<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS GOVERNMENT FUND, INC.
Dear Investor:
U.S. economic growth slowed during the first six months of 1995. In response to
the Federal Reserve's tightening of monetary policy, economic growth downshifted
from an unsustainable 5.1% fourth quarter pace to a more moderate 2.7% rate in
the first quarter of 1995. By Spring, the financial markets began to anticipate
an end to the Federal Reserve's interest rate hikes. The economic crisis in
Mexico, higher individual tax payments and excessive business inventories
further dampened the U.S. economy in the second quarter. By June, in a notable
reversal of opinion from six months earlier, the markets began to expect the
Federal Reserve to lower short-term interest rates to insure against the
possibility of a recession.
Slower growth resulted in a substantial decline in long-term interest rates. In
this environment, high coupon mortgage-backed bonds underperformed Treasury
bonds as homeowners prepaid outstanding mortgages. To reduce the Fund's exposure
to prepayment risk, the Fund sold relatively high coupon mortgage-backed bonds
early in the second quarter and bought lower coupon mortgage-backed bonds. In
addition, mortgage-backed investments were reduced from 83% of the Fund's assets
to 62% and Treasury bond holdings were increased from 17% to 35%.
These adjustments enabled the Fund to participate more fully in the bond
market's rally. For the first six months of 1995, the total return of First
Investors Government Fund on a net asset value basis was 9.43% for the Class A
shares and 8.58% for the Class B shares (first offered for sale on January 12,
1995). During this period, dividends paid from net investment income amounted to
36.6 cents per share on Class A shares and 30.3 cents per share on Class B
shares.
As always we appreciate the opportunity to serve your investment needs.
Sincerely,
John A. Tomasulo
Portfolio Manager
July 31, 1995
1
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS GOVERNMENT FUND, INC.
June 30, 1995
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT SECURITY VALUE
---------------------------------------------------------------------------------------
<C> <S> <C>
MORTGAGE-BACKED CERTIFICATES--62.1%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION I
$ 49,440M 7%, 10/15/2022-6/15/2025 $ 48,660,237
26,615M 8%, 12/15/2021-4/15/2025 27,263,946
11,309M 8 1/2%, 4/15/2016-6/15/2017 11,810,795
46,371M 9%, 1/15/2016-10/15/2017 49,124,776
522M 11 1/2%, 10/15/2012-5/15/2015 585,219
---------------------------------------------------------------------------------------
TOTAL VALUE OF MORTGAGE-BACKED CERTIFICATES (cost
$136,677,875) 137,444,973
---------------------------------------------------------------------------------------
UNITED STATES TREASURY OBLIGATIONS--35.5%
UNITED STATES TREASURY BONDS--27.2%
4,000M 7 5/8%, 2/15/2025 4,520,000
5,000M 10 3/4%, 8/15/2005 6,636,719
10,000M 11 1/8%, 8/15/2003 13,089,063
15,000M 12%, 5/15/2005 21,222,656
10,000M 12%, 8/15/2013 14,745,313
---------------------------------------------------------------------------------------
60,213,751
---------------------------------------------------------------------------------------
UNITED STATES TREASURY NOTES--8.3%
10,000M 7 3/4%, 11/30/1999 10,671,875
7,000M 8 1/2%, 11/15/2000 7,790,781
---------------------------------------------------------------------------------------
18,462,656
---------------------------------------------------------------------------------------
TOTAL VALUE OF UNITED STATES TREASURY OBLIGATIONS (cost
$77,709,063) 78,676,407
---------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--1.8%
4,000M Xerox Corp., 6.2%, 7/5/1995 (cost $3,997,244) 3,997,244
---------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $218,384,182) 99.4% 220,118,624
OTHER ASSETS, LESS LIABILITIES .6 1,296,665
---------------------------------------------------------------------------------------
NET ASSETS 100.0% $221,415,289
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
</TABLE>
2 See notes to financial statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
FIRST INVESTORS GOVERNMENT FUND, INC.
June 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value (identified cost
$218,384,182 ) (Note 1A)...................................... $220,118,624
Cash............................................................ 662,784
Receivables:
Interest...................................................... $ 2,453,348
Capital shares sold........................................... 98,312 2,551,660
------------
Other assets.................................................... 27,268
------------
Total Assets.................................................... 223,360,336
LIABILITIES
Payables:
Dividend payable July 20, 1995................................ 1,241,162
Capital shares redeemed....................................... 478,020
Accrued advisory fee............................................ 139,627
Accrued expenses................................................ 86,238
------------
Total Liabilities............................................... 1,945,047
------------
NET ASSETS (Note 4):
Class A (19,899,903 shares outstanding)....................... 220,993,987
Class B (37,938 shares outstanding)........................... 421,302 $221,415,289
------------ ------------
------------
NET ASSETS CONSIST OF:
Capital paid in................................................. $242,139,564
Undistributed net investment income............................. 232,541
Accumulated net realized loss on investment transactions........ (22,691,258)
Net unrealized appreciation in value of investments............. 1,734,442
------------
Total........................................................... $221,415,289
------------
------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE--CLASS A......... $11.11
------------
------------
MAXIMUM OFFERING PRICE PER SHARE--CLASS A ($11.11/.9375)*....... $11.85
------------
------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE--CLASS B........... $11.11
------------
------------
<FN>
*On purchases of $25,000 or more, the sales charge is reduced.
</TABLE>
See notes to financial statements 3
<PAGE>
STATEMENT OF OPERATIONS
FIRST INVESTORS GOVERNMENT FUND, INC.
Six Months Ended June 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest income...................................................... $ 8,903,521
Expenses:
Advisory fee (Note 3).............................................. $1,076,459
Distribution plan expenses--Class A (Note 3)....................... 332,790
Distribution plan expenses--Class B (Note 3)....................... 925
Shareholder servicing costs (Note 3)............................... 259,580
Reports and notices to shareholders................................ 50,747
Professional fees.................................................. 21,342
Other expenses..................................................... 35,218
----------
Total expenses....................................................... 1,777,061
Less: Portion of advisory fee waived (Note 3)........................ 250,000
----------
Net expenses......................................................... 1,527,061
-----------
Net investment income................................................ 7,376,460
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain on investments..................................... 3,142,707
Net unrealized appreciation of investments........................... 9,263,024
----------
Net gain on investments.............................................. 12,405,731
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $19,782,191
-----------
-----------
</TABLE>
4 See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FIRST INVESTORS GOVERNMENT FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1995 1994
---------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income....... $ 7,376,460 $ 15,514,626
Net realized gain (loss) on
investments............... 3,142,707 (20,964,402)
Net unrealized appreciation
(depreciation) of
investments............... 9,263,024 (3,213,275)
-------------- --------------
Net increase (decrease) in
net assets resulting
from operations......... 19,782,191 (8,663,051)
-------------- --------------
DIVIDENDS TO SHAREHOLDERS
FROM:
Net investment income--Class
A......................... (7,455,939) (15,227,729)
Net investment income--Class
B......................... (6,228) --
-------------- --------------
Total dividends........... (7,462,167) (15,227,729)
-------------- --------------
CAPITAL SHARE TRANSACTIONS (a)
Class A:
Proceeds from shares
sold.................... 6,312,740 13,055,386
Value of dividends
reinvested.............. 5,109,156 12,577,537
Cost of shares redeemed... (21,799,246) (70,979,348)
-------------- --------------
(10,377,350) (45,346,425)
-------------- --------------
Class B:
Proceeds from shares
sold.................... 440,587 --
Value of dividends
reinvested.............. 3,634 --
Cost of shares redeemed... (32,552) --
-------------- --------------
411,669 --
-------------- --------------
Net decrease from
capital share
transactions.......... (9,965,681) (45,346,425)
-------------- --------------
Net increase
(decrease) in net
assets.............. 2,354,343 (69,237,205)
NET ASSETS
Beginning of period......... 219,060,946 288,298,151
-------------- --------------
End of period (including
undistributed net
investment income of
$232,541 and $318,248,
respectively)............. $ 221,415,289 $ 219,060,946
-------------- --------------
-------------- --------------
(a)CAPITAL SHARES ISSUED AND
REDEEMED
Class A:
Sold...................... 585,812 1,192,645
Issued for dividends
reinvested.............. 472,580 1,159,051
Redeemed.................. (2,018,301) (6,453,882)
-------------- --------------
Net decrease in Class A
shares outstanding.... (959,909) (4,102,186)
-------------- --------------
-------------- --------------
Class B:
Sold...................... 40,575 --
Issued for dividends
reinvested.............. 332 --
Redeemed.................. (2,969) --
-------------- --------------
Net increase in Class B
shares outstanding.... 37,938 --
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements 5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FIRST INVESTORS GOVERNMENT 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--U.S. Government obligations are traded primarily in the
over-the-counter markets. Such securities are valued at the mean between the
last bid and asked prices as furnished by dealers who make a market in such
securities. 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 direction 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, federal income taxes. At June 30, 1995, the Fund had
capital loss carryovers of $23,984,420 of which $369,131 expires in 1998,
$1,892,743 expires in 2001 and $21,722,546 expires in 2002.
C. Distributions to Shareholders--Dividends to shareholders from net investment
income are declared daily and paid monthly. 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 losses.
D. 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. Interest income and estimated expenses are accrued daily.
2. SECURITIES TRANSACTIONS--For the six months ended June 30, 1995, purchases
and sales (including pay-downs) of other than short-term U.S. Government
obligations and corporate notes, aggregated $193,662,894 and $171,094,717,
respectively.
At June 30, 1995, the cost of investments for federal income tax purposes was
$218,384,182. Accumulated net unrealized appreciation on investments was
$1,734,442 consisting of $3,165,965 gross unrealized appreciation and $1,431,523
gross unrealized depreciation.
3. 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"), 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 Fund's Individual Retirement Accounts. 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 FIC.
The Investment Advisory Agreement provides as compensation to FIMCO an annual
fee, payable monthly, at the rate of 1% on the first $200 million of the 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. Since July 1987, FIMCO has voluntarily waived .25% of the fee on the
first
6
<PAGE>
$200 million of the Fund's average daily net assets. For the six months ended
June 30, 1995, this reduction amounted to $250,000.
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
six months ended June 30, 1995, no reimbursement was required pursuant to these
provisions.
For the six months ended June 30, 1995, FIC, as underwriter, received $229,342
in commissions after allowing $5,851 to other dealers. Shareholder servicing
costs included $148,090 in transfer agent fees paid to ADM, and $70,670 in
custodian fees paid to FFS.
Pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940 Act, the
Fund is authorized to pay FIC a fee equal to .30% of the average net assets of
the Class A shares and 1% of the average net assets of the Class B shares on an
annualized 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 Fund.
4. CAPITAL--The 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 are subject to a maximum 12b-1 fee at the annual rate of
.30% of the Fund's average daily net assets attributable to Class A shares.
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% during a six-year period and pay a 12b-1 fee at the annual rate of 1% of the
Fund's average daily net assets attributable to Class B shares. Class B shares
automatically convert into Class A shares after eight years. Realized and
unrealized gains or losses, investment income and expenses (other than 12b-1
fees and certain other class expenses) are allocated daily to each class of
shares based upon the relative proportion of net assets of each class. Of the
1,000,000,000 shares originally authorized, the Fund has designated 500,000,000
shares as Class A and 500,000,000 shares as Class B.
7
<PAGE>
FINANCIAL HIGHLIGHTS
FIRST INVESTORS GOVERNMENT FUND, INC.
The following table sets forth the per share operating performance for a share
of capital stock outstanding, total return, ratios to average net assets and
other supplemental data for each period indicated.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------------------------------------- ---------
1/1/95 Year Ended December 31 1/12/95*
to ------------------------------------------- to
6/30/95 1994 1993 1992 1991 1990 6/30/95
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
--------------------------------------
Net Asset Value, Beginning of
Period............................... $10.50 $ 11.55 $ 11.83 $ 11.92 $ 11.08 $ 11.01 $ 10.52
--------- ------- ------- ------- ------- ------- ---------
Income from Investment Operations
Net investment income............... .36 .69 .72 .76 .84 .90 .29
Net realized and unrealized gain
(loss) on investments............. .62 (1.06) (.26) (.09) .83 .07 .60
--------- ------- ------- ------- ------- ------- ---------
Total from Investment
Operations.................... .98 (.37) .46 .67 1.67 .97 .89
--------- ------- ------- ------- ------- ------- ---------
Less Distributions from:
Net investment income............... .37 .68 .74 .76 .79 .90 .30
Net realized gains.................. -- -- -- -- .04 -- --
--------- ------- ------- ------- ------- ------- ---------
Total Distributions............. .37 .68 .74 .76 .83 .90 .30
--------- ------- ------- ------- ------- ------- ---------
Net Asset Value, End of Period........ $11.11 $ 10.50 $ 11.55 $ 11.83 $ 11.92 $ 11.08 $ 11.11
--------- ------- ------- ------- ------- ------- ---------
--------- ------- ------- ------- ------- ------- ---------
TOTAL RETURN(%)+...................... 9.43 (3.22) 3.99 5.90 15.74 9.20 8.58
RATIOS/SUPPLEMENTAL DATA
--------------------------------------
Net Assets, End of Period (in
millions)............................ $221.0 $ 219.1 $ 288.3 $ 306.0 $ 316.0 $ 299.4 $.4
Ratio to Average Net Assets:(%)++
Expenses............................ 1.37(a) 1.40 1.32 1.33 1.34 1.28 2.05(a)
Net investment income............... 6.64(a) 6.31 6.14 6.45 7.43 8.24 6.03(a)
Ratio to Average Net Assets Before
Expenses Waived (Note 3):(%)
Expenses............................ 1.60(a) 1.60 1.48 1.49 1.50 1.49 2.27(a)
Net investment income............... 6.42(a) 6.11 5.98 6.29 7.27 8.03 5.81(a)
Portfolio Turnover Rate(%)............ 84 260 584 330 117 94 84
<FN>
*Date shares first offered
+Calculated without sales charges
++Net after fees waived (Note 3)
(a)Annualized
</TABLE>
See notes to financial statements
8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors of
First Investors Government Fund, Inc.
We have audited the accompanying statement of assets and liabilities of First
Investors Government Fund, Inc., including the portfolio of investments, as of
June 30, 1995, and the related statement of operations for the six months then
ended, the statement of changes in net assets for the six months ended June 30,
1995 and the year ended December 31, 1994 and financial highlights for each of
the periods presented. 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 June 30, 1995, 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 Government Fund, Inc. at June 30, 1995, and the results of its
operations, changes in its net assets and financial highlights for the periods
presented, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
July 31, 1995
9
<PAGE>
FIRST INVESTORS GOVERNMENT FUND, INC.
DIRECTORS
-------------------------------------------
JAMES J. COY
ROGER L. GRAYSON
GLENN O. HEAD
KATHRYN S. HEAD
F. WILLIAM ORTMAN, JR.
REX R. REED
HERBERT RUBINSTEIN
JAMES M. SRYGLEY
JOHN T. SULLIVAN
ROBERT F. WENTWORTH
OFFICERS
-------------------------------------------
GLENN O. HEAD
President
CONCETTA DURSO
Vice President and Secretary
JOSEPH I. BENEDEK
Treasurer
CAROL LERNER BROWN
Assistant Secretary
10
<PAGE>
FIRST INVESTORS GOVERNMENT FUND, INC.
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 M Street, N.W.
Washington, DC 20036
AUDITORS
TAIT, WELLER & BAKER
Two Penn Center Plaza
Philadelphia, PA 19102
It is the Fund's practice to mail only one copy of its 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 Fund will ensure that separate reports are sent to any
shareholder who subsequently changes his or her mailing address.
This report is authorized for distribution only to existing shareholders, and,
if given to prospective shareholders, must be accompanied or preceded by the
Fund's prospectus.
11
<PAGE>
FIRST INVESTORS GOVERNMENT FUND, INC.
95 WALL STREET
NEW YORK, NY 10005
The following appears on the bottom lefthand side:
First Investors Logo, which is described as follows: the arabic numeral one
separated into seven vertical segments followed by the word "First Investors."
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK
FIUSA03
Vertically reading from bottom to top in the center of the page the words "FIRST
INVESTORS" appear.
FIRST
INVESTORS
GOVERNMENT
FUND, INC.
SEMI-
ANNUAL
REPORT
JUNE 30, 1995
