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 NUMBERS 811-3967
FIRST INVESTORS INCOME FUNDS
(Exact name of registrant as specified in charter)
110 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: SEPTEMBER 30, 2007
DATE OF REPORTING PERIOD: SEPTEMBER 30, 2007
Item 1. Reports to Stockholders
The Annual Report to Stockholders follows
FOREWORD
This report is for the information of the shareholders of the Funds. It is the Funds’ practice to mail only one copy of their 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 1-800-423-4026. The Funds will ensure that separate reports are sent to any shareholder who subsequently changes his or her mailing address.
The views expressed in the portfolio manager letters reflect those views of the portfolio managers only through the end of the period covered. Any such views are subject to change at any time based upon market or other conditions and we disclaim any responsibility to update such views. These views may not be relied on as investment advice.
You may obtain a free prospectus for any of the Funds by contacting your representative, calling 1-800-423-4026, writing to us at the following address: First Investors Corporation, 110 Wall Street, New York, NY 10005, or by visiting our website at www.firstinvestors.com. You should consider the investment objectives, risks, charges and expenses of a Fund carefully before investing. The prospectus contains this and other information about the Fund, and should be read carefully before investing.
An investment in a Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the Cash Management Fund seeks to preserve a net asset value at $1.00 per share, it is possible to lose money by investing in it, just as it is possible to lose money by investing in any of the other Funds. Past performance is no guarantee of future results.
A Statement of Additional Information (“SAI”) for any of the Funds may also be obtained, without charge, upon request by calling 1-800-423-4026, writing to us at our address or by visiting our website listed above. The SAI contains more detailed information about the Fund, including information about its Trustees.
Portfolio Managers’ Letter
TOTAL RETURN FUND
Dear Investor:
This is the annual report for the First Investors Total Return Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 11.7% for Class A shares and 10.9% for Class B shares, including dividends of 29.8 cents per share on Class A shares and 18.9 cents per share on Class B shares, and capital gains distributions of 10.2 cents per share for both Class A and Class B shares.
The Fund’s strategy remains to allocate its portfolio among stocks, bonds and cash equivalents, with at least 50% in stocks and at least 25% in bonds. Given the solid rise in equity prices during the fiscal year, the Fund benefited from its 59.9% average allocation to equity investments. The Fund also held, on average, a 35.3% allocation to fixed income securities and a 4.8% allocation to cash equivalents.
The performance of the equity portion of the portfolio was largely the result of the Fund’s investments in the industrials, technology, materials, energy and consumer staples sectors. Overall stock selection benefited most notably in the industrials, materials and consumer staples sectors.
Notable individual performers within the industrials sector included Precision Castparts, which benefited from increased demand for complex metal components and castings used in aerospace and industrial machines, 3M, the large-cap maker of “Scotch Tape” as well as other industrial, consumer and technology products, and Honeywell International, which benefited from increased global demand for its aerospace, automotive, power and control technology products. Within the materials sector, shares of specialty chemical producer Celanese benefited from increased worldwide demand for chemical feedstocks ethylene and propylene. Within the consumer staples sector, shares of small-cap personal products maker Chattem were strong as their acquisition of well known brand products from Johnson & Johnson, such as Kaopectate, ACT, Cortizone-10 and Balmex, added more in earnings than was originally anticipated.
The Fund continued to benefit from strong merger and acquisition activity among its holdings, as both strategic acquirers and private equity firms remained very active. During the fiscal year, eleven of our holdings received merger offers, which are either closed or still pending. The most notable contributors were the takeovers of First Data and Dollar General by the investment group KKR, Biomet by an investment consortium led by the Blackstone Group, Paxar by Avery Dennison and Triad Hospitals by Community Health Systems. The Fund has three deals waiting for completion as of the reporting date: the purchase of Clear Channel Communications by Bain Capital, the purchase of regional bank USB Holdings by KeyCorp and the pending merger of TransOcean and Global Santa Fe.
1 |
Portfolio Managers’ Letter (continued)
TOTAL RETURN FUND
The Fund maintained a diverse allocation strategy, which at the end of the reporting period was 57% large cap, 16% mid cap and 27% small cap, according to Lipper’s market capitalization ranges. While the large- and mid-cap components delivered satisfactory results, performance in the small-cap area was weaker as stock selection detracted particularly during the more volatile second half of the year.
During the review period, the Fund maintained a fixed income allocation of 35.3% of total assets, in addition to a 4.8% cash position. The fixed income investments were primarily allocated among high grade corporate bonds, U.S. government notes and mortgage-backed securities. The Fund had no investments in subprime mortgage-backed securities.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Edwin D. Miska
Portfolio Manager and
Director of Equities, First Investors Management Company, Inc.
Clark D. Wagner
Portfolio Manager and
Director of Fixed Income, First Investors Management Company, Inc.
November 1, 2007
2 |
Understanding Your Fund’s Expenses
FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
As a mutual fund shareholder, you incur two types of costs: (1) transaction costs, including a sales charge (load) on purchase payments (on Class A shares only), a contingent deferred sales charge on redemptions (on Class B shares only); and (2) ongoing costs, including advisory fees; distribution and service fees (12b-1); 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, April 1, 2007, and held for the entire six-month period ended September 30, 2007. 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 the 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 for Class A and Class B shares, 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, such as front-end or contingent deferred sales charges (loads). Therefore, the hypothetical expenses 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.
3 |
Fund Expenses
TOTAL RETURN 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 | |
(4/1/07) | (9/30/07) | (4/1/07-9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,037.76 | $6.69 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.50 | $6.63 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,034.67 | $10.25 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.99 | $10.15 |
* Expenses are equal to the annualized expense ratio of 1.31% for Class A shares and 2.01% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period).
Portfolio Composition
TOP TEN SECTORS
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
4
Cumulative Performance Information
TOTAL RETURN FUND
Comparison of change in value of $10,000 investment in the First Investors Total Return
Fund (Class A shares), the Merrill Lynch U.S. Corporate & Government Master Index and the
Standard & Poor's 500 Index.
The graph compares a $10,000 investment in the First Investors Total Return Fund (Class A shares) beginning 12/31/97 with theoretical investments in the Merrill Lynch Corporate & Government Master Index and the Standard & Poor’s 500 Index (the “Indices”). The Merrill Lynch U.S. Corporate & Government Master Index is unmanaged and tracks the performance of U.S. dollar-denominated investment grade U.S. Government and corporate public debt issued in the U.S. domestic bond market, excluding collateralized products such as mortgage pass-through and assets backed securities. Qualifying bonds have at least one year to maturity, a fixed coupon schedule and minimum amount outstanding of $1 billion for U.S. Treasuries and $150 million for all other securities. The Standard & Poor’s 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad dome stic economy through changes in the aggregate market value of such stocks, which represent all major industries. It is not possible to invest directly in these Indices. In addition, the Indices do not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 9.01% and 4.37%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 9.27% and 4.40%, respectively. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Merrill Lynch U.S. Corporate & Government Master Index figures are from Merrill Lynch & Co., Standard & Poor’s 500 Index figures are from Standard & Poor's and all other figures are from First Investors Management Company, Inc.
5
Portfolio of Investments
TOTAL RETURN FUND
September 30, 2007
Shares | Security | Value | ||
COMMON STOCKS—58.8% | ||||
Consumer Discretionary—9.7% | ||||
81,800 | bebe stores, inc. | $ | 1,196,734 | |
62,100 | Brown Shoe Company, Inc. | 1,204,740 | ||
32,100 | * | Carter’s, Inc. | 640,395 | |
51,900 | CBS Corporation – Class “B” | 1,634,850 | ||
60,900 | * | CEC Entertainment, Inc. | 1,636,383 | |
40,000 | Cinemark Holdings, Inc. | 742,400 | ||
49,600 | Clear Channel Communications, Inc. | 1,857,024 | ||
26,100 | * | Eddie Bauer Holdings, Inc. | 224,460 | |
83,600 | Foot Locker, Inc. | 1,281,588 | ||
13,100 | Genuine Parts Company | 655,000 | ||
49,700 | H&R Block, Inc. | 1,052,646 | ||
62,200 | Home Depot, Inc. | 2,017,768 | ||
14,300 | J.C. Penney Company, Inc. | 906,191 | ||
40,000 | Journal Register Company | 96,000 | ||
30,200 | Kenneth Cole Productions, Inc. – Class “A” | 584,974 | ||
40,200 | Leggett & Platt, Inc. | 770,232 | ||
55,500 | * | Lincoln Educational Services Corporation | 723,720 | |
56,400 | McDonald’s Corporation | 3,072,108 | ||
102,700 | * | Morgans Hotel Group Company | 2,233,725 | |
57,700 | Movado Group, Inc. | 1,841,784 | ||
65,200 | Newell Rubbermaid, Inc. | 1,879,064 | ||
22,400 | Orient-Express Hotels, Ltd. | 1,148,448 | ||
12,900 | Polo Ralph Lauren Corporation – Class “A” | 1,002,975 | ||
71,100 | * | Quiksilver, Inc. | 1,016,730 | |
66,300 | Ruby Tuesday, Inc. | 1,215,942 | ||
17,500 | Sherwin-Williams Company | 1,149,925 | ||
28,500 | * | Skechers U.S.A., Inc. – Class “A” | 629,850 | |
53,900 | Staples, Inc. | 1,158,311 | ||
26,800 | * | Steiner Leisure, Ltd. | 1,163,120 | |
29,550 | * | Viacom, Inc. – Class “B” | 1,151,564 | |
79,200 | Westwood One, Inc. | 217,800 | ||
56,460 | Wyndham Worldwide Corporation | 1,849,630 | ||
37,956,081 | ||||
Consumer Staples—4.3% | ||||
41,200 | Altria Group, Inc. | 2,864,636 | ||
34,200 | Avon Products, Inc. | 1,283,526 | ||
15,500 | * | Chattem, Inc. | 1,093,060 | |
18,100 | Coca-Cola Company | 1,040,207 | ||
58,200 | CVS Caremark Corporation | 2,306,466 | ||
6 |
Shares | Security | Value | ||
Consumer Staples (continued) | ||||
28,549 | Kraft Foods, Inc. – Class “A” | $ | 985,226 | |
123,200 | Nu Skin Enterprises, Inc. – Class “A” | 1,990,912 | ||
13,400 | PepsiCo, Inc. | 981,684 | ||
20,800 | Procter & Gamble Company | 1,463,072 | ||
22,824 | Tootsie Roll Industries, Inc. | 605,521 | ||
39,600 | Wal-Mart Stores, Inc. | 1,728,540 | ||
8,475 | WD-40 Company | 289,337 | ||
16,632,187 | ||||
Energy—5.4% | ||||
15,400 | Anadarko Petroleum Corporation | 827,750 | ||
65,900 | * | Cal Dive International, Inc. | 988,500 | |
12,950 | Chesapeake Energy Corporation | 456,617 | ||
23,200 | ConocoPhillips | 2,036,264 | ||
29,900 | ExxonMobil Corporation | 2,767,544 | ||
1,897 | Hugoton Royalty Trust | 44,845 | ||
8,386 | Marathon Oil Corporation | 478,170 | ||
41,400 | Noble Corporation | 2,030,670 | ||
19,900 | * | North American Energy Partners, Inc. | 343,474 | |
32,700 | Sasol, Ltd. (ADR) | 1,405,773 | ||
38,800 | Suncor Energy, Inc. | 3,678,628 | ||
18,200 | * | Swift Energy Company | 744,744 | |
23,400 | * | Transocean, Inc. | 2,645,370 | |
20,200 | World Fuel Services Corporation | 824,362 | ||
31,066 | XTO Energy, Inc. | 1,921,121 | ||
21,193,832 | ||||
Financials—8.8% | ||||
13,600 | American Express Company | 807,432 | ||
28,900 | American International Group, Inc. | 1,955,085 | ||
2,580 | Ameriprise Financial, Inc. | 162,824 | ||
34,100 | Astoria Financial Corporation | 904,673 | ||
39,200 | Bank of America Corporation | 1,970,584 | ||
40,000 | Brookline Bancorp, Inc. | 463,600 | ||
17,092 | Capital One Financial Corporation | 1,135,421 | ||
35,300 | Citigroup, Inc. | 1,647,451 | ||
52,300 | Colonial BancGroup, Inc. | 1,130,726 | ||
26,550 | * | Discover Financial Services | 552,240 | |
64,350 | * | First Mercury Financial Corporation | 1,384,168 | |
13,024 | Hartford Financial Services Group, Inc. | 1,205,371 | ||
7 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2007
Shares | Security | Value | ||
Financials (continued) | ||||
47,200 | JPMorgan Chase & Company | $ | 2,162,704 | |
16,800 | Lehman Brothers Holdings, Inc. | 1,037,064 | ||
16,900 | Merrill Lynch & Company, Inc. | 1,204,632 | ||
23,900 | Morgan Stanley | 1,505,700 | ||
53,500 | New York Community Bancorp, Inc. | 1,019,175 | ||
71,100 | NewAlliance Bancshares, Inc. | 1,043,748 | ||
13,100 | Plum Creek Timber Company, Inc. (REIT) | 586,356 | ||
34,800 | South Financial Group, Inc. | 791,352 | ||
58,775 | Sovereign Bancorp, Inc. | 1,001,526 | ||
67,700 | Sunstone Hotel Investors, Inc. | 1,735,828 | ||
19,600 | SunTrust Banks, Inc. | 1,483,132 | ||
52,500 | U.S. Bancorp | 1,707,825 | ||
53,845 | U.S.B. Holding Company, Inc. | 1,250,819 | ||
26,000 | Wachovia Corporation | 1,303,900 | ||
34,300 | Washington Mutual, Inc. | 1,211,133 | ||
16,300 | Webster Financial Corporation | 686,556 | ||
36,500 | Wells Fargo & Company | 1,300,130 | ||
34,351,155 | ||||
Health Care—5.6% | ||||
42,400 | Abbott Laboratories | 2,273,488 | ||
18,500 | Aetna, Inc. | 1,003,995 | ||
12,300 | * | Amgen, Inc. | 695,811 | |
5,800 | Baxter International, Inc. | 326,424 | ||
12,675 | * | Covidien, Ltd. | 526,013 | |
5,200 | * | Genentech, Inc. | 405,704 | |
45,900 | Johnson & Johnson | 3,015,630 | ||
13,400 | * | Laboratory Corporation of America Holdings | 1,048,282 | |
19,400 | Medtronic, Inc. | 1,094,354 | ||
21,200 | Merck & Company, Inc. | 1,095,828 | ||
112,280 | Pfizer, Inc. | 2,743,000 | ||
32,600 | Sanofi-Aventis (ADR) | 1,382,892 | ||
32,900 | * | St. Jude Medical, Inc. | 1,449,903 | |
25,600 | * | Thermo Fisher Scientific, Inc. | 1,477,632 | |
23,000 | * | TriZetto Group, Inc. | 402,730 | |
14,350 | UnitedHealth Group, Inc. | 694,970 | ||
46,700 | Wyeth | 2,080,485 | ||
21,717,141 | ||||
8 |
Shares | Security | Value | ||
Industrials—11.1% | ||||
40,200 | 3M Company | $ | 3,761,916 | |
27,000 | * | AAR Corporation | 819,180 | |
22,500 | Alexander & Baldwin, Inc. | 1,127,925 | ||
95,704 | * | Altra Holdings, Inc. | 1,595,386 | |
31,700 | * | Armstrong World Industries, Inc. | 1,286,703 | |
13,600 | Avery Dennison Corporation | 775,472 | ||
62,000 | Barnes Group, Inc. | 1,979,040 | ||
25,450 | * | BE Aerospace, Inc. | 1,056,938 | |
21,600 | Burlington Northern Santa Fe Corporation | 1,753,272 | ||
26,000 | Caterpillar, Inc. | 2,039,180 | ||
36,500 | * | Gardner Denver, Inc. | 1,423,500 | |
66,600 | General Electric Company | 2,757,240 | ||
10,500 | * | Genlyte Group, Inc. | 674,730 | |
38,800 | Harsco Corporation | 2,299,676 | ||
51,800 | Honeywell International, Inc. | 3,080,546 | ||
9,000 | Hubbell, Inc. – Class “B” | 514,080 | ||
31,900 | Illinois Tool Works, Inc. | 1,902,516 | ||
74,100 | Knoll, Inc. | 1,314,534 | ||
14,300 | Lockheed Martin Corporation | 1,551,407 | ||
25,700 | * | Mobile Mini, Inc. | 620,912 | |
12,800 | * | Navigant Consulting, Inc. | 162,048 | |
23,600 | Northrop Grumman Corporation | 1,840,800 | ||
41,000 | * | PGT, Inc. | 325,130 | |
27,000 | * | Pinnacle Airlines Corporation | 432,540 | |
14,100 | Precision Castparts Corporation | 2,086,518 | ||
13,000 | Steelcase, Inc. – Class “A” | 233,740 | ||
64,500 | TAL International Group, Inc. | 1,617,015 | ||
12,675 | Tyco International, Ltd. | 562,010 | ||
44,900 | United Technologies Corporation | 3,613,552 | ||
43,207,506 | ||||
Information Technology—9.2% | ||||
7,900 | * | CACI International, Inc. – Class “A” | 403,611 | |
105,600 | * | Cisco Systems, Inc. | 3,496,416 | |
38,800 | * | Electronics for Imaging, Inc. | 1,042,168 | |
96,900 | * | EMC Corporation | 2,015,520 | |
79,400 | * | Entrust, Inc. | 169,122 | |
38,600 | Harris Corporation | 2,230,694 | ||
42,900 | Hewlett-Packard Company | 2,135,991 | ||
48,500 | Intel Corporation | 1,254,210 | ||
30,800 | International Business Machines Corporation | 3,628,240 | ||
9 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2007
Shares | Security | Value | ||
Information Technology (continued) | ||||
92,900 | Microsoft Corporation | $ | 2,736,834 | |
72,100 | Motorola, Inc. | 1,336,013 | ||
50,500 | * | NCI, Inc. – Class “A” | 955,460 | |
52,200 | Nokia Corporation – Class “A” (ADR) | 1,979,946 | ||
89,400 | * | Parametric Technology Corporation | 1,557,348 | |
35,600 | QUALCOMM, Inc. | 1,504,456 | ||
161,500 | * | Silicon Image, Inc. | 831,725 | |
75,800 | * | SMART Modular Technologies (WWH), Inc. | 541,970 | |
52,500 | * | Symantec Corporation | 1,017,450 | |
106,500 | * | TIBCO Software, Inc. | 787,035 | |
12,675 | Tyco Electronics, Ltd. | 449,075 | ||
13,500 | * | ValueClick, Inc. | 303,210 | |
36,000 | * | Varian Semiconductor Equipment Associates, Inc. | 1,926,720 | |
19,300 | * | VeriSign, Inc. | 651,182 | |
31,476 | Western Union Company | 660,052 | ||
22,000 | * | Wright Express Corporation | 802,780 | |
52,300 | Xilinx, Inc. | 1,367,122 | ||
35,784,350 | ||||
Materials—3.5% | ||||
7,800 | Ashland, Inc. | 469,638 | ||
52,600 | Celanese Corporation – Series “A” | 2,050,348 | ||
21,900 | Dow Chemical Company | 943,014 | ||
20,900 | Freeport-McMoRan Copper & Gold, Inc. | 2,192,201 | ||
32,500 | Lubrizol Corporation | 2,114,450 | ||
14,400 | PPG Industries, Inc. | 1,087,920 | ||
16,800 | Praxair, Inc. | 1,407,168 | ||
52,200 | RPM International, Inc. | 1,250,190 | ||
13,000 | Scotts Miracle-Gro Company – Class “A” | 555,750 | ||
30,250 | Temple-Inland, Inc. | 1,592,057 | ||
13,662,736 | ||||
Telecommunication Services—.7% | ||||
43,200 | AT&T, Inc. | 1,827,792 | ||
19,600 | Verizon Communications, Inc. | 867,888 | ||
2,695,680 | ||||
10 |
Shares or | ||||
Principal | ||||
Amount | Security | Value | ||
Utilities—.5% | ||||
30,200 | Atmos Energy Corporation | $ | 855,264 | |
19,500 | Consolidated Edison, Inc. | 902,850 | ||
1,758,114 | ||||
Total Value of Common Stocks (cost $164,509,642) | 228,958,782 | |||
CORPORATE BONDS—12.4% | ||||
Aerospace/Defense—.3% | ||||
$ 500M | Boeing Co., 7.25%, 2025 | 574,967 | ||
500M | Precision Castparts Corp., 5.6%, 2013 | 510,800 | ||
1,085,767 | ||||
Automotive—.1% | ||||
500M | Daimler Chrysler NA Holdings Corp., 5.75%, 2009 | 505,422 | ||
Chemicals—.2% | ||||
900M | Praxair, Inc., 5.375%, 2016 | 884,757 | ||
Consumer Non-Durables—.2% | ||||
700M | Newell Rubbermaid, Inc., 6.75%, 2012 | 726,974 | ||
Energy—.6% | ||||
500M | ConocoPhillips, 5.625%, 2016 | 498,938 | ||
500M | Kinder Morgan Finance Co., 5.35%, 2011 | 489,133 | ||
1,000M | Northern Border Pipeline Co., 7.1%, 2011 | 1,051,475 | ||
419M | Pacific Energy Partners LP, 7.125%, 2014 | 430,076 | ||
2,469,622 | ||||
Financial Services—1.9% | ||||
950M | Citigroup, Inc., 6%, 2033 | 928,535 | ||
1,000M | Endurance Specialty Holdings, Ltd., 7%, 2034 | 930,209 | ||
310M | GATX Financial Corp., 5.5%, 2012 | 309,051 | ||
1,000M | Goldman Sachs Group, Inc., 6.45%, 2036 | 978,871 | ||
500M | Hibernia Corp., 5.35%, 2014 | 481,287 | ||
760M | Independence Community Bank Corp., 4.9%, 2010 | 741,737 | ||
500M | JPMorgan Chase & Co., 5.25%, 2015 | 484,180 | ||
765M | Marshall & Ilsley Bank, 5.2%, 2017 | 731,200 | ||
500M | MetLife, Inc., 6.4%, 2036 | 476,947 | ||
1,000M | Nationsbank Corp., 7.8%, 2016 | 1,122,350 | ||
335M | Washington Mutual Bank, 5.95%, 2013 | 331,086 | ||
7,515,453 | ||||
11 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2007
Principal | ||||
Amount | Security | Value | ||
Financials—1.3% | ||||
$ 500M | Caterpillar Financial Services Corp., 5.85%, 2017 | $ | 505,495 | |
927M | Ford Motor Credit Co., 9.75%, 2010 | 946,309 | ||
500M | General Electric Capital Corp., 5.625%, 2017 | 500,806 | ||
1,000M | General Motors Acceptance Corp., 7.75%, 2010 | 992,376 | ||
625M | Health Care Property Investors, Inc., 6%, 2017 | 597,924 | ||
1,000M | International Lease Finance Corp., 5.625%, 2013 | 992,720 | ||
500M | Siemens Financieringsmaatschappij NV, 5.75%, 2016 † | 505,108 | ||
5,040,738 | ||||
Food/Beverage/Tobacco—1.0% | ||||
1,000M | Altria Group, Inc., 7%, 2013 | 1,088,079 | ||
500M | Anheuser-Busch Cos., Inc., 4.375%, 2013 | 476,236 | ||
200M | Bottling Group, LLC , 5%, 2013 | 196,701 | ||
1,170M | Bunge Limited Finance Corp., 5.875%, 2013 | 1,160,961 | ||
1,000M | Coca-Cola Enterprises, Inc., 7.125%, 2017 | 1,111,160 | ||
4,033,137 | ||||
Food/Drug—.2% | ||||
700M | Kroger Co., 6.75%, 2012 | 736,817 | ||
Gaming/Leisure—.4% | ||||
700M | International Speedway Corp., 4.2%, 2009 | 692,084 | ||
750M | MGM Mirage, Inc., 8.5%, 2010 | 787,500 | ||
1,479,584 | ||||
Health Care—.4% | ||||
500M | Abbott Laboratories, 5.875%, 2016 | 505,347 | ||
336M | Baxter International, Inc., 5.9%, 2016 | 339,339 | ||
800M | Wyeth, 6.95%, 2011 | 839,082 | ||
1,683,768 | ||||
Information Technology—.3% | ||||
1,000M | International Business Machines Corp., 7%, 2025 | 1,105,244 | ||
Manufacturing—.5% | ||||
1,000M | Caterpillar, Inc., 6.05%, 2036 | 1,004,680 | ||
1,000M | Crane Co., 6.55%, 2036 | 985,207 | ||
1,989,887 | ||||
12 |
Principal | ||||
Amount | Security | Value | ||
Media-Broadcasting—.4% | ||||
$ 750M | Comcast Cable Communications, Inc., 7.125%, 2013 | $ | 799,280 | |
800M | Cox Communications, Inc., 5.5%, 2015 | 773,166 | ||
1,572,446 | ||||
Media-Diversified—1.1% | ||||
AOL Time Warner, Inc.: | ||||
750M | 6.75%, 2011 | 780,154 | ||
1,000M | 6.875%, 2012 | 1,050,308 | ||
500M | News America, Inc., 5.3%, 2014 | 487,149 | ||
705M | Viacom, Inc., 8.625%, 2012 | 788,514 | ||
1,000M | Walt Disney Co., 5.7%, 2011 | 1,015,133 | ||
4,121,258 | ||||
Metals/Mining—.4% | ||||
1,000M | Alcoa, Inc., 6%, 2012 | 1,020,853 | ||
500M | Vale Overseas, Ltd., 6.875%, 2036 | 517,633 | ||
1,538,486 | ||||
Real Estate Investment Trusts—.2% | ||||
700M | Mack-Cali Realty LP, 7.75%, 2011 | 750,103 | ||
Retail-General Merchandise—.4% | ||||
500M | Lowe’s Companies, Inc., 5.6%, 2012 | 505,443 | ||
1,200M | Wal-Mart Stores, Inc., 5.8%, 2018 | 1,210,639 | ||
1,716,082 | ||||
Telecommunications—.8% | ||||
800M | GTE Corp., 6.84%, 2018 | 854,853 | ||
600M | SBC Communications, Inc., 6.25%, 2011 | 617,888 | ||
600M | Verizon New York, Inc., 6.875%, 2012 | 632,652 | ||
1,000M | Vodafone AirTouch PLC, 7.75%, 2010 | 1,056,392 | ||
3,161,785 | ||||
Transportation—.6% | ||||
500M | Burlington Northern Santa Fe Corp., 4.3%, 2013 | 472,096 | ||
500M | Canadian Pacific Railroad Co., 5.95%, 2037 | 463,212 | ||
335M | FedEx Corp., 5.5%, 2009 | 338,895 | ||
1,000M | Union Pacific Corp., 7.375%, 2009 | 1,044,965 | ||
2,319,168 | ||||
13 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2007
Principal | ||||
Amount | Security | Value | ||
Utilities—.8% | ||||
$ 1,000M | Carolina Power & Light, Inc., 5.15%, 2015 | $ | 970,738 | |
350M | Entergy Gulf States, Inc., 5.25%, 2015 | 330,410 | ||
1,000M | Great River Energy Co., 5.829%, 2017 † | 1,024,152 | ||
900M | Public Service Electric & Gas Co., 6.75%, 2016 | 964,184 | ||
3,289,484 | ||||
Waste Management—.3% | ||||
1,000M | Waste Management, Inc., 6.875%, 2009 | 1,034,003 | ||
Total Value of Corporate Bonds (cost $49,041,842) | 48,759,985 | |||
MORTGAGE-BACKED CERTIFICATES—10.6% | ||||
Fannie Mae—10.0% | ||||
12,223M | 5.5%, 4/1/2033—3/1/2037 | 11,996,150 | ||
18,916M | 6%, 5/1/2036—8/1/2037 | 18,950,269 | ||
5,722M | 6.5%, 11/1/2033—7/1/2037 | 5,834,370 | ||
1,881M | 7%, 3/1/2032—8/1/2032 | 1,975,191 | ||
38,755,980 | ||||
Freddie Mac—.6% | ||||
2,295M | 6%, 9/1/2032—10/1/2035 | 2,302,690 | ||
Total Value of Mortgage-Backed Certificates (cost $41,214,243) | 41,058,670 | |||
U.S. GOVERNMENT AGENCY OBLIGATIONS—9.2% | ||||
Fannie Mae: | ||||
2,000M | 6%, 2012 | 2,005,018 | ||
5,000M | 5.4%, 2013 | 5,000,485 | ||
4,000M | 6%, 2014 | 4,009,964 | ||
5,000M | 6%, 2015 | 5,001,370 | ||
4,000M | 6%, 2016 | 4,001,604 | ||
1,000M | 6%, 2016 | 1,001,869 | ||
1,000M | 6.5%, 2017 | 1,002,502 | ||
Federal Farm Credit Bank: | ||||
4,650M | 4.94%, 2012 | 4,636,134 | ||
3,000M | 5.33%, 2013 | 2,999,982 | ||
5,000M | Federal Home Loan Bank, 6%, 2013 | 5,044,690 | ||
1,000M | Freddie Mac, 6%, 2017 | 1,019,083 | ||
Total Value of U.S. Government Agency Obligations (cost $35,620,587) | 35,722,701 | |||
14 |
Principal | |||||
Amount | Security | Value | |||
U.S. GOVERNMENT OBLIGATIONS—3.2% | |||||
U.S. Treasury Notes: | |||||
$ 5,000M | 4.5%, 2012 | $ | 5,062,110 | ||
7,000M | 5.375%, 2031 | 7,495,474 | |||
Total Value of U.S. Government Obligations (cost $12,419,736) | 12,557,584 | ||||
MUNICIPAL BONDS—.8% | |||||
3,000M | Tobacco Settlement Fin. Auth., West Virginia, Series “A”, | ||||
7.467%, 2047 (cost $3,000,000) | 2,953,470 | ||||
PASS THROUGH CERTIFICATES—.2% | |||||
Transportation | |||||
613M | Continental Airlines, Inc., 8.388%, 2020 (cost $640,188) | 611,594 | |||
SHORT-TERM CORPORATE NOTES—4.5% | |||||
General Electric Capital Corp.: | |||||
11,100M | 4.72%, 10/10/07 | 11,083,983 | |||
1,000M | 4.74%, 10/15/07 | 997,893 | |||
3,500M | 5.24%, 10/23/07 | 3,487,730 | |||
2,000M | New Jersey Natural Gas Co., 4.75%, 10/9/07 | 1,997,359 | |||
Total Value of Short-Term Corporate Notes (cost $17,566,965) | 17,566,965 | ||||
Total Value of Investments (cost $324,013,203) | 99.7 | % | 388,189,751 | ||
Other Assets, Less Liabilities | . 3 | 1,279,596 | |||
Net Assets | 100.0 | % | $389,469,347 | ||
* Non-income producing
† Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4).
Summary of Abbreviations:
ADR American Depositary Receipts
REIT Real Estate Investment Trusts
See notes to financial statements | 15 |
Portfolio Manager’s Letter
VALUE FUND
Dear Investor:
This is the annual report for the First Investors Value Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 11.4% for Class A shares and 10.6% for Class B shares, including dividends of 10.0 cents per share on Class A shares and 4.4 cents per share on Class B shares.
Although the Fund benefited from positive returns across all major economic sectors, the energy sector was the leading sector for the Fund. The Fund’s biggest individual contributors to performance were Marathon Oil, Chevron and McDonald’s.
The Fund benefited from an underweight position in health care stocks, which lagged broad market returns. Stock selection in the financials sector was also beneficial to the Fund. Within this sector, performance was driven by A.G. Edwards, a brokerage firm that agreed to be acquired by Wachovia, and Brookfield Asset Management, an asset management company with substantial real estate and power generation assets.
While the Fund lagged the S&P 500 Index, this was primarily due to the fact that the Fund employs a multi-cap strategy. As a result, the Fund held small-cap stocks, which as a class did not perform as well as mid- and large-cap stocks. The S&P 500 is predominantly made up of large- and mid-cap stocks.
On a relative basis, the Fund’s sector allocation in the energy, information technology and consumer discretionary sectors hurt performance. The Fund was underweight in energy and information technology, two top-performing sectors, and overweight in consumer discretionary, a weaker performing sector. In addition, stock selection in the industrials, materials and utilities sectors had a negative impact. The two poorest performing stocks were Talbot’s, a women’s apparel retailer and Lee Enterprises, a newspaper publisher. The Fund’s cash position was also a drag on performance.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Matthew S. Wright
Portfolio Manager
November 1, 2007
16 |
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 | |
(4/1/07) | (9/30/07) | (4/1/07-9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,024.96 | $6.70 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.45 | $6.68 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,020.55 | $10.23 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.94 | $10.20 |
* Expenses are equal to the annualized expense ratio of 1.32% for Class A shares and 2.02%
for Class B shares, multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
Portfolio Composition
TOP TEN SECTORS
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007, and are based on the total value of investments.
17 |
Cumulative Performance Information
VALUE FUND
Comparison of change in value of $10,000 investment in the First Investors Value Fund
(Class A shares) and the Standard & Poor's 500 Index.
The graph compares a $10,000 investment in the First Investors Value Fund (Class A shares) beginning 10/31/97 with a theoretical investment in the Standard & Poor’s 500 Index (the “Index”). The Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of such stocks, which represent all major industries. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A ���S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02 the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or l ess than the original cost. Standard & Poor’s 500 Index figures are from Standard & Poor’s and all other figures are from First Investors Management Company, Inc.
18
Portfolio of Investments
VALUE FUND
September 30, 2007
Shares | Security | Value | ||
COMMON STOCKS—93.6% | ||||
Consumer Discretionary—15.9% | ||||
10,500 | Autoliv, Inc. | $ | 627,375 | |
123,600 | bebe stores, inc. | 1,808,268 | ||
24,500 | Best Buy Company, Inc. | 1,127,490 | ||
58,900 | Bob Evans Farms, Inc. | 1,777,602 | ||
48,900 | Carnival Corporation | 2,368,227 | ||
34,300 | CBS Corporation – Class “B” | 1,080,450 | ||
80,300 | Cinemark Holdings, Inc. | 1,490,368 | ||
102,500 | Clear Channel Communications, Inc. | 3,837,600 | ||
107,100 | Family Dollar Stores, Inc. | 2,844,576 | ||
46,000 | Gannett Company, Inc. | 2,010,200 | ||
46,000 | Genuine Parts Company | 2,300,000 | ||
62,000 | H&R Block, Inc. | 1,313,160 | ||
14,825 | * | Hanesbrands, Inc. | 415,990 | |
99,900 | Haverty Furniture Companies, Inc. | 876,123 | ||
89,000 | Home Depot, Inc. | 2,887,160 | ||
24,700 | J.C. Penney Company, Inc. | 1,565,239 | ||
57,600 | Jones Apparel Group, Inc. | 1,217,088 | ||
61,200 | Kenneth Cole Productions, Inc. – Class “A” | 1,185,444 | ||
118,600 | Lee Enterprises, Inc. | 1,846,602 | ||
118,300 | Leggett & Platt, Inc. | 2,266,628 | ||
31,600 | Liz Claiborne, Inc. | 1,084,828 | ||
16,400 | Magna International, Inc. – Class “A” | 1,579,484 | ||
75,100 | Marine Products Corporation | 636,848 | ||
102,600 | McDonald’s Corporation | 5,588,622 | ||
111,100 | Modine Manufacturing Company | 2,957,482 | ||
101,700 | New York Times Company – Class “A” | 2,009,592 | ||
42,500 | Newell Rubbermaid, Inc. | 1,224,850 | ||
102,600 | Pearson PLC (ADR) | 1,586,196 | ||
100,100 | Ruby Tuesday, Inc. | 1,835,834 | ||
50,000 | Staples, Inc. | 1,074,500 | ||
132,000 | Stein Mart, Inc. | 1,004,520 | ||
118,100 | Talbots, Inc. | 2,125,800 | ||
61,700 | Tiffany & Company | 3,229,995 | ||
170,800 | Time Warner, Inc. | 3,135,888 | ||
32,901 | Tribune Company | 898,855 | ||
123,700 | Walt Disney Company | 4,254,043 | ||
32,920 | Wyndham Worldwide Corporation | 1,078,459 | ||
70,151,386 | ||||
19 |
Portfolio of Investments (continued)
VALUE FUND
September 30, 2007
Shares | Security | Value | ||
Consumer Staples—11.0% | ||||
88,800 | Anheuser-Busch Companies, Inc. | $ | 4,439,112 | |
76,400 | Avon Products, Inc. | 2,867,292 | ||
66,000 | B&G Foods, Inc. – Class “A” | 844,800 | ||
86,600 | Coca-Cola Company | 4,976,902 | ||
59,400 | ConAgra Foods, Inc. | 1,552,122 | ||
34,141 | Del Monte Foods Company | 358,481 | ||
45,200 | Diageo PLC (ADR) | 3,965,396 | ||
34,100 | Estee Lauder Companies, Inc. – Class “A” | 1,447,886 | ||
41,400 | Fomento Economico Mexicano SA de CV (ADR) | 1,548,360 | ||
53,600 | H.J. Heinz Company | 2,476,320 | ||
71,300 | Hershey Company | 3,309,033 | ||
47,100 | Kimberly-Clark Corporation | 3,309,246 | ||
133,700 | Kraft Foods, Inc. – Class “A” | 4,613,987 | ||
19,900 | Pepsi Bottling Group, Inc. | 739,683 | ||
46,800 | Ruddick Corporation | 1,569,672 | ||
148,200 | Sara Lee Corporation | 2,473,458 | ||
50,625 | Tasty Baking Company | 510,806 | ||
106,700 | Topps Company, Inc. | 1,033,923 | ||
37,100 | UST, Inc. | 1,840,160 | ||
100,900 | Wal-Mart Stores, Inc. | 4,404,285 | ||
48,280,924 | ||||
Energy—8.0% | ||||
53,900 | Anadarko Petroleum Corporation | 2,897,125 | ||
45,300 | BP PLC (ADR) | 3,141,555 | ||
65,917 | Chevron Corporation | 6,168,513 | ||
54,400 | ConocoPhillips | 4,774,688 | ||
36,100 | Diamond Offshore Drilling, Inc. | 4,089,769 | ||
8,100 | Hess Corporation | 538,893 | ||
101,600 | Marathon Oil Corporation | 5,793,232 | ||
54,100 | Royal Dutch Shell PLC – Class “A” (ADR) | 4,445,938 | ||
57,600 | Tidewater, Inc. | 3,619,584 | ||
35,469,297 | ||||
Financials—24.1% | ||||
44,000 | A.G. Edwards, Inc. | 3,736,040 | ||
19,600 | ACE, Ltd. | 1,187,172 | ||
28,500 | Allstate Corporation | 1,629,915 | ||
31,000 | American International Group, Inc. | 2,097,150 | ||
51,600 | Aon Corporation | 2,312,196 | ||
20 |
Shares | Security | Value | ||
Financials (continued) | ||||
45,000 | Aspen Insurance Holdings, Ltd. | $ | 1,255,950 | |
35,000 | Assured Guaranty, Ltd. | 950,950 | ||
166,200 | Bank Mutual Corporation | 1,959,498 | ||
94,266 | Bank of America Corporation | 4,738,752 | ||
104,528 | Bank of New York Mellon Corporation | 4,613,866 | ||
147,375 | Brookfield Asset Management, Inc. – Class “A” | 5,673,938 | ||
96,200 | Brookline Bancorp, Inc. | 1,114,958 | ||
25,903 | Capital One Financial Corporation | 1,720,736 | ||
43,456 | Chubb Corporation | 2,330,980 | ||
54,047 | Cincinnati Financial Corporation | 2,340,776 | ||
93,600 | Citigroup, Inc. | 4,368,312 | ||
44,800 | Comerica, Inc. | 2,297,344 | ||
45,300 | * | Discover Financial Services | 942,240 | |
41,400 | EMC Insurance Group, Inc. | 1,075,986 | ||
39,149 | Erie Indemnity Company – Class “A” | 2,393,178 | ||
21,000 | FBL Financial Group, Inc. – Class “A” | 829,290 | ||
85,900 | First Potomac Realty Trust (REIT) | 1,872,620 | ||
91,300 | Hudson City Bancorp, Inc. | 1,404,194 | ||
102,800 | Invesco PLC (ADR) | 2,806,440 | ||
102,100 | JPMorgan Chase & Company | 4,678,222 | ||
48,600 | KeyCorp | 1,571,238 | ||
44,074 | Lincoln National Corporation | 2,907,562 | ||
41,900 | Merrill Lynch & Company, Inc. | 2,986,632 | ||
53,600 | Morgan Stanley | 3,376,800 | ||
119,200 | NewAlliance Bancshares, Inc. | 1,749,856 | ||
33,900 | One Liberty Properties, Inc. (REIT) | 659,355 | ||
100,000 | People’s United Financial, Inc. | 1,728,000 | ||
55,800 | Plum Creek Timber Company, Inc. (REIT) | 2,497,608 | ||
31,500 | PMI Group, Inc. | 1,030,050 | ||
48,800 | PNC Financial Services Group, Inc. | 3,323,280 | ||
96,500 | Progressive Corporation | 1,873,065 | ||
51,000 | Protective Life Corporation | 2,164,440 | ||
115,117 | Regions Financial Corporation | 3,393,649 | ||
34,400 | St. Joe Company | 1,156,184 | ||
43,893 | State Street Corporation | 2,991,747 | ||
36,700 | SunTrust Banks, Inc. | 2,777,089 | ||
116,400 | U-Store-It Trust (REIT) | 1,536,480 | ||
44,200 | Wachovia Corporation | 2,216,630 | ||
54,000 | Waddell & Reed Financial, Inc. – Class “A” | 1,459,620 | ||
9,000 | Washington Mutual, Inc. | 317,790 | ||
21 |
Portfolio of Investments (continued)
VALUE FUND
September 30, 2007
Shares | Security | Value | ||
Financials (continued) | ||||
96,300 | Wells Fargo & Company | $ | 3,430,206 | |
97,300 | Westfield Financial, Inc. | 944,783 | ||
106,422,767 | ||||
Health Care—5.1% | ||||
74,800 | Abbott Laboratories | 4,010,776 | ||
23,875 | * | Covidien, Ltd. | 990,813 | |
49,100 | GlaxoSmithKline PLC (ADR) | 2,612,120 | ||
90,800 | Johnson & Johnson | 5,965,560 | ||
32,100 | Novartis AG (ADR) | 1,764,216 | ||
179,500 | Pfizer, Inc. | 4,385,185 | ||
81,700 | Schering-Plough Corporation | 2,584,171 | ||
22,312,841 | ||||
Industrials—7.8% | ||||
26,000 | 3M Company | 2,433,080 | ||
2,600 | Alexander & Baldwin, Inc. | 130,338 | ||
38,600 | Avery Dennison Corporation | 2,200,972 | ||
57,200 | Dover Corporation | 2,914,340 | ||
87,200 | Federal Signal Corporation | 1,339,392 | ||
41,300 | General Dynamics Corporation | 3,488,611 | ||
69,000 | Honeywell International, Inc. | 4,103,430 | ||
17,800 | Hubbell, Inc. – Class “B” | 1,016,736 | ||
21,000 | Illinois Tool Works, Inc. | 1,252,440 | ||
32,422 | Lawson Products, Inc. | 1,128,610 | ||
86,200 | Masco Corporation | 1,997,254 | ||
39,600 | Norfolk Southern Corporation | 2,055,636 | ||
59,600 | Pitney Bowes, Inc. | 2,707,032 | ||
7,500 | SPX Corporation | 694,200 | ||
23,875 | Tyco International, Ltd. | 1,058,618 | ||
47,400 | United Parcel Service, Inc. – Class “B” | 3,559,740 | ||
139,600 | Werner Enterprises, Inc. | 2,394,140 | ||
34,474,569 | ||||
Information Technology—6.4% | ||||
46,000 | Automatic Data Processing, Inc. | 2,112,780 | ||
45,700 | AVX Corporation | 735,770 | ||
33,765 | Bel Fuse, Inc. – Class “B” | 1,170,295 | ||
19,100 | Broadridge Financial Solutions, Inc. | 361,945 | ||
30,200 | Fair Isaac Corporation | 1,090,522 | ||
22 |
Shares | Security | Value | ||
Information Technology (continued) | ||||
76,400 | Hewlett-Packard Company | $ | 3,803,956 | |
65,000 | Intel Corporation | 1,680,900 | ||
12,200 | International Business Machines Corporation | 1,437,160 | ||
159,100 | Methode Electronics, Inc. | 2,394,455 | ||
120,500 | Microsoft Corporation | 3,549,930 | ||
54,600 | Molex, Inc. | 1,470,378 | ||
130,700 | Motorola, Inc. | 2,421,871 | ||
76,000 | Nokia Corporation – Class “A” (ADR) | 2,882,680 | ||
91,600 | * | Planar Systems, Inc. | 614,636 | |
34,000 | Texas Instruments, Inc. | 1,244,060 | ||
32,775 | Tyco Electronics, Ltd. | 1,161,218 | ||
28,132,556 | ||||
Materials—7.7% | ||||
36,400 | Air Products & Chemicals, Inc. | 3,558,464 | ||
44,400 | Albemarle Corporation | 1,962,480 | ||
63,200 | Alcoa, Inc. | 2,472,384 | ||
20,400 | Bemis Company, Inc. | 593,844 | ||
124,330 | Chemtura Corporation | 1,105,294 | ||
56,600 | Compass Minerals International, Inc. | 1,926,664 | ||
103,300 | Dow Chemical Company | 4,448,098 | ||
79,200 | DuPont (E.I.) de Nemours & Company | 3,925,152 | ||
32,000 | Glatfelter | 474,880 | ||
106,200 | Louisiana-Pacific Corporation | 1,802,214 | ||
61,700 | Lubrizol Corporation | 4,014,202 | ||
60,100 | MeadWestvaco Corporation | 1,774,753 | ||
73,830 | Myers Industries, Inc. | 1,463,311 | ||
144,800 | Sappi, Ltd. (ADR) | 2,215,440 | ||
66,600 | Sonoco Products Company | 2,009,988 | ||
45,223 | Tronox, Inc. – Class “B” | 408,364 | ||
34,155,532 | ||||
Telecommunication Services—4.1% | ||||
9,651 | ALLTEL Corporation | 672,482 | ||
135,430 | AT&T, Inc. | 5,730,043 | ||
55,200 | D&E Communications, Inc. | 784,944 | ||
4,120 | Embarq Corporation | 229,072 | ||
50,900 | Nippon Telegraph and Telephone Corporation (ADR) | 1,184,443 | ||
142,600 | Sprint Nextel Corporation | 2,709,400 | ||
24,000 | Telephone & Data Systems, Inc. | 1,602,000 | ||
23 |
Portfolio of Investments (continued)
VALUE FUND
September 30, 2007
Shares | Security | Value | ||
Telecommunication Services (continued) | ||||
30,000 | Telephone & Data Systems, Inc. – Special Shares | $ | 1,860,000 | |
73,828 | Verizon Communications, Inc. | 3,269,104 | ||
9,978 | Windstream Corporation | 140,889 | ||
18,182,377 | ||||
Utilities—3.5% | ||||
29,250 | American States Water Company | 1,140,750 | ||
41,400 | FPL Group, Inc. | 2,520,431 | ||
84,250 | MDU Resources Group, Inc. | 2,345,520 | ||
85,800 | NiSource, Inc. | 1,642,211 | ||
37,700 | Northwest Natural Gas Company | 1,722,890 | ||
40,200 | ONEOK, Inc. | 1,905,480 | ||
51,200 | Southwest Gas Corporation | 1,448,448 | ||
48,700 | United Utilities PLC (ADR) | 1,389,075 | ||
50,300 | Vectren Corporation | 1,372,686 | ||
15,487,491 | ||||
Total Value of Common Stocks (cost $308,539,111) | 413,069,740 | |||
PREFERRED STOCKS—.6% | ||||
Financials—.2% | ||||
44,000 | Citigroup Capital XVI, 6.45%, 2066 – Series “W” | 1,030,040 | ||
Telecommunication Services—.2% | ||||
44,800 | AT&T, Inc., 6.375%, 2056 | 1,067,136 | ||
Utilities—.2% | ||||
31,600 | Entergy Louisiana, LLC, 7.6%, 2032 | 790,632 | ||
Total Value of Preferred Stocks (cost $3,035,047) | 2,887,808 | |||
CONVERTIBLE PREFERRED STOCKS—.4% | ||||
Financials | ||||
56,900 | Lehman Brothers Holdings, Inc., 6.25%, 2007 – Series “GIS” | |||
(cost $1,446,983) | 1,536,300 | |||
24 |
Principal | |||||
Amount | Security | Value | |||
CORPORATE BONDS—.1% | |||||
Utilities | |||||
$ 500M | Union Electric Co., 6.75%, 2008 (cost $499,872) | $ | 502,954 | ||
SHORT-TERM CORPORATE NOTES—5.2% | |||||
19,700M | General Electric Capital Corp., 4.72%, 10/10/07 | 19,671,573 | |||
3,100M | New Jersey Natural Gas Co., 4.75%, 10/12/07 | 3,094,681 | |||
Total Value of Short-Term Corporate Notes (cost $22,766,254) | 22,766,254 | ||||
Total Value of Investments (cost $336,287,267) | 99.9 | % | 440,763,056 | ||
Other Assets, Less Liabilities | .1 | 450,768 | |||
Net Assets | 100.0 | % | $441,213,824 | ||
* Non-income producing
Summary of Abbreviations:
ADR American Depositary Receipts
REIT Real Estate Investment Trust
See notes to financial statements | 25 |
Portfolio Managers’ Letter
BLUE CHIP FUND
Dear Investor:
This is the annual report for the First Investors Blue Chip Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 14.8% for Class A shares and 14.0% for Class B shares, including dividends of 13.0 cents per share on Class A shares.
Although the Fund benefited from positive returns across all major economic sectors, the energy sector was the leading sector for the Fund. The biggest individual contributors to results within the energy sector were ExxonMobil, Chevron and Schlumberger.
The information technology, telecommunications services and industrials sectors also turned in strong performances. Nokia and International Business Machines were the top contributing holdings in technology. The telecommunications services sector was led by shares of AT&T and Verizon Communications. General Electric and United Technologies boosted performance in the industrials sector.
The financials sector generated the weakest returns for the Fund as deterioration in the housing market affected some of our holdings. Capital One Financial and Washington Mutual were among our worst performing financial stocks. Aside from financials, performance in the health care sector lagged in large part due to the Fund’s holdings in Amgen and Pfizer.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Matthew S. Wright Portfolio Manager | Constance Unger Assistant Portfolio Manager |
November 1, 2007
26 |
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 | |
(4/1/07) | (9/30/07) | (4/1/07-9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,088.06 | $7.17 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.20 | $6.93 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,083.98 | $10.81 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.69 | $10.45 |
* Expenses are equal to the annualized expense ratio of 1.37% for Class A shares and 2.07%
for Class B shares, multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
Portfolio Composition
TOP TEN SECTORS
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
27 |
Cumulative Performance Information
BLUE CHIP FUND
Comparison of change in value of $10,000 investment in the First Investors Blue Chip Fund
(Class A shares) and the Standard & Poor’s 500 Index.
The graph compares a $10,000 investment in the First Investors Blue Chip Fund (Class A shares) beginning 12/31/97 with a theoretical investment in the Standard & Poor’s 500 Index (the “Index”). The Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of such stocks, which represent all major industries. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 10.89% and 2.83%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 11.16% and 2.88%, respectively. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Standard & Poor’s 500 Index figures are from Standard & Poor's and all other figures are from First Investors Management Company, Inc.
28
Portfolio of Investments
BLUE CHIP FUND
September 30, 2007
Shares | Security | Value | ||
COMMON STOCKS—98.4% | ||||
Consumer Discretionary—9.3% | ||||
41,200 | Best Buy Company, Inc. | $ | 1,896,024 | |
45,100 | Carnival Corporation | 2,184,193 | ||
89,295 | CBS Corporation – Class “B” | 2,812,792 | ||
56,800 | Clear Channel Communications, Inc. | 2,126,592 | ||
47,394 | * | Comcast Corporation – Class “A” | 1,145,987 | |
84,350 | * | Comcast Corporation – Special Class “A” | 2,021,026 | |
57,200 | H&R Block, Inc. | 1,211,496 | ||
27,300 | Hilton Hotels Corporation | 1,269,177 | ||
151,500 | Home Depot, Inc. | 4,914,660 | ||
14,700 | * | Kohl’s Corporation | 842,751 | |
107,400 | Lowe’s Companies, Inc. | 3,009,348 | ||
77,300 | McDonald’s Corporation | 4,210,531 | ||
162,400 | News Corporation – Class “A” | 3,571,176 | ||
34,000 | NIKE, Inc. – Class “B” | 1,994,440 | ||
58,700 | Staples, Inc. | 1,261,463 | ||
63,500 | Target Corporation | 4,036,695 | ||
283,300 | Time Warner, Inc. | 5,201,388 | ||
17,042 | Tribune Company | 465,587 | ||
70,600 | * | Viacom, Inc. – Class “B” | 2,751,282 | |
147,000 | Walt Disney Company | 5,055,330 | ||
30,920 | Wyndham Worldwide Corporation | 1,012,939 | ||
52,994,877 | ||||
Consumer Staples—12.1% | ||||
81,600 | Altria Group, Inc. | 5,673,648 | ||
75,800 | Anheuser-Busch Companies, Inc. | 3,789,242 | ||
85,600 | Avon Products, Inc. | 3,212,568 | ||
156,900 | Coca-Cola Company | 9,017,043 | ||
27,000 | Colgate-Palmolive Company | 1,925,640 | ||
36,800 | Costco Wholesale Corporation | 2,258,416 | ||
98,700 | CVS Caremark Corporation | 3,911,481 | ||
36,400 | General Mills, Inc. | 2,111,564 | ||
28,800 | Hershey Company | 1,336,608 | ||
61,800 | Kimberly-Clark Corporation | 4,342,068 | ||
117,824 | Kraft Foods, Inc. – Class “A” | 4,066,106 | ||
106,900 | PepsiCo, Inc. | 7,831,494 | ||
140,940 | Procter & Gamble Company | 9,913,720 | ||
51,800 | Walgreen Company | 2,447,032 | ||
161,730 | Wal-Mart Stores, Inc. | 7,059,514 | ||
68,896,144 | ||||
29 |
Portfolio of Investments (continued)
BLUE CHIP FUND
September 30, 2007
Shares | Security | Value | ||
Energy—12.0% | ||||
17,800 | BP PLC (ADR) | $ | 1,234,430 | |
153,100 | Chevron Corporation | 14,327,098 | ||
89,870 | ConocoPhillips | 7,887,890 | ||
239,000 | ExxonMobil Corporation | 22,121,840 | ||
105,790 | Halliburton Company | 4,062,336 | ||
17,500 | Hess Corporation | 1,164,275 | ||
84,200 | Schlumberger, Ltd. | 8,841,000 | ||
80,350 | Spectra Energy Corporation | 1,966,968 | ||
46,100 | * | Transocean, Inc. | 5,211,605 | |
29,200 | Valero Energy Corporation | 1,961,656 | ||
68,779,098 | ||||
Financials—18.5% | ||||
49,200 | ACE, Ltd. | 2,980,044 | ||
31,200 | Allstate Corporation | 1,784,328 | ||
98,500 | American Express Company | 5,847,945 | ||
158,600 | American International Group, Inc. | 10,729,290 | ||
17,900 | Ameriprise Financial, Inc. | 1,129,669 | ||
206,666 | Bank of America Corporation | 10,389,100 | ||
158,487 | Bank of New York Mellon Corporation | 6,995,616 | ||
850 | * | Berkshire Hathaway, Inc. – Class “B” | 3,359,200 | |
48,600 | Capital One Financial Corporation | 3,228,498 | ||
37,300 | Chubb Corporation | 2,000,772 | ||
278,500 | Citigroup, Inc. | 12,997,595 | ||
58,750 | * | Discover Financial Services | 1,222,000 | |
28,600 | Fannie Mae | 1,739,166 | ||
44,500 | Freddie Mac | 2,625,945 | ||
187,968 | JPMorgan Chase & Company | 8,612,694 | ||
20,500 | Lehman Brothers Holdings, Inc. | 1,265,465 | ||
44,500 | Marsh & McLennan Companies, Inc. | 1,134,750 | ||
53,300 | Merrill Lynch & Company, Inc. | 3,799,224 | ||
70,700 | Morgan Stanley | 4,454,100 | ||
20,000 | PNC Financial Services Group, Inc. | 1,362,000 | ||
73,000 | Progressive Corporation | 1,416,930 | ||
22,500 | SunTrust Banks, Inc. | 1,702,575 | ||
41,000 | Travelers Companies, Inc. | 2,063,940 | ||
64,500 | U.S. Bancorp | 2,098,185 | ||
83,600 | Wachovia Corporation | 4,192,540 | ||
62,000 | Washington Mutual, Inc. | 2,189,220 | ||
117,400 | Wells Fargo & Company | 4,181,788 | ||
105,502,579 | ||||
30 |
Shares | Security | Value | ||
Health Care—11.8% | ||||
107,000 | Abbott Laboratories | $ | 5,737,340 | |
33,200 | Aetna, Inc. | 1,801,764 | ||
82,700 | * | Amgen, Inc. | 4,678,339 | |
34,600 | Baxter International, Inc. | 1,947,288 | ||
136,300 | Bristol-Myers Squibb Company | 3,928,166 | ||
41,225 | * | Covidien, Ltd. | 1,710,838 | |
12,100 | * | Genentech, Inc. | 944,042 | |
184,800 | Johnson & Johnson | 12,141,360 | ||
90,700 | Medtronic, Inc. | 5,116,387 | ||
71,200 | Merck & Company, Inc. | 3,680,328 | ||
80,300 | Novartis AG (ADR) | 4,413,288 | ||
403,560 | Pfizer, Inc. | 9,858,971 | ||
31,700 | * | St. Jude Medical, Inc. | 1,397,019 | |
64,200 | Teva Pharmaceutical Industries, Ltd. (ADR) | 2,854,974 | ||
87,800 | UnitedHealth Group, Inc. | 4,252,154 | ||
66,100 | Wyeth | 2,944,755 | ||
67,407,013 | ||||
Industrials—11.4% | ||||
56,100 | 3M Company | 5,249,838 | ||
33,400 | Boeing Company | 3,506,666 | ||
38,900 | Caterpillar, Inc. | 3,050,927 | ||
45,600 | Dover Corporation | 2,323,320 | ||
84,200 | Emerson Electric Company | 4,481,124 | ||
454,200 | General Electric Company | 18,803,880 | ||
44,600 | Honeywell International, Inc. | 2,652,362 | ||
32,400 | Illinois Tool Works, Inc. | 1,932,336 | ||
24,800 | ITT Corporation | 1,684,664 | ||
33,700 | Lockheed Martin Corporation | 3,656,113 | ||
74,700 | Masco Corporation | 1,730,799 | ||
34,500 | Northrop Grumman Corporation | 2,691,000 | ||
41,225 | Tyco International, Ltd. | 1,827,916 | ||
46,600 | United Parcel Service, Inc. – Class “B” | 3,499,660 | ||
102,700 | United Technologies Corporation | 8,265,296 | ||
65,355,901 | ||||
Information Technology—16.8% | ||||
36,320 | Accenture, Ltd. – Class “A” | 1,461,880 | ||
38,000 | Analog Devices, Inc. | 1,374,080 | ||
17,400 | * | Apple, Inc. | 2,671,596 | |
31 |
Portfolio of Investments (continued)
BLUE CHIP FUND
September 30, 2007
Shares | Security | Value | ||
Information Technology (continued) | ||||
72,100 | Applied Materials, Inc. | $ | 1,492,470 | |
30,000 | Automatic Data Processing, Inc. | 1,377,900 | ||
272,200 | * | Cisco Systems, Inc. | 9,012,542 | |
92,000 | Corning, Inc. | 2,267,800 | ||
183,700 | * | Dell, Inc. | 5,070,120 | |
31,500 | * | eBay, Inc. | 1,229,130 | |
226,625 | * | EMC Corporation | 4,713,800 | |
100,900 | Hewlett-Packard Company | 5,023,811 | ||
320,200 | Intel Corporation | 8,280,372 | ||
70,100 | International Business Machines Corporation | 8,257,780 | ||
42,800 | Maxim Integrated Products, Inc. | 1,256,180 | ||
555,945 | Microsoft Corporation | 16,378,140 | ||
160,100 | Motorola, Inc. | 2,966,653 | ||
167,000 | Nokia Corporation – Class “A” (ADR) | 6,334,310 | ||
183,300 | * | Oracle Corporation | 3,968,445 | |
57,970 | QUALCOMM, Inc. | 2,449,812 | ||
109,900 | Texas Instruments, Inc. | 4,021,241 | ||
50,225 | Tyco Electronics, Ltd. | 1,779,472 | ||
103,200 | Western Union Company | 2,164,104 | ||
55,300 | * | Xerox Corporation | 958,902 | |
65,300 | * | Yahoo!, Inc. | 1,752,652 | |
96,263,192 | ||||
Materials—2.7% | ||||
58,600 | Alcoa, Inc. | 2,292,432 | ||
39,649 | * | Cemex SA de CV (ADR) | 1,186,298 | |
96,900 | Dow Chemical Company | 4,172,514 | ||
55,900 | DuPont (E.I.) de Nemours & Company | 2,770,404 | ||
72,700 | International Paper Company | 2,607,749 | ||
21,300 | Newmont Mining Corporation | 952,749 | ||
7,600 | PPG Industries, Inc. | 574,180 | ||
11,100 | Weyerhaeuser Company | 802,530 | ||
15,358,856 | ||||
Telecommunication Services—2.9% | ||||
164,700 | AT&T, Inc. | 6,968,457 | ||
206,366 | Sprint Nextel Corporation | 3,920,954 | ||
129,700 | Verizon Communications, Inc. | 5,743,116 | ||
16,632,527 | ||||
32
Shares or | |||||
Principal | |||||
Amount | Security | Value | |||
Utilities—.9% | |||||
177,700 | Duke Energy Corporation | $ | 3,321,213 | ||
31,200 | FPL Group, Inc. | 1,899,456 | |||
5,220,669 | |||||
Total Value of Common Stocks (cost $370,180,273) | 562,410,856 | ||||
SHORT-TERM CORPORATE NOTES—1.8% | |||||
$ 5,000M | General Electric Capital Corp., 4.72%, 10/10/07 | 4,992,785 | |||
3,200M | New Jersey Natural Gas Co., 4.75%, 10/12/07 | 3,194,509 | |||
2,000M | Toyota Motor Credit Corp., 5.26%, 10/12/07 | 1,996,192 | |||
Total Value of Short-Term Corporate Notes (cost $10,183,486) | 10,183,486 | ||||
Total Value of Investments (cost $380,363,759) | 100.2 | % | 572,594,342 | ||
Excess of Liabilities Over Other Assets | (.2 | ) | (829,803) | ||
Net Assets | 100.0 | % | $571,764,539 | ||
* Non-income producing
Summary of Abbreviations:
ADR American Depositary Receipts
See notes to financial statements | 33 |
Portfolio Manager’s Letter
GROWTH & INCOME FUND
Dear Investor:
This is the annual report for the First Investors Growth & Income Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 16.8% for Class A shares and 16.0% for Class B shares, including dividends of 7.1 cents per share on Class A shares, 0.4 cents per shares on B shares, and capital gains distributions of 23.5 cents per share for both Class A and Class B shares.
The Fund’s performance was driven by solid performance of the equity markets, better than expected corporate earnings results, and significant merger and acquisition activity among the Fund’s holdings. Overall stock selection benefited investments most notably in the industrials, materials and consumer staples sectors. Overweight positions in the industrials and materials areas also contributed positively.
Notable performers within the industrials sector included Precision Castparts, which benefited from increased demand for complex metal components and castings used in aerospace and industrial machines, 3M, the large-cap maker of “Scotch Tape” as well as other industrial, consumer and technology products, and Honeywell International, which benefited from increased global demand for its aerospace, automotive, power and control technology products. Within the materials sector, shares of specialty chemical producer Celanese benefited from increased worldwide demand for chemical feedstocks: ethylene and propylene. Within consumer staples, shares of small-cap personal products maker Chattem were strong as their acquisition of well known brand products from Johnson & Johnson, such as Kaopectate, ACT, Cortizone-10 and Balmex, added more in earnings than was originally anticipated.
The Fund continued to benefit from strong merger and acquisition activity among its holdings, as both strategic acquirers and private equity firms remained very active. During the fiscal year, eleven of our holdings received merger offers, which are either closed or still pending. The most notable contributors were the takeovers of First Data and Dollar General by the investment group KKR, Biomet by an investment consortium led by the Blackstone Group, Paxar by Avery Dennison and Triad Hospitals by Community Health Systems. The Fund has three deals waiting for completion as of the reporting date: the purchase of Clear Channel Communications by Bain Capital, the purchase of regional bank institution USB Holdings by KeyCorp and the pending merger of TransOcean and Global Santa Fe.
The Fund has maintained a diverse allocation strategy, which at the end of the reporting period was 57% large cap, 16% mid cap and 27% small cap, according to Lipper’s market capitalization ranges. While the large- and mid-cap components delivered satisfactory results, performance in the small-cap area was weaker as stock selection detracted particularly during the more volatile second half of the year.
34 |
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Edwin D. Miska
Portfolio Manager and
Director of Equities, First Investors Management Company, Inc.
November 1, 2007
35 |
Fund Expenses
GROWTH & INCOME 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 | |
(4/1/07) | (9/30/07) | (4/1/07-9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,051.58 | $6.69 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.55 | $6.58 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,047.84 | $10.27 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,015.04 | $10.10 |
* Expenses are equal to the annualized expense ratio of 1.30% for Class A shares and 2.00% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period).
Portfolio Composition
TOP TEN SECTORS
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
36
Cumulative Performance Information
GROWTH & INCOME FUND
Comparison of change in value of $10,000 investment in the First Investors Growth & Income
Fund (Class A shares) and the Standard & Poor’s 500 Index.
The graph compares a $10,000 investment in the First Investors Growth & Income Fund (Class A shares) beginning 10/31/97 with a theoretical investment in the Standard & Poor’s 500 Index (the “Index”). The Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of such stocks, which represent all major industries. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares performance may be greater than or less than tha t shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02 the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Standard & Poor’s 500 Index figures are from Standard & Poor’s and all other figures are from First Investors Management Company, Inc.
37 |
Portfolio of Investments
GROWTH & INCOME FUND
September 30, 2007
Shares | Security | Value | ||
COMMON STOCKS—99.7% | ||||
Consumer Discretionary—16.5% | ||||
305,000 | bebe stores, inc. | $ | 4,462,150 | |
230,000 | Brown Shoe Company, Inc. | 4,462,000 | ||
120,000 | * | Carter’s, Inc. | 2,394,000 | |
200,000 | CBS Corporation – Class “B” | 6,300,000 | ||
225,000 | * | CEC Entertainment, Inc. | 6,045,750 | |
150,000 | Cinemark Holdings, Inc. | 2,784,000 | ||
190,000 | Clear Channel Communications, Inc. | 7,113,600 | ||
100,000 | * | Eddie Bauer Holdings, Inc. | 860,000 | |
315,000 | Foot Locker, Inc. | 4,828,950 | ||
50,000 | Genuine Parts Company | 2,500,000 | ||
195,800 | H&R Block, Inc. | 4,147,044 | ||
235,000 | Home Depot, Inc. | 7,623,400 | ||
55,000 | J.C. Penney Company, Inc. | 3,485,350 | ||
150,000 | Journal Register Company | 360,000 | ||
114,700 | Kenneth Cole Productions, Inc. – Class “A” | 2,221,739 | ||
155,000 | Leggett & Platt, Inc. | 2,969,800 | ||
203,900 | * | Lincoln Educational Services Corporation | 2,658,856 | |
215,000 | McDonald’s Corporation | 11,711,050 | ||
385,000 | * | Morgans Hotel Group Company | 8,373,750 | |
221,700 | Movado Group, Inc. | 7,076,664 | ||
245,000 | Newell Rubbermaid, Inc. | 7,060,900 | ||
90,000 | Orient-Express Hotels, Ltd. | 4,614,300 | ||
50,000 | Polo Ralph Lauren Corporation – Class “A” | 3,887,500 | ||
275,000 | * | Quiksilver, Inc. | 3,932,500 | |
245,000 | Ruby Tuesday, Inc. | 4,493,300 | ||
67,500 | Sherwin-Williams Company | 4,435,425 | ||
105,000 | * | Skechers U.S.A., Inc. – Class “A” | 2,320,500 | |
200,000 | Staples, Inc. | 4,298,000 | ||
100,000 | * | Steiner Leisure, Ltd. | 4,340,000 | |
112,500 | * | Viacom, Inc. – Class “B” | 4,384,125 | |
300,000 | Westwood One, Inc. | 825,000 | ||
217,500 | Wyndham Worldwide Corporation | 7,125,300 | ||
144,094,953 | ||||
Consumer Staples—7.1% | ||||
155,000 | Altria Group, Inc. | 10,777,150 | ||
130,000 | Avon Products, Inc. | 4,878,900 | ||
60,000 | * | Chattem, Inc. | 4,231,200 | |
67,500 | Coca-Cola Company | 3,879,225 | ||
38
Shares | Security | Value | ||
Consumer Staples (continued) | ||||
220,000 | CVS Caremark Corporation | $ | 8,718,600 | |
107,263 | Kraft Foods, Inc. – Class “A” | 3,701,646 | ||
460,000 | Nu Skin Enterprises, Inc. – Class “A” | 7,433,600 | ||
50,000 | PepsiCo, Inc. | 3,663,000 | ||
77,500 | Procter & Gamble Company | 5,451,350 | ||
84,515 | Tootsie Roll Industries, Inc. | 2,242,183 | ||
150,000 | Wal-Mart Stores, Inc. | 6,547,500 | ||
32,800 | WD-40 Company | 1,119,792 | ||
62,644,146 | ||||
Energy—9.3% | ||||
60,000 | Anadarko Petroleum Corporation | 3,225,000 | ||
248,900 | * | Cal Dive International, Inc. | 3,733,500 | |
50,000 | Chesapeake Energy Corporation | 1,763,000 | ||
90,000 | ConocoPhillips | 7,899,300 | ||
115,000 | ExxonMobil Corporation | 10,644,400 | ||
7,153 | Hugoton Royalty Trust | 169,097 | ||
33,096 | Marathon Oil Corporation | 1,887,134 | ||
160,000 | Noble Corporation | 7,848,000 | ||
76,600 | * | North American Energy Partners, Inc. | 1,322,116 | |
127,000 | Sasol, Ltd. (ADR) | 5,459,730 | ||
150,000 | Suncor Energy, Inc. | 14,221,500 | ||
70,000 | * | Swift Energy Company | 2,864,400 | |
90,000 | * | Transocean, Inc. | 10,174,500 | |
75,000 | World Fuel Services Corporation | 3,060,750 | ||
120,000 | XTO Energy, Inc. | 7,420,800 | ||
81,693,227 | ||||
Financials—14.9% | ||||
52,000 | American Express Company | 3,087,240 | ||
110,000 | American International Group, Inc. | 7,441,500 | ||
10,000 | Ameriprise Financial, Inc. | 631,100 | ||
130,000 | Astoria Financial Corporation | 3,448,900 | ||
150,000 | Bank of America Corporation | 7,540,500 | ||
150,000 | Brookline Bancorp, Inc. | 1,738,500 | ||
65,380 | Capital One Financial Corporation | 4,343,193 | ||
134,000 | Citigroup, Inc. | 6,253,780 | ||
200,000 | Colonial BancGroup, Inc. | 4,324,000 | ||
100,000 | * | Discover Financial Services | 2,080,000 | |
238,100 | * | First Mercury Financial Corporation | 5,121,531 | |
39 |
Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2007
Shares | Security | Value | ||
Financials (continued) | ||||
50,000 | Hartford Financial Services Group, Inc. | $ 4,627,500 | ||
177,500 | JPMorgan Chase & Company | 8,133,050 | ||
65,000 | Lehman Brothers Holdings, Inc. | 4,012,450 | ||
65,000 | Merrill Lynch & Company, Inc. | 4,633,200 | ||
90,000 | Morgan Stanley | 5,670,000 | ||
200,000 | New York Community Bancorp, Inc. | 3,810,000 | ||
265,000 | NewAlliance Bancshares, Inc. | 3,890,200 | ||
50,000 | Plum Creek Timber Company, Inc. (REIT) | 2,238,000 | ||
130,000 | South Financial Group, Inc. | 2,956,200 | ||
221,000 | Sovereign Bancorp, Inc. | 3,765,840 | ||
250,000 | Sunstone Hotel Investors, Inc. (REIT) | 6,410,000 | ||
75,000 | SunTrust Banks, Inc. | 5,675,250 | ||
200,000 | U.S. Bancorp | 6,506,000 | ||
200,000 | U.S.B. Holding Company, Inc. | 4,646,000 | ||
100,000 | Wachovia Corporation | 5,015,000 | ||
132,500 | Washington Mutual, Inc. | 4,678,575 | ||
60,000 | Webster Financial Corporation | 2,527,200 | ||
140,000 | Wells Fargo & Company | 4,986,800 | ||
130,191,509 | ||||
Health Care—9.4% | ||||
160,000 | Abbott Laboratories | 8,579,200 | ||
70,000 | Aetna, Inc. | 3,798,900 | ||
46,700 | * | Amgen, Inc. | 2,641,819 | |
22,417 | Baxter International, Inc. | 1,261,629 | ||
48,750 | * | Covidien, Ltd. | 2,023,125 | |
20,000 | * | Genentech, Inc. | 1,560,400 | |
175,000 | Johnson & Johnson | 11,497,500 | ||
50,000 | * | Laboratory Corporation of America Holdings | 3,911,500 | |
75,000 | Medtronic, Inc. | 4,230,750 | ||
80,000 | Merck & Company, Inc. | 4,135,200 | ||
425,000 | Pfizer, Inc. | 10,382,750 | ||
125,000 | Sanofi-Aventis (ADR) | 5,302,500 | ||
125,000 | * | St. Jude Medical, Inc. | 5,508,750 | |
100,000 | * | Thermo Fisher Scientific, Inc. | 5,772,000 | |
90,000 | * | TriZetto Group, Inc. | 1,575,900 | |
55,000 | UnitedHealth Group, Inc. | 2,663,650 | ||
175,000 | Wyeth | 7,796,250 | ||
82,641,823 | ||||
40 |
Shares | Security | Value | ||
Industrials—18.9% | ||||
155,000 | 3M Company | $ | 14,504,900 | |
100,000 | * | AAR Corporation | 3,034,000 | |
84,600 | Alexander & Baldwin, Inc. | 4,240,998 | ||
354,000 | * | Altra Holdings, Inc. | 5,901,180 | |
120,000 | * | Armstrong World Industries, Inc. | 4,870,800 | |
50,000 | Avery Dennison Corporation | 2,851,000 | ||
236,400 | Barnes Group, Inc. | 7,545,888 | ||
100,000 | * | BE Aerospace, Inc. | 4,153,000 | |
80,000 | Burlington Northern Santa Fe Corporation | 6,493,600 | ||
100,000 | Caterpillar, Inc. | 7,843,000 | ||
140,000 | Gardner Denver, Inc. | 5,460,000 | ||
250,000 | General Electric Company | 10,350,000 | ||
40,000 | Genlyte Group, Inc. | 2,570,400 | ||
147,500 | Harsco Corporation | 8,742,325 | ||
197,500 | Honeywell International, Inc. | 11,745,325 | ||
35,000 | Hubbell, Inc. – Class “B” | 1,999,200 | ||
120,000 | Illinois Tool Works, Inc. | 7,156,800 | ||
282,600 | Knoll, Inc. | 5,013,324 | ||
55,000 | Lockheed Martin Corporation | 5,966,950 | ||
96,400 | * | Mobile Mini, Inc. | 2,329,024 | |
50,000 | * | Navigant Consulting, Inc. | 633,000 | |
90,000 | Northrop Grumman Corporation | 7,020,000 | ||
150,000 | * | PGT, Inc. | 1,189,500 | |
100,000 | * | Pinnacle Airlines Corporation | 1,602,000 | |
57,500 | Precision Castparts Corporation | 8,508,850 | ||
50,000 | Steelcase, Inc. – Class “A” | 899,000 | ||
281,000 | TAL International Group, Inc. | 7,044,670 | ||
48,750 | Tyco International, Ltd. | 2,161,575 | ||
170,000 | United Technologies Corporation | 13,681,600 | ||
165,511,909 | ||||
Information Technology—15.6% | ||||
30,000 | * | CACI International, Inc. – Class “A” | 1,532,700 | |
400,000 | * | Cisco Systems, Inc. | 13,244,000 | |
150,900 | * | Electronics for Imaging, Inc. | 4,053,174 | |
371,000 | * | EMC Corporation | 7,716,800 | |
300,000 | * | Entrust, Inc. | 639,000 | |
150,000 | Harris Corporation | 8,668,500 | ||
165,000 | Hewlett-Packard Company | 8,215,350 | ||
185,000 | Intel Corporation | 4,784,100 | ||
41 |
Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2007
Shares | Security | Value | ||
Information Technology (continued) | ||||
115,000 | International Business Machines Corporation | $ | 13,547,000 | |
350,000 | Microsoft Corporation | 10,311,000 | ||
275,000 | Motorola, Inc. | 5,095,750 | ||
190,301 | * | NCI, Inc. – Class “A” | 3,600,495 | |
200,000 | Nokia Corporation – Class “A” (ADR) | 7,586,000 | ||
340,000 | * | Parametric Technology Corporation | 5,922,800 | |
135,000 | QUALCOMM, Inc. | 5,705,100 | ||
600,000 | * | Silicon Image, Inc. | 3,090,000 | |
292,000 | * | SMART Modular Technologies (WWH), Inc. | 2,087,800 | |
200,000 | * | Symantec Corporation | 3,876,000 | |
400,000 | * | TIBCO Software, Inc. | 2,956,000 | |
48,750 | Tyco Electronics, Ltd. | 1,727,213 | ||
50,000 | * | ValueClick, Inc. | 1,123,000 | |
140,000 | * | Varian Semiconductor Equipment Associates, Inc.�� | 7,492,800 | |
75,000 | * | VeriSign, Inc. | 2,530,500 | |
120,000 | Western Union Company | 2,516,400 | ||
83,500 | * | Wright Express Corporation | 3,046,915 | |
200,000 | Xilinx, Inc. | 5,228,000 | ||
136,296,397 | ||||
Materials—6.0% | ||||
30,000 | Ashland, Inc. | 1,806,300 | ||
200,000 | Celanese Corporation – Series “A” | 7,796,000 | ||
85,000 | Dow Chemical Company | 3,660,100 | ||
80,000 | Freeport-McMoRan Copper & Gold, Inc. | 8,391,200 | ||
125,000 | Lubrizol Corporation | 8,132,500 | ||
55,000 | PPG Industries, Inc. | 4,155,250 | ||
65,000 | Praxair, Inc. | 5,444,400 | ||
200,000 | RPM International, Inc. | 4,790,000 | ||
50,000 | Scotts Miracle-Gro Company – Class “A” | 2,137,500 | ||
115,000 | Temple-Inland, Inc. | 6,052,450 | ||
52,365,700 | ||||
Telecommunication Services—1.2% | ||||
165,000 | AT&T, Inc. | 6,981,150 | ||
75,000 | Verizon Communications, Inc. | 3,321,000 | ||
10,302,150 | ||||
42 |
Shares or | |||||
Principal | |||||
Amount | Security | Value | |||
Utilities—.8% | |||||
115,400 | Atmos Energy Corporation | $ | 3,268,128 | ||
75,000 | Consolidated Edison, Inc. | 3,472,500 | |||
6,740,628 | |||||
Total Value of Common Stocks (cost $629,150,927) | 872,482,442 | ||||
SHORT-TERM CORPORATE NOTES—.3% | |||||
General Electric Capital Corp.: | |||||
$1,800M | 4.73%, 10/10/07 | 1,797,398 | |||
800M | 4.74%, 10/15/07 | 798,314 | |||
Total Value of Short-Term Corporate Notes (cost $2,595,712) | 2,595,712 | ||||
Total Value of Investments (cost $631,746,639) | 100.0 | % | 875,078,154 | ||
Excess of Liabilities Over Other Assets | — | (213,024) | |||
Net Assets | 100.0 | % | $874,865,130 | ||
* Non-income producing
Summary of Abbreviations:
ADR American Depositary Receipts
REIT Real Estate Investment Trust
See notes to financial statements | 43 |
Portfolio Manager’s Letter
GLOBAL FUND
Dear Investor:
This is the annual report for the First Investors Global Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 26.4% for Class A shares and 25.6% for Class B shares, including dividends of 5.1 cents per share for both A and B shares, and capital gains distributions of 76.4 cents per share for both Class A and Class B shares.
The Fund’s strong overall performance during the reporting period was driven by fluctuating investor sentiments and performance of the equity markets. Foreign markets outperformed U.S. domestic markets during the period, illustrating the benefit of the Fund’s global investment approach. Within the MSCI All Country World Index, emerging markets led all markets, returning 58%, followed closely by Pacific Basin (excluding Japan), which returned 56%. Europe, the U.K. and the U.S. performed strongly as well, returning 31%, 23%, and 17%, respectively. Japan lagged at 7%.
Stock selection was solid across a number of sectors, particularly in the materials, financials and information technology sectors. Within materials, the Fund’s outperformance relative to the MSCI All Country World Index was driven by its holdings in the Brazilian metals and mining company Companhia Vale do Rio Doce, whose shares rose on a sharp increase in metal prices and demand for commodities. The Swiss company Xstrata, a diversified mining company, gained on completion of its acquisition of the Canadian company Falconbridge, as well as an increase in metal prices. In the financials sector, holdings in Hong Kong Exchanges and China Merchants Bank aided relative performance. Shares of Hong Kong Exchanges gained substantially amid news of accelerating stock exchange consolidation worldwide and continuing positive fund flows. Within the information technology sector, holdings in Nokia benefited results as the company reported sharply higher profits as new products and strong demand from emerging markets drove sales and gains in market share. Security selection within the telecommunication services and health care sectors, particularly our holdings in Vodafone and Medco Health Solutions, detracted from results.
On a regional basis, holdings in the emerging markets, U.S. and U.K. all contributed strongly to results relative to the MSCI All Country World Index. Security selection within Europe (excluding the U.K.) detracted from relative results, as holdings in Koninklijke Numico and UniCredito Italiano underperformed. The Fund ended the reporting period with 9.3% of its assets in emerging markets holdings after increasing its exposure to take advantage of attractive opportunities.
44
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Nicolas Choumenkovitch
Portfolio Manager*
November 1, 2007
*Mr. Choumenkovitch became the Fund’s Portfolio Manager on May 21, 2007.
45 |
Fund Expenses
GLOBAL 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 | |
(4/1/07) | (9/30/07) | (4/1/07-9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,145.46 | $8.98 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,016.70 | $8.44 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,141.63 | $12.72 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,013.19 | $11.96 |
* Expenses are equal to the annualized expense ratio of 1.67% for Class A shares and 2.37% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived.
Portfolio Composition
TOP TEN SECTORS
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
46
Cumulative Performance Information
GLOBAL FUND
Comparison of change in value of $10,000 investment in the First Investors Global Fund
(Class A shares) and the Morgan Stanley Capital International (“MSCI”) All Country World
Free Index.
The graph compares a $10,000 investment in the First Investors Global Fund (Class A shares) beginning 12/31/97 with a theoretical investment in the MSCI All Country World Free Index (the “Index”). The Index is unmanaged and represents both the developed and the emerging markets. The Index includes 48 countries of which 25 are emerging markets. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees pai d by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year would have been 19.20% . The Class B “S.E.C. Standardized” Average Annual Total Return for One Year would have been 21.56% . Results represent past performance and do not indicate future r esults. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. MSCI All Country World Free Index figures are from Morgan Stanley & Co., Inc. and all other figures are from First Investors Management Company, Inc.
47 |
Portfolio of Investments
GLOBAL FUND
September 30, 2007
Shares | Security | Value | ||
COMMON STOCKS—96.0% | ||||
United States—42.5% | ||||
14,690 | Abbott Laboratories | $ | 787,678 | |
20,265 | ACE, Ltd. | 1,227,451 | ||
30,290 | * | Adobe Systems, Inc. | 1,322,461 | |
9,100 | * | Affiliated Managers Group, Inc. | 1,160,341 | |
2,600 | Allegheny Technologies, Inc. | 285,870 | ||
20,435 | Altera Corporation | 492,075 | ||
22,580 | Altria Group, Inc. | 1,569,987 | ||
1,600 | Ambac Financial Group, Inc. | 100,656 | ||
72,105 | American Eagle Outfitters, Inc. | 1,897,083 | ||
76,755 | American Electric Power Company, Inc. | 3,536,870 | ||
40,768 | American International Group, Inc. | 2,757,955 | ||
32,460 | * | Amgen, Inc. | 1,836,262 | |
27,900 | Amphenol Corporation – Class “A” | 1,109,304 | ||
17,820 | Apache Corporation | 1,604,869 | ||
3,000 | * | Apple, Inc. | 460,620 | |
29,615 | Applied Materials, Inc. | 613,031 | ||
79,020 | AT&T, Inc. | 3,343,336 | ||
15,285 | Automatic Data Processing, Inc. | 702,040 | ||
56,915 | Bank of America Corporation | 2,861,117 | ||
13,740 | Boeing Company | 1,442,563 | ||
7,100 | * | Cameron International Corporation | 655,259 | |
13,300 | Cardinal Health, Inc. | 831,649 | ||
49,800 | * | Carter’s, Inc. | 993,510 | |
29,545 | Caterpillar, Inc. | 2,317,214 | ||
146,040 | * | Cisco Systems, Inc. | 4,835,384 | |
92,614 | Citigroup, Inc. | 4,322,295 | ||
9,400 | Colgate-Palmolive Company | 670,408 | ||
48,500 | * | Complete Production Services, Inc. | 993,280 | |
21,935 | ConocoPhillips | 1,925,235 | ||
108,460 | Corning, Inc. | 2,673,539 | ||
13,100 | Coventry Health Care, Inc. | 814,951 | ||
22,745 | Danaher Corporation | 1,881,239 | ||
50,945 | Dover Corporation | 2,595,648 | ||
49,535 | * | E*TRADE Financial Corporation | 646,927 | |
6,500 | * | eBay, Inc. | 253,630 | |
34,340 | Eli Lilly & Company | 1,954,976 | ||
125,145 | * | EMC Corporation | 2,603,016 | |
27,235 | EOG Resources, Inc. | 1,969,908 | ||
25,345 | Exelon Corporation | 1,909,999 | ||
67,150 | ExxonMobil Corporation | 6,215,404 | ||
48 |
Shares | Security | Value | ||
United States (continued) | ||||
5,500 | FirstEnergy Corporation | $ | 348,370 | |
4,135 | Fluor Corporation | 595,357 | ||
3,200 | Franklin Resources, Inc. | 408,000 | ||
26,195 | Freeport-McMoRan Copper & Gold, Inc. | 2,747,594 | ||
28,010 | * | Genentech, Inc. | 2,185,340 | |
12,640 | General Dynamics Corporation | 1,067,701 | ||
106,300 | General Electric Company | 4,400,820 | ||
7,100 | * | Genzyme Corporation | 439,916 | |
54,100 | GlobalSantaFe Corporation | 4,112,682 | ||
4,400 | Goldman Sachs Group, Inc. | 953,656 | ||
5,065 | * | Google, Inc. – Class “A” | 2,873,223 | |
26,400 | Graco, Inc. | 1,032,504 | ||
17,311 | Halliburton Company | 664,742 | ||
20,900 | * | Health Net, Inc. | 1,129,645 | |
52,955 | Hewlett-Packard Company | 2,636,629 | ||
16,800 | International Business Machines Corporation | 1,979,040 | ||
15,510 | * | Iron Mountain, Inc. | 472,745 | |
3,700 | Joy Global, Inc. | 188,182 | ||
47,490 | * | Kohl’s Corporation | 2,722,602 | |
39,800 | * | Lam Research Corporation | 2,119,748 | |
21,200 | Manpower, Inc. | 1,364,221 | ||
43,880 | Maxim Integrated Products, Inc. | 1,287,878 | ||
23,000 | MDU Resources Group, Inc. | 640,320 | ||
58,835 | Medtronic, Inc. | 3,318,882 | ||
9,590 | Merrill Lynch & Company, Inc. | 683,575 | ||
105,950 | Microsoft Corporation | 3,121,287 | ||
17,200 | NIKE, Inc. – Class “B” | 1,008,952 | ||
50,300 | * | Oracle Corporation | 1,088,995 | |
16,700 | Oshkosh Truck Corporation | 1,034,899 | ||
26,570 | PepsiCo, Inc. | 1,946,518 | ||
32,265 | PNC Financial Services Group, Inc. | 2,197,247 | ||
9,600 | Precision Castparts Corporation | 1,420,608 | ||
10,900 | * | Priceline.com, Inc. | 967,375 | |
15,345 | Procter & Gamble Company | 1,079,367 | ||
4,400 | QUALCOMM, Inc. | 185,944 | ||
24,500 | * | Quanta Services, Inc. | 648,025 | |
38,015 | Schering-Plough Corporation | 1,202,414 | ||
16,900 | * | St. Jude Medical, Inc. | 744,783 | |
112,035 | Staples, Inc. | 2,407,632 | ||
31,145 | State Street Corporation | 2,122,843 | ||
13,300 | Target Corporation | 845,481 | ||
49 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2007
Shares | Security | Value | ||
United States (continued) | ||||
12,500 | * | Terex Corporation | $ | 1,112,750 |
15,200 | Texas Instruments, Inc. | 556,168 | ||
11,200 | * | Thomas & Betts Corporation | 656,768 | |
31,930 | Time Warner, Inc. | 586,236 | ||
14,440 | United Technologies Corporation | 1,162,131 | ||
34,400 | UnitedHealth Group, Inc. | 1,665,992 | ||
24,445 | * | Viacom, Inc. – Class “B” | 952,622 | |
31,600 | W.R. Berkley Corporation | 936,308 | ||
12,200 | * | Waters Corporation | 816,424 | |
16,360 | * | WellPoint, Inc. | 1,291,131 | |
21,740 | Williams Companies, Inc. | 740,464 | ||
143,047,776 | ||||
United Kingdom—7.4% | ||||
43,020 | Antofagasta PLC | 668,312 | ||
35,011 | Burberry Group PLC | 468,639 | ||
220,152 | Invesco PLC | 2,967,026 | ||
28,841 | Johnson Matthey PLC | 979,523 | ||
62,583 | Kelda Group PLC | 1,099,088 | ||
124,231 | Man Group PLC | 1,400,930 | ||
36,924 | Reckitt Benckiser PLC | 2,160,539 | ||
57,471 | Rio Tinto PLC | 4,950,541 | ||
72,238 | Standard Chartered PLC | 2,354,803 | ||
226,832 | Tesco PLC | 2,029,949 | ||
86,286 | Xstrata PLC | 5,702,825 | ||
24,782,175 | ||||
Japan—5.8% | ||||
19,200 | Astellas Pharma, Inc. | 919,810 | ||
66,950 | Canon, Inc. | 3,649,754 | ||
18,855 | Daiichi Sankyo Company, Ltd. † | 565,576 | ||
25,400 | Daiichi Sankyo Company, Ltd. | 761,901 | ||
20,000 | Eisai Company, Ltd. | 944,225 | ||
209,000 | Hitachi, Ltd. | 1,390,123 | ||
52,600 | Honda Motor Company, Ltd. | 1,765,300 | ||
767 | Japan Tobacco, Inc. | 4,207,947 | ||
69,000 | Mitsubishi Electric Corporation | 863,887 | ||
29,000 | Mitsubishi Estate Company, Ltd. | 829,545 | ||
176,000 | Mitsubishi Rayon Company, Ltd. | 1,245,611 | ||
50 |
Shares | Security | Value | ||
Japan (continued) | ||||
1 | Mitsubishi UFJ Financial Group, Inc. | $ | 5,971 | |
26,100 | Sony Corporation | 1,263,983 | ||
135,000 | Toshiba Corporation | 1,259,444 | ||
19,673,077 | ||||
Germany—5.0% | ||||
67,707 | * | Arcandor AG | 2,244,511 | |
19,598 | Continental AG | 2,713,273 | ||
19,785 | DaimlerChrysler AG – Registered | 1,990,430 | ||
20,736 | Deutsche Boerse AG | 2,809,192 | ||
15,759 | Deutsche Postbank AG | 1,154,202 | ||
14,160 | E.ON AG | 2,606,418 | ||
23,795 | Siemens AG | 3,257,109 | ||
16,775,135 | ||||
Brazil—4.1% | ||||
125,500 | All America Latina Logistica | 1,763,821 | ||
68,400 | Banco Bradesco SA (ADR) | 2,008,908 | ||
134,140 | Companhia Vale do Rio Doce (ADR) | 4,551,370 | ||
6,500 | * | MMX Mineracao e Metalicos SA | 2,250,272 | |
27,500 | Petroleo Brasileiro SA (ADR) | 2,076,250 | ||
57,900 | * | Redecard SA | 1,070,206 | |
13,720,827 | ||||
Switzerland—3.8% | ||||
17,747 | Holcim, Ltd. | 1,953,659 | ||
53,947 | Julius Baer Holding, Ltd. AG – Registered | 4,019,934 | ||
11,143 | Nestle SA – Registered | 4,988,691 | ||
7,744 | Synthes, Inc. | 863,759 | ||
17,720 | UBS AG – Registered | 943,590 | ||
12,769,633 | ||||
France—3.7% | ||||
3,355 | Alstom | 680,247 | ||
71,549 | Axa | 3,193,025 | ||
19,833 | BNP Paribas SA | 2,164,492 | ||
15,738 | Bouygues SA | 1,353,876 | ||
31,502 | Essilor International SA | 1,971,227 | ||
51 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2007
Shares | Security | Value | ||
France (continued) | ||||
45,519 | France Telecom SA | $ | 1,520,623 | |
61,189 | Safran SA | 1,473,249 | ||
12,356,739 | ||||
Canada—3.5% | ||||
22,000 | Canadian Imperial Bank of Commerce | 2,200,443 | ||
5,100 | Canadian Natural Resources, Ltd. | 386,325 | ||
38,900 | Canadian Natural Resources, Ltd. | 2,957,919 | ||
31,400 | EnCana Corporation | 1,945,555 | ||
19,000 | * | Research In Motion, Ltd. | 1,871,893 | |
42,900 | Telus Corporation | 2,482,389 | ||
11,844,524 | ||||
Netherlands—3.2% | ||||
92,000 | * | AerCap Holdings NV | 2,289,880 | |
97,285 | * | ASML Holding NV | 3,216,731 | |
71,650 | Koninklijke (Royal) Philips Electronics NV | 3,225,045 | ||
71,628 | Unilever NV | 2,205,396 | ||
10,937,052 | ||||
Italy—3.2% | ||||
41,532 | Bulgari SpA | 652,075 | ||
151,054 | Enel SpA | 1,705,684 | ||
110,308 | Eni SpA | 4,077,173 | ||
17,410 | Tod’s SpA | 1,458,096 | ||
350,244 | UniCredito Italiano SpA | 2,988,600 | ||
10,881,628 | ||||
China—2.2% | ||||
2,551,000 | Bank of China, Ltd. | 1,366,024 | ||
233,000 | China Communications Construction Company, Ltd. | 554,258 | ||
531,500 | China Merchants Bank Company, Ltd. | 2,336,407 | ||
408,000 | China Resources Enterprise, Ltd. | 1,733,120 | ||
30,000 | China Shenhua Energy Company, Ltd. | 180,340 | ||
798,000 | Huaneng Power International, Inc. | 1,103,219 | ||
7,273,368 | ||||
52 |
Shares | Security | Value | ||
Finland—1.8% | ||||
29,500 | Nokia Corporation – Class “A” (ADR) | $ | 1,118,935 | |
133,597 | Nokia OYJ | 5,065,271 | ||
6,184,206 | ||||
Norway—1.6% | ||||
22,000 | Aker Kvaerner ASA | 696,851 | ||
14,100 | Frontline, Ltd. | 680,748 | ||
42,800 | * | Petroleum Geo-Services ASA | 1,227,424 | |
143,100 | * | Telenor ASA | 2,850,256 | |
5,455,279 | ||||
Hong Kong—1.5% | ||||
183,000 | Cathay Pacific Airways, Ltd. | 500,570 | ||
59,000 | Hong Kong Exchanges & Clearing, Ltd. | 1,804,483 | ||
788,888 | Shangri-La Asia, Ltd. | 2,660,548 | ||
4,965,601 | ||||
Australia—1.1% | ||||
309,491 | * | Lihir Gold, Ltd. | 1,079,101 | |
78,916 | * | Paladin Resources, Ltd. | 540,535 | |
12,404 | Rio Tinto, Ltd. | 1,187,919 | ||
19,000 | Woodside Petroleum, Ltd. (ADR) | 844,064 | ||
3,651,619 | ||||
Ireland—.9% | ||||
27,600 | * | Elan Corporation PLC (ADR) | 580,704 | |
58,400 | * | Ryanair Holdings PLC (ADR) | 2,424,184 | |
3,004,888 | ||||
Sweden—.8% | ||||
51,600 | Assa Abloy – Class “B” | 1,066,849 | ||
376,000 | Telefonaktiebolaget LM Ericsson – Class “B” | 1,499,571 | ||
2,566,420 | ||||
Mexico—.7% | ||||
19,200 | America Movil SAB de CV (ADR) – Series “L” | 1,228,800 | ||
37,400 | Grupo Aeroportuario del Centro Norte SA de CV (ADR) | 1,077,120 | ||
2,305,920 | ||||
53 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2007
Shares | Security | Value | ||
Russia—.6% | ||||
20,650 | Evraz Group SA (GDR) | $ 1,307,145 | ||
16,300 | TMK OAO (GDR) †† | 673,190 | ||
1,980,335 | ||||
Egypt—.5% | ||||
24,200 | Orascom Telecom Holding SAE (GDR) | 1,582,680 | ||
Austria—.4% | ||||
21,021 | OMV AG | 1,399,985 | ||
South Africa—.4% | ||||
38,083 | Impala Platinum Holdings, Ltd. | 1,325,250 | ||
Greece—.3% | ||||
32,209 | EFG Eurobank Ergasias | 1,129,578 | ||
Turkey—.3% | ||||
37,571 | Akbank T.A.S. | 256,896 | ||
41,000 | Turkcell Iletisim Hizmetleri AS (ADR) | 872,480 | ||
1,129,376 | ||||
Israel—.3% | ||||
23,100 | Teva Pharmaceutical Industries, Ltd. (ADR) | 1,027,257 | ||
Belgium—.2% | ||||
12,831 | UCB SA | 755,087 | ||
India—.1% | ||||
4,700 | HDFC Bank, Ltd. (ADR) | 503,511 | ||
South Korea—.1% | ||||
5,313 | Shinhan Financial Group Company, Ltd. | 347,175 | ||
Total Value of Common Stocks (cost $257,320,490) | 323,376,101 | |||
54 |
Principal | |||||
Amount | Security | Value | |||
REPURCHASE AGREEMENT—3.1% | |||||
$10,453M | Banc of America Securities, 3.8%, dated 9/28/2007, to be | ||||
repurchased at $10,456,310 on 10/1/07 (collateralized by | |||||
U.S. Treasury Bonds, 8.125%, 8/15/2019, valued | |||||
at $10,635,395) (cost $10,453,000) | $ | 10,453,000 | |||
Total Value of Investments (cost $267,773,490) | 99.1 | % | 333,829,101 | ||
Other Assets, Less Liabilities | .9 | 2,941,862 | |||
Net Assets | 100.0 | % | $336,770,963 | ||
* Non-income producing
† Securities valued at Fair Value (see Note 1A)
†† Security exempt from registration under rule 144A of the Securities Act of 1933 (see Note 4).
Summary of Abbreviations:
ADR American Depositary Receipts
GDR Global Depositary Receipts
REIT Real Estate Investment Trust
See notes to financial statements | 55 |
Portfolio Manager’s Letter
SELECT GROWTH FUND
Dear Investor:
This is the annual report for the First Investors Select Growth Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 19.8% for Class A shares and 19.0% for Class B shares, including capital gains distributions of 75.6 cents per share for both Class A and Class B shares.
The Fund made a number of changes in May of 2007. It appointed a new subadviser (the Smith Asset Management Group), implemented a different investment approach and was renamed the Select Growth Fund. The Smith Group seeks to build a risk-controlled portfolio of attractively valued, high quality stocks that have the potential to report better than expected earnings. In addition, the Fund now holds significantly fewer securities than it did previously, with approximately 40 to 45 stocks in its portfolio.
From May 7, 2007 (when the Smith Group began managing the Fund) until the end of the reporting period, the Fund returned 5.8% . During that same time period, the Russell 3000 Growth Index returned 4.3%, and the S&P 500 Index returned 2.2% .
Stock selection was the primary factor in the Fund’s favorable relative performance. The three best performing stocks since May were National Oilwell Varco, Jacobs Engineering Group and Air Products & Chemicals. The biggest underperformers were Ambac Financial Group, Manpower and Kohl’s.
Thank you for placing your trust in First Investors. We appreciate the opportunity to serve your investment needs.
Sincerely,
John D. Brim
Portfolio Manager*
November 1, 2007
*Mr. Brim is part of a portfolio management team that began managing the Fund on
May 7, 2007.
56 |
Fund Expenses
SELECT 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 | |
(4/1/07) | (9/30/07) | (4/1/07-9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,129.42 | $7.95 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.60 | $7.54 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,126.60 | $11.68 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.09 | $11.06 |
* Expenses are equal to the annualized expense ratio of 1.49% for Class A shares and 2.19% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period).
Portfolio Composition
BY SECTOR
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
57 |
Cumulative Performance Information
SELECT GROWTH FUND
Comparison of change in value of $10,000 investment in the First Investors Select Growth
Fund (Class A shares) and the Russell 3000 Growth Index.
The graph compares a $10,000 investment in the Class A shares of First Investors Select Growth Fund (formerly, First Investors All-Cap Growth Fund) beginning 10/25/00 (inception date) with a theoretical investment in the Russell 3000 Growth Index (the “Index”). The Index is an unmanaged index that measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values (the Russell 3000 Index is an unmanaged index that measures the performance of the 3,000 largest U.S. companies based on total market capitalization). It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund. Class B shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in the sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Total Return Since Inception would have been .56%. The Class B “S.E.C. Standardized” Total Return Since Inception would have been .73%. Results represent past performance and do not indicate future results. The graph a nd the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Russell 3000 Growth Index figures are from Frank Russell and Company and all other figures are from First Investors Management Company, Inc.
58 |
Portfolio of Investments
SELECT GROWTH FUND
September 30, 2007
Shares | Security | Value | ||
COMMON STOCKS—99.0% | ||||
Consumer Discretionary—11.7% | ||||
208,100 | * | Big Lots, Inc. | $ | 6,209,704 |
166,430 | * | Coach, Inc. | 7,867,146 | |
146,900 | * | Dollar Tree Stores, Inc. | 5,955,326 | |
117,000 | Men’s Wearhouse, Inc. | 5,910,840 | ||
110,400 | Omnicom Group, Inc. | 5,309,136 | ||
31,252,152 | ||||
Consumer Staples—5.6% | ||||
120,650 | Colgate-Palmolive Company | 8,604,758 | ||
87,400 | PepsiCo, Inc. | 6,402,924 | ||
15,007,682 | ||||
Energy—6.4% | ||||
54,400 | ExxonMobil Corporation | 5,035,264 | ||
85,000 | Marathon Oil Corporation | 4,846,700 | ||
50,900 | * | National-Oilwell Varco, Inc. | 7,355,050 | |
17,237,014 | ||||
Financials—10.6% | ||||
100,660 | Bank of New York Mellon Corporation | 4,443,132 | ||
42,700 | Hartford Financial Services Group, Inc. | 3,951,885 | ||
82,900 | JPMorgan Chase & Company | 3,798,478 | ||
76,200 | MetLife, Inc. | 5,313,426 | ||
68,600 | Northern Trust Corporation | 4,546,122 | ||
116,200 | T. Rowe Price Group, Inc. | 6,471,178 | ||
28,524,221 | ||||
Health Care—16.5% | ||||
90,400 | Becton, Dickinson & Company | 7,417,320 | ||
83,400 | Cigna Corporation | 4,444,386 | ||
144,600 | * | Express Scripts, Inc. | 8,071,572 | |
99,700 | * | Humana, Inc. | 6,967,036 | |
267,810 | Schering-Plough Corporation | 8,470,830 | ||
134,070 | * | Waters Corporation | 8,971,965 | |
44,343,109 | ||||
59 |
Portfolio of Investments (continued) |
SELECT GROWTH FUND |
September 30, 2007 |
Shares or | |||||
Principal | |||||
Amount | Security | Value | |||
Industrials—17.5% | |||||
49,000 | Cummins, Inc. | $ | 6,266,610 | ||
81,100 | Danaher Corporation | 6,707,781 | |||
101,400 | * | Jacobs Engineering Group, Inc. | 7,663,812 | ||
195,660 | Manitowoc Company, Inc. | 8,663,825 | |||
61,100 | Northrop Grumman Corporation | 4,765,800 | |||
178,200 | Republic Services, Inc. | 5,828,922 | |||
86,000 | United Technologies Corporation | 6,921,280 | |||
46,818,030 | |||||
Information Technology—26.2% | |||||
226,070 | Amphenol Corporation – Class “A” | 8,988,543 | |||
320,500 | * | Cadence Design Systems, Inc. | 7,111,895 | ||
292,990 | * | Cisco Systems, Inc. | 9,700,899 | ||
95,000 | FactSet Research Systems, Inc. | 6,512,250 | |||
138,600 | Harris Corporation | 8,009,694 | |||
168,800 | Hewlett-Packard Company | 8,404,552 | |||
237,600 | Microsoft Corporation | 6,999,696 | |||
407,000 | * | Oracle Corporation | 8,811,550 | ||
157,500 | Texas Instruments, Inc. | 5,762,925 | |||
70,302,004 | |||||
Materials—2.1% | |||||
56,500 | Air Products & Chemicals, Inc. | 5,523,440 | |||
Telecommunication Services—2.4% | |||||
149,100 | AT&T, Inc. | 6,308,421 | |||
Total Value of Common Stocks (cost $239,939,586) | 265,316,073 | ||||
SHORT-TERM CORPORATE NOTES—.7% | |||||
$2,000M | General Electric Capital Corp., 4.72%, 10/5/07 (cost $1,998,427) | 1,998,427 | |||
Total Value of Investments (cost $241,938,013) | 99.7 | % | 267,314,500 | ||
Other Assets, Less Liabilities | .3 | 686,063 | |||
Net Assets | 100.0 | % | $268,000,563 | ||
* Non-income producing
60 | See notes to financial statements |
Portfolio Managers’ Letter
MID-CAP OPPORTUNITY FUND
Dear Investor:
This is the annual report for the First Investors Mid-Cap Opportunity Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 16.6% for Class A shares and 15.8% for Class B shares, including capital gains distributions of $1.33 per share for both Class A and Class B shares.
The Fund’s performance was helped by investments in two key sectors: consumer discretionary and industrials. Shares of apparel and accessory makers, such as Warnaco, Coach and Polo Ralph Lauren, were key contributors due to strong global demand for luxury and name brand goods. For the second year in a row, industrials were strong. This time, performance was driven by strong commercial demand in the aerospace and energy end markets.
The Fund’s stock selection in consumer apparel and life sciences also helped returns. Within consumer apparel, strength came from luxury and name brand goods. For example, Warnaco, which is most widely recognized for its Speedo swimwear and Calvin Klein jeanwear brands, benefited from strong end-market demand in Europe and Asia, as well as new cost savings initiatives. In life sciences, makers of equipment that assist in new drug discovery did particularly well, as some of their biggest customers – large pharmaceutical companies – increased spending on research and development. The Fund’s beneficiaries included Thermo Fisher Scientific and Waters Corp.
In the retailing sector, specialty stores such as New York & Co., Children’s Place and bebe stores underperformed because of poor merchandising and low mall traffic. In the technology hardware sector, positions such as SMART Modular and QLogic suffered as relationships with large hardware customers became less favorable.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Steven S. Hill Portfolio Manager | Edwin D . Miska Portfolio Manager and Director of Equities, First Investors Management Company, Inc. |
November 1, 2007 |
*Mr. Miska became the Fund’s Co-Portfolio Manager on August 21, 2007.
61 |
Fund Expenses
MID-CAP OPPORTUNITY 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 | |
(4/1/07) | (9/30/07) | (4/1/07-9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,032.65 | $6.88 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.30 | $6.83 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,029.07 | $10.43 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.79 | $10.35 |
* Expenses are equal to the annualized expense ratio of 1.35% for Class A shares and 2.05% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period).
Portfolio Composition
TOP TEN SECTORS
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
62 |
Cumulative Performance Information
MID-CAP OPPORTUNITY FUND
Comparison of change in value of $10,000 investment in the First Investors Mid-Cap
Opportunity Fund (Class A shares) and the Standard & Poor’s MidCap 400 Index.
The graph compares a $10,000 investment in the First Investors Mid-Cap Opportunity Fund (Class A shares) beginning 10/31/97 with a theoretical investment in the Standard & Poor’s MidCap 400 Index (the “Index”). The Index is an unmanaged capitalization-weighted index of 400 stocks designed to measure performance of the mid-range sector of the U.S. stock market. As of 9/30/07, the median market capitalization is approximately $2.36 billion. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares per formance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 14.97% and 7.28%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 15.31% and 7.29%, respectively. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Standard & Poor’s MidCap 400 Index figures are from Standard & Poor’s and all other figures are from First Investors Management Company, Inc.
63 |
Portfolio of Investments
MID-CAP OPPORTUNITY FUND
September 30, 2007
Shares | Security | Value | ||
COMMON STOCKS—97.5% | ||||
Consumer Discretionary—14.3% | ||||
160,000 | bebe stores, inc. | $ | 2,340,800 | |
81,407 | BorgWarner, Inc. | 7,451,183 | ||
185,000 | Brown Shoe Company, Inc. | 3,589,000 | ||
65,000 | * | CEC Entertainment, Inc. | 1,746,550 | |
47,000 | * | Children’s Place Retail Stores, Inc. | 1,141,160 | |
200,000 | Cinemark Holdings, Inc. | 3,712,000 | ||
80,000 | * | Coach, Inc. | 3,781,600 | |
130,000 | Foot Locker, Inc. | 1,992,900 | ||
63,500 | Gannett Company, Inc. | 2,774,950 | ||
200,000 | * | Morgans Hotel Group Company | 4,350,000 | |
110,500 | Movado Group, Inc. | 3,527,160 | ||
100,000 | Nordstrom, Inc. | 4,689,000 | ||
118,500 | * | Office Depot, Inc. | 2,443,470 | |
50,000 | Orient-Express Hotels, Ltd. | 2,563,500 | ||
51,500 | Polo Ralph Lauren Corporation – Class “A” | 4,004,125 | ||
300,000 | * | Quiksilver, Inc. | 4,290,000 | |
72,500 | * | Red Robin Gourmet Burgers, Inc. | 3,110,250 | |
90,000 | Tiffany & Company | 4,711,500 | ||
272,500 | * | Warnaco Group, Inc. | 10,646,575 | |
112,500 | Wolverine World Wide, Inc. | 3,082,500 | ||
75,948,223 | ||||
Consumer Staples—4.0% | ||||
50,000 | Altria Group, Inc. | 3,476,500 | ||
100,000 | Dean Foods Company | 2,558,000 | ||
100,000 | Kraft Foods, Inc. – Class “A” | 3,451,000 | ||
275,000 | Nu Skin Enterprises, Inc. – Class “A” | 4,444,000 | ||
262,500 | Sara Lee Corporation | 4,381,125 | ||
116,000 | Tootsie Roll Industries, Inc. | 3,077,480 | ||
21,388,105 | ||||
Energy—8.5% | ||||
228,800 | * | Cal Dive International, Inc. | 3,432,000 | |
97,500 | Chesapeake Energy Corporation | 3,437,850 | ||
50,000 | EOG Resources, Inc. | 3,616,500 | ||
50,000 | GlobalSantaFe Corporation | 3,801,000 | ||
85,000 | * | Grant Prideco, Inc. | 4,634,200 | |
86,000 | Hess Corporation | 5,721,580 | ||
93,500 | * | Swift Energy Company | 3,826,020 | |
64 |
Shares | Security | Value | ||
Energy (continued) | ||||
200,000 | Talisman Energy, Inc. | $ | 3,940,000 | |
40,000 | * | Transocean, Inc. | 4,522,000 | |
70,000 | * | Weatherford International, Ltd. | 4,702,600 | |
60,000 | XTO Energy, Inc. | 3,710,400 | ||
45,344,150 | ||||
Financials—13.4% | ||||
70,000 | A.G. Edwards, Inc. | 5,943,700 | ||
135,000 | * | AmeriCredit Corporation | 2,373,300 | |
79,000 | CIT Group, Inc. | 3,175,800 | ||
75,000 | City National Corporation | 5,213,250 | ||
222,500 | Colonial BancGroup, Inc. | 4,810,450 | ||
130,000 | * | Discover Financial Services | 2,704,000 | |
98,000 | Douglas Emmett, Inc. (REIT) | 2,423,540 | ||
30,000 | Federal Realty Investment Trust (REIT) | 2,658,000 | ||
53,000 | General Growth Properties, Inc. (REIT) | 2,841,860 | ||
85,000 | HCP, Inc. (REIT) | 2,819,450 | ||
132,000 | Lazard, Ltd. – Class “A” | 5,596,800 | ||
125,000 | * | Nasdaq Stock Market, Inc. | 4,710,000 | |
220,000 | NewAlliance Bancshares, Inc. | 3,229,600 | ||
60,000 | PMI Group, Inc. | 1,962,000 | ||
95,000 | Protective Life Corporation | 4,031,800 | ||
230,000 | Sovereign Bancorp, Inc. | 3,919,200 | ||
120,000 | Sunstone Hotel Investors, Inc. (REIT) | 3,076,800 | ||
185,000 | Waddell & Reed Financial, Inc. – Class “A” | 5,000,550 | ||
71,000 | Zions Bancorporation | 4,875,570 | ||
71,365,670 | ||||
Health Care—11.8% | ||||
85,000 | * | Barr Pharmaceuticals, Inc. | 4,837,350 | |
70,000 | Beckman Coulter, Inc. | 5,163,200 | ||
140,000 | * | Community Health Systems, Inc. | 4,401,600 | |
165,000 | DENTSPLY International, Inc. | 6,870,600 | ||
330,000 | * | Exelixis, Inc. | 3,494,700 | |
80,000 | * | Express Scripts, Inc. | 4,465,600 | |
150,000 | * | Gilead Sciences, Inc. | 6,130,500 | |
54,500 | * | Laboratory Corporation of America Holdings | 4,263,535 | |
82,500 | McKesson Corporation | 4,850,175 | ||
65 |
Portfolio of Investments (continued)
MID-CAP OPPORTUNITY FUND
September 30, 2007
Shares | Security | Value | ||
Health Care (continued) | ||||
74,900 | * | Psychiatric Solutions, Inc. | $ | 2,942,072 |
97,500 | * | St. Jude Medical, Inc. | 4,296,825 | |
137,000 | * | Thermo Fisher Scientific, Inc. | 7,907,640 | |
45,000 | * | Waters Corporation | 3,011,400 | |
62,635,197 | ||||
Industrials—16.5% | ||||
61,600 | * | AAR Corporation | 1,868,944 | |
55,000 | * | Armstrong World Industries, Inc. | 2,232,450 | |
172,500 | Chicago Bridge & Iron Company NV—NY Shares | 7,427,850 | ||
37,000 | FedEx Corporation | 3,875,750 | ||
153,500 | * | Gardner Denver, Inc. | 5,986,500 | |
42,800 | * | Genlyte Group, Inc. | 2,750,328 | |
135,000 | Harsco Corporation | 8,001,450 | ||
145,000 | IDEX Corporation | 5,276,550 | ||
160,000 | J.B. Hunt Transport Services, Inc. | 4,208,000 | ||
200,000 | Knoll, Inc. | 3,548,000 | ||
50,000 | L-3 Communications Holdings, Inc. | 5,107,000 | ||
78,000 | Manpower, Inc. | 5,019,300 | ||
145,047 | * | Mobile Mini, Inc. | 3,504,336 | |
65,500 | Northrop Grumman Corporation | 5,109,000 | ||
40,000 | Precision Castparts Corporation | 5,919,200 | ||
83,750 | Regal-Beloit Corporation | 4,010,787 | ||
90,000 | Rolls-Royce Group PLC (ADR) | 4,790,358 | ||
108,000 | Roper Industries, Inc. | 7,074,000 | ||
120,000 | Southwest Airlines Company | 1,776,000 | ||
87,485,803 | ||||
Information Technology—14.4% | ||||
332,500 | * | BEA Systems, Inc. | 4,611,775 | |
40,000 | * | Business Objects SA (ADR) | 1,794,800 | |
125,000 | * | Cadence Design Systems, Inc. | 2,773,750 | |
45,000 | * | Cognos, Inc. | 1,868,850 | |
65,000 | * | DST Systems, Inc. | 5,577,650 | |
150,000 | * | Electronics for Imaging, Inc. | 4,029,000 | |
80,000 | Fair Isaac Corporation | 2,888,800 | ||
112,500 | Harris Corporation | 6,501,375 | ||
282,500 | * | Ingram Micro, Inc. – Class “A” | 5,539,825 | |
200,000 | Intersil Corporation – Class “A” | 6,686,000 | ||
127,500 | * | Intuit, Inc. | 3,863,250 | |
66 |
Shares | Security | Value | ||
Information Technology (continued) | ||||
87,500 | * | Lam Research Corporation | $ | 4,660,250 |
180,000 | * | Macrovision Corporation | 4,433,400 | |
190,000 | * | Open Text Corporation | 4,934,300 | |
480,000 | * | Silicon Image, Inc. | 2,472,000 | |
240,000 | * | SMART Modular Technologies (WWH), Inc. | 1,716,000 | |
217,500 | * | Sybase, Inc. | 5,030,775 | |
135,000 | * | Varian Semiconductor Equipment Associates, Inc. | 7,225,200 | |
76,607,000 | ||||
Materials—7.0% | ||||
95,000 | Agrium, Inc. | 5,166,100 | ||
26,000 | Allegheny Technologies, Inc. | 2,858,700 | ||
48,000 | Freeport-McMoRan Copper & Gold, Inc. | 5,034,720 | ||
162,500 | Louisiana-Pacific Corporation | 2,757,625 | ||
90,000 | Lubrizol Corporation | 5,855,400 | ||
67,000 | Praxair, Inc. | 5,611,920 | ||
200,000 | Sappi, Ltd. (ADR) | 3,060,000 | ||
140,000 | Sigma-Aldrich Corporation | 6,823,600 | ||
37,168,065 | ||||
Telecommunication Services—2.5% | ||||
215,000 | Citizens Communications Company | 3,078,800 | ||
212,000 | NTELOS Holdings Corporation | 6,245,520 | ||
171,000 | * | Time Warner Telecom, Inc. – Class “A” | 3,756,870 | |
13,081,190 | ||||
Utilities—5.1% | ||||
111,000 | AGL Resources, Inc. | 4,397,820 | ||
100,000 | California Water Service Group | 3,849,000 | ||
100,000 | Equitable Resources, Inc. | 5,187,000 | ||
122,500 | Portland General Electric Company | 3,405,500 | ||
125,000 | SCANA Corporation | 4,842,500 | ||
120,000 | Wisconsin Energy Corporation | 5,403,600 | ||
27,085,420 | ||||
Total Value of Common Stocks (cost $383,377,592) | 518,108,823 | |||
67 |
Portfolio of Investments (continued)
MID-CAP OPPORTUNITY FUND
September 30, 2007
Principal | |||||
Amount | Security | Value | |||
SHORT-TERM CORPORATE NOTES—2.5% | |||||
$5,300M | General Electric Capital Corp., 4.74%, 10/15/07 | $ | 5,288,833 | ||
5,300M | New Jersey Natural Gas Co., 4.75%, 10/5/07 | 5,295,800 | |||
2,800M | Toyota Motor Credit Corp., 5.26%, 10/12/07 | 2,794,668 | |||
Total Value of Short-Term Corporate Notes (cost $13,379,301) | 13,379,301 | ||||
Total Value of Investments (cost $396,756,893) | 100.0 | % | 531,488,124 | ||
Excess of Liabilities Over Other Assets | — | (301,873) | |||
Net Assets | 100.0 | % | $531,186,251 | ||
* Non-income producing
Summary of Abbreviations:
ADR American Depositary Receipts
REIT Real Estate Investment Trust
68 | See notes to financial statements |
Portfolio Managers’ Letter
SPECIAL SITUATIONS FUND
Dear Investor:
This is the annual report for the First Investors Special Situations Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 16.3% for Class A shares and 15.5% for Class B shares, including capital gains distributions of $1.88 per share for both Class A and Class B shares.
The Fund’s strategy of buying well-managed companies neglected by Wall Street has again proven its worth, as the Fund’s Class A shares outperformed its benchmark by a wide margin. This relative outperformance was driven both by individual stock selection and sector allocation.
Our investments in the aerospace and defense industry paid off well this year. Wood-ward Governor and Curtiss Wright were up 88% and 57%, respectively; and United Industrial Corporation, a leading manufacturer of unmanned drones for the military, finalized a merger agreement with Textron. Two semiconductor-related names, Varian Semiconductor and Avnet, were also top performers. Varian makes equipment used to manufacture semiconductors, and Avnet is one of the largest semiconductor distributors in the world. Both companies were disparagingly called “chicken tech” stocks (i.e., technology stocks for investors who are scared to take big risks) in the 1990s, and were underfollowed for years. Both companies rose by more than 100% this year.
For most of 2007, the market has been buffeted by problems in the subprime mortgage market. The Fund’s decision to underweight financial stocks helped our relative outperformance significantly. We remain focused on finding out-of-favor stocks with attractive prices, good management teams and clean balance sheets.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Jason Ronovech Portfolio Manager* | Jonathan S. Vyorst Portfolio Manager* |
November 1, 2007 |
* Mr. Ronovech and Mr. Vyorst became the Fund’s Co-Portfolio Managers on
August 8, 2007.
69 |
Fund Expenses
SPECIAL SITUATIONS 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 | |
(4/1/07) | (9/30/07) | (4/1/07-9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,031.01 | $7.48 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.70 | $7.44 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,026.94 | $11.03 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.19 | $10.96 |
* Expenses are equal to the annualized expense ratio of 1.47% for Class A shares and 2.17% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived.
Portfolio Composition
TOP TEN SECTORS
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
70 |
Cumulative Performance Information
SPECIAL SITUATIONS FUND
Comparison of change in value of $10,000 investment in the First Investors Special Situations
Fund (Class A shares) and the Russell 2000 Index.
The graph compares a $10,000 investment in the First Investors Special Situations Fund (Class A shares) beginning 12/31/97 with a theoretical investment in the Russell 2000 Index (the “Index”). The Index consists of the smallest 2,000 companies in the Russell 3000 Index (which represents approximately 98% of the investable U.S. equity market). The Index is an unmanaged index generally considered as the premier of small capitalization stocks. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares performance may be greater than or less than th at shown in the line graph above for Class A shares based on differences in the sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been 9.46%, 14.21% and 2.45%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been 11.32%, 14.53% and 2 .43%, respectively. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Russell 2000 Index figures are from Frank Russell and Company and all other figures are from First Investors Management Company, Inc.
71 |
Portfolio of Investments
SPECIAL SITUATIONS FUND
September 30, 2007
Shares | Security | Value | ||
COMMON STOCKS—95.7% | ||||
Consumer Discretionary—10.3% | ||||
192,400 | Foot Locker, Inc. | $ 2,949,492 | ||
229,800 | Interactive Data Corporation | 6,480,360 | ||
207,800 | Jackson Hewitt Tax Service, Inc. | 5,810,088 | ||
299,100 | * | Rent-A-Center, Inc. | 5,422,683 | |
209,600 | Tempur-Pedic International, Inc. | 7,493,200 | ||
787,400 | * | Visteon Corporation | 4,055,110 | |
32,210,933 | ||||
Consumer Staples—5.4% | ||||
137,150 | Church & Dwight Company, Inc. | 6,451,536 | ||
267,900 | Flower Foods, Inc. | 5,840,220 | ||
130,400 | Hormel Foods Corporation | 4,665,712 | ||
16,957,468 | ||||
Energy—5.5% | ||||
156,800 | * | Denbury Resources, Inc. | 7,007,392 | |
111,600 | * | Plains Exploration & Production Company | 4,934,952 | |
118,700 | * | Whiting Petroleum Corporation | 5,276,215 | |
17,218,559 | ||||
Financials—11.7% | ||||
15,602 | * | Alleghany Corporation | 6,334,412 | |
170,900 | Arthur J. Gallagher & Company | 4,950,973 | ||
256,100 | FirstMerit Corporation | 5,060,536 | ||
141,500 | Harleysville Group, Inc. | 4,525,170 | ||
108,100 | Midland Company | 5,941,176 | ||
370,700 | Phoenix Companies, Inc. | 5,230,577 | ||
115,900 | Wilmington Trust Corporation | 4,508,510 | ||
36,551,354 | ||||
Health Care—8.0% | ||||
83,800 | Hillenbrand Industries, Inc. | 4,610,676 | ||
70,100 | * | Invitrogen Corporation | 5,729,273 | |
143,800 | * | Lincare Holdings, Inc. | 5,270,270 | |
103,200 | * | Magellan Health Services, Inc. | 4,187,856 | |
41,800 | STERIS Corporation | 1,142,394 | ||
99,500 | West Pharmaceutical Services, Inc. | 4,145,170 | ||
25,085,639 | ||||
72 |
Shares | Security | Value | ||
Industrials—23.6% | ||||
92,500 | Alexander & Baldwin, Inc. | $ 4,637,025 | ||
14,200 | * | Alliant Techsystems, Inc. | 1,552,060 | |
134,300 | Carlisle Companies, Inc. | 6,526,980 | ||
171,100 | CLARCOR, Inc. | 5,853,331 | ||
132,200 | Curtiss-Wright Corporation | 6,279,500 | ||
134,600 | Deluxe Corporation | 4,958,664 | ||
109,500 | HNI Corporation | 3,942,000 | ||
136,100 | * | Kansas City Southern, Inc. | 4,378,337 | |
256,700 | * | Labor Ready, Inc. | 4,751,517 | |
325,800 | Mueller Water Products, Inc. – Class “B” | 3,583,800 | ||
39,500 | * | NCI Building Systems, Inc. | 1,706,795 | |
170,500 | Pentair, Inc. | 5,657,190 | ||
114,700 | Robbins & Myers, Inc. | 6,571,163 | ||
87,800 | United Industrial Corporation | 6,607,828 | ||
107,400 | Woodward Governor Company | 6,701,760 | ||
73,707,950 | ||||
Information Technology—14.0% | ||||
128,850 | * | Avnet, Inc. | 5,135,961 | |
314,500 | AVX Corporation | 5,063,450 | ||
69,900 | * | Cabot Microelectronics Corporation | 2,988,225 | |
215,200 | * | Checkpoint Systems, Inc. | 5,679,128 | |
222,500 | * | Convergys Corporation | 3,862,600 | |
232,300 | * | Epicor Software Corporation | 3,198,771 | |
197,800 | MoneyGram International, Inc. | 4,468,302 | ||
94,000 | * | Rogers Corporation | 3,871,860 | |
326,700 | * | Tyler Technologies, Inc. | 4,361,445 | |
92,500 | * | Varian Semiconductor Equipment Associates, Inc. | 4,950,600 | |
43,580,342 | ||||
Materials—7.0% | ||||
161,700 | AptarGroup, Inc. | 6,123,579 | ||
81,500 | Commercial Metals Company | 2,579,475 | ||
106,200 | Eagle Materials, Inc. | 3,795,588 | ||
118,100 | Neenah Paper, Inc. | 3,907,929 | ||
68,200 | * | RTI International Metals, Inc. | 5,405,532 | |
21,812,103 | ||||
73 |
Portfolio of Investments (continued)
SPECIAL SITUATIONS FUND
September 30, 2007
Shares or | |||||
Principal | |||||
Amount | Security | Value | |||
Telecommunication Services—3.7% | |||||
416,700 | * | Premiere Global Services, Inc. | $ | 5,271,255 | |
102,675 | Telephone & Data Systems, Inc. – Special Shares | 6,365,850 | |||
11,637,105 | |||||
Utilities—6.5% | |||||
264,700 | CMS Energy Corporation | 4,452,254 | |||
621,200 | * | Dynegy, Inc. – Class “A” | 5,739,888 | ||
177,200 | Energy East Corporation | 4,793,260 | |||
184,800 | Portland General Electric Company | 5,137,440 | |||
20,122,842 | |||||
Total Value of Common Stocks (cost $249,327,571) | 298,884,295 | ||||
SHORT-TERM CORPORATE NOTES—4.8% | |||||
$15,000M | UBS Finance Delaware, LLC, 4.6%, 10/1/07 (cost $14,996,166) | 14,996,166 | |||
Total Value of Investments (cost $264,323,737) | 100.5 | % | 313,880,461 | ||
Excess of Liabilities Over Other Assets | (.5 | ) | (1,565,155) | ||
Net Assets | 100.0 | % | $312,315,306 | ||
* Non-income producing
74 | See notes to financial statements |
Portfolio Manager’s Letter
INTERNATIONAL FUND
Dear Investor:
This is the annual report for the First Investors International Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 23.8% for Class A shares and 22.9% for Class B shares, including dividends of 7.2 cents per share on both Class A and Class B shares.
The Fund invests in a portfolio of 40 to 60 equity securities of companies that are located outside of the U.S., with the objective of long-term capital growth. The Fund’s absolute and relative performance benefited from the strong positive returns in emerging markets, and the benefits of a weak American dollar.
The Fund’s performance was generally in-line with the MSCI-EAFE Index during the reporting period. Among the top individual contributors were HDFC Bank, an Indian bank and Tesco, a British supermarket. Also helpful to performance were positions in British American Tobacco and Bharti Televentures, a telecommunications services company based in India. Sector allocation also helped performance. The three top sectors for the Fund were consumer staples, financials and telecommunications.
The Fund looks for attractive investment opportunities in all foreign markets, including developed and emerging markets. At the end of the reporting period, the Fund held 25.4% of its assets in emerging markets, a significant overweight position compared to the MSCI-EAFE Index. This helped the Fund’s performance, as emerging markets outperformed developed markets. Our research and screening found exceptional investment opportunities in companies based in developing markets such as Brazil, India and Mexico.
While its greatest allocation is to large-cap stocks, the Fund invests in companies of any size. Throughout the reporting period, the Fund held an average of 70.2% of its assets in large caps, 27.8 % in mid caps and 1.6% in small caps, based on Lipper’s market-cap ranges. The Fund’s market capitalization breakdown was not a significant contributor to performance during the reporting period.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Rajiv Jain
Portfolio Manager
November 1, 2007
75 |
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 | |
(4/1/07) | (9/30/07) | (4/1/07-9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,107.57 | $13.21 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,012.54 | $12.61 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,103.88 | $16.88 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,009.03 | $16.12 |
* Expenses are equal to the annualized expense ratio of 2.50% for Class A shares and 3.20% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived.
Portfolio Composition
TOP TEN SECTORS
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
76 |
Cumulative Performance Information
INTERNATIONAL FUND
Comparison of change in value of $10,000 investment in the First Investors International Fund
(Class A shares) and the Morgan Stanley Capital International (“MSCI”) EAFE Index (Net).
The graph compares a $10,000 investment in the First Investors International Fund (Class A shares) beginning 6/27/06 (inception date) with a theoretical investment in the MSCI EAFE Index (Net) (the “Index”). The Index is a free float-adjusted market capitalization unmanaged index that measures developed foreign market equity performance, excluding the U.S. and Canada. The Index is calculated on a total-return basis with net dividends reinvested. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares performance may be greater than or less tha n that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 16.54% . The Class B “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 18.43% . Results represent past performance and do not indicate future results. The graph and the returns show n do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. MSCI EAFE Index (Net) figures are from Morgan Stanley & Co., Inc. and all other figures are from First Investors Management Company, Inc.
77 |
Portfolio of Investments
INTERNATIONAL FUND
September 30, 2007
Shares | Security | Value | ||
COMMON STOCKS—85.9% | ||||
Switzerland—15.1% | ||||
68,400 | ABB, Ltd. – Registered | $ | 1,795,193 | |
19,200 | Compagnie Financiere Richemont SA | 1,268,002 | ||
18,331 | EFG International – Registered | 859,903 | ||
5,477 | Geberit AG – Registered | 714,045 | ||
22,657 | Kuehne & Nagel International AG – Registered | 2,222,644 | ||
236 | Lindt & Spruengli AG | 817,980 | ||
7,390 | Nestle SA – Registered | 3,308,483 | ||
18,355 | Roche Holding AG – Genusscheine | 3,316,847 | ||
16,800 | UBS AG – Registered | 900,257 | ||
15,203,354 | ||||
United Kingdom—15.0% | ||||
121,109 | British American Tobacco PLC | 4,322,942 | ||
73,725 | Diageo PLC | 1,613,199 | ||
51,379 | Imperial Tobacco Group PLC | 2,345,829 | ||
33,517 | Reckitt Benckiser PLC | 1,961,185 | ||
53,620 | SABMiller PLC | 1,520,670 | ||
367,106 | Tesco PLC | 3,285,278 | ||
15,049,103 | ||||
Australia—7.1% | ||||
130,577 | Aristocrat Leisure, Ltd. | 1,606,198 | ||
35,200 | BHP Billiton, Ltd. | 1,387,740 | ||
14,194 | Rio Tinto, Ltd. | 1,359,346 | ||
91 | Westfield Group | 1,748 | ||
66,051 | Woolworths, Ltd. | 1,736,600 | ||
28,722 | WorleyParsons, Ltd. | 1,077,955 | ||
7,169,587 | ||||
Japan—6.3% | ||||
75,650 | Millea Holdings, Inc. | 3,038,760 | ||
111,500 | Park24 Company, Ltd. | 1,001,430 | ||
38,650 | Toyota Motor Corporation | 2,278,372 | ||
6,318,562 | ||||
78 |
Shares | Security | Value | ||
Brazil—4.9% | ||||
28,315 | Banco Itau Holding Financeira SA (ADR) | $ | 1,433,305 | |
64,400 | Companhia Vale do Rio Doce (ADR) | 2,185,092 | ||
16,998 | Petroleo Brasileiro SA – Petrobras (ADR) | 1,283,349 | ||
4,901,746 | ||||
Hong Kong—5.6% | ||||
75,000 | China Mobile, Ltd. | 1,228,978 | ||
11,000 | China Mobile, Ltd. (ADR) | 902,440 | ||
1,182,800 | CNOOC, Ltd. | 1,988,424 | ||
51,635 | Jardine Matheson Holdings, Ltd. | 1,476,761 | ||
5,596,603 | ||||
Mexico—3.8% | ||||
100,633 | America Movil SAB de CV – Series “L” | 322,110 | ||
30,825 | America Movil SAB de CV (ADR) – Series “L” | 1,972,800 | ||
317,971 | Grupo Modelo SA de CV – Series “C” | 1,526,659 | ||
3,821,569 | ||||
Sweden—3.7% | ||||
86,500 | Atlas Copco AB – Series “B” | 1,377,250 | ||
39,400 | Investor AB – Class “B” | 1,007,984 | ||
63,500 | Sandvik AB | 1,357,058 | ||
3,742,292 | ||||
Belgium—3.7% | ||||
3,395 | Colruyt NV | 715,298 | ||
32,935 | InBev NV | 2,977,059 | ||
3,692,357 | ||||
India—3.3% | ||||
31,180 | HDFC Bank, Ltd. (ADR) | 3,340,313 | ||
Spain—3.1% | ||||
4,101 | Banco Santander Central Hispano SA | 79,493 | ||
78,070 | Enagas | 2,018,477 | ||
20,555 | Red Electrica de Espana | 1,062,595 | ||
3,160,565 | ||||
79 |
Portfolio of Investments (continued)
INTERNATIONAL FUND
September 30, 2007
Shares, | ||||
Warrants | ||||
or Options | Security | Value | ||
Canada—3.1% | ||||
31,350 | Canadian Natural Resources, Ltd. | $ | 2,383,824 | |
18,310 | Power Corporation of Canada | 736,306 | ||
3,120,130 | ||||
Norway—2.9% | ||||
161,985 | Orkla ASA | 2,876,879 | ||
Germany—2.8% | ||||
11,600 | Deutsche Boerse AG | 1,571,500 | ||
9,000 | Siemens AG – Registered | 1,231,939 | ||
2,803,439 | ||||
France—2.8% | ||||
6,910 | Air Liquide SA | 922,368 | ||
16,000 | * | Paris RE Holdings, Ltd. | 384,550 | |
18,870 | Total SA | 1,530,189 | ||
2,837,107 | ||||
Netherlands Antilles—1.8% | ||||
1,600 | Schlumberger, Ltd. | 169,179 | ||
16,000 | Schlumberger, Ltd. (ADR) | 1,680,000 | ||
1,849,179 | ||||
Taiwan—.9% | ||||
92,665 | Taiwan Semiconductor Manufacturing Company, Ltd. (ADR) | 937,770 | ||
Total Value of Common Stocks (cost $74,227,222) | 86,420,555 | |||
WARRANTS—8.0% | ||||
India | ||||
209,315 | * | Bharti Tele-Ventures, Ltd. (expiring 5/31/10) † | 4,937,113 | |
23,421 | HDFC Bank, Ltd. (expiring 6/28/10) † | 843,788 | ||
35,630 | Housing Development Finance Corp. (expiring 5/25/09) † | 2,259,762 | ||
Total Value of Warrants (cost $5,817,042) | 8,040,663 | |||
OPTIONS—.1% | ||||
Switzerland | ||||
13 | * | Roche Holding AG – Genusscheine (exercise price 160 CHF, | ||
expiring 12/18/09) (cost $70,620) | 65,256 | |||
80 |
Principal | |||||
Amount | Security | Value | |||
SHORT-TERM CORPORATE NOTES—3.5% | |||||
United States | |||||
$1,500M | General Electric Capital Corp., 5.16%, 10/3/07 | $ | 1,499,137 | ||
2,000M | New Jersey Natural Gas Co., 4.75%, 10/12/07 | 1,996,568 | |||
Total Value of Short-Term Corporate Notes (cost $3,495,705) | 3,495,705 | ||||
Total Value of Investments (cost $83,610,589) | 97.5 | % | 98,022,179 | ||
Other Assets, Less Liabilities | 2.5 | 2,550,057 | |||
Net Assets | 100.0 | % | $100,572,236 | ||
* Non-income producing
† Securities valued at Fair Value (see Note 1A)
Summary of Abbreviations:
ADR American Depositary Receipts
See notes to financial statements | 81 |
Portfolio Manager’s Letter
CASH MANAGEMENT FUND
Dear Investor:
This is the annual report for the First Investors Cash Management Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 4.6% for Class A shares and 3.8% for Class B shares, including dividends of 4.5 cents per share on Class A shares and 3.7 cents per share on Class B shares. The Fund maintained a $1.00 net asset value for each class of shares throughout the year.
During the reporting period, performance was primarily driven by shifting market sentiments regarding the direction of short-term interest rates.
The Federal Reserve (the “Fed”) held its target federal funds rate unchanged through most of the review period as the economy exhibited moderate growth and limited inflationary pressures. During the last quarter of the fiscal year, the money markets, as well as other financial markets, experienced significant disruption because of concerns regarding subprime mortgage investments. These disruptions drove the Fed to lower short-term interest rates by 50 basis points (.5%) in September.
The Fund effectively used corporate bonds and notes for incremental return, in addition to floating rate securities and various types of callable securities. The Fund continued to invest conservatively, mitigating credit risk by generally limiting corporate security investments to shorter maturities and smaller position sizes while maintaining a signifi-cant portion of its assets in U.S. government and agency securities. In addition, the Fund continued to commit a significant portion of its assets to floating rate securities. Because the Fund is managed conservatively, it did not invest in asset-backed commercial paper during the review period.
Although money market funds are generally conservative vehicles, there can be no assurance that they will be able to maintain a stable net asset value of $1.00 per share. Money market mutual funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Michael J. O’Keefe
Portfolio Manager
November 1, 2007
82
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 | |
(4/1/07) | (9/30/07) | (4/1/07–9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,022.82 | $4.06 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,021.06 | $4.05 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,018.98 | $7.84 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.30 | $7.84 |
* Expenses are equal to the annualized expense ratio of .80% for Class A shares and 1.55% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived.
Portfolio Composition
BY SECTOR
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
83 |
Portfolio of Investments
CASH MANAGEMENT FUND
September 30, 2007
Principal | Interest | |||||
Amount | Security | Rate* | Value | |||
CORPORATE NOTES—53.7% | ||||||
$ 7,000M | Anheuser-Busch Cos., Inc., 10/25/07 † | 4.99 | % | $ | 6,976,668 | |
Archer-Daniels-Midland Co.: | ||||||
6,000M | 10/30/07 † | 5.00 | 5,975,786 | |||
3,500M | 11/20/07 † | 4.75 | 3,476,898 | |||
5,000M | Brown-Forman Beverage, Europe, Ltd., 12/10/07 † | 5.27 | 4,948,583 | |||
5,000M | Chevron Funding Corp., 10/24/07 | 5.20 | 4,983,229 | |||
Coca Cola Co.: | ||||||
5,000M | 10/11/07 † | 5.22 | 4,992,684 | |||
5,000M | 12/14/07 † | 4.72 | 4,951,444 | |||
5,000M | Dupont (E.I.) de Nemours & Co., 10/1/07 † | 5.00 | 5,000,000 | |||
General Electric Capital Corp.: | ||||||
9,000M | 10/18/07 | 5.23 | 8,977,574 | |||
500M | 4/1/08 # | 5.10 | 507,048 | |||
500M | 4/1/08 # | 5.32 | 507,048 | |||
IBM International Group Capital, LLC: | ||||||
4,000M | 11/8/07 † | 5.21 | 3,977,813 | |||
1,000M | 12/18/07 † | 4.98 | 989,191 | |||
1,590M | International Business Machines Corp., 2/1/08 | 5.03 | 1,582,893 | |||
4,000M | Johnson & Johnson, 10/26/07 † | 5.23 | 3,985,370 | |||
4,000M | McGraw-Hill Cos., Inc., 10/3/07 † | 5.24 | 3,998,826 | |||
4,000M | Merrill Lynch & Co., Inc., 10/25/07 | 5.21 | 3,985,956 | |||
Paccar Financial Corp.: | ||||||
3,000M | 10/25/07 | 5.20 | 2,989,497 | |||
5,000M | 11/29/07 | 5.25 | 4,956,784 | |||
3,000M | PepsiCo, Inc., 10/26/07 † | 4.73 | 2,990,139 | |||
7,000M | Pitney Bowes, Inc., 10/9/07 † | 5.20 | 6,991,879 | |||
Procter & Gamble International Funding, SCA: | ||||||
5,500M | 10/31/07 † | 5.22 | 5,475,861 | |||
4,500M | 12/6/07 † | 5.20 | 4,456,951 | |||
Prudential Funding Corp.: | ||||||
3,000M | 10/15/07 | 5.23 | 2,993,844 | |||
2,500M | 10/29/07 | 5.20 | 2,489,792 | |||
5,000M | Toyota Motor Credit Corp., 12/7/07 | 5.27 | 4,950,736 | |||
10,000M | Wal-Mart Stores, Inc., 10/9/07 † | 5.19 | 9,988,339 | |||
Total Value of Corporate Notes (cost $118,100,833) | 118,100,833 | |||||
84 |
Principal | Interest | |||||
Amount | Security | Rate* | Value | |||
U.S. GOVERNMENT AGENCY OBLIGATIONS—22.3% | ||||||
Fannie Mae: | ||||||
$ 900M | 1/18/08 | 5.29 | % | $ | 899,581 | |
500M | 3/25/08 # | 5.22 | 496,969 | |||
Federal Home Loan Bank: | ||||||
2,000M | 11/14/07 | 5.22 | 2,000,000 | |||
1,020M | 11/27/07 | 5.33 | 1,017,165 | |||
3,300M | 1/23/08 | 5.31 | 3,299,497 | |||
2,300M | 1/28/08 | 5.25 | 2,290,782 | |||
1,385M | 1/30/08 | 5.23 | 1,377,502 | |||
5,000M | 2/15/08 | 5.30 | 4,994,400 | |||
1,190M | 2/15/08 | 4.80 | 1,188,698 | |||
5,000M | 2/28/08 | 5.22 | 5,000,000 | |||
7,450M | 3/19/08 | 5.30 | 7,451,851 | |||
5,000M | 8/8/08 | 4.96 | 5,000,000 | |||
2,850M | 8/15/08 | 5.38 | 2,850,000 | |||
3,700M | 8/20/08 | 5.38 | 3,700,000 | |||
2,000M | 8/20/08 | 5.36 | 2,000,000 | |||
Freddie Mac: | ||||||
800M | 11/26/07 | 5.25 | 798,636 | |||
4,650M | 1/11/08 | 5.22 | 4,649,717 | |||
Total Value of U.S. Government Agency Obligations (cost $49,014,798) | 49,014,798 | |||||
FLOATING RATE NOTES—16.6% | ||||||
3,900M | Advanced Packaging Corp., 10/1/36 | |||||
(LOC; Fifth Third Bank) | 5.17 | 3,900,000 | ||||
Bank of New York: | ||||||
6,000M | 11/16/07 | 5.51 | 6,000,155 | |||
2,750M | 11/19/07 | 5.46 | 2,749,958 | |||
3,000M | Federal Home Loan Bank, 3/14/08 | 4.12 | 3,000,000 | |||
3,945M | Genesys Medsports, LLC, 1/1/27 (LOC; Fifth Third Bank) | 5.17 | 3,945,000 | |||
3,620M | Suntrust Bank, 1/28/08 | 5.12 | 3,620,024 | |||
5,150M | US Bank, NA, 2/8/08 | 5.76 | 5,147,545 | |||
3,100M | Wachovia Bank, NA, 11/30/07 | 5.12 | 3,100,203 | |||
5,000M | Wachovia Corp., 11/8/07 | 5.43 | 5,000,650 | |||
Total Value of Floating Rate Notes (cost $36,463,535) | 36,463,535 | |||||
85 |
Portfolio of Investments (continued)
CASH MANAGEMENT FUND
September 30, 2007
Principal | Interest | |||||
Amount | Security | Rate* | Value | |||
BANKERS’ ACCEPTANCES—4.1% | ||||||
Bank of America, NA: | ||||||
$ 5,000M | 10/29/07 | 5.18 | % | $ | 4,979,680 | |
2,000M | 11/20/07 | 5.17 | 1,985,514 | |||
2,104M | 11/23/07 | 5.17 | 2,087,846 | |||
Total Value of Bankers’ Acceptances (cost $9,053,040) | 9,053,040 | |||||
CERTIFICATES OF DEPOSIT—3.0% | ||||||
Citibank, NA: | ||||||
2,000M | 11/14/07 | 5.49 | 2,000,000 | |||
4,700M | 11/16/07 | 5.47 | 4,700,000 | |||
Total Value of Certificates of Deposit (cost $6,700,000) | 6,700,000 | |||||
Total Value of Investments (cost $219,332,206) †† | 99.7 | % | 219,332,206 | |||
Other Assets, Less Liabilities | .3 | 512,689 | ||||
Net Assets | 100.0 | % | $219,844,895 | |||
* The interest rates shown are the effective rates at the time of purchase by the Fund. The interest
rates shown on floating rate notes are adjusted periodically; the rates shown are the rates in
effect at September 30, 2007.
† Security exempt from registration under Section 4(2) of the Securities Act of 1933 (see Note 4).
††Aggregate cost for federal income tax purposes is the same.
# Denotes a step bond (a zero coupon bond that converts to a fixed interest rate at a
designated date).
Summary of Abbreviations:
LOC Letters of Credit
86 | See notes to financial statements |
Portfolio Manager’s Letter
GOVERNMENT FUND
Dear Investor:
This is the annual report for the First Investors Government Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 4.1% for Class A shares and 3.3% for Class B shares, including dividends of 49.7 cents per share on Class A shares and 41.9 cents per share on Class B shares.
The Fund invests primarily in Government Mortgage Association (GNMA) mortgage-backed bonds. These bonds are backed by the full faith and credit of the U.S. government and have the highest possible credit rating (AAA).
Because the Fund is managed conservatively, it did not invest in any subprime mortgage-backed debt during the reporting period. Nonetheless, the Fund’s performance was impacted by developments in the housing market and the decline in liquidity in the financial markets following the subprime mortgage crisis this past summer.
The housing market remained in recession during the review period. New home sales declined 23% from October 2006 through September of 2007, while existing home sales fell 19%. From their 2005 peaks, new and existing home sales have fallen 45% and 30%, respectively. The continued decline of the housing market impacted the Fund in two ways.
First, it slowed down prepayments on mortgage-backed bonds. While this was positive for high coupon mortgage-backed holdings, it hurt the performance of discount coupon holdings. The latter had a greater impact on Fund performance than the former.
Second, the downturn in the housing market triggered defaults on subprime mortgage-backed securities. While the Fund did not own any subprime mortgage-backed securities, the defaults in these instruments caused substantial dislocations in the financial markets in general, and therefore indirectly affected the Fund. One aspect of the dislocation was a decline in liquidity in the capital markets as firms stopped lending money to other financial institutions. Investment firms rely on loans to finance their holdings of mortgage-backed securities. Without this source of liquidity, they were forced to sell mortgage-backed holdings. This selling compressed the price differential between generic mortgage-backed securities and “specified” mortgage-backed holdings (which normally trade at a premium to the market because the underlying mortgages that make up the securities have desirable characteristics). A substantial portion of the Fund 46;s mortgage-backed holdings are specified securities, so this summer’s events had a negative impact, at least temporarily, on the Fund’s relative performance.
87 |
Portfolio Manager’s Letter (continued)
GOVERNMENT FUND
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Clark D. Wagner
Portfolio Manager and
Director of Fixed Income, First Investors Management Company, Inc.
November 1, 2007
88 |
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 | |
(4/1/07) | (9/30/07) | (4/1/07–9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,015.77 | $5.56 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,019.55 | $5.57 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,012.15 | $9.08 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,016.05 | $9.10 |
* Expenses are equal to the annualized expense ratio of 1.10% for Class A shares and 1.80% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived.
Portfolio Composition
BY SECTOR
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
89 |
Cumulative Performance Information
GOVERNMENT FUND
Comparison of change in value of $10,000 investment in the First Investors Government Fund
(Class A shares) and the Merrill Lynch GNMA Master Index.
The graph compares a $10,000 investment in the First Investors Government Fund (Class A shares) beginning 12/31/97 with a theoretical investment in the Merrill Lynch GNMA Master Index (the “Index”). The Index is unmanaged and is a market capitalization-weighted index, including generic-coupon GNMA mortgages, with at least $150 million principal amounts outstanding. Every issue included in the Index is trader-priced, and the Index follows consistent and realistic availability limits, including only those securities with sufficient amounts outstanding. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were rein vested. Class B shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (2.01%), 1.52% and 3.75%, respectively, and the S.E.C. 30-Day Yield for September 2007 would have been 4.12% . The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (.80%), 1.62% and 3.76%, respectively, and the S.E.C. 30-Day Yield for September 2007 would have been 3.67% . Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Merrill Lynch GNMA Master Index figures are from Merrill Lynch & Co. and all other figures are from First Investors Management Company, Inc.
90 |
Portfolio of Investments
GOVERNMENT FUND
September 30, 2007
Principal | |||||
Amount | Security | Value | |||
MORTGAGE-BACKED CERTIFICATES—101.4% | |||||
Fannie Mae—8.6% | |||||
$18,314M | 5.5%, 4/1/2033—9/1/2035 | $ | 17,980,829 | ||
Government National Mortgage | |||||
Association I Program—92.8% | |||||
28,698M | 5%, 5/15/2033—5/15/2036 | 27,799,973 | |||
52,021M | 5.5%, 3/15/2033—10/18/2037 | 51,358,158 | |||
82,973M | 6%, 3/15/2031—8/15/2037 | 83,621,966 | |||
23,257M | 6.5%, 10/15/2028—3/15/2037 | 23,891,519 | |||
5,527M | 7%, 4/15/2032—8/15/2035 | 5,792,535 | |||
2,519M | 7.5%, 7/15/2023—6/15/2034 | 2,640,605 | |||
195,104,756 | |||||
Total Value of Mortgage-Backed Certificates | |||||
(cost $215,950,224) | 101.4 | % | 213,085,585 | ||
Excess of Liabilities Over Other Assets | (1.4 | ) | (2,909,328) | ||
Net Assets | 100.0 | % | $210,176,257 | ||
See notes to financial statements | 91 |
Portfolio Manager’s Letter
INVESTMENT GRADE FUND
Dear Investor:
This is the annual report for the First Investors Investment Grade Fund for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 3.9% for Class A shares and 3.2% for Class B shares, including dividends of 46.5 cents per share on Class A shares and 39.5 cents per share on Class B shares.
The Fund invests in investment grade fixed income securities. While the majority of the Fund’s holdings are investment grade corporate bonds, the Fund also generally had 5% to 10% positions in each of the following fixed income sectors during the reporting period: mortgage-backed bonds, U.S. government agency securities, U.S. Treasury notes and high yield corporate bonds.
The primary factors that drove the Fund’s performance were the steepening of the yield curve and the outperformance of most fixed income sectors relative to investment grade corporate bonds. The Fund did not invest in any subprime mortgage-backed securities during the reporting period. Therefore, it was largely able to avoid the negative impact of the disruption in the market for these securities.
Short-term interest rates fell substantially during the review period in anticipation of the Federal Reserve’s decision to lower interest rates in September. The yield of the two-year U.S. Treasury note fell from 4.69% to 3.99% . In contrast, long-term interest rates were almost unchanged with the 10-year U.S. Treasury rate moving from 4.63% to 4.59% . This steepening of the yield curve contributed to the Fund’s performance since it was underweight corporate bonds with maturities longer than 10 years.
After a prolonged period of low volatility, the downturn in the housing market triggered defaults on subprime mortgage-backed securities, which in turn caused substantial dislocations in the financial markets this summer. Part of the dislocation involved a reassessment of risk by investors, causing spreads on corporate bonds to move to their widest level in several years. As a result, investment grade corporate bonds underperformed most other fixed income classes for the review period. Consequently, the Fund’s investments in fixed income sectors other than high-grade corporate bonds contributed significantly to performance relative to the Merrill Lynch Corporate Index.
92 |
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Clark D. Wagner
Portfolio Manager* and
Director of Fixed Income, First Investors Management Company, Inc.
November 1, 2007
* Mr. Wagner became the Fund’s Portfolio Manager on March 13, 2007.
93 |
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 | |
(4/1/07) | (9/30/07) | (4/1/07–9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,014.28 | $5.55 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,019.55 | $5.57 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,010.62 | $9.07 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,016.05 | $9.10 |
* Expenses are equal to the annualized expense ratio of 1.10% for Class A shares and 1.80% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived.
Portfolio Composition
TOP TEN SECTORS
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
94 |
Cumulative Performance Information
INVESTMENT GRADE FUND
Comparison of change in value of $10,000 investment in the First Investors Investment Grade
Fund (Class A shares) and the Merrill Lynch U.S. Corporate Master Index.
The graph compares a $10,000 investment in the First Investors Investment Grade Fund (Class A shares) beginning 12/31/97 with a theoretical investment in the Merrill Lynch U.S. Corporate Master Index (the “Index”). The Index is unmanaged and includes publicly issued, fixed-rate, nonconvertible investment grade dollar-denominated, S.E.C.-registered corporate debt. All issues have at least one year to maturity and an outstanding par value of at least $250 million. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (2.19%), 2.71% and 4.36%, respectively, and the S.E.C. 30-Day Yield for September 2007 would have been 4.29% . The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (.96%), 2.82% and 4.39%, respectively, and the S.E.C. 30-Day Yield for September 2007 would have been 3.85% . Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Merrill Lynch U.S. Corporate Master Index figures are from Merrill Lynch & Co. and all other figures are from First Investors Management Company, Inc.
95 |
Portfolio of Investments
INVESTMENT GRADE FUND
September 30, 2007
Principal | ||||
Amount | Security | Value | ||
CORPORATE BONDS—71.8% | ||||
Aerospace/Defense—1.9% | ||||
$ 2,000M | Boeing Co., 7.25%, 2025 | $ | 2,299,868 | |
Honeywell International, Inc.: | ||||
1,050M | 7.5%, 2010 | 1,113,505 | ||
975M | 6.125%, 2011 | 1,009,697 | ||
400M | Precision Castparts Corp., 5.6%, 2013 | 408,640 | ||
717M | TRW, Inc., 7.125%, 2009 | 738,147 | ||
5,569,857 | ||||
Automotive—.6% | ||||
1,700M | Daimler Chrysler NA Holdings Corp., 5.75%, 2009 | 1,718,435 | ||
Chemicals—2.8% | ||||
1,700M | Air Products & Chemicals, Inc., 4.125%, 2010 | 1,673,601 | ||
1,700M | Cabot Corp., 5.25%, 2013 † | 1,682,932 | ||
3,500M | DuPont (E.I.) de Nemours & Co., 5.6%, 2036 | 3,167,854 | ||
1,800M | Praxair, Inc., 5.375%, 2016 | 1,769,513 | ||
8,293,900 | ||||
Consumer Durables—.5% | ||||
1,650M | Black & Decker Corp., 5.75%, 2016 | 1,615,008 | ||
Consumer Non-Durables—1.6% | ||||
1,000M | Colgate-Palmolive Co., 5.98%, 2012 | 1,036,924 | ||
1,600M | Newell Rubbermaid, Inc., 6.75%, 2012 | 1,661,656 | ||
2,000M | Procter & Gamble Co., 4.85%, 2015 | 1,933,246 | ||
4,631,826 | ||||
Energy—3.2% | ||||
1,700M | Anadarko Petroleum Corp., 5.95%, 2016 | 1,686,582 | ||
850M | Kinder Morgan Finance Co., 5.35%, 2011 | 831,526 | ||
2,000M | Nexen, Inc., 5.05%, 2013 | 1,938,008 | ||
2,000M | Northern Border Pipeline Co., 7.1%, 2011 | 2,102,950 | ||
2,220M | Phillips Petroleum Co., 7.125%, 2028 | 2,281,905 | ||
500M | Tesoro Corp., 6.5%, 2017 † | 498,750 | ||
9,339,721 | ||||
96 |
Principal | ||||
Amount | Security | Value | ||
Financial Services—11.6% | ||||
$ 2,000M | Bank of America Corp., 7.4%, 2011 | $ | 2,129,730 | |
2,000M | Citigroup, Inc., 6%, 2033 | 1,954,810 | ||
2,100M | Endurance Specialty Holdings, Ltd., 7%, 2034 | 1,953,439 | ||
1,200M | First Union National Bank, 7.8%, 2010 | 1,286,428 | ||
1,000M | Fleet Capital Trust II, 7.92%, 2026 | 1,039,080 | ||
600M | GATX Financial Corp., 5.5%, 2012 | 598,164 | ||
2,300M | Goldman Sachs Group, Inc., 6.45%, 2036 | 2,251,403 | ||
625M | Greenpoint Bank, 9.25%, 2010 | 698,631 | ||
2,420M | Hibernia Corp., 5.35%, 2014 | 2,329,427 | ||
900M | HSBC Finance Corp., 5%, 2015 | 851,230 | ||
1,880M | Independence Community Bank Corp., 4.9%, 2010 | 1,834,824 | ||
2,000M | JPMorgan Chase & Co., 5.25%, 2015 | 1,936,720 | ||
1,700M | Lehman Brothers Holdings, Inc., 5.75%, 2011 | 1,707,174 | ||
2,625M | MetLife, Inc., 6.4%, 2036 | 2,503,972 | ||
1,200M | National City Bank of Pennsylvania, 7.25%, 2011 | 1,276,218 | ||
1,505M | Nationsbank Corp., 7.8%, 2016 | 1,689,137 | ||
1,298M | Republic NY Corp., 7.75%, 2009 | 1,356,657 | ||
2,000M | Royal Bank of Scotland Group PLC, 5%, 2014 | 1,935,026 | ||
1,500M | US Bank, NA, 6.3%, 2014 | 1,554,690 | ||
500M | Wachovia Bank, NA, 4.875%, 2015 | 473,682 | ||
2,565M | Washington Mutual Bank, 5.95%, 2013 | 2,535,028 | ||
33,895,470 | ||||
Financials—6.8% | ||||
900M | American Express Co., 4.875%, 2013 | 866,746 | ||
875M | American General Finance Corp., 8.125%, 2009 | 925,587 | ||
900M | Caterpillar Financial Services Corp., 4.6%, 2014 | 855,827 | ||
ERAC USA Finance Enterprise Co.: | ||||
1,775M | 7.35%, 2008 † | 1,794,663 | ||
1,170M | 8%, 2011 † | 1,262,352 | ||
2,363M | Ford Motor Credit Co., 9.75%, 2010 | 2,412,221 | ||
General Electric Capital Corp.: | ||||
700M | 8.5%, 2008 | 717,602 | ||
2,500M | 5.45%, 2013 | 2,526,263 | ||
2,625M | General Motors Acceptance Corp., 7.75%, 2010 | 2,604,987 | ||
1,200M | Health Care Property Investors, Inc., 6%, 2017 | 1,148,014 | ||
1,825M | Household Finance Corp., 6.5%, 2008 | 1,850,384 | ||
2,000M | International Lease Finance Corp., 5.625%, 2013 | 1,985,440 | ||
900M | Siemens Financieringsmaatschappij NV, 5.75%, 2016 † | 909,194 | ||
19,859,280 | ||||
97 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2007
Principal | ||||
Amount | Security | Value | ||
Food/Beverage/Tobacco—4.7% | ||||
$ 2,860M | Altria Group, Inc., 7%, 2013 | $ | 3,111,906 | |
900M | Anheuser-Busch Cos., Inc., 4.375%, 2013 | 857,224 | ||
910M | Bottling Group, LLC , 5%, 2013 | 894,991 | ||
1,980M | Bunge Limited Finance Corp., 5.875%, 2013 | 1,964,703 | ||
900M | Cargill, Inc., 5.6%, 2012 † | 907,879 | ||
1,500M | Coca-Cola Enterprises, Inc., 7.125%, 2017 | 1,666,740 | ||
1,949M | ConAgra Foods, Inc., 6.75%, 2011 | 2,039,034 | ||
1,000M | Pepsi Bottling Group, Inc., 7%, 2029 | 1,100,985 | ||
1,225M | UST, Inc., 7.25%, 2009 | 1,260,979 | ||
13,804,441 | ||||
Food/Drug—1.0% | ||||
2,000M | Kroger Co., 6.75%, 2012 | 2,105,192 | ||
700M | Safeway, Inc., 6.5%, 2011 | 732,884 | ||
2,838,076 | ||||
Forest Products/Containers—.6% | ||||
1,725M | Sappi Papier Holding AG, 6.75%, 2012 † | 1,694,795 | ||
Gaming/Leisure—1.5% | ||||
1,423M | Hilton Hotels Corp., 7.2%, 2009 | 1,508,968 | ||
2,000M | International Speedway Corp., 4.2%, 2009 | 1,977,382 | ||
750M | MGM Mirage, Inc., 8.5%, 2010 | 787,500 | ||
4,273,850 | ||||
Health Care—5.0% | ||||
Abbott Laboratories: | ||||
900M | 5.6%, 2011 | 917,436 | ||
2,000M | 5.875%, 2016 | 2,021,388 | ||
1,800M | AstraZeneca PLC, 5.9%, 2017 | 1,830,541 | ||
564M | Baxter International, Inc., 5.9%, 2016 | 569,605 | ||
1,880M | Becton, Dickinson & Co., 7.15%, 2009 | 1,970,157 | ||
2,500M | Fisher Scientific International, Inc., 6.75%, 2014 | 2,519,978 | ||
Johnson & Johnson: | ||||
900M | 5.55%, 2017 | 916,016 | ||
900M | 5.95%, 2037 | 926,128 | ||
1,130M | Tenet Healthcare Corp., 6.375%, 2011 | 994,400 | ||
1,830M | Wyeth, 6.95%, 2011 | 1,919,401 | ||
14,585,050 | ||||
98 |
Principal | ||||
Amount | Security | Value | ||
Housing—.7% | ||||
$ 1,970M | D.R. Horton, Inc., 8%, 2009 | $ | 1,956,791 | |
Information Technology—2.3% | ||||
2,645M | International Business Machines Corp., 7%, 2025 | 2,923,370 | ||
2,000M | Oracle Corp., 5.25%, 2016 | 1,950,700 | ||
1,750M | Xerox Corp., 6.875%, 2011 | 1,817,720 | ||
6,691,790 | ||||
Manufacturing—4.0% | ||||
1,750M | Briggs & Stratton Corp., 8.875%, 2011 | 1,876,875 | ||
2,000M | Caterpillar, Inc., 6.05%, 2036 | 2,009,360 | ||
2,500M | Crane Co., 6.55%, 2036 | 2,463,018 | ||
1,112M | Hanson Australia Funding, Ltd., 5.25%, 2013 | 1,066,008 | ||
646M | Hanson PLC, 7.875%, 2010 | 688,353 | ||
875M | Ingersoll-Rand Co., 9%, 2021 | 1,114,364 | ||
United Technologies Corp.: | ||||
900M | 6.5%, 2009 | 919,293 | ||
1,600M | 7.125%, 2010 | 1,697,170 | ||
11,834,441 | ||||
Media-Broadcasting—1.6% | ||||
2,000M | Comcast Cable Communications, Inc., 7.125%, 2013 | 2,131,414 | ||
2,000M | Cox Communications, Inc., 4.625%, 2013 | 1,888,854 | ||
700M | PanAmSat Corp., 6.375%, 2008 | 702,625 | ||
4,722,893 | ||||
Media-Diversified—3.0% | ||||
1,575M | AOL Time Warner, Inc., 6.875%, 2012 | 1,654,235 | ||
1,800M | News America, Inc., 5.3%, 2014 | 1,753,736 | ||
1,000M | Time Warner, Inc., 9.125%, 2013 | 1,147,638 | ||
Viacom, Inc.: | ||||
1,200M | 5.75%, 2011 | 1,212,578 | ||
500M | 8.625%, 2012 | 559,230 | ||
360M | 8.875%, 2014 | 415,545 | ||
2,000M | Walt Disney Co., 5.7%, 2011 | 2,030,266 | ||
8,773,228 | ||||
99 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2007
Principal | ||||
Amount | Security | Value | ||
Metals/Mining—1.1% | ||||
$ 1,300M | Alcoa, Inc., 6%, 2012 | $ | 1,327,109 | |
2,000M | Vale Overseas, Ltd., 6.25%, 2017 | 2,032,398 | ||
3,359,507 | ||||
Real Estate Investment Trusts—2.6% | ||||
1,654M | Archstone-Smith Trust, 7.9%, 2016 | 1,805,865 | ||
AvalonBay Communities, Inc.: | ||||
1,900M | 7.5%, 2010 | 2,036,133 | ||
200M | 6.625%, 2011 | 208,114 | ||
1,350M | Duke Weeks Realty Corp., 7.75%, 2009 | 1,415,223 | ||
1,900M | Mack-Cali Realty LP, 7.75%, 2011 | 2,035,993 | ||
7,501,328 | ||||
Retail—General Merchandise—1.6% | ||||
900M | Costco Wholesale Corp., 5.5%, 2017 | 882,136 | ||
Lowe’s Cos., Inc.: | ||||
900M | 8.25%, 2010 | 972,909 | ||
450M | 6.1%, 2017 | 455,505 | ||
Wal-Mart Stores, Inc.: | ||||
1,400M | 4.5%, 2015 | 1,309,476 | ||
1,080M | 5.8%, 2018 | 1,089,575 | ||
4,709,601 | ||||
Telecommunications—3.8% | ||||
900M | AT&T, Inc., 6.5%, 2037 | 931,093 | ||
2,000M | Deutsche Telekom AG, 8%, 2010 | 2,143,664 | ||
1,359M | GTE Corp., 6.84%, 2018 | 1,452,181 | ||
2,000M | SBC Communications, Inc., 6.25%, 2011 | 2,059,628 | ||
1,725M | Sprint Capital Corp., 6.375%, 2009 | 1,752,493 | ||
800M | Verizon New York, Inc., 6.875%, 2012 | 843,536 | ||
1,750M | Vodafone AirTouch PLC, 7.75%, 2010 | 1,848,686 | ||
11,031,281 | ||||
Transportation—2.7% | ||||
2,000M | Burlington Northern Santa Fe Corp., 4.3%, 2013 | 1,888,382 | ||
2,000M | Canadian National Railway Co., 6.25%, 2034 | 1,986,146 | ||
565M | FedEx Corp., 5.5%, 2009 | 571,570 | ||
1,000M | Norfolk Southern Corp., 7.7%, 2017 | 1,118,693 | ||
1,958M | Union Pacific Corp., 7.375%, 2009 | 2,046,041 | ||
300M | Union Pacific Railroad, 7.28%, 2011 | 322,621 | ||
7,933,453 | ||||
100 |
Principal | ||||
Amount | Security | Value | ||
Utilities—5.7% | ||||
$ 1,350M | Carolina Power & Light, Inc., 5.15%, 2015 | $ | 1,310,496 | |
1,800M | Consumers Energy Co., 6.875%, 2018 | 1,956,276 | ||
1,450M | Dominion Resources, Inc., 5%, 2013 | 1,402,710 | ||
2,650M | Entergy Gulf States, Inc., 5.25%, 2015 | 2,501,674 | ||
1,550M | Florida Power & Light Co., 5.85%, 2033 | 1,507,389 | ||
750M | Great River Energy Co., 5.829%, 2017 † | 768,114 | ||
1,325M | Jersey Central Power & Light Co., 5.625%, 2016 | 1,300,326 | ||
NiSource Finance Corp.: | ||||
900M | 7.875%, 2010 | 964,010 | ||
600M | 5.4%, 2014 | 583,979 | ||
1,400M | OGE Energy Corp., 5%, 2014 | 1,327,228 | ||
775M | PSI Energy, Inc., 8.85%, 2022 | 975,041 | ||
1,510M | Public Service Electric & Gas Co., 6.75%, 2016 | 1,617,687 | ||
400M | South Carolina Electric & Gas Co., 6.7%, 2011 | 419,425 | ||
16,634,355 | ||||
Waste Management—.9% | ||||
500M | Allied Waste NA, Inc., 5.75%, 2011 | 493,750 | ||
2,000M | Waste Management, Inc., 6.875%, 2009 | 2,068,006 | ||
2,561,756 | ||||
Total Value of Corporate Bonds (cost $210,912,535) | 209,830,133 | |||
MORTGAGE-BACKED CERTIFICATES—7.5% | ||||
Fannie Mae—6.1% | ||||
13,713M | 5.5%, 1/1/2037—8/1/2037 | 13,434,955 | ||
2,000M | 6%, 9/1/2037 | 2,003,304 | ||
2,225M | 6.5%, 7/1/2037 | 2,265,829 | ||
17,704,088 | ||||
Freddie Mac—1.4% | ||||
4,188M | 5.5%, 6/1/2036—9/1/2036 | 4,103,775 | ||
Total Value of Mortgage-Backed Certificates (cost $21,687,462) | 21,807,863 | |||
101 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2007
Principal | ||||
Amount | Security | Value | ||
U.S. GOVERNMENT OBLIGATIONS—7.2% | ||||
$ 1,085M | FDA Queens LP, 6.99%, 2017 † | $ | 1,185,442 | |
U.S. Treasury Notes: | ||||
7,000M | 4.875%, 2009 | 7,082,579 | ||
3,950M | 4.625%, 2011 | 4,020,361 | ||
1,000M | 4.75%, 2014 | 1,022,813 | ||
1,700M | 4.625%, 2016 | 1,708,900 | ||
860M | 4.875%, 2016 | 880,426 | ||
5,100M | 5.125%, 2016 | 5,315,557 | ||
Total Value of U.S. Government Obligations (cost $20,822,674) | 21,216,078 | |||
U.S. GOVERNMENT AGENCY OBLIGATIONS—6.3% | ||||
Fannie Mae: | ||||
2,625M | 5.25%, 2010 | 2,630,326 | ||
2,000M | 5.65%, 2014 | 2,005,714 | ||
2,600M | 6%, 2016 | 2,614,635 | ||
Federal Home Loan Bank: | ||||
3,000M | 5.125%, 2013 | 3,063,345 | ||
2,625M | 5.815%, 2013 | 2,648,090 | ||
1,000M | 7.23%, 2015 | 1,069,892 | ||
Freddie Mac: | ||||
1,000M | 6%, 2012 | 1,004,769 | ||
2,500M | 6%, 2017 | 2,547,708 | ||
1,000M | 6%, 2017 | 1,006,390 | ||
Total Value of U.S. Government Agency Obligations (cost $18,448,415) | 18,590,869 | |||
PASS THROUGH CERTIFICATES—1.1% | ||||
Transportation | ||||
518M | American Airlines, Inc., 7.377%, 2019 | 487,431 | ||
1,231M | Continental Airlines, Inc., 8.388%, 2020 | 1,228,175 | ||
1,289M | FedEx Corp., 7.5%, 2018 | 1,398,779 | ||
Total Value of Pass Through Certificates (cost $3,206,077) | 3,114,385 | |||
MUNICIPAL BONDS—.6% | ||||
1,750M | Tobacco Settlement Fin. Auth., West Virginia, Series “A”, | |||
7.467%, 2047 (cost $1,750,000) | 1,722,856 | |||
102 |
Principal | |||||
Amount | Security | Value | |||
SHORT-TERM CORPORATE NOTES—4.1% | |||||
$ 1,000M | Johnson & Johnson, 4.72%, 10/9/07 †† | $ 998,950 | |||
6,200M | New Jersey Natural Gas Co., 4.75%, 10/9/07 | 6,193,450 | |||
1,750M | Prudential Funding Corp., 4.6%, 10/11/07 | 1,747,761 | |||
3,000M | Toyota Motor Credit Corp., 5.22%, 10/16/07 | 2,993,459 | |||
Total Value of Short-Term Corporate Notes (cost $11,933,620) | 11,933,620 | ||||
Total Value of Investments (cost $288,760,783) | 98.6 | % | 288,215,804 | ||
Other Assets, Less Liabilities | 1.4 | 4,170,730 | |||
Net Assets | 100.0 | % | $292,386,534 | ||
† Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4).
†† Security exempt from registration under Section 4(2) of the Securities Act of 1933 (see Note 4).
See notes to financial statements | 103 |
Portfolio Managers’ Letter
FUND FOR INCOME
Dear Investor:
This is the annual report for the First Investors Fund For Income for the fiscal year ended September 30, 2007. During the period, the Fund’s return on a net asset value basis was 6.4% for Class A shares and 6.0% for Class B shares, including dividends of 21.0 cents per share on Class A shares and 18.8 cents per share on Class B shares.
The most important factors driving the Fund’s performance during the reporting period were the overall performance of the high yield market and the Fund’s individual security selections.
The high yield market was the top performing fixed income sector during the reporting period. The first half of the reporting period was strong, as the economy did not present a concern for investors and the feeling was that defaults would remain historically low throughout 2007. After posting solid returns through May, volatility and risk aversion returned to the high yield market in June. Rising Treasury yields, concern about the problems in the subprime mortgage market spilling over to other risky asset classes, and an increase in aggressively structured leveraged buyouts (“LBOs”) contributed to investor anxiety. The remainder of the fiscal year continued to be marked by volatility as July was the worst performing month since June of 2002, and September was the best performing month since December of 2003. The Federal Reserve’s 50 basis point cut in the federal funds rate spurred the recovery in the high yield market in September.
Aiding the Fund’s performance were investments in cable television providers Charter Communications and Adelphia Communications, electronics retailer Gregg Appliances, and exploration and production company El Paso Production Holdings. Charter Communications reported improved operating results and benefited from a debt exchange. Adelphia Communications was acquired out of bankruptcy by Time Warner Cable, and the Fund received Time Warner Cable common stock. Gregg Appliances redeemed its bonds at a premium following its initial public offering. El Paso Production Holdings benefited from strong energy prices prior to tendering for its bonds at a premium.
The most significant negative contributor to the Fund’s performance was its investment in Delco Remy, an auto parts supplier. Delco Remy faced deteriorating business conditions and an overleveraged balance sheet. Sinclair Broadcast Group, a television broadcaster, and MediaNews, a newspaper publisher, declined over concerns that “old world” media assets are losing market share to digital media. The Fund’s investments in real estate service provider Realogy Corporation and teen retailer Claire’s Stores suffered from investors shunning aggressively structured LBOs.
104 |
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Richard T. Bourke
Portfolio Manager
Greg Miller
Portfolio Manager
November 1, 2007
105 |
Fund Expenses
FUND FOR INCOME
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 | |
(4/1/07) | (9/30/07) | (4/1/07–9/30/07)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $998.33 | $6.46 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.60 | $6.53 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $994.84 | $9.95 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,015.09 | $10.05 |
*Expenses are equal to the annualized expense ratio of 1.29% for Class A shares and 1.99% for
Class B shares, multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period).
Portfolio Composition
BY SECTOR
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2007,
and are based on the total value of investments.
106 |
Cumulative Performance Information
FUND FOR INCOME
Comparison of change in value of $10,000 investment in the First Investors Fund For Income
(Class A shares) and the Credit Suisse High Yield Index II.
The graph compares a $10,000 investment in the First Investors Fund For Income (Class A shares) beginning 12/31/97 with a theoretical investment in the Credit Suisse High Yield Index II (the “Index”). The Index is unmanaged and is designed to measure the performance of the high yield bond market. As of 9/30/07, the Index consisted of 1,216 different issues, most of which were cash pay, also included in the Index were zero-coupon bonds, step bonds, payment-in-kind bonds and bonds which were in default. As of 9/30/07, approximately 2.04% of the market value of the Index was in default. The bonds included in the Index have an average maturity of 7.31 years, an average duration of 4.47 years and an average coupon of 8.29% . It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless othe rwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/07) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%) . The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be wort h more or less than the original cost. The issuers of the high yield bonds, in which the Fund primarily invests, pay higher interest rates because they have a greater likelihood of financial difficulty, which could result in their inability to repay the bonds fully when due. Prices of high yield bonds are also subject to greater fluctuations. Credit Suisse High Yield Index II figures are from Credit Suisse Corporation and all other figures are from First Investors Management Company, Inc.
107 |
Portfolio of Investments
FUND FOR INCOME
September 30, 2007
Principal | ||||
Amount | Security | Value | ||
CORPORATE BONDS—87.0% | ||||
Aerospace/Defense—4.0% | ||||
$ 150M | Alion Science & Technology Corp., 10.25%, 2015 | $ | 136,875 | |
4,775M | Alliant Techsystems, Inc., 6.75%, 2016 | 4,739,187 | ||
DRS Technologies, Inc.: | ||||
5,250M | 6.875%, 2013 | 5,276,250 | ||
1,000M | 6.625%, 2016 | 992,500 | ||
5,508M | DynCorp International, LLC, 9.5%, 2013 | 5,728,320 | ||
1,747M | GenCorp, Inc., 9.5%, 2013 | 1,829,982 | ||
4,375M | L-3 Communications Corp., 7.625%, 2012 | 4,495,313 | ||
23,198,427 | ||||
Automotive—4.6% | ||||
2,700M | Accuride Corp., 8.5%, 2015 | 2,605,500 | ||
250M | American Axle & Manufacturing, Inc., 7.875%, 2017 | 242,500 | ||
Asbury Automotive Group, Inc.: | ||||
5,400M | 8%, 2014 | 5,238,000 | ||
2,000M | 7.625%, 2017 † | 1,850,000 | ||
6,975M | Avis Budget Car Rental, LLC, 7.75%, 2016 | 6,870,375 | ||
4,208M | Cambridge Industries Liquidating Trust, 2008 †† ** | 2,630 | ||
500M | Tenneco Automotive, Inc., 8.625%, 2014 | 506,250 | ||
6,575M | United Auto Group, Inc., 7.75%, 2016 | 6,328,438 | ||
3,600M | United Components, Inc., 9.375%, 2013 | 3,672,000 | ||
27,315,693 | ||||
Chemicals—5.4% | ||||
3,500M | Equistar Chemicals LP, 10.625%, 2011 | 3,675,000 | ||
1,850M | Huntsman International, LLC, 7.375%, 2015 | 1,942,500 | ||
Huntsman, LLC: | ||||
1,636M | 11.625%, 2010 | 1,738,250 | ||
2,765M | 11.5%, 2012 | 3,020,762 | ||
500M | MacDermid, Inc., 9.5%, 2017 † | 485,000 | ||
5,250M | Nell AF S.a.r.l., 8.375%, 2015 † | 4,816,875 | ||
4,800M | Newmarket Corp., 7.125%, 2016 | 4,680,000 | ||
4,500M | Terra Capital, Inc., 7%, 2017 | 4,410,000 | ||
3,900M | Tronox Worldwide, LLC, 9.5%, 2012 | 3,909,750 | ||
3,075M | Westlake Chemical Corp., 6.625%, 2016 | 2,936,625 | ||
31,614,762 | ||||
108 |
Principal | ||||
Amount | Security | Value | ||
Consumer Non-Durables—1.9% | ||||
$ 1,700M | Broder Brothers Co., 11.25%, 2010 | $ | 1,487,500 | |
4,000M | GFSI, Inc., 11.5%, 2011 † *** | 4,180,000 | ||
4,000M | Levi Strauss & Co., 9.75%, 2015 | 4,220,000 | ||
1,150M | Remington Arms Co., 10.5%, 2011 | 1,138,500 | ||
11,026,000 | ||||
Energy—11.1% | ||||
5,275M | Basic Energy Services, Inc., 7.125%, 2016 | 5,156,312 | ||
3,600M | Calfrac Holdings, 7.75%, 2015 † | 3,483,000 | ||
Chesapeake Energy Corp.: | ||||
1,800M | 7.5%, 2014 | 1,854,000 | ||
8,850M | 6.625%, 2016 | 8,850,000 | ||
4,500M | Cimarex Energy Co., 7.125%, 2017 | 4,488,750 | ||
4,350M | Compagnie Generale de Geophysique, 7.5%, 2015 | 4,502,250 | ||
4,375M | Complete Production Services, Inc., 8%, 2016 | 4,347,656 | ||
8,500M | Delta Petroleum Corp., 7%, 2015 | 7,267,500 | ||
1,350M | Hilcorp Energy I, LP, 9%, 2016 † | 1,383,750 | ||
250M | Hornbeck Offshore Services, Inc., 6.125%, 2014 | 235,000 | ||
Pacific Energy Partners LP: | ||||
3,070M | 7.125%, 2014 | 3,151,155 | ||
1,920M | 6.25%, 2015 | 1,852,740 | ||
Petroplus Finance, Ltd.: | ||||
900M | 6.75%, 2014 † | 868,500 | ||
3,950M | 7%, 2017 † | 3,772,250 | ||
POGO Producing Co.: | ||||
350M | 7.875%, 2013 | 364,000 | ||
2,650M | 6.875%, 2017 | 2,676,500 | ||
3,600M | Stallion Oilfield Services, Ltd., 9.75%, 2015 † | 3,505,500 | ||
2,600M | Stewart & Stevenson, LLC, 10%, 2014 | 2,652,000 | ||
900M | Stone Energy Corp., 6.75%, 2014 | 837,000 | ||
500M | Swift Energy Co., 7.125%, 2017 | 476,250 | ||
3,490M | Tesoro Corp., 6.25%, 2012 | 3,516,175 | ||
65,240,288 | ||||
Financial Services—2.2% | ||||
13,100M | Targeted Return Index Securities Trust, 7.548%, 2016 † | 12,860,571 | ||
Financials—.7% | ||||
4,350M | General Motors Acceptance Corp., 6.75%, 2014 | 3,948,147 | ||
109 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2007
Principal | ||||
Amount | Security | Value | ||
Food/Beverage/Tobacco—3.0% | ||||
$ 9,000M | Constellation Brands, Inc., 7.25%, 2016 | $ | 9,045,000 | |
Land O’Lakes, Inc.: | ||||
1,800M | 9%, 2010 | 1,872,000 | ||
775M | 8.75%, 2011 | 799,219 | ||
1,800M | Pierre Foods, Inc., 9.875%, 2012 | 1,665,000 | ||
4,125M | Southern States Cooperative, Inc., 10.5%, 2010 † | 4,269,375 | ||
17,650,594 | ||||
Food/Drug—1.1% | ||||
6,250M | Ingles Markets, Inc., 8.875%, 2011 | 6,406,250 | ||
Forest Products/Containers—1.2% | ||||
2,150M | Jefferson Smurfit Corp., 8.25%, 2012 | 2,166,125 | ||
2,000M | Tekni-Plex, Inc., 8.75%, 2013 | 1,815,000 | ||
3,275M | Verso Paper Holdings, LLC, 9.106%, 2014 *** | 3,307,750 | ||
7,288,875 | ||||
Gaming/Leisure—7.5% | ||||
4,250M | Circus & Eldorado/Silver Legacy, 10.125%, 2012 | 4,451,875 | ||
2,200M | Herbst Gaming, Inc., 8.125%, 2012 | 1,982,750 | ||
4,500M | Isle of Capri Casinos, Inc., 7%, 2014 | 4,050,000 | ||
5,220M | Mandalay Resort Group, 6.375%, 2011 | 5,246,100 | ||
6,960M | MGM Mirage, Inc., 6.625%, 2015 | 6,638,100 | ||
5,000M | Park Place Entertainment Corp., 7%, 2013 | 5,218,470 | ||
1,800M | Pinnacle Entertainment, Inc., 7.5%, 2015 † | 1,712,250 | ||
9,745M | Speedway Motorsports, Inc., 6.75%, 2013 | 9,647,550 | ||
4,500M | Station Casinos, Inc., 6.875%, 2016 | 3,937,500 | ||
1,800M | Wimar Opco, LLC, (Tropicana Entertainment), 9.625%, 2014 † | 1,404,000 | ||
44,288,595 | ||||
Health Care—5.4% | ||||
3,150M | Alliance Imaging, Inc., 7.25%, 2012 | 3,031,875 | ||
4,350M | DaVita, Inc., 7.25%, 2015 | 4,382,625 | ||
3,480M | Fisher Scientific International, Inc., 6.125%, 2015 | 3,421,710 | ||
4,400M | Genesis Health Ventures, Inc., 9.75%, 2008 †† ** | 2,750 | ||
HCA, Inc.: | ||||
4,400M | 6.95%, 2012 | 4,114,000 | ||
1,730M | 6.75%, 2013 | 1,561,325 | ||
1,800M | MedQuest, Inc., 11.875%, 2012 | 1,818,000 | ||
4,000M | Omnicare, Inc., 6.875%, 2015 | 3,720,000 | ||
3,025M | Res-Care, Inc., 7.75%, 2013 | 3,009,875 | ||
110 |
Principal | ||||
Amount | Security | Value | ||
Health Care (continued) | ||||
Tenet Healthcare Corp.: | ||||
$ 5,200M | 6.375%, 2011 | $ | 4,576,000 | |
2,250M | 9.25%, 2015 | 1,996,875 | ||
31,635,035 | ||||
Housing—4.0% | ||||
4,360M | Beazer Homes USA, Inc., 6.875%, 2015 | 3,248,200 | ||
6,100M | Builders FirstSource, Inc., 9.808%, 2012 *** | 5,901,750 | ||
900M | NTK Holdings, Inc., 0%—10.75%, 2014 # | 558,000 | ||
7,700M | Ply Gem Industries, Inc., 9%, 2012 | 6,275,500 | ||
3,500M | Realogy Corp., 12.375%, 2015 † | 2,651,250 | ||
William Lyon Homes, Inc.: | ||||
4,500M | 7.625%, 2012 | 3,082,500 | ||
2,700M | 10.75%, 2013 | 2,011,500 | ||
23,728,700 | ||||
Information Technology—3.4% | ||||
7,650M | Belden CDT, Inc., 7%, 2017 † | 7,611,750 | ||
3,000M | Exodus Communications, Inc., 10.75%, 2009 ††** | 1,875 | ||
Freescale Semiconductor, Inc.: | ||||
5,250M | 9.125%, 2014 | 4,882,500 | ||
875M | 10.125%, 2016 | 818,125 | ||
Iron Mountain, Inc.: | ||||
1,000M | 8.625%, 2013 | 1,017,500 | ||
1,000M | 6.625%, 2016 | 940,000 | ||
1,000M | NXP BV/NXP Funding, LLC, 7.875%, 2014 | 966,250 | ||
Sanmina – SCI Corp.: | ||||
875M | 8.444%, 2014 † *** | 840,000 | ||
1,300M | 8.125%, 2016 | 1,131,000 | ||
Xerox Corp.: | ||||
500M | 6.4%, 2016 | 507,004 | ||
1,000M | 6.75%, 2017 | 1,025,310 | ||
19,741,314 | ||||
Investment/Finance Companies—1.3% | ||||
7,300M | LaBranche & Co., Inc., 11%, 2012 | 7,354,750 | ||
111 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2007
Principal | ||||
Amount | Security | Value | ||
Manufacturing—1.0% | ||||
$ 2,740M | Case New Holland, Inc., 7.125%, 2014 | $ | 2,822,200 | |
ESCO Corp.: | ||||
250M | 8.625%, 2013 † | 247,500 | ||
250M | 9.569%, 2013 † *** | 242,500 | ||
2,500M | Itron, Inc., 7.75%, 2012 | 2,475,000 | ||
5,787,200 | ||||
Media-Broadcasting—4.0% | ||||
5,250M | Block Communications, Inc., 8.25%, 2015 † | 5,250,000 | ||
250M | Bonten Media Group, Inc., 9%, 2015 † | 225,000 | ||
4,400M | LBI Media, Inc., 8.5%, 2017 † | 4,400,000 | ||
5,000M | Nexstar Finance Holding, LLC, 0%—11.375%, 2013 # | 4,950,000 | ||
450M | Nexstar Finance, Inc., 7%, 2014 | 434,250 | ||
1,357M | Sinclair Broadcasting Group, Inc., 8%, 2012 | 1,394,352 | ||
Young Broadcasting, Inc.: | ||||
2,920M | 10%, 2011 | 2,708,300 | ||
4,900M | 8.75%, 2014 | 4,165,000 | ||
23,526,902 | ||||
Media-Cable TV—9.5% | ||||
8,745M | Adelphia Communications Escrow Bond, 2011 †† | 1,530,375 | ||
6,250M | Atlantic Broadband Finance, LLC, 9.375%, 2014 | 6,125,000 | ||
6,900M | Cablevision Systems Corp., 8%, 2012 | 6,727,500 | ||
Charter Communications Holdings, LLC: | ||||
8,500M | 10%, 2009 | 8,521,250 | ||
2,000M | 10.25%, 2010 | 1,930,000 | ||
8,250M | 0%—11.75%, 2011# | 7,950,937 | ||
2,000M | 8%, 2012 † | 2,000,000 | ||
4,625M | CSC Holdings, Inc., 8.125%, 2009 | 4,717,500 | ||
8,690M | Echostar DBS Corp., 6.375%, 2011 | 8,755,175 | ||
Mediacom LLC/Mediacom Capital Corp.: | ||||
4,000M | 7.875%, 2011 | 3,950,000 | ||
2,000M | 9.5%, 2013 | 2,035,000 | ||
Quebecor Media, Inc.: | ||||
1,000M | 7.75%, 2016 | 958,750 | ||
800M | 7.75%, 2016 † | 767,000 | ||
55,968,487 | ||||
112 |
Principal | ||||
Amount | Security | Value | ||
Media-Diversified—4.5% | ||||
$ 5,200M | Cenveo, Inc., 7.875%, 2013 | $ | 4,758,000 | |
2,000M | Deluxe Corp., 7.375%, 2015 | 1,985,000 | ||
5,250M | Idearc, Inc., 8%, 2016 | 5,263,125 | ||
MediaNews Group, Inc.: | ||||
2,625M | 6.875%, 2013 | 2,008,125 | ||
3,100M | 6.375%, 2014 | 2,309,500 | ||
1,000M | R.H. Donnelley Corp., 8.875%, 2017 † | 1,020,000 | ||
R.H. Donnelley, Inc.: | ||||
1,500M | 10.875%, 2012 † | 1,601,250 | ||
164M | 10.875%, 2012 | 174,803 | ||
Six Flags, Inc.: | ||||
2,500M | 8.875%, 2010 | 2,268,750 | ||
1,800M | 9.625%, 2014 | 1,496,250 | ||
3,400M | Universal City Development Partners, Ltd., 11.75%, 2010 | 3,561,500 | ||
250M | Universal City Florida Holding Co., 10.106%, 2010 *** | 253,750 | ||
26,700,053 | ||||
Metals/Mining—1.2% | ||||
500M | Freeport-McMoRan Copper & Gold, Inc., 8.375%, 2017 | 547,500 | ||
1,750M | Metals USA, Inc., 11.125%, 2015 | 1,872,500 | ||
4,610M | Russell Metals, Inc., 6.375%, 2014 | 4,344,925 | ||
6,764,925 | ||||
Retail-General Merchandise—3.1% | ||||
4,400M | Claire’s Stores, Inc., 9.625%, 2015, PIK † | 3,641,000 | ||
GSC Holdings Corp.: | ||||
1,800M | 9.235%, 2011 *** | 1,836,000 | ||
1,700M | 8%, 2012 | 1,776,500 | ||
6,100M | Neiman Marcus Group, Inc., 10.375%, 2015 | 6,679,500 | ||
4,750M | Yankee Acquisition Corp., 9.75%, 2017 | 4,512,500 | ||
18,445,500 | ||||
Services—4.3% | ||||
Allied Waste NA, Inc.: | ||||
1,800M | 7.875%, 2013 | 1,867,500 | ||
6,000M | 7.375%, 2014 | 6,060,000 | ||
5,250M | 6.875%, 2017 | 5,302,500 | ||
113 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2007
Principal | ||||
Amount | ||||
or Shares | Security | Value | ||
Services (continued) | ||||
$ 4,700M | Ashtead Capital, Inc., 9%, 2016 † | $ | 4,658,875 | |
United Rentals, Inc.: | ||||
2,700M | 6.5%, 2012 | 2,747,250 | ||
4,350M | 7%, 2014 | 4,458,750 | ||
25,094,875 | ||||
Telecommunications—.0% | ||||
6,050M | E. Spire Communications, Inc., 13%, 2010 †† ** | 605 | ||
2,400M | ICG Services, Inc., 10%, 2008 †† ** | 1,500 | ||
2,105 | ||||
Transportation—.4% | ||||
1,750M | Overseas Shipholding Group, Inc., 8.25%, 2013 | 1,813,438 | ||
500M | Titan Petrochemicals Group, Ltd., 8.5%, 2012 † | 447,500 | ||
2,260,938 | ||||
Utilities—.0% | ||||
250M | Reliant Energy, Inc., 6.75%, 2014 | 253,750 | ||
Wireless Communications—2.2% | ||||
8,000M | Nextel Communications, Inc., 5.95%, 2014 | 7,647,696 | ||
5,200M | Rogers Wireless, Inc., 6.375%, 2014 | 5,259,764 | ||
12,907,460 | ||||
Total Value of Corporate Bonds (cost $537,959,513) | 511,010,196 | |||
COMMON STOCKS—3.8% | ||||
Automotive—.0% | ||||
37,387 | * | Safelite Glass Corporation – Class “B” † ** | 28,040 | |
2,523 | * | Safelite Realty Corporation ** | 30,528 | |
58,568 | ||||
Chemicals—1.0% | ||||
14,634 | * | Texas Petrochemicals Corporation ** | 386,338 | |
180,613 | * | Texas Petrochemicals Corporation ** | 5,418,390 | |
5,804,728 | ||||
Consumer Staples—.7% | ||||
325,000 | Sinclair Broadcasting Group, Inc. | 3,913,000 | ||
114 |
Shares, | ||||
Warrants or | ||||
Principal | ||||
Amount | Security | Value | ||
Food/Drug—.3% | ||||
55,850 | Ingles Markets, Inc. | $ | 1,600,661 | |
Media-Broadcasting—.7% | ||||
105,000 | Clear Channel Communications, Inc. | 3,931,200 | ||
Media-Cable TV—1.1% | ||||
8,731,521 | * | Adelphia Recovery Trust | 894,981 | |
173,887 | * | Time Warner Cable, Inc. – Class “A” | 5,703,494 | |
6,598,475 | ||||
Telecommunications—.0% | ||||
16,049 | Deutsche Telekom AG (ADR) | 315,042 | ||
2,533 | * | Viatel Holding (Bermuda), Ltd.** | 14 | |
18,224 | * | World Access, Inc. | 24 | |
315,080 | ||||
Total Value of Common Stocks (cost $21,222,250) | 22,221,712 | |||
WARRANTS—.0% | ||||
Aerospace/Defense—.0% | ||||
3,000 | * | DeCrane Aircraft Holdings, Inc. (expiring 9/30/08) † ** | 30 | |
Telecommunication Services—.0% | ||||
3,500 | * | GT Group Telecom, Inc. (expiring 2/1/10) † ** | — | |
Total Value of Warrants (cost $319,220) | 30 | |||
SHORT-TERM CORPORATE NOTES—7.6% | ||||
$15,700M | General Electric Capital Corp., 4.72%, 10/10/07 | 15,681,459 | ||
2,400M | Johnson & Johnson, 4.72%, 10/9/07 ††† | 2,397,480 | ||
7,000M | PepsiCo, Inc., 4.73%, 10/19/07 ††† | 6,983,436 | ||
20,000M | Toyota Motor Credit Corp., 5.18%, 10/25/07 | 19,930,793 | ||
Total Value of Short-Term Corporate Notes (cost $44,993,168) | 44,993,168 | |||
115 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2007
Principal | |||||
Amount | Security | Value | |||
SHORT-TERM U.S. GOVERNMENT | |||||
AGENCY OBLIGATIONS—.5% | |||||
$ 3,000M | Fannie Mae, 5.16%, 10/1/07 (cost $3,000,000) | $ | 3,000,000 | ||
Total Value of Investments (cost $607,494,151) | 98.9 | % | 581,225,106 | ||
Other Assets, Less Liabilities | 1.1 | 6,428,492 | |||
Net Assets | 100.0 | % | $587,653,598 | ||
† Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4).
†† In default as to principal and/or interest payment
††† Security exempt from registration under Section 4(2) of the Securities Act of 1933
(see Note 4).
* Non-income producing
** Securities 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 September 30, 2007.
# Denotes a step bond (a zero coupon bond that converts to a fixed interest rate at a
designated date).
116 | See notes to financial statements |
Portfolio Composition (Unaudited)
FUND FOR INCOME
The dollar weighted average of credit ratings of all bonds held by the Fund during the fiscal year ended September 30, 2007 and the dollar weighted average of the total of the Fund's investments in step bonds and pay-in-kind bonds during the 2007 fiscal year, computed on a monthly basis, are set forth below. This information reflects the average composition of the Fund's assets during the 2007 fiscal year and is not necessarily representative of the Fund as of the end of its 2007 fiscal year, the current fiscal year or at any other time in the future.
Comparable Quality of | |||||||||||||||
Rated by | Unrated Securities to | ||||||||||||||
Moody's | Bonds Rated by Moody's | ||||||||||||||
A1 | 0.04 | % | 0.00 | % | |||||||||||
Baa3 | 4.28 | 0.00 | |||||||||||||
Ba1 | 2.96 | 0.00 | |||||||||||||
Ba2 | 8.41 | 0.00 | |||||||||||||
Ba3 | 7.09 | 0.00 | |||||||||||||
B1 | 14.13 | 0.00 | |||||||||||||
B2 | 17.15 | 0.00 | |||||||||||||
B3 | 19.50 | 0.00 | |||||||||||||
Caa1 | 10.51 | 0.00 | |||||||||||||
Caa2 | 1.47 | 0.68 | |||||||||||||
Caa3 | 3.12 | 0.00 | |||||||||||||
Ca | 0.11 | 0.03 | |||||||||||||
C | 0.00 | 1.18 | |||||||||||||
Step Bonds | 0.91 | % | |||||||||||||
Pay-in-kind Bonds | 0.25 | % | |||||||||||||
117 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2007
TOTAL | GROWTH & | ||||||||||
RETURN | VALUE | BLUE CHIP | INCOME | GLOBAL | |||||||
Assets | |||||||||||
Investments in securities: | |||||||||||
At identified cost | $324,013,203 | $336,287,267 | $380,363,759 | $631,746,639 | $267,773,490 | ||||||
At value (Note 1A) | $388,189,751 | $440,763,056 | $572,594,342 | $875,078,154 | $333,829,101 | ||||||
Cash | 370,601 | 175,410 | 246,096 | 1,531,845 | 13,767 | ||||||
Receivables: | |||||||||||
Investment securities sold | 2,634,495 | 213,235 | — | 701,144 | 4,381,121 | ||||||
Dividends and interest | 1,822,158 | 810,218 | 562,503 | 839,555 | 464,322 | ||||||
Shares sold | 603,692 | 856,965 | 406,692 | 1,585,550 | 401,642 | ||||||
Other assets | 16,378 | 17,105 | 22,941 | 34,336 | 33,085 | ||||||
Total Assets | 393,637,075 | 442,835,989 | 573,832,574 | 879,770,584 | 339,123,038 | ||||||
Liabilities | |||||||||||
Payables: | |||||||||||
Investment securities purchased | 3,048,202 | 244,383 | 782,026 | 2,983,105 | 1,685,053 | ||||||
Shares redeemed | 775,723 | 1,012,750 | 762,954 | 1,243,274 | 306,602 | ||||||
Dividends payable | 25,849 | 19,153 | 6,492 | 6,068 | — | ||||||
Forward currency contracts (Note 5) | — | — | — | — | 1,023 | ||||||
Accrued advisory fees | 219,626 | 247,131 | 315,222 | 470,490 | 233,485 | ||||||
Accrued shareholder servicing costs | 68,745 | 82,795 | 137,716 | 177,400 | 62,530 | ||||||
Accrued expenses | 29,583 | 15,953 | 63,625 | 25,117 | 63,382 | ||||||
Total Liabilities | 4,167,728 | 1,622,165 | 2,068,035 | 4,905,454 | 2,352,075 | ||||||
Net Assets | $389,469,347 | $441,213,824 | $571,764,539 | $874,865,130 | $336,770,963 | ||||||
Net Assets Consist of: | |||||||||||
Capital paid in | $318,846,363 | $363,468,188 | $474,440,786 | $623,657,480 | $232,527,631 | ||||||
Undistributed net investment income | 1,278,939 | 1,142,213 | 1,116,148 | 973,789 | 1,025,782 | ||||||
Accumulated net realized gain (loss) on investments | |||||||||||
and foreign currency transactions | 5,167,497 | (27,872,366) | (96,022,978) | 6,902,346 | 37,152,416 | ||||||
Net unrealized appreciation in value of investments | |||||||||||
and foreign currency transactions | 64,176,548 | 104,475,789 | 192,230,583 | 243,331,515 | 66,065,134 | ||||||
Total | $389,469,347 | $441,213,824 | $571,764,539 | $874,865,130 | $336,770,963 | ||||||
Net Assets: | |||||||||||
Class A | $355,272,429 | $414,174,229 | $526,159,601 | $808,201,849 | $322,732,127 | ||||||
Class B | $ 34,196,918 | $ 27,039,595 | $ 45,604,938 | $ 66,663,281 | $ 14,038,836 | ||||||
Shares outstanding (Note 5): | |||||||||||
Class A | 22,394,051 | 50,889,055 | 20,522,856 | 47,934,192 | 36,589,963 | ||||||
Class B | 2,188,236 | 3,375,790 | 1,909,621 | 4,169,048 | 1,760,207 | ||||||
Net asset value and redemption price | |||||||||||
per share – Class A | $ 15.86 | $ 8.14 | $ 25.64 | $ 16.86 | $ 8.82 | ||||||
Maximum offering price per share – Class A | |||||||||||
(Net asset value/.9425)* | $ 16.83 | $ 8.64 | $ 27.20 | $ 17.89 | $ 9.36 | ||||||
Net asset value and offering price per share – | |||||||||||
Class B (Note 5) | $ 15.63 | $ 8.01 | $ 23.88 | $ 15.99 | $ 7.98 | ||||||
118 | See notes to financial statements | 119 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2007
SELECT | MID-CAP | SPECIAL | |||||||||
GROWTH | OPPORTUNITY | SITUATIONS | INTERNATIONAL | ||||||||
Assets | |||||||||||
Investments in securities: | |||||||||||
At identified cost | $241,938,013 | $396,756,893 | $264,323,737 | $ 83,610,589 | |||||||
At value (Note 1A) | $267,314,500 | $531,488,124 | $313,880,461 | $ 98,022,179 | |||||||
Cash | 1,067,559 | 295,825 | 99,775 | 1,168,891 | |||||||
Receivables: | |||||||||||
Investment securities sold | — | 3,079,361 | 978,426 | 2,560,795 | |||||||
Dividends and interest | 146,740 | 397,941 | 154,511 | 162,783 | |||||||
Shares sold | 702,279 | 655,292 | 593,525 | 851,416 | |||||||
Forward currency contracts (Note 5) | — | — | — | 15,231 | |||||||
Other assets | 10,861 | 22,680 | 12,579 | 1,008 | |||||||
Total Assets | 269,241,939 | 535,939,223 | 315,719,277 | 102,782,303 | |||||||
Liabilities | |||||||||||
Payables: | |||||||||||
Investment securities purchased | 567,299 | 3,723,761 | 2,713,888 | 1,477,725 | |||||||
Shares redeemed | 413,372 | 591,261 | 378,472 | 50,778 | |||||||
Foreign exchange contracts (Note 5) | — | — | — | 506,174 | |||||||
Accrued advisory fees | 148,336 | 293,954 | 189,640 | 101,664 | |||||||
Accrued shareholder servicing costs | 63,075 | 111,414 | 75,263 | 37,023 | |||||||
Accrued expenses | 49,294 | 32,582 | 46,708 | 36,703 | |||||||
Total Liabilities | 1,241,376 | 4,752,972 | 3,403,971 | 2,210,067 | |||||||
Net Assets | $268,000,563 | $531,186,251 | $312,315,306 | $100,572,236 | |||||||
Net Assets Consist of: | |||||||||||
Capital paid in | $204,377,926 | $349,054,062 | $247,226,369 | $ 87,996,027 | |||||||
Undistributed net investment income | — | 2,398,990 | — | 744,306 | |||||||
Accumulated net realized gain (loss) on investments | |||||||||||
and foreign currency transactions | 38,246,150 | 45,001,968 | 15,532,213 | (2,091,388) | |||||||
Net unrealized appreciation in value of investments | |||||||||||
and foreign currency transactions | 25,376,487 | 134,731,231 | 49,556,724 | 13,923,291 | |||||||
Total | $268,000,563 | $531,186,251 | $312,315,306 | $100,572,236 | |||||||
Net Assets: | |||||||||||
Class A | $242,549,754 | $480,829,261 | $294,519,098 | $ 96,382,699 | |||||||
Class B | $ 25,450,809 | $ 50,356,990 | $ 17,796,208 | $ 4,189,537 | |||||||
Shares outstanding (Note 5): | |||||||||||
Class A | 23,748,806 | 15,350,824 | 12,137,199 | 7,311,002 | |||||||
Class B | 2,624,576 | 1,779,015 | 818,933 | 320,513 | |||||||
Net asset value and redemption price | |||||||||||
per share – Class A | $ 10.21 | $ 31.32 | $ 24.27 | $ 13.18 | |||||||
Maximum offering price per share – Class A | |||||||||||
(Net asset value/.9425)* | $ 10.83 | $ 33.23 | $ 25.75 | $ 13.98 | |||||||
Net asset value and offering price per share – | |||||||||||
Class B (Note 5) | $ 9.70 | $ 28. 31 | $ 21.73 | $ 13.07 |
*On purchases of $100,000 or more, the sales charge is reduced.
120 | See notes to financial statements | 121 |
Statements of Assets and Liabilities
FIRST INVESTORS INCOME FUNDS
September 30, 2007
CASH | INVESTMENT | ||||||||||
MANAGEMENT | GOVERNMENT | GRADE | INCOME | ||||||||
Assets | |||||||||||
Investments in securities: | |||||||||||
At identified cost | $219,332,206 | $215,950,224 | $288,760,783 | $607,494,151 | |||||||
At value (Note 1A) | $219,332,206 | $213,085,585 | $288,215,804 | $581,225,106 | |||||||
Cash | 1,835,803 | 1,188,570 | 61,065 | 228,800 | |||||||
Receivables: | |||||||||||
Interest and dividends | 799,854 | 1,020,839 | 3,945,504 | 12,102,674 | |||||||
Shares sold | — | 305,300 | 792,882 | 501,373 | |||||||
Other assets | 34,129 | 36,729 | 11,857 | 259,412 | |||||||
Total Assets | 222,001,992 | 215,637,023 | 293,027,112 | 594,317,365 | |||||||
Liabilities | |||||||||||
Payables: | |||||||||||
Investment securities purchased | 1,593,298 | 4,973,689 | — | 4,422,594 | |||||||
Dividends payable | 45,379 | 93,180 | 147,187 | 733,067 | |||||||
Shares redeemed | 335,554 | 218,020 | 289,149 | 999,080 | |||||||
Accrued advisory fees | 77,094 | 98,916 | 136,583 | 348,747 | |||||||
Accrued shareholder servicing costs | 58,637 | 32,361 | 47,057 | 91,599 | |||||||
Accrued distribution fees | — | 3,894 | 5,625 | 10,570 | |||||||
Accrued expenses | 47,135 | 40,706 | 14,977 | 58,110 | |||||||
Total Liabilities | 2,157,097 | 5,460,766 | 640,578 | 6,663,767 | |||||||
Net Assets | $219,844,895 | $210,176,257 | $292,386,534 | $587,653,598 | |||||||
Net Assets Consist of: | |||||||||||
Capital paid in | $219,844,895 | $223,463,294 | $305,220,242 | $771,058,624 | |||||||
Undistributed net investment income (deficit) | — | 6,781 | (3,329,972) | 2,359,858 | |||||||
Accumulated net realized loss on investments | — | (10,429,179) | (8,958,757) | (159,495,839) | |||||||
Net unrealized depreciation in value of investments | — | (2,864,639) | (544,979) | (26,269,045) | |||||||
Total | $219,844,895 | $210,176,257 | $292,386,534 | $587,653,598 | |||||||
Net Assets: | |||||||||||
Class A | $217,514,371 | $198,528,051 | $270,528,455 | $563,044,650 | |||||||
Class B | $ 2,330,524 | $ 11,648,206 | $ 21,858,079 | $ 24,608,948 | |||||||
Shares outstanding (Note 6): | |||||||||||
Class A | 217,514,371 | 18,658,103 | 28,727,165 | 188,315,274 | |||||||
Class B | 2,330,524 | 1,094,849 | 2,323,565 | 8,241,936 | |||||||
Net asset value and redemption price per share — Class A | $ 1.00 | # | $ 10.64 | $ 9.42 | $ 2.99 | ||||||
Maximum offering price per share — Class A | |||||||||||
(Net asset value/.9425)* | N/A | $ 11.29 | $ 9.99 | $ 3.17 | |||||||
Net asset value and offering price per share — Class B (Note 6) | $ 1.00 | $ 10.64 | $ 9.41 | $ 2.99 | |||||||
#Also maximum offering price per share.
*On purchases of $100,000 or more, the sales charge is reduced.
122 | See notes to financial statements | 123 |
Statements of Operations
FIRST INVESTORS EQUITY FUNDS
Year Ended September 30, 2007
TOTAL | GROWTH & | ||||||||||
RETURN | VALUE | BLUE CHIP | INCOME | GLOBAL | |||||||
Investment Income | |||||||||||
Dividends | $ 4,169,531 | (a) | $ 9,435,657 | (b) | $ 10,085,749 | (c) | $ 15,365,239 | (d) | $ 4,569,314 | (e) | |
Interest | 8,394,390 | 1,700,835 | 350,897 | 65,785 | 345,551 | ||||||
Total income | 12,563,921 | 11,136,492 | 10,436,646 | 15,431,024 | 4,914,865 | ||||||
Expenses (Notes 1 and 3): | |||||||||||
Advisory fees | 2,777,398 | 3,086,099 | 3,778,092 | 5,945,597 | 2,953,892 | ||||||
Distribution plan expenses – Class A | 1,012,224 | 1,162,803 | 1,408,553 | 2,278,643 | 863,604 | ||||||
Distribution plan expenses – Class B | 358,761 | 285,582 | 434,330 | 710,440 | 137,810 | ||||||
Shareholder servicing costs | 818,665 | 959,394 | 1,473,295 | 2,081,565 | 828,522 | ||||||
Professional fees | 38,599 | 43,847 | 78,353 | 77,214 | 58,881 | ||||||
Custodian fees | 40,582 | 30,321 | 32,126 | 52,165 | 223,675 | ||||||
Registration fees | 40,850 | 41,422 | 39,510 | 53,517 | 35,230 | ||||||
Reports to shareholders | 30,388 | 33,686 | 48,499 | 64,586 | 34,229 | ||||||
Trustees’ fees | 17,117 | 18,990 | 23,184 | 37,973 | 14,053 | ||||||
Other expenses | 74,316 | 73,734 | 98,816 | 138,879 | 93,487 | ||||||
Total expenses | 5,208,900 | 5,735,878 | 7,414,758 | 11,440,579 | 5,243,383 | ||||||
Less: Expenses waived | — | — | — | — | (22,431) | ||||||
Expenses paid indirectly | (20,489) | (29,161) | (23,559) | (16,830) | (1,400) | ||||||
Net expenses | 5,188,411 | 5,706,717 | 7,391,199 | 11,423,749 | 5,219,552 | ||||||
Net investment income (loss) | 7,375,510 | 5,429,775 | 3,045,447 | 4,007,275 | (304,687) | ||||||
Realized and Unrealized Gain (Loss) on Investments | |||||||||||
(Note 2): | |||||||||||
Net realized gain (loss) on: | |||||||||||
Investments | 9,847,727 | 7,421,981 | 12,432,271 | 20,850,814 | 46,356,804 | ||||||
Foreign currency transactions | — | — | — | — | (46,121) | ||||||
Net realized gain on investments | |||||||||||
and foreign currency transactions | 9,847,727 | 7,421,981 | 12,432,271 | 20,850,814 | 46,310,683 | ||||||
Net unrealized appreciation of: | |||||||||||
Investments | 23,270,714 | 29,157,401 | 56,419,022 | 99,717,015 | 25,026,398 | ||||||
Foreign currency transactions | — | — | — | — | 4,488 | ||||||
Net unrealized appreciation of investments | |||||||||||
and foreign currency transactions | 23,270,714 | 29,157,401 | 56,419,022 | 99,717,015 | 25,030,886 | ||||||
Net gain on investments and foreign currency transactions | 33,118,441 | 36,579,382 | 68,851,293 | 120,567,829 | 71,341,569 | ||||||
Net Increase in Net Assets Resulting from Operations | $ 40,493,951 | $ 42,009,157 | $ 71,896,740 | $124,575,104 | $ 71,036,882 |
(a) Net of $16,040 foreign taxes withheld
(b) Net of $42,664 foreign taxes withheld
(c) Net of $33,353 foreign taxes withheld
(d) Net of $61,140 foreign taxes withheld
(e) Net of $450,617 foreign taxes withheld
124 | See notes to financial statements | 125 |
Statements of Operations
FIRST INVESTORS EQUITY FUNDS
Year Ended September 30, 2007
SELECT | MID-CAP | SPECIAL | |||||||||
GROWTH | OPPORTUNITY | SITUATIONS | INTERNATIONAL | ||||||||
Investment Income | |||||||||||
Dividends | $ 2,094,912 | (f) | $ 9,431,478 | (g) | $ 3,101,940 | $ 1,233,620 | (h) | ||||
Interest | 304,812 | 523,106 | 497,423 | 189,029 | |||||||
Total income | 2,399,724 | 9,954,584 | 3,599,363 | 1,422,649 | |||||||
Expenses (Notes 1 and 3): | |||||||||||
Advisory fees | 1,778,837 | 3,850,695 | 2,769,823 | 567,090 | |||||||
Distribution plan expenses – Class A | 639,160 | 1,413,021 | 852,435 | 165,521 | |||||||
Distribution plan expenses – Class B | 241,250 | 524,095 | 186,808 | 26,886 | |||||||
Shareholder servicing costs | 802,747 | 1,471,416 | 980,517 | 382,329 | |||||||
Professional fees | 35,067 | 46,076 | 46,760 | 24,060 | |||||||
Custodian fees | 16,431 | 41,533 | 31,168 | 94,629 | |||||||
Registration fees | 30,959 | 49,595 | 35,432 | 89,640 | |||||||
Reports to shareholders | 62,054 | 54,395 | 37,496 | 14,805 | |||||||
Trustees’ fees | 10,807 | 24,207 | 13,835 | 2,361 | |||||||
Other expenses | 50,528 | 101,460 | 54,039 | 14,942 | |||||||
Total expenses | 3,667,840 | 7,576,493 | 5,008,313 | 1,382,263 | |||||||
Less: Expenses (waived) repaid to advisor (Note 3) | — | — | (459,291) | 81,989 | |||||||
Expenses paid indirectly | (8,956) | (20,899) | (13,514) | (223) | |||||||
Net expenses | 3,658,884 | 7,555,594 | 4,535,508 | 1,464,029 | |||||||
Net investment income (loss) | (1,259,160) | 2,398,990 | (936,145) | (41,380) | |||||||
Realized and Unrealized Gain (Loss) on Investments | |||||||||||
and Foreign Currency Transactions (Note 2): | |||||||||||
Net realized gain (loss) on: | |||||||||||
Investments | 40,730,258 | 50,721,848 | 30,291,871 | (580,497) | |||||||
Foreign currency transactions | — | — | — | (417,453) | |||||||
Net realized gain (loss) on investments | |||||||||||
and foreign currency transactions | 40,730,258 | 50,721,848 | 30,291,871 | (997,950) | |||||||
Net unrealized appreciation (depreciation) of: | |||||||||||
Investments | 3,580,367 | 25,202,521 | 14,116,468 | 13,685,842 | |||||||
Foreign currency transactions | — | — | — | (574,240) | |||||||
Net unrealized appreciation of investments | |||||||||||
and foreign currency transactions | 3,580,367 | 25,202,521 | 14,116,468 | 13,111,602 | |||||||
Net gain on investments and foreign currency transactions | 44,310,625 | 75,924,369 | 44,408,339 | 12,113,652 | |||||||
Net Increase in Net Assets Resulting from Operations | $ 43,051,465 | $ 78,323,359 | $ 43,472,194 | $ 12,072,272 |
(f) Net of $24,013 foreign taxes withheld
(g) Net of $64,258 foreign taxes withheld
(h) Net of $170,643 foreign taxes withheld
126 | See notes to financial statements | 127 |
Statements of Operations
FIRST INVESTORS INCOME FUNDS
Year Ended September 30, 2007
CASH | INVESTMENT | ||||||||||
MANAGEMENT | GOVERNMENT | GRADE | INCOME | ||||||||
Investment Income | |||||||||||
Income (Note 1F): | |||||||||||
Interest | $ 11,329,792 | $ 11,083,393 | $ 15,423,174 | $ 49,253,272 | |||||||
Dividends | — | — | — | 235,689 | (a) | ||||||
Total income | 11,329,792 | 11,083,393 | 15,423,174 | 49,488,961 | |||||||
Expenses (Notes 1 and 3): | |||||||||||
Advisory fees | 1,068,882 | 1,347,338 | 1,797,777 | 4,358,204 | |||||||
Distribution plan expenses – Class A | — | 551,766 | 719,941 | 1,712,175 | |||||||
Distribution plan expenses – Class B | 18,700 | 124,120 | 225,923 | 282,007 | |||||||
Shareholder servicing costs | 703,492 | 390,908 | 552,768 | 1,160,944 | |||||||
Professional fees | 32,307 | 36,392 | 33,888 | 87,974 | |||||||
Registration fees | 61,668 | 40,940 | 43,708 | 36,539 | |||||||
Custodian fees | 27,496 | 33,004 | 20,931 | 36,461 | |||||||
Reports to shareholders | 41,259 | 22,168 | 25,161 | 63,636 | |||||||
Trustees’ fees | 9,566 | 9,335 | 12,325 | 27,536 | |||||||
Other expenses | 43,564 | 59,604 | 58,670 | 124,532 | |||||||
Total expenses | 2,006,934 | 2,615,575 | 3,491,092 | 7,890,008 | |||||||
Less: Expenses waived | (263,782) | (257,080) | (311,867) | — | |||||||
Expenses paid indirectly | (14,366) | (24,502) | (21,989) | (33,954) | |||||||
Net expenses | 1,728,786 | 2,333,993 | 3,157,236 | 7,856,054 | |||||||
Net investment income | 9,601,006 | 8,749,400 | 12,265,938 | 41,632,907 | |||||||
Realized and Unrealized Gain (Loss) on Investments (Note 2): | |||||||||||
Net realized gain (loss) on investments | — | (362,482) | 461,845 | (5,253,591) | |||||||
Net unrealized appreciation (depreciation) of investments | — | (191,790) | (2,402,019) | 1,569,619 | |||||||
Net loss on investments | — | (554,272) | (1,940,174) | (3,683,972) | |||||||
Net Increase in Net Assets Resulting from Operations | $ 9,601,006 | $ 8,195,128 | $ 10,325,764 | $ 37,948,935 |
(a) Net of $3,318 foreign taxes withheld
128 | See notes to financial statements | 129 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
TOTAL RETURN | VALUE | BLUE CHIP | GROWTH & INCOME | ||||||||
Year Ended September 30 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||
Increase (Decrease) in Net Assets From Operations | |||||||||||
Net investment income | $ 7,375,510 | $ 5,140,567 | $ 5,429,775 | $ 4,020,796 | $ 3,045,447 | $ 1,901,453 | $ 4,007,275 | $ 1,951,361 | |||
Net realized gain on investments | 9,847,727 | 9,374,460 | 7,421,981 | 13,345,405 | 12,432,271 | 13,151,335 | 20,850,814 | 29,207,344 | |||
Net unrealized appreciation of investments | 23,270,714 | 5,379,510 | 29,157,401 | 23,282,192 | 56,419,022 | 26,847,027 | 99,717,015 | 23,026,678 | |||
Net increase in net assets resulting from operations | 40,493,951 | 19,894,537 | 42,009,157 | 40,648,393 | 71,896,740 | 41,899,815 | 124,575,104 | 54,185,383 | |||
Distributions to Shareholders | |||||||||||
Net investment income – Class A | (6,496,959) | (4,717,963) | (4,884,892) | (3,480,451) | (2,538,723) | (1,292,468) | (3,321,330) | (2,247,490) | |||
Net investment income – Class B | (437,230) | (329,562) | (158,524) | (127,641) | — | — | (20,137) | — | |||
Net realized gains – Class A | (2,189,339) | — | — | — | — | — | (10,825,654) | — | |||
Net realized gains – Class B | (248,051) | — | — | — | — | — | (1,163,363) | — | |||
Total distributions | (9,371,579) | (5,047,525) | (5,043,416) | (3,608,092) | (2,538,723) | (1,292,468) | (15,330,484) | (2,247,490) | |||
Share Transactions * | |||||||||||
Class A: | |||||||||||
Proceeds from shares sold | 58,416,394 | 61,431,640 | 100,634,552 | 75,863,544 | 58,252,544 | 55,709,500 | 144,742,009 | 126,552,654 | |||
Value of shares issued for acquisition** | — | — | — | — | 42,266,488 | — | — | — | |||
Reinvestment of distributions | 8,570,045 | 4,647,596 | 4,810,843 | 3,419,946 | 2,514,542 | 1,281,752 | 14,046,975 | 2,226,784 | |||
Cost of shares redeemed | (51,721,710) | (48,555,127) | (62,678,699) | (43,351,991) | (77,931,789) | (77,002,217) | (121,637,432) | (100,395,457) | |||
15,264,729 | 17,524,109 | 42,766,696 | 35,931,499 | 25,101,785 | (20,010,965) | 37,151,552 | 28,383,981 | ||||
Class B: | |||||||||||
Proceeds from shares sold | 3,131,690 | 4,213,768 | 3,741,260 | 4,874,190 | 3,077,799 | 4,440,225 | 6,702,137 | 9,940,937 | |||
Value of shares issued for acquisition** | — | — | — | — | 5,256,892 | — | — | — | |||
Reinvestment of distributions | 682,111 | 327,500 | 157,220 | 126,427 | — | — | 1,180,077 | — | |||
Cost of shares redeemed | (8,579,532) | (8,153,743) | (7,606,342) | (7,056,112) | (13,096,048) | (16,026,612) | (22,768,583) | (25,190,976) | |||
(4,765,731) | (3,612,475) | (3,707,862) | (2,055,495) | (4,761,357) | (11,586,387) | (14,886,369) | (15,250,039) | ||||
Net increase (decrease) from share transactions | 10,498,998 | 13,911,634 | 39,058,834 | 33,876,004 | 20,340,428 | (31,597,352) | 22,265,183 | 13,133,942 | |||
Net increase in net assets | 41,621,370 | 28,758,646 | 76,024,575 | 70,916,305 | 89,698,445 | 9,009,995 | 131,509,803 | 65,071,835 | |||
Net Assets | |||||||||||
Beginning of year | 347,847,977 | 319,089,331 | 365,189,249 | 294,272,944 | 482,066,094 | 473,056,099 | 743,355,327 | 678,283,492 | |||
End of year † | $ 389,469,347 | $ 347,847,977 | $ 441,213,824 | $ 365,189,249 | $ 571,764,539 | $ 482,066,094 | $ 874,865,130 | $ 743,355,327 | |||
†Includes undistributed net investment income of | $ 1,278,939 | $ 521,918 | $ 1,142,213 | $ 1,005,773 | $ 1,116,148 | $ 609,424 | $ 973,789 | $ 511,981 | |||
*Shares Issued and Redeemed | |||||||||||
Class A: | |||||||||||
Sold | 3,759,553 | 4,294,534 | 12,509,647 | 10,879,798 | 2,409,744 | 2,606,479 | 8,893,877 | 8,823,823 | |||
Issued for acquisition** | — | — | — | — | 1,728,265 | — | — | — | |||
Issued for distributions reinvested | 552,458 | 323,247 | 593,740 | 483,325 | 102,169 | 59,127 | 891,851 | 153,919 | |||
Redeemed | (3,332,365) | (3,397,469) | (7,781,774) | (6,213,962) | (3,212,113) | (3,601,132) | (7,473,683) | (7,005,475) | |||
Net increase (decrease) in Class A shares outstanding | 979,646 | 1,220,312 | 5,321,613 | 5,149,161 | 1,028,065 | (935,526) | 2,312,045 | 1,972,267 | |||
Class B: | |||||||||||
Sold | 204,942 | 299,997 | 473,203 | 712,632 | 136,806 | 222,526 | 435,580 | 725,027 | |||
Issued for acquisition** | — | — | — | — | 230,867 | — | — | — | |||
Issued for distributions reinvested | 44,782 | 23,118 | 19,735 | 18,191 | — | — | 79,575 | — | |||
Redeemed | (560,413) | (579,661) | (962,290) | (1,026,380) | (581,227) | (800,563) | (1,482,827) | (1,837,472) | |||
Net decrease in Class B shares outstanding | (310,689) | (256,546) | (469,352) | (295,557) | (213,554) | (578,037) | (967,672) | (1,112,445) |
**See Note 8.
130 | See notes to financial statements | 131 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
GLOBAL | SELECT GROWTH | MID-CAP OPPORTUNITY | SPECIAL SITUATIONS | ||||||||
Year Ended September 30 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||
Increase (Decrease) in Net Assets From Operations | |||||||||||
Net investment income (loss) | $ (304,687) | $ 268,295 | $ (1,259,160) | $ (1,537,185) | $ 2,398,990 | $ (1,951,907) | $ (936,145) | $ (1,388,380) | |||
Net realized gain on investments | |||||||||||
and foreign currenty transactions | 46,310,683 | 26,596,850 | 40,730,258 | 21,955,545 | 50,721,848 | 17,445,399 | 30,291,871 | 16,672,396 | |||
Net unrealized appreciation (depreciation) | |||||||||||
of investments and foreign currency transactions | 25,030,886 | (1,448,505) | 3,580,367 | (11,082,663) | 25,202,521 | (4,037,732) | 14,116,468 | 10,315,175 | |||
Net increase in net assets resulting from operations | 71,036,882 | 25,416,640 | 43,051,465 | 9,335,697 | 78,323,359 | 11,455,760 | 43,472,194 | 25,599,191 | |||
Distributions to Shareholders | |||||||||||
Net investment income – Class A | (1,703,811) | (511,516) | — | — | — | — | — | — | |||
Net investment income – Class B | (95,763) | — | — | — | — | — | — | — | |||
Net realized gains – Class A | (25,963,154) | — | (16,002,768) | — | (20,488,349) | (11,436,474) | (21,193,345) | — | |||
Net realized gains – Class B | (1,455,638) | — | (1,981,350) | — | (2,618,556) | (1,696,534) | (1,645,023) | — | |||
Total distributions | (29,218,366) | (511,516) | (17,984,118) | — | (23,106,905) | (13,133,008) | (22,838,368) | — | |||
Share Transactions * | |||||||||||
Class A: | |||||||||||
Proceeds from shares sold | 32,159,549 | 32,079,774 | 45,079,857 | 48,443,378 | 64,062,828 | 87,073,595 | 48,294,542 | 37,576,661 | |||
Reinvestment of distributions | 27,199,554 | 455,744 | 15,949,659 | — | 20,403,976 | 11,364,891 | 21,100,036 | — | |||
Cost of shares redeemed | (37,229,022) | (34,415,861) | (36,742,589) | (30,853,902) | (88,627,638) | (72,718,404) | (43,381,291) | (35,967,977) | |||
22,130,081 | (1,880,343) | 24,286,927 | 17,589,476 | (4,160,834) | 25,720,082 | 26,013,287 | 1,608,684 | ||||
Class B: | |||||||||||
Proceeds from shares sold | 1,559,530 | — | 2,358,789 | 4,128,019 | 3,841,591 | 8,879,710 | 1,733,569 | 2,561,815 | |||
Reinvestment of distributions | 1,549,112 | 2,181,431 | 1,970,727 | — | 2,609,026 | 1,688,114 | 1,642,521 | — | |||
Cost of shares redeemed | (4,240,943) | (4,344,498) | (4,462,038) | (5,146,160) | (12,113,021) | (16,113,816) | (4,822,147) | (7,038,485) | |||
(1,132,301) | (2,163,067) | (132,522) | (1,018,141) | (5,662,404) | (5,545,992) | (1,446,057) | (4,476,670) | ||||
Net increase (decrease) from share transactions | 20,997,780 | (4,043,410) | 24,154,405 | 16,571,335 | (9,823,238) | 20,174,090 | 24,567,230 | (2,867,986) | |||
Net increase in net assets | 62,816,296 | 20,861,714 | 49,221,752 | 25,907,032 | 45,393,216 | 18,496,842 | 45,201,056 | 22,731,205 | |||
Net Assets | |||||||||||
Beginning of year | 273,954,667 | 253,092,953 | 218,778,811 | 192,871,779 | 485,793,035 | 467,296,193 | 267,114,250 | 244,383,045 | |||
End of year † | $ 336,770,963 | $ 273,954,667 | $ 268,000,563 | $ 218,778,811 | $ 531,186,251 | $ 485,793,035 | $ 312,315,306 | $ 267,114,250 | |||
†Includes undistributed net investment income of | $ 1,025,782 | $ — | $ — | $ — | $ 2,398,990 | $ — | $ — | $ — | |||
*Shares Issued and Redeemed | |||||||||||
Class A: | |||||||||||
Sold | 4,050,899 | 4,311,883 | 4,765,079 | 5,226,164 | 2,107,842 | 3,078,938 | 2,019,030 | 1,736,840 | |||
Issued for distributions reinvested | 3,693,256 | 63,740 | 1,822,725 | — | 721,695 | 429,026 | 923,327 | — | |||
Redeemed | (4,696,640) | (4,642,293) | (3,931,282) | (3,347,110) | (2,932,699) | (2,581,308) | (1,809,098) | (1,672,171) | |||
Net increase (decrease) in Class A shares outstanding | 3,047,515 | (266,670) | 2,656,522 | 1,879,054 | (103,162) | 926,656 | 1,133,259 | 64,669 | |||
Class B: | |||||||||||
Sold | 216,529 | 318,906 | 262,040 | 461,478 | 140,039 | 341,525 | 80,360 | 129,614 | |||
Issued for distributions reinvested | 230,957 | — | 235,478 | — | 101,414 | 69,270 | 79,633 | — | |||
Redeemed | (592,221) | (633,693) | (501,113) | (578,815) | (441,498) | (621,241) | (225,014) | (357,334) | |||
Net decrease in Class B shares outstanding | (144,735) | (314,787) | (3,595) | (117,337) | (200,045) | (210,446) | (65,021) | (227,720) |
132 | See notes to financial statements | 133 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
INTERNATIONAL | |||||||||||
6/27/06** | |||||||||||
Year Ended September 30 | 2007 | to 9/30/06 | |||||||||
Increase (Decrease) in Net Assets From Operations | |||||||||||
Net investment income (loss) | $ (41,380) | $ 3,583 | |||||||||
Net realized loss on investments | |||||||||||
and foreign currenty transactions | (997,950) | (108,954) | |||||||||
Net unrealized appreciation | |||||||||||
of investments and foreign currency transactions | 13,111,602 | 811,689 | |||||||||
Net increase in net assets resulting from operations | 12,072,272 | 706,318 | |||||||||
Dividends to Shareholders | |||||||||||
Net investment income – Class A | (191,658) | — | |||||||||
Net investment income – Class B | (10,723) | — | |||||||||
Total dividends | (202,381) | — | |||||||||
Share Transactions * | |||||||||||
Class A: | |||||||||||
Proceeds from shares sold | 70,673,752 | 18,783,707 | |||||||||
Reinvestment of dividends | 191,287 | — | |||||||||
Cost of shares redeemed | (5,066,692) | (233,440) | |||||||||
65,798,347 | 18,550,267 | ||||||||||
Class B: | |||||||||||
Proceeds from shares sold | 2,992,429 | 1,041,875 | |||||||||
Reinvestment of dividends | 10,605 | — | |||||||||
Cost of shares redeemed | (365,541) | (31,955) | |||||||||
2,637,493 | 1,009,920 | ||||||||||
Net increase from share transactions | 68,435,840 | 19,560,187 | |||||||||
Net increase in net assets | 80,305,731 | 20,266,505 | |||||||||
Net Assets | |||||||||||
Beginning of year | 20,266,505 | — | |||||||||
End of year † | $ 100,572,236 | $ 20,266,505 | |||||||||
†Includes undistributed net investment income (deficit) of | $ 744,306 | $ (100,724) | |||||||||
*Shares Issued and Redeemed | |||||||||||
Class A: | |||||||||||
Sold | 5,913,413 | 1,817,728 | |||||||||
Reinvestment of dividends | 16,831 | — | |||||||||
Redeemed | (414,729) | (22,242) | |||||||||
Net increase in Class A shares outstanding | 5,515,515 | 1,795,486 | |||||||||
Class B: | |||||||||||
Sold | 253,454 | 99,686 | |||||||||
Reinvestment of dividends | 936 | — | |||||||||
Redeemed | (30,527) | (3,037) | |||||||||
Net increase in Class B shares outstanding | 223,863 | 96,649 |
**Commencement of operations
134 | See notes to financial statements |
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135 |
Statements of Changes in Net Assets
FIRST INVESTORS INCOME FUNDS
CASH MANAGEMENT | GOVERNMENT | INVESTMENT GRADE | INCOME | ||||||||
Year Ended September 30 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||
Increase (Decrease) in Net Assets From Operations | |||||||||||
Net investment income | $ 9,601,006 | $ 6,863,484 | $ 8,749,400 | $ 7,985,081 | $ 12,265,938 | $ 10,201,659 | $ 41,632,907 | $ 42,573,235 | |||
Net realized gain (loss) on investments | — | — | (362,482) | (1,053,822) | 461,845 | (1,697,495) | (5,253,591) | (24,922,862) | |||
Net unrealized appreciation (depreciation) of investments | — | — | (191,790) | (1,213,735) | (2,402,019) | (2,079,190) | 1,569,619 | 12,744,718 | |||
Net increase in net assets resulting from operations | 9,601,006 | 6,863,484 | 8,195,128 | 5,717,524 | 10,325,764 | 6,424,974 | 37,948,935 | 30,395,091 | |||
Dividends to Shareholders | |||||||||||
Net investment income – Class A | (9,508,072) | (6,783,444) | (8,953,505) | (8,240,446) | (12,261,832) | (10,975,640) | (39,264,321) | (40,228,929) | |||
Net investment income – Class B | (92,934) | (80,040) | (489,437) | (537,292) | (944,574) | (1,132,856) | (1,743,259) | (2,178,739) | |||
Total dividends | (9,601,006) | (6,863,484) | (9,442,942) | (8,777,738) | (13,206,406) | (12,108,496) | (41,007,580) | (42,407,668) | |||
Share Transactions * | |||||||||||
Class A: | |||||||||||
Proceeds from shares sold | 234,508,668 | 257,607,283 | 38,427,226 | 30,565,693 | 69,936,306 | 60,013,611 | 60,588,115 | 50,444,587 | |||
Reinvestment of dividends | 9,341,321 | 6,697,930 | 7,807,197 | 7,208,291 | 10,583,520 | 9,351,362 | 30,474,627 | 30,767,790 | |||
Cost of shares redeemed | (226,716,504) | (226,043,737) | (32,955,729) | (30,230,638) | (38,531,439) | (36,660,785) | (79,486,802) | (86,314,638) | |||
17,133,485 | 38,261,476 | 13,278,694 | 7,543,346 | 41,988,387 | 32,704,188 | 11,575,940 | (5,102,261) | ||||
Class B: | |||||||||||
Proceeds from shares sold | 2,857,393 | 3,043,930 | 1,656,236 | 2,185,110 | 2,657,890 | 3,201,697 | 2,526,656 | 3,015,926 | |||
Reinvestment of dividends | 84,139 | 75,499 | 449,226 | 499,852 | 853,540 | 1,004,830 | 1,307,604 | 1,609,592 | |||
Cost of shares redeemed | (3,120,867) | (3,792,293) | (3,659,377) | (4,647,314) | (5,240,826) | (8,046,954) | (9,854,689) | (9,915,612) | |||
(179,335) | (672,864) | (1,553,915) | (1,962,352) | (1,729,396) | (3,840,427) | (6,020,429) | (5,290,094) | ||||
Net increase (decrease) from share transactions | 16,954,150 | 37,588,612 | 11,724,779 | 5,580,994 | 40,258,991 | 28,863,761 | 5,555,511 | (10,392,355) | |||
Net increase (decrease) in net assets | 16,954,150 | 37,588,612 | 10,476,965 | 2,520,780 | 37,378,349 | 23,180,239 | 2,496,866 | (22,404,932) | |||
Net Assets | |||||||||||
Beginning of year | 202,890,745 | 165,302,133 | 199,699,292 | 197,178,512 | 255,008,185 | 231,827,946 | 585,156,732 | 607,561,664 | |||
End of year † | $ 219,844,895 | $ 202,890,745 | $ 210,176,257 | $ 199,699,292 | $ 292,386,534 | $ 255,008,185 | $ 587,653,598 | $ 585,156,732 | |||
†Includes undistributed net investment income (deficit) of | $ — | $ — | $ 6,781 | $ 140,734 | $ (3,329,972) | $ (3,181,735) | $ 2,359,858 | $ 1,231,134 | |||
*Shares Issued and Redeemed | |||||||||||
Class A: | |||||||||||
Sold | 234,508,668 | 257,607,283 | 3,603,914 | 2,853,699 | 7,387,319 | 6,319,955 | 19,785,469 | 16,823,867 | |||
Issued for dividends reinvested | 9,341,321 | 6,697,930 | 731,771 | 673,757 | 1,117,383 | 986,091 | 9,965,886 | 10,263,990 | |||
Redeemed | (226,716,504) | (226,043,737) | (3,086,866) | (2,823,408) | (4,068,637) | (3,865,698) | (25,966,873) | (28,800,606) | |||
Net increase (decrease) in Class A shares outstanding | 17,133,485 | 38,261,476 | 1,248,819 | 704,048 | 4,436,065 | 3,440,348 | 3,784,482 | (1,712,749) | |||
Class B: | |||||||||||
Sold | 2,857,393 | 3,043,930 | 155,318 | 204,003 | 280,947 | 337,660 | 829,168 | 1,007,871 | |||
Issued for dividends reinvested | 84,139 | 75,499 | 42,104 | 46,721 | 90,199 | 105,988 | 427,922 | 537,485 | |||
Redeemed | (3,120,867) | (3,792,293) | (342,831) | (434,613) | (552,729) | (850,003) | (3,219,167) | (3,310,888) | |||
Net decrease in Class B shares outstanding | (179,335) | (672,864) | (145,409) | (183,889) | (181,583) | (406,355) | (1,962,077) | (1,765,532) |
136 | See notes to financial statements | 137 |
Notes to Financial Statements
FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
September 30, 2007
1. Significant Accounting Policies—First Investors Equity Funds (“Equity Funds”) and First Investors Income Funds (“Income Funds”) are Delaware statutory trusts (each a “Trust”, collectively, “the Trusts”) that are registered under the Investment Company Act of 1940 (“the 1940 Act”) as diversified, open-end management investment companies and operate as series funds. The Equity Funds issue shares of beneficial interest in the Total Return Fund, Value Fund, Blue Chip Fund, Growth & Income Fund, Global Fund, Select Growth Fund, Mid-Cap Opportunity Fund, Special Situations Fund, and International Fund. The Income Funds issue shares of beneficial interest in the Cash Management Fund, Government Fund, Investment Grade Fund and Fund For Income (each a “Fund”, collectively, “the Funds”). The Trusts account separately for the assets, liabilities and operations of each Fund. The objective of each Fund is as follows:
Total Return Fund seeks high, long-term total investment return consistent with moderate investment risk.
Value Fund seeks total return.
Blue Chip Fund seeks high total investment return.
Growth & Income Fund seeks long-term growth of capital and current income.
Global Fund primarily seeks long-term capital growth and, secondarily, a reasonable level of current income.
Select Growth Fund seeks long-term growth of capital.
Mid-Cap Opportunity Fund seeks long-term capital growth.
Special Situations Fund seeks long-term growth of capital.
International Fund primarily seeks long-term capital growth.
Cash Management Fund seeks to earn a high rate of current income consistent with the preservation of capital and maintenance of liquidity.
Government Fund seeks to achieve a significant level of current income which is consistent with security and liquidity of principal.
Investment Grade Fund seeks to generate a maximum level of income consistent with investment in investment grade debt securities.
Fund For Income primarily seeks high current income and, secondarily, seeks capital appreciation.
138 |
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 Trusts’ 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 o n a pricing service in circumstances where the U.S. securities markets exceed a predetermined 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 of 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 and issuer-specific developments. 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. The Board has also approved the Funds use of a pricing service to fair value foreign securities in the event of a significant fluctuation in U.S. securities markets. For valuation pur poses, where applicable, quotations of foreign securities in foreign currency are translated to U.S. dollar equivalents using the foreign exchange quotation in
139 |
Notes to Financial Statements (continued)
FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
September 30, 2007
effect. At September 30, 2007, the Global Fund held one security that was fair valued by its Valuation Committee with an aggregate value of $565,576 representing .2% of the Fund’s net assets, the International Fund held three securities that were fair valued by its Valuation Committee with an aggregate value of $8,040,663 representing 8.0% of the Fund’s net assets, the Fund For Income held twelve securities that were fair valued by its Valuation Committee with an aggregate value of $5,872,700, representing 1.0% of the Fund’s net assets.
B. Federal Income Taxes—No provision has been made for federal income taxes on net income or capital gains since it is the policy of each Fund to continue to comply with the special provisions of the Internal Revenue Code applicable to investment companies and to make sufficient distributions of income and capital gains (in excess of any available capital loss carryovers) to relieve it from all, or substantially all, such taxes.
At September 30, 2007, capital loss carryovers were as follows:
Year Capital Loss Carryovers Expire | |||||||||||||||||||
Fund | Total | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | ||||||||||
Value | $ | 27,853,262 | $ | — | $ | — | $ | — | $ | 27,853,262 | $ | — | $ | — | $ | — | $ | — | |
Blue | |||||||||||||||||||
Chip* | 87,909,626 | 2,138,552 | 2,138,552 | 12,306,431 | 71,326,091 | — | — | — | — | ||||||||||
Interna- |
| ||||||||||||||||||
tional | 82,339 | — | — | — | — | — | — | — | 82,339 | ||||||||||
Govern- | |||||||||||||||||||
ment | 9,588,398 | 1,017,364 | 2,144,197 | — | 54,921 | 2,120,906 | 1,600,894 | 740,643 | 1,909,473 | ||||||||||
Investment | |||||||||||||||||||
Grade | 7,875,581 | — | 1,715,940 | 27,419 | 407,283 | 1,356,376 | 14 | 74,116 | 4,294,433 | ||||||||||
Fund For | |||||||||||||||||||
Income | 154,363,100 | 1,832,458 | 13,810,649 | 18,563,112 | 52,099,335 | 25,740,298 | 10,200,012 | 7,456,986 | 24,660,250 |
*For Blue Chip Fund, $8,554,208 of the $87,909,626 capital loss carryforward expiring in 2011 was acquired in the reorganization with Focused Equity Fund.
C. Distributions to Shareholders—Dividends from net investment income, if any, of Total Return Fund, Value Fund, Blue Chip Fund and Growth & Income Fund are declared and paid quarterly. Dividends from net investment income, if any, of Global Fund, Select Growth Fund, Mid-Cap Opportunity Fund, Special Situations Fund and International Fund are declared and paid annually. Dividends from net investment income of the Government Fund, Investment Grade Fund and Fund For Income are generally declared daily and paid monthly. The Cash Management Fund declares distributions daily and pays distributions monthly and distributions are declared from the total of net investment income plus or minus all realized short-term gains and losses on investments. Distributions from net realized capital gains of each of the
140 |
other Funds, if any, are normally declared and paid annually. Income dividends 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 capital loss carryforwards, deferral of wash sales losses, post-October capital losses, net operating losses and foreign currency transactions.
D. Expense Allocation—Expenses directly charged or attributable to a Fund are paid from the assets of that Fund. General expenses of each Trust are allocated among and charged to the assets of each Fund in the Trust 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.
E. Repurchase Agreements—Securities pledged as collateral for repurchase agreements entered into by the Global Fund are held by the Global Fund’s custodian until maturity of the repurchase agreement. The agreements provide that the Global 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 Global Fund.
F. 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.
G. Foreign Currency Translations—The accounting records of Global Fund and International Fund are maintained in U.S. dollars. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated to 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.
Global Fund and International Fund do 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. These changes 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.
141 |
Notes to Financial Statements (continued)
FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
September 30, 2007
H. Other—Security transactions are accounted for on the date the securities are purchased or sold. Cost is determined, and gains and losses are based, on the identi-fied cost basis 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 discounts and premiums are accreted or amortized using the interest method. For the year ended September 30, 2007, the Bank of New York, custodian of each Fund (other than Global Fund and International Fund), has provided credits in the amount of $118,511 for the Equity Funds and $88,579 for the Income Funds against custodian charges based on the uninvested cash balances of these Funds. The Funds also reduced expenses through brokerage service arrangements. For the year ended September 30, 2007, expenses were reduced by $16,766 for the Equity Funds and by $6,232 for the Income F unds under these arrangements.
2. Security Transactions—For the year ended September 30, 2007, purchases and sales of securities and long-term U.S. Government obligations (excluding U.S. Treasury bills, repurchase agreements, short-term securities and foreign currencies) were as follows:
Long-Term U.S. | ||||||||
Securities | Government Obligations | |||||||
Cost of | Proceeds | Cost of | Proceeds | |||||
Fund | Purchases | of Sales | Purchases | of Sales | ||||
Total Return | $98,752,015 | $108,670,832 | $43,129,538 | $31,885,546 | ||||
Value | 75,178,044 | 29,953,085 | — | — | ||||
Blue Chip | 13,774,606 | 46,231,201 | — | — | ||||
Growth & Income | 197,942,401 | 187,576,983 | — | — | ||||
Global | 396,174,154 | 413,547,477 | — | — | ||||
Select Growth | 401,731,047 | 392,761,038 | — | — | ||||
Mid-Cap Opportunity. | 253,855,892 | 281,592,774 | — | �� | ||||
Special Situations | 185,064,575 | 188,570,422 | — | — | ||||
International | 99,247,133 | 36,437,577 | — | — | ||||
Government | — | — | 68,887,509 | 47,090,590 | ||||
Investment Grade | 86,858,162 | 38,613,514 | 75,902,730 | 91,415,615 | ||||
Fund For Income | 189,379,283 | 212,468,324 | — | — |
142 |
At September 30, 2007, 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) | ||||
Total Return | $326,211,436 | $ 71,755,653 | $ 9,777,338 | $ 61,978,315 | ||||
Value | 336,306,371 | 116,651,153 | 12,194,468 | 104,456,685 | ||||
Blue Chip | 388,477,112 | 192,982,142 | 8,864,912 | 184,117,230 | ||||
Growth & Income | 635,735,573 | 271,520,999 | 32,178,418 | 239,342,581 | ||||
Global* | 269,597,673 | 67,408,830 | 3,177,402 | 64,231,428 | ||||
Select Growth | 268,491,553 | 28,061,454 | 2,687,809 | 25,373,645 | ||||
Mid-Cap Opportunity. | 336,321,538 | 150,201,688 | 15,561,234 | 134,640,454 | ||||
Special Situations | 264,530,455 | 59,578,493 | 10,228,487 | 49,350,006 | ||||
International* | 85,326,994 | 13,492,423 | 797,238 | 12,695,185 | ||||
Government | 215,950,224 | 542,369 | 3,407,008 | (2,864,639) | ||||
Investment Grade | 292,511,776 | 1,866,121 | 6,162,093 | (4,295,972) | ||||
Fund For Income | 609,275,448 | 10,445,664 | 38,496,006 | (28,050,342) |
*Aggregate cost includes PFIC income of $1,106,120 for Global Fund and $1,587,080 for International Fund.
3. Advisory Fee and Other Transactions With Affiliates—Certain officers and trustees of the Trusts are officers and directors of the Trusts’ investment adviser, First Investors Management Company, Inc. (“FIMCO”), their underwriter, First Investors Corporation (“FIC”), their transfer agent, Administrative Data Management Corp. (“ADM”) and/or First Investors Federal Savings Bank, (“FIFSB”), custodian of the Funds’ retirement accounts. Trustees of the Trusts who are not “interested persons” of the Funds as defined in the 1940 Act are remunerated by the Funds. For the year ended September 30, 2007, total trustees fees accrued by the Equity Funds and Income Funds amounted to $162,527 and $57,762, respectively.
The Investment Advisory Agreements provide as compensation to FIMCO, an annual fee, payable monthly, at the following rates:
Total Return, Value, Blue Chip, Growth & Income, Select Growth, and Mid-Cap Opportunity Funds—.75% on the first $300 million of each Fund’s average daily net assets, .72% on the next $200 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.
143 |
Notes to Financial Statements (continued)
FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
September 30, 2007
Special Situations Fund—1% on the first $200 million of the Fund’s average daily net assets, .75% on the next $300 million, .72% on the next $250 million, .69% on the next $250 million, .66% on the next $500 million, and .64% on average daily net assets over $1.5 billion. During the period October 1, 2006 to June 30, 2007, FIMCO has voluntarily waived 25% of the 1% annual fee on the first $200 million of the Fund’s average daily net assets. During the period July 1, 2007 to September 30, 2007, FIMCO has voluntarily waived 20% of the 1% annual fee to limit the advisory fee to .80% of the Fund’s average daily net assets.
Global and International Funds—.98% on the first $300 million of the Fund’s average daily net assets, .95% on the next $300 million, .92% on the next $400 million, .90% on the next $500 million and .88% on average daily net assets over $1.5 billion. During the period July 1, 2007 to September 30, 2007, FIMCO has voluntarily waived 3.1% of the .98% annual fee on Global Fund to limit the advisory fee to .95% of the Fund’s average daily net assets.
Cash Management Fund—.50% of the Fund’s average daily net assets. FIMCO has voluntarily waived $263,782 in advisory fees to limit the Fund’s overall expense ratio to .80% on Class A shares and 1.55% on Class B shares.
Government Fund—.66% on the first $500 million of the Fund’s average daily net assets, declining by .02% on each $500 million thereafter, down to .60% on average daily net assets over $1.5 billion. During the period October 1, 2006 to December 31, 2006, FIMCO has voluntarily waived $41,163 in advisory fees to limit the Fund’s overall expense ratio to 1.10% on Class A shares and 1.85% on Class B shares. During the period January 1, 2007 through September 30, 2007, FIMCO has voluntarily waived $215,917 in advisory fees to limit the Fund’s overall expense ratio to 1.10% on Class A shares and 1.80% on Class B shares.
Investment Grade Fund—.66% on the first $500 million of the Fund’s average daily net assets, declining by .02% on each $500 million thereafter, down to .60% on average daily net assets over $1.5 billion. During the period October 1, 2006 to December 31, 2006, FIMCO has voluntarily waived $42,058 in advisory fees to limit the Fund’s overall expense ratio to 1.10% on Class A shares and 1.85% on Class B shares. During the period January 1, 2007 through September 30, 2007, FIMCO has voluntarily waived $269,809 in advisory fees to limit the Fund’s overall expense ratio to 1.10% on Class A shares and 1.80% on Class B shares.
Fund For Income—.75% on the first $250 million of the 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.
144 |
For the year ended September 30, 2007, total advisory fees accrued to FIMCO by the Equity Funds and Income Funds were $27,507,523 and $8,572,201, respectively, of which $399,733 and $832,729, respectively, was voluntarily waived by FIMCO as noted above.
For the year ended September 30, 2007, FIC, as underwriter, received from the Equity Funds and Income Funds $18,295,218 and $5,090,746, respectively, in commissions from the sale of shares of the Funds, after allowing $49,949 and $53,836, respectively, to other dealers. For the year ended September 30, 2007, shareholder servicing costs for the Equity Funds and Income Funds included $7,451,297 and $2,136,073, respectively, in transfer agent fees accrued to ADM and $1,884,490 and $378,714, respectively, in retirement accounts custodian fees accrued to FIFSB.
Pursuant to Distribution Plans adopted under Rule 12b-1 of the 1940 Act, each Fund, other than the Cash Management Fund, is authorized to pay FIC a fee up to .30% of the average daily net assets of the Class A shares and 1% of the average daily net assets of the Class B shares on an annualized basis each fiscal year, payable monthly. The fee consists of a distribution fee and a service fee. The service fee is paid for the ongoing servicing of clients who are shareholders of that Fund. The distribution fees paid by Government Fund and Investment Grade Fund through December 31, 2006, were limited to .25% on Class A shares and 1% on Class B shares and effective January 1, 2007, the distribution fees were limited to .30% on Class A shares and 1% on Class B shares. For the year ended September 30, 2007, total distribution plan fees accrued to FIC by the Equity Funds and Income Funds amounted to $12,701,926 and $3,634,632, respectively.
Effective May 7, 2007, Smith Asset Management Group, L.P. serves as investment subadviser to Select Growth Fund (prior to May 7, 2007, known as All-Cap Growth Fund). Wellington Management Company, LLP (“Wellington”) serves as investment subadviser to Global Fund, Paradigm Capital Management, Inc. serves as investment subadviser to Special Situations Fund and Vontobel Asset Management, Inc. serves as investment adviser to International Fund. Wellington served as investment subadviser to All-Cap Growth Fund through May 4, 2007. The subadvisers are paid by FIMCO and not by the Funds.
4. 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 September 30, 2007, Total Return Fund held two 144A securities with a value of $1,529,260 representing .4% of the Fund’s net assets, the Global Fund held one 144A security with a value of $673,190, representing .2% of the Fund’s net assets, Investment Grade Fund held nine 144A securities with an aggregate value of $10,704,121 representing 3.7% of the Fund’s net assets and Fund For Income held thirty-one 144A securities with an aggregate
145 |
Notes to Financial Statements (continued)
FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
September 30, 2007
value of $80,222,766 representing 13.7% 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 only be sold to qualified investors. At September 30, 2007, Cash Management Fund held sixteen Section 4(2) securities with an aggregate value of $79,176,432 representing 36.0% of the Fund’s net assets, Investment Grade Fund held one Section 4(2) security with a value of $998,950 representing .3% of the Fund’s net assets and Fund For Income held two Section 4(2) securities with an aggregate value of $9,380,916 representing 1.6% of the Fund’s net assets. These securities are valued as set forth in Note 1A.
5. Forward Currency Contracts and Foreign Exchange Contracts—Forward currency contracts and foreign exchange contracts are obligations to purchase or sell a specific currency for an agreed-upon price at a future date. When a Fund purchases or sells foreign securities it customarily enters into a forward currency contract to minimize foreign exchange risk between the trade date and the settlement date of such transactions. The 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 and foreign exchange 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 Global Fund had the following forward currency contracts outstanding at September 30, 2007:
Contracts to Buy | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||||
7,018,306 | Japanese Yen | US $ | 61,164 | 10/1/07 | US $ | 143 | ||||
96,597,137 | Japanese Yen | 838,255 | 10/2/07 | (1,611) | ||||||
7,591,530 | Japanese Yen | 65,879 | 10/3/07 | (126) | ||||||
$ 965,298 | (1,594) | |||||||||
Contracts to Sell | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||||
792,224 | Norwegian Krone | US $ | 143,831 | 10/1/07 | US $ | 2,276 | ||||
11,617,396 | Hong Kong Dollar | 1,497,126 | 10/2/07 | (1,705) | ||||||
$1,640,957 | 571 | |||||||||
Net Unrealized Loss on Forward Currency Contracts | $(1,023) | |||||||||
146 |
The International Fund had the following forward currency contracts outstanding at September 30, 2007:
Contracts to Buy | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||||
28,030 | Euro | US $ | 39,666 | 10/2/07 | US $ | 1,066 | ||||
1,779,818 | Norwegian Krone | 324,891 | 10/2/07 | (1,561) | ||||||
101,711,637 | Japanese Yen | 884,334 | 10/3/07 | — | ||||||
$1,248,891 | (495) | |||||||||
Contracts to Sell | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||||
193,132 | Euro | US $ | 272,770 | 9/2807 | US $ | 1,893 | ||||
339,732 | Mexican Peso | 31,118 | 10/2/07 | (49) | ||||||
2,643,540 | South African Rand | 377,770 | 10/2/07 | 5,532 | ||||||
213,411 | British Pound | 431,937 | 10/2/07 | 2,860 | ||||||
3,403,171 | South African Rand | 490,130 | 10/3/07 | 3,315 | ||||||
498,568 | Australian Dollar | 438,317 | 10/3/07 | 2,890 | ||||||
1,994,564 | South African Rand | 289,918 | 10/4/07 | (715) | ||||||
$2,331,960 | 15,726 | |||||||||
Net Unrealized Gain on Forward Currency Contracts | $15,231 | |||||||||
The International Fund had the following foreign exchange contracts outstanding at September 30, 2007.
Contracts to Buy | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Gain | |||||||
4,350,000 | British Pound | US $ | 8,786,478 | 11/19/07 | US $ | 76,061 | ||||
3,275,000 | British Pound | 6,565,720 | 11/23/07 | 106,651 | ||||||
2,850,000 | Euro | 3,896,805 | 2/19/08 | 156,327 | ||||||
2,860,000 | Australian Dollar | 2,373,743 | 2/29/08 | 157,208 | ||||||
4,395,000 | South African Rand | 598,314 | 3/5/08 | 38,943 | ||||||
351,000,000 | Japanese Yen | 2,977,781 | 5/12/08 | 73,995 | ||||||
8,310,000 | Swiss Franc | 7,020,123 | 5/13/08 | 93,385 | ||||||
$32,218,864 | 702,570 | |||||||||
147 |
Notes to Financial Statements (continued)
FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
September 30, 2007
Contracts to Sell | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||||
4,350,000 | British Pound | US $ | 8,578,896 | 11/19/07 | US $ | (283,643) | ||||
3,275,000 | British Pound | 6,469,763 | 11/23/07 | (202,609) | ||||||
2,850,000 | Euro | 3,875,715 | 2/19/08 | (177,417) | ||||||
2,860,000 | Australian Dollar | 2,314,598 | 2/29/08 | (216,353) | ||||||
4,395,000 | South African Rand | 575,537 | 3/5/08 | (61,720) | ||||||
5,700,000 | British Pound | 11,458,558 | 3/26/08 | (154,424) | ||||||
351,000,000 | Japanese Yen | 3,053,627 | 5/12/08 | 1,851 | ||||||
8,310,000 | Swiss Franc | 6,999,078 | 5/13/08 | (114,429) | ||||||
$43,325,772 | (1,208,744) | |||||||||
Net Unrealized Loss on Foreign Exchange Contracts | $ (506,174) | |||||||||
6. Capital—The Trusts are authorized to issue an unlimited number of shares of beneficial interest without par value. The Trusts consist of the Funds listed on the cover page, each of which is a separate and distinct series of the Trusts. Each Fund has designated two classes of shares, Class A shares and Class B shares (each, a “Class”). Each share of each Class has an equal beneficial interest in the assets, has identical voting, dividend, liquidation and other rights and is subject to the same term and conditions except that expenses allocated to a Class may be borne solely by that Class as determined by the Trustees and a Class may have exclusive voting rights with respect to matters affecting only that Class. Cash Management Fund’s Class A and Class B shares are sold without an initial sales charge; however, its Class B shares may only be a cquired through an exchange of Class B shares from another First Investors eligible Fund or through the reinvestment of dividends on Class B shares and are generally subject to a contingent deferred sales charge at the rate of 4% in the first year and declining to 0% over a six-year period, which is payable to FIC as underwriter of the Trusts. The Class A and Class B shares sold by the other Funds have a public offering price that reflects different sales charges and expense levels. Class A shares are sold with an initial sales charge of up to 5.75% of the amount invested and together with the Class B shares are subject to distribution plan fees as described in Note 3. Class B shares are sold without an initial sales charge, but are generally subject to a contingent deferred sales charge which declines in steps from 4% to 0% over a six-year period. Class B shares automatically convert into Class A shares after eight years. Realized and unrealized gains or losses, investment income and expenses (other than di stribution plan fees) are allocated daily to each class of shares based upon the relative proportion of net assets to each class.
148 |
7. Tax Components of Capital and Distributions to Shareholders—The tax character of distributions declared for the years ended September 30, 2007, and September 30, 2006 were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||
Distributions | Distributions | |||||||||||
Declared from | Declared from | |||||||||||
Ordinary | Realized | Ordinary | Realized | |||||||||
Fund | Income | Capital Gain | Total | Income | Capital Gain | Total | ||||||
Total Return | $ | 6,934,189 | $ | 2,437,390 | $ | 9,371,579 | $ | 5,047,525 | $ | — | $ | 5,047,525 |
Value | 5,043,416 | — | 5,043,416 | 3,608,092 | — | 3,608,092 | ||||||
Blue Chip | 2,538,723 | — | 2,538,723 | 1,292,468 | — | 1,292,468 | ||||||
Growth & Income | 3,341,467 | 11,989,017 | 15,330,484 | 2,247,490 | — | 2,247,490 | ||||||
Global | 1,799,574 | 27,418,792 | 29,218,366 | 511,516 | — | 511,516 | ||||||
Select Growth | — | 17,984,118 | 17,984,118 | — | — | — | ||||||
Mid-Cap Opportunity | — | 23,106,905 | 23,106,905 | — | 13,133,008 | 13,133,008 | ||||||
Special Situations | — | 22,838,368 | 22,838,368 | — | — | — | ||||||
International | 202,381 | — | 202,381 | — | — | — | ||||||
Cash Management | 9,601,006 | — | 9,601,006 | 6,863,484 | — | 6,863,484 | ||||||
Government | 9,442,942 | — | 9,442,942 | 8,777,738 | — | 8,777,738 | ||||||
Investment Grade | 13,206,406 | — | 13,206,406 | 12,108,496 | — | 12,108,496 | ||||||
Income | 41,007,580 | — | 41,007,580 | 42,407,668 | — | 42,407,668 |
As of September 30, 2007, the components of distributable earnings on a tax basis were as follows:
Total | ||||||||||||
Undistributed | Undistributed | Capital | Other | Unrealized | Distributable | |||||||
Ordinary | Capital | (Loss) | Accumulated | Appreciation | Income | |||||||
Fund | Income | Gains | Carryovers | Gain (Loss) | (Depreciation) | (Deficit) | ||||||
Total Return | $ | 5,422,524 | $ | 3,222,145 | $ | — | $ | — | $ | 61,978,315 | $ | 70,622,984 |
Value | 1,142,213 | — | (27,853,262) | — | 104,456,685 | 77,745,636 | ||||||
Blue Chip | 1,116,148 | — | (87,909,626) | — | 184,117,231 | 97,323,753 | ||||||
Growth & Income | 11,865,069 | — | — | — | 239,342,581 | 251,207,650 | ||||||
Global | 19,029,486 | 20,723,957 | — | 258,461 | 64,231,428 | 104,243,332 | ||||||
Select Growth | 6,648,762 | 31,600,230 | — | — | 25,373,645 | 63,622,637 | ||||||
Mid-Cap Opportunity | 8,836,959 | 38,654,776 | — | — | 134,640,454 | 182,132,189 | ||||||
Special Situations | 8,020,760 | 7,718,168 | — | — | 49,350,009 | 65,088,937 | ||||||
International | 2,769,858 | — | (82,339) | (924,245) | 12,695,185 | 14,458,459 | ||||||
Government | 6,781 | — | (9,588,398) | — | (3,705,420) | (13,287,037) | ||||||
Investment Grade | 421,021 | — | (8,542,581) | — | (4,712,148) | (12,833,708) | ||||||
Fund For Income | 4,141,155 | — | (154,363,100) | — | (33,183,081) | (183,405,026) |
; 149
Notes to Financial Statements (continued)
FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
September 30, 2007
Other accumulated losses consist primarily of post-October loss deferrals.
For the year ended September 30, 2007, the following reclassifications were made to reflect permanent differences between book and tax reporting:
Accumulated | Undistributed | |||||||
Securities at | Capital | Net Realized | Net Investment | |||||
Fund | Cost | Paid In | Gain | Income | ||||
Total Return | $ | — | $ | — | $ | (373,859) | $ | 373,859 |
Value | 15,167 | — | 234,752 | (249,919) | ||||
Blue Chip | — | (2,517,508) | 2,517,508 | — | ||||
Growth & Income | 9,779 | — | 194,221 | (204,000) | ||||
Global | — | 18,969 | (3,149,012) | 3,130,043 | ||||
Select Growth | — | — | (1,259,159) | 1,259,159 | ||||
Special Situations | — | — | (936,145) | 936,145 | ||||
International | — | — | (1,088,791) | 1,088,791 | ||||
Government | — | — | (559,589) | 559,589 | ||||
Investment Grade | — | — | (792,232) | 792,232 | ||||
Fund For Income | — | (842,581) | 339,185 | 503,396 |
8. Reorganization—On August 10, 2007, First Investors Blue Chip Fund (“Blue Chip Fund”) acquired all of the net assets of the First Investors Focused Equity Fund (“Focused Equity Fund”) in connection with a tax-free reorganization that was approved by the Equity Fund’s Board of Trustees. The Blue Chip Fund issued 1,728,265 Class A shares and 230,867 Class B shares to the Focused Equity Fund in connection with the reorganization. In return, it received net assets of $47,523,380 from the Focused Equity Fund (which included $1,253,787 of unrealized appreciation and $11,500,588 of accumulated net realized losses). The Blue Chip Fund’s shares were issued at their current net asset values as of the date of the reorganization. The aggregate net assets of the Blue Chip Fund and Focused Equity Fund immediately before the acquisition were $549,166,656 consisting of Blue Chip Fund $501,643,276 ($462,090,636 Class A and $39,552,640 Class B) and Focused Equity Fund $47,523,380 ($42,266,488 Class A and $5,256,892 Class B), respectively.
9. New Accounting Pronouncements—In July 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal
150 |
years beginning after December 15, 2006, and is to be applied to all open tax years as of the effective date. FIMCO believes that the adoption of FIN 48 will have no impact on the financial statements of the Funds.
In September 2006, the FASB issued Statement on Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The changes to current generally accepted accounting principles for the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of September 30, 2007, FIMCO does not believe the adoption of SFAS No. 157 will impact the financial statement amo unts of the Funds, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period.
151 |
Financial Highlights
FIRST INVESTORS EQUITY FUNDS
The following table sets forth the per share operating performance data for a share outstanding, total return, ratios to average net assets and other supplemental data for each fiscal year ended September 30, except as otherwise indicated.
P E R S H A R E D A T A | 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 | |||||||||||||||
Less Distributions | Ratio to Average | Assets Before Expenses | |||||||||||||
Investment Operations | from | Net Assets** | Waived or Assumed | ||||||||||||
Net Asset | Net Realized | Net Asset | |||||||||||||
Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net | Net | Portfolio | |||||
Beginning | Investment | Gain on | Investment | Investment | Realized | Total | End of | Total | End of Year | Investment | Investment | Turnover | |||
of Year | Income | Investments | Operations | Income | Gain | Distributions | Year | Return* | (in millions) | Expenses | Income | Expenses | Income | Rate | |
TOTAL RETURN FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $10.59 | $ .20 | $1.44 | $1.64 | $ .21 | $ — | $ .21 | $12.02 | 15 .58% | $ 177 | 1 .52% | 1.72% | 1 .77% | 1.47% | 80% |
2004 | 12 .02 | .20 | 96 | 1.16 | .20 | — | .20 | 12 .98 | 9 .65 | 231 | 1 .44 | 1.60 | 1 .65 | 1.39 | 41 |
2005 | 12 .98 | .23 | 97 | 1.20 | .25 | — | .25 | 13 .93 | 9 .25 | 281 | 1 .40 | 1.69 | 1 .57 | 1.52 | 52 |
2006 | 13 .93 | .23 | 64 | 87 | .23 | — | .23 | 14 .57 | 6 .24 | 312 | 1 .38 | 1.63 | 1 .44 | 1.57 | 57 |
2007 | 14 .57 | .29 | 1.40 | 1.69 | .30 | .10 | .40 | 15 .86 | 11 .68 | 355 | 1 .33 | 2.05 | N/A | N/A | 40 |
Class B | |||||||||||||||
2003 | 10 .46 | .09 | 1.44 | 1.53 | .13 | — | .13 | 11 .86 | 14 .71 | 28 | 2 .22 | 1.02 | 2 .47 | .77 | 80 |
2004 | 11 .86 | .12 | .94 | 1.06 | .12 | — | .12 | 12 .80 | 8 .92 | 36 | 2 .14 | .90 | 2 .35 | .69 | 41 |
2005 | 12 .80 | .13 | .95 | 1.08 | .15 | — | .15 | 13 .73 | 8 .49 | 38 | 2 .10 | .99 | 2 .27 | .82 | 52 |
2006 | 13 .73 | .13 | .63 | .76 | .13 | — | .13 | 14 .36 | 5 .53 | 36 | 2 .08 | .93 | 2 .14 | .87 | 57 |
2007 | 14 .36 | .14 | 1.42 | 1.56 | .19 | .10 | .29 | 15 .63 | 10 .93 | 34 | 2 .03 | 1.35 | N/A | N/A | 40 |
VALUE FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $ 4.26 | $ .08 | $ .73 | $ .81 | $ .08 | — | $ .08 | $ 4.99 | 19 .04% | $126 | 1 .67% | 1.69% | N/A | N/A | 92% |
2004 | 4 .99 | .07 | .96 | 1.03 | .07 | — | .07 | 5 .95 | 20 .57 | 185 | 1 .48 | 1.21 | N/A | N/A | 11 |
2005 | 5 .95 | .08 | .65 | .73 | .07 | — | .07 | 6 .61 | 12 .31 | 267 | 1 .43 | 1.31 | N/A | N/A | 17 |
2006 | 6 .61 | .09 | .78 | .87 | .08 | — | .08 | 7 .40 | 13 .22 | 337 | 1 .40 | 1.29 | N/A | N/A | 15 |
2007 | 7 .40 | .10 | .74 | .84 | .10 | — | .10 | 8 .14 | 11 .36 | 414 | 1 .33 | 1.34 | N/A | N/A | 8 |
Class B | |||||||||||||||
2003 | 4 .20 | .05 | .71 | .76 | .04 | — | .04 | 4 .92 | 18 .26 | 19 | 2 .37 | .99 | N/A | N/A | 92 |
2004 | 4 .92 | .03 | .95 | .98 | .03 | — | .03 | 5 .87 | 19 .91 | 23 | 2 .18 | .51 | N/A | N/A | 11 |
2005 | 5 .87 | .04 | .63 | .67 | .03 | — | .03 | 6 .51 | 11 .43 | 27 | 2 .13 | .61 | N/A | N/A | 17 |
2006 | 6 .51 | .04 | .76 | .80 | .03 | — | .03 | 7 .28 | 12 .34 | 28 | 2 .10 | .59 | N/A | N/A | 15 |
2007 | 7 .28 | .05 | .72 | .77 | .04 | — | .04 | 8 .01 | 10 .64 | 27 | 2 .03 | .64 | N/A | N/A | 8 |
152 | 153 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | ||||||||||||||
Less Distributions | Ratio to Average Net | ||||||||||||||
Investment Operations | from | Ratio to Average | Assets Before Expenses | ||||||||||||
Net Assets** | Waived or Assumed | ||||||||||||||
Net Asset | Net | Net Realized | Net Asset | ||||||||||||
Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net | Net | Portfolio | |||||
Beginning | Income | Gain on | Investment | Investment | Realized | Total | End of | Total | End of Year | Investment | Investment | Turnover | |||
of Year | (Loss) | Investments | Operations | Income | Gain | Distributions | Year | Return* | (in millions) | Expenses | Income (Loss) | Expenses | Income (Loss) | Rate | |
BLUE CHIP | |||||||||||||||
Class A | |||||||||||||||
2003 | $14.56 | $ — | $ 2.58 | $ 2.58 | $ — | — | $ — | $17.14 | 17 .72% | $383 | 1 .56% | —% | 1 .68% | (.12)% | 111% |
2004 | 17 .14 | .01 | 1.54 | 1.55 | — | — | — | 18 .69 | 9 .04 | 414 | 1 .47 | .03 | 1 .58 | (.08) | 94 |
2005 | 18 .69 | .10 | 1.91 | 2.01 | .10 | — | .10 | 20 .60 | 10 .76 | 421 | 1 .45 | .54 | 1 .56 | .43 | 55 |
2006 | 20 .60 | .10 | 1.82 | 1.92 | .07 | — | .07 | 22 .45 | 9 .31 | 438 | 1 .46 | .47 | 1 .50 | .43 | 6 |
2007 | 22 .45 | .15 | 3.17 | 3.32 | .13 | — | .13 | 25 .64 | 14 .81 | 526 | 1 .39 | .65 | N/A | N/A | 3 |
Class B | |||||||||||||||
2003 | 13 .91 | (.11) | 2.46 | 2.35 | — | — | — | 16 .26 | 16 .90 | 62 | 2 .26 | (.70) | 2 .38 | (.82) | 111 |
2004 | 16 .26 | (.13) | 1.48 | 1.35 | — | — | — | 17 .61 | 8 .30 | 61 | 2 .17 | (.67) | 2 .28 | (.78) | 94 |
2005 | 17 .61 | .09 | 1.67 | 1.76 | .07 | — | .07 | 19 .30 | 9 .98 | 52 | 2 .15 | (.16) | 2 .26 | (.27) | 55 |
2006 | 19 .30 | (.08) | 1.72 | 1.64 | — | — | — | 20 .94 | 8 .50 | 44 | 2 .16 | (.23) | 2 .20 | (.27) | 6 |
2007 | 20 .94 | (.06) | 3 .00 | 2.94 | — | — | — | 23 .88 | 14 .04 | 46 | 2 .09 | (.05) | N/A | N/A | 3 |
GROWTH & INCOME FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $ 8.83 | $ .04 | $ 1.85 | $ 1.89 | $.04 | $ — | $.04 | $10.68 | 21 .49% | $400 | 1 .52% | .44% | N/A | N/A | 70% |
2004 | 10 .68 | .06 | 1.43 | 1.49 | .03 | — | .03 | 12 .14 | 13 .95 | 499 | 1 .42 | .53 | N/A | N/A | 32 |
2005 | 12 .14 | .09 | 1.54 | 1.63 | .10 | — | .10 | 13 .67 | 13 .43 | 597 | 1 .38 | .72 | N/A | N/A | 42 |
2006 | 13 .67 | .05 | 1.05 | 1.10 | .05 | — | .05 | 14 .72 | 8 .06 | 671 | 1 .37 | .35 | N/A | N/A | 34 |
2007 | 14 .72 | .08 | 2.37 | 2.45 | .07 | .24 | .31 | 16 .86 | 16 .78 | 808 | 1 .32 | .54 | N/A | N/A | 23 |
Class B | |||||||||||||||
2003 | 8 .51 | (.03) | 1.78 | 1.75 | — | — | — | 10 .26 | 20 .56 | 76 | 2 .22 | (.26) | N/A | N/A | 70 |
2004 | 10 .26 | (.03) | 1.39 | 1.36 | — | — | — | 11 .62 | 13 .26 | 83 | 2 .12 | (.17) | N/A | N/A | 32 |
2005 | 11 .62 | (.04) | 1.51 | 1.47 | .03 | — | .03 | 13 .06 | 12 .65 | 82 | 2 .08 | .02 | N/A | N/A | 42 |
2006 | 13 .06 | (.12) | 1.07 | .95 | — | — | — | 14 .01 | 7 .28 | 72 | 2 .07 | (.35) | N/A | N/A | 34 |
2007 | 14 .01 | (.13) | 2.35 | 2.22 | — | .24 | .24 | 15 .99 | 15 .98 | 67 | 2 .02 | (.16) | N/A | N/A | 23 |
154 | 155 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | ||||||||||||||
Less Distributions | Ratio to Average Net | ||||||||||||||
Investment Operations | from | Ratio to Average | Assets Before Expenses | ||||||||||||
Net Assets** | Waived or Assumed | ||||||||||||||
Net Asset | Net | Net Realized | Net | Net | Net Asset | Net Assets | Net | Net | Portfolio | ||||||
Value, | Investment | and Unrealized | Total from | Value, | |||||||||||
Beginning | Income | Gain on | Investment | Investment | Realized | Total | End of | Total | End of Year | Investment | Investment | Turnover | |||
of Year | (Loss) | Investments | Operations | Income | Gain | Distributions | Year | Return* | (in millions) | Expenses | Income (Loss) | Expenses | Income (Loss) | Rate | |
GLOBAL FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $4.24 | $(.01) | $ .93 | $ .92 | $ — | $ — | $ — | $ 5.16 | 21 .70% | $192 | 1 .98% | (.19)% | N/A | N/A | 112% |
2004 | 5 .16 | (.01) | .78 | .77 | — | — | — | 5 .93 | 14 .92 | 209 | 1 .86 | (.13) | N/A | N/A | 105 |
2005 | 5 .93 | — | 1.13 | 1.13 | — | — | — | 7 .06 | 19 .06 | 239 | 1 .78 | .05 | N/A | N/A | 104 |
2006 | 7 .06 | .01 | .71 | .72 | .02 | — | .02 | 7 .76 | 10 .15 | 260 | 1 .77 | .14 | N/A | N/A | 105 |
2007 | 7 .76 | — | 1.87 | 1.87 | .05 | .76 | .81 | 8 .82 | 26 .43 | 323 | 1.70 | (.07) | 1 .70% | (.07)% | 134 |
Class B | |||||||||||||||
2003 | 4 .00 | (.04) | .88 | .84 | — | — | — | 4 .84 | 21 .00 | 15 | 2 .68 | (.89) | N/A | N/A | 112 |
2004 | 4 .84 | (.05) | .73 | .68 | — | — | — | 5 .52 | 14 .05 | 15 | 2 .56 | (.83) | N/A | N/A | 105 |
2005 | 5 .52 | (.04) | 1.04 | 1 .00 | — | — | — | 6 .52 | 18 .12 | 14 | 2 .48 | (.65) | N/A | N/A | 104 |
2006 | 6 .52 | (.05) | .67 | .62 | — | — | — | 7 .14 | 9 .51 | 14 | 2 .47 | (.56) | N/A | N/A | 105 |
2007 | 7 .14 | (.16) | 1.81 | 1.65 | .05 | .76 | .81 | 7 .98 | 25 .57 | 14 | 2.40 | (.77) | 2 .40 | (.77) | 134 |
SELECT GROWTH FUND †† | |||||||||||||||
Class A | |||||||||||||||
2003 | $5.33 | $(.06) | $1.48 | $1.42 | — | $ — | $ — | $ 6.75 | 26 .64% | $ 77 | 1.94% | (1.15)% | 1 .96% | (1.17)% | 126% |
2004 | 6 .75 | (.07) | 1.12 | 1.05 | — | — | — | 7 .80 | 15 .56 | 130 | 1.68 | (1.12) | N/A | N/A | 75 |
2005 | 7 .80 | (.05) | 1.07 | 1.02 | — | — | — | 8 .82 | 13 .08 | 169 | 1.58 | (.66) | N/A | N/A | 91 |
2006 | 8 .82 | (.06) | .50 | .44 | — | — | — | 9 .26 | 4 .99 | 195 | 1.53 | (.65) | N/A | N/A | 107 |
2007 | 9 .26 | (.04) | 1.75 | 1.71 | — | .76 | .76 | 10 .21 | 19 .81 | 243 | 1.47 | (.46) | N/A | N/A | 169 |
Class B | |||||||||||||||
2003 | 5 .26 | (.09) | 1.44 | 1.35 | — | — | — | 6 .61 | 25 .67 | 14 | 2.64 | (1.85) | 2 .66 | (1 .87) | 126 |
2004 | 6 .61 | (.12) | 1.10 | .98 | — | — | — | 7 .59 | 14 .83 | 20 | 2.38 | (1.82) | N/A | N/A | 75 |
2005 | 7 .59 | (.11) | 1.04 | .93 | — | — | — | 8 .52 | 12 .25 | 23 | 2.28 | (1.36) | N/A | N/A | 91 |
2006 | 8 .52 | (.12) | .49 | .37 | — | — | — | 8 .89 | 4 .34 | 23 | 2.23 | (1.35) | N/A | N/A | 107 |
2007 | 8 .89 | (.11) | 1.68 | 1.57 | — | .76 | .76 | 9 .70 | 19 .00 | 25 | 2.17 | (1.16) | N/A | N/A | 169 |
156 | 157 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | ||||||||||||||
Less Distributions | |||||||||||||||
Investment Operations | from | ||||||||||||||
Ratio to Average Net | |||||||||||||||
Ratio to Average | Assets Before Expenses | ||||||||||||||
Net Assets** | Waived or Assumed | ||||||||||||||
Net Asset | Net | Net Realized | Net Asset | ||||||||||||
Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net | Net | Portfolio | |||||
Beginning | Income | Gain on | Investment | Investment | Realized | Total | End of | Total | End of Year | Investment | Investment | Turnover | |||
of Year | (Loss) | Investments | Operations | Income | Gain | Distributions | Year | Return* | (in millions) | Expenses | Income (Loss) | Expenses | Income (Loss) | Rate | |
MID-CAP OPPORTUNITY FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $15.78 | $ (.12) | $3.52 | $3.40 | — | $ — | $ — | $19.18 | 21 .55% | $192 | 1 .73% | (.80)% | 1 .97% | (1.04)% | 37% |
2004 | 19 .18 | (.09) | 3.62 | 3.53 | — | — | — | 22 .71 | 18 .41 | 277 | 1 .56 | (.46) | 1 .73 | (.63) | 40 |
2005 | 22 .71 | (.09) | 5.62 | 5.53 | — | — | — | 28 .24 | 24 .35 | 410 | 1 .48 | (.39) | 1 .61 | (.52) | 43 |
2006 | 28 .24 | (.09) | .77 | .68 | — | .78 | .78 | 28 .14 | 2 .58 | 435 | 1 .44 | (.33) | 1 .47 | (.36) | 55 |
2007 | 28 .14 | .16 | 4.35 | 4.51 | — | 1.33 | 1.33 | 31 .32 | 16 .57 | 481 | 1 .38 | .52 | N/A | N/A | 50 |
Class B | |||||||||||||||
2003 | 14 .87 | (.23) | 3.31 | 3.08 | — | — | — | 17 .95 | 20 .71 | 35 | 2 .43 | (1.50) | 2 .67 | (1.74) | 37 |
2004 | 17 .95 | (.23) | 3.38 | 3.15 | — | — | — | 21 .10 | 17 .55 | 46 | 2 .26 | (1.16) | 2 .43 | (1.33) | 40 |
2005 | 21 .10 | (.26) | 5.22 | 4.96 | — | — | — | 26 .06 | 23 .51 | 57 | 2 .18 | (1.09) | 2 .31 | (1.22) | 43 |
2006 | 26 .06 | (.29) | .73 | .44 | — | .78 | .78 | 25 .72 | 1 .85 | 51 | 2 .14 | (1.03) | 2 .17 | (1.06) | 55 |
2007 | 25 .72 | (.05) | 3.97 | 3.92 | — | 1.33 | 1.33 | 28 .31 | 15 .80 | 50 | 2 .08 | (.18) | N/A | N/A | 50 |
SPECIAL SITUATIONS FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $12.66 | $ (.17) | $3.14 | $2.97 | — | $ — | $ — | $15.63 | 23 .46% | $169 | 1 .80% | (1.26)% | 2 .05% | (1.51)% | 111% |
2004 | 15 .63 | (.18) | 1.39 | 1.21 | — | — | — | 16 .84 | 7 .74 | 190 | 1 .63 | (1.08) | 1 .86 | (1.31) | 119 |
2005 | 16 .84 | (.12) | 3.72 | 3.60 | — | — | — | 20 .44 | 21 .38 | 224 | 1 .60 | (.64) | 1 .82 | (.86) | 112 |
2006 | 20 .44 | .11 | 2.07 | 2.18 | — | — | — | 22 .62 | 10 .67 | 249 | 1 .53 | (.49) | 1 .73 | (.69) | 48 |
2007 | 22 .62 | (.06) | 3.59 | 3.53 | — | 1.88 | 1.88 | 24 .27 | 16 .30 | 295 | 1 .46 | (.27) | 1 .61 | (.42) | 64 |
Class B | |||||||||||||||
2003 | 11 .84 | (.25) | 2.93 | 2.68 | — | — | — | 14 .52 | 22 .63 | 20 | 2 .50 | (1.96) | 2 .75 | (2.21) | 111 |
2004 | 14 .52 | (.30) | 1.32 | 1.02 | — | — | — | 15 .54 | 7 .03 | 21 | 2 .33 | (1.78) | 2 .56 | (2.01) | 119 |
2005 | 15 .54 | (.26) | 3.44 | 3.18 | — | — | — | 18 .72 | 20 .46 | 21 | 2 .30 | (1.34) | 2 .52 | (1.56) | 112 |
2006 | 18 .72 | (.26) | 2.11 | 1.85 | — | — | — | 20 .57 | 9 .88 | 18 | 2 .23 | (1.19) | 2 .43 | (1.39) | 48 |
2007 | 20 .57 | (.22) | 3.26 | 3.04 | — | 1.88 | 1.88 | 21 .73 | 15 .48 | 18 | 2 .16 | (.97) | 2 .31 | (1.12) | 64 |
158 | 159 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
P E R S H A R E D A T A | 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 | |||||||||||||||
Less Distributions | Ratio to Average Net | Assets Before Expenses | |||||||||||||
Investment Operations | from | Assets** | Waived or Assumed | ||||||||||||
Net Asset | Net | Net Realized | Net Asset | ||||||||||||
Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net | Net | Portfolio | |||||
Beginning | Income | Gain on | Investment | Investment | Realized | Total | End of | Total | End of Year | Investment | Investment | Turnover | |||
of Year | (Loss) | Investments | Operations | Income | Gain | Distributions | Year | Return* | (in millions) | Expenses | Income (Loss) | Expenses | Income (Loss) | Rate | |
INTERNATIONAL FUND | |||||||||||||||
Class A | |||||||||||||||
2006(a) | $10.00 | $ — | $ .71 | $ .71 | $ — | — | $ — | $10.71 | 7 .10% | $19 | 2 .35%† | . 15%† | 5 .65%† | (3.15)%† | 9 |
2007 | 10 .71 | .08 | 2.46 | 2.54 | .07 | — | .07 | 13 .18 | 23 .84 | 96 | 2 .50 | (.05) | 2 .35 | .10 | 67 |
Class B | |||||||||||||||
2006(a) | 10 .00 | (.01) | .71 | 70 | — | — | — | 10.70 | 7 .00 | 1 | 3 .05† | (.55)† | 6 .35† | (3.85)† | 9 |
2007 | 10 .70 | — | 2.44 | 2.44 | .07 | — | .07 | 13 .07 | 22 .93 | 4 | 3 .20 | (.75) | 3 .05 | (.60) | 67 |
* Calculated without sales charges.
** Net of expenses waived or assumed by the investment adviser (Note 3).
† Annualized.
†† Prior to May 7, 2007, known as All-Cap Growth Fund.
(a) For the period June 27, 2006 (commencement of operations) to September 30, 2006.
160 | See notes to financial statements | 161 |
Financial Highlights
FIRST INVESTORS INCOME FUNDS
The following table sets forth the per share operating performance data for a share outstanding, total return, ratios to average net assets and other supplemental data for each fiscal year ended September 30.
P E R S H A R E D A T A | 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 | |||||||||||||||
Less Distributions | Ratio to Average Net | Assets Before Expenses | |||||||||||||
Investment Operations | from | Assets** | Waived or Assumed | ||||||||||||
Net Asset | Net Realized | Net Asset | |||||||||||||
Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net | Net | Portfolio | |||||
Beginning | Investment | Loss on | Investment | Investment | Realized | Total | End of | Total | End of Year | Investment | Investment | Turnover | |||
of Year | Income | Investments | Operations | Income | Gain | Distributions | Year | Return* | (in millions) | Expenses | Income | Expenses | Income (Loss) | Rate | |
CASH MANAGEMENT FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $ 1.00 | $ .006 | — | $ .006 | $ .006 | — | $ .006 | $ 1.00 | .62% | $179 | . 78% | . 62% | . 97% | .43% | — |
2004 | 1 .00 | .005 | — | .005 | .005 | — | .005 | 1 .00 | .50 | 171 | .70 | .50 | 1.05 | .15 | — |
2005 | 1 .00 | .019 | — | .019 | .019 | — | .019 | 1 .00 | 1 .94 | 162 | .70 | 1.90 | 1.04 | 1.56 | — |
2006 | 1 .00 | .038 | — | .038 | .038 | — | .038 | 1 .00 | 3 .89 | 200 | .78 | 3.85 | 1 .01 | 3.62 | — |
2007 | 1 .00 | .045 | — | .045 | .045 | — | .045 | 1 .00 | 4 .59 | 218 | .80 | 4.51 | .93 | 4.38 | — |
Class B | |||||||||||||||
2003 | 1 .00 | .001 | — | .001 | .001 | — | .001 | 1 .00 | .05 | 6 | 1.34 | .06 | 1.53 | (.13) | — |
2004 | 1 .00 | — | — | — | — | — | — | 1 .00 | — | 5 | 1.20 | — | 1.55 | (.35) | — |
2005 | 1 .00 | .012 | — | .012 | .012 | — | .012 | 1 .00 | 1 .18 | 3 | 1.45 | 1.15 | 1.79 | .81 | — |
2006 | 1 .00 | .031 | — | .031 | .031 | — | .031 | 1 .00 | 3 .11 | 3 | 1.53 | 3.10 | 1.76 | 2.87 | — |
2007 | 1 .00 | .037 | — | .037 | .037 | — | .037 | 1 .00 | 3 .81 | 2 | 1.55 | 3.76 | 1.68 | 3.63 | — |
GOVERNMENT FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $11.50 | $ .54 | $ (.19) | $ .35 | $ .54 | — | $ .54 | $11.31 | 3.08% | $184 | 1.10% | 4.69% | 1.58% | 4.21% | 65% |
2004 | 11 .31 | .51 | (.18) | .33 | .51 | — | .51 | 11 .13 | 3.01 | 179 | 1.10 | 4.59 | 1.56 | 4.13 | 60 |
2005 | 11 .13 | .50 | (.25) | .25 | .50 | — | .50 | 10 .88 | 2.25 | 182 | 1.10 | 4.49 | 1.57 | 4.02 | 48 |
2006 | 10 .88 | .45 | (.13) | .32 | .49 | — | .49 | 10 .71 | 3.02 | 186 | 1.10 | 4.14 | 1.35 | 3.89 | 43 |
2007 | 10 .71 | .49 | (.06) | .43 | .50 | — | .50 | 10 .64 | 4.07 | 199 | 1.10 | 4.62 | 1.24 | 4.48 | 23 |
Class B | |||||||||||||||
2003 | 11 .49 | .45 | (.19) | .26 | .45 | — | .45 | 11 .30 | 2.33 | 21 | 1.85 | 3.94 | 2.33 | 3.46 | 65 |
2004 | 11 .30 | .43 | (.18) | .25 | .43 | — | .43 | 11 .12 | 2.25 | 17 | 1.85 | 3.84 | 2.31 | 3.38 | 60 |
2005 | 11 .12 | .41 | (.25) | .16 | .41 | — | .41 | 10 .87 | 1.48 | 15 | 1.85 | 3.74 | 2.32 | 3.27 | 48 |
2006 | 10 .87 | .36 | (.12) | .24 | .40 | — | .40 | 10 .71 | 2.32 | 13 | 1.85 | 3.39 | 2.10 | 3.14 | 43 |
2007 | 10 .71 | .41 | (.06) | .35 | .42 | — | .42 | 10 .64 | 3.33 | 12 | 1.82 | 3.90 | 1.96 | 3.76 | 23 |
162 | 163 |
Financial Highlights (continued)
FIRST INVESTORS INCOME FUNDS
P E R S H A R E D A T A | 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 | |||||||||||||||
Less Distributions | Ratio to Average Net | Assets Before Expenses | |||||||||||||
Investment Operations | from | Assets** | Waived or Assumed | ||||||||||||
Net Asset | Net Realized | Net Asset | |||||||||||||
Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net | Net | Portfolio | |||||
Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Year | Investment | Investment | Turnover | |||
of Year | Income | Investments | Operations | Income | Gain | Distributions | Year | Return* | (in millions) | Expenses | Income | Expenses | Income | Rate | |
INVESTMENT GRADE FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $ 9.96 | $ .51 | $ 35 | $ .86 | $ .54 | — | $ .54 | $10.28 | 8 .94% | $144 | 1.10% | 4.85% | 1.35% | 4.60% | 6% |
2004 | 10 .28 | .47 | (.11) | .36 | .53 | — | .53 | 10 .11 | 3 .57 | 170 | 1.10 | 4.49 | 1.32 | 4.27 | 9 |
2005 | 10 .11 | .45 | (.28) | .17 | .52 | — | .52 | 9 .76 | 1 .70 | 203 | 1.10 | 4.21 | 1.31 | 4.00 | 11 |
2006 | 9 .76 | .44 | (.19) | .25 | .49 | — | .49 | 9 .52 | 2 .69 | 231 | 1.10 | 4.35 | 1.27 | 4.18 | 74 |
2007 | 9 .52 | .45 | (.09) | .36 | .46 | — | .46 | 9 .42 | 3 .91 | 271 | 1.10 | 4.58 | 1.22 | 4.46 | 50 |
Class B | |||||||||||||||
2003 | 9 .96 | .43 | .36 | .79 | .47 | — | .47 | 10 .28 | 8 .17 | 31 | 1.85 | 4.10 | 2.10 | 3.85 | 6 |
2004 | 10 .28 | .38 | (.11) | .27 | .45 | — | .45 | 10 .10 | 2 .74 | 30 | 1.85 | 3.74 | 2.07 | 3.52 | 9 |
2005 | 10 .10 | .34 | (.24) | .10 | .45 | — | .45 | 9 .75 | .97 | 28 | 1.85 | 3.46 | 2.06 | 3.25 | 11 |
2006 | 9 .75 | .30 | (.12) | .18 | .42 | — | .42 | 9 .51 | 1 .92 | 24 | 1.85 | 3.60 | 2.02 | 3.43 | 74 |
2007 | 9 .51 | .35 | (.05) | .30 | .40 | — | .40 | 9 .41 | 3 .17 | 22 | 1.82 | 3.86 | 1.94 | 3.74 | 50 |
INCOME FUND | |||||||||||||||
Class A | |||||||||||||||
2003 | $ 2.64 | $ .24 | $ .41 | $ .65 | $ .24 | — | $ .24 | $3.05 | 25 .78% | $509 | 1.34% | 8.38% | N/A | N/A | 31% |
2004 | 3 .05 | .23 | .13 | .36 | .23 | — | .23 | 3 .18 | 12 .06 | 561 | 1.29 | 7.35 | N/A | N/A | 37 |
2005 | 3 .18 | .23 | (.11) | .12 | .23 | — | .23 | 3 .07 | 3 .79 | 571 | 1.30 | 7.33 | N/A | N/A | 39 |
2006 | 3 .07 | .22 | (.06) | .16 | .22 | — | .22 | 3 .01 | 5 .40 | 555 | 1.31 | 7.28 | N/A | N/A | 28 |
2007 | 3 .01 | .21 | (.02) | .19 | .21 | — | .21 | 2 .99 | 6 .38 | 563 | 1.29 | 7.00 | N/A | N/A | 34 |
Class B | |||||||||||||||
2003 | 2 .63 | .23 | .41 | .64 | .22 | — | .22 | 3 .05 | 25 .24 | 37 | 2.04 | 7.68 | N/A | N/A | 31 |
2004 | 3 .05 | .21 | .12 | .33 | .20 | — | .20 | 3 .18 | 11 .22 | 40 | 1.99 | 6.65 | N/A | N/A | 37 |
2005 | 3 .18 | .21 | (.13) | .08 | .20 | — | .20�� | 3 .06 | 2 .68 | 37 | 2.00 | 6.63 | N/A | N/A | 39 |
2006 | 3 .06 | .20 | (.06) | .14 | .20 | — | .20 | 3 .00 | 4 .64 | 31 | 2.01 | 6.58 | N/A | N/A | 28 |
2007 | 3 .00 | .19 | (.01) | .18 | .19 | — | .19 | 2 .99 | 5 .99 | 25 | 1.99 | 6.30 | N/A | N/A | 34 |
* Calculated without sales charges.
** Net of expenses waived or assumed by the investment adviser (Note 3).
164 | See notes to financial statements | 165 |
Report of Independent Registered Public
Accounting Firm
To the Shareholders and Board of Trustees of First Investors Equity Funds and First Investors Income Funds
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments of the Total Return Fund, Value Fund, Blue Chip Fund, Growth & Income Fund, Global Fund, Select Growth Fund, Mid-Cap Opportunity Fund, Special Situations Fund, and International Fund (each a series of First Investors Equity Funds), and the Cash Management Fund, Government Fund, Investment Grade Fund and Fund For Income, (each a series of First Investors Income Funds), as of September 30, 2007, 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 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 September 30, 2007, by correspondence with the custodian and brokers. Where brokers have not replied to our confir-mation 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.
166 |
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Total Return Fund, Value Fund, Blue Chip Fund, Growth & Income Fund, Global Fund, Select Growth Fund, Mid-Cap Opportunity Fund, Special Situations Fund, International Fund, Cash Management Fund, Government Fund, Investment Grade Fund and Fund For Income, as of September 30, 2007, 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.
&nb sp; Tait, Weller & Baker LLP
Philadelphia, Pennsylvania
November 15, 2007
167 |
Board Considerations of Advisory Contracts and Fees
(Unaudited)
FIRST INVESTORS EQUITY FUNDS
Annual Consideration of the Investment Advisory Agreements and the Sub-Advisory Agreements with Wellington Management Company, LLP, Paradigm Capital Management, Inc. and Vontobel Asset Management, Inc.
At a meeting held on May 17, 2007 (“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 agreement (the “Advisory Agreement”) between First Investors Management Company, Inc. (“FIMCO”) and each of the following funds (each a “Fund” and collectively the “Funds”): Growth & Income Fund, Total Return Fund, Blue Chip Fund, Value Fund, Mid-Cap Opportunity Fund, Special Situations Fund, Select Growth Fund (formerly All-Cap Growth Fund), Focused Equity Fund, Global Fund and International Fund. In addition, at the May Meeting, the Board, including a majority of the independent Trustees, approved the renewal of the sub-advisory agreements (each a “Sub-Advisory Agreement” and collectively the “Sub-Advisory Agreements”) with: (1) Wellington Management Company, LLP (“WMC”) with respect to the Global Fund; (2) Paradigm Capital Management, Inc. (“Paradigm”) with respect to the Special Situations Fund; and (3) Vontobel Asset Management, Inc. (“Vontobel”) with respect to the International Fund. The Global Fund, Special Situations Fund and International Fund are collectively referred to as the “Sub-Advised Funds.”
At the May Meeting, the Board, including a majority of the independent Trustees, also approved the continuance of the sub-advisory agreement with WMC with respect to the Focused Equity Fund on an interim basis. At that meeting, FIMCO also recommended, and the Board approved, a proposal to reorganize the Focused Equity Fund into the Blue Chip Fund. As part of this proposal, FIMCO was authorized to terminate WMC as sub-adviser of the Focused Equity Fund and to assume day-to-day management of the Fund. This occurred on June 7, 2007.
In reaching its decisions to approve the continuation of the Advisory Agreement for each Fund and the Sub-Advisory Agreements with WMC, Paradigm and Vontobel the Board considered information furnished and discussed throughout the year at regularly scheduled Board meetings and Investment Committee meetings as well as information provided specifically in relation to the renewal of the Advisory Agreement and Sub-Advisory Agreements for the May Meeting. Information furnished at Board meetings and/or Investment Committee meetings throughout the year included FIMCO’s analysis of each Fund’s investment performance, presentations given by representatives of FIMCO, WMC, Paradigm and Vontobel and various reports on compliance and other services provided by FIMCO and its affiliates. In preparation for the May Meeting, the independent Trustees requested and received information
168 |
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 and its affiliates to the Funds, including investment advisory and administrative services to the Funds; (2) the actual management fees paid by each Fund to FIMCO; (3) the costs of providing services to each Fund and the profitability of FIMCO and its affiliate, Administrative Data Management Corp. (“ADM”), the Funds’ affiliated transfer agent, from the relations hip with each Fund; and (4) any “fall out” or ancillary benefits accruing to FIMCO or its affiliates 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 as well as comparative profitability information based on analysis performed by FIMCO of the financial statements of certain publicly-traded mutual fund asset managers. 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, Paradigm and Vontobel furnished, and the Board reviewed, information concerning aspects of their respective operations, including: (1) the nature, extent and quality of services provided by WMC, Paradigm and Vontobel to the applicable Sub-Advised Funds; (2) the sub-advisory fee rates charged by WMC, Paradigm and Vontobel and a comparison of those fee rates to the fee rates charged by WMC, Paradigm and Vontobel for providing sub-advisory services to other investment companies or accounts, as applicable, with objectives similar to the applicable Sub-Advised Funds; (3) profitability information provided by WMC, Paradigm and Vontobel; and (4) any “fall out” or ancillary benefits accruing to WMC, Paradigm and Vontobel as a result of the relationship with each applicable Sub-Advised Fund. In addition, WMC provided, a nd 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 Fund 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
169 |
Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS EQUITY FUNDS
the Advisory Agreement 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.
Based on all of the information presented, the Board, including a majority of its independent Trustees, determined on a Fund-by-Fund basis that the fees charged under the Advisory Agreement and each Sub-Advisory Agreement are reasonable in relation to the services that are provided under each Agreement. 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 Agreement for each Fund 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 Agreement for each Fund and Sub-Advisory Agreements with WMC, Paradigm and Vontobel.
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 the philosophy of FIMCO and its affiliates to provide a high level of personal service to the shareholders of the Funds, that FIMCO and its affiliates strive to service the needs of a shareholder base that includes many investors who are less affluent 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 explanation regarding the significant costs involved in providing the level of personal service that the First Investors fund complex attempts to deliver to its shareholders.
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
170 |
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 Agreement 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 and/or sub-advisers of Funds that have had significant periods of underper-formance, adding to its in-house research and analytical capabilities when necessary, and providing significant compens ation incentives to portfolio managers and analysts for above-the-median Fund performance.
The Board also considered the nature, extent and quality of the services provided to the Funds by FIMCO’s affiliates, including transfer agency and distribution services. The Board took into account the fact that ADM is dedicated to providing transfer agency services exclusively to the Funds and the other funds in the First Investors fund complex. As a result, ADM can tailor its processes and services to satisfy the needs of the Funds’ shareholder base. The Board noted that the Funds’ shares are distributed primarily through First Investors Corporation (“FIC”), which is an affiliate of FIMCO.
Furthermore, the Board considered the nature, extent and quality of the investment management services provided by WMC, Paradigm and Vontobel to the applicable Sub-Advised Funds. The Trustees considered WMC’s, Paradigm’s and Vontobel’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 information considered, the Board concluded that the nature, extent and quality of FIMCO’s, WMC’s, Paradigm’s and Vontobel’s services, as applicable, as well as the services of FIMCO’s affiliates supported approval of the Advisory Agreement and each Sub-Advisory Agreement.
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. In particular, the Trustees reviewed the performance of the Funds over the most recent calendar year (“1-year period”) and, to the extent
171 |
Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS EQUITY FUNDS
provided by Lipper, the 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. On a Fund-by-Fund basis, the performance reports indicated, and the Board noted, that each Fund, except for Focused Equity Fund and Global Fund, fell within the top three quintiles for at least one of the performance periods provided by Lipper. In addition, with regard to Select Growth Fund, the Board noted that FIMCO had previously recommended, and the Bo ard had approved, the hiring of a new subadviser for the Fund, which took effect on May 7, 2007.
With regard to Focused Equity Fund, the Board considered and approved FIMCO’s recommendation that the Fund’s sub-advisory agreement with WMC be terminated and that FIMCO assume day-to-day portfolio management of the Fund and then the Focused Equity Fund be subsequently reorganized into the Blue Chip Fund.
With regard to Global Fund, the Board considered that WMC assigned an additional portfolio manager to the Fund in 2006 and will be replacing one of the portfolio managers at the end of 2007. The Board also noted that the Board’s Investment Committee would continue to monitor the Global Fund’s performance.
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 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.
Based on the 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 Value Fund, Special Situations Fund and Global Fund, was in the first three quintiles
172 |
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 and Global Fund, was in the first three quintiles of its respective Peer Group. The Board also considered that, effective July 1, 2007 through the 2008 fiscal year, FIMCO proposed: (i) a reduction in its current management fee waiver agreement for the Special Situations Fund; (ii) the continuation of the current total expense cap agreement for the International Fund; and (iii) the imposition of a new agreement to cap the total expenses of the Global Fund.
In considering the sub-advisory fee rates charged by and costs and profitability of WMC, Paradigm and Vontobel with regard to the respective Sub-Advised Funds, the Board noted that FIMCO pays WMC, Paradigm or Vontobel, as the case may be, a sub-advisory fee from its own advisory fee rather than each Fund paying WMC, Paradigm or Vontobel a fee directly. WMC, Paradigm and Vontobel provided, and the Board reviewed, information comparing the fees charged by WMC, Paradigm and Vontobel for services to the respective Sub-Advised Funds versus the fees charged by WMC, Paradigm and Vontobel 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, Paradig m and Vontobel, as the case may be, for services to each applicable Sub-Advised Fund appeared competitive to the fees WMC, Paradigm and Vontobel charge to such other comparable investment companies or accounts. Furthermore, the Board noted that the fees charged by WMC for managing the Global Fund appeared competitive to fees charged by other sub-advisers to investment companies in the same Peer Group as the Global Fund. At the May Meeting, the Board also considered and approved FIMCO’s recommendation to increase the amount of the sub-advisory fee paid to Paradigm by FIMCO with respect to the Special Situations Fund.
The Board also reviewed the information compiled by Lipper comparing each Fund’s total expense ratio (Class A Shares), taking into account FIMCO’s expense waivers (as applicable), and the ratio of the sum of actual management and other non-management fees (i.e., fees other than management, transfer agency and 12b-1/non-12b-1 fees) to other funds in its Peer Group, including on a quintile basis. In considering the level of the total expense ratio and the ratio of the sum of actual management and other non-management fees, the Board took into account management’s explanation that: (i) the Funds’ total operating expense ratios were impacted by their relatively small average account size; (ii) there are significant costs involved in providing the level of personal service that the First Investors fund complex attempts to deliver to
173 |
Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS EQUITY FUNDS
its shareholders; and (ii) overall Fund expenses cover custodial fees for shareholders who invest in the Fund through retirement accounts and a significant majority of the shares of the Funds are held in retirement accounts. Furthermore, the Board recognized management’s ongoing efforts to reduce Fund expenses and encouraged management to continue to seek 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 analysis of FIMCO’s profitability with respect to each Fund, calculated for the year ended December 31, 2006, as well as overall profitability information relating to the past five calendar years. The Board also considered the information provided by FIMCO comparing the profitability of certain other publicly-traded mutual fund asset managers as analyzed by FIMCO based on publicly available financial statements. In reviewing the profit-ability information, the Trustees also considered the “fall-out” or ancillary benefits that may accrue to FIMCO and its affiliates as a result of their relationship with the Funds, which are d iscussed below. The Trustees acknowledged that, as a business matter, FIMCO was entitled to earn reasonable profits for its services to the 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 noted that the Growth & Income Fund, Total Return Fund, Blue Chip Fund, Value Fund, Mid-Cap Opportunity Fund and Special Situations Fund have each reached an asset size at which the Fund and its shareholders are benefiting from reduced management fee rates due to breakpoints in their respective fee schedules. With regard to the Select Growth Fund, Focused Equity Fund, Global Fund and International Fund, the Board recognized that, although these Funds have not reached a size at which they c an 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, Paradigm and Vontobel as a result of their relationship with the Funds. In that regard, the Board considered the fact that FIMCO, WMC and Vontobel receive research from broker-dealers that execute brokerage transactions for the funds in the First Investors fund complex. However,
174 |
the Board noted that FIMCO and the sub-advisers must select brokers based on each Fund’s requirements for seeking best execution. The Board also considered that Paradigm executes brokerage transactions for the Special Situations Fund through the use of an affiliated broker-dealer and that this also provides a source of fall-out benefits to Paradigm. The Board also considered ADM’s fees and profitability and the income received by FIC and FIMCO’s affiliated bank as a result of FIMCO’s management of the First Investors funds.
* * *
In summary, 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, Paradigm and Vontobel, the Board concluded that the level of fees paid to FIMCO with respect to each Fund, and WMC, Paradigm and Vontobel with respect to each applicable Sub-Advised Fund, is reasonable. As a result, the Board, including a majority of the independent Trustees, approved the Advisory Agreement and each Sub-Advisory Agreement.
At the May Meeting, the Board, including a majority of the independent Trustees, approved a revised fee schedule to the existing sub-advisory agreement with Smith Asset Management Group, L.P. (“Smith Group”) for the Select Growth Fund to provide that the assets of the Life Series Focused Equity Fund and Select Growth Fund are to be aggregated in calculating the fee payable to Smith Group by FIMCO for the Select Growth Fund. In approving the revised fee schedule, Smith Group provided a written representation that there will be no change in the nature, quality or quantity of services Smith Group provides to the Select Growth Fund.
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Board Considerations of Advisory Contracts and Fees
(Unaudited)
FIRST INVESTORS INCOME FUNDS
At a meeting held on May 17, 2007 (“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 agreement (the “Advisory Agreement”) between First Investors Management Company, Inc. (“FIMCO”) and each of the following funds (each a “Fund” and collectively the “Funds”): Government Fund, Investment Grade Fund, Fund For Income and Cash Management Fund. In reaching its decisions, the Board considered information furnished and discussed throughout the year at regularly scheduled Board meetings and Investment Committee meetings as well as information provided specifically in relation to the renewal of the Advisory Agreement for the May Meeting.
Information furnished at Board meetings and/or Investment Committee meetings throughout the year included FIMCO’s analysis of each Fund’s investment performance, presentations given by the portfolio managers of the Funds and various reports on compliance and other services provided by FIMCO and its affiliates. 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 and its affiliates to the Funds, including investment advisory and administrative services to the Funds; (2) the actual management fees paid by each Fund to FIMCO; (3) the costs of providing services to each Fund and the profitability of FIMCO and its affili-ate, Administrative Data Management Corp. (“ADM”), the Funds’ affiliated transfer agent, from the relationship with each Fund; and (4) any “fall out” or ancillary ben-efits accruing to FIMCO or its affiliates as a result of the relationship with each Fund. FIMCO also provided, and the Board considered, an analysis of the overall profitabil-ity of the First Investors mutual fund business that included various entities affiliated with FIMCO as well as comparative profitability information based on analysis performed by FIMCO of the financial statements of certain publicly-traded mutual fund asset managers. 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 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
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legal standards that are applicable to approvals of advisory agreements. Although the Advisory Agreement for all of the Funds was considered at the same Board meeting, the Trustees addressed each Fund separately during the May Meeting.
Based on all of the information presented, the Board, including a majority of its independent Trustees, determined on a Fund-by-Fund basis that the fees charged under the Advisory Agreement are reasonable in relation to the services that are provided under the Agreement. 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 Agreement for each Fund. 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 Agreement for each Fund.
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 the philosophy of FIMCO and its affiliates to provide a high level of personal service to the shareholders of the Funds, that FIMCO and its affiliates strive to service the needs of a shareholder base that includes many investors who are less affluent 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 explanation regarding the significant costs involved in providing the level of personal service that the First Investors fund complex attempts to deliver to its shareholders.
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
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Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS INCOME FUNDS
of certain administrative services to the Funds, including fund accounting; and (6) the implementation of Board directives as they relate to the Funds. The Trustees noted that under the Advisory Agreement 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 of Funds that have had significant periods of underperformance, adding to its in-house research and analytical capabilities when necessary, and providing significant compensation incentives to portfolio managers and analysts for above-the-median Fund performance.
The Board also considered the nature, extent and quality of the services provided to the Funds by FIMCO’s affiliates, including transfer agency and distribution services. The Board took into account the fact that ADM is dedicated to providing transfer agency services exclusively to the Funds and the other funds in the First Investors fund complex. As a result, ADM can tailor its processes and services to satisfy the needs of the Funds’ shareholder base. The Board noted that the Funds’ shares are distributed primarily through First Investors Corporation (“FIC”), which is an affiliate of FIMCO.
Based on the information considered, the Board concluded that the nature, extent and quality of FIMCO’s services as well as the services of its affiliates supported approval of the Advisory Agreement.
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. In particular, the Trustees reviewed the performance of the Funds over the most recent calendar year (“1-year period”) and the annualized performance over the most recent three calendar year period (“3-year period”) and five calendar year period (“5-year period”). The Board also reviewed the annual yield of each Fund for each of the past three calendar years. In this regard, the Board considered the performance and yield of each Fund on a percentile and quintile basis as compared to its Peer Group. For purposes of the data provided by Lipper, the first quintile is defined as 20% of the funds in the applicable Peer Group with the highest performance or yield, as applicable, and the fifth quintile is defined as 20% of the funds in the applicable Peer Group with the lowest performance or yield. On a Fund-by-Fund basis, the performance reports indicated, and the Board noted, that each Fund, except for Investment Grade Fund, fell within the top three quintiles for at least
178 |
one of the performance periods provided by Lipper. The Board also noted that the yield for Government Fund, Investment Grade Fund and Fund For Income for each of the past three calendar years fell within the top three quintiles.
The Board also considered that management had assigned a new portfolio manager to the Investment Grade Fund in early 2006 in an effort to improve the Fund’s relative performance. It also took notice of management’s belief that this Fund should continue to be managed in a comparatively conservative style, even if this might affect relative performance. The Board also noted that the Board’s Investment Committee would continue to monitor the Investment Grade Fund’s performance.
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. 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 on a quin-tile 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 G roup with the highest management fee.
Based on the data provided on management fee rates, on a Fund-by-Fund basis, the Board noted that the contractual management fee rate and actual management fee rate (after taking into account any applicable fee waivers) for each Fund, except the actual management fee rate for the Cash Management Fund, did not fall within the first three quintiles of its respective Peer Group. The Board considered that, effective July 1, 2007 through the 2008 fiscal year, FIMCO proposed the continuation of the current total expense cap agreements for the Government Fund, Investment Grade Fund and Cash Management Fund. The Board expressed its intention to continue to evaluate, through its Investment Committee, the management fees for the Government Fund, Investment Grade Fund and Fund For Income.
The Board also reviewed the information compiled by Lipper comparing each Fund’s total expense ratio (Class A Shares), taking into account FIMCO’s expense waivers (as applicable), and the ratio of the sum of actual management and other non-management fees (i.e., fees other than management, transfer agency and 12b-1/non-12b-1 fees) to other funds in its Peer Group, including on a quintile basis. In considering the level of the total expense ratio and the ratio of the sum of actual management and
179 |
Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS INCOME FUNDS
other non-management fees, the Board took into account management’s explanation that: (i) there are significant costs involved in providing the level of personal service that the First Investors fund complex attempts to deliver to its shareholders; and (ii) overall Fund expenses cover (a) check-writing and wiring privileges for Cash Management Fund shareholders at no additional cost and (b) custodial fees for shareholders who invest in the Funds through retirement accounts, and a majority of shares of each Fund, other than the Cash Management Fund, are held in retirement accounts. Furthermore, the Board recognized management’s ongoing efforts to reduce Fund expenses and encouraged management to continue to seek 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 analysis of FIMCO’s profitability with respect to each Fund, calculated for the year ended December 31, 2006, as well as overall profitability information relating to the past five calendar years. The Board also considered the information provided by FIMCO comparing the profitability of certain other publicly-traded mutual fund asset managers as analyzed by FIMCO based on publicly available financial statements. In reviewing the profit-ability information, the Trustees also considered the “fall-out” or ancillary benefits that may accrue to FIMCO and its affiliates as a result of their relationship with the Funds, which are d iscussed below. The Trustees acknowledged that, as a business matter, FIMCO was entitled to earn reasonable profits for its services to the 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, except the Cash Management Fund, includes breakpoints to account for management economies of scale. The Board noted that Fund For Income has reached an asset size at which the Fund and its shareholders are benefiting from reduced management fee rates due to breakpoints in its fee schedule. With regard to Government Fund and Investment Grade Fund, 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 g row, economies of scale may be shared for the benefit of shareholders. With respect to Cash Management Fund, the Board concluded that the fee structure is appropriate at current asset levels.
180 |
“Fall Out” or Ancillary Benefits. The Board considered the “fall-out” or ancillary benefits that may accrue to FIMCO as a result of its relationship with the Funds. In that regard, the Board considered ADM’s fees and profitability and the income received by FIC and FIMCO’s affiliated bank as a result of FIMCO’s management of the First Investors funds.
* * *
In summary, 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, the Board concluded that the level of fees paid to FIMCO with respect to each Fund is reasonable. As a result, the Board, including a majority of the independent Trustees, approved the Advisory Agreement with each Fund.
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FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
Trustees and Officers*
Position(s) | ||||
Held with | Principal | Number of | Other | |
Funds and | Occupation(s) | Portfolios in | Trusteeships | |
Name, Year of Birth | Length of | During Past | Fund Complex | Directorships |
and Address | Service | 5 Years | Overseen | Held |
——————— | ———— | ———— | ————— | ——— |
DISINTERESTED TRUSTEES | ||||
Charles R. Barton, III 1965 | Trustee since | Chief Operating | 47 | None |
c/o First Investors | 1/1/06 | Officer and | ||
Management Company, Inc. | Board Member | |||
110 Wall Street | of Barton Mines | |||
New York, NY 10005 | Corp. since 9/07; | |||
President of | ||||
Noe Pierson | ||||
Corporation; | ||||
Board Member | ||||
of the Barton | ||||
Group, LLC | ||||
Stefan L. Geiringer 1934 | Trustee since | Founder/Partner | 47 | None |
c/o First Investors | 1/1/06 | of Real Time | ||
Management Company, Inc. | Energy Solu- | |||
110 Wall Street | tions, Inc. since | |||
New York, NY 10005 | 2006; | |||
Founder/Owner | ||||
of SLG, Inc. | ||||
Since 2005; | ||||
Senior Vice | ||||
President of | ||||
Pepco Energy | ||||
Services (North- | ||||
east Region) | ||||
From 2003-2005; | ||||
Founder/Owner | ||||
and President of | ||||
North Atlantic | ||||
Utilities, Inc. | ||||
from 1987-2003 | ||||
Robert M. Grohol 1932 | Trustee since | None/Retired | 47 | None |
c/o First Investors | 8/15/05; | |||
Management Company, Inc. | Director/Trustee | |||
110 Wall Street | of predecessor | |||
New York, NY 10005 | funds since | |||
6/30/00 |
182 |
Position(s) | ||||
Held with | Principal | Number of | Other | |
Funds and | Occupation(s) | Portfolios in | Trusteeships | |
Name, Year of Birth | Length of | During Past | Fund Complex | Directorships |
and Address | Service | 5 Years | Overseen | Held |
——————— | ———— | ———— | ————— | ——— |
Arthur M. Scutro, Jr. 1941 | Trustee since | Retired; formerly | 47 | None |
c/o First Investors | 1/1/06 | Senior Vice | ||
Management Company, Inc. | President of UBS | |||
110 Wall Street | PaineWebber | |||
New York, NY 10005 | from 1985-2001 | |||
James M. Srygley 1932 | Trustee since | Retired; | 47 | None |
c/o First Investors | 8/15/05; | Owner | ||
Management Company, Inc. | Director/Trustee | Hampton | ||
110 Wall Street | of predecessor | Properties | ||
New York, NY 10005 | funds since | |||
1/19/95 | ||||
Robert F. Wentworth 1929 | Trustee since | None/Retired | 47 | None |
c/o First Investors | 8/15/05; | |||
Management Company, Inc. | Director/Trustee | |||
110 Wall Street | of predecessor | |||
New York, NY 10005 | funds since | |||
10/15/92 |
183 |
FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
Trustees and Officers* (continued)
Position(s) | ||||
Held with | Principal | Number of | Other | |
Funds and | Occupation(s) | Portfolios in | Trusteeships | |
Name, Year of Birth | Length of | During Past | Fund Complex | Directorships |
and Address | Service | 5 Years | Overseen | Held |
——————— | ———— | ———— | ————— | ——— |
INTERESTED TRUSTEES** | ||||
Kathryn S. Head 1955 | Trustee and | Chairman, | 47 | None |
c/o First Investors | President since | Officer and | ||
Management Company, Inc. | 8/15/05; | Director of | ||
Raritan Plaza I | Director/Trustee | First Investors | ||
Edison, NJ 08837 | of predecessor | Corporation; | ||
funds since | First Investors | |||
3/17/94; | Consolidated | |||
President of | Corporation; | |||
Predecessor | First Investors | |||
funds since | Management | |||
2001 | Company, Inc.; | |||
Administrative | ||||
Data Manage - | ||||
ment Corp.; First | ||||
Investors Federal | ||||
Savings Bank; | ||||
First Investors | ||||
Name Saver, | ||||
Inc.; and other | ||||
affiliated | ||||
companies*** |
*Each Trustee serves for an indefinite term with the Funds, until his/her successor is elected.
**Ms. Head is an interested trustee because (a) she indirectly owns more than 5% of the voting stock of the adviser and principal underwriter of the Funds, (b) she is an officer, director and employee of the adviser and principal underwriter of the Funds, and (c) she is an officer of the Funds.
***Other affiliated companies consist of: First Investors Realty Company, Inc., First Investors Life Insurance Company, First Investors Leverage Corporation, Route 33 Realty Corporation, First Investors Credit Funding Corporation, N.A.K. Realty Corporation, Real Property Development Corporation, First Investors Credit Corporation and First Investors Resources, Inc.
184 |
Position(s) | ||||
Held with | Principal | Number of | Other | |
Funds and | Occupation(s) | Portfolios in | Trusteeships | |
Name, Year of Birth | Length of | During Past | Fund Complex | Directorships |
and Address | Service | 5 Years | Overseen | Held |
——————— | ———— | ———— | ————— | ——— |
OFFICER (S) WHO ARE NOT TRUSTEES | ||||
Joseph I. Benedek 1957 | Treasurer | Treasurer of | 47 | None |
c/o First Investors | since 8/18/05; | First Investors | ||
Management Company, Inc. | Treasurer of | Management | ||
Raritan Plaza I | predecessor fund | Company, Inc. | ||
Edison, NJ 08837 | since 1988 | |||
Larry R. Lavoie 1947 | Chief | General Counsel | 47 | None |
c/o First Investors | Compliance | of First Investors | ||
Management Company, Inc. | Officer since | Corporation and | ||
110 Wall Street | 8/18/05; | its affiliates; | ||
New York, NY 10005 | Chief | Director of | ||
Compliance | First Investors | |||
Officer of | Corporation | |||
predecessor funds | and various | |||
since 2004 | affiliates |
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FIRST INVESTORS EQUITY FUNDS
FIRST INVESTORS INCOME FUNDS
Shareholder Information
————————————————————
Investment Adviser | Custodian |
First Investors Management Company, Inc. | The Bank of New York Mellon |
110 Wall Street | One Wall Street |
New York, NY 10005 | New York, NY 10286 |
Subadviser (Global Fund only) | Custodian |
Wellington Management Company, LLP | (Global and International Funds only) |
75 State Street | Brown Brothers Harriman & Co. |
Boston, MA 02109 | 40 Water Street |
Boston, MA 02109 | |
Subadviser (Select Growth Fund only) | |
Smith Asset Management Group, L.P. | Transfer Agent |
100 Crescent Court | Administrative Data Management Corp. |
Dallas, TX 75201 | Raritan Plaza I – 8th Floor |
Edison, NJ 08837-3620 | |
Subadviser (Special Situations Fund only) | |
Paradigm Capital Management, Inc. | Independent Registered Public |
Nine Elk Street | Accounting Firm |
Albany, NY 12207 | Tait, Weller & Baker LLP |
1818 Market Street | |
Subadviser (International Fund only) | Philadelphia, PA 19103 |
Vontobel Asset Management, Inc. | |
1540 Broadway | Legal Counsel |
New York, NY 10036 | Kirkpatrick & Lockhart |
Preston Gates Ellis, LLP | |
Underwriter | 1601 K Street, N.W. |
First Investors Corporation | Washington, DC 20006 |
110 Wall Street | |
New York, NY 10005 |
186 |
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 1-800-423-4026, or can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission’s (SEC) 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 at our address listed above or by calling 1-800-423-4026 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 Funds’ 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 1-800-SEC-0330. The schedule of portfolio holdings is also available, without charge, upon request, by calling 1-800-423-4026 or writing to us at our address listed above.
187 |
NOTES
188 |
The following is a replacement for page 149 of the 2007 Annual Report. The tax character of distributions shown in the table below now reflects long-term capital gain distributions and ordinary income (including short-term capital gains) distributions.
The components of distributable earnings now reflect other accumulated gain (loss).
7. Tax Components of Capital and Distributions to Shareholders—The tax character of distributions declared for the years ended September 30, 2007, and September 30, 2006 were as follows:
Year Ended September 30, 2007 | Year Ended September 30, 2006 | |||||||||||
Distributions | Distributions | |||||||||||
Declared from | Declared from | |||||||||||
Ordinary | Long-Term | Ordinary | Long-Term | |||||||||
Fund | Income | Capital Gain | Total | Income | Capital Gain | Total | ||||||
Total Return | $ | 6,934,189 | $ | 2,437,390 | $ | 9,371,579 | $ | 5,047,525 | $ | — | $ | 5,047,525 |
Value | 5,043,416 | — | 5,043,416 | 3,608,092 | — | 3,608,092 | ||||||
Blue Chip | 2,538,723 | — | 2,538,723 | 1,292,468 | — | 1,292,468 | ||||||
Growth & Income | 4,289,637 | 11,040,847 | 15,330,484 | 2,247,490 | — | 2,247,490 | ||||||
Global. | 5,722,180 | 23,496,186 | 29,218,366 | 511,516 | — | 511,516 | ||||||
Select Growth | — | 17,984,118 | 17,984,118 | — | — | — | ||||||
Mid-Cap Opportunity | — | 23,106,905 | 23,106,905 | — | 13,133,008 | 13,133,008 | ||||||
Special Situations | 1,966,923 | 20,871,445 | 22,838,368 | — | — | — | ||||||
International | 202,381 | — | 202,381 | — | — | — | ||||||
Cash Management | 9,601,006 | — | 9,601,006 | 6,863,484 | — | 6,863,484 | ||||||
Government | 9,442,942 | — | 9,442,942 | 8,777,738 | — | 8,777,738 | ||||||
Investment Grade | 13,206,406 | — | 13,206,406 | 12,108,496 | — | 12,108,496 | ||||||
Income | 41,007,580 | — | 41,007,580 | 42,407,668 | — | 42,407,668 |
As of September 30, 2007, the components of distributable earnings on a tax basis were as follows:
Total | ||||||||||||
Undistributed | Undistributed | Capital | Other | Unrealized | Distributable | |||||||
Ordinary | Capital | Loss | Accumulated | Appreciation | Income | |||||||
Fund | Income | Gains | Carryovers | Gain (Loss) | (Depreciation) | (Deficit) | ||||||
Total Return | $ | 5,422,524 | $ | 3,222,145 | $ | — | $ | — | $ 61,978,315 | $ | 70,622,984 | |
Value | 1,142,213 | — | (27,853,262) | — | 104,456,685 | 77,745,636 | ||||||
Blue Chip | 1,116,148 | — | (87,909,626) | — | 184,117,231 | 97,323,753 | ||||||
Growth & Income | 11,865,069 | — | — | — | 239,342,581 | 251,207,650 | ||||||
Global. | 19,029,486 | 20,723,957 | — | 258,461 | 64,231,428 | 104,243,332 | ||||||
Select Growth | 6,648,762 | 31,600,230 | — | — | 25,373,645 | 63,622,637 | ||||||
Mid-Cap Opportunity | 8,836,959 | 38,654,776 | — | — | 134,640,454 | 182,132,189 | ||||||
Special Situations. | 8,020,760 | 7,718,168 | — | — | 49,350,009 | 65,088,937 | ||||||
International | 2,769,858 | — | (82,339) | (2,806,495) | 12,695,185 | 12,576,209 | ||||||
Government | 6,781 | — | (9,588,398) | (840,781) | (2,864,639) | (13,287,037) | ||||||
Investment Grade | 421,021 | — | (7,875,581) | (1,083,176) | (4,295,972) | (12,833,708) | ||||||
Fund For Income | 4,141,155 | — | (154,363,100) | (5,132,739) | (28,050,342) | (183,405,026) |
149 |
Item 2. Code of Ethics
As of September 30, 2007, the Registrant has adopted a code of ethics that applies to the Registrant's President/Principal Executive Officer and Treasurer/Principal Financial Officer.
For the year ended September 30, 2007 the registrant amended its Sarbanes-Oxley Code of Ethics to include in it a general prohibition on accepting or providing "any gift or entertainment that is illegal or that is intended to cause any action, or any failure to take any action, that adversely affects the interests of any of the Funds" and deleting from that Code the specific limits on acceptance of gifts and entertainment that duplicated those that are contained in its Rule 17j-1 Code of Ethics.
For the year ended September 30, 2007, there were no waivers granted from a provision of the code of ethics.
A copy of the Registrant's code of ethics is filed under Item 12(a)(1).
Item 3. Audit Committee Financial Expert
The Registrant's Board has determined that it has at least one "audit committee financial expert" serving on its audit committee. Robert F. Wentworth is the "audit committee financial expert" and is considered to be "independent" as defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
Fiscal Year Ended | ||||
September 30, | ||||
----------------- | ||||
2007 | 2006 | |||
---- | ---- | |||
(a) Audit Fees | ||||
First Investors Income Funds | $ | 96,700 | $ | 92,500 |
(b) Audit-Related Fees | ||||
First Investors Income Funds | $ | 0 | $ | 0 |
(c) Tax Fees | ||||
First Investors Income Funds | $ | 14,500 | $ | 13,800 |
Nature of fees: tax returns preparation and tax compliance | ||||
(d) All Other Fees | ||||
First Investors Income Funds | $ | 0 | $ | 0 |
(e)(1) Audit committee's pre-approval policies
The Audit Committee has adopted a charter under which it has the duties, among other things:
(a) to pre-approve, and to recommend to the full Board, the selection, retention or termination of the independent auditors to provide audit, review or attest services to the Funds and, in connection therewith, evaluate the independence of the auditors and to obtain the auditors' specific representations as to their independence;
(b) to pre-approve all non-audit services to be provided to the Funds by the independent auditor;
(c) to pre-approve all non-audit services to be provided by the Funds' independent auditor to the Funds' investment adviser or to any entity that controls, is controlled by or is under common control with the Funds investment adviser ("adviser affiliate") and that provides ongoing services to the Funds, if the engagement relates directly to the operations and financial reporting of the Funds;
(d) to establish, if deemed necessary or appropriate as an alternative to Audit Committee pre-approval of services to be provided by the independent auditor as required by paragraphs (b) and (c) above, policies and procedures to permit such services to be pre-approved by other means, such as by action of a designated member and members of the Audit Committee, subject to subsequent Committee review and oversight;
(e) to consider whether the non-audit services provided by the Funds' independent auditors to the Funds' investment adviser or any adviser affiliate that provides ongoing services to the Funds, which services were not pre-approved by the Audit Committee, are compatible with maintaining the auditors' independence;
(f) to review and approve the fees proposed to be charged to the Funds by the auditors for each audit and non-audit service;
(e)(2) None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and All Other Fees paid by the Registrant and Related Entities disclosed above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit review or attest services, if certain conditions are satisfied).
(f) Not Applicable
(g) Aggregate non-audit fees billed by the Registrant's accountant for services rendered to the Registrant and the Registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant for the two fiscal years ended September 30, 2007 and 2006 were $61,500 and $71,000, respectively.
(h) 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 shareholders 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 - Filed herewith
(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 Income Funds
(Registrant)
By | /S/ | KATHRYN S. HEAD |
Kathryn S. Head | ||
President and Principal Executive Officer |
Date: November 29, 2007
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 Income Funds
(Registrant)
By | /S/ | JOSEPH I. BENEDEK |
Joseph I. Benedek | ||
Treasurer and Principal Financial Officer |
Date: November 29, 2007