UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-2981
FIRST INVESTORS SPECIAL BOND FUND, INC.
(Exact name of registrant as specified in charter)
95 Wall Street
New York, NY 10005
(Address of principal executive offices) (Zip code)
Joseph I. Benedek
First Investors Management Company, Inc.
581 Main Street
Woodbridge, NJ 07095
1-732-855-2712
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
1-212-858-8000
DATE OF FISCAL YEAR END: DECEMBER 31, 2004
DATE OF REPORTING PERIOD: JUNE 30, 2004
Item 1. Reports to Stockholders
The Semi-Annual Report to Stockholders follows
The words "First Investors" in a box across the top of the page.
FIRST INVESTORS
SPECIAL BOND FUND, INC.
SEMI-ANNUAL REPORT
June 30, 2004
First Investors Logo
The words "A MEMBER OF THE FIRST INVESTORS FINANCIAL NETWORK"
under the First Investors logo.
LIF007
Portfolio of Investments
FIRST INVESTORS SPECIAL BOND FUND, INC.
June 30, 2004
- ---------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ---------------------------------------------------------------------------------------------------------
CORPORATE BONDS--87.6%
Aerospace/Defense--2.0%
$ 150M Alliant Techsystems, Inc., 8.5%, 2011 $ 162,750 $ 77
250M L-3 Communications Corp., 8%, 2008 260,000 122
- ---------------------------------------------------------------------------------------------------------
422,750 199
- ---------------------------------------------------------------------------------------------------------
Automotive--8.2%
225M Accuride Corp., 9.25%, 2008 230,625 108
75M Asbury Automotive Group, Inc., 9%, 2012 76,875 36
594M Cambridge Industries Liquidating Trust++** 1,187 1
500M Collins & Aikman Products Co., 11.5%, 2006 495,000 233
175M Dana Corp., 9%, 2011 205,625 97
500M Special Devices, Inc., 11.375%, 2008 482,500 227
228M TRW Automotive, Inc., 9.375%, 2013 258,210 121
- ---------------------------------------------------------------------------------------------------------
1,750,022 823
- ---------------------------------------------------------------------------------------------------------
Chemicals--8.7%
75M BCP Caylux Holding Lux SCA, 9.625%, 2014+ 78,094 37
150M Equistar Chemicals LP, 10.625%, 2011 167,250 79
100M Huntsman, LLC, 11.625%, 2010 111,000 52
100M IMC Global, Inc., 10.875%, 2013 119,750 56
Lyondell Chemical Co.:
350M 9.625%, 2007 367,500 173
150M 9.5%, 2008 157,125 74
Millennium America, Inc.:
90M 9.25%, 2008 97,200 46
110M 9.25%, 2008+ 118,800 56
675M Resolution Performance Products, LLC, 13.5%, 2010 632,813 297
- ---------------------------------------------------------------------------------------------------------
1,849,532 870
- ---------------------------------------------------------------------------------------------------------
Consumer Non-Durables--1.0%
200M AKI, Inc., 10.5%, 2008 206,500 97
- ---------------------------------------------------------------------------------------------------------
Energy--11.2%
300M Bluewater Finance, Ltd., 10.25%, 2012 318,000 150
500M Compagnie Generale de Geophysique, 10.625%, 2007 535,000 252
125M Dresser, Inc., 9.375%, 2011 134,375 63
250M El Paso Production Holding Co., 7.75%, 2013 230,625 108
- ---------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
FIRST INVESTORS SPECIAL BOND FUND, INC.
June 30, 2004
- ---------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ---------------------------------------------------------------------------------------------------------
Energy (continued)
$ 745M Giant Industries, Inc., 11%, 2012 $ 834,400 $ 392
300M Tesoro Petroleum Corp., 9.625%, 2008 330,000 155
- ---------------------------------------------------------------------------------------------------------
2,382,400 1,120
- ---------------------------------------------------------------------------------------------------------
Financial Services--2.3%
500M Dow Jones Trac-X NA, High Yield, Series 2,
Trust 3, 8%, 2009+ 485,938 228
- ---------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--1.4%
150M Land O'Lakes, Inc., 8.75%, 2011 138,750 65
150M Pilgrim's Pride Corp., 9.625%, 2011 166,500 79
- ---------------------------------------------------------------------------------------------------------
305,250 144
- ---------------------------------------------------------------------------------------------------------
Food/Drug--.8%
175M Di Giorgio Corp., 10%, 2007 171,500 81
- ---------------------------------------------------------------------------------------------------------
Forest Products/Containers--4.5%
250M AEP Industries, Inc., 9.875%, 2007 257,500 121
175M Potlatch Corp., 10%, 2011 195,125 92
200M Stone Container Corp., 9.75%, 2011 221,000 104
Tekni-Plex, Inc.:
175M 12.75%, 2010 168,875 79
130M 8.75%, 2013+ 124,800 58
- ---------------------------------------------------------------------------------------------------------
967,300 454
- ---------------------------------------------------------------------------------------------------------
Gaming/Leisure--2.7%
250M Circus & Eldorado/Silver Legacy, 10.125%, 2012 252,500 119
300M Park Place Entertainment Corp., 9.375%, 2007 326,625 153
- ---------------------------------------------------------------------------------------------------------
579,125 272
- ---------------------------------------------------------------------------------------------------------
Health Care--6.3%
15M ALARIS Medical Systems, Inc., 7.25%, 2011 16,575 8
165M HCA, Inc., 5.25%, 2008 164,135 77
150M Insight Health Services Corp., 9.875%, 2011 161,250 76
150M MedQuest, Inc., 11.875%, 2012 171,000 80
75M Quintiles Transnational Corp., 10%, 2013 74,625 35
250M Sybron Dental Specialties, Inc., 8.125%, 2012 268,750 126
550M Tenet Healthcare Corp., 6.375%, 2011 484,000 228
- ---------------------------------------------------------------------------------------------------------
1,340,335 630
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ---------------------------------------------------------------------------------------------------------
Housing--1.8%
$ 100M Integrated Electrical Services, Inc., 9.375%, 2009 $ 103,750 $ 49
250M Nortek, Inc., 9.875%, 2011 286,250 134
- ---------------------------------------------------------------------------------------------------------
390,000 183
- ---------------------------------------------------------------------------------------------------------
Information Technology--.0%
150M Exodus Communications, Inc., 10.75%, 2009++** 94 --
- ---------------------------------------------------------------------------------------------------------
Investment/Finance Companies--.3%
115M Finova Group, Inc., 7.5%, 2009 63,535 30
- ---------------------------------------------------------------------------------------------------------
Manufacturing--3.5%
600M Columbus McKinnon Corp., 8.5%, 2008 555,000 261
200M Wolverine Tube, Inc., 7.375%, 2008+ 197,000 93
- ---------------------------------------------------------------------------------------------------------
752,000 354
- ---------------------------------------------------------------------------------------------------------
Media-Broadcasting--2.2%
150M Nexstar Finance, LLC, 12%, 2008 166,500 78
150M Sinclair Broadcasting Group, Inc., 8.75%, 2011 161,250 76
136M Young Broadcasting Corp., 10%, 2011 139,060 65
- ---------------------------------------------------------------------------------------------------------
466,810 219
- ---------------------------------------------------------------------------------------------------------
Media-Cable TV--8.9%
225M Adelphia Communications Corp., 10.25%, 2011++ 231,750 109
500M Cablevision Systems Corp., 8%, 2012+ 495,000 233
500M Charter Communications Holdings, LLC, 10%, 2009 420,000 198
500M Mediacom LLC/Mediacom Capital Corp., 8.5%, 2008 505,000 237
200M Quebecor Media, Inc., 11.125%, 2011 229,250 108
- ---------------------------------------------------------------------------------------------------------
1,881,000 885
- ---------------------------------------------------------------------------------------------------------
Media-Diversified--5.8%
500M Garden State Newspapers, Inc., 8.625%, 2011 524,375 247
300M Mail-Well I Corp., 7.875%, 2013+ 274,500 129
Six Flags, Inc.:
150M 8.875%, 2010 149,250 70
50M 9.625%, 2014+ 50,000 24
200M Universal City Development Partners, Ltd., 11.75%, 2010 232,500 109
- ---------------------------------------------------------------------------------------------------------
1,230,625 579
- ---------------------------------------------------------------------------------------------------------
Portfolio of Investments (continued)
FIRST INVESTORS SPECIAL BOND FUND, INC.
June 30, 2004
- ---------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ---------------------------------------------------------------------------------------------------------
Metals/Mining--3.7%
$ 600M Commonwealth Aluminum Corp., 10.75%, 2006 $ 609,000 $ 286
160M Euramax International, Inc., 8.5%, 2011 167,200 79
- ---------------------------------------------------------------------------------------------------------
776,200 365
- ---------------------------------------------------------------------------------------------------------
Retail-General Merchandise--2.8%
250M General Nutrition Centers, Inc., 8.5%, 2010+ 260,625 123
300M Michaels Stores, Inc., 9.25%, 2009 330,000 155
- ---------------------------------------------------------------------------------------------------------
590,625 278
- ---------------------------------------------------------------------------------------------------------
Services--5.4%
Allied Waste NA, Inc.:
150M 5.75%, 2011+ 142,875 67
300M 7.375%, 2014+ 293,250 138
325M Hydrochem Industrial Services, Inc., 10.375%, 2007 329,063 155
384M Kindercare Learning Centers, Inc., 9.5%, 2009 391,680 184
- ---------------------------------------------------------------------------------------------------------
1,156,868 544
- ---------------------------------------------------------------------------------------------------------
Telecommunications--1.4%
600M ICG Services, Inc., 10%, 2008++** 375 --
500M RCN Corp., 11%, 2008++ 292,500 138
400M XO Communications, Inc., 9%, 2008++** 250 --
- ---------------------------------------------------------------------------------------------------------
293,125 138
- ---------------------------------------------------------------------------------------------------------
Utilities--.0%
125M AES Drax Energy, Ltd., 11.5%, 2010++ 1,250 1
- ---------------------------------------------------------------------------------------------------------
Wireless Communications--2.7%
300M Crown Castle International Corp., 9.375%, 2011 331,500 156
Triton Communications, LLC:
100M 8.75%, 2011 83,000 39
175M 9.375%, 2011 150,500 71
- ---------------------------------------------------------------------------------------------------------
565,000 266
- ---------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $19,278,841) 18,627,784 8,760
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Amount
Principal Invested
Amount, For Each
Shares or $10,000 of
Warrants Security Value Net Assets
- ---------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--5.1%
$1,000M U.S. Treasury Notes, 7%, 2006 (cost $1,025,472) $ 1,083,790 $ 510
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS--1.9%
Media-Cable TV--.3%
2,061 * Echostar Communications Corp. -- Class "A" 63,376 30
- ---------------------------------------------------------------------------------------------------------
Media-Diversified--1.0%
1,500 * MediaNews Group, Inc. -- Class "A" 225,000 105
- ---------------------------------------------------------------------------------------------------------
Telecommunications--.6%
1,450 * ICG Communications, Inc. 653 1
2,111 * NTL, Inc. 121,635 57
230 * Viatel Holding (Bermuda), Ltd. 282 --
1,571 * World Access, Inc. 2 --
- ---------------------------------------------------------------------------------------------------------
122,572 58
- ---------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $640,908) 410,948 193
- ---------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--.8%
Manufacturing
363 * Day International Group, Inc., 12.25%, 2010,
PIK (cost $292,926) 164,280 77
- ---------------------------------------------------------------------------------------------------------
WARRANTS--.0%
Telecommunications
250 * GT Group Telecom, Inc. (expiring 2/1/10) (cost $22,587)+** -- --
- ---------------------------------------------------------------------------------------------------------
SHORT--TERM CORPORATE NOTES--2.6%
$ 550M Toyota Motor Corp., 1.2%, 7/20/04 (cost $549,652) 549,652 259
- ---------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $21,810,386) 98.0% 20,836,454 9,799
Other Assets, Less Liabilities 2.0 428,263 201
- ---------------------------------------------------------------------------------------------------------
Net Assets 100.0% $21,264,717 $10,000
=========================================================================================================
+ Security exempt from registration under rule 144A of the Securities Act of 1933 (see Note 5).
++ In default as to principal and/or interest payment
* Non-income producing
** Security valued at fair value (see Note 1A)
See notes to financial statements
Statement of Assets and Liabilities
FIRST INVESTORS SPECIAL BOND FUND, INC
June 30, 2004
- ---------------------------------------------------------------------------------------------
Assets
Investments in securities, at value
(identified cost $21,810,386) (Note 1A) $20,836,454
Cash 97,078
Interest receivable 435,636
Other assets 6,570
------------
Total Assets 21,375,738
------------
Liabilities
Payables:
Investment securities purchased 77,992
Shares redeemed 6,282
Accrued advisory fee 14,125
Accrued expenses 12,622
------------
Total Liabilities 111,021
------------
Net Assets $21,264,717
============
Net Assets Consist of:
Capital paid in $29,107,117
Accumulated deficit in net investment income (79,583)
Accumulated net realized loss on investment transactions (6,788,885)
Net unrealized depreciation in value of investments (973,932)
------------
Total $21,264,717
============
Net Asset Value, Offering Price and Redemption Price Per Share
($21,264,717 divided by 2,301,306 shares outstanding),
25,000,000 shares authorized, $1.00 par value (Note 2) $9.24
=====
See notes to financial statements
Statement of Operations
FIRST INVESTORS SPECIAL BOND FUND, INC.
Six Months Ended June 30, 2004
- ---------------------------------------------------------------------------------------------
Investment Income
Interest Income $930,978
Expenses (Notes 1 and 4):
Advisory fee $80,344
Professional fees 9,735
Custodian fees 2,050
Reports to shareholders 1,668
Directors' fees 417
Registration fees 310
Other expenses 5,889
------------
Total expenses 100,413
Less -- Custodian fees paid indirectly (761)
------------
Net expenses 99,652
------------
Net investment income 831,326
Realized and Unrealized Gain (Loss)
on Investments (Note 3):
Net realized gain on investments 183,618
Net unrealized depreciation of investments (294,034)
------------
Net loss on investments (110,416)
------------
Net Increase in Net Assets Resulting from Operations $720,910
============
See notes to financial statements
Statement of Changes in Net Assets
FIRST INVESTORS SPECIAL BOND FUND, INC.
- ---------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 2004 December 31, 2003
- ---------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 831,326 $ 1,836,769
Net realized gain (loss) on investments 183,618 (1,519,663)
Net unrealized appreciation (depreciation)
of investments (294,034) 4,897,672
------------ ------------
Net increase in net assets resulting
from operations 720,910 5,214,778
------------ ------------
Dividends to Shareholders
Net investment income (835,346) (1,864,508)
------------ ------------
Capital Share Transactions *
Proceeds from shares sold 27,135 44,332
Reinvestment of dividends 835,346 1,864,508
Cost of shares redeemed (1,670,990) (2,528,932)
------------ ------------
Net decrease in net assets resulting
from share transactions (808,509) (620,092)
------------ ------------
Net increase (decrease) in net assets (922,945) 2,730,178
Net Assets
Beginning of period 22,187,662 19,457,484
------------ ------------
End of the period (including accumulated
deficit in net investment income of $79,583 and
$75,563, respectively) $21,264,717 $22,187,662
============ ============
*Capital Shares Issued and Redeemed
Sold 2,924 5,042
Issued for dividends reinvested 90,257 212,029
Redeemed (179,946) (293,043)
------------ ------------
Net decrease in capital shares (86,765) (75,972)
============ ============
See notes to financial statements
Notes to Financial Statements
FIRST INVESTORS SPECIAL BOND FUND, INC.
June 30, 2004
1. Significant Accounting Policies--The Fund is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end
management investment company. The investment objective of the Fund is to
seek high current income without undue risk to principal and secondarily to
seek growth of capital.
A. Security Valuation--Except as provided below, a security listed or
traded on an exchange or the Nasdaq Stock Market is valued at its last sale
price on the exchange or market where the security is principally traded,
and lacking any sales, the security is valued at the mean between the
closing bid and asked prices. Securities traded in the over-the-counter
market (including securities listed on exchanges whose primary market is
believed to be over-the-counter) are valued at the mean between the last
bid and asked prices based upon quotes furnished by a market maker for such
securities. Securities may also be priced by a pricing service approved by
the Fund's Board of Directors (the "Board"). The pricing service uses
quotations obtained from investment dealers or brokers, information with
respect to market transactions in comparable securities, and other
available information in determining value. For valuation purposes, where
applicable, quotations of foreign securities in foreign countries are
translated to U.S. dollar equivalents using the foreign exchange quotation
in effect. Short-term debt securities that mature in 60 days or less are
valued on the amortized cost method which approximates market value.
Securities for which market quotations are not readily available or
determined to be unreliable, and any other assets are valued on a
consistent basis at fair value as determined in good faith by or under the
supervision of the Fund's officers in a manner specifically authorized by
the Board. At June 30, 2004, the Fund held five securities that were fair
valued by its Valuation Committee with an aggregate value of $1,906
representing 0% of the Fund's net assets.
B. Federal Income Taxes--No provision has been made for federal income
taxes on net income or capital gains, since it is the policy of the Fund to
continue to comply with the special provisions of the Internal Revenue Code
applicable to regulated 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. As of December 31, 2003, the Fund had capital loss carryovers of
$6,962,823 of which $253,501 expires in 2004, $636,995 expires in 2007,
$365,853 expires in 2008, $1,284,606 expires in 2009, $2,764,915 expires in
2010, and $1,656,953 expires in 2011.
C. Distributions to Shareholders--Dividends to shareholders from net
investment income are declared daily and paid quarterly. Distributions from
net realized capital gains, if any, are normally declared and paid
annually. Income dividends and capital gain distributions are determined in
accordance with income tax regulations which
Notes to Financial Statements (continued)
FIRST INVESTORS SPECIAL BOND FUND, INC.
June 30, 2004
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 and post-October capital losses.
D. 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.
E. Other--Security transactions are accounted for on the date the
securities are purchased or sold. Cost is determined, and gains and losses
are based, on the 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 expenses are accrued daily. Bond
premiums and discounts are amortized/accreted using the interest method.
For the six months ended June 30, 2004, the Fund's custodian has provided
credits in the amount of $761 against custodian charges based on the
uninvested cash balances of the Fund.
2. Capital Stock--Shares of the Fund are sold only through the purchase of
First Investors Life Variable Annuity Fund A contracts issued by First
Investors Life Insurance Company.
3. Security Transactions--For the six months ended June 30, 2004, purchases
and sales of investment securities, other than short-term U.S. Government
obligations and short-term corporate notes, aggregated $2,266,375 and
$3,278,491, respectively.
As of June 30, 2004, the cost of investments for federal income tax
purposes was $21,894,314. Accumulated net unrealized depreciation on
investments was $1,057,860, consisting of $1,312,483 gross unrealized
appreciation and $2,370,343 gross unrealized depreciation.
4. Advisory Fee and Other Transactions With Affiliates--Certain officers
and directors of the Fund are officers and directors of its investment
adviser, First Investors Management Company, Inc. ("FIMCO") and its
transfer agent, Administrative Data Management Corp. (ADM). Directors of
the Fund who are not "interested persons" of the Fund as defined in the
1940 Act are remunerated by the Fund. For the six months ended June 30,
2004, total directors fees accrued by the Fund amounted to $417.
The Investment Advisory Agreement provides as compensation to FIMCO an
annual fee, payable monthly, at the rate of .75% on the first $250 million
of the Fund's
average daily net assets, declining by .03% on each $250 million
thereafter, down to .66% on average daily net assets over $750 million.
5. Restricted Securities--Under Rule 144A, certain restricted securities
are exempt from the registration requirements of the Securities Act of 1933
and may only be resold to qualified institutional investors. At June 30,
2004, the Fund held twelve 144A securities with an aggregate value of
$2,520,882 representing 11.9% of the Fund's net assets. These securities
are valued as set forth in Note 1A.
6. Concentration of Credit Risk--The Fund's investment in high yield
securities, whether rated or unrated, may be considered speculative and
subject to greater market fluctuations and risk of loss of income and
principal than lower-yielding, higher-rated, fixed-income securities. The
risk of loss due to default by the issuer may be significantly greater for
the holders of high-yielding securities, because such securities are
generally unsecured and are often subordinated to other creditors of the
issuer.
Financial Highlights
FIRST INVESTORS SPECIAL BOND FUND, INC.
The following table sets forth the operating performance data for a share
of capital stock outstanding, total return, ratios to average net assets
and other supplemental data for each period indicated.
Year Ended December 31
1/1/04 to ----------------------------------------------------------------------------
6/30/04 2003 2002 2001* 2000 1999
------------ ------------ ------------ ------------ ------------ ------------
Per Share Data
Net Asset Value,
Beginning of Period $ 9.29 $ 7.90 $ 8.53 $ 9.47 $11.37 $11.86
------------ ------------ ------------ ------------ ------------ ------------
Income from Investment Operations
Net investment income .36 .76 .80 .90 1.08 1.10
Net realized and
unrealized gain (loss)
on investments (.05) 1.41 (.62) (.90) (1.78) (.39)
------------ ------------ ------------ ------------ ------------ ------------
Total from Investment
Operations .31 2.17 .18 -- (.70) .71
------------ ------------ ------------ ------------ ------------ ------------
Less Dividends from
Net Investment Income .36 .78 .81 .94 1.20 1.20
------------ ------------ ------------ ------------ ------------ ------------
Net Asset Value,
End of Period $ 9.24 $ 9.29 $ 7.90 $ 8.53 $ 9.47 $11.37
============ ============ ============ ============ ============ ============
Total Return (%) + 3.37 28.31 2.20 (.01) (6.57) 6.24
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands) $21,265 $22,188 $19,457 $22,058 $24,135 $30,194
Ratio to Average Net Assets:(%)
Expenses .95(a) .93 .93 .90 .89 .87
Net Investment Income 7.76(a) 8.84 9.77 9.80 10.09 9.38
Portfolio Turnover Rate (%) 11 23 18 35 37 32
* Prior to January 1, 2001, the Fund did not amortize premiums on debt
securities. The per share data and ratios prior to 2001 have not been
restated. The cumulative effect of this accounting change had no impact
on the total net assets of the Fund.
+ The effect of fees and charges incurred at the separate account level
are not reflected in these performance figures.
(a) Annualized
See notes to financial statements
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
First Investors Special Bond Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
First Investors Special Bond Fund, Inc., including the portfolio of
investments, as of June 30, 2004, and the related statement of operations,
the statement of changes in net assets, and the financial highlights for
each of the periods indicated thereon. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with 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. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
June 30, 2004, by correspondence with the custodian and brokers. Where
brokers have not responded to our confirmation request, we have carried out
other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of First Investors Special Bond Fund, Inc. as of June 30, 2004, and the
results of its operations, changes in its net assets and financial
highlights for the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
Tait, Weller & Baker
Philadelphia, Pennsylvania
August 2, 2004
FIRST INVESTORS SPECIAL BOND FUND, INC.
Directors
- --------------------------------------
Robert M. Grohol
Glenn O. Head
Kathryn S. Head
Larry R. Lavoie
Rex R. Reed
Herbert Rubinstein
James M. Srygley
John T. Sullivan
Robert F. Wentworth
Officers
- --------------------------------------
Kathryn S. Head
President
Joseph I. Benedek
Treasurer
Mark S. Spencer
Assistant Treasurer
Carol Lerner Brown
Assistant Secretary
FIRST INVESTORS SPECIAL BOND FUND, INC.
Shareholder Information
Investment Adviser
First Investors Management Company, Inc.
95 Wall Street
New York, NY 10005
Custodian
The Bank of New York
48 Wall Street
New York, NY 10286
Transfer Agent
Administrative Data Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036
Auditors
Tait, Weller & Baker
1818 Market Street
Philadelphia, PA 19103
It is the Fund's practice to mail only one copy of its annual and
semi-annual reports to all family members who reside in the same household.
Additional copies of the reports will be mailed if requested by any
shareholder in writing or by calling 800-423-4026. The Fund will ensure
that separate reports are sent to any shareholder who subsequently changes
his or her mailing address.
This report is authorized for distribution only to existing shareholders,
and, if given to prospective shareholders, must be accompanied or preceded
by the Fund's prospectus.
The Statement of Additional Information includes additional information
about the Fund's directors and is available, without charge, upon request
in writing or by calling 800-423-4026.
A description of the policies and procedures that the Fund uses to vote
proxies relating to its portfolio securities is available, without charge,
upon request by calling toll free 1-800-423-4026 or can be viewed online or
downloaded from the EDGAR database on the SEC's internet website at
http://www.sec.gov. In addition, commencing on August 31, 2004, information
regarding how the Fund voted proxies relating to its portfolio securities
during the most recent 12-month period ended June 30, will be available,
without charge, upon request by calling 1-800-423-4026 and on the SEC's
internet website at http://www.sec.gov.
Item 2. Code of Ethics
The Registrant's Board of Directors/Trustees ("Board") has
adopted a Code of Ethics that applies to the First Investors Funds'
("Funds") principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the Funds or a third party. The Code of Ethics is attached to this
report as Exhibit A.
During the period of the report, there have been no amendments to the
Code of Ethics or waivers, implicit or otherwise, from its provisions.
Item 3. Audit Committee Financial Expert
Not applicable to Semi-Annual Report
Item 4. Principal Accountant Fees and Services
Not applicable to Semi-Annual Report
Item 5. Audit Committee of Listed Registrants
Not applicable to Semi-Annual Report
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 to the Registrant
Item 8. Purchases of Equity Securities by Closed-End Management
Investment Companies and Affiliated Purchasers
Not applicable to the Registrant
Item 9. Submission of Matters to a Vote of Security Holders
Not applicable to the Registrant for this filing
Item 10. 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 significant changes in the Registrant's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Item 11. Exhibits
(a) Code of Ethics - Filed herewith
(b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 - Filed herewith
(c) 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 Special Bond Fund, Inc.
(Registrant)
By /S/ KATHRYN S. HEAD
Kathryn S. Head
President and Principal Executive Officer
Date: September 8, 2004
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 Special Bond Fund, Inc.
(Registrant)
By /S/ JOSEPH I. BENEDEK
Joseph I. Benedek
Treasurer and Principal Financial Officer
Date: September 8, 2004