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 811-6618 |
FIRST INVESTORS EQUITY 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, 2008
DATE OF REPORTING PERIOD: SEPTEMBER 30, 2008
Item 1. Reports to Stockholders
The Annual Report to Stockholders follows
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx1x1.jpg)
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 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. See page 1 for information regarding the Cash Management Fund’s participation in the U.S. Department of the Treasury Temporary Guarantee Program for Money Market 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 Funds, including information about their Trustees.
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, 2008. During the period, the Fund’s return on a net asset value basis was 2.7% for Class A shares and 1.9% for Class B shares, including dividends of 2.7 cents per share on Class A shares and 1.9 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, the stress in the financial markets spread to the money markets. Liquidity became a significant issue for the money markets. While benchmark interest rates were low, secondary markets for securities often reflected a premium for quality and liquidity that defied historical market experience.
The Federal Reserve (the “Fed”) injected an enormous amount of liquidity into the financial system during the reporting period, reducing its target federal funds rate by 275 basis points to 2.00% by the end of September. The Fed has since reduced the rate by another .50% to 1.50%. In addition, over the last year, the U.S. government implemented various other liquidity measures to boost confidence in the market. Despite the government’s considerable efforts, market conditions have been difficult, with a significant and prolonged flight to quality as investors have been exceptionally risk averse. Credit spreads in the money markets widened notably.
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, and attempted to mitigate credit risk by generally limiting corporate security investments to shorter maturities and smaller position sizes while maintaining a significant portion of its assets in U.S. government and agency securities. Because the Fund is managed conservatively, it did not invest in asset-backed commercial paper during the review period. Market volatility reduced the normal benefits of a longer-than-average weighted average maturity during the period as the money markets experienced severe dislocation where normal relationships and correlations became invalid.
Although money market funds are relatively 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. However, it should be noted the Fund is participating in the U.S. Department of the Treasury’s Temporary Guarantee Program for Money Market Funds (the “Program”). The Program is designed to protect shareholders of the Fund as of September 19, 2008, against the risk of loss in the event that the Fund cannot maintain a $1.00 net asset value (“triggering event”). The Program generally does not guarantee any new investments in the Fund made after September 19, 2008 and is scheduled to expire on December 18, 2008. Moreover, it only
1 |
Portfolio Manager’s Letter (continued)
CASH MANAGEMENT FUND
provides coverage to the amount of shares held as of September 19, 2008. If shares are sold prior to the date the guarantee is triggered, then the shares covered by the guarantee will be the lesser of (i) the amounts held in the Fund as of close of business on September 19, 2008 or (ii) the amounts held in the Fund on the date the guarantee is triggered. The Program does not provide any coverage for any increase in the number of shares held in an account after September 19, 2008 or for new shareholders who open accounts in the Fund after September 19, 2008, by direct purchase, exchange, or other means. For more information about the Program’s scope and limitations, please see the Fund’s most recent prospectus as supplemented on October 8, 2008.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx4x1.jpg)
Michael J. O’Keefe
Portfolio Manager
October 31, 2008
2 |
Understanding Your Fund’s Expenses
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY 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, 2008, and held for the entire six-month period ended September 30, 2008. 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
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,008.77 | $4.02 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,021.00 | $4.04 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,005.01 | $7.77 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,008.63 | $7.82 |
* | 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 183/366 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
BY SECTOR
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx6x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
4 |
Portfolio of Investments
CASH MANAGEMENT FUND
September 30, 2008
Principal | Interest | ||||||||||
Amount | Security | Rate | * | Value | |||||||
CORPORATE NOTES—62.4% | |||||||||||
Abbott Laboratories: | |||||||||||
$ | 1,400 | M | 2/17/09 | 2.60 | % | $ | 1,403,157 | ||||
2,000 | M | 5/15/09 | 2.86 | 2,030,688 | |||||||
800 | M | 5/15/09 | 2.80 | 812,280 | |||||||
11,000 | M | Brown-Forman Corp., 12/3/08 (a) | 2.27 | 10,956,239 | |||||||
Chevron Funding Corp.: | |||||||||||
6,000 | M | 10/9/08 | 2.20 | 5,997,066 | |||||||
3,200 | M | 10/17/08 | 2.20 | 3,196,869 | |||||||
Coca-Cola Co.: | |||||||||||
5,000 | M | 10/10/08 (a) | 2.40 | 4,996,982 | |||||||
1,500 | M | 12/5/08 (a) | 2.25 | 1,493,901 | |||||||
4,500 | M | ConocoPhillips, 11/5/08 (a) | 2.21 | 4,490,301 | |||||||
General Electric Capital Corp.: | |||||||||||
3,500 | M | 12/17/08 | 2.62 | 3,480,303 | |||||||
2,276 | M | 4/1/09 | 2.80 | 2,279,339 | |||||||
5,000 | M | Hershey Co., 10/28/08 (a) | 2.17 | 4,991,841 | |||||||
7,500 | M | Hewlett-Packard Co., 10/15/08 (a) | 2.65 | 7,492,266 | |||||||
6,000 | M | Illinois Tool Works, Inc., 10/20/08 | 2.35 | 5,992,555 | |||||||
1,000 | M | International Business Machines Corp., 2/1/09 | 5.38 | 1,008,280 | |||||||
7,000 | M | Johnson & Johnson, 10/10/08 (a) | 2.06 | 6,996,385 | |||||||
12,000 | M | Kimberly-Clark Worldwide, 10/7/08 (a) | 2.02 | 11,995,955 | |||||||
9,500 | M | Madison Gas & Electric Co., 10/24/08 | 3.00 | 9,481,782 | |||||||
5,000 | M | New Jersey Natural Gas Co., 11/24/08 | 2.35 | 4,982,358 | |||||||
6,955 | M | Pepsi Bottling Holdings, Inc., 2/17/09 (b) | 3.00 | 7,025,709 | |||||||
4,000 | M | PepsiCo, Inc., 10/9/08 (a) | 2.55 | 3,997,731 | |||||||
1,460 | M | Pfizer, Inc., 10/30/08 (a) | 2.20 | 1,457,410 | |||||||
1,585 | M | Pitney Bowes Credit Corp., 9/15/09 | 3.17 | 1,664,304 | |||||||
Procter & Gamble International Finance: | |||||||||||
5,000 | M | 10/3/08 (a) | 2.23 | 4,999,377 | |||||||
4,000 | M | 11/10/08 (a) | 2.15 | 3,990,418 | |||||||
6,000 | M | Prudential Funding Corp., 10/2/08 | 2.40 | 5,999,597 | |||||||
3,000 | M | Stanley Works, 10/21/08 (a) | 2.25 | 2,996,235 | |||||||
8,000 | M | Toyota Motor Credit Corp., 10/1/08 | 2.45 | 8,000,000 | |||||||
Wal-Mart Stores, Inc.: | |||||||||||
1,150 | M | 10/1/08 | 2.65 | 1,150,000 | |||||||
4,500 | M | 11/10/08 (a) | 2.11 | 4,489,446 | |||||||
8,500 | M | Washington Gas Light Co., 10/14/08 | 2.70 | 8,491,707 | |||||||
Total Value of Corporate Notes (cost $148,340,481) | 148,340,481 |
5 |
Portfolio of Investments (continued)
CASH MANAGEMENT FUND
September 30, 2008
Principal | Interest | ||||||||||
Amount | Security | Rate | * | Value | |||||||
U.S. GOVERNMENT AGENCY | |||||||||||
OBLIGATIONS—17.4% | |||||||||||
$ | 12,000 | M | Fannie Mae, 11/19/08 | 2.05 | % | $ | 11,966,515 | ||||
5,000M | M | Federal Farm Credit Bank, 11/12/08 | 2.25 | 4,986,852 | |||||||
Federal Home Loan Bank: | |||||||||||
1,000 | M | 3/3/09 | 2.73 | 1,000,000 | |||||||
3,000 | M | 3/17/09 | 3.00 | 2,996,992 | |||||||
3,500 | M | 4/30/09 | 2.63 | 3,500,000 | |||||||
2,000 | M | 6/26/09 | 3.25 | 2,000,000 | |||||||
Freddie Mac: | |||||||||||
4,000 | M | 10/14/08 | 2.20 | 3,996,821 | |||||||
4,200 | M | 10/14/08 | 2.48 | 4,196,237 | |||||||
3,250 | M | 1/30/09 | 2.81 | 3,250,000 | |||||||
3,400 | M | 7/21/09 | 3.15 | 3,400,000 | |||||||
Total Value of U.S. Government Agency Obligations (cost $41,293,417) | 41,293,417 | ||||||||||
FLOATING RATE NOTES—11.8% | |||||||||||
430 | M | Advanced Packaging Corp., 10/1/36 | |||||||||
(LOC; Fifth Third Bank) | 10.00 | 430,000 | |||||||||
5,000 | M | Federal Home Loan Bank, 11/26/08 | 2.58 | 4,999,711 | |||||||
1,000 | M | General Electric Capital Corp., 2/2/09 | 2.94 | 1,000,000 | |||||||
100 | M | Genesys Medsports, LLC, 1/1/27 | |||||||||
(LOC; Fifth Third Bank) | 10.00 | 100,000 | |||||||||
5,000 | M | IBM International Group, 7/29/09 | 3.13 | 5,014,941 | |||||||
3,000 | M | Procter & Gamble International Funding, SCA, 2/19/09 | 2.88 | 3,000,000 | |||||||
8,400 | M | Valdez Alaska Marine Terminal Rev., | |||||||||
12/1/33 (Exxon Mobil) | 3.90 | 8,400,000 | |||||||||
5,000 | M | Walt Disney Co., 9/10/09 | 2.92 | 5,002,763 | |||||||
Total Value of Floating Rate Notes (cost $27,947,415) | 27,947,415 |
6 |
Principal | Interest | ||||||||||
Amount | Security | Rate | * | Value | |||||||
CERTIFICATES OF DEPOSIT—4.2% | |||||||||||
$ | 10,000 | M | Chase Bank NA, 11/19/08 (cost $10,000,000) | 2.66 | % | $ | 10,000,000 | ||||
BANKERS’ ACCEPTANCES—3.0% | |||||||||||
Bank of America, NA: | |||||||||||
6,277 | M | 12/15/08 | 3.10 | 6,236,430 | |||||||
1,028 | M | 12/22/08 | 3.10 | 1,020,735 | |||||||
Total Value of Bankers’ Acceptances (cost $7,257,165) | 7,257,165 | ||||||||||
Total Value of Investments (cost $238,838,478)** | 98.8 | % | 234,838,478 | ||||||||
Other Assets, Less Liabilities | 1.2 | 2,820,973 | |||||||||
Net Assets | 100.0 | % | $ | 237,659,451 |
* 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, 2008.
** Aggregate cost for federal income tax purposes is the same.
(a) Security exempt from registration under Section 4(2) of the Securities Act of 1933 (see Note 4).
(b) Security exempt from registration under Rule 144A of Securities Act of 1933 (see Note 4).
Summary of Abbreviations:
LOC Letters of Credit
See notes to financial statements | 7 |
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, 2008. During the period, the Fund’s return on a net asset value basis was 5.7% for Class A shares and 5.0% for Class B shares, including dividends of 48.2 cents per share on Class A shares and 40.6 cents per share on Class B shares.
The Fund invests primarily in Ginnie Maes, which are mortgage-backed bonds issued by the Government National Mortgage Association (GNMA). These bonds are backed by the full faith and credit of the U.S. government and have the highest possible credit rating (AAA). The Fund does not invest in subprime mortgage-backed debt.
The bond market was extremely volatile during the review period due to extraordinary stresses in the financial system related to the subprime mortgage crisis that began last year. In this environment, high quality investments — such as U.S. Treasury securities and Ginnie Maes — performed well primarily due to two factors. First, benchmark U.S. Treasury rates declined during the review period, reflecting multiple reductions in short-term interest rates by the Federal Reserve and a slowing in the economy. Second, a flight-to-safety bid by investors benefited high quality bonds.
Falling interest rates caused lower coupon mortgage-backed bonds to outperform higher coupon mortgage-backed bonds. The Fund was underweight lower coupon mortgage-backed bonds, which consequently had a negative impact on performance.
The Fund began the reporting period with approximately 9% of its assets in Fannie Mae mortgage-backed bonds, which are securities issued by the Federal National Mortgage Association (FNMA). Fannie Maes have implicit U.S. government backing and AAA credit ratings. Over the course of the reporting period, the Fund increased these holdings to 18% of assets. Fannie Mae mortgage-backed bonds outperformed Ginnie Maes due to both the government’s takeover of the FNMA in September (which strengthened the government’s implicit support of its debt) and a substantial increase in Ginnie Mae mortgage-backed issuance relative to Fannie Mae issuance. As a result, the Fund’s Fannie Mae holdings had a positive impact on performance.
8 |
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx11x1.jpg)
Clark D. Wagner
Portfolio Manager and
Director of Fixed Income, First Investors Management Company, Inc.
October 31, 2008
9 |
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,005.58 | $5.52 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,019.50 | $5.55 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,002.06 | $9.01 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,016.00 | $9.07 |
* | 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 183/366 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
BY SECTOR
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx12x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
10 |
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.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx13x1.jpg)
The graph compares a $10,000 investment in the First Investors Government Fund (Class A shares) beginning 9/30/98 with a theoretical investment in the Merrill Lynch GNMA Master Index (the “Index”). The Index is a market capitalization-weighted index of securities backed by mortgage pools of the Government National Mortgage Association (GNMA). 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 9/30/08) 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 (.50%), 2.12% and 3.51%, respectively, and the S.E.C. 30-Day Yield for September 2008 would have been 4.10%. The Class B “S.E.C. Standardized" Average Annual Total Return for One Year, Five Years and Ten Years would have been .85%, 2.24% and 3.50%, respectively, and the S.E.C. 30-Day Yield for September 2008 would have been 3.65%. 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.
11 |
Portfolio of Investments (continued)
GOVERNMENT FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
MORTGAGE-BACKED CERTIFICATES—98.1% | |||||||||||
Fannie Mae—17.2% | |||||||||||
$ | 19,800 | M | 5.5%, 4/1/2033 – 5/1/2036 | $ | 19,794,134 | ||||||
21,169 | M | 6%, 1/1/2036 – 4/1/2038 | 21,468,619 | ||||||||
41,262,753 | |||||||||||
Government National Mortgage Association I | |||||||||||
Program—80.9% | |||||||||||
29,978 | M | 5%, 5/15/2033 – 5/15/2036 | 29,467,902 | ||||||||
59,194 | M | 5.5%, 3/15/2033 – 10/18/2038 | 59,408,411 | ||||||||
68,169 | M | 6%, 3/15/2031 – 5/15/2038 | 69,390,910 | ||||||||
28,874 | M | 6.5%, 10/15/2028 – 4/15/2038 | 29,706,388 | ||||||||
4,219 | M | 7%, 4/15/2032 – 8/15/2035 | 4,455,886 | ||||||||
1,498 | M | 7.5%, 7/15/2023 – 6/15/2034 | 1,614,122 | ||||||||
194,043,619 | |||||||||||
Total Value of Mortgage-Backed Certificates (cost $235,919,891) | 235,306,372 | ||||||||||
SHORT-TERM INVESTMENTS—2.8% | |||||||||||
Money Market Fund | |||||||||||
6,785 | M | First Investors Cash Reserve Fund, 2.16% (cost $6,785,000)* | 6,785,000 | ||||||||
Total Value of Investments (cost $242,704,891) | 100.9 | % | 242,091,372 | ||||||||
Excess of Liabilities Over Other Assets | (.9 | ) | (2,190,742) | ||||||||
Net Assets | 100.0 | % | $ | 239,900,630 | |||||||
* Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
12 | See notes to financial statements |
Portfolio Managers’ 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, 2008. During the period, the Fund’s return on a net asset value basis was –8.1% for Class A shares and –8.8% for Class B shares, including dividends of 46.8 cents per share on Class A shares and 40.2 cents per share on Class B shares.
The Fund invests in investment grade fixed income securities. While the majority of the Fund’s holdings were 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, high yield corporate bonds and preferred stocks.
At the beginning of 2008, the investment grade corporate bond market valuations appeared attractive by historical standards, compared to other fixed income asset classes. However, the ongoing global credit crunch drove investors to safe haven investments, such as U.S. Treasury notes, agency debts and conventional mortgage-backed securities, to which the Fund had little exposure. This contributed negatively to performance.
The Fund’s performance was further affected by the adverse price movements of certain securities issued by financial institutions that experienced extreme distress during the course of the year, including AIG, Lehman Brothers, Fannie Mae and Freddie Mac. These positions collectively detracted from the Fund’s performance.
The Fund did not invest in subprime or Alt-A residential mortgage-backed securities (Alt-A mortgages are considered less risky than subprime mortgages, but are still riskier than prime mortgages), commercial mortgage-backed securities or structured finance products during the reporting period. Therefore, it was largely able to avoid the negative impact of the disruption in the market for these securities. The Fund’s performance also benefited from a low exposure to high yield corporate bonds.
13 |
Portfolio Managers’ Letter (continued)
INVESTMENT GRADE FUND
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx16x1.jpg)
Clark D. Wagner
Portfolio Manager and
Director of Fixed Income, First Investors Management Company, Inc.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx16x2.jpg)
Steve Chan
Portfolio Manager*
October 31, 2008
* Mr. Chan became the Fund’s Co-Portfolio Manager on November 5, 2007.
14 |
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $891.85 | $5.20 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,019.50 | $5.55 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $888.48 | $8.50 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,016.00 | $9.07 |
* | 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 183/366 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx17x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, and are based on the total value of investments.
15 |
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.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx18x1.jpg)
The graph compares a $10,000 investment in the First Investors Investment Grade Fund (Class A shares) beginning 9/30/98 with a theoretical investment in the Merrill Lynch U.S. Corporate Master Index (the “Index”). The Index tracks the performance of U.S. dollar-denominated investment grade Corporate public debt issued in the U.S. domestic bond market. Qualifying bonds must have at least one year remaining term to maturity, a fixed coupon schedule and a minimum amount outstanding of $150 million. Bonds must be rated investment grade based on a composite of Moody’s and S&P. 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 divide nds 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 9/30/08) 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 (13.47%), (.72%) and 2.36%, respectively, and the S.E.C. 30-Day Yield for September 2008 would have been 5.35%. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years wou ld have been (12.39%), (.59%) and 2.35%, respectively, and the S.E.C. 30-Day Yield for September 2008 would have been 4.91%. 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.
16 |
Portfolio of Investments
INVESTMENT GRADE FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
CORPORATE BONDS—77.1% | |||||||||||
Automotive—3.5% | |||||||||||
$ | 10,301 | M | Daimler Chrysler NA Holdings Corp., 6.5%, 2013 | $ 10,063,315 | |||||||
Chemicals—1.2% | |||||||||||
1,700 | M | Air Products & Chemicals, Inc., 4.125%, 2010 | 1,695,858 | ||||||||
1,700 | M | Cabot Corp., 5.25%, 2013 (a) | 1,689,518 | ||||||||
3,385,376 | |||||||||||
Consumer Durables—.5% | |||||||||||
1,650 | M | Black & Decker Corp., 5.75%, 2016 | 1,499,510 | ||||||||
Consumer Non-Durables—.6% | |||||||||||
1,600 | M | Newell Rubbermaid, Inc., 6.75%, 2012 | 1,617,726 | ||||||||
Energy—10.4% | |||||||||||
2,700 | M | Canadian Natural Resources, Ltd., 5.9%, 2018 | 2,380,433 | ||||||||
850 | M | Kinder Morgan Finance Co., 5.35%, 2011 | 807,500 | ||||||||
2,800 | M | Nabors Industries, Inc., 6.15%, 2018 (a) | 2,674,210 | ||||||||
2,000 | M | Nexen, Inc., 5.05%, 2013 | 1,838,080 | ||||||||
2,000 | M | Northern Border Pipeline Co., 7.1%, 2011 | 2,044,740 | ||||||||
2,150 | M | Pacific Energy Partners LP, 7.125%, 2014 | 2,115,560 | ||||||||
7,200 | M | Rockies Express Pipeline, 6.25%, 2013 (a) | 7,109,770 | ||||||||
5,800 | M | Spectra Energy Capital, LLC, 6.2%, 2018 | 5,368,028 | ||||||||
1,800 | M | Suncor Energy, Inc., 6.85%, 2039 | 1,569,271 | ||||||||
500 | M | Tesoro Corp., 6.5%, 2017 | 402,500 | ||||||||
3,600 | M | TransOcean, Inc., 6%, 2018 | 3,365,766 | ||||||||
29,675,858 | |||||||||||
Financial Services—11.2% | |||||||||||
4,900 | M | Amvescap PLC, 5.375%, 2013 | 4,508,368 | ||||||||
7,200 | M | Citigroup, Inc., 5.5%, 2013 | 6,290,654 | ||||||||
7,460 | M | CoBank, ACB, 7.875%, 2018 (a) | 7,195,931 | ||||||||
1,800 | M | Compass Bank, 6.4%, 2017 | 1,586,716 | ||||||||
1,000 | M | Fleet Capital Trust II, 7.92%, 2026 | 993,550 | ||||||||
625 | M | Greenpoint Bank, 9.25%, 2010 | 615,113 | ||||||||
2,420 | M | Hibernia Corp., 5.35%, 2014 | 2,011,165 | ||||||||
1,880 | M | Independence Community Bank Corp., 4.9%, 2010 | 1,447,299 | ||||||||
1,200 | M | National City Bank of Pennsylvania, 7.25%, 2011 | 723,606 | ||||||||
2,000 | M | Royal Bank of Scotland Group PLC, 5%, 2014 | 1,965,938 | ||||||||
17 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
Financial Services (continued) | |||||||||||
SunTrust Banks, Inc.: | |||||||||||
$ | 1,600 | M | 7.25%, 2018 | $ | 1,419,520 | ||||||
3,000 | M | 5.853%, 2049 | 1,651,038 | ||||||||
1,800 | M | Wachovia Corp., 5.5%, 2013 | 1,490,618 | ||||||||
31,899,516 | |||||||||||
Financials—5.1% | |||||||||||
American General Finance Corp.: | |||||||||||
875 | M | 8.125%, 2009 | 586,975 | ||||||||
1,800 | M | 6.9%, 2017 | 835,735 | ||||||||
1,500 | M | Bear Stearns Cos., Inc., 7.25%, 2018 | 1,445,958 | ||||||||
1,170 | M | ERAC USA Finance Enterprise Co., 8%, 2011 (a) | 1,197,579 | ||||||||
2,363 | M | Ford Motor Credit Co., 9.75%, 2010 | 1,695,129 | ||||||||
Goldman Sachs Group, Inc.: | |||||||||||
500 | M | 6.15%, 2018 | 416,463 | ||||||||
1,600 | M | 6.45%, 2036 | 1,046,880 | ||||||||
3,600 | M | Lehman Brothers Holdings, Inc., 5.625%, 2013 (b) | 468,000 | ||||||||
6,700 | M | Merrill Lynch & Co., 5.45%, 2013 | 6,041,156 | ||||||||
1,100 | M | Morgan Stanley, 6.625%, 2018 | 729,096 | ||||||||
14,462,971 | |||||||||||
Food/Beverage/Tobacco—3.5% | |||||||||||
1,980 | M | Bunge Limited Finance Corp., 5.875%, 2013 | 1,937,733 | ||||||||
1,900 | M | Cargill, Inc., 6%, 2017 (a) | 1,790,718 | ||||||||
1,949 | M | ConAgra Foods, Inc., 6.75%, 2011 | 2,021,926 | ||||||||
4,600 | M | Philip Morris International, Inc., 5.65%, 2018 | 4,259,609 | ||||||||
10,009,986 | |||||||||||
Food/Drug—1.0% | |||||||||||
2,000 | M | Kroger Co., 6.75%, 2012 | 2,049,014 | ||||||||
700 | M | Safeway, Inc., 6.5%, 2011 | 721,701 | ||||||||
2,770,715 | |||||||||||
Gaming/Leisure—.2% | |||||||||||
750 | M | MGM Mirage, Inc., 8.5%, 2010 | 693,750 | ||||||||
Health Care—.9% | |||||||||||
2,500 | M | Fisher Scientific International, Inc., 6.75%, 2014 | 2,449,908 | ||||||||
Housing—.7% | |||||||||||
1,970 | M | D.R. Horton, Inc., 8%, 2009 | 1,947,838 |
18 |
Principal | |||||||||||
Amount | Security | Value | |||||||||
Industrials—.8% | |||||||||||
$ | 2,365 | M | Harley-Davidson Funding Corp., 6.8%, 2018 (a) | $ | 2,218,277 | ||||||
Information Technology—.6% | |||||||||||
1,750 | M | Xerox Corp., 6.875%, 2011 | 1,764,420 | ||||||||
Manufacturing—2.4% | |||||||||||
1,750 | M | Briggs & Stratton Corp., 8.875%, 2011 | 1,723,750 | ||||||||
2,500 | M | Crane Co., 6.55%, 2036 | 2,284,008 | ||||||||
1,112 | M | Hanson Australia Funding, Ltd., 5.25%, 2013 | 1,040,610 | ||||||||
646 | M | Hanson PLC, 7.875%, 2010 | 678,047 | ||||||||
875 | M | Ingersoll-Rand Co., 9%, 2021 | 1,017,242 | ||||||||
6,743,657 | |||||||||||
Media-Broadcasting—1.6% | |||||||||||
2,600 | M | Comcast Cable Communications, Inc., 7.125%, 2013 | 2,627,846 | ||||||||
2,000 | M | Cox Communications, Inc., 4.625%, 2013 | 1,850,722 | ||||||||
4,478,568 | |||||||||||
Media-Diversified—9.6% | |||||||||||
3,208 | M | Dun & Bradstreet Corp., 6%, 2013 | 3,188,717 | ||||||||
1,800 | M | McGraw-Hill Cos., Inc., 5.9%, 2017 | 1,786,892 | ||||||||
6,900 | M | News America, Inc., 5.3%, 2014 | 6,567,537 | ||||||||
4,500 | M | Thomson Reuters Corp., 5.95%, 2013 | 4,499,325 | ||||||||
Time Warner Cable, Inc.: | |||||||||||
4,430 | M | 6.2%, 2013 | 4,302,093 | ||||||||
2,700 | M | 6.75%, 2018 | 2,525,988 | ||||||||
Time Warner, Inc.: | |||||||||||
3,550 | M | 6.875%, 2012 | 3,522,559 | ||||||||
1,000 | M | 9.125%, 2013 | 1,050,918 | ||||||||
27,444,029 | |||||||||||
Metals/Mining—3.2% | |||||||||||
1,300 | M | Alcoa, Inc., 6%, 2012 | 1,307,203 | ||||||||
8,834 | M | ArcelorMittal, 6.125%, 2018 (a) | 7,841,615 | ||||||||
9,148,818 |
19 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
Real Estate Investment Trusts—1.2% | |||||||||||
AvalonBay Communities, Inc.: | |||||||||||
$ | 1,900 | M | 7.5%, 2010 | $ | 1,973,146 | ||||||
200 | M | 6.625%, 2011 | 200,498 | ||||||||
1,350 | M | Duke Weeks Realty Corp., 7.75%, 2009 | 1,353,252 | ||||||||
3,526,896 | |||||||||||
Telecommunications—5.7% | |||||||||||
9,000 | M | Deutsche Telekom International Finance BV, 5.875%, 2013 | 8,604,090 | ||||||||
1,359 | M | GTE Corp., 6.84%, 2018 | 1,285,397 | ||||||||
2,000 | M | SBC Communications, Inc., 6.25%, 2011 | 2,022,420 | ||||||||
1,725 | M | Sprint Capital Corp., 6.375%, 2009 | 1,690,733 | ||||||||
800 | M | Verizon New York, Inc., 6.875%, 2012 | 800,584 | ||||||||
1,750 | M | Vodafone AirTouch PLC, 7.75%, 2010 | 1,804,267 | ||||||||
16,207,491 | |||||||||||
Transportation—3.4% | |||||||||||
4,397 | M | Burlington Northern Santa Fe Corp., 4.3%, 2013 | 4,108,315 | ||||||||
5,500 | M | Union Pacific Corp., 5.7%, 2018 | 5,131,484 | ||||||||
300 | M | Union Pacific Railroad, 7.28%, 2011 | 320,064 | ||||||||
9,559,863 | |||||||||||
Utilities—8.9% | |||||||||||
1,800 | M | Consumers Energy Co., 6.875%, 2018 | 1,796,769 | ||||||||
8,250 | M | E. ON International Finance BV, 5.8%, 2018 (a) | 7,899,194 | ||||||||
2,650 | M | Entergy Gulf States, Inc., 5.25%, 2015 | 2,444,773 | ||||||||
655 | M | Great River Energy Co., 5.829%, 2017 (a) | 663,282 | ||||||||
NiSource Finance Corp.: | |||||||||||
5,300 | M | 7.875%, 2010 | 5,453,732 | ||||||||
3,600 | M | 6.15%, 2013 | 3,487,824 | ||||||||
1,400 | M | OGE Energy Corp., 5%, 2014 | 1,246,458 | ||||||||
775 | M | PSI Energy, Inc., 8.85%, 2022 | 890,258 | ||||||||
1,510 | M | Public Service Electric & Gas Co., 6.75%, 2016 | 1,575,566 | ||||||||
25,457,856 | |||||||||||
Waste Management—.9% | |||||||||||
500 | M | Allied Waste NA, Inc., 5.75%, 2011 | 481,250 | ||||||||
2,000 | M | Waste Management, Inc., 6.875%, 2009 | 2,006,000 | ||||||||
2,487,250 | |||||||||||
Total Value of Corporate Bonds (cost $236,843,136) | 219,513,594 |
20 |
Principal | |||||||||||
Amount | |||||||||||
or Shares | Security | Value | |||||||||
U.S. GOVERNMENT AGENCY | |||||||||||
OBLIGATIONS—8.6% | |||||||||||
$ | 4,500 | M | Fannie Mae, 4.02%, 2015 | $ | 4,377,384 | ||||||
5,500 | M | Federal Farm Credit Bank, 5.37%, 2018 | 5,442,811 | ||||||||
Federal Home Loan Bank: | |||||||||||
2,100 | M | 4.01%, 2013 | 2,076,310 | ||||||||
5,400 | M | 4.025%, 2013 | 5,342,620 | ||||||||
3,600 | M | 4.05%, 2013 | 3,530,009 | ||||||||
1,000 | M | 7.23%, 2015 | 1,065,692 | ||||||||
2,500 | M | Freddie Mac, 6%, 2017 | 2,543,658 | ||||||||
Total Value of U.S. Government Agency Obligations (cost $24,299,994) | 24,378,484 | ||||||||||
U.S. GOVERNMENT OBLIGATIONS—5.5% | |||||||||||
999 | M | FDA Queens LP, 6.99%, 2017 (a) | 1,123,495 | ||||||||
U.S. Treasury Notes: | |||||||||||
4,500 | M | 3.125%, 2013 | 4,535,861 | ||||||||
10,000 | M | 4%, 2018 | 10,145,320 | ||||||||
Total Value of U.S. Government Obligations (cost $16,203,250) | 15,804,676 | ||||||||||
PREFERRED STOCKS—3.1% | |||||||||||
Financial Services | |||||||||||
250,900 | Citigroup, Inc., 8.125%, 2049 – Series”AA” | 4,139,850 | |||||||||
5,600,000 | JPMorgan Chase & Co., 7.9%, 2049 | 4,727,134 | |||||||||
Total Value of Preferred Stocks (cost $11,772,746) | 8,866,984 | ||||||||||
MORTGAGE-BACKED CERTIFICATES—2.0% | |||||||||||
Fannie Mae | |||||||||||
$ 5,779 | M | 5.5%, 8/1/2038 (cost $5,789,477) | 5,767,888 | ||||||||
SHORT-TERM TAX EXEMPT INVESTMENTS—1.0% | |||||||||||
Adjustable Rate Notes (c) | |||||||||||
1,800 | M | Bay Area Toll Auth., CA Toll Brdg. Rev. Bonds, 7.68%, 2045 | 1,796,483 | ||||||||
900 | M | Harris County, TX Health Facs. Dev. Corp. | |||||||||
Hosp. Rev. Bonds, 7.94%, 2047 | 898,123 | ||||||||||
Total Value of Adjustable Rate Notes (cost $2,694,606) | 2,694,606 | ||||||||||
MUNICIPAL BONDS—.5% | |||||||||||
1,730 | M | Tobacco Settlement Fin. Auth. West Virginia | |||||||||
Series “A”, 7.467%, 2047 (cost $1,730,000) | 1,485,292 |
21 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
PASS THROUGH CERTIFICATES—.4% | |||||||||||
Transportation | |||||||||||
$ | 471 | M | American Airlines, Inc., 7.377%, 2019 | $ | 230,557 | ||||||
1,181 | M | Continental Airlines, Inc., 8.388%, 2020 | 933,163 | ||||||||
Total Value of Pass Through Certificates (cost $1,651,531) | 1,163,720 | ||||||||||
SHORT-TERM INVESTMENTS—2.0% | |||||||||||
Money Market Fund | |||||||||||
5,750 | M | First Investors Cash Reserve Fund, 2.16% (cost $5,750,000) (d) | 5,750,000 | ||||||||
Total Value of Investments (cost $306,734,740) | 100.2 | % | 285,425,244 | ||||||||
Excess of Liabilities Over Other Assets | (.2 | ) | (484,333) | ||||||||
Net Assets | 100.0 | % | $284,940,911 |
(a) Security exempt from registration under Rule 144A of Securities Act of 1933 (see Note 4).
(b) In default as to principal and/ or interest payment.
(c) Interest rates on adjustable rate notes are determined and reset periodically by the issuer and are the rates in effect at September 30, 2008.
(d) Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
22 | See notes to financial statements |
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, 2008. During the period, the Fund’s return on a net asset value basis was –11.6% for Class A shares and –12.3% 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.
During the reporting period, the high yield market was the worst performing fixed income asset class. Similar to last year, the reporting period was marked by extreme volatility. The high yield market started the fiscal year on a positive note, continuing the momentum that the market displayed in September 2007 following the Federal Reserve’s (the “Fed’s”) 50 basis point cut in the federal funds rate. However, in October 2007, sentiment changed following disappointing financial services earnings (or the lack thereof), and the return of structured credit issues that plagued the markets during the summer of 2007. This negative overhang continued into 2008 due to the combination of a weak economy, poor liquidity, financial system distress and an increase in defaults. The Fed and the U.S. government took unprecedented actions to stabilize the financial system, including the Fed’s bailout of Bear Stearns in March. These actions contributed to a strong rally in the high yield market in April, making it the best performing month for high yield in over five years. However, a lower than expected second quarter gross domestic product, weakening employment picture and declining consumer confidence dragged on the markets throughout the summer.
Then in September 2008, a series of events changed the financial landscape forever. The Fed placed Freddie Mac and Fannie Mae under conservatorship, Lehman Brothers filed for bankruptcy, AIG was bailed out, Washington Mutual was sold to JP Morgan, and Wachovia was initially sold to Citibank. In all cases the equity holders were wiped out or severely diluted, while Lehman, AIG, and Washington Mutual bondholders suffered severe losses. As a result, September 2008 was the worst performing month in the high yield market since September 1990.
The Fund’s performance was hurt by investments in television broadcaster Young Broadcasting, yellow pages publishers Idearc and R.H. Donnelley, chemical supplier Texas Petrochemicals and gaming company Station Casinos. Young Broadcasting announced that it would not meet its previously stated goal of concluding a sale agreement for KRON-TV by the end of the first calendar quarter — and the bonds have traded off over investor concerns about liquidity absent the asset sale. Idearc
23 |
Portfolio Managers’ Letter (continued)
FUND FOR INCOME
and R.H. Donnelley are facing downward pressures on advertising sales due to a combination of both cyclical and secular issues. Despite reporting better year over year results, stock in Texas Petrochemicals has traded off due to the stock being not registered as planned and a large shareholder exiting his position. Station Casinos underwent a management buyout and subsequently posted lower earnings as a result of the weak “locals” market in Las Vegas.
Aiding the Fund’s performance were investments in acute-care provider Tenet Healthcare, gaming company Park Place Entertainment, cable television provider Cablevision and aerospace and defense contractor DRS Technologies. Tenet Healthcare benefited from improving results — indicating that its turnaround is making progress — and the defensive nature of the health care sector. Park Place Entertainment’s bonds were tendered in conjunction with the leveraged buyout of its parent company Harrah’s. Cablevision continued to report strong results and benefited from the defensive nature of the cable sector. DRS Technologies was being acquired by Italian defense contractor Finmeccanica and will benefit from a probable redemption of its debt.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx26x1.jpg)
Richard T. Bourke
Portfolio Manager
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx26x2.jpg)
Greg Miller
Portfolio Manager
October 31, 2008
24 |
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $936.78 | $6.15 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.65 | $6.41 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $933.07 | $9.52 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,015.15 | $9.92 |
* | Expenses are equal to the annualized expense ratio of 1.27% for Class A shares and 1.97% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/366 | |
. | (to reflect the one-half year period). Expenses paid during the period are net of expenses waived |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx27x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
25 |
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.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx28x1.jpg)
The graph compares a $10,000 investment in the First Investors Fund For Income (Class A shares) beginning 9/30/98 with a theoretical investment in the Credit Suisse High Yield Index II (the “Index”). The Index is designed to measure the performance of the high yield bond market. As of 9/30/08, the Index consisted of 1,130 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 9/30/08, approximately 0.73% of the market value of the Index was in default. The bonds included in the Index have an average maturity of 6.64 years, an average duration of 4.27 years and an average coupon of 8.37%. 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 9/30/08) 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 would have been (16.61%) and the S.E.C. 30-Day Yield for September 2008 would have been 9.68%. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year would have been (15.54%) and the S.E.C. 30-Day Yield for September 2008 would have bee n 9.52%. 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. 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.
26 |
Portfolio of Investments
FUND FOR INCOME
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
CORPORATE BONDS—89.8% | |||||||||||
Aerospace/Defense—4.7% | |||||||||||
$ | 4,775 | M | Alliant Techsystems, Inc., 6.75%, 2016 | $ | 4,488,500 | ||||||
DRS Technologies, Inc.: | |||||||||||
5,250 | M | 6.875%, 2013 | 5,223,750 | ||||||||
1,000 | M | 6.625%, 2016 | 1,015,000 | ||||||||
5,508 | M | DynCorp International, LLC, 9.5%, 2013 | 5,397,840 | ||||||||
1,747 | M | GenCorp, Inc., 9.5%, 2013 | 1,729,530 | ||||||||
4,375 | M | L-3 Communications Corp., 7.625%, 2012 | 4,320,313 | ||||||||
22,174,933 | |||||||||||
Automotive—4.7% | |||||||||||
2,700 | M | Accuride Corp., 8.5%, 2015 (a) | 1,728,000 | ||||||||
Asbury Automotive Group, Inc.: | |||||||||||
5,400 | M | 8%, 2014 (a) | 3,820,500 | ||||||||
2,000 | M | 7.625%, 2017 | 1,290,000 | ||||||||
6,975 | Avis Budget Car Rental, LLC, 7.75%, 2016 | 4,394,250 | |||||||||
General Motors Corp.: | |||||||||||
3,500 | M | 7.7%, 2016 (a) | 1,408,750 | ||||||||
3,500 | M | 8.375%, 2033 (a) | 1,417,500 | ||||||||
500 | M | Tenneco Automotive, Inc., 8.625%, 2014 (a) | 400,000 | ||||||||
6,575 | M | United Auto Group, Inc., 7.75%, 2016 | 4,734,000 | ||||||||
3,600 | M | United Components, Inc., 9.375%, 2013 | 3,006,000 | ||||||||
22,199,000 | |||||||||||
Chemicals—4.2% | |||||||||||
Huntsman, LLC: | |||||||||||
1,636 | M | 11.625%, 2010 | 1,672,810 | ||||||||
4,515 | M | 11.5%, 2012 | 4,627,875 | ||||||||
4,375 | M | Nell AF S.a.r.l., 8.375%, 2015 (a)(b) | 2,078,125 | ||||||||
4,800 | M | Newmarket Corp., 7.125%, 2016 | 4,632,000 | ||||||||
4,500 | M | Terra Capital, Inc., 7%, 2017 | 4,297,500 | ||||||||
3,075 | M | Westlake Chemical Corp., 6.625%, 2016 | 2,629,125 | ||||||||
19,937,435 | |||||||||||
Consumer Non-Durables—1.3% | |||||||||||
4,000 | M | GFSI, Inc., 10.5%, 2011 (b)(c) | 3,620,000 | ||||||||
3,125 | M | Levi Strauss & Co., 9.75%, 2015 | 2,625,000 | ||||||||
6,245,000 |
27 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
Energy—13.2% | |||||||||||
$ | 5,275 | M | Basic Energy Services, Inc., 7.125%, 2016 | $ | 4,721,125 | ||||||
3,600 | M | Calfrac Holdings, 7.75%, 2015 (b) | 3,006,000 | ||||||||
Chesapeake Energy Corp.: | |||||||||||
1,800M | M | 7.5%, 2014 (a) | 1,732,500 | ||||||||
8,850 | M | 6.625%, 2016 | 7,987,125 | ||||||||
4,500 | M | Cimarex Energy Co., 7.125%, 2017 | 4,162,500 | ||||||||
4,350 | M | Compagnie Generale de Geophysique, 7.5%, 2015 | 4,176,000 | ||||||||
4,375 | M | Complete Production Services, Inc., 8%, 2016 | 4,178,125 | ||||||||
1,800 | M | Connacher Oil & Gas, Ltd., 10.25%, 2015 (b) | 1,737,000 | ||||||||
8,500 | M | Delta Petroleum Corp., 7%, 2015 | 5,950,000 | ||||||||
3,100 | M | Hilcorp Energy I, LP, 9%, 2016 (b) | 2,836,500 | ||||||||
3,501 | M | National Oilwell Varco, Inc., 6.125%, 2015 | 3,421,139 | ||||||||
Pacific Energy Partners LP: | |||||||||||
3,070 | M | 7.125%, 2014 | 3,020,825 | ||||||||
1,920 | M | 6.25%, 2015 | 1,805,226 | ||||||||
Petroplus Finance, Ltd.: | |||||||||||
900 | M | 6.75%, 2014 (b) | 765,000 | ||||||||
3,950 | M | 7%, 2017 (b) | 3,298,250 | ||||||||
2,625 | M | Plains Exploration & Production Co., 7.625%, 2018 | 2,336,250 | ||||||||
3,600 | M | Stallion Oilfield Services, Ltd., 9.75%, 2015 (b) | 2,358,000 | ||||||||
2,600 | M | Stewart & Stevenson, LLC, 10%, 2014 | 2,288,000 | ||||||||
3,490 | M | Tesoro Corp., 6.25%, 2012 | 3,071,200 | ||||||||
62,850,765 | |||||||||||
Financials—.2% | |||||||||||
2,175 | M | General Motors Acceptance Corp., 6.75%, 2014 | 835,594 | ||||||||
Food/Beverage/Tobacco—3.2% | |||||||||||
9,000 | M | Constellation Brands, Inc., 7.25%, 2016 | 8,325,000 | ||||||||
Land O’Lakes, Inc.: | |||||||||||
1,800 | M | 9%, 2010 | 1,845,000 | ||||||||
775 | M | 8.75%, 2011 | 780,812 | ||||||||
4,125 | M | Southern States Cooperative, Inc., 10.5%, 2010 (b) | 4,186,875 | ||||||||
15,137,687 | |||||||||||
Food/Drug—1.3% | |||||||||||
6,250 | M | Ingles Markets, Inc., 8.875%, 2011 | 6,296,875 |
28 |
Principal | |||||||||||
Amount | Security | Value | |||||||||
Forest Products/Containers—2.0% | |||||||||||
$ | 2,150 | M | Jefferson Smurfit Corp., 8.25%, 2012 | $ | 1,806,000 | ||||||
4,400 | M | Sappi Papier Holding, AG, 6.75%, 2012 (b) | 3,478,715 | ||||||||
2,000 | M | Tekni-Plex, Inc., 8.75%, 2013 (a) | 1,540,000 | ||||||||
3,275 | M | Verso Paper Holdings, LLC, 6.551%, 2014 (c) | 2,718,250 | ||||||||
9,542,965 | |||||||||||
Gaming/Leisure—5.8% | |||||||||||
4,250 | M | Circus & Eldorado/Silver Legacy, 10.125%, 2012 | 3,633,750 | ||||||||
4,500 | M | Isle of Capri Casinos, Inc., 7%, 2014 (a) | 3,037,500 | ||||||||
5,220 | M | Mandalay Resort Group, 6.375%, 2011 | 4,306,500 | ||||||||
6,960 | M | MGM Mirage, Inc., 6.625%, 2015 | 4,872,000 | ||||||||
1,800 | M | Pinnacle Entertainment, Inc., 7.5%, 2015 | 1,341,000 | ||||||||
9,745 | M | Speedway Motorsports, Inc., 6.75%, 2013 | 9,209,025 | ||||||||
4,500 | M | Station Casinos, Inc., 6.875%, 2016 (a) | 1,282,500 | ||||||||
27,682,275 | |||||||||||
Health Care—8.0% | |||||||||||
Alliance Imaging, Inc.: | |||||||||||
1,800 | M | 7.25%, 2012 | 1,647,000 | ||||||||
3,150 | M | 7.25%, 2012 | 2,882,250 | ||||||||
4,375 | M | Community Health Systems, 8.875%, 2015 | 4,178,125 | ||||||||
1,000 | M | Cooper Companies, Inc., 7.125%, 2015 | 985,000 | ||||||||
4,350 | M | DaVita, Inc., 7.25%, 2015 | 4,154,250 | ||||||||
3,480 | M | Fisher Scientific International, Inc., 6.125%, 2015 | 3,363,389 | ||||||||
4,400 | M | Genesis Health Ventures, Inc., 9.75%, 2011 (d)(e) | 2,750 | ||||||||
5,700 | M | HCA, Inc., 6.75%, 2013 | 4,816,500 | ||||||||
4,000 | M | Omnicare, Inc., 6.875%, 2015 | 3,580,000 | ||||||||
3,025 | M | Res-Care, Inc., 7.75%, 2013 | 2,858,625 | ||||||||
Tenet Healthcare Corp.: | |||||||||||
3,450 | M | 7.375%, 2013 | 3,156,750 | ||||||||
2,250 | M | 9.25%, 2015 (a) | 2,137,500 | ||||||||
4,500 | M | Universal Hospital Services, Inc., 6.303%, 2015 | 3,982,500 | ||||||||
37,744,639 | |||||||||||
Housing—2.5% | |||||||||||
2,180 | M | Beazer Homes USA, Inc., 6.875%, 2015 (a) | 1,362,500 | ||||||||
6,100 | M | Builders FirstSource, Inc., 7.054%, 2012 (a)(c) | 3,965,000 | ||||||||
900 | M | NTK Holdings, Inc., 0%—10.75%, 2014 (a)(f) | 391,500 | ||||||||
3,380 | M | Ply Gem Industries, Inc., 9%, 2012 (a) | 1,859,000 | ||||||||
3,500 | M | Realogy Corp., 12.375%, 2015 (a) | 1,207,500 |
29 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
Housing (continued) | |||||||||||
William Lyon Homes, Inc.: | |||||||||||
$ | 4,500 | M | 7.625%, 2012 (a) | $ | 1,777,500 | ||||||
2,700 | M | 10.75%, 2013 (a) | 1,174,500 | ||||||||
11,737,500 | |||||||||||
Information Technology—3.8% | |||||||||||
7,650 | M | Belden CDT, Inc., 7%, 2017 | 6,846,750 | ||||||||
3,000 | M | Exodus Communications, Inc., 10.75%, 2009 (d)(e) | 1,875 | ||||||||
Freescale Semiconductor, Inc.: | |||||||||||
5,250 | M | 9.125%, 2014 | 3,333,750 | ||||||||
875 | M | 10.125%, 2016 (a) | 564,375 | ||||||||
Iron Mountain, Inc.: | |||||||||||
1,000 | M | 8.625%, 2013 | 990,000 | ||||||||
1,000 | M | 6.625%, 2016 | 945,000 | ||||||||
1,500 | M | 8%, 2020 | 1,447,500 | ||||||||
1,000 | M | NXP BV/NXP Funding, LLC, 7.875%, 2014 | 675,000 | ||||||||
Sanmina – SCI Corp.: | |||||||||||
875 | M | 5.569%, 2014 (b)(c) | 765,625 | ||||||||
1,300 | M | 8.125%, 2016 | 1,111,500 | ||||||||
Xerox Corp.: | |||||||||||
500 | M | 6.4%, 2016 | 466,316 | ||||||||
1,000 | M | 6.75%, 2017 | 945,170 | ||||||||
18,092,861 | |||||||||||
Investment/Finance Companies—1.4% | |||||||||||
7,300 | M | LaBranche & Co., Inc., 11%, 2012 | 6,898,500 | ||||||||
Manufacturing—2.4% | |||||||||||
2,740 | M | Case New Holland, Inc., 7.125%, 2014 | 2,507,100 | ||||||||
ESCO Corp.: | |||||||||||
250 | M | 6.694%, 2013 (b)(c) | 231,250 | ||||||||
2,000 | M | 8.625%, 2013 (b) | 1,970,000 | ||||||||
2,500 | M | Itron, Inc., 7.75%, 2012 | 2,493,750 | ||||||||
4,500 | M | Terex Corp., 8%, 2017 | 4,117,500 | ||||||||
11,319,600 | |||||||||||
Media-Broadcasting—2.7% | |||||||||||
5,250 | M | Block Communications, Inc., 8.25%, 2015 (b) | 4,751,250 | ||||||||
1 | M | Canwest Media, Inc., 8%, 2012 | 504 | ||||||||
4,400 | M | LBI Media, Inc., 8.5%, 2017 (b) | 2,926,000 | ||||||||
3,196 | M | Nexstar Finance Holding, LLC, 11.375%, 2013 | 2,668,580 | ||||||||
1,357 | M | Sinclair Broadcasting Group, Inc., 8%, 2012 | 1,312,898 |
30 |
Principal | |||||||||||
Amount | Security | Value | |||||||||
Media-Broadcasting (continued) | |||||||||||
Young Broadcasting, Inc.: | |||||||||||
$ | 2,920 | M | 10%, 2011 | $ | 438,000 | ||||||
4,900 | M | 8.75%, 2014 (a) | 735,000 | ||||||||
12,832,232 | |||||||||||
Media-Cable TV—9.9% | |||||||||||
8,745 | M | Adelphia Communications Escrow Bond, 10.25%, 2011 (d) | 393,525 | ||||||||
6,250 | M | Atlantic Broadband Finance, LLC, 9.375%, 2014 | 5,562,500 | ||||||||
6,900 | M | Cablevision Systems Corp., 8%, 2012 | 6,520,500 | ||||||||
Charter Communications Holdings, LLC: | |||||||||||
8,500 | M | 10%, 2009 (a) | 8,202,500 | ||||||||
2,000 | M | 10.25%, 2010 | 1,930,000 | ||||||||
8,250 | M | 11.75%, 2011 | 4,826,250 | ||||||||
2,000 | M | 8%, 2012 (b) | 1,800,000 | ||||||||
CSC Holdings, Inc.: | |||||||||||
2,750 | M | 8.125%, 2009 | 2,729,375 | ||||||||
1,875 | M | 6.75%, 2012 | 1,727,344 | ||||||||
6,940 | M | Echostar DBS Corp., 6.375%, 2011 | 6,402,150 | ||||||||
Mediacom LLC/Mediacom Capital Corp.: | |||||||||||
4,000 | M | 7.875%, 2011 (a) | 3,640,000 | ||||||||
2,000 | M | 9.5%, 2013 (a) | 1,800,000 | ||||||||
Quebecor Media, Inc.: | |||||||||||
800 | M | 7.75%, 2016 | 704,000 | ||||||||
1,000 | M | 7.75%, 2016 | 880,000 | ||||||||
47,118,144 | |||||||||||
Media-Diversified—3.3% | |||||||||||
Cenveo, Inc.: | |||||||||||
5,200 | M | 7.875%, 2013 | 4,030,000 | ||||||||
500 | M | 10.5%, 2016 (b) | 465,000 | ||||||||
2,000 | M | Deluxe Corp., 7.375%, 2015 | 1,710,000 | ||||||||
7,875 | M | Idearc, Inc., 8%, 2016 | 2,185,312 | ||||||||
MediaNews Group, Inc.: | |||||||||||
2,625 | M | 6.875%, 2013 | 800,625 | ||||||||
3,100 | M | 6.375%, 2014 | 945,500 | ||||||||
6,450 | M | R.H. Donnelley Corp., 8.875%, 2017 (a) | 2,225,250 | ||||||||
3,400 | M | Universal City Development Partners, Ltd., 11.75%, 2010 | 3,293,750 | ||||||||
250 | M | Universal City Florida Holding Co., 7.551%, 2010 (c) | 236,250 | ||||||||
15,891,687 |
31 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
Metals/Mining—1.6% | |||||||||||
$ | 500 | M | Freeport-McMoRan Copper & Gold, Inc., 8.375%, 2017 | $ | 493,235 | ||||||
1,750 | M | Metals USA, Inc., 11.125%, 2015 | 1,688,750 | ||||||||
6,010 | M | Russell Metals, Inc., 6.375%, 2014 | 5,446,562 | ||||||||
7,628,547 | |||||||||||
Retail-General Merchandise—2.5% | |||||||||||
3,750 | M | GSC Holdings Corp., 8%, 2012 | 3,787,500 | ||||||||
6,100 | M | Neiman Marcus Group, Inc., 10.375%, 2015 (a) | 5,139,250 | ||||||||
4,750 | M | Yankee Acquisition Corp., 9.75%, 2017 (a) | 2,731,250 | ||||||||
11,658,000 | |||||||||||
Services—5.3% | |||||||||||
Allied Waste NA, Inc.: | |||||||||||
1,800 | M | 7.875%, 2013 | 1,795,500 | ||||||||
6,000 | M | 7.375%, 2014 (a) | 5,865,000 | ||||||||
5,250 | M | 6.875%, 2017 | 4,908,750 | ||||||||
4,700 | M | Ashtead Capital, Inc., 9%, 2016 (b) | 4,065,500 | ||||||||
3,950 | M | First Data Corp., 9.875%, 2015 (a)(b) | 3,105,687 | ||||||||
United Rentals, Inc.: | |||||||||||
2,863 | M | 6.5%, 2012 | 2,404,920 | ||||||||
4,350 | M | 7%, 2014 | 3,066,750 | ||||||||
25,212,107 | |||||||||||
Telecommunications—.9% | |||||||||||
5,250 | M | Citizens Communications Co., 7.125%, 2019 | 4,200,000 | ||||||||
Transportation—.9% | |||||||||||
4,200 | M | Roadway Corp., 8.25%, 2008 | 4,168,500 | ||||||||
500 | M | Titan Petrochemicals Group, Ltd., 8.5%, 2012 (b) | 147,500 | ||||||||
4,316,000 | |||||||||||
Utilities—1.8% | |||||||||||
5,250 | M | Dynergy Holdings, Inc., 7.75%, 2019 | 4,226,250 | ||||||||
4,625 | M | NRG Energy, Inc., 7.375%, 2017 | 4,220,312 | ||||||||
8,446,562 |
32 |
Principal | |||||||||||
Amount | |||||||||||
or Shares | Security | Value | |||||||||
Wireless Communications—2.2% | |||||||||||
$ | 8,000 | M | Nextel Communications, Inc., 5.95%, 2014 | $ | 5,365,664 | ||||||
5,200 | M | Rogers Wireless, Inc., 6.375%, 2014 | 4,978,756 | ||||||||
10,344,420 | |||||||||||
Total Value of Corporate Bonds (cost $525,200,878) | 426,343,328 | ||||||||||
COMMON STOCKS—2.5% | |||||||||||
Automotive—.0% | |||||||||||
37,387 | * | Safelite Glass Corporation – Class “B” (b)(e) | 23,180 | ||||||||
2,523 | * | Safelite Realty Corporation (e) | 30,528 | ||||||||
53,708 | |||||||||||
Chemicals—.7% | |||||||||||
14,634 | * | Texas Petrochemicals Corporation (e) | 231,803 | ||||||||
170,613 | * | Texas Petrochemicals Corporation (e) | 3,071,034 | ||||||||
3,302,837 | |||||||||||
Media-Broadcasting—.4% | |||||||||||
325,000 | Sinclair Broadcasting Group, Inc. | 1,638,000 | |||||||||
Media-Cable TV—1.0% | |||||||||||
8,731,521 | * | Adelphia Recovery Trust | 371,090 | ||||||||
179,877 | * | Time Warner Cable, Inc. – Class “A” | 4,353,023 | ||||||||
4,724,113 | |||||||||||
Telecommunications—.4% | |||||||||||
175,000 | Frontier Communications Corporation | 2,012,500 | |||||||||
8 | * | Viatel Holding (Bermuda), Ltd. (e) | 29 | ||||||||
18,224 | * | World Access, Inc. | 9 | ||||||||
2,012,538 | |||||||||||
Total Value of Common Stocks (cost $19,097,461) | 11,731,196 |
33 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2008
Warrants or | |||||||||||
Principal | |||||||||||
Amount | Security | Value | |||||||||
WARRANTS—.0% | |||||||||||
Telecommunication Services | |||||||||||
3,500 | * | GT Group Telecom, Inc. (expiring 2/1/10) (cost $316,222) (b)(e) | $ | — | |||||||
SHORT-TERM CORPORATE NOTES (g)—5.5% | |||||||||||
$ | 1,400 | M | ANZ National, Ltd., 2.64%, 11/5/08 | 1,394,764 | |||||||
1,500 | M | Bank of America Corp., 2.55%, 10/15/08 | 1,497,303 | ||||||||
1,400 | M | BNP Paribas Fin. Inc., 2.76% 12/10/08 | 1,389,783 | ||||||||
1,500 | M | Calyon NA, 2.60%, 10/22/08 | 1,496,405 | ||||||||
1,500 | M | CBA (DEL) Fin. Inc., 2.73%, 11/21/08 | 1,491,910 | ||||||||
1,750 | M | Dexia (DEL) LLC, 2.82%, 11/10/08 | 1,742,551 | ||||||||
1,400 | M | DNB Bank, 2.61%, 11/21/08 | 1,391,883 | ||||||||
1,400 | M | Fortis Funding, LLC, 2.69%, 11/4/08 (h) | 1,394,909 | ||||||||
1,400 | M | ING Funding, LLC, 2.72%,12/8/08 | 1,390,070 | ||||||||
1,500 | M | Intesa Funding, LLC, 2.63%, 10/1/08 | 1,499,637 | ||||||||
1,750 | M | JPMorgan Chase & Co., 2.75%, 12/3/08 | 1,738,485 | ||||||||
1,400 | M | Macquarie Bank, Ltd., 2.55%, 10/8/08 (h) | 1,398,572 | ||||||||
1,75 | M | MetLife Short Term Funding, LLC, 2.84%, 11/3/08 | 1,750,000 | ||||||||
1,400 | M | RaboBank USA Fin. Corp., 2.58%, 11/25/08 | 1,391,871 | ||||||||
1,750 | M | Royal Bank of Scotland 2.62%, 10/14/08 | 1,747,252 | ||||||||
1,750 | M | Skandinviska Enskilda 2.65%, 10/10/08 | 1,747,826 | ||||||||
1,750 | M | Societe Generale NA, 2.80%, 11/06/08 | 1,743,274 | ||||||||
Total Value of Short-Term Corporate Notes (cost $26,206,495) | 26,206,495 | ||||||||||
SHORT-TERM INVESTMENTS—3.4% | |||||||||||
Money Market Fund | |||||||||||
16,005M | M | First Investors Cash Reserve Fund, 2.16% (cost $16,005,000) (i) | 16,005,000 | ||||||||
SHORT-TERM TAX EXEMPT | |||||||||||
INVESTMENTS—1.8% | |||||||||||
Adjustable Rate Note (j)—.9% | |||||||||||
2,500M | M | Bay Area Toll Auth., CA Toll Brdg. Rev. Bonds, 7.68%, 2045 | 2,495,115 | ||||||||
1,750M | M | Harris County, TX Health Facs. Dev. Corp. Hosp. Rev. Bonds, | |||||||||
7.94%, 2047 | 1,746,350 | ||||||||||
4,241,465 | |||||||||||
Auction Rate Securities (k)—.9% | |||||||||||
2,300M | M | New York State Twy. Auth. Svc. Contract Rev., 3.732%, 2021 | 2,300,000 | ||||||||
1,750M | M | Winter Park, FL Elec. Rev., 6.51%, 2034 | 1,750,000 | ||||||||
4,050,000 | |||||||||||
Total Value of Short-Term Tax Exempt Investments (cost $8,291,465) | 8,291,465 |
34 |
Principal | |||||||||||
Amount | Security | Value | |||||||||
SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||||||
OBLIGATIONS (g)—1.5% | |||||||||||
$ | 5,000 | M | Federal Home Loan Bank, 2.59%, 11/24/08 | $ | 4,985,500 | ||||||
2,000 | M | Federal Home Loan Mortgage Corp., 2.69%, 12/23/08 | 1,988,400 | ||||||||
Total Value of Short-term U.S. Government Agency Obligations (cost $6,973,900) | 6,973,900 | ||||||||||
REPURCHASE AGREEMENTS (g)—1.1% | |||||||||||
3,297 | M | Barclays Bank PLC, 2%, dated 9/30/08, to be repurchased | |||||||||
at $3,297,183 on 10/1/08 (collateralized by Freddie Mac, | |||||||||||
4.875%, 2/9/10, valued at $3,362,960) | 3,297,000 | ||||||||||
2,000 | M | Deutsche Bank, 2%, dated 9/30/08, to be repurchased | |||||||||
at $2,000,111 on 10/1/08 (collateralized by Freddie Mac, | |||||||||||
Zero Coupon, 10/31/08 valued at $2,040,388) | 2,000,000 | ||||||||||
Total Value of Repurchase Agreements (cost $5,297,000) | 5,297,000 | ||||||||||
CERTIFICATES OF DEPOSIT (g)—.3% | |||||||||||
1,400 | M | Banco Bilbao Vizcaya, 2.79%, 12/4/08 (cost $1,395,677) | 1,395,677 | ||||||||
Total Value of Investments (cost $608,784,098) | 105.9 | % | 502,244,061 | ||||||||
Excess of Liabilities Over Other Assets | (5.9 | ) | (27,620,795) | ||||||||
Net Assets | 100.0 | % | $ | 474,623,266 |
* Non-income producing
(a) Loaned security; a portion or all of the security is on loan as of September 30, 2008.
(b) Security exempt from registration under Rule 144A of Securities Act of 1933 (see Note 4).
(c) Interest rates on adjustable rate bonds are determined and reset quarterly by the indentures. The interest rates above are the rates in effect on September 30, 2008.
(d) In default as to principal and/or interest payment.
(e) Securities valued at fair value (see Note 1A).
(f) Denotes a step bond (a zero coupon bond that converts to a fixed interest rate at a designated date)
(g) Issued as collateral for securities on loan.
(h) Security exempt from registration under Section 4(2) of the Securities Act of 1933 (see Note 4).
(i) Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008.
(j) Interest rates on adjustable rate notes are determined and reset periodically by the issuer and are the rates in effect at September 30, 2008.
(k) Interest Rates on auction rate securities are determined and reset periodically by the issuer and are the rates in effect at September 30, 2008.
See notes to financial statements | 35 |
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, 2008 and the dollar weighted average of the total of the Fund’s investments in step bonds and pay-in-kind bonds during the 2008 fiscal year, computed on a monthly basis, are set forth below. This information reflects the average composition of the Fund’s assets during the 2008 fiscal year and is not necessarily representative of the Fund as of the end of its 2008 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 | 0.00 | % | 0.03 | % | |||
A3 | 0.10 | 0.03 | |||||
Baa2 | 0.26 | 0.00 | |||||
Baa3 | 4.88 | 0.00 | |||||
Ba1 | 3.25 | 0.00 | |||||
Ba2 | 7.34 | 0.04 | |||||
Ba3 | 12.35 | 0.00 | |||||
B1 | 16.59 | 0.00 | |||||
B2 | 14.36 | 0.03 | |||||
B3 | 18.73 | 0.00 | |||||
Caa1 | 9.51 | 0.03 | |||||
Caa2 | 4.40 | 0.76 | |||||
Caa3 | 0.60 | 0.00 | |||||
Ca | 2.86 | 0.00 | |||||
C | 0.00 | 0.18 | |||||
Step Bonds | 0.86 | % | |||||
Pay-in-kind Bonds | 0.44 | % |
36 |
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, 2008. During the period, the Fund’s return on a net asset value basis was –12.7% for Class A shares and –13.4% for Class B shares, including dividends of 37.1 cents per share on Class A shares and 26.9 cents per share on Class B shares, and capital gains distributions of 30.1 cents per share for both Class A and Class B shares.
While no one is satisfied with negative returns, the Fund’s performance was 11.3 percentage points above that of the S&P 500 Index, as measured by its Class A shares. This was attributable to the Fund’s strategy of allocating its portfolio among stocks, bonds and cash equivalents, with at least 50% in stocks and at least 25% in bonds. Given the volatile nature of the equity markets this year, the Fund benefited from its 38.2% average allocation to fixed income and 5.8% average allocation to cash equivalents. The Fund also held, on average, a 56% allocation to equity investments.
The performance of the equity portion of the portfolio was driven by the overall weakness of the equity markets. The ongoing effects of the credit market maelstrom, which started with subprime mortgages in mid-2007, has been the overwhelming factor influencing equity returns during the past year. Despite some brief periods of respite, stocks have been battered due to the ongoing credit market paralysis and the ensuing deleveraging of financial firms’ balance sheets to stave off insolvency. The Fund’s overall returns can be attributed to a more defensive position throughout the period. The Fund was underweight in financials for most of the year and moved to an underweighting in energy around mid-year. The Fund’s weightings in consumer staples and health care increased throughout the year. Overall stock selection benefited the Fund’s relative performance most notably within investments in the financials, technology, health care, energy and telecommunica tions sectors. The Fund’s overweighting in the industrials, materials and consumer discretionary sectors detracted from performance.
Notable performers within consumer staples included shares of small-cap personal products maker Chattem, direct seller Avon Products and candy maker Tootsie Roll. Shares of giant retailer Wal-Mart also provided solid returns. Within health care, shares of Baxter International, Covidien, Barr Pharmaceuticals, TriZetto Group, Johnson & Johnson and Abbott Labs were top contributors. Among technology names, investments in government IT services providers NCI and SI International aided performance.
The Fund continued to benefit from merger and acquisition activity among its holdings despite the challenging market environment, spotlighting its long-term purchase discipline. During the reporting period, five of the Fund’s holdings received takeover
37 |
Portfolio Managers’ Letter (continued)
TOTAL RETURN FUND
or merger offers, three of which are still pending. The two offers completed during the period were the takeovers of industrial lighting manufacturer Genlyte Group by Philips, and of health care technology provider TriZetto Group by the investment group Apax Partners.
The Fund maintained a diverse market capitalization allocation during the year, ending with 64% large cap, 11% mid cap and 25% small cap, according to Lipper’s market capitalization ranges. This allocation was notably more heavily weighted toward large caps than the previous year. While the large-cap tranche performed modestly below peers, the small- and mid-cap components delivered satisfactory results. Much of the large-cap underperformance was generated within the troubled financials sector.
During the review period, the Fund maintained an average fixed income allocation of 38.2% and a cash-equivalent allocation of 5.8%. The fixed income investments were primarily allocated among high-grade corporate bonds, mortgage-backed securities and U.S. government obligations. The Fund had no investments in subprime mortgage-backed securities. Allocations to fixed income and cash benefited the Fund to the extent that they substantially outperformed the equity market 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,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx40x1.jpg)
Edwin D. Miska
Portfolio Manager and
Director of Equities,
First Investors Management
Company, Inc.
October 31, 2008
Clark D. Wagner
Portfolio Manager and
Director of Fixed Income,
First Investors Management
Company, Inc.
38 |
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $933.55 | $6.53 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.25 | $6.81 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $929.79 | $9.89 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.75 | $10.33 |
* | 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 183/366 | |
(to reflect the one-half year period). |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx41x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
39 |
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, the Merrill Lynch U.S. Corporate, Government & Mortgage Master Index† and the Standard & Poor’s 500 Index.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx42x1.jpg)
The graph compares a $10,000 investment in the First Investors Total Return Fund (Class A shares) beginning 9/30/98 with theoretical investments in the Merrill Lynch U.S. Corporate & Government Master Index, the Merrill Lynch U.S. Corporate, Government & Mortgage Master Index and the Standard & Poor’s 500 Index (the “Indices”). The Merrill Lynch U.S. Corporate & Government Master Index 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 Merrill Lynch U.S. Corporate, Government & Mortgage Master Index tracks the performance of U.S. dollar-denominated investment grade publicly issued in the U.S. domestic market, including U.S. Treasury, quasi-government, corporate and residential mortgage pass-through securities. Qualifying securities must have an investment grade rating. The Standard & Poor’s 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of such stocks, which represent all major industries. It is not possible to invest directly in 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 9/30/08) 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 3.11% and 2.60%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 3.26% and 2.64%, respectively. Results represe nt 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 and Merrill Lynch U.S. Corporate, Government & Mortgage 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.
† We have added a comparison to the Merrill Lynch U.S. Corporate, Government & Mortgage Master Index this year because it is more suitable to the Fund’s current investment strategies and risk. After this year we will not show a comparison to the Merrill Lynch U.S. Corporate & Government Master Index.
40
Portfolio of Investments
TOTAL RETURN FUND September 30, 2008
Shares | Security | Value | ||||||||
COMMON STOCKS—53.3% | ||||||||||
Consumer Discretionary—6.6% | ||||||||||
29,800 | BorgWarner, Inc. | $ | 976,546 | |||||||
69,000 | Brown Shoe Company, Inc. | 1,130,220 | ||||||||
53,100 | CBS Corporation – Class “B” | 774,198 | ||||||||
50,600 | * | CEC Entertainment, Inc. | 1,679,920 | |||||||
40,000 | Cinemark Holdings, Inc. | 544,000 | ||||||||
40,800 | * | Coach, Inc. | 1,021,632 | |||||||
26,800 | * | Eddie Bauer Holdings, Inc. | 143,380 | |||||||
19,100 | Genuine Parts Company | 768,011 | ||||||||
23,600 | H&R Block, Inc. | 532,180 | ||||||||
64,200 | Home Depot, Inc. | 1,662,138 | ||||||||
14,900 | J.C. Penney Company, Inc. | 496,766 | ||||||||
60,900 | * | Jack in the Box, Inc. | 1,284,990 | |||||||
53,000 | * | Lincoln Educational Services Corporation | 701,190 | |||||||
24,500 | Luxottica Group SpA (ADR) | 563,255 | ||||||||
39,400 | McDonald’s Corporation | 2,430,980 | ||||||||
120,300 | * | Morgans Hotel Group Company | 1,312,473 | |||||||
27,400 | Newell Rubbermaid, Inc. | 472,924 | ||||||||
13,200 | Polo Ralph Lauren Corporation – Class “A” | 879,648 | ||||||||
67,500 | * | Ruby Tuesday, Inc. | 390,825 | |||||||
49,700 | Staples, Inc. | 1,118,250 | ||||||||
25,700 | * | Steiner Leisure, Ltd. | 883,566 | |||||||
30,750 | * | Viacom, Inc. – Class “B” | 763,830 | |||||||
66,160 | Wyndham Worldwide Corporation | 1,039,374 | ||||||||
21,570,296 | ||||||||||
Consumer Staples—7.0% | ||||||||||
103,500 | Altria Group, Inc. | 2,053,440 | ||||||||
35,200 | Avon Products, Inc. | 1,463,264 | ||||||||
18,900 | * | Chattem, Inc. | 1,477,602 | |||||||
18,100 | Coca-Cola Company | 957,128 | ||||||||
62,800 | CVS Caremark Corporation | 2,113,848 | ||||||||
29,349 | Kraft Foods, Inc. – Class “A” | 961,180 | ||||||||
132,200 | Nu Skin Enterprises, Inc. – Class “A” | 2,144,284 | ||||||||
13,500 | PepsiCo, Inc. | 962,145 | ||||||||
61,000 | Philip Morris International, Inc. | 2,934,100 | ||||||||
21,000 | Procter & Gamble Company | 1,463,490 | ||||||||
67,600 | Safeway, Inc. | 1,603,472 |
41
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2008
Shares | Security | Value | ||||||||
Consumer Staples (continued) | ||||||||||
14,117 | Tootsie Roll Industries, Inc. | $ | 408,122 | |||||||
68,700 | Walgreen Company | 2,126,952 | ||||||||
40,800 | Wal-Mart Stores, Inc. | 2,443,512 | ||||||||
23,112,539 | ||||||||||
Energy—4.6% | ||||||||||
16,000 | Anadarko Petroleum Corporation | 776,160 | ||||||||
67,500 | * | Cal Dive International, Inc. | 715,500 | |||||||
23,800 | ConocoPhillips | 1,743,350 | ||||||||
30,800 | ExxonMobil Corporation | 2,391,928 | ||||||||
1,897 | Hugoton Royalty Trust | 50,915 | ||||||||
16,986 | Marathon Oil Corporation | 677,232 | ||||||||
42,600 | Noble Corporation | 1,870,140 | ||||||||
20,500 | Sasol, Ltd. (ADR) | 871,045 | ||||||||
51,000 | Suncor Energy, Inc. | 2,155,770 | ||||||||
14,470 | * | Transocean, Inc. | 1,589,385 | |||||||
20,600 | World Fuel Services Corporation | 474,418 | ||||||||
39,532 | XTO Energy, Inc. | 1,839,029 | ||||||||
15,154,872 | ||||||||||
Financials—5.1% | ||||||||||
13,700 | American Express Company | 485,391 | ||||||||
29,100 | Astoria Financial Corporation | 603,243 | ||||||||
25,700 | Bank of America Corporation | 899,500 | ||||||||
48,600 | Brookline Bancorp, Inc. | 621,594 | ||||||||
17,092 | Capital One Financial Corporation | 871,692 | ||||||||
29,800 | Citigroup, Inc. | 611,198 | ||||||||
26,550 | Discover Financial Services | 366,921 | ||||||||
48,750 | * | First Mercury Financial Corporation | 694,688 | |||||||
13,324 | Hartford Financial Services Group, Inc. | 546,151 | ||||||||
48,200 | JPMorgan Chase & Company | 2,250,940 | ||||||||
24,499 | KeyCorp | 292,518 | ||||||||
5,000 | Merrill Lynch & Company, Inc. | 126,500 | ||||||||
46,100 | Morgan Stanley | 1,060,300 | ||||||||
53,900 | New York Community Bancorp, Inc. | 904,981 | ||||||||
73,200 | NewAlliance Bancshares, Inc. | 1,100,196 | ||||||||
24,000 | South Financial Group, Inc. | 175,920 | ||||||||
47,975 | Sovereign Bancorp, Inc. | 189,501 | ||||||||
87,800 | Sunstone Hotel Investors, Inc. (REIT) | 1,185,300 |
42 |
Shares | Security | Value | ||||||||
Financials (continued) | ||||||||||
53,400 | U.S. Bancorp | $ | 1,923,468 | |||||||
16,700 | Webster Financial Corporation | 421,675 | ||||||||
36,800 | Wells Fargo & Company | 1,381,104 | ||||||||
16,712,781 | ||||||||||
Health Care—7.4% | ||||||||||
38,000 | Abbott Laboratories | 2,188,040 | ||||||||
27,400 | Aetna, Inc. | 989,414 | ||||||||
12,600 | * | Amgen, Inc. | 746,802 | |||||||
32,400 | * | Barr Pharmaceuticals, Inc. | 2,115,720 | |||||||
5,900 | Baxter International, Inc. | 387,217 | ||||||||
19,100 | Becton, Dickinson & Company | 1,532,966 | ||||||||
16,400 | * | Genentech, Inc. | 1,454,352 | |||||||
47,200 | Johnson & Johnson | 3,270,016 | ||||||||
13,400 | * | Laboratory Corporation of America Holdings | 931,300 | |||||||
20,200 | Medtronic, Inc. | 1,012,020 | ||||||||
26,700 | Merck & Company, Inc. | 842,652 | ||||||||
114,680 | Pfizer, Inc. | 2,114,699 | ||||||||
33,700 | Sanofi-Aventis (ADR) | 1,107,719 | ||||||||
33,200 | * | St. Jude Medical, Inc. | 1,443,868 | |||||||
142,400 | Stewart Enterprises, Inc. – Class “A” | 1,119,264 | ||||||||
26,800 | * | Thermo Fisher Scientific, Inc. | 1,474,000 | |||||||
47,300 | Wyeth | 1,747,262 | ||||||||
24,477,311 | ||||||||||
Industrials—9.0% | ||||||||||
21,400 | 3M Company | 1,461,834 | ||||||||
57,200 | * | AAR Corporation | 948,948 | |||||||
22,700 | Alexander & Baldwin, Inc. | 999,481 | ||||||||
27,000 | * | Allied Waste Industries, Inc. | 299,970 | |||||||
35,504 | * | Altra Holdings, Inc. | 524,039 | |||||||
50,000 | Armstrong World Industries, Inc. | 1,445,000 | ||||||||
24,800 | Avery Dennison Corporation | 1,103,104 | ||||||||
27,100 | Barnes Group, Inc. | 547,962 | ||||||||
25,450 | * | BE Aerospace, Inc. | 402,873 | |||||||
20,200 | Burlington Northern Santa Fe Corporation | 1,867,086 | ||||||||
48,900 | Chicago Bridge & Iron Company NV – NY Shares | 940,836 | ||||||||
27,400 | Dover Corporation | 1,111,070 | ||||||||
22,900 | * | Esterline Technologies Corporation | 906,611 | |||||||
61,200 | General Electric Company | 1,560,600 | ||||||||
34,100 | Harsco Corporation | 1,268,179 |
43 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2008
Shares | Security | Value | ||||||||
Industrials (continued) | ||||||||||
37,100 | Honeywell International, Inc. | $ | 1,541,505 | |||||||
34,100 | IDEX Corporation | 1,057,782 | ||||||||
37,300 | Illinois Tool Works, Inc. | 1,657,985 | ||||||||
14,300 | Lockheed Martin Corporation | 1,568,281 | ||||||||
59,700 | * | Mobile Mini, Inc. | 1,154,001 | |||||||
24,600 | Northrop Grumman Corporation | 1,489,284 | ||||||||
39,230 | * | PGT, Inc. | 118,867 | |||||||
27,000 | * | Pinnacle Airlines Corporation | 107,460 | |||||||
81,200 | TAL International Group, Inc. | 1,690,584 | ||||||||
40,500 | Textainer Group Holdings, Ltd. | 615,195 | ||||||||
27,175 | Tyco International, Ltd. | 951,668 | ||||||||
38,100 | United Technologies Corporation | 2,288,286 | ||||||||
29,628,491 | ||||||||||
Information Technology—9.5% | ||||||||||
12,000 | * | CACI International, Inc. – Class “A” | 601,200 | |||||||
106,200 | * | Cisco Systems, Inc. | 2,395,872 | |||||||
56,100 | * | Electronics for Imaging, Inc. | 781,473 | |||||||
99,400 | * | EMC Corporation | 1,188,824 | |||||||
79,400 | * | Entrust, Inc. | 170,710 | |||||||
51,000 | Harris Corporation | 2,356,200 | ||||||||
37,500 | Hewlett-Packard Company | 1,734,000 | ||||||||
49,600 | Intel Corporation | 929,008 | ||||||||
31,000 | International Business Machines Corporation | 3,625,760 | ||||||||
54,000 | * | Macrovision Solutions Corporation | 830,520 | |||||||
107,900 | Microsoft Corporation | 2,879,851 | ||||||||
35,600 | * | NCI, Inc. – Class “A” | 1,013,888 | |||||||
72,500 | Nokia Corporation – Class “A” (ADR) | 1,352,125 | ||||||||
69,500 | * | Parametric Technology Corporation | 1,278,800 | |||||||
42,600 | QUALCOMM, Inc. | 1,830,522 | ||||||||
24,500 | * | SI International, Inc. | 736,225 | |||||||
101,300 | * | Symantec Corporation | 1,983,454 | |||||||
54,000 | Technology Select Sector SPDR Fund | 1,068,660 | ||||||||
102,300 | * | TIBCO Software, Inc. | 748,836 | |||||||
19,350 | Tyco Electronics, Ltd. | 535,221 | ||||||||
23,000 | * | ValueClick, Inc. | 235,290 | |||||||
40,076 | Western Union Company | 988,675 | ||||||||
24,600 | * | Wright Express Corporation | 727,176 | |||||||
53,700 | Xilinx, Inc. | 1,259,265 | ||||||||
31,251,555 |
44 |
Shares or | ||||||||||
Principal | ||||||||||
Amount | Security | Value | ||||||||
Materials—2.5% | ||||||||||
52,600 | Celanese Corporation – Series “A” | $ | 1,468,066 | |||||||
18,200 | Freeport-McMoRan Copper & Gold, Inc. | 1,034,670 | ||||||||
36,500 | Lubrizol Corporation | 1,574,610 | ||||||||
18,800 | PPG Industries, Inc. | 1,096,416 | ||||||||
17,000 | Praxair, Inc. | 1,219,580 | ||||||||
63,700 | RPM International, Inc. | 1,231,958 | ||||||||
41,550 | Temple-Inland, Inc. | 634,053 | ||||||||
8,259,353 | ||||||||||
Telecommunication Services—1.2% | ||||||||||
64,400 | AT&T, Inc. | 1,798,048 | ||||||||
72,000 | Verizon Communications, Inc. | 2,310,480 | ||||||||
4,108,528 | ||||||||||
Utilities—.4% | ||||||||||
30,700 | Atmos Energy Corporation | 817,234 | ||||||||
13,700 | Consolidated Edison, Inc. | 588,552 | ||||||||
1,405,786 | ||||||||||
Total Value of Common Stocks (cost $161,792,010) | 175,681,512 | |||||||||
MORTGAGE-BACKED CERTIFICATES—16.8% | ||||||||||
Fannie Mae—16.0% | ||||||||||
$ 1,850 | M | 5%, 7/1/2033 | 1,808,388 | |||||||
21,289 | M | 5.5%, 4/1/2033 – 5/1/2037 | 21,280,055 | |||||||
22,577 | M | 6%, 5/1/2036 – 7/1/2038 | 22,896,357 | |||||||
5,016 | M | 6.5%, 11/1/2033 – 7/1/2037 | 5,157,066 | |||||||
1,575 | M | 7%, 3/1/2032 – 8/1/2032 | 1,668,223 | |||||||
52,810,089 | ||||||||||
Freddie Mac—.8% | ||||||||||
2,445 | M | 6%, 9/1/2032 – 10/1/2035 | 2,480,959 | |||||||
Total Value of Mortgage-Backed Certificates (cost $54,768,183) | 55,291,048 | |||||||||
CORPORATE BONDS—12.2% | ||||||||||
Consumer Non-Durables—.2% | ||||||||||
700 | M | Newell Rubbermaid, Inc., 6.75%, 2012 | 707,755 |
45 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
Energy—1.2% | |||||||||||
$ | 1,000M | M | Canadian Natural Resources, Ltd., 5.9%, 2018 | $ | 881,642 | ||||||
500M | M | Kinder Morgan Finance Co., 5.35%, 2011 | 475,000 | ||||||||
1,000M | M | Northern Border Pipeline Co., 7.1%, 2011 | 1,022,370 | ||||||||
1,000M | M | Pacific Energy Partners LP, 7.125%, 2014 | 983,982 | ||||||||
500M | M | Spectra Energy Capital, LLC, 6.2%, 2018 | 462,761 | ||||||||
3,825,755 | |||||||||||
Financial Services—1.4% | |||||||||||
1,000M | M | CoBank, ACB, 7.875%, 2018 (a) | 964,602 | ||||||||
1,000 | M | Fifth Third Bancorp, 5.45%, 2017 | 727,456 | ||||||||
500 | M | Hibernia Corp., 5.35%, 2014 | 415,530 | ||||||||
760 | M | Independence Community Bank Corp., 4.9%, 2010 | 585,078 | ||||||||
1,000 | M | Nationsbank Corp., 7.8%, 2016 | 955,668 | ||||||||
1,000 | M | Prudential Financial, Inc., 6%, 2017 | 892,911 | ||||||||
4,541,245 | |||||||||||
Financials—1.3% | |||||||||||
1,000 | M | American General Finance Corp., 6.9%, 2017 | 464,297 | ||||||||
1,000 | M | Bear Stearns Cos., Inc., 7.25%, 2018 | 963,972 | ||||||||
927 | M | Ford Motor Credit Co., 9.75%, 2010 | 664,996 | ||||||||
1,000 | M | General Motors Acceptance Corp., 7.75%, 2010 | 598,911 | ||||||||
1,000 | M | Goldman Sachs Group, Inc., 6.45%, 2036 | 654,300 | ||||||||
1,000 | M | Merrill Lynch & Co., 5.45%, 2013 | 901,665 | ||||||||
4,248,141 | |||||||||||
Food/Beverage/Tobacco—1.5% | |||||||||||
1,170 | M | Bunge Limited Finance Corp., 5.875%, 2013 | 1,145,024 | ||||||||
900 | M | Cargill, Inc., 6%, 2017 (a) | 848,235 | ||||||||
1,000 | M | Coca-Cola Enterprises, Inc., 7.125%, 2017 | 1,077,183 | ||||||||
2,000 | M | Philip Morris International, Inc., 5.65%, 2018 | 1,852,004 | ||||||||
4,922,446 | |||||||||||
Food/Drug—.2% | |||||||||||
700 | M | Kroger Co., 6.75%, 2012 | 717,155 | ||||||||
Gaming/Leisure—.2% | |||||||||||
750 | M | MGM Mirage, Inc., 8.5%, 2010 | 693,750 | ||||||||
Information Technology—.3% | |||||||||||
1,000 | M | Oracle Corp., 5.75%, 2018 | 930,163 |
46 |
Principal | |||||||||||
Amount | Security | Value | |||||||||
Manufacturing—.3% | |||||||||||
$ | 1,000 | M | Crane Co., 6.55%, 2036 | $ | 913,603 | ||||||
Manufacturing-Diversified—.3% | |||||||||||
1,200 | M | General Electric Co., 5.25%, 2017 | 1,051,879 | ||||||||
Media-Broadcasting—.5% | |||||||||||
750 | M | Comcast Cable Communications, Inc., 7.125%, 2013 | 758,032 | ||||||||
800 | M | Cox Communications, Inc., 5.5%, 2015 | 733,049 | ||||||||
1,491,081 | |||||||||||
Media-Diversified—1.0% | |||||||||||
AOL Time Warner, Inc.: | |||||||||||
750 | M | 6.75%, 2011 | 748,753 | ||||||||
1,000 | M | 6.875%, 2012 | 992,270 | ||||||||
1,000 | M | McGraw-Hill Cos., Inc., 5.9%, 2017 | 992,718 | ||||||||
500 | M | News America, Inc., 5.3%, 2014 | 475,909 | ||||||||
3,209,650 | |||||||||||
Metals/Mining—1.0% | |||||||||||
1,000 | M | Alcoa, Inc., 6%, 2012 | 1,005,541 | ||||||||
2,000 | M | ArcelorMittal, 6.125%, 2018 (a) | 1,775,326 | ||||||||
500 | M | Vale Overseas, Ltd., 6.875%, 2036 | 447,554 | ||||||||
3,228,421 | |||||||||||
Telecommunications—1.2% | |||||||||||
800 | M | GTE Corp., 6.84%, 2018 | 756,672 | ||||||||
600 | M | SBC Communications, Inc., 6.25%, 2011 | 606,726 | ||||||||
1,000 | M | Verizon Communications, Inc., 5.5%, 2018 | 885,520 | ||||||||
600 | M | Verizon New York, Inc., 6.875%, 2012 | 600,438 | ||||||||
1,000 | M | Vodafone AirTouch PLC, 7.75%, 2010 | 1,031,010 | ||||||||
3,880,366 | |||||||||||
Transportation—.1% | |||||||||||
500 | M | Burlington Northern Santa Fe Corp., 4.3%, 2013 | 467,172 |
47 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
Utilities—1.2% | |||||||||||
$ | 2,000 | M | E. ON International Finance BV, 5.8%, 2018 (a) | $ | 1,914,956 | ||||||
350 | M | Entergy Gulf States, Inc., 5.25%, 2015 | 322,895 | ||||||||
873 | M | Great River Energy, 5.829%, 2017 (a) | 884,376 | ||||||||
900 | M | Public Service Electric & Gas Co., 6.75%, 2016 | 939,079 | ||||||||
4,061,306 | |||||||||||
Waste Management—.3% | |||||||||||
1,000 | M | Waste Management, Inc., 6.875%, 2009 | 1,003,000 | ||||||||
Total Value of Corporate Bonds (cost $44,136,930) | 39,892,888 | ||||||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS—5.0% | |||||||||||
Fannie Mae: | |||||||||||
5,000 | M | 5%, 2011 | 5,228,045 | ||||||||
1,000 | M | 5.5%, 2018 | 998,693 | ||||||||
2,000 | M | Federal Farm Credit Bank, 5.37%, 2018 | 1,979,204 | ||||||||
Federal Home Loan Bank: | |||||||||||
2,000 | M | 5%, 2018 | 1,958,310 | ||||||||
2,500 | M | 5.65%, 2018 | 2,478,335 | ||||||||
Freddie Mac: | |||||||||||
1,000 | M | 6%, 2017 | 1,017,463 | ||||||||
1,000 | M | 6%, 2018 | 1,000,871 | ||||||||
2,000 | M | Tennessee Valley Authority, 4.5%, 2018 | 1,959,140 | ||||||||
Total Value of U.S. Government Agency Obligations (cost $16,786,779) | 16,620,061 | ||||||||||
MUNICIPAL BONDS—3.8% | |||||||||||
4,000 | M | California State General Obligation, 5%, 2034 | 3,674,040 | ||||||||
5,000 | M | Maryland State General Obligation, 5%, 2017 | 5,294,750 | ||||||||
1,000 | M | Minnesota State General Obligation, 5%, 2024 | 992,370 | ||||||||
1,100 | M | Nebraska Pub. Pwr. Dist. Rev., 5%, 2038 | 959,992 | ||||||||
1,965 | M | Tobacco Settlement Fin. Auth., West Virginia, | |||||||||
Series “A”, 7.467%, 2047 | 1,687,051 | ||||||||||
Total Value of Municipal Bonds (cost $13,372,965) | 12,608,203 | ||||||||||
U.S. GOVERNMENT OBLIGATIONS—1.2% | |||||||||||
3,500 | M | U .S. Treasury Notes, 5.375%, 2031 (cost $3,689,231) | 3,978,243 |
48 |
Shares or | |||||||||||
Principal | |||||||||||
Amount | Security | Value | |||||||||
PREFERRED STOCKS—1.0% | |||||||||||
Financials | |||||||||||
1,000,000 | Bank of America Corp., 8%, 2049 | $ | 793,062 | ||||||||
40,000 | Citigroup, Inc., 8.125%, 2049 – Series “AA” | 660,000 | |||||||||
2,000,000 | JPMorgan Chase & Co., 7.9%, 2049 | 1,688,262 | |||||||||
Total Value of Preferred Stocks (cost $4,028,999) | 3,141,324 | ||||||||||
PASS THROUGH CERTIFICATES—.1% | |||||||||||
Transportation | |||||||||||
$ | 588 | M | Continental Airlines, Inc., 8.388%, 2020 (cost $606,903) | 464,687 | |||||||
SHORT-TERM TAX EXEMPT INVESTMENTS (b)—4.3% | |||||||||||
Adjustable Rate Notes | |||||||||||
1,000 | M | Bay Area Toll Auth., CA Toll Brdg. Rev. Bonds, 7.68%, 2045 | 998,046 | ||||||||
1,000 | M | Harris County, TX Health Facs. Dev. Corp. Hosp. | |||||||||
Rev. Bonds, 7.94%, 2047 | 997,914 | ||||||||||
1,000 | M | Massachusetts State Health & Edl. Facs. Auth. Rev., 8.05%, 2030 | 1,000,000 | ||||||||
3,000 | M | New York City, NY, 8.25%, 2036 | 2,996,291 | ||||||||
1,000 | M | New York State Loc. Govt. Assistance Corp., 8%, 2021 | 1,000,000 | ||||||||
2,000 | M | Pennsylvania St. Tpk. Comm. Rev., 8.2%, 2038 | 2,000,000 | ||||||||
2,500 | M | Portland OR Multi-Family Rev., 7%, 2011 | 2,498,955 | ||||||||
2,500 | M | Southeastern PA Trans. Auth., 8.25%, 2022 | 2,500,000 | ||||||||
Total Value of Short-Term Tax Exempt Investments (cost $13,991,206) | 13,991,206 | ||||||||||
SHORT-TERM INVESTMENTS—1.0% | |||||||||||
Money Market Fund | |||||||||||
3,400 | M | First Investors Cash Reserve Fund, 2.16% (cost $3,400,000) (c) | 3,400,000 | ||||||||
Total Value of Investments (cost $316,573,206) | 98.7 | % | 325,069,172 | ||||||||
Other Assets, Less Liabilities | 1.3 | 4,387,260 | |||||||||
Net Assets | 100.0 | % | $329,456,432 |
* Non-income producing
(a) Security exempt from registration under Rule 144A of Securities Act of 1933 (see Note 4).
(b) Interest rates on adjustable rate notes are determined and reset periodically by the issuer and are the rates in effect at September 30, 2008.
(c) Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
Summary of Abbreviations:
ADR American Depositary Receipts
REIT Real Estate Investment Trusts
See notes to financial statements | 49 |
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, 2008. During the period, the Fund’s return on a net asset value basis was –16.9% for Class A shares and –17.4% for Class B shares, including dividends of 12.1 cents per share on Class A shares and 6.9 cents per share on Class B shares.
The Fund’s performance largely reflected the negative effect of the prolonged housing downturn and the tightened credit markets that resulted from it. Financial institutions, as well as consumers and corporations, felt the impact of these economic events.
The value of the Fund’s investments in the financials, industrials, materials, information technology, telecommunications, consumer discretionary and energy sectors fell dramatically. Utilities and health care sustained more modest losses, while consumer staples stocks provided the lone bright spot with a positive return.
On a relative basis, the Fund outperformed the S&P 500 Index primarily because the Fund’s holdings in the financial sector were more conservative and lost less money than those in the Index. The Fund’s overweight position in consumer staples, coupled with positive investment returns in the sector, also contributed significantly to its relative outperformance.
The worst performing holdings of the Fund included Wachovia, Citigroup and Merrill Lynch. All three were considered bellwethers in the financial sector prior to this economic crisis. Wal-Mart, Anheuser-Busch and Compass Minerals International were among the best performing holdings, each generating a substantial positive return.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx52x1.jpg)
Matthew S. Wright
Portfolio Manager
October 31, 2008
50
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $944.25 | $6.61 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.20 | $6.86 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $941.27 | $10.00 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.70 | $10.38 |
* | Expenses are equal to the annualized expense ratio of 1.36% for Class A shares and 2.06% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/366 | |
(to reflect the one-half year period). |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx53x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
51 |
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.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx54x1.jpg)
The graph compares a $10,000 investment in the First Investors Value Fund (Class A shares) beginning 9/30/98 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 9/30/08) 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. Standa rd & Poor’s 500 Index figures are from Standard & Poor’s and all other figures are from First Investors Management Company, Inc.
52 |
Portfolio of Investments (continued)
VALUE FUND
September 30, 2008
Shares | Security | Value | ||||||||
COMMON STOCKS—93.9% | ||||||||||
Consumer Discretionary—12.3% | ||||||||||
123,600 | bebe stores, inc. | $ | 1,207,572 | |||||||
24,500 | Best Buy Company, Inc. | 918,750 | ||||||||
58,900 | Bob Evans Farms, Inc. | 1,607,381 | ||||||||
55,800 | Carnival Corporation | 1,972,530 | ||||||||
56,100 | CBS Corporation – Class “B” | 817,938 | ||||||||
94,700 | Cinemark Holdings, Inc. | 1,287,920 | ||||||||
131,400 | Family Dollar Stores, Inc. | 3,114,180 | ||||||||
58,300 | Gannett Company, Inc. | 985,853 | ||||||||
52,000 | Genuine Parts Company | 2,090,920 | ||||||||
62,000 | H&R Block, Inc. | 1,398,100 | ||||||||
96,400 | Home Depot, Inc. | 2,495,796 | ||||||||
36,800 | J.C. Penney Company, Inc. | 1,226,912 | ||||||||
93,100 | Leggett & Platt, Inc. | 2,028,649 | ||||||||
50,900 | Lowe’s Companies, Inc. | 1,205,821 | ||||||||
8,200 | Magna International, Inc. – Class “A” | 419,758 | ||||||||
91,900 | Marine Products Corporation | 762,770 | ||||||||
58,800 | McDonald’s Corporation | 3,627,960 | ||||||||
101,700 | New York Times Company – Class “A” | 1,453,293 | ||||||||
55,700 | Newell Rubbermaid, Inc. | 961,382 | ||||||||
125,800 | Pearson PLC (ADR) | 1,371,220 | ||||||||
112,400 | Ruby Tuesday, Inc. | 650,796 | ||||||||
78,000 | Staples, Inc. | 1,755,000 | ||||||||
68,700 | Tiffany & Company | 2,440,224 | ||||||||
199,600 | Time Warner, Inc. | 2,616,756 | ||||||||
131,500 | Walt Disney Company | 4,035,735 | ||||||||
39,220 | Wyndham Worldwide Corporation | 616,146 | ||||||||
43,069,362 | ||||||||||
Consumer Staples—17.1% | ||||||||||
88,300 | Anheuser-Busch Companies, Inc. | 5,728,904 | ||||||||
73,200 | Avon Products, Inc. | 3,042,924 | ||||||||
87,300 | Coca-Cola Company | 4,616,424 | ||||||||
59,400 | ConAgra Foods, Inc. | 1,155,924 | ||||||||
23,881 | Del Monte Foods Company | 186,272 | ||||||||
45,200 | Diageo PLC (ADR) | 3,112,472 | ||||||||
33,000 | Estee Lauder Companies, Inc. – Class “A” | 1,647,030 | ||||||||
35,400 | Fomento Economico Mexicano SA de CV (ADR) | 1,350,156 | ||||||||
26,625 | General Mills, Inc. | 1,829,670 | ||||||||
53,600 | H.J. Heinz Company | 2,675,176 | ||||||||
91,900 | Hershey Company | 3,633,726 |
53 |
Portfolio of Investments (continued)
VALUE FUND
September 30, 2008
Shares | Security | Value | ||||||||
Consumer Staples (continued) | ||||||||||
59,600 | Kimberly-Clark Corporation | $ | 3,864,464 | |||||||
160,700 | Kraft Foods, Inc. – Class “A” | 5,262,925 | ||||||||
30,600 | McCormick & Company, Inc. | 1,176,570 | ||||||||
71,000 | PepsiAmericas, Inc. | 1,471,120 | ||||||||
14,000 | PepsiCo, Inc. | 997,780 | ||||||||
69,300 | Philip Morris International, Inc. | 3,333,330 | ||||||||
30,400 | Ruddick Corporation | 986,480 | ||||||||
37,200 | Safeway, Inc. | 882,384 | ||||||||
176,700 | Sara Lee Corporation | 2,231,721 | ||||||||
37,100 | UST, Inc. | 2,468,634 | ||||||||
78,300 | Walgreen Company | 2,424,168 | ||||||||
97,400 | Wal-Mart Stores, Inc. | 5,833,286 | ||||||||
59,911,540 | ||||||||||
Energy—8.2% | ||||||||||
51,000 | Anadarko Petroleum Corporation | 2,474,010 | ||||||||
49,200 | BP PLC (ADR) | 2,468,364 | ||||||||
60,417 | Chevron Corporation | 4,983,194 | ||||||||
59,300 | ConocoPhillips | 4,343,725 | ||||||||
30,800 | Diamond Offshore Drilling, Inc. | 3,174,248 | ||||||||
10,700 | Hess Corporation | 878,256 | ||||||||
106,600 | Marathon Oil Corporation | 4,250,142 | ||||||||
54,100 | Royal Dutch Shell PLC – Class “A” (ADR) | 3,192,441 | ||||||||
53,900 | Tidewater, Inc. | 2,983,904 | ||||||||
28,748,284 | ||||||||||
Financials—18.6% | ||||||||||
18,000 | ACE, Ltd. | 974,340 | ||||||||
39,500 | Allstate Corporation | 1,821,740 | ||||||||
44,300 | Aon Corporation | 1,991,728 | ||||||||
45,000 | Aspen Insurance Holdings, Ltd. | 1,237,500 | ||||||||
157,200 | Bank Mutual Corporation | 1,784,220 | ||||||||
91,866 | Bank of America Corporation | 3,215,310 | ||||||||
93,028 | Bank of New York Mellon Corporation | 3,030,852 | ||||||||
69,821 | Brookfield Asset Management, Inc. – Class “A” | 1,915,888 | ||||||||
25,903 | Capital One Financial Corporation | 1,321,053 | ||||||||
43,456 | Chubb Corporation | 2,385,734 | ||||||||
54,047 | Cincinnati Financial Corporation | 1,537,097 | ||||||||
99,400 | Citigroup, Inc. | 2,038,694 | ||||||||
44,800 | Comerica, Inc. | 1,468,992 | ||||||||
32,700 | EMC Insurance Group, Inc. | 963,996 |
54 |
Shares | Security | Value | ||||||||
Financials (continued) | ||||||||||
39,149 | Erie Indemnity Company – Class “A” | $ | 1,654,828 | |||||||
85,900 | First Potomac Realty Trust (REIT) | 1,476,621 | ||||||||
88,900 | Hudson City Bancorp, Inc. | 1,640,205 | ||||||||
73,500 | Invesco, Ltd. | 1,542,030 | ||||||||
197,200 | Investors Real Estate Trust (REIT) | 2,206,668 | ||||||||
100,300 | JPMorgan Chase & Company | 4,684,010 | ||||||||
58,600 | KeyCorp | 699,684 | ||||||||
44,074 | Lincoln National Corporation | 1,886,808 | ||||||||
45,400 | Merrill Lynch & Company, Inc. | 1,148,620 | ||||||||
53,600 | Morgan Stanley | 1,232,800 | ||||||||
118,300 | NewAlliance Bancshares, Inc. | 1,778,049 | ||||||||
120,600 | People’s United Financial, Inc. | 2,321,550 | ||||||||
47,300 | Plum Creek Timber Company, Inc. (REIT) | 2,358,378 | ||||||||
43,300 | PNC Financial Services Group, Inc. | 3,234,510 | ||||||||
49,300 | Protective Life Corporation | 1,405,543 | ||||||||
99,817 | Regions Financial Corporation | 958,243 | ||||||||
16,300 | State Street Corporation | 927,144 | ||||||||
35,400 | SunTrust Banks, Inc. | 1,592,646 | ||||||||
116,400 | U-Store-It Trust (REIT) | 1,428,228 | ||||||||
34,600 | Waddell & Reed Financial, Inc. – Class “A” | 856,350 | ||||||||
94,600 | Wells Fargo & Company | 3,550,338 | ||||||||
107,400 | Westfield Financial, Inc. | 1,106,220 | ||||||||
65,376,617 | ||||||||||
Health Care—6.1% | ||||||||||
71,400 | Abbott Laboratories | 4,111,212 | ||||||||
27,875 | Covidien, Ltd. | 1,498,560 | ||||||||
55,600 | GlaxoSmithKline PLC (ADR) | 2,416,376 | ||||||||
90,800 | Johnson & Johnson | 6,290,624 | ||||||||
49,700 | Novartis AG (ADR) | 2,626,148 | ||||||||
179,500 | Pfizer, Inc. | 3,309,980 | ||||||||
67,300 | Schering-Plough Corporation | 1,243,031 | ||||||||
21,495,931 | ||||||||||
Industrials—10.3% | ||||||||||
39,600 | 3M Company | 2,705,076 | ||||||||
2,600 | Alexander & Baldwin, Inc. | 114,478 | ||||||||
30,600 | Armstrong World Industries, Inc. | 884,340 | ||||||||
58,600 | Avery Dennison Corporation | 2,606,528 | ||||||||
73,300 | Dover Corporation | 2,972,315 | ||||||||
33,600 | General Dynamics Corporation | 2,473,632 |
55 |
Portfolio of Investments (continued)
VALUE FUND
September 30, 2008
Shares | Security | Value | ||||||||
Industrials (continued) | ||||||||||
149,800 | General Electric Company | $ | 3,819,900 | |||||||
70,800 | Honeywell International, Inc. | 2,941,740 | ||||||||
23,900 | Hubbell, Inc. – Class “B” | 837,695 | ||||||||
62,700 | Illinois Tool Works, Inc. | 2,787,015 | ||||||||
33,000 | ITT Corporation | 1,835,130 | ||||||||
38,430 | Lawson Products, Inc. | 1,062,590 | ||||||||
30,600 | Norfolk Southern Corporation | 2,026,026 | ||||||||
65,900 | Pitney Bowes, Inc. | 2,191,834 | ||||||||
47,800 | Textainer Group Holdings, Ltd. | 726,082 | ||||||||
30,375 | Tyco International, Ltd. | 1,063,733 | ||||||||
47,000 | United Parcel Service, Inc. – Class “B” | 2,955,830 | ||||||||
106,500 | Werner Enterprises, Inc. | 2,312,115 | ||||||||
36,316,059 | ||||||||||
Information Technology—6.9% | ||||||||||
74,700 | Automatic Data Processing, Inc. | 3,193,425 | ||||||||
96,400 | AVX Corporation | 982,316 | ||||||||
36,465 | Bel Fuse, Inc. – Class “B” | 1,038,159 | ||||||||
85,600 | Hewlett-Packard Company | 3,958,144 | ||||||||
59,300 | Intel Corporation | 1,110,689 | ||||||||
12,200 | International Business Machines Corporation | 1,426,912 | ||||||||
169,100 | Methode Electronics, Inc. | 1,511,754 | ||||||||
120,500 | Microsoft Corporation | 3,216,145 | ||||||||
76,500 | Molex, Inc. | 1,717,425 | ||||||||
130,700 | Motorola, Inc. | 933,198 | ||||||||
98,900 | Nokia Corporation – Class “A” (ADR) | 1,844,485 | ||||||||
53,600 | Texas Instruments, Inc. | 1,152,400 | ||||||||
47,875 | Tyco Electronics, Ltd. | 1,324,222 | ||||||||
35,500 | Xilinx, Inc. | 832,475 | ||||||||
24,241,749 | ||||||||||
Materials—7.0% | ||||||||||
36,700 | Air Products & Chemicals, Inc. | 2,513,583 | ||||||||
70,200 | Alcoa, Inc. | 1,585,116 | ||||||||
38,600 | Bemis Company, Inc. | 1,008,232 | ||||||||
27,100 | Compass Minerals International, Inc. | 1,419,769 | ||||||||
106,700 | Dow Chemical Company | 3,390,926 | ||||||||
105,100 | DuPont (E.I.) de Nemours & Company | 4,235,530 | ||||||||
72,300 | Glatfelter | 978,942 | ||||||||
49,700 | Lubrizol Corporation | 2,144,058 | ||||||||
55,000 | MeadWestvaco Corporation | 1,282,050 |
56 |
Shares | Security | Value | ||||||||
Materials (continued) | ||||||||||
73,830 | Myers Industries, Inc. | $ 930,996 | ||||||||
31,600 | PPG Industries, Inc. | 1,842,912 | ||||||||
144,800 | Sappi, Ltd. (ADR) | 1,448,000 | ||||||||
65,100 | Sonoco Products Company | 1,932,168 | ||||||||
24,712,282 | ||||||||||
Telecommunication Services—3.1% | ||||||||||
150,530 | AT&T, Inc. | 4,202,798 | ||||||||
60,200 | D&E Communications, Inc. | 454,510 | ||||||||
21,420 | Embarq Corporation | 868,581 | ||||||||
24,000 | Telephone & Data Systems, Inc. | 858,000 | ||||||||
30,000 | Telephone & Data Systems, Inc. – Special Shares | 1,077,000 | ||||||||
103,128 | Verizon Communications, Inc. | 3,309,378 | ||||||||
10,770,267 | ||||||||||
Utilities—4.3% | ||||||||||
20,150 | American States Water Company | 775,775 | ||||||||
61,100 | Duke Energy Corporation | 1,064,973 | ||||||||
30,300 | FPL Group, Inc. | 1,524,090 | ||||||||
10,700 | Integrys Energy Group, Inc. | 534,358 | ||||||||
80,050 | MDU Resources Group, Inc. | 2,321,450 | ||||||||
130,600 | NiSource, Inc. | 1,927,656 | ||||||||
40,200 | ONEOK, Inc. | 1,382,880 | ||||||||
56,200 | Portland General Electric Company | 1,329,692 | ||||||||
56,700 | Southwest Gas Corporation | 1,715,742 | ||||||||
37,631 | United Utilites Group PLC (ADR) | 932,342 | ||||||||
56,700 | Vectren Corporation | 1,579,095 | ||||||||
15,088,053 | ||||||||||
Total Value of Common Stocks (cost $300,237,449) | 329,730,144 | |||||||||
PREFERRED STOCKS—.7% | ||||||||||
Financials—.2% | ||||||||||
36,600 | Citigroup Capital XVI, 6.45%, 2066 – Series “W” | 542,412 | ||||||||
Telecommunication Services—.3% | ||||||||||
44,800 | AT&T, Inc., 6.375%, 2056 | 1,039,360 | ||||||||
Utilities—.2% | ||||||||||
31,600 | Entergy Louisiana, LLC, 7.6%, 2032 | 718,584 | ||||||||
Total Value of Preferred Stocks (cost $2,847,457) | 2,300,356 |
57 |
Portfolio of Investments (continued)
VALUE FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
SHORT-TERM INVESTMENTS—5.3% | |||||||||||
Money Market Fund | |||||||||||
$ | 18,480 | M | First Investors Cash Reserve Fund, 2.16% (cost $18,480,000)* | $ | 18,480,000 | ||||||
Total Value of Investments (cost $321,564,906) | 99.9 | % | 350,510,500 | ||||||||
Other Assets, Less Liabilities | .1 | 510,174 | |||||||||
Net Assets | 100.0 | % | $351,020,674 |
* Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
Summary of Abbreviations:
ADR American Depositary Receipts
REIT Real Estate Investment Trust
58 | See notes to financial statements |
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, 2008. During the period, the Fund’s return on a net asset value basis was –19.4% for Class A shares and –20.0% for Class B shares, including dividends of 19.4 cents per share on Class A shares and 4.0 cents per share on Class B shares.
The value of the Fund’s investments in the financials, telecommunications, industrials, materials, information technology, consumer discretionary and energy sectors fell dramatically. Holdings in utilities and health care sustained more modest losses, while consumer staples stocks provided the lone bright spot with a positive return.
Despite the difficult investment environment, the Fund outperformed the S&P 500 Index. Two primary reasons for this outperformance were the Fund’s overweight in consumer staples stocks and its underweight in financials. The Fund’s holdings in financials were generally more conservative than the Index holdings. One other significant contributor to the relative outperformance was the Fund’s health care holdings.
The worst performing holdings of the Fund included AIG, General Electric, and Citigroup. Wal-Mart Stores, Anheuser-Busch and Johnson & Johnson each provided a significant positive contribution during the period.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx61x1.jpg)
Matthew S. Wright
Portfolio Manager
October 31, 2008
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx61x2.jpg)
Constance Unger
Assistant Portfolio Manager
59 |
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $920.84 | $6.87 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.85 | $7.21 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $917.29 | $10.21 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.35 | $10.73 |
* | Expenses are equal to the annualized expense ratio of 1.43% for Class A shares and 2.13% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/366 | |
(to reflect the one-half year period). |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx62x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
60 |
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.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx63x1.jpg)
The graph compares a $10,000 investment in the First Investors Blue Chip Fund (Class A shares) beginning 9/30/98 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 9/30/08) 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 2.80% and .72%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 2.95% and .78%, 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.
61 |
Portfolio of Investments (continued)
BLUE CHIP FUND
September 30, 2008
Shares | Security | Value | ||||||||
COMMON STOCKS—99.7% | ||||||||||
Consumer Discretionary—9.0% | ||||||||||
41,200 | Best Buy Company, Inc. | $ | 1,545,000 | |||||||
45,100 | Carnival Corporation | 1,594,285 | ||||||||
89,295 | CBS Corporation – Class “B” | 1,301,921 | ||||||||
47,394 | Comcast Corporation – Class “A” | 930,344 | ||||||||
84,350 | Comcast Corporation – Special Class “A” | 1,663,382 | ||||||||
57,200 | H&R Block, Inc. | 1,289,860 | ||||||||
151,500 | Home Depot, Inc. | 3,922,335 | ||||||||
35,600 | * | Kohl’s Corporation | 1,640,448 | |||||||
127,100 | Lowe’s Companies, Inc. | 3,010,999 | ||||||||
55,700 | McDonald’s Corporation | 3,436,690 | ||||||||
162,400 | News Corporation – Class “A” | 1,947,176 | ||||||||
29,500 | NIKE, Inc. – Class “B” | 1,973,550 | ||||||||
64,100 | Staples, Inc. | 1,442,250 | ||||||||
46,200 | Target Corporation | 2,266,110 | ||||||||
283,300 | Time Warner, Inc. | 3,714,063 | ||||||||
70,600 | * | Viacom, Inc. – Class “B” | 1,753,704 | |||||||
143,400 | Walt Disney Company | 4,400,946 | ||||||||
37,833,063 | ||||||||||
Consumer Staples—16.4% | ||||||||||
81,600 | Altria Group, Inc. | 1,618,944 | ||||||||
72,700 | Anheuser-Busch Companies, Inc. | 4,716,776 | ||||||||
78,600 | Avon Products, Inc. | 3,267,402 | ||||||||
143,700 | Coca-Cola Company | 7,598,856 | ||||||||
34,800 | Colgate-Palmolive Company | 2,622,180 | ||||||||
24,700 | Costco Wholesale Corporation | 1,603,771 | ||||||||
91,600 | CVS Caremark Corporation | 3,083,256 | ||||||||
32,100 | General Mills, Inc. | 2,205,912 | ||||||||
34,100 | Hershey Company | 1,348,314 | ||||||||
61,800 | Kimberly-Clark Corporation | 4,007,112 | ||||||||
123,724 | Kraft Foods, Inc. – Class “A” | 4,051,961 | ||||||||
106,900 | PepsiCo, Inc. | 7,618,763 | ||||||||
94,900 | Philip Morris International, Inc. | 4,564,690 | ||||||||
125,940 | Procter & Gamble Company | 8,776,759 | ||||||||
44,600 | Safeway, Inc. | 1,057,912 | ||||||||
108,200 | Walgreen Company | 3,349,872 | ||||||||
128,330 | Wal-Mart Stores, Inc. | 7,685,684 | ||||||||
69,178,164 |
62 |
Shares | Security | Value | ||||||||
Energy—13.1% | ||||||||||
39,300 | BP PLC (ADR) | $ | 1,971,681 | |||||||
121,900 | Chevron Corporation | 10,054,312 | ||||||||
89,870 | ConocoPhillips | 6,582,978 | ||||||||
17,300 | Devon Energy Corporation | 1,577,760 | ||||||||
204,600 | ExxonMobil Corporation | 15,889,236 | ||||||||
105,790 | Halliburton Company | 3,426,538 | ||||||||
17,500 | Hess Corporation | 1,436,400 | ||||||||
61,000 | Marathon Oil Corporation | 2,432,070 | ||||||||
75,200 | Schlumberger, Ltd. | 5,872,368 | ||||||||
92,150 | Spectra Energy Corporation | 2,193,170 | ||||||||
26,951 | * | Transocean, Inc. | 2,960,298 | |||||||
33,500 | Energy Corporation | 1,015,050 | ||||||||
55,411,861 | ||||||||||
Financials—12.2% | ||||||||||
42,600 | ACE, Ltd. | 2,305,938 | ||||||||
48,700 | Allstate Corporation | 2,246,044 | ||||||||
98,500 | American Express Company | 3,489,855 | ||||||||
133,966 | Bank of America Corporation | 4,688,810 | ||||||||
147,187 | Bank of New York Mellon Corporation | 4,795,352 | ||||||||
850 | * | Berkshire Hathaway, Inc. – Class “B” | 3,735,750 | |||||||
43,000 | Capital One Financial Corporation | 2,193,000 | ||||||||
48,000 | Chubb Corporation | 2,635,200 | ||||||||
120,400 | Citigroup, Inc. | 2,469,404 | ||||||||
174,068 | JPMorgan Chase & Company | 8,128,976 | ||||||||
48,400 | Marsh & McLennan Companies, Inc. | 1,537,184 | ||||||||
42,200 | Merrill Lynch & Company, Inc. | 1,067,660 | ||||||||
65,300 | Morgan Stanley | 1,501,900 | ||||||||
20,000 | PNC Financial Services Group, Inc. | 1,494,000 | ||||||||
21,600 | SunTrust Banks, Inc. | 971,784 | ||||||||
48,700 | Travelers Companies, Inc. | 2,201,240 | ||||||||
64,500 | U.S. Bancorp | 2,323,290 | ||||||||
94,600 | Wells Fargo & Company | 3,550,338 | ||||||||
51,335,725 | ||||||||||
Health Care—14.6% | ||||||||||
93,100 | Abbott Laboratories | 5,360,698 | ||||||||
56,200 | Aetna, Inc. | 2,029,382 | ||||||||
76,500 | * | Amgen, Inc. | 4,534,155 | |||||||
27,300 | Baxter International, Inc. | 1,791,699 | ||||||||
136,300 | Bristol-Myers Squibb Company | 2,841,855 |
63 |
Portfolio of Investments (continued)
BLUE CHIP FUND
September 30, 2008
Shares | Security | Value | ||||||||
Health Care (continued) | ||||||||||
46,725 | Covidien, Ltd. | $ | 2,511,936 | |||||||
26,200 | * | Genentech, Inc. | 2,323,416 | |||||||
184,800 | Johnson & Johnson | 12,802,944 | ||||||||
42,300 | McKesson Corporation | 2,276,163 | ||||||||
90,700 | Medtronic, Inc. | 4,544,070 | ||||||||
91,800 | Merck & Company, Inc. | 2,897,208 | ||||||||
80,300 | Novartis AG (ADR) | 4,243,052 | ||||||||
360,760 | Pfizer, Inc. | 6,652,414 | ||||||||
31,700 | * | St. Jude Medical, Inc. | 1,378,633 | |||||||
44,200 | Teva Pharmaceutical Industries, Ltd. (ADR) | 2,023,918 | ||||||||
60,600 | UnitedHealth Group, Inc. | 1,538,634 | ||||||||
56,000 | Wyeth | 2,068,640 | ||||||||
61,818,817 | ||||||||||
Industrials—10.7% | ||||||||||
56,100 | 3M Company | 3,832,191 | ||||||||
21,200 | Boeing Company | 1,215,820 | ||||||||
15,100 | Caterpillar, Inc. | 899,960 | ||||||||
45,600 | Dover Corporation | 1,849,080 | ||||||||
21,600 | Eaton Corporation | 1,213,488 | ||||||||
70,700 | Emerson Electric Company | 2,883,853 | ||||||||
434,300 | General Electric Company | 11,074,650 | ||||||||
51,500 | Honeywell International, Inc. | 2,139,825 | ||||||||
46,200 | Illinois Tool Works, Inc. | 2,053,590 | ||||||||
37,800 | ITT Corporation | 2,102,058 | ||||||||
33,700 | Lockheed Martin Corporation | 3,695,879 | ||||||||
30,700 | Northrop Grumman Corporation | 1,858,578 | ||||||||
55,725 | Tyco International, Ltd. | 1,951,490 | ||||||||
34,700 | United Parcel Service, Inc. – Class “B” | 2,182,283 | ||||||||
102,700 | United Technologies Corporation | 6,168,162 | ||||||||
45,120,907 | ||||||||||
Information Technology—17.1% | ||||||||||
36,320 | Accenture, Ltd. – Class “A” | 1,380,160 | ||||||||
36,000 | Analog Devices, Inc. | 948,600 | ||||||||
17,400 | * | Apple, Inc. | 1,977,684 | |||||||
72,100 | Applied Materials, Inc. | 1,090,873 | ||||||||
31,800 | Automatic Data Processing, Inc. | 1,359,450 | ||||||||
272,200 | * | Cisco Systems, Inc. | 6,140,832 | |||||||
92,000 | Corning, Inc. | 1,438,880 | ||||||||
183,700 | * | Dell, Inc. | 3,027,376 |
64 |
Shares | Security | Value | ||||||||
Information Technology (continued) | ||||||||||
31,500 | * | eBay, Inc. | $ | 704,970 | ||||||
226,625 | * | EMC Corporation | 2,710,435 | |||||||
134,300 | Hewlett-Packard Company | 6,210,032 | ||||||||
251,400 | Intel Corporation | 4,708,722 | ||||||||
59,800 | International Business Machines Corporation | 6,994,208 | ||||||||
547,445 | Microsoft Corporation | 14,611,307 | ||||||||
139,400 | Nokia Corporation – Class “A” (ADR) | 2,599,810 | ||||||||
183,300 | * | Oracle Corporation | 3,722,823 | |||||||
52,570 | QUALCOMM, Inc. | 2,258,933 | ||||||||
99,100 | * | Symantec Corporation | 1,940,378 | |||||||
109,900 | Texas Instruments, Inc. | 2,362,850 | ||||||||
50,225 | Tyco Electronics, Ltd. | 1,389,223 | ||||||||
103,200 | Western Union Company | 2,545,944 | ||||||||
90,100 | Xerox Corporation | 1,038,853 | ||||||||
68,100 | * | Yahoo!, Inc. | 1,178,130 | |||||||
72,340,473 | ||||||||||
Materials—2.8% | ||||||||||
58,600 | Alcoa, Inc. | 1,323,188 | ||||||||
96,900 | Dow Chemical Company | 3,079,482 | ||||||||
77,600 | DuPont (E.I.) de Nemours & Company | 3,127,280 | ||||||||
54,500 | International Paper Company | 1,426,810 | ||||||||
28,000 | Newmont Mining Corporation | 1,085,280 | ||||||||
31,400 | PPG Industries, Inc. | 1,831,248 | ||||||||
11,873,288 | ||||||||||
Telecommunication Services—2.5% | ||||||||||
190,000 | AT&T, Inc. | 5,304,800 | ||||||||
159,000 | Verizon Communications, Inc. | 5,102,310 | ||||||||
10,407,110 | ||||||||||
Utilities—1.3% | ||||||||||
34,500 | American Electric Power Company, Inc. | 1,279,260 | ||||||||
177,700 | Duke Energy Corporation | 3,097,311 | ||||||||
23,500 | FPL Group, Inc. | 1,182,050 | ||||||||
5,558,621 | ||||||||||
Total Value of Common Stocks (cost $333,365,726) | 420,878,029 |
65 |
Portfolio of Investments (continued)
BLUE CHIP FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
SHORT-TERM INVESTMENTS—.3% | |||||||||||
Money Market Fund | |||||||||||
$ | 1,225 | M | First Investors Cash Reserve Fund, 2.16% (cost $1,225,000)** | $ | 1,225,000 | ||||||
Total Value of Investments (cost $334,590,726) | 100.0 | % | 422,103,029 | ||||||||
Other Assets, Less Liabilities | — | 169,633 | |||||||||
Net Assets | 100.0 | % | $422,272,662 |
* Non-income producing
** Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
Summary of Abbreviations:
ADR American Depositary Receipts
66 | See notes to financial statements |
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, 2008. During the period, the Fund’s return on a net asset value basis was –21.2% for Class A shares and –21.8% for Class B shares, including dividends of 10.8 cents per share on Class A shares, 2.2 cents per shares on B shares, and capital gains distributions of 22.9 cents per share for both Class A and Class B shares.
The Fund’s results were driven by the weak performance of the equity markets. The ongoing effects of the credit market maelstrom, which started with subprime mortgages in mid-2007, has been the overwhelming factor influencing equity returns during the past year. Despite some brief periods of respite, stocks have been battered due to the ongoing credit market paralysis and the ensuing deleveraging of financial firms’ balance sheets to stave off insolvency. The Fund was underweight in financials for most of the year and moved to an underweighting in energy around mid-year. The Fund’s weightings in consumer staples and health care increased throughout the year. Overall stock selection benefited the Fund’s relative performance most notably within investments in the financials, technology, health care, energy and telecommunications sectors. The Fund’s overweighting in the industrials, materials and consumer discretionary sectors detracted from perform ance.
Notable performers within consumer staples included shares of small-cap personal products maker Chattem, direct seller Avon Products and candy maker Tootsie Roll. Shares of giant retailer Wal-Mart also provided solid returns. Within health care, shares of Baxter International, Covidien, Barr Pharmaceuticals, TriZetto Group, Johnson & Johnson and Abbott Labs were top contributors. Among technology names, investments in government IT services providers NCI and SI International aided performance.
The Fund continued to benefit from merger and acquisition activity among its holdings despite the challenging market environment, spotlighting its long-term purchase discipline. During the reporting period, five of the Fund’s holdings received takeover or merger offers, three of which are still pending. The two offers completed during the period were the takeovers of industrial lighting manufacturer Genlyte Group by Philips, and of health care technology provider TriZetto Group by the investment group Apax Partners.
The Fund maintained a diverse market capitalization allocation during the year, ending with 64% large cap, 11% mid cap and 25% small cap, according to Lipper’s market capitalization ranges. This allocation was notably more heavily weighted toward large caps than the previous year. While the large-cap tranche performed modestly below peers, the small- and mid-cap components delivered satisfactory results. Much of the large-cap underperformance was generated within the troubled financials sector.
67 |
Portfolio Manager’s Letter (continued)
GROWTH & INCOME FUND
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx70x1.jpg)
Edwin D. Miska
Portfolio Manager and
Director of Equities, First Investors Management Company, Inc.
October 31, 2008
68
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $909.27 | $6.44 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.25 | $6.81 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $909.27 | $6.44 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.75 | $10.33 |
* | 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 183/366 | |
Class B shares, multiplied by the average account value over the period, multiplied by 183/366 |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx71x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
69 |
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.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx72x1.jpg)
The graph compares a $10,000 investment in the First Investors Growth & Income Fund (Class A shares) beginning 9/30/98 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 9/30/08) 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. Standa rd & Poor’s 500 Index figures are from Standard & Poor’s and all other figures are from First Investors Management Company, Inc.
70 |
Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2008
Shares | Security | Value | ||||||||
COMMON STOCKS—98.2% | ||||||||||
Consumer Discretionary—12.6% | ||||||||||
110,000 | BorgWarner, Inc. | $ | 3,604,700 | |||||||
255,000 | Brown Shoe Company, Inc. | 4,176,900 | ||||||||
200,000 | CBS Corporation – Class “B” | 2,916,000 | ||||||||
186,600 | * | CEC Entertainment, Inc. | 6,195,120 | |||||||
150,000 | Cinemark Holdings, Inc. | 2,040,000 | ||||||||
150,000 | * | Coach, Inc. | 3,756,000 | |||||||
100,000 | * | Eddie Bauer Holdings, Inc. | 535,000 | |||||||
70,000 | Genuine Parts Company | 2,814,700 | ||||||||
100,000 | H&R Block, Inc. | 2,255,000 | ||||||||
235,000 | Home Depot, Inc. | 6,084,150 | ||||||||
55,000 | J.C. Penney Company, Inc. | 1,833,700 | ||||||||
225,000 | * | Jack in the Box, Inc. | 4,747,500 | |||||||
194,600 | * | Lincoln Educational Services Corporation | 2,574,558 | |||||||
90,000 | Luxottica Group SpA (ADR) | 2,069,100 | ||||||||
145,000 | McDonald’s Corporation | 8,946,500 | ||||||||
445,000 | * | Morgans Hotel Group Company | 4,854,950 | |||||||
100,000 | Newell Rubbermaid, Inc. | 1,726,000 | ||||||||
50,000 | Polo Ralph Lauren Corporation – Class “A” | 3,332,000 | ||||||||
245,000 | * | Ruby Tuesday, Inc. | 1,418,550 | |||||||
180,000 | Staples, Inc. | 4,050,000 | ||||||||
95,900 | * | Steiner Leisure, Ltd. | 3,297,042 | |||||||
526,900 | Stewart Enterprises, Inc. – Class “A” | 4,141,434 | ||||||||
112,500 | * | Viacom, Inc. – Class “B” | 2,794,500 | |||||||
240,000 | Wyndham Worldwide Corporation | 3,770,400 | ||||||||
83,933,804 | ||||||||||
Consumer Staples—12.8% | ||||||||||
378,900 | Altria Group, Inc. | 7,517,376 | ||||||||
130,000 | Avon Products, Inc. | 5,404,100 | ||||||||
70,000 | * | Chattem, Inc. | 5,472,600 | |||||||
67,500 | Coca-Cola Company | 3,569,400 | ||||||||
230,000 | CVS Caremark Corporation | 7,741,800 | ||||||||
107,263 | Kraft Foods, Inc. – Class “A” | 3,512,863 | ||||||||
485,000 | Nu Skin Enterprises, Inc. – Class “A” | 7,866,700 | ||||||||
50,000 | PepsiCo, Inc. | 3,563,500 | ||||||||
225,000 | Philip Morris International, Inc. | 10,822,500 | ||||||||
77,500 | Procter & Gamble Company | 5,400,975 | ||||||||
250,000 | Safeway, Inc. | 5,930,000 |
71 |
Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2008
Shares | Security | Value | ||||||||
Consumer Staples (continued) | ||||||||||
50,550 | Tootsie Roll Industries, Inc. | $ | 1,461,400 | |||||||
250,000 | Walgreen Company | 7,740,000 | ||||||||
150,000 | Wal-Mart Stores, Inc. | 8,983,500 | ||||||||
84,986,714 | ||||||||||
Energy—8.5% | ||||||||||
60,000 | Anadarko Petroleum Corporation | 2,910,600 | ||||||||
255,000 | * | Cal Dive International, Inc. | 2,703,000 | |||||||
90,000 | ConocoPhillips | 6,592,500 | ||||||||
115,000 | ExxonMobil Corporation | 8,930,900 | ||||||||
7,153 | Hugoton Royalty Trust | 191,986 | ||||||||
63,096 | Marathon Oil Corporation | 2,515,638 | ||||||||
160,000 | Noble Corporation | 7,024,000 | ||||||||
80,000 | Sasol, Ltd. (ADR) | 3,399,200 | ||||||||
190,000 | Suncor Energy, Inc. | 8,031,300 | ||||||||
55,000 | * | Transocean, Inc. | 6,041,200 | |||||||
75,000 | World Fuel Services Corporation | 1,727,250 | ||||||||
150,000 | XTO Energy, Inc. | 6,978,000 | ||||||||
57,045,574 | ||||||||||
Financials—10.0% | ||||||||||
52,000 | American Express Company | 1,842,360 | ||||||||
110,000 | Astoria Financial Corporation | 2,280,300 | ||||||||
100,000 | Bank of America Corporation | 3,500,000 | ||||||||
182,000 | Brookline Bancorp, Inc. | 2,327,780 | ||||||||
65,380 | Capital One Financial Corporation | 3,334,380 | ||||||||
114,000 | Citigroup, Inc. | 2,338,140 | ||||||||
100,000 | Discover Financial Services | 1,382,000 | ||||||||
200,000 | Financial Select Sector SPDR Fund | 3,958,000 | ||||||||
180,000 | * | First Mercury Financial Corporation | 2,565,000 | |||||||
50,000 | Hartford Financial Services Group, Inc. | 2,049,500 | ||||||||
177,500 | JPMorgan Chase & Company | 8,289,250 | ||||||||
91,000 | KeyCorp | 1,086,540 | ||||||||
20,000 | Merrill Lynch & Company, Inc. | 506,000 | ||||||||
170,000 | Morgan Stanley | 3,910,000 | ||||||||
200,000 | New York Community Bancorp, Inc. | 3,358,000 | ||||||||
265,000 | NewAlliance Bancshares, Inc. | 3,982,950 | ||||||||
90,000 | South Financial Group, Inc. | 659,700 | ||||||||
176,000 | Sovereign Bancorp, Inc. | 695,200 | ||||||||
320,000 | Sunstone Hotel Investors, Inc. (REIT) | 4,320,000 |
72 |
Shares | Security | Value | ||||||||
Financials (continued) | ||||||||||
200,000 | U.S. Bancorp | $ | 7,204,000 | |||||||
60,000 | Webster Financial Corporation | 1,515,000 | ||||||||
140,000 | Wells Fargo & Company | 5,254,200 | ||||||||
66,358,300 | ||||||||||
Health Care—13.0% | ||||||||||
140,000 | Abbott Laboratories | 8,061,200 | ||||||||
100,000 | Aetna, Inc. | 3,611,000 | ||||||||
46,700 | * | Amgen, Inc. | 2,767,909 | |||||||
120,000 | * | Barr Pharmaceuticals, Inc. | 7,836,000 | |||||||
22,417 | Baxter International, Inc. | 1,471,228 | ||||||||
70,000 | Becton, Dickinson & Company | 5,618,200 | ||||||||
60,000 | * | Genentech, Inc. | 5,320,800 | |||||||
175,000 | Johnson & Johnson | 12,124,000 | ||||||||
50,000 | * | Laboratory Corporation of America Holdings | 3,475,000 | |||||||
75,000 | Medtronic, Inc. | 3,757,500 | ||||||||
100,000 | Merck & Company, Inc. | 3,156,000 | ||||||||
425,000 | Pfizer, Inc. | 7,837,000 | ||||||||
125,000 | Sanofi-Aventis (ADR) | 4,108,750 | ||||||||
125,000 | * | St. Jude Medical, Inc. | 5,436,250 | |||||||
100,000 | * | Thermo Fisher Scientific, Inc. | 5,500,000 | |||||||
175,000 | Wyeth | 6,464,500 | ||||||||
86,545,337 | ||||||||||
Industrials—16.6% | ||||||||||
80,000 | 3M Company | 5,464,800 | ||||||||
209,700 | * | AAR Corporation | 3,478,923 | |||||||
84,600 | Alexander & Baldwin, Inc. | 3,724,938 | ||||||||
100,000 | * | Allied Waste Industries, Inc. | 1,111,000 | |||||||
132,700 | * | Altra Holdings, Inc. | 1,958,652 | |||||||
185,000 | Armstrong World Industries, Inc. | 5,346,500 | ||||||||
90,000 | Avery Dennison Corporation | 4,003,200 | ||||||||
106,400 | Barnes Group, Inc. | 2,151,408 | ||||||||
100,000 | * | BE Aerospace, Inc. | 1,583,000 | |||||||
75,000 | Burlington Northern Santa Fe Corporation | 6,932,250 | ||||||||
180,000 | Chicago Bridge & Iron Company NV – NY Shares | 3,463,200 | ||||||||
100,000 | Dover Corporation | 4,055,000 | ||||||||
85,000 | * | Esterline Technologies Corporation | 3,365,150 | |||||||
225,000 | General Electric Company | 5,737,500 | ||||||||
130,000 | Harsco Corporation | 4,834,700 | ||||||||
140,000 | Honeywell International, Inc. | 5,817,000 |
73 |
Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2008
Shares | Security | Value | ||||||||
Industrials (continued) | ||||||||||
125,000 | IDEX Corporation | $ | 3,877,500 | |||||||
137,500 | Illinois Tool Works, Inc. | 6,111,875 | ||||||||
55,000 | Lockheed Martin Corporation | 6,031,850 | ||||||||
222,000 | * | Mobile Mini, Inc. | 4,291,260 | |||||||
90,000 | Northrop Grumman Corporation | 5,448,600 | ||||||||
142,888 | * | PGT, Inc. | 432,951 | |||||||
100,000 | * | Pinnacle Airlines Corporation | 398,000 | |||||||
300,100 | TAL International Group, Inc. | 6,248,082 | ||||||||
150,000 | Textainer Group Holdings, Ltd. | 2,278,500 | ||||||||
100,000 | Tyco International, Ltd. | 3,502,000 | ||||||||
145,000 | United Technologies Corporation | 8,708,700 | ||||||||
110,356,539 | ||||||||||
Information Technology—16.9% | ||||||||||
45,000 | * | CACI International, Inc. – Class “A” | 2,254,500 | |||||||
400,000 | * | Cisco Systems, Inc. | 9,024,000 | |||||||
205,000 | * | Electronics for Imaging, Inc. | 2,855,650 | |||||||
371,000 | * | EMC Corporation | 4,437,160 | |||||||
300,000 | * | Entrust, Inc. | 645,000 | |||||||
190,000 | Harris Corporation | 8,778,000 | ||||||||
140,000 | Hewlett-Packard Company | 6,473,600 | ||||||||
185,000 | Intel Corporation | 3,465,050 | ||||||||
115,000 | International Business Machines Corporation | 13,450,400 | ||||||||
200,000 | * | Macrovision Solutions Corporation | 3,076,000 | |||||||
400,000 | Microsoft Corporation | 10,676,000 | ||||||||
127,500 | * | NCI, Inc. – Class “A” | 3,631,200 | |||||||
275,000 | Nokia Corporation – Class “A” (ADR) | 5,128,750 | ||||||||
255,000 | * | Parametric Technology Corporation | 4,692,000 | |||||||
160,000 | QUALCOMM, Inc. | 6,875,200 | ||||||||
89,900 | * | SI International, Inc. | 2,701,495 | |||||||
375,000 | * | Symantec Corporation | 7,342,500 | |||||||
375,000 | * | TIBCO Software, Inc. | 2,745,000 | |||||||
70,000 | Tyco Electronics, Ltd. | 1,936,200 | ||||||||
85,000 | * | ValueClick, Inc. | 869,550 | |||||||
150,000 | Western Union Company | 3,700,500 | ||||||||
91,900 | * | Wright Express Corporation | 2,716,564 | |||||||
200,000 | Xilinx, Inc. | 4,690,000 | ||||||||
112,164,319 |
74 |
Shares or | |||||||||||
Principal | |||||||||||
Amount | Security | Value | |||||||||
Materials—4.7% | |||||||||||
200,000 | Celanese Corporation – Series “A” | $ | 5,582,000 | ||||||||
70,000 | Freeport-McMoRan Copper & Gold, Inc. | 3,979,500 | |||||||||
135,000 | Lubrizol Corporation | 5,823,900 | |||||||||
70,000 | PPG Industries, Inc. | 4,082,400 | |||||||||
65,000 | Praxair, Inc. | 4,663,100 | |||||||||
235,000 | RPM International, Inc. | 4,544,900 | |||||||||
150,000 | Temple-Inland, Inc. | 2,289,000 | |||||||||
30,964,800 | |||||||||||
Telecommunication Services—2.3% | |||||||||||
240,000 | AT&T, Inc. | 6,700,800 | |||||||||
265,000 | Verizon Communications, Inc. | 8,503,850 | |||||||||
15,204,650 | |||||||||||
Utilities—.8% | |||||||||||
115,400 | Atmos Energy Corporation | 3,071,948 | |||||||||
50,000 | Consolidated Edison, Inc. | 2,148,000 | |||||||||
5,219,948 | |||||||||||
Total Value of Common Stocks (cost $601,474,736) | 652,779,985 | ||||||||||
SHORT-TERM INVESTMENTS—.9% | |||||||||||
Money Market Fund | |||||||||||
$ | 5,890 | M | First Investors Cash Reserve Fund, 2.16% (cost $5,890,000)** | 5,890,000 | |||||||
Total Value of Investments (cost $607,364,736) | 99.1 | % | 658,669,985 | ||||||||
Other Assets, Less Liabilities | .9 | 5,852,012 | |||||||||
Net Assets | 100.0 | % | $664,521,997 |
* Non-income producing
** Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
Summary of Abbreviations:
ADR American Depositary Receipts
REIT Real Estate Investment Trust
See notes to financial statements | 75 |
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, 2008. During the period, the Fund’s return on a net asset value basis was –25.4% for Class A shares and –25.9% for Class B shares, including dividends of 1.1 cents per share on Class A shares and capital gains distributions of $1.12 per share for both Class A and Class B shares.
Global equities fell sharply amid worldwide recession fears and a significant deterioration in both credit market conditions and investor confidence. While the roots of financial market uncertainty were largely U.S.-based, the impact was felt worldwide with losses in non-U.S. developed market shares, as well as emerging markets. Amid this backdrop, the Fund’s return modestly beat that of the MSCI All Country World Free Index. Within the Index, all regions struggled during the period. The Pacific Basin (excluding Japan) declined the most at –34%. The emerging markets followed closely falling 33%, the U.K. was down 31%, and developed Europe was down 30%. On a relative basis, Canada (–18%), the U.S. (–22%) and Japan (–27%) held up the best, albeit all were still down significantly.
Stock selection was solid across a number of sectors, particularly in the financials, energy and materials sectors. Within financials, the Fund’s outperformance relative to the MSCI All Country World Free Index was driven by its holdings in regional bank PNC Financial, whose shares gained on solid second quarter revenues and the sense that the regional banks were a safer haven within the financials sector. Shares of Capital One Financial also aided results as the company built reserves and raised capital, increasing its financial and strategic flexibility. In energy, shares of EOG Resources rose on strong production growth. In materials, Rio Tinto holdings gained on speculation that BHP Billiton would acquire the company. Security selection within the industrials, health care and utilities sectors detracted from results. Holdings in discount airline Ryanair hurt results as shares fell on rising fuel prices and a worsening outlook for the economy. French water and wa ste management company Veolia Environment saw shares decline sharply after disappointing earnings results, which were weighed down by an increase in fuel prices.
On a regional basis, holdings in the emerging markets and U.K. all contributed strongly to relative performance. Security selection within Europe (excluding the U.K.) detracted from relative results, as holdings in Nokia and UBS underperformed.
76 |
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx79x1.jpg)
Nicolas Choumenkovitch
Portfolio Manager
October 31, 2008
77 |
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $824.96 | $7.80 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,016.45 | $8.62 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $823.62 | $10.99 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,012.95 | $12.13 |
* | Expenses are equal to the annualized expense ratio of 1.71% for Class A shares and 2.41% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/366 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx80x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
78 |
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.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx81x1.jpg)
The graph compares a $10,000 investment in the First Investors Global Fund (Class A shares) beginning 9/30/98 with a theoretical investment in the MSCI All Country World Free Index (the “Index”). The Index 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 paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/08) 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 and Five Years and Ten Years would have been (29.76%) and 6.02%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year and Five Years would have been (28.49%) and 6.21%, 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. MSCI All Country World Free Index figures are from Morgan Stanley & Co., Inc. and all other figures are from First Investors Management Company, Inc.
79 |
Portfolio of Investments
GLOBAL FUND
September 30, 2008
Shares | Security | Value | ||||||||
COMMON STOCKS—94.0% | ||||||||||
United States—44.7% | ||||||||||
49,215 | Abbott Laboratories | $ | 2,833,800 | |||||||
22,400 | Accenture, Ltd. – Class “A” | 851,200 | ||||||||
16,765 | ACE, Ltd. | 907,489 | ||||||||
27,700 | * | Akamai Technologies, Inc. | 483,088 | |||||||
11,275 | Alcoa, Inc. | 254,589 | ||||||||
24,000 | * | Amdocs, Ltd. | 657,120 | |||||||
50,970 | American Electric Power Company, Inc. | 1,889,968 | ||||||||
37,900 | * | Amgen, Inc. | 2,246,333 | |||||||
37,555 | Apache Corporation | 3,916,235 | ||||||||
2,900 | * | Apple, Inc. | 329,614 | |||||||
32,400 | Assured Guaranty, Ltd. | 526,824 | ||||||||
114,140 | AT&T, Inc. | 3,186,789 | ||||||||
78,745 | Bank of America Corporation | 2,756,075 | ||||||||
12,520 | * | BMC Software, Inc. | 358,448 | |||||||
21,400 | Broadcom Corporation – Class “A” | 398,682 | ||||||||
43,725 | Capital One Financial Corporation | 2,229,975 | ||||||||
25,315 | Caterpillar, Inc. | 1,508,774 | ||||||||
15,070 | Chesapeake Energy Corporation | 540,410 | ||||||||
132,125 | * | Cisco Systems, Inc. | 2,980,740 | |||||||
80,850 | Citigroup, Inc. | 1,658,234 | ||||||||
103,080 | Corning, Inc. | 1,612,171 | ||||||||
65,825 | * | Coventry Health Care, Inc. | 2,142,604 | |||||||
27,485 | Covidien, Ltd. | 1,477,594 | ||||||||
14,600 | CVS Caremark Corporation | 491,436 | ||||||||
10,990 | Eli Lilly & Company | 483,890 | ||||||||
169,190 | * | EMC Corporation | 2,023,512 | |||||||
20,460 | EOG Resources, Inc. | 1,830,352 | ||||||||
25,180 | Exelon Corporation | 1,576,772 | ||||||||
16,430 | ExxonMobil Corporation | 1,275,954 | ||||||||
26,560 | Freeport-McMoRan Copper & Gold, Inc. | 1,509,936 | ||||||||
117,845 | General Electric Company | 3,005,048 | ||||||||
20,300 | * | Genzyme Corporation | 1,642,067 | |||||||
8,760 | Goldman Sachs Group, Inc. | 1,121,280 | ||||||||
1,995 | * | Google, Inc. – Class “A” | 799,037 | |||||||
18,700 | Graco, Inc. | 665,907 | ||||||||
21,800 | * | Gymboree Corporation | 773,900 | |||||||
13,616 | Halliburton Company | 441,022 | ||||||||
36,900 | * | Hercules Offshore, Inc. | 559,404 | |||||||
6,300 | Hess Corporation | 517,104 | ||||||||
72,755 | Hewlett-Packard Company | 3,364,191 |
80 |
Shares | Security | Value | ||||||||
United States (continued) | ||||||||||
30,100 | Honeywell International, Inc. | $ | 1,250,655 | |||||||
38,700 | Intel Corporation | 724,851 | ||||||||
13,095 | International Business Machines Corporation | 1,531,591 | ||||||||
32,425 | Invesco PLC | 680,277 | ||||||||
68,695 | JPMorgan Chase & Company | 3,208,057 | ||||||||
84,570 | * | Kohl’s Corporation | 3,896,986 | |||||||
8,955 | Lockheed Martin Corporation | 982,095 | ||||||||
13,315 | Manpower, Inc. | 574,675 | ||||||||
41,645 | Marathon Oil Corporation | 1,660,386 | ||||||||
9,900 | * | McDermott International, Inc. | 252,945 | |||||||
57,165 | Medtronic, Inc. | 2,863,967 | ||||||||
22,810 | Merck & Company, Inc. | 719,884 | ||||||||
114,955 | Microsoft Corporation | 3,068,149 | ||||||||
33,900 | * | National Oilwell Varco, Inc. | 1,702,797 | |||||||
24,325 | * | NII Holdings, Inc. | 922,404 | |||||||
13,200 | NIKE, Inc. – Class “B” | 883,080 | ||||||||
7,900 | Noble Corporation | 346,810 | ||||||||
11,200 | Noble Energy, Inc. | 622,608 | ||||||||
111,540 | * | Oracle Corporation | 2,265,377 | |||||||
37,700 | PepsiCo, Inc. | 2,686,879 | ||||||||
64,670 | Philip Morris International, Inc. | 3,110,627 | ||||||||
15,095 | PNC Financial Services Group, Inc. | 1,127,597 | ||||||||
17,045 | Precision Castparts Corporation | 1,342,805 | ||||||||
40,050 | Procter & Gamble Company | 2,791,084 | ||||||||
18,100 | QUALCOMM, Inc. | 777,757 | ||||||||
46,510 | Schering-Plough Corporation | 859,040 | ||||||||
22,300 | Simon Property Group, Inc. (REIT) | 2,163,100 | ||||||||
23,000 | St. Mary Land & Exploration Company | 819,950 | ||||||||
17,000 | * | St. Jude Medical, Inc. | 739,330 | |||||||
67,020 | Staples, Inc. | 1,507,950 | ||||||||
12,000 | * | Terex Corporation | 366,240 | |||||||
4,000 | * | Thomas & Betts Corporation | 156,280 | |||||||
15,628 | Transocean, Inc. | 1,716,580 | ||||||||
13,500 | * | Ultra Petroleum Corporation | 747,090 | |||||||
1,600 | Union Pacific Corporation | 113,856 | ||||||||
86,995 | UnitedHealth Group, Inc. | 2,208,803 | ||||||||
14,700 | W.R. Berkley Corporation | 346,185 | ||||||||
42,370 | Wal-Mart Stores, Inc. | 2,537,539 | ||||||||
21,600 | * | WellPoint, Inc. | 1,010,232 | |||||||
82,615 | Western Union Company | 2,038,112 | ||||||||
115,152,198 |
81 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2008
Shares | Security | Value | ||||||||
United Kingdom—11.7% | ||||||||||
39,059 | AstraZeneca PLC | $ | 1,713,611 | |||||||
127,912 | BG Group PLC | 2,325,803 | ||||||||
138,339 | BHP Billiton PLC | 3,142,042 | ||||||||
141,772 | British Airways PLC | 433,638 | ||||||||
108,577 | British Land Company PLC | 1,468,337 | ||||||||
257,600 | HSBC Holdings PLC | 4,178,270 | ||||||||
69,680 | Imperial Tobacco Group PLC | 2,242,550 | ||||||||
62,763 | Reckitt Benckiser PLC | 3,050,907 | ||||||||
134,797 | SABMiller PLC | 2,638,655 | ||||||||
171,996 | Smith & Nephew PLC | 1,821,211 | ||||||||
51,114 | Standard Chartered PLC | 1,260,932 | ||||||||
1,443,776 | Vodafone Group PLC | 3,196,704 | ||||||||
158,974 | Wolseley PLC | 1,204,716 | ||||||||
45,075 | Xstrata PLC | 1,408,368 | ||||||||
30,085,744 | ||||||||||
Japan—7.3% | ||||||||||
17,700 | Astellas Pharma, Inc. | 745,071 | ||||||||
72,450 | Canon, Inc. | 2,751,558 | ||||||||
57,300 | Denso Corporation | 1,407,960 | ||||||||
353 | East Japan Railway Company | 2,637,257 | ||||||||
24,600 | Eisai Company, Ltd. | 962,349 | ||||||||
25,000 | Honda Motor Company, Ltd. | 759,676 | ||||||||
1,106 | Japan Tobacco, Inc. | 4,176,069 | ||||||||
77,000 | Mitsubishi Estate Company, Ltd. | 1,520,012 | ||||||||
465 | Sumitomo Mitsui Banking Corporation, Inc. | 2,920,612 | ||||||||
180,000 | Toshiba Corporation | 786,432 | ||||||||
18,666,996 | ||||||||||
Switzerland—6.6% | ||||||||||
54,800 | ABB Ltd. (ADR) | 1,063,120 | ||||||||
48,811 | Julius Baer Holding, Ltd. AG – Registered | 2,433,779 | ||||||||
99,333 | Nestle SA – Registered | 4,304,222 | ||||||||
20,259 | Roche Holding AG – Genusscheine | 3,179,727 | ||||||||
17,814 | Synthes, Inc. | 2,470,914 | ||||||||
206,800 | * | UBS AG – Registered | 3,544,017 | |||||||
16,995,779 |
82 |
Shares | Security | Value | ||||||||
France—5.4% | ||||||||||
25,646 | BNP Paribas SA | $ | 2,442,629 | |||||||
5,972 | Essilor International SA | 297,607 | ||||||||
112,086 | France Telecom SA | 3,136,939 | ||||||||
27,972 | Groupe Danone | 1,979,671 | ||||||||
26,728 | L’Oreal SA | 2,616,784 | ||||||||
26,172 | Campagnie Generale des Etablissement Michelin – Class “B” | 1,691,432 | ||||||||
20,523 | Societe Generale | 1,839,452 | ||||||||
14,004,514 | ||||||||||
Germany—4.3% | ||||||||||
18,591 | Allianz AG | 2,555,774 | ||||||||
25,501 | Deutsche Boerse AG | 2,356,460 | ||||||||
31,029 | E.ON AG | 1,572,426 | ||||||||
44,682 | SAP AG | 2,372,503 | ||||||||
23,732 | Siemens AG | 2,227,176 | ||||||||
11,084,339 | ||||||||||
Canada—3.3% | ||||||||||
14,490 | Agrium, Inc. | 812,599 | ||||||||
47,200 | Brookfield Asset Management, Inc. – Class ‘A’ | 1,294,093 | ||||||||
27,300 | Canadian Imperial Bank of Commerce | 1,584,797 | ||||||||
37,300 | Canadian Natural Resources, Ltd. | 2,551,570 | ||||||||
3,500 | Potash Corporation of Saskatchewan, Inc. | 462,035 | ||||||||
132,100 | Talisman Energy, Inc. | 1,907,200 | ||||||||
8,612,294 | ||||||||||
Netherlands—2.2% | ||||||||||
130,286 | Aegon NV | 1,150,103 | ||||||||
47,949 | ASML Holding NV | 836,111 | ||||||||
150,683 | Koninklijke (Royal) KPN NV | 2,171,290 | ||||||||
52,328 | Unilever NV | 1,469,682 | ||||||||
5,627,186 | ||||||||||
Finland—1.5% | ||||||||||
35,098 | Fortum OYJ | 1,175,230 | ||||||||
27,100 | Nokia Corporation – Class “A” (ADR) | 505,415 | ||||||||
119,611 | Nokia OYJ | 2,225,929 | ||||||||
3,906,574 |
83 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2008
Shares | Security | Value | ||||||||
Israel—1.0% | ||||||||||
54,500 | Teva Pharmaceutical Industries, Ltd. (ADR) | $ | 2,495,555 | |||||||
South Africa—.8% | ||||||||||
56,455 | Impala Platinum Holdings, Ltd. | 1,152,961 | ||||||||
67,820 | MTN Group, Ltd. | 957,360 | ||||||||
2,110,321 | ||||||||||
Brazil—.8% | ||||||||||
8,200 | Banco Bradesco SA (ADR) | 132,020 | ||||||||
46,375 | Banco Itau Holding Financeira SA (ADR) | 811,562 | ||||||||
16,020 | Companhia Vale do Rio Doce (ADR) | 306,783 | ||||||||
17,400 | Petroleo Brasileiro SA (ADR) | 764,730 | ||||||||
2,015,095 | ||||||||||
Taiwan—.7% | ||||||||||
200,800 | Taiwan Semiconductor Manufacturing Company, Ltd. (ADR) | 1,881,496 | ||||||||
Austria—.7% | ||||||||||
41,509 | OMV AG | 1,745,698 | ||||||||
China—.6% | ||||||||||
438,000 | China Life Insurance Company, Ltd. | 1,631,812 | ||||||||
Spain—.6% | ||||||||||
57,653 | Banco Bilbao Vizcaya Argentaria SA | 930,207 | ||||||||
45,670 | Banco Santander SA | 683,259 | ||||||||
1,613,466 | ||||||||||
Hong Kong—.6% | ||||||||||
1,042,888 | Shangri-La Asia, Ltd. | 1,494,198 | ||||||||
Denmark—.4% | ||||||||||
21,250 | Novo Nordisk A/S – Series “B” | 1,099,201 | ||||||||
Ireland—.3% | ||||||||||
38,300 | * | Ryanair Holdings PLC (ADR) | 859,069 | |||||||
India—.2% | ||||||||||
15,900 | Infosys Technologies, Ltd. (ADR) | 529,629 | ||||||||
Norway—.1% | ||||||||||
8,570 | Yara International ASA | 303,079 |
84 |
Shares or | |||||||||||
Principal | |||||||||||
Amount | Security | Value | |||||||||
Qatar—.1% | |||||||||||
45,000 | Commercial Bank of Qatar (GDR) (a) | $ | 247,500 | ||||||||
South Korea—.1% | |||||||||||
1,908 | LG Electronics, Inc. | 176,545 | |||||||||
Total Value of Common Stocks (cost $261,881,022) | 242,338,288 | ||||||||||
SHORT-TERM INVESTMENTS—5.2% | |||||||||||
Money Market Fund | |||||||||||
$ | 13,310 | M | First Investors Cash Reserve Fund, 2.16% (cost $13,310,000) ** | 13,310,000 | |||||||
Total Value of Investments (cost $275,191,022) | 99.2 | % | 255,648,288 | ||||||||
Other Assets, Less Liabilities | .8 | 1,970,507 | |||||||||
Net Assets | 100.0 | % | $257,618,795 |
* Non-income producing
** Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
(a) Security exempt from registration under Rule 144A of 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 | 85 |
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, 2008. During the period, the Fund’s return on a net asset value basis was –23.8% for Class A shares and –24.4% for Class B shares, including capital gains distributions of $1.42 per share for both Class A and Class B shares.
The Fund’s performance was driven principally by the financial crisis that unfolded over the year. Reacting to historic levels of economic turbulence and interventions by the Federal Reserve and U.S. Treasury, investors focused on stocks perceived to have relatively low downside risk. The best performing stocks during the reporting period were therefore those with low beta, high dividend yield and high earnings quality. By contrast, stocks that were projected to have better than expected earnings, usually among the best performers in most economic and stock market environments, were among the worst performers during the period.
The Fund’s underperformance relative to the Russell 3000 Growth Index was attributable to stock selection in the consumer discretionary sector. The worst performing consumer discretionary stocks during the year were Tempur-Pedic International, Big Lots, Fossil and ITT Educational Services. These four stocks accounted for all of the negative relative performance in the sector.
The Fund’s energy and information technology holdings also detracted from performance, while financials aided relative performance during the reporting period. UnionBanCal and JP Morgan Chase were the best performers in this group.
The Fund maintained a diverse market capitalization allocation during the year, ending with 52% large cap, 34% mid cap and 14% small cap, according to Lipper’s market capitalization ranges.
Thank you for placing your trust in First Investors. We appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx88x1.jpg)
Portfolio Manager
October 31, 2008
86 |
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $892.00 | $7.00 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.60 | $7.47 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $889.05 | $10.30 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.10 | $10.98 |
* | Expenses are equal to the annualized expense ratio of 1.48% for Class A shares and 2.18% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/366 | |
(to reflect the one-half year period). |
Portfolio Composition
TOP SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx89x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
87 |
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.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx90x1.jpg)
The graph compares a $10,000 investment in the First Investors Select Growth Fund (Class A shares) 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 9/30/08) 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 some of 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 (2.90%) . The Class B “S.E.C. Standardized” Total Return for Since Inception would have been (2.86%). 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 3000 Growth Index figures are from Frank Russell and Company and all other figures are from First Investors Management Company, Inc.
88 |
Portfolio of Investments (continued)
SELECT GROWTH FUND
September 30, 2008
Shares | Security | Value | ||||||||
COMMON STOCKS—98.3% | ||||||||||
Consumer Discretionary—10.5% | ||||||||||
176,300 | * | Aeropostale, Inc. | $ | 5,660,993 | ||||||
96,900 | * | Apollo Group, Inc. – Class “A” | 5,746,170 | |||||||
178,100 | Guess?, Inc. | 6,196,099 | ||||||||
96,200 | McDonald’s Corporation | 5,935,540 | ||||||||
23,538,802 | ||||||||||
Consumer Staples—8.9% | ||||||||||
115,400 | Church & Dwight Company, Inc. | 7,165,186 | ||||||||
87,750 | Colgate-Palmolive Company | 6,611,962 | ||||||||
105,600 | Wal-Mart Stores, Inc. | 6,324,384 | ||||||||
20,101,532 | ||||||||||
Energy—9.8% | ||||||||||
54,400 | ExxonMobil Corporation | 4,224,704 | ||||||||
46,850 | Hess Corporation | 3,845,448 | ||||||||
80,900 | * | National-Oilwell Varco, Inc. | 4,063,607 | |||||||
69,450 | Noble Energy, Inc. | 3,860,725 | ||||||||
86,600 | Occidental Petroleum Corporation | 6,100,970 | ||||||||
22,095,454 | ||||||||||
Financials—12.2% | ||||||||||
96,600 | Assurant, Inc. | 5,313,000 | ||||||||
117,070 | JPMorgan Chase & Co. | 5,467,169 | ||||||||
408,155 | KeyCorp | 4,873,371 | ||||||||
170,600 | * | NASDAQ OMX Group, Inc. | 5,215,242 | |||||||
198,600 | Raymond James Financial, Inc. | 6,549,828 | ||||||||
27,418,610 | ||||||||||
Health Care—19.1% | ||||||||||
90,400 | Becton, Dickinson & Company | 7,255,504 | ||||||||
75,000 | * | Cephalon, Inc. | 5,811,750 | |||||||
84,900 | * | Express Scripts, Inc. | 6,267,318 | |||||||
21,920 | * | Intuitive Surgical, Inc. | 5,282,282 | |||||||
190,900 | Omnicare, Inc. | 5,492,193 | ||||||||
133,000 | * | OSI Pharmaceuticals, Inc. | 6,555,570 | |||||||
110,300 | * | Varian Medical Systems, Inc. | 6,301,439 | |||||||
42,966,056 |
89 |
Portfolio of Investments (continued)ontinued)
SELECT GROWTH FUND
September 30, 2008
Shares or | |||||||||||
Principal | |||||||||||
Amount | Security | Value | |||||||||
Industrials—13.6% | |||||||||||
108,600 | * | AGCO Corporation | $ | 4,627,446 | |||||||
81,100 | Danaher Corporation | 5,628,340 | |||||||||
129,200 | Dover Corporation | 5,239,060 | |||||||||
80,900 | * | Jacobs Engineering Group, Inc. | 4,393,679 | ||||||||
84,500 | Norfolk Southern Corporation | 5,594,745 | |||||||||
86,000 | United Technologies Corporation | 5,165,160 | |||||||||
30,648,430 | |||||||||||
Information Technology—19.8% | |||||||||||
122,470 | Amphenol Corporation – Class “A” | 4,915,946 | |||||||||
181,700 | * | BMC Software, Inc. | 5,202,071 | ||||||||
152,300 | Hewlett-Packard Company | 7,042,352 | |||||||||
56,000 | International Business Machines Corporation | 6,549,760 | |||||||||
236,051 | * | Juniper Networks, Inc. | 4,973,595 | ||||||||
259,950 | National Semiconductor Corporation | 4,473,739 | |||||||||
365,000 | * | Parametric Technology Corporation | 6,716,000 | ||||||||
111,700 | QUALCOMM, Inc. | 4,799,749 | |||||||||
44,673,212 | |||||||||||
Materials—2.4% | |||||||||||
101,800 | Sigma-Aldrich Corporation | 5,336,356 | |||||||||
Utilities—2.0% | |||||||||||
67,900 | FirstEnergy Corporation | 4,548,621 | |||||||||
Total Value of Common Stocks (cost $229,193,447) | 221,327,073 | ||||||||||
SHORT-TERM INVESTMENTS—2.3% | |||||||||||
Money Market Fund | |||||||||||
$ | 5,150 | M | First Investors Cash Reserve Fund, 2.16% (cost $5,150,000)** | 5,150,000 | |||||||
Total Value of Investments (cost $234,343,447) | 100.6 | % | 226,477,073 | ||||||||
Excess of Liabilities Over Other Assets | (.6 | ) | (1,285,608) | ||||||||
Net Assets | 100.0 | % | $225,191,465 |
* Non-income producing
** Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
90 | See notes to financial statements |
Portfolio Managers’ Letter
OPPORTUNITY FUND
Dear Investor:
This is the annual report for the First Investors Opportunity Fund for the fiscal year ended September 30, 2008. During the period, the Fund’s return on a net asset value basis was –19.4% for Class A shares and –20.0% for Class B shares, including dividends of 14.1 cents per share and capital gains distributions of $2.66 per share for both Class A and Class B shares.
Effective January 31, 2008, the First Investors Mid-Cap Opportunity Fund was renamed the First Investors Opportunity Fund. The Fund continues to invest primarily in mid-cap stocks as defined in the prospectus. The name change was designed to provide the Fund with additional flexibility to invest outside of its primary market capitalization range.
On a relative basis, the Fund underperformed its benchmark, the S&P 400 MidCap Index, due to stock selection in the financials and industrials sectors. In financials, community banks such as Zions Bancorp and Sovereign Bancorp underperformed due to the crisis caused by declining construction loans and residential mortgages. In industrials, engineering and construction firm Chicago Bridge & Iron suffered after two large projects — one in Wales and one in Texas — ran significantly over budget.
Among positive contributors to relative performance were the Fund’s stock selections in health care, software and life sciences. Shares of generic drug maker Barr Pharmaceuticals were a key contributor due to a takeover offer. Also, the Fund’s decision to avoid HMOs ahead of the election cycle was timely. Virtually every publicly traded HMO faced stronger than anticipated cost trends. Within software, strength came from enterprise-focused companies. For example, Open Text, which gives large companies the ability to easily find e-mails and documents for legal compliance, saw demand for its products increase substantially. Similarly, Sybase, which sells database software that helps financial institutions quickly analyze problem loans, saw increased demand during the financial crisis. In life sciences, Express Scripts, a pharmacy ben-efit manager, and Gilead, a biotechnology firm targeting drugs for HIV/AIDS, both reported strong earnings after prescription sales trends increased.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx93x1.jpg)
Steven S. Hill
Portfolio Manager
October 31, 2008
Edwin D. Miska
Portfolio Manager and
Director of Equities,
First Investors Management Company, Inc.
91 |
Fund Expenses
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $903.35 | $6.66 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.00 | $7.06 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $899.92 | $9.97 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.50 | $10.58 |
* | Expenses are equal to the annualized expense ratio of 1.40% for Class A shares and 2.10% |
for Class B shares, multiplied by the average account value over the period, multiplied by | |
183/366 (to reflect the one-half year period). |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx94x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
92 |
Cumulative Performance Information
OPPORTUNITY FUND
Comparison of change in value of $10,000 investment in the First Investors Opportunity Fund (Class A shares) and the Standard & Poor’s MidCap 400 Index.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx95x1.jpg)
The graph compares a $10,000 investment in the First Investors Opportunity Fund (Class A shares) beginning 9/30/98 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 midrange sector of the U.S. stock market. As of 9/30/08 the median market capitalization is approximately $2.18 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 performance may be greater than or less than that sh own 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 9/30/08) 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 5.93% and 7.43%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 6.13% and 7.53%, respectively. Results represe nt 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.
93 |
Portfolio of Investments
OPPORTUNITY FUND
September 30, 2008
Shares | Security | Value | ||||||||
COMMON STOCKS—96.1% | ||||||||||
Consumer Discretionary—13.8% | ||||||||||
170,000 | BorgWarner, Inc. | $ | 5,570,900 | |||||||
220,000 | Brown Shoe Company, Inc. | 3,603,600 | ||||||||
45,000 | * | CEC Entertainment, Inc. | 1,494,000 | |||||||
225,000 | Cinemark Holdings, Inc. | 3,060,000 | ||||||||
142,500 | * | Coach, Inc. | 3,568,200 | |||||||
170,000 | * | Jack in the Box, Inc. | 3,587,000 | |||||||
295,000 | * | Morgans Hotel Group Company | 3,218,450 | |||||||
50,000 | Nordstrom, Inc. | 1,441,000 | ||||||||
65,000 | Polo Ralph Lauren Corporation – Class “A” | 4,331,600 | ||||||||
165,000 | * | Red Robin Gourmet Burgers, Inc. | 4,422,000 | |||||||
493,400 | Stewart Enterprises, Inc. – Class “A” | 3,878,124 | ||||||||
117,500 | Tiffany & Company | 4,173,600 | ||||||||
225,000 | * | Warnaco Group, Inc. | 10,190,250 | |||||||
150,000 | Wolverine World Wide, Inc. | 3,970,500 | ||||||||
56,509,224 | ||||||||||
Consumer Staples—6.4% | ||||||||||
245,000 | * | Dean Foods Company | 5,723,200 | |||||||
320,000 | Nu Skin Enterprises, Inc. – Class “A” | 5,190,400 | ||||||||
85,500 | Philip Morris International, Inc. | 4,112,550 | ||||||||
180,000 | Safeway, Inc. | 4,269,600 | ||||||||
375,000 | Sara Lee Corporation | 4,736,250 | ||||||||
72,980 | Tootsie Roll Industries, Inc. | 2,109,852 | ||||||||
26,141,852 | ||||||||||
Energy—8.2% | ||||||||||
280,000 | * | Cal Dive International, Inc. | 2,968,000 | |||||||
47,500 | EOG Resources, Inc. | 4,249,350 | ||||||||
33,000 | Hess Corporation | 2,708,640 | ||||||||
90,000 | * | National-Oilwell Varco, Inc. | 4,520,700 | |||||||
100,000 | * | Plains Exploration & Production Company | 3,516,000 | |||||||
225,000 | Talisman Energy, Inc. | 3,199,500 | ||||||||
45,000 | * | Transocean, Inc. | 4,942,800 | |||||||
160,500 | * | Weatherford International, Ltd. | 4,034,970 | |||||||
70,000 | XTO Energy, Inc. | 3,256,400 | ||||||||
33,396,360 |
94 |
Shares | Security | Value | ||||||||
Financials—10.4% | ||||||||||
40,000 | City National Corporation | $ | 2,172,000 | |||||||
130,000 | Discover Financial Services | 1,796,600 | ||||||||
150,000 | Douglas Emmett, Inc. (REIT) | 3,460,500 | ||||||||
32,500 | Federal Realty Investment Trust (REIT) | 2,782,000 | ||||||||
75,000 | Financial Select Sector SPDR Fund | 1,484,250 | ||||||||
115,000 | HCP, Inc. (REIT) | 4,614,950 | ||||||||
175,000 | Lazard, Ltd. – Class “A” | 7,483,000 | ||||||||
125,000 | Nasdaq OMX Group, Inc. | 3,821,250 | ||||||||
220,000 | NewAlliance Bancshares, Inc. | 3,306,600 | ||||||||
105,000 | Protective Life Corporation | 2,993,550 | ||||||||
190,000 | Sovereign Bancorp, Inc. | 750,500 | ||||||||
235,000 | Sunstone Hotel Investors, Inc. (REIT) | 3,172,500 | ||||||||
195,000 | Waddell & Reed Financial, Inc. – Class “A” | 4,826,250 | ||||||||
42,663,950 | ||||||||||
Health Care—15.5% | ||||||||||
50,000 | * | Alpharma, Inc. – Class “A” | 1,844,500 | |||||||
140,000 | * | Barr Pharmaceuticals, Inc. | 9,142,000 | |||||||
80,000 | Beckman Coulter, Inc. | 5,679,200 | ||||||||
145,000 | * | Community Health Systems, Inc. | 4,249,950 | |||||||
185,000 | DENTSPLY International, Inc. | 6,944,900 | ||||||||
380,000 | * | Exelixis, Inc. | 2,310,400 | |||||||
75,000 | * | Gilead Sciences, Inc. | 3,418,500 | |||||||
75,000 | * | Laboratory Corporation of America Holdings | 5,212,500 | |||||||
75,000 | McKesson Corporation | 4,035,750 | ||||||||
165,000 | * | PSS World Medical, Inc. | 3,217,500 | |||||||
177,800 | * | Psychiatric Solutions, Inc. | 6,747,510 | |||||||
120,000 | * | St. Jude Medical, Inc. | 5,218,800 | |||||||
95,000 | * | Thermo Fisher Scientific, Inc. | 5,225,000 | |||||||
63,246,510 | ||||||||||
Industrials—13.9% | ||||||||||
176,800 | * | AAR Corporation | 2,933,112 | |||||||
100,000 | * | Allied Waste Industries, Inc. | 1,111,000 | |||||||
135,000 | Armstrong World Industries, Inc. | 3,901,500 | ||||||||
65,000 | Avery Dennison Corporation | 2,891,200 | ||||||||
159,500 | Baldor Electric Company | 4,595,195 | ||||||||
190,900 | Chicago Bridge & Iron Company NV – NY Shares | 3,672,916 | ||||||||
110,000 | Dover Corporation | 4,460,500 | ||||||||
130,200 | * | Esterline Technologies Corporation | 5,154,618 | |||||||
115,000 | Harsco Corporation | 4,276,850 |
95 |
Portfolio of Investments (continued)
OPPORTUNITY FUND
September 30, 2008
Shares | Se curity | Value | ||||||||
Industrials (continued) | ||||||||||
170,000 | IDEX Corporation | $ | 5,273,400 | |||||||
115,000 | J.B. Hunt Transport Services, Inc. | 3,837,550 | ||||||||
55,000 | Manpower, Inc. | 2,373,800 | ||||||||
202,500 | * | Mobile Mini, Inc. | 3,914,325 | |||||||
110,000 | Rolls-Royce Group PLC (ADR) | 3,298,845 | ||||||||
92,800 | Roper Industries, Inc. | 5,285,888 | ||||||||
56,980,699 | ||||||||||
Information Technology—13.2% | ||||||||||
15,000 | * | CACI International, Inc. – Class “A” | 751,500 | |||||||
140,000 | * | Electronics for Imaging, Inc. | 1,950,200 | |||||||
85,000 | * | Fiserv, Inc. | 4,022,200 | |||||||
145,000 | Harris Corporation | 6,699,000 | ||||||||
160,000 | Intersil Corporation – Class “A” | 2,652,800 | ||||||||
210,000 | * | Intuit, Inc. | 6,638,100 | |||||||
235,000 | * | Macrovision Solutions Corporation | 3,614,300 | |||||||
55,000 | * | Mettler-Toledo International, Inc. | 5,390,000 | |||||||
80,000 | * | Open Text Corporation | 2,766,400 | |||||||
65,000 | * | Parametric Technology Corporation | 1,196,000 | |||||||
255,000 | * | Sybase, Inc. | 7,808,100 | |||||||
282,725 | * | Symantec Corporation | 5,535,756 | |||||||
250,000 | Technology Select Sector SPDR Fund | 4,917,500 | ||||||||
53,941,856 | ||||||||||
Materials—6.4% | ||||||||||
142,500 | Agrium, Inc. | 7,991,400 | ||||||||
72,500 | Allegheny Technologies, Inc. | 2,142,375 | ||||||||
44,000 | Freeport-McMoRan Copper & Gold, Inc. | 2,501,400 | ||||||||
110,000 | Lubrizol Corporation | 4,745,400 | ||||||||
63,500 | Praxair, Inc. | 4,555,490 | ||||||||
80,000 | Sigma-Aldrich Corporation | 4,193,600 | ||||||||
26,129,665 | ||||||||||
Telecommunication Services���2.1% | ||||||||||
250,000 | Frontier Communications Corporation | 2,875,000 | ||||||||
215,000 | Holdings Corporation | 5,781,350 | ||||||||
8,656,350 |
96 |
Shares or | |||||||||||
Principal | |||||||||||
Amount | Security | Value | |||||||||
Utilities—6.2% | |||||||||||
111,000 | AGL Resources, Inc. | $ | 3,483,180 | ||||||||
110,000 | California Water Service Group | 4,235,000 | |||||||||
100,000 | Equitable Resources, Inc. | 3,669,000 | |||||||||
160,200 | Portland General Electric Company | 3,790,332 | |||||||||
125,000 | SCANA Corporation | 4,866,250 | |||||||||
120,000 | Wisconsin Energy Corporation | 5,388,000 | |||||||||
25,431,762 | |||||||||||
Total Value of Common Stocks (cost $370,268,464) | 393,098,228 | ||||||||||
SHORT-TERM INVESTMENTS—3.2% | |||||||||||
Money Market Fund | |||||||||||
$ | 12,900 | M | First Investors Cash Reserve Fund, 2.16% (cost $12,900,000)** | 12,900,000 | |||||||
Total Value of Investments (cost $383,168,464) | 99.3 | % | 405,998,228 | ||||||||
Other Assets, Less Liabilities | .7 | 3,036,460 | |||||||||
Net Assets | 100.0 | % | $ | 409,034,688 |
* Non-income producing
** Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
Summary of Abbreviations
ADR American Depositary Receipts
REIT Real Estate Investment Trust
See notes to financial statements | 97 |
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, 2008. During the period, the Fund’s return on a net asset value basis was –12.7% for Class A shares and –13.3% for Class B shares, including capital gains distributions of $1.22 per share for both Class A and Class B shares.
This reporting period was very difficult for the financial markets, as the problems arising from subprime mortgages spread into other asset classes, and developed into a full-blown credit crisis. There was a general decline in stock prices during the period, with many stocks hitting new lows. The Fund outperformed the Russell 2000 Index during the year due to strength in the Fund’s industrials and consumer staples holdings.
In the industrials sector, Kansas City Southern, the U.S. railroad with extensive operations in Mexico, and Woodward Governor, which makes components for aircraft engines, both contributed positively to absolute performance. In the consumer staples sector, Flowers Food, the baked goods company, Church & Dwight, the owner of Arm & Hammer, and food marketer and manufacturer J.M. Smucker all produced positive absolute returns.
Offsetting these positive returns was the Fund’s investment in the utilities sector, where the Fund’s holding in wholesale power provider Dynegy hurt relative performance.
The government has taken many steps in an effort to stem the panic that engulfed the markets in late September, by infusing capital directly into banks and employing various interventions in the short-term capital markets to ensure the smooth flowing of credit throughout the banking system.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx100x1.jpg)
Jason Ronovech
Portfolio Manager
October 31, 2008
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx100x2.jpg)
Jonathan S. Vyorst
Portfolio Manager
98 |
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $973.43 | $7.35 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,015.40 | $7.52 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $970.04 | $10.79 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.05 | $11.03 |
* | 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 183/366 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx101x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
99 |
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.
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx102x1.jpg)
The graph compares a $10,000 investment in the First Investors Special Situations Fund (Class A shares) beginning 9/30/98 with a theoretical investment in the Russell 2000 Index (the “Index”). The Index is an unmanaged Index that measures the performance of the small-cap segment of the U.S. equity universe. The Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. The Index includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. 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 dis tributions 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 the sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/08) 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 (17.80%), 6.57% and 4.21%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (16.65%), 6.78% and 4.25%, 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.
100 |
Portfolio of Investments
SPECIAL SITUATIONS FUND
September 30, 2008
Shares | Security | Value | ||||||||
COMMON STOCKS—88.1% | ||||||||||
Consumer Discretionary—13.2% | ||||||||||
249,400 | * | AnnTaylor Stores Corporation | $ | 5,147,616 | ||||||
353,600 | Callaway Golf Company | 4,975,152 | ||||||||
171,200 | * | Goodyear Tire & Rubber Company | 2,621,072 | |||||||
193,000 | Interactive Data Corporation | 4,867,460 | ||||||||
328,300 | Penske Automotive Group, Inc. | 3,765,601 | ||||||||
129,500 | PetSmart, Inc. | 3,199,945 | ||||||||
161,400 | Phillips Van-Heusen Corporation | 6,118,674 | ||||||||
313,000 | Regal Entertainment Group – Class “A” | 4,939,140 | ||||||||
35,634,660 | ||||||||||
Consumer Staples—7.2% | ||||||||||
73,950 | Church & Dwight Company, Inc. | 4,591,556 | ||||||||
190,500 | Flowers Foods, Inc. | 5,593,080 | ||||||||
130,400 | Hormel Foods Corporation | 4,730,912 | ||||||||
91,100 | J. M. Smucker Company | 4,617,859 | ||||||||
19,533,407 | ||||||||||
Energy—3.3% | ||||||||||
85,300 | * | Denbury Resources, Inc. | 1,624,112 | |||||||
111,600 | * | Plains Exploration & Production Company | 3,923,856 | |||||||
39,500 | St. Mary Land & Exploration Company | 1,408,175 | ||||||||
28,500 | * | Whiting Petroleum Corporation | 2,030,910 | |||||||
8,987,053 | ||||||||||
Financials—12.5% | ||||||||||
15,914 | * | Alleghany Corporation | 5,808,610 | |||||||
198,600 | American Financial Group, Inc. | 5,858,700 | ||||||||
789,600 | Anworth Mortgage Asset Corporation (REIT) | 4,674,432 | ||||||||
170,900 | Arthur J. Gallagher & Company | 4,385,294 | ||||||||
167,700 | Harleysville Group, Inc. | 6,339,060 | ||||||||
687,300 | MFA Mortgage Investments, Inc. (REIT) | 4,467,450 | ||||||||
73,900 | Wilmington Trust Corporation | 2,130,537 | ||||||||
33,664,083 |
101 |
Portfolio of Investments (continued)
SPECIAL SITUATIONS FUND
September 30, 2008
Shares | Security | Value | ||||||||
Health Care—14.4% | ||||||||||
226,800 | * | Endo Pharmaceuticals Holdings, Inc. | $ | 4,536,000 | ||||||
138,300 | * | Invitrogen Corporation | 5,227,740 | |||||||
244,500 | * | K-V Pharmaceutical Company – Class “A” | 5,552,595 | |||||||
127,100 | * | Lincare Holdings, Inc. | 3,824,439 | |||||||
135,500 | * | Magellan Health Services, Inc. | 5,563,630 | |||||||
214,352 | PerkinElmer, Inc. | 5,352,369 | ||||||||
113,400 | STERIS Corporation | 4,261,572 | ||||||||
95,300 | West Pharmaceutical Services, Inc. | 4,652,546 | ||||||||
38,970,891 | ||||||||||
Industrials—12.4% | ||||||||||
92,500 | Alexander & Baldwin, Inc. | 4,072,775 | ||||||||
43,200 | * | Alliant Techsystems, Inc. | 4,058,208 | |||||||
51,700 | Carlisle Companies, Inc. | 1,549,449 | ||||||||
109,600 | Curtiss-Wright Corporation | 4,981,320 | ||||||||
41,900 | Deluxe Corporation | 602,941 | ||||||||
334,500 | Interface, Inc. – Class “A” | 3,803,265 | ||||||||
129,027 | Kansas City Southern, Inc. | 5,723,638 | ||||||||
73,000 | Pentair, Inc. | 2,523,610 | ||||||||
90,800 | Robbins & Myers, Inc. | 2,808,444 | ||||||||
97,100 | Woodward Governor Company | 3,424,717 | ||||||||
33,548,367 | ||||||||||
Information Technology—16.1% | ||||||||||
191,250 | * | Avnet, Inc. | 4,710,488 | |||||||
314,500 | AVX Corporation | 3,204,755 | ||||||||
96,800 | * | Cabot Microelectronics Corporation | 3,105,344 | |||||||
106,020 | * | Checkpoint Systems, Inc. | 1,995,296 | |||||||
495,000 | * | Compuware Corporation | 4,796,550 | |||||||
281,400 | * | Convergys Corporation | 4,159,092 | |||||||
370,700 | * | Epicor Software Corporation | 2,924,823 | |||||||
193,200 | Fair Isaac Corporation | 4,455,192 | ||||||||
206,100 | * | Sybase, Inc. | 6,310,782 | |||||||
135,300 | * | Varian Semiconductor Equipment Associates, Inc. | 3,398,736 | |||||||
269,400 | * | Verigy, Ltd. | 4,385,832 | |||||||
43,446,890 |
102 |
Shares or | |||||||||||
Principal | |||||||||||
Amount | Security | Value | |||||||||
Materials—2.6% | |||||||||||
109,000 | AptarGroup, Inc. | $ | 4,262,990 | ||||||||
67,700 | Innospec, Inc. | 816,462 | |||||||||
102,300 | * | RTI International Metals, Inc. | 2,000,988 | ||||||||
7,080,440 | |||||||||||
Telecommunication Services—3.1% | |||||||||||
330,700 | * | Premiere Global Services, Inc. | 4,649,642 | ||||||||
102,675 | Telephone & Data Systems, Inc. – Special Shares | 3,686,032 | |||||||||
8,335,674 | |||||||||||
Utilities—3.3% | |||||||||||
264,700 | CMS Energy Corporation | 3,300,809 | |||||||||
362,600 | * | Dynegy, Inc. – Class “A” | 1,298,108 | ||||||||
184,800 | Portland General Electric Company | 4,372,368 | |||||||||
8,971,285 | |||||||||||
Total Value of Common Stocks (cost $235,606,022) | 238,172,750 | ||||||||||
SHORT-TERM INVESTMENTS—12.6% | |||||||||||
Money Market Fund | |||||||||||
$ | 34,010 | M | First Investors Cash Reserve Fund, 2.16% (cost $34,010,000)** | 34,010,000 | |||||||
Total Value of Investments (cost $269,616,022) | 100.7 | % | 272,182,750 | ||||||||
Excess of Liabilities Over Other Assets | (.7 | ) | (1,805,625) | ||||||||
Net Assets | 100.0 | % | $ | 270,377,125 |
* Non-income producing
** Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
Summary of Abbreviations:
REIT Real Estate Investment Trust
See notes to financial statements | 103 |
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, 2008. During the period, the Fund’s return on a net asset value basis was –26.4% for Class A shares and –26.9% for Class B shares, including capital gains distributions of 31.9 cents per share on both Class A and Class B shares.
The fund outperformed the MSCI EAFE Index by more than four percentage points during the reporting period, though absolute returns were still significantly negative. The Fund’s holdings in the United Kingdom, Switzerland and Brazil made strong positive contributions to relative performance during the period. Among the top individual contributors were Nestlé, the Swiss consumer product company, and Kuehne & Nagel International, a Swiss logistics services company. Although the portfolio was underweight in the financials sector, Banco Itau Holdings Financeira SA, a Brazilian financial company, also contributed positively to performance. In addition, sector allocation aided performance. The Fund was significantly overweight in consumer staples, as companies in this sector continued to meet our investment criteria. The sector made a strong positive contribution to relative performance during the period. The Fund continues to like financials in emerging countries . Unlike financial companies in Western markets, those in emerging countries tend to have heavily regulated banking systems.
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 18.5% of its assets in emerging markets, a significant overweight position compared to the MSCI EAFE Index. Most emerging countries currently do not have the structural issues apparent in the U.S. and Europe, including struggling financial systems, high levels of consumer debt and lack of liquidity. Instead, emerging countries face cyclical issues created by global weakness. While they will be affected by a worldwide slowdown, domestic demand for infrastructure and consumer goods should continue to fuel growth.
While its greatest allocation is to large-cap stocks, the Fund invests in companies of any size. At the end of the reporting period, the Fund held 75.4% of its assets in large caps, 17.2% in mid caps and 1.8% in small caps, based on Lipper’s market capitalization ranges.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx106x1.jpg)
Rajiv Jain
Portfolio Manager
October 31, 2008
104
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 | |
(4/1/08) | (9/30/08) | (4/1/08-9/30/08)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $797.98 | $8.63 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,011.90 | $10.08 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $795.39 | $11.76 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,011.90 | $13.18 |
* | Expenses are equal to the annualized expense ratio of 1.92% for Class A shares and 2.62% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/366 | |
(to reflect the one-half year period). |
Portfolio Composition
TOP SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx107x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2008, |
and are based on the total value of investments. |
105 |
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).
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequityfrontx108x1.jpg)
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 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. The Index is unmanaged and 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 9/30/08) 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 (5.13%). The Class B “S.E.C. Standardized” Average Annual Total Return Since Inception would have been (4.48%). 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. MSCI EAFE Index (Net) figures are from Morgan Stanley & Co., Inc. and all other figures are from First Investors Management Company, Inc.
106 |
Portfolio of Investments
INTERNATIONAL FUND
September 30, 2008
Shares | Security | Value | ||||||||
COMMON STOCKS—95.3% | ||||||||||
United Kingdom—23.3% | ||||||||||
79,800 | AMEC PLC | 917,698 | ||||||||
86,000 | BG Group PLC | 1,563,724 | ||||||||
107,046 | BHP Billiton PLC | 2,431,296 | ||||||||
191,731 | British American Tobacco PLC | 6,275,644 | ||||||||
100,061 | Diageo PLC | 1,711,391 | ||||||||
10,800 | HSBC Holdings PLC (ADR) | 872,964 | ||||||||
94,012 | Imperial Tobacco Group PLC | 3,025,640 | ||||||||
42,682 | Reckitt Benckiser Group PLC | 2,074,770 | ||||||||
88,597 | Standard Chartered PLC | 2,185,601 | ||||||||
1,500 | Standard Chartered PLC | 35,948 | ||||||||
527,644 | Tesco PLC | 3,679,224 | ||||||||
17,200 | X strata PLC | 537,414 | ||||||||
25,311,314 | ||||||||||
India—9.7% | ||||||||||
105,515 | * | Bharti Airtel, Ltd. | 1,789,686 | |||||||
40,205 | HDFC Bank, Ltd. (ADR) | 3,415,415 | ||||||||
41,300 | Housing Development Finance Corporation, Ltd. | 1,920,707 | ||||||||
6,900 | Infosys Technologies, Ltd. | 209,846 | ||||||||
9,000 | Infosys Technologies, Ltd. (ADR) | 299,790 | ||||||||
362,279 | ITC, Ltd. | 1,469,050 | ||||||||
50,267 | United Spirits, Ltd. | 1,375,137 | ||||||||
10,479,631 | ||||||||||
United States—7.0% | ||||||||||
103,800 | Philip Morris International, Inc. | 4,992,780 | ||||||||
23,200 | * | Transocean, Inc. | 2,548,288 | |||||||
7,541,068 | ||||||||||
Japan—6.9% | ||||||||||
37,800 | Mitsubishi Corporation | 789,925 | ||||||||
2,800 | Nintendo Company, Ltd. | 1,189,812 | ||||||||
52,500 | Secom Company, Ltd. | 2,190,941 | ||||||||
90,550 | Tokio Marine Holdings, Inc. | 3,330,385 | ||||||||
7,501,063 |
107 |
Portfolio of Investments (continued)
INTERNATIONAL FUND
September 30, 2008
Shares | Security | Value | ||||||||
Switzerland—6.3% | ||||||||||
441 | Lindt & Spruengli AG | $ | 1,078,099 | |||||||
76,820 | Nestle SA – Registered | 3,328,706 | ||||||||
15,738 | Roche Holding AG – Genusscheine | 2,470,138 | ||||||||
6,876,943 | ||||||||||
Spain—6.3% | ||||||||||
176,670 | Enagas | 3,801,172 | ||||||||
60,500 | Electrica Corporacion SA | 3,073,856 | ||||||||
6,875,028 | ||||||||||
Brazil—5.2% | ||||||||||
128,975 | Banco Itau Holding Financeira SA (ADR) | 2,257,062 | ||||||||
48,672 | Petroleo Brasileiro SA – Petrobras (ADR) | 2,139,134 | ||||||||
55,030 | Souza Cruz SA | 1,284,067 | ||||||||
5,680,263 | ||||||||||
Netherlands—4.4% | ||||||||||
35,061 | Core Laboratories NV | 3,552,381 | ||||||||
43,028 | Unilever NV-CVA | 1,208,482 | ||||||||
4,760,863 | ||||||||||
Canada—4.2% | ||||||||||
42,550 | Canadian Natural Resources, Ltd. | 2,910,705 | ||||||||
39,241 | Suncor Energy, Inc. | 1,661,616 | ||||||||
4,572,321 | ||||||||||
France—3.9% | ||||||||||
14,020 | Air Liquide SA | 1,537,133 | ||||||||
21,100 | Essilor International SA | 1,051,491 | ||||||||
26,246 | Total SA | 1,590,878 | ||||||||
4,179,502 | ||||||||||
Australia—3.6% | ||||||||||
115,300 | Coca-Cola Amatil, Ltd. | 768,418 | ||||||||
105,939 | Incitec Pivot, Ltd. | 423,672 | ||||||||
58,105 | Woolworths, Ltd. | 1,277,587 | ||||||||
56,322 | W orleyParsons, Ltd. | 1,390,533 | ||||||||
3,860,210 |
108 |
Shares | Security | Value | ||||||||
Germany—2.9% | ||||||||||
26,000 | RWE AG | $ | 2,489,699 | |||||||
7,500 | Siemens AG – Registered | 703,852 | ||||||||
3,193,551 | ||||||||||
Netherlands Antilles—2.8% | ||||||||||
1,600 | Schlumberger, Ltd. | 122,586 | ||||||||
37,650 | Schlumberger, Ltd. (ADR) | 2,940,089 | ||||||||
3,062,675 | ||||||||||
Mexico—2.5% | ||||||||||
35,025 | America Movil SAB de CV (ADR) – Series “L” | 1,623,759 | ||||||||
29,400 | Fomento Economico Mexicano SAB de CV (ADR) | 1,121,316 | ||||||||
2,745,075 | ||||||||||
Hong Kong—1.7% | ||||||||||
50,500 | HSBC Holdings PLC | 806,577 | ||||||||
39,046 | Jardine Matheson Holdings, Ltd. | 1,020,055 | ||||||||
1,826,632 | ||||||||||
Denmark—1.5% | ||||||||||
31,637 | Novo Nordisk A/S – Series “B” | 1,636,491 | ||||||||
Norway—1.4% | ||||||||||
167,860 | Orkla ASA | 1,534,957 | ||||||||
China—1.2% | ||||||||||
1,167,247 | CNOOC, Ltd. | 1,311,365 | ||||||||
Italy—.5% | ||||||||||
162,990 | Maire Tecnimont SpA | 577,008 | ||||||||
Total Value of Common Stocks (cost $114,040,092) | 103,525,960 |
109 |
Portfolio of Investments (continued)
INTERNATIONAL FUND
September 30, 2008
Principal | |||||||||||
Amount | Security | Value | |||||||||
SHORT-TERM INVESTMENTS—2.3% | |||||||||||
Money Market Fund | |||||||||||
$ | 2,450 | M | First Investors Cash Reserve Fund, 2.16% (cost $2,450,000) ** | $ | 2,450,000 | ||||||
Total Value of Investments (cost $116,490,092) | 97.6 | % | 105,975,960 | ||||||||
Other Assets, Less Liabilities | 2.4 | 2,599,796 | |||||||||
Net Assets | 100.0 | % | $ | 108,575,756 |
* Non-income producing
** Affiliated unregistered money market fund available only to First Investors funds and certain accounts managed by First Investors Management Company, Inc. Rate shown is the 7-day yield at September 30, 2008 (see Note 2).
Summary of Abbreviations:
ADR American Depositary Receipts
110 | See notes to financial statements |
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111 |
Statements of Assets and Liabilities
FIRST INVESTORS INCOME FUNDS
September 30, 2008
CASH | INVESTMENT | |||||||||
MANAGEMENT | GOVERNMENT | GRADE | INCOME | |||||||
Assets | ||||||||||
Investments in securities: | ||||||||||
Cost – Unaffiliated issuers | $234,838,478 | $235,919,891 | $300,984,740 | $592,779,098 | ** | |||||
Cost – Affiliated money market fund (Note 2) | — | 6,785,000 | 5,750,000 | 16,005,000 | ||||||
Total cost of investments | $234,838,478 | $242,704,891 | $306,734,740 | $608,784,098 | ||||||
Value – Unaffiliated issuers (Note 1A) | $234,838,478 | $235,306,372 | $279,675,244 | $486,239,061 | ** | |||||
Value – Affiliated money market fund (Note 2) | — | 6,785,000 | 5,750,000 | 16,005,000 | ||||||
Total value of investments | 234,838,478 | 242,091,372 | 285,425,244 | 502,244,061 | ||||||
Cash | 2,140,928 | 105,177 | 174,210 | 116,311 | ||||||
Receivables: | ||||||||||
Investment Securities sold | 1,515,887 | — | 1,809,955 | 2,592,465 | ||||||
Interest and dividends | 406,048 | 1,117,667 | 4,739,671 | 11,977,805 | ||||||
Shares sold | — | 1,985,559 | 791,526 | 349,146 | ||||||
Other assets | 32,896 | 35,613 | 11,147 | 255,292 | ||||||
Total Assets | 238,934,237 | 245,335,388 | 292,951,753 | 517,535,080 | ||||||
Liabilities | ||||||||||
Payables: | ||||||||||
Investment securities purchased | — | 4,670,030 | 5,800,954 | 1,019,093 | ||||||
Collateral for securities loaned (Note 1H) | — | — | — | 39,873,072 | ||||||
Shares redeemed. | 1,020,722 | 472,479 | 1,843,366 | 883,064 | ||||||
Dividends payable | 50,570 | 92,565 | 156,564 | 703,861 | ||||||
Accrued advisory fees | 91,535 | 121,885 | 145,806 | 306,235 | ||||||
Accrued shareholder servicing costs. | 59,992 | 36,363 | 51,207 | 85,918 | ||||||
Accrued expenses | 51,967 | 41,436 | 12,945 | 40,571 | ||||||
Total Liabilities | 1,274,786 | 5,434,758 | 8,010,842 | 42,911,814 | ||||||
Net Assets | $237,659,451 | $239,900,630 | $284,940,911 | $474,623,266 | ||||||
Net Assets Consist of: | ||||||||||
Capital paid in | $237,659,451 | $250,048,186 | $339,067,531 | $760,779,786 | ||||||
Undistributed net investment income (deficit) | — | 100,547 | (1,367,287) | 1,811,639 | ||||||
Accumulated net realized loss on investments | — | (9,634,584) | (31,449,837) | (181,428,122) | ||||||
Net unrealized depreciation in value of investments | — | (613,519) | (21,309,496) | (106,540,037) | ||||||
Total | $237,659,451 | $239,900,630 | $284,940,911 | $474,623,266 | ||||||
Net Assets: | ||||||||||
Class A | $234,095,627 | $228,289,483 | $267,521,007 | $459,576,626 | ||||||
Class B | $ 3,563,824 | $ 11,611,147 | $ 17,419,904 | $ 15,046,640 | ||||||
Shares outstanding (Note 7): | ||||||||||
Class A | 234,095,627 | 21,215,694 | 32,506,311 | 187,402,103 | ||||||
Class B | 3,563,824 | 1,079,214 | 2,118,952 | 6,140,286 | ||||||
Net asset value and redemption price per share — Class A | $ 1.00 | # | $ 10.76 | $ 8.23 | $ 2.45 | |||||
Maximum offering price per share — Class A | ||||||||||
(Net asset value/.9425)* | N/A | $ 11.42 | $ 8.73 | $ 2.60 | ||||||
Net asset value and offering price per share — Class B (Note 7) | $ 1.00 | $ 10.76 | $ 8.22 | $ 2.45 |
#Also maximum offering price per share.
*On purchases of $100,000 or more, the sales charge is reduced.
**Investments at cost and value include $39,873,072 of collateral for securities loaned (Note 1H).
112 | See notes to financial statements | 113 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
TOTAL | GROWTH & | |||||||||||
RETURN | VALUE | BLUE CHIP | INCOME | GLOBAL | ||||||||
Assets | ||||||||||||
Investments in securities: | ||||||||||||
Cost – Unaffiliated issuers | $313,173,206 | $303,084,906 | $333,365,726 | $601,474,736 | $261,881,022 | |||||||
Cost – Affiliated money market fund (Note 2) | 3,400,000 | 18,480,000 | 1,225,000 | 5,890,000 | 13,310,000 | |||||||
Total cost of investments | $316,573,206 | $321,564,906 | $334,590,726 | $607,364,736 | $275,191,022 | |||||||
Value – Unaffiliated issuers (Note 1A) | $321,669,172 | $332,030,500 | $420,878,029 | $652,779,985 | $242,338,288 | |||||||
Value – Affiliated money market fund (Note 2) | 3,400,000 | 18,480,000 | 1,225,000 | 5,890,000 | 13,310,000 | |||||||
Total Value of Investments | 325,069,172 | 350,510,500 | 422,103,029 | 658,669,985 | 255,648,288 | |||||||
Cash | 136,592 | 141,213 | 72,233 | 103,222 | 240,379 | |||||||
Receivables: | ||||||||||||
Investment securities sold | 2,907,405 | 496,956 | 130,795 | 6,941,860 | 3,820,234 | |||||||
Dividends and interest | 1,857,347 | 763,478 | 628,663 | 922,010 | 504,601 | |||||||
Shares sold | 735,275 | 833,310 | 683,916 | 1,421,455 | 506,678 | |||||||
Forward currency contracts (Note 6) | — | — | — | — | 24,666 | |||||||
Other assets | 15,173 | 17,262 | 22,720 | 33,778 | 33,561 | |||||||
Total Assets | 330,720,964 | 352,762,719 | 423,641,356 | 668,092,310 | 260,778,407 | |||||||
Liabilities | ||||||||||||
Payables: | ||||||||||||
Investment securities purchased | 310,410 | 470,337 | — | 1,151,219 | 2,225,116 | |||||||
Shares redeemed | 599,713 | 910,008 | 926,274 | 1,756,694 | 576,957 | |||||||
Dividends payable | 30,834 | 21,550 | 7,237 | 8,898 | — | |||||||
Accrued advisory fees | 225,028 | 240,148 | 286,218 | 449,747 | 227,345 | |||||||
Accrued shareholder servicing costs. | 73,419 | 84,699 | 130,413 | 184,693 | 73,588 | |||||||
Accrued expenses | 25,128 | 15,303 | 18,552 | 19,062 | 56,606 | |||||||
Total Liabilities | 1,264,532 | 1,742,045 | 1,368,694 | 3,570,313 | 3,159,612 | |||||||
Net Assets | $329,456,432 | $351,020,674 | $422,272,662 | $664,521,997 | $257,618,795 | |||||||
Net Assets Consist of: | ||||||||||||
Capital paid in | $324,183,687 | $352,885,161 | $434,873,565 | $613,755,312 | $284,244,340 | |||||||
Undistributed net investment income | 978,375 | 917,502 | 1,263,414 | 2,514,196 | (93,065) | |||||||
Accumulated net realized loss on investments | ||||||||||||
and foreign currency transactions | (4,201,596) | (31,727,583) | (101,376,620) | (3,052,760) | (6,976,269) | |||||||
Net unrealized appreciation (depreciation) in value of | ||||||||||||
investments and foreign currency transactions | 8,495,966 | 28,945,594 | 87,512,303 | 51,305,249 | (19,556,211) | |||||||
Total | $329,456,432 | $351,020,674 | $422,272,662 | $664,521,997 | $257,618,795 | |||||||
Net Assets: | ||||||||||||
Class A | $304,419,095 | $333,576,382 | $395,747,171 | $623,384,741 | $248,884,632 | |||||||
Class B | $ 25,037,337 | $ 17,444,292 | $ 26,525,491 | $ 41,137,256 | $ 8,734,163 | |||||||
Shares outstanding (Note 7): | ||||||||||||
Class A | 22,994,648 | 50,146,639 | 19,324,317 | 47,953,870 | 43,250,458 | |||||||
Class B | 1,920,836 | 2,664,388 | 1,390,804 | 3,343,329 | 1,716,678 | |||||||
Net asset value and redemption price | ||||||||||||
per share – Class A. | $ 13.24 | $ 6.65 | $ 20.48 | $ 13.00 | $ 5.75 | |||||||
Maximum offering price per share – Class A | ||||||||||||
(Net asset value/.9425)* | $ 14.05 | $ 7.06 | $ 21.73 | $ 13.79 | $ 6.10 | |||||||
Net asset value and offering price per share – | ||||||||||||
Class B (Note 7) | $ 13.03 | $ 6.55 | $ 19.07 | $ 12.30 | $ 5.09 | |||||||
*On purchases of $100,000 or more, the sales charge is reduced |
114 | See notes to financial statements | 115 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
SELECT | SPECIAL | |||||||||
GROWTH | OPPORTUNITY | SITUATIONS | INTERNATIONAL | |||||||
Assets | ||||||||||
Investments in securities: | ||||||||||
Cost – Unaffiliated issuers | $229,193,447 | $370,268,464 | $235,606,022 | $114,040,092 | ||||||
Cost – Affiliated money market fund (Note 2) | 5,150,000 | 12,900,000 | 34,010,000 | 2,450,000 | ||||||
Total cost of investments | $234,343,447 | $383,168,464 | $269,616,022 | $116,490,092 | ||||||
Value – Unaffiliated issuers (Note 1A) | $221,327,073 | $393,098,228 | $238,172,750 | $103,525,960 | ||||||
Value – Affiliated money market fund (Note 2) | 5,150,000 | 12,900,000 | 34,010,000 | 2,450,000 | ||||||
Total Value of Investments | 226,477,073 | 405,998,228 | 272,182,750 | 105,975,960 | ||||||
Cash | 127,015 | 117,354 | 164,102 | 689,677 | ||||||
Receivables: | ||||||||||
Investment securities sold | 1,709,204 | 3,303,516 | — | 3,405,142 | ||||||
Dividends and interest | 118,627 | 488,303 | 583,601 | 409,310 | ||||||
Shares sold | 658,624 | 898,345 | 587,276 | 596,494 | ||||||
Foreign exchange contracts (Note 6) | — | — | — | 1,219,495 | ||||||
Other assets | 11,113 | 19,726 | 12,509 | 3,844 | ||||||
Total Assets | 229,101,656 | 410,825,472 | 273,530,238 | 112,299,922 | ||||||
Liabilities | ||||||||||
Payables: | ||||||||||
Investment securities purchased | 3,063,262 | 570,725 | 2,170,440 | 3,105,507 | ||||||
Shares redeemed. | 609,799 | 800,113 | 670,804 | 334,933 | ||||||
Forward currency contracts (Note 6) | — | — | — | 101,987 | ||||||
Accrued advisory fees | 157,214 | 286,858 | 198,953 | 99,441 | ||||||
Accrued shareholder servicing costs | 72,057 | 113,044 | 76,603 | 47,644 | ||||||
Accrued expenses | 7,859 | 20,044 | 36,313 | 34,654 | ||||||
Total Liabilities | 3,910,191 | 1,790,784 | 3,153,113 | 3,724,166 | ||||||
Net Assets | $225,191,465 | $409,034,688 | $270,377,125 | $108,575,756 | ||||||
Net Assets Consist of: | ||||||||||
Capital paid in | $266,391,715 | $374,927,693 | $260,497,554 | $136,172,006 | ||||||
Undistributed net investment income (loss) | — | — | 317,458 | (914,170) | ||||||
Accumulated net realized gain (loss) on investments | ||||||||||
and foreign currency transactions | (33,333,876) | 11,277,231 | 6,995,385 | (17,274,899) | ||||||
Net unrealized appreciation (depreciation) in value of | ||||||||||
investments and foreign currency transactions | (7,866,374) | 22,829,764 | 2,566,728 | (9,407,181) | ||||||
Total | $225,191,465 | $409,034,688 | $270,377,125 | $108,575,756 | ||||||
Net Assets: | ||||||||||
Class A | $207,233,634 | $377,282,814 | $258,167,899 | $104,692,032 | ||||||
Class B | $ 17,957,831 | $ 31,751,874 | $ 12,209,226 | $ 3,883,724 | ||||||
Shares outstanding (Note 7): | ||||||||||
Class A | 30,964,735 | 16,411,210 | 12,810,152 | 11,042,852 | ||||||
Class B | 2,871,665 | 1,555,683 | 685,433 | 416,186 | ||||||
Net asset value and redemption price | ||||||||||
per share – Class A. | $6.69 | $ 22.99 | $ 20.15 | $ 9.48 | ||||||
Maximum offering price per share – Class A | ||||||||||
(Net asset value/.9425)* | $7.10 | $ 24.39 | $ 21.38 | $ 10.06 | ||||||
Net asset value and offering price per share – | ||||||||||
Class B (Note 7) | $ 6.25 | $ 20.41 | $ 17.81 | $ 9.33 | ||||||
*On purchases of $100,000 or more, the sales charge is reduced |
116 | See notes to financial statements | 117 |
Statements of Operations
FIRST INVESTORS INCOME FUNDS
Year Ended September 30, 2008
CASH | INVESTMENT | |||||||||
MANAGEMENT | GOVERNMENT | GRADE | INCOME | |||||||
Investment Income | ||||||||||
Income (Note 1F): | ||||||||||
Interest. | $ 8,318,282 | $ 12,092,564 | $ 16,610,082 | $ 46,095,299 | ||||||
Dividends | — | — | 1,557,020 | 338,351 | ||||||
Dividends from affiliate (Note 2) | — | 32,363 | 85,269 | 158,570 | ||||||
Securities lending income | — | — | — | 470,009 | ||||||
Total income | 8,318,282 | 12,124,927 | 18,252,371 | 47,062,229 | ||||||
Expenses (Notes 1 and 3): | ||||||||||
Advisory fees | 1,211,658 | 1,483,763 | 2,042,543 | 3,956,604 | ||||||
Distribution plan expenses – Class A | — | 639,850 | 865,619 | 1,562,525 | ||||||
Distribution plan expenses – Class B | 23,208 | 115,292 | 209,366 | 199,880 | ||||||
Shareholder servicing costs | 758,509 | 432,231 | 618,285 | 1,108,666 | ||||||
Professional fees | 45,141 | 44,344 | 41,805 | 109,027 | ||||||
Registration fees | 57,943 | 35,285 | 41,629 | 37,749 | ||||||
Custodian fees | 55,846 | 36,886 | 25,998 | 31,803 | ||||||
Reports to shareholders | 29,993 | 14,697 | 23,985 | 44,601 | ||||||
Trustees’ fees | 12,930 | 11,475 | 15,901 | 28,013 | ||||||
Other expenses | 57,897 | 56,343 | 60,919 | 103,229 | ||||||
Total expenses | 2,253,125 | 2,870,166 | 3,946,050 | 7,182,097 | ||||||
Less: Expenses waived | (288,617) | (309,538) | (384,732) | (43,601) | ||||||
Expenses paid indirectly | (2,551) | (7,033) | (11,779) | (16,208) | ||||||
Net expenses | 1,961,957 | 2,553,595 | 3,549,539 | 7,122,288 | ||||||
Net investment income | 6,356,325 | 9,571,332 | 14,702,832 | 39,939,941 | ||||||
Realized and Unrealized Gain (Loss) on Investments (Note 2): | ||||||||||
Net realized gain (loss) on investments | — | 241,855 | (19,862,926) | (23,520,343) | ||||||
Net unrealized appreciation (depreciation) of investments | — | 2,251,120 | (20,764,517) | (80,270,992) | ||||||
Net gain (loss) on investments | — | 2,492,975 | (40,627,443) | (103,791,335) | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ 6,356,325 | $ 12,064,307 | $(25,924,611) | $(63,851,394) |
118 | See notes to financial statements | 119 |
Statements of Operations
FIRST INVESTORS EQUITY FUNDS
Year Ended September 30, 2008
TOTAL | GROWTH & | |||||||||||
RETURN | VALUE | BLUE CHIP | INCOME | GLOBAL | ||||||||
Investment Income | ||||||||||||
Dividends | $ 5,068,465 | (a) | $ 11,059,622 | (b) | $ 11,066,441 | (c) | $ 17,741,473 | (d) | $ 6,278,362 | (e) | ||
Dividends from affiliate (Note 2) | 169,817 | 216,060 | 38,305 | 46,199 | 128,590 | |||||||
Interest | 8,257,281 | 484,352 | 185,805 | 32,850 | 197,083 | |||||||
Total income | 13,495,563 | 11,760,034 | 11,290,551 | 17,820,522 | 6,604,035 | |||||||
Expenses (Notes 1 and 3): | ||||||||||||
Advisory fees | 2,738,997 | 2,935,004 | 3,672,747 | 5,613,699 | 3,101,469 | |||||||
Distribution plan expenses – Class A | 1,014,251 | 1,119,021 | 1,388,119 | 2,178,206 | 915,370 | |||||||
Distribution plan expenses – Class B | 297,642 | 220,641 | 354,355 | 541,004 | 119,275 | |||||||
Shareholder servicing costs | 852,249 | 958,218 | 1,542,786 | 2,134,138 | 932,874 | |||||||
Professional fees. | 47,060 | 56,610 | 79,786 | 97,136 | 66,650 | |||||||
Custodian fees | 41,790 | 29,837 | 32,623 | 56,349 | 236,012 | |||||||
Registration fees | 34,063 | 36,418 | 33,614 | 40,148 | 33,833 | |||||||
Reports to shareholders | 30,991 | 36,204 | 28,778 | 77,735 | 33,668 | |||||||
Trustees’ fees | 18,863 | 20,271 | 25,712 | 40,074 | 16,328 | |||||||
Other expenses | 73,940 | 76,758 | 84,625 | 141,308 | 96,550 | |||||||
Total expenses | 5,149,846 | 5,488,982 | 7,243,145 | 10,919,797 | 5,552,029 | |||||||
Less: Expenses waived | — | — | — | — | (89,484) | |||||||
Expenses paid indirectly | (12,229) | (11,188) | (10,974) | (11,126) | (1,532) | |||||||
Net expenses | 5,137,617 | 5,477,794 | 7,232,171 | 10,908,671 | 5,461,013 | |||||||
Net investment income | 8,357,946 | 6,282,240 | 4,058,380 | 6,911,851 | 1,143,022 | |||||||
Realized and Unrealized Gain (Loss) on Investments | ||||||||||||
(Note 2): | ||||||||||||
Net realized gain (loss) on: | ||||||||||||
Investments | (1,608,059) | (4,080,397) | (6,119,538) | 1,823,903 | (2,493,335) | |||||||
Foreign currency transactions | — | — | — | — | (93,065) | |||||||
Net realized gain (loss) on investments | ||||||||||||
and foreign currency transactions | (1,608,059) | (4,080,397) | (6,119,538) | 1,823,903 | (2,586,400) | |||||||
Net unrealized depreciation of: | ||||||||||||
Investments | (55,680,582) | (75,530,195) | (104,718,281) | (192,026,266) | (85,598,345) | |||||||
Foreign currency transactions | — | — | — | — | (23,000) | |||||||
Net unrealized depreciation of investments | ||||||||||||
and foreign currency transactions | (55,680,582) | (75,530,195) | (104,718,281) | (192,026,266) | (85,621,345) | |||||||
Net loss on investments and foreign currency transactions | (57,288,641) | (79,610,592) | (110,837,819) | (190,202,363) | (88,207,745) | |||||||
Net Decrease in Net Assets Resulting from Operations | $(48,930,695) | $(73,328,352) | $(106,779,439) | $(183,290,512) | $(87,064,723) |
(a) Net of $22,511 foreign taxes withheld
(b) Net of $56,897 foreign taxes withheld
(c) Net of $40,928 foreign taxes withheld
(d) Net of $84,380 foreign taxes withheld
(e) Net of $540,690 foreign taxes withheld
120 | See notes to financial statements | 121 |
Statements of Operations
FIRST INVESTORS EQUITY FUNDS
Year Ended September 30, 2008
SELECT | SPECIAL | |||||||||
GROWTH | OPPORTUNITY | SITUATIONS | INTERNATIONAL | |||||||
Investment Income | ||||||||||
Dividends | $ 2,197,019 | $ 6,513,657 | (f) | $ 4,356,177 | $ 2,399,906 | (g) | ||||
Dividends from affiliate (Note 2) | 58,266 | 47,587 | 197,699 | 41,384 | ||||||
Interest. | 212,542 | 135,894 | 295,056 | 182,987 | ||||||
Total income | 2,467,827 | 6,697,138 | 4,848,932 | 2,624,277 | ||||||
Expenses (Notes 1 and 3): | ||||||||||
Advisory fees | 1,926,635 | 3,579,637 | 2,729,537 | 1,195,267 | ||||||
Distribution plan expenses – Class A | 703,339 | 1,328,525 | 844,880 | 351,850 | ||||||
Distribution plan expenses – Class B | 224,382 | 420,193 | 152,808 | 46,827 | ||||||
Shareholder servicing costs | 871,323 | 1,415,055 | 956,280 | 566,076 | ||||||
Professional fees. | 35,615 | 54,696 | 56,127 | 27,978 | ||||||
Custodian fees | 29,676 | 37,366 | 21,715 | 122,974 | ||||||
Registration fees | 44,434 | 36,013 | 29,896 | 23,515 | ||||||
Reports to shareholders | 26,408 | 50,237 | 34,044 | 19,743 | ||||||
Trustees’ fees | 13,119 | 24,712 | 15,120 | 6,189 | ||||||
Other expenses | 42,403 | 94,619 | 53,391 | 31,630 | ||||||
Total expenses | 3,917,334 | 7,041,053 | 4,893,798 | 2,392,049 | ||||||
Less: Expenses (waived) repaid to advisor (Note 3) | — | — | (354,279) | 19,276 | ||||||
Expenses paid indirectly | (26,401) | (8,162) | (8,045) | (588) | ||||||
Net expenses | 3,890,933 | 7,032,891 | 4,531,474 | 2,410,737 | ||||||
Net investment income (loss) | (1,423,106) | (335,753) | 317,458 | 213,540 | ||||||
Realized and Unrealized Gain (Loss) on Investments | ||||||||||
and Foreign Currency Transactions (Note 2): | ||||||||||
Net realized gain (loss) on: | ||||||||||
Investments | (33,331,034) | 11,704,587 | 7,202,882 | (12,642,581) | ||||||
Foreign currency transactions | — | — | — | (1,642,654) | ||||||
Net realized gain (loss) on investments | ||||||||||
and foreign currency transactions | (33,331,034) | 11,704,587 | 7,202,882 | (14,285,235) | ||||||
Net unrealized depreciation of: | ||||||||||
Investments | (33,242,861) | (111,901,468) | (46,989,996) | (24,925,722) | ||||||
Foreign currency transactions | — | — | — | 1,595,250 | ||||||
Net unrealized depreciation of investments | ||||||||||
and foreign currency transactions | (33,242,861) | (111,901,468) | (46,989,996) | (23,330,472) | ||||||
Net loss on investments and foreign currency transactions | (66,573,895) | (100,196,881) | (39,787,114) | (37,615,707) | ||||||
Net Decrease in Net Assets Resulting from Operations | $(67,997,001) | $(100,532,634) | $(39,469,656) | $(37,402,167) |
(f) Net of $11,489 foreign taxes withheld
(g) Net of $286,987 foreign taxes withheld
122 | See notes to financial statements | 123 |
Statements of Changes in Net Assets
FIRST INVESTORS INCOME FUNDS
CASH MANAGEMENT | GOVERNMENT | INVESTMENT GRADE | INCOME | |||||||||||||||
Year Ended September 30 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||||
Increase (Decrease) in Net Assets From Operations | ||||||||||||||||||
Net investment income | $ 6,356,325 | $ 9,601,006 | $ 9,571,332 | $ 8,749,400 | $ 14,702,832 | $ 12,265,938 | $ 39,939,941 | $ 41,632,907 | ||||||||||
Net realized gain (loss) on investments | — | — | 241,855 | (362,482) | (19,862,926) | 461,845 | (23,520,343) | (5,253,591) | ||||||||||
Net unrealized appreciation (depreciation) of investments | — | — | 2,251,120 | (191,790) | (20,764,517) | (2,402,019) | (80,270,992) | 1,569,619 | ||||||||||
Net increase (decrease) in net assets resulting | ||||||||||||||||||
from operations | 6,356,325 | 9,601,006 | 12,064,307 | 8,195,128 | (25,924,611) | 10,325,764 | (63,851,394) | 37,948,935 | ||||||||||
Dividends to Shareholders | ||||||||||||||||||
Net investment income – Class A | (6,300,152) | (9,508,072) | (9,508,609) | (8,953,505) | (14,466,779) | (12,261,832) | (39,378,847) | (39,264,321) | ||||||||||
Net investment income – Class B | (56,173) | (92,934) | (433,580) | (489,437) | (901,522) | (944,574) | (1,353,711) | (1,743,259 | ||||||||||
Total dividends | (6,356,325) | (9,601,006) | (9,942,189) | (9,442,942) | (15,368,301) | (13,206,406) | (40,732,558) | (41,007,580) | ||||||||||
Share Transactions * | ||||||||||||||||||
Class A: | ||||||||||||||||||
Proceeds from shares sold | 228,564,733 | 234,508,668 | 53,495,830 | 38,427,226 | 76,586,604 | 69,936,306 | 45,861,746 | 60,588,115 | ||||||||||
Reinvestment of dividends | 6,186,351 | 9,341,321 | 8,447,996 | 7,807,197 | 12,726,546 | 10,583,520 | 31,092,107 | 30,474,627 | ||||||||||
Cost of shares redeemed | (218,169,828) | (226,716,504) | (34,189,386) | (32,955,729) | (53,576,760) | (38,531,439) | (79,571,081) | (79,486,802) | ||||||||||
16,581,256 | 17,133,485 | 27,754,440 | 13,278,694 | 35,736,390 | 41,988,387 | (2,617,228) | 11,575,940 | |||||||||||
Class B: | ||||||||||||||||||
Proceeds from shares sold | 6,076,772 | 2,857,393 | 2,672,620 | 1,656,236 | 2,841,907 | 2,657,890 | 1,365,640 | 2,526,656 | ||||||||||
Reinvestment of dividends | 52,562 | 84,139 | 400,468 | 449,226 | 819,873 | 853,540 | 1,062,813 | 1,307,604 | ||||||||||
Cost of shares redeemed | (4,896,034) | (3,120,867) | (3,225,273) | (3,659,377) | (5,550,881) | (5,240,826) | (8,257,605) | (9,854,689) | ||||||||||
1,233,300 | (179,335) | (152,185) | (1,553,915) | (1,889,101) | (1,729,396) | (5,829,152) | (6,020,429) | |||||||||||
Net increase (decrease) from share transactions | 17,814,556 | 16,954,150 | 27,602,255 | 11,724,779 | 33,847,289 | 40,258,991 | (8,446,380) | 5,555,511 | ||||||||||
Net increase (decrease) in net assets | 17,814,556 | 16,954,150 | 29,724,373 | 10,476,965 | (7,445,623) | 37,378,349 | (113,030,332) | 2,496,866 | ||||||||||
Net Assets | ||||||||||||||||||
Beginning 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 | ||||||||||
End of year † | $ 237,659,451 | $ 219,844,895 | $ 239,900,630 | $ 210,176,257 | $ 284,940,911 | $ 292,386,534 | $ 474,623,266 | $ 587,653,598 | ||||||||||
†Includes undistributed net investment income (deficit) of | $ — | $ — | $ 100,547 | $ 6,781 | $ (1,367,287) | $ (3,329,972) | $ 1,811,639 | $ 2,359,858 | ||||||||||
Shares Issued and Redeemed | ||||||||||||||||||
Class A: | ||||||||||||||||||
Sold | 228,564,733 | 234,508,668 | 4,941,143 | 3,603,914 | 8,193,353 | 7,387,319 | 16,524,176 | 19,785,469 | ||||||||||
Issued for dividends reinvested | 6,186,351 | 9,341,321 | 780,509 | 731,771 | 1,373,634 | 1,117,383 | 11,314,035 | 9,965,886 | ||||||||||
Redeemed | (218,169,828) | (226,716,504) | (3,164,061) | (3,086,866) | (5,787,841) | (4,068,637) | (28,751,382) | (25,966,873) | ||||||||||
Net increase (decrease) in Class A shares outstanding | 16,581,256 | 17,133,485 | 2,557,591 | 1,248,819 | 3,779,146 | 4,436,065 | (913,171) | 3,784,482 | ||||||||||
Class B: | ||||||||||||||||||
Sold | 6,076,772 | 2,857,393 | 246,088 | 155,318 | 302,164 | 280,947 | 491,818 | 829,168 | ||||||||||
Issued for dividends reinvested | 52,562 | 84,139 | 36,992 | 42,104 | 88,380 | 90,199 | 386,088 | 427,922 | ||||||||||
Redeemed | (4,896,034) | (3,120,867) | (298,716) | (342,831) | (595,157) | (552,729) | (2,979,556) | (3,219,167) | ||||||||||
Net increase (decrease) in Class B shares outstanding | 1,233,300 | (179,335) | (15,636) | (145,409) | (204,613) | (181,583) | (2,101,650) | (1,962,077) |
124 | See notes to financial statements | 125 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
TOTAL RETURN | VALUE | BLUE CHIP | GROWTH & INCOME | |||||||||||||
Year Ended September 30 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||
Increase (Decrease) in Net Assets From Operations | ||||||||||||||||
Net investment income | $ 8,357,946 | $ 7,375,510 | $ 6,282,240 | $ 5,429,775 | $ 4,058,380 | $ 3,045,447 | $ 6,911,851 | $ 4,007,275 | ||||||||
Net realized gain (loss) on investments | (1,608,059) | 9,847,727 | (4,080,397) | 7,421,981 | (6,119,538) | 12,432,271 | 1,823,903 | 20,850,814 | ||||||||
Net unrealized appreciation (depreciation) of investments | (55,680,582) | 23,270,714 | (75,530,195) | 29,157,401 | (104,718,281) | 56,419,022 | (192,026,266) | 99,717,015 | ||||||||
Net increase (decrease) in net assets resulting | ||||||||||||||||
from operations | (48,930,695) | 40,493,951 | (73,328,352) | 42,009,157 | (106,779,439) | 71,896,740 | (183,290,512) | 124,575,104 | ||||||||
Distributions to Shareholders | ||||||||||||||||
Net investment income – Class A | (8,482,572) | (6,496,959) | (6,075,415) | (4,884,892) | (3,843,653) | (2,538,723) | (5,193,481) | (3,321,330) | ||||||||
Net investment income – Class B | (544,177) | (437,230) | (206,356) | (158,524) | (67,462) | — | (90,794) | (20,137) | ||||||||
Net realized gains – Class A | (6,767,191) | (2,189,339) | — | — | — | — | (10,953,020) | (10,825,654) | ||||||||
Net realized gains – Class B | (625,604) | (248,051) | — | — | — | — | (913,158) | (1,163,363) | ||||||||
Total distributions | (16,419,544) | (9,371,579) | (6,281,771) | (5,043,416) | (3,911,115) | (2,538,723) | (17,150,453) | (15,330,484) | ||||||||
Share Transactions * | ||||||||||||||||
Class A: | ||||||||||||||||
Proceeds from shares sold | 54,926,724 | 58,416,394 | 61,763,002 | 100,634,552 | 50,687,564 | 58,252,544 | 109,163,017 | 144,742,009 | ||||||||
Value of shares issued for acquisition** | — | — | — | — | — | 42,266,488 | — | — | ||||||||
Reinvestment of distributions. | 15,063,988 | 8,570,045 | 5,987,167 | 4,810,843 | 3,808,942 | 2,514,542 | 16,025,049 | 14,046,975 | ||||||||
Cost of shares redeemed | (60,728,853) | (51,721,710) | (73,184,887) | (62,678,699) | (82,062,296) | (77,931,789) | (123,461,494) | (121,637,432) | ||||||||
9,261,859 | 15,264,729 | (5,434,718) | 42,766,696 | (27,565,790) | 25,101,785 | 1,726,572 | 37,151,552 | |||||||||
Class B: | ||||||||||||||||
Proceeds from shares sold | 2,333,837 | 3,131,690 | 2,259,660 | 3,741,260 | 2,402,580 | 3,077,799 | 4,516,660 | 6,702,137 | ||||||||
Value of shares issued for acquisition** | — | — | — | — | — | 5,256,892 | — | — | ||||||||
Reinvestment of distributions. | 1,161,520 | 682,111 | 204,520 | 157,220 | 67,354 | — | 1,001,473 | 1,180,077 | ||||||||
Cost of shares redeemed | (7,419,892) | (8,579,532) | (7,612,489) | (7,606,342) | (13,705,467) | (13,096,048) | (17,146,873) | (22,768,583) | ||||||||
(3,924,535) | (4,765,731) | (5,148,309) | (3,707,862) | (11,235,533) | (4,761,357) | (11,628,740) | (14,886,369) | |||||||||
Net increase (decrease) from share transactions | 5,337,324 | 10,498,998 | (10,583,027) | 39,058,834 | (38,801,323) | 20,340,428 | (9,902,168) | 22,265,183 | ||||||||
Net increase (decrease) in net assets | (60,012,915) | 41,621,370 | (90,193,150) | 76,024,575 | (149,491,877) | 89,698,445 | (210,343,133) | 131,509,803 | ||||||||
Net Assets | ||||||||||||||||
Beginning 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 | ||||||||
End of year† | $ 329,456,432 | $ 389,469,347 | $ 351,020,674 | $ 441,213,824 | $ 422,272,662 | $ 571,764,539 | $ 664,521,997 | $ 874,865,130 | ||||||||
†Includes undistributed net investment income of | $ 978,375 | $ 1,278,939 | $ 917,502 | $ 1,142,213 | $ 1,263,414 | $ 1,116,148 | $ 2,514,196 | $ 973,789 | ||||||||
*Shares Issued and Redeemed | ||||||||||||||||
Class A: | ||||||||||||||||
Sold | 3,736,223 | 3,759,553 | 8,384,742 | 12,509,647 | 2,197,104 | 2,409,744 | 7,284,893 | 8,893,877 | ||||||||
Issued for acquisition** | — | — | — | — | — | 1,728,265 | — | — | ||||||||
Issued for distributions reinvested | 1,020,067 | 552,458 | 840,055 | 593,740 | 169,700 | 102,169 | 1,021,080 | 891,851 | ||||||||
Redeemed | (4,155,693) | (3,332,365) | (9,967,213) | (7,781,774) | (3,565,342) | (3,212,113) | (8,286,295) | (7,473,683) | ||||||||
Net increase (decrease) in Class A shares outstanding | 600,597 | 979,646 | (742,416) | 5,321,613 | (1,198,538) | 1,028,065 | 19,678 | 2,312,045 | ||||||||
Class B: | ||||||||||||||||
Sold | 162,847 | 204,942 | 311,458 | 473,203 | 111,952 | 136,806 | 318,321 | 435,580 | ||||||||
Issued for acquisition** | — | — | — | — | — | 230,867 | — | — | ||||||||
Issued for distributions reinvested | 79,189 | 44,782 | 28,911 | 19,735 | 3,069 | — | 65,169 | 79,575 | ||||||||
Redeemed | (509,436) | (560,413) | (1,051,771) | (962,290) | (633,838) | (581,227) | (1,209,209) | (1,482,827) | ||||||||
Net decrease in Class B shares outstanding | (267,400) | (310,689) | (711,402) | (469,352) | (518,817) | (213,554) | (825,719) | (967,672) |
**See Note 9
126 | See notes to financial statements | 127 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
GLOBAL | SELECT GROWTH | OPPORTUNITY | SPECIAL SITUATIONS | |||||||||||||
Year Ended September 30 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||
Increase (Decrease) in Net Assets From Operations | ||||||||||||||||
Net investment income (loss) | $ 1,143,022 | $ (304,687) | $ (1,423,106) | $ (1,259,160) | $ (335,753) | $ 2,398,990 | $ 317,458 | $ (936,145) | ||||||||
Net realized gain (loss) on investments | ||||||||||||||||
and foreign currenty transactions | (2,586,400) | 46,310,683 | (33,331,034) | 40,730,258 | 11,704,587 | 50,721,848 | 7,202,882 | 30,291,871 | ||||||||
Net unrealized appreciation (depreciation) | ||||||||||||||||
of investments and foreign currency transactions | (85,621,345) | 25,030,886 | (33,242,861) | 3,580,367 | (111,901,468) | 25,202,521 | (46,989,996) | 14,116,468 | ||||||||
Net increase (decrease) in net assets resulting | ||||||||||||||||
from operations | (87,064,723) | 71,036,882 | (67,997,001) | 43,051,465 | (100,532,634) | 78,323,359 | (39,469,656) | 43,472,194 | ||||||||
Distributions to Shareholders | ||||||||||||||||
Net investment income – Class A | (387,052) | (1,703,811) | — | — | (2,157,616) | — | — | — | ||||||||
Net investment income – Class B | — | (95,763) | — | — | (241,374) | — | — | — | ||||||||
Net realized gains – Class A | (41,309,270) | (25,963,154) | (34,525,068) | (16,002,768) | (40,556,491) | (20,488,349) | (14,772,999) | (21,193,345) | ||||||||
Net realized gains – Class B | (1,904,536) | (1,455,638) | (3,724,631) | (1,981,350) | (4,537,080) | (2,618,556) | (966,711) | (1,645,023) | ||||||||
Total distributions | (43,600,858) | (29,218,366) | (38,249,699) | (17,984,118) | (47,492,561) | (23,106,905) | (15,739,710) | (22,838,368) | ||||||||
Share Transactions * | ||||||||||||||||
Class A: | ||||||||||||||||
Proceeds from shares sold | 51,429,580 | 32,159,549 | 60,620,663 | 45,079,857 | 64,628,411 | 64,062,828 | 41,157,489 | 48,294,542 | ||||||||
Reinvestment of distributions. | 41,083,108 | 27,199,554 | 34,371,915 | 15,949,659 | 42,542,593 | 20,403,976 | 14,700,522 | 21,100,036 | ||||||||
Cost of shares redeemed | (40,792,493) | (37,229,022) | (33,794,385) | (36,742,589) | (76,137,000) | (88,627,638) | (40,045,712) | (43,381,291) | ||||||||
51,720,195 | 22,130,081 | 61,198,193 | 24,286,927 | 31,034,004 | (4,160,834) | 15,812,299 | 26,013,287 | |||||||||
Class B: | ||||||||||||||||
Proceeds from shares sold | 1,994,555 | 1,559,530 | 2,501,234 | 2,358,789 | 3,091,684 | 3,841,591 | 1,305,910 | 1,733,569 | ||||||||
Reinvestment of distributions. | 1,896,632 | 1,549,112 | 3,702,717 | 1,970,727 | 4,761,120 | 2,609,026 | 963,948 | 1,642,521 | ||||||||
Cost of shares redeemed | (4,097,969) | (4,240,943) | (3,964,542) | (4,462,038) | (13,013,176) | (12,113,021) | (4,810,972) | (4,822,147) | ||||||||
(206,782) | (1,132,301) | 2,239,409 | (132,522) | (5,160,372) | (5,662,404) | (2,541,114) | (1,446,057) | |||||||||
Net increase (decrease) from share transactions | 51,513,413 | 20,997,780 | 63,437,602 | 24,154,405 | 25,873,632 | (9,823,238) | 13,271,185 | 24,567,230 | ||||||||
Net increase (decrease) in net assets | (79,152,168) | 62,816,296 | (42,809,098) | 49,221,752 | (122,151,563) | 45,393,216 | (41,938,181) | 45,201,056 | ||||||||
Net Assets | ||||||||||||||||
Beginning 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 | ||||||||
End of year† | $ 257,618,795 | $ 336,770,963 | $ 225,191,465 | $ 268,000,563 | $ 409,034,688 | $ 531,186,251 | $ 270,377,125 | $ 312,315,306 | ||||||||
†Includes undistributed net investment income (deficit) of | $ (93,065) | $ 1,025,782 | $ — | $ — | $ — | $ 2,398,990 | $ 317,458 | $ — | ||||||||
*Shares Issued and Redeemed | ||||||||||||||||
Class A: | ||||||||||||||||
Sold | 7,067,592 | 4,050,899 | 7,496,389 | 4,765,079 | 2,401,751 | 2,107,842 | 1,867,242 | 2,019,030 | ||||||||
Issued for distributions reinvested | 5,206,984 | 3,693,256 | 3,919,261 | 1,822,725 | 1,490,630 | 721,695 | 625,820 | 923,327 | ||||||||
Redeemed. | (5,614,081) | (4,696,640) | (4,199,720) | (3,931,282) | (2,831,995) | (2,932,699) | (1,820,109) | (1,809,098) | ||||||||
Net increase (decrease) in Class A shares outstanding | 6,660,495 | 3,047,515 | 7,215,930 | 2,656,522 | 1,060,386 | (103,162) | 672,953 | 1,133,259 | ||||||||
Class B: | ||||||||||||||||
Sold | 306,217 | 216,529 | 323,798 | 262,040 | 127,952 | 140,039 | 65,821 | 80,360 | ||||||||
Issued for distributions reinvested | 270,176 | 230,957 | 449,359 | 235,478 | 186,857 | 101,414 | 46,166 | 79,633 | ||||||||
Redeemed | (619,922) | (592,221) | (526,068) | (501,113) | (538,141) | (441,498) | (245,486) | (225,014) | ||||||||
Net increase (decrease) in Class B shares outstanding | (43,529) | (144,735) | 247,089 | (3,595) | (223,332) | (200,045) | (133,499) | (65,021) |
128 | See notes to financial statements | 129 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
INTERNATIONAL | |||||||||
Year Ended September 30 | 2008 | 2007 | |||||||
Increase (Decrease) in Net Assets From Operations | |||||||||
Net investment income (loss) | $ 213,540 | $ (41,380) | |||||||
Net realized loss on investments | |||||||||
and foreign currenty transactions. | (14,285,235) | (997,950) | |||||||
Net unrealized appreciation (depreciation) | |||||||||
of investments and foreign currency transactions | (23,330,472) | 13,111,602 | |||||||
Net increase (decrease) in net assets resulting | |||||||||
from operations | (37,402,167) | 12,072,272 | |||||||
Distributions to Shareholders | |||||||||
Net realized gain – Class A | (2,659,071) | (191,658) | |||||||
Net realized gain – Class B | (111,221) | (10,723) | |||||||
Total distributions | (2,770,292) | (202,381) | |||||||
Share Transactions * | |||||||||
Class A: | |||||||||
Proceeds from shares sold | 61,600,305 | 70,673,752 | |||||||
Reinvestment of distributions. | 2,652,722 | 191,287 | |||||||
Cost of shares redeemed | (17,297,672) | (5,066,692) | |||||||
46,955,355 | 65,798,347 | ||||||||
Class B: | |||||||||
Proceeds from shares sold | 1,980,202 | 2,992,429 | |||||||
Reinvestment of distributions. | 111,198 | 10,605 | |||||||
Cost of shares redeemed | (870,776) | (365,541) | |||||||
1,220,624 | 2,637,493 | ||||||||
Net increase from share transactions | 48,175,979 | 68,435,840 | |||||||
Net increase in net assets | 8,003,520 | 80,305,731 | |||||||
Net Assets | |||||||||
Beginning of year | 100,572,236 | 20,266,505 | |||||||
�� End of year † | $ 108,575,756 | $ 100,572,236 | |||||||
†Includes undistributed net investment income (deficit) of | (914,170) | 744,306 | |||||||
*Shares Issued and Redeemed | |||||||||
Class A: | |||||||||
Sold | 5,014,211 | 5,913,413 | |||||||
Reinvestment of distributions. | 196,789 | 16,831 | |||||||
Redeemed. | (1,479,150) | (414,729) | |||||||
Net increase in Class A shares outstanding | 3,731,850 | 5,515,515 | |||||||
Class B: | |||||||||
Sold | 161,304 | 253,454 | |||||||
Reinvestment of distributions. | 8,336 | 936 | |||||||
Redeemed. | (73,967) | (30,527) | |||||||
Net increase in Class B shares outstanding. | 95,673 | 223,863 | |||||||
130 | See notes to financial statements |
Notes to Financial Statements
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
1. Significant Accounting Policies — First Investors Income Funds (“Income Funds”) and First Investors Equity Funds (“Equity Funds”) each a Delaware statutory trust (each a “Trust”, collectively, “the Trusts”), are registered under the Investment Company Act of 1940 (“the 1940 Act”) as a diversified, open-end management investment companies and operate as series funds. The Income Funds issue shares of beneficial interest in the Cash Management Fund, Government Fund, Investment Grade Fund and Fund For Income. 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 (formerly All-Cap Growth Fund), Opportunity Fund (formerly Mid-Cap Opportunity Fund), Special Situations Fund, and International Fund (each a “Fund”, collectively, “the Funds”). The Trusts acco unt separately for the assets, liabilities and operations of each Fund. The objective of each Fund as of September 30, 2008 is as follows:
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 seeks high current income.
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 seeks long-term capital growth.
Select Growth Fund seeks long-term growth of capital.
Opportunity Fund seeks long-term capital growth.
Special Situations Fund seeks long-term growth of capital.
International Fund primarily seeks long-term capital growth.
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
131 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
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. Short-term debt securities that mature in 60 days or less are valued at amortized cost.
The Funds monitor for significant events occurring prior to the close of trading on the New York Stock Exchange that could have a material impact on the value of any securities that are held by the Funds. Examples of such events include trading halts, natural disasters, political events and issuer-specific developments. If the Valuation Committee decides that such events warrant using fair value estimates, 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 also be valued at fair value as determined in good faith pursuant to procedures adopted by the Board. The Funds also use a pricing service to fair value foreign securities in the event that fluctuation in U.S. securities markets exceed a predetermined level. For valuation purposes, where applicable, quotations of foreign securities in foreign currency are translated to U.S. dollar equivalents using the foreign exchange quotation in effect. At September 30, 2008, Fund For Income held eight securities that were fair valued by its Valuation Committee with an aggregate value of $3,361,199, representing .7% of the Fund’s net assets. At September 30, 2008, fair value pricing was used for certain foreign securities in the Global Fund and International Fund portfolios.
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.
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
132 |
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, 2008, Capital Loss Carryovers were as follows:
Year Capital Loss Carryovers Expire | ||||||||||||||||||
Fund | Total | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||
Government | $ 9,634,584 | $ 2,144,197 | $ — | $ 54,921 | $ 2,120,906 | $ 1,600,894 | $ 740,643 | $ 1,909,473 | $1,063,550 | |||||||||
Investment Grade | 8,943,990 | 1,715,940 | 27,419 | 407,283 | 1,356,376 | 14 | 741,116 | 4,294,433 | 401,409 | |||||||||
Fund For Income | 157,563,760 | 13,810,649 | 18,563,112 | 52,099,335 | 25,740,298 | 10,200,012 | 7,456,986 | 24,660,250 | 5,033,118 | |||||||||
Value | 21,180,006 | — | — | 21,180,006 | — | — | — | — | — | |||||||||
Blue Chip* | 85,248,208 | — | 14,615,567 | 70,632,641 | — | — | — | — | — | |||||||||
International | 1,635,239 | — | — | — | — | — | — | 82,339 | 1,552,900 | |||||||||
Select Growth | 2,098,139 | — | — | — | — | — | — | — | 2,098,139 |
*For Blue Chip Fund, $3,583,654 of the $85,248,208 capital loss carryover was acquired in the reorganization with the Focused Equity Fund. Due to the reorganization the Fund will have available for utilization $2,138,552 for the taxable year 2010 and $1,445,102 for the taxable year 2011. These capital loss carryovers will expire as follows: $2,832,002 in 2010 and $751,652 in 2011.
Effective June 29, 2007, the Funds adopted the Financial Accounting Standards Board (“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. Management has reviewed the tax positions for each of the open tax years 2005 to 2008 and has determined the adoption of FIN 48 had no impact on the financial statements of the Funds.
C. Distributions to Shareholders—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. Distributions are declared from the total of net investment income plus or minus all realized short-term gains and losses on investments. 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, Opportunity Fund, Special Situations Fund, and International Fund are declared and paid annually. Distributions from net realized capital gains of each of the other Funds, if any, are normally declared and paid annually. Income
133 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
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 amortization of premiums, 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 the Trusts are allocated among and charged to the assets of each Fund on a fair and equitable basis, which may be based on the relative assets of each Fund or the nature of the services performed and relative applicability to each Fund.
E. 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.
F. 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.
G. Security Lending—Fund For Income may loan securities to other investors through the Securities Lending Management Agreement (“the Agreement”) with Credit Suisse. Under the terms of the Agreement, the Fund is required to maintain collateral with a market value not less than 101% of the market value of loaned securities. Collateral is adjusted daily in connection with changes in market value of securities on loan. Collateral may consist of cash or securities issued or guaranteed by the U.S. government or its agencies. Cash collateral may be invested in permissible instruments authorized by the Agreement. Interest earned on the collateral and premiums paid by the broker are
134 |
recorded as income by the Fund net of fees and rebates charged by Credit Suisse for its services in connection with this securities lending program. The Fund is subject to all of the investment risks associated with the securities that are being loaned and the investments made with the cash collateral. The Fund is also subject to the risks associated with a delay in recovering the loaned securities or an inability to recover the loaned securities in the event the collateral is not sufficient. The market value of securities on loan at Sep-tember 30, 2008, was $38,375,841 (including $1,212,215 of accrued interest), for which the Fund received cash collateral of $39,873,072.
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, 2008, the Bank of New York Mellon, custodian of each Fund (other than Global Fund and International Fund), has provided credits in the amount of $30,462 for the Income Funds and $73,339 for the Equity 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, 2008, expenses were reduced by $7,109 for the Income Funds and by $16,906 for the Equity Funds under these arrangements.
2. Security Transactions—For the year ended September 30, 2008, 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 | ||||
Government | $ — | $ — | $101,789,098 | $81,619,649 | ||||
Investment Grade | 311,889,639 | 253,706,122 | 106,832,834 | 122,835,680 | ||||
Fund For Income | 97,673,256 | 90,570,506 | — | — | ||||
Total Return | 144,357,623 | 135,452,702 | 58,585,571 | 72,817,052 | ||||
Value | 63,226,360 | 69,582,129 | — | — | ||||
Blue Chip | 41,374,628 | 72,068,963 | — | — | ||||
Growth & Income | 184,844,538 | 214,344,638 | — | — | ||||
Global | 411,827,915 | 404,774,055 | — | — | ||||
Select Growth | 267,711,320 | 245,125,167 | — | — | ||||
Opportunity | 188,786,562 | 213,600,332 | — | — | ||||
Special Situations | 144,084,916 | 165,009,277 | — | — | ||||
International | 186,211,241 | 139,649,773 | — | — |
135 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
At September 30, 2008, 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) | ||||
Government | $242,704,891 | $ 1,281,347 | $ 1,894,866 | $ (613,519) | ||||
Investment Grade | 309,061,894 | 253,720 | 23,890,370 | (23,636,650) | ||||
Fund For Income | 570,885,611 | 572,458 | 109,087,080 | (108,514,622) | ||||
Total Return | 318,557,339 | 37,222,165 | 30,710,332 | 6,511,833 | ||||
Value | 321,584,009 | 63,172,080 | 34,245,590 | 28,926,490 | ||||
Blue Chip | 341,590,195 | 109,348,519 | 28,835,685 | 80,512,834 | ||||
Growth & Income | 610,912,702 | 139,668,567 | 91,911,284 | 47,757,283 | ||||
Global | 281,147,016 | 10,416,467 | 35,915,196 | (25,498,729) | ||||
Select Growth | 234,343,447 | 9,874,032 | 17,740,406 | (7,866,374) | ||||
Opportunity | 383,171,089 | 67,836,813 | 45,009,675 | 22,827,138 | ||||
Special Situations | 269,662,751 | 28,516,512 | 25,996,513 | 2,519,999 | ||||
International* | 117,551,949 | 1,228,939 | 12,804,928 | (11,575,989) |
*Aggregate cost includes PFIC income of $586,401.
Certain of the Funds may invest in First Investors Cash Reserve Fund, LLC (“Cash Reserve Fund”), an affiliated unregistered money market fund managed by First Investors Management Company, Inc. During the year ended September 30, 2008, purchases, sales and dividend income earned by the Funds that invested in the Cash Reserve Fund were as follows:
Value at | Purchase | Sales | Value at | Dividend | ||||||
Fund | 9/30/07 | Shares/Cost | Shares/Costs | 9/30/08 | Income | |||||
Government | — | $36,650,000 | $ 29,865,000 | $ 6,785,000 | $ 32,363 | |||||
Investment Grade | — | 105,370,000 | 99,620,000 | 5,750,000 | 85,269 | |||||
Fund For Income | — | 68,080,000 | 52,075,000 | 16,005,000 | 158,570 | |||||
Total Return | — | 67,785,000 | 64,385,000 | 3,400,000 | 169,817 | |||||
Value | — | 36,720,000 | 18,240,000 | 18,480,000 | 216,060 | |||||
Blue Chip | — | 23,470,000 | 22,245,000 | 1,225,000 | 38,305 | |||||
Growth & Income | — | 55,270,000 | 49,380,000 | 5,890,000 | 46,199 | |||||
Global | — | 66,095,000 | 52,785,000 | 13,310,000 | 128,590 | |||||
Select Growth | — | 81,365,000 | 76,215,000 | 5,150,000 | 58,266 | |||||
Opportunity | — | 53,665,000 | 40,765,000 | 12,900,000 | 47,587 | |||||
Special Situations | — | 68,415,000 | 34,405,000 | 34,010,000 | 197,699 | |||||
International | — | 44,815,000 | 42,365,000 | 2,450,000 | 41,384 |
136 |
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, 2008, total trustees fees accrued by the Income Funds and Equity Funds amounted to $68,319 and $180,389, respectively.
The Investment Advisory Agreements provide as compensation to FIMCO, an annual fee, payable monthly, at the following rates:
Cash Management Fund— .50% of the Fund’s average daily net assets. For the year ended September 30, 2008, FIMCO has voluntarily waived $288,617 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. For the year ended September 30, 2008, FIMCO has voluntarily waived $309,538 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. For the year ended September 30, 2008, FIMCO has voluntarily waived $384,732 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. During the period July 1, 2008 to September 30, 2008, FIMCO has voluntarily waived 6.7% of the .75% annual fee to limit the advisory fee to .70% of the Fund’s average daily net assets.
Total Return, Value, Blue Chip, Growth & Income, Select Growth, and 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.
137 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
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. For the year ended September 30, 2008, 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. For the year ended September 30, 2008, 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.
For the year ended September 30, 2008, total advisory fees accrued to FIMCO by the Income Funds and Equity Funds were $8,694,568 and $27,492,992, respectively, of which $1,026,488 and $443,763, respectively, was voluntarily waived by FIMCO as noted above.
FIMCO, pursuant to an expense limitation agreement, assumed for the International Fund organizational expenses and expenses incurred during the fiscal year ended September 30, 2006, to limit the International Fund’s total expenses to 2.50% of the average daily net assets on the Class A shares and 3.20% of the average daily net assets on the Class B shares. FIMCO and the International Fund have agreed that any expenses of the International Fund assumed by FIMCO pursuant to this agreement shall be repaid to FIMCO by the International Fund in the first, second, or third fiscal years following the year ended September 30, 2006, if the total expenses of the International Fund for such year or years do not exceed 2.50% of the average daily net assets on Class A shares and 3.20% on the average daily net assets of Class B shares or lower expense limitations to which FIMCO may otherwise agree. The total organizational expenses and expenses incurred in excess of the above stated limitations was $101,265. During the year ended September 30, 2007, the International Fund has repaid FIMCO $81,989 pursuant to the terms of the agreement. During the period October 1, 2007 to September 30, 2008, the International Fund has repaid FIMCO the remaining amount of $19,276.
For the year ended September 30, 2008, FIC, as underwriter, received from the Income Funds and the Equity Funds $4,806,720 and $18,843,047, respectively, in commissions in connection with the sale of shares of the Funds, after allowing $10,313 and $5,648, respectively, to other dealers. For the year ended September 30, 2008, shareholder servicing costs for the Income Funds and the Equity Funds included $2,261,442 and
138 |
$7,508,571, respectively, in transfer agent fees accrued to ADM and $376,502 and $1,967,304, 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 Cash Management Fund is authorized to pay FIC a fee of 1% of the average daily net assets of the Class B shares. 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. For the year ended September 30, 2008, total distribution plan fees accrued to FIC by the Income Funds and the Equity Funds amounted to $3,615,740 and $12,220,688, respectively.
Wellington Management Company, LLP (“Wellington”) serves as investment sub-adviser to Global Fund, Smith Asset Management Group, L.P. serves as investment subadviser to Select Growth Fund, Paradigm Capital Management, Inc. serves as investment subadviser to Special Situations Fund and Vontobel Asset Management, Inc. serves as investment subadviser to International Fund. 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. Unless otherwise noted, these 144A securities are deemed to be liquid. At September 30, 2008, Cash Management Fund held one 144A security with a value of $7,025,709 representing 3.0% of the Fund’s net assets, Investment Grade Fund held eleven 144A securities with an aggregate value of $41,403,589 representing 14.5% of the Fund’s net assets, Fund For Income held twenty-two 144A securities with an aggregate value of $47,615,457 representing 10.0% of the Fund’s net assets, Total Return Fund held five 144A securities with an aggregate value of $6,387,495 representing 1.9% of the Fund’s net assets, Global Fund held one 144A security with a value of $247,500, representing .1% of the Fund’s net assets. Certai n 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. Unless otherwise noted, these section 4(2) securities are deemed to be liquid. At September 30, 2008, Cash Management Fund held fourteen Section 4(2) securities with an aggregate value of $75,344,487 representing 31.7% of the Fund’s net assets and Fund For Income held two Section 4(2) securities with an aggregate value of $2,793,481 representing .6% of the Fund’s net assets. These securities are valued as set forth in Note 1A.
5. High Yield Credit Risk—The investments of Fund For Income in high yield securities whether rated or unrated may be considered speculative and subject to
139 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
greater market fluctuations and risks of loss of income and principal than lower-yielding, higher-rated, fixed-income securities. The risk of loss due to default by the issuer may be significantly greater for holders of high-yielding securities, because such securities are generally unsecured and are often subordinated to other creditors of the issuer.
6. 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 has the following forward currency contracts outstanding at September 30, 2008:
Contracts to Buy | Unrealized | |||||||
Foreign Currency | In Exchange for | Settlement Date | Gain | |||||
1,745,262 | Norwegian Krone | US $ 308,203 | 10/1/08 | US $13,011 | ||||
147,863 | Euro | 216,243 | 10/1/08 | 8,546 | ||||
559,928 | Canadian Dollar | 535,048 | 10/2/08 | 8,404 | ||||
37,948 | Euro | 54,833 | 10/2/08 | 1,529 | ||||
658,602 | Euro | 927,575 | 10/2/08 | 2,468 | ||||
38,056,726 | Japanese Yen | 361,783 | 10/3/08 | 3,316 | ||||
$2,403,685 | $ 37,274 | |||||||
Contracts to Sell | Unrealized | |||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||
95,721 | Euro | US $ 138,317 | 10/1/08 | US $ (3,862) | ||||
37,197 | British Pound | 67,497 | 10/2/08 | (1,196) | ||||
59,253,564 | Japanese Yen | 557,906 | 10/2/08 | 221 | ||||
89,184,998 | Japanese Yen | 847,831 | 10/3/08 | (7,771) | ||||
$1,611,551 | $(12,608) | |||||||
Net Unrealized Gain on Forward Currency Contracts | $ 24,666 |
140 |
The International Fund had the following forward currency contracts outstanding at September 30, 2008:
Contracts to Buy | Unrealized | |||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||
242,665 | Euro | US $ 344,397 | 9/23/08 | US $ (3,434) | ||||
180,753 | Euro | 265,138 | 9/30/08 | 745 | ||||
105,944 | Swiss Franc | 97,559 | 9/30/08 | 496 | ||||
64,394 | Australian Dollar | 53,821 | 9/30/08 | (290) | ||||
159,860 | Euro | 233,498 | 10/1/08 | (360) | ||||
105,303 | British Pound | 194,088 | 10/1/08 | (45) | ||||
19,015,166 | Japanese Yen | 179,020 | 10/1/08 | (453) | ||||
121,662 | Swiss Franc | 111,827 | 10/1/08 | 1,225 | ||||
129,355 | Australian Dollar | 107,319 | 10/1/08 | (770) | ||||
6,262,369 | Hong Kong Dollar | 806,165 | 10/2/08 | (582) | ||||
240,819 | British Pound | 370,598 | 10/2/08 | 5,522 | ||||
12,290,027 | Japanese Yen | 117,210 | 10/2/08 | (286) | ||||
3,584,064 | Japanese Yen | 33,759 | 10/3/08 | — | ||||
$ 2,914,399 | $ 1,768 | |||||||
Contracts to Sell | Unrealized | |||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||
146,881 | Euro | US $ 214,983 | 9/25/08 | US $ (8,667) | ||||
399,915 | Euro | 588,933 | 9/26/08 | (27,192) | ||||
12,967,433 | Japanese Yen | 122,305 | 9/29/08 | 29 | ||||
17,623 | Swiss Franc | 16,191 | 9/29/08 | (170) | ||||
311,030 | British Pound | 574,503 | 9/30/08 | (20,112) | ||||
358,229 | Euro | 523,244 | 10/1/08 | (20,057) | ||||
12,718,810 | Indian Rupee | 273,258 | 10/1/08 | (2,444) | ||||
270,992 | Canadian Dollar | 261,777 | 10/1/08 | (6,894) | ||||
427,032 | British Pound | 772,670 | 10/2/08 | (11,514) | ||||
1,005,352 | Norwegian Krone | 174,236 | 10/2/08 | (4,192) | ||||
97,390 | Canadian Dollar | 94,042 | 10/2/08 | (2,441) | ||||
2,609 | Euro | 3,767 | 10/2/08 | (101) | ||||
344,686 | Australian Dollar | 271,888 | 10/3/08 | — | ||||
27,558 | Euro | 38,710 | 10/3/08 | — | ||||
$ 3,930,507 | $ (103,755) | |||||||
Net Unrealized Loss on Forward Currency Contracts | $ (101,987) |
The Global Fund had no foreign exchange contracts outstanding at September 30, 2008.
141 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
The International Fund had the following foreign exchange contracts outstanding at September 30, 2008.
Contracts to Buy | Unrealized | |||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||
16,743,000 | British Pound | US $30,085,718 | 2/11/09 | US ($242,394) | ||||
9,560,000 | Euro | 13,523,591 | 2/11/09 | (95,116) | ||||
7,745,000 | Canadian Dollar | 7,267,647 | 2/12/09 | 16,966 | ||||
6,350,000 | Australian Dollar | 5,141,872 | 2/13/09 | (132,998) | ||||
5,613,000 | Swiss Franc | 5,032,147 | 2/13/09 | (26,127) | ||||
2,714,000 | Australian Dollar | 2,151,646 | 3/4/09 | (10,845) | ||||
$63,202,621 | ($490,514) | |||||||
Contracts to Sell | Unrealized | |||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss) | |||||
9,560,000 | Euro | US $13,960,366 | 2/11/09 | US $531,891 | ||||
16,743,000 | British Pound | 30,261,183 | 2/11/09 | 417,859 | ||||
7,745,000 | Canadian Dollar | 7,238,809 | 2/12/09 | (45,804) | ||||
6,350,000 | Australian Dollar | 5,510,975 | 2/13/09 | 502,101 | ||||
5,613,000 | Swiss Franc | 5,199,918 | 2/13/09 | 193,898 | ||||
2,714,000 | Australian Dollar | 2,258,849 | 3/4/09 | 118,048 | ||||
86,060,000 | Indian Rupee | 1,824,444 | 3/16/09 | (7,984) | ||||
$66,254,544 | $1,710,009 | |||||||
Net Unrealized Gain on Foreign Exchange Contracts | $1,219,495 |
7. 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 terms 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 acquired through an exchange of Class B shares from another First Inve stors 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
142 |
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 distribution plan fees) are allocated daily to each class of shares based upon the relative proportion of net assets to each class.
8. Tax Components of Capital and Distributions to Shareholders—The tax character of distributions declared for the years ended September 30, 2008 and September 30, 2007 were as follows:
Year Ended September 30, 2008 | Year Ended September 30, 2007 | |||||||||||
Distributions | Distributions | |||||||||||
Declared from | Declared from | |||||||||||
Ordinary | Long-Term | Ordinary | Long-Term | |||||||||
Fund | Income | Capital Gain | Total | Income | Capital Gain | Total | ||||||
Cash Management | $ 6,356,325 | $ — | $ 6,356,325 | $ 9,601,006 | $ — | $ 9,601,006 | ||||||
Government | 9,942,189 | — | 9,942,189 | 9,442,942 | — | 9,442,942 | ||||||
Investment Grade | 15,368,301 | — | 15,368,301 | 13,206,406 | — | 13,206,406 | ||||||
Fund For Income | 40,732,558 | — | 40,732,558 | 41,007,580 | — | 41,007,580 | ||||||
Total Return | 12,765,632 | 3,653,912 | 16,419,544 | 6,934,189 | 2,437,390 | 9,371,579 | ||||||
Value | 6,281,771 | — | 6,281,771 | 5,043,416 | — | 5,043,416 | ||||||
Blue Chip | 3,911,115 | — | 3,911,115 | 2,538,723 | — | 2,538,723 | ||||||
Growth & Income | 16,175,556 | 974,898 | 17,150,454 | 3,341,467 | 11,989,017 | 15,330,484 | ||||||
Global | 21,687,345 | 21,913,513 | 43,600,858 | 1,799,574 | 27,418,792 | 29,218,366 | ||||||
Select Growth | 6,649,469 | 31,600,230 | 38,249,699 | — | 17,984,118 | 17,984,118 | ||||||
Opportunity | 8,679,957 | 38,812,604 | 47,492,561 | — | 23,106,905 | 23,106,905 | ||||||
Special Situations | 8,020,760 | 7,718,950 | 15,739,710 | — | 23,106,905 | 23,106,905 | ||||||
International | 2,770,292 | — | 2,770,292 | 202,381 | — | 202,381 |
143 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2008
As of September 30, 2008, the components of distributable earnings (deficit) on a tax basis were as follows:
Undistributed | Total | |||||||||
Undistributed | Capital Gains | Other | Unrealized | Distributable | ||||||
Ordinary | or (Loss) | Accumulated | Appreciation | Earnings | ||||||
Fund | Income | Carryover | Losses | (Depreciation) | (Deficit)* | |||||
Government | $ 100,547 | $ (9,634,584) | $ — | $ (613,519) | $ (10,147,556) | |||||
Investment Grade | 927,215 | (8,943,990) | (22,473,192) | (23,636,653) | (54,126,620) | |||||
Fund For Income | 3,786,222 | (157,563,760) | (23,864,360) | (108,514,622) | (286,156,520) | |||||
Total Return | 1,568,641 | — | (2,807,729) | 6,511,833 | 5,272,745 | |||||
Value | 917,502 | (21,180,006) | (10,594,449) | 28,992,466 | (1,864,487) | |||||
Blue Chip | 1,263,414 | (85,248,208) | (9,128,943) | 80,512,834 | (12,600,903) | |||||
Growth & Income | 3,234,635 | 451,328 | (676,562) | 47,757,284 | 50,766,685 | |||||
Global | — | — | (1,113,339) | (25,512,206) | (26,625,545) | |||||
Select Growth | — | (2,098,139) | (31,235,737) | (7,866,374) | (41,200,250) | |||||
Opportunity | 2,000,977 | 9,215,790 | — | 22,890,228 | 34,106,995 | |||||
Special Situations | 317,458 | 7,042,111 | — | 2,520,002 | 9,879,571 | |||||
International | 779,182 | (1,635,239) | (15,164,204) | (11,575,989) | (27,596,250) |
*Differences between book distributable earnings and tax distributable earnings consist primarily of wash sales, passive foreign investment companies and amortization of bond premium and discounts.
Other accumulated losses consist primarily of post-October loss deferrals.
For the year ended September 30, 2008, the following reclassifications were made to reflect permanent differences between book and tax reporting which are primarily due to the differences between book and tax treatment of investments in real estate trusts and passive foreign investment companies, foreign currency transactions and expiration of capital loss carryovers.
Capital | Undistributed | Accumulated Capital | ||||
Fund | Paid In | Ordinary Income | Gains (Losses) | |||
Government | $(1,017,364) | $ 464,623 | $ 552,741 | |||
Investment Grade | — | 2,628,154 | (2,628,154) | |||
Fund For Income | (1,832,458) | 244,398 | 1,588,060 | |||
Total Return | — | 368,238 | (368,238) | |||
Value | — | (225,180) | 225,180 | |||
Blue Chip | (765,897) | 1 | 765,896 | |||
Growth & Income | — | (87,169) | 87,169 | |||
Global | 203,296 | (810,988) | 607,692 | |||
Select Growth | (1,423,813) | 1,423,106 | 707 | |||
Opportunity | — | 335,753 | (335,753) | |||
International | — | 898,276 | (898,276) |
144 |
9. Reorganizations—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 C lass 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.
10. New Accounting Pronouncements—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, 2008, FIMCO does not believe the adoption of SFAS No. 157 will impact the financial statement amounts 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.
In March 2008, Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”) was issued and is effective for fiscal years beginning after November 15, 2008. SFAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operation and financial position. Management is currently evaluating the implications of SFAS 161. The impact on the Fund’s financial statement disclosures, if any, is currently being assessed.
145 |
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 | |||||||||||||||||||||||||||||||
Less Distributions | Ratio to Average Net | |||||||||||||||||||||||||||||||
Investment Operations | from | Ratio to Average Net | Assets Before Expenses | |||||||||||||||||||||||||||||
Net Asset | Net Realized | Net Asset | Assets** | Waived or Assumed | ||||||||||||||||||||||||||||
Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Year | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
of Year | Income | Investments | Operations | Income | Gain | Distributions | Year | Return | * | (in millions) | Credits | Credits | (a) | Income | Expenses | Income (Loss) | Rate | |||||||||||||||
CASH MANAGEMENT FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $1.00 | $.005 | — | $.005 | $.005 | — | $.005 | $1.00 | .50 | % | $171 | .70 | % | .70 | % | .50 | % | 1.05 | % | .15 | % | — | ||||||||||
2005 | 1.00 | .019 | — | .019 | .019 | — | .019 | 1.00 | 1.94 | 162 | .70 | .71 | 1.90 | 1.04 | 1.56 | — | ||||||||||||||||
2006 | 1.00 | .038 | — | .038 | .038 | — | .038 | 1.00 | 3.89 | 200 | .78 | .79 | 3.85 | 1.01 | 3.62 | — | ||||||||||||||||
2007 | 1.00 | .045 | — | .045 | .045 | — | .045 | 1.00 | 4.59 | 218 | .80 | .81 | 4.51 | .93 | 4.38 | — | ||||||||||||||||
2008 | 1.00 | .027 | — | .027 | .027 | — | .027 | 1.00 | 2.69 | 234 | .80 | .80 | 2.63 | .92 | 2.51 | — | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 1.00 | — | — | — | — | — | — | 1.00 | — | 5 | 1.20 | 1.20 | — | 1.55 | (.35) | — | ||||||||||||||||
2005 | 1.00 | .012 | — | .012 | .012 | — | .012 | 1.00 | 1.18 | 3 | 1.45 | 1.46 | 1.15 | 1.79 | .81 | — | ||||||||||||||||
2006 | 1.00 | .031 | — | .031 | .031 | — | .031 | 1.00 | 3.11 | 3 | 1.53 | 1.54 | 3.10 | 1.76 | 2.87 | — | ||||||||||||||||
2007 | 1.00 | .037 | — | .037 | .037 | — | .037 | 1.00 | 3.81 | 2 | 1.55 | 1.56 | 3.76 | 1.68 | 3.63 | — | ||||||||||||||||
2008 | 1.00 | .019 | — | .019 | .019 | — | .019 | 1.00 | 1.92 | 4 | 1.55 | 1.55 | 1.88 | 1.67 | 1.76 | — | ||||||||||||||||
GOVERNMENT FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $11.31 | $ .51 | $ (.18) | $ .33 | $ .51 | — | $ .51 | $11.13 | 3.01 | % | $179 | 1.10 | % | 1.10 | % | 4.59 | % | 1.56 | % | 4.13 | % | 60 | % | |||||||||
2005 | 11.13 | .50 | (.25) | .25 | .50 | — | .50 | 10.88 | 2.25 | 182 | 1.10 | 1.11 | 4.49 | 1.57 | 4.02 | 48 | ||||||||||||||||
2006 | 10.88 | .45 | (.13) | .32 | .49 | — | .49 | 10.71 | 3.02 | 186 | 1.10 | 1.11 | 4.14 | 1.35 | 3.89 | 43 | ||||||||||||||||
2007 | 10.71 | .49 | (.06) | .43 | .50 | — | .50 | 10.64 | 4.07 | 199 | 1.10 | 1.11 | 4.62 | 1.24 | 4.48 | 23 | ||||||||||||||||
2008 | 10.64 | .49 | .11 | .60 | .48 | — | .48 | 10.76 | 5.73 | 228 | 1.10 | 1.10 | 4.29 | 1.24 | 4.15 | 37 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 11.30 | .43 | (.18) | .25 | .43 | — | .43 | 11.12 | 2.25 | 17 | 1.85 | 1.85 | 3.84 | 2.31 | 3.38 | 60 | ||||||||||||||||
2005 | 11.12 | .41 | (.25) | .16 | .41 | — | .41 | 10.87 | 1.48 | 15 | 1.85 | 1.86 | 3.74 | 2.32 | 3.27 | 48 | ||||||||||||||||
2006 | 10.87 | .36 | (.12) | .24 | .40 | — | .40 | 10.71 | 2.32 | 13 | 1.85 | 1.86 | 3.39 | 2.10 | 3.14 | 43 | ||||||||||||||||
2007 | 10.71 | .41 | (.06) | .35 | .42 | — | .42 | 10.64 | 3.33 | 12 | 1.82 | 1.83 | 3.90 | 1.96 | 3.76 | 23 | ||||||||||||||||
2008 | 10.64 | .41 | .12 | .53 | .41 | — | .41 | 10.76 | 4.99 | 12 | 1.80 | 1.80 | 3.59 | 1.94 | 3.45 | 37 |
146 | 147 |
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 | |||||||||||||||||||||||||||||||
Less Distributions | Ratio to Average Net | |||||||||||||||||||||||||||||||
Investment Operations | from | Ratio to Average Net | Assets Before Expenses | |||||||||||||||||||||||||||||
Net Asset | Net Realized | Net Asset | Assets** | Waived or Assumed | ||||||||||||||||||||||||||||
Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Year | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
of Year | Income | Investments | Operations | Income | Gain | Distributions | Year | Return | * | (in millions) | Credits | Credits | (a) | Income | Expenses | Income | Rate | |||||||||||||||
INVESTMENT GRADE FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $10.28 | $.47 | $ (.11) | $.36 | $.53 | — | $ .53 | $10.11 | 3.57 | % | $170 | 1.10 | % | 1.10 | % | 4.49 | % | 1.32 | % | 4.27 | % | 9 | % | |||||||||
2005 | 10.11 | .45 | (.28) | .17 | .52 | — | .52 | 9.76 | 1.70 | 203 | 1.10 | 1.11 | 4.21 | 1.31 | 4.00 | 11 | ||||||||||||||||
2006 | 9.76 | .44 | (.19) | .25 | .49 | — | .49 | 9.52 | 2.69 | 231 | 1.10 | 1.11 | 4.35 | 1.27 | 4.18 | 74 | ||||||||||||||||
2007 | 9.52 | .45 | (.09) | .36 | .46 | — | .46 | 9.42 | 3.91 | 271 | 1.10 | 1.11 | 4.58 | 1.22 | 4.46 | 50 | ||||||||||||||||
2008 | 9.42 | .48 | (1.20) | (.72) | .47 | — | .47 | 8.23 | (8.12) | 268 | 1.10 | 1.10 | 4.80 | 1.23 | 4.67 | 127 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 10.28 | .38 | (.11) | .27 | .45 | — | .45 | 10.10 | 2.74 | 30 | 1.85 | 1.85 | 3.74 | 2.07 | 3.52 | 9 | ||||||||||||||||
2005 | 10.10 | .34 | (.24) | .10 | .45 | — | .45 | 9.75 | .97 | 28 | 1.85 | 1.86 | 3.46 | 2.06 | 3.25 | 11 | ||||||||||||||||
2006 | 9.75 | .30 | (.12) | .18 | .42 | — | .42 | 9.51 | 1.92 | 24 | 1.85 | 1.86 | 3.60 | 2.02 | 3.43 | 74 | ||||||||||||||||
2007 | 9.51 | .35 | (.05) | .30 | .40 | — | .40 | 9.41 | 3.17 | 22 | 1.82 | 1.83 | 3.86 | 1.94 | 3.74 | 50 | ||||||||||||||||
2008 | 9.41 | .42 | (1.21) | (.79) | .40 | — | .40 | 8.22 | (8.78) | 17 | 1.80 | 1.80 | 4.10 | 1.93 | 3.97 | 127 | ||||||||||||||||
INCOME FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $3.05 | $.23 | $ .13 | $.36 | $.23 | — | $ .23 | $ 3.18 | 12.06 | % | $561 | 1.29 | % | 1.29 | % | 7.35 | % | N/A | N/A | 37 | % | |||||||||||
2005 | 3.18 | .23 | (.11) | .12 | .23 | — | .23 | 3.07 | 3.79 | 571 | 1.30 | 1.30 | 7.33 | N/A | N/A | 39 | ||||||||||||||||
2006 | 3.07 | .22 | (.06) | .16 | .22 | — | .22 | 3.01 | 5.40 | 555 | 1.30 | 1.31 | 7.28 | N/A | N/A | 28 | ||||||||||||||||
2007 | 3.01 | .21 | (.02) | .19 | .21 | — | .21 | 2.99 | 6.38 | 563 | 1.28 | 1.29 | 7.00 | N/A | N/A | 34 | ||||||||||||||||
2008 | 2.99 | .21 | (.54) | (.33) | .21 | — | .21 | 2.45 | (11.58) | 460 | 1.29 | 1.29 | 7.40 | 1.30 | 7.39 | 17 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 3.05 | .21 | .12 | .33 | .20 | — | .20 | 3.18 | 11.22 | 40 | 1.99 | 1.99 | 6.65 | N/A | N/A | 37 | ||||||||||||||||
2005 | 3.18 | .21 | (.13) | .08 | .20 | — | .20 | 3.06 | 2.68 | 37 | 2.00 | 2.00 | 6.63 | N/A | N/A | 39 | ||||||||||||||||
2006 | 3.06 | .20 | (.06) | .14 | .20 | — | .20 | 3.00 | 4.64 | 31 | 2.00 | 2.01 | 6.58 | N/A | N/A | 28 | ||||||||||||||||
2007 | 3.00 | .19 | (.01) | .18 | .19 | — | .19 | 2.99 | 5.99 | 25 | 1.98 | 1.99 | 6.30 | N/A | N/A | 34 | ||||||||||||||||
2008 | 2.99 | .19 | (.54) | (.35) | .19 | — | .19 | 2.45 | (12.25) | 15 | 1.99 | 1.99 | 6.70 | 2.00 | 6.69 | 17 |
* | Calculated without sales charges. |
** | Net of expenses waived or assumed (Note 3). |
(a) | The ratios do not include a reduction of expenses from cash balances maintained with the custodian or |
from brokerage service arrangements (Note 1E). |
148 | See notes to financial statements | 149 |
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 | |||||||||||||||||||||||||||||||
Less Distributions | Ratio to Average Net | |||||||||||||||||||||||||||||||
Investment Operations | from | Ratio to Average Net | Assets Before Expenses | |||||||||||||||||||||||||||||
Net Asset | Net Realized | Net Asset | Assets** | Waived or Assumed | ||||||||||||||||||||||||||||
Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Year | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
of Year | Income | Investments | Operations | Income | Gain | Distributions | Year | Return* | (in millions) | Credits | Credits(a) | Income | Expenses | Income | Rate | |||||||||||||||||
TOTAL RETURN FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $12.02 | $.20 | $ .96 | $ 1.16 | $.20 | $ — | $.20 | $12.98 | 9.65 | % | $231 | 1.44 | % | 1.44 | % | 1.60 | % | 1.65 | % | 1.39 | % | 41 | % | |||||||||
2005 | 12.98 | .23 | .97 | 1.20 | .25 | — | .25 | 13.93 | 9.25 | 281 | 1.39 | 1.40 | 1.69 | 1.57 | 1.52 | 52 | ||||||||||||||||
2006 | 13.93 | .23 | .64 | .87 | .23 | — | .23 | 14.57 | 6.24 | 312 | 1.37 | 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 | 1.32 | 1.33 | 2.05 | N/A | N/A | 40 | ||||||||||||||||
2008 | 15.86 | .36 | (2.31) | (1.95) | .37 | .30 | .67 | 13.24 | (12.66) | 304 | 1.34 | 1.34 | 2.32 | N/A | N/A | 59 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 11.86 | .12 | .94 | 1.06 | .12 | — | .12 | 12.80 | 8.92 | 36 | 2.14 | 2.14 | .90 | 2.35 | .69 | 41 | ||||||||||||||||
2005 | 12.80 | .13 | .95 | 1.08 | .15 | — | .15 | 13.73 | 8.49 | 38 | 2.09 | 2.10 | .99 | 2.27 | .82 | 52 | ||||||||||||||||
2006 | 13.73 | .13 | .63 | .76 | .13 | — | .13 | 14.36 | 5.53 | 36 | 2.07 | 2.08 | .93 | 2.14 | .87 | 57 | ||||||||||||||||
2007 | 14.36 | .14 | 1.42 | 1.56 | .19 | .10 | .29 | 15.63 | 10.93 | 34 | 2.02 | 2.03 | 1.35 | N/A | N/A | 40 | ||||||||||||||||
2008 | 15.63 | .26 | (2.29) | (2.03) | .27 | .30 | .57 | 13.03 | (13.35) | 25 | 2.04 | 2.04 | 1.62 | N/A | N/A | 59 | ||||||||||||||||
VALUE FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $4.99 | $.07 | $ .96 | $ 1.03 | $.07 | — | $.07 | $5.95 | 20.57 | % | $185 | 1.48 | % | 1.48 | % | 1.21 | % | N/A | N/A | 11 | % | |||||||||||
2005 | 5.95 | .08 | .65 | .73 | .07 | — | .07 | 6.61 | 12.31 | 267 | 1.42 | 1.43 | 1.31 | N/A | N/A | 17 | ||||||||||||||||
2006 | 6.61 | .09 | .78 | .87 | .08 | — | .08 | 7.40 | 13.22 | 337 | 1.39 | 1.40 | 1.29 | N/A | N/A | 15 | ||||||||||||||||
2007 | 7.40 | .10 | .74 | .84 | .10 | — | .10 | 8.14 | 11.36 | 414 | 1.32 | 1.33 | 1.34 | N/A | N/A | 8 | ||||||||||||||||
2008 | 8.14 | .12 | (1.49) | (1.37) | .12 | — | .12 | 6.65 | (16.91) | 334 | 1.35 | 1.35 | 1.62 | N/A | N/A | 17 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 4.92 | .03 | .95 | .98 | .03 | — | .03 | 5.87 | 19.91 | 23 | 2.18 | 2.18 | .51 | N/A | N/A | 11 | ||||||||||||||||
2005 | 5.87 | .04 | .63 | .67 | .03 | — | .03 | 6.51 | 11.43 | 27 | 2.12 | 2.13 | .61 | N/A | N/A | 17 | ||||||||||||||||
2006 | 6.51 | .04 | .76 | .80 | .03 | — | .03 | 7.28 | 12.34 | 28 | 2.09 | 2.10 | .59 | N/A | N/A | 15 | ||||||||||||||||
2007 | 7.28 | .05 | .72 | .77 | .04 | — | .04 | 8.01 | 10.64 | 27 | 2.02 | 2.03 | .64 | N/A | N/A | 8 | ||||||||||||||||
2008 | 8.01 | .07 | (1.46) | (1.39) | .07 | — | .07 | 6.55 | (17.42) | 17 | 2.05 | 2.05 | .92 | N/A | N/A | 17 |
150 | 151 |
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 Net | Assets Before Expenses | |||||||||||||||||||||||||||||
Net Asset | Net | Net Realized | Net Asset | Assets** | Waived or Assumed | |||||||||||||||||||||||||||
Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
Beginning | Income | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Year | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
of Year | (Loss) | Investments | Operations | Income | Gain | Distributions | Year | Return | * | (in millions) | Credits | Credits | (a) | Income (Loss) | Expenses | Income (Loss) | Rate | |||||||||||||||
BLUE CHIP FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $17.14 | $ .01 | $ 1.54 | $ 1.55 | $ — | — | $ — | $18.69 | 9.04 | % | $414 | 1.47 | % | 1.47 | % | .03 | % | 1.58 | % | (.08) | % | 94 | % | |||||||||
2005 | 18.69 | .10 | 1.91 | 2.01 | .10 | — | .10 | 20.60 | 10.76 | 421 | 1.45 | 1.45 | .54 | 1.56 | .43 | 55 | ||||||||||||||||
2006 | 20.60 | .10 | 1.82 | 1.92 | .07 | — | .07 | 22.45 | 9.31 | 438 | 1.46 | 1.46 | .47 | 1.50 | .43 | 6 | ||||||||||||||||
2007 | 22.45 | .15 | 3.17 | 3.32 | .13 | — | .13 | 25.64 | 14.81 | 526 | 1.39 | 1.39 | .65 | N/A | N/A | 3 | ||||||||||||||||
2008 | 25.64 | .21 | (5.18) | (4.97) | .19 | — | .19 | 20.48 | (19.43) | 396 | 1.40 | 1.41 | .86 | N/A | N/A | 8 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 16.26 | (.13) | 1.48 | 1.35 | — | — | — | 17.61 | 8.30 | 61 | 2.17 | 2.17 | (.67) | 2.28 | (.78) | 94 | ||||||||||||||||
2005 | 17.61 | .09 | 1.67 | 1.76 | .07 | — | .07 | 19.30 | 9.98 | 52 | 2.15 | 2.15 | (.16) | 2.26 | (.27) | 55 | ||||||||||||||||
2006 | 19.30 | (.08) | 1.72 | 1.64 | — | — | — | 20.94 | 8.50 | 44 | 2.16 | 2.16 | (.23) | 2.20 | (.27) | 6 | ||||||||||||||||
2007 | 20.94 | (.06) | 3.00 | 2.94 | — | — | — | 23.88 | 14.04 | 46 | 2.09 | 2.09 | (.05) | N/A | N/A | 3 | ||||||||||||||||
2008 | 23.88 | .03 | (4.80) | (4.77) | .04 | — | .04 | 19.07 | (20.00) | 27 | 2.10 | 2.11 | .16 | N/A | N/A | 8 | ||||||||||||||||
GROWTH & INCOME FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $10.68 | $ .06 | $ 1.43 | $ 1.49 | $.03 | $ — | $.03 | $12.14 | 13.95 | % | $499 | 1.42 | % | 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 | 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 | 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 | 1.32 | .54 | N/A | N/A | 23 | ||||||||||||||||
2008 | 16.86 | .14 | (3.66) | (3.52) | .11 | .23 | .34 | 13.00 | (21.23) | 623 | 1.35 | 1.35 | .94 | N/A | N/A | 24 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 10.26 | (.03) | 1.39 | 1.36 | — | — | — | 11.62 | 13.26 | 83 | 2.12 | 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 | 2.08 | .02 | N/A | N/A | 42 | ||||||||||||||||
2006 | 13.06 | (.12) | 1.07 | .95 | — | — | — | 14.01 | 7.28 | 72 | 2.07 | 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 | 2.02 | (.16) | N/A | N/A | 23 | ||||||||||||||||
2008 | 15.99 | .03 | (3.47) | (3.44) | .02 | .23 | .25 | 12.30 | (21.82) | 41 | 2.05 | 2.05 | .24 | N/A | N/A | 24 |
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 Net | Assets Before Expenses | |||||||||||||||||||||||||||||
Net Asset | Net | Net Realized | Net Asset | Assets** | Waived or Assumed | |||||||||||||||||||||||||||
Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
Beginning | Income | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Year | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
of Year | (Loss) | Investments | Operations | Income | Gain | Distributions | Year | Return | * | (in millions) | Credits | Credits | (a) | Income (Loss) | Expenses | Income (Loss) | Rate | |||||||||||||||
GLOBAL FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $5.16 | $ (.01) | $ .78 | $ .77 | $ — | $ — | $ — | $5.93 | 14.92 | % | $209 | 1.86 | % | 1.86 | % | (.13) | % | N/A | N/A | 105 | % | |||||||||||
2005 | 5.93 | — | 1.13 | 1.13 | — | — | — | 7.06 | 19.06 | 239 | 1.78 | 1.78 | .05 | N/A | N/A | 104 | ||||||||||||||||
2006 | 7.06 | .01 | .71 | .72 | .02 | — | .02 | 7.76 | 10.15 | 260 | 1.77 | 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 | 1.70 | (.07) | 1.70 | % | (.07) | % | 134 | ||||||||||||||
2008 | 8.82 | .03 | (1.97) | (1.94) | .01 | 1.12 | 1.13 | 5.75 | (25.44) | 249 | 1.70 | 1.70 | .39 | 1.73 | .36 | 133 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 4.84 | (.05) | .73 | .68 | — | — | — | 5.52 | 14.05 | 15 | 2.56 | 2.56 | (.83) | N/A | N/A | 105 | ||||||||||||||||
2005 | 5.52 | (.04) | 1.04 | 1.00 | — | — | — | 6.52 | 18.12 | 14 | 2.48 | 2.48 | (.65) | N/A | N/A | 104 | ||||||||||||||||
2006 | 6.52 | (.05) | .67 | .62 | — | — | — | 7.14 | 9.51 | 14 | 2.47 | 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 | 2.40 | (.77) | 2.40 | (.77) | 134 | ||||||||||||||||
2008 | 7.98 | (.02) | (1.75) | (1.77) | — | 1.12 | 1.12 | 5.09 | (25.91) | 9 | 2.40 | 2.40 | (.31) | 2.43 | (.34) | 133 | ||||||||||||||||
SELECT GROWTH FUND†† | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $6.75 | $ (.07) | $ 1.12 | $ 1.05 | — | $ — | $ — | $7.80 | 15.56 | % | $130 | 1.68 | % | 1.68 | % | (1.12) | % | N/A | N/A | 75 | % | |||||||||||
2005 | 7.80 | (.05) | 1.07 | 1.02 | — | — | — | 8.82 | 13.08 | 169 | 1.58 | 1.58 | (.66) | N/A | N/A | 91 | ||||||||||||||||
2006 | 8.82 | (.06) | .50 | .44 | — | — | — | 9.26 | 4.99 | 195 | 1.53 | 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 | 1.47 | (.46) | N/A | N/A | 169 | ||||||||||||||||
2008 | 10.21 | (.04) | (2.06) | (2.10) | — | 1.42 | 1.42 | 6.69 | (23.84) | 207 | 1.46 | 1.47 | (.52) | N/A | N/A | 99 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 6.61 | (.12) | 1.10 | .98 | — | — | — | 7.59 | 14.83 | 20 | 2.38 | 2.38 | (1.82) | N/A | N/A | 75 | ||||||||||||||||
2005 | 7.59 | (.11) | 1.04 | .93 | — | — | — | 8.52 | 12.25 | 23 | 2.28 | 2.28 | (1.36) | N/A | N/A | 91 | ||||||||||||||||
2006 | 8.52 | (.12) | .49 | .37 | — | — | — | 8.89 | 4.34 | 23 | 2.23 | 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 | 2.17 | (1.16) | N/A | N/A | 169 | ||||||||||||||||
2008 | 9.70 | (.09) | (1.94) | (2.03) | — | 1.42 | 1.42 | 6.25 | (24.43) | 18 | 2.16 | 2.17 | (1.22) | N/A | N/A | 99 |
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 Net | Assets Before Expenses | |||||||||||||||||||||||||||||
Net Asset | Net | Net Realized | Net Asset | Assets** | Waived or Assumed | |||||||||||||||||||||||||||
Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
Beginning | Income | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Year | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
of Year | (Loss) | Investments | Operations | Income | Gain | Distributions | Year | Return | * | (in millions) | Credits | Credits | (a) | Income (Loss) | Expenses | (Loss) | Rate | |||||||||||||||
OPPORTUNITY FUND††† | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $19.18 | $(.09) | $ 3.62 | $ 3.53 | $ — | $ — | $ — | $22.71 | 18.41 | % | $277 | 1.56 | % | 1.56 | % | (.46) | % | 1.73 | % | (.63) | % | 40 | % | |||||||||
2005 | 22.71 | (.09) | 5.62 | 5.53 | — | — | — | 28.24 | 24.35 | 410 | 1.48 | 1.48 | (.39) | 1.61 | (.52) | 43 | ||||||||||||||||
2006 | 28.24 | (.09) | .77 | .68 | — | .78 | .78 | 28.14 | 2.58 | 435 | 1.44 | 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 | 1.38 | .52 | N/A | N/A | 50 | ||||||||||||||||
2008 | 31.32 | — | (5.53) | (5.53) | .14 | 2.66 | 2.80 | 22.99 | (19.40) | 377 | 1.39 | 1.40 | (.01) | N/A | N/A | 40 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 17.95 | (.23) | 3.38 | 3.15 | — | — | — | 21.10 | 17.55 | 46 | 2.26 | 2.26 | (1.16) | 2.43 | (1.33) | 40 | ||||||||||||||||
2005 | 21.10 | (.26) | 5.22 | 4.96 | — | — | — | 26.06 | 23.51 | 57 | 2.18 | 2.18 | (1.09) | 2.31 | (1.22) | 43 | ||||||||||||||||
2006 | 26.06 | (.29) | .73 | .44 | — | .78 | .78 | 25.72 | 1.85 | 51 | 2.14 | 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 | 2.08 | (.18) | N/A | N/A | 50 | ||||||||||||||||
2008 | 28.31 | (.21) | (4.89) | (5.10) | .14 | 2.66 | 2.80 | 20.41 | (19.99) | 32 | 2.09 | 2.10 | (.71) | N/A | N/A | 40 | ||||||||||||||||
SPECIAL SITUATIONS FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2004 | $15.63 | $(.18) | $ 1.39 | $ 1.21 | — | $ — | $ — | $16.84 | 7.74 | % | $190 | 1.63 | % | 1.63 | % | (1.08) | % | 1.86 | % | (1.31) | % | 119 | % | |||||||||
2005 | 16.84 | (.12) | 3.72 | 3.60 | — | — | — | 20.44 | 21.38 | 224 | 1.59 | 1.60 | (.64) | 1.82 | (.86) | 112 | ||||||||||||||||
2006 | 20.44 | (.11) | 2.07 | 2.18 | — | — | — | 22.62 | 10.67 | 249 | 1.53 | 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 | 1.46 | (.27) | 1.61 | (.42) | 64 | ||||||||||||||||
2008 | 24.27 | .03 | (2.93) | (2.90) | — | 1.22 | 1.22 | 20.15 | (12.67) | 258 | 1.49 | 1.50 | .14 | 1.61 | .02 | 52 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2004 | 14.52 | (.30) | 1.32 | 1.02 | — | — | — | 15.54 | 7.03 | 21 | 2.33 | 2.33 | (1.78) | 2.56 | (2.01) | 119 | ||||||||||||||||
2005 | 15.54 | (.26) | 3.44 | 3.18 | — | — | — | 18.72 | 20.46 | 21 | 2.29 | 2.30 | (1.34) | 2.52 | (1.56) | 112 | ||||||||||||||||
2006 | 18.72 | (.26) | 2.11 | 1.85 | — | — | — | 20.57 | 9.88 | 18 | 2.23 | 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 | 2.16 | (.97) | 2.31 | (1.12) | 64 | ||||||||||||||||
2008 | 21.73 | (.13) | (2.57) | (2.70) | — | 1.22 | 1.22 | 17.81 | (13.26) | 12 | 2.19 | 2.20 | (.56) | 2.31 | (.68) | 52 |
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 | Ratio to Average Net | |||||||||||||||||||||||||||||||
Investment Operations | from | Ratio to Average Net | Assets Before Expenses | |||||||||||||||||||||||||||||
Net Asset | Net | Net Realized | Net Asset | Assets** | Waived or Assumed | |||||||||||||||||||||||||||
Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
Beginning | Income | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Year | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
of Year | (Loss) | Investments | Operations | Income | Gain | Distributions | Year | Return | * | (in millions) | Credits | Credits | (a) | Income (Loss) | Expenses | Income (Loss) | Rate | |||||||||||||||
INTERNATIONAL FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
2006(b) | $10.00 | $ — | $ .71 | $ .71 | — | $ — | $ — | $10.71 | 7.10 | % | $ 19 | 2.35 | %† | 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 | 2.50 | (.05) | 2.35 | .10 | 67 | ||||||||||||||||
2008 | 13.18 | .07 | (3.45) | (3.38) | — | .32 | .32 | 9.48 | (26.37) | 105 | 1.95 | 1.95 | .20 | 1.94 | .20 | 122 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
2006(b) | 10.00 | (.01) | .71 | .70 | — | — | — | 10.70 | 7.00 | 1 | 3.05 | † | 3.05 | † | (.55) | † | 6.35 | † | (3.85) | † | 9 | |||||||||||
2007 | 10.70 | — | 2.44 | 2.44 | — | .07 | .07 | 13.07 | 22.93 | 4 | 3.20 | 3.20 | (.75) | 3.05 | (.60) | 67 | ||||||||||||||||
2008 | 13.07 | (.02) | (3.40) | (3.42) | — | .32 | .32 | 9.33 | (26.91) | 4 | 2.65 | 2.65 | (.50) | 2.64 | (.50) | 122 |
* | 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. |
††† | Prior to January 31, 2008, known as Mid-Cap Opportunity Fund. |
(a) | The ratios do not include a reduction of expenses from cash balances maintained with the custodian or |
from brokerage service arrangements (Note1E). | |
(b) | For the period June 27, 2006 (commencement of operations) to September 30, 2006. |
158 | See notes to financial statements | 159 |
Report of Independent Registered Public
Accounting Firm
To the Shareholders and Board of Trustees of
First Investors Income Funds and First Investors Equity Funds
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments of the Cash Management Fund, Government Fund, Investment Grade Fund and Fund For Income, (each a series of First Investors Income Funds), and the Total Return Fund, Value Fund, Blue Chip Fund, Growth & Income Fund, Global Fund, Select Growth Fund, Opportunity Fund, Special Situations Fund, and International Fund (each a series of First Investors Equity Funds), as of September 30, 2008, 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 , 2008, by correspondence with the custodian and brokers. Where brokers have not replied to our confirmation requests, we have carried out other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
160 |
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Cash Management Fund, Government Fund, Investment Grade Fund, Fund For Income, Total Return Fund, Value Fund, Blue Chip Fund, Growth & Income Fund, Global Fund, Select Growth Fund, Opportunity Fund, Special Situations Fund and International Fund, as of September 30, 2008, and the results of their operations, changes in their net assets, and their financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
Tait, Weller & Baker LLP |
Philadelphia, Pennsylvania
November 26, 2008
161 |
Board Considerations of Advisory Contracts and Fees
(Unaudited)
FIRST INVESTORS INCOME FUNDS
At a meeting held on May 15, 2008 (“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: (1) 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”); and (2) comparative information on each Fund’s volatility versus total return. FIMCO also provided, at the Board’s request, a special performance report on the Fund For Income. Additionally, in response to specific requests from the independent Trustees in connecti on 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 relationship 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 st atements 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.
162 |
In considering the information and materials described above, the independent Trustees received assistance from and met separately with independent legal counsel and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to approvals of advisory agreements. Although the Advisory 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.
163 |
Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS INCOME FUNDS
The Board noted that FIMCO has undertaken extensive responsibilities as manager of the Funds, including: (1) the provision of investment advice to the Funds; (2) implementing policies and procedures designed to ensure compliance with each Fund’s investment objectives and policies; (3) the review of brokerage arrangements; (4) oversight of general portfolio compliance with applicable laws; (5) the provision of certain administrative services to the Funds, including fund accounting; 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 to address performance iss ues and providing significant incentives to portfolio managers and analysts based on 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 or Investment Committee meetings, as applicable, 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”). In addition, the Board considered the performance information provided by FIMCO for each Fund through April 30, 2008 (the “year-to-date period”). The Board also reviewed the annual yield of each Fund for each of the past three calendar years. With regard to the performance and yield information, the Board considered the performance and
164 |
yield of each Fund on a percentile and quintile basis as compared to its Peer Group. For purposes of the data provided, 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 the Investment Grade Fund and Cash Management Fund fell within one of the top three quintiles for at least one of the performance periods provided by Lipper and that the Investment Grade Fund fell within one of the top three quintiles for the year-to-date period. Also, the Board considered that the performance for the Government Fund, Investment Grade Fund and Fund For Income had improved during the year-to-date period. The Board noted that the yield for each Fund, except for the Government Fund, for each of the past three calendar years fell within one of the top three quintiles and the yield for the Government Fund fell within one of the top three quintiles for two of the past three calendar years. Moreover, the Board considered the volatility versus total return data provided by Lipper as well as FIMCO’s representation that it believes that the Funds use a more conservative styl e than many of their peers. The Board also considered FIMCO’s special performance report on the Fund For Income and noted the actions FIMCO is taking to improve performance. Finally, the Board considered that FIMCO assigned a new portfolio manager to the Investment Grade Fund in November 2007 in an effort to improve 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 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 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 one of the
165 |
Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS INCOME FUNDS
first three quintiles of its respective Peer Group. The Board considered that FIMCO agreed to: (i) continue the current total expense cap agreements for the Government Fund, Investment Grade Fund and Cash Management Fund through the 2009 fiscal year; and (ii) cap the management fees of the Fund For Income beginning July 1, 2008 through the 2009 fiscal year, which would result in a management fee reduction of approximately three basis points.
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) there are significant costs involved in providing the level of personal service that the First Investors fund complex attempts to deliver to its shareholders; (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 accou nts, and a majority of shares of each Fund, other than the Cash Management Fund, are held in retirement accounts; and (iii) Lipper expense comparisons do not take into account the size of a fund complex, and as a result, in most cases the First Investors funds are compared to funds in complexes that are much larger than First Investors.
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, 2007, 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 profitability 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 discussed below. The Trustees acknowledged that, as a business matter, FI MCO was entitled to earn reasonable profits for its services to the Funds.
166 |
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 grow, 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.
“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.
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., Smith Group Asset Management, LP and Vontobel Asset Management, Inc.
At a meeting held on May 15, 2008 (“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, Opportunity Fund, Special Situations Fund, Select Growth 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; (3) Smith Group Asset Management, LP (“Smith Group”) with respect to the Select Growth Fund; and (4) Vontobel Asset Management, Inc. (“Vontobel”) with respect to the International Fund. The Global Fund, Special Situations Fund, Select Growth Fund and International Fund are collectively referred to as the “Sub-Advised Funds.”
In reaching its decisions to approve the continuation of the Advisory Agreement for each Fund and the Sub-Advisory Agreements for the Sub-Advised Funds, 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, Smith Group 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 compiled by Lipper, Inc. (“Lipper”), an independent provider of investment com pany data, on: (1) 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”); and (2) comparative information on each Fund’s volatility versus total return. Additionally, in response to specific requests from the independent Trustees in connection with the May Meeting, FIMCO
168 |
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 relationship 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 finan cial 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, Smith Group 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, Smith Group and Vontobel to the applicable Sub-Advised Funds; (2) the sub-advisory fee rates charged by WMC, Paradigm, Smith Group and Vontobel and a comparison of those fee rates to the fee rates of WMC, Paradigm, Smith Group and Vontobel for providing advisory services to other investment companies or accounts, as applicable, with an investment mandate similar to the applicable Sub-Advised Funds; (3) profitability information provided by WMC, Paradigm, Smith Group and Vontobel; and (4) any “fall out” or ancillary benefits accruing to WMC, Paradigm, Smith Group and Vontobel as a result of the relationship with each applicable Sub-A dvised Fund.
In considering the information and materials described above, the independent Trustees received assistance from and met separately with independent legal counsel and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to approvals of advisory agreements. Although 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
169 |
Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS EQUITY FUNDS
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 Paradigm, Smith Group, Vontobel and WMC.
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 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
170 |
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 to address performance issues and providing significant incentives to portfolio managers and analysts based on 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, Smith Group and Vontobel to the applicable Sub-Advised Funds. The Trustees considered WMC’s, Paradigm’s, Smith Group’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, Smith Group’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 or Investment Committee meetings, as applicable, 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 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 addition, the Board considered the performance information provided by FIMCO for each Fund through April 30, 2008 (the “year-to-date period”). With regard to the performance information, the Board considered the performance of each Fund on a percentile and quintile basis as compared to its Peer Group. For purposes of the performan ce data provided, 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.
171 |
Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS EQUITY FUNDS
On a Fund-by-Fund basis, the performance reports indicated, and the Board noted, that the Total Return Fund, Value Fund, Opportunity Fund, Special Situations Fund, Select Growth Fund, Global Fund and International Fund fell within one of the top three quintiles for at least one of the performance periods provided by Lipper. With regard to the Growth & Income Fund and Blue Chip Fund, the Board considered that the performance of each such Fund for the year-to-date period had improved and fell within one of the top three quintiles. Moreover, the Board considered the volatility versus total return data provided by Lipper as well as FIMCO’s representation that it believes that the Funds use a more conservative style than many of their peers.
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 Gr oup 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 Global Fund, was in one of the top three quintiles of its respective Peer Group; and (2) the actual management fee rate (after taking into account any applicable fee waivers) for each Fund, except the Growth & Income Fund, Value Fund, Global Fund and International Fund, was in one of the top three quintiles of its respective Peer Group. The Board also considered that, through the 2009 fiscal year, FIMCO agreed to: (i) continue its current management fee waiver agreement for the Special Situations Fund and Global Fund; and (ii) eliminate the current total expense cap agreement for the International Fund (which would have no economic impact on FIMCO or the Fund since the Fund is operating below the expense cap).
In considering the sub-advisory fee rates charged by and costs and profitability of WMC, Paradigm, Smith Group and Vontobel with regard to the respective Sub-Advised Funds, the Board noted that FIMCO pays WMC, Paradigm, Smith Group or Vontobel, as the case may be, a sub-advisory fee from its own advisory fee rather
172 |
than each Fund paying WMC, Paradigm, Smith Group or Vontobel a fee directly. WMC, Paradigm, Smith Group and Vontobel provided, and the Board reviewed, information comparing the fees charged by WMC, Paradigm, Smith Group and Vontobel for services to the respective Sub-Advised Funds versus the fee rates of WMC, Paradigm, Smith Group and Vontobel for providing advisory services to other comparable investment companies or accounts or compared to their standard fee schedule, as applicable. Based on a review of this information, the Board noted that the fees charged by WMC, Paradigm, Smith Group and Vontobel, as the case may be, for services to each applicable Sub-Advised Fund appeared competitive to the fees WMC, Paradigm, Smith Group and Vontobel charge to such other comparable investment companies or accounts or compared to their standard fee schedule, as applicable.
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) there are significant costs involved in providing the level of personal service that the First Investors fund complex attempts to deliver to its shareholders; (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; and (iii) Lipper e xpense comparisons do not take into account the size of a fund complex, and as a result, in certain cases the First Investors funds are compared to funds in complexes that are much larger than First Investors.
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, 2007, 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 profitability 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
173 |
Board Considerations of Advisory Contracts and Fees (continued)
(Unaudited)
FIRST INVESTORS EQUITY FUNDS
discussed 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, Opportunity Fund, Special Situations Fund and Global 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 and International 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 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, Smith Group and Vontobel as a result of their relationship with the Funds. In that regard, the Board considered the fact that FIMCO, WMC, Paradigm, Smith Group and Vontobel receive research from broker-dealers that execute brokerage transactions for the funds in the First Investors fund complex. However, 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 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, Smith Group and Vontobel, the Board concluded that the level of fees paid to FIMCO with respect to each Fund, and WMC, Paradigm, Smith Group 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.
174 |
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY 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 | 41 | None |
c/o First Investors | 1/1/06 | Officer (since | ||
Management Company, Inc. | 2007) and Direc- | |||
110 Wall Street | tor and Trustee of | |||
New York, NY 10005 | the Barton Group, | |||
LLC; President | ||||
of Noe Pierson | ||||
Corporation | ||||
Stefan L. Geiringer 1934 | Trustee since | Co-founder and | 41 | None |
c/o First Investors | 1/1/06 | Senior Vice | ||
Management Company, Inc. | President of Real | |||
110 Wall Street | Time Energy | |||
New York, NY 10005 | Solutions, Inc. | |||
since 2005; | ||||
Founder/Owner | ||||
of SLG, Inc. | ||||
since 2005; | ||||
Senior Vice | ||||
President of | ||||
Pepco Energy | ||||
Services (North- | ||||
east Region) | ||||
from 2003-2006; | ||||
Founder/Owner | ||||
and President of | ||||
North Atlantic | ||||
Utilities, Inc. | ||||
from 1987-2003 | ||||
Robert M. Grohol 1932 | Trustee since | None/Retired | 41 | 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 |
175 |
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY 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 |
Arthur M. Scutro, Jr. 1941 | Trustee since | None/Retired | 41 | None |
c/o First Investors | 1/1/06 | |||
Management Company, Inc. | ||||
110 Wall Street | ||||
New York, NY 10005 | ||||
James M. Srygley 1932 | Trustee since | Retired; | 41 | None |
c/o First Investors | 8/15/05; | Owner | ||
Management Company, Inc. | Director/Trustee | Hampton | ||
110 Wall Street | of predecessor | Properties, Inc. | ||
New York, NY 10005 | funds since | |||
1/19/95 | ||||
Robert F. Wentworth 1929 | Trustee since | None/Retired | 41 | 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 |
176 |
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, | 41 | 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. |
177 |
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY 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 |
OFFICER (S) WHO ARE NOT TRUSTEES | ||||
Joseph I. Benedek 1957 | Treasurer | Treasurer of | 41 | 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 | 41 | 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 |
178 |
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY 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) | Custodian |
Wellington Management Company, LLP | (Global and International Funds) |
75 State Street | Brown Brothers Harriman & Co. |
Boston, MA 02109 | 40 Water Street |
Boston, MA 02109 | |
Subadviser (Select Growth Fund) | |
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) | |
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) | Philadelphia, PA 19103 |
Vontobel Asset Management, Inc. | |
1540 Broadway, 38th Floor | Legal Counsel |
New York, NY 10036 | K&L Gates LLP |
1601 K Street, N.W. | |
Underwriter | Washington, DC 20006 |
First Investors Corporation | |
110 Wall Street | |
New York, NY 10005 |
179 |
A description of the policies and procedures that the Funds use to vote proxies relating to a portfolio’s securities is available, without charge, upon request by calling toll free 800-423-4026 or can be viewed online or downloaded from the EDGAR database on the Securities and Exchange Commission’s (“SEC”) internet website at http://www.sec.gov. In addition, information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, is available, without charge, upon request in writing or by calling 800-423-4026 and on the SEC’s internet website at http://www.sec.gov.
The Funds file their complete schedule of portfolio holdings with the SEC on Form N-Q, for the first and third quarters of each fiscal year. The Fund’s Form N-Q will be available on the SEC’s website at http://www.sec.gov; and may also be reviewed and copied at the SEC’s Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. The schedule of portfolio holdings is available, without charge, upon request in writing or by calling 800-423-4026.
180 |
NOTES
181 |
![](https://capedge.com/proxy/N-CSR/0000886048-08-000022/incomeequitypendx23x1.jpg)
Item 2. Code of Ethics
As of September 30, 2008, 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, 2008, 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 two "audit committee financial experts" serving on its audit committee. Robert F. Wentworth and Arthur M. Scutro, Jr. are the "audit committee financial experts" and are 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, | ||||||
----------------- | ||||||
2008 | 2007 | |||||
---- | ---- | |||||
(a) Audit Fees | ||||||
First Investors Equity Funds | $ | 237,000 | $ | 242,300 | ||
(b) Audit-Related Fees | ||||||
First Investors Equity Funds | $ | 0 | $ | 0 | ||
(c) Tax Fees | ||||||
First Investors Equity Funds | $ | 36,000 | $ | 39,000 | ||
Nature of fees: tax returns preparation and tax compliance | ||||||
(d) All Other Fees | ||||||
First Investors Equity Funds | $ | 0 | $ | 0 | ||
(e)(1) Audit committee's pre-approval policies |
The Charter of the Audit Committee requires the Audit Committee:
(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, 2008 and 2007 were $83,750 and $61,500 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 control 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 Equity Funds | |
(Registrant) | |
By | /S/ KATHRYN S. HEAD |
Kathryn S. Head | |
President and Principal Executive Officer | |
Date: | December 8, 2008 |
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 Equity Funds | |
(Registrant) | |
By | /S/ JOSEPH I. BENEDEK |
Joseph I. Benedek | |
Treasurer and Principal Financial Officer | |
Date: | December 8, 2008 |