Portfolio Manager's Letter
FIRST INVESTORS SPECIAL BOND FUND, INC.
Dear Investor:
The principal factors that affected the Fund's performance in 1994 were
strong economic growth and fears of inflation. The U.S. economic recovery
hit full stride with gross domestic product growth of approximately 4%. The
unemployment rate fell from 6.4% to 5.4% as the economy created 3.5 million
new jobs. Feeling secure about job prospects, consumers were willing to
borrow and spend. U.S. vehicle sales reached their highest level since
1988. Despite strong growth, inflation remained below 3% as low labor
costs, improved productivity and international competition kept prices from
accelerating.
Nonetheless, concerned that strong economic growth would eventually lead to
inflation, the Federal Reserve in February engineered the first of six short
term interest rate increases which in total raised rates 250 basis points
(2.50%). As is typical at this point in the economic cycle, long-term
interest rates also rose with the benchmark 30 year U.S. Treasury bond yield
increasing approximately 155 basis points (1.55%) during the year. With
higher interest rates creating concern that the economy might slow, broad
stock market indices were unable to advance and ended the year unchanged to
slightly lower despite strong earnings reported by many companies.
Last year began positively as high yield bonds were in great demand.
However, as rising interest rates caused bond investors to retrench,
especially in the second half of 1994, caution pervaded the market. High
yield underwriting volume fell to $43 billion from over $70 billion in 1993.
A market preference for better quality credits benefitted that sector of the
market and First Investors Special Bond Fund in particular.
The high yield market was not immune to difficult conditions in the fixed
income and equity markets with the First Boston High Yield Index posting a
total return of -.97%. The First Investors Special Bond Fund posted a total
return of -1.00%. This compares favorably to a total return of -3.83% for
the average high yield fund (according to Lipper Analytical Services). The
average high yield fund exceeded the performance of the benchmark U.S.
treasury ten year note by over four percent.
The Fund's performance benefitted from an interest rate posture that proved
to be relatively defensive.
With an important part of the portfolio invested in high coupon bonds that
tend to be more stable in price, the Fund was less adversely affected by the
trend toward higher interest rates than it might have been. Lower or zero
coupon bonds trading at discounted prices were negatives, but the Fund had
moderate exposure to these types of securities.
Correct industry choices and individual bond selections are the key factors
that differentiated First Investors Special Bond Fund from many of its
competitors. Announcements by investment grade companies that they were
acquiring issuers whose securities were held by the Fund, bolstered the
values of various Fund holdings, such as Healthtrust 10 3/4% and 8 3/4%, Summit
Communications 10 1/2% and Transco Energy 11 1/4%. We foresaw good economic
growth and emphasized cyclical investments benefitting from volume growth
and pricing improvement in the chemical, mining/metal and paper/forest
product sectors. As importantly, the Fund had little or no exposure to some
of the worst performing sectors: casinos, home builders and emerging
markets. Through careful management, the Fund avoided distressed situations
in all but one instance, Acme Holdings 11 3/4%. Still, credit concerns caused
other bonds such as Synthetic Industries 12 3/4% to decline in value.
To sum up, high yield bonds were less buffeted by interest rate risk than
most fixed income alternatives. Investors who were able to accept the
inherent credit risk and who managed it well were rewarded. As always, we
appreciate the opportunity to serve your investment needs.
Sincerely,
/s/ George V. Ganter
Portfolio Manager
January 31, 1995
Cumulative Performance Information
FIRST INVESTORS SPECIAL BOND FUND, INC.
Comparison of change in value of $10,000 investment in the First Investors
Special Bond Fund, Inc. and the First Boston High Yield Index.
The following table is the source data for the line chart which
appears at this point in the printed document. This table is
not part of the original printed document and is shown for
reference only. The same is also true for this descriptive
paragraph.
SPECIAL BOND FIRST BOSTON
Jan-85 $9,300 $10,000
Dec-85 11,482 12,493
Dec-86 13,694 14,446
Dec-87 14,124 15,390
Dec-88 16,063 17,491
Dec-89 15,828 17,558
Dec-90 14,386 16,438
Dec-91 19,530 23,629
Dec-92 22,374 27,565
Dec-93 26,457 32,778
Dec-94 26,170 32,460
Average Annual Total Return*
N.A.V. Only S.E.C. Standarized
One Year (1.00%) (7.96%)
Five Years 10.58% 8.99%
Ten Years 10.90% 10.10%
S.E.C. 30-Day Yield 9.75%
The graph compares a $10,000 investment made in the First Investors Special
Bond Fund, Inc. on 1/1/85 with a similar investment in the First Boston High
Yield Index. 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.
The First Boston High Yield Index is designed to measure the performance of
the high yield bond market. The Index consists of 661 different issues, 576
of these are cash pay, 70 are zero-coupon, 6 are step bonds, 4 are
payment-in-kind bonds and the remaining 5 are in default. The bonds
included in the Index have an average life of 8.1 years, an average maturity
of 8.2 years, an average duration of 4.7 years and an average coupon of
10.65%. The Index does not take into account fees and expenses. It is not
possible to invest in the First Boston High Yield Index.
* Average Annual Total Return figures (for the period ended 12/31/94)
include the reinvestment of all dividends and distributions. "N.A.V. Only"
returns are calculated without sales charges. The "S.E.C. Standardized"
returns shown are based on the maximum sales charge of 7.00%. 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. First Boston High Yield Index figures from CS
First Boston and all other figures from First Investors Management Company,
Inc.
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS SPECIAL BOND FUND, INC.
December 31, 1994
- - --------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--89.0%
Apparel/Textiles--.0%
$ 500M + Linter Textiles Corp., Ltd., 13 3/4%, 2000 $ 6,250 $ 2
- - --------------------------------------------------------------------------------------------------------------------------
Automotive--2.7%
1,000M SPX Corp.,11 3/4%, 2002 998,750 272
- - --------------------------------------------------------------------------------------------------------------------------
Chemicals--6.7%
1,100M OSI Specialties, Inc., 9 1/4%, 2003 1,006,500 274
700M Rexene Corp., 11 3/4%, 2004 822,000 224
800M Synthetic Industries, Inc., 12 3/4%, 2002 619,500 169
- - --------------------------------------------------------------------------------------------------------------------------
2,448,000 667
- - --------------------------------------------------------------------------------------------------------------------------
Conglomerates--2.2%
1,250M Eagle Industries, Inc., 0%-10 1/2%, 2003 806,250 220
- - --------------------------------------------------------------------------------------------------------------------------
Containers--2.8%
1,000M Owens Illinois, Inc., 11%, 2003 1,040,000 283
- - --------------------------------------------------------------------------------------------------------------------------
Durable Goods Manufacturing--1.8%
700M Idex Corp., 9 3/4%, 2002 675,500 184
- - --------------------------------------------------------------------------------------------------------------------------
Electrical Equipment--10.9%
1,100M Essex Group, Inc., 10%, 2003 1,028,500 280
1,000M IMO Industries, Inc., 12%, 2001 1,005,000 274
1,000M Mark IV Industries, Inc., 8 3/4%, 2003 915,000 249
472M Thermadyne Industries, Inc., 10 1/4%, 2002 453,120 123
656M Thermadyne Industries, Inc., 10 3/4%, 2003 616,640 168
- - --------------------------------------------------------------------------------------------------------------------------
4,018,260 1,094
- - --------------------------------------------------------------------------------------------------------------------------
Energy Services--8.6%
1,000M Clark Oil & Refining Corp., 10 1/2%, 2001 1,017,500 277
1,000M Clark R&M Holdings, Inc., 0%, 2000 568,750 155
837M Synergy Group, Inc., 9 1/2%, 2000 669,600 182
850M Transco Energy Co., 11 1/4%, 1999 907,375 247
- - --------------------------------------------------------------------------------------------------------------------------
3,163,225 861
- - --------------------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--1.9%
750M Canandaigua Wine, Inc., 8 3/4%, 2003 678,750 185
- - --------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging--3.8%
900M GB Funding, Inc., 10 7/8%, 2004 733,500 200
800M Showboat, Inc., 9 1/4%, 2008 674,000 183
- - --------------------------------------------------------------------------------------------------------------------------
1,407,500 383
- - --------------------------------------------------------------------------------------------------------------------------
Healthcare--8.4%
870M Abbey Healthcare Group, Inc., 9 1/2%, 2002 783,000 213
800M Healthtrust, Inc., 8 3/4%, 2005 772,000 210
700M Hillhaven Corp., 10 1/8%, 2001 701,750 191
900M Mediq/PRN Life Support Services, Inc., 11 1/8%, 1999 814,500 222
- - --------------------------------------------------------------------------------------------------------------------------
3,071,250 836
- - --------------------------------------------------------------------------------------------------------------------------
Media/Cable Television--14.6%
1,500M Affiliated Newspaper Investments, 13 1/4%, 2006 780,000 212
1,000M Cablevision Industries, Inc., 10 3/4%, 2002 995,000 271
700M Continental Broadcasting, Inc., 10 5/8%, 2003 707,875 193
500M Rogers Cablesystems, Ltd., 9 5/8%, 2002 491,250 134
800M Summit Communications Group, 10 1/2%, 2005 818,000 223
1,400M Videotron Holding, PLC., 0% - 11 1/8%, 2004 742,000 202
900M World Color Press, Inc., 9 1/8%, 2003 834,750 227
- - --------------------------------------------------------------------------------------------------------------------------
5,368,875 1,462
- - --------------------------------------------------------------------------------------------------------------------------
Mining/Metals--1.8%
800M Geneva Steel Corp., 11 1/8%, 2001 675,000 184
- - --------------------------------------------------------------------------------------------------------------------------
Miscellaneous--1.2%
1,050M + Acme Holdings, Inc., 11 3/4%, 2000 441,000 120
- - --------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--5.9%
700M Rainy River Forest Products Co., Inc., 10 3/4%, 2001 698,250 190
800M SD Warren Co., Inc., 12%, 2004 (Note 5) 820,000 223
700M Stone Container Corp., 9 7/8%, 2001 665,000 181
- - --------------------------------------------------------------------------------------------------------------------------
2,183,250 594
- - --------------------------------------------------------------------------------------------------------------------------
Real Estate/Construction--2.5%
1,000M Oriole Homes, Inc., 12 1/2%, 2003 895,000 244
- - --------------------------------------------------------------------------------------------------------------------------
Retail/Food/Drug--3.0%
600M P&C Food Markets, Inc., 11 1/2%, 2001 609,000 166
500M Penn Traffic Company, 10 1/4%, 2002 484,375 132
- - --------------------------------------------------------------------------------------------------------------------------
1,093,375 298
- - --------------------------------------------------------------------------------------------------------------------------
Retail/General Merchandise-- .5%
5M Barry's Jewelers, Inc., 12 5/8%, 1996 2,611 1
200M General Host Co., Inc., 11 1/2%, 2002 176,000 48
- - --------------------------------------------------------------------------------------------------------------------------
178,611 49
- - --------------------------------------------------------------------------------------------------------------------------
Telecommunications--7.5%
850M Cencall Communication Corp., 0%-10 1/8%, 2004 301,750 82
1,000M MFS Communication, Inc., 0%-9 3/8%, 2004 581,250 158
900M Paging Network, Inc., 11 3/4%, 2002 897,750 244
1,000M PanAmSat Capital Corp., 9 3/4%, 2000 955,000 260
- - --------------------------------------------------------------------------------------------------------------------------
2,735,750 744
- - --------------------------------------------------------------------------------------------------------------------------
Transportation--2.2%
900M Eletson Holdings, Inc., 9 1/4%, 2003 805,500 219
- - --------------------------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $35,380,953) 32,690,096 8,901
- - --------------------------------------------------------------------------------------------------------------------------
BOND UNITS--2.4%
1,675 Echostar Communication Corp., 0%-12 7/8%, 2004(cost $967,268) 875,188 238
- - --------------------------------------------------------------------------------------------------------------------------
Shares,
Warrants or
Principal
Amount
- - --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS-- .6%
Electrical Equipment-- .0%
1,036 *Thermadyne Holding Corp. 12,432 4
- - --------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging-- .0%
8,500 *Goldriver Hotel & Casino Corp., Series "B" 12,750 4
- - --------------------------------------------------------------------------------------------------------------------------
Media/Cable Television-- .1%
1,500 *Affiliated Newspaper Investments, Inc. "B" 37,500 10
- - --------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products-- .2%
6,136 *Gaylord Container Corp., Class "A" 55,991 15
- - --------------------------------------------------------------------------------------------------------------------------
Retail/General Merchandise--.3%
14,354 *Barry's Jewelers, Inc. 100,484 27
- - --------------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $408,307) 219,157 60
- - --------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--2.7%
Financial Services
10,000 California Federal Bank, 10 5/8%, Series B (cost $1,000,000) 1,000,000 272
- - --------------------------------------------------------------------------------------------------------------------------
WARRANTS--.7%
Gaming/Lodging--.0%
850 *Goldriver Finance Corp., Liquidating Trust 12,750 4
- - --------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--.7%
32,590 *Gaylord Container Corp. (expiring 7/31/96) 240,351 65
- - --------------------------------------------------------------------------------------------------------------------------
Total Value of Warrants (cost $48,875) 253,101 69
- - --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--2.0%
$ 750M Raytheon Co., 5.95%, 1/9/95 (cost $749,008) 749,008 204
- - --------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $38,554,411) 97.4% 35,786,550 9,744
Other Assets, Less Liabilities 2.6 938,533 256
- - --------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $36,725,083 $10,000
==========================================================================================================================
* Non-incoming producing
+ In default as to principal and/or interest (Note 5).
(a)Each unit consists of a $1,000 principal amount 12 7/8% senior secured
discount note due 6/1/04 and warrants to purchase six shares of
common stock.
See notes to financial statements
</TABLE>
<TABLE>
<Captions>
Statement of Assets and Liabilities
FIRST INVESTORS SPECIAL BOND FUND, INC.
December 31, 1994
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities, at value (identified cost $38,554,411) (Note 1A) $ 35,786,550
Cash ..................................................................... 201,460
Interest and dividends receivable ........................................ 802,078
Other assets ............................................................. 4,373
------------
Total Assets ............................................................. 36,794,461
Liabilities
Payable for capital stock redeemed ....................................... $33,745
Accrued advisory fee ..................................................... 22,478
Accrued expenses ......................................................... 13,155
-------
Total Liabilities ........................................................ 69,378
------------
Net Assets ............................................................... $ 36,725,083
Net Assets Consist of:
Capital paid in .......................................................... $ 58,807,036
Undistributed net investment income ...................................... 307,141
Accumulated net realized loss on investment transactions ................. (19,621,233)
Net unrealized depreciation in value of investments ...................... (2,767,861)
------------
Total .................................................................... $ 36,725,083
------------
Net Asset Value, Offering Price and Redemption Price Per Share
($36,725,083 divided by 3,329,503 shares outstanding),
25,000,000 shares authorized, $1.00 par value (Note 2) ................... $11.03
------------
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
FIRST INVESTORS SPECIAL BOND FUND, INC.
Year Ended December 31, 1994
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Income:
Interest ................................................$ 3,922,367
Consent fees ............................................ 56,596
Dividends ............................................... 43,000
-----------
Total income .............................................. $ 4,021,963
Expenses:
Advisory fee (Note 4) ................................... 294,179
Professional fees ....................................... 26,426
Reports and notices to shareholders ..................... 9,146
Other expenses .......................................... 11,448
-----------
Total expenses ............................................ 341,199
-----------
Net investment income ..................................... 3,680,764
Realized and Unrealized Gain (Loss) on Investments (Note 3):
Net realized gain on investments .......................... 702,669
Net unrealized depreciation of investments ................ (4,824,981)
-----------
Net loss on investments ................................... (4,122,312)
-----------
Net Decrease in Net Assets Resulting from Operations ...... $ (441,548)
-----------
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS SPECIAL BOND FUND, INC.
- - ---------------------------------------------------------------------------------------------------
Year Ended December 31 1994 1993
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income ........................................ $ 3,680,764 $ 4,106,596
Net realized gain on investments ............................. 702,669 1,935,640
Net unrealized appreciation (depreciation) of investments .... (4,824,981) 1,228,902
------------ -----------
Net increase (decrease) in net assets resulting from operations (441,548) 7,271,138
------------ -----------
Dividends to Shareholders from:
Net investment income ........................................ (3,465,637) (4,340,494)
------------ -----------
Capital Share Transactions (a)
Issued ....................................................... 385,945 402,565
Issued on reinvestment ....................................... 3,465,637 4,340,494
Redeemed ..................................................... (6,275,104) (8,734,275)
------------ -----------
Net decrease in net assets resulting from share transactions (2,423,522) (3,991,216)
------------ -----------
Total decrease in net assets ................................. (6,330,707) (1,060,572)
Net Assets
Beginning of year ............................................ 43,055,790 44,116,362
------------ -----------
End of year (including undistributed net investment income of
$307,141 and $92,014, respectively) ........................ $36,725,083 $43,055,790
=========== ============
(a)Capital Shares Issued and Redeemed
Issued ....................................................... 33,791 34,124
Issued on reinvestment ....................................... 305,954 362,231
Redeemed ..................................................... (546,626) (738,147)
------------ -----------
Net decrease in capital shares ............................... (206,881) (341,792)
=========== ============
See notes to financial statements
</TABLE>
Notes to Financial Statements
FIRST INVESTORS SPECIAL BOND FUND, INC.
1. Significant Accounting Policies - The Fund is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end
management investment company.
A. Security Valuation - Except as provided below, a security listed or
traded on an exchange or the NASDAQ National Market System is valued at its
last sale price on the exchange or system where the security is principally
traded, and lacking any sales, the security is valued at the mean between
the closing bid and asked prices. Each security traded in the
over-the-counter market (including securities listed on exchanges whose
primary market is believed to be over-the-counter) is 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 value. Short-term corporate notes which are purchased at a
discount are valued at amortized cost. Securities for which market
quotations are not readily available are valued on a consistent basis at
fair value as determined in good faith by or under the supervision of the
Fund's officers in a manner specifically authorized by the Board of
Directors.
B. Federal Income Taxes - No provision has been made for federal income
taxes on net income or capital gains, since it is the policy of the Fund to
continue to comply with the special provisions of the Internal Revenue Code
applicable to investment companies and to make sufficient distributions of
income and capital gains (in excess of any available capital loss
carryovers) to relieve it from all, or substantially all, such taxes. At
December 31, 1994, the Fund had capital loss carryovers of $19,621,233, of
which $16,599,362 expires in 1998 and $3,021,871 expires in 1999.
C. Other - Security transactions are accounted for on the date the
securities are purchased or sold. Cost is determined, and gains and losses
are based, on the identified cost basis for both financial statement and
federal income tax purposes. Dividend income is recorded on the ex-dividend
date. Interest income and estimated expenses are accrued daily. Dividends
from net investment income are declared daily and paid monthly.
2. Capital Stock - Shares of the Fund are sold only through the purchase of
annuity contracts issued by First Investors Life Variable Annuity Fund A.
3.Security Transactions - For the year ended December 31, 1994, purchases
and sales of investment securities, other than United States Government
obligations and short-term corporate notes, aggregated $20,232,779 and
$21,725,665, respectively.
At December 31, 1994, the cost of investments for federal income tax
purposes was $38,554,411. Accumulated net unrealized depreciation on
investments was $2,767,861, consisting of $505,644 gross unrealized
appreciation and $3,273,505 gross unrealized depreciation.
4. Advisory Fee and Other Transactions With Affiliates - Certain officers
and directors of the Fund are officers and directors of its investment
adviser, First Investors Management Company, Inc. ("FIMCO") and its transfer
agent, Administrative Data Management Corp. Officers and directors of the
Fund received no remuneration from the Fund for serving in such capacities.
Their remuneration (together with certain other expenses of the Fund) is
paid by FIMCO or First Investors Corporation.
The Investment Advisory Agreement provides as compensation to FIMCO an
annual fee, payable monthly, at the rate of .75% on the first $250 million
of the Fund's average daily net assets, declining by .03% on each $250
million thereafter, down to .66% on average daily net assets over $750
million.
Pursuant to certain state regulations, FIMCO has agreed to reimburse the
Fund if and to the extent that the Fund's aggregate operating expenses,
including the advisory fee but generally excluding interest, taxes,
brokerage commissions and extraordinary expenses, exceed any limitation on
expenses applicable to the Fund in those states (unless waivers of such
limitations have been obtained). The amount of any such reimbursement is
limited to the yearly advisory fee. For the year ended December 31, 1994, no
reimbursement was required pursuant to these provisions.
5. 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 resold to qualified institutional investors. At December 31,
1994, the Fund held one 144A security with a aggregate value of $820,000
representing 2.2% of the Fund's net assets. These securities are valued as
set forth in Note 1A.
6. Concentration of Credit Risk - The Fund's investment in high yield
securities, whether rated or unrated, may be considered speculative and
subject to greater market fluctuations and risk of loss of income and
principal than lower yielding, higher rated, fixed income securities. The
risk of loss due to default by the issuer may be significantly greater for
the holders of high yielding securities, because such securities are
generally unsecured and are often subordinated to other creditors of the
issuer. At December 31, 1994, the Fund held two defaulted securities with a
value aggregating $447,250 representing 1.2% of the Fund's net assets.
<TABLE>
<CAPTION>
Financial Highlights
FIRST INVESTORS SPECIAL BOND FUND, INC.
The following table sets forth the per share operating performance data
for a share of capital stock outstanding, total return, ratios to
average net assets and other supplemental data for each year indicated.
Year Ended December 31
------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data
- - ----------------
Net Asset Value, Beginning of Year $12.18 $11.38 $11.05 $ 9.16 $11.47 $13.19 $12.99 $14.37 $13.93 $12.76
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations
Net investment income 1.09 1.14 1.27 1.26 1.32 1.57 1.61 1.57 1.61 1.61
Net realized and unrealized
gain (loss) on investments 1.22 0.86 0.29 1.86 (2.30) (1.73) 0.20 (1.15) 0.92 1.22
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total from Investment Operations (0.13) 2.00 1.56 3.12 (.98) (.16) 1.81 .42 2.53 2.83
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Less Distributions from
Net investment income 1.02 1.20 1.23 1.23 1.33 1.56 1.61 1.58 1.61 1.63
Net realized gain -- -- -- -- -- -- -- 0.19 0.48 0.03
Capital surplus -- -- -- -- -- -- -- 0.03 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total Distributions 1.02 1.20 1.23 1.23 1.33 1.56 1.61 1.80 2.09 1.66
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Net Asset Value, End of Year $11.03 $12.18 $11.38 $11.05 $9.16 $11.47 $13.19 $12.99 $14.37 $13.93
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return(%)+ (1.00) 18.15 14.56 35.76 (9.18) (1.60) 14.43 2.74 19.44 23.29
- - -----------------
Ratios/Supplemental Data
- - --------------------------
Net Assets, End of Year (in thousands) $36,725 $43,056 $44,116 $50,914 $53,328 $85,719 $69,641 $43,965 $23,078 $5,738
Ratio to Average Net Assets:(%)
Expenses .87 .85 .88 .89 .86 .82 .84 .86 1.04 1.24
Net investment income 9.38 9.54 10.95 11.99 12.57 12.38 11.96 11.16 11.01 11.79
Portfolio Turnover Rate:(%) 54 79 65 47 37 34 51 71 112 153
+ Calculated without sales charge
See notes to financial statements
</TABLE>
Independent Auditor's Report
To the Shareholders and Board of Directors of
First Investors Special Bond Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
First Investors Special Bond Fund, Inc., including the portfolio of
investments, as of December 31, 1994, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and financial highlights
for each of the ten years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with 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 December 31,
1994, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
First Investors Special Bond Fund, Inc. at December 31, 1994, and the
results of its operations, changes in its net assets and financial
highlights for each of the respective years presented, in conformity with
generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1995
FIRST INVESTORS SPECIAL BOND FUND, INC.
Directors
- - ---------
James J. Coy
Roger L. Grayson
Glenn O. Head
Kathryn S. Head
F. William Ortman, Jr.
Rex R. Reed
Herbert Rubinstein
John T. Sullivan
Robert F. Wentworth
Officers
- - --------
Glenn O. Head
President
George V. Ganter
Vice President
Concetta Durso
Vice President and Secretary
Joseph I. Benedek
Treasurer
Carol Lerner Brown
Assistant Secretary
Shareholder Information
- - -----------------------
Investment Adviser
First Investors
Management Company, Inc.
95 Wall Street
New York, NY 10005
Custodian
The Bank of New York
48 Wall Street
New York, NY 10286
Transfer Agent
Administrative Data
Management Corp.
10 Woodbridge Center Drive
Woodbridge, NJ 07095-1198
Legal Counsel
Kirkpatrick & Lockhart
1800 M Street, N.W.
Washington, DC 20036
Auditors
Tait, Weller & Baker
Two Penn Center Plaza
Philadelphia, PA 19102
For more complete information about First Investors Special Bond Fund, Inc.,
including charges and expenses, you may obtain a prospectus from your
registered representative or by calling 1-800-423-4026. Read it carefully
before you invest or send money.
First Investors LOGO
LOGO is described as follows: The arabic numeral one separated into seven
vertical segments followed by the words "First Investors".
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK
LIF007
Vertically reading from bottom to top in center of the page the words
"FIRST INVESTORS" appear in the printed piece.
