31/05
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations
Net investment income $2,646,141 $5,545,686 $972,830 $789,330
Net realized gain (loss) on investments, futures
contracts and foreign currency transactions (1,614,031) (704,824) 17,689,219 9,973,711
Net unrealized appreciation (depreciation)
of investments, futures contracts and foreign
currency transactions 520,666 (4,569,995) (10,345,363) (1,882,542)
------------ ------------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations 1,552,776 270,867 8,316,686 8,880,499
------------ ------------- ----------- ------------
Distributions to Shareholders
Net investment income (5,591,784) (5,064,757) (802,343) (1,261,502)
Net realized gains -- -- (3,322,771) --
------------ ------------ ------------ ------------
Total distributions (5,591,784) (5,064,757) (4,125,114) (1,261,502)
------------ ------------ ------------ ------------
Trust Share Transactions*
Proceeds from shares sold 1,106,617 3,940,456 2,482,851 3,909,546
Reinvestment of distributions 5,591,784 5,064,757 4,125,114 1,261,502
Cost of shares redeemed (5,107,409) (5,571,885) (4,545,503) (6,833,388)
------------ ------------ ------------ ------------
Net increase (decrease) from trust share
transactions 1,590,992 3,433,328 2,062,462 (1,662,340)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets (2,448,016) (1,360,562) 6,254,034 5,956,657
Net Assets
Beginning of period 68,588,609 69,949,171 104,834,176 98,877,519
------------ ------------ ------------ ------------
End of period+ $66,140,593 $68,588,609 $111,088,210 $104,834,176
============ ============ ============ ============
+Includes undistributed net investment income of $2,487,388 $5,433,031 $815,970 $645,483
============ ============ ============ ============
*Trust Shares Issued and Redeemed
Sold 142,256 487,701 118,689 211,096
Issued for distributions reinvested 738,677 625,278 205,127 68,821
Redeemed (659,748) (691,732) (219,067) (367,151)
------------ ------------ ------------ ------------
Net increase (decrease) in trust shares
outstanding 221,185 421,247 104,749 (87,234)
============ ============ ============ ============
See notes to financial statements
Statements of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUNDS
- ----------------------------------------------------------------------------------------------------------
INVESTMENT GRADE TARGET MATURITY 2007
-------------------------- --------------------------
1/1/06 to 1/1/05 to 1/1/06 to 1/1/05 to
6/30/06 12/31/05 6/30/06 12/31/05
- ----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations
Net investment income $880,669 $1,872,353 $561,897 $1,203,954
Net realized gain (loss) on investments (311,433) 103,981 44,373 140,661
Net unrealized depreciation of investments (953,504) (1,478,911) (441,975) (1,194,150)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations (384,268) 497,423 164,295 150,465
------------- ------------- ------------- -------------
Distributions to Shareholders
Net investment income (2,116,649) (2,163,678) (1,203,940) (1,308,023)
Net realized gains -- -- (140,667) (490,887)
------------- ------------- ------------- -------------
Total distributions (2,116,649) (2,163,678) (1,344,607) (1,798,910)
------------- ------------- ------------- -------------
Trust Share Transactions*
Proceeds from shares sold 1,435,617 3,850,145 50,210 233,673
Reinvestment of distributions 2,116,649 2,163,678 1,344,607 1,798,910
Cost of shares redeemed (3,120,445) (3,829,276) (2,125,472) (3,159,262)
------------- ------------- ------------- -------------
Net increase (decrease) from trust share
transactions 431,821 2,184,547 (730,655) (1,126,679)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets (2,069,096) 518,292 (1,910,967) (2,775,124)
Net Assets
Beginning of period 38,230,329 37,712,037 20,584,991 23,360,115
------------- ------------- ------------- -------------
End of period $36,161,233 $38,230,329 $18,674,024 $20,584,991
============= ============= ============= =============
Includes undistributed net investment income of $171,178 $1,407,158 $561,890 $1,203,933
============= ============= ============= =============
*Trust Shares Issued and Redeemed
Sold 134,169 346,028 4,239 19,169
Issued for distributions reinvested 200,821 197,056 118,992 150,789
Redeemed (294,288) (342,801) (182,890) (260,033)
------------- ------------- ------------- -------------
Net increase (decrease) in trust shares
outstanding 40,702 200,283 (59,659) (90,075)
============= ============= ============= =============
Statements of Changes in Net Assets (continued)
FIRST INVESTORS LIFE SERIES FUNDS
- ---------------------------------------------------------------------------------------------------------
TARGET MATURITY 2010 TARGET MATURITY 2015
-------------------------- --------------------------
1/1/06 to 1/1/05 to 1/1/06 to 1/1/05 to
6/30/06 12/31/05 6/30/06 12/31/05
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations
Net investment income $388,950 $794,705 $477,674 $806,537
Net realized gain (loss) on investments 20,502 135,809 -- 15,085
Net unrealized depreciation of investments (650,064) (685,194) (1,430,510) (12,852)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations (240,612) 245,320 (952,836) 808,770
------------- ------------- ------------- -------------
Distributions to Shareholders
Net investment income (794,710) (785,755) (806,540) (614,835)
Net realized gains (135,821) (162,643) -- --
------------- ------------- ------------- -------------
Total distributions (930,531) (948,398) (806,540) (614,835)
------------- ------------- ------------- -------------
Trust Share Transactions*
Proceeds from shares sold 350,386 1,520,068 1,789,210 5,821,850
Reinvestment of distributions 930,531 948,398 806,540 614,835
Cost of shares redeemed (1,840,374) (2,421,773) (1,011,164) (1,570,233)
------------- ------------- ------------- -------------
Net increase (decrease) from trust share
transactions (559,457) 46,693 1,584,586 4,866,452
------------- ------------- ------------- -------------
Net increase (decrease) in net assets (1,730,600) (656,385) (174,790) 5,060,387
Net Assets
Beginning of period 16,032,346 16,688,731 21,749,150 16,688,763
------------- ------------- ------------- -------------
End of period $14,301,746 $16,032,346 $21,574,360 $21,749,150
============= ============= ============= =============
Includes undistributed net investment income of $388,944 $794,704 $477,659 $806,525
============= ============= ============= =============
*Trust Shares Issued and Redeemed
Sold 25,862 105,245 128,402 408,145
Issued for distributions reinvested 69,339 67,262 58,276 44,264
Redeemed (136,389) (168,419) (73,146) (110,135)
------------- ------------- ------------- -------------
Net increase (decrease) in trust shares
outstanding (41,188) 4,088 113,532 342,274
============= ============= ============= =============
See notes to financial statements
Statements of Changes in Net Assets
FIRST INVESTORS LIFE SERIES FUNDS
- ---------------------------------------------------------------------------------------------------------
VALUE SPECIAL BOND
-------------------------- --------------------------
1/1/06 to 1/1/05 to 1/1/06 to 1/1/05 to
6/30/06 12/31/05 6/30/06 12/31/05
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations
Net investment income $746,290 $1,422,315 $605,372 $1,614,774
Net realized gain (loss) on investments 1,708,609 4,992,544 (364,058) (209,198)
Net unrealized appreciation (depreciation) of
investments 3,557,701 (1,957,386) 2,870 (1,104,523)
------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations 6,012,600 4,457,473 244,184 301,053
------------ ------------ ------------ ------------
Dividends to Shareholders
Net investment income (1,422,321) (1,158,946) (491,959) (1,534,143)
------------ ------------ ------------ ------------
Trust Share Transactions*
Proceeds from shares sold 3,411,743 9,619,339 5,879 505,525
Reinvestment of dividends 1,422,321 1,158,946 491,959 1,534,143
Cost of shares redeemed (3,880,888) (4,522,357) (2,376,970) (3,088,225)
------------ ------------ ------------ ------------
Net increase (decrease) from trust share
transactions 953,176 6,255,928 (1,879,132) (1,048,557)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 5,543,455 9,554,455 (2,126,907) (2,281,647)
Net Assets
Beginning of period 79,011,864 69,457,409 19,202,830 21,484,477
------------ ------------ ------------ ------------
End of period+ $84,555,319 $79,011,864 $17,075,923 $19,202,830
============ ============ ============ ============
+Includes undistributed net investment income of $746,241 $1,422,272 $155,240 $41,827
============ ============ ============ ============
*Trust Shares Issued and Redeemed
Sold 227,113 697,807 660 54,058
Issued for dividends reinvested 96,038 84,656 55,245 170,080
Redeemed (258,383) (324,863) (267,162) (340,301)
------------ ------------ ------------ ------------
Net increase (decrease) in trust shares
outstanding 64,768 457,600 (211,257) (116,163)
============ ============ ============ ============
See notes to financial statements
Notes to Financial Statements
FIRST INVESTORS LIFE SERIES FUNDS
June 30, 2006
1. Significant Accounting Policies--First Investors Life Series Funds, a
Delaware statutory trust ("the Trust"), is registered under the Investment
Company Act of 1940 ("the 1940 Act") as a diversified, open-end management
investment company. The Trust operates as a series fund, issuing shares of
beneficial interest in the Blue Chip Fund, Cash Management Fund, Discovery
Fund, Focused Equity Fund, Government Fund, Growth Fund, High Yield Fund,
International Fund (formerly International Securities Fund), Investment
Grade Fund, Target Maturity 2007 Fund, Target Maturity 2010 Fund, Target
Maturity 2015 Fund and Special Bond Fund (each a "Fund", collectively, "the
Funds"), and accounts separately for the assets, liabilities and operations
of each Fund. The objective of each Fund is as follows:
Blue Chip Fund seeks high total investment return.
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 growth of capital.
Focused Equity Fund seeks capital appreciation.
Government Fund seeks to achieve a significant level of current income which
is consistent with security and liquidity of principal.
Growth Fund seeks long-term capital appreciation.
High Yield Fund primarily seeks high current income and, secondarily, seeks
capital appreciation.
International Fund primarily seeks long-term capital growth.
Investment Grade Fund seeks to generate a maximum level of income consistent
with investment in investment grade debt securities.
Target Maturity 2007, Target Maturity 2010 and Target Maturity 2015 Funds
seek a predictable compounded investment return for investors who hold their
Fund shares until the Fund's maturity, consistent with the preservation of
capital.
Value Fund seeks total return.
Special Bond seeks high current income without undue risk to principal and,
secondarily, seeks growth of capital.
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 listed
on exchanges whose primary market is believed to be OTC) are valued at the
mean between the last bid and asked prices based on quotes furnished by a
market maker for such securities. Securities may also be priced by a pricing
service approved by the Trust's Board of Trustees (the "Board"). The pricing
service considers security type, rating, market condition and yield data as
well as market quotations, prices provided by market makers and other
available information in determining value. The Funds also rely on a pricing
service in circumstances where the U.S. securities markets exceed a
pre-determined threshold to value foreign securities held in the Funds'
portfolios. The pricing service, its methodology or the threshold may change
from time to time. Short-term debt securities that mature in 60 days or less
are valued at amortized cost.
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 market 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.
The Funds monitor for significant events occurring after the close of
foreign markets but prior to the close of trading on the New York Stock
Exchange that could have a material impact on the value of any foreign
securities that are held by the Funds. Examples of such events include
natural disasters, political events, issuer-specific developments such as
bankruptcies and significant fluctuations in securities markets. If the
Valuation Committee decides that such events warrant using fair value
estimates for foreign securities, it will take such events into
consideration in determining the fair values of such securities. If market
quotations or prices are not readily available or determined to be
unreliable, the securities will be valued at fair value as determined in
good faith pursuant to procedures adopted by the Board. At June 30, 2006,
the High Yield Fund held seven securities that were fair valued by the
Valuation Committee with an aggregate value of $975,749 representing 1.5% of
the Fund's net assets and the Special Bond Fund held eight securities that
were fair valued by the Valuation Committee with an aggregate value of
$713,361 representing 4.2% of the Fund's net assets. For valuation purposes,
where applicable, quotations of foreign securities in foreign currencies are
translated to U.S. dollar equivalents using the foreign exchange quotation
in effect.
Notes to Financial Statements (continued)
FIRST INVESTORS LIFE SERIES FUNDS
June 30, 2006
B. Federal Income Tax--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, 2005, capital loss carryovers were as follows:
Year Capital Loss Carryovers Expire
-------------------------------------------------------------------------------------------------
Fund Total 2007 2008 2009 2010 2011 2012 2013
- ---- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Blue
Chip $34,702,370 $ -- $ -- $8,100,765 $22,469,579 $4,132,026 $ -- $ --
Discovery 3,166,065 -- -- -- 3,166,065 -- -- --
Focused
Equity 2,022,302 -- 339,694 248,878 1,083,303 350,427 -- --
Government 791,737 140,904 133,450 -- -- 272,546 51,149 193,688
High
Yield 16,201,385 566,369 1,503,018 3,751,289 4,221,351 4,736,272 790,779 632,307
Investment
Grade 1,306,622 -- 626,718 37,096 17,173 517,182 -- 108,453
Target
Maturity
2015 48,365 -- -- 2,287 4,285 14,833 26,960 --
Value 13,789,079 -- -- 1,076,863 11,439,916 1,272,300 -- --
Special
Bond 7,075,630 636,995 365,853 1,284,606 2,764,915 1,656,953 212,617 153,691
C. Foreign Currency Translations--The accounting records of the International
Fund are maintained in U.S. dollars. Portfolio securities and other assets
and liabilities denominated in foreign currencies are translated into U.S.
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 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 foreign currency
transactions include 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 generally declared and
paid annually on all
Funds, except for the Cash Management Fund which declares dividends from the
total of net investment income (plus or minus all realized short-term gains
and losses on investments) daily and pays monthly. Dividends from net
investment income and capital gain distributions are determined in
accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. 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 Trust 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 accounting principles generally accepted in the United
States of America 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 generally accounted for on the first
business day following the date the securities are purchased or sold. Cost
is determined and gains and losses are based, on the identified cost basis
for securities, for both financial statement and federal income tax
purposes. Dividend income is recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond premiums and discounts
are accreted or amortized using the interest method. Interest income on
zero-coupon bonds and step bonds is accrued daily at the effective interest
rate. For the six months ended June 30, 2006, the Bank of New York,
custodian for all the Funds, except the International Fund, has provided
credits in the amount of $27,647 against custodian charges based on the
uninvested cash balances of the Funds. The Funds also reduced expenses
through brokerage service arrangements. For the six months ended June 30,
2006, the Funds' expenses were reduced by $5,168 under these arrangements.
Notes to Financial Statements (continued)
FIRST INVESTORS LIFE SERIES FUNDS
June 30, 2006
2. Trust Shares--The Trust is authorized to issue an unlimited number of
shares of beneficial interest without par value. The Trust consists of the
Funds listed on the cover page, each of which is a separate and distinct
series of the Trust. 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 six months ended June 30, 2006, purchases
and sales (including pay-downs on Government Fund) of securities and
long-term U.S. Government obligations (excluding short-term U.S. Government
obligations, repurchase agreements, foreign currencies and short-term
securities), were as follows:
Long-Term U.S.
Securities Government Obligations
--------------------------- ---------------------------
Cost of Proceeds Cost of Proceeds
Fund Purchases of Sales Purchases of Sales
- ---- ------------ ------------ ------------ ------------
Blue Chip $ 7,437,296 $ 9,574,317 $ -- $ --
Discovery 30,273,958 31,601,247 -- --
Focused Equity 4,684,765 4,953,526 -- --
Government -- -- 1,877,535 2,577,592
Growth 123,480,816 129,231,057 -- --
High Yield 12,170,128 11,276,490 -- --
International 142,677,878 146,297,896 -- --
Investment Grade 6,355,934 10,188,316 10,870,887 7,090,092
Target Maturity 2007 -- -- -- 2,218,783
Target Maturity 2010 -- -- -- 1,397,880
Target Maturity 2015 -- -- 954,838 --
Value 9,139,629 6,811,166 -- --
Special Bond 3,039,156 3,934,640 -- --
At June 30, 2006, aggregate cost and net unrealized appreciation
(depreciation) of securities for federal income tax purposes were as
follows:
Net
Gross Gross Unrealized
Aggregate Unrealized Unrealized Appreciation
Fund Cost Appreciation Depreciation (Depreciation)
- ---- ------------ ------------ ------------ ------------
Blue Chip $131,154,542 $42,029,120 $4,692,287 $37,336,833
Discovery 126,325,890 24,220,573 6,525,023 17,695,550
Focused Equity 10,067,720 1,366,006 356,852 1,009,154
Government 19,858,010 20,248 647,850 (627,602)
Growth 205,728,503 48,043,065 7,168,103 40,874,962
High Yield 68,632,671 1,226,565 5,412,301 (4,185,736)
International* 95,349,469 5,350,987 118,135 5,232,852
Investment Grade 36,439,870 163,858 1,167,625 (1,003,767)
Target Maturity 2007 18,162,877 355,868 -- 355,868
Target Maturity 2010 13,632,655 760,038 -- 760,038
Target Maturity 2015 21,372,358 374,532 266,456 108,076
Value 66,073,736 19,910,417 1,737,750 18,172,667
Special Bond 17,752,344 595,022 1,828,805 (1,233,783)
*Aggregate Tax Cost includes PFIC income of $144,047.
4. Advisory Fee and Other Transactions With Affiliates--Certain officers and
trustees of the Trust are officers and trustees of its investment adviser,
First Investors Management Company, Inc. ("FIMCO") and/or its transfer
agent, Administrative Data Management Corp. Trustees of the Trust who are
not "interested persons" of the Trust as defined in the 1940 Act are
remunerated by the Funds. For the six months ended June 30, 2006, total
trustee fees accrued by the Funds amounted to $26,540.
The Investment Advisory Agreement provides as compensation to FIMCO an
annual fee, payable monthly, at the following rates:
Through April 30, 2006, the rate was .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.
Effective May 1, 2006, the rate was changed to .75% on the first $250
million of each Fund's average daily net assets, .72% on the next $250
million, .69% on the next $250 million, .66% on the next $500 million,
declining by .02% on each $500 million thereafter, down to .60% on average
daily net assets over $2.25 billion. For the six months ended June 30, 2006,
FIMCO has voluntarily waived 20% of the .75% annual fee on the first $250
million of average daily net assets of the Government, Investment Grade,
Target Maturity 2007, Target Maturity 2010 and Target Maturity 2015 Funds.
In addition, FIMCO has voluntarily waived $9,449 in advisory fees on the
Cash Management Fund to limit the Fund's
Notes to Financial Statements (continued)
FIRST INVESTORS LIFE SERIES FUNDS
June 30, 2006
overall expense ratio to .70%. For the six months ended June 30, 2006, total
advisory fees accrued to FIMCO were $3,688,697 of which $97,592 was waived
as noted above.
Wellington Management Company, LLP serves as investment subadviser to the
Focused Equity and Growth Funds. Effective March 8, 2005, Paradigm Capital
Management, Inc. serves as investment subadviser to the Discovery Fund.
Effective June 27, 2006, Vontobel Asset Management, Inc. serves as
investment adviser to the International Fund. The subadvisers are paid by
FIMCO and not by the Funds.
5. Restricted Securities--Certain restricted securities are exempt from the
registration requirements under Rule 144A of the Securities Act of 1933 and
may only be sold to qualified institutional investors. At June 30, 2006, the
Government Fund held one 144A security with an aggregate value of $966,080
representing 5.0% of the Fund's net assets, the High Yield Fund held
twenty-two 144A securities with an aggregate value of $8,912,001
representing 13.5% of the Fund's net assets, the Investment Grade Fund held
nine 144A securities with an aggregate value of $2,214,543 representing 6.1%
of the Fund's net assets, the Special Bond Fund held eighteen 144A
securities with an aggregate value of $2,029,155 representing 11.9% of the
Fund's net assets. Certain restricted securities are exempt from the
registration requirements under Section 4(2) of the Securities Act of 1933
and may be sold to qualified investors. At June 30, 2006, the Cash
Management Fund held seven Section 4(2) securities with an aggregate value
of $1,870,407 representing 24.2% of the Fund's net assets. These securities
are valued as set forth in Note 1A.
6. Forward Currency Contracts and Future 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 Fund purchases or
sells foreign securities, it may enter into a forward currency contract to
minimize the foreign exchange risk between the trade date and the settlement
date of such transactions. The International Fund could be exposed to risk
if counter parties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
Forward currency contracts are "marked-to-market" daily at the applicable
translation rate and the resulting unrealized gains or losses are reflected
in the Fund's assets. The International Fund had no forward currency
contracts outstanding at June 30, 2006.
The International Fund may purchase or sell stock index futures contracts as
a hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities or cash, and/or by securing a standby
letter of credit from a major commercial bank, as collateral, for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking- to-
market" on a daily basis to reflect the market value of the contract at the
end of each day's trading. Variation margin payments are made or received
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction
and the Fund's basis in the contract. Risk includes the possibility of an
illiquid market and that a change in the value of the contract may not
correlate with changes in the securities being hedged. At June 30, 2006, the
International Fund had no open futures contracts.
7. High Yield 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.
8. Fund Reorganizations--At the close of business on April 28, 2006, First
Investors Life Series Funds were reorganized into corresponding series of
the Trust pursuant to an Agreement and Plan of Conversion and Termination
(the "Reorganizations") that was approved by each Fund's shareholders. The
Reorganizations were accomplished through tax-free exchanges of shares,
which had no impact on net assets, operations, and number of shares
outstanding.
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.
- ----------------------------------------------------------------------------------------------------
P E R S H A R E D A T A
----------------------------------------------------------------------------------------
Less Distributions
Investment Operations from
------------------------------------- ----------------------
Net Asset Net Net Realized
Value, Investment and Unrealized Total from Net Net
Beginning Income Gain (Loss) on Investment Investment Realized Total
of Period (Loss) Investments Operations Income Gain Distributions
- -----------------------------------------------------------------------------------------------------
BLUE CHIP FUND
- --------------
2001 $28.43 $ .08 $(5.18) $(5.10) $ .08 $2.81 $2.89
2002 20.44 .11 (5.36) (5.25) .09 -- .09
2003 15.10 .12 3.80 3.92 .11 -- .11
2004 18.91 .19 1.20 1.39 .12 -- .12
2005 20.18 .20 .67 .87 .20 -- .20
2006(a) 20.85 .13 .31 .44 .20 -- .20
- ----------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND
- --------------------
2001 $ 1.00 $.037 -- $ .037 $.037 -- $.037
2002 1.00 .012 -- .012 .012 -- .012
2003 1.00 .005 -- .005 .005 -- .005
2004 1.00 .007 -- .007 .007 -- .007
2005 1.00 .024 -- .024 .024 -- .024
2006(a) 1.00 .020 -- .020 .020 -- .020
- ----------------------------------------------------------------------------------------------------
DISCOVERY FUND
- --------------
2001 $30.50 $(.07) $(6.22) $(6.29) $ -- $2.78 $2.78
2002 21.43 (.08) (5.73) (5.81) -- -- --
2003 15.62 (.06) 6.19 6.13 -- -- --
2004 21.75 (.04) 2.82 2.78 -- -- --
2005 24.53 .08 1.18 1.26 -- -- --
2006(a) 25.79 .02 2.07 2.09 .04 -- .04
- ----------------------------------------------------------------------------------------------------
FOCUSED EQUITY FUND
- -------------------
2001 $ 9.13 $ .02 $ (.47) $ (.45) $ .02 -- $.02
2002 8.66 .01 (2.44) (2.43) .02 -- .02
2003 6.21 .04 1.68 1.72 .01 -- .01
2004 7.92 .10 .36 .46 .04 -- .04
2005 8.34 .05 .41 .46 .10 -- .10
2006(a) 8.70 .04 -- .04 .05 -- .05
- ----------------------------------------------------------------------------------------------------
GOVERNMENT FUND
- ---------------
2001 $10.22 $ .52 $ .36 $ .88 $ .65 -- $ .65
2002 10.45 .45 .33 .78 .52 -- .52
2003 10.71 .55 (.22) .33 .45 -- .45
2004 10.59 .54 (.17) .37 .58 -- .58
2005 10.38 .51 (.26) .25 .53 -- .53
2006(a) 10.10 .26 (.29) (.03) .51 -- .51
- ----------------------------------------------------------------------------------------------------
GROWTH FUND
- -----------
2001 $39.80 $ .06 $(5.11) $(5.05) $ .02 $4.02 $4.04
2002 30.71 .12 (6.94) (6.82) .06 -- .06
2003 23.83 .16 6.75 6.91 .12 -- .12
2004 30.62 .25 3.04 3.29 .16 -- .16
2005 33.75 .16 2.25 2.41 .25 -- .25
2006(a) 35.91 .10 .80 .90 .16 2.27 2.43
- ----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
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 Net Assets Before Expenses
Assets** Waived or Assumed
-------------------- ----------------------
Net Asset Net
Value, Net Assets Investment Net Portfolio
End of Total End of Period Income Investment Turnover
Period Return* (in millions) Expenses (Loss) Expenses Income Rate
- -----------------------------------------------------------------------------------------------------------
BLUE CHIP FUND
- --------------
2001 $20.44 (19.27)% $220 .81% .38% N/A N/A 105%
2002 15.10 (25.80) 148 .81 .58 N/A N/A 138
2003 18.91 26.19 179 .83 .71 N/A N/A 96
2004 20.18 7.37 181 .83 .99 N/A N/A 100
2005 20.85 4.34 174 .85 .93 N/A N/A 34
2006(a) 21.09 2.09 169 .82+ 1.12+ N/A N/A 4
- -----------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND
- --------------------
2001 $ 1.00 3.77% $12 .70% 3.59% .86% 3.43% N/A
2002 1.00 1.22 14 .70 1.20 .98 .92 N/A
2003 1.00 .54 10 .70 .55 .95 .30 N/A
2004 1.00 .71 7 .70 .69 1.04 .35 N/A
2005 1.00 2.44 6 .70 2.38 1.09 1.99 N/A
2006(a) 1.00 1.97 8 .70+ 3.92+ 1.13+ 3.49+ N/A
- -----------------------------------------------------------------------------------------------------------
DISCOVERY FUND
- --------------
2001 $21.43 (21.12)% $126 .83% (.33)% N/A N/A 163%
2002 15.62 (27.11) 89 .83 (.43) N/A N/A 130
2003 21.75 39.24 122 .85 (.35) N/A N/A 111
2004 24.53 12.78 134 .83 (.18) N/A N/A 93
2005 25.79 5.14 137 .90 .15 N/A N/A 111
2006(a) 27.84 8.10 144 .81+ .16+ N/A N/A 21
- -----------------------------------------------------------------------------------------------------------
FOCUSED EQUITY FUND
- -------------------
2001 $ 8.66 (4.90)% $ 9 .91% .28% N/A N/A 201%
2002 6.21 (28.09) 7 1.04 .13 N/A N/A 127
2003 7.92 27.73 10 .95 .67 N/A N/A 43
2004 8.34 5.87 11 .96 1.23 N/A N/A 50
2005 8.70 5.55 11 .99 .57 N/A N/A 66
2006(a) 8.69 .45 11 .91+ .81+ N/A N/A 42
- -----------------------------------------------------------------------------------------------------------
GOVERNMENT FUND
- ---------------
2001 $10.45 8.98% $ 17 .66% 6.09% .81 5.94% 52%
2002 10.71 7.79 25 .78 5.39 .93 5.24 101
2003 10.59 3.18 24 .75 4.98 .90 4.83 83
2004 10.38 3.62 21 .76 4.81 .91 4.66 62
2005 10.10 2.54 20 .81 4.85 .96 4.70 52
2006(a) 9.56 (.37) 19 .78+ 5.17+ .92+ 5.03+ 10
- -----------------------------------------------------------------------------------------------------------
GROWTH FUND
- -----------
2001 $30.71 (13.36)% $241 .81% .19% N/A N/A 72%
2002 23.83 (22.24) 176 .82 .43 N/A N/A 69
2003 30.62 29.18 222 .83 .60 N/A N/A 74
2004 33.75 10.77 239 .83 .79 N/A N/A 76
2005 35.91 7.20 249 .85 .46 N/A N/A 93
2006(a) 34.38 2.48 247 .83+ .57+ N/A N/A 50
- -----------------------------------------------------------------------------------------------------------
Financial Highlights (continued)
FIRST INVESTORS LIFE SERIES FUND
- -----------------------------------------------------------------------------------------------------
P E R S H A R E D A T A
----------------------------------------------------------------------------------------
Less Distributions
Investment Operations from
------------------------------------- ----------------------
Net Asset Net Realized
Value, Net and Unrealized Total from Net Net
Beginning Investment Gain (Loss) on Investment Investment Realized Total
of Period Income Investments Operations Income Gain Distributions
- -----------------------------------------------------------------------------------------------------
HIGH YIELD FUND
- ---------------
2001 $ 9.44 $ .89 $(1.14) $ (.25) $1.06 -- $1.06
2002 8.13 .70 (.54) .16 .89 -- .89
2003 7.40 .63 1.16 1.79 .69 -- .69
2004 8.50 .62 .17 .79 .63 -- .63
2005 8.66 .65 (.61) .04 .63 -- .63
2006(a) 8.07 .31 (.12) .19 .67 -- .67
- ----------------------------------------------------------------------------------------------------
INTERNATIONAL FUND++
- ------------------
2001 $19.74 $ .12 $(2.95) $(2.83) $ .24 $1.26 $1.50
2002 15.41 .08 (2.91) (2.83) .08 -- .08
2003 12.50 .10 3.91 4.01 .13 -- .13
2004 16.38 .09 2.28 2.37 .20 -- .20
2005 18.55 .28 1.41 1.69 .24 -- .24
2006(a) 20.00 .21 1.36 1.57 .15 .64 .79
- ----------------------------------------------------------------------------------------------------
INVESTMENT GRADE FUND
- ---------------------
2001 11.24 $ .64 $ .21 $ .85 $ .73 -- $ .73
2002 11.36 .63 .22 .85 .64 -- .64
2003 11.57 .61 .34 .95 .65 -- .65
2004 11.87 .59 (.12) .47 .67 -- .67
2005 11.67 .56 (.42) .14 .67 -- .67
2006(a) 11.14 .26 (.36) (.10) .62 -- .62
- ----------------------------------------------------------------------------------------------------
TARGET MATURITY 2007 FUND
- -------------------------
2001 $13.12 $ .68 $ .31 $ .99 $ .68 $ -- $ .68
2002 13.43 .74 1.20 1.94 .69 -- .69
2003 14.68 .77 (.50) .27 .74 .14 .88
2004 14.07 .77 (.61) .16 .80 .38 1.18
2005 13.05 .72 (.65) .07 .74 .28 1.02
2006(a) 12.10 .37 (.26) .11 .74 .09 .83
- ----------------------------------------------------------------------------------------------------
TARGET MATURITY 2010 FUND
- -------------------------
2001 $13.55 $ .65 $ .03 $ .68 $ .64 $ -- $ .64
2002 13.59 .65 1.82 2.47 .65 -- .65
2003 15.41 .72 (.28) .44 .67 -- .67
2004 15.18 .72 (.13) .59 .73 .06 .79
2005 14.98 .70 (.50) .20 .70 .14 .84
2006(a) 14.34 .37 (.59) (.22) .72 .12 .84
- ----------------------------------------------------------------------------------------------------
TARGET MATURITY 2015 FUND
- -------------------------
2001 $11.85 $ .47 $ (.36) $ .11 $.39 -- $ .39
2002 11.57 .38 2.23 2.61 .47 -- .47
2003 13.71 .50 (.06) .44 .41 -- .41
2004 13.74 .53 .61 1.14 .51 -- .51
2005 14.37 .53 .08 .61 .52 -- .52
2006(a) 14.46 .28 (.88) (.60) .52 -- .52
- ----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
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 Net Assets Before Expenses
Assets** Waived or Assumed
Net Asset -------------------- ----------------------
Value, Net Assets Net Net Portfolio
End of Total End of Period Investment Investment Turnover
Period Return* (in millions) Expenses Income Expenses Income Rate
- -----------------------------------------------------------------------------------------------------------
HIGH YIELD FUND
- ---------------
2001 $ 8.13 (3.47)% $ 50 .83% 10.12% N/A N/A 32%
2002 7.40 2.25 50 .86 9.34 N/A N/A 13
2003 8.50 26.14 64 .85 8.34 N/A N/A 30
2004 8.66 9.94 70 .85 7.55 N/A N/A 33
2005 8.07 .41 69 .87 8.01 N/A N/A 35
2006(a) 7.59 2.35 66 .85+ 7.78+ N/A N/A 18
- -----------------------------------------------------------------------------------------------------------
INTERNATIONAL FUND++
- ------------------
2001 $15.41 (14.79)% $ 97 1.03% .73% N/A N/A 125%
2002 12.50 (18.43) 72 1.09 .63 N/A N/A 129
2003 16.38 32.52 90 1.08 .74 N/A N/A 119
2004 18.55 14.58 99 1.02 .94 N/A N/A 114
2005 20.00 9.22 105 .99 .80 N/A N/A 104
2006(a) 20.78 8.04 111 1.00+ 1.76+ N/A N/A 140
- -----------------------------------------------------------------------------------------------------------
INVESTMENT GRADE FUND
- ---------------------
2001 $11.36 7.86% $ 28 .68% 6.36% .83% 6.21% 13%
2002 11.57 7.86 34 .74 6.02 .89 5.87 14
2003 11.87 8.60 37 .73 5.29 .88 5.14 14
2004 11.67 4.04 38 .72 5.03 .87 4.88 16
2005 11.14 1.31 38 .75 4.91 .90 4.76 24
2006(a) 10.42 (.95) 36 .72+ 4.72+ .88+ 4.56+ 48
- -----------------------------------------------------------------------------------------------------------
TARGET MATURITY 2007 FUND
- -------------------------
2001 $13.43 7.76% $ 32 .66% 5.24% .81% 5.09% 3%
2002 14.68 15.09 33 .73 5.02 .88 4.87 1
2003 14.07 1.90 28 .72 4.89 .87 4.74 0
2004 13.05 1.12 23 .73 5.14 .88 4.99 0
2005 12.10 .65 21 .75 5.46 .90 5.31 0
2006(a) 11.38 .90 19 .77+ 5.78+ .92+ 5.63+ 0
- -----------------------------------------------------------------------------------------------------------
TARGET MATURITY 2010 FUND
- -------------------------
2001 $13.59 5.15% $ 14 .67% 5.16% .82% 5.01% 2%
2002 15.41 18.88 18 .78 4.82 .93 4.67 3
2003 15.18 2.84 17 .74 4.54 .89 4.39 1
2004 14.98 3.96 17 .75 4.70 .90 4.55 4
2005 14.34 1.46 16 .76 4.74 .91 4.59 3
2006(a) 13.28 (1.54) 14 .77+ 5.09+ .92+ 4.94+ 0
- -----------------------------------------------------------------------------------------------------------
TARGET MATURITY 2015 FUND
- -------------------------
2001 $11.57 .85% $ 4 .67% 5.21% .82% 5.06% 31%
2002 13.71 23.36 9 .88 4.70 1.03 4.55 1
2003 13.74 3.24 12 .80 4.27 .95 4.12 3
2004 14.37 8.47 17 .75 4.34 .90 4.19 2
2005 14.46 4.39 22 .73 4.14 .88 3.99 0
2006(a) 13.34 (4.25) 22 .71+ 4.41+ .86+ 4.26+ 0
- -----------------------------------------------------------------------------------------------------------
Financial Highlights (continued)
FIRST INVESTORS LIFE SERIES FUND
- -----------------------------------------------------------------------------------------------------
P E R S H A R E D A T A
----------------------------------------------------------------------------------------
Less Distributions
Investment Operations from
------------------------------------- ----------------------
Net Asset Net Realized
Value, Net and Unrealized Total from Net Net
Beginning Investment Gain (Loss) on Investment Investment Realized Total
of Period Income Investments Operations Income Gain Distributions
- -----------------------------------------------------------------------------------------------------
VALUE FUND+++
- ----------
2001 $16.39 $ .27 $(3.53) $(3.26) $ .30 $ .12 $ .42
2002 12.71 .32 (3.02) (2.70) .27 -- .27
2003 9.74 .22 2.35 2.57 .32 -- .32
2004 11.99 .23 1.71 1.94 .22 -- .22
2005 13.71 .25 .57 .82 .22 -- .22
2006(a) 14.31 .13 .95 1.08 .26 -- .26
- -----------------------------------------------------------------------------------------------------
SPECIAL BOND FUND
- -----------------
2001 $ 9.47 $ .90 $ (.90) $ -- $ .94 -- $ .94
2002 8.53 .80 (.62) .18 .81 -- .81
2003 7.90 .76 1.41 2.17 .78 -- .78
2004 9.29 .73 .20 .93 .72 -- .72
2005 9.50 .73 (.58) .15 .70 -- .70
2006(a) 8.95 .29 (.18) .11 .23 -- .23
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
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 Net Assets Before Expenses
Assets** Waived or Assumed
Net Asset -------------------- ----------------------
Value, Net Assets Net Net Portfolio
End of Total End of Period Investment Investment Turnover
Period Return* (in millions) Expenses Income Expenses Income Rate
- -----------------------------------------------------------------------------------------------------------
VALUE FUND+++
- ----------
2001 $12.71 (20.29)% $ 66 .82% 1.88% N/A N/A 50%
2002 9.74 (21.60) 45 .97 2.72 N/A N/A 71
2003 11.99 27.59 58 .83 2.19 N/A N/A 33
2004 13.71 16.39 69 .84 1.87 N/A N/A 20
2005 14.31 6.09 79 .87 1.89 N/A N/A 21
2006(a) 15.13 7.57 85 .83+ 1.78+ N/A N/A 8
- -----------------------------------------------------------------------------------------------------------
SPECIAL BOND FUND
- -----------------
2001 $ 8.53 (.01)% $ 22 .90% 9.80% N/A N/A 35%
2002 7.90 2.20 19 .93 9.77 N/A N/A 18
2003 9.29 28.31 22 .93 8.84 N/A N/A 23
2004 9.50 10.38 21 .93 7.79 N/A N/A 31
2005 8.95 1.69 19 .97 8.05 N/A N/A 28
2006(a) 8.83 1.26 17 .96+ 6.59+ N/A N/A 17
- -----------------------------------------------------------------------------------------------------------
* The effect of fees and charges incurred at the separate account level
are not reflected in these performance figures.
** Net of expenses waived or assumed by the investment adviser (Note 4).
+ Annualized
++ Prior to June 26, 2006, known as International Securities Fund.
+++ Prior to December 31, 2002, known as Utilities Income Fund.
(a) For the period January 1, 2006 to June 30, 2006.
See notes to financial statements.
Report of Independent Registered Public
Accounting Firm
To the Shareholders and Trustees of
First Investors Life Series Funds
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the fourteen Funds comprising
First Investors Life Series Funds, as of June 30, 2006, the related
statements of operations, the statements of changes in net assets, and the
financial highlights for each of the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Life Series Funds' 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 the standards of the Public
Company Accounting Oversight Board (United States). 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. The Funds are not required to have, nor were we
engaged to perform, an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Funds' internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2006, 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 fourteen Funds comprising First Investors Life Series Funds, as
of June 30, 2006, and the results of their operations, changes in their net
assets, and their financial highlights for the periods presented, in
conformity with accounting principles generally accepted in the United
States of America.
Tait, Weller & Baker LLP
Philadelphia, Pennsylvania
August 2, 2006
FIRST INVESTORS LIFE SERIES FUNDS
Trustees
- -----------------------
Charles R. Barton, III
Stefan L. Geiringer
Robert M. Grohol
Kathryn S. Head
Arthur M. Scutro, Jr.
James M. Srygley
John T. Sullivan
Robert F. Wentworth
Officers
- -----------------------
Kathryn S. Head
President
Larry R. Lavoie
Chief Compliance Officer
Joseph I. Benedek
Treasurer
Mark S. Spencer
Assistant Treasurer
Carol Lerner Brown
Assistant Secretary
FIRST INVESTORS LIFE SERIES FUNDS
Shareholder Information
- -----------------------
Investment Adviser
First Investors Management Company, Inc.
95 Wall Street
New York, NY 10005
Subadviser
(Focused Equity and Growth Funds only)
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Subadviser
(Discovery Fund only)
Paradigm Capital Management, Inc.
Nine Elk Street
Albany, NY 12207
Subadviser
(International Fund only)
Vontobel Asset Management, Inc.
450 Park Avenue
New York, NY 10022
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Custodian
(International Fund only)
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Administrative Data Management Corp.
Raritan Plaza I - 8th Floor
Edison, NJ 08837-3620
Independent Registered
Public Accounting Firm
Tait, Weller & Baker LLP
1818 Market Street
Philadelphia, PA 19103
Legal Counsel
Kirkpatrick & Lockhart
Nicholson Graham LLP
1601 K Street, N.W.
Washington, DC 20006
FIRST INVESTORS LIFE SERIES FUNDS
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 Federal Deposit Insurance Corporation (FDIC) or any other government
agency.
It is the Trust's practice to mail only one copy of its annual and
semi-annual reports to all family members who reside in the same household.
Additional copies of the reports will be mailed if requested by any
shareholder in writing or by calling 800-423-4026. The Trust 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 Trust's prospectus.
The Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request in
writing or by calling 800-423-4026.
A description of the policies and procedures that the Funds use to vote
proxies relating to a portfolio's securities is available, without charge,
upon request by calling toll free 800-423-4026 or can be viewed online or
downloaded from the EDGAR database on the Securities and Exchange
Commission's ("SEC") internet website at http://www.sec.gov. In addition,
information regarding how the Funds voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30, is
available, without charge, upon request in writing or by calling
800-423-4026 and on the SEC's internet website at http://www.sec.gov.
The Funds file their complete schedule of portfolio holdings with the SEC on
Form N-Q, for the first and third quarters of each fiscal year. The Fund's
Form N-Q is available on the SEC's website at http://www.sec.gov; and may
also be reviewed and copied at the SEC's Public Reference Room in Washington
D.C. Information on the operation of the Public Reference Room may be
obtained by calling 800-SEC-0330. The schedule of portfolio holdings is
available, without charge, upon request in writing or by calling
800-423-4026.
NOTES
Item 2. Code of Ethics
Not applicable
Item 3. Audit Committee Financial Expert
Not applicable
Item 4. Principal Accountant Fees and Services
Not applicable
Item 5. Audit Committee of Listed Registrants
Not applicable
Item 6. Schedule of Investments
Schedule is included as part of the report to
stockholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies & Procedures for
Closed-End Management Investment Companies
Not applicable
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Companies and Affiliated Purchasers
Not applicable
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedure by which shareholders
may recommend nominees to the Registrant's Board of Trustees.
Item 11. Controls and Procedures
(a) The Registrant's Principal Executive Officer and Principal
Financial Officer have concluded that the Registrant's disclosure controls
and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940, as amended) are effective, based on their evaluation of these
disclosure controls and procedures as of a date within 90 days of the
filing date of this report.
(b) There were no changes in the Registrant's internal controls over
financial reporting that occurred during the second fiscal quarter of the
period covered by this report that has materially affected, or is reasonably
likely to materially affect, the Registrant's internal control over
financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics - Not applicable
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 - Filed herewith
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 - Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
First Investors Life Series Funds
(Registrant)
By /S/ KATHRYN S. HEAD
Kathryn S. Head
President and Principal Executive Officer
Date: September 7, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
First Investors Life Series Funds
(Registrant)
By /S/ JOSEPH I. BENEDEK
Joseph I. Benedek
Treasurer and Principal Financial Officer
Date: September 7, 2006