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, 2009
DATE OF REPORTING PERIOD: SEPTEMBER 30, 2009
Item 1. Reports to Stockholders
The Annual Report to Stockholders follows
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx1x1.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 1-800-423-4026. The Funds will ensure that separate reports are sent to any shareholder who subsequently changes his or her mailing address.
The views expressed in the portfolio manager letters reflect those views of the portfolio managers only through the end of the period covered. Any such views are subject to change at any time based upon market or other conditions and we disclaim any responsibility to update such views. These views may not be relied on as investment advice.
You may obtain a free prospectus for any of the Funds by contacting your representative, calling 1-800-423-4026, writing to us at the following address: First Investors Corporation, 110 Wall Street, New York, NY 10005, or by visiting our website at www.firstinvestors.com. You should consider the investment objectives, risks, charges and expenses of a Fund carefully before investing. The prospectus contains this and other information about the Fund, and should be read carefully before investing.
An investment in a Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the Cash Management Fund seeks to preserve a net asset value at $1.00 per share, it is possible to lose money by investing in it, just as it is possible to lose money by investing in any of the other Funds. Past performance is no guarantee of future results.
A Statement of Additional Information (“SAI”) for any of the Funds may also be obtained, without charge, upon request by calling 1-800-423-4026, writing to us at our address or by visiting our website listed above. The SAI contains more detailed information about the Funds, including information about its 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, 2009. During the period, the Fund’s return on a net asset value basis was 0.5% for Class A shares and 0.1% for Class B shares, including dividends of 0.5 cents per share on Class A shares and 0.1 cents per share on Class B shares. The Fund maintained a $1.00 net asset value for each class of shares throughout the year.
The review period began immediately following the bankruptcy of Lehman Brothers as financial markets and the economy encountered their worst crisis since the Great Depression. By the end of the review period, the financial markets had experienced a significant recovery. Nevertheless, the Federal Reserve (the “Fed”) kept short-term interest rates at record lows, near zero. This was the major factor in determining the Fund’s return.
The Fund continued to invest conservatively through the period, 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. The Fund did not invest in asset-backed commercial paper or second-tier securities during the review period and it avoided negative credit events as well.
Furthermore, the Treasury Department terminated its Temporary Guarantee Program for Money Market Funds (“Program”) on September 18, 2009. Therefore, the Fund no longer participates in the Program.
By the end of the review period, First Investors Management Company (“FIMCO”) was not only waiving its management fees, but also voluntarily assuming certain other expenses otherwise payable by the Fund in order to avoid a negative yield to its shareholders. FIMCO expects this situation to continue, and as a result, the yield to shareholders should be at or near zero for the foreseeable future. To reduce expenses, the Fund will be limiting its wire transfer and draft check redemption privileges, effective January 1, 2010.
1 |
Portfolio Manager’s Letter (continued)
CASH MANAGEMENT FUND
Although money market funds in general, and the Fund in particular, are relatively conservative vehicles, there can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. Money market mutual funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
Thank you for placing your trust in First Investors. As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx4x1.jpg)
Michael J. O’Keefe
Portfolio Manager
October 30, 2009
2 |
Understanding Your Fund’s Expenses (unaudited)
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, 2009, and held for the entire six-month period ended September 30, 2009. 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 (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,000.80 | $3.16 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,021.91 | $3.19 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,000.00 | $4.06 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,021.01 | $4.10 |
* | Expenses are equal to the annualized expense ratio of .63% for Class A shares and .81% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
BY SECTOR
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx6x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total value of investments.
4 |
Portfolio of Investments
CASH MANAGEMENT FUND
September 30, 2009
Principal | Interest | ||||||
Amount | Security | Rate | * | Value | |||
CORPORATE NOTES—47.1% | |||||||
$ 1,200M | 3M Co., 11/6/09 | 1.07 | % | $ 1,204,731 | |||
4,880M | Bellsouth Capital Funding Corp., 2/15/10 | 1.20 | 4,997,704 | ||||
4,400M | BP Capital Markets PLC, 3/15/10 | 1.55 | 4,465,859 | ||||
4,000M | Brown-Forman Corp., 10/6/09 (a) | 0.16 | 3,999,911 | ||||
8,000M | Campbell Soup Co., 11/23/09 (a) | 0.23 | 7,997,290 | ||||
Coca-Cola Co.: | |||||||
3,500M | 10/20/09 (a) | 0.22 | 3,499,594 | ||||
5,000M | 12/2/09 (a) | 0.26 | 4,997,760 | ||||
DuPont (E.I.) de Nemours & Co.: | |||||||
1,475M | 10/15/09 | 0.80 | 1,478,398 | ||||
2,605M | 10/15/09 | 1.55 | 2,610,249 | ||||
2,350M | Electric Data Systems Corp., 10/15/09 | 1.41 | 2,355,096 | ||||
3,725M | General Electric Capital Corp., 1/19/10 | 1.30 | 3,791,905 | ||||
7,000M | Madison Gas & Electric Co., 10/30/09 | 0.17 | 6,999,041 | ||||
7,000M | Medtronic, Inc., 10/28/09 (a) | 0.16 | 6,999,160 | ||||
7,100M | Paccar Financial Corp., 11/16/09 | 0.25 | 7,097,732 | ||||
3,000M | Procter & Gamble International Finance, 10/21/09 (a) | 0.26 | 2,999,566 | ||||
6,500M | Shell International Finance BV, 10/6/09 (a) | 0.15 | 6,499,865 | ||||
3,700M | United Technologies Corp., 5/1/10 | 0.63 | 3,780,470 | ||||
7,000M | Washington Gas Light Co., 10/5/09 | 0.17 | 6,999,868 | ||||
Total Value of Corporate Notes (cost $82,774,199) | 82,774,199 | ||||||
FLOATING RATE NOTES—27.8% | |||||||
5,400M | BP Capital Markets PLC, 3/17/10 | 0.50 | 5,407,861 | ||||
5,000M | Federal Farm Credit Bank, 4/9/10 | 0.58 | 5,000,206 | ||||
5,000M | Federal Home Loan Bank, 10/13/09 | 0.44 | 5,000,271 | ||||
Freddie Mac: | |||||||
2,250M | 10/8/09 | 0.18 | 2,249,924 | ||||
4,000M | 1/8/10 | 0.56 | 4,000,539 | ||||
8,000M | GlaxoSmithKline Capital, Inc., 5/13/10 | 1.08 | 8,036,054 | ||||
4,025M | Monongallia Health Systems, 7/1/40 (LOC: JP Morgan) | 0.90 | 4,025,000 | ||||
700M | Port Blakely Community WA Rev., Series “C” | ||||||
2/15/21 (LOC: Bank of America) | 0.55 | 700,000 | |||||
2,880M | Procter & Gamble Co., 3/9/10 | 0.49 | 2,882,987 | ||||
5,500M | Roche Holdings, Inc., 2/25/10 (b) | 1.39 | 5,525,210 | ||||
3,000M | Toyota Motor Credit Corp., 1/29/10 | 1.75 | 3,000,000 | ||||
3,060M | University of Oklahoma Hospital Rev., Series “B” | ||||||
8/15/21 (LOC: Bank of America) | 0.35 | 3,060,000 | |||||
Total Value of Floating Rate Notes (cost $48,888,052) | 48,888,052 |
5 |
Portfolio of Investments (continued)
CASH MANAGEMENT FUND
September 30, 2009
Principal | Interest | ||||||
Amount | Security | Rate | * | Value | |||
U.S. GOVERNMENT AGENCY | |||||||
OBLIGATIONS—18.2% | |||||||
Fannie Mae: | |||||||
$ 2,500M | 10/28/09 | 0.14 | % | $ 2,499,737 | |||
4,000M | 11/16/09 | 0.12 | 3,999,387 | ||||
3,000M | 11/27/09 | 0.29 | 2,998,621 | ||||
6,750M | 12/2/09 | 0.13 | 6,748,489 | ||||
3,000M | 12/2/09 | 0.14 | 2,999,277 | ||||
Federal Home Loan Bank: | |||||||
4,500M | 12/4/09 | 0.13 | 4,498,960 | ||||
1,500M | 1/6/10 | 0.93 | 1,510,070 | ||||
2,000M | 1/26/10 | 1.00 | 1,999,172 | ||||
4,700M | 7/29/10 | 0.63 | 4,700,000 | ||||
Total Value of U.S. Government Agency Obligations (cost $31,953,713) | 31,953,713 | ||||||
BANKERS’ ACCEPTANCES—1.1% | |||||||
2,000M | Bank of America NA, 12/15/09 (cost $1,996,953) | 0.73 | 1,996,953 | ||||
SHORT-TERM U.S. GOVERNMENT | |||||||
OBLIGATIONS—4.9% | |||||||
8,500M | U.S. Treasury Bills, 10/31/09 (cost $8,523,688) | 0.19 | 8,523,688 | ||||
Total Value of Investments (cost $174,136,605)** | 99.1 | % | 174,136,605 | ||||
Other Assets, Less Liabilities | .9 | 1,629,974 | |||||
Net Assets | 100.0 | % | $ 175,766,579 |
* | 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, 2009. | |
** | 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 |
6 |
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Corporate Notes | $ | — | $ | 82,774,199 | $ | — | $ | 82,774,199 | ||||
Floating Rate Notes: | ||||||||||||
Corporate Notes | — | 32,637,112 | — | 32,637,112 | ||||||||
U.S. Government Agency | ||||||||||||
Obligations | — | 16,250,940 | — | 16,250,940 | ||||||||
U.S. Government Agency | ||||||||||||
Obligations | — | 31,953,713 | — | 31,953,713 | ||||||||
Bankers’ Acceptances | — | 1,996,953 | — | 1,996,953 | ||||||||
Short-Term U.S. Government | ||||||||||||
Obligations | — | 8,523,688 | — | 8,523,688 | ||||||||
Total Investments in Securities | $ | — | $174,136,605 | $ | — | $ | 174,136,605 |
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, 2009. During the period, the Fund’s return on a net asset value basis was 8.6% for Class A shares and 7.8% for Class B shares, including dividends of 46.7 cents per share on Class A shares and 39.2 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 review period began immediately following the bankruptcy of Lehman Brothers as financial markets and the economy encountered their worst crisis since the Great Depression. Over the next several months, extraordinary actions by the U.S. government and the Federal Reserve (the “Fed”) helped stabilize both the markets and the economy. By the end of the review period, the financial markets had experienced a significant recovery. The mortgage-backed bond market benefited greatly from government support during the review period. In an effort to keep mortgage rates low and aid the housing market, the Fed announced in November that it would purchase up to $500 billion of mortgage-backed securities. In March, this commitment was increased to $1.25 trillion.
The Fund’s underweight in lower coupon mortgage-backed bonds, particularly during the fourth quarter of last year, detracted from performance. Although the Fund generally holds very low cash balances, even a small amount of cash (slightly more than 1% on average) affected performance as money market rates fell to extraordinarily low levels during the review period.
The Fund’s total return was boosted in general by the Fed’s support of the mortgage-backed market. The Fund’s performance also benefited from its focus on selecting securities with favorable prepayment characteristics. Prepayments on mortgage-backed bonds occur when a homeowner refinances an existing mortgage or — as was increasingly the case during the period — when a homeowner defaults on a mortgage. Because prepayments result in a mortgage being called or bought out of the pool of mortgages which comprise a mortgage-backed security they generally reduce the value of that security. Therefore, low prepayments on the Fund’s holdings helped performance. An additional factor that contributed to performance was the Fund’s 17% position in Fannie Mae mortgage-backed bonds at the beginning of the review period. Fannie Maes outperformed Ginnie Mae bonds during the fourth quarter of last year, after which time the Fund reduced its holdings to 8.5% of assets.
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/0000886048-09-000026/incomequityx11x1.jpg)
Clark D. Wagner
Portfolio Manager and
Director of Fixed Income, First Investors Management Company, Inc.
October 30, 2009
9 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,026.02 | $5.59 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,019.55 | $5.57 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,021.64 | $9.12 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,016.05 | $9.10 |
* | Expenses are equal to the annualized expense ratio of 1.10% for Class A shares and 1.80% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
BY SECTOR
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx12x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total value of investments.
10 |
Cumulative Performance Information (unaudited)
GOVERNMENT FUND
Comparison of change in value of $10,000 investment in the First Investors Government Fund (Class A shares) and the Bank of America Merrill Lynch GNMA Master Index.
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx13x1.jpg)
The graph compares a $10,000 investment in the First Investors Government Fund (Class A shares) beginning 9/30/99 with a theoretical investment in the Bank of America 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 difference s in sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/09) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02, the maximum sales charge was 6.25%). The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been 2.16%, 3.26% and 4.34%, respectively, and the S.E.C. 30-Day Yield for September 2009 would have been 3.46%. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been 3.59%, 3.38% and 4.32%, respectively, and the S.E.C. 30-Day Yield for September 2009 would have been 2.98%. 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. Bank of America Merrill Lynch GNMA Master Index figures are from Bank of America Merrill Lynch & Co. and all other figures are from First Investors Management Company, Inc.
11 |
Portfolio of Investments
GOVERNMENT FUND
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
MORTGAGE-BACKED CERTIFICATES—96.5% | |||||||
Fannie Mae—8.3% | |||||||
$ 9,879M | 5.5%, 7/1/2033 – 12/1/2035 | $ 10,403,432 | |||||
13,733M | 6%, 1/1/2036 – 7/1/2039 | 14,524,424 | |||||
24,927,856 | |||||||
Government National Mortgage Association I | |||||||
Program—88.2% | |||||||
80,279M | 5%, 6/15/2033 – 10/15/2039 | 83,354,818 | |||||
80,740M | 5.5%, 3/15/2033 – 6/15/2039 | 85,171,017 | |||||
65,124M | 6%, 3/15/2031 – 7/15/2039 | 69,231,298 | |||||
20,132M | 6.5%, 10/15/2028 – 12/15/2038 | 21,718,937 | |||||
3,504M | 7%, 4/15/2032 – 4/15/2034 | 3,877,078 | |||||
1,206M | 7.5%, 7/15/2023 – 6/15/2034 | 1,347,815 | |||||
264,700,963 | |||||||
Total Value of Mortgage-Backed Certificates (cost $280,186,388) | 289,628,819 | ||||||
SHORT-TERM INVESTMENTS—5.7% | |||||||
Money Market Fund | |||||||
17,018M | First Investors Cash Reserve Fund, .39% (cost $17,018,000)* | 17,018,000 | |||||
Total Value of Investments (cost $297,204,388) | 102.2 | % | 306,646,819 | ||||
Excess of Liabilities Over Other Assets | (2.2 | ) | (6,671,491) | ||||
Net Assets | 100.0 | % | $299,975,328 |
* | 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, 2009 (see Note 2). |
12 |
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Mortgage-Backed Certificates | $ | — | $ | 289,628,819 | $ | — | $ | 289,628,819 | ||||
Money Market Fund | 17,018,000 | — | — | 17,018,000 | ||||||||
Total Investments in Securities | $ | 17,018,000 | $ | $289,628,819 | $ | — | $ | 306,646,819 |
See notes to financial statements | 13 |
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, 2009. During the period, the Fund’s return on a net asset value basis was 17.1% for Class A shares and 16.4% for Class B shares, including dividends of 47.2 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 had as much as 25% of its assets invested in a combination of U.S. agency debt, mortgage-backed securities, U.S. Treasury notes, high yield corporate bonds, municipal bonds, and preferred stocks.
The review period began immediately following the bankruptcy of Lehman Brothers as financial markets and the economy encountered their worst crisis since the Great Depression. Over the next several months, extraordinary actions by the U.S. government and the Federal Reserve helped stabilize both the markets and the economy. By the end of the review period, the financial markets had experienced a significant recovery. For the corporate bond market, this environment resulted in significant volatility as the market priced itself for a worst-case outcome (and valuations moved to historically cheap levels), and then staged a terrific rebound. By the end of the review period, the corporate bond market had registered very strong 12-month returns.
While the Fund had strong double-digit returns over the period, it underperformed the Bank of America Merrill Lynch Corporate Index. The Fund had approximately 3% of its assets in the preferred stocks of several financial companies during the fourth quarter of last year, unlike the Index which had none. These holdings had substantial negative returns, which hurt the Fund’s performance before they were sold. An additional factor that affected relative performance was the Fund’s underweight in corporate bonds with maturities longer than ten years. Longer maturity bonds had the highest returns during the review period as a result of the rally in the corporate bond market during the last half of the review period.
The Fund began the review period with only approximately 75% of its assets in corporate bonds. As the market stabilized, the Fund gradually increased its corporate bond holdings to over 90% of assets. While the Fund’s relatively low weighting in corporate bonds helped performance in the first half of the review period, ultimately the fact that the Fund was not fully invested in corporate bonds detracted from its performance when the market rallied during the second half of the review period.
14 |
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/0000886048-09-000026/incomequityx17x1.jpg)
Clark D. Wagner
Portfolio Manager and
Director of Fixed Income, First Investors Management Company, Inc.
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx17x2.jpg)
Rajeev Sharma
Portfolio Manager*
October 30, 2009
* Mr. Sharma became the Fund’s Co-Portfolio Manager on July 27, 2009.
15 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,183.36 | $6.02 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,019.55 | $5.57 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,180.15 | $9.84 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,016.05 | $9.10 |
* | Expenses are equal to the annualized expense ratio of 1.10% for Class A shares and 1.80% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx18x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total value of investments.
16 |
Cumulative Performance Information (unaudited)
INVESTMENT GRADE FUND
Comparison of change in value of $10,000 investment in the First Investors Investment Grade Fund (Class A shares) and the Bank of America Merrill Lynch U.S. Corporate Master Index.
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx19x1.jpg)
The graph compares a $10,000 investment in the First Investors Investment Grade Fund (Class A shares) beginning 9/30/99 with a theoretical investment in the Bank of America 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 investm ent 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 9/30/09) 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 10.19%, 1.77% and 4.25%, respectively, and the S.E.C. 30-Day Yield for September 2009 would have been 3.67%. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been 12.17%, 1.93% and 4.24%, respectively, and the S.E.C. 30-Day Yield for September 2009 would have been 3.19%. 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. Bank of America Merrill Lynch U.S. Corporate Master Index figures are from Bank of America Merrill Lynch & Co. and all other figures are from First Investors Management Company, Inc.
17 |
Portfolio of Investments
INVESTMENT GRADE FUND
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
CORPORATE BONDS—90.6% | |||||||
Aerospace/Defense—.5% | |||||||
$ 1,800M | BAE Systems Holdings, Inc., 4.95%, 2014 (a) | $ 1,868,407 | |||||
Agriculture—1.2% | |||||||
1,900M | Cargill, Inc., 6%, 2017 (a) | 2,060,732 | |||||
1,900M | Potash Corp. of Saskatchewan, Inc., 4.875%, 2020 | 1,901,685 | |||||
3,962,417 | |||||||
Automotive—.9% | |||||||
3,000M | Daimler Chrysler NA, LLC, 6.5%, 2013 | 3,234,981 | |||||
Chemicals—1.4% | |||||||
1,700M | Cabot Corp., 5.25%, 2013 (a) | 1,717,377 | |||||
2,400M | Chevron Phillips Chemicals Co., LLC, 8.25%, 2019 (a) | 2,903,558 | |||||
4,620,935 | |||||||
Consumer Durables—1.0% | |||||||
1,650M | Black & Decker Corp., 5.75%, 2016 | 1,650,310 | |||||
1,600M | Newell Rubbermaid, Inc., 6.75%, 2012 | 1,691,186 | |||||
3,341,496 | |||||||
Energy—19.1% | |||||||
3,900M | Canadian Oil Sands, Ltd., 7.75%, 2019 (a) | 4,521,395 | |||||
4,800M | DCP Midstream, LLC, 9.75%, 2019 (a) | 5,743,430 | |||||
2,400M | Enbridge Energy Partners LP, 7.5%, 2038 | 2,749,620 | |||||
1,800M | Energy Transfer Partners LP, 8.5%, 2014 | 2,081,966 | |||||
850M | Kinder Morgan Finance Co., 5.35%, 2011 | 858,500 | |||||
5,000M | Maritime & Northeast Pipeline, LLC, 7.5%, 2014 (a) | 5,264,045 | |||||
2,800M | Nabors Industries, Inc., 6.15%, 2018 | 2,811,530 | |||||
Nexen, Inc.: | |||||||
2,000M | 5.05%, 2013 | 2,056,428 | |||||
2,250M | 7.875%, 2032 | 2,491,819 | |||||
1,800M | 6.4%, 2037 | 1,757,945 | |||||
2,000M | Northern Border Partners, LP, 7.1%, 2011 | 2,112,542 | |||||
Pacific Energy Partners, LP: | |||||||
2,150M | 7.125%, 2014 | 2,226,605 | |||||
3,200M | 6.25%, 2015 | 3,259,642 | |||||
900M | Plains All American Pipeline, LP, 8.75%, 2019 | 1,082,189 | |||||
7,200M | Rockies Express Pipeline, LLC, 6.25%, 2013 (a) | 7,788,118 | |||||
5,800M | Spectra Energy Capital, LLC, 6.2%, 2018 | 6,182,174 |
18 |
Principal | |||||||
Amount | Security | Value | |||||
Energy (continued) | |||||||
$ 4,400M | Suncor Energy, Inc., 6.85%, 2039 | $ 4,801,892 | |||||
2,575M | Trans-Canada Pipelines, Ltd., 7.625%, 2039 | 3,296,860 | |||||
Valero Energy Corp.: | |||||||
1,700M | 6.125%, 2017 | 1,757,831 | |||||
1,000M | 9.375%, 2019 | 1,167,165 | |||||
900M | 10.5%, 2039 | 1,152,608 | |||||
65,164,304 | |||||||
Financial Services—9.7% | |||||||
1,800M | American Express Co., 7%, 2018 | 1,983,335 | |||||
1,800M | American General Finance Corp., 6.9%, 2017 | 1,260,655 | |||||
5,040M | Amvescap PLC, 5.375%, 2013 | 5,071,949 | |||||
7,460M | CoBank, ACB, 7.875%, 2018 (a) | 7,274,276 | |||||
1,800M | Compass Bank, 6.4%, 2017 | 1,693,348 | |||||
1,170M | ERAC USA Finance Co., 8%, 2011 (a) | 1,226,942 | |||||
2,363M | Ford Motor Credit Co., 9.75%, 2010 | 2,415,262 | |||||
3,000M | General Electric Capital Corp., 4.375%, 2015 | 2,974,941 | |||||
625M | Greenpoint Bank, 9.25%, 2010 | 645,587 | |||||
Harley-Davidson Funding Corp.: | |||||||
1,800M | 5%, 2010 (a) | 1,789,151 | |||||
2,365M | 6.8%, 2018 (a) | 2,306,684 | |||||
4,600M | Prudential Financial, Inc., 4.75%, 2015 | 4,573,582 | |||||
33,215,712 | |||||||
Financials—12.2% | |||||||
1,900M | Bank of America Corp., 5.65%, 2018 | 1,879,187 | |||||
1,500M | Bear Stearns Cos., Inc., 7.25%, 2018 | 1,715,795 | |||||
Citigroup, Inc.: | |||||||
2,700M | 6.375%, 2014 | 2,794,400 | |||||
2,400M | 6.125%, 2017 | 2,386,610 | |||||
Goldman Sachs Group, Inc.: | |||||||
500M | 6.15%, 2018 | 526,827 | |||||
1,600M | 6.45%, 2036 | 1,594,856 | |||||
2,750M | 6.75%, 2037 | 2,847,138 | |||||
2,420M | Hibernia Corp., 5.35%, 2014 | 2,323,052 | |||||
3,000M | JPMorgan Chase & Co., 3.7%, 2015 | 2,977,083 | |||||
6,700M | Merrill Lynch & Co., Inc., 5.45%, 2013 | 6,952,644 | |||||
Morgan Stanley: | |||||||
3,400M | 5.95%, 2017 | 3,467,286 | |||||
2,600M | 6.625%, 2018 | 2,753,772 | |||||
2,900M | Royal Bank of Scotland Group PLC, 5%, 2014 | 2,625,686 |
19 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
Financials (continued) | |||||||
$ 1,600M | SunTrust Bank, Inc., 7.25%, 2018 | $ 1,673,360 | |||||
2,300M | UBS AG, 5.875%, 2016 | 2,299,195 | |||||
3,000M | Wells Fargo & Co., 3.75%, 2014 | 2,988,354 | |||||
41,805,245 | |||||||
Food/Beverage/Tobacco—4.4% | |||||||
4,600M | Altria Group, Inc., 10.2%, 2039 | 6,403,835 | |||||
1,980M | Bunge Limited Finance Corp., 5.875%, 2013 | 2,095,147 | |||||
1,600M | ConAgra Foods, Inc., 5.875%, 2014 | 1,758,174 | |||||
4,600M | Philip Morris International, Inc., 5.65%, 2018 | 4,904,695 | |||||
15,161,851 | |||||||
Food/Drug—.6% | |||||||
1,875M | CVS/Caremark Corp., 6.125%, 2039 | 1,913,880 | |||||
Forest Products/Container—.8% | |||||||
2,200M | International Paper Co., 9.375%, 2019 | 2,580,206 | |||||
Health Care—4.2% | |||||||
2,000M | Biogen IDEC, Inc., 6.875%, 2018 | 2,199,210 | |||||
2,400M | Novartis, 5.125%, 2019 | 2,559,706 | |||||
1,000M | Pfizer, Inc., 6.2%, 2019 | 1,129,187 | |||||
1,000M | Roche Holdings, Inc., 6%, 2019 (a) | 1,115,169 | |||||
3,125M | St. Jude Medical, Inc., 4.875%, 2019 | 3,225,478 | |||||
3,000M | Watson Pharmaceuticals, Inc., 5%, 2014 | 3,078,564 | |||||
900M | Wyeth, 5.5%, 2016 | 983,406 | |||||
14,290,720 | |||||||
Industrials—.6% | |||||||
Pitney Bowes, Inc.: | |||||||
900M | 5%, 2015 | 957,560 | |||||
1,000M | 5.25%, 2037 | 1,036,394 | |||||
1,993,954 |
20 |
Principal | |||||||
Amount | Security | Value | |||||
Information Technology—2.3% | |||||||
$ 900M | Dell, Inc., 5.875%, 2019 | $ 966,641 | |||||
3,208M | Dun & Bradstreet Corp., 6%, 2013 | 3,327,434 | |||||
900M | Intuit, Inc., 5.4%, 2012 | 945,100 | |||||
900M | Oracle Corp., 5%, 2019 | 948,619 | |||||
1,750M | Xerox Corp., 6.875%, 2011 | 1,867,339 | |||||
8,055,133 | |||||||
Manufacturing—.8% | |||||||
1,750M | Briggs & Stratton Corp., 8.875%, 2011 | 1,828,750 | |||||
900M | Crane Co., 6.55%, 2036 | 885,904 | |||||
2,714,654 | |||||||
Manufacturing-Diversified—.6% | |||||||
900M | General Electric Co., 5.25%, 2017 | 925,152 | |||||
1,230M | Tyco Electronics Group SA, 6.55%, 2017 | 1,289,587 | |||||
2,214,739 | |||||||
Media-Broadcasting—4.7% | |||||||
3,950M | British Sky Broadcasting Group PLC, 9.5%, 2018 (a) | 5,062,130 | |||||
Cox Communications, Inc.: | |||||||
2,000M | 4.625%, 2013 | 2,079,424 | |||||
3,100M | 8.375%, 2039 (a) | 3,835,999 | |||||
Time Warner, Inc.: | |||||||
3,550M | 6.875%, 2012 | 3,910,219 | |||||
1,000M | 9.125%, 2013 | 1,162,054 | |||||
16,049,826 | |||||||
Media-Diversified—8.0% | |||||||
McGraw-Hill Cos., Inc.: | |||||||
1,800M | 5.9%, 2017 | 1,844,858 | |||||
2,300M | 6.55%, 2037 | 2,272,140 | |||||
6,900M | News America, Inc., 5.3%, 2014 | 7,436,247 | |||||
4,500M | Thomson Reuters Corp., 5.95%, 2013 | 4,944,375 | |||||
Time Warner Cable, Inc.: | |||||||
4,430M | 6.2%, 2013 | 4,830,073 | |||||
2,700M | 6.75%, 2018 | 2,987,839 | |||||
2,800M | Walt Disney Co., 4.5%, 2013 | 2,991,047 | |||||
27,306,579 |
21 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
Metals/Mining—2.0% | |||||||
$ 2,900M | ArcelorMittal, 6.125%, 2018 | $ 2,861,685 | |||||
3,800M | Newmont Mining Corp., 5.125%, 2019 | 3,805,681 | |||||
6,667,366 | |||||||
Real Estate Investment Trusts—.5% | |||||||
1,800M | ProLogis, 7.625%, 2014 | 1,841,382 | |||||
Telecommunications—4.1% | |||||||
3,000M | AT&T, Inc., 5.8%, 2019 | 3,215,937 | |||||
6,100M | Deutsche Telekom Intl. Finance BV, 5.875%, 2013 | 6,644,687 | |||||
1,359M | GTE Corp., 6.84%, 2018 | 1,483,157 | |||||
2,400M | Verizon Wireless Capital, LLC, 5.55%, 2014 (a) | 2,596,135 | |||||
13,939,916 | |||||||
Transportation—1.1% | |||||||
3,300M | GATX Corp., 8.75%, 2014 | 3,716,902 | |||||
Utilities—8.3% | |||||||
1,800M | Consumers Energy Co., 6.875%, 2018 | 2,024,734 | |||||
8,250M | E. ON International Finance BV, 5.8%, 2018 (a) | 8,893,426 | |||||
2,100M | Electricite de France SA, 6.95%, 2039 (a) | 2,610,955 | |||||
2,650M | Entergy Gulf States, Inc., 5.25%, 2015 | 2,648,492 | |||||
2,800M | Exelon Generation Co., LLC, 6.2%, 2017 | 3,060,672 | |||||
833M | Great River Energy Co., 5.829%, 2017 (a) | 883,744 | |||||
1,400M | OGE Energy Corp., 5%, 2014 | 1,375,501 | |||||
3,000M | Ohio Power Co., 5.375%, 2021 | 3,050,667 | |||||
775M | PSI Energy, Inc., 8.85%, 2022 | 906,834 | |||||
1,510M | Public Service Electric & Gas Co., 6.75%, 2016 | 1,689,932 | |||||
1,000M | Sempra Energy, 9.8%, 2019 | 1,282,841 | |||||
28,427,798 | |||||||
Waste Management—1.6% | |||||||
Allied Waste NA, Inc.: | |||||||
2,000M | 7.375%, 2014 | 2,083,104 | |||||
1,400M | 7.25%, 2015 | 1,462,889 | |||||
1,900M | 7.125%, 2016 | 2,007,145 | |||||
5,553,138 | |||||||
Total Value of Corporate Bonds (cost $286,474,424) | 309,641,541 | ||||||
22 |
Principal | |||||||
Amount | Security | Value | |||||
MORTGAGE-BACKED CERTIFICATES—4.5% | |||||||
Fannie Mae | |||||||
$11,455M | 5.5%, 1/1/2036 – 10/1/2038 | $ 12,009,511 | |||||
3,185M | 6%, 11/1/2038 – 4/1/2039 | 3,365,116 | |||||
Total Value of Mortgage-Backed Certificates (cost $14,900,863) | 15,374,627 | ||||||
U.S. GOVERNMENT AGENCY | |||||||
OBLIGATIONS—3.0% | |||||||
4,500M | Fannie Mae, 4.02%, 2015 | 4,626,662 | |||||
Federal Home Loan Bank: | |||||||
1,000M | 7.23%, 2015 | 1,059,371 | |||||
2,000M | 4.5%, 2019 | 2,024,104 | |||||
1,400M | Federal Home Loan Mtg. Assoc., 5.25%, 2019 | 1,417,014 | |||||
1,000M | Freddie Mac, 5.5%, 2019 | 1,001,801 | |||||
Total Value of U.S. Government Agency Obligations (cost $9,783,396) | 10,128,952 | ||||||
PASS THROUGH CERTIFICATES—.1% | |||||||
Transportation | |||||||
423M | American Airlines, Inc., 7.377%, 2019 (cost $412,275) | 304,392 | |||||
SHORT-TERM INVESTMENTS—1.7% | |||||||
Money Market Fund | |||||||
5,775M | First Investors Cash Reserve Fund, .39% (cost $5,775,000) (b) | 5,775,000 | |||||
Total Value of Investments (cost $317,345,958) | 99.9 | % | 341,224,512 | ||||
Other Assets, Less Liabilities | .1 | 461,397 | |||||
Net Assets | 100.0 | % | $341,685,909 | ||||
(a) | Security exempt from registration under Rule 144A of Securities Act of 1933 (see Note 4). |
(b) | 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, 2009 (see Note 2). |
23 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2009
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Corporate Bonds | $ | — | $ | 309,641,541 | $ | — | $ | 309,641,541 | ||||
Mortgage-Backed Certificates | — | 15,374,627 | — | 15,374,627 | ||||||||
U.S. Government Agency | ||||||||||||
Obligations | — | 10,128,952 | — | 10,128,952 | ||||||||
Pass Through Certificates | — | 304,392 | — | 304,392 | ||||||||
Money Market Fund | 5,775,000 | — | — | 5,775,000 | ||||||||
Total Investments in Securities* | $ | 5,775,000 | $ | 335,449,512 | $ | — | $ | 341,224,512 |
* The Portfolio of Investments provides information on the industry categorization for corporate bonds.
24 | See notes to financial statements |
Portfolio Manager’s 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, 2009. During the period, the Fund’s return on a net asset value basis was 4.3% for Class A shares and 3.8% for Class B shares, including dividends of 19.9 cents per share on Class A shares and 18.0 cents per share on Class B shares.
The Fund underwent significant changes during the review period. Muzinich & Co., Inc. (“Muzinich”) became subadviser of the Fund on April 24, 2009. Muzinich is an institutional asset manager specializing in high yield, with approximately $6 billion in high yield assets under management for clients in the U.S. and Europe. Muzinich emphasizes rigorous research to carefully select credits that offer good value for the risk they present relative to other offerings in the marketplace.
The review period began immediately following the bankruptcy of Lehman Brothers as financial markets and the economy encountered their worst crisis since the Great Depression. Over the next several months, extraordinary actions by the U.S. government and the Federal Reserve helped stabilize both the markets and the economy. By the end of the review period, the financial markets had experienced a significant recovery. For the corporate bond market, this environment resulted in significant volatility as the market priced itself for a worst-case outcome (and valuations moved to historically cheap levels), and then staged a terrific rebound. By the end of the review period, the corporate bond market had registered very strong 12-month returns.
Throughout the second and third quarters, significant cash flowed into the high yield market as investors became more confident about the broad economy. High yield enjoyed a noticeable bounce through the summer as earnings reports exceeded the marketplace’s very low expectations. Interest in high yield continued to climb through the summer as more positive economic news made it easier for a growing number of high yield companies to regain liquidity they had lost during the credit crisis.
Since taking over the Fund, we took advantage of rising market bids for high yield bonds and a growing market appetite for risk, by replacing many of the Fund’s most illiquid and highest-default risk positions with higher quality credits. We believe the Fund’s relatively more conservative approach positions it well for the future. However, in the last year, when the most speculative risk was favored, the Fund under-performed the Credit Suisse High Yield II Index. Particularly in the second and third quarters of 2009, the vast majority of the market’s returns went to credits priced at very distressed levels, or to those in the financial services sectors. In a rally such as this one, the Fund’s higher-quality portfolio was bound to underperform. In 2009, massive risk-taking, not credit analysis, was rewarded.
25 |
Portfolio Manager’s Letter (continued)
FUND FOR INCOME
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/0000886048-09-000026/incomequityx28x1.jpg)
John Ingallinera*
Senior Portfolio Manager
October 30, 2009
*Mr. Ingallinera is part of a portfolio management team that began managing the Fund on April 24, 2009.
26 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,261.08 | $7.65 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.30 | $6.83 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,261.66 | $11.62 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.79 | $10.35 |
* | Expenses are equal to the annualized expense ratio of 1.35% for Class A shares and 2.05% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx29x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total value of investments.
27 |
Cumulative Performance Information (unaudited)
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/0000886048-09-000026/incomequityx30x1.jpg)
The graph compares a $10,000 investment in the First Investors Fund For Income (Class A shares) beginning 9/30/99 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 9/30/09, the Index consisted of 1,204 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 9/30/09, approximately .76% of the market value of the Index was in default. The bonds included in the Index have an average maturity of 6.36 years, an average duration of 3.94 years and an average coupon of 8.45%. 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 9/30/09) 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 (1.78%), .24% and 2.58%, respectively, and the S.E.C. 30-Day Yield for September 2009 would have been 7.14%. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and T en Years would have been (.09%), .43% and 2.65%, respectively, and the S.E.C. 30-Day Yield for September 2009 would have been 6.86%. 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. 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 Corpora tion and all other figures are from First Investors Management Company, Inc.
28 |
Portfolio of Investments
FUND FOR INCOME
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
CORPORATE BONDS—97.4% | |||||||
Aerospace/Defense—3.3% | |||||||
$ 4,775M | Alliant Techsystems, Inc., 6.75%, 2016 | $ 4,631,750 | |||||
5,508M | DynCorp International, LLC, 9.5%, 2013 | 5,645,700 | |||||
4,375M | L-3 Communications Corp., 7.625%, 2012 | 4,446,094 | |||||
14,723,544 | |||||||
Airlines—.4% | |||||||
1,775M | American Airlines, Inc., 10.5%, 2012 (a) | 1,806,062 | |||||
Automotive—1.1% | |||||||
2,200M | Cooper Tire & Rubber Co., 8%, 2019 | 1,991,000 | |||||
2,500M | Goodyear Tire & Rubber Co., 10.5%, 2016 | 2,725,000 | |||||
4,716,000 | |||||||
Building Materials—2.1% | |||||||
3,150M | Building Materials Corp., 7.75%, 2014 | 3,047,625 | |||||
4,550M | Hanson, Ltd., 6.125%, 2016 | 4,191,706 | |||||
1,375M | Interface, Inc., 11.375%, 2013 (a) | 1,498,750 | |||||
900M | NTK Holdings, Inc., 10.75%, 2014 | 29,250 | |||||
500M | Owens Corning, Inc., 9%, 2019 | 537,882 | |||||
9,305,213 | |||||||
Capital Goods—.6% | |||||||
2,650M | Belden CDT, Inc., 9.25%, 2019 (a) | 2,769,250 | |||||
Chemicals—2.8% | |||||||
800M | Ashland, Inc., 9.125%, 2017 (a) | 858,000 | |||||
2,225M | Huntsman International, LLC, 5.5%, 2016 (a) | 1,902,375 | |||||
1,475M | Invista, 9.25%, 2012 (a) | 1,482,375 | |||||
4,800M | Newmarket Corp., 7.125%, 2016 | 4,608,000 | |||||
750M | Olin Corp., 8.875%, 2019 | 787,500 | |||||
500M | Titan Petrochemicals Group, Ltd., 8.5%, 2012 (a) | 172,500 | |||||
3,075M | Westlake Chemical Corp., 6.625%, 2016 | 2,905,875 | |||||
12,716,625 |
29 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
Consumer Durables—1.1% | |||||||
Sealy Mattress Co.: | |||||||
$ 3,500M | 8.25%, 2014 | $ 3,255,000 | |||||
1,550M | 10.875%, 2016 (a) | 1,716,625 | |||||
4,971,625 | |||||||
Consumer Non-Durables—1.4% | |||||||
575M | Acco Brands Corp., 10.625%, 2015 (a) | 603,750 | |||||
3,815M | GFSI, Inc., 10.5%, 2011 (a)(b) | 2,308,075 | |||||
3,125M | Levi Strauss & Co., 9.75%, 2015 | 3,265,625 | |||||
6,177,450 | |||||||
Energy—10.5% | |||||||
400M | Basic Energy Services, Inc., 11.625%, 2014 (a) | 426,000 | |||||
Berry Petroleum Co.: | |||||||
2,600M | 10.25%, 2014 | 2,788,500 | |||||
1,825M | 8.25%, 2016 | 1,761,125 | |||||
Chesapeake Energy Corp.: | |||||||
1,800M | 7.5%, 2014 | 1,788,750 | |||||
2,375M | 6.625%, 2016 | 2,256,250 | |||||
4,500M | Cimarex Energy Co., 7.125%, 2017 | 4,207,500 | |||||
275M | Concho Resources, Inc., 8.625%, 2017 | 283,250 | |||||
250M | Continental Resources, Inc., 8.25%, 2019 (a) | 258,125 | |||||
El Paso Corp.: | |||||||
2,650M | 7%, 2017 | 2,610,250 | |||||
275M | 7.75%, 2032 | 253,329 | |||||
2,350M | Ferrellgas Partners LP, 9.125%, 2017 (a) | 2,432,250 | |||||
1,900M | Helix Energy Solutions Group, Inc., 9.5%, 2016 (a) | 1,909,500 | |||||
3,100M | Hilcorp Energy I, LP, 9%, 2016 (a) | 3,092,250 | |||||
Linn Energy, LLC: | |||||||
1,275M | 11.75%, 2017 (a) | 1,380,187 | |||||
1,750M | 9.875%, 2018 | 1,785,000 | |||||
2,750M | Mariner Energy, Inc., 11.75%, 2016 | 2,976,875 | |||||
950M | Pacific Energy Partners, LP, 7.125%, 2014 | 983,848 | |||||
925M | Penn Virginia Corp., 10.375%, 2016 | 1,003,625 | |||||
Plains Exploration & Production Co.: | |||||||
450M | 7.75%, 2015 | 448,875 | |||||
2,625M | 7.625%, 2018 | 2,585,625 | |||||
Quicksilver Resources, Inc.: | |||||||
1,175M | 7.125%, 2016 | 1,025,187 | |||||
1,325M | 11.75%, 2016 | 1,467,438 | |||||
1,775M | 9.125%, 2019 | 1,775,000 |
30 |
Principal | |||||||
Amount | Security | Value | |||||
Energy (continued) | |||||||
$ 1,350M | Sandridge Energy, Inc., 9.875%, 2016 (a) | $ 1,414,125 | |||||
2,600M | Stewart & Stevenson, LLC, 10%, 2014 | 2,405,000 | |||||
3,925M | Williams Partners, LP, 7.25%, 2017 | 3,862,534 | |||||
47,180,398 | |||||||
Food/Beverage/Tobacco—3.3% | |||||||
3,725M | Constellation Brands, Inc. , 7.25%, 2016 | 3,725,000 | |||||
250M | Del Monte Corp., 7.5%, 2019 (a) | 253,750 | |||||
875M | Dole Foods Co., 8%, 2016 (a) | 882,656 | |||||
3,725M | JBS USA, LLC, 11.625%, 2014 (a) | 4,023,000 | |||||
775M | Land O’Lakes, Inc., 8.75%, 2011 | 780,812 | |||||
Smithfield Foods, Inc.: | |||||||
2,700M | 10%, 2014 (a) | 2,848,500 | |||||
3,075M | 7.75%, 2017 | 2,544,563 | |||||
15,058,281 | |||||||
Food/Drug—1.4% | |||||||
5,825M | Ingles Markets, Inc., 8.875%, 2017 | 5,999,750 | |||||
450M | Rite Aid Corp., 9.75%, 2016 (a) | 488,250 | |||||
6,488,000 | |||||||
Forest Products/Containers—2.4% | |||||||
275M | Cascades, Inc., 7.25%, 2013 | 270,875 | |||||
1,000M | Crown Americas, LLC, 7.625%, 2017 (a) | 1,015,000 | |||||
2,000M | Domtar Corp., 10.75%, 2017 | 2,250,000 | |||||
250M | Graham Packaging Co., LP, 8.5%, 2012 | 253,750 | |||||
Graphic Packaging International, Inc.: | |||||||
150M | 9.5%, 2017 (a) | 160,125 | |||||
300M | 9.5%, 2017 (a) | 320,250 | |||||
1,150M | NewPage Corp., 11.375%, 2014 (a) | 1,135,625 | |||||
1,425M | Owens-Brockway Glass Container, Inc., 7.375%, 2016 | 1,453,500 | |||||
1,800M | PE Paper Escrow GmbH, 12%, 2014 (a) | 1,947,566 | |||||
1,760M | Sappi Papier Holding, AG, 6.75%, 2012 (a) | 1,629,941 | |||||
188M | Tekni-Plex, Inc., 8.75%, 2013 | 138,180 | |||||
10,574,812 | |||||||
Gaming/Leisure—7.6% | |||||||
1,050M | Ameristar Casinos, Inc., 9.25%, 2014 (a) | 1,094,625 | |||||
1,875M | Las Vegas Sands Corp., 6.375%, 2015 | 1,687,500 | |||||
2,610M | Mandalay Resort Group, 6.375%, 2011 | 2,349,000 |
31 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
Gaming/Leisure (continued) | |||||||
MGM Mirage, Inc.: | |||||||
$ 275M | 13%, 2013 (a) | $ 316,250 | |||||
1,375M | 11.125%, 2017 (a) | 1,509,063 | |||||
4,775M | 11.375%, 2018 (a) | 4,512,375 | |||||
Mohegan Tribal Gaming Authority: | |||||||
450M | 8%, 2012 | 383,625 | |||||
550M | 6.125%, 2013 | 457,875 | |||||
Pinnacle Entertainment, Inc.: | |||||||
2,350M | 7.5%, 2015 | 2,091,500 | |||||
1,250M | 8.625%, 2017 (a) | 1,262,500 | |||||
1,275M | Scientific Games, International, Inc., 9.25%, 2019 (a) | 1,332,375 | |||||
Speedway Motorsports, Inc.: | |||||||
8,445M | 6.75%, 2013 | 8,381,663 | |||||
1,275M | 8.75%, 2016 (a) | 1,332,375 | |||||
4,700M | Universal City Development Partners, Ltd., 11.75%, 2010 | 4,747,000 | |||||
2,600M | Yonkers Racing Corp., 11.375%, 2016 (a) | 2,717,000 | |||||
34,174,726 | |||||||
Health Care—8.8% | |||||||
Alliance Imaging, Inc.: | |||||||
900M | 7.25%, 2012 | 873,000 | |||||
3,150M | 7.25%, 2012 | 3,055,500 | |||||
2,000M | Biomet, Inc., 11.625%, 2017 | 2,190,000 | |||||
6,375M | Community Health Systems, Inc., 8.875%, 2015 | 6,550,312 | |||||
1,000M | Cooper Companies, Inc., 7.125%, 2015 | 975,000 | |||||
4,400M | Genesis Health Ventures, Inc., 9.75%, 2011 (c)(d) | 2,750 | |||||
HCA, Inc.: | |||||||
5,700M | 6.75%, 2013 | 5,486,250 | |||||
2,800M | 6.375%, 2015 | 2,506,000 | |||||
2,250M | Iasis Healthcare, LLC, 8.75%, 2014 | 2,261,250 | |||||
4,000M | Omnicare, Inc., 6.875%, 2015 | 3,860,000 | |||||
3,025M | Res-Care, Inc., 7.75%, 2013 | 2,964,500 | |||||
Tenet Healthcare Corp.: | |||||||
2,525M | 7.375%, 2013 | 2,512,375 | |||||
2,250M | 9.25%, 2015 | 2,359,688 | |||||
4,500M | Universal Hospital Services, Inc., 4.635%, 2015 (b) | 3,836,250 | |||||
39,432,875 |
32 |
Principal | |||||||
Amount | Security | Value | |||||
Information Technology—1.0% | |||||||
Jabil Circuit, Inc.: | |||||||
$ 350M | 7.75%, 2016 | $ 357,000 | |||||
450M | 8.25%, 2018 | 459,000 | |||||
875M | Sanmina – SCI Corp., 3.049%, 2014 (a)(b) | 791,875 | |||||
1,300M | Seagate Technology HDD Holdings, 6.8%, 2016 | 1,199,250 | |||||
1,350M | Seagate Technology International, Inc., 10%, 2014 (a) | 1,481,625 | |||||
4,288,750 | |||||||
Manufacturing—3.0% | |||||||
2,650M | Baldor Electric Co., 8.625%, 2017 | 2,703,000 | |||||
1,175M | Case New Holland, Inc., 7.75%, 2013 (a) | 1,175,000 | |||||
450M | CPM Holdings, Inc,, 10.625%, 2014 (a) | 466,875 | |||||
2,000M | ESCO Corp., 8.625%, 2013 (a) | 1,970,000 | |||||
Terex Corp.: | |||||||
2,425M | 10.875%, 2016 | 2,655,375 | |||||
5,100M | 8%, 2017 | 4,704,750 | |||||
13,675,000 | |||||||
Media-Broadcasting—1.2% | |||||||
Belo Corp.: | |||||||
1,875M | 6.75%, 2013 | 1,769,531 | |||||
725M | 7.75%, 2027 | 573,656 | |||||
675M | Geoeye, Inc., 9.625%, 2015 (a) | 686,812 | |||||
3,196M | Nexstar Finance Holdings, LLC, 11.375%, 2013 | 1,358,259 | |||||
1,000M | Univision Communications, Inc., 12%, 2014 (a) | 1,080,000 | |||||
Young Broadcasting, Inc.: | |||||||
2,920M | 10%, 2011 (c) | 3,650 | |||||
4,900M | 8.75%, 2014 (c) | 6,125 | |||||
5,478,033 | |||||||
Media-Cable TV—6.8% | |||||||
6,250M | Atlantic Broadband Finance, LLC, 9.375%, 2014 | 6,093,750 | |||||
6,900M | Cablevision Systems Corp., 8%, 2012 | 7,227,750 | |||||
Charter Communications Holdings, LLC: | |||||||
8,250M | 11.75%, 2011 (c) | 61,875 | |||||
3,185M | 10%, 2012 (a) | 3,256,662 | |||||
5,444M | 10%, 2015 (c) | 40,830 | |||||
1,875M | CSC Holdings, Inc., 8.5%, 2014 (a) | 1,978,125 | |||||
2,250M | Echostar DBS Corp., 6.625%, 2014 | 2,193,750 | |||||
1,900M | Mediacom LLC/Mediacom Capital Corp., 9.125%, 2019 (a) | 1,961,750 |
33 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
Media-Cable TV (continued) | |||||||
Quebecor Media, Inc.: | |||||||
$ 1,425M | 7.75%, 2016 | $ 1,417,875 | |||||
1,000M | 7.75%, 2016 | 995,000 | |||||
275M | UPC Holding BV, 9.875%, 2018 (a) | 290,125 | |||||
4,925M | Virgin Media Finance PLC, 9.5%, 2016 | 5,208,188 | |||||
30,725,680 | |||||||
Media-Diversified—1.3% | |||||||
2,000M | Deluxe Corp., 7.375%, 2015 | 1,927,500 | |||||
Gannett Company, Inc.: | |||||||
800M | 8.75%, 2014 | 783,000 | |||||
625M | 9.375%, 2017 | 614,844 | |||||
1,225M | Interpublic Group of Cos., Inc., 10%, 2017 (a) | 1,329,125 | |||||
MediaNews Group, Inc.: | |||||||
2,625M | 6.875%, 2013 (c) | 6,825 | |||||
3,100M | 6.375%, 2014 (c) | 8,060 | |||||
725M | Scholastic Corp., 5%, 2013 | 623,500 | |||||
250M | Universal City Florida Holding Co., 5.233%, 2010 (b) | 245,625 | |||||
425M | WMG Acquisition Corp., 9.5%, 2016 (a) | 450,500 | |||||
5,988,979 | |||||||
Metals/Mining—6.3% | |||||||
900M | AK Steel Corp., 7.75%, 2012 | 907,875 | |||||
1,025M | Arch Coal, Inc., 8.75%, 2016 (a) | 1,060,875 | |||||
425M | Arch Western Finance, LLC, 6.75%, 2013 | 420,219 | |||||
1,175M | Drummond Co., Inc., 7.375%, 2016 (a) | 1,039,875 | |||||
5,500M | Massey Energy Co., 6.875%, 2013 | 5,335,000 | |||||
1,750M | Metals USA, Inc., 11.125%, 2015 | 1,690,937 | |||||
Novelis, Inc.: | |||||||
2,075M | 7.25%, 2015 | 1,805,250 | |||||
1,600M | 11.5%, 2015 (a) | 1,624,000 | |||||
6,010M | Russell Metals, Inc., 6.375%, 2014 | 5,416,513 | |||||
Teck Resources, Ltd.: | |||||||
1,850M | 9.75%, 2014 | 2,044,250 | |||||
3,725M | 10.25%, 2016 | 4,227,875 | |||||
1,350M | 10.75%, 2019 | 1,576,125 | |||||
1,325M | Vedanta Resources PLC, 9.5%, 2018 (a) | 1,311,750 | |||||
28,460,544 |
34 |
Principal | |||||||
Amount | Security | Value | |||||
Real Estate Investment Trusts—3.0% | |||||||
$ 2,925M | Brandywine Operating Partnership, LP, 5.7%, 2017 | $ 2,637,277 | |||||
1,550M | CB Richard Ellis Service, 11.625%, 2017 (a) | 1,681,750 | |||||
Developers Diversified Realty Corp.: | |||||||
2,475M | 4.625%, 2010 | 2,433,623 | |||||
775M | 5.5%, 2015 | 671,626 | |||||
2,900M | 9.625%, 2016 | 2,912,548 | |||||
HRPT Properties Trust: | |||||||
450M | 6.25%, 2016 | 413,369 | |||||
1,975M | 6.25%, 2017 | 1,782,576 | |||||
1,100M | ProLogis, 7.625%, 2014 | 1,125,289 | |||||
13,658,058 | |||||||
Retail-General Merchandise—5.7% | |||||||
3,075M | Federated Retail Holdings, Inc., 5.9%, 2016 | 2,832,665 | |||||
2,900M | HSN, Inc., 11.25%, 2016 | 3,153,750 | |||||
2,225M | Landry’s Restaurants, Inc., 14%, 2011 | 2,244,469 | |||||
650M | Macy’s Retail Holdings, Inc., 6.7%, 2034 | 509,077 | |||||
4,325M | QVC, Inc., 7.5%, 2019 (a) | 4,352,031 | |||||
650M | Regal Cinemas Corp., 8.625%, 2019 (a) | 676,000 | |||||
5,525M | Toys R Us Property Co., Inc., 10.75%, 2017 (a) | 5,967,000 | |||||
2,425M | Wendy’s/Arby’s Restaurants, LLC, 10%, 2016 (a) | 2,588,688 | |||||
3,350M | Yankee Acquisition Corp., 8.5%, 2015 | 3,165,750 | |||||
25,489,430 | |||||||
Services—4.2% | |||||||
1,900M | Aramark Corp., 8.5%, 2015 | 1,926,125 | |||||
4,700M | Ashtead Capital, Inc., 9%, 2016 (a) | 4,535,500 | |||||
2,200M | Hertz Corp., 10.5%, 2016 | 2,299,000 | |||||
Iron Mountain, Inc.: | |||||||
225M | 8.75%, 2018 | 235,125 | |||||
1,125M | 8%, 2020 | 1,136,250 | |||||
1,000M | 8.375%, 2021 | 1,035,000 | |||||
3,425M | Kar Holdings, Inc., 8.75%, 2014 | 3,407,875 | |||||
2,375M | Reliance Intermediate Holdings, LP, 9.5%, 2019 (a) | 2,357,188 | |||||
2,113M | United Rentals, Inc., 6.5%, 2012 | 2,128,848 | |||||
19,060,911 |
35 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
Telecommunications—12.0% | |||||||
$ 2,050M | Cincinnati Bell, Inc., 8.375%, 2014 | $ 2,070,500 | |||||
5,500M | Citizens Communications Co., 7.125%, 2019 | 5,211,250 | |||||
Cricket Communications Inc.: | |||||||
875M | 9.375%, 2014 | 892,500 | |||||
425M | 7.75%, 2016 (a) | 433,500 | |||||
1,875M | Frontier Communications Corp., 8.125%, 2018 | 1,896,094 | |||||
2,075M | Intelsat Corp., 9.25%, 2014 | 2,137,250 | |||||
750M | Intelsat Jackson Holdings, Ltd., 9.5%, 2016 | 791,250 | |||||
2,450M | Intelsat Subsidiary Holdings Co., Ltd., 8.5%, 2013 | 2,492,875 | |||||
3,500M | MetroPCS Wireless, Inc., 9.25%, 2014 | 3,596,250 | |||||
Nextel Communications, Inc.: | |||||||
3,550M | Series “F”, 5.95%, 2014 | 3,159,500 | |||||
5,725M | Series “D”, 7.375%, 2015 | 5,166,812 | |||||
975M | Qwest Capital Funding, Inc., 7.25%, 2011 | 979,875 | |||||
Qwest Communications International, Inc.: | |||||||
3,500M | 7.5%, 2014 | 3,473,750 | |||||
2,125M | 8%, 2015 (a) | 2,132,969 | |||||
5,200M | Rogers Wireless, Inc., 6.375%, 2014 | 5,746,016 | |||||
SBA Telecommunications, Inc.: | |||||||
250M | 8%, 2016 (a) | 256,875 | |||||
1,450M | 8.25%, 2019 (a) | 1,500,750 | |||||
1,275M | Sprint Nextel Corp., 8.375%, 2017 | 1,275,000 | |||||
5,800M | Wind Acquisition Finance SA, 11.75%, 2017 (a) | 6,568,500 | |||||
Windstream Corp.: | |||||||
3,100M | 8.625%, 2016 | 3,185,250 | |||||
1,250M | 7.875%, 2017 | 1,242,188 | |||||
54,208,954 | |||||||
Utilities—6.1% | |||||||
AES Corp.: | |||||||
1,000M | 8.75%, 2013 (a) | 1,023,750 | |||||
875M | 9.75%, 2016 (a) | 958,125 | |||||
2,600M | Calpine Construction Finance Co., LP, 8%, 2016 (a) | 2,678,000 | |||||
875M | CMS Energy Corp., 8.75%, 2019 | 956,192 | |||||
5,250M | Dynegy, Inc., 7.75%, 2019 | 4,501,875 | |||||
2,225M | Edison Mission Energy, 7.5%, 2013 | 2,097,062 | |||||
2,150M | Energy Future Holdings Corp., 10.875%, 2017 | 1,634,000 | |||||
4,100M | Intergen NV, 9%, 2017 (a) | 4,243,500 | |||||
1,050M | Mirant North America, LLC, 7.375%, 2013 | 1,050,000 |
36 |
Principal | |||||||
Amount, | |||||||
Shares, | |||||||
or Warrants | Security | Value | |||||
Utilities (continued) | |||||||
NRG Energy, Inc.: | |||||||
$ 4,625M | 7.375%, 2017 | $ 4,486,250 | |||||
1,375M | 8.5%, 2019 | 1,383,594 | |||||
2,050M | NSG Holdings, LLC, 7.75%, 2025 (a) | 1,845,000 | |||||
469M | Tenaska Alabama Partners, LP, 7%, 2021 (a) | 428,540 | |||||
27,285,888 | |||||||
Total Value of Corporate Bonds (cost $455,647,494) | 438,415,088 | ||||||
AUCTION RATE SECURITIES(e)—.5% | |||||||
2,300M | New York State Thw. Auth. Svc. Contract Rev., | ||||||
.431%, 2021 (cost $2,300,000) (d) | 2,120,646 | ||||||
COMMON STOCKS—.0% | |||||||
Automotive—.0% | |||||||
37,387 | * | Safelite Glass Corporation – Class “B” (d) | 14,020 | ||||
2,523 | * | Safelite Realty Corporation (d) | 25 | ||||
14,045 | |||||||
Telecommunications—.0% | |||||||
8 | * | Viatel Holding (Bermuda), Ltd. (d) | — | ||||
18,224 | * | World Access, Inc. | 27 | ||||
27 | |||||||
Total Value of Common Stocks (cost $385,770) | 14,072 | ||||||
WARRANTS—.0% | |||||||
Telecommunication Services | |||||||
3,500 | * | GT Group Telecom, Inc. (expiring 2/1/10) | |||||
(cost $316,222) (a)(d) | — | ||||||
SHORT-TERM INVESTMENTS—.9% | |||||||
Money Market Fund | |||||||
$ 4,170M | First Investors Cash Reserve Fund, .39% | ||||||
(cost $4,170,000) (f) | 4,170,000 | ||||||
Total Value of Investments (cost $462,819,486) | 98.8 | % | 444,719,806 | ||||
Other Assets, Less Liabilities | 1.2 | 5,227,612 | |||||
Net Assets | 100.0 | % | $449,947,418 |
37 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2009
* | 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 bonds are determined and reset quarterly. The interest rates |
shown are the rated in effect on September 30, 2009. | |
(c) | In default as to principal and/or interest payment. |
(d) | Securities valued at fair value (see Note 1A). |
(e) | The interest rates shown are the rates that were in effect on September 30, 2009. While interest |
rates on auction rate securities are normally determined and reset periodically by the issuer, the | |
auctions on these securities have failed. Therefore, the rates are those that are stipulated under the | |
auction procedures when there are no sufficient clearing bids on an auction date. | |
(f) | 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, 2009 (see Note 2). |
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Corporate Bonds | $ | — | $ | 438,412,338 | $ | 2,750 | $ | 438,415,088 | ||||
Auction Rate Securities | — | — | 2,120,646 | 2,120,646 | ||||||||
Common Stocks | 27 | — | 14,045 | 14,072 | ||||||||
Warrants | — | — | — | — | ||||||||
Money Market Fund | 4,170,000 | — | — | 4,170,000 | ||||||||
Total Investments in Securities* | $ | 4,170,027 | $ | 438,412,338 | $ | 2,137,441 | $ | 444,719,806 |
* The Portfolio of Investments provides information on the industry categorization for the portfolio.
38 |
The following is a reconciliation of Fund investments valued using Level 3 inputs for the period:
Investments | ||||||||||||
Investments | in Auction | Investments | ||||||||||
in Corporate | Rate | in Common | ||||||||||
Bonds | Securities | Stocks | Total | |||||||||
Balance, September 30, 2008 | $ | 4,625 | $ | — | $ | 3,356,574 | $ | 3,361,199 | ||||
Net purchases (sales) | (81) | (1,594,750) | (630,915) | (2,225,746) | ||||||||
Change in unrealized | ||||||||||||
appreciation (depreciation) | 2,326,411 | — | 1,510,656 | 3,837,067 | ||||||||
Realized gain (loss) | (2,328,205) | (155,250) | (4,222,270) | (6,705,725) | ||||||||
Transfer in and/or out of Level 3 | — | 3,870,646 | — | 3,870,646 | ||||||||
Balance, September 30, 2009 | $ | 2,750 | $ | 2,120,646 | $ | 14,045 | $ | 2,137,441 | ||||
The following is a summary of Level 3 inputs by industry | ||||||||||||
Auction Rate Securities | $ | 2,120,646 | ||||||||||
Automotive | 14,045 | |||||||||||
Health Care | 2,750 | |||||||||||
Telecommunications | — | |||||||||||
$ | 2,137,441 |
See notes to financial statements | 39 |
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, 2009 and the dollar weighted average of the total of the Fund’s investments in step bonds during the 2009 fiscal year, computed on a monthly basis, are set forth below. This information reflects the average composition of the Fund’s assets during the 2009 fiscal year and is not necessarily representative of the Fund as of the end of its 2009 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 | |
Aaa | 0.03% | 0.00% |
Aa3 | 0.97 | 0.00 |
A3 | 0.66 | 0.00 |
Baa1 | 0.33 | 0.00 |
Baa2 | 1.00 | 0.00 |
Baa3 | 5.64 | 0.00 |
Ba1 | 2.75 | 0.00 |
Ba2 | 9.87 | 0.00 |
Ba3 | 15.97 | 0.00 |
B1 | 14.71 | 0.00 |
B2 | 14.47 | 0.00 |
B3 | 15.84 | 0.00 |
Caa1 | 6.18 | 0.00 |
Caa2 | 2.22 | 0.00 |
Caa3 | 0.80 | 0.77 |
Ca | 1.18 | 0.03 |
C | 0.19 | 0.03 |
Step Bonds | 0.03% |
40 |
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, 2009. During the period, the Fund’s return on a net asset value basis was 2.8% for Class A shares and 2.1% for Class B shares, including dividends of 31.8 cents per share on Class A shares and 23.5 cents per share on Class B shares.
While returns were modest, they were at least positive. The primary reason for this was the Fund’s significant fixed income position during the period. Given the volatile nature of the equity markets during the review period, the Fund maintained an average allocation of 41% to fixed income and an average allocation of 6% to cash equivalents. On average, the Fund allocated only 53% of its assets to equity investments. The Fund chose to actively manage its allocation policy more than usual, given the extraordinary period of uncertainty. In fact, during the months of October and November 2008, the Fund held, on average, 49% and 45% in equities, which is below the normal threshold of 50%. This was due to market depreciation and to our actively managing the portfolio more defensively during the worst sustained period of the downturn. The Fund gradually increased its weighting in equities during the balance of the year, as the government interventions and st imuli began to take hold, and the markets stabilized. At the end of the review period, the Fund held 59% in equities.
The performance of the equity portion of the portfolio was driven by the volatile performance of the equity markets. During the first part of the review period, the markets were in a steep free fall, culminating with a multi-decade market low achieved on March 9, 2009. During this period, equities fell over 42% (as measured by the S&P 500 Index) from September 30, 2008, as the bankruptcy of Lehman Brothers and the ensuing freeze up of the credit markets, caused aftershocks in the global markets. Only after U.S. and global regulators took extraordinary measures to supply massive financial aid and intervention, such as through the TARP program, did the markets stabilize. Since then, the markets have rallied convincingly from the lows hit in March. Stocks are up over 50% (as measured by S&P 500 Index returns) during this period, and have recovered much of the value lost over the first part of the review period. Gloom has been giving rise to hope, as in vestors now anticipate that an economic recovery may be at hand.
With this as a backdrop, the Fund assumed a relatively conservative position with respect to its equity investments, choosing to underweight or avoid volatile and uncertain areas of the market. This strategy benefited the Fund during the market decline, but caused it to lag during the recovery phase beginning in March of 2009. Following the strategy from last fiscal year, the Fund remained underweight the financials sector for the entire year, as we were concerned that uncertainty over continuing loan losses, inadequate capital structures and ongoing governmental involvement would impair valuations for equity holders for some time to come. The Fund likewise reduced its holdings in the volatile energy sector, as global recession has dampened usage, and energy pricing still seems to hold a speculative bias that is not reflective of true underlying supply and demand. Oil has had its own volatile year, starting the period at $121 a barrel, falling to $31 in Dec ember 2008, and rebounding to over $70 on September 30, 2009.
The weightings of the Fund’s equity investments in consumer staples and health care increased throughout the year, as these sectors demonstrated solid earnings and were generally immune from the economic chaos. Overall stock selection and weightings
41 |
Portfolio Managers’ Letter (continued)
TOTAL RETURN FUND
benefited the Fund’s relative performance most notably within investments in these sectors. Additionally, stock selection aided investments within the financials, energy, utilities and materials sectors. The Fund’s underweighting in the energy, financials and utilities sectors also helped performance. The Fund’s performance was hurt by its investments in the technology, industrials and consumer discretionary sectors.
The equity portion of the Fund maintained a diverse market capitalization allocation during the period, with 60% large cap, 14% mid cap and 26% small cap, according to Lipper’s market capitalization ranges. The large-cap segment performed slightly better than its peers and small-caps performed largely in line with theirs, while the mid-cap components delivered results slightly below the benchmark.
The fixed income markets also experienced unusual volatility, driven by the near collapse of the financial system following Lehman Brothers’ bankruptcy, economic recession, and the subsequent extraordinary actions by the U.S. government to stabilize the financial markets and the economy. This volatility was the most significant factor in the performance of the fixed income portion of the Fund. During the first quarter of the review period, high quality bonds (such as U.S. Treasury securities) provided the best performance as investors shunned riskier assets. After the markets stabilized, high quality bonds underperformed while riskier bonds (such as corporate bonds) had exceptionally strong returns. By the conclusion of the reporting period, the bond market had solid twelve-month returns, up 10.6% as measured by the Bank of America Merrill Lynch U.S. Corporate, Government and Mortgage Index.
The Fund’s bond investments were primarily allocated among investment grade corporate bonds, mortgage-backed securities, and U.S. government obligations. In general, the Fund benefited from its bond and cash allocations to the extent that they substantially outperformed the equity market during the reporting period. In particular, the performance of the bond allocation benefited from minimal exposure to the U.S. Treasury market, which was the weakest fixed income sector.
The Fund’s performance during this period of extreme volatility in all markets demonstrates the value of its asset allocation strategy, which generally allocates at least 50% to stocks and 25% to bonds. 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/0000886048-09-000026/incomequityx44x1.jpg)
Edwin D. Miska
Portfolio Manager and
Director of Equities,
First Investors Management
Company, Inc.
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx44x2.jpg)
Clark D. Wagner
Portfolio Manager and
Director of Fixed Income,
First Investors Management
Company, Inc.
October 30, 2009
42 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,223.80 | $7.86 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,018.00 | $7.13 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,219.40 | $11.74 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.49 | $10.66 |
* | Expenses are equal to the annualized expense ratio of 1.41% for Class A shares and 2.11% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx45x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total market value of investments.
43 |
Cumulative Performance Information (unaudited)
TOTAL RETURN FUND
Comparison of change in value of $10,000 investment in the First Investors Total Return Fund (Class A shares), the Bank of America Merrill Lynch U.S. Corporate, Government & Mortgage Master Index and the Standard & Poor’s 500 Index.
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx46x1.jpg)
The graph compares a $10,000 investment in the First Investors Total Return Fund (Class A shares) beginning 9/30/99 with theoretical investments in the Bank of America Merrill Lynch U.S. Corporate, Government & Mortgage Master Index and the Standard & Poor’s 500 Index (the “Indices”). The Bank of America 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. Qualifying U.S. Treasuries must have at least one-year remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of $1 billion. Qualifying U.S. agency, foreign government, supranational and corporate securities must have at least one-year remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of $250 million. Qualifying residential mortgage pass-through securities include both fixed rate and hybrid securities publicly issued by U.S. agencies. 30-year, 20-year, 15-year and interest-only fixed rate mortgage pools are included in the Index provided they have at least one year remaining term to final maturity and a minimum amount outstanding of at least $5 billion per generic coupon and $250 million per production year within each generic coupon. Hybrid mortgage pools that reset versus 1-year CMT, 1 year LIBOR or 6-month LIBOR during their adjustable rate period are also included in the Index provided they have at least $2.5 billion per generic coupon and $250 million per production year within each generic coupon. 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 stock s, 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 9/30/09) 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 1.82% and 1.78%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 1.95% and 1.71%, respectively. R esults 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. Bank of America Merrill Lynch U.S. Corporate, Government & Mortgage Master Index figures are from Bank of America Merrill Lynch & Co. and Standard & Poor’s 500 Index figures are from Standard & Poor’s and all other figures are from First Investors Management Company, Inc.
44 |
Portfolio of Investments
TOTAL RETURN FUND
September 30, 2009
Shares | Security | Value | |||||
COMMON STOCKS—58.8% | |||||||
Consumer Discretionary—8.5% | |||||||
57,000 | * | Big Lots, Inc. | $ 1,426,140 | ||||
29,800 | BorgWarner, Inc. | 901,748 | |||||
26,400 | Brown Shoe Company, Inc. | 211,728 | |||||
53,100 | CBS Corporation – Class “B” | 639,855 | |||||
70,700 | * | CEC Entertainment, Inc. | 1,828,302 | ||||
47,500 | Coach, Inc. | 1,563,700 | |||||
58,000 | * | GameStop Corporation – Class “A” | 1,535,260 | ||||
23,500 | Genuine Parts Company | 894,410 | |||||
72,100 | H&R Block, Inc. | 1,325,198 | |||||
66,400 | Home Depot, Inc. | 1,768,896 | |||||
87,500 | * | Jack in the Box, Inc. | 1,792,875 | ||||
22,700 | Limited Brands, Inc. | 385,673 | |||||
62,600 | * | Lincoln Educational Services Corporation | 1,432,288 | ||||
17,000 | * | Luxottica Group SpA (ADR) | 439,110 | ||||
34,900 | McDonald’s Corporation | 1,991,743 | |||||
135,300 | * | Morgans Hotel Group Company | 733,326 | ||||
107,700 | Newell Rubbermaid, Inc. | 1,689,813 | |||||
17,500 | NIKE, Inc. – Class “B” | 1,132,250 | |||||
15,600 | Polo Ralph Lauren Corporation – Class “A” | 1,195,272 | |||||
102,700 | * | Ruby Tuesday, Inc. | 864,734 | ||||
57,100 | Staples, Inc. | 1,325,862 | |||||
31,700 | * | Steiner Leisure, Ltd. | 1,133,592 | ||||
230,800 | Stewart Enterprises, Inc – Class “A” | 1,207,084 | |||||
73,860 | Wyndham Worldwide Corporation | 1,205,395 | |||||
28,624,254 | |||||||
Consumer Staples—10.0% | |||||||
136,600 | Altria Group, Inc. | 2,432,846 | |||||
32,200 | Avon Products, Inc. | 1,093,512 | |||||
36,900 | * | Chattem, Inc. | 2,450,529 | ||||
38,500 | Coca-Cola Company | 2,067,450 | |||||
96,300 | CVS Caremark Corporation | 3,441,762 | |||||
54,700 | * | Dean Foods Company | 973,113 | ||||
35,449 | Kraft Foods, Inc. – Class “A” | 931,245 | |||||
59,800 | McCormick & Company, Inc. | 2,029,612 | |||||
192,900 | Nu Skin Enterprises, Inc. – Class “A” | 3,574,437 | |||||
34,200 | PepsiCo, Inc. | 2,006,172 | |||||
73,000 | Philip Morris International, Inc. | 3,558,020 | |||||
30,500 | Procter & Gamble Company | 1,766,560 | |||||
77,500 | Safeway, Inc. | 1,528,300 |
45 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2009
Shares | Security | Value | |||||
Consumer Staples (continued) | |||||||
16,340 | Tootsie Roll Industries, Inc. | $ 388,565 | |||||
84,700 | Walgreen Company | 3,173,709 | |||||
47,500 | Wal-Mart Stores, Inc. | 2,331,775 | |||||
33,747,607 | |||||||
Energy—4.6% | |||||||
19,700 | Anadarko Petroleum Corporation | 1,235,781 | |||||
120,100 | * | Cal Dive International, Inc. | 1,187,789 | ||||
28,000 | ConocoPhillips | 1,264,480 | |||||
31,900 | ExxonMobil Corporation | 2,188,659 | |||||
1,897 | Hugoton Royalty Trust | 33,975 | |||||
24,486 | Marathon Oil Corporation | 781,104 | |||||
58,500 | Noble Corporation | 2,220,660 | |||||
24,300 | Sasol, Ltd. (ADR) | 926,316 | |||||
77,400 | Suncor Energy, Inc. | 2,674,944 | |||||
14,470 | * | Transocean, Ltd. | 1,237,619 | ||||
38,200 | XTO Energy, Inc. | 1,578,424 | |||||
15,329,751 | |||||||
Financials—5.5% | |||||||
16,100 | American Express Company | 545,790 | |||||
29,100 | Astoria Financial Corporation | 321,264 | |||||
20,897 | Bank of America Corporation | 353,577 | |||||
60,600 | Brookline Bancorp, Inc. | 589,032 | |||||
20,692 | Capital One Financial Corporation | 739,325 | |||||
16,400 | Citigroup, Inc. | 79,376 | |||||
26,550 | Discover Financial Services | 430,907 | |||||
181,500 | Financial Select Sector SPDR Fund (ETF) | 2,711,610 | |||||
56,250 | First Mercury Financial Corporation | 749,250 | |||||
13,324 | Hartford Financial Services Group, Inc. | 353,086 | |||||
74,700 | Hudson City Bancorp, Inc. | 982,305 | |||||
57,900 | JPMorgan Chase & Company | 2,537,178 | |||||
24,499 | KeyCorp | 159,244 | |||||
53,000 | Morgan Stanley | 1,636,640 | |||||
84,200 | New York Community Bancorp, Inc. | 961,564 | |||||
88,200 | NewAlliance Bancshares, Inc. | 943,740 | |||||
65,300 | SPDR KBW Regional Banking (ETF) | 1,392,196 | |||||
116,172 | Sunstone Hotel Investors, Inc. (REIT) | 824,821 | |||||
33,300 | U.S. Bancorp | 727,938 |
46 |
Shares | Security | Value | |||||
Financials (continued) | |||||||
28,700 | Urstadt Biddle Properties – Class “A” (REIT) | $ 418,733 | |||||
18,800 | Webster Financial Corporation | 234,436 | |||||
34,500 | Wells Fargo & Company | 972,210 | |||||
18,664,222 | |||||||
Health Care—8.7% | |||||||
52,300 | Abbott Laboratories | 2,587,281 | |||||
15,100 | * | Amgen, Inc. | 909,473 | ||||
18,500 | Baxter International, Inc. | 1,054,685 | |||||
32,500 | Becton, Dickinson & Company | 2,266,875 | |||||
21,500 | * | Cephalon, Inc. | 1,252,160 | ||||
23,700 | * | Genzyme Corporation | 1,344,501 | ||||
39,300 | * | Gilead Sciences, Inc. | 1,830,594 | ||||
57,800 | Johnson & Johnson | 3,519,442 | |||||
22,400 | * | Laboratory Corporation of America Holdings | 1,471,680 | ||||
45,100 | Medtronic, Inc. | 1,659,680 | |||||
31,100 | Merck & Company, Inc. | 983,693 | |||||
57,000 | Perrigo Company | 1,937,430 | |||||
135,380 | Pfizer, Inc. | 2,240,539 | |||||
54,900 | * | PSS World Medical, Inc. | 1,198,467 | ||||
33,700 | Sanofi-Aventis (ADR) | 1,245,215 | |||||
21,100 | * | St. Jude Medical, Inc. | 823,111 | ||||
22,700 | * | Thermo Fisher Scientific, Inc. | 991,309 | ||||
39,000 | Wyeth | 1,894,620 | |||||
29,210,755 | |||||||
Industrials—8.1% | |||||||
25,100 | 3M Company | 1,852,380 | |||||
45,100 | * | AAR Corporation | 989,494 | ||||
27,600 | Alexander & Baldwin, Inc. | 885,684 | |||||
35,504 | * | Altra Holdings, Inc. | 397,290 | ||||
50,000 | * | Armstrong World Industries, Inc. | 1,723,000 | ||||
18,600 | Baldor Electric Company | 508,524 | |||||
25,450 | * | BE Aerospace, Inc. | 512,563 | ||||
11,300 | Burlington Northern Santa Fe Corporation | 902,079 | |||||
55,600 | Chicago Bridge & Iron Company NV – NY Shares | 1,038,608 | |||||
43,800 | * | DynCorp International, Inc. – Class “A” | 788,400 | ||||
37,400 | * | Esterline Technologies Corporation | 1,466,454 | ||||
72,200 | General Electric Company | 1,185,524 | |||||
15,900 | Harsco Corporation | 563,019 | |||||
46,100 | Honeywell International, Inc. | 1,712,615 |
47 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2009
Shares | Security | Value | |||||
Industrials (continued) | |||||||
41,300 | IDEX Corporation | $ 1,154,335 | |||||
19,300 | Lockheed Martin Corporation | 1,506,944 | |||||
69,700 | * | Mobile Mini, Inc. | 1,209,992 | ||||
19,600 | Northrop Grumman Corporation | 1,014,300 | |||||
39,230 | * | PGT, Inc. | 112,590 | ||||
27,000 | * | Pinnacle Airlines Corporation | 180,900 | ||||
31,700 | Raytheon Company | 1,520,649 | |||||
26,210 | Republic Services, Inc. | 696,400 | |||||
93,300 | TAL International Group, Inc. | 1,326,726 | |||||
59,200 | Textainer Group Holdings, Ltd. | 947,792 | |||||
32,975 | Tyco International, Ltd. | 1,136,978 | |||||
28,700 | United Technologies Corporation | 1,748,691 | |||||
27,081,931 | |||||||
Information Technology—9.2% | |||||||
3,100 | * | Avago Technologies, Ltd. | 52,917 | ||||
26,200 | * | Blackboard, Inc. | 989,836 | ||||
28,600 | * | CACI International, Inc. – Class “A” | 1,351,922 | ||||
64,600 | * | Cisco Systems, Inc. | 1,520,684 | ||||
116,600 | * | EMC Corporation | 1,986,864 | ||||
34,700 | Harris Corporation | 1,304,720 | |||||
48,500 | Hewlett-Packard Company | 2,289,685 | |||||
58,400 | Intel Corporation | 1,142,888 | |||||
35,300 | International Business Machines Corporation | 4,222,233 | |||||
17,200 | * | ManTech International Corporation – Class “A” | 811,152 | ||||
151,400 | Microsoft Corporation | 3,919,746 | |||||
8,150 | * | NCI, Inc. – Class “A” | 233,579 | ||||
103,800 | Nokia Corporation – Class “A” (ADR) | 1,517,556 | |||||
79,500 | * | Parametric Technology Corporation | 1,098,690 | ||||
51,300 | QUALCOMM, Inc. | 2,307,474 | |||||
81,075 | * | SRA International, Inc. – Class “A” | 1,750,409 | ||||
142,400 | * | Symantec Corporation | 2,345,328 | ||||
33,800 | * | TIBCO Software, Inc. | 320,762 | ||||
10,000 | * | Websense, Inc. | 168,000 | ||||
66,076 | Western Union Company | 1,250,158 | |||||
19,600 | Xilinx, Inc. | 459,032 | |||||
31,043,635 |
48 |
Shares or | |||||||
Principal | |||||||
Amount | Security | Value | |||||
Materials—2.2% | |||||||
53,600 | Bemis Company, Inc. | $ 1,388,776 | |||||
40,400 | Celanese Corporation – Series “A” | 1,010,000 | |||||
26,900 | Freeport-McMoRan Copper & Gold, Inc. | 1,845,609 | |||||
13,600 | Praxair, Inc. | 1,110,984 | |||||
73,700 | RPM International, Inc. | 1,362,713 | |||||
41,550 | Temple-Inland, Inc. | 682,251 | |||||
7,400,333 | |||||||
Telecommunication Services—1.5% | |||||||
79,300 | AT&T, Inc. | 2,141,893 | |||||
91,100 | Verizon Communications, Inc. | 2,757,597 | |||||
4,899,490 | |||||||
Utilities—.5% | |||||||
38,100 | Atmos Energy Corporation | 1,073,658 | |||||
15,700 | Consolidated Edison, Inc. | 642,758 | |||||
1,716,416 | |||||||
Total Value of Common Stocks (cost $185,392,054) | 197,718,394 | ||||||
CORPORATE BONDS—24.1% | |||||||
Aerospace/Defense—.6% | |||||||
$ 1,000M | BAE Systems Holdings, Inc., 4.95%, 2014 (a) | 1,038,004 | |||||
1,000M | United Technologies Corp., 6.125%, 2019 | 1,146,194 | |||||
2,184,198 | |||||||
Agriculture—.6% | |||||||
900M | Cargill, Inc., 6%, 2017 (a) | 976,136 | |||||
1,000M | Potash Corp. of Saskatchewan, Inc., 4.875%, 2020 | 1,000,887 | |||||
1,977,023 | |||||||
Automotive—.3% | |||||||
1,000M | Daimler Chrysler NA, LLC, 6.5%, 2013 | 1,078,327 | |||||
Chemicals—.4% | |||||||
1,000M | Chevron Phillips Chemicals, Co., LLC, 8.25%, 2019 (a) | 1,209,816 |
49 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
Consumer Durables—.6% | |||||||
$ 1,000M | Black & Decker Corp., 8.95%, 2014 | $ 1,176,179 | |||||
700M | Newell Rubbermaid, Inc., 6.75%, 2012 | 739,894 | |||||
1,916,073 | |||||||
Energy—4.3% | |||||||
1,000M | Canadian Natural Resources, Ltd., 5.9%, 2018 | 1,068,015 | |||||
500M | Canadian Oil Sands, Ltd., 7.75%, 2019 (a) | 579,666 | |||||
1,000M | ConocoPhillips, 5.75%, 2019 | 1,091,464 | |||||
1,000M | Energy Transfer Partners, LP, 8.5%, 2014 | 1,156,648 | |||||
500M | Kinder Morgan Finance Co., 5.35%, 2011 | 505,000 | |||||
1,000M | Maritime & Northeast Pipeline, LLC, 7.5%, 2014 (a) | 1,052,809 | |||||
1,000M | Nabors Industries, Inc., 5.375%, 2012 | 1,018,352 | |||||
1,000M | Nexen, Inc., 6.4%, 2037 | 976,636 | |||||
1,000M | Northern Border Pipeline Co., 7.1%, 2011 | 1,056,271 | |||||
1,000M | Pacific Energy Partners, LP, 7.125%, 2014 | 1,035,630 | |||||
1,000M | Shell International Finance BV, 3.25%, 2015 | 1,007,831 | |||||
500M | Spectra Energy Capital, LLC, 6.2%, 2018 | 532,946 | |||||
1,000M | Suncor Energy, Inc., 6.1%, 2018 | 1,046,822 | |||||
1,000M | Trans-Canada Pipelines, Ltd., 7.625%, 2039 | 1,280,334 | |||||
1,000M | Valero Energy Corp., 6.875%, 2012 | 1,076,848 | |||||
14,485,272 | |||||||
Financial Services—2.3% | |||||||
1,000M | American Express Co., 7%, 2018 | 1,101,853 | |||||
1,000M | American General Finance Corp., 6.9%, 2017 | 700,364 | |||||
1,000M | Caterpillar Financial Services Corp., 5.85%, 2017 | 1,077,409 | |||||
1,000M | CoBank, ACB, 7.875%, 2018 (a) | 975,104 | |||||
1,000M | Fifth Third Bancorp, 5.45%, 2017 | 872,307 | |||||
927M | Ford Motor Credit Co., 9.75%, 2010 | 947,502 | |||||
1,000M | General Electric Capital Corp., 4.375%, 2015 | 991,647 | |||||
1,000M | Prudential Financial, Inc., 6%, 2017 | 1,015,127 | |||||
7,681,313 | |||||||
Financials—2.6% | |||||||
1,000M | Bear Stearns Cos., Inc., 7.25%, 2018 | 1,143,863 | |||||
1,000M | Citigroup, Inc., 6.375%, 2014 | 1,034,963 | |||||
1,000M | Goldman Sachs Group, Inc., 6.45%, 2036 | 996,785 | |||||
500M | Hibernia Corp., 5.35%, 2014 | 479,970 | |||||
1,000M | JPMorgan Chase & Co., 3.7%, 2015 | 992,361 | |||||
1,000M | Merrill Lynch & Co., Inc., 5.45%, 2013 | 1,037,708 |
50 |
Principal | |||||||
Amount | Security | Value | |||||
Financials (continued) | |||||||
$ 1,000M | Morgan Stanley, 5.3%, 2013 | $ 1,048,647 | |||||
1,000M | Nationsbank Corp., 7.8%, 2016 | 1,079,676 | |||||
1,000M | Wells Fargo & Co., 3.75%, 2014 | 996,118 | |||||
8,810,091 | |||||||
Food/Beverage/Tobacco—2.2% | |||||||
1,000M | Altria Group, Inc., 10.2%, 2039 | 1,392,138 | |||||
1,170M | Bunge Limited Finance Corp., 5.875%, 2013 | 1,238,041 | |||||
1,000M | Coca-Cola Enterprises, Inc., 7.125%, 2017 | 1,191,572 | |||||
1,270M | ConAgra Foods, Inc., 5.875%, 2014 | 1,395,551 | |||||
1,000M | Diageo Capital PLC, 5.75%, 2017 | 1,099,366 | |||||
1,000M | Philip Morris International, Inc., 5.65%, 2018 | 1,066,238 | |||||
7,382,906 | |||||||
Food/Drug—.3% | |||||||
935M | CVS/Caremark Corp., 6.125%, 2039 | 954,388 | |||||
Forest Products/Containers—.2% | |||||||
650M | International Paper Co., 9.375%, 2019 | 762,334 | |||||
Health Care—1.4% | |||||||
1,000M | Biogen IDEC, Inc., 6.875%, 2018 | 1,099,605 | |||||
1,200M | Novartis, 5.125%, 2019 | 1,279,853 | |||||
1,000M | Pfizer, Inc., 6.2%, 2019 | 1,129,187 | |||||
1,000M | Roche Holdings, Inc., 6%, 2019 (a) | 1,115,169 | |||||
4,623,814 | |||||||
Information Technology—.6% | |||||||
1,000M | Pitney Bowes, Inc., 5%, 2015 | 1,063,955 | |||||
1,000M | Xerox Corp., 5.5%, 2012 | 1,049,198 | |||||
2,113,153 | |||||||
Manufacturing—.5% | |||||||
500M | Crane Co., 6.55%, 2036 | 492,169 | |||||
1,000M | John Deere Capital Corp., 5.35%, 2018 | 1,064,874 | |||||
1,557,043 |
51 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
Media-Broadcasting—1.2% | |||||||
$ 1,000M | British Sky Broadcasting Group, PLC, 9.5%, 2018 (a) | $ 1,281,552 | |||||
Cox Communications, Inc.: | |||||||
800M | 5.5%, 2015 | 855,633 | |||||
500M | 8.375%, 2039 (a) | 618,709 | |||||
1,000M | Time Warner Cable, Inc., 7.5%, 2014 | 1,148,039 | |||||
3,903,933 | |||||||
Media-Diversified—1.0% | |||||||
AOL Time Warner, Inc.: | |||||||
750M | 6.75%, 2011 | 801,866 | |||||
1,000M | 6.875%, 2012 | 1,101,470 | |||||
1,000M | McGraw-Hill Cos., Inc., 5.9%, 2017 | 1,024,921 | |||||
500M | News America, Inc., 5.3%, 2014 | 538,858 | |||||
3,467,115 | |||||||
Metals/Mining—.6% | |||||||
1,000M | ArcelorMittal, 6.125%, 2018 | 986,788 | |||||
1,000M | Newmont Mining Corp., 5.125%, 2019 | 1,001,495 | |||||
1,988,283 | |||||||
Real Estate Investment Trusts—.3% | |||||||
1,000M | ProLogis, 7.625%, 2014 | 1,022,990 | |||||
Telecommunications—1.1% | |||||||
500M | AT&T, Inc., 5.8%, 2019 | 535,990 | |||||
800M | GTE Corp., 6.84%, 2018 | 873,087 | |||||
600M | SBC Communications, Inc., 6.25%, 2011 | 639,808 | |||||
1,000M | Verizon Communications, Inc., 8.75%, 2018 | 1,251,307 | |||||
400M | Verizon Wireless Capital, LLC, 5.55%, 2014 (a) | 432,689 | |||||
3,732,881 | |||||||
Transportation—.2% | |||||||
500M | GATX Corp., 8.75%, 2014 | 563,167 | |||||
Utilities—2.5% | |||||||
1,000M | Consolidated Edison Co. of New York, 7.125%, 2018 | 1,188,176 | |||||
1,000M | E. ON International Finance BV, 5.8%, 2018 (a) | 1,077,991 | |||||
600M | Electricite de France SA, 6.95%, 2039 (a) | 745,987 | |||||
350M | Entergy Gulf States, Inc., 5.25%, 2015 | 349,801 | |||||
1,000M | Exelon Generation Co., LLC, 6.2%, 2017 | 1,093,097 |
52 |
Principal | |||||||
Amount | Security | Value | |||||
Utilities (continued) | |||||||
$ 757M | Great River Energy Co., 5.829%, 2017 (a) | $ 803,404 | |||||
1,000M | Ohio Power Co., 5.375%, 2021 | 1,016,889 | |||||
900M | Public Service Electric & Gas Co., 6.75%, 2016 | 1,007,244 | |||||
1,000M | Sempra Energy, 9.8%, 2019 | 1,282,841 | |||||
8,565,430 | |||||||
Waste Management—.3% | |||||||
1,000M | Allied Waste NA, Inc., 7.125%, 2016 | 1,056,392 | |||||
Total Value of Corporate Bonds (cost $76,660,402) | 81,035,942 | ||||||
MORTGAGE-BACKED CERTIFICATES—10.8% | |||||||
Fannie Mae—9.9% | |||||||
11,630M | 5.5%, 5/1/2033 – 5/1/2037 | 12,250,307 | |||||
14,982M | 6%, 5/1/2036 – 7/1/2038 | 15,847,417 | |||||
3,408M | 6.5%, 11/1/2033 – 6/1/2036 | 3,660,673 | |||||
1,410M | 7%, 3/1/2032 – 8/1/2032 | 1,574,726 | |||||
33,333,123 | |||||||
Freddie Mac—.9% | |||||||
2,976M | 6%, 9/1/2032 – 5/1/2038 | 3,152,953 | |||||
Total Value of Mortgage-Backed Certificates (cost $34,633,347) | 36,486,076 | ||||||
U.S. GOVERNMENT AGENCY | |||||||
OBLIGATIONS—2.6% | |||||||
2,000M | Fannie Mae, 2.5%, 2014 | 1,997,832 | |||||
Freddie Mac: | |||||||
1,000M | 6.03%, 2017 | 1,036,062 | |||||
1,000M | 4.25%, 2018 | 1,004,034 | |||||
1,000M | 5.5%, 2019 | 1,001,801 | |||||
Tennessee Valley Authority: | |||||||
1,450M | 4.375%, 2015 | 1,546,163 | |||||
2,000M | 4.5%, 2018 | 2,063,518 | |||||
Total Value of U.S. Government Agency Obligations (cost $8,579,318) | 8,649,410 |
53 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
MUNICIPAL BONDS—2.1% | |||||||
$1,000M | Allegheny Cnty. PA Hosp. Dev. Auth. (Univ. of Pittsburgh), | ||||||
5.5%, 2034 | $ 1,076,490 | ||||||
1,000M | Atlanta GA Wtr. & Wastewtr. Rev. Series “A”, 6%, 2029 | 1,108,510 | |||||
1,000M | Hawaii State, 5%, 2028 | 1,118,190 | |||||
1,500M | Lower Colorado River Auth. TX Rev., 5.5%, 2033 | 1,620,915 | |||||
1,000M | Richmond VA Pub. Util. Rev., 5%, 2035 | 1,080,130 | |||||
1,000M | Salt River Proj. AZ Agric. Impt. & Pwr. Dist. Elec. | ||||||
Sys. Rev. Series “A”, 5%, 2029 | 1,113,040 | ||||||
Total Value of Municipal Bonds (cost $6,515,208) | 7,117,275 | ||||||
U.S. GOVERNMENT FDIC | |||||||
GUARANTEED DEBT—.8% | |||||||
Financials | |||||||
2,500M | Regions Bank, 2.75%, 2010 (cost $2,516,752) | 2,560,155 | |||||
SHORT-TERM CORPORATE NOTES—.2% | |||||||
Money Market Fund | |||||||
700M | First Investors Cash Reserve Fund, .39% (cost $700,000) (b) | 700,000 | |||||
Total Value of Investments (cost $314,997,081) | 99.4 | % | 334,267,252 | ||||
Other Assets, Less Liabilities | .6 | 1,919,306 | |||||
Net Assets | 100.0 | % | $336,186,558 |
* | Non-income producing |
(a) | Security exempt from registration under Rule 144A of Securities Act of 1933 (see Note 4). |
(b) | 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, 2009 (see Note 2). |
Summary of Abbreviations: | ||
ADR | American Depositary Receipts | |
ETF | Exchange Traded Fund | |
REIT | Real Estate Investment Trust |
54 |
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Common Stocks | $ | 197,718,394 | $ | — | $ | — | $ | 197,718,394 | ||||
Corporate Bonds | — | 81,035,942 | — | 81,035,942 | ||||||||
Mortgage-Backed Certificates | — | 36,486,076 | — | 36,486,076 | ||||||||
U.S. Government Agency | ||||||||||||
Obligations | — | 8,649,410 | — | 8,649,410 | ||||||||
Municipal Bonds | — | 7,117,275 | — | 7,117,275 | ||||||||
U.S. Government FDIC | ||||||||||||
Guaranteed Debt | — | 2,560,155 | — | 2,560,155 | ||||||||
Money Market Fund | 700,000 | — | — | 700,000 | ||||||||
Total Investments in Securities* | $ | 198,418,394 | $ | 135,848,858 | $ | — | $ | 334,267,252 |
* The Portfolio of Investments provides information on the industry categorization for common stocks and corporate bonds.
See notes to financial statements | 55 |
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, 2009. During the period, the Fund’s return on a net asset value basis was –7.8% for Class A shares and –8.4% for Class B shares, including dividends of 10.6 cents per share on Class A shares and 6.8 cents per share on Class B shares.
The past year was defined by the volatile performance of the equity markets. During the first part of the review period, the markets were in a steep free fall, culminating with a multi-decade market low achieved on March 9, 2009. During this period, equities fell over 42% (as measured by the S&P 500 Index) from September 30, 2008, as the bankruptcy of Lehman Brothers and the ensuing freeze up of the credit markets, caused aftershocks in the global markets. Only after U.S. and global regulators took extraordinary measures to supply massive financial aid and intervention, such as through the TARP program, did the markets stabilize. Since then, the markets have rallied convincingly from the lows hit in March. Stocks are up over 50% (as measured by S&P 500 Index returns) during this period, and have recovered much of the value lost over the first part of the review period. Gloom has been giving rise to hope, as investors now anticipate that an econo mic recovery may be at hand.
The Fund’s performance largely reflected the negative effect of the economic downturn on corporate earnings. At the center of the storm was the financials sector. This was also the area of greatest weakness in the Fund even though we reduced our exposure to the sector and emphasized well-capitalized institutions that did not face the same level of distress as those that dominated the headlines. Performance in the utilities, energy, and industrials sectors was also poor. Positions that hurt the Fund’s return the most were financial services companies Citigroup and Lincoln National, and integrated energy company ConocoPhillips. Citigroup, with tentacles in almost every aspect of the financial industry, found itself in the eye of the storm during the credit crisis—though it has managed to survive with help from taxpayers. During the first several months of the reporting period, Lincoln felt financial stress due to pressure on its variable an nuity business and related concerns over capital adequacy. More modest losses were sustained in the materials, health care, information technology, consumer staples and consumer discretionary sectors.
Telecommunications was the only sector to turn in a positive performance during the review period. While the Fund’s largest holdings in the sector, Verizon and AT&T, both generated small losses, they were more than offset by the companies’ dividend payouts. There were also positive highlights from a few of our holdings within some of the poor performing sectors. Pharmaceutical company Schering-Plough, oil and natural gas exploration and production company Anadarko Petroleum and discount retailer Family Dollar Stores were the biggest positive contributors to performance. Schering agreed
56
to be acquired by rival drug company Merck while Anadarko announced a significant international oil discovery. Family Dollar benefited from increased traffic as consumers became more value-conscious.
The Fund’s small-cap holdings outperformed its holdings in the mid-cap and large-cap areas. The Fund will continue to pursue its strategy of pursuing dividend-paying companies of any size that are deemed to be both undervalued and well capitalized.
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/0000886048-09-000026/incomequityx59x1.jpg)
Matthew S. Wright
Portfolio Manager
October 30, 2009
57 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,286.67 | $8.37 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.75 | $7.38 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,282.14 | $12.36 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.24 | $10.91 |
* | Expenses are equal to the annualized expense ratio of 1.46% for Class A shares and 2.16% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx60x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total market value of investments.
58 |
Cumulative Performance Information (unaudited)
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/0000886048-09-000026/incomequityx61x1.jpg)
The graph compares a $10,000 investment in the First Investors Value Fund (Class A shares) beginning 9/30/99 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 9/30/09) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02 the maximum sales charge was 6.25%). The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Standard & Poor’s 500 Index figures are from Standard & Poor’s and all other figures are from First Investors Management Company, Inc.
59 |
Portfolio of Investments
VALUE FUND
September 30, 2009
Shares | Security | Value | |||||
COMMON STOCKS—94.2% | |||||||
Consumer Discretionary—11.3% | |||||||
28,400 | Best Buy Company, Inc. | $ 1,065,568 | |||||
36,800 | Bob Evans Farms, Inc. | 1,069,408 | |||||
43,300 | Carnival Corporation | 1,441,024 | |||||
78,900 | Cinemark Holdings, Inc. | 817,404 | |||||
86,800 | Comcast Corporation – Special Class “A” | 1,395,744 | |||||
95,500 | Family Dollar Stores, Inc. | 2,521,200 | |||||
65,100 | Genuine Parts Company | 2,477,706 | |||||
93,800 | H&R Block, Inc. | 1,724,044 | |||||
80,900 | Home Depot, Inc. | 2,155,176 | |||||
29,700 | J.C. Penney Company, Inc. | 1,002,375 | |||||
96,400 | Lowe’s Companies, Inc. | 2,018,616 | |||||
54,700 | McDonald’s Corporation | 3,121,729 | |||||
73,100 | Newell Rubbermaid, Inc. | 1,146,939 | |||||
35,900 | Omnicom Group, Inc. | 1,326,146 | |||||
104,300 | Pearson PLC (ADR) | 1,296,449 | |||||
128,400 | * | Ruby Tuesday, Inc. | 1,081,128 | ||||
78,000 | Staples, Inc. | 1,811,160 | |||||
69,400 | Tiffany & Company | 2,673,982 | |||||
66,533 | Time Warner, Inc. | 1,914,820 | |||||
131,500 | Walt Disney Company | 3,610,990 | |||||
39,220 | Wyndham Worldwide Corporation | 640,071 | |||||
36,311,679 | |||||||
Consumer Staples—17.5% | |||||||
70,700 | Avon Products, Inc. | 2,400,972 | |||||
91,600 | Coca-Cola Company | 4,918,920 | |||||
13,300 | Colgate-Palmolive Company | 1,014,524 | |||||
65,400 | ConAgra Foods, Inc. | 1,417,872 | |||||
45,800 | Costco Wholesale Corporation | 2,585,868 | |||||
53,100 | CVS/Caremark Corporation | 1,897,794 | |||||
51,800 | Diageo PLC (ADR) | 3,185,182 | |||||
31,600 | Estee Lauder Companies, Inc. – Class “A” | 1,171,728 | |||||
10,800 | General Mills, Inc. | 695,304 | |||||
58,600 | H.J. Heinz Company | 2,329,350 | |||||
48,400 | Hershey Corporation | 1,880,824 | |||||
63,600 | Kimberly-Clark Corporation | 3,751,128 | |||||
169,700 | Kraft Foods, Inc. – Class “A” | 4,458,019 | |||||
54,300 | Kroger Company | 1,120,752 | |||||
54,000 | McCormick & Company, Inc. | 1,832,760 | |||||
35,500 | PepsiAmericas, Inc. | 1,013,880 |
60 |
Shares | Security | Value | |||||
Consumer Staples (continued) | |||||||
53,400 | PepsiCo, Inc. | $ 3,132,444 | |||||
80,000 | Philip Morris International, Inc. | 3,899,200 | |||||
26,600 | Procter & Gamble Company | 1,540,672 | |||||
44,800 | Ruddick Corporation | 1,192,576 | |||||
43,450 | Safeway, Inc. | 856,834 | |||||
190,200 | Sara Lee Corporation | 2,118,828 | |||||
74,900 | Walgreen Company | 2,806,503 | |||||
101,800 | Wal-Mart Stores, Inc. | 4,997,362 | |||||
56,219,296 | |||||||
Energy—9.0% | |||||||
50,800 | Anadarko Petroleum Corporation | 3,186,684 | |||||
53,800 | BP PLC (ADR) | 2,863,774 | |||||
60,117 | Chevron Corporation | 4,234,040 | |||||
67,700 | ConocoPhillips | 3,057,332 | |||||
30,300 | Diamond Offshore Drilling, Inc. | 2,894,256 | |||||
35,100 | ExxonMobil Corporation | 2,408,211 | |||||
23,200 | Hess Corporation | 1,240,272 | |||||
106,600 | Marathon Oil Corporation | 3,400,540 | |||||
56,100 | Royal Dutch Shell PLC – Class “A” (ADR) | 3,208,359 | |||||
53,700 | Tidewater, Inc. | 2,528,733 | |||||
29,022,201 | |||||||
Financials—14.9% | |||||||
25,800 | ACE, Ltd. | 1,379,268 | |||||
39,500 | Allstate Corporation | 1,209,490 | |||||
48,300 | Aon Corporation | 1,965,327 | |||||
36,700 | Aspen Insurance Holdings, Ltd. | 971,449 | |||||
167,200 | Bank Mutual Corporation | 1,478,048 | |||||
130,887 | Bank of America Corporation | 2,214,608 | |||||
88,328 | Bank of New York Mellon Corporation | 2,560,629 | |||||
40,821 | Brookfield Asset Management, Inc. – Class “A” | 927,045 | |||||
25,903 | Capital One Financial Corporation | 925,514 | |||||
48,656 | Chubb Corporation | 2,452,749 | |||||
62,847 | Cincinnati Financial Corporation | 1,633,394 | |||||
89,600 | Citigroup, Inc. | 433,664 | |||||
44,800 | Comerica, Inc. | 1,329,216 | |||||
36,100 | EMC Insurance Group, Inc. | 762,793 | |||||
40,066 | Erie Indemnity Company – Class “A” | 1,500,872 | |||||
58,700 | Financial Select Sector SPDR Fund (ETF) | 876,978 | |||||
85,900 | First Potomac Realty Trust (REIT) | 993,004 |
61 |
Portfolio of Investments (continued)
VALUE FUND
September 30, 2009
Shares | Security | Value | |||||
Financials (continued) | |||||||
102,300 | Hudson City Bancorp, Inc. | $ 1,345,245 | |||||
68,300 | Invesco, Ltd. | 1,554,508 | |||||
203,100 | Investors Real Estate Trust (REIT) | 1,836,024 | |||||
100,200 | JPMorgan Chase & Company | 4,390,764 | |||||
58,600 | KeyCorp | 380,900 | |||||
53,600 | Morgan Stanley | 1,655,168 | |||||
136,100 | NewAlliance Bancshares, Inc. | 1,456,270 | |||||
145,300 | People’s United Financial, Inc. | 2,260,868 | |||||
47,100 | Plum Creek Timber Company, Inc. (REIT) | 1,443,144 | |||||
41,300 | PNC Financial Services Group, Inc. | 2,006,767 | |||||
49,300 | Protective Life Corporation | 1,056,006 | |||||
16,800 | SunTrust Banks, Inc. | 378,840 | |||||
34,600 | Waddell & Reed Financial, Inc. – Class “A” | 984,370 | |||||
87,200 | Wells Fargo & Company | 2,457,296 | |||||
107,400 | Westfield Financial, Inc. | 909,678 | |||||
47,729,896 | |||||||
Health Care—8.5% | |||||||
101,900 | Abbott Laboratories | 5,040,993 | |||||
33,400 | Becton, Dickinson & Company | 2,329,650 | |||||
44,775 | Covidien PLC | 1,936,967 | |||||
58,600 | GlaxoSmithKline PLC (ADR) | 2,315,286 | |||||
98,800 | Johnson & Johnson | 6,015,932 | |||||
48,900 | Medtronic, Inc. | 1,799,520 | |||||
55,100 | Novartis AG (ADR) | 2,775,938 | |||||
189,500 | Pfizer, Inc. | 3,136,225 | |||||
67,300 | Schering-Plough Corporation | 1,901,225 | |||||
27,251,736 | |||||||
Industrials—11.2% | |||||||
41,600 | 3M Company | 3,070,080 | |||||
14,200 | ABM Industries, Inc. | 298,768 | |||||
8,700 | Alexander & Baldwin, Inc. | 279,183 | |||||
30,600 | * | Armstrong World Industries, Inc. | 1,054,476 | ||||
47,400 | Avery Dennison Corporation | 1,706,874 | |||||
70,100 | Dover Corporation | 2,717,076 | |||||
31,400 | Emerson Electric Company | 1,258,512 | |||||
34,200 | Equifax, Inc. | 996,588 | |||||
43,100 | General Dynamics Corporation | 2,784,260 | |||||
149,800 | General Electric Company | 2,459,716 | |||||
76,000 | Honeywell International, Inc. | 2,823,400 |
62 |
Shares | Security | Value | |||||
Industrials (continued) | |||||||
23,900 | Hubbell, Inc. – Class “B” | $ 1,003,800 | |||||
54,900 | Illinois Tool Works, Inc. | 2,344,779 | |||||
40,800 | ITT Corporation | 2,127,720 | |||||
38,430 | Lawson Products, Inc. | 669,066 | |||||
37,400 | Norfolk Southern Corporation | 1,612,314 | |||||
51,600 | Pitney Bowes, Inc. | 1,282,260 | |||||
47,800 | Textainer Group Holdings, Ltd. | 765,278 | |||||
38,175 | Tyco International, Ltd. | 1,316,274 | |||||
49,000 | United Parcel Service, Inc. – Class “B” | 2,767,030 | |||||
30,000 | Waste Management, Inc. | 894,600 | |||||
86,000 | Werner Enterprises, Inc. | 1,602,180 | |||||
35,834,234 | |||||||
Information Technology—7.9% | |||||||
79,700 | Automatic Data Processing, Inc. | 3,132,210 | |||||
110,900 | AVX Corporation | 1,323,037 | |||||
43,365 | Bel Fuse, Inc. – Class “B” | 825,236 | |||||
42,600 | * | Electronic Arts, Inc. | 811,530 | ||||
87,900 | Hewlett-Packard Company | 4,149,759 | |||||
59,300 | Intel Corporation | 1,160,501 | |||||
15,700 | International Business Machines Corporation | 1,877,877 | |||||
146,400 | Methode Electronics, Inc. | 1,269,288 | |||||
145,200 | Microsoft Corporation | 3,759,228 | |||||
80,900 | Molex, Inc. | 1,689,192 | |||||
132,300 | Nokia Corporation – Class “A” (ADR) | 1,934,226 | |||||
53,600 | Texas Instruments, Inc. | 1,269,784 | |||||
47,875 | Tyco Electronics, Ltd. | 1,066,655 | |||||
39,800 | Xilinx, Inc. | 932,116 | |||||
25,200,639 | |||||||
Materials—5.9% | |||||||
36,700 | Air Products & Chemicals, Inc. | 2,847,186 | |||||
70,200 | Alcoa, Inc. | 921,024 | |||||
88,000 | Bemis Company, Inc. | 2,280,080 | |||||
25,900 | Compass Minerals International, Inc. | 1,595,958 | |||||
106,500 | Dow Chemical Company | 2,776,455 | |||||
111,000 | DuPont (E.I.) de Nemours & Company | 3,567,540 |
63 |
Portfolio of Investments (continued)
VALUE FUND
September 30, 2009
Shares | Security | Value | |||||
Materials (continued) | |||||||
72,300 | Glatfelter | $ 830,004 | |||||
29,100 | PPG Industries, Inc. | 1,693,911 | |||||
89,200 | Sonoco Products Company | 2,456,568 | |||||
18,968,726 | |||||||
Telecommunication Services—3.3% | |||||||
175,230 | AT&T, Inc. | 4,732,962 | |||||
29,045 | CenturyTel, Inc. | 975,912 | |||||
24,000 | Telephone & Data Systems, Inc. | 744,240 | |||||
30,000 | Telephone & Data Systems, Inc. – Special Shares | 890,400 | |||||
108,128 | Verizon Communications, Inc. | 3,273,035 | |||||
10,616,549 | |||||||
Utilities—4.7% | |||||||
40,900 | American Electric Power Company, Inc. | 1,267,490 | |||||
20,150 | American States Water Company | 729,027 | |||||
61,100 | Duke Energy Corporation | 961,714 | |||||
33,200 | FPL Group, Inc. | 1,833,636 | |||||
9,900 | Integrys Energy Group, Inc. | 355,311 | |||||
80,050 | MDU Resources Group, Inc. | 1,669,043 | |||||
130,600 | NiSource, Inc. | 1,814,034 | |||||
36,800 | ONEOK, Inc. | 1,347,616 | |||||
67,500 | Portland General Electric Company | 1,331,100 | |||||
56,700 | Southwest Gas Corporation | 1,450,386 | |||||
61,700 | Vectren Corporation | 1,421,568 | |||||
21,700 | Wisconsin Energy Corporation | 980,189 | |||||
15,161,114 | |||||||
Total Value of Common Stocks (cost $294,421,997) | 302,316,070 | ||||||
PREFERRED STOCKS—.7% | |||||||
Telecommunication Services—.4% | |||||||
49,800 | AT&T, Inc., 6.375%, 2056 | 1,332,150 | |||||
Utilities—.3% | |||||||
36,600 | Entergy Louisiana, LLC, 7.6%, 2032 | 927,810 | |||||
Total Value of Preferred Stocks (cost $2,171,926) | 2,259,960 |
64 |
Principal | |||||||
Amount | Security | Value | |||||
SHORT-TERM INVESTMENTS—4.9% | |||||||
Money Market Fund | |||||||
$15,725M | First Investors Cash Reserve Fund, .39% (cost $15,725,000)** | $ 15,725,000 | |||||
Total Value of Investments (cost $312,318,923) | 99.8 | % | 320,301,030 | ||||
Other Assets, Less Liabilities | .2 | 519,915 | |||||
Net Assets | 100.0 | % | $320,820,945 |
* | 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, 2009 (see Note 2). |
Summary of Abbreviations: | |||
ADR | American Depositary Receipts | ||
ETF | Exchange Traded Fund | ||
REIT | Real Estate Investment Trust |
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Common Stocks | $302,316,070 | $ | — | $ | — | $302,316,070 | ||||||
Preferred Stocks | 2,259,960 | — | — | 2,259,960 | ||||||||
Money Market Fund | 15,725,000 | — | — | 15,725,000 | ||||||||
Total Investments in Securities* | $320,301,030 | $ | — | $ | — | $320,301,030 |
* The Portfolio of Investments provides information on the industry categorization for the portfolio.
See notes to financial statements | 65 |
Portfolio Manager’s 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, 2009. During the period, the Fund’s return on a net asset value basis was –8.4% for Class A shares and –9.0% for Class B shares, including dividends of 20.0 cents per share on Class A shares and 9.1 cents per share on Class B shares.
The past year was defined by the volatile performance of the equity markets. During the first part of the review period, the markets were in a steep free fall, culminating with a multi-decade market low achieved on March 9, 2009. During this period, equities fell over 42% (as measured by the S&P 500 Index) from September 30, 2008, as the bankruptcy of Lehman Brothers and the ensuing freeze up of the credit markets, caused aftershocks in the global markets. Only after U.S. and global regulators took extraordinary measures to supply massive financial aid and intervention, such as through the TARP program, did the markets stabilize. Since then, the markets have rallied convincingly from the lows hit in March. Stocks are up over 50% (as measured by S&P 500 Index returns) during this period, and have recovered much of the value lost over the first part of the review period. Gloom has been giving rise to hope, as investors now anticipate that an econo mic recovery may be at hand.
The Fund’s performance largely reflected the negative effect of the economic downturn on corporate earnings. At the center of the storm was the financials sector, which was also the area of greatest weakness in the Fund, despite reducing its overall sector weighting as well as attempting to minimize exposure to companies facing the most difficulty. Other sectors that turned in weak results for the Fund were energy, materials, and industrials due to reduced end-user demand during the recession. The worst performing holdings of the Fund included General Electric, a conglomerate with a big finance arm, integrated energy company ConocoPhillips, and Bank of America. GE and Bank of America were both heavily affected by the meltdown in the real estate and credit markets. More modest losses were generated in the consumer staples, consumer discretionary, utilities and health care sectors.
The only sectors to generate positive returns were telecommunications services and information technology. In telecommunications, while shares of AT&T and Verizon lost some value, the losses were more than offset by the companies’ large dividend payouts. There were several companies in the technology sector that generated strong earnings results due to new innovations and unique product offerings. A few of our technology holdings, including electronics giant Apple, data storage and security software provider EMC and desktop publishing software company Adobe Systems, provided significant positive contributions during the review period.
66 |
The Fund continues to invest in shares of large companies that display industry leadership and growth potential while trading at reasonable valuations.
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/0000886048-09-000026/incomequityx69x1.jpg)
Matthew S. Wright
Portfolio Manager
October 30, 2009
67 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,282.30 | $8.87 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.30 | $7.84 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,278.17 | $12.85 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,013.79 | $11.36 |
* Expenses are equal to the annualized expense ratio of 1.55% for Class A shares and 2.25% for Class B shares, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx70x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total market value of investments.
68 |
Cumulative Performance Information (unaudited)
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/0000886048-09-000026/incomequityx71x1.jpg)
The graph compares a $10,000 investment in the First Investors Blue Chip Fund (Class A shares) beginning 9/30/99 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 9/30/09) 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 (.69%) and (2.36%), respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been (.61%) and (2.44%), 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.
69 |
Portfolio of Investments
BLUE CHIP FUND
September 30, 2009
Shares | Security | Value | |||||
COMMON STOCKS—98.1% | |||||||
Consumer Discretionary—9.2% | |||||||
24,400 | Best Buy Company, Inc. | $ 915,488 | |||||
47,394 | Comcast Corporation – Class “A” | 800,485 | |||||
138,050 | Comcast Corporation – Special Class “A” | 2,219,844 | |||||
106,100 | H&R Block, Inc. | 1,950,118 | |||||
127,700 | Home Depot, Inc. | 3,401,928 | |||||
35,600 | * | Kohl’s Corporation | 2,030,980 | ||||
157,000 | Lowe’s Companies, Inc. | 3,287,580 | |||||
50,100 | McDonald’s Corporation | 2,859,207 | |||||
113,200 | News Corporation – Class “A” | 1,357,268 | |||||
29,500 | NIKE, Inc. – Class “B” | 1,908,650 | |||||
37,100 | Omnicom Group, Inc. | 1,370,474 | |||||
67,600 | Staples, Inc. | 1,569,672 | |||||
46,200 | Target Corporation | 2,156,616 | |||||
94,433 | Time Warner, Inc. | 2,717,782 | |||||
70,600 | * | Viacom, Inc. – Class “B” | 1,979,624 | ||||
143,400 | Walt Disney Company | 3,937,764 | |||||
34,463,480 | |||||||
Consumer Staples—15.3% | |||||||
81,600 | Altria Group, Inc. | 1,453,296 | |||||
67,100 | Avon Products, Inc. | 2,278,716 | |||||
129,500 | Coca-Cola Company | 6,954,150 | |||||
20,700 | Colgate-Palmolive Company | 1,578,996 | |||||
46,900 | Costco Wholesale Corporation | 2,647,974 | |||||
112,100 | CVS Caremark Corporation | 4,006,454 | |||||
22,100 | General Mills, Inc. | 1,422,798 | |||||
64,500 | Kimberly-Clark Corporation | 3,804,210 | |||||
128,024 | Kraft Foods, Inc. – Class “A” | 3,363,190 | |||||
42,700 | Kroger Company | 881,328 | |||||
112,300 | PepsiCo, Inc. | 6,587,518 | |||||
94,900 | Philip Morris International, Inc. | 4,625,426 | |||||
102,640 | Procter & Gamble Company | 5,944,909 | |||||
51,700 | Safeway, Inc. | 1,019,524 | |||||
112,100 | Walgreen Company | 4,200,387 | |||||
136,130 | Wal-Mart Stores, Inc. | 6,682,622 | |||||
57,451,498 |
70 |
Shares | Security | Value | |||||
Energy—10.7% | |||||||
42,000 | BP PLC (ADR) | $ 2,235,660 | |||||
107,500 | Chevron Corporation | 7,571,225 | |||||
89,870 | ConocoPhillips | 4,058,529 | |||||
35,200 | Devon Energy Corporation | 2,370,016 | |||||
160,700 | ExxonMobil Corporation | 11,025,627 | |||||
68,790 | Halliburton Company | 1,865,585 | |||||
22,100 | Hess Corporation | 1,181,466 | |||||
61,000 | Marathon Oil Corporation | 1,945,900 | |||||
62,700 | Schlumberger, Ltd. | 3,736,920 | |||||
78,450 | Spectra Energy Corporation | 1,485,843 | |||||
23,251 | * | Transocean, Ltd. | 1,988,658 | ||||
46,470 | Valero Energy Corporation | 901,053 | |||||
40,366,482 | |||||||
Financials—11.4% | |||||||
45,800 | ACE, Ltd. | 2,448,468 | |||||
48,700 | Allstate Corporation | 1,491,194 | |||||
98,000 | American Express Company | 3,322,200 | |||||
170,236 | Bank of America Corporation | 2,880,393 | |||||
130,387 | Bank of New York Mellon Corporation | 3,779,919 | |||||
850 | * | Berkshire Hathaway, Inc. – Class “B” | 2,824,550 | ||||
43,000 | Capital One Financial Corporation | 1,536,390 | |||||
50,700 | Chubb Corporation | 2,555,787 | |||||
92,000 | Citigroup, Inc. | 445,280 | |||||
135,100 | Financial Select Sector SPDR Fund (ETF) | 2,018,394 | |||||
63,800 | Hudson City Bancorp, Inc. | 838,970 | |||||
173,868 | JPMorgan Chase & Company | 7,618,896 | |||||
61,700 | Marsh & McLennan Companies, Inc. | 1,525,841 | |||||
65,300 | Morgan Stanley | 2,016,464 | |||||
20,000 | PNC Financial Services Group, Inc. | 971,800 | |||||
51,400 | Travelers Companies, Inc. | 2,530,422 | |||||
64,500 | U.S. Bancorp | 1,409,970 | |||||
87,100 | Wells Fargo & Company | 2,454,478 | |||||
42,669,416 | |||||||
Health Care—15.0% | |||||||
120,100 | Abbott Laboratories | 5,941,347 | |||||
68,000 | * | Amgen, Inc. | 4,095,640 | ||||
16,300 | Baxter International, Inc. | 929,263 | |||||
146,300 | Bristol-Myers Squibb Company | 3,294,676 | |||||
24,400 | C.R. Bard, Inc. | 1,918,084 |
71 |
Portfolio of Investments (continued)
BLUE CHIP FUND
September 30, 2009
Shares | Security | Value | |||||
Health Care (continued) | |||||||
22,800 | * | Genzyme Corporation | $ 1,293,444 | ||||
39,600 | * | Gilead Sciences, Inc. | 1,844,568 | ||||
184,800 | Johnson & Johnson | 11,252,472 | |||||
42,300 | McKesson Corporation | 2,518,965 | |||||
93,700 | Medtronic, Inc. | 3,448,160 | |||||
91,800 | Merck & Company, Inc. | 2,903,634 | |||||
75,300 | Novartis AG (ADR) | 3,793,614 | |||||
328,860 | Pfizer, Inc. | 5,442,633 | |||||
56,800 | * | St. Jude Medical, Inc. | 2,215,768 | ||||
44,200 | Teva Pharmaceutical Industries, Ltd. (ADR) | 2,234,752 | |||||
50,400 | UnitedHealth Group, Inc. | 1,262,016 | |||||
38,800 | Wyeth | 1,884,904 | |||||
1,800 | * | Zimmer Holdings, Inc. | 96,210 | ||||
56,370,150 | |||||||
Industrials—11.6% | |||||||
50,900 | 3M Company | 3,756,420 | |||||
44,200 | Danaher Corporation | 2,975,544 | |||||
37,100 | Dover Corporation | 1,437,996 | |||||
70,700 | Emerson Electric Company | 2,833,656 | |||||
434,300 | General Electric Company | 7,131,206 | |||||
62,200 | Honeywell International, Inc. | 2,310,730 | |||||
43,500 | Illinois Tool Works, Inc. | 1,857,885 | |||||
37,800 | ITT Corporation | 1,971,270 | |||||
37,200 | Lockheed Martin Corporation | 2,904,576 | |||||
17,600 | Norfolk Southern Corporation | 758,736 | |||||
37,600 | Northrop Grumman Corporation | 1,945,800 | |||||
46,500 | Raytheon Company | 2,230,605 | |||||
64,725 | Tyco International, Ltd. | 2,231,718 | |||||
34,700 | United Parcel Service, Inc. – Class “B” | 1,959,509 | |||||
92,600 | United Technologies Corporation | 5,642,118 | |||||
54,600 | Waste Management, Inc. | 1,628,172 | |||||
43,575,941 | |||||||
Information Technology—18.3% | |||||||
49,220 | Accenture PLC | 1,834,429 | |||||
30,500 | * | Activision Blizzard, Inc. | 377,895 | ||||
44,200 | * | Adobe Systems, Inc. | 1,460,368 | ||||
36,000 | Analog Devices, Inc. | 992,880 | |||||
17,400 | * | Apple, Inc. | 3,225,438 | ||||
72,100 | Applied Materials, Inc. | 966,140 |
72 |
Shares | Security | Value | |||||
Information Technology (continued) | |||||||
48,000 | Automatic Data Processing, Inc. | $ 1,886,400 | |||||
272,200 | * | Cisco Systems, Inc. | 6,407,588 | ||||
87,500 | * | Dell, Inc. | 1,335,250 | ||||
178,425 | * | EMC Corporation | 3,040,362 | ||||
137,300 | Hewlett-Packard Company | 6,481,933 | |||||
251,400 | Intel Corporation | 4,919,898 | |||||
54,700 | International Business Machines Corporation | 6,542,667 | |||||
523,645 | Microsoft Corporation | 13,557,169 | |||||
143,400 | Nokia Corporation – Class “A” (ADR) | 2,096,508 | |||||
183,300 | Oracle Corporation | 3,819,972 | |||||
55,170 | QUALCOMM, Inc. | 2,481,547 | |||||
108,800 | * | Symantec Corporation | 1,791,936 | ||||
109,900 | Texas Instruments, Inc. | 2,603,531 | |||||
103,000 | Western Union Company | 1,948,760 | |||||
56,200 | * | Yahoo!, Inc. | 1,000,922 | ||||
68,771,593 | |||||||
Materials—1.9% | |||||||
89,900 | Dow Chemical Company | 2,343,693 | |||||
81,700 | DuPont (E.I.) de Nemours & Company | 2,625,838 | |||||
35,100 | Newmont Mining Corporation | 1,545,102 | |||||
10,600 | PPG Industries, Inc. | 617,026 | |||||
7,131,659 | |||||||
Telecommunication Services—2.9% | |||||||
206,300 | AT&T, Inc. | 5,572,163 | |||||
179,200 | Verizon Communications, Inc. | 5,424,384 | |||||
10,996,547 | |||||||
Utilities—1.8% | |||||||
62,500 | American Electric Power, Inc. | 1,936,875 | |||||
165,500 | Duke Energy Corporation | 2,604,970 | |||||
29,700 | FPL Group, Inc. | 1,640,331 | |||||
9,800 | Wisconsin Energy Corporation | 442,666 | |||||
6,624,842 | |||||||
Total Value of Common Stocks (cost $312,198,008) | 368,421,608 |
73 |
Portfolio of Investments (continued)
BLUE CHIP FUND
September 30, 2009
Principal | |||||||
Amount | Security | Value | |||||
SHORT-TERM INVESTMENTS—2.0% | |||||||
Money Market Fund | |||||||
$7,485M | First Investors Cash Reserve Fund, .39% (cost $7,485,000)** | $ 7,485,000 | |||||
Total Value of Investments (cost $319,683,008) | 100.1 | % | 375,906,608 | ||||
Excess of Liabilities Over Other Assets | (.1 | ) | (546,058) | ||||
Net Assets | 100.0 | % | $375,360,550 |
* | 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, 2009 (see Note 2). |
Summary of Abbreviations: | ||
ADR | American Depositary Receipts | |
ETF | Exchange Traded Fund |
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Common Stocks | $ | 368,421,608 | $ | — | $ | — | $ | 368,421,608 | ||||
Money Market Fund | 7,485,000 | — | — | 7,485,000 | ||||||||
Total Investments in Securities* | $ | 375,906,608 | $ | — | $ | — | $ | 375,906,608 |
* The Portfolio of Investments provides information on the industry categorization for the portfolio.
74 | 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, 2009. During the period, the Fund’s return on a net asset value basis was –6.9% for Class A shares and –7.6% for Class B shares, including dividends of 13.7 cents per share on Class A shares, 9.9 cents per shares on B shares, and capital gains distributions of 2.3 cents per share for both Class A and Class B shares.
The Fund’s results were driven by the volatile performance of the equity markets. During the first part of the review period, the markets were in a steep free fall, culminating with a multi-decade market low achieved on March 9, 2009. During this period, equities fell over 42% (as measured by the S&P 500 Index) from September 30, 2008, as the bankruptcy of Lehman Brothers and the ensuing freeze up of the credit markets, caused aftershocks in the global markets. Only after U.S. and global regulators took extraordinary measures to supply massive financial aid and intervention, such as through the TARP program, did the markets stabilize. Since then, the markets have rallied convincingly from the lows hit in March. Stocks are up over 50% (as measured by S&P 500 Index returns) during this period, and have recovered much of the value lost over the first part of the review period. Gloom has been giving rise to hope, as investors now anticipate that an economic recovery may be at hand.
With this as a backdrop, the Fund assumed a relatively conservative position, choosing to underweight or avoid volatile and uncertain areas of the market. This strategy benefited the Fund during the market decline, but caused the Fund to lag during the recovery phase beginning in March of 2009. For the period overall, the Fund performed in line with the S&P 500 Index. Following the strategy from last fiscal year, the Fund remained underweight the financials sector for the entire year, as we were concerned that uncertainty over continuing loan losses, inadequate capital structures and ongoing governmental involvement would impair valuations for equity holders for some time to come. The Fund likewise reduced its holdings in the volatile energy sector, as global recession has dampened usage, and energy pricing still seems to hold a speculative bias that is not reflective of true underlying supply and demand. Oil has had its own volatile year, starting the period at $121 a barrel, falling to $31 in December 2008, and rebounding to over $70 on September 30, 2009.
The Fund’s weightings in consumer staples and health care increased throughout the year, as these sectors demonstrated solid earnings and were generally immune from the economic chaos. Overall stock selection and weightings benefited the Fund’s relative performance most notably within investments in these sectors. Additionally, stock selection aided investments within the financials, energy, utilities and materials sectors. The Fund’s underweighting in the energy, financials and utilities sectors also helped
75 |
Portfolio Manager’s Letter
GROWTH & INCOME FUND
performance. The Fund’s performance was hurt by its investments in the technology, industrials and consumer discretionary sectors.
Notable individual performers within consumer staples included shares of small-cap direct seller NuSkin Enterprises, spice maker McCormick & Co. and tobacco giant Philip Morris International. Shares of large-cap pharmacy and drugstore operators Walgreen’s and CVS Caremark also provided solid returns. Within health care, Wyeth was a top contributor after agreeing to merge with competitor Pfizer. Biotech firm Genentech was also a top performer after agreeing to a merger offer from rival Novartis. The overall top performer was for-profit education holding Lincoln Education, which benefited from curriculum offerings that appealed to people in a high unemployment environment.
The Fund maintained a diverse market capitalization allocation during the period, ending with 60% large cap, 14% mid cap and 26% small cap, according to Lipper’s market capitalization ranges. The large-cap segment performed slightly better than its peers and small-caps performed largely in line with theirs, while the mid-cap components delivered results slightly below the benchmark.
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/0000886048-09-000026/incomequityx78x1.jpg)
Edwin D. Miska
Portfolio Manager and
Director of Equities, First Investors Management Company, Inc.
October 30, 2009
76 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,336.21 | $8.67 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.65 | $7.49 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,330.96 | $12.74 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.14 | $11.01 |
* 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 183/365 (to reflect the one-half year period).
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx79x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total market value of investments.
77 |
Cumulative Performance Information (unaudited)
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/0000886048-09-000026/incomequityx80x1.jpg)
The graph compares a $10,000 investment in the First Investors Growth & Income Fund (Class A shares) beginning 9/30/99 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 9/30/09) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75% (prior to 6/17/02 the maximum sales charge was 6.25%). The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Standard & Poor’s 500 Index figures are from Standard & Poor’s and all other figures are from First Investors Management Company, Inc.
78 |
Portfolio of Investments
GROWTH & INCOME FUND
September 30, 2009
Shares | Security | Value | |||||
COMMON STOCKS—99.7% | |||||||
Consumer Discretionary—14.6% | |||||||
177,000 | * | Big Lots, Inc. | $ 4,428,540 | ||||
110,000 | BorgWarner, Inc. | 3,328,600 | |||||
99,025 | Brown Shoe Company, Inc. | 794,181 | |||||
195,000 | CBS Corporation – Class “B” | 2,349,750 | |||||
210,000 | * | CEC Entertainment, Inc. | 5,430,600 | ||||
146,250 | Coach, Inc. | 4,814,550 | |||||
180,000 | * | GameStop Corporation – Class “A” | 4,764,600 | ||||
68,250 | Genuine Parts Company | 2,597,595 | |||||
215,000 | H&R Block, Inc. | 3,951,700 | |||||
200,000 | Home Depot, Inc. | 5,328,000 | |||||
260,000 | * | Jack in the Box, Inc. | 5,327,400 | ||||
70,000 | Limited Brands, Inc. | 1,189,300 | |||||
194,500 | * | Lincoln Educational Services Corporation | 4,450,160 | ||||
50,000 | * | Luxottica Group SpA (ADR) | 1,291,500 | ||||
110,000 | McDonald’s Corporation | 6,277,700 | |||||
445,000 | * | Morgans Hotel Group Company | 2,411,900 | ||||
340,000 | Newell Rubbermaid, Inc. | 5,334,600 | |||||
50,000 | NIKE, Inc. – Class “B” | 3,235,000 | |||||
48,750 | Polo Ralph Lauren Corporation – Class “A” | 3,735,225 | |||||
313,875 | * | Ruby Tuesday, Inc. | 2,642,827 | ||||
175,500 | Staples, Inc. | 4,075,110 | |||||
93,502 | * | Steiner Leisure, Ltd. | 3,343,631 | ||||
741,800 | Stewart Enterprises, Inc. – Class “A” | 3,879,614 | |||||
234,000 | Wyndham Worldwide Corporation | 3,818,880 | |||||
88,800,963 | |||||||
Consumer Staples—16.8% | |||||||
420,000 | Altria Group, Inc. | 7,480,200 | |||||
100,000 | Avon Products, Inc. | 3,396,000 | |||||
110,000 | * | Chattem, Inc. | 7,305,100 | ||||
115,000 | Coca-Cola Company | 6,175,500 | |||||
300,000 | CVS Caremark Corporation | 10,722,000 | |||||
170,000 | Dean Foods Company | 3,024,300 | |||||
104,581 | Kraft Foods, Inc. – Class “A” | 2,747,343 | |||||
185,000 | McCormick & Company, Inc. | 6,278,900 | |||||
569,700 | Nu Skin Enterprises, Inc. – Class “A” | 10,556,541 | |||||
100,000 | PepsiCo, Inc. | 5,866,000 | |||||
225,000 | Philip Morris International, Inc. | 10,966,500 | |||||
90,562 | Procter & Gamble Company | 5,245,351 | |||||
228,750 | Safeway, Inc. | 4,510,950 |
79 |
Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2009
Shares | Security | Value | |||||
Consumer Staples (continued) | |||||||
50,764 | Tootsie Roll Industries, Inc. | $ 1,207,168 | |||||
250,000 | Walgreen Company | 9,367,500 | |||||
146,250 | Wal-Mart Stores, Inc. | 7,179,413 | |||||
102,028,766 | |||||||
Energy—7.8% | |||||||
58,046 | Anadarko Petroleum Corporation | 3,641,226 | |||||
368,625 | * | Cal Dive International, Inc. | 3,645,701 | ||||
87,750 | ConocoPhillips | 3,962,790 | |||||
100,000 | ExxonMobil Corporation | 6,861,000 | |||||
6,920 | Hugoton Royalty Trust | 123,937 | |||||
76,519 | Marathon Oil Corporation | 2,440,956 | |||||
182,700 | Noble Corporation | 6,935,292 | |||||
78,000 | Sasol, Ltd. (ADR) | 2,973,360 | |||||
230,000 | Suncor Energy, Inc. | 7,948,800 | |||||
53,208 | * | Transocean, Ltd. | 4,550,880 | ||||
110,000 | XTO Energy, Inc. | 4,545,200 | |||||
47,629,142 | |||||||
Financials—9.5% | |||||||
50,700 | American Express Company | 1,718,730 | |||||
102,625 | Astoria Financial Corporation | 1,132,980 | |||||
64,260 | Bank of America Corporation | 1,087,279 | |||||
182,000 | Brookline Bancorp, Inc. | 1,769,040 | |||||
63,745 | Capital One Financial Corporation | 2,277,609 | |||||
61,150 | Citigroup, Inc. | 295,966 | |||||
97,500 | Discover Financial Services | 1,582,425 | |||||
550,000 | Financial Select Sector SPDR Fund (ETF) | 8,217,000 | |||||
175,500 | First Mercury Financial Corporation | 2,337,660 | |||||
48,750 | Hartford Financial Services Group, Inc. | 1,291,875 | |||||
230,000 | Hudson City Bancorp, Inc. | 3,024,500 | |||||
173,062 | JPMorgan Chase & Company | 7,583,577 | |||||
88,725 | KeyCorp | 576,713 | |||||
165,750 | Morgan Stanley | 5,118,360 | |||||
250,000 | New York Community Bancorp, Inc. | 2,855,000 | |||||
265,000 | NewAlliance Bancshares, Inc. | 2,835,500 | |||||
200,000 | SPDR KBW Regional Banking (ETF) | 4,264,000 | |||||
353,166 | Sunstone Hotel Investors, Inc. (REIT) | 2,507,479 | |||||
100,000 | U.S. Bancorp | 2,186,000 |
80 |
Shares | Security | Value | |||||
Financials (continued) | |||||||
90,000 | Urstadt Biddle Properties – Class “A” (REIT) | $ 1,313,100 | |||||
58,500 | Webster Financial Corporation | 729,495 | |||||
107,250 | Wells Fargo & Company | 3,022,305 | |||||
57,726,593 | |||||||
Health Care—14.6% | |||||||
155,000 | Abbott Laboratories | 7,667,850 | |||||
45,532 | * | Amgen, Inc. | 2,742,392 | ||||
55,000 | Baxter International, Inc. | 3,135,550 | |||||
100,000 | Becton, Dickinson & Company | 6,975,000 | |||||
65,000 | * | Cephalon, Inc. | 3,785,600 | ||||
70,000 | * | Genzyme Corporation | 3,971,100 | ||||
120,000 | * | Gilead Sciences, Inc. | 5,589,600 | ||||
170,625 | Johnson & Johnson | 10,389,356 | |||||
70,000 | * | Laboratory Corporation of America Holdings | 4,599,000 | ||||
133,125 | Medtronic, Inc. | 4,899,000 | |||||
97,500 | Merck & Company, Inc. | 3,083,925 | |||||
170,000 | Perrigo Company | 5,778,300 | |||||
414,375 | Pfizer, Inc. | 6,857,906 | |||||
160,000 | * | PSS World Medical, Inc. | 3,492,800 | ||||
121,875 | Sanofi-Aventis (ADR) | 4,503,281 | |||||
65,000 | * | St. Jude Medical, Inc. | 2,535,650 | ||||
65,000 | * | Thermo Fisher Scientific, Inc. | 2,838,550 | ||||
120,000 | Wyeth | 5,829,600 | |||||
88,674,460 | |||||||
Industrials—14.0% | |||||||
78,000 | 3M Company | 5,756,400 | |||||
130,000 | * | AAR Corporation | 2,852,200 | ||||
82,485 | Alexander & Baldwin, Inc. | 2,646,944 | |||||
129,382 | * | Altra Holdings, Inc. | 1,447,784 | ||||
185,000 | * | Armstrong World Industries, Inc. | 6,375,100 | ||||
58,500 | Baldor Electric Company | 1,599,390 | |||||
97,500 | * | BE Aerospace, Inc. | 1,963,650 | ||||
35,000 | Burlington Northern Santa Fe Corporation | 2,794,050 | |||||
175,500 | Chicago Bridge & Iron Company NV – NY Shares | 3,278,340 | |||||
135,000 | * | DynCorp International, Inc. – Class “A” | 2,430,000 | ||||
115,000 | * | Esterline Technologies Corporation | 4,509,150 | ||||
219,375 | General Electric Company | 3,602,137 | |||||
50,000 | Harsco Corporation | 1,770,500 | |||||
136,500 | Honeywell International, Inc. | 5,070,975 |
81 |
Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2009
Shares | Security | Value | |||||
Industrials (continued) | |||||||
121,875 | IDEX Corporation | $ 3,406,406 | |||||
60,000 | Lockheed Martin Corporation | 4,684,800 | |||||
216,450 | * | Mobile Mini, Inc. | 3,757,572 | ||||
60,000 | Northrop Grumman Corporation | 3,105,000 | |||||
142,888 | * | PGT, Inc. | 410,089 | ||||
96,743 | * | Pinnacle Airlines Corporation | 648,178 | ||||
95,000 | Raytheon Company | 4,557,150 | |||||
78,900 | Republic Services, Inc. | 2,096,373 | |||||
300,100 | TAL International Group, Inc. | 4,267,422 | |||||
175,000 | Textainer Group Holdings, Ltd. | 2,801,750 | |||||
97,500 | Tyco International, Ltd. | 3,361,800 | |||||
100,000 | United Technologies Corporation | 6,093,000 | |||||
85,286,160 | |||||||
Information Technology—15.5% | |||||||
9,400 | * | Avago Technologies, Ltd. | 160,458 | ||||
80,000 | * | Blackboard, Inc. | 3,022,400 | ||||
85,000 | * | CACI International, Inc. – Class “A” | 4,017,950 | ||||
200,000 | * | Cisco Systems, Inc. | 4,708,000 | ||||
361,725 | * | EMC Corporation | 6,163,794 | ||||
100,000 | Harris Corporation | 3,760,000 | |||||
150,000 | Hewlett-Packard Company | 7,081,500 | |||||
180,375 | Intel Corporation | 3,529,939 | |||||
108,525 | International Business Machines Corporation | 12,980,675 | |||||
52,200 | * | ManTech International Corporation – Class “A” | 2,461,752 | ||||
450,000 | Microsoft Corporation | 11,650,500 | |||||
23,700 | * | NCI, Inc. – Class “A” | 679,242 | ||||
308,125 | Nokia Corporation – Class “A” (ADR) | 4,504,788 | |||||
248,625 | * | Parametric Technology Corporation | 3,435,998 | ||||
156,000 | QUALCOMM, Inc. | 7,016,880 | |||||
246,200 | * | SRA International, Inc. – Class “A” | 5,315,458 | ||||
425,625 | * | Symantec Corporation | 7,010,044 | ||||
100,000 | * | TIBCO Software, Inc. | 949,000 | ||||
30,000 | * | Websense, Inc. | 504,000 | ||||
195,000 | Western Union Company | 3,689,400 | |||||
60,000 | Xilinx, Inc. | 1,405,200 | |||||
94,046,978 |
82 |
Shares or | |||||||
Principal | |||||||
Amount | Security | Value | |||||
Materials—3.7% | |||||||
149,000 | Bemis Company, Inc. | $ 3,860,590 | |||||
125,000 | Celanese Corporation – Series “A” | 3,125,000 | |||||
80,000 | Freeport-McMoRan Copper & Gold, Inc. | 5,488,800 | |||||
40,000 | Praxair, Inc. | 3,267,600 | |||||
229,125 | RPM International, Inc. | 4,236,521 | |||||
146,250 | Temple-Inland, Inc. | 2,401,425 | |||||
22,379,936 | |||||||
Telecommunication Services—2.4% | |||||||
234,000 | AT&T, Inc. | 6,320,340 | |||||
280,000 | Verizon Communications, Inc. | 8,475,600 | |||||
14,795,940 | |||||||
Utilities—.8% | |||||||
112,515 | Atmos Energy Corporation | 3,170,673 | |||||
48,371 | Consolidated Edison, Inc. | 1,980,309 | |||||
5,150,982 | |||||||
Total Value of Common Stocks (cost $588,174,458) | 606,519,920 | ||||||
SHORT-TERM INVESTMENTS—.9% | |||||||
Money Market Fund | |||||||
$5,405M | First Investors Cash Reserve Fund, .39% (cost $5,405,000)** | 5,405,000 | |||||
Total Value of Investments (cost $593,579,458) | 100.6 | % | 611,924,920 | ||||
Excess of Liabilities Over Other Assets | (.6 | ) | (3,633,548) | ||||
Net Assets | 100.0 | % | $608,291,372 |
* | 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, 2009 (see Note 2). |
Summary of Abbreviations: | ||
ADR | American Depositary Receipts | |
ETF | Exchange Traded Fund | |
REIT | Real Estate Investment Trust |
83 |
Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2009
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Common Stocks | $ | 606,519,920 | $ | — | $ | — | $ | 606,519,920 | ||||
Money Market Fund | 5,405,000 | — | — | 5,405,000 | ||||||||
Total Investments in Securities* | $ | $611,924,920 | $ | — | $ | — | $ | $611,924,920 |
* The Portfolio of Investments provides information on the industry categorization for the portfolio.
84 | See notes to financial statements |
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, 2009. During the period, the Fund’s return on a net asset value basis was 0.5% for Class A shares and –0.4% for Class B shares, including dividends of 3.9 cents per share on Class A shares and 3.3 cents per share on Class B shares.
While the Fund’s performance for the past year has been relatively flat, the market saw both dramatic rises and falls during the reporting period. During the first part of the review period, the markets were in a steep free fall, culminating with a multi-decade market low achieved on March 9, 2009. During this period, global equities fell over 41%, (as measured by the MSCI All Country World Free Index (the “MSCI ACWFI”)) from September 30, 2008, as the bankruptcy of Lehman Brothers and the ensuing freeze up of the credit markets caused aftershocks in the global markets. Only after U.S. and global regulators took extraordinary measures to supply massive financial aid and intervention, such as through the TARP program, did the markets stabilize. Since then, the markets have rallied convincingly from the lows hit in March. Global stocks were up 70% (as measured by the MSCI ACWFI) during this period, and have recovered all the value lost over the first part of the review period. Amid this backdrop, the Fund’s return performed in line with the MSCI ACWFI. Within the Index, Pacific Developed ex-Japan (23.9%) and Emerging Markets (19.7%) posted strong returns, while the U.S. (–6.7%), the U.K. (–1.1%), and Japan (–0.3%) lagged. There was also a wide disparity in sector returns, with the technology sector up 10.3% over the year while financials declined 5.9%.
Though financials was the weakest sector in the Index, the Fund’s relative stock selection in financials was strong. Nevertheless, strong stock selection in the financials and consumer discretionary sectors was offset by disappointing results in the energy, utilities and consumer staples sectors.
On a regional basis, positive security selection in Europe offset the portfolio’s underweight position in strong performing Emerging Markets, particularly China. Top contributors to relative performance during the period included Rio Tinto (materials), ING Groep (financials), and Precision Castparts (industrials). Shares of diversified mining company Rio Tinto were purchased in late 2008 when we believed the market was overly pessimistic about the company’s ability to refinance its debt; the company subsequently benefited from rising copper prices and the company’s reduced balance sheet risk following successful debt and rights issues and a planned iron ore joint venture with BHP. Shares of ING Groep, a Netherlands-based global banking, investments and insurance company, rose after the company announced plans to reduce risk by selling certain operations, refocusing on Europe, and managing its banking and
85 |
Portfolio Manager’s Letter
GLOBAL FUND
insurance operations separately. Shares of complex metal component manufacturer Precision Castparts rose as the company was able to maintain its profitability by controlling costs as overall industrial demand declined.
The largest detractors from relative performance during the period included Simon Property Group (financials), Sumitomo Mitsui Financial Group (financials) and Transocean (energy). Shares of Simon Property, which owns and operates regional malls in upscale areas, suffered in 2008 as big U.S. homebuilders and real estate companies alike slumped as housing starts fell to a record low and concerns about the commercial real estate market grew. Shares of Sumitomo Mitsui Financial, a Japan-based financial holding company and Japan’s third largest bank, fell sharply as big Japanese banks were hit by concerns about their capital strength. We continue to believe that Japanese banks are undervalued when compared to both their own history and global peers. Shares of Transocean, an international provider of offshore contract drilling services for oil and gas wells, fell after the company reported quarterly results that missed expectations and as a drop in crud e oil prices weighed on energy stocks. Falling prices, coupled with the effects of the global financial crisis, have prompted investor questions about budgets and cash flow at exploration and production companies, which need to spend heavily to drill for oil and gas.
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/0000886048-09-000026/incomequityx88x1.jpg)
Nicolas Choumenkovitch
Portfolio Manager
October 30, 2009
Beginning | Ending | ||
Account | Account | Expenses Paid | |
Value | Value | During Period | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,411.33 | $11.12 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,015.84 | $9.30 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,405.03 | $15.31 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,012.34 | $12.81 |
Fund Expenses (unaudited)
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.
* | Expenses are equal to the annualized expense ratio of 1.84% for Class A shares and 2.54% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx89x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total market value of investments.
87 |
Cumulative Performance Information (unaudited)
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/0000886048-09-000026/incomequityx90x1.jpg)
The graph compares a $10,000 investment in the First Investors Global Fund (Class A shares) beginning 9/30/99 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 45 countries of which 22 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 9/30/09) 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 (5.27%), 3.21% and .58%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (4.35%) , 3.38% and .46%, 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.
88 |
Portfolio of Investments
GLOBAL FUND
September 30, 2009
Shares | Security | Value | |||||
COMMON STOCKS—94.0% | |||||||
United States—42.2% | |||||||
32,205 | Abbott Laboratories | $ 1,593,181 | |||||
13,800 | Abercrombie & Fitch Company – Class “A” | 453,744 | |||||
15,900 | Accenture PLC | 592,593 | |||||
5,870 | ACE, Ltd. | 313,810 | |||||
33,010 | Aflac, Inc. | 1,410,847 | |||||
17,600 | * | Alliance Data Systems Corporation | 1,075,008 | ||||
23,500 | American Electric Power Company, Inc. | 728,265 | |||||
17,700 | Ameriprise Financial, Inc. | 643,041 | |||||
26,075 | * | Amgen, Inc. | 1,570,497 | ||||
39,130 | Apache Corporation | 3,593,308 | |||||
3,250 | * | Apple, Inc. | 602,453 | ||||
55,400 | Assured Guaranty, Ltd. | 1,075,868 | |||||
81,225 | AT&T, Inc. | 2,193,887 | |||||
87,300 | Bank of America Corporation | 1,477,116 | |||||
14,100 | Best Buy Company, Inc. | 529,032 | |||||
7,535 | Boeing Company | 408,020 | |||||
16,900 | * | Broadcom Corporation – Class “A” | 518,661 | ||||
11,700 | * | Cephalon, Inc. | 681,408 | ||||
146,090 | * | Cisco Systems, Inc. | 3,438,959 | ||||
97,545 | Citigroup, Inc. | 472,118 | |||||
50,270 | Coach, Inc. | 1,654,888 | |||||
16,150 | Consol Energy, Inc. | 728,527 | |||||
74,205 | Corning, Inc. | 1,136,079 | |||||
29,795 | Covidien PLC | 1,288,932 | |||||
22,900 | CVS Caremark Corporation | 818,446 | |||||
30,200 | D.R. Horton, Inc. | 344,582 | |||||
18,500 | Deere & Company | 794,020 | |||||
22,300 | * | eBay, Inc. | 526,503 | ||||
151,360 | * | EMC Corporation | 2,579,174 | ||||
16,405 | Exelon Corporation | 814,016 | |||||
24,095 | ExxonMobil Corporation | 1,653,158 | |||||
15,425 | FedEx Corporation | 1,160,269 | |||||
17,600 | Flowserve Corporation | 1,734,304 | |||||
8,420 | Fluor Corporation | 428,157 | |||||
4,900 | Freeport-McMoRan Copper & Gold, Inc. | 336,189 | |||||
11,900 | * | GameStop Corporation – Class “A” | 314,993 | ||||
134,100 | General Electric Company | 2,201,922 | |||||
12,650 | Goldman Sachs Group, Inc. | 2,332,028 | |||||
5,075 | * | Google, Inc. – Class “A” | 2,516,439 | ||||
8,500 | H.J. Heinz Company | 337,875 | |||||
22,011 | Halliburton Company | 596,938 | |||||
54,115 | Hartford Financial Services Group, Inc. | 1,434,048 |
89 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2009
Shares | Security | Value | ||
United States (continued) | ||||
52,575 | Hewlett-Packard Company | $ 2,482,066 | ||
50,560 | Honeywell International, Inc. | 1,878,304 | ||
52,105 | Intel Corporation | 1,019,695 | ||
12,295 | International Business Machines Corporation | 1,470,605 | ||
53,035 | JPMorgan Chase & Company | 2,323,994 | ||
29,385 | * | Kohl’s Corporation | 1,676,414 | |
44,395 | Lowe’s Companies, Inc. | 929,631 | ||
31,700 | Marathon Oil Corporation | 1,011,230 | ||
14,935 | Martin Marietta Materials, Inc. | 1,375,065 | ||
28,455 | Maxim Integrated Products, Inc. | 516,174 | ||
8,600 | McDonald’s Corporation | 490,802 | ||
57,330 | Medtronic, Inc. | 2,109,744 | ||
67,430 | Merck & Company, Inc. | 2,132,811 | ||
55,800 | * | Micron Technology, Inc. | 457,560 | |
106,245 | Microsoft Corporation | 2,750,683 | ||
12,645 | Mosaic Company | 607,845 | ||
41,400 | Noble Corporation | 1,571,544 | ||
10,100 | Noble Energy, Inc. | 666,196 | ||
43,720 | Nordstrom, Inc. | 1,335,209 | ||
19,640 | Nucor Corporation | 923,276 | ||
109,375 | Oracle Corporation | 2,279,375 | ||
44,310 | PepsiCo, Inc. | 2,599,225 | ||
64,730 | Pfizer, Inc. | 1,071,282 | ||
45,580 | Philip Morris International, Inc. | 2,221,569 | ||
31,755 | Precision Castparts Corporation | 3,234,882 | ||
56,175 | Procter & Gamble Company | 3,253,656 | ||
42,105 | QUALCOMM, Inc. | 1,893,883 | ||
45,390 | Staples, Inc. | 1,053,956 | ||
13,885 | Texas Instruments, Inc. | 328,936 | ||
20,295 | * | Thermo Fisher Scientific, Inc. | 886,283 | |
16,203 | * | Transocean, Ltd. | 1,385,843 | |
25,290 | U.S. Bancorp | 552,839 | ||
25,020 | * | Ultra Petroleum Corporation | 1,224,979 | |
63,490 | UnitedHealth Group, Inc. | 1,589,790 | ||
46,175 | Wal-Mart Stores, Inc. | 2,266,731 | ||
71,110 | Wells Fargo & Company | 2,003,880 | ||
7,500 | * | WESCO International, Inc. | 216,000 | |
60,235 | Western Union Company | 1,139,646 | ||
10,200 | * | Whiting Petroleum Corporation | 587,316 | |
35,400 | Wyeth | 1,719,732 | ||
108,341,954 |
90 |
Shares | Security | Value | |||||
United Kingdom—12.4% | |||||||
38,442 | AstraZeneca PLC | $ 1,723,972 | |||||
18,300 | AstraZeneca PLC (ADR) | 822,585 | |||||
222,294 | BAE Systems PLC | 1,241,504 | |||||
98,744 | * | Barclays PLC | 584,331 | ||||
145,828 | BG Group PLC | 2,535,227 | |||||
651,745 | * | GKN PLC | 1,185,180 | ||||
402,707 | HSBC Holdings PLC | 4,611,567 | |||||
110,191 | Imperial Tobacco Group PLC | 3,186,331 | |||||
894,324 | * | Lloyds Banking Group PLC | 1,483,269 | ||||
137,532 | Pearson PLC | 1,695,916 | |||||
276,528 | Rexam PLC | 1,154,319 | |||||
83,043 | Rio Tinto PLC | 3,544,186 | |||||
66,887 | Standard Chartered PLC | 1,649,576 | |||||
158,861 | Thomas Cook Group PLC | 590,218 | |||||
40,061 | * | Wolseley PLC | 965,565 | ||||
256,918 | WPP PLC | 2,206,557 | |||||
172,367 | * | Xstrata PLC | 2,543,120 | ||||
31,723,423 | |||||||
Switzerland—7.0% | |||||||
52,085 | ABB, Ltd. (ADR) | 1,043,783 | |||||
32,882 | Compagnie Financiere Richemont SA | 927,851 | |||||
23,924 | Julius Baer Holding, Ltd. AG – Registered | 1,193,145 | |||||
7,852 | Kuehne & Nagel International AG | 681,417 | |||||
58,284 | Nestle SA – Registered | 2,480,433 | |||||
15,338 | Roche Holding AG – Genusscheine | 2,475,897 | |||||
13,909 | Synthes, Inc. | 1,674,200 | |||||
121,375 | * | UBS AG – Registered | 2,222,376 | ||||
281,800 | * | UBS AG – Registered | 5,151,781 | ||||
17,850,883 | |||||||
Japan—4.6% | |||||||
25,600 | Eisai Company, Ltd. | 966,415 | |||||
184,000 | Fujitsu, Ltd. | 1,206,322 | |||||
212,000 | Hino Motors, Ltd. | 807,416 | |||||
195 | KDDI Corporation | 1,102,027 | |||||
120,000 | Konica Minolta Holdings, Inc. | 1,140,560 | |||||
111,000 | * | Mitsubishi Electric Corporation | 843,022 | ||||
374,000 | Mitsubishi UFJ Financial Group, Inc. | 2,013,380 | |||||
27,000 | NGK Spark Plug Company, Ltd. | 345,586 | |||||
179,100 | Nomura Holdings, Inc. | 1,106,185 | |||||
4,100 | OSAKA Titanium Technologies Company, Ltd. | 117,686 |
91 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2009
Shares | Security | Value | |||||
Japan (continued) | |||||||
37,300 | Softbank Corporation | $ 821,946 | |||||
34,600 | Sumitomo Mitsui Financial Group, Inc. | 1,209,561 | |||||
9,100 | TOHO Titanium Company, Ltd. | 123,691 | |||||
11,803,797 | |||||||
Germany—4.0% | |||||||
59,518 | Daimler AG | 3,011,874 | |||||
134,356 | Deutsche Post AG | 2,517,714 | |||||
9,159 | HeidelbergCement AG | 592,009 | |||||
12,530 | MAN SE | 1,044,884 | |||||
21,135 | SAP AG | 1,036,469 | |||||
22,059 | Siemens AG | 2,055,224 | |||||
10,258,174 | |||||||
Canada—3.7% | |||||||
11,700 | Agrium, Inc. | 582,543 | |||||
31,990 | Barrick Gold Corporation | 1,212,421 | |||||
67,600 | Brookfield Asset Management, Inc. – Class ‘A’ | 1,528,605 | |||||
17,900 | Potash Corporation of Saskatchewan, Inc. | 1,616,720 | |||||
17,700 | * | Research in Motion, Ltd. | 1,195,635 | ||||
8,740 | Suncor Energy, Inc. | 302,054 | |||||
90,400 | Suncor Energy, Inc. | 3,121,424 | |||||
9,559,402 | |||||||
Hong Kong—2.8% | |||||||
512,000 | Cathay Pacific Airways, Ltd. | 808,624 | |||||
233,500 | Esprit Holdings, Ltd. | 1,566,700 | |||||
866,888 | Shangri-La Asia, Ltd. | 1,633,095 | |||||
218,000 | Sun Hung Kai Properties, Ltd. | 3,212,315 | |||||
7,220,734 | |||||||
China—2.7% | |||||||
500 | * | Baidu.com, Inc. (ADR) | 195,525 | ||||
964,000 | China Construction Bank Corporation | 769,951 | |||||
282,000 | China Life Insurance Co., Ltd. | 1,228,057 | |||||
10,300 | * | Ctrip.com International, Ltd. (ADR) | 605,537 | ||||
1,812,000 | Industrial and Commercial Bank of China, Ltd. | 1,365,421 | |||||
4,300 | * | NetEase.com, Inc. (ADR) | 196,424 | ||||
3,300 | * | Perfect World Company, Ltd. (ADR) | 158,730 | ||||
20,700 | PetroChina Company, Ltd. (ADR) | 2,354,625 | |||||
6,874,270 |
92 |
Shares | Security | Value | |||||
France—2.1% | |||||||
15,565 | BNP Paribas | $ 1,242,233 | |||||
43,558 | Danone SA | 2,621,897 | |||||
32,690 | * | Renault SA | 1,522,615 | ||||
5,386,745 | |||||||
Spain—2.0% | |||||||
106,145 | Banco Santander SA | 1,706,686 | |||||
69,407 | Enagas | 1,448,748 | |||||
37,474 | Red Electrica Corporacion SA | 1,915,522 | |||||
5,070,956 | |||||||
Netherlands—1.7% | |||||||
49,352 | * | AEGON NV | 418,474 | ||||
105,591 | * | ING Groep NV – CVA | 1,882,990 | ||||
123,246 | Koninklijke (Royal) KPN NV | 2,042,000 | |||||
4,343,464 | |||||||
Ireland—1.1% | |||||||
88,279 | CRH PLC | 2,449,148 | |||||
15,800 | Ryanair Holdings PLC (ADR) | 458,832 | |||||
2,907,980 | |||||||
South Africa—1.0% | |||||||
11,645 | Anglo Platinum, Ltd. | 1,025,037 | |||||
70,394 | Impala Platinum Holdings, Ltd. | 1,625,727 | |||||
2,650,764 | |||||||
Israel—1.0% | |||||||
51,400 | Teva Pharmaceutical Industries, Ltd. (ADR) | 2,598,784 | |||||
Brazil—1.0% | |||||||
86,200 | Banco Bradesco SA (ADR) | 1,714,518 | |||||
23,510 | Companhia Energetica de Minas Gerais (ADR) | 357,352 | |||||
9,300 | Petroleo Brasileiro SA (ADR) | 426,870 | |||||
2,498,740 |
93 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2009
Shares | Security | Value | ||
South Korea—1.0% | ||||
2,188 | Samsung Electronics Company, Ltd. | $ 1,513,448 | ||
16,350 | Samsung Securities Company, Ltd. | 953,316 | ||
2,466,764 | ||||
Belgium—.9% | ||||
501,849 | Fortis | 2,348,119 | ||
Denmark—.5% | ||||
74,434 | DSV A/S | 1,325,538 | ||
Taiwan—.5% | ||||
139,509 | Hon Hai Precision Industry Co., Ltd. – Registered (GDR) | 1,116,072 | ||
741 | HTC Corporation | 32,546 | ||
1,148,618 | ||||
India—.5% | ||||
2,800 | HDFC Bank, Ltd. | 331,436 | ||
16,800 | Infosys Technologies, Ltd. (ADR) | 814,632 | ||
1,146,068 | ||||
Australia—.4% | ||||
87,350 | Westfield Group | 1,071,562 | ||
Greece—.4% | ||||
29,055 | * | National Bank of Greece SA | 1,040,515 | |
Mexico—.3% | ||||
18,900 | America Movil SA de CV (ADR) – Series “L” | 828,387 | ||
Norway—.1% | ||||
15,050 | Frontline Ltd. | 352,019 | ||
Malaysia—.1% | ||||
487,600 | * | Airasia Berhad | 197,238 | |
Total Value of Common Stocks (cost $197,015,558) | 241,014,898 |
94 |
Shares, | |||||||
Rights or | |||||||
Principal | |||||||
Amount | Security | Value | |||||
PREFERRED STOCKS—1.0% | |||||||
Brazil | |||||||
70,383 | Itau Unibanco Holdings SA (ADR) | $ 1,418,207 | |||||
49,100 | Usinas Siderurgicas de Minas Gerais SA | 1,291,438 | |||||
Total Value of Preferred Stocks (cost $2,446,082) | 2,709,645 | ||||||
RIGHTS—.0% | |||||||
France | |||||||
15,565 | * | BNP Paribas Rights (expiring 10/13/09) (cost $18,924) | 33,672 | ||||
SHORT-TERM INVESTMENTS—4.7% | |||||||
Money Market Fund | |||||||
$11,955M | First Investors Cash Reserve Fund, .39% (cost $11,955,000)** | 11,955,000 | |||||
Total Value of Investments (cost $211,435,564) | 99.7 | % | 255,713,215 | ||||
Other Assets, Less Liabilities | .3 | 831,907 | |||||
Net Assets | 100.0 | % | $256,545,122 |
* | 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, 2009 (see Note 2). |
Summary of Abbreviations: | ||
ADR | American Depositary Receipts | |
GDR | Global Depositary Receipts |
95 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2009
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Common Stocks | $ | 241,014,898 | $ | — | $ | — | $ | $241,014,898 | ||||
Preferred Stocks | 2,709,645 | — | — | 2,709,645 | ||||||||
Rights | 33,672 | — | — | 33,672 | ||||||||
Money Market Fund | 11,955,000 | — | — | 11,955,000 | ||||||||
Total Investments in Securities* | $ | $255,713,215 | $ | — | $ | — | $ | $255,713,215 |
* The Portfolio of Investments provides information on the country categorization for the portfolio.
96 | See notes to financial statements |
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, 2009. During the period, the Fund’s return on a net asset value basis was –20.3% for Class A shares and –21.0% for Class B shares.
The Fund’s performance was principally driven by the financial crisis that began last year and the rally in low quality stocks that followed the market hitting bottom in March of 2009. During the first part of the review period, the markets were in a steep free fall, culminating with a multi-decade market low achieved on March 9, 2009. During this period, equities fell over 42% (as measured by the S&P 500 Index) from September 30, 2008, as the bankruptcy of Lehman Brothers and the ensuing freeze up of the credit markets, caused aftershocks in the global markets. Only after U.S. and global regulators took extraordinary measures to supply massive financial aid and intervention, such as through the TARP program, did the markets stabilize. Since then, the markets have rallied convincingly from the lows hit in March. Stocks are up over 50% (as measured by S&P 500 Index returns) during this period. However, the best performing stocks were those s tocks with low earnings quality and high price volatility. By contrast, stocks that were projected to have better than expected earnings, usually among the best performers in most economic and stock market environments, and those favored by the Fund, were among the worst performers during the period.
Earnings are an integral part of the investment process used to manage the Fund. Criteria relating to both earnings growth and earnings quality are primary metrics for selecting stocks. Over the course of the fiscal year, as the economy was deteriorating, the focus on earnings naturally concentrated the Fund in companies with better stability to their business. Thus, over time, the portfolio was more exposed to consumer staples, health care, and counter-cyclical consumer discretionary companies. This also led the Fund to have significantly less exposure to companies with high price volatility and low earnings quality. As the economy has shown signs of recovery, the Fund has found more opportunities to buy better earnings quality companies with improving growth potential in the more cyclical sectors. Thus the Fund’s exposure to companies with higher price volatility has recently increased closer to market levels.
The Fund’s underperformance relative to the Russell 3000 Growth Index was broad-based among all sectors, but its two worst performing sectors were health care and information technology. The Fund’s worst performing health care stocks during the year were Intuitive Surgical and Varian Medical Systems. These companies manufacture advanced technology in the fields of minimally invasive surgery and precision radiation treatment for cancer, respectively. With an enduring recession impacting
97 |
Portfolio Manager’s Letter
SELECT GROWTH FUND
admissions in hospitals, both of these companies experienced slowing demand as customers reduced capital expenditure budgets.
The information technology sector was the best performer in the benchmark, up almost 9% for the year, as many stocks turned in strong performances during the high volatility rally off the market bottom. The Fund did not participate in this rally; it had holdings such as Red Hat and Apple that helped performance, but those were more than offset by sluggish performance by service companies such as SAIC and Affili-ated Computer Services.
The Fund maintained a diverse market capitalization allocation during the year, ending with 59% large cap, 29% mid cap and 12% small cap, according to Lipper’s market capitalization ranges.
While our focus on high quality companies with strong earnings expectations was not rewarded over the past year, we remain confident in our approach over the long term. 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/0000886048-09-000026/incomequityx100x1.jpg)
John D. Brim
Portfolio Manager
October 30, 2009
98 |
Beginning | Ending | ||
Account | Account | Expenses Paid | |
Value | Value | During Period | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,163.76 | $8.95 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,016.80 | $8.34 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,159.63 | $12.72 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,013.29 | $11.86 |
* | Expenses are equal to the annualized expense ratio of 1.65% for Class A shares and 2.35% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). |
Fund Expenses (unaudited)
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.
Portfolio Composition
BY SECTOR
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx101x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total market value of investments.
99 |
Cumulative Performance Information (unaudited)
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/0000886048-09-000026/incomequityx102x1.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 rates (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 9/30/09) 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 (5.05%)%. The Class B “S.E.C. Standardized” Total Return for Since Inception would have been (4.91%). Results represent past performance and do not indi cate 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.
100 |
Portfolio of Investments
SELECT GROWTH FUND
September 30, 2009
Shares | Security | Value | |||||
COMMON STOCKS—98.8% | |||||||
Consumer Discretionary—14.0% | |||||||
54,700 | * | Apollo Group, Inc. – Class “A” | $ 4,029,749 | ||||
164,800 | Home Depot, Inc. | 4,390,272 | |||||
66,400 | McDonald’s Corporation | 3,789,448 | |||||
102,300 | Ross Stores, Inc. | 4,886,871 | |||||
16,595 | Strayer Education, Inc. | 3,612,400 | |||||
101,800 | * | WMS Industries, Inc. | 4,536,208 | ||||
25,244,948 | |||||||
Consumer Staples—10.0% | |||||||
79,200 | Church & Dwight Company, Inc. | 4,493,808 | |||||
65,180 | Colgate-Palmolive Company | 4,971,930 | |||||
82,700 | Wal-Mart Stores, Inc. | 4,059,743 | |||||
150,600 | * | Whole Foods Market, Inc. | 4,591,794 | ||||
18,117,275 | |||||||
Energy—9.2% | |||||||
48,400 | Apache Corporation | 4,444,572 | |||||
86,800 | ConocoPhillips | 3,919,888 | |||||
147,100 | * | Dresser-Rand Group, Inc. | 4,570,397 | ||||
54,400 | ExxonMobil Corporation | 3,732,384 | |||||
16,667,241 | |||||||
Financials—10.2% | |||||||
44,200 | Franklin Resources, Inc. | 4,446,520 | |||||
25,600 | Goldman Sachs Group, Inc. | 4,719,360 | |||||
110,270 | JPMorgan Chase & Company | 4,832,031 | |||||
220,300 | * | TD Ameritrade Holding Corporation | 4,322,286 | ||||
18,320,197 | |||||||
Health Care—12.5% | |||||||
93,500 | Abbott Laboratories | 4,625,445 | |||||
184,500 | Bristol-Myers Squibb Company | 4,154,940 | |||||
60,700 | Express Scripts, Inc. | 4,709,106 | |||||
79,400 | McKesson Corporation | 4,728,270 | |||||
155,000 | Valeant Pharmaceuticals International | 4,349,300 | |||||
22,567,061 |
101 |
Portfolio of Investments (continued)
SELECT GROWTH FUND
September 30, 2009
Shares or | |||||||
Principal | |||||||
Amount | Security | Value | |||||
Industrials—9.3% | |||||||
99,700 | Con-way, Inc. | $ 3,820,504 | |||||
100,700 | Illinois Tool Works, Inc. | 4,300,897 | |||||
55,100 | L-3 Communications Holdings, Inc. | 4,425,632 | |||||
86,500 | Raytheon Company | 4,149,405 | |||||
16,696,438 | |||||||
Information Technology—28.6% | |||||||
25,000 | * | Apple, Inc. | 4,634,250 | ||||
128,400 | * | BMC Software, Inc. | 4,818,852 | ||||
208,100 | * | Cisco Systems, Inc. | 4,898,674 | ||||
94,300 | Hewlett-Packard Company | 4,451,903 | |||||
248,800 | Intel Corporation | 4,869,016 | |||||
34,900 | International Business Machines Corporation | 4,174,389 | |||||
127,500 | Lender Processing Services, Inc. | 4,866,675 | |||||
108,435 | * | McAfee, Inc. | 4,748,369 | ||||
191,280 | * | Red Hat, Inc. | 5,286,979 | ||||
235,500 | * | SAIC, Inc. | 4,130,670 | ||||
128,400 | * | Western Digital Corporation | 4,690,452 | ||||
51,570,229 | |||||||
Materials—5.0% | |||||||
63,700 | Freeport-McMoRan Copper & Gold, Inc. | 4,370,457 | |||||
178,000 | * | Pactiv Corporation | 4,636,900 | ||||
9,007,357 | |||||||
Total Value of Common Stocks (cost $158,937,147) | 178,190,746 | ||||||
SHORT-TERM INVESTMENTS—1.3% | |||||||
Money Market Fund | |||||||
$2,435M | First Investors Cash Reserve Fund, .39% (cost $2,435,000)** | 2,435,000 | |||||
Total Value of Investments (cost $161,372,147) | 100.1 | % | 180,625,746 | ||||
Excess of Liabilities Over Other Assets | (.1 | ) | (200,273) | ||||
Net Assets | 100.0 | % | $180,425,473 |
* | 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, 2009 (see Note 2). | |
102 |
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Common Stocks | $ | 178,190,746 | $ | — | $ | — | $ | 178,190,746 | ||||
Money Market Fund | 2,435,000 | — | — | 2,435,000 | ||||||||
Total Investments in Securities* | $ | 180,625,746 | $ | — | $ | — | $ | 180,625,746 |
* The Portfolio of Investments provides information on the industry categorization for the portfolio.
See notes to financial statements | 103 |
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, 2009. During the period, the Fund’s return on a net asset value basis was –6.2% for Class A shares and –6.9% for Class B shares, including capital gains distributions of 63.3 cents per share for both Class A and Class B shares.
The past year was defined by the volatile performance of the equity markets. During the first part of the review period, the markets were in a steep free fall, culminating with a multi-decade market low achieved on March 9, 2009. During this period, equities fell over 42% (as measured by the S&P 500 Index) from September 30, 2008, as the bankruptcy of Lehman Brothers and the ensuing freeze up of the credit markets caused aftershocks in the global markets. Small- and mid-cap equities fared even worse, declining 47% (according to the Russell 2000 Index) and 45% (according to the S&P 400 MidCap Index), respectively. Only after U.S. and global regulators took extraordinary measures to supply massive financial aid and intervention, such as through the TARP program, did the markets stabilize. Since then, the markets have rallied convincingly from those lows hit in March. By the end of the review period, mid-cap stocks were up over 70% from March lows, as measured by S&P 400 Index returns.
Overall, the Fund did not attempt to alter its long-term investing strategy, despite the chaotic environment. The Fund continued to make investments with an eye toward growth resuming with an eventual recovery. The Fund maintained its focus on mid-and small-cap stocks that have attractive long-term potential. As of the end of the reporting period, it held 82% of its assets in mid- and small-cap stocks, according to the Lipper methodology. The 18% invested within larger-cap stocks is mainly the result of capital appreciation of former mid-cap stocks that we have decided to hold on to. Typically, mid- and small-cap stocks perform well during the initial months of an economic rebound. This period has been challenging however, as the rebound has mainly occurred in lower-priced and lower-quality issues (companies with no earnings or higher volatility), which were hardest hit when the markets collapsed. These stocks have been leading the way since the market rally began in March.
During the review period, the Fund underperformed the S&P 400 Index due to weaker stock performance within consumer discretionary and health care names. Shares of Brown Shoe, a shoe retailer with significant exposure to the back-to-school season, fell on concerns that consumer spending would be weaker than expected. Funeral home operator Stewart Enterprises fell after a potential acquirer withdrew its offer and ensuing earnings reports were disappointing. Within health care, shares of services provider Psychiatric Solutions were weaker due to budget problems at state governments, impacting facility enrollments.
104 |
The Fund’s underweight in financials aided relative performance. Although our stocks declined roughly in line with the group during the crisis, the fact that our exposure was about half that of the benchmark reduced the drag. Separately, solid stock selection in utilities also helped performance. EQT, a utility that operates in the Appalachian Mountains, jumped on news that it increased its natural gas reserve potential.
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/0000886048-09-000026/incomequityx107x1.jpg)
Steven S. Hill
Portfolio Manager
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx107x2.jpg)
Edwin D. Miska
Portfolio Manager and
Director of Equities,
First Investors Management Company, Inc.
October 30, 2009
105 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,395.16 | $9.19 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.40 | $7.74 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,390.08 | $13.36 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,013.89 | $11.26 |
* | Expenses are equal to the annualized expense ratio of 1.53% for Class A shares and 2.23% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx108x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total value of investments.
106 |
Cumulative Performance Information (unaudited)
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/0000886048-09-000026/incomequityx109x1.jpg)
The graph compares a $10,000 investment in the First Investors Opportunity Fund (Class A shares) beginning 9/30/99 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 9/30/09 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 les s 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 9/30/09) 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 1.12% and 2.88%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 1.29% and 2.74%, respectively. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Standard & Poor’s MidCap 400 Index figures are from Standard & Poor’s and all other figures are from First Investors Management Company, Inc.
107 |
Portfolio of Investments
OPPORTUNITY FUND
September 30, 2009
Shares | Security | Value | |||||
COMMON STOCKS—99.8% | |||||||
Consumer Discretionary—15.2% | |||||||
129,700 | * | Big Lots, Inc. | $ 3,245,094 | ||||
70,000 | BorgWarner, Inc. | 2,118,200 | |||||
100,000 | * | CEC Entertainment, Inc. | 2,586,000 | ||||
159,000 | Cinemark Holdings, Inc. | 1,647,240 | |||||
142,500 | Coach, Inc. | 4,691,100 | |||||
90,000 | * | Dreamworks Animation SKG, Inc. – Class “A” | 3,201,300 | ||||
145,000 | * | GameStop Corporation – Class “A” | 3,838,150 | ||||
140,000 | H&R Block, Inc. | 2,573,200 | |||||
190,000 | * | Jack in the Box, Inc. | 3,893,100 | ||||
45,000 | Limited Brands, Inc. | 764,550 | |||||
36,400 | * | Lincoln Educational Services Corporation | 832,832 | ||||
295,000 | * | Morgans Hotel Group Company | 1,598,900 | ||||
50,000 | Nordstrom, Inc. | 1,527,000 | |||||
52,500 | Polo Ralph Lauren Corporation – Class “A” | 4,022,550 | |||||
57,000 | * | Ruby Tuesday, Inc. | 479,940 | ||||
5,000 | * | Shanda Games, Ltd. (ADR) | 58,500 | ||||
617,200 | Stewart Enterprises, Inc. – Class “A” | 3,227,956 | |||||
135,000 | Tiffany & Company | 5,201,550 | |||||
195,000 | * | Warnaco Group, Inc. | 8,552,700 | ||||
135,000 | Wolverine World Wide, Inc. | 3,353,400 | |||||
57,413,262 | |||||||
Consumer Staples—8.8% | |||||||
75,000 | * | Chattem, Inc. | 4,980,750 | ||||
270,000 | * | Dean Foods Company | 4,803,300 | ||||
130,000 | McCormick & Company, Inc. | 4,412,200 | |||||
369,000 | Nu Skin Enterprises, Inc. – Class “A” | 6,837,570 | |||||
60,000 | Philip Morris International, Inc. | 2,924,400 | |||||
150,000 | Safeway, Inc. | 2,958,000 | |||||
425,000 | Sara Lee Corporation | 4,734,500 | |||||
75,169 | Tootsie Roll Industries, Inc. | 1,787,519 | |||||
33,438,239 | |||||||
Energy—9.0% | |||||||
335,000 | * | Cal Dive International, Inc. | 3,313,150 | ||||
37,500 | * | Dril-Quip, Inc. | 1,861,500 | ||||
42,500 | EOG Resources, Inc. | 3,549,175 | |||||
43,000 | Hess Corporation | 2,298,780 | |||||
110,000 | * | National-Oilwell Varco, Inc. | 4,744,300 |
108 |
Shares | Security | Value | |||||
Energy (continued) | |||||||
110,000 | * | Plains Exploration & Production Company | $ 3,042,600 | ||||
225,000 | Talisman Energy, Inc. | 3,901,500 | |||||
52,500 | * | Transocean, Ltd. | 4,490,325 | ||||
190,000 | * | Weatherford International, Ltd. | 3,938,700 | ||||
70,000 | XTO Energy, Inc. | 2,892,400 | |||||
34,032,430 | |||||||
Financials—12.7% | |||||||
90,000 | Ameriprise Financial, Inc. | 3,269,700 | |||||
40,000 | City National Corporation | 1,557,200 | |||||
130,000 | Discover Financial Services | 2,109,900 | |||||
150,000 | Douglas Emmett, Inc. (REIT) | 1,842,000 | |||||
32,500 | Federal Realty Investment Trust (REIT) | 1,994,525 | |||||
450,000 | Financial Select Sector SPDR Fund (ETF) | 6,723,000 | |||||
190,000 | Hudson City Bancorp, Inc. | 2,498,500 | |||||
185,000 | Lazard, Ltd. – Class “A” | 7,642,350 | |||||
165,000 | * | Nasdaq OMX Group, Inc. | 3,473,250 | ||||
235,000 | NewAlliance Bancshares, Inc. | 2,514,500 | |||||
150,000 | Protective Life Corporation | 3,213,000 | |||||
185,000 | SPDR KBW Regional Banking (ETF) | 3,944,200 | |||||
266,105 | * | Sunstone Hotel Investors, Inc. (REIT) | 1,889,345 | ||||
195,000 | Waddell & Reed Financial, Inc. – Class “A” | 5,547,750 | |||||
48,219,220 | |||||||
Health Care—15.8% | |||||||
72,500 | Beckman Coulter, Inc. | 4,998,150 | |||||
57,500 | * | Cephalon, Inc. | 3,348,800 | ||||
90,000 | * | Cubist Pharmaceutical, Inc. | 1,818,000 | ||||
75,000 | DENTSPLY International, Inc. | 2,590,500 | |||||
62,500 | * | Gilead Sciences, Inc. | 2,911,250 | ||||
277,900 | * | King Pharmaceuticals, Inc. | 2,992,983 | ||||
67,500 | * | Laboratory Corporation of America Holdings | 4,434,750 | ||||
67,500 | McKesson Corporation | 4,019,625 | |||||
65,000 | * | Mettler-Toledo International, Inc. | 5,888,350 | ||||
145,000 | Perrigo Company | 4,928,550 | |||||
210,000 | * | PSS World Medical, Inc. | 4,584,300 | ||||
80,000 | * | Psychiatric Solutions, Inc. | 2,140,800 | ||||
30,000 | * | Sirona Dental Systems, Inc. | 892,500 |
109 |
Portfolio of Investments (continued)
OPPORTUNITY FUND
September 30, 2009
Shares | Security | Value | |||||
Health Care (continued) | |||||||
55,000 | * | St. Jude Medical, Inc. | $ 2,145,550 | ||||
95,000 | * | Thermo Fisher Scientific, Inc. | 4,148,650 | ||||
360,000 | * | Warner Chilcott PLC – Class “A” | 7,783,200 | ||||
59,625,958 | |||||||
Industrials—11.6% | |||||||
108,000 | * | AAR Corporation | 2,369,520 | ||||
135,000 | * | Armstrong World Industries, Inc. | 4,652,100 | ||||
159,500 | Baldor Electric Company | 4,360,730 | |||||
140,000 | Chicago Bridge & Iron Company NV – NY Shares | 2,615,200 | |||||
215,000 | * | DynCorp International, Inc. – Class “A” | 3,870,000 | ||||
100,000 | * | Esterline Technologies Corporation | 3,921,000 | ||||
43,000 | Harsco Corporation | 1,522,630 | |||||
170,000 | IDEX Corporation | 4,751,500 | |||||
92,500 | J.B. Hunt Transport Services, Inc. | 2,972,025 | |||||
220,000 | * | Mobile Mini, Inc. | 3,819,200 | ||||
110,900 | Republic Services, Inc. | 2,946,613 | |||||
110,000 | Rolls-Royce Group PLC (ADR) | 4,136,000 | |||||
40,000 | Roper Industries, Inc. | 2,039,200 | |||||
43,975,718 | |||||||
Information Technology—13.2% | |||||||
9,400 | * | Avago Technologies, Ltd. | 160,458 | ||||
65,000 | * | Blackboard, Inc. | 2,455,700 | ||||
80,000 | * | CACI International, Inc. – Class “A” | 3,781,600 | ||||
158,900 | * | FEI Company | 3,916,885 | ||||
95,000 | * | Fiserv, Inc. | 4,579,000 | ||||
60,000 | Harris Corporation | 2,256,000 | |||||
100,000 | * | Intuit, Inc. | 2,850,000 | ||||
42,063 | * | ManTech International Corporation – Class “A” | 1,983,691 | ||||
55,000 | * | Rovi Corporation | 1,848,000 | ||||
184,300 | * | SRA International, Inc. – Class A | 3,979,037 | ||||
160,000 | * | Sybase, Inc. | 6,224,000 | ||||
297,725 | * | Symantec Corporation | 4,903,531 | ||||
250,000 | Technology Select Sector SPDR Fund (ETF) | 5,217,500 | |||||
30,000 | * | Websense, Inc. | 504,000 | ||||
140,000 | * | Western Digital Corporation | 5,114,200 | ||||
49,773,602 |
110 |
Shares or | |||||||
Principal | |||||||
Amount | Security | Value | |||||
Materials—6.1% | |||||||
120,000 | Agrium, Inc. | $ 5,974,800 | |||||
65,000 | Allegheny Technologies, Inc. | 2,274,350 | |||||
102,000 | Bemis Company, Inc. | 2,642,820 | |||||
52,500 | Freeport-McMoRan Copper & Gold, Inc. | 3,602,025 | |||||
91,280 | * | Globe Specialty Metals, Inc. | 823,346 | ||||
40,000 | Praxair, Inc. | 3,267,600 | |||||
80,000 | Sigma-Aldrich Corporation | 4,318,400 | |||||
22,903,341 | |||||||
Telecommunication Services—1.5% | |||||||
250,000 | Frontier Communications Corporation | 1,885,000 | |||||
220,000 | NTELOS Holdings Corporation | 3,885,200 | |||||
5,770,200 | |||||||
Utilities—5.9% | |||||||
111,000 | AGL Resources, Inc. | 3,914,970 | |||||
40,000 | California Water Service Group | 1,557,600 | |||||
90,000 | EQT Corporation | 3,834,000 | |||||
171,700 | Portland General Electric Company | 3,385,924 | |||||
125,000 | SCANA Corporation | 4,362,500 | |||||
120,000 | Wisconsin Energy Corporation | 5,420,400 | |||||
22,475,394 | |||||||
Total Value of Common Stocks (cost $357,628,215) | 377,627,364 | ||||||
SHORT-TERM INVESTMENTS—1.0% | |||||||
Money Market Fund | |||||||
$3,830M | First Investors Cash Reserve Fund, .39% (cost $3,830,000)** | 3,830,000 | |||||
Total Value of Investments (cost $361,458,215) | 100.8 | % | 381,457,364 | ||||
Excess of Liabilities Over Other Assets | (.8 | ) | (3,012,877) | ||||
Net Assets | 100.0 | % | $378,444,487 |
* | 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, 2009 (see Note 2). |
111 |
Portfolio of Investments (continued)
OPPORTUNITY FUND
September 30, 2009
Summary of Abbreviations: | |||
ADR | American Depositary Receipts | ||
ETF | Exchange Traded Fund | ||
REIT | Real Estate Investment Trust |
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below: Level 1 — quoted prices in active markets for identical securities Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments) The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Common Stocks | $ | 377,627,364 | $ | — | $ | — | 377,627,364 | |||||
Money Market Fund | 3,830,000 | — | — | 3,830,000 | ||||||||
Total Investments in Securities* | $ | 381,457,364 | $ | — | $ | — | 381,457,364 |
* The Portfolio of Investments provides information on the industry categorization for the portfolio.
112 | See notes to financial statements |
Portfolio Managers’ Letter
SPECIAL SITUATIONS FUND
Dear Investor:
This is the annual report for the First Investors Special Situations Fund for the fiscal year ended September 30, 2009. During the period, the Fund’s return on a net asset value basis was –5.3% for Class A shares and –6.0% for Class B shares, including dividends of 2.5 cents per share on Class A shares and 0.1 cents per share on Class B shares, and capital gains distributions of 52.8 cents per share for both Class A and Class B shares.
During the first half of the reporting period, the stock market experienced its worst panic since the 1970s, as the banking system seemed close to collapse. Fortunately, the Federal Reserve and U.S. Treasury were able to restore confidence in the system by the early spring, and the stock market has rallied strongly since mid-March. Most of the rally, however, was concentrated in stocks of lower-quality companies, including banking and financial institutions.
The Fund certainly experienced the turbulence of the markets this year. However, because of our decision to eschew the stocks of most banks and other financial institutions, we managed to outperform our benchmark significantly. In fact, the financials sector was the Fund’s best performing sector during this period. Energy and materials also contributed to the Fund’s relative outperformance, while poor stock selection in the consumer discretionary and industrial sectors detracted from performance.
The Fund was able to pick up several high quality names during the sell-off in the late winter and early spring that made significant contributions to Fund returns. Jefferies Group, a mid-tier brokerage house, was one of them. Jefferies wisely raised excess capital in early 2008. Because of its strong balance sheet, the firm did not have to accept TARP funds from the government, and managed to recruit top talent away from former powerhouses that had to go hat-in-hand to the government to maintain solvency. Micros Systems, a software company with a rock-solid balance sheet, was another top contributor to Fund performance. Through the strength of its franchise and flexibility of its business model, Micros managed to generate record operating margins, despite tough economic headwinds. Mednax was another. The company manages neonatal units and anesthesiology practices for hospitals. The market had been concerned about neonatal unit volumes and reimbursement rat es, allowing us to purchase shares in this top quality health care company for only nine times trailing earnings. Subsequent to our purchase, Mednax reported double-digit earnings growth, and continued high operating margins and cash flow generation.
113 |
Portfolio Managers’ Letter
SPECIAL SITUATIONS FUND
On a macroeconomic level, we are still somewhat concerned about the high level of unemployment in the U.S., although we have seen some positive data on the economy recently. Our conversations with company managements indicate to us that a bottom of the downturn may have been reached. The timing of a recovery is harder to predict. However, we are long-term value investors, not market timers, and we remain focused on finding good companies at attractive valuations.
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/0000886048-09-000026/incomequityx116x1.jpg)
Jason Ronovech
Portfolio Manager
Jonathan S. Vyorst
Portfolio Manager
October 30, 2009
114 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,340.13 | $9.27 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,017.15 | $7.99 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,334.17 | $13.34 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,013.64 | $11.51 |
* | Expenses are equal to the annualized expense ratio of 1.58% for Class A shares and 2.28% for |
Class B shares, multiplied by the average account value over the period, multiplied by 183/365 | |
(to reflect the one-half year period). Expenses paid during the period are net of expenses waived. |
Portfolio Composition
TOP TEN SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx117x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total value of investments.
115 |
Cumulative Performance Information (unaudited)
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/0000886048-09-000026/incomequityx118x1.jpg)
The graph compares a $10,000 investment in the First Investors Special Situations Fund (Class A shares) beginning 9/30/99 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 2000 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 divi dends 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 the sales loads and fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the periods ended 9/30/09) 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 (10.86%), 3.84% and .82%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (9.77% ), 4.00% and .68%, 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.
116 |
Portfolio of Investments
SPECIAL SITUATIONS FUND
September 30, 2009
Shares | Security | Value | |||||
COMMON STOCKS—97.1% | |||||||
Consumer Discretionary—11.7% | |||||||
244,300 | American Eagle Outfitters, Inc. | $ 4,118,898 | |||||
154,000 | * | Career Education Corporation | 3,754,520 | ||||
360,900 | Foot Locker, Inc. | 4,312,755 | |||||
150,700 | Hasbro, Inc. | 4,181,925 | |||||
243,000 | * | Pacific Sunwear of California, Inc. | 1,251,450 | ||||
162,000 | PetSmart, Inc. | 3,523,500 | |||||
101,500 | Phillips Van-Heusen Corporation | 4,343,185 | |||||
349,200 | Regal Entertainment Group – Class “A” | 4,302,144 | |||||
29,788,377 | |||||||
Consumer Staples—9.7% | |||||||
62,050 | Church & Dwight Company, Inc. | 3,520,717 | |||||
136,400 | Corn Products International, Inc. | 3,890,128 | |||||
159,000 | Flowers Foods, Inc. | 4,180,110 | |||||
202,100 | * | Fresh Del Monte Produce, Inc. | 4,569,481 | ||||
96,900 | Hormel Foods Corporation | 3,441,888 | |||||
98,100 | J. M. Smucker Company | 5,200,281 | |||||
24,802,605 | |||||||
Energy—6.3% | |||||||
77,900 | * | Denbury Resources, Inc. | 1,178,627 | ||||
193,800 | * | EXCO Resources, Inc. | 3,622,122 | ||||
113,700 | * | Matrix Service Company | 1,235,919 | ||||
87,600 | * | Plains Exploration & Production Company | 2,423,016 | ||||
119,500 | St. Mary Land & Exploration Company | 3,878,970 | |||||
63,300 | * | Whiting Petroleum Corporation | 3,644,814 | ||||
15,983,468 | |||||||
Financials—20.8% | |||||||
16,232 | * | Alleghany Corporation | 4,204,900 | ||||
146,300 | American Financial Group, Inc. | 3,730,650 | |||||
574,500 | Anworth Mortgage Asset Corporation (REIT) | 4,527,060 | |||||
59,200 | Arthur J. Gallagher & Company | 1,442,704 | |||||
53,000 | Everest Re Group, Ltd. | 4,648,100 | |||||
334,300 | * | EZCORP, Inc. – Class “A” | 4,566,538 | ||||
112,900 | Harleysville Group, Inc. | 3,573,285 | |||||
310,000 | * | Hilltop Holdings, Inc. | 3,800,600 | ||||
210,800 | * | Jefferies Group, Inc. | 5,740,084 | ||||
9,600 | * | Markel Corporation | 3,166,272 |
117 |
Portfolio of Investments (continued)
SPECIAL SITUATIONS FUND
September 30, 2009
Shares | Security | Value | |||||
Financials (continued) | |||||||
477,400 | MFA Financial, Inc. (REIT) | $ 3,800,104 | |||||
9,752 | National Western Life Insurance Company – Class “A” | 1,716,157 | |||||
97,100 | * | Piper Jaffray Companies, Inc. | 4,633,612 | ||||
211,800 | Walter Investment Management Corporation (REIT) | 3,393,036 | |||||
52,943,102 | |||||||
Health Care—13.8% | |||||||
155,400 | * | AMERIGROUP Corporation | 3,445,218 | ||||
212,500 | * | Endo Pharmaceuticals Holdings, Inc. | 4,808,875 | ||||
94,400 | * | Life Technologies Corporation | 4,394,320 | ||||
162,800 | * | Lincare Holdings, Inc. | 5,087,500 | ||||
162,900 | * | Magellan Health Services, Inc. | 5,059,674 | ||||
69,000 | * | MEDNAX, Inc. | 3,789,480 | ||||
212,400 | PerkinElmer, Inc. | 4,086,576 | |||||
145,300 | STERIS Corporation | 4,424,385 | |||||
35,096,028 | |||||||
Industrials—9.7% | |||||||
43,200 | * | Alliant Techsystems, Inc. | 3,363,120 | ||||
93,200 | Curtiss-Wright Corporation | 3,180,916 | |||||
75,300 | * | DXP Enterprises, Inc. | 839,595 | ||||
151,800 | * | EMCOR Group, Inc. | 3,843,576 | ||||
44,100 | Precision Castparts Corporation | 4,492,467 | |||||
90,800 | Robbins & Myers, Inc. | 2,131,984 | |||||
85,700 | Rockwell Collins, Inc. | 4,353,560 | |||||
109,500 | Woodward Governor Company | 2,656,470 | |||||
24,861,688 | |||||||
Information Technology—12.6% | |||||||
142,850 | * | Avnet, Inc. | 3,709,814 | ||||
607,000 | * | Compuware Corporation | 4,449,310 | ||||
334,500 | * | Convergys Corporation | 3,324,930 | ||||
432,700 | EarthLink, Inc. | 3,639,007 | |||||
143,500 | Fair Isaac Corporation | 3,083,815 | |||||
114,000 | * | MICROS Systems, Inc. | 3,441,660 | ||||
233,900 | * | QLogic Corporation | 4,023,080 | ||||
105,900 | * | Sybase, Inc. | 4,119,510 | ||||
199,200 | * | Verigy, Ltd. | 2,314,704 | ||||
32,105,830 |
118 |
Shares or | |||||||
Principal | |||||||
Amount | Security | Value | |||||
Materials—7.3% | |||||||
66,500 | AptarGroup, Inc. | $ 2,484,440 | |||||
35,600 | Compass Minerals International, Inc. | 2,193,672 | |||||
161,400 | * | Crown Holdings, Inc. | 4,390,080 | ||||
197,600 | Innospec, Inc. | 2,914,600 | |||||
38,400 | * | OM Group, Inc. | 1,166,976 | ||||
71,200 | Silgan Holdings, Inc. | 3,754,376 | |||||
164,800 | Titanium Metals Corporation | 1,580,432 | |||||
18,484,576 | |||||||
Telecommunication Services—4.4% | |||||||
382,900 | * | Iridium Communications, Inc. | 4,368,889 | ||||
457,800 | * | Premiere Global Services, Inc. | 3,804,318 | ||||
102,675 | Telephone & Data Systems, Inc. – Special Shares | 3,047,394 | |||||
11,220,601 | |||||||
Utilities—.8% | |||||||
160,900 | CMS Energy Corporation | 2,156,060 | |||||
Total Value of Common Stocks (cost $212,441,305) | 247,442,335 | ||||||
SHORT-TERM INVESTMENTS—3.9% | |||||||
Money Market Fund | |||||||
$10,031M | First Investors Cash Reserve Fund, .39% (cost $10,031,000)** | 10,031,000 | |||||
Total Value of Investments (cost $222,472,305) | 101.0 | % | 257,473,335 | ||||
Excess of Liabilities Over Other Assets | (1.0 | ) | (2,554,492) | ||||
Net Assets | 100.0 | % | $254,918,843 |
* | 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, 2009 (see Note 2). |
Summary of Abbreviations: | ||
REIT Real Estate Investment Trust |
See notes to financial statements | 119 |
Portfolio of Investments (continued)
SPECIAL SITUATIONS FUND
September 30, 2009
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments) The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Common Stocks | $ | 247,442,335 | $ | — | $ | — | $ | 247,442,335 | ||||
Money Market Fund | 10,031,000 | — | — | 10,031,000 | ||||||||
Total Investments in Securities* | $ | 257,473,335 | $ | — | $ | — | $ | 257,473,335 |
* The Portfolio of Investments provides information on the industry categorization for the portfolio.
120 | See notes to financial statements |
Portfolio Manager’s Letter
INTERNATIONAL FUND
Dear Investor:
This is the annual report for the First Investors International Fund for the fiscal year ended September 30, 2009. During the period, the Fund’s return on a net asset value basis was –4.5% for Class A shares and –5.2% for Class B shares, including dividends of 13.1 cents per share on Class A shares and 11.7 cents per share on Class B shares.
During the first five months of the period, through March 2009, the Fund outperformed its benchmark, the MSCI EAFE Index. Unfortunately, the relative gains made during this time were overwhelmed by the return of the global markets’ appetite for risk, causing the Fund to underperform the Index for the year. In general, during the last seven months of the period, investors poured money into cyclical, highly leveraged businesses that we believe have less visible earnings growth potential and are of lower quality than the names held in our portfolio. As the Fund’s fiscal year drew to a close, there were some signs that riskier investments might be starting to lose their appeal, and that quality names, like those in the portfolio, might be gaining luster in the eyes of the market.
The risk rally of the past seven months was apparent in the relative performance of various sectors during the reporting period. Our focus on high quality companies with predictable earnings growth caused the Fund to be underweight in more cyclical sectors during the fiscal year. The portfolio had less exposure than the Index to companies in the materials and industrials sectors, which were strong outperformers during the reporting period and were major reasons for the Fund’s relative underperformance. In addition, the Fund’s selective investments in the energy sector were a meaningful source of underperformance. The high level of price volatility in oil during the past year produced increased volatility in the earnings streams of some of these businesses and that negatively affected share prices. Despite their performance this past year, we have confidence in the portfolio’s current holdings in the energy secto r.
The strategy’s positions in Denmark, the Netherlands, and India made attractive contributions to relative performance during the period. However, these were overpowered by the weak relative performance of the portfolio’s investments in the U.K., Switzerland, and Australia. Although the weaker positions were relatively small in size, our financials and energy related holdings in the U.K. hurt performance. Similarly, Swiss health care companies were poor performers in the portfolio largely due to concerns about the outcome of health care reform in the U.S. In Australia, the companies held by the Index delivered stronger performance than the names held in the portfolio, which contributed to relative underperformance.
121
Portfolio Manager’s Letter
INTERNATIONAL FUND
The financial crisis of the past year has created opportunities for us to concentrate the portfolio in shares of world-class companies that have been acquired at extremely attractive valuations. And, despite the rally, our holdings are trading at extremely attractive relative and absolute valuations. The quality of the portfolio’s holdings is reflected by the ongoing earnings growth of our investments during the past year —even at a time when the collective earnings of the Index have experienced a meaningful decline. The companies we hold represent high quality businesses that we believe will continue to deliver consistent underlying earnings growth. Attractive valuations and consistent earnings growth are the drivers that make it possible for companies to deliver attractive investment returns to shareholders over time.
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/0000886048-09-000026/incomequityx124x1.jpg)
Rajiv Jain
Portfolio Manager
October 30, 2009
122 |
Fund Expenses (unaudited)
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 | |
(4/1/09) | (9/30/09) | (4/1/09–9/30/09)* | |
Expense Example – Class A Shares | |||
Actual | $1,000.00 | $1,342.38 | $12.86 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,014.09 | $11.06 |
Expense Example – Class B Shares | |||
Actual | $1,000.00 | $1,335.89 | $16.92 |
Hypothetical | |||
(5% annual return before expenses) | $1,000.00 | $1,010.58 | $14.57 |
* Expenses are equal to the annualized expense ratio of 2.19% for Class A shares and 2.89% for Class B shares, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
Portfolio Composition
TOP SECTORS
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityx125x1.jpg)
Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2009, and are based on the total market value of investments.
123 |
Cumulative Performance Information (unaudited)
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/0000886048-09-000026/incomequityx126x1.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 9/30/09) 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 (4.88%). The Class B “S.E.C. Standardized” Average Annual Total Return Since Inception would have been (4.66%). 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.
124 |
Portfolio of Investments
INTERNATIONAL FUND
September 30, 2009
Shares | Security | Value | |||||
COMMON STOCKS—96.1% | |||||||
United Kingdom—25.2% | |||||||
89,299 | BG Group PLC | $1,552,467 | |||||
181,306 | British American Tobacco PLC | 5,692,182 | |||||
154,742 | Cadbury PLC | 1,987,330 | |||||
151,403 | Capita Group PLC | 1,749,519 | |||||
84,375 | De La Rue PLC | 1,211,815 | |||||
123,379 | Diageo PLC | 1,894,344 | |||||
48,922 | HSBC Holdings PLC | 560,226 | |||||
169,830 | Imperial Tobacco Group PLC | 4,910,878 | |||||
69,666 | Reckitt Benckiser Group PLC | 3,407,255 | |||||
82,117 | Scottish and Southern Energy PLC | 1,540,556 | |||||
537,196 | Tesco PLC | 3,433,243 | |||||
27,939,815 | |||||||
India—13.9% | |||||||
16,957 | Bharat Heavy Electricals, Ltd. | 820,919 | |||||
218,355 | Cipla, Ltd. | 1,270,503 | |||||
140,000 | HDFC Bank, Ltd. | 4,803,451 | |||||
268,016 | Hindustan Unilever, Ltd. | 1,463,070 | |||||
82,156 | Housing Development Finance Corporation, Ltd. | 4,764,126 | |||||
342,920 | ITC, Ltd. | 1,661,314 | |||||
12,924 | Nestle India, Ltd. | 609,810 | |||||
15,393,193 | |||||||
Switzerland—12.6% | |||||||
269 | Lindt & Spruengli AG | 652,247 | |||||
99,520 | Nestle SA – Registered | 4,235,343 | |||||
58,393 | Novartis AG – Registered | 2,917,821 | |||||
28,100 | Roche Holding AG – Genusscheine | 4,535,971 | |||||
13,255 | Synthes, Inc. | 1,595,480 | |||||
13,936,862 | |||||||
Spain—5.6% | |||||||
172,122 | Enagas | 3,592,741 | |||||
51,700 | Red Electrica Corporacion SA | 2,642,698 | |||||
6,235,439 |
125 |
Portfolio of Investments (continued)
INTERNATIONAL FUND
September 30, 2009
Shares | Security | Value | |||||
Australia—5.5% | |||||||
95,963 | Coca-Cola Amatil, Ltd. | $ 830,830 | |||||
107,317 | QBE Insurance Group, Ltd. | 2,278,786 | |||||
117,158 | Woolworths, Ltd. | 3,024,386 | |||||
6,134,002 | |||||||
Brazil—5.3% | |||||||
127,800 | Companhia Brasileira de Meios de Pagamento SA | 1,258,919 | |||||
56,100 | CPFL Energia SA | 1,008,893 | |||||
99,300 | Redecard SA | 1,526,621 | |||||
57,830 | Souza Cruz SA | 2,046,252 | |||||
5,840,685 | |||||||
United States—4.8% | |||||||
109,200 | Philip Morris International, Inc. | 5,322,408 | |||||
France—4.2% | |||||||
39,358 | Essilor International SA | 2,240,506 | |||||
41,690 | Total SA | 2,474,416 | |||||
4,714,922 | |||||||
Germany—3.7% | |||||||
11,425 | Deutsche Boerse AG | 936,538 | |||||
11,882 | Fresenius Medical Care AG & Company | 591,903 | |||||
6,912 | Muenchener Rueckversicherungs-Gesellschaft AG – Registered | 1,104,295 | |||||
16,129 | RWE AG | 1,501,315 | |||||
4,134,051 | |||||||
Canada—3.6% | |||||||
17,712 | Canadian Natural Resources, Ltd. | 1,188,171 | |||||
39,600 | Power Corporation of Canada | 1,087,681 | |||||
40,699 | Shoppers Drug Mart Corporation | 1,662,770 | |||||
3,938,622 | |||||||
Netherlands—3.1% | |||||||
33,861 | Core Laboratories NV | 3,490,731 | |||||
Denmark—3.0% | |||||||
54,026 | Novo Nordisk A/S – Series “B” | 3,378,515 |
126 |
Shares or | |||||||
Principal | |||||||
Amount | Security | Value | |||||
Japan—1.7% | |||||||
4,300 | Nintendo Company, Ltd. | $ 1,104,596 | |||||
16,400 | Secom Company, Ltd. | 827,922 | |||||
1,932,518 | |||||||
Ireland—1.5% | |||||||
38,573 | Covidien PLC | 1,668,668 | |||||
Italy—1.5% | |||||||
424,500 | Terna-Rete Elettrica Nationale SpA | 1,653,622 | |||||
Belgium—.9% | |||||||
4,201 | Colruyt SA | 986,188 | |||||
Total Value of Common Stocks (cost $97,379,854) | 106,700,241 | ||||||
PREFERRED STOCKS—3.0% | |||||||
Brazil | |||||||
83,987 | AES Tiete SA | 947,541 | |||||
15,300 | Companhia de Bebidas das Americas (ADR) | 1,258,578 | |||||
77,948 | Companhia Energetica de Minas Gerais | 1,172,545 | |||||
Total Value of Preferred Stocks (cost $2,353,123) | 3,378,664 | ||||||
SHORT-TERM INVESTMENTS—1.1% | |||||||
Money Market Fund | |||||||
$1,250M | First Investors Cash Reserve Fund, .39% (cost $1.250,000)* | 1,250,000 | |||||
Total Value of Investments (cost $100,982,977) | 100.2 | % | 111,328,905 | ||||
Excess of Liabilities Over Other Assets | (.2 | ) | (282,905) | ||||
Net Assets | 100.0 | % | $111,046,000 |
* | 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, 2009 (see Note 2). |
Summary of Abbreviations: | |
ADR American Depositary Receipts |
127 |
Portfolio of Investments (continued)
INTERNATIONAL FUND
September 30, 2009
Accounting Standards Codification (“ASC”) 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes (see Note 1A). The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments) The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2009:
Level 2 | ||||||||||||
Other | Level 3 | |||||||||||
Level 1 | Significant | Significant | ||||||||||
Quoted | Observable | Unobservable | ||||||||||
Prices | Inputs | Inputs | Total | |||||||||
Common Stocks | $106,700,241 | $ | — | $ | — | $106,700,241 | ||||||
Preferred Stocks | 3,378,664 | — | — | 3,378,664 | ||||||||
Money Market Fund | 1,250,000 | — | — | 1,250,000 | ||||||||
Total Investments in Securities* | $111,328,905 | $ | — | $ | — | $111,328,905 | ||||||
Other Financial Instruments** | $ | — | $ | (753,595) | $ | — | $ (753,595) |
* | The Portfolio of Investments provides information on the country categorization for the portfolio. | ||
** | Other financial instruments are foreign exchange contracts, which are considered derivative | ||
instruments, and are valued at the net unrealized depreciation amount on such contracts (see Note 7). | |||
128 | See notes to financial statements |
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129 |
Statements of Assets and Liabilities
FIRST INVESTORS INCOME FUNDS
September 30, 2009
CASH | INVESTMENT | |||||||
MANAGEMENT | GOVERNMENT | GRADE | INCOME | |||||
Assets | ||||||||
Investments in securities: | ||||||||
Cost – Unaffiliated issuers | $174,136,605 | $280,186,388 | $311,570,958 | $458,649,486 | ||||
Cost – Affiliated money market fund (Note 2) | — | 17,018,000 | 5,775,000 | 4,170,000 | ||||
Total cost of investments | $174,136,605 | $297,204,388 | $317,345,958 | $462,819,486 | ||||
Value – Unaffiliated issuers (Note 1A) | $174,136,605 | $289,628,819 | $335,449,512 | $440,549,806 | ||||
Value – Affiliated money market fund (Note 2) | — | 17,018,000 | 5,775,000 | 4,170,000 | ||||
Total value of investments | 174,136,605 | 306,646,819 | 341,224,512 | 444,719,806 | ||||
Cash | 1,360,719 | 77,841 | 3,072,481 | 234,644 | ||||
Receivables: | ||||||||
Investment securities sold | — | 7,355,327 | 2,835,689 | 15,878,960 | ||||
Interest and dividends | 614,367 | 1,268,804 | 4,980,451 | 9,708,916 | ||||
Shares sold | — | 425,436 | 250,532 | 118,163 | ||||
Other assets | 39,993 | 48,000 | 56,330 | 88,003 | ||||
Total Assets | 176,151,684 | 315,822,227 | 352,419,995 | 470,748,492 | ||||
Liabilities | ||||||||
Payables: | ||||||||
Investment securities purchased | — | 15,174,430 | 9,972,075 | 19,553,252 | ||||
Shares redeemed | 222,235 | 380,169 | 374,419 | 370,882 | ||||
Dividends payable | 50,469 | 65,308 | 155,518 | 462,282 | ||||
Accrued advisory fees | 2,352 | 130,130 | 129,845 | 253,084 | ||||
Accrued shareholder servicing costs | 61,875 | 45,036 | 54,963 | 85,283 | ||||
Accrued expenses | 48,174 | 51,826 | 47,266 | 76,291 | ||||
Total Liabilities | 385,105 | 15,846,899 | 10,734,086 | 20,801,074 | ||||
Net Assets | $175,766,579 | $299,975,328 | $341,685,909 | $449,947,418 | ||||
Net Assets Consist of: | ||||||||
Capital paid in | $175,766,579 | $297,901,346 | $362,172,446 | $747,876,735 | ||||
Undistributed net investment income (deficit) | — | 121,938 | (732,205 | ) | 1,807,103 | |||
Accumulated net realized loss on investments | — | (7,490,387 | ) | (43,632,886 | ) | (281,636,740 | ) | |
Net unrealized appreciation (depreciation) in value of investments | — | 9,442,431 | 23,878,554 | (18,099,680 | ) | |||
Total | $175,766,579 | $299,975,328 | $341,685,909 | $449,947,418 | ||||
Net Assets: | ||||||||
Class A | $172,336,447 | $286,844,180 | $325,316,243 | $438,247,960 | ||||
Class B | $ 3,430,132 | $ 13,131,148 | $ 16,369,666 | $ 11,699,458 | ||||
Shares outstanding (Note 8): | ||||||||
Class A | 172,336,447 | 25,622,088 | 35,739,732 | 188,729,643 | ||||
Class B | 3,430,132 | 1,173,327 | 1,797,755 | 5,031,218 | ||||
Net asset value and redemption price per share — Class A | $1.00 | # | $ 11.20 | $ 9.10 | $ 2.32 | |||
Maximum offering price per share — Class A | ||||||||
(Net asset value/.9425)* | N/A | $ 11.88 | $ 9.66 | $ 2.46 | ||||
Net asset value and offering price per share — Class B (Note 8) | $1.00 | $ 11.19 | $ 9.11 | $ 2.33 |
#Also maximum offering price per share.
*On purchases of $100,000 or more, the sales charge is reduced.
130 | See notes to financial statements | 131 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
TOTAL | GROWTH & | |||||||||
RETURN | VALUE | BLUE CHIP | INCOME | GLOBAL | ||||||
Assets | ||||||||||
Investments in securities: | ||||||||||
Cost – Unaffiliated issuers | $314,297,081 | $296,593,923 | $312,198,008 | $588,174,458 | $199,480,564 | |||||
Cost – Affiliated money market fund (Note 2) | 700,000 | 15,725,000 | 7,485,000 | 5,405,000 | 11,955,000 | |||||
Total cost of investments | $314,997,081 | $312,318,923 | $319,683,008 | $593,579,458 | $211,435,564 | |||||
Value – Unaffiliated issuers (Note 1A) | $333,567,252 | $304,576,030 | $368,421,608 | $606,519,920 | $243,758,215 | |||||
Value – Affiliated money market fund (Note 2) | 700,000 | 15,725,000 | 7,485,000 | 5,405,000 | 11,955,000 | |||||
Total Value of Investments | 334,267,252 | 320,301,030 | 375,906,608 | 611,924,920 | 255,713,215 | |||||
Cash | 42,510 | 52,250 | 62,550 | 213,954 | 45,900 | |||||
Receivables: | ||||||||||
Investment securities sold | 5,803,120 | 361,425 | 338,207 | 65,676 | 1,765,238 | |||||
Dividends and interest | 1,916,372 | 712,742 | 533,575 | 673,508 | 427,660 | |||||
Shares sold | 229,388 | 215,024 | 227,224 | 591,165 | 222,048 | |||||
Other assets | 59,497 | 61,302 | 72,818 | 115,793 | 46,408 | |||||
Total Assets | 342,318,139 | 321,703,773 | 377,140,982 | 613,585,016 | 258,220,469 | |||||
Liabilities | ||||||||||
Payables: | ||||||||||
Investment securities purchased | 5,231,363 | 153,545 | 844,222 | 3,680,841 | 1,005,912 | |||||
Shares redeemed | 547,463 | 384,372 | 521,998 | 988,003 | 321,456 | |||||
Dividends payable | 21,896 | 18,938 | 6,423 | 5,251 | — | |||||
Forward currency contracts (Note 6) | — | — | — | — | 568 | |||||
Accrued advisory fees | 203,534 | 194,321 | 226,848 | 358,643 | 197,920 | |||||
Accrued shareholder servicing costs | 73,678 | 80,942 | 121,339 | 173,489 | 69,770 | |||||
Accrued expenses | 53,647 | 50,710 | 59,602 | 87,417 | 79,721 | |||||
Total Liabilities | 6,131,581 | 882,828 | 1,780,432 | 5,293,644 | 1,675,347 | |||||
Net Assets | $336,186,558 | $320,820,945 | $375,360,550 | $608,291,372 | $256,545,122 | |||||
Net Assets Consist of: | ||||||||||
Capital paid in | $330,605,147 | $356,514,718 | $429,096,355 | $614,456,672 | $283,670,945 | |||||
Undistributed net investment income (deficit) | 470,660 | 1,047,762 | 1,394,468 | 34,203 | (113,939 | ) | ||||
Accumulated net realized loss on investments | ||||||||||
and foreign currency transactions | (14,159,420 | ) | (44,723,642 | ) | (111,353,873 | ) | (24,544,965 | ) | (71,296,024 | ) |
Net unrealized appreciation in value of investments | ||||||||||
and foreign currency transactions | 19,270,171 | 7,982,107 | 56,223,600 | 18,345,462 | 44,284,140 | |||||
Total | $336,186,558 | $320,820,945 | $375,360,550 | $608,291,372 | $256,545,122 | |||||
Net Assets: | ||||||||||
Class A | $315,611,961 | $308,402,357 | $356,951,438 | $577,801,010 | $249,205,845 | |||||
Class B | $ 20,574,597 | $ 12,418,588 | $ 18,409,112 | $ 30,490,362 | $ 7,339,277 | |||||
Shares outstanding (Note 8): | ||||||||||
Class A | 23,822,025 | 51,301,488 | 19,253,837 | 48,519,541 | 43,484,564 | |||||
Class B | 1,577,852 | 2,099,144 | 1,067,110 | 2,716,386 | 1,457,806 | |||||
Net asset value and redemption price | ||||||||||
per share – Class A | $ 13.25 | $ 6.01 | $ 18.54 | $ 11.91 | $ 5.73 | |||||
Maximum offering price per share – Class A | ||||||||||
(Net asset value/.9425)* | $ 14.06 | $ 6.38 | $ 19.67 | $ 12.64 | $ 6.08 | |||||
Net asset value and offering price per share – | ||||||||||
Class B (Note 8) | $ 13.04 | $ 5.92 | $ 17.25 | $ 11.22 | $ 5.03 | |||||
*On purchases of $100,000 or more, the sales charge is reduced. |
132 | See notes to financial statements | 133 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
SELECT | SPECIAL | ||||||||
GROWTH | OPPORTUNITY | SITUATIONS | INTERNATIONAL | ||||||
Assets | |||||||||
Investments in securities: | |||||||||
Cost – Unaffiliated issuers | $158,937,147 | $357,628,215 | $212,441,305 | $ 99,732,977 | |||||
Cost – Affiliated money market fund (Note 2) | 2,435,000 | 3,830,000 | 10,031,000 | 1,250,000 | |||||
Total cost of investments | $161,372,147 | $361,458,215 | $222,472,305 | $100,982,977 | |||||
Value – Unaffiliated issuers (Note 1A) | $178,190,746 | $377,627,364 | $247,442,335 | $110,078,905 | |||||
Value – Affiliated money market fund (Note 2) | 2,435,000 | 3,830,000 | 10,031,000 | 1,250,000 | |||||
Total Value of Investments | 180,625,746 | 381,457,364 | 257,473,335 | 111,328,905 | |||||
Cash | 43,586 | 37,854 | 86,803 | 81,266 | |||||
Receivables: | |||||||||
Investment securities sold | — | 635,319 | 445,514 | — | |||||
Dividends and interest | 105,484 | 457,380 | 36,234 | 605,724 | |||||
Shares sold | 85,458 | 183,672 | 123,233 | 101,225 | |||||
Unrealized appreciation of foreign exchange | |||||||||
contracts (Note 6) | — | — | — | 829,715 | |||||
Other assets | 38,566 | 71,683 | 47,737 | 19,951 | |||||
Total Assets | 180,898,840 | 382,843,272 | 258,212,856 | 112,966,786 | |||||
Liabilities | |||||||||
Payables: | |||||||||
Investment securities purchased | — | 3,609,073 | 2,781,851 | — | |||||
Shares redeemed | 255,068 | 401,027 | 227,575 | 158,419 | |||||
Unrealized depreciation of foreign exchange | |||||||||
contracts (Note 6) | — | — | — | 1,583,310 | |||||
Accrued advisory fees | 109,185 | 226,320 | 164,606 | 86,811 | |||||
Accrued shareholder servicing costs | 66,476 | 104,330 | 74,550 | 42,347 | |||||
Accrued expenses | 42,638 | 58,035 | 45,431 | 49,899 | |||||
Total Liabilities | 473,367 | 4,398,785 | 3,294,013 | 1,920,786 | |||||
Net Assets | $180,425,473 | $378,444,487 | $254,918,843 | $111,046,000 | |||||
Net Assets Consist of: | |||||||||
Capital paid in | $266,569,882 | $382,733,814 | $267,430,896 | $143,959,439 | |||||
Undistributed net investment income | — | 73,125 | 363,450 | 994,587 | |||||
Accumulated net realized loss on investments | |||||||||
and foreign currency transactions | (105,398,008 | ) | (24,361,601 | ) | (47,876,533 | ) | (43,514,507 | ) | |
Net unrealized appreciation in value of investments | |||||||||
and foreign currency transactions | 19,253,599 | 19,999,149 | 35,001,030 | 9,606,481 | |||||
Total | $180,425,473 | $378,444,487 | $254,918,843 | $111,046,000 | |||||
Net Assets: | |||||||||
Class A | $169,930,206 | $355,323,509 | $246,062,963 | $107,644,535 | |||||
Class B | $ 10,495,267 | $ 23,120,978 | $ 8,855,880 | $ 3,401,465 | |||||
Shares outstanding (Note 8): | |||||||||
Class A | 31,892,007 | 17,113,573 | 13,375,996 | 12,090,718 | |||||
Class B | 2,123,034 | 1,269,357 | 550,234 | 390,315 | |||||
Net asset value and redemption price | |||||||||
per share – Class A | $ 5.33 | $ 20.76 | $ 18.40 | $ 8.90 | |||||
Maximum offering price per share – Class A | |||||||||
(Net asset value/.9425)* | $ 5.66 | $ 22.03 | $ 19.52 | $ 9.44 | |||||
Net asset value and offering price per share – | |||||||||
Class B (Note 8) | $ 4.94 | $ 18.21 | $ 16.09 | $ 8.71 | |||||
*On purchases of $100,000 or more, the sales charge is reduced. |
134 | See notes to financial statements | 135 |
Statements of Operations
FIRST INVESTORS INCOME FUNDS
Year Ended September 30, 2009
CASH | INVESTMENT | |||||||
MANAGEMENT | GOVERNMENT | GRADE | INCOME | |||||
Investment Income | ||||||||
Income: | ||||||||
Interest | $2,763,738 | $ 13,957,045 | $ 18,068,398 | $ 39,015,905 | ||||
Dividends | — | — | 446,935 | 2,089,469 | ||||
Dividends from affiliate (Note 2) | — | 75,340 | 64,067 | 184,215 | ||||
Securities lending income | — | — | — | 82,364 | ||||
Total income | 2,763,738 | 14,032,385 | 18,579,400 | 41,371,953 | ||||
Expenses (Notes 1 and 3): | ||||||||
Advisory fees | 1,068,948 | 1,805,633 | 1,917,564 | 2,914,779 | ||||
Distribution plan expenses – Class A | — | 783,450 | 825,028 | 1,149,378 | ||||
Distribution plan expenses – Class B | 32,596 | 124,309 | 155,306 | 112,876 | ||||
Shareholder servicing costs | 791,263 | 587,469 | 674,548 | 1,137,868 | ||||
U.S. Treasury Guarantee Program (Note 10) | 93,856 | — | — | — | ||||
Professional fees | 66,438 | 52,912 | 70,578 | 155,216 | ||||
Registration fees | 64,166 | 45,848 | 44,153 | 39,388 | ||||
Custodian fees | 27,482 | 44,671 | 25,169 | 37,153 | ||||
Reports to shareholders | 23,819 | 16,288 | 20,079 | 47,402 | ||||
Trustees’ fees | 13,947 | 17,515 | 18,505 | 25,639 | ||||
Other expenses | 43,389 | 70,520 | 63,022 | 78,016 | ||||
Total expenses | 2,225,904 | 3,548,615 | 3,813,952 | 5,697,715 | ||||
Less: Expenses waived | (680,299 | ) | (450,716 | ) | (507,359 | ) | (153,883 | ) |
Expenses paid indirectly | (3,368 | ) | (1,501 | ) | (1,621 | ) | (2,572 | ) |
Net expenses | 1,542,237 | 3,096,398 | 3,304,972 | 5,541,260 | ||||
Net investment income | 1,221,501 | 10,935,987 | 15,274,428 | 35,830,693 | ||||
Realized and Unrealized Gain (Loss) on Investments (Note 2): | ||||||||
Net realized gain (loss) on investments | — | 980,301 | (12,048,295 | ) | (112,253,431 | ) | ||
Net unrealized appreciation of investments | — | 10,055,950 | 45,188,050 | 88,440,358 | ||||
Net gain (loss) on investments | — | 11,036,251 | 33,139,755 | (23,813,073) | ||||
Net Increase in Net Assets Resulting from Operations | $1,221,501 | $ 21,972,238 | $ 48,414,183 | $ 12,017,620 |
136 | See notes to financial statements | 137 |
Statements of Operations
FIRST INVESTORS EQUITY FUNDS
Year Ended September 30, 2009
TOTAL | GROWTH & | ||||||||||
RETURN | VALUE | BLUE CHIP | INCOME | GLOBAL | |||||||
Investment Income | |||||||||||
Dividends | $ 3,959,767 | (a) | $ 9,873,908 | (b) | $ 9,286,457 | (c) | $ 12,221,534 | (d) | $ 4,636,197 | (e) | |
Dividends from affiliate (Note 2) | 153,861 | 162,076 | 69,721 | 136,414 | 111,481 | ||||||
Interest | 6,921,054 | — | — | — | 1,260 | ||||||
Total income | 11,034,682 | 10,035,984 | 9,356,178 | 12,357,948 | 4,748,938 | ||||||
Expenses (Notes 1 and 3): | |||||||||||
Advisory fees | 2,184,695 | 2,079,083 | 2,460,974 | 3,773,136 | 2,038,868 | ||||||
Distribution plan expenses – Class A | 814,491 | 795,346 | 933,453 | 1,452,479 | 604,687 | ||||||
Distribution plan expenses – Class B | 200,181 | 122,035 | 182,488 | 285,088 | 64,853 | ||||||
Shareholder servicing costs | 858,007 | 934,369 | 1,416,565 | 1,997,521 | 903,038 | ||||||
Professional fees | 62,101 | 64,081 | 100,395 | 111,598 | 87,013 | ||||||
Custodian fees | 35,886 | 24,046 | 26,432 | 40,209 | 178,799 | ||||||
Registration fees | 38,575 | 40,883 | 40,867 | 47,200 | 36,282 | ||||||
Reports to shareholders | 26,671 | 29,468 | 42,447 | 58,911 | 30,666 | ||||||
Trustees’ fees | 18,826 | 18,056 | 21,520 | 33,302 | 13,337 | ||||||
Other expenses | 73,536 | 81,110 | 75,216 | 139,032 | 102,011 | ||||||
Total expenses | 4,312,969 | 4,188,477 | 5,300,357 | 7,938,476 | 4,059,554 | ||||||
Less: Expenses waived | — | — | — | — | (62,416 | ) | |||||
Expenses paid indirectly | (2,529 | ) | (2,310 | ) | (2,705 | ) | (4,363 | ) | (1,681 | ) | |
Net expenses | 4,310,440 | 4,186,167 | 5,297,652 | 7,934,113 | 3,995,457 | ||||||
Net investment income | 6,724,242 | 5,849,817 | 4,058,526 | 4,423,835 | 753,481 | ||||||
Realized and Unrealized Gain (Loss) on Investments | |||||||||||
(Note 2): | |||||||||||
Net realized loss on: | |||||||||||
Investments | (9,483,692 | ) | (13,268,873 | ) | (9,977,253 | ) | (20,403,791 | ) | (64,320,069 | ) | |
Foreign currency transactions | — | — | — | — | (58,198 | ) | |||||
Net realized loss on investments | |||||||||||
and foreign currency transactions | (9,483,692 | ) | (13,268,873 | ) | (9,977,253 | ) | (20,403,791 | ) | (64,378,267 | ) | |
Net unrealized appreciation (depreciation) of: | |||||||||||
Investments | 10,774,205 | (20,963,487 | ) | (31,288,703 | ) | (32,959,787 | ) | 63,840,351 | |||
Foreign currency transactions | — | — | — | — | — | ||||||
Net unrealized appreciation (depreciation) of | |||||||||||
investments and foreign currency transactions | 10,774,205 | (20,963,487 | ) | (31,288,703 | ) | (32,959,787 | ) | 63,840,351 | |||
Net gain (loss) on investments and | |||||||||||
foreign currency transactions | 1,290,513 | (34,232,360 | ) | (41,265,956 | ) | (53,363,578 | ) | (537,916 | ) | ||
Net Increase (Decrease) in Net Assets Resulting | |||||||||||
from Operations | $ 8,014,755 | $ (28,382,543 | ) | $ (37,207,430 | ) | $ (48,939,743 | ) | $ 215,565 |
(a) Net of $20,830 foreign taxes withheld
(b) Net of $54,780 foreign taxes withheld
(c) Net of $33,678 foreign taxes withheld
(d) Net of $68,994 foreign taxes withheld
(e) Net of $366,155 foreign taxes withheld
138 | See notes to financial statements | 139 |
Statements of Operations
FIRST INVESTORS EQUITY FUNDS
Year Ended September 30, 2009
SELECT | SPECIAL | ||||||||
GROWTH | OPPORTUNITY | SITUATIONS | INTERNATIONAL | ||||||
Investment Income | |||||||||
Dividends | $ 1,904,300 | $ 5,050,157 | (f) | $ 3,752,482 | $ 3,000,661 | (g) | |||
Dividends from affiliate (Note 2) | 34,066 | 92,380 | 188,426 | 26,345 | |||||
Interest | — | — | — | 2,941 | |||||
Total income | 1,938,366 | 5,142,537 | 3,940,908 | 3,029,947 | |||||
Expenses (Notes 1 and 3): | |||||||||
Advisory fees | 1,253,367 | 2,312,489 | 2,075,637 | 884,574 | |||||
Distribution plan expenses – Class A | 468,143 | 863,985 | 609,581 | 261,939 | |||||
Distribution plan expenses – Class B | 110,680 | 210,978 | 82,914 | 29,496 | |||||
Shareholder servicing costs | 842,769 | 1,350,544 | 934,473 | 545,134 | |||||
Professional fees | 43,133 | 63,936 | 49,433 | 52,183 | |||||
Custodian fees | 17,685 | 28,439 | 23,733 | 133,631 | |||||
Registration fees | 40,896 | 38,290 | 37,795 | 36,982 | |||||
Reports to shareholders | 28,097 | 40,428 | 30,012 | 18,576 | |||||
Trustees’ fees | 11,080 | 20,003 | 13,675 | 5,778 | |||||
Other expenses | 52,860 | 94,074 | 50,967 | 39,652 | |||||
Total expenses | 2,868,710 | 5,023,166 | 3,908,220 | 2,007,945 | |||||
Less: Expenses waived | — | — | (383,757 | ) | — | ||||
Expenses paid indirectly | (1,402 | ) | (2,567 | ) | (1,801 | ) | (730 | ) | |
Net expenses | 2,867,308 | 5,020,599 | 3,522,662 | 2,007,215 | |||||
Net investment income (loss) | (928,942 | ) | 121,938 | 418,246 | 1,022,732 | ||||
Realized and Unrealized Gain (Loss) on Investments | |||||||||
and Foreign Currency Transactions (Note 2): | |||||||||
Net realized gain (loss) on: | |||||||||
Investments | (72,064,132 | ) | (24,480,008 | ) | (47,829,807 | ) | (25,971,261 | ) | |
Foreign currency transactions | — | — | — | 2,128,685 | |||||
Net realized loss on investments | |||||||||
and foreign currency transactions | (72,064,132 | ) | (24,480,008 | ) | (47,829,807 | ) | (23,842,576 | ) | |
Net unrealized appreciation (depreciation) of: | |||||||||
Investments | 27,119,973 | (2,830,615 | ) | 32,434,302 | 20,860,060 | ||||
Foreign currency transactions | — | — | — | (1,846,398 | ) | ||||
Net unrealized appreciation (depreciation) of investments | |||||||||
and foreign currency transactions | 27,119,973 | (2,830,615 | ) | 32,434,302 | 19,013,662 | ||||
Net loss on investments and foreign currency transactions | (44,944,159 | ) | (27,310,623 | ) | (15,395,505 | ) | (4,828,914 | ) | |
Net Decrease in Net Assets Resulting from Operations | $ (45,873,101 | ) | $ (27,188,685 | ) | $ (14,977,259 | ) | $ (3,806,182 | ) |
(f) Net of $10,358 foreign taxes withheld
(g) Net of $269,997 foreign taxes withheld
140 | See notes to financial statements | 141 |
Statements of Changes in Net Assets
FIRST INVESTORS INCOME FUNDS
CASH MANAGEMENT | GOVERNMENT | INVESTMENT GRADE | INCOME | ||||||||||||||
Year Ended September 30 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||
Increase (Decrease) in Net Assets From Operations | |||||||||||||||||
Net investment income | $ 1,221,501 | $ 6,356,325 | $ 10,935,987 | $ 9,571,332 | $ 15,274,428 | $ 14,702,832 | $ 35,830,693 | $ 39,939,941 | |||||||||
Net realized gain (loss) on investments | — | — | 980,301 | 241,855 | (12,048,295 | ) | (19,862,926 | ) | (112,253,431 | ) | (23,520,343 | ) | |||||
Net unrealized appreciation (depreciation) of investments | — | — | 10,055,950 | 2,251,120 | 45,188,050 | (20,764,517 | ) | 88,440,358 | (80,270,992 | ) | |||||||
Net increase (decrease) in net assets resulting | |||||||||||||||||
from operations | 1,221,501 | 6,356,325 | 21,972,238 | 12,064,307 | 48,414,183 | (25,924,611 | ) | 12,017,620 | (63,851,394 | ) | |||||||
Dividends to Shareholders | |||||||||||||||||
Net investment income – Class A | (1,215,241 | ) | (6,300,152 | ) | (11,010,399 | ) | (9,508,609 | ) | (15,729,968 | ) | (14,466,779 | ) | (36,620,365 | ) | (39,378,847 | ) | |
Net investment income – Class B | (6,260 | ) | (56,173 | ) | (439,921 | ) | (433,580 | ) | (760,072 | ) | (901,522 | ) | (980,700 | ) | (1,353,711 | ) | |
Total dividends | (1,221,501 | ) | (6,356,325 | ) | (11,450,320 | ) | (9,942,189 | ) | (16,490,040 | ) | (15,368,301 | ) | (37,601,065 | ) | (40,732,558 | ) | |
Share Transactions * | |||||||||||||||||
Class A: | |||||||||||||||||
Proceeds from shares sold | 149,200,434 | 228,564,733 | 89,368,837 | 53,495,830 | 62,035,917 | 76,586,604 | 38,647,729 | 45,861,746 | |||||||||
Reinvestment of dividends | 1,183,936 | 6,186,351 | 9,894,128 | 8,447,996 | 13,931,701 | 12,726,546 | 29,097,696 | 31,092,107 | |||||||||
Cost of shares redeemed | (212,143,550 | ) | (218,169,828 | ) | (50,746,193 | ) | (34,189,386 | ) | (48,574,281 | ) | (53,576,760 | ) | (64,519,916 | ) | (79,571,081 | ) | |
(61,759,180 | ) | 16,581,256 | 48,516,772 | 27,754,440 | 27,393,337 | 35,736,390 | 3,225,509 | (2,617,228 | ) | ||||||||
Class B: | |||||||||||||||||
Proceeds from shares sold | 4,860,797 | 6,076,772 | 4,308,972 | 2,672,620 | 2,161,072 | 2,841,907 | 1,369,449 | 1,365,640 | |||||||||
Reinvestment of dividends | 6,061 | 52,562 | 411,452 | 400,468 | 691,880 | 819,873 | 796,975 | 1,062,813 | |||||||||
Cost of shares redeemed | (5,000,550 | ) | (4,896,034 | ) | (3,684,416 | ) | (3,225,273 | ) | (5,425,434 | ) | (5,550,881 | ) | (4,484,336 | ) | (8,257,605 | ) | |
(133,692 | ) | 1,233,300 | 1,036,008 | (152,185 | ) | (2,572,482 | ) | (1,889,101 | ) | (2,317,912 | ) | (5,829,152 | ) | ||||
Net increase (decrease) from share transactions | (61,892,872 | ) | 17,814,556 | 49,552,780 | 27,602,255 | 24,820,855 | 33,847,289 | 907,597 | (8,446,380 | ) | |||||||
Net increase (decrease) in net assets | (61,892,872 | ) | 17,814,556 | 60,074,698 | 29,724,373 | 56,744,998 | (7,445,623 | ) | (24,675,848 | ) | (113,030,332 | ) | |||||
Net Assets | |||||||||||||||||
Beginning 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 | |||||||||
End of year † | $ 175,766,579 | $ 237,659,451 | $ 299,975,328 | $ 239,900,630 | $ 341,685,909 | $ 284,940,911 | $ 449,947,418 | $ 474,623,266 | |||||||||
†Includes undistributed net investment income (deficit) of | $ — | $ — | $ 121,938 | $ 100,547 | $ (732,205 | ) | $ (1,367,287 | ) | $ 1,807,103 | $ 1,811,639 | |||||||
*Shares Issued and Redeemed | |||||||||||||||||
Class A: | |||||||||||||||||
Sold | 149,200,434 | 228,564,733 | 8,119,199 | 4,941,143 | 7,506,299 | 8,193,353 | 18,474,840 | 16,524,176 | |||||||||
Issued for dividends reinvested | 1,183,936 | 6,186,351 | 896,474 | 780,509 | 1,685,746 | 1,373,634 | 14,128,160 | 11,314,035 | |||||||||
Redeemed | (212,143,550 | ) | (218,169,828 | ) | (4,609,280 | ) | (3,164,061 | ) | (5,958,625 | ) | (5,787,841 | ) | (31,275,460 | ) | (28,751,382 | ) | |
Net increase (decrease) in Class A shares outstanding | (61,759,180 | ) | 16,581,256 | 4,406,393 | 2,557,591 | 3,233,420 | 3,779,146 | 1,327,540 | (913,171 | ) | |||||||
Class B: | |||||||||||||||||
Sold | 4,860,797 | 6,076,772 | 391,751 | 246,088 | 263,623 | 302,164 | 664,130 | 491,818 | |||||||||
Issued for dividends reinvested | 6,061 | 52,562 | 37,308 | 36,992 | 84,000 | 88,380 | 387,573 | 386,088 | |||||||||
Redeemed | (5,000,550 | ) | (4,896,034 | ) | (334,945 | ) | (298,716 | ) | (668,820 | ) | (595,157 | ) | (2,160,772 | ) | (2,979,556 | ) | |
Net increase (decrease) in Class B shares outstanding | (133,692 | ) | 1,233,300 | 94,114 | (15,636 | ) | (321,197 | ) | (204,613 | ) | (1,109,069 | ) | (2,101,650 | ) |
142 | See notes to financial statements | 143 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
TOTAL RETURN | VALUE | BLUE CHIP | GROWTH & INCOME | ||||||||||||||
Year Ended September 30 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||
Increase (Decrease) in Net Assets From Operations | |||||||||||||||||
Net investment income | $ 6,724,242 | $ 8,357,946 | $ 5,849,817 | $ 6,282,240 | $ 4,058,526 | $ 4,058,380 | $ 4,423,835 | $ 6,911,851 | |||||||||
Net realized gain (loss) on investments | (9,483,692 | ) | (1,608,059 | ) | (13,268,873 | ) | (4,080,397 | ) | (9,977,253 | ) | (6,119,538 | ) | (20,403,791 | ) | 1,823,903 | ||
Net unrealized appreciation (depreciation) of investments | 10,774,205 | (55,680,582 | ) | (20,963,487 | ) | (75,530,195 | ) | (31,288,703 | ) | (104,718,281 | ) | (32,959,787 | ) | (192,026,266 | ) | ||
Net increase (decrease) in net assets resulting | |||||||||||||||||
from operations | 8,014,755 | (48,930,695 | ) | (28,382,543 | ) | (73,328,352 | ) | (37,207,430 | ) | (106,779,439 | ;) | (48,939,743 | ) | (183,290,512 | ) | ||
Distributions to Shareholders | |||||||||||||||||
Net investment income – Class A | (7,294,927 | ) | (8,482,572 | ) | (5,289,493 | ) | (6,075,415 | ) | (3,817,452 | ) | (3,843,653 | ) | (6,507,658 | ) | (5,193,481 | ) | |
Net investment income – Class B | (411,162 | ) | (544,177 | ) | (157,251 | ) | (206,356 | ) | (110,020 | ) | (67,462 | ) | (312,817 | ) | (90,794 | ) | |
Net realized gains – Class A | — | (6,767,191 | ) | — | — | — | — | (1,098,693 | ) | (10,953,020 | ) | ||||||
Net realized gains – Class B | — | (625,604 | ) | — | — | — | — | (73,074 | ) | (913,158 | ) | ||||||
Total distributions | (7,706,089 | ) | (16,419,544 | ) | (5,446,744 | ) | (6,281,771 | ) | (3,927,472 | ) | (3,911,115 | ) | (7,992,242 | ) | (17,150,453 | ) | |
Share Transactions * | |||||||||||||||||
Class A: | |||||||||||||||||
Proceeds from shares sold | 48,128,682 | 54,926,724 | 46,162,803 | 61,763,002 | 41,475,826 | 50,687,564 | 78,339,719 | 109,163,017 | |||||||||
Reinvestment of distributions | 7,183,309 | 15,063,988 | 5,211,749 | 5,987,167 | 3,786,180 | 3,808,942 | 7,539,347 | 16,025,049 | |||||||||
Cost of shares redeemed | (45,000,268 | ) | (60,728,853 | ) | (44,829,250 | ) | (73,184,887 | ) | (46,153,726 | ) | (82,062,296 | ) | (79,223,395 | ) | (123,461,494 | ) | |
10,311,723 | 9,261,859 | 6,545,302 | (5,434,718 | ) | (891,720) | ) | (27,565,790 | ) | 6,655,671 | 1,726,572 | |||||||
Class B: | |||||||||||||||||
Proceeds from shares sold | 1,896,768 | 2,333,837 | 1,383,432 | 2,259,660 | 1,712,240 | 2,402,580 | 2,970,932 | 4,516,660 | |||||||||
Reinvestment of distributions | 405,877 | 1,161,520 | 156,218 | 204,520 | 109,716 | 67,354 | 384,206 | 1,001,473 | |||||||||
Cost of shares redeemed | (6,192,908 | ) | (7,419,892 | ) | (4,455,394 | ) | (7,612,489 | ) | (6,707,446 | ) | (13,705,467 | ) | (9,309,449 | ) | (17,146,873 | ) | |
(3,890,263 | ) | (3,924,535 | ) | (2,915,744 | ) | (5,148,309 | ) | (4,885,490 | ) | (11,235,533 | ) | (5,954,311 | ) | (11,628,740 | ) | ||
Net increase (decrease) from share transactions | 6,421,460 | 5,337,324 | 3,629,558 | (10,583,027 | ) | (5,777,210 | ) | (38,801,323 | ) | 701,360 | (9,902,168 | ) | |||||
Net increase (decrease) in net assets | 6,730,126 | (60,012,915 | ) | (30,199,729 | ) | (90,193,150 | ) | (46,912,112 | ) | (149,491,877 | ) | (56,230,625 | ) | (210,343,133 | ) | ||
Net Assets | |||||||||||||||||
Beginning 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 | |||||||||
End of year† | $ 336,186,558 | $ 329,456,432 | $ 320,820,945 | $ 351,020,674 | $ 375,360,550 | $ 422,272,662 | $ 608,291,372 | $ 664,521,997 | |||||||||
†Includes undistributed net investment income of | $ 470,660 | $ 978,375 | $ 1,047,762 | $ 917,502 | $ 1,394,468 | $ 1,263,414 | $ 34,203 | $ 2,514,196 | |||||||||
*Shares Issued and Redeemed | |||||||||||||||||
Class A: | |||||||||||||||||
Sold | 4,109,052 | 3,736,223 | 8,803,750 | 8,384,742 | 2,580,194 | 2,197,104 | 7,829,046 | 7,284,893 | |||||||||
Issued for distributions reinvested | 603,791 | 1,020,067 | 985,364 | 840,055 | 232,570 | 169,700 | 746,863 | 1,021,080 | |||||||||
Redeemed | (3,885,466 | ) | (4,155,693 | ) | (8,634,264 | ) | (9,967,213 | ) | (2,883,244 | ) | (3,565,342 | ) | (8,010,238 | ) | (8,286,295 | ) | |
Net increase (decrease) in Class A shares outstanding | 827,377 | 600,597 | 1,154,850 | (742,416 | ) | (70,480 | ) | (1,198,538 | ) | 565,671 | 19,678 | ||||||
Class B: | |||||||||||||||||
Sold | 165,872 | 162,847 | 272,994 | 311,458 | 115,095 | 111,952 | 317,151 | 318,321 | |||||||||
Issued for distributions reinvested | 34,840 | 79,189 | 30,278 | 28,911 | 7,334 | 3,069 | 40,830 | 65,169 | |||||||||
Redeemed | (543,696 | ) | (509,436 | ) | (868,516 | ) | (1,051,771 | ) | (446,123 | ) | (633,838 | ) | (984,923 | ) | (1,209,209 | ) | |
Net decrease in Class B shares outstanding | (342,984 | ) | (267,400 | ) | (565,244 | ) | (711,402 | ) | (323,694 | ) | (518,817 | ) | (626,942 | ) | (825,719 | ) |
144 | See notes to financial statements | 145 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
GLOBAL | SELECT GROWTH | OPPORTUNITY | SPECIAL SITUATIONS | ||||||||||||||
Year Ended September 30 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||
Increase (Decrease) in Net Assets From Operations | |||||||||||||||||
Net investment income (loss) | $ 753,481 | $ 1,143,022 | $ (928,942 | ) | $ (1,423,106 | ) | $ 121,938 | $ (335,753 | ) | $ 418,246 | $ 317,458 | ||||||
Net realized gain (loss) on investments | |||||||||||||||||
and foreign currency transactions | (64,378,267 | ) | (2,586,400 | ) | (72,064,132 | ) | (33,331,034 | ) | (24,480,008 | ) | 11,704,587 | (47,829,807 | ) | 7,202,882 | |||
Net unrealized appreciation (depreciation) of investments | |||||||||||||||||
and foreign currency transactions | 63,840,351 | (85,621,345 | ) | 27,119,973 | (33,242,861 | ) | (2,830,615 | ) | (111,901,468 | ) | 32,434,302 | (46,989,996 | ) | ||||
Net increase (decrease) in net assets resulting | |||||||||||||||||
from operations | 215,565 | (87,064,723 | ) | (45,873,101 | ) | (67,997,001 | ) | (27,188,685 | ) | (100,532,634 | ) | (14,977,259 | ) | (39,469,656 | ) | ||
Distributions to Shareholders | |||||||||||||||||
Net investment income – Class A | (700,428 | ) | (1,935,582 | ) | — | — | — | (2,157,616 | ) | (316,738 | ) | — | |||||
Net investment income – Class B | (15,414 | ) | (88,410 | ) | — | — | — | (241,374 | ) | (769 | ) | — | |||||
Distributions in excess of net investment income – Class A | (1,000,030 | ) | — | — | — | — | — | — | — | ||||||||
Distributions in excess of net investment income – Class B | (37,956 | ) | — | — | — | — | — | — | — | ||||||||
Net realized gains – Class A | — | (39,760,740 | ) | — | (34,525,068 | ) | (10,298,045 | ) | (40,556,491 | ) | (6,706,340 | ) | (14,772,999 | ) | |||
Net realized gains – Class B | — | (1,816,126 | ) | — | (3,724,631 | ) | (918,722 | ) | (4,537,080 | ) | (335,771 | ) | (966,711 | ) | |||
Total distributions | (1,753,828 | ) | (43,600,858 | ) | — | (38,249,699 | ) | (11,216,767 | ) | (47,492,561 | ) | (7,359,618 | ) | (15,739,710 | ) | ||
Share Transactions * | |||||||||||||||||
Class A: | |||||||||||||||||
Proceeds from shares sold | 27,829,425 | 51,429,580 | 30,784,311 | 60,620,663 | 45,788,903 | 64,628,411 | 31,078,864 | 41,157,489 | |||||||||
Reinvestment of distributions | 1,665,406 | 41,083,108 | — | 34,371,915 | 10,254,773 | 42,542,593 | 6,983,764 | 14,700,522 | |||||||||
Cost of shares redeemed | (27,935,429 | ) | (40,792,493 | ) | (26,091,741 | ) | (33,794,385 | ) | (43,909,512 | ) | (76,137,000 | ) | (29,343,070 | ) | (40,045,712 | ) | |
1,559,402 | 51,720,195 | 4,692,570 | 61,198,193 | 12,134,164 | 31,034,004 | 8,719,558 | 15,812,299 | ||||||||||
Class B: | |||||||||||||||||
Proceeds from shares sold | 1,013,659 | 1,994,555 | 1,073,575 | 2,501,234 | 1,869,978 | 3,091,684 | 785,115 | 1,305,910 | |||||||||
Reinvestment of distributions | 53,157 | 1,896,632 | — | 3,702,717 | 916,291 | 4,761,120 | 335,504 | 963,948 | |||||||||
Cost of shares redeemed | (2,161,628 | ) | (4,097,9690 | ) | (4,659,036 | ) | (3,964,542 | ) | (7,105,182 | ) | (13,013,176 | ) | (2,961,582 | ) | (4,810,972 | ) | |
(1,094,812 | ) | (206,782 | ) | (3,585,461 | ) | 2,239,409 | (4,318,913 | ) | (5,160,372 | ) | (1,840,963 | ) | (2,541,114 | ) | |||
Net increase from share transactions | 464,590 | 51,513,413 | 1,107,109 | 63,437,602 | 7,815,251 | 25,873,632 | 6,878,595 | 13,271,185 | |||||||||
Net decrease in net assets | (1,073,673 | ) | (79,152,168 | ) | (44,765,992 | ) | (42,809,098 | ) | (30,590,201 | ) | (122,151,563 | ) | (15,458,282 | ) | (41,938,181 | ) | |
Net Assets | |||||||||||||||||
Beginning 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 | |||||||||
End of year† | $ 256,545,122 | $ 257,618,795 | $ 180,425,473 | $ 225,191,465 | $ 378,444,487 | $ 409,034,688 | $ 254,918,843 | $ 270,377,125 | |||||||||
†Includes undistributed net investment income (deficit) of | $ (113,939 | ) | $ (93,065 | ) | $ — | $ — | $ 73,125 | $ — | $ 363,450 | $ 317,458 | |||||||
*Shares Issued and Redeemed | |||||||||||||||||
Class A: | |||||||||||||||||
Sold | 5,981,721 | 7,067,592 | 6,231,108 | 7,496,389 | 2,694,996 | 2,401,751 | 2,014,582 | 1,867,242 | |||||||||
Issued for distributions reinvested | 370,090 | 5,206,984 | — | 3,919,261 | 620,749 | 1,490,630 | 471,557 | 625,820 | |||||||||
Redeemed | (6,117,705 | ) | (5,614,081 | ) | (5,303,836 | ) | (4,199,720 | ) | (2,613,382 | ) | (2,831,995 | ) | (1,920,295 | ) | (1,820,109 | ) | |
Net increase in Class A shares outstanding | 234,106 | 6,660,495 | 927,272 | 7,215,930 | 702,363 | 1,060,386 | 565,844 | 672,953 | |||||||||
Class B: | |||||||||||||||||
Sold | 257,172 | 306,217 | 236,169 | 323,798 | 126,727 | 127,952 | 58,566 | 65,821 | |||||||||
Issued for distributions reinvested | 13,356 | 270,176 | — | 449,359 | 62,889 | 186,857 | 25,749 | 46,166 | |||||||||
Redeemed | (529,400 | ) | (619,922 | ) | (984,800 | ) | (526,068 | ) | (475,942 | ) | (538,141 | ) | (219,514 | ) | (245,486 | ) | |
Net increase (decrease) in Class B shares outstanding | (258,872 | ) | (43,529 | ) | (748,631 | ) | 247,089 | ) | (286,326 | ) | (223,332 | ) | (135,199 | ) | (133,499 | ) |
146 | See notes to financial statements | 147 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
INTERNATIONAL | ||||
Year Ended September 30 | 2009 | 2008 | ||
Increase (Decrease) in Net Assets From Operations | ||||
Net investment income | $ 1,022,732 | $213,540 | ||
Net realized loss on investments | ||||
and foreign currency transactions | (23,842,576 | ) | (14,285,235 | ) |
Net unrealized appreciation (depreciation) of investments | ||||
and foreign currency transactions | 19,013,662 | (23,330,472 | ) | |
Net decrease in net assets resulting from operations | (3,806,182 | ) | (37,402,167 | ) |
Dividends to Shareholders | ||||
Net investment income – Class A | (1,461,635 | ) | (2,659,071 | ) |
Net investment income – Class B | (46,959 | ) | (111,221 | ) |
Total dividends | (1,508,594 | ) | (2,770,292 | ) |
Share Transactions * | ||||
��Class A: | ||||
Proceeds from shares sold | 22,093,794 | 61,600,305 | ||
Reinvestment of dividends | 1,452,292 | 2,652,722 | ||
Cost of shares redeemed | (15,560,100 | ) | (17,297,672 | ) |
7,985,986 | 46,955,355 | |||
Class B: | ||||
Proceeds from shares sold | 520,694 | 1,980,202 | ||
Reinvestment of dividends | 46,946 | 111,198 | ||
Cost of shares redeemed | (768,606 | ) | (870,776 | ) |
(200,966 | ) | 1,220,624 | ||
Net increase from share transactions | 7,785,020 | 48,175,979 | ||
Net increase in net assets | 2,470,244 | 8,003,520 | ||
Net Assets | ||||
Beginning of year | 108,575,756 | 100,572,236 | ||
End of year † | $ 111,046,000 | $ 108,575,756 | ||
†Includes undistributed net investment income (deficit) of | $ 994,587 | $(914,170 | ) | |
*Shares Issued and Redeemed | ||||
Class A: | ||||
Sold | 2,936,440 | 5,014,211 | ||
Reinvestment of dividends | 189,594 | 196,789 | ||
Redeemed | (2,078,169 | ) | (1,479,150 | ) |
Net increase in Class A shares outstanding | 1,047,865 | 3,731,850 | ||
Class B: | ||||
Sold | 71,230 | 161,304 | ||
Reinvestment of dividends | 6,234 | 8,336 | ||
Redeemed | (103,335 | ) | (73,967 | ) |
Net increase (decrease) in Class B shares outstanding | (25,871 | ) | 95,673 |
148 | See notes to financial statements |
Notes to Financial Statements
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
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 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, Opportunity Fund, Special Situations Fund, and International Fund (each a “Fund”, collectively, “the Funds”). The Trusts account separately for the assets, liabilities and operation s of each Fund. The objective of each Fund as of September 30, 2009 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 or market where the security is principally traded, and lacking any sales, the security
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Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
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 pricing services approved by the Trusts’ Board of Trustees (the “Board”). The pricing services consider 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 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 or if a foreign market is closed. For valuation purposes, where applicable, quotations of foreign securi ties in foreign currency are translated to U.S. dollar equivalents using the foreign exchange quotation in effect. At September 30, 2009, Fund For Income held six securities that were fair valued by its Valuation Committee with an aggregate value of $2,137,441, representing .5% of the Fund’s net assets.
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.
In accordance with Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”), formerly known as Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 157, Fair Value Measurements, investments held by the Funds are carried at “fair value”. As defined by ASC 820, fair value is defined as the price that a fund would receive upon
150 |
selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment under current market conditions. Various inputs are used in determining the value of the Funds’ investments.
In addition, effective June 15, 2009, the Funds adopted FASB Staff position (“FSP) No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP No. 157-4”). FSP No. 157-4 emphasizes that the objective of fair value measurement described in ASC 820 remains unchanged and provides additional guidance for estimating fair value in accordance with ASC 820 when the volume and level of activity for the asset or liability have significantly decreased, as well as identifying circumstances that indicate that transactions are not orderly. FSP No. 157-4 identifies factors to be considered when determining whether or not a market is inactive and indicates that if a market is determined to be inactive and/ or current market prices are reflective of “distressed sales”, significant management judgment may be necessar y to estimate fair value in accordance with ASC 820.
In addition to defining fair value, ASC 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1 — quoted prices in active markets for identical securities
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)
The aggregate value by input level, as of September 30, 2009, for each Fund’s investments is included at the end of each Fund’s schedule of investments.
B. Federal Income Taxes—No provision has been made for federal income taxes on net income or capital gains since it is the policy of each Fund to continue to comply with the special provisions of the Internal Revenue Code applicable to investment companies, and to make sufficient distributions of income and capital gains (in excess of any available capital loss carryovers) to relieve it from all, or substantially all, such taxes. At September 30, 2009, capital loss carryovers were as follows:
151 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
Year Capital Loss Carryovers Expire | |||||||||||||||||
Total | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |||||||||
Government | $ 7,490,387 | $ | — | $ | 54,921 | $ | 2,120,906 | $ | 1,600,894 | $ | 740,643 | $ | 1,909,473 | $ | 1,063,550 | $ | — |
Investment Grade | 34,032,850 | 27,419 | 407,283 | 1,356,376 | 14 | 741,116 | 4,294,433 | 401,409 | 26,804,800 | ||||||||
Fund for Income | 167,702,831 | 18,563,112 | 52,099,335 | 25,740,298 | 10,200,012 | 7,456,986 | 24,660,250 | 5,033,118 | 23,949,720 | ||||||||
Total Return | 5,168,651 | — | — | — | — | — | — | — | 5,168,651 | ||||||||
Value | 39,572,144 | — | 21,002,401 | — | — | — | — | — | 18,569,743 | ||||||||
Blue Chip* | 97,578,186 | 14,615,567 | 70,632,641 | — | — | — | — | — | 12,329,978 | ||||||||
Growth & Income | 8,796,265 | — | — | — | — | — | — | — | 8,796,265 | ||||||||
Global | 18,998,989 | — | — | — | — | — | — | — | 18,998,989 | ||||||||
Select Growth | 50,114,227 | — | — | — | — | — | — | 2,098,139 | 48,016,088 | ||||||||
Opportunity | 4,904,349 | — | — | — | — | — | — | — | 4,904,349 | ||||||||
Special Situations | 12,205,466 | — | — | — | — | — | — | — | 12,205,466 | ||||||||
International | 21,176,305 | — | — | — | — | — | 82,339 | 1,552,900 | 19,541,066 |
*For Blue Chip Fund, $3,583,654 of the $97,578,186 capital loss carryover was acquired on August 10, 2007 in the tax-free reorganization with the First Investors Focused Equity Fund that was approved by the Equity Fund's Board of Trustees. 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.
The Funds have adopted the provisions of ASC 740 “Income Taxes” (ASC 740”), formerly known as FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes —an interpretation of FASB Statement No. 109”. ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken, or expected to be taken, in a tax return. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. The Funds are subject to examination by the U.S. federal and state tax authorities for returns filed for the prior three fiscal years 2006 – 2009. As of September 30, 2009, the Funds did not have any unrecognized tax benefits.
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
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from net realized capital gains of each of the other Funds, if any, are normally declared and paid annually. Income dividends and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for capital loss carryforwards, deferral of wash sales losses, post-October capital losses, net operating losses and foreign currency transactions.
D. Expense Allocation—Expenses directly charged or attributable to a Fund are paid from the assets of that Fund. General expenses of 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. Other—Security transactions are generally accounted for on the date the securities are purchased or sold. Cost is determined, and gains and losses are based, on the identified cost basis for both financial statement and federal income tax purposes. Dividend income is recorded on the ex-dividend date. Interest income and estimated
153 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
expenses are accrued daily. Bond discounts and premiums are accreted or amortized using the interest method. For the year ended September 30, 2009, the Bank of New York Mellon, custodian of each Fund (other than Global Fund and International Fund), has provided credits in the amount of $1,100 for the Income Funds and $725 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, 2009, expenses were reduced by $7,962 for the Income Funds and by $19,363 for the Equity Funds under these arrangements.
2. Security Transactions—For the year ended September 30, 2009, 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 | $ 158,624,021 | $ 114,819,310 | $ — | $ — | |||||
Investment Grade | 243,965,172 | 187,298,199 | 6,198,578 | 37,822,033 | |||||
Fund For Income | 298,514,270 | 278,252,586 | — | — | |||||
Total Return | 157,273,292 | 122,754,973 | 17,372,113 | 27,090,785 | |||||
Value | 45,567,775 | 38,789,886 | — | — | |||||
Blue Chip | 37,427,925 | 48,618,390 | — | — | |||||
Growth & Income | 142,135,350 | 135,031,838 | — | — | |||||
Global | 286,293,713 | 284,373,987 | — | — | |||||
Select Growth | 204,340,711 | 202,532,880 | — | — | |||||
Opportunity | 122,680,007 | 110,840,248 | — | — | |||||
Special Situations | 135,022,139 | 110,357,049 | — | — | |||||
International | 64,670,797 | 53,006,652 | — | — |
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At September 30, 2009, 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 | $ 297,204,388 | $ 9,451,487 | $ 9,056 | $ 9,442,431 | ||||||||
Investment Grade | 318,486,318 | 24,611,934 | 1,873,740 | 22,738,194 | ||||||||
Fund For Income | 463,386,694 | 22,153,558 | 40,820,446 | (18,666,888 | ) | |||||||
Total Return | 316,798,690 | 40,993,061 | 23,524,499 | 17,468,562 | ||||||||
Value | 312,338,026 | 44,277,033 | 36,314,030 | 7,963,003 | ||||||||
Blue Chip | 326,277,759 | 81,420,570 | 31,791,721 | 49,628,849 | ||||||||
Growth & Income | 596,668,768 | 107,633,098 | 92,376,947 | 15,256,151 | ||||||||
Global* | 222,222,990 | 40,032,021 | 6,541,796 | 33,490,225 | ||||||||
Select Growth | 161,372,147 | 21,710,318 | 2,456,719 | 19,253,599 | ||||||||
Opportunity | 361,460,841 | 68,772,463 | 48,775,940 | 19,996,523 | ||||||||
Special Situations | 223,886,597 | 43,076,236 | 9,489,498 | 33,586,738 | ||||||||
International | 102,329,098 | 11,881,799 | 2,881,992 | 8,999,807 |
*Aggregate cost includes PFIC income of $60,104 for Global Fund.
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, 2009, 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 | 9/30/08 | Shares/Cost | Shares/Costs | 9/30/09 | Income | |||||||||||
Government | $ 6,785,000 | $121,833,000 | $111,600,000 | $17,018,000 | $ 75,340 | |||||||||||
Investment Grade | 5,750,000 | 135,960,000 | 135,935,000 | 5,775,000 | 64,067 | |||||||||||
Fund For Income | 16,005,000 | 167,145,000 | 178,980,000 | 4,170,000 | 184,215 | |||||||||||
Total Return | 3,400,000 | 101,605,000 | 104,305,000 | 700,000 | 153,861 | |||||||||||
Value | 18,480,000 | 30,325,000 | 33,080,000 | 15,725,000 | 162,076 | |||||||||||
Blue Chip | 1,225,000 | 36,343,000 | 30,083,000 | 7,485,000 | 69,721 | |||||||||||
Growth & Income | 5,890,000 | 94,310,000 | 94,795,000 | 5,405,000 | 136,414 | |||||||||||
Global | 13,310,000 | 78,950,000 | 80,305,000 | 11,955,000 | 111,481 | |||||||||||
Select Growth | 5,150,000 | 63,740,000 | 66,455,000 | 2,435,000 | 34,066 | |||||||||||
Opportunity | 12,900,000 | 73,445,000 | 82,515,000 | 3,830,000 | 92,380 | |||||||||||
Special Situations | 34,010,000 | 71,519,000 | 95,498,000 | 10,031,000 | 188,426 | |||||||||||
International | 2,450,000 | 36,515,000 | 37,715,000 | 1,250,000 | 26,345 |
155 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
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, 2009, total trustees fees accrued by the Income Funds and Equity Funds amounted to $75,606 and $155,577, 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. During the period October 1, 2008 to January 31, 2009, FIMCO has voluntarily waived $104,480 in advisory fees to limit the Fund’s overall expense ratio to .80% on Class A shares and 1.55% on Class B shares. During the period February 1, 2009 to September 30, 2009, FIMCO has voluntarily waived $550,739 in advisory fees to limit the Fund’s over all expense ratio to .60% on Class A shares and 1.35% on Class B shares. In addition, FIMCO has voluntarily waived $25,080 in advisory fees to prevent a negative yield on the Fund's 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, 2009, FIMCO has voluntarily waived $450,716 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, 2009, FIMCO has voluntarily waived $507,359 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. For the year ended September 30, 2009, 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.
156 |
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.
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, 2009, 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, 2009, 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, 2009, total advisory fees accrued to FIMCO by the Income Funds and Equity Funds were $7,706,924 and $19,062,823, respectively, of which $1,792,257 and $446,173, respectively, was voluntarily waived by FIMCO as noted above.
For the year ended September 30, 2009, FIC, as underwriter, received from the Income Funds and Equity Funds $5,550,398 and $17,154,434, respectively, in commissions in connection with the sale of shares of the Funds, after allowing $70,747 and $13,504, respectively, to other dealers. For the year ended September 30, 2009, shareholder servicing costs for the Income Funds and Equity Funds included $2,506,015 and $7,142,349, respectively, in transfer agent fees accrued to ADM and $397,190 and $1,961,346, 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
157 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
the year ended September 30, 2009, total distribution plan fees accrued to FIC by the Income Funds and Equity Funds amounted to $3,182,943 and $8,092,817, respectively.
Wellington Management Company, LLP (“Wellington”) serves as investment subadviser 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. Effective April 24, 2009, Muzinich & Co., Inc., serves as investment subadviser to Fund For Income. 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, 2009, Cash Management Fund held one 144A security with a value of $5,525,210 representing 3.1% of the Fund’s net assets, Investment Grade Fund held nineteen 144A securities with an aggregate value of $69,461,673 representing 20.3% of the Fund’s net assets, Fund For Income held seventy-two 144A securities with an aggregate value of $120,994,065 representing 26.9% of the Fund’s net assets, Total Return Fund held thirteen 144A securities with an aggregate value of $11,907,036 representing 3.5% of the Fund’s net assets. Certain restricted securities are exempt from the registration requirements under Section 4( 2) of the Securities Act of 1933 and may only be sold to qualified investors. Unless otherwise noted, these section 4(2) securities are deemed to be liquid. At September 30, 2009, Cash Management Fund held seven Section 4(2) securities with an aggregate value of $36,993,146 representing 21.0% 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 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—Forward currency contracts are obligations to purchase or sell a specific currency for an agreed-upon price at a future date. When the Global Fund and the International Fund purchase or sell foreign securities they may enter into a forward currency contract to minimize foreign exchange risk
158 |
between the trade date and the settlement date of such transactions. The Funds could be exposed to risk if counter parties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. Forward currency contracts are “marked-to-market” daily at the applicable translation rate and the resulting unrealized gains or losses are reflected in the Fund’s assets.
The Global Fund has the following forward currency contracts outstanding at September 30, 2009:
Contracts to Buy | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Gain | |||||||
30,806,059 | Japanese Yen | US | $ 342,673 | 10/2/09 | US | $ 1,395 | ||||
Contracts to Sell | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Loss | |||||||
235,341 | Euro | US | $ 342,915 | 10/1/09 | US | $ (1,085 | ) | |||
190,462 | Euro | 277,521 | 10/2/09 | (878 | ) | |||||
$ 620,436 | $ ( 1,963 | ) | ||||||||
Net Unrealized Loss on Forward Currency Contracts | $ (568 | ) |
The International Fund had no forward currency contracts outstanding at September 30, 2009.
7. Foreign Exchange Contracts—The Global Fund and the International Fund may enter into foreign exchange contracts for the purchase or sell of foreign currencies at negotiated rates at future dates. These contracts are considered derivative instruments and are used to decrease exposure to foreign exchange risk associated with foreign currency denominated securities held by the Funds. The Funds 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. Foreign exchange contracts are “marked-to-market” daily at the applicable translation rate and the resulting unrealized gains and losses are reflected in the Fund’s assets.
159 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
The Global Fund had no foreign exchange contracts open at September 30, 2009.
The International Fund had the following foreign exchange contracts open at September 30, 2009:
Contracts to Buy | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss | ) | ||||||
9,071,000 | British Pound | US $ | 15,161,214 | 12/7/09 | US$ | (653,417 | ) | |||
5,494,000 | Swiss Franc | 5,160,536 | 12/7/09 | 134,120 | ||||||
5,299,000 | Brazilian Real | 2,723,990 | 12/7/09 | 250,303 | ||||||
4,764,000 | Euro | 6,777,814 | 12/7/09 | 185,775 | ||||||
$ | 29,823,554 | $ (83,219 | ) | |||||||
Contracts to Sell | Unrealized | |||||||||
Foreign Currency | In Exchange for | Settlement Date | Gain (Loss | ) | ||||||
9,071,000 | British Pound | US $ | 14,729,208 | 12/7/09 | $ 221,412 | |||||
5,494,000 | Swiss Franc | 5,066,929 | 12/7/09 | (227,727 | ) | |||||
5,299,000 | Brazilian Real | 2,588,907 | 12/7/09 | (385,386 | ) | |||||
4,764,000 | Euro | 6,646,809 | 12/7/09 | (316,780 | ) | |||||
2,588,000 | British Pound | 4,158,580 | 3/29/10 | 19,435 | ||||||
2,148,000 | Swiss Franc | 2,085,801 | 3/29/10 | 15,739 | ||||||
1,799,000 | Euro | 2,632,549 | 3/29/10 | 2,931 | ||||||
$ | 37,908,783 | $(670,376 | ) | |||||||
Net Unrealized Loss on Foreign Exchange Contracts | $(753,595 | ) |
Fair Value of Derivative Instruments—The fair value of derivative instruments as of September 30, 2009, was as follows:
Assets Derivatives | Liability Derivatives | ||||
Derivatives not accounted | Statements of | Statements of | |||
for as hedging instruments | Assets and | Assets and | |||
under Statement 133 | Liabilities Location | Value | Liabilities Location | Value | |
Foreign exchange contracts: | Unrealized | Unrealized | |||
appreciation of | depreciation of | ||||
foreign exchange | foreign exchange | ||||
contracts | $829,715 | contracts | $1,583,310 |
160 |
The effect of derivative instruments on the Statement of Operations are as follows:
Amount of Realized Gain or Loss Recognized on Derivatives | ||
Derivatives not accounted | Net Realized Gain (Loss) | |
for as hedging instruments | on Foreign Currency | |
under Statement 133 | Transactions | |
Foreign currency transactions: | $2,128,685 | |
Amount of Change in Unrealized Gain or Loss Recognized on Derivatives | ||
Derivatives not accounted | Net Unrealized Appreciation | |
for as hedging instruments | (Depreciation) on Foreign | |
under Statement 133 | Currency Transactions | |
Foreign currency transactions: | $(1,846,398) |
8. 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 anoth er First Investors eligible Fund or through the reinvestment of dividends on Class B shares and are generally subject to a contingent deferred sales charge at the rate of 4% in the first year and declining to 0% over a six-year period, which is payable to FIC as underwriter of the Trusts. The Class A and Class B shares sold by the other Funds have a public offering price that reflects different sales charges and expense levels. Class A shares are sold with an initial sales charge of up to 5.75% of the amount invested and together with the Class B shares are subject to distribution plan fees as described in Note 3. Class B shares are sold without an initial sales charge, but are generally subject to a contingent deferred sales charge which declines in steps from 4% to 0% over a six-year period. Class B shares automatically convert into Class A shares after eight years. Realized and unrealized gains or losses, investment income and expenses (other than distribution plan fees) are allocated daily to each class of shares based upon the relative proportion of net assets to each class.
161 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
9. Tax Components of Capital and Distributions to Shareholders—The tax character of distributions declared for the years ended September 30, 2009 and September 30, 2008 were as follows:
Year Ended September 30, 2009 | Year Ended September 30, 2008 | |||||||||||||||||||
Distributions | Distributions | |||||||||||||||||||
Declared from | Declared from | |||||||||||||||||||
Long-Term | Long-Term | |||||||||||||||||||
Ordinary | Capital | Ordinary | Capital | |||||||||||||||||
Fund | Income | Gain | Total | Income | Gain | Total | ||||||||||||||
Cash Management | $ | 1,221,501 | $ | — | $ | 1,221,501 | $ | 6,356,325 | $ | — | $ | 6,356,325 | ||||||||
Government | 11,450,320 | — | 11,450,320 | 9,942,189 | — | 9,942,189 | ||||||||||||||
Investment Grade | 16,490,040 | — | 16,490,040 | 15,368,301 | — | 15,368,301 | ||||||||||||||
Fund For Income | 37,601,065 | — | 37,601,065 | 40,732,558 | — | 40,732,558 | ||||||||||||||
Total Return | 7,706,089 | — | 7,706,089 | 12,765,632 | 3,653,912 | 16,419,544 | ||||||||||||||
Value | 5,446,744 | — | 5,446,744 | 6,281,771 | — | 6,281,771 | ||||||||||||||
Blue Chip | 3,927,472 | — | 3,927,472 | 3,911,115 | — | 3,911,115 | ||||||||||||||
Growth & Income | 7,540,914 | 451,328 | 7,992,242 | 16,175,556 | 974,897 | 17,150,453 | ||||||||||||||
Global | 1,753,828 | — | 1,753,828 | 21,687,345 | 21,913,513 | 43,600,858 | ||||||||||||||
Select Growth | — | — | — | 6,649,469 | 31,600,230 | 38,249,699 | ||||||||||||||
Opportunity | 1,730,190 | 9,486,577 | 11,216,767 | 8,679,957 | 38,812,604 | 47,492,561 | ||||||||||||||
Special Situations | 317,507 | 7,042,111 | 7,359,618 | 8,020,760 | 7,718,950 | 15,739,710 | ||||||||||||||
International | 1,508,594 | — | 1,508,594 | 2,770,292 | — | 2,770,292 |
As of September 30, 2009, 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 | $ | 121,938 | $ | (7,490,387 | ) | $ | — | $ | 9,442,431 | $ | 2,073,982 | |||||||
Investment Grade | 408,155 | (34,032,850 | ) | (9,600,036 | ) | 22,738,194 | (20,486,537 | ) | ||||||||||
Fund For Income | 2,374,309 | (167,702,831 | ) | (113,933,907 | ) | (18,666,888 | ) | (297,929,317 | ) | |||||||||
Total Return | 862,225 | (5,168,651 | ) | (7,580,725 | ) | 17,468,562 | 5,581,411 | |||||||||||
Value | 856,063 | (39,572,144 | ) | (4,940,695 | ) | 7,963,003 | (35,693,773 | ) | ||||||||||
Blue Chip | 1,394,468 | (97,578,186 | ) | (7,180,936 | ) | 49,628,849 | (53,735,805 | ) | ||||||||||
Growth & Income | 28,284 | (8,796,265 | ) | (12,653,470 | ) | 15,256,151 | (6,165,300 | ) | ||||||||||
Global | — | (18,998,989 | ) | (41,623,549 | ) | 33,496,715 | (27,125,823 | ) | ||||||||||
Select Growth | — | (50,114,227 | ) | (55,283,782 | ) | 19,253,600 | (86,144,409 | ) | ||||||||||
Opportunity | — | (4,904,349 | ) | (19,381,501 | ) | 19,996,523 | (4,289,327 | ) | ||||||||||
Special Situations | — | (12,205,466 | ) | (33,893,325 | ) | 33,586,738 | (12,512,053 | ) | ||||||||||
International | 255,140 | (21,176,305 | ) | (20,992,081 | ) | 8,999,807 | (32,913,439 | ) |
* Differences between book distributable earnings and tax distributable earnings consist primarily of wash sales, passive foreign investment companies, real estate investment trusts and amortization of bond premium.
162 |
Other accumulated losses consist primarily of post-October loss deferrals.
For the year ended September 30, 2009, 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 | $ (1,699,619 | ) | $ 535,724 | $ 1,163,895 | |||||||
Investment Grade | (1,715,940 | ) | 1,850,694 | (134,754 | ) | ||||||
Fund For Income | (13,810,649 | ) | 1,765,836 | 12,044,813 | |||||||
Total Return | — | 474,132 | (474,132 | ) | |||||||
Value | — | (272,814 | ) | 272,814 | |||||||
Growth & Income | — | (83,353 | ) | 83,353 | |||||||
Global | (1,037,986 | ) | 979,473 | 58,513 | |||||||
Select Growth | (928,492 | ) | 928,492 | — | |||||||
Opportunity | (9,132 | ) | (48,813 | ) | 57,945 | ||||||
Special Situations | 54,747 | (54,747 | ) | — | |||||||
International | 2,413 | 2,394,619 | (2,397,032 | ) |
10. U.S. Treasury’s Temporary Guarantee Program for Money Market Funds— The Board approved the Cash Management Fund’s participation in the U.S. Department of the Treasury’s Temporary Guarantee Program for Money Market Funds (the “Program”) through December 18, 2008, which has subsequently been extended twice through April 30, 2009 and September 18, 2009, respectively. The Program was designed to protect shareholders of the Cash Management Fund as of September 18, 2008, against the risk of loss in the event that the Cash Management Fund net asset value falls below $0.995. The fee paid to the U.S. Treasury to participate in the initial three-month stage of the Program, which expired on December 18, 2008, was 0.01% of the net asset value of the Cash Management Fund as of September 18, 2008. The fee paid to participate in each extension was 0.015% of the net asset s value of the Cash Management Fund on September 18, 2008. The fees were borne by the Cash Management Fund without regard to any expenses limitation currently in effect for the Cash Management Fund. The Program terminated on September 18, 2009.
163 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2009
11. New Accounting Pronouncements—In accordance with the provision set forth in ASC 855 “Subsequent Events” (“ASC 855”), formerly known as Financial Accounting Standards No. 165, “Subsequent Events”, Management has evaluated the possibility of subsequent events existing in the Funds’ financial statements through November 25, 2009. Management has determined that there are no subsequent events that, in accordance with ASC 855, would need to be disclosed in the Fund’s financial statements through this date.
164 |
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165 |
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, 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 (Loss) | Rate | |||||||||||||||||
CASH MANAGEMENT FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
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 | — | ||||||||||||||||
2009 | 1.00 | .005 | — | .005 | .005 | — | .005 | 1.00 | .54 | 172 | .71 | .71 | .58 | 1.03 | .26 | — | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | — | ||||||||||||||||
2009 | 1.00 | .001 | — | .001 | .001 | — | .001 | 1.00 | .14 | 3 | 1.13 | 1.13 | .16 | 1.78 | (.49 | ) | — | |||||||||||||||
GOVERNMENT FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||
2009 | 10.76 | .47 | .44 | .91 | .47 | — | .47 | 11.20 | 8.59 | 287 | 1.10 | 1.10 | 4.03 | 1.26 | 3.87 | 43 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||
2009 | 10.76 | .39 | .43 | .82 | .39 | — | .39 | 11.19 | 7.75 | 13 | 1.80 | 1.80 | 3.33 | 1.96 | 3.17 | 43 |
166 | 167 |
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 | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 8.23 | .49 | .85 | 1.34 | .47 | — | .47 | 9.10 | 17.06 | 325 | 1.10 | 1.10 | 5.29 | 1.27 | 5.12 | 79 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 8.22 | .44 | .85 | 1.29 | .40 | — | .40 | 9.11 | 16.35 | 16 | 1.80 | 1.80 | 4.59 | 1.97 | 4.42 | 79 | ||||||||||||||||
INCOME FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 2.45 | .20 | (.13 | ) | .07 | .20 | — | .20 | 2.32 | 4.28 | 438 | 1.38 | 1.38 | 9.10 | 1.42 | 9.06 | 73 | |||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 2.45 | .19 | (.13 | ) | .06 | .18 | — | .18 | 2.33 | 3.75 | 12 | 2.08 | 2.08 | 8.40 | 2.12 | 8.36 | 73 |
* Calculated without sales charges.
** Net of expenses waived or assumed by the investment adviser (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 1H).
168 | See notes to financial statements | 169 |
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 | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 13.24 | .30 | .03 | .33 | .32 | — | .32 | 13.25 | 2.77 | 316 | 1.43 | 1.43 | 2.35 | N/A | N/A | 53 | ||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 13.03 | .21 | .03 | .24 | .23 | — | .23 | 13.04 | 2.10 | 21 | 2.13 | 2.13 | 1.65 | N/A | N/A | 53 | ||||||||||||||||
VALUE FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 6.65 | .11 | (.64 | ) | (.53 | ) | .11 | — | .11 | 6.01 | (7.81 | ) | 308 | 1.48 | 1.48 | 2.14 | N/A | N/A | 15 | |||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 6.55 | .08 | (.64 | ) | (.56 | ) | .07 | — | .07 | 5.92 | (8.43 | ) | 12 | 2.18 | 2.18 | 1.44 | N/A | N/A | 15 |
170 | 171 |
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 | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 20.48 | .21 | (1.95 | ) | (1.74 | ) | .20 | — | .20 | 18.54 | (8.36 | ) | 357 | 1.57 | 1.57 | 1.27 | N/A | N/A | 11 | |||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 19.07 | .09 | (1.82 | ) | (1.73 | ) | .09 | — | .09 | 17.25 | (9.00 | ) | 18 | 2.27 | 2.27 | .57 | N/A | N/A | 11 | |||||||||||||
GROWTH & INCOME FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 13.00 | .09 | (1.02 | ) | (0.93 | ) | .14 | .02 | .16 | 11.91 | (6.93 | ) | 578 | 1.51 | 1.51 | .90 | N/A | N/A | 26 | |||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 12.30 | .01 | (.97 | ) | (.96 | ) | .10 | .02 | .12 | 11.22 | (7.59 | ) | 30 | 2.21 | 2.21 | .20 | N/A | N/A | 26 |
172 | 173 |
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 | Distributions | Net Asset | Assets** | Waived or Assumed | ||||||||||||||||||||||||||||
Value, | Investment | and Unrealized | Total from | Net | Net | in Excess of | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | |||||||||||||||||||||
Beginning | Income | Gain (Loss) on | Investment | Investment | Realized | Net Investment | Total | End of | Total | End of Year | After Fee | Before Fee | Investment | Investment | Turnover | |||||||||||||||||||
of Year | (Loss) | Investments | Operations | Income | Gain | Income | Distributions | Year | Return* | (in millions) | Credits | Credits(a) | Income (Loss) | Expenses | Income (Loss) | Rate | ||||||||||||||||||
GLOBAL FUND | ||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||
2009 | 5.75 | .02 | — | .02 | .02 | — | .02 | .04 | 5.73 | .53 | 249 | 1.90 | 1.90 | .38 | 1.93 | .35 | 141 | |||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||
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 | |||||||||||
2009 | 5.09 | (.03 | ) | — | (.03 | ) | .01 | — | .02 | .03 | 5.03 | (.37 | ) | 7 | 2.60 | 2.60 | (.32 | ) | 2.63 | (.35 | ) | 141 | ||||||||||||
SELECT GROWTH FUND†† | ||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||
2009 | 6.69 | (.02 | ) | (1.34 | ) | (1.36 | ) | — | — | — | — | 5.33 | (20.33 | ) | 170 | 1.67 | 1.67 | (.51 | ) | N/A | N/A | 120 | ||||||||||||
Class B | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||
2009 | 6.25 | (.06 | ) | (1.25 | ) | (1.31 | ) | — | — | — | — | 4.94 | (20.96 | ) | 10 | 2.37 | 2.37 | (1.21 | ) | N/A | N/A | 120 |
174 | 175 |
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 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||
2009 | 22.99 | .01 | (1.61 | ) | (1.60 | ) | — | .63 | .63 | 20.76 | (6.24 | ) | 355 | 1.58 | 1.58 | .09 | N/A | N/A | 35 | |||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | |||||||||||
2009 | 20.41 | (.10 | ) | (1.47 | ) | (1.57 | ) | — | .63 | .63 | 18.21 | (6.90 | ) | 23 | 2.28 | 2.28 | (.61 | ) | N/A | N/A | 35 | |||||||||||
SPECIAL SITUATIONS FUND | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
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 | |||||||||||||
2009 | 20.15 | .03 | (1.23 | ) | (1.20 | ) | .02 | .53 | .55 | 18.40 | (5.28 | ) | 246 | 1.64 | 1.64 | .22 | 1.82 | .04 | 55 | |||||||||||||
Class B | ||||||||||||||||||||||||||||||||
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 | ||||||||||
2009 | 17.81 | (.10 | ) | (1.09 | ) | (1.19 | ) | — | .53 | .53 | 16.09 | (5.99 | ) | 9 | 2.34 | 2.34 | (.48 | ) | 2.52 | (.66 | ) | 55 |
176 | 177 |
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 | |||||||||||||
2009 | 9.48 | .29 | (.74 | ) | (.45 | ) | .13 | — | .13 | 8.90 | (4.52 | ) | 108 | 2.20 | 2.20 | 1.16 | N/A | N/A | 60 | |||||||||||||
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 | ||||||||||
2009 | 9.33 | .22 | (.72 | ) | (.50 | ) | .12 | — | .12 | 8.71 | (5.19 | ) | 3 | 2.90 | 2.90 | .46 | N/A | N/A | 60 |
* 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.
178 | See notes to financial statements | 179 |
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, 2009, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years then ended, and the financial highlights for each of the periods indicated therein. 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 o f September 30, 2009, 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.
180 |
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, 2009, and the results of their operations for the year then ended, changes in their net assets for each of the two years then ended, and their financial highlights for the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America.
Tait, Weller & Baker LLP |
Philadelphia, Pennsylvania
November 25, 2009
Board Considerations of Advisory Contracts and Fees
(unaudited)
FIRST INVESTORS INCOME FUNDS
I. Annual Consideration of the Investment Advisory Agreement
At a meeting held on May 21, 2009 (“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. (“FIM-CO”) 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, that included, among other things: (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 furnished, and the Board co nsidered, information concerning various 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 statements of certain publicly-traded mutual fund as set 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.
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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. The Board did not identify any single factor as being of paramount importance in reaching its conclusions and determinations with respect to the continuance of the Advisory Agreement for each Fund. Although not meant to be all-inclusive, the following describes some of the factors that were considered by the Board in deciding 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 Board 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 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; and (6) the
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implementation of Board directives as they relate to the Funds. The Board noted that FIMCO provides not only advisory services but certain administrative 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 providing significant incentives to portfolio managers and analysts based on Fund performance, and FIMCO’s willingness to make changes in portfolio managers and sub-advisers, such as the recent hiring of Muzinich & Co., Inc. (“Muzinich”) as sub-adviser to the Fund For Income. In addition, the Board considered information regarding the overall financial strength of FIMCO and its affiliates and the resources and staffing in place with respect to the services provided to the Funds in light of the current market environment.
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, 2009 (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 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
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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 Government Fund and Cash Management Fund fell within one of the top three quintiles for at least one of the performance periods provided by Lipper. With respect to the performance of the Investment Grade Fund, although the performance of the Fund did not fall within one of the top three quintiles for at least one of the performance periods provided by Lipper, the Fund’s performance had improved during the year-to-date period and fell within one of the top three quintiles for such year-to-date period. In addition, the Board considered that, in order to improve the performance of the Fund For Income, it had approved, based on FIMCO’s recommendation, the recent hiring of Muzinich as sub-adviser to the Fund For Income, which had previously been managed by an internal portfolio management team at FIMCO. 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 investment 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. 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 Cash Management Fund, did not fall within one of the first three quintiles of its respective Peer Group. The Board considered that FIMCO informed the Board that it intends to: (i) extend, on a voluntary basis, the existing total expense cap limitation for the
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Cash Management Fund through May 31, 2010; (ii) extend, on a voluntary basis, the existing management fee cap for the Fund For Income through May 31, 2010; and (iii) waive management fees, on a voluntary basis, above 55 basis points for the Government Fund and Investment Grade Fund from the date that their existing total expense cap agreements expire until May 31, 2010. The Board also considered that, with respect to the Cash Management Fund, FIMCO is currently waiving additional management fees to maintain total expense levels below the total expense cap for such Fund due to the low interest rate environment. With respect to the Government Fund and Investment Grade Fund, the Board considered FIMCO’s explanation for capping their management fees rather than their total expenses and the resulting increase in expense ratio of such a change.
The Board also reviewed the information compiled by Lipper comparing each Fund’s Class A share total expense ratio, 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 seeks 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) the custodial fees for shareholders who invest in the Funds through reti rement accounts are paid by the Funds and are reflected in the Funds’ total expense ratio, and a significant majority of the shares of the Funds, 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 Board also noted that Lipper expense data is based upon historical information taken from each fund’s most recent annual report and, as a result of the dramatic decline in mutual fund assets on an industry-wide basis during the fourth quarter of 2008, is based on asset levels that may be higher than the level currently existing for most funds. While recognizing the limitations inherent in Lipper’s methodology and that current expense ratios may increase as assets decline, the Board believed that the data provided by Lipper was a generally appropriate measur e of comparative expenses.
The foregoing comparisons assisted the Trustees by providing them with a basis for evaluating each Fund’s management fee and expense ratio on a relative basis.
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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, 2008, 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 publicly-traded mutual fund asset managers as analyzed by FIMCO based on publicly available financial statements. In reviewing the profitability information, the Board 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 Board acknowledged that, as a business matter, FIMCO was entitled to earn reasonable profits for its services to the Funds.
Economies of Scale. With respect to whether economies of scale are realized by FIMCO as a Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fee rates charged, the Board considered that the Advisory Agreement fee schedule for each Fund, except the Cash Management Fund, includes breakpoints to account for management economies of scale. The Board noted that the 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 the Government Fund and Investment Grade Fund, the Board recognized that, although these Funds are not currently at an asset level 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 increase, economies of scale may be sh ared for the benefit of shareholders. With respect to the 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 the profits earned or losses incurred by ADM and the income received by FIC and FIMCO’s affiliated bank as a result of FIMCO’s management of the First Investors funds.
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In summary, after evaluation of the comparative performance, fee and expense information and the profitability, ancillary benefits and other considerations as described above, and in light of the nature, extent and quality of services to be provided by FIMCO, the Board concluded that the level of fees paid to FIMCO with respect to each Fund is reasonable. As a result, the Board, including a majority of the independent Trustees, approved the Advisory Agreement with each Fund.
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Board Considerations of Advisory Contracts and Fees (continued)
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II. Initial Consideration of the Subadvisory Agreement with Muzinich & Co., Inc. for the Fund For Income
On April 23, 2009, the Board, including a majority of the non-interested Trustees (“Independent Trustees”), approved a Subadvisory Agreement (the “Agreement”) among the First Investors Fund For Income (the “Fund”), a series of First Investors Income Funds, First Investors Management Company, Inc. (“FIMCO”) and Muzinich & Co., Inc. (“Muzinich”). The Agreement also applied to another high yield fund within the First Investors Fund Family.
FIMCO’s recommended that the Board approve the appointment of Muzinich as subadviser to the Fund to improve the consistency of the performance of the Fund and address the fact that the aggregate assets managed by FIMCO in the high yield sector had declined to the point that maintaining an internal management team was no longer cost effective. As of March 31, 2009, Muzinich had more than $3.3 billion of assets under management and extensive experience in managing high-yield and investment grade bond portfolios similar to those of the Fund.
In reaching its decision, the Board considered several factors when evaluating Muzinich and in approving the Agreement, including Muzinich’s experience in managing U.S. dollar denominated high yield bonds (“U.S. high yield bonds”) and high yield bond portfolios, the past performance of accounts managed by Muzinich with a similar investment mandate as the Fund, its overall capabilities to perform the services under the Agreement and its willingness to perform those services for the Fund. A discussion of the factors relating to the Board’s appointment of Muzinich as subadviser to the Fund and approval of the Agreement and subadvisory fee to be paid by FIMCO to Muzinich follows.
Nature, extent, and quality of the services to be provided by Muzinich
The Board considered Muzinich’s investment process, its experience in managing portfolios of U.S. high yield bonds, and the experience and capabilities of the personnel who will be responsible for the management of the Fund. In addition, the Board considered the differences between Muzinich’s investment strategy compared to that of the FIMCO portfolio managers who were managing the Fund at the time. The Board also took into consideration FIMCO’s belief that Muzinich’s approach to investing in U.S. high yield bonds would reduce the risk profile of the portfolio of the Fund and improve the relative performance for Fund shareholders when the high yield market is performing poorly. The Board also considered Muzinich’s plan for transitioning the Fund’s portfolio over time and its sell side discipline. In addition, the Board considered Muzinich’s investment resources, infrastructure and the adequacy of its compliance program. Ba sed on this
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information, the Board concluded that the nature, extent and quality of the subadvisory services to be provided by Muzinich were appropriate for the Fund in light of its investment objective, and, thus, supported a decision to approve the Agreement.
Investment Performance of Muzinich
The Board evaluated Muzinich’s historical investment performance record in managing assets utilizing a U.S. high yield bond mandate. In this regard, the Board evaluated the performance of Muzinich’s U.S. High Yield Composite (the “Composite”) with the performance of the Merrill Lynch BB/B Index and Merrill Lynch High Yield Index (each, an “Index”) and the average performance of the applicable Lipper peer group for the three-, five- and 10-year periods ending December 31, 2008, as well as the annual performance for each of 2004 through 2008 and year-to-date performance through March 31, 2009. The Board noted that the performance of the Composite was better than the performance of each Index and the Lipper peer group for most of the periods presented. The Trustees concluded that the historical investment performance record of Muzinich supported approval of the Agreement.
Subadvisory Fees
In evaluating the Agreement, the Board reviewed Muzinich’s proposed subadvisory fee schedule. The Board considered that Muzinich represented to FIMCO that the fee to be paid by FIMCO under the Agreement is competitive with the fees Muzinich charges any other fund or separate account client for a similar investment mandate. The Trustees concluded that Muzinich’s subadvisory fees under the Agreement appeared to be within a reasonable range for the services to be provided to the Fund.
Costs of the services to be provided and profits to be realized by Muzinich and its affiliates from the relationship with the Fund
Since the subadvisory relationship with Muzinich is new, the Board did not consider the costs of the services to be provided and profits to be realized by Muzinich and its affiliates from the relationship with the Fund. The Trustees did consider, however, FIMCO’s representation that FIMCO did not anticipate any material change to its profitability as a result of the hiring of Muzinich.
Extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale for the benefit of Fund investors
The Board considered that the fees to be paid to Muzinich under the Agreement are to be paid by FIMCO and not the Fund, and noted that FIMCO negotiated “breakpoints” in Muzinich’s fees based on the levels of assets in the Fund. The Board also considered that the investment management agreement fee schedule with FIMCO for the Fund includes
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Board Considerations of Advisory Contracts and Fees (continued)
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breakpoints so that, to the extent that assets of the Fund grow, certain management economies of scale may be shared for the benefit of shareholders.
Benefits to be derived by Muzinich from the relationship with the Fund
The Board considered the “fall-out” or ancillary benefits that may accrue to Muzinich as a result of the subadvisory relationship with the Fund, including access to the U.S. mutual fund marketplace with respect to the subadviser’s investment process and expanding the level of assets under management by Muzinich. The Board also noted that Muzinich does not participate in any soft dollar arrangements with any parties. After review of this information, the Trustees concluded that the potential benefits accruing to Muzinich by virtue of its relationship with the Funds appeared to be reasonable.
Other
The Trustees considered the selection and due diligence process employed by FIM-CO in deciding to recommend Muzinich as subadviser to the Funds and also considered FIMCO’s conclusion that the fees to be paid to Muzinich for its services to the Funds are reasonable and appropriate in light of the nature and quality of services to be provided by Muzinich and the reasons supporting that conclusion. The Trustees concluded that FIMCO’s recommendations and conclusions supported approval of the Agreement with Muzinich.
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The Board did not identify any single factor as being of paramount importance and different Trustees may have given different weights to different factors. In summary, based on the various considerations described above, the Trustees, including a majority of the Independent Trustees, concluded that the proposed subadvisory fee for each Fund is reasonable and that the approval of the Agreement is in the best interests of each Fund and its shareholders, and as a result approved the Agreement.
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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 21, 2009 (“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. (“FIM-CO”) 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 th e 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 company data, that included, among other things: (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
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Board Considerations of Advisory Contracts and Fees (continued)
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independent Trustees in connection with the May Meeting, FIMCO furnished, and the Board considered, information concerning various 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 co mparative profitability information based on analysis performed by FIMCO of the financial statements of certain publicly-traded mutual fund asset managers. In addition to evaluating, among other things, the written information provided by FIMCO, the Board also evaluated the answers to questions posed by the Board to representatives of FIMCO at the May Meeting.
In addition, in response to specific requests from the independent Trustees in connection with the May Meeting, WMC, Paradigm, Smith Group and Vontobel furnished, and the Board reviewed, information concerning various 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 Von-tobel 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 or compared to their standard fee schedule, 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 V ontobel as a result of the relationship with each applicable Sub-Advised 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.
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Based on all of the information presented, the Board, including a majority of its independent Trustees, determined on a Fund-by-Fund basis that the fees charged under the Advisory Agreement and each Sub-Advisory Agreement are reasonable in relation to the services that are provided under each Agreement. The Board did not identify any single factor as being of paramount importance in reaching its conclusions and determinations with respect to the continuance of the Advisory Agreement for each Fund and Sub-Advisory Agreements. Although not meant to be all-inclusive, the following describes some of the factors that were considered by the Board in deciding 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 Board 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 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 Board noted that FIMCO provides not only advisory services but certain administrative 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 providing significant incentives to
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portfolio managers and analysts based on Fund performance, and FIMCO’s willingness to make changes in portfolio managers and sub-advisers. In addition, the Board considered information regarding the overall financial strength of FIMCO and its affiliates and the resources and staffing in place with respect to the services provided to the Funds in light of the current market environment.
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 Board 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. In light of the current market environment, the Board also considered information regarding the resources and staffing in place with respect to the services provided by each sub-adviser.
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 Board 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, 2009 (the “year-to-date period”). With regard to the performance information, the Board considered the performance
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of each Fund on a percentile and quintile basis as compared to its Peer Group. For purposes of the performance 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.
On a Fund-by-Fund basis, the performance reports indicated, and the Board noted, that each Fund fell within one of the top three quintiles for at least one of the performance periods provided by Lipper. The Board also 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 investment 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 appl icable Peer Group with the highest management fee.
Based on the data provided on management fee rates, on a Fund-by-Fund basis, the Board noted that: (1) the contractual management fee rate for each Fund, except the Growth & Income Fund and 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, Total Return Fund, Value Fund and Global Fund, was in one of the top three quintiles of its respective Peer Group. The Board also considered that FIMCO informed the Board that it intends to extend, on a voluntary basis, the existing management fee caps for the Special Situations Fund and Global Fund until May 31, 2010.
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 than each Fund paying WMC, Paradigm, Smith Group or Vontobel a fee directly. WMC, Paradigm,
195 |
Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS EQUITY FUNDS
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 their 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 Class A share total expense ratio, taking into account FIMCO’s expense waivers (as applicable), and the ratio of the sum of actual management and other non-management fees (i.e., fees other than management, transfer agency and 12b-1/non-12b-1 fees) to other funds in its Peer Group, including on a quintile basis. In considering the level of the total expense ratio and the ratio of the sum of actual management and other non-management fees, the Board took into account management’s explanation that: (i) the Funds have average account sizes that are relatively small compared with the industry average for equity funds; (ii) there are significant costs involved in providing the level of personal service that the First Investors fund complex seeks to deliver to its shareholders; (iii) the custodial fees for shareholders who invest in the Funds through retirement account s are paid by the Funds and are reflected in the Funds’ total expense ratio, and a significant majority of the shares of the Funds are held in retirement accounts; and (iv) Lipper expense 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 Board also noted that Lipper expense data is based upon historical information taken from each fund’s most recent annual report and, as a result of the dramatic decline in mutual fund assets on an industry-wide basis during the fourth quarter of 2008, is based on asset levels that may be higher than the level currently existing for most funds. While recognizing the limitations inherent in Lipper’s methodology and that current expense ratios may increase as assets decline, the Board believed that the data provided by Lipper was a generally appropriate measure of comparative expenses.
The foregoing comparisons assisted the Trustees by providing them with a basis for evaluating each Fund’s management fee and expense ratio on a relative basis.
Profitability. The Board reviewed the materials it received from FIMCO regarding its revenues and costs in providing investment management and certain administrative
196 |
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, 2008, 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 publicly-traded mutual fund asset managers as analyzed by FIMCO based on publicly available financial statements. In reviewing the profitability information, the Board 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 Board 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, Blue Chip Fund, Opportunity Fund and Special Situations Fund have each reached an asset size at which the Fund and its shareholders are benefiting from reduced management fee rates due to breakpoints in their respective fee schedules. With regard to the Total Return Fund, Value Fund, Select Growth Fund, Global Fund and International Fund, the Board recognized that, although these Funds are not currently at an asset level 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 increase, 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 the profits earned or losses incurred by ADM and the income received by FIC and FIMCO’s aff iliated bank as a result of FIMCO’s management of the First Investors funds.
* * * |
197 |
Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS EQUITY 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.
198 |
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 | 39 | 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 | 39 | None | |||||||||||
c/o First Investors | 1/1/06 | and Senior Vice | |||||||||||||
Management Company, Inc. | President of Real | ||||||||||||||
110 Wall Street | Time Energy So- | ||||||||||||||
New York, NY 10005 | lutions, Inc. since | ||||||||||||||
2005; Founder/ | |||||||||||||||
Owner of SLG, | |||||||||||||||
Inc. since 2005; | |||||||||||||||
Senior Vice | |||||||||||||||
President of | |||||||||||||||
Pepco Energy | |||||||||||||||
Services (North- | |||||||||||||||
east Division) | |||||||||||||||
from 2003-2006; | |||||||||||||||
Founder/Owner | |||||||||||||||
and President of | |||||||||||||||
North Atlantic | |||||||||||||||
Utilities, Inc. | |||||||||||||||
from 1987-2003 | |||||||||||||||
Robert M. Grohol 1932 | Trustee since | None/Retired | 39 | None | |||||||||||
c/o First Investors | 8/18/05; | ||||||||||||||
Management Company, Inc. | Director/Trustee | ||||||||||||||
110 Wall Street | of predecessor | ||||||||||||||
New York, NY 10005 | funds since | ||||||||||||||
6/30/00 |
199 |
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 | |||||||||||
DISINTERESTED TRUSTEES (continued) | |||||||||||||||
Arthur M. Scutro, Jr. 1941 | Trustee since | None/Retired | 39 | None | |||||||||||
c/o First Investors | 1/1/06 | ||||||||||||||
Management Company, Inc. | |||||||||||||||
110 Wall Street | |||||||||||||||
New York, NY 10005 | |||||||||||||||
Robert F. Wentworth 1929 | Trustee since | None/Retired | 39 | None | |||||||||||
c/o First Investors | 8/18/05; | ||||||||||||||
Management Company, Inc. | Director/Trustee | ||||||||||||||
110 Wall Street | of predecessor | ||||||||||||||
New York, NY 10005 | funds since | ||||||||||||||
10/15/92 |
200 |
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, Of- | 39 | None | |||||||||||
c/o First Investors | President since | ficer and Director | |||||||||||||
Management Company, Inc. | 8/18/05; Direc- | of First Investors | |||||||||||||
Raritan Plaza I | tor/Trustee of | Corporation; | |||||||||||||
Edison, NJ 08837 | predecessor funds | First Investors | |||||||||||||
since 3/17/94; | Consolidated | ||||||||||||||
President of | Corporation; | ||||||||||||||
predecessor funds | First Investors | ||||||||||||||
since 2001 | Management | ||||||||||||||
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.
201 |
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 | 39 | None | |||||||||||
c/o First Investors | since 8/18/05; | First Investors | |||||||||||||
Management Company, Inc. | Treasurer of | Management | |||||||||||||
Raritan Plaza I | predecessor funds | Company, Inc. | |||||||||||||
Edison, NJ 08837 | since 1988 | ||||||||||||||
Larry R. Lavoie 1947 | Chief | General Counsel | 39 | 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 |
202 |
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
Shareholder Information | ||
Investment Adviser | Underwriter | |
First Investors Management | First Investors Corporation | |
Company, Inc. | 110 Wall Street | |
110 Wall Street | New York, NY 10005 | |
New York, NY 10005 | ||
Subadviser | Custodian | |
(Fund For Income) | The Bank of New York Mellon | |
Muzinich & Co., Inc. | One Wall Street | |
450 Park Avenue | New York, NY 10286 | |
New York, NY 10022 | ||
Subadviser | Custodian | |
(Global Fund) | (Global and International Funds) | |
Wellington Management Company, LLP | Brown Brothers Harriman & Co. | |
75 State Street | 40 Water Street | |
Boston, MA 02109 | Boston, MA 02109 | |
Subadviser | Transfer Agent | |
(Select Growth Fund) | Administrative Data Management Corp. | |
Smith Asset Management Group, L.P. | Raritan Plaza I – 8th Floor | |
100 Crescent Court | Edison, NJ 08837-3620 | |
Dallas, TX 75201 | ||
Subadviser | Independent Registered Public | |
(Special Situations Fund) | Accounting Firm | |
Paradigm Capital Management, Inc. | Tait, Weller & Baker LLP | |
Nine Elk Street | 1818 Market Street | |
Albany, NY 12207 | Philadelphia, PA 19103 | |
Subadviser | Legal Counsel | |
(International Fund) | K&L Gates LLP | |
Vontobel Asset Management, Inc. | 1601 K Street, N.W. | |
1540 Broadway | Washington, DC 20006 | |
New York, NY 10036 |
203 |
A description of the policies and procedures that the Funds use to vote proxies relating to a portfolio’s securities is available, without charge, upon request, by calling 1-800-423-4026, or can be viewed online or downloaded from the Edgar database on the Securities and Exchange Commission’s (SEC) website at http://www.sec.gov. In addition, information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, is available, without charge, upon request in writing or by calling 1-800-423-4026 and on the SEC’s internet website at http://www.sec.gov.
The Funds file their complete schedule of portfolio holdings with the SEC on Form N-Q for the first and third quarters of each fiscal year. The Funds’ Form N-Q is available on the SEC’s website at http://www.sec.gov; and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The schedule of portfolio holdings is also available, without charge, upon request, by calling 1-800-423-4026.
204 |
NOTES
205 |
NOTES
206 |
NOTES
207 |
NOTES
208 |
![](https://capedge.com/proxy/N-CSR/0000886048-09-000026/incomequityfundsx31x1.jpg)
Item 2. Code of Ethics
As of September 30, 2009, 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, 2009, 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
During the reporting period 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, | ||||
----------------- | ||||
2009 | 2008 | |||
-------- | -------- | |||
(a) Audit Fees | ||||
First Investors Equity Funds | $ | 258,200 | $ | 237,000 |
(b) Audit-Related Fees | ||||
First Investors Equity Funds | $ | 0 | $ | 0 |
(c) Tax Fees | ||||
First Investors Equity Funds | $ | 38,250 | $ | 36,000 |
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 meet with the Funds’ independent auditors, including meetings without management representatives, as necessary (i) to review the arrangements for, and scope of, the annual audit, any special audits and any other services to be provided to the Fund’s by the auditors; (ii) to discuss any matters of concern relating to the Fund’s financial statements, including any adjustments to such statements recommended by the auditors, or other results of said audit(s); and (iii) to review the form of opinion the auditors propose to render to the Board and sharedholders;
(g) to receive and consider (i) information and comments from the auditors with respect to the Funds’ accounting and financial reporting policies, procedures and internal control over
financial reporting (including the Funds’ critical accounting policies and practices) and to consider management’s responses to any such comments; (ii) reports from the auditors regarding any material written communications between the auditors and management; and (iii) reports from the auditors regarding all non-audit services provided to any entity in the Funds’ investment complex that were not pre-approved by the Audit Committee or pursuant to pre-approved policies and procedures established by the Audit Committee and associated fees;
(h) to consider the effect upon the Funds of any changes in accounting principals or practices proposed by management or the auditors;
(i) to review and approve the fees proposed to be charged to the Funds by the auditors for each audit and non-audit service;
(j) to receive reports from Fund management in connection with the required certifications on Form N-CSR under the 1940 Act of any significant deficiencies in the design or operation of the Funds’ internal control over financial reporting or material weakness therein and any reported evidence of fraud, whether or not material, involving management or other employees of the Funds who have a significant role in the Funds’ internal control over financial reporting;
(k) to investigate improprieties or suspected improprieties in the Funds’ accounting or financial reporting brought to the attention of the Audit Committee;
(l) to receive and consider reports from attorneys, in accordance with the “Up-the-Ladder” Reporting Policies for attorneys who appear or practice before the Securities and Exchange Commission in the representation of the Funds and in accordance with applicable federal law, and auditors relating to possible material violations of federal or state law or fiduciary duty;
(m) to report its activities to the full Board on a regular basis and to make such recommendations with respect to the above and other matters as the Audit Committee may deem necessary or appropriate;
(n) to meet with the Treasurer of the Funds and, as necessary, with internal auditors, if any, for the management company;
(o) to meet in executive session with the Chief Compliance Officer of the Funds at least annually; and,
(p) to perform such other functions and to have such powers as may be necessary or appropriate in the efficient and lawful discharge of the powers provided in this Charter.
(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, 2009 and 2008 were $82,100 and $83,750 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 9, 2009
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 9, 2009 |