The words "First Investors" in a box across the top of the page.
FIRST INVESTORS
U.S. GOVERNMENT PLUS FUND
SEMI-ANNUAL REPORT
JUNE 30, 2000
First Investors Logo
The words "A MEMBER OF THE FIRST INVESTORS FINANCIAL NETWORK"
under the First Investors logo.
Market Overview
FIRST INVESTORS U.S. GOVERNMENT PLUS FUND
Dear Investor:
We are pleased to present this Market Overview for the semi-annual
report for the First Investors U.S Government Plus Fund for the six-
month period ended June 30, 2000.
The Economy
The U.S. economy, now in its tenth year of expansion, continued its
solid performance during the period, with the gross domestic product
(GDP) growing by 5.0% on an annualized basis. The unemployment rate
fell to 4.0% in June, near a 30-year low. Consumer confidence
remained high as personal income continued to grow. Durable goods
orders (for airplanes, computers, etc.) and industrial production
continued to rise.
The rate of inflation began to trend slightly higher, although
remaining benign by historical standards. The consumer price index,
a broad inflation gauge, increased 3.7% during the 12 months ending
June 2000, but only 2.4% excluding the volatile food and energy
components. The primary inflation story was the approximately 45%
increase in the price of oil during the first six months of the
year. In the labor market, the inflationary impact of rising wages
was largely offset by the continued improvement in productivity that
has characterized much of the current economic expansion.
Against this backdrop, the Federal Reserve ("the Fed") continued to
tighten monetary policy based upon its concerns about the pace of
economic growth (fourth quarter 1999 and first quarter 2000 growth
exceeded 6.5%) and the tight labor market. In all, the Fed raised
short-term interest rates three times during the review period,
accounting for a total of 100 basis points (1%).
The Equity Market
The first three months of 2000 were very bumpy for equity investors.
Encouraged by the smooth transition into the new century, investors
flooded the market with cash that had been hoarded in anticipation
of Y2K computer difficulties. The market surged in early January,
before quickly coming back down to earth and ending the month with
its worst January performance since 1990. The market continued to
gyrate up and down for much of the first quarter of 2000, and
ultimately posted a positive return of 2.3% for the quarter, as
measured by the Standard & Poor's 500 Index. Investors continued to
chase after technology stocks, and the Nasdaq market again had
strong returns, posting a 12.4% gain. As remarkable as the first
quarter volatility was, it seems merely to have been a precursor of
the three month roller coaster ride that took place in the second
quarter of 2000.
Macro-economic concerns, such as inflation and rising interest
rates, weighed heavily on the market during the second quarter. Amid
the volatility, investors initially gravitated toward safety, moving
into pharmaceutical, utilities, consumer and food stocks. Technology
and retail stocks, however, were shunned and did not fare as well.
The Nasdaq was particularly hard hit early in the second quarter. By
May 20th, the Nasdaq Composite Index had fallen 37% from its March
10th high of 5,048. It then reversed course and posted one of its
best months ever in June, gaining 16%. These short-term ups-and-
downs resulted in a 13% drop for the second quarter and a 2.5%
decline for the first half of 2000. However, from a longer term
viewpoint, the Nasdaq was up a very strong 48% over the past 52
weeks. The broader Standard & Poor's 500 Index did not suffer the
severe swings of the technology heavy Nasdaq, but it did drop from
its closing high of 1,527.46 on March 24, 2000 to 1,356.56 on April
14, 2000, a fall of 11%. The Index finished the quarter off 3% and
down 1% for the first half of 2000. Despite this extreme volatility,
the first-half of the year ended with the equity market on an
upswing, posting a strong performance in June as technology stocks
picked up some momentum.
The Bond Market
The economy's continued good health and the Fed's attempts to cool
the economy produced mixed results for the bond market during the
first half of the year. Short-term interest rates rose, with two-
year Treasury note yields increasing from 6.21% at year-end to 6.36%
on June 30. The increase in rates was primarily attributable to the
Fed's ongoing tightening of the money supply. Conversely, long-term
interest rates fell slightly after reaching their highest level
since 1997 in January. The ten-year Treasury note yield dropped from
6.44% at year-end 1999 to 6.03% as of June 30. This rate decline
occurred despite the solid economy and the Fed's actions largely
because of the U.S. budget surplus. Driven by the strong economy of
recent years, tax collections have increased, producing a budget
surplus estimated at $211 billion for 2000 and $1.3 trillion over
the next ten years. The Federal government's good fortune has helped
shrink the supply of U.S. Treasury debt. Issuance of new Treasury
securities has slowed and the Treasury has begun buying back debt in
the open market. If the economy continues to steam ahead, some
optimistic analysts have predicted that all public debt (U.S.
Treasury and municipal bonds) could be eliminated by 2012.
The decrease in Treasury debt helped trigger an unusual occurrence
in the bond market. Normally, interest rates on bonds with longer
maturities are higher than interest rates on bonds with shorter
maturities due to the former's greater interest rate risk. However,
in recent months, the interest rates on longer maturity Treasury
bonds have fallen below those of shorter maturities, causing the
yield curve to invert. While the Fed has raised short-term rates,
long-term Treasury rates have fallen due to the scarcity of high-
quality bonds. However, the decline in long-term interest rates has
been limited to public debt. In the private debt markets (corporate
bonds, mortgage-backed bonds, etc.), long-term yields have remained
high, reflecting the strong economy and inflation concerns.
Among the different sectors of the bond market, Treasury securities
(particularly long-term debt) provided the highest returns during
the first six months. The municipal bond sector was the second best
performing sector, with new issuance down 22% versus the same period
of 1999, as the strong economy helped decrease the need for
municipalities to issue debt. In the mortgage-backed bond sector,
investors also benefited from a decline in issuance as well as an
excellent prepayment environment, as refinancings declined but home
sales remained high. In the investment grade corporate bond sector,
the active Fed, "event risk" (mergers and other actions taken by
companies to improve their stock price), the inverted yield curve,
and heavy supply (June was the heaviest month in the history of
corporate bond issuance) converged to produce disappointing results.
However, higher-rated issues fared better than lower-rated credits.
The high yield bond segment posted the weakest returns in the bond
market, due to the factors which adversely affected the investment
grade corporate bond market plus rising default rates and lack of
investor demand due to better returns in other asset classes.
Looking Ahead
Going forward, the Fed may raise interest rates once or twice more
in an effort to slow the economy's momentum. The Fed took no action
at its meeting at the end of June, but maintained a bias to raise
rates. For the equity market, we remain optimistic that solid
economic fundamentals and healthy corporate profits may produce
positive returns for the second half of 2000. In the bond market, it
appears that long-term rates most likely peaked in January. Rates
may move somewhat higher from current levels until the Fed concludes
its rate increases. The conclusion of Fed tightening, coupled with a
slowing economy, could create a catalyst for a bond market rally by
the end of the year.
Because it is impossible to predict the future direction of the
markets, even over the short term, there are certain basic
investment principles that we encourage our clients to follow to
reduce exposure to risk.* First, we encourage clients to take a
long-term view, and to avoid trying to time the market. Attempting
to time the market is extremely difficult, even for professional
investors. Second, we encourage our clients to diversify their
portfolios among stock funds, bond funds and money market funds.
Third, we encourage our shareholders to follow a regular investment
plan, investing a specific amount of money at defined intervals.
This strategy is known as "dollar cost averaging." It may help you
to avoid getting caught up in the excitement of a rising market and
will reduce the risk of buying at high points.
Of course, no financial plan or program, no matter how well-
designed, is guaranteed to be successful. In addition, nothing
eliminates the risk associated with overall market trends. However,
utilizing these various strategies may help to minimize the risk by
reducing the extent to which an investor may be affected by a
decline in any one security or segment of the market. If you use
dollar cost averaging, you should consider your ability to continue
purchases through periods of declining prices.
Thank you for placing your trust in First Investors. As always, we
appreciate the opportunity to serve your investment needs.
Sincerely,
/S/ PATRICIA D. POITRA
Patricia D. Poitra
Director of Equities
First Investors Management Company, Inc.
/S/ CLARK D. WAGNER
Clark D. Wagner
Chief Investment Officer
First Investors Management Company, Inc.
July 31, 2000
* There are a variety of risks associated with investing in mutual
funds. For stock funds, the risks include market risk (the risk that
the entire stock market will decline because of an event such as a
deterioration in the economy or a rise in interest rates), as well
as special risks associated with investing in certain types of stock
mutual funds, such as small-cap funds and global and international
funds. For bond funds, the risks include interest rate risk and
credit risk. Interest rate risk is the risk that bonds will decrease
in value as interest rates rise. As a general matter, longer-term
bonds fluctuate more than shorter-term bonds in reaction to changes
in interest rates. Credit risk is the risk that bonds will decline
in value as the result of a decline in the credit rating of the
bonds or the economy as a whole. You should consult your prospectus
for a precise explanation of the risks associated with your fund.
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS U.S. GOVERNMENT PLUS FUND -- 1st FUND
June 30, 2000
-------------------------------------------------------------------------------------------------
Amount
Principal Invested
Amount For Each
or $10,000 of
Shares Security Value Net Assets
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--98.6%
$1,350M Treasury STRIPS, due 11/15/2004 (cost $879,570) $1,034,038 $ 9,862
-------------------------------------------------------------------------------------------------
COMMON STOCKS--.3%
Basic Materials--.2%
100 Chirex, Inc. 2,000 19
-------------------------------------------------------------------------------------------------
Consumer Cyclicals--.1%
100 Ames Department Stores, Inc. 775 8
-------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $4,332) 2,775 27
-------------------------------------------------------------------------------------------------
Total Value of Investments (cost $883,902) 98.9% 1,036,813 9,889
Other Assets, Less Liabilities 1.1 11,659 111
-------------------------------------------------------------------------------------------------
Net Assets 100.0% $1,048,472 $10,000
=================================================================================================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS U.S. GOVERNMENT PLUS FUND -- 1st FUND
June 30, 2000
--------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in securities:
At identified cost $ 883,902
==========
At value (Note 1A) $1,036,813
Cash 11,756
Other assets 2,675
----------
Total Assets 1,051,244
----------
Liabilities
Accrued expenses 2,260
Accrued advisory fees 512
----------
Total Liabilities 2,772
----------
Net Assets $1,048,472
==========
Net Assets Consist of:
Capital paid in $ 846,327
Undistributed net investment income 37,631
Accumulated net realized gain on investment transactions 11,603
Net unrealized appreciation in value of investments 152,911
----------
Total $1,048,472
==========
Shares of beneficial interest outstanding (Note 3) 113,572
==========
Net Asset Value and Redemption Price Per Share
(Net assets divided by shares of beneficial interest outstanding) $ 9.23
======
Maximum Offering Price Per Share
(Net asset value /.92)* $10.03
======
* On purchases of $10,000 or more, the sales charge is reduced.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
FIRST INVESTORS U.S. GOVERNMENT PLUS FUND -- 1st FUND
Six Months Ended June 30, 2000
--------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Interest income $ 43,323
--------
Expenses (Notes 1 and 4):
Advisory fee 5,174
Professional fees 5,396
Shareholder servicing costs 1,493
Reports and notices to shareholders 290
Custodian fees 71
Other expenses 242
--------
Total expenses 12,666
Less: Expenses waived or assumed (6,903)
Custodian fees paid indirectly (71)
--------
Net expenses 5,692
--------
Net investment income 37,631
--------
Realized and Unrealized Gain (Loss) on Investments (Note 2):
Net realized gain on investments 11,603
Net unrealized depreciation of investments (9,000)
--------
Net gain on investments 2,603
--------
Net Increase in Net Assets Resulting from Operations $ 40,234
========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS U.S. GOVERNMENT PLUS FUND -- 1st FUND
------------------------------------------------------------------------------------------------
1/1/00 to 1/1/99 to
6/30/00 12/31/99
------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 37,631 $ 76,639
Net realized gain on investments 11,603 16,271
Net unrealized depreciation of investments (9,000) (155,580)
---------- ----------
Net increase (decrease) in net assets resulting from operations 40,234 (62,670)
---------- ----------
Distributions to Shareholders
Net investment income -- (76,736)
Net realized gains -- (16,271)
---------- ----------
Total distributions -- (93,007)
---------- ----------
Trust Share Transactions *
Proceeds from shares sold -- --
Reinvestment of distributions -- 90,921
Cost of shares redeemed (82,239) (79,314)`
---------- ----------
Net increase (decrease) from trust share transactions (82,239) 11,607
---------- ----------
Net decrease in net assets (42,005) (144,070)
Net Assets
Beginning of period 1,090,477 1,234,547
---------- ----------
End of period (including undistributed net investment income of
$37,631 and $0 respectively) $1,048,472 $1,090,477
========== ==========
* Trust Shares Issued and Redeemed
Sold ... -- --
Issued on distributions reinvested -- 10,239
Redeemed (9,265) (8,078)
---------- ----------
Net increase (decrease) in trust shares outstanding.. (9,265) 2,161
========== ==========
See notes to financial statements
</TABLE>
Notes to Financial Statements
FIRST INVESTORS U.S. GOVERNMENT PLUS FUND -- 1st FUND
1. Significant Accounting Policies -- First Investors U.S.
Government Plus Fund (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of
1940 (the "1940 Act") as a diversified open-end management
investment company. The Trust operates as a series fund, currently
issuing shares of beneficial interest of the 1st Fund (the "Fund")
only. The Fund's objective is first to generate income, and, to a
lesser extent, achieve long-term capital appreciation.
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. Securities which have no sales on a particular
day and securities traded in the over-the-counter market are valued
at the mean between the closing bid and asked prices. The Treasury
STRIPS in which the Fund invests are traded primarily in the over-
the-counter market. Such securities are valued at the mean between
the last bid and asked prices based upon quotes furnished by a
market maker for 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 under the direction
of the Trust's officers in a manner specifically authorized by the
Trustees of the Trust.
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 the Fund from all,
or substantially all, federal income taxes.
C. Distributions to Shareholders -- Distributions to shareholders
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 post-October capital losses.
D. Security Transactions and Investment Income -- 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 common stocks and the
amortized cost basis for Treasury STRIPS for both financial
statement and federal income tax purposes. Dividend income is
recorded on the ex-dividend date. Interest income (consisting of
accreted discount) and estimated expenses are accrued daily. For the
six months ended June 30, 2000, the Fund's custodian has provided
credits in the amount of $71 against custodian charges based on the
uninvested cash balances of the Fund.
E. 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 reporting period. Actual results could differ from those
estimates.
Notes to Financial Statements (continued)
FIRST INVESTORS U.S. GOVERNMENT PLUS FUND -- 1st FUND
2. Security Transactions -- During the six months ended June 30,
2000, the Fund sold long-term U.S. Government Obligations amounting
to $90,419. There were no other security transaction during the period.
At June 30, 2000, the cost of investments for federal income tax
purposes was $883,902. Accumulated net unrealized appreciation on
investments was $152,911, consisting of $154,968 gross unrealized
appreciation and $2,057 gross unrealized depreciation.
3. Trust Shares -- The Declaration of Trust permits the Trust to
issue an unlimited number of shares of beneficial interest of the Fund.
4. Advisory Fee and Other Transactions With Affiliates -- Certain
officers and trustees of the Trust 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
Trust's individual retirement accounts ("IRA"). Trustees of the
Trust who are not "interested persons" of the Trust as defined in
the 1940 Act are remunerated by the Fund. For the six months ended
June 30, 2000, total trustees fees accrued by the Fund amounted to $150.
The Investment Advisory Agreement provides as compensation to FIMCO,
an annual fee, payable monthly, at the rate of 1% of 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. Total
advisory fee accrued to FIMCO for the six months ended June 30,
2000, was $5,174 of which $2,070 was waived. In addition, expenses
of $4,833 were assumed by FIMCO.
For the six months ended June 30, 2000, shareholder servicing costs
included $707 in transfer agent fees paid to ADM and $326 in IRA
custodian fees paid to FFS.
<TABLE>
<CAPTION>
Financial Highlights
FIRST INVESTORS U.S. GOVERNMENT PLUS FUND -- 1st FUND
The following table sets forth the operating performance data for a share of beneficial interest outstanding,
total return, ratios to average net assets and other supplemental data for each year indicated.
1/1/00 Year Ended December 31
to -------------------------------------------------------
6/30/00 1999 1998 1997 1996 1995
-------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
--------------
Net Asset Value, Beginning of Year $ 8.88 $ 10.23 $10.25 $10.37 $11.58 $ 9.83
-------- -------- --------- -------- -------- --------
Income from Investment Operations:
Net Investment Income 0.331 0.681 0.723 0.670 0.648 0.667
Net Realized and Unrealized Gain
(Loss) on Investments 0.019 (1.205) 0.453 0.274 (0.863) 2.114
-------- -------- --------- -------- -------- --------
Total from Investment Operations 0.350 (0.524) 1.176 0.944 (0.215) 2.781
-------- -------- --------- -------- -------- --------
Less Distributions from:
Net Investment Income -- 0.681 0.723 0.670 0.648 0.667
Net Realized Gain -- 0.145 0.473 0.394 0.347 0.364
-------- -------- --------- -------- -------- --------
Total Distributions -- 0.826 1.196 1.064 0.995 1.031
-------- -------- --------- -------- -------- --------
Net Asset Value, End of Year $9.23 $8.88 $10.23 $10.25 $10.37 $11.58
======== ======== ========= ======== ======== ========
Total Return (%)+ 3.94 (5.12) 11.47 9.10 (1.86) 28.29
-----------------
Ratios/Supplemental Data
------------------------
Net Assets, End of Year (in thousands) $1,048 $1,090 $1,235 $1,282 $1,359 $1,524
Ratio to Average Net Assets:(%)*
Expenses 1.10(a) 1.10 1.10 1.37 1.60 1.60
Net Investment Income 7.22(a) 6.65 6.35 6.11 5.70 5.60
Ratio to Average Net Assets
Before Expenses
Waived or Assumed:(%)
Expenses 2.44(a) 2.08 1.93 1.93 1.98 1.87
Net Investment Income 5.88(a) 5.67 5.52 5.55 5.32 5.33
Portfolio Turnover Rate (%) 0 1 1 0 7 7
+ Calculated without sales charges
* Net of expenses waived or assumed (Note 4)
(a) Annualized
See notes to financial statements
</TABLE>
Independent Auditors' Report
To the Shareholders and Trustees of
First Investors U.S. Government Plus Fund
We have audited the accompanying statement of assets and
liabilities, including the portfolio of investments, of the 1st Fund
of First Investors U.S. Government Plus Fund at June 30, 2000, 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, 2000 and the year ended December 31, 1999 and financial
highlights for each of the periods indicated thereon. These
financial statements and financial highlights are the responsibility
of the Trust'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 at June 30,
2000, 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 the 1st Fund of First Investors U.S.
Government Plus Fund at June 30, 2000, and the results of its
operations for the six months then ended, changes in its net assets
and financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
July 31, 2000
FIRST INVESTORS U.S. GOVERNMENT PLUS FUND
Trustees
--------
James J. Coy (Emeritus)
Robert M. Grohol
Glenn O. Head
Kathryn S. Head
Larry R. Lavoie
Rex R. Reed
Herbert Rubinstein
James M. Srygley
John T. Sullivan
Robert T. Wentworth
Officers
--------
Glenn O. Head
President
Concetta Durso
Vice President and Secretary
Patricia D. Poitra
Vice President
Joseph I. Benedek
Treasurer
Mark S. Spencer
Assistant Treasurer
Carol Lerner Brown
Assistant Secretary
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
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue
Washington, DC 20036
Auditors
Tait, Weller & Baker
Eight Penn Center Plaza
Philadelphia, PA 19103
It is the Trust'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 mail 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.
