<PAGE>
[LOGO] [ART]
GOVERNMENT
INVESTMENT GRADE
FUND FOR INCOME
HIGH YIELD
BOND FUNDS
ANNUAL REPORT
SEPTEMBER 30, 1998
<PAGE>
MARKET OVERVIEW
FIRST INVESTORS GOVERNMENT FUND, INC.
FIRST INVESTORS INVESTMENT GRADE FUND
FIRST INVESTORS FUND FOR INCOME, INC.
FIRST INVESTORS HIGH YIELD FUND, INC.
Dear Investor:
We are pleased to present the annual reports for the First Investors taxable
bond funds for the fiscal year ending September 30, 1998. Included are annual
reports for the First Investors Government Fund, Inc. ("Government Fund"), First
Investors Investment Grade Fund ("Investment Grade Fund"), First Investors Fund
For Income, Inc. ("Fund For Income") and First Investors High Yield Fund, Inc.
("High Yield Fund").
You will note that the Funds have a new fiscal year-end, September 30. In prior
years, these four Funds had fiscal years ending December 31. Consequently, this
report will cover a nine month period: January 1, 1998 through September 30,
1998.
For much of the first half of 1998, the U.S. bond market traded in an unusually
narrow range. The offsetting forces of strong economic growth and low inflation
resulted in stable interest rates. Most economists felt that the Federal Reserve
would either keep monetary policy unchanged or raise short-term rates slightly
because of concerns about tight labor markets. Over the summer, investors'
attention shifted unexpectedly from the U.S. economy to overseas events. By the
end of September, long-term Treasury bond yields had fallen to historic lows and
the Federal Reserve had lowered short-term interest rates.
Through September of 1998, the U.S. economy enjoyed an ideal combination of
moderate growth and low levels of inflation and unemployment. Over the first
three quarters of 1998, the Gross Domestic Product (GDP) grew 3.5% on an
annualized basis. Despite sustained economic growth, inflation, as measured by
the Consumer Price Index (CPI), rose less than 2% over the past 12 months. The
unemployment rate fell to as low as 4.3%, the lowest rate since 1970. Buoyed by
the healthy economy, consumer confidence and personal income continued to be
high. Due to the low interest rates, housing starts were at a record level. Our
sound domestic economy helped offset the weakness in several overseas economies.
With regard to the bond market, the year began with a brief rally, then settled
down over the next four months as the Treasury market traded in a very narrow
range. In June, financial and economic problems in Southeast Asia triggered a
global "flight to quality," as investors shifted assets into the U.S. bond
market. The Treasury market rally pushed yields to a year-to-date low, then
moved
1
<PAGE>
MARKET OVERVIEW (continued)
FIRST INVESTORS GOVERNMENT FUND, INC.
FIRST INVESTORS INVESTMENT GRADE FUND
FIRST INVESTORS FUND FOR INCOME, INC.
FIRST INVESTORS HIGH YIELD FUND, INC.
sideways until August. Continued overseas turmoil initiated a second powerful
rally in August, driving 30-year Treasury bond yields down from 5.71% to a then
all-time low of 4.98% at the end of September.
A number of factors contributed to this substantial decline in interest rates:
the financial difficulties in Russia, ultimately leading to default; concerns
about other emerging market economies; weakness in the U.S. stock market;
Japan's recession and banking crisis; and hedge fund problems due to the
preceding situations.
The bond market has also benefited from a decreased supply of Treasury bonds,
thanks to the Federal government's budget surplus. These factors helped to lower
the yield on the 10-year Treasury note to its lowest level since the 1960s, and
to provide homeowners with lifetime best mortgage rates.
With this as a backdrop, the Federal Reserve lowered short-term interest rates
by 25 basis points on September 29, the first easing since March of 1997. As
reasoning for the rate decrease, the Fed cited concerns that overseas problems
could negatively impact the U.S. economy, as well as the need to provide
liquidity to the U.S. financial system.
Investors who buy bond funds -- whether for income or total return -- should be
aware that the value of their investment fluctuates as interest rates change.
For example, a 100 basis point (or 1%) increase in yield on a 10-year Treasury
bond results in roughly a 7 1/2% decrease in that bond's price. In each of the
last five years, 10-year Treasury bond yields have fluctuated by more than 1%.
In addition, the value of a fund can fluctuate based on changes in the credit
quality of the bonds it holds. In particular, investments in higher yielding,
lower-rated debt obligations are more sensitive than are higher-rated
investments to adverse economic changes or individual corporate developments,
and thus can be subject to higher incidence of default. Investors should be
aware of these risks and recognize that successful investing generally requires
a long-term commitment to the market.
2
<PAGE>
Going forward, further easing of short-term interest rates by the Fed is
anticipated by the market, as U.S. economic growth slows due to overseas
turmoil. While U.S. interest rates should remain low, the market has entered a
period of substantial volatility. Complex, diverse factors -- such as Japan's
banking reform, the health of Brazil's economy and the outlook for the U.S.
consumer -- are moving the market in the short term. In this environment,
investors are best served by focusing on long-term objectives and maintaining a
disciplined approach to investing.
As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Clark D. Wagner
Chief Investment Officer
First Investors Management Company, Inc.
October 30, 1998
3
<PAGE>
This page has been left blank intentionally.
4
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS GOVERNMENT FUND, INC.
Dear Investor:
We are pleased to present this annual report for the First Investors Government
Fund for the fiscal year ending September 30, 1998. As noted in my Market
Overview, this is a new fiscal year-end for the Fund.
For the period, the Fund's return on a net asset value basis was 6.0% on Class A
shares and 5.5% on Class B shares. In comparison, the average return for
Government National Mortgage Association (GNMA) bond funds was 6.1% according to
Lipper Analytical Services. During the period, the Fund declared dividends from
net investment income of 47 cents per share on Class A shares and 40 cents per
share on Class B shares. The Government Fund invests primarily in GNMA
mortgage-backed bonds. The principal factors affecting the Fund's performance
were falling interest rates and increases in home refinancings, as well as
adjustments made to the Fund's portfolio to deal with these factors.
The year began with 10-year Treasury yields falling to their lowest level since
1993. Mortgage refinancings soared, causing mortgage securities to substantially
underperform Treasury securities. From February through July, the bond market
traded in an unusually tight range. Mortgage-backed bond performance was very
good, as investors purchased them for incremental income in an environment of
low volatility. From August through the end of September, the bond market
experienced a powerful rally, bringing 10-year Treasury note yields to their
lowest level since the 1960s. Mortgage rates also fell to their lowest level
since the 1960s, presenting homeowners with a lifetime best opportunity to
refinance. The volume of mortgage refinancings reached an all-time high,
surpassing January's level. Mortgage-backed securities substantially
underperformed Treasuries, with the yield spread between the two reaching their
widest level of the decade.
Management of the Fund focused on adjusting to the changes in interest rates and
mortgage refinancings. To manage interest rate risk, the Fund's duration (or
interest rate sensitivity) was adjusted based on the current trend of interest
rates, as well as the future outlook. This was accomplished primarily by
adjusting the average maturity of the Treasury securities held by the Fund
(usually 5-10% of assets). During the market's rally at the beginning of the
year, 10% of the Fund was invested in 10-year Treasury notes. As the market
entered a trading range, 5% of the Fund was shifted from Treasuries to higher
yielding GNMA mortgage-backed bonds, shortening the duration of the Fund. In
July, the Fund's duration was shortened an additional time.
A principal risk in buying mortgage-backed bonds is prepayment risk. Prepayment
risk is the risk that homeowners (whose mortgages compose GNMA mortgage-backed
bonds) will refinance (or prepay) their current mortgages when interest rates
fall. This would cause the Fund to lose its higher yielding bonds at a time when
interest rates
5
<PAGE>
PORTFOLIO MANAGER'S LETTER (continued)
FIRST INVESTORS GOVERNMENT FUND, INC.
are relatively low. To compensate investors for this risk, mortgage-backed bonds
offer substantially more yield than Treasury securities (which generally cannot
be called). Generally, lower coupon mortgage-backed bonds have less prepayment
risk, while higher coupon mortgage-backed bonds offer more income.
To manage prepayment risk, the Fund's weighted average coupon (WAC) was lowered
several times during the year. At the beginning of the year, the WAC of the
Fund's mortgage-backed holdings was 7.78%. To reduce prepayment risk, during the
first few months the Fund sold several large positions in GNMA 8 1/2% to 9%
coupons, lowering WAC to 7.36%. As the market rallied in the summer, the Fund
further reduced prepayment risk by selling GNMA 7 1/2% coupons and buying GNMA
7% and 6 1/2% coupons, lowering its WAC to 7.24%.
The Fund's performance essentially matched the performance of the Lipper
Analytical Services GNMA bond fund group. Performance was helped by gradually
lowering the Fund's WAC, particularly by selling GNMA 8 1/2% to 9% coupons.
Maintaining 5% to 10% of the Fund's assets in Treasury securities also helped
performance, as Treasuries provided the highest total returns to the Fund during
the reporting period. The Fund's performance was hurt by the decision to reduce
duration in July in anticipation of upcoming Treasury supply, as the market
rallied substantially in August and September.
The Fund closed the reporting period with 92% of its assets in GNMA mortgage-
backed bonds with a WAC of 7.24%, 6% in U.S. agency notes and 2% in cash. With
refinancings at record levels, the Fund will look for further opportunities to
reduce prepayment risk by lowering its WAC. Given the substantial amount of
yield available on mortgage-backed bonds relative to Treasury securities, the
Fund does not anticipate increasing its holdings in the latter.
As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Clark D. Wagner
Chief Investment Officer
and Portfolio Manager
October 30, 1998
6
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS GOVERNMENT FUND, INC.
Comparison of change in value of $10,000 investment in the First Investors
Government Fund, Inc. (Class A shares), the Salomon Brothers Mortgage Index and
the Salomon Brothers Government Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
GOVERNMENT SALOMON SALOMON
FUND MORTGAGE GOVERNMENT
<S> <C> <C> <C>
Jan-89 $9,375 $10,000 $10,000
Dec-89 10,498 11,516 11,438
Dec-90 11,472 12,770 12,424
Dec-91 13,235 14,769 14,324
Dec-92 14,062 15,857 15,355
Dec-93 14,623 16,973 16,995
Dec-94 14,152 16,731 16,422
Dec-95 16,272 19,536 19,444
Dec-96 16,843 20,584 20,015
Dec-97 18,258 22,492 21,947
Sep-98 19,359 23,859 24,126
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
Class A Shares
One Year 8.44% 1.64%
Five Years 5.59% 4.23%
Ten Years 7.54% 6.85%
S.E.C. 30-Day Yield 5.15%
Class B Shares
One Year 7.66% 3.66%
Since Inception (1/12/95) 7.96% 7.30%
S.E.C. 30-Day Yield 4.78%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS GOVERNMENT
FUND, INC. (CLASS A SHARES) BEGINNING 1/1/89 WITH THEORETICAL INVESTMENTS IN
THE SALOMON BROTHERS MORTGAGE INDEX AND THE SALOMON BROTHERS GOVERNMENT
INDEX. THE SALOMON BROTHERS MORTGAGE INDEX IS A MARKET
CAPITALIZATION-WEIGHTED INDEX THAT CONSISTS OF ALL AGENCY PASS-THROUGHS AND
FHA AND GNMA PROJECT NOTES. THE SALOMON BROTHERS GOVERNMENT INDEX IS A MARKET
CAPITALIZATION-WEIGHTED INDEX THAT CONSISTS OF DEBT ISSUED BY THE U.S.
TREASURY AND U.S. GOVERNMENT SPONSORED AGENCIES. EVERY ISSUE INCLUDED IN THE
INDICES IS TRADER-PRICED, AND THE INDICES FOLLOW CONSISTENT AND REALISTIC
AVAILABILITY LIMITS, INCLUDING ONLY THOSE SECURITIES WITH SUFFICIENT AMOUNTS
OUTSTANDING. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THESE INDICES. IN
ADDITION, THE INDICES DO NOT TAKE INTO ACCOUNT FEES AND EXPENSES. 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 PERIOD ENDED 9/30/98) 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 6.25% (PRIOR TO 7/1/93 AND
12/29/89, THE MAXIMUM SALES CHARGES WERE 6.9% AND 7.25%, RESPECTIVELY). THE
CLASS B "S.E.C. STANDARDIZED" RETURNS ARE ADJUSTED FOR THE APPLICABLE DEFERRED
SALES CHARGE (MAXIMUM OF 4% IN THE FIRST YEAR). SOME OR ALL 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 1.31%, 3.98% AND 6.61%, RESPECTIVELY,
AND THE S.E.C. 30-DAY YIELD FOR SEPTEMBER 1998 WOULD HAVE BEEN 4.82%. THE
CLASS B "S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR AND
SINCE INCEPTION WOULD HAVE BEEN 3.32% AND 6.96%, RESPECTIVELY, AND THE S.E.C.
30-DAY YIELD FOR SEPTEMBER 1998 WOULD HAVE BEEN 4.43%. RESULTS REPRESENT PAST
PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS. 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. SALOMON
BROTHERS MORTGAGE INDEX AND SALOMON BROTHERS GOVERNMENT INDEX FIGURES FROM
SALOMON BROTHERS AND ALL OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT
COMPANY, INC.
7
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS GOVERNMENT FUND, INC.
September 30, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE-BACKED CERTIFICATES--91.5%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION I
PROGRAM--43.5%
$ 23,836M 6.50%, 4/15/2028-8/15/2028 $ 24,386,622 $ 1,491
15,000M 7%, 7/15/2027 15,500,560 948
30,084M 7.50%, 11/15/2022-5/15/2028 31,216,747 1,908
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
PROGRAM--48.0%
45,309M 7%, 6/20/2023-11/20/2027 46,690,635 2,855
20,137M 7.50%, 12/20/2022-10/20/2023 20,881,228 1,277
10,255M 9%, 4/20/2016-7/20/2021 11,016,272 673
--------------------------------------------------------------------------------------
TOTAL VALUE OF MORTGAGE-BACKED CERTIFICATES (cost
$145,613,800) 149,692,064 9,152
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--6.5%
10,000M Federal Home Loan Mortgage Corp., 5.75%,
4/15/2008 (cost $9,934,375) 10,572,710 647
--------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--1.8%
3,000M Chevron USA, Inc., 5.25%, 10/6/1998 (cost
$2,997,812) 2,997,812 183
--------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $158,545,987) 99.8% 163,262,586 9,982
OTHER ASSETS, LESS LIABILITIES .2 293,156 18
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $163,555,742 $ 10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
8
<PAGE>
PORTFOLIO MANAGERS' LETTER
FIRST INVESTORS INVESTMENT GRADE FUND
Dear Investor:
We are pleased to present this annual report for the First Investors Investment
Grade Fund for the fiscal year ending September 30, 1998. As noted in the Market
Overview, the Fund has a new fiscal year-end, September 30.
During the period, the Fund's return on a net asset value basis was 8.3% on
Class A shares and 7.7% on Class B shares. The Fund outperformed the BBB
investment grade bond fund peer group, which had an average return of 5.5% as
measured by Lipper Analytical Services. During the period, the Fund declared
dividends from net investment income of 45 cents per share on Class A shares and
40 cents per share on Class B shares. The primary factors that drove the Fund's
performance during the fiscal year were falling interest rates and the "flight
to quality," as described in the Market Overview. Sector selection and a focus
on credit quality also bolstered the Fund's performance relative to its peer
group.
In the first half of 1998, corporations took advantage of low yields by bringing
a record number of new bond issues to market, causing the yield spread between
Treasuries and corporate bonds to widen. However, merger and acquisition
activity in the banking and telecommunications sectors enabled these spreads to
recover somewhat from their wider trading levels. As a result, high grade bonds
generally performed in line with government securities.
In the third quarter, corporate bonds lagged the Treasury market. Overseas
economic turmoil caused spreads to widen dramatically. Risk was reassessed, as
more yield was required to compensate investors for the perceived deterioration
in the economic outlook. Investors became more attuned to the potential risks to
U.S. multi-national corporations' profits and concerns grew that weakening
global demand would pressure the profitability of commodity based cyclicals.
These uncertainties prompted a "flight to quality" as investors sought the
relative safety of Treasury securities and, to a lesser extent, the highly
rated, highly liquid debt issues of well-known companies. The situation worsened
as broker/dealers attempted to lighten their bond inventories, which had been
inflated by the large number of new issues brought to market earlier in the
year. Bonds of lower quality and riskier sectors underperformed, and the new
issue market was almost non-existent.
For the first half of 1998, the Fund's exposure to money center banks and
telecommunications companies helped performance, as merger and acquisition
activity caused these sectors to outperform. For example, the
Travelers/Citibank, BankAmerica/ NationsBank and AT&T/Teleport and AT&T/TCI
deals helped enhance credit ratings and boost returns. The Fund's underweighted
position in Yankee bonds (U.S. dollar denominated bonds issued by foreign
entities that are registered with the Securities and Exchange Commission)
negatively impacted returns early in the year, as Yankee
9
<PAGE>
PORTFOLIO MANAGERS' LETTER (continued)
FIRST INVESTORS INVESTMENT GRADE FUND
bonds staged a recovery from a dismal fourth quarter of 1997. Throughout the
reporting period, the Fund's duration tended to be shorter than its peers. This
was a negative factor through much of the first half of 1998, as long-term
Treasuries rallied.
In the third quarter, the Fund's underweighted position in Yankee bonds helped
performance, as the sector was hard hit by overseas turmoil precipitated by the
devaluation of the Russian currency. The Fund also benefited from its focus on
two sectors that are viewed as "safe havens": utilities and defensive
industrials. These sectors performed well due to their stability and
non-cyclical nature. Credit quality and liquidity were also key determinants of
performance. The Fund's focus on highly rated, highly liquid issues of large,
well-known companies with strong balance sheets aided returns, as these
benchmark issues outperformed. Holdings of money center banks hindered
performance during the third quarter, as their performance lagged amid concerns
over their exposure to Asia and hedge funds.
Going forward, the Fund will continue to maintain its focus on credit quality
and seek relative value in the investment grade corporate bond arena.
As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Nancy W. Jones
Vice President
and Co-Portfolio Manager
[SIGNATURE]
Clark D. Wagner
Chief Investment Officer
and Co-Portfolio Manager
October 30, 1998
10
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS INVESTMENT GRADE FUND
Comparison of change in value of $10,000 investment in the First Investors
Investment Grade Fund (Class A shares) and the Lehman Brothers Corporate Bond
Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
INVESTMENT LEHMAN CORPORATE
GRADE FUND BOND INDEX
<S> <C> <C>
Feb-91 $9,375 $10,000
Dec-91 10,621 11,702
Dec-92 11,498 12,719
Dec-93 12,857 14,266
Dec-94 12,263 13,705
Dec-95 14,642 16,754
Dec-96 14,993 17,304
Dec-97 16,363 19,074
Sep-98 17,719 20,585
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
Class A Shares
One Year 11.39% 4.43%
Five Years 6.59% 5.23%
Since Inception (2/19/91) 8.71% 7.79%
S.E.C. 30-Day Yield 4.47%
Class B Shares
One Year 10.62% 6.62%
Since Inception (1/12/95) 9.52% 8.88%
S.E.C. 30-Day Yield 4.07%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS INVESTMENT
GRADE FUND (CLASS A SHARES) BEGINNING 2/19/91 (INCEPTION DATE) WITH A
THEORETICAL INVESTMENT IN THE LEHMAN BROTHERS CORPORATE BOND INDEX. THE
LEHMAN BROTHERS CORPORATE BOND INDEX INCLUDES ALL PUBLICLY ISSUED, FIXED
RATE, NONCONVERTIBLE INVESTMENT GRADE DOLLAR-DENOMINATED, S.E.C.-REGISTERED
CORPORATE DEBT. ALL ISSUES HAVE AT LEAST ONE YEAR TO MATURITY AND AN
OUTSTANDING PAR VALUE OF AT LEAST $100 MILLION. IT IS NOT POSSIBLE TO INVEST
DIRECTLY IN THIS INDEX. IN ADDITION, THE INDEX DOES NOT TAKE INTO ACCOUNT
FEES AND EXPENSES. 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 PERIOD ENDED 9/30/98) 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 6.25% (PRIOR TO 7/1/93, THE
MAXIMUM SALES CHARGE WAS 6.9%). THE CLASS B "S.E.C. STANDARDIZED" RETURNS ARE
ADJUSTED FOR THE APPLICABLE DEFERRED SALES CHARGE (MAXIMUM OF 4% IN THE FIRST
YEAR). SOME OR ALL 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 SINCE INCEPTION WOULD HAVE
BEEN 4.07%, 4.72% AND 7.11%, RESPECTIVELY, AND THE S.E.C. 30-DAY YIELD FOR
SEPTEMBER 1998 WOULD HAVE BEEN 4.16%. THE CLASS B "S.E.C. STANDARDIZED"
AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR AND SINCE INCEPTION WOULD HAVE BEEN
6.26% AND 8.45%, RESPECTIVELY, AND THE S.E.C. 30-DAY YIELD FOR SEPTEMBER 1998
WOULD HAVE BEEN 3.74%. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE
FUTURE RESULTS. 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. LEHMAN BROTHERS CORPORATE BOND INDEX FIGURES FROM
LEHMAN BROTHERS, INC. AND ALL OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT
COMPANY, INC.
11
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS INVESTMENT GRADE FUND
September 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS--87.9%
AEROSPACE/DEFENSE--4.3%
$ 750M Lockheed Martin Corp., 7.25%, 2006 $ 829,077 $ 151
750M Rockwell International Corp., 8.375%, 2001 807,320 147
700M Thiokol Corp., 6.625%, 2008 736,700 134
- --------------------------------------------------------------------------------------
2,373,097 432
- --------------------------------------------------------------------------------------
APPAREL/TEXTILES--1.9%
250M VF Corp., 9.50%, 2001 277,403 50
740M Westpoint Stevens, Inc., 7.875%, 2008 758,500 138
- --------------------------------------------------------------------------------------
1,035,903 188
- --------------------------------------------------------------------------------------
BASIC MATERIALS--1.3%
730M Navistar International Corp., 8%, 2008 730,000 133
- --------------------------------------------------------------------------------------
CHEMICALS--3.0%
750M Du Pont (E.I.) de Nemours & Co., 8.125%, 2004 858,973 156
700M Lubrizol Corp., 7.25%, 2025 798,636 145
- --------------------------------------------------------------------------------------
1,657,609 301
- --------------------------------------------------------------------------------------
CONGLOMERATES--2.9%
700M Hanson Overseas BV, 7.375%, 2003 754,034 137
750M Tenneco, Inc., 7.875%, 2027 831,986 151
- --------------------------------------------------------------------------------------
1,586,020 288
- --------------------------------------------------------------------------------------
CONSUMER PRODUCTS--2.8%
750M Dial Corp., 6.50%, 2008 764,866 139
735M Mattel, Inc., 6%, 2003 764,319 139
- --------------------------------------------------------------------------------------
1,529,185 278
- --------------------------------------------------------------------------------------
CONSUMER STAPLES--1.3%
700M Kroger Co., 7%, 2018 723,016 131
- --------------------------------------------------------------------------------------
ELECTRIC & GAS UTILITIES--11.3%
750M Baltimore Gas and Electric Co., 6.50%, 2003 789,594 143
735M Consumers Energy Co., 6.375%, 2008 756,558 137
1,000M Duke Energy Corp., 5.875%, 2003 1,011,379 184
800M Kansas Gas & Electric Co., 7.60%, 2003 876,980 159
350M Niagara Mohawk Power Corp., 7.625%, 2005 361,924 66
525M Old Dominion Electric Cooperative, 7.97%, 2002 556,068 101
- --------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
ELECTRIC & GAS UTILITIES (continued)
$ 750M Philadelphia Electric Co., 8%, 2002 $ 817,084 $ 148
925M Southwestern Electric Power Co., 7%, 2007 1,033,801 188
- --------------------------------------------------------------------------------------
6,203,388 1,126
- --------------------------------------------------------------------------------------
ENERGY--5.4%
700M Baroid Corp., 8%, 2003 780,380 142
500M Mobil Corp., 8.625%, 2021 659,572 120
725M Occidental Petroleum Corp., 6.50%, 2005 737,584 134
750M Phillips Petroleum Co., 7.20%, 2023 779,345 142
- --------------------------------------------------------------------------------------
2,956,881 538
- --------------------------------------------------------------------------------------
ENTERTAINMENT/LEISURE--1.4%
700M Walt Disney Company, 6.75%, 2006 771,170 140
- --------------------------------------------------------------------------------------
FINANCIAL SERVICES--16.0%
660M BankAmerica Corp., 9.50%, 2001 725,808 132
700M Chemical Bank, Inc., 7%, 2005 753,248 137
800M Citicorp, 8%, 2003 874,440 159
800M First Union Corp., 8.125%, 2002 875,178 159
750M Fleet Capital, 7.92%, 2026 799,498 145
700M Key Corp., 7.50%, 2006 778,793 142
750M Mellon Bank NA, 6.50%, 2005 786,260 143
550M Meridian Bancorp, 7.875%, 2002 598,289 109
925M Morgan Guaranty Trust Co., 7.375%, 2002 987,005 179
875M NationsBank Corp., 8.50%, 1999 884,158 161
700M NationsBank Corp., 8.125%, 2002 761,750 138
- --------------------------------------------------------------------------------------
8,824,427 1,604
- --------------------------------------------------------------------------------------
FOOD/BEVERAGE/TOBACCO--6.8%
750M Anheuser-Busch Cos., Inc., 7%, 2005 793,195 144
500M Coca-Cola Enterprises, Inc., 7.875%, 2002 543,004 99
700M Hershey Foods Corp., 6.70%, 2005 764,161 139
900M Philip Morris Cos., Inc., 7.125%, 2002 956,674 174
650M Universal Corp., 9.25%, 2001 706,892 128
- --------------------------------------------------------------------------------------
3,763,926 684
- --------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS INVESTMENT GRADE FUND
September 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
GAS TRANSMISSION--2.8%
$ 700M Columbia Gas System, Inc., 6.80%, 2005 $ 749,274 $ 136
700M Enron Corp., 7.125%, 2007 769,215 140
- --------------------------------------------------------------------------------------
1,518,489 276
- --------------------------------------------------------------------------------------
HEALTHCARE--1.3%
700M Warner-Lambert Co., 6%, 2008 747,204 136
- --------------------------------------------------------------------------------------
INVESTMENT/FINANCE COMPANIES--4.7%
700M Associates Corp. of North America, 7.875%, 2001 752,727 137
700M General Electric Capital Corp., 7.875%, 2006 817,281 149
700M General Motors Acceptance Corp., 6.625%, 2005 741,386 135
250M International Lease Finance Corp., 8.875%, 2001 271,448 49
- --------------------------------------------------------------------------------------
2,582,842 470
- --------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--4.3%
700M New York Times Co., Inc., 7.625%, 2005 795,393 145
750M News America Holdings, Inc., 8.50%, 2005 854,327 155
700M PanAmSat Corp., 6.375%, 2008 710,641 129
- --------------------------------------------------------------------------------------
2,360,361 429
- --------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--1.5%
750M Temple Inland, Inc., 9%, 2001 820,977 149
- --------------------------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISE--2.9%
700M Federated Department Stores, Inc., 7.45%, 2017 752,235 137
700M Wal-Mart Stores, Inc., 8%, 2006 831,889 151
- --------------------------------------------------------------------------------------
1,584,124 288
- --------------------------------------------------------------------------------------
TECHNOLOGY--3.5%
750M International Business Machines Corp., 7%, 2025 833,772 151
300M Raytheon Co., 6.55%, 2010 320,632 58
725M Xerox Corp., 7.20%, 2016 797,607 145
- --------------------------------------------------------------------------------------
1,952,011 354
- --------------------------------------------------------------------------------------
TELECOMMUNICATIONS--7.1%
850M MCI Communication Corp., 7.50%, 2004 938,912 171
368M MCI WorldCom, Inc., 8.875%, 2006 382,720 70
700M New York Telephone Co., 7.25%, 2024 737,090 134
- --------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
TELECOMMUNICATIONS (continued)
$ 1,000M Pacific Bell Telephone Co., 7%, 2004 $ 1,094,297 $ 199
700M TCI Communications, Inc., 6.375%, 2003 731,202 133
- --------------------------------------------------------------------------------------
3,884,221 707
- --------------------------------------------------------------------------------------
TRANSPORTATION--1.4%
700M Norfolk Southern Corp., 7.35%, 2007 787,747 143
- --------------------------------------------------------------------------------------
TOTAL VALUE OF CORPORATE BONDS (cost $45,379,908) 48,392,598 8,795
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--4.2%
2,200M U.S. Treasury Note, 5.50%, 2003 (cost $2,194,672) 2,308,627 419
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--2.9%
1,500M Federal National Mortgage Association, 5.75%,
2008
(cost $1,501,699) 1,589,650 289
- --------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.1%
1,700M Chevron USA, Inc., 5.30%, 10/6/98 (cost
$1,698,749) 1,698,749 309
- --------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $50,775,028) 98.1% 53,989,624 9,812
OTHER ASSETS, LESS LIABILITIES 1.9 1,034,319 188
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $55,023,943 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
15
<PAGE>
This page has been left blank intentionally.
16
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS FUND FOR INCOME, INC.
Dear Investor:
We are pleased to present this annual report for the First Investors Fund For
Income for the fiscal year ending September 30, 1998. As noted in the Market
Overview, this is a new fiscal year-end for the Fund.
For the period, the Fund's return on a net asset value basis was .5% on Class A
shares and -.1% on Class B shares. The Fund outperformed the average high yield
bond fund, which had an average return of -3.0% as measured by Lipper Analytical
Services. During the period, the Fund declared dividends from net investment
income of 29 cents per share on Class A shares and 26 cents per share on Class B
shares. The primary factors that drove the Fund's performance were a
deterioration in the high yield market as a result of the "flight to quality,"
as described in the Market Overview, and a perceived credit squeeze. The Fund's
limited exposure to emerging market debt and its focus on higher-rated junk
bonds helped its performance, relative to its peer group.
During the first quarter of 1998, the performance of the high yield market was
strong, fueled by relatively stable interest rates, healthy equity markets, and
solid performance by the emerging markets, which rebounded from a dismal fourth
quarter of 1997. The environment in the second quarter was more problematic.
Interest rates declined, the equity markets lost momentum and concern over Asian
markets grew. High yield performance was lackluster, posting barely positive
returns. Risk was beginning to be reassessed, causing the yield spread between
Treasuries and high yield bonds to widen. Upper tier credits (i.e., higher-rated
speculative bonds) and cash pay securities outperformed lower-quality issues and
deferred pay securities. A number of sectors underperformed, including commodity
based cyclicals and energy, reflecting the drop in the price of oil. The
emerging markets began to decline as spreads widened.
In the third quarter, heightened concern about the global economy and financial
markets triggered a "flight to quality," as the Treasury market rallied and the
equity market declined. The high yield market was negatively impacted, with
returns turning negative. Risk was dramatically reassessed, pushing spreads
wider and reducing liquidity. Upper quality credits significantly outperformed
lower quality bonds. In addition, the energy and commodity cyclical (e.g.,
paper, metals) sectors underperformed. Emerging markets dropped sharply amid
continued economic and financial turmoil.
During the first half of the year, we saw a continuation of the heady pace of
new issuance seen in 1997, despite the widening of spreads toward the end of the
half. However, in the third quarter, there was virtually no new issuance as
investors became risk averse.
17
<PAGE>
PORTFOLIO MANAGER'S LETTER (continued)
FIRST INVESTORS FUND FOR INCOME, INC.
During the first half of the year, the Fund benefited from a number of factors.
Return was enhanced by exposure to the cable industry, both domestically and in
the United Kingdom, as consolidation within the industry validated market
valuations. Merger and acquisition activity boosted a number of holdings, as
lower-rated issuers were acquired by stronger or higher-grade companies, such as
by Allied Signal's acquisition of Pharmaceutical Fine Chemicals. The Fund was
hindered by its lower exposure to riskier credits, as well as its position in
Premier Cruises, which dropped precipitously in price when earnings and cash
flow failed to materialize.
In the third quarter, the Fund benefited from management's focus on higher
quality issues within the high yield market, as well as the Fund's negligible
positions in emerging markets' issues. In addition, the Fund held relatively few
bonds of issuers whose price traded down sharply when reported earnings failed
to meet expectations. The Fund's holdings in the commodity cyclical sector
negatively impacted returns, although their decline was tempered somewhat by
their structure (e.g., coupon, maturity) and higher credit quality. Within the
sector, Murrin, an Australian start-up mining company, and Riverwood, a paper
company, both underperformed. Also, performance of some telecommunications
holdings (e.g., Omnipoint and 21(st) Century Communications) lagged as the
market became concerned over whether those companies would be able to fund their
future growth.
After the end in the fiscal year, the high yield market stabilized and yield
spreads contracted slightly, though by no means to their prior historically
tight levels. While the markets will likely be volatile for the next few months,
I am guardedly optimistic that the new credit spreads the market seems to have
settled on represent good value over the long term.
As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
Nancy W. Jones
Vice President
and Portfolio Manager
October 30, 1998
18
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS FUND FOR INCOME, INC.
Comparison of change in value of $10,000 investment in the First Investors Fund
For Income, Inc. (Class A shares) and the CS First Boston High Yield Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
CS FIRST BOSTON
FUND FOR INCOME HIGH YIELD INDEX
<S> <C> <C>
Jan-89 $9,375 $10,000
Dec-89 8,629 10,038
Dec-90 7,145 9,398
Dec-91 10,206 13,509
Dec-92 11,911 15,760
Dec-93 14,062 18,740
Dec-94 14,144 18,558
Dec-95 16,766 21,783
Dec-96 19,014 24,489
Dec-97 21,413 27,582
Sep-98 21,517 27,003
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
Class A Shares
One Year 2.68% (3.83%)
Five Years 9.82% 8.43%
Ten Years 8.96% 8.26%
S.E.C. 30-Day Yield 7.43%
Class B Shares
One Year 1.97% (2.03%)
Since Inception (1/12/95) 11.11% 10.50%
S.E.C. 30-Day Yield 7.20%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS FUND FOR
INCOME, INC. (CLASS A SHARES) BEGINNING 1/1/89 WITH A THEORETICAL INVESTMENT
IN THE CS FIRST BOSTON HIGH YIELD INDEX. THE CS FIRST BOSTON HIGH YIELD INDEX
IS DESIGNED TO MEASURE THE PERFORMANCE OF THE HIGH YIELD BOND MARKET. THE
INDEX CONSISTS OF 1,541 DIFFERENT ISSUES, 1,344 OF WHICH ARE CASH PAY, 150
ARE ZERO-COUPON, 11 ARE STEP BONDS, 6 ARE PAY-IN-KIND BONDS AND THE REMAINING
30 ARE IN DEFAULT. THE BONDS INCLUDED IN THE INDEX HAVE AN AVERAGE LIFE OF
8.2 YEARS, AN AVERAGE MATURITY OF 8.2 YEARS, AN AVERAGE DURATION OF 4.9 YEARS
AND AN AVERAGE COUPON OF 10.4%. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THIS
INDEX. IN ADDITION, THE INDEX DOES NOT TAKE INTO ACCOUNT FEES AND EXPENSES.
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 PERIOD ENDED 9/30/98) 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 6.25% (PRIOR TO 7/1/93 AND
12/29/89, THE MAXIMUM SALES CHARGES WERE 6.9% AND 8.5%, RESPECTIVELY). 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. 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 UNUSUALLY
HIGH CURRENT YIELDS OFFERED REFLECT THE SUBSTANTIAL RISKS ASSOCIATED WITH
INVESTMENTS IN HIGH YIELD BONDS. THE ISSUERS OF THE BONDS 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. CS FIRST BOSTON
HIGH YIELD INDEX FIGURES FROM CS FIRST BOSTON CORPORATION AND ALL OTHER
FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
19
<PAGE>
PORTFOLIO COMPOSITION
FIRST INVESTORS FUND FOR INCOME, INC.
The dollar weighted average of credit ratings of all bonds held by the Fund
during the fiscal year ended September 30, 1998 and the dollar weighted average
of the total of the Fund's investments in zero coupon bonds, step bonds and
pay-in-kind bonds during the 1998 fiscal year, computed on a monthly basis, are
set forth below. This information reflects the average composition of the Fund's
assets during the 1998 fiscal year and is not necessarily representative of the
Fund as of the end of its 1998 fiscal year, the current fiscal year or at any
other time in the future.
<TABLE>
<CAPTION>
Comparable Quality of
Rated by Unrated Securities to
Moody's Bonds Rated by Moody's
----------------------------------------------------------------------------
<S> <C> <C>
Baa3 1.16% 0.00%
Ba1 1.72 0.00
Ba2 2.31 0.00
Ba3 7.05 0.00
B1 14.40 0.00
B2 32.12 0.22
B3 22.13 0.52
Caa1 2.42 3.15
Caa2 0.53 0.00
<CAPTION>
----------------------------------------------------------------------------
<S> <C> <C>
Zero Coupon Bonds 12.73%
Step Bonds 1.01%
Pay-in-Kind Bonds 3.22%
</TABLE>
20
<PAGE>
This page has been left blank intentionally.
21
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS FUND FOR INCOME, INC.
September 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS--83.4%
AEROSPACE/DEFENSE--.5%
$ 2,000M Burke Industries, Inc., 10%, 2007 $ 1,990,000 $ 48
--------------------------------------------------------------------------------------
AGRICULTURAL PRODUCTS--1.4%
5,500M Terra Industries, Inc., 10.50%, 2005 5,720,000 137
--------------------------------------------------------------------------------------
APPAREL/TEXTILES--3.0%
3,500M Dan River, Inc., 10.125%, 2003 3,622,500 87
2,000M GFSI, Inc., 9.625%, 2007 1,890,000 45
2,450M Pillowtex Corp., 10%, 2006 2,529,625 60
4,600M Polymer Group, Inc., 9%, 2007 4,427,500 106
--------------------------------------------------------------------------------------
12,469,625 298
--------------------------------------------------------------------------------------
AUTOMOTIVE--3.0%
4,000M Accuride Corp., 9.25%, 2008 3,900,000 93
1,650M Cambridge Industries, Inc., 10.25%, 2007 1,509,750 36
2,800M Collins & Aikman Products Co., 11.50%, 2006 2,940,000 70
2,000M Exide Corp., 10%, 2005 1,860,000 44
2,260M Safelite Glass Corp., 9.875%, 2006+ 2,203,500 53
--------------------------------------------------------------------------------------
12,413,250 296
--------------------------------------------------------------------------------------
BUILDING MATERIALS--2.2%
3,500M American Architectural Products Corp., 11.75%,
2007 3,263,750 78
3,000M Nortek, Inc., 9.125%, 2007 2,955,000 71
2,000M Republic Group, Inc., 9.50%, 2008+ 1,905,000 46
1,277M Waxman USA, Inc., 11.125%, 2001 1,275,404 30
--------------------------------------------------------------------------------------
9,399,154 225
--------------------------------------------------------------------------------------
CHEMICALS--6.9%
5,300M AEP Industries, Inc., 9.875%, 2007 5,114,500 122
4,200M Harris Chemical North America, Inc., 10.25%, 2001 4,315,500 103
3,000M Harris Chemical North America, Inc., 10.75%, 2003 3,112,500 74
6,600M Huntsman Polymers Corp., 11.75%, 2004 7,095,000 170
3,450M Hydrochem Industrial Services, Inc., 10.375%,
2007 3,225,750 77
--------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
CHEMICALS (continued)
$ 1,500M Precise Technology, Inc., 11.125%, 2007 $ 1,447,500 $ 35
4,500M Texas Petrochemicals Corp., 11.125%, 2006 4,387,500 105
--------------------------------------------------------------------------------------
28,698,250 686
--------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--.4%
1,500M R.H. Donnelley, Inc., 9.125%, 2008+ 1,522,500 36
--------------------------------------------------------------------------------------
CONSUMER PRODUCTS--2.7%
1,300M AKI, Inc., 10.50%, 2008+ 1,254,500 30
2,000M Chattem, Inc., 8.875%, 2008 1,950,000 47
4,070M Herff Jones, Inc., 11%, 2005 4,415,950 105
1,300M Hines Horticulture, Inc., 11.75%, 2005 1,358,500 32
2,700M Syratech Corp., 11%, 2007 2,268,000 54
--------------------------------------------------------------------------------------
11,246,950 268
--------------------------------------------------------------------------------------
CONTAINERS/PACKAGING--.9%
600M Plastic Containers, Inc., 10%, 2006 615,000 15
3,300M Tekni-Plex, Inc., 9.25%, 2008 3,184,500 76
--------------------------------------------------------------------------------------
3,799,500 91
--------------------------------------------------------------------------------------
DURABLE GOODS MANUFACTURING--2.1%
1,000M Amtrol, Inc., 10.625%, 2006 920,000 22
1,200M Columbus McKinnon Corp., 8.50%, 2008 1,131,000 27
2,500M Day International Group, Inc., 11.125%, 2005 2,512,500 60
4,275M Fairfield Manufacturing, Inc., 11.375%, 2001 4,275,000 102
--------------------------------------------------------------------------------------
8,838,500 211
--------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--.2%
1,000M Amphenol Corp., 9.875%, 2007 975,000 23
--------------------------------------------------------------------------------------
ELECTRONICS/INSTRUMENTS/COMPONENTS--1.1%
3,000M Advanced Micro Devices, Inc., 11%, 2003 3,045,000 73
1,600M L-3 Communications Corp., 10.375%, 2007 1,752,000 42
--------------------------------------------------------------------------------------
4,797,000 115
--------------------------------------------------------------------------------------
ENERGY--3.0%
1,200M Chesapeake Energy Corp., 9.625%, 2005 1,056,000 25
5,000M KCS Energy, Inc., 11%, 2003 4,968,750 119
--------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS FUND FOR INCOME, INC.
September 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
ENERGY (continued)
$ 4,500M Magnum Hunter Resources, Inc., 10%, 2007 $ 3,870,000 $ 92
3,000M Tesoro Petroleum Corp., 9%, 2008 2,895,000 69
--------------------------------------------------------------------------------------
12,789,750 305
--------------------------------------------------------------------------------------
ENTERTAINMENT/LEISURE--2.7%
4,000M KSL Recreation Group, Inc., 10.25%, 2007 4,020,000 96
3,800M Loews Cineplex Entertainment Corp., 8.875%, 2008+ 3,771,500 90
4,000M Outboard Marine Corp., 10.75%, 2008+ 3,740,000 89
--------------------------------------------------------------------------------------
11,531,500 275
--------------------------------------------------------------------------------------
FINANCIAL--1.0%
4,500M Bay View Capital Corp., 9.125%, 2007 4,342,500 104
--------------------------------------------------------------------------------------
FOOD/BEVERAGE/TOBACCO--1.6%
1,000M Delta Beverage Group, Inc., 9.75%, 2003 995,000 24
3,500M Di Giorgio Corp., 10%, 2007 3,272,500 78
2,625M Fleming Companies, Inc., 10.625%, 2007 2,493,750 60
--------------------------------------------------------------------------------------
6,761,250 162
--------------------------------------------------------------------------------------
GAMING/LODGING--2.5%
4,000M Casino America, Inc., 12.50%, 2003 4,255,000 102
4,000M Grand Casinos, Inc., 9%, 2004 4,190,000 100
2,250M Prime Hospitality Corp., 9.25%, 2006 2,235,937 53
--------------------------------------------------------------------------------------
10,680,937 255
--------------------------------------------------------------------------------------
HEALTHCARE--4.8%
2,250M Alaris Medical Systems, Inc., 9.75%, 2006 2,148,750 51
2,000M Conmed Corp., 9%, 2008 1,887,500 45
4,100M Fisher Scientific International, Inc., 9%, 2008 3,854,000 92
4,000M Genesis Health Ventures, Inc., 9.75%, 2005 3,960,000 95
3,750M Integrated Health Services, Inc., 10.25%, 2006 3,820,312 91
2,200M Owens & Minor, Inc., 10.875%, 2006 2,310,000 55
2,500M Vencor, Inc., 9.875%, 2005 1,975,000 47
--------------------------------------------------------------------------------------
19,955,562 476
--------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
MEDIA (CABLE TV/BROADCASTING)--9.6%
$ 5,000M Comcast United Kingdom Cable Corp., 0%-11.20%,
2007 $ 4,150,000 $ 99
4,750M Diamond Cable Communications PLC, 0%-11.75%, 2005 3,788,125 90
8,050M Echostar Communications Corp., 0%-12.875%, 2004 7,828,625 187
5,000M Marcus Cable Operating Co., 0%-13.50%, 2004 4,918,750 118
4,000M Mediacom LLC/Mediacom Capital Corp., 8.50%, 2008+ 4,050,000 97
3,000M Rogers Cantel, Inc., 8.80%, 2007 2,857,500 68
3,000M Sinclair Broadcasting Group, Inc., 10%, 2005 3,127,500 75
3,850M Star Choice Communications, Inc., 13%, 2005 3,657,500 87
3,150M TCI Satellite Entertainment, Inc., 10.875%, 2007 2,850,750 68
3,000M Young Broadcasting Corp., 10.125%, 2005 3,135,000 75
--------------------------------------------------------------------------------------
40,363,750 964
--------------------------------------------------------------------------------------
MEDIA (OTHER)--1.7%
4,000M MDC Communications Corp., 10.50%, 2006 3,920,000 94
3,000M Von Hoffman Press, Inc., 10.375%, 2007+ 3,075,000 73
--------------------------------------------------------------------------------------
6,995,000 167
--------------------------------------------------------------------------------------
MINING/METALS--3.7%
1,400M Euramax International PLC, 11.25%, 2006 1,386,000 33
3,000M Murrin Murrin Holdings Property, Ltd., 9.375%,
2007 2,565,000 61
4,000M Renco Metals, Inc., 11.50%, 2003 3,980,000 95
4,000M Russel Metals, Inc., 10.25%, 2000 4,145,000 99
3,500M Wheeling-Pittsburgh Corp., 9.25%, 2007 3,290,000 79
--------------------------------------------------------------------------------------
15,366,000 367
--------------------------------------------------------------------------------------
MISCELLANEOUS--1.4%
4,300M Allied Waste North America, Inc., 10.25%, 2006 4,708,500 112
1,025M Kindercare Learning Centers, Inc., 9.50%, 2009 986,562 24
--------------------------------------------------------------------------------------
5,695,062 136
--------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--4.6%
4,000M Container Corp., 11.25%, 2004 4,000,000 96
1,450M Fonda Group, Inc., 9.50%, 2007 1,312,250 31
2,500M Riverwood International Corp., 10.25%, 2006 2,309,375 55
--------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS FUND FOR INCOME, INC.
September 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
PAPER/FOREST PRODUCTS (continued)
$ 5,600M S.D. Warren Co., Inc., 12%, 2004 $ 6,132,000 $ 147
3,000M Stone Container Corp., 11.875%, 1998 3,011,250 72
2,400M Stone Container Corp., 10.75%, 2002 2,421,000 58
--------------------------------------------------------------------------------------
19,185,875 459
--------------------------------------------------------------------------------------
REAL ESTATE/CONSTRUCTION--.5%
4,000M Cathay International, Ltd., 13%, 2008+ 2,200,000 53
--------------------------------------------------------------------------------------
RETAIL - FOOD/DRUG--.5%
2,000M Randall's Food Markets, Inc., 9.375%, 2007 2,070,000 49
--------------------------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISE--.5%
2,000M Big 5 Corp., 10.875%, 2007 1,910,000 46
--------------------------------------------------------------------------------------
TELECOMMUNICATIONS--17.8%
1,350M 21st Century Telecom Group, Inc., 0%-12.25%, 2008 651,375 16
5,800M Comcast Cellular Holdings, Inc., 9.50%, 2007 5,974,000 143
5,300M E. Spire Communications, Inc., 0%-13%, 2005 4,041,250 97
3,000M Facilicom International, Inc., 10.50%, 2008 2,610,000 62
4,600M GST USA, Inc., 0%-13.875%, 2005 3,335,000 80
4,000M Hyperion Telecommunications, Inc., 0%-13%, 2003 2,755,000 66
5,000M Intermedia Communications, Inc., 8.50%, 2008 4,975,000 119
4,300M Level 3 Communications, Inc., 9.125%, 2008 4,047,375 97
5,500M MetroNet Communications Corp., 0%-9.95%, 2008 3,052,500 73
5,000M Nextel Communications, Inc., 0%-9.95%, 2008 2,937,500 70
7,000M Nextlink Communications, Inc., 12.50%, 2006 7,560,000 181
1,700M Nextlink Communications, Inc., 9%, 2008 1,600,125 38
750M Nextlink Communications, Inc., 0%-9.45%, 2008+ 434,063 10
4,000M Omnipoint Corp., 11.625%, 2006 2,880,000 69
6,000M Orion Network Systems, Inc., 11.25%, 2007 6,180,000 148
5,000M Paging Network, Inc., 10%, 2008 4,950,000 118
3,800M Powertel, Inc., 0%-12%, 2006 2,717,000 65
4,000M Powertel, Inc., 11.125%, 2007 4,020,000 96
4,175M Qwest Communications International, Inc.,
0%-9.47%, 2007 3,225,188 77
6,000M RCN Corp., 0%-11.125%, 2007 3,360,000 80
--------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
PRINCIPAL INVESTED
AMOUNT FOR EACH
OR $10,000 OF
SHARES SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
TELECOMMUNICATIONS (continued)
$ 6,000M Triton PCS, Inc., 0%-11%, 2008+ $ 2,760,000 $ 66
480M Viatel, Inc., 0%-12.50%, 2008+ 480,000 11
--------------------------------------------------------------------------------------
74,545,376 1,782
--------------------------------------------------------------------------------------
TRANSPORTATION--3.1%
4,000M Coach USA, Inc., 9.375%, 2007 4,000,000 96
5,700M Eletson Holdings, Inc., 9.25%, 2003 5,543,250 132
3,100M Moran Transportation Co., 11.75%, 2004 3,270,500 78
--------------------------------------------------------------------------------------
12,813,750 306
--------------------------------------------------------------------------------------
TOTAL VALUE OF CORPORATE BONDS (cost $358,887,257) 349,076,041 8,340
--------------------------------------------------------------------------------------
COMMON STOCKS--.1%
MEDIA (CABLE TV/BROADCASTING)--.1%
15,753 *Echostar Communications Corp. - Class "A" 378,072 9
--------------------------------------------------------------------------------------
TECHNOLOGY--.0%
3,633 *Loral Space & Communications Corp. 53,587 1
--------------------------------------------------------------------------------------
TOTAL VALUE OF COMMON STOCKS (cost $0) 431,659 10
--------------------------------------------------------------------------------------
PREFERRED STOCKS--6.0%
MEDIA (CABLE TV/BROADCASTING)--4.8%
2,631 CBS Radio, Inc., 11.375% 302,565 7
93,401 CSC Holdings, Inc., 11.125%, PIK, Series "M" 10,274,147 245
4,481 Echostar Communications Corp., 12.125%, Series
"B" 4,346,473 104
4,755 Time Warner, Inc., 10.25%, PIK, Series "K" 5,278,050 126
--------------------------------------------------------------------------------------
20,201,235 482
--------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--1.2%
100,000 S.D. Warren Co., Inc., 14%, Series "B" 4,850,000 116
--------------------------------------------------------------------------------------
TELECOMMUNICATIONS--.0%
503 Viatel, Inc., 10%, Series "A" 29,174 1
--------------------------------------------------------------------------------------
TOTAL VALUE OF PREFERRED STOCKS (cost $21,381,808) 25,080,409 599
--------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS FUND FOR INCOME, INC.
September 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
WARRANTS $10,000 OF
OR UNITS SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
WARRANTS--.3%
GAMING/LODGING--.0%
7,000 *Goldriver Finance Corp., Liquidating Trust $ 7,000 $ --
--------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--.1%
89,166 *Star Choice Communications, Inc. (expiring
12/15/05)+ 234,061 6
--------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--.1%
100,000 *S.D. Warren Co., Inc. (expiring 12/15/06)+ 500,000 12
--------------------------------------------------------------------------------------
TELECOMMUNICATIONS--.1%
7,300 *E. Spire Communications, Inc. (expiring
11/1/05)+ 547,500 13
--------------------------------------------------------------------------------------
TOTAL VALUE OF WARRANTS (cost $0) 1,288,561 31
--------------------------------------------------------------------------------------
UNITS--1.1%
AEROSPACE/DEFENSE--.7%
3,000 Decrane Aircraft Holdings, Inc. (a)+ 3,030,000 73
--------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--.4%
4,150 Diva Systems Corp. (b)+ 1,390,250 33
--------------------------------------------------------------------------------------
TOTAL VALUE OF UNITS (cost $5,360,313) 4,420,250 106
--------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--2.1%
$ 7,500M U.S. Treasury Note, 7.25%, 2004 (cost $8,163,281) $ 8,608,598 $ 206
--------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--6.1%
300M Chevron USA, Inc., 5.25%, 10/6/98 299,781 7
6,500M Chevron USA, Inc., 5.30%, 10/6/98 6,495,215 155
400M Ford Motor Credit Corp., 5.50%, 10/22/98 398,717 10
16,000M Nordstrom, Inc., 5.53%, 10/1/98 16,000,000 382
2,500M Oyster Creek Fuel Corp., 5.60%, 10/2/98 2,499,611 60
--------------------------------------------------------------------------------------
TOTAL VALUE OF SHORT-TERM CORPORATE NOTES (cost $25,693,324) 25,693,324 614
--------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $419,485,983) 99.1% 414,598,842 9,906
OTHER ASSETS, LESS LIABILITIES .9 3,946,359 94
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $418,545,201 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
+ See Note 4
(a) Each unit consists of one 12% senior discount note due 2008 and one warrant
to buy 1.55 shares of common stock.
(b) Each unit consists of one 0%-12.625% senior discount note due 2008 and three
warrants to buy three shares of common stock.
See notes to financial statements
29
<PAGE>
This page has been left blank intentionally.
30
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS HIGH YIELD FUND, INC.
Dear Investor:
We are pleased to present this annual report for the First Investors High Yield
Fund for the fiscal year ending September 30, 1998. As noted in the Market
Overview, this is a new fiscal year-end for the Fund.
During the period, the Fund's return on a net asset value basis was .1% on Class
A shares and -.6% on Class B shares. The Fund outperformed the average high
yield bond fund, which had an average return of -3.0% as measured by Lipper
Analytical Services. During the period, the Fund declared dividends from net
investment income of 34 cents per share on Class A shares and 32 cents per share
on Class B shares. The primary factors that drove the Fund's performance were a
deterioration in the high yield market as a result of the "flight to quality,"
as described in the Market Overview, and a perceived credit squeeze. The Fund's
limited exposure to emerging market debt and its focus on higher-rated junk
bonds helped its performance, relative to its peer group.
Through the early part of 1998, the financial markets saw a continuation of the
positive characteristics exhibited in 1997. The financial system remained
supportive, despite widespread emerging markets worries. The equity market
continued its strong performance--the ultimate expression of investor
confidence. This stock market strength and the abundance of initial public
offerings brought to market provided high yield issuers with a source of
financial flexibility and contributed to the positive performance of some
issues. The Treasury market rallied early in 1998, with 10-year Treasuries
falling to 5.36% on January 12. Within the high yield market, its long-term
historical track record and set of positive fundamentals encouraged investing.
This, in turn, drove issuance to a record pace. High yield bonds were, and are,
a comparatively attractive source of capital for funding merger and acquisition
activity and other aggressive business plans.
In the second quarter, fear of the Asian contagion and projections of slower
economic growth conflicted with the frenetic pace of issuance, and caused
quality spreads to widen as investors began to resist the lower yields that they
were being asked to accept. In the high yield market, performance leadership
shifted to the "upper tier" (relatively stronger junk bond issues) from the
"middle tier" bonds (those judged to rank lower--not lowest--in credit strength)
where it had been through the first quarter. Extremely aggressive deals, "lower
tier issues," deferred pay (zero coupon) bonds and emerging markets
underperformed the market.
During the third quarter, several severe shocks to the world financial system
caused risk to be both reassessed and shunned by investors. The Russian default
and wider difficulties in emerging markets also negatively impacted the domestic
high yield and investment grade bond markets, as well as the equity markets. The
high yield market
31
<PAGE>
PORTFOLIO MANAGER'S LETTER (continued)
FIRST INVESTORS HIGH YIELD FUND, INC.
experienced severe liquidity concerns and stratification as upper tier issues
outperformed lower tier issues. New issuance slowed, and the issues that were
sold to the market successfully were brought by a select group of well-known,
already widely held companies.
The Fund's strong relative performance reflects its long-term investment
approach, a credit and quality orientation and its positioning to avoid
dependence on perpetual bull markets. The Fund benefited from diversification
across industry and structure, low exposure to emerging markets, but especially
from its preference for stable to improving companies. While the Fund must
accept the inherent risks of the high yield market, it often shuns the most
speculative investments that carry the greatest level of risk.
Rather than a having a depressed outlook, we have the view that value has
returned to the high yield market. With bonds cheaper, we now perceive a more
appealing risk/ reward equation and the potential for enhanced performance.
However, we remain wary of a number of risks, including hedge fund difficulties,
questionable stability of emerging markets and other system-wide risks. The high
yield market remains stratified, lower tier issues are still relatively illiquid
and we have seen reduced willingness within the brokerage community for helping
to trade the deals they sold to the market. Despite these factors, we think that
this is not an opportune time to pull out of high yield investments. In fact,
given the better value that is available, it probably makes sense to commit
gradually to this market.
As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
[SIGNATURE]
George V. Ganter
Vice President
and Portfolio Manager
October 30, 1998
32
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS HIGH YIELD FUND, INC.
Comparison of change in value of $10,000 investment in the First Investors High
Yield Fund, Inc. and the CS First Boston High Yield Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
HIGH CS FIRST BOSTON
YIELD FUND HIGH YIELD INDEX
<S> <C> <C> <C>
Jan-89 $9,375 $10,000
Dec-89 8,623 10,038
Dec-90 7,155 9,398
Dec-91 9,696 13,509
Dec-92 11,532 15,760
Dec-93 13,487 18,740
Dec-94 13,540 18,558
Dec-95 16,036 21,783
Dec-96 18,177 24,489
Dec-97 20,329 27,582
Sep-98 20,345 27,003
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
Class A Shares
One Year 2.10% (4.29%)
Five Years 9.44% 8.02%
Ten Years 8.17% 7.47%
S.E.C. 30-Day Yield 7.66%
Class B Shares
One Year 1.24% (2.76%)
Since Inception (1/12/95) 10.67% 10.05%
S.E.C. 30-Day Yield 7.42%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS HIGH YIELD
FUND, INC. (CLASS A SHARES) BEGINNING 1/1/89 WITH A THEORETICAL INVESTMENT IN
THE CS FIRST BOSTON HIGH YIELD INDEX. THE CS FIRST BOSTON HIGH YIELD INDEX IS
DESIGNED TO MEASURE THE PERFORMANCE OF THE HIGH YIELD BOND MARKET. THE INDEX
CONSISTS OF 1,541 DIFFERENT ISSUES, 1,344 OF WHICH ARE CASH PAY, 150 ARE
ZERO-COUPON, 11 ARE STEP BONDS, 6 ARE PAY-IN-KIND BONDS AND THE REMAINING 30
ARE IN DEFAULT. THE BONDS INCLUDED IN THE INDEX HAVE AN AVERAGE LIFE OF 8.2
YEARS, AN AVERAGE MATURITY OF 8.2 YEARS, AN AVERAGE DURATION OF 4.9 YEARS AND
AN AVERAGE COUPON OF 10.4% IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THIS
INDEX. IN ADDITION, THE INDEX DOES NOT TAKE INTO ACCOUNT FEES AND EXPENSES.
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 PERIOD ENDED 9/30/98) 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 6.25% (PRIOR TO 7/1/93 AND
12/29/89, THE MAXIMUM SALES CHARGES WERE 6.9% AND 8.5%, RESPECTIVELY). THE
CLASS B "S.E.C. STANDARDIZED" RETURNS ARE ADJUSTED FOR THE APPLICABLE DEFERRED
SALES CHARGE (MAXIMUM OF 4% IN THE FIRST YEAR). SOME OR ALL 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 (4.50%), 7.88% AND 7.34%,
RESPECTIVELY, AND THE S.E.C. YIELD FOR SEPTEMBER 1998 WOULD HAVE BEEN 7.48%.
THE CLASS B "S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR AND
SINCE INCEPTION WOULD HAVE BEEN (2.94%) AND 9.83%, RESPECTIVELY, AND THE
S.E.C. YIELD FOR SEPTEMBER 1998 WOULD HAVE BEEN 7.23%. RESULTS REPRESENT PAST
PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS. 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 UNUSUALLY
HIGH CURRENT YIELDS OFFERED REFLECT THE SUBSTANTIAL RISKS ASSOCIATED WITH
INVESTMENTS IN HIGH YIELD BONDS. THE ISSUERS OF THE BONDS 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. CS FIRST BOSTON
HIGH YIELD INDEX FIGURES FROM CS FIRST BOSTON CORPORATION AND ALL OTHER
FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
33
<PAGE>
PORTFOLIO COMPOSITION
FIRST INVESTORS HIGH YIELD FUND, INC.
The dollar weighted average of credit ratings of all bonds held by the Fund
during the fiscal year ended September 30, 1998 and the dollar weighted average
of the total of the Fund's investments in zero coupon bonds, step bonds and
pay-in-kind bonds during the 1998 fiscal year, computed on a monthly basis, are
set forth below. This information reflects the average composition of the Fund's
assets during the 1998 fiscal year and is not necessarily representative of the
Fund as of the end of its 1998 fiscal year, the current fiscal year or at any
other time in the future.
<TABLE>
<CAPTION>
Comparable Quality of
Rated by Unrated Securities to
Moody's Bonds Rated by Moody's
----------------------------------------------------------------------------
<S> <C> <C>
Baa3 1.17% 0.00%
Ba1 0.85 0.00
Ba2 5.12 0.00
Ba3 8.32 0.15
B1 14.78 0.26
B2 33.85 0.20
B3 19.94 0.06
Caa1 1.34 3.01
Caa2 0.37 0.00
<CAPTION>
----------------------------------------------------------------------------
<S> <C> <C>
Zero Coupon Bonds 10.05%
Step Bonds 1.48%
Pay-in-Kind Bonds 2.46%
</TABLE>
34
<PAGE>
This page has been left blank intentionally.
35
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS HIGH YIELD FUND, INC.
September 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS--87.4%
AEROSPACE/DEFENSE--.5%
$ 1,000M Moog, Inc., 10%, 2006 $ 1,025,000 $ 51
--------------------------------------------------------------------------------------
AGRICULTURAL PRODUCTS--.7%
1,400M Terra Industries, Inc., 10.50%, 2005 1,456,000 72
--------------------------------------------------------------------------------------
APPAREL/TEXTILES--2.7%
1,000M Pillowtex Corp., 10%, 2006 1,032,500 51
2,450M Polymer Group, Inc., 9%, 2007 2,358,125 117
2,250M Worldtex, Inc., 9.625%, 2007 2,013,750 100
--------------------------------------------------------------------------------------
5,404,375 268
--------------------------------------------------------------------------------------
AUTOMOTIVE--3.5%
1,120M Aftermarket Technology Corp., 12%, 2004 1,192,800 59
2,000M Cambridge Industries, Inc., 10.25%, 2007 1,830,000 90
1,750M Cooperative Computing, Inc., 9%, 2008 1,487,500 74
1,185M Safelite Glass Corp., 9.875%, 2006+ 1,155,375 57
1,500M Walbro Corp., 9.875%, 2005 1,353,750 67
--------------------------------------------------------------------------------------
7,019,425 347
--------------------------------------------------------------------------------------
BUILDING MATERIALS--1.4%
1,650M American Architectural Products Corp., 11.75%,
2007 1,538,625 76
1,274M Waxman USA, Inc., 11.125%, 2001 1,272,407 63
--------------------------------------------------------------------------------------
2,811,032 139
--------------------------------------------------------------------------------------
CHEMICALS--5.0%
2,250M AEP Industries, Inc., 9.875%, 2007 2,171,250 107
3,000M Harris Chemical North America, Inc., 10.25%, 2001 3,082,500 152
2,800M Huntsman Polymers Corp., 11.75%, 2004 3,010,000 149
1,900M Hydrochem Industrial Services, Inc., 10.375%,
2007 1,776,500 88
--------------------------------------------------------------------------------------
10,040,250 496
--------------------------------------------------------------------------------------
CONSUMER PRODUCTS--4.1%
1,000M AKI Holding Corp., 0%-13.50%, 2009+ 475,000 23
1,000M AKI, Inc., 10.50%, 2008+ 965,000 48
1,000M Corning Consumer Products Co., 9.625%, 2008+ 812,500 40
--------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
CONSUMER PRODUCTS (continued)
$ 2,500M Herff Jones, Inc., 11%, 2005 $ 2,712,500 $ 134
1,235M Hines Horticulture, Inc., 11.75%, 2005 1,290,575 64
1,200M Syratech Corp., 11%, 2007 1,008,000 50
1,000M William Carter Co., 10.375%, 2006 1,050,000 52
--------------------------------------------------------------------------------------
8,313,575 411
--------------------------------------------------------------------------------------
CONTAINERS/PACKAGING--3.0%
2,850M Radnor Holdings, Inc., 10%, 2003 2,835,750 140
1,200M Tekni-Plex, Inc., 9.25%, 2008 1,158,000 57
2,000M U. S. Can Corp., 10.125%, 2006 2,030,000 100
--------------------------------------------------------------------------------------
6,023,750 297
--------------------------------------------------------------------------------------
DURABLE GOODS MANUFACTURING--1.4%
750M Amtrol, Inc., 10.625%, 2006 690,000 34
2,070M Fairfield Manufacturing, Inc., 11.375%, 2001 2,070,000 102
--------------------------------------------------------------------------------------
2,760,000 136
--------------------------------------------------------------------------------------
ENERGY--3.6%
1,500M Giant Industries, Inc., 9.75%, 2003 1,470,000 73
3,000M Gulf Canada Resources, Ltd., 9.625%, 2005 3,071,250 152
1,100M Magnum Hunter Resources, Inc., 10%, 2007 946,000 47
1,900M Stone Energy Corp., 8.75%, 2007 1,831,125 91
--------------------------------------------------------------------------------------
7,318,375 363
--------------------------------------------------------------------------------------
ENTERTAINMENT/LEISURE--3.3%
1,000M Bell Sports, Inc., 11%, 2008+ 975,000 48
2,600M Loews Cineplex Entertainment Corp., 8.875%, 2008+ 2,580,500 128
3,300M Outboard Marine Corp., 10.75%, 2008+ 3,085,500 153
--------------------------------------------------------------------------------------
6,641,000 329
--------------------------------------------------------------------------------------
FOOD/BEVERAGE/TOBACCO--2.0%
2,100M Fleming Companies, Inc., 10.50%, 2004 2,021,250 100
2,000M International Home Foods, Inc., 10.375%, 2006 2,130,000 105
--------------------------------------------------------------------------------------
4,151,250 205
--------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS HIGH YIELD FUND, INC.
September 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
GAMING/LODGING--3.0%
$ 2,400M Casino America, Inc., 12.50%, 2003 $ 2,553,000 $ 126
1,750M Grand Casinos, Inc., 9%, 2004 1,833,125 91
1,750M Prime Hospitality Corp., 9.25%, 2006 1,739,062 86
--------------------------------------------------------------------------------------
6,125,187 303
--------------------------------------------------------------------------------------
HEALTHCARE--7.4%
1,700M Genesis Health Ventures, Inc., 9.75%, 2005 1,683,000 83
2,000M Integrated Health Services, Inc., 10.25%, 2006 2,037,500 101
2,600M Integrated Health Services, Inc., 9.25%, 2008 2,479,750 123
1,100M Leiner Health Products, Inc., 9.625%, 2007 1,111,000 55
2,489M Owens & Minor, Inc., 10.875%, 2006 2,613,450 129
1,100M Packard Bioscience, Inc., 9.375%, 2007 1,012,000 50
2,000M Tenet Healthcare Corp., 8.625%, 2007 2,080,000 103
2,500M Vencor, Inc., 9.875%, 2005 1,975,000 98
--------------------------------------------------------------------------------------
14,991,700 742
--------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--10.6%
1,000M Allbritton Communications Corp., 9.75%, 2007 1,020,000 50
2,000M Century Communications Corp., 9.50%, 2005 2,200,000 109
3,875M Echostar Communications Corp., 0%-12.875%, 2004 3,768,437 186
1,000M Groupe Videotron, Ltee, 10.625%, 2005 1,098,750 54
2,050M Grupo Televisa, SA, 11.875%, 2006 1,906,500 94
2,000M Lenfest Communication, Inc., 10.50%, 2006 2,267,500 112
1,300M Mediacom LLC/Mediacom Capital Corp., 8.50%, 2008+ 1,316,250 65
2,000M Rogers Cablesystems, Inc., 10%, 2005 2,195,000 109
1,700M Rogers Communications, Inc., 8.875%, 2007 1,683,000 83
2,000M Salem Communications Corp., 9.50%, 2007 2,020,000 100
2,000M Star Choice Communications, Inc., 13%, 2005 1,900,000 94
--------------------------------------------------------------------------------------
21,375,437 1,056
--------------------------------------------------------------------------------------
MEDIA (OTHER)--3.6%
2,800M Garden State Newspapers, Inc., 12%, 2004 3,080,000 152
1,800M Garden State Newspapers, Inc., 8.75%, 2009 1,746,000 86
2,400M Outdoor Systems, Inc., 8.875%, 2007 2,478,000 123
--------------------------------------------------------------------------------------
7,304,000 361
--------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
MINING/METALS--4.1%
$ 2,500M Commonwealth Aluminum, Corp., 10.75%, 2006 $ 2,437,500 $ 121
3,200M CSN Iron, SA, 9.125%, 2007+ 1,824,000 90
2,000M Renco Metals, Inc., 11.50%, 2003 1,990,000 98
2,100M Wheeling-Pittsburgh Corp., 9.25%, 2007 1,974,000 98
--------------------------------------------------------------------------------------
8,225,500 407
--------------------------------------------------------------------------------------
MISCELLANEOUS--4.7%
3,000M Allied Waste North America, Inc., 10.25%, 2006 3,285,000 162
1,750M Iron Mountain, Inc., 10.125%, 2006 1,828,750 90
2,500M Kindercare Learning Centers, Inc., 9.50%, 2009 2,406,250 119
2,000M Loomis Fargo & Co., 10%, 2004 1,920,000 95
--------------------------------------------------------------------------------------
9,440,000 466
--------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--4.5%
2,850M Fonda Group, Inc., 9.50%, 2007 2,579,250 128
2,600M S.D. Warren Co., Inc., 12%, 2004 2,847,000 141
2,750M Stone Container Corp., 11.875%, 1998 2,760,313 136
1,000M Stone Container Corp., 10.75%, 2002 1,008,750 50
--------------------------------------------------------------------------------------
9,195,313 455
--------------------------------------------------------------------------------------
REAL ESTATE/CONSTRUCTION--.6%
2,200M Cathay International, Ltd., 13%, 2008+ 1,210,000 60
--------------------------------------------------------------------------------------
RETAIL - FOOD/DRUG--.5%
1,000M Randall's Food Markets, Inc., 9.375%, 2007 1,035,000 51
--------------------------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISE--.8%
1,700M Big 5 Corp., 10.875%, 2007 1,623,500 80
--------------------------------------------------------------------------------------
TELECOMMUNICATIONS--12.8%
2,000M 21st Century Telecom Group, Inc., 0%-12.25%, 2008 965,000 48
2,100M Comcast Cellular Holdings, Inc., 9.50%, 2007 2,163,000 107
3,750M E. Spire Communications, Inc., 0%-13%, 2005 2,859,375 141
2,000M ICG Services, Inc., 0%-10%, 2008 990,600 49
1,700M Level 3 Communications, Inc., 9.125%, 2008 1,600,125 79
3,000M McCaw International, Ltd., 0%-13%, 2007 1,965,000 97
2,300M McLeodUSA, Inc., 9.25%, 2007 2,366,125 117
750M Nextlink Communications, Inc., 0%-9.45%, 2008 434,063 21
--------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS HIGH YIELD FUND, INC.
September 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
PRINCIPAL INVESTED
AMOUNT FOR EACH
OR $10,000 OF
SHARES SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
TELECOMMUNICATIONS (continued)
$ 3,000M Omnipoint Corp., 11.625%, 2006 $ 2,160,000 $ 107
1,300M Orion Network Systems, Inc., 11.25%, 2007 1,339,000 66
2,300M Paging Network, Inc., 10%, 2008 2,277,000 113
1,750M Powertel, Inc., 0%-12%, 2006 1,277,500 63
3,100M Powertel, Inc., 0%-12%, 2006 2,216,500 110
2,000M Qwest Communications International, Inc.,
0%-9.47%, 2007 1,545,000 76
3,000M RCN Corp., 0%-11.125%, 2007 1,680,000 83
--------------------------------------------------------------------------------------
25,838,288 1,277
--------------------------------------------------------------------------------------
TRANSPORTATION--3.6%
2,500M American Commercial Lines, LLC, 10.25%, 2008+ 2,462,500 122
3,550M Eletson Holdings, Inc., 9.25%, 2003 3,452,375 171
1,350M Moran Transportation Co., 11.75%, 2004 1,424,250 70
--------------------------------------------------------------------------------------
7,339,125 363
--------------------------------------------------------------------------------------
TOTAL VALUE OF CORPORATE BONDS (cost $183,113,890) 176,667,082 8,735
--------------------------------------------------------------------------------------
COMMON STOCKS--.1%
MEDIA (CABLE TV/BROADCASTING)--.1%
8,846 *Echostar Communications Corp. - Class "A" 212,304 10
--------------------------------------------------------------------------------------
TECHNOLOGY--.0%
787 *Loral Space & Communications Corp. 11,608 1
--------------------------------------------------------------------------------------
TOTAL VALUE OF COMMON STOCKS (cost $0) 223,912 11
--------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
INVESTED
SHARES FOR EACH
OR $10,000 OF
WARRANTS SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
PREFERRED STOCKS--3.9%
FINANCIAL--.6%
40,800 Astoria Financial Corp., 12%, Series "B" $ 1,147,500 $ 57
--------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--2.6%
40,026 CSC Holdings, Inc., 11.125%, PIK, Series "M" 4,402,900 218
983 Echostar Communications Corp., 12.125%, Series
"B" 953,558 47
--------------------------------------------------------------------------------------
5,356,458 265
--------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--.7%
30,200 S.D. Warren Co., Inc., 14%, Series "B" 1,464,700 72
--------------------------------------------------------------------------------------
TOTAL VALUE OF PREFERRED STOCKS (cost $6,905,929) 7,968,658 394
--------------------------------------------------------------------------------------
WARRANTS--.3%
GAMING/LODGING--.0%
17,660 *President Riverboat Casinos, Inc. (expiring
9/30/99) 177 --
--------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--.0%
46,320 *Star Choice Communications, Inc. (expiring
12/15/05)+ 121,590 6
--------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--.1%
30,200 *S.D. Warren Co., Inc. (expiring 12/15/06)+ 151,000 7
--------------------------------------------------------------------------------------
TELECOMMUNICATIONS--.2%
3,750 *E. Spire Communications, Inc. (expiring
11/1/05)+ 281,250 14
3,000 *McCaw International, Ltd. (expiring 4/15/07)+ 15,000 1
5,600 *Powertel, Inc. (expiring 2/1/06) 40,600 2
--------------------------------------------------------------------------------------
336,850 17
--------------------------------------------------------------------------------------
TOTAL VALUE OF WARRANTS (cost $91,816) 609,617 30
--------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
PORTFOLIO OF INVESTMENTS (continued)
FIRST INVESTORS HIGH YIELD FUND, INC.
September 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
AMOUNT
UNITS INVESTED
OR FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
UNITS--.5%
MEDIA (CABLE TV/BROADCASTING)
3,000 Diva Systems Corp. (a)+ (cost $1,697,796) $ 1,005,000 $ 50
--------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--2.6%
$ 4,500M United States Treasury Note, 7%, 2006
(cost $4,795,281) 5,245,317 259
--------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.4%
500M Chevron USA, Inc., 5.25%, 10/6/98 499,635 25
1,400M Chevron USA, Inc., 5.30%, 10/6/98 1,398,969 69
150M Ford Motor Credit Corp., 5.50%, 10/22/98 149,519 7
4,000M Nordstrom, Inc., 5.53%, 10/1/98 4,000,000 198
800M Oyster Creek Fuel Corp., 5.60%, 10/2/98 799,876 40
--------------------------------------------------------------------------------------
TOTAL VALUE OF SHORT-TERM CORPORATE NOTES (cost $6,847,999) 6,847,999 339
--------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $203,452,711) 98.2% 198,567,585 9,818
OTHER ASSETS, LESS LIABILITIES 1.8 3,672,873 182
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $202,240,458 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
+ See Note 4
(a) Each unit consists of one 0%-12.625% senior discount note due 2008 and three
warrants to buy three shares of common stock.
See notes to financial statements
42
<PAGE>
This page has been left blank intentionally.
43
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
FIRST INVESTORS
September 30, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
INVESTMENT
GOVERNMENT GRADE
- -------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in securities:
At identified cost................... $158,545,987 $ 50,775,028
------------ ------------
------------ ------------
At value (Note 1A)................... $163,262,586 $ 53,989,624
Cash................................... 194,120 261,586
Receivables:
Interest and dividends............... 1,146,609 865,982
Shares sold.......................... 281,569 248,930
Other assets........................... 27,482 --
------------ ------------
Total Assets........................... 164,912,366 55,366,122
------------ ------------
LIABILITIES
Payables:
Investment securities purchased...... -- --
Dividends payable.................... 731,962 242,019
Shares redeemed...................... 481,582 48,926
Accrued advisory fee................... 88,236 26,843
Accrued expenses....................... 54,844 24,391
------------ ------------
Total Liabilities...................... 1,356,624 342,179
------------ ------------
NET ASSETS............................. $163,555,742 $ 55,023,943
------------ ------------
------------ ------------
NET ASSETS CONSIST OF:
Capital paid in........................ $178,420,489 $ 51,402,236
Undistributed net investment income.... 317,681 80,851
Accumulated net realized gain (loss) on
investment transactions.............. (19,899,027) 326,260
Net unrealized appreciation
(depreciation) of investments........ 4,716,599 3,214,596
------------ ------------
Total.................................. $163,555,742 $ 55,023,943
------------ ------------
------------ ------------
NET ASSETS:
Class A.............................. $160,500,183 $ 49,754,346
Class B.............................. $ 3,055,559 $ 5,269,597
SHARES OUTSTANDING (Note 6):
Class A.............................. 13,971,297 4,723,817
Class B.............................. 266,240 499,976
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE - CLASS A.................. $ 11.49 $ 10.53
------ ------
------ ------
MAXIMUM OFFERING PRICE PER
SHARE - CLASS A
(Net asset value/.9375)*............. $ 12.26 $ 11.23
------ ------
------ ------
NET ASSET VALUE AND OFFERING PRICE PER
SHARE - CLASS B (Note 6)............. $ 11.48 $ 10.54
------ ------
------ ------
</TABLE>
* On purchases of $25,000 or more, the sales charge is reduced
See notes to financial statements
44
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
INCOME HIGH YIELD
- ---------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in securities:
At identified cost................... $ 419,485,983 $ 203,452,711
------------- -------------
------------- -------------
At value (Note 1A)................... $ 414,598,842 $ 198,567,585
Cash................................... 947,042 596,518
Receivables:
Interest and dividends............... 9,497,747 4,885,900
Shares sold.......................... 244,614 117,527
Other assets........................... 168,816 59,061
------------- -------------
Total Assets........................... 425,457,061 204,226,591
------------- -------------
LIABILITIES
Payables:
Investment securities purchased...... 3,000,000 --
Dividends payable.................... 3,107,054 1,393,608
Shares redeemed...................... 445,664 383,667
Accrued advisory fee................... 256,972 126,228
Accrued expenses....................... 102,170 82,630
------------- -------------
Total Liabilities...................... 6,911,860 1,986,133
------------- -------------
NET ASSETS............................. $ 418,545,201 $ 202,240,458
------------- -------------
------------- -------------
NET ASSETS CONSIST OF:
Capital paid in........................ $ 626,464,513 $ 325,392,033
Undistributed net investment income.... 4,855,065 921,445
Accumulated net realized gain (loss) on
investment transactions.............. (207,887,236) (119,187,894)
Net unrealized appreciation
(depreciation) of investments........ (4,887,141) (4,885,126)
------------- -------------
Total.................................. $ 418,545,201 $ 202,240,458
------------- -------------
------------- -------------
NET ASSETS:
Class A.............................. $ 409,628,858 $ 193,654,541
Class B.............................. $ 8,916,343 $ 8,585,917
SHARES OUTSTANDING (Note 6):
Class A.............................. 98,273,452 37,273,048
Class B.............................. 2,143,544 1,654,588
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE - CLASS A.................. $ 4.17 $ 5.20
----- -----
----- -----
MAXIMUM OFFERING PRICE PER
SHARE - CLASS A
(Net asset value/.9375)*............. $ 4.45 $ 5.55
----- -----
----- -----
NET ASSET VALUE AND OFFERING PRICE PER
SHARE - CLASS B (Note 6)............. $ 4.16 $ 5.19
----- -----
----- -----
</TABLE>
* On purchases of $25,000 or more, the sales charge is reduced
See notes to financial statements
45
<PAGE>
STATEMENT OF OPERATIONS
FIRST INVESTORS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
GOVERNMENT
-----------------------
1/1/98 TO 1/1/97 TO
9/30/98 12/31/97
- ----------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest............................. $8,703,983 $13,293,739
Dividends (Note 1F).................. -- --
Miscellaneous........................ -- --
---------- -----------
Total income........................... 8,703,983 13,293,739
---------- -----------
Expenses (Notes 1 and 3):
Advisory fee......................... 1,247,674 1,774,029
Shareholder servicing costs.......... 299,074 409,833
Distribution plan expenses - Class
A.................................. 369,108 527,205
Distribution plan expenses - Class
B.................................. 17,316 16,678
Reports and notices to
shareholders....................... 22,901 14,773
Professional fees.................... 29,741 38,877
Custodian fees....................... 25,387 63,875
Other expenses....................... 36,757 70,409
---------- -----------
Total expenses......................... 2,047,958 2,915,679
Less: Expenses waived or assumed....... (436,686) (532,208)
Custodian fees paid indirectly.... (13,315) (13,559)
---------- -----------
Net expenses........................... 1,597,957 2,369,912
---------- -----------
Net investment income.................. 7,106,026 10,923,827
---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 2):
Net realized gain on investments....... 1,183,567 639,617
Net unrealized appreciation
(depreciation) of investments........ 1,409,717 2,599,700
---------- -----------
Net gain (loss) on investments......... 2,593,284 3,239,317
---------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $9,699,310 $14,163,144
---------- -----------
---------- -----------
</TABLE>
See notes to financial statements
46
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE INCOME HIGH YIELD
---------------------- ------------------------- -------------------------
1/1/98 TO 1/1/97 TO 1/1/98 TO 1/1/97 TO 1/1/98 TO 1/1/97 TO
9/30/98 12/31/97 9/30/98 12/31/97 9/30/98 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest............................. $2,686,747 $3,440,948 $ 30,634,968 $39,650,340 $ 14,918,836 $19,158,853
Dividends (Note 1F).................. -- -- 1,704,153 1,956,990 537,545 567,681
Miscellaneous........................ -- -- 703,631 1,046,130 255,768 687,574
---------- ---------- ------------ ----------- ------------ -----------
Total income........................... 2,686,747 3,440,948 33,042,752 42,653,460 15,712,149 20,414,108
---------- ---------- ------------ ----------- ------------ -----------
Expenses (Notes 1 and 3):
Advisory fee......................... 283,399 354,373 2,448,268 3,217,285 1,587,262 2,074,251
Shareholder servicing costs.......... 101,631 136,884 667,053 891,951 414,421 578,311
Distribution plan expenses - Class
A.................................. 104,202 133,624 925,396 647,844 440,202 306,597
Distribution plan expenses - Class
B.................................. 30,519 27,081 52,937 38,520 60,776 46,763
Reports and notices to
shareholders....................... 7,722 7,072 35,954 58,307 31,223 37,000
Professional fees.................... 11,038 14,530 36,064 60,379 35,413 42,983
Custodian fees....................... 7,545 10,183 35,940 49,935 20,968 26,018
Other expenses....................... 7,896 10,881 42,618 91,858 27,181 33,428
---------- ---------- ------------ ----------- ------------ -----------
Total expenses......................... 553,952 694,628 4,244,230 5,056,079 2,617,446 3,145,351
Less: Expenses waived or assumed....... (115,398) (152,831) -- -- (375,000) (400,000)
Custodian fees paid indirectly.... (2,832) (3,124) (10,192) (19,773) (6,512) (8,849)
---------- ---------- ------------ ----------- ------------ -----------
Net expenses........................... 435,722 538,673 4,234,038 5,036,306 2,235,934 2,736,502
---------- ---------- ------------ ----------- ------------ -----------
Net investment income.................. 2,251,025 2,902,275 28,808,714 37,617,154 13,476,215 17,677,606
---------- ---------- ------------ ----------- ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 2):
Net realized gain on investments....... 332,824 145,546 6,072,547 7,801,754 2,887,542 713,528
Net unrealized appreciation
(depreciation) of investments........ 1,502,946 1,059,248 (32,899,878) 7,327,698 (16,132,114) 5,114,885
---------- ---------- ------------ ----------- ------------ -----------
Net gain (loss) on investments......... 1,835,770 1,204,794 (26,827,331) 15,129,452 (13,244,572) 5,828,413
---------- ---------- ------------ ----------- ------------ -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $4,086,795 $4,107,069 $ 1,981,383 $52,746,606 $ 231,643 $23,506,019
---------- ---------- ------------ ----------- ------------ -----------
---------- ---------- ------------ ----------- ------------ -----------
</TABLE>
See notes to financial statements
47
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FIRST INVESTORS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
GOVERNMENT
----------------------------------------
1/1/98 TO 1/1/97 TO 1/1/96 TO
9/30/98 12/31/97 12/31/96
- --------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................ $ 7,106,026 $ 10,923,827 $ 12,270,836
Net realized gain (loss) on
investments........................ 1,183,567 639,617 (1,232,902)
Net unrealized appreciation
(depreciation) of investments...... 1,409,717 2,599,700 (4,653,836)
------------ ------------ ------------
Net increase in net assets
resulting from operations........ 9,699,310 14,163,144 6,384,098
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income - Class A...... (6,724,124) (10,429,404) (11,494,009)
Net investment income - Class B...... (81,974) (87,929) (61,453)
Net realized gains - Class A......... -- -- --
Net realized gains - Class B......... -- -- --
------------ ------------ ------------
Total distributions................ (6,806,098) (10,517,333) (11,555,462)
------------ ------------ ------------
SHARE TRANSACTIONS(a)
Class A:
Proceeds from shares sold............ 9,525,532 5,908,414 9,616,660
Reinvestment of distributions........ 4,926,021 8,585,051 9,449,764
Cost of shares redeemed.............. (26,851,304) (34,742,760) (44,314,807)
------------ ------------ ------------
(12,399,751) (20,249,295) (25,248,383)
------------ ------------ ------------
Class B:
Proceeds from shares sold............ 1,211,035 771,873 674,440
Reinvestment of distributions........ 61,087 77,395 53,224
Cost of shares redeemed.............. (255,377) (293,938) (202,104)
------------ ------------ ------------
1,016,745 555,330 525,560
------------ ------------ ------------
Net increase (decrease) from share
transactions....................... (11,383,006) (19,693,965) (24,722,823)
------------ ------------ ------------
Net increase (decrease) in net
assets........................... (8,489,794) (16,048,154) (29,894,187)
NET ASSETS
Beginning of period.................. 172,045,536 188,093,690 217,987,877
------------ ------------ ------------
End of period+....................... $163,555,742 $172,045,536 $188,093,690
------------ ------------ ------------
------------ ------------ ------------
+Includes undistributed net investment
income of............................ $ 317,681 $ 17,753 $ 84,473
------------ ------------ ------------
------------ ------------ ------------
(a)SHARES ISSUED AND REDEEMED
Class A:
Sold................................. 840,674 532,781 872,095
Issued for distributions
reinvested......................... 435,243 772,790 857,565
Redeemed............................. (2,371,443) (3,132,875) (4,024,024)
------------ ------------ ------------
Net increase (decrease) in Class A
shares outstanding................. (1,095,526) (1,827,304) (2,294,364)
------------ ------------ ------------
------------ ------------ ------------
Class B:
Sold................................. 106,792 69,580 60,779
Issued for distributions
reinvested......................... 5,403 6,967 4,837
Redeemed............................. (22,630) (26,527) (18,407)
------------ ------------ ------------
Net increase in Class B shares
outstanding........................ 89,565 50,020 47,209
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE INCOME
--------------------------------------- ----------------------------------------
1/1/98 TO 1/1/97 TO 1/1/96 TO 1/1/98 TO 1/1/97 TO 1/1/96 TO
9/30/98 12/31/97 12/31/96 9/30/98 12/31/97 12/31/96
- --------------------------------------- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................ $ 2,251,025 $ 2,902,275 $ 3,033,842 $ 28,808,714 $ 37,617,154 $ 39,637,266
Net realized gain (loss) on
investments........................ 332,824 145,546 108,990 6,072,547 7,801,754 (5,886,757)
Net unrealized appreciation
(depreciation) of investments...... 1,502,946 1,059,248 (2,054,202) (32,899,878) 7,327,698 19,592,189
----------- ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations......... 4,086,795 4,107,069 1,088,630 1,981,383 52,746,606 53,342,698
----------- ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income - Class A...... (2,031,526) (2,740,532) (2,965,537) (28,271,152) (37,571,202) (37,526,146)
Net investment income - Class B...... (157,556) (148,190) (95,970) (427,881) (367,759) (210,871)
Net realized gains - Class A......... -- (145,340) (79,969) -- -- --
Net realized gains - Class B......... -- (10,710) (4,021) -- -- --
----------- ------------ ------------ ------------ ------------ ------------
Total distributions................ (2,189,082) (3,044,772) (3,145,497) (28,699,033) (37,938,961) (37,737,017)
----------- ------------ ------------ ------------ ------------ ------------
SHARE TRANSACTIONS(a)
Class A:
Proceeds from shares sold............ 7,654,519 6,253,282 8,590,879 19,191,549 16,851,806 14,956,436
Reinvestment of distributions........ 1,382,541 2,236,906 2,386,687 17,811,002 26,312,729 25,915,540
Cost of shares redeemed.............. (6,018,074) (10,870,685) (12,567,534) (39,843,145) (50,837,153) (50,539,459)
----------- ------------ ------------ ------------ ------------ ------------
3,018,986 (2,380,497) (1,589,968) (2,840,594) (7,672,618) (9,667,483)
----------- ------------ ------------ ------------ ------------ ------------
Class B:
Proceeds from shares sold............ 2,122,648 1,206,438 1,459,481 4,069,154 2,600,932 1,604,309
Reinvestment of distributions........ 97,513 110,137 78,964 222,517 234,762 127,411
Cost of shares redeemed.............. (438,399) (402,070) (325,873) (634,541) (543,250) (249,045)
----------- ------------ ------------ ------------ ------------ ------------
1,781,762 914,505 1,212,572 3,657,130 2,292,444 1,482,675
----------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) from share
transactions....................... 4,800,748 (1,465,992) (377,396) 816,536 (5,380,174) (8,184,808)
----------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net
assets............................ 6,698,461 (403,695) (2,434,263) (25,901,114) 9,427,471 7,420,873
NET ASSETS
Beginning of period.................. 48,325,482 48,729,177 51,163,440 444,446,315 435,018,844 427,597,971
----------- ------------ ------------ ------------ ------------ ------------
End of period+....................... $55,023,943 $ 48,325,482 $ 48,729,177 $418,545,201 $444,446,315 $435,018,844
----------- ------------ ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------ ------------
+Includes undistributed net investment
income of............................ $ 80,851 $ 18,908 $ 9,294 $ 4,855,065 $ 4,745,384 $ 5,067,191
----------- ------------ ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------ ------------
(a)SHARES ISSUED AND REDEEMED
Class A:
Sold................................. 746,328 628,030 863,456 4,340,514 3,881,531 3,564,924
Issued for distributions
reinvested......................... 135,264 224,425 240,179 4,026,825 6,059,302 6,171,776
Redeemed............................. (587,942) (1,095,164) (1,264,529) (9,003,279) (11,715,604) (12,071,004)
----------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in Class A
shares outstanding................. 293,650 (242,709) (160,894) (635,940) (1,774,771) (2,334,304)
----------- ------------ ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------ ------------
Class B:
Sold................................. 206,853 120,858 147,002 928,514 599,023 383,768
Issued for distributions
reinvested......................... 9,529 11,021 7,948 50,572 54,064 30,324
Redeemed............................. (42,765) (40,307) (32,903) (144,214) (124,769) (59,519)
----------- ------------ ------------ ------------ ------------ ------------
Net increase in Class B shares
outstanding........................ 173,617 91,572 122,047 834,872 528,318 354,573
----------- ------------ ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------ ------------
</TABLE>
49
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (continued)
FIRST INVESTORS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
HIGH YIELD
----------------------------------------
1/1/98 TO 1/1/97 TO 1/1/96 TO
9/30/98 12/31/97 12/31/96
- --------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................ $ 13,476,215 $ 17,677,606 $ 17,406,418
Net realized gain (loss) on
investments........................ 2,887,542 713,528 (7,765,501)
Net unrealized appreciation
(depreciation) of investments...... (16,132,114) 5,114,885 14,736,452
------------ ------------ ------------
Net increase in net assets
resulting from operations........ 231,643 23,506,019 24,377,369
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income - Class A...... (12,837,075) (18,059,105) (17,643,461)
Net investment income - Class B...... (469,260) (449,764) (171,377)
Net realized gains - Class A......... -- -- --
Net realized gains - Class B......... -- -- --
------------ ------------ ------------
Total distributions................ (13,306,335) (18,508,869) (17,814,838)
------------ ------------ ------------
SHARE TRANSACTIONS(a)
Class A:
Proceeds from shares sold............ 13,015,941 18,043,474 20,402,130
Reinvestment of distributions........ 8,343,126 12,110,096 13,062,488
Cost of shares redeemed.............. (23,733,242) (28,096,512) (25,196,197)
------------ ------------ ------------
(2,374,175) 2,057,058 8,268,421
------------ ------------ ------------
Class B:
Proceeds from shares sold............ 3,149,731 3,582,510 3,074,309
Reinvestment of distributions........ 232,619 255,493 88,770
Cost of shares redeemed.............. (1,125,496) (1,007,361) (226,919)
------------ ------------ ------------
2,256,854 2,830,642 2,936,160
------------ ------------ ------------
Net increase (decrease) from share
transactions....................... (117,321) 4,887,700 11,204,581
------------ ------------ ------------
Net increase (decrease) in net
assets........................... (13,192,013) 9,884,850 17,767,112
NET ASSETS
Beginning of period.................. 215,432,471 205,547,621 187,780,509
------------ ------------ ------------
End of period+....................... $202,240,458 $215,432,471 $205,547,621
------------ ------------ ------------
------------ ------------ ------------
+Includes undistributed net investment
income of............................ $ 921,445 $ 751,565 $ 1,582,828
------------ ------------ ------------
------------ ------------ ------------
(a)SHARES ISSUED AND REDEEMED
Class A:
Sold................................. 2,358,746 3,324,677 3,871,810
Issued for distributions
reinvested......................... 1,516,355 2,233,259 2,471,711
Redeemed............................. (4,319,040) (5,175,518) (4,780,167)
------------ ------------ ------------
Net increase (decrease) in Class A
shares outstanding................. (443,939) 382,418 1,563,354
------------ ------------ ------------
------------ ------------ ------------
Class B:
Sold................................. 571,087 661,609 581,031
Issued for distributions
reinvested......................... 42,398 46,771 16,742
Redeemed............................. (206,051) (185,884) (43,012)
------------ ------------ ------------
Net increase in Class B shares
outstanding........................ 407,434 522,496 554,761
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to financial statements
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES--First Investors Government Fund, Inc.
("Government Fund"), First Investors Investment Grade Fund ("Investment Grade
Fund"), a series of First Investors Series Fund ("Series Fund"), First Investors
Fund For Income, Inc. ("Income Fund") and First Investors High Yield Fund, Inc.
("High Yield Fund") are registered under the Investment Company Act of 1940 (the
"1940 Act") as diversified, open-end management investment companies. Each Fund
accounts separately for the assets, liabilities and operations of the Fund.
Series Fund offers four additional series which are not included in this report.
The objective of each Fund is as follows:
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.
INCOME FUND primarily seeks to earn a high level of current income and, to the
extent possible, in view of that objective, secondarily seeks growth of capital.
HIGH YIELD FUND primarily seeks high current income and secondarily seeks
capital appreciation.
On March 19, 1998, the Boards of Directors/Trustees of the Government Fund,
Series Fund, Income Fund and High Yield Fund approved a change in the fiscal
year-ends of each of the above listed Funds to September 30. Previously, the
fiscal year-ends were December 31 for each of the Funds.
A. Security Valuation--Except as provided below, a security listed or traded on
an exchange or the Nasdaq Stock Market is valued at its last sale price on the
exchange or market where the security is principally traded, and lacking any
sales, the security is valued at the mean between the closing bid and asked
prices. Securities traded in the over-the-counter ("OTC") market (including
securities listed on exchanges whose primary market is believed to be OTC) are
valued at the mean between the last bid and asked prices based upon quotes
furnished by a market maker for such securities. Securities may also be priced
by a pricing service. 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 values.
Short-term debt securities that mature in 60 days or less are valued at
amortized cost. Securities for which market quotations are not readily
available, and any other assets are valued on a consistent basis at fair value
as determined in good faith by or under the
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
supervision of the Fund's officers in a manner specifically authorized by the
Board of Directors/Trustees.
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, federal income taxes. At September 30, 1998, capital
loss carryovers were as follows:
<TABLE>
<CAPTION>
Year Capital Loss Government Income High Yield
Carryovers Expire Fund Fund Fund
- --------------------------------------- ---------- ------------ ------------
<S> <C> <C> <C>
1999................................... $ -- $207,520,038 $109,407,947
2001................................... -- -- 1,762,042
2002................................... 19,694,519 254,689 135,416
2003................................... -- -- 593,956
2004................................... 204,508 -- 4,405,482
2005................................... -- 112,509 2,883,051
---------- ------------ ------------
Total................................ $19,899,027 $207,887,236 $119,187,894
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
C. Distributions to Shareholders--Dividends to shareholders from net investment
income are generally declared daily and paid monthly. Distributions from net
realized capital gains, if any, are generally declared and paid annually. Income
dividends and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
mortgage-backed securities, capital loss carryforwards and post-October capital
losses.
D. Use of Estimates--The preparation of the financial statements in conformity
with generally accepted accounting principles 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 accounting period. Actual results could differ
from those estimates.
E. Expense Allocation--Expenses directly charged or attributable to a Fund are
paid from the assets of that Fund. General expenses of Series Fund are allocated
among and charged to the assets of each Fund in Series Fund on a fair and
52
<PAGE>
equitable basis, which may be based on the relative assets of each Fund or the
nature of the services performed and relative applicability of each Fund.
F. 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. Shares of stock
received in lieu of cash dividends on certain preferred stock holdings of Income
Fund and High Yield Fund are recognized as dividend income and recorded at the
market value of the shares received. During the period ended September 30, 1998,
Income Fund and High Yield Fund recognized $1,253,637 and $353,246,
respectively, from these taxable "pay-in-kind" distributions. Interest income
and estimated expenses are accrued daily. For the period ended September 30,
1998, the Bank of New York, custodian for the Funds, has provided total credits
in the amount of $32,851 against custodian charges based on the uninvested cash
balances of the Funds.
2. SECURITIES TRANSACTIONS--For the period ended September 30, 1998, purchases
and sales (including pay-downs on Government Fund) of securities and long-term
U.S. Government obligations (excluding U.S. Treasury bills, short-term U.S.
Government obligations and short-term securities) were as follows:
<TABLE>
<CAPTION>
Long-Term
U.S. Government
Securities Obligations
-------------------------- -------------------------
<S> <C> <C> <C> <C>
Cost of Proceeds Cost of Proceeds
Fund Purchases from Sales Purchases from Sales
- --------------------------------------- ------------ ------------ ----------- ------------
Government............................. $ -- $ -- $98,909,650 $112,074,977
Investment Grade....................... 21,502,551 18,019,807 5,848,099 5,961,133
Income................................. 117,701,821 136,897,843 -- --
High Yield............................. 40,644,388 42,616,365 -- --
</TABLE>
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
At September 30, 1998, aggregate cost and net unrealized appreciation
(depreciation) of securities for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Aggregate Unrealized Unrealized Appreciation
Fund Cost Appreciation Depreciation (Depreciation)
- --------------------------------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Government............................. $158,545,987 $ 4,716,599 $ -- $ 4,716,599
Investment Grade....................... 50,775,028 3,228,225 13,629 3,214,596
Income................................. 419,485,983 11,776,374 16,663,515 (4,887,141)
High Yield............................. 203,452,711 5,537,846 10,422,972 (4,885,126)
</TABLE>
3. ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES--Certain officers and
directors/trustees of the Funds are officers and directors of the Funds'
investment adviser, First Investors Management Company, Inc. ("FIMCO"), its
underwriter, First Investors Corporation ("FIC"), its transfer agent,
Administrative Data Management Corp. ("ADM") and/or First Financial Savings
Bank, S.L.A. ("FFS"), custodian of the Funds' Individual Retirement Accounts.
Directors/ trustees of the Funds who are not "interested persons" of the Funds
as defined in the 1940 Act are remunerated by the Funds. For the period ended
September 30, 1998, total directors/trustees fees accrued by the Funds amounted
to $24,050.
The Investment Advisory Agreements provide as compensation to FIMCO an annual
fee, payable monthly, at the following rates:
GOVERNMENT AND HIGH YIELD FUNDS--1% on the first $200 million of each Fund's
average daily net assets, .75% on the next $300 million, declining by .03% on
each $250 million thereafter, down to .66% on average daily net assets over $1
billion. FIMCO has voluntarily waived 35% of the 1% annual fee on the first $200
million of Government Fund's average daily net assets for the period ended
September 30, 1998. For the same period, FIMCO also has voluntarily waived 25%
of the 1% annual fee on the first $200 million of High Yield Fund's average
daily net assets.
INVESTMENT GRADE FUND--.75% on the first $300 million of the Fund's average
daily net assets, .72% on the next $200 million, .69% on the next $250 million,
and .66% on average daily assets over $750 million. FIMCO has voluntarily waived
20% of the .75% annual fee on the first $300 million of the Fund's average daily
net assets for the period ended September 30, 1998.
54
<PAGE>
INCOME FUND--.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.
For the period ended September 30, 1998, total advisory fees accrued to FIMCO by
the Funds were $5,566,603 of which $868,366 was waived. In addition, FIMCO
assumed $58,718 of Investment Grade Fund expenses.
For the period ended September 30, 1998, FIC, as underwriter, received
$1,244,107 in commissions from the sale of shares of the Funds after allowing
$176,893 to other dealers. Shareholder servicing costs included $890,018 in
transfer agent fees accrued to ADM and $279,647 in IRA custodian fees accrued to
FFS.
Pursuant to Distribution Plans adopted under Rule 12b-1 of the 1940 Act, each
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 annual basis each year, payable monthly. The fee consists of a
distribution fee and a service fee. The service fee is paid for the ongoing
servicing of clients who are shareholders of the Funds. However, pursuant to
settlements entered into with various state regulators, the fee of Income Fund
and High Yield Fund was limited to .15% for Class A and .85% for Class B until
February 1, 1998. For the period ended September 30, 1998, this fee reduction on
Income Fund amounted to $55,178 for Class A and $733 for Class B and on High
Yield Fund it amounted to $26,198 for Class A and $905 for Class B.
4. RULE 144A SECURITIES--Under Rule 144A, certain restricted securities are
exempt from the registration requirements of the Securities Act of 1933 and may
only be sold to qualified institutional investors. At September 30, 1998, Income
Fund held seventeen 144A securities with an aggregate value of $33,097,874
representing 7.9% of the Fund's net assets and High Yield Fund held sixteen 144A
securities with an aggregate value of $18,435,465 representing 9.1% of the
Fund's net assets. These securities are valued as set forth in Note 1A.
5. CONCENTRATION OF CREDIT RISK--The investments of Income Fund and High Yield
Fund in high yield securities whether rated or unrated may be considered
speculative and subject to greater market fluctuations and risks of loss of
income and principal than lower yielding, higher rated, fixed income securities.
The risk of loss due to default by the issuer may be significantly greater for
the holders of high yielding securities, because such securities are generally
unsecured and are often subordinated to other creditors of the issuer.
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
6. CAPITAL--Each Fund sells two classes of shares, Class A and Class B, each
with 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 6.25% 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. Of the 1,000,000,000 shares
originally authorized by both Government Fund and Income Fund, each Fund has
designated 500,000,000 shares as Class A and 500,000,000 as Class B. Series
Fund, of which Investment Grade Fund is a series, has established an unlimited
number of shares of beneficial interest for both Class A and Class B shares. Of
the 500,000,000 shares originally authorized by High Yield Fund, the Fund has
designated 250,000,000 shares as Class A and 250,000,000 shares as Class B.
7. SUBSEQUENT EVENT--The Investment Grade Fund declared a distribution of net
realized capital gains in the amount of $0.066 per share to shareholders of
record as of October 30, 1998 payable November 10, 1998.
56
<PAGE>
This page has been left blank intentionally.
57
<PAGE>
FINANCIAL HIGHLIGHTS
FIRST INVESTORS
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 period indicated.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
P E R S H A R E D A T A
--------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
NET ASSET -------------------------------------- FROM
VALUE NET REALIZED --------------------
--------- NET AND UNREALIZED TOTAL FROM NET NET
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAIN DISTRIBUTIONS
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT
CLASS A
1993................................... $ 11.83 $ .72 $ (.26) $ .46 $ .74 $ -- $ .74
1994................................... 11.55 .69 (1.06) (.37) .68 -- .68
1995................................... 10.50 .71 .82 1.53 .72 -- .72
1996................................... 11.31 .68 (.30) .38 .64 -- .64
1997................................... 11.05 .69 .21 .90 .66 -- .66
1998(a)................................ 11.29 .49 .18 .67 .47 -- .47
CLASS B
1995(b)................................ 10.52 .63 .80 1.43 .64 -- .64
1996................................... 11.31 .60 (.31) .29 .56 -- .56
1997................................... 11.04 .61 .21 .82 .59 -- .59
1998(a)................................ 11.27 .42 .19 .61 .40 -- .40
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE
CLASS A
1993................................... $ 9.90 $ .65 $ .50 $ 1.15 $ .65 $ .07 $ .72
1994................................... 10.33 .62 (1.09) (.47) .62 -- .62
1995................................... 9.24 .64 1.10 1.74 .64 -- .64
1996................................... 10.34 .62 (.39) .23 .62 .02 .64
1997................................... 9.93 .62 .25 .87 .61 .03 .64
1998(a)................................ 10.16 .46 .36 .82 .45 -- .45
CLASS B
1995(b)................................ 9.26 .54 1.10 1.64 .55 -- .55
1996................................... 10.35 .55 (.39) .16 .55 .02 .57
1997................................... 9.94 .55 .26 .81 .55 .03 .58
1998(a)................................ 10.17 .41 .36 .77 .40 -- .40
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE>
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 period indicated.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
------------------------------------------------------------------------------
---------
RATIO TO AVERAGE NET RATIO TO AVERAGE NET
ASSETS BEFORE
EXPENSES
ASSETS++ WAIVED OR ASSUMED
NET ASSET -------------------- --------------------
VALUE TOTAL NET NET PORTFOLIO
--------- RETURN NET ASSETS INVESTMENT INVESTMENT TURNOVER
END * END OF PERIOD EXPENSES INCOME EXPENSES INCOME RATE
OF PERIOD (%) (IN MILLIONS) (%) (%) (%) (%) (%)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT
CLASS A
1993................................... $ 11.55 3.99 $ 288 1.32 6.14 1.48 5.98 584
1994................................... 10.50 (3.22) 219 1.40 6.31 1.60 6.11 260
1995................................... 11.31 14.98 217 1.38 6.50 1.61 6.27 163
1996................................... 11.05 3.51 187 1.39 6.15 1.63 5.90 121
1997................................... 11.29 8.40 170 1.34 6.16 1.64 5.86 134
1998(a)................................ 11.49 6.03 161 1.28+ 5.71+ 1.62+ 5.37+ 62
CLASS B
1995(b)................................ 11.31 13.94 1 2.13+ 5.75+ 2.37+ 5.51+ 163
1996................................... 11.04 2.73 1 2.09 5.44 2.34 5.20 121
1997................................... 11.27 7.60 2 2.04 5.46 2.34 5.16 134
1998(a)................................ 11.48 5.54 3 1.98+ 5.01+ 2.32+ 4.67+ 62
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE
CLASS A
1993................................... $ 10.33 11.82 $ 49 .86 6.27 1.40 5.73 38
1994................................... 9.24 (4.62) 46 .95 6.46 1.47 5.94 17
1995................................... 10.34 19.40 50 1.10 6.43 1.43 6.10 27
1996................................... 9.93 2.39 46 1.11 5.96 1.42 5.65 22
1997................................... 10.16 9.14 45 1.11 6.18 1.43 5.86 34
1998(a)................................ 10.53 8.29 50 1.10+ 6.02+ 1.40+ 5.72+ 49
CLASS B
1995(b)................................ 10.35 18.08 1 1.80+ 5.73+ 2.13+ 5.40+ 27
1996................................... 9.94 1.64 2 1.81 5.26 2.12 4.95 22
1997................................... 10.17 8.40 3 1.81 5.48 2.13 5.16 34
1998(a)................................ 10.54 7.73 5 1.80+ 5.32+ 2.10+ 5.02+ 49
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
FIRST INVESTORS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
P E R S H A R E D A T A
--------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
NET ASSET -------------------------------------- FROM
VALUE NET REALIZED --------------------
--------- NET AND UNREALIZED TOTAL FROM NET NET
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAIN DISTRIBUTIONS
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
CLASS A
1993................................... $ 3.89 $ .39 $ .29 $ .68 $ .40 $ -- $ .40
1994................................... 4.17 .37 (.35) .02 .38 -- .38
1995................................... 3.81 .38 .30 .68 .36 -- .36
1996................................... 4.13 .39 .14 .53 .37 -- .37
1997................................... 4.29 .38 .14 .52 .38 -- .38
1998(a)................................ 4.43 .29 (.26) .03 .29 -- .29
CLASS B
1995(b)................................ 3.81 .31 .33 .64 .32 -- .32
1996................................... 4.13 .38 .12 .50 .35 -- .35
1997................................... 4.28 .34 .15 .49 .35 -- .35
1998(a)................................ 4.42 .26 (.26) -- .26 -- .26
- -------------------------------------------------------------------------------------------------------------------
HIGH YIELD
CLASS A
1993................................... $ 4.97 $ .47 $ .34 $ .81 $ .48 $ -- $ .48
1994................................... 5.30 .48 (.46) .02 .48 -- .48
1995................................... 4.84 .47 .39 .86 .48 -- .48
1996................................... 5.22 .47 .20 .67 .49 -- .49
1997................................... 5.40 .46 .15 .61 .48 -- .48
1998(a)................................ 5.53 .35 (.34) .01 .34 -- .34
CLASS B
1995(b)................................ 4.84 .42 .40 .82 .43 -- .43
1996................................... 5.23 .44 .18 .62 .45 -- .45
1997................................... 5.40 .43 .14 .57 .44 -- .44
1998(a)................................ 5.53 .32 (.34) (.02) .32 -- .32
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Calculated without sales charges
+ Annualized
++ Net of expenses waived or assumed (Note 3)
(a) For the period January 1, 1998 to September 30, 1998
(b) For the period January 12, 1995 (date Class B shares first offered) to
December 31, 1995
See notes to financial statements
60
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
------------------------------------------------------------------------------
---------
RATIO TO AVERAGE NET RATIO TO AVERAGE NET
ASSETS BEFORE
EXPENSES
ASSETS++ WAIVED OR ASSUMED
NET ASSET -------------------- --------------------
VALUE TOTAL NET NET PORTFOLIO
--------- RETURN NET ASSETS INVESTMENT INVESTMENT TURNOVER
END * END OF PERIOD EXPENSES INCOME EXPENSES INCOME RATE
OF PERIOD (%) (IN MILLIONS) (%) (%) (%) (%) (%)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
CLASS A
1993................................... $ 4.17 18.06 $ 431 1.32 9.54 N/A N/A 76
1994................................... 3.81 .58 401 1.22 9.34 N/A N/A 39
1995................................... 4.13 18.54 425 1.18 9.53 N/A N/A 33
1996................................... 4.29 13.40 432 1.16 9.27 N/A N/A 30
1997................................... 4.43 12.62 439 1.15 8.63 N/A N/A 45
1998(a)................................ 4.17 .49 410 1.27+ 8.68+ N/A N/A 28
CLASS B
1995(b)................................ 4.13 17.46 2 1.92+ 8.78+ N/A N/A 33
1996................................... 4.28 12.51 3 1.86 8.57 N/A N/A 30
1997................................... 4.42 11.95 6 1.85 7.93 N/A N/A 45
1998(a)................................ 4.16 (.06) 9 1.97+ 7.98+ N/A N/A 28
- --------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD
CLASS A
1993................................... $ 5.30 16.95 $ 191 1.69 8.96 N/A N/A 87
1994................................... 4.84 .39 170 1.56 9.48 1.59 9.44 32
1995................................... 5.22 18.43 187 1.45 9.22 1.55 9.12 42
1996................................... 5.40 13.35 202 1.37 8.99 1.52 8.84 29
1997................................... 5.53 11.84 209 1.29 8.17 1.48 7.98 46
1998(a)................................ 5.20 .08 194 1.36+ 8.36+ 1.59+ 8.13+ 20
CLASS B
1995(b)................................ 5.23 17.40 1 2.22+ 8.45+ 2.32+ 8.35+ 42
1996................................... 5.40 12.41 4 2.07 8.28 2.22 8.13 29
1997................................... 5.53 11.11 7 1.99 7.47 2.18 7.28 46
1998(a)................................ 5.19 (.59) 9 2.06+ 7.66+ 2.29+ 7.43+ 20
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Calculated without sales charges
+ Annualized
++ Net of expenses waived or assumed (Note 3)
(a) For the period January 1, 1998 to September 30, 1998
(b) For the period January 12, 1995 (date Class B shares first offered) to
December 31, 1995
See notes to financial statements
61
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Boards of Directors/Trustees of
First Investors Government Fund, Inc.
First Investors Investment Grade Fund
First Investors Fund For Income, Inc.
First Investors High Yield Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of the First Investors Government Fund,
Investment Grade Fund (a series of First Investors Series Fund), Fund For Income
and High Yield Fund as of September 30, 1998, the related statement of
operations, the statement of changes in net assets and financial highlights for
each of the periods indicated thereon. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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
September 30, 1998, by correspondence with the custodian and brokers. 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 the
First Investors Government Fund, Investment Grade Fund, Fund For Income and High
Yield Fund at September 30, 1998, and the results of their operations, changes
in their net assets and financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 30, 1998
62
<PAGE>
FIRST INVESTORS
DIRECTORS
- --------------------------------
JAMES J. COY (Emeritus)
GLENN O. HEAD
KATHRYN S. HEAD
LARRY R. LAVOIE
REX R. REED
HERBERT RUBINSTEIN
NANCY S. SCHAENEN
JAMES M. SRYGLEY
JOHN T. SULLIVAN
ROBERT F. WENTWORTH
OFFICERS
- --------------------------------
GLENN O. HEAD
President
NANCY W. JONES
Vice President
GEORGE V. GANTER
Vice President
CLARK D. WAGNER
Vice President
CONCETTA DURSO
Vice President and Secretary
JOSEPH I. BENEDEK
Treasurer
CAROL LERNER BROWN
Assistant Secretary
GREGORY R. KINGSTON
Assistant Treasurer
MARK S. SPENCER
Assistant Treasurer
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FIRST INVESTORS
SHAREHOLDER INFORMATION
- ----------------------------------
INVESTMENT ADVISER
FIRST INVESTORS MANAGEMENT COMPANY, INC.
95 Wall Street
New York, NY 10005
UNDERWRITER
FIRST INVESTORS CORPORATION
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
Eight Penn Center Plaza
Philadelphia, PA 19103
It is the Funds' practice to mail
only one copy of the annual and
semi-annual reports to any address at
which more than one shareholder with
the same last name has indicated that
mail is to be delivered. Additional
copies of the reports will be mailed
if requested by any shareholder in
writing or by calling 800-423-4026.
The Funds will ensure that separate
reports are sent to any shareholder
who subsequently changes his or her
mailing address.
This report is authorized for
distribution only to existing
shareholders, and, if given to
prospective shareholders, must be
accompanied or preceded by the Funds'
prospectus.
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95 WALL STREET
NEW YORK, NEW YORK 10005
