<PAGE>
PORTFOLIO MANAGERS' LETTER
FIRST INVESTORS BLUE CHIP FUND
Dear Investor:
1997 was a very good year for the U.S. economy and financial markets. The
economy grew at an annual pace of 3.8%, with the unemployment rate falling to
its lowest level since the 1970's. Despite faster economic growth, inflation, as
measured by the Consumer Price Index, rose less than 2%, its smallest increase
in over ten years. Reflecting the strong economy, the Federal budget deficit
declined substantially and had almost been eliminated by year-end. Against this
backdrop, the Federal Reserve held monetary policy steady after one small
increase in the benchmark Federal funds rate in March.
Although both the U.S. bond and stock markets suffered setbacks at times during
the year, the combination of moderate growth and low inflation ultimately
provided a rewarding environment for investors. Long-term bond yields fell to
their lowest level in two years, while the broad stock market indices recorded
their third consecutive year of substantial gains. While many overseas markets
were buffeted by the economic crisis in Southeast Asia, U.S. markets remained
relatively stable or--in the case of the bond market--benefited from a "flight
to safety" as investors sought the security of the world's largest and most
efficient financial markets.
Returns in the equity market, as measured by the Standard & Poor's 500 Index,
were in double digits for an unprecedented third year in a row. Bullish equity
investor sentiment was sustained by an outlook for continued low inflation and
interest rates and solid economic growth. For 1997, First Investors Blue Chip
Fund returned 26.1% on a net asset value basis for Class A shares and 25.2% for
Class B shares. In addition to solid absolute returns, the Blue Chip Fund was in
line with its peer group as measured by the Lipper Growth and Income Average,
which returned 27.1% for the year.
The Blue Chip Fund's performance in 1997 was bolstered by select investments in
the healthcare, financial and publishing sectors of the S&P 500 Index. While the
second half of the year was a difficult one for the technology sector, certain
technology stocks performed quite well over the full year. The Fund's
performance also benefited from select investments in the telecommunications
equipment area.
The fundamentals supporting performance of the healthcare sector remained in
place during the year. Demographics and continued demand for the best health
care in the world here in the United States generated above average returns for
innovative healthcare companies. Stocks in companies such as Eli Lilly,
Warner-Lambert, Pfizer and Medtronic all outperformed the S&P 500 Index in 1997.
The demographic trend supporting healthcare--the aging baby boomers--also
benefited the financial sector as more money flowed into investment and
retirement products. The retirement investment trend led to outsized gains in
the stocks of financial services companies such as Merrill Lynch and Travelers
Group as well as solid gains in the stocks of banks such as BankBoston and
BankAmerica. Supported by the growing demand for wireless telephone services
worldwide, stocks in companies like Ericsson and Nokia performed well in the
first half of the year. Newspaper publishers benefited from declining newsprint
prices and increased help wanted advertising, which generated above average
returns in the stock of Tribune Company. Finally, perennial performers like
Microsoft and General Electric contributed to the Blue Chip Fund's performance.
As the year entered the third quarter, concerns about the economic problems
facing Southeast Asia spilled over into the United States markets and had a
negative impact on the investment outlook for certain sectors. The most notable
sector to feel the impact was technology. Anticipating a slowdown in demand
along
1
<PAGE>
PORTFOLIO MANAGERS' LETTER (continued)
FIRST INVESTORS BLUE CHIP FUND
with possible competitive pricing pressures from less expensive sources, many
technology stocks retreated in the fourth quarter, generating underperformance
for the full year. The stocks in the Blue Chip Fund most directly affected by
the Asian situation, Motorola and Intel, subsequently underperformed. The
concerns about Asia also had an impact on the stocks of the major money center
banks held by the Fund, Chase Manhattan and Citicorp. Although Chase and
Citicorp both generated decent absolute returns, they underperformed the market.
Companies whose growth was driven by exports, most notably those in the capital
goods sector, were also affected by the Asian problem. AlliedSignal, Boeing,
Lockheed Martin and United Technologies were all impacted by the downturn in the
Asian economies and were all underperformers for the year.
While we continue to believe the fundamentals that pushed U.S. stock markets to
new highs remain in place, investors should remain aware of the risks associated
with investing in the stock markets. Stock markets tend to follow cycles and the
current upward cycle or bull market is now the longest in history. On a
technical basis, the length of the cycle could present some pressure against
continued gains in the short-term, but the current economic environment of
stable growth, low inflation and low interest rates provides positive support
for continued gains. The aging population, saving and investing for retirement,
adds another level of support for continued positive trends in the financial
markets. However, the impact of lower global economic growth, due to the turmoil
in the Asian economies and the possible impact on U.S. companies' profits, could
present a risk to U.S. equity investors.
As in the past, the investment strategy of the Blue Chip Fund will be to search
for equity opportunities on a company specific or bottom up basis. However, the
impact of major economic events, such as the current Asian turmoil, will play a
role in the final investment decision. The Fund will continue to invest in
companies that have a demonstrated record of consistent profits and growth
supported by solid management. The Fund will also continue to take a long-term
investment perspective on any investment under consideration.
Following 1997's strong performance, the outlook for U.S. financial markets
continues to be positive, although uncertainties do exist. In particular, we
believe that the economic problems in Southeast Asia will slow growth in the
U.S. However, it is unclear to what extent growth will be slowed and,
consequently, what the ultimate impact will be on the financial markets. On a
positive note, Southeast Asia's problems should result in lower inflation
worldwide. Uncertainty often leads to volatile markets. During such times,
investors are generally 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]
Dennis T. Fitzpatrick
Co-Portfolio Manager
[SIGNATURE]
Kimberly C. Speegle
Co-Portfolio Manager
January 30, 1998
2
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS BLUE CHIP FUND
Comparison of change in value of $10,000 investment in the First Investors Blue
Chip Fund (Class A shares) and the Standard & Poor's 500 Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
BLUE CHIP FUND STANDARD & POOR'S 500 INDEX
<S> <C> <C>
Jan-89 $9,375 $10,000
Dec-89 $10,813 $12,261
Dec-90 $10,435 $11,885
Dec-91 $13,308 $15,460
Dec-92 $14,181 $16,554
Dec-93 $15,283 $18,155
Dec-94 $14,821 $18,388
Dec-95 $19,862 $25,906
Dec-96 $23,945 $31,856
Dec-97 $30,183 $42,402
Average Annual Total Return*
Class A shares N.A.V. Only S.E.C. Standardized
One Year 26.05% 18.16%
Five Years 16.31% 14.82%
Since Inception (1/3/89) 13.88% 13.06%
Class B Shares
One Year 25.19% 21.19%
Since Inception (1/12/95) 26.09% 25.45%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS BLUE CHIP FUND
(CLASS A SHARES) BEGINNING 1/3/89 (INCEPTION DATE) WITH A THEORETICAL INVESTMENT
IN THE STANDARD & POOR'S 500 INDEX. THE STANDARD & POOR'S 500 INDEX IS AN
UNMANAGED CAPITALIZATION-WEIGHTED INDEX OF 500 STOCKS DESIGNED TO MEASURE
PERFORMANCE OF THE BROAD DOMESTIC ECONOMY THROUGH CHANGES IN THE AGGREGATE
MARKET VALUE OF SUCH STOCKS, WHICH REPRESENT ALL MAJOR INDUSTRIES. 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 12/31/97) 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
12/4/89, 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 SINCE INCEPTION WOULD HAVE BEEN 17.91%, 14.60% AND 12.64%,
RESPECTIVELY. THE CLASS B "S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN
FOR ONE YEAR AND SINCE INCEPTION WOULD HAVE BEEN 20.92% AND 25.05%,
RESPECTIVELY. 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. STANDARD & POOR'S 500 INDEX FIGURES FROM STANDARD & POOR'S
AND ALL OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
3
<PAGE>
PORTFOLIO MANAGERS' LETTER
FIRST INVESTORS INSURED INTERMEDIATE TAX EXEMPT FUND
Dear Investor:
1997 was a very good year for the U.S. economy and financial markets. The
economy grew at an annual pace of 3.8%, with the unemployment rate falling to
its lowest level since the 1970's. Despite faster economic growth, inflation, as
measured by the Consumer Price Index, rose less than 2%, its smallest increase
in over ten years. Reflecting the strong economy, the Federal budget deficit
declined substantially and had almost been eliminated by year-end. Against this
backdrop, the Federal Reserve held monetary policy steady after one small
increase in the benchmark Federal funds rate in March.
Although both the U.S. bond and stock markets suffered setbacks at times during
the year, the combination of moderate growth and low inflation ultimately
provided a rewarding environment for investors. Long-term bond yields fell to
their lowest level in two years, while the broad stock market indices recorded
their third consecutive year of substantial gains. While many overseas markets
were buffeted by the economic crisis in Southeast Asia, U.S. markets remained
relatively stable or--in the case of the bond market--benefited from a "flight
to safety" as investors sought the security of the world's largest and most
efficient financial markets.
Long-term municipal bond yields ended 1997 near their lowest level since the
mid-1970's. Most of the decline in yields occurred during the second half of the
year as the bond market benefited from low inflation in the U.S. and instability
in Southeast Asia. Low yields spurred issuance of $220 billion of municipal
bonds during 1997, the third largest volume of supply in the market's history.
This supply kept municipal bond yields higher than they might have been
otherwise. As a result, municipal bonds ended the year somewhat cheap relative
to taxable bonds, laying the groundwork for strong performance in 1998.
During 1997, First Investors Insured Intermediate Tax Exempt Fund's Class A
shares had a total return of 7.7% on a net asset value basis compared to the
average return of 7.2% for intermediate maturity municipal bond funds as
reported by Lipper Analytical Services, Inc. Class B shares returned 6.4% on a
net asset value basis. For 1997, the Fund declared dividends from investment
income of 29.2 cents per share on Class A shares and 23.2 cents per share on
Class B shares.
Fund performance during 1997 was driven primarily by three factors. First,
virtually all of the Fund's assets were invested in noncallable bonds. Most
municipal bonds are callable which means that issuers can buy-- or call--bonds
from investors if interest rates fall. This limits the price appreciation of
callable bonds when interest rates fall as they did in 1997. In contrast,
noncallable bonds have unlimited potential to increase in price. Our holdings of
noncallable bonds contributed significantly to the Fund's total return. Second,
the Fund remained substantially fully invested throughout the year. This allowed
the Fund to earn the highest amount of income possible and provided the best
opportunity to benefit on a total return basis from falling interest rates.
Third, the Fund enhanced total return by taking advantage of short-term trading
opportunities, particularly by purchasing relatively cheap new issues.
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 50 basis point (or .5%) increase in yield on a ten-year municipal
bond results in roughly a 4% decrease in that bond's price. In each of the last
five years, ten-year municipal bond yields have fluctuated by more than 50 basis
points. In addition, while the Fund's municipal bonds are insured as to timely
payment of principal and interest, the insurance does
4
<PAGE>
not protect the bonds against changes in market value. Investors should be aware
of these risks and recognize that successful investing generally requires a
long-term commitment to the market.
Following 1997's strong performance, the outlook for U.S. financial markets
continues to be positive, although uncertainties do exist. In particular, we
believe that the economic problems in Southeast Asia will slow growth in the
U.S. However, it is unclear to what extent growth will be slowed and,
consequently, what the ultimate impact will be on the financial markets. On a
positive note, Southeast Asia's problems should result in lower inflation
worldwide. Uncertainty often leads to volatile markets. During such times,
investors are generally 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
and Co-Portfolio Manager
[SIGNATURE]
W. Richard Yu
Co-Portfolio Manager
January 30, 1998
5
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS INSURED INTERMEDIATE TAX EXEMPT FUND
Comparison of change in value of $10,000 investment in the First Investors
Insured Intermediate Tax Exempt Fund (Class A shares) and the Lehman Brothers
Municipal Bond Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
INSURED INTERMEDIATE LEHMAN BROTHERS
TAX EXEMPT FUND MUNICIPAL BOND INDEX
<S> <C> <C>
Nov-93 $9,375 $10,000
Dec-93 $9,375 $10,211
Dec-94 $9,177 $9,683
Dec-95 $10,415 $11,373
Dec-96 $10,840 $11,856
Dec-97 $11,672 $12,946
Average Annual Total Return*
Class A Shares N.A.V. Only S.E.C. Standardized
One Year 7.68% 0.88%
Since Inception (11/22/93) 5.49% 3.83%
S.E.C. 30-Day Yield 4.00%
Class B Shares
One Year 6.39% 2.39%
Since Inception (1/12/95) 7.29% 6.40%
S.E.C. 30-Day Yield 3.30%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS INSURED
INTERMEDIATE TAX EXEMPT FUND (CLASS A SHARES) BEGINNING 11/22/93 (INCEPTION
DATE) WITH A THEORETICAL INVESTMENT IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A TOTAL RETURN PERFORMANCE BENCHMARK
FOR THE LONG-TERM INVESTMENT GRADE TAX-EXEMPT BOND MARKET. RETURNS AND
ATTRIBUTES FOR THE INDEX ARE CALCULATED SEMI-MONTHLY USING APPROXIMATELY 21,000
MUNICIPAL BONDS WHICH ARE PRICED BY MULLER DATA CORP. THE INDEX DOES NOT TAKE
INTO ACCOUNT FEES AND EXPENSES OR COST OF INSURANCE OF THE BONDS HELD BY AN
INSURED TAX-EXEMPT BOND FUND. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THE
LEHMAN BROTHERS MUNICIPAL BOND 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. 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 12/31/97) 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 1/12/95 THE
MAXIMUM SALES CHARGE WAS 3.5%). 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 AND SINCE INCEPTION WOULD HAVE BEEN .26% AND
2.93%, RESPECTIVELY, AND THE S.E.C. 30-DAY YIELD FOR DECEMBER 1997 WOULD HAVE
BEEN 3.42%. THE CLASS B "S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR
ONE YEAR AND SINCE INCEPTION WOULD HAVE BEEN 2.06% AND 5.82%, RESPECTIVELY,
AND THE S.E.C. 30-DAY YIELD FOR DECEMBER 1997 WOULD HAVE BEEN 2.99%. 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 MUNICIPAL BOND INDEX FIGURES FROM LEHMAN BROTHERS, INC.
AND ALL OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
6
<PAGE>
PORTFOLIO MANAGERS' LETTER
FIRST INVESTORS INVESTMENT GRADE FUND
Dear Investor:
1997 was a very good year for the U.S. economy and financial markets. The
economy grew at an annual pace of 3.8%, with the unemployment rate falling to
its lowest level since the 1970's. Despite faster economic growth, inflation, as
measured by the Consumer Price Index, rose less than 2%, its smallest increase
in over ten years. Reflecting the strong economy, the Federal budget deficit
declined substantially and had almost been eliminated by year-end. Against this
backdrop, the Federal Reserve held monetary policy steady after one small
increase in the benchmark Federal funds rate in March.
Although both the U.S. bond and stock markets suffered setbacks at times during
the year, the combination of moderate growth and low inflation ultimately
provided a rewarding environment for investors. Long-term bond yields fell to
their lowest level in two years, while the broad stock market indices recorded
their third consecutive year of substantial gains. While many overseas markets
were buffeted by the economic crisis in Southeast Asia, U.S. markets remained
relatively stable or--in the case of the bond market--benefited from a "flight
to safety" as investors sought the security of the world's largest and most
efficient financial markets.
After outperforming Treasuries during the first half of 1997, corporate bonds
failed to keep pace with the Treasury rally in the second half of the year. At
year-end, investment grade corporate bonds had underperformed the 10-year
Treasury bond, but had finished ahead of a maturity-weighted Treasury portfolio.
With the economic turmoil in Southeast Asia, many investors sought refuge in
Treasuries with yields on the 30-year bond dropping to 5.92% at year-end.
Corporate bonds benefited from this decline. But with the heightened volatility
caused by the uncertainty surrounding the impact of the economic events in Asia,
corporate spreads widened from the historically tight mid-summer levels.
Investors became increasingly concerned about the well-being of overseas
economies and their potential impact on the profitability of American companies,
many of which are multinational in scope.
During 1997, First Investors Investment Grade Fund returned 9.1% on a net asset
value basis for Class A shares and 8.4% for Class B shares, compared to a return
of 10.1% for the average BBB investment grade bond fund as measured by Lipper
Analytical Services, Inc. For 1997, the Fund declared dividends from net
investment income of 61.2 cents per share on Class A shares and 54.5 cents per
share on Class B shares. The Fund also declared a capital gain distribution of
3.3 cents per share on both classes.
Sector choices were important as the events in Asia impacted the Fund's
performance. The bonds of money center banks such as Citicorp and J.P. Morgan
lagged as spreads widened over concerns of potential loan and trading losses
stemming from their Asian exposures. The Fund maintained a high exposure to
banks, including money center banks, due to the improving credit fundamentals
within the sector. On the other hand, the portfolio continued to be
underweighted in Yankee bonds (dollar denominated bonds issued by foreign
entities that are registered with the Securities and Exchange Commission). These
issues significantly underperformed the market due to the overseas volatility.
The large exposure to industrial and utility companies also aided returns as
these two sectors were the top performers in 1997.
Duration was also an important determinant of performance. In early 1997, we
held the Fund's duration shorter than its peer group because of concerns over
the strength of the domestic economy and the fear that higher inflation would
follow. We lengthened the duration in mid-year as it became apparent that
inflation rates were not increasing. That move proved to be beneficial as the
bond market rallied and the
7
<PAGE>
PORTFOLIO MANAGERS' LETTER (continued)
FIRST INVESTORS INVESTMENT GRADE FUND
longer maturities outperformed shorter ones. However, on balance, we believe the
Fund's duration was shorter than that of our peers, and that had the Fund's
duration been longer, relative performance would have been better.
Looking forward, we are more concerned about the market than about the economy
this year. Even after the fourth quarter spread-widening, spreads remain tight
by long-term standards. Additional shocks from Asia, slower profit growth or
equity-market volatility could serve to push corporate spreads wider. We would
view any such widening as a buying opportunity, as we believe long-term
fundamentals are still strong.
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 1% increase in yield on a ten-year Treasury bond results in
roughly a 7% decrease in that bond's price. In each of the last five years,
ten-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. Also, lower-rated debt obligations are more sensitive than
higher-rated investments to adverse economic changes or individual corporate
developments, and thus can be subject to a 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.
Following 1997's strong performance, the outlook for U.S. financial markets
continues to be positive, although uncertainties do exist. In particular, we
believe that the economic problems in Southeast Asia will slow growth in the
U.S. However, it is unclear to what extent growth will be slowed and,
consequently, what the ultimate impact will be on the financial markets. On a
positive note, Southeast Asia's problems should result in lower inflation
worldwide. Uncertainty often leads to volatile markets. During such times,
investors are generally 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]
Nancy W. Jones
Vice President
and Co-Portfolio Manager
[SIGNATURE]
Clark D. Wagner
Vice President
and Co-Portfolio Manager
January 30, 1998
8
<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 DECEMBER 31, 1997
Investment Grade Fund Lehman Brothers Corporate 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
Average Annual Total Return*
Class A Shares N.A.V. Only S.E.C. Standardized
One Year 9.14% 2.34%
Five Years 7.31% 5.94%
Since Inception (2/19/91) 8.44% 7.42%
S.E.C. 30-Day Yield 5.19%
Class B Shares
One Year 8.40% 4.40%
Since Inception (1/12/95) 9.27% 8.42%
S.E.C. 30-Day Yield 4.85%
</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 12/31/97) 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 2.00%, 5.29% AND 6.70%, RESPECTIVELY, AND THE S.E.C. 30-DAY YIELD FOR
DECEMBER 1997 WOULD HAVE BEEN 4.87%. THE CLASS B "S.E.C. STANDARDIZED" AVERAGE
ANNUAL TOTAL RETURN FOR ONE YEAR AND SINCE INCEPTION WOULD HAVE BEEN 4.04% AND
7.97%, RESPECTIVELY, AND THE S.E.C. 30-DAY YIELD FOR DECEMBER 1997 WOULD HAVE
BEEN 4.51%. 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.
9
<PAGE>
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS SPECIAL SITUATIONS FUND
Dear Investor:
1997 was a very good year for the U.S. economy and financial markets. The
economy grew at an annual pace of 3.8%, with the unemployment rate falling to
its lowest level since the 1970's. Despite faster economic growth, inflation, as
measured by the Consumer Price Index, rose less than 2%, its smallest increase
in over ten years. Reflecting the strong economy, the Federal budget deficit
declined substantially and had almost been eliminated by year-end. Against this
backdrop, the Federal Reserve held monetary policy steady after one small
increase in the benchmark Federal funds rate in March.
Although both the U.S. bond and stock markets suffered setbacks at times during
the year, the combination of moderate growth and low inflation ultimately
provided a rewarding environment for investors. Long-term bond yields fell to
their lowest level in two years, while the broad stock market indices recorded
their third consecutive year of substantial gains. While many overseas markets
were buffeted by the economic crisis in Southeast Asia, U.S. markets remained
relatively stable or--in the case of the bond market--benefited from a "flight
to safety" as investors sought the security of the world's largest and most
efficient financial markets.
The Fund's performance was driven by investments in the energy and financial
sectors. Other sectors, such as the technology and healthcare sectors, proved to
be mixed performers, while the forest and paper products sector underperformed
the market as a whole.
During 1997, First Investors Special Situations Fund had a total return of 16.2%
on a net asset value basis for Class A shares and 15.3% for Class B shares,
compared to a 20.8% return for the Lipper Small Company Growth Fund Average. For
1997, the Fund declared a capital gain distribution of $1.897 per share on both
classes.
In the energy sector, oilfield service stocks generated solid returns for the
year in spite of a difficult fourth quarter. Because the Fund acquired the
majority of its holdings in the first quarter, stocks in companies such as
Patterson Energy, EVI, Newpark Resources, Global Industries, R&B Falcon
(formerly Falcon Drilling), Veritas DGC, Maverick Tube and Cliffs Drilling
generated above average returns for the year.
The Fund also benefited from its holdings in financial stocks. Consolidation,
real and perceived, was the driver of the solid performance in financial stocks,
especially in the fourth quarter. The Fund held consolidators such as Centura
Banks, Commercial Federal, and Peoples Heritage Financial Group. The Fund's top
performer in the financial sector was HealthCare Financial Partners, a specialty
finance company focused on asset based lending to growing health care service
providers. However, not all financial stocks held by the Fund generated above
average returns. Redwood Trust reported disappointing earnings, while the Money
Store was hampered by concerns about slower loan growth and delinquencies in the
subprime auto finance and mortgage industries. While the Fund had roughly twelve
percent of its assets invested in the financial sector, in hindsight, a higher
weighting would have been preferable.
In 1997, the Fund's investments in the technology sector generated mixed
results. While the stocks in companies such as EMC, Network Appliance and Cisco
Systems appreciated over 30% for the year, the rapid and unexpected downturn in
the Asian economies had adverse impacts on many technology companies. With the
possible loss of the Asian markets for their products and the expectations of
increased competition in many areas of the technology sector, many technology
companies adjusted earnings expectations downward. The lowered earnings
expectations led to lower fourth quarter returns in many technology
10
<PAGE>
stocks. The stocks of companies such as Hadco, Altera and Adaptec all suffered
from the "Asian Flu".
While the macro-economic fundamental--aging baby-boomers who generally demand
the highest quality medical care--supporting the healthcare sector remained in
place, the Fund's holdings in this sector had lackluster performances. Health
Care and Retirement Corporation, a nursing home benefiting from the "graying of
America", did generate a return in excess of 40%. However, other companies in
the nursing home sector did not generate good returns, for reasons ranging from
poor execution of strategy to use of questionable accounting practices, and
hindered the Fund's performance. Examples of such companies are Genesis Health
Ventures and Vencor.
The outlook for the forest and paper products industry appeared to be improving
before the Asian economic crisis occurred. There was an increase in
restructuring and merger activity that was rationalizing capacity at the same
time global economic conditions appeared solid. However, just as we began to see
some positive momentum in the sector, the Asian crisis undercut the investment
thesis in the paper and forest products sector. Asia accounts for approximately
33% of the world's consumption of paper products and approximately 29% of its
production. The downturn in the Asia region, led to concerns about the earnings
rebound of the paper industry, a rebound that now appears to be on hold
indefinitely. The Fund's holdings in stocks of companies like Boise Cascade,
Louisiana-Pacific and Gaylord Container Corp. were adversely affected by the
turmoil in Asia.
While we continue to believe the fundamentals that pushed U.S. stock markets to
new highs remain in place, investors should remain aware of the risks associated
with investing in the stock markets. Stock markets tend to be cyclical requiring
a long term time-horizon when investing. Additionally, on a technical basis, the
current bull market is now the longest in history. Providing positive economic
support is the convergence of stable economic growth, low inflation and
constructive interest rates. Also supportive are the demographic trends that are
propelling "baby boomers" savings and investment rates to continue at high
levels. However, one of the risks to U.S. equity investors is the impact which
lower global growth, caused by the turmoil in Asian economies, will have on U.S.
companies' profits and therefore stock market prices.
Following 1997's strong performance, the outlook for U.S. financial markets
continues to be positive, although uncertainties do exist. In particular, we
believe that the economic problems in Southeast Asia will slow growth in the
U.S. However, it is unclear to what extent growth will be slowed and,
consequently, what the ultimate impact will be on the financial markets. On a
positive note, Southeast Asia's problems should result in lower inflation
worldwide. Uncertainty often leads to volatile markets. During such times,
investors are generally 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]
Patricia D. Poitra
Director of Equities
and Portfolio Manager
January 30, 1998
11
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS SPECIAL SITUATIONS FUND
Comparison of change in value of $10,000 investment in the First Investors
Special Situations Fund (Class A shares), the Lipper Small Company Growth Fund
Index and the Russell 2000 Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
Special Situations Fund Lipper Small Company Growth Fund Index
<S> <C> <C>
Sep-90 9,375 10,000
Dec-90 9,741 10,050
Dec-91 14,657 15,326
Dec-92 17,186 18,155
Dec-93 20,714 21,606
Dec-94 19,955 20,919
Dec-95 24,730 26,401
Dec-96 27,588 30,232
Dec-97 32,042 36,505
Average Annual Total Return*
Class A Shares N.A.V. Only S.E.C. Standardized
One Year 16.15% 8.89%
Five Years 13.27% 11.82%
Since Inception (9/18/90) 18.36% 17.32%
Class B Shares
One Year 15.34% 11.34%
Since Inception (1/12/95) 16.60% 15.85%
<CAPTION>
Russell 2000 Index
<S> <C>
Sep-90 10,000
Dec-90 10,754
Dec-91 16,214
Dec-92 17,853
Dec-93 20,776
Dec-94 20,624
Dec-95 27,106
Dec-96 31,107
Dec-97 37,969
Average Annual Total Return*
Class A Shares N.A.V. Only S.E.C. Standardized
One Year 16.15% 8.89%
Five Years 13.27% 11.82%
Since Inception (9/18/90) 18.36% 17.32%
Class B Shares
One Year 15.34% 11.34%
Since Inception (1/12/95) 16.60% 15.85%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS SPECIAL
SITUATIONS FUND (CLASS A SHARES) BEGINNING 9/18/90 (INCEPTION DATE) WITH
THEORETICAL INVESTMENTS IN THE LIPPER SMALL COMPANY GROWTH FUND INDEX AND THE
RUSSELL 2000 INDEX. THE LIPPER SMALL COMPANY GROWTH FUND INDEX IS A NET VALUE
WEIGHTED INDEX OF THE 30 LARGEST SMALL COMPANY GROWTH FUNDS. IT IS CALCULATED
WITH ADJUSTMENTS FOR INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AS OF
EX-DIVIDEND DATES. THE RUSSELL 2000 INDEX CONSISTS OF THE SMALLEST 2,000
COMPANIES IN THE RUSSELL 3000 INDEX (WHICH REPRESENTS APPROXIMATELY 98% OF THE
INVESTABLE U.S. EQUITY MARKET). THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX
GENERALLY CONSIDERED AS THE PREMIER OF SMALL CAPITALIZATION STOCKS. IT IS NOT
POSSIBLE TO INVEST DIRECTLY IN THESE INDICES. IN ADDITION, THE RUSSELL 2000
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 THE SALES LOADS AND FEES PAID BY
SHAREHOLDERS INVESTING IN THE DIFFERENT CLASSES.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/97) 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 8.64%, 11.61% AND 16.82%, RESPECTIVELY. THE CLASS B "S.E.C. STANDARDIZED"
AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR AND SINCE INCEPTION WOULD HAVE BEEN
11.07% AND 15.58%, RESPECTIVELY. 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. LIPPER SMALL COMPANY GROWTH FUND
INDEX FIGURES FROM LIPPER ANALYTICAL SERVICES, INC., RUSSELL 2000 INDEX
FIGURES FROM FRANK RUSSELL AND COMPANY AND ALL OTHER FIGURES FROM FIRST
INVESTORS MANAGEMENT COMPANY, INC.
12
<PAGE>
CHIEF INVESTMENT OFFICER'S LETTER
FIRST INVESTORS TOTAL RETURN FUND
Dear Investor:
1997 was a very good year for the U.S. economy and financial markets. The
economy grew at an annual pace of 3.8%, with the unemployment rate falling to
its lowest level since the 1970's. Despite faster economic growth, inflation, as
measured by the Consumer Price Index, rose less than 2%, its smallest increase
in over ten years. Reflecting the strong economy, the Federal budget deficit
declined substantially and had almost been eliminated by year-end. Against this
backdrop, the Federal Reserve held monetary policy steady after one small
increase in the benchmark Federal funds rate in March.
Although both the U.S. bond and stock market suffered setbacks at times during
the year, the combination of moderate growth and low inflation ultimately
provided a rewarding environment for investors. Long-term bond yields fell to
their lowest level in two years. The fixed income market reacted positively to
low inflation, a substantial reduction in the Federal budget deficit, and the
turmoil in Southeast Asia which caused investors to seek the stability of the
U.S. bond market. Returns in the equity market, as measured by the Standard &
Poor's 500 Index, were in double digits for an unprecedented third year in a
row. Bullish equity investor sentiment was sustained by low inflation and
interest rates, as well as solid economic growth and corporate earnings.
During 1997, First Investors Total Return Fund returned 18.1% on a net asset
value basis for Class A shares and 17.2% for Class B shares. In comparison, the
average return for flexible funds, such as Total Return Fund, was 18.7%
according to Lipper Analytical Services, Inc. During the year, the Fund declared
dividends from net investment income of 28 cents per share on Class A shares and
19.3 cents per share on Class B shares. The Fund also declared a capital gain
distribution of $1.082 per share on both classes.
During the year, the Fund benefited primarily from the strong performance of the
U.S. stock market and secondarily from positive bond market returns. In
particular, the Fund began 1997 with 75% of its assets in stocks, 18% in bonds
and 7% in cash. This allocation represented an overweight position in stocks
versus comparable funds. Consequently, the Fund was well positioned for the
rally in the stock market which occurred in January. With the stock market
declining in the Spring, the Fund reduced its equity market exposure to 65% of
assets, and increased bonds to 25% of assets. Over the remainder of the year,
the Fund incrementally increased its bond position to 35% of assets and further
decreased its equity allocation as several factors supported greater exposure to
fixed income investments. The Fund ended the year with a diversified portfolio
consisting of 55% in stocks, 35% in bonds and 10% in cash. The stock investments
were divided between medium and large capitalization stocks, with a slightly
greater allocation in the former. The bond investments consisted primarily of
investment grade and high yield corporate debt, with smaller holdings of U.S.
Treasury obligations and municipal bonds.
While we continue to believe the fundamentals that pushed the U.S. stock market
to new highs remain in place, investors should remain aware of the risks
associated with investing in the stock market. The stock market tends to follow
cycles and the current upward cycle or bull market is now the longest in
history. On a technical basis, the length of the cycle could present some
pressure against continued gains in the short-term. As well, the impact of lower
global economic growth, due to turmoil in the Asian economies and the possible
impact on U.S. companies' profits, could present a risk to U.S. equity
investors. The bond market can also be volatile. For example, a 100 basis point
(or 1%) increase in yield on a ten-year Treasury bond results in roughly a 7%
decrease in that
13
<PAGE>
CHIEF INVESTMENT OFFICER'S LETTER (continued)
FIRST INVESTORS TOTAL RETURN FUND
bond's price. In each of the last five years, ten-year Treasury bond yields have
fluctuated by more than 100 basis points. In addition, the value of a bond can
fluctuate based on changes in the credit quality. In particular, investments in
higher yielding lower-rated debt obligations are more sensitive than
higher-rated investments to adverse economic changes or individual corporate
developments, and thus can be subject to a 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.
Following 1997's strong performance, the outlook for U.S. financial markets
continues to be positive, although uncertainties do exist. In particular, we
believe that the economic problems in Southeast Asia will slow growth in the
U.S. However, it is unclear to what extent growth will be slowed and,
consequently, what the ultimate impact will be on the financial markets.
On a positive note, Southeast Asia's problems should result in lower inflation
worldwide. Uncertainty often leads to volatile markets. During such times,
investors are generally 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
January 30, 1998
14
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS TOTAL RETURN FUND
Comparison of change in value of $10,000 investment in the First Investors Total
Return Fund (Class A shares), the Lehman Brothers Government/Corporate Bond
Index and the Standard & Poor's 500 Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
LEHMAN BROTHERS
GOVERNMENT/CORPORATE STANDARD & POOR'S
TOTAL RETURN FUND BOND INDEX 500 INDEX
<S> <C> <C> <C>
Apr-90 9,375 10,000 10,000
Dec-90 9,543 10,829 10,242
Dec-91 11,606 12,576 13,367
Dec-92 11,489 13,528 14,326
Dec-93 12,314 15,024 15,727
Dec-94 11,879 14,497 15,929
Dec-95 15,065 17,286 22,443
Dec-96 16,665 17,787 27,596
Dec-97 19,678 19,523 36,731
Average Annual Total Return*
Class A Shares N.A.V. Only S.E.C. Standardized
One Year 18.08% 10.73%
Five Years 11.36% 9.94%
Since Inception (4/24/90) 10.11% 9.20%
Class B Shares
One Year 17.24% 13.24%
Since Inception (1/12/95) 17.64% 16.90%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS TOTAL RETURN FUND
(CLASS A SHARES) BEGINNING 4/24/90 (INCEPTION DATE) WITH THEORETICAL INVESTMENTS
IN THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX AND THE STANDARD & POOR'S
500 INDEX. THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX COMBINES THE
LEHMAN BROTHERS GOVERNMENT BOND INDEX WITH THE LEHMAN BROTHERS CORPORATE BOND
INDEX. THE GOVERNMENT BOND INDEX IS MADE UP OF THE TREASURY BOND INDEX (ALL
PUBLIC OBLIGATIONS OF THE U.S. TREASURY) AND THE AGENCY BOND INDEX (ALL PUBLICLY
ISSUED DEBT OF U.S. GOVERNMENT AGENCIES AND QUASI-FEDERAL CORPORATIONS, AND
CORPORATE DEBT GUARANTEED BY THE U.S. GOVERNMENT). THE CORPORATE BOND INDEX
INCLUDES ALL PUBLICLY ISSUED, FIXED RATE, NONCONVERTIBLE INVESTMENT GRADE
DOLLAR-DENOMINATED, S.E.C.-REGISTERED CORPORATE DEBT. THE STANDARD & POOR'S 500
INDEX IS AN UNMANAGED CAPITALIZATION-WEIGHTED INDEX OF 500 STOCKS DESIGNED TO
MEASURE PERFORMANCE OF THE BROAD DOMESTIC ECONOMY THROUGH CHANGES IN THE
AGGREGATE MARKET VALUE OF SUCH STOCKS, WHICH REPRESENT ALL MAJOR INDUSTRIES. 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 12/31/97) 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 10.48%, 9.65% AND 8.74%, RESPECTIVELY. THE CLASS B "S.E.C. STANDARDIZED"
AVERAGE ANNUAL TOTAL RETURN FOR ONE YEAR AND SINCE INCEPTION WOULD HAVE BEEN
12.97% AND 16.52%, RESPECTIVELY. 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
GOVERNMENT/CORPORATE BOND INDEX FIGURES FROM LEHMAN BROTHERS, INC., STANDARD &
POOR'S 500 INDEX FIGURES FROM STANDARD & POOR'S AND ALL OTHER FIGURES FROM
FIRST INVESTORS MANAGEMENT COMPANY, INC.
15
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS BLUE CHIP FUND
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--93.5%
BASIC MATERIALS--2.9%
16,400 Aluminum Company of America $ 1,154,150 $ 30
21,300 Dow Chemical Company 2,161,950 56
61,200 Du Pont (E.I.) de Nemours & Company 3,675,825 95
53,500 Monsanto Company 2,247,000 58
36,400 Morton International, Inc. 1,251,250 32
24,200 Sigma-Aldrich Corporation 961,950 25
- ---------------------------------------------------------------------------------------
11,452,125 296
- ---------------------------------------------------------------------------------------
CAPITAL GOODS--10.0%
60,600 AlliedSignal, Inc. 2,359,612 61
49,900 *American Power Conversion Corporation 1,178,887 30
38,700 Avery Dennison Corporation 1,731,825 45
66,000 Boeing Company 3,229,875 83
39,500 Corning, Inc. 1,466,437 38
28,600 Emerson Electric Company 1,614,112 42
161,600 General Electric Company 11,857,400 306
88,600 Ingersoll-Rand Company 3,588,300 92
19,400 Lockheed Martin Corporation 1,910,900 49
39,200 Textron, Inc. 2,450,000 63
39,000 Thomas & Betts Corporation 1,842,750 47
63,300 Tyco International, Ltd. 2,852,456 74
71,100 *USA Waste Services, Inc. 2,790,675 72
- ---------------------------------------------------------------------------------------
38,873,229 1,002
- ---------------------------------------------------------------------------------------
COMMUNICATION SERVICES--5.5%
98,100 *AirTouch Communications, Inc. 4,077,281 105
44,100 Bell Atlantic Corporation 4,013,100 103
47,100 BellSouth Corporation 2,652,319 68
63,600 GTE Corporation 3,323,100 86
10,700 *Intermedia Communications, Inc. 650,025 17
85,300 *LCI International, Inc. 2,622,975 68
53,100 SBC Communications, Inc. 3,889,575 100
- ---------------------------------------------------------------------------------------
21,228,375 547
- ---------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
CONSUMER CYCLICALS--9.1%
66,900 *Cendant Corporation $ 2,299,687 $ 59
60,400 Chrysler Corporation 2,125,325 55
33,300 *Costco Companies, Inc. 1,486,012 38
64,400 *Federated Department Stores, Inc. 2,773,225 71
13,350 Goodyear Tire & Rubber Company 849,394 22
60,300 Hilton Hotels Corporation 1,793,925 46
47,850 Home Depot, Inc. 2,817,169 73
68,300 *Lear Corporation 3,244,250 84
26,700 Masco Corporation 1,358,362 35
71,200 Mattel, Inc. 2,652,200 68
15,200 McGraw-Hill Companies, Inc. 1,124,800 29
52,600 Ogden Corporation 1,482,662 38
45,000 *Staples, Inc. 1,248,750 32
64,400 Tribune Company 4,008,900 103
31,600 Unifi, Inc. 1,285,725 33
116,000 Wal-Mart Stores, Inc. 4,574,750 118
- ---------------------------------------------------------------------------------------
35,125,136 904
- ---------------------------------------------------------------------------------------
CONSUMER STAPLES--14.6%
53,300 American Stores Company 1,095,981 28
69,600 Anheuser-Busch Companies, Inc. 3,062,400 79
35,600 *Apollo Group, Inc. 1,682,100 43
28,400 Clorox Company 2,245,375 58
63,900 Coca-Cola Company 4,257,337 110
72,800 ConAgra, Inc. 2,388,750 62
32,400 CPC International, Inc. 3,491,100 90
62,000 Felcor Suite Hotels, Inc. 2,201,000 57
35,600 Fort James Corporation 1,361,700 35
28,800 Gillette Company 2,892,600 75
100,000 *Host Marriott Corporation 1,962,500 51
41,700 Kimberly-Clark Corporation 2,056,331 53
130,900 PepsiCo, Inc. 4,769,669 123
85,400 Philip Morris Companies, Inc. 3,869,687 100
65,900 Procter & Gamble Company 5,259,644 136
- ---------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS BLUE CHIP FUND
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
CONSUMER STAPLES (continued)
22,100 Rite Aid Corporation $ 1,296,994 $ 33
24,795 *Safeway, Inc. 1,568,284 40
41,887 *Tele-Communications, Inc. Liberty Media Group -
Series "A" 1,518,404 39
56,700 Time Warner, Inc. 3,515,400 91
46,400 Unilever N.V. 2,897,100 75
30,800 Walt Disney Company 3,051,125 79
- ---------------------------------------------------------------------------------------
56,443,481 1,457
- ---------------------------------------------------------------------------------------
ENERGY--9.7%
24,100 Amoco Corporation 2,051,512 53
49,700 Atlantic Richfield Company 3,982,212 103
40,600 Baker Hughes, Inc. 1,771,175 46
32,000 Chevron Corporation 2,464,000 64
36,200 Dresser Industries, Inc. 1,518,137 39
71,400 Exxon Corporation 4,368,787 113
12,300 Kerr-McGee Corporation 778,744 20
38,700 Mobil Corporation 2,793,656 72
105,400 Royal Dutch Petroleum Company 5,711,362 147
30,200 Schlumberger, Ltd. 2,431,100 63
27,400 Texaco, Inc. 1,489,875 38
106,700 Tosco Corporation 4,034,594 104
142,400 Williams Companies, Inc. 4,040,600 104
- ---------------------------------------------------------------------------------------
37,435,754 966
- ---------------------------------------------------------------------------------------
FINANCIAL--16.6%
36,400 Allstate Corporation 3,307,850 85
23,500 American Express Company 2,097,375 54
35,550 American International Group, Inc. 3,866,062 100
34,800 BankAmerica Corporation 2,540,400 65
52,800 BankBoston Corporation 4,959,900 128
21,400 Chase Manhattan Corporation 2,343,300 60
24,900 Chubb Corporation 1,883,062 49
25,100 Citicorp 3,173,581 82
71,400 Conseco, Inc. 3,244,237 84
- ---------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
FINANCIAL (continued)
80,700 Fannie Mae $ 4,604,944 $ 119
88,900 First Union Corporation 4,556,125 117
50,900 Freddie Mac 2,134,619 55
30,600 Jefferson-Pilot Corporation 2,382,975 61
30,800 Marshall & Ilsley Corporation 1,913,450 49
38,200 Merrill Lynch & Company, Inc. 2,786,213 72
107,200 Money Store, Inc. 2,251,200 58
24,900 Morgan Stanley, Dean Witter, Discover and Company 1,472,213 38
36,700 NationsBank Corporation 2,231,819 58
141,400 Norwest Corporation 5,461,575 141
71,550 Travelers Group, Inc. 3,854,756 99
73,200 USF&G Corporation 1,614,975 42
21,300 Wachovia Corporation 1,727,963 45
- ---------------------------------------------------------------------------------------
64,408,594 1,661
- ---------------------------------------------------------------------------------------
HEALTHCARE--11.0%
32,700 Abbott Laboratories 2,143,894 55
30,000 Baxter International, Inc. 1,513,125 39
60,300 Bristol-Myers Squibb Company 5,705,888 147
64,600 Eli Lilly and Company 4,497,775 116
60,450 *Health Management Associates, Inc. - Class "A" 1,526,363 39
49,600 Johnson & Johnson 3,267,400 84
87,700 *MedPartners, Inc. 1,962,288 51
71,200 *Medtronic, Inc. 3,724,650 96
58,400 Merck & Company, Inc. 6,205,000 160
56,200 Pfizer, Inc. 4,190,413 108
106,700 Pharmacia & Upjohn, Inc. 3,907,888 101
30,200 United Healthcare Corporation 1,500,563 39
21,800 Warner-Lambert Company 2,703,200 70
- ---------------------------------------------------------------------------------------
42,848,447 1,105
- ---------------------------------------------------------------------------------------
TECHNOLOGY--10.8%
46,700 *Adaptec, Inc. 1,733,738 45
99,600 *Cadence Design Systems, Inc. 2,440,200 63
- ---------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS BLUE CHIP FUND
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
TECHNOLOGY (continued)
69,450 *Cisco Systems, Inc. $ 3,871,838 $ 100
71,100 Comdisco, Inc. 2,377,406 61
14,200 Eastman Kodak Company 863,538 22
15,000 Grainger (W.W.), Inc. 1,457,813 38
40,800 Hewlett-Packard Company 2,550,000 66
51,200 Intel Corporation 3,596,800 93
43,400 International Business Machines Corporation 4,538,013 117
25,100 *Microsoft Corporation 3,244,175 84
53,300 Motorola, Inc. 3,041,431 78
19,200 Raytheon Company 969,600 25
41,700 *Sterling Commerce, Inc. 1,602,844 41
79,000 *Sun Microsystems, Inc. 3,150,125 81
71,200 *Synopsys, Inc. 2,545,400 66
35,600 *Tellabs, Inc. 1,882,350 48
80,800 *Transcrypt International, Inc. 2,009,900 52
- ---------------------------------------------------------------------------------------
41,875,171 1,080
- ---------------------------------------------------------------------------------------
TRANSPORTATION--.7%
17,800 Burlington Northern Santa Fe Corporation 1,654,288 43
14,900 *US Airways Group, Inc. 931,250 24
- ---------------------------------------------------------------------------------------
2,585,538 67
- ---------------------------------------------------------------------------------------
UTILITIES--2.6%
60,400 Consolidated Edison, Inc. 2,476,400 64
44,400 Duke Energy Corporation 2,458,650 63
55,300 FPL Group, Inc. 3,273,069 84
53,500 Sierra Pacific Resources 2,006,250 52
- ---------------------------------------------------------------------------------------
10,214,369 263
- ---------------------------------------------------------------------------------------
TOTAL VALUE OF COMMON STOCKS (cost $254,383,351) 362,490,219 9,348
- ---------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM CORPORATE NOTES--5.9%
$ 7,000M American Express Credit Corp., 5.75%, 1/12/98 $ 6,987,701 $ 180
2,500M Bell Atlantic Network Funding, Inc., 5.88%,
1/13/98 2,495,075 65
5,000M Brown-Forman Corp., 6.05%, 1/7/98 4,994,958 129
3,025M Florida Power Corp., 5.90%, 1/12/98 3,019,546 78
3,043M Florida Power Corp., 5.90%, 1/13/98 3,037,016 78
2,600M Texaco, Inc., 5.88%, 1/13/98 2,594,904 67
- ---------------------------------------------------------------------------------------
TOTAL VALUE OF SHORT-TERM CORPORATE NOTES (cost
$23,129,200) 23,129,200 597
- ---------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $277,512,551) 99.4% 385,619,419 9,945
OTHER ASSETS, LESS LIABILITIES .6 2,133,294 55
- ---------------------------------------------------------------------------------------
NET ASSETS 100.0% $387,752,713 $10,000
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
See notes to financial statements
21
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS INSURED INTERMEDIATE TAX EXEMPT FUND
December 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
MUNICIPAL BONDS--100.4%
ALASKA--2.8%
$ 200M Anchorage General Obligation, 6.50%, 7/1/2004 $ 225,250 $ 276
- -------------------------------------------------------------------------------------
ARIZONA--16.7%
255M Apache Junction Water District, 5%, 7/1/2003 266,156 326
250M Maricopa County Uni. Sch. Dist. Gen. Oblig. #80
(Chandler), 6.60%, 7/1/2006 289,687 355
250M Phoenix Civic Impt. Corp. Mun. Facs. Excise Tax
Rev., 6.75%, 7/1/2004 284,687 349
300M Pima County Indl. Dev. Auth. Healthpartners, 5%,
4/1/2004 312,750 384
200M Yuma County Indl. Dev. Auth. Reg. Med. Ctr., 5%,
8/1/2002 207,000 254
- -------------------------------------------------------------------------------------
1,360,280 1,668
- -------------------------------------------------------------------------------------
CALIFORNIA--2.0%
150M Pittsburg Pub. Fing. Auth. Wastewater Rev.,
6.80%, 6/1/2001* 165,937 204
- -------------------------------------------------------------------------------------
CONNECTICUT--3.7%
300M Connecticut Health & Educ. Fac. Auth. Corp.,
4.625%, 7/1/2007 302,250 371
- -------------------------------------------------------------------------------------
ILLINOIS--21.8%
Cook County High School District General
Obligation #205:
250M 5.40%, 12/1/2001 262,500 322
200M 5.90%, 12/1/2003 213,750 262
250M Chicago Board of Education, 6%, 12/1/2007 280,625 344
250M Chicago General Obligation, 6.25%, 10/31/2001 269,062 330
250M Northwest Subn. Mun. Jt. Action Water Agy.,
6.35%, 5/1/2006 283,438 348
400M Regional Transportation Authority, 7.75%,
6/1/2003 468,500 575
- -------------------------------------------------------------------------------------
1,777,875 2,181
- -------------------------------------------------------------------------------------
INDIANA--2.1%
150M Valparaiso Indpt. Multi-Schools Bldg. Corp.,
6.625%, 7/1/2002* 166,875 205
- -------------------------------------------------------------------------------------
KENTUCKY--3.2%
200M Louisville & Jefferson County Met. Sewer
District, 10%, 5/15/2004 262,750 322
- -------------------------------------------------------------------------------------
LOUISIANA--2.3%
175M Louisiana General Obligation, 7%, 5/1/2001 190,313 233
- -------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
MICHIGAN--13.5%
$ 300M Allegan Pub. Schl. Dist. Gen. Oblig., 6.50%,
5/1/2007 $ 348,375 $ 427
1,000M Brighton Area Schl. Dist. Gen. Oblig., 7.50%,
5/1/2005** 356,250 437
350M Greater Detroit Resources Recovery Authority
Revenue, 6.25%, 12/13/2007 398,125 488
- -------------------------------------------------------------------------------------
1,102,750 1,352
- -------------------------------------------------------------------------------------
NEW JERSEY--2.8%
200M New Jersey Econ. Dev. Auth. Mkt. Transition Fac.
Rev., 7%, 7/1/2004* 230,750 283
- -------------------------------------------------------------------------------------
NEW YORK--7.9%
New York City General Obligation:
150M 6.625%, 8/1/2002 166,875 205
250M 8%, 8/1/2005 307,500 377
150M Niagara Falls Bridge Commission, 6.30%,
10/1/2002* 165,938 204
- -------------------------------------------------------------------------------------
640,313 786
- -------------------------------------------------------------------------------------
OHIO--2.8%
200M Columbus City Sch. Dist. Gen. Oblig., 6.65%,
12/1/2002* 224,750 276
- -------------------------------------------------------------------------------------
OREGON--2.0%
150M Tillamook General Obligation, 5.75%, 1/15/2002 159,563 196
- -------------------------------------------------------------------------------------
PENNSYLVANIA--7.1%
550M Harrisburg General Obligation, 5%, 9/15/2007** 352,688 433
200M Pennsylvania Intergovernmental Coop. Auth. Spec.
Tax Rev., 7%, 6/15/2004 229,500 282
- -------------------------------------------------------------------------------------
582,188 715
- -------------------------------------------------------------------------------------
RHODE ISLAND--2.7%
200M Rhode Island Depositors Econ. Protection Corp.,
7.10%, 8/1/2001* 222,750 273
- -------------------------------------------------------------------------------------
TEXAS--4.1%
300M Harris County Toll Road Gen. Oblig., 6.50%,
8/15/2002* 333,000 408
- -------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS INSURED INTERMEDIATE TAX EXEMPT FUND
December 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
WASHINGTON--2.9%
$ 200M Snohomish & Island Counties Schl. Dist. Gen.
Oblig. #401 (Stanwood), 7%, 12/15/2005 $ 235,750 $ 289
- -------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $7,720,293) 100.4% 8,183,344 10,038
EXCESS OF LIABILITIES OVER OTHER ASSETS (.4) (31,302) (38)
- -------------------------------------------------------------------------------------
NET ASSETS 100.0% $8,152,042 $10,000
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
* Municipal bonds which have been prerefunded are shown maturing at the
prerefunded call date.
** Zero coupon bond issued at a discount. The interest rate shown represents the
rate of discount on date purchased.
See notes to financial statements
24
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS INVESTMENT GRADE FUND
December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS--89.5%
AEROSPACE/DEFENSE--4.8%
$ 700M Boeing Co., 6.35%, 2003 $ 709,553 $ 147
750M Lockheed Martin Corp., 7.25%, 2006 787,690 163
750M Rockwell International Corp., 8.375%, 2001 800,014 166
- --------------------------------------------------------------------------------------
2,297,257 476
- --------------------------------------------------------------------------------------
APPAREL/TEXTILES--.6%
250M VF Corp., 9.50%, 2001 275,233 57
- --------------------------------------------------------------------------------------
BUILDING MATERIALS--1.4%
600M Masco Corp., 9%, 2001 654,727 135
- --------------------------------------------------------------------------------------
CHEMICALS--3.2%
750M Du Pont (E.I.) de Nemours & Co., 8.125%, 2004 822,469 170
700M Lubrizol Corp., 7.25%, 2025 743,877 154
- --------------------------------------------------------------------------------------
1,566,346 324
- --------------------------------------------------------------------------------------
CONGLOMERATES--3.2%
700M Hanson Overseas, B.V., 7.375%, 2003 731,051 151
750M Tenneco, Inc., 7.875%, 2027 830,587 172
- --------------------------------------------------------------------------------------
1,561,638 323
- --------------------------------------------------------------------------------------
CONSUMER PRODUCTS--2.1%
1,000M Mattel, Inc., 6.75%, 2000 1,011,686 209
- --------------------------------------------------------------------------------------
ELECTRIC & GAS UTILITIES--10.2%
750M Baltimore Gas and Electric Co., 6.50%, 2003 760,766 157
1,000M Duke Energy Corp., 5.875%, 2003 983,524 203
800M Kansas Gas & Electric Co., 7.60%, 2003 848,130 175
525M Old Dominion Electric Cooperative, 7.97%, 2002 549,979 114
750M Philadelphia Electric Co., 8%, 2002 797,068 165
925M Southwestern Electric Power Co., 7%, 2007 974,807 202
- --------------------------------------------------------------------------------------
4,914,274 1,016
- --------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS INVESTMENT GRADE FUND
December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
ENERGY--5.9%
$ 700M Baroid Corp., 8%, 2003 $ 756,057 $ 156
500M Mobil Corp., 8.625%, 2021 630,788 131
700M Newpark Resources, Inc., 8.625%, 2007 (Note 5) 714,875 148
750M Phillips Petroleum Co., 7.20%, 2023 757,732 157
- --------------------------------------------------------------------------------------
2,859,452 592
- --------------------------------------------------------------------------------------
ENTERTAINMENT/LEISURE--1.5%
700M Walt Disney Company, 6.75%, 2006 724,212 150
- --------------------------------------------------------------------------------------
FINANCIAL SERVICES--17.9%
660M BankAmerica Corp., 9.50%, 2001 724,516 150
875M Barnett Banks, Inc., 8.50%, 1999 899,001 186
700M Chemical Bank, Inc., 7%, 2005 728,451 151
800M Citicorp, 8%, 2003 856,909 177
800M First Union Corp., 8.125%, 2002 858,590 178
750M Fleet Capital, 7.92%, 2026 796,199 165
700M Key Corp., 7.50%, 2006 743,634 154
750M Mellon Bank N.A., 6.50%, 2005 752,837 156
550M Meridian Bancorp, 7.875%, 2002 586,247 121
925M Morgan Guaranty Trust Co., 7.375%, 2002 965,565 200
700M NationsBank Corp., 8.125%, 2002 751,565 156
- --------------------------------------------------------------------------------------
8,663,514 1,794
- --------------------------------------------------------------------------------------
FOOD/BEVERAGE/TOBACCO--7.6%
750M Anheuser-Busch Cos., Inc., 7%, 2005 773,730 160
500M Coca-Cola Enterprises, Inc., 7.875%, 2002 530,656 110
700M Hershey Foods Corp., 6.70%, 2005 721,530 149
900M Philip Morris Cos., Inc., 7.125%, 2002 926,312 192
650M Universal Corp., 9.25%, 2001 701,737 145
- --------------------------------------------------------------------------------------
3,653,965 756
- --------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
GAS TRANSMISSION--3.0%
$ 700M Columbia Gas System, Inc., 6.80%, 2005 $ 714,750 $ 148
700M Enron Corp., 7.125%, 2007 725,635 150
- --------------------------------------------------------------------------------------
1,440,385 298
- --------------------------------------------------------------------------------------
HEALTHCARE--1.0%
425M Tenet Healthcare Corp., 10.125%, 2005 463,250 96
- --------------------------------------------------------------------------------------
INVESTMENT/FINANCE COMPANIES--5.2%
700M Associates Corp. of North America, 7.875%, 2001 738,556 153
700M General Electric Capital Corp., 7.875%, 2006 775,407 160
700M General Motors Acceptance Corp., 7.125%, 1999 710,529 147
250M International Lease Finance Corp., 8.875%, 2001 269,550 56
- --------------------------------------------------------------------------------------
2,494,042 516
- --------------------------------------------------------------------------------------
MEDIA (CABLE TV/BROADCASTING)--4.6%
700M Bell Cablemedia, PLC, 0%-11.95%, 2004 666,750 138
700M New York Times Co., Inc., 7.625%, 2005 753,171 156
750M News America Holdings, Inc., 8.50%, 2005 823,018 170
- --------------------------------------------------------------------------------------
2,242,939 464
- --------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--1.7%
750M Temple Inland, Inc., 9%, 2001 814,642 169
- --------------------------------------------------------------------------------------
RETAIL - FOOD/DRUG--1.5%
700M Kroger Co., 8.50%, 2003 735,586 152
- --------------------------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISE--3.1%
700M Federated Department Stores, Inc., 7.45%, 2017 736,375 152
700M Wal-Mart Stores, Inc., 8%, 2006 786,300 163
- --------------------------------------------------------------------------------------
1,522,675 315
- --------------------------------------------------------------------------------------
TECHNOLOGY--3.2%
750M International Business Machines Corp., 7%, 2025 777,788 161
725M Xerox Corp., 7.15%, 2004 759,353 157
- --------------------------------------------------------------------------------------
1,537,141 318
- --------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS INVESTMENT GRADE FUND
December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
TELECOMMUNICATIONS--6.3%
$ 850M MCI Communication Corp., 7.50%, 2004 $ 896,088 $ 185
700M New York Telephone Co., 7.25%, 2024 717,836 149
1,000M Pacific Bell Telephone Co., 7%, 2004 1,037,817 215
368M WorldCom, Inc., 8.875%, 2006 397,440 82
- --------------------------------------------------------------------------------------
3,049,181 631
- --------------------------------------------------------------------------------------
TRANSPORTATION--1.5%
700M Norfolk Southern Corp., 7.35%, 2007 741,063 153
- --------------------------------------------------------------------------------------
TOTAL VALUE OF CORPORATE BONDS (cost $41,635,802) 43,223,208 8,944
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--7.8%
750M United States Treasury Bond, 6.625%, 2027 814,220 168
2,800M U.S. Treasury Note, 6.625%, 2007 2,965,376 614
- --------------------------------------------------------------------------------------
TOTAL VALUE OF U.S. GOVERNMENT OBLIGATIONS (cost
$3,655,352) 3,779,596 782
- --------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--1.0%
200M Ford Motor Credit Corp., 6.12%, 1/9/98 199,728 42
300M Lubrizol Corp., 6.35%, 1/5/98 299,788 62
- --------------------------------------------------------------------------------------
TOTAL VALUE OF SHORT-TERM CORPORATE NOTES (cost
$499,516) 499,516 104
- --------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $45,790,670) 98.3% 47,502,320 9,830
OTHER ASSETS, LESS LIABILITIES 1.7 823,162 170
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $48,325,482 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
28
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS SPECIAL SITUATIONS FUND
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--87.9%
BASIC MATERIALS--3.6%
68,000 Birmingham Steel Corporation $ 1,071,000 $ 51
38,500 Boise Cascade Corporation 1,164,625 55
11,300 ChemFirst, Inc. 319,225 15
41,000 *ChiRex, Inc. 722,625 34
17,100 Dexter Corporation 738,506 35
90,600 *Gaylord Container Corporation - Class "A" 520,950 25
34,300 Lilly Industries, Inc. - Class "A" 707,437 34
41,800 Louisiana-Pacific Corporation 794,200 38
22,800 Schulman (A.), Inc. 572,850 27
17,100 Southdown, Inc. 1,008,900 48
- ---------------------------------------------------------------------------------------
7,620,318 362
- ---------------------------------------------------------------------------------------
CAPITAL GOODS--8.2%
31,200 Aeroquip-Vickers, Inc. 1,530,750 73
31,300 *American Power Conversion Corporation 739,462 35
43,200 *American Residential Services, Inc. 675,000 32
55,800 *Checkpoint Systems, Inc. 976,500 46
35,800 Columbus McKinnon Corporation 868,150 41
40,600 Corning, Inc. 1,507,275 72
69,100 *Corporate Express, Inc. 889,662 42
27,600 *Eastern Environmental Services, Inc. 607,200 29
74,900 Gleason Corporation 2,017,619 96
25,500 *Hadco Corporation 1,153,875 55
69,000 *ITEQ, Inc. 793,500 38
42,700 *Jacobs Engineering Group, Inc. 1,083,512 51
82,800 *Newpark Resources, Inc. 1,449,000 69
56,100 *Philip Services Corporation 806,437 38
14,484 *Sanmina Corporation 981,291 47
50,100 Titan International, Inc. 1,005,131 48
20,600 *Tractor Supply Company 303,850 14
- ---------------------------------------------------------------------------------------
17,388,214 826
- ---------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS SPECIAL SITUATIONS FUND
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMUNICATION SERVICES--4.7%
29,600 *Brooks Fiber Properties, Inc. $ 1,628,000 $ 77
36,500 Cincinnati Bell, Inc. 1,131,500 54
51,100 *Clearnet Communications, Inc. - Class "A" 581,262 28
67,800 ECI Telecommunications, Ltd. (ADR) 1,728,900 82
25,000 *ICG Communications, Inc. 681,250 32
41,100 *IXC Communications, Inc. 1,289,512 61
42,500 *Primus Telecommunications Group, Inc. 685,312 33
46,300 *Tel-Save Holdings, Inc. 920,212 44
173,900 *USCI, Inc. 1,217,300 58
- ---------------------------------------------------------------------------------------
9,863,248 469
- ---------------------------------------------------------------------------------------
CONSUMER CYCLICALS--18.5%
51,100 *Activision, Inc. 913,412 43
34,000 *American Skiing Company 505,750 24
24,014 *APAC Teleservices, Inc. 324,189 15
20,400 *Avis Rent A Car, Inc. 651,525 31
53,300 *Building Materials Holding Corporation 559,650 27
55,300 *Cendant Corporation 1,900,937 90
109,500 *CheckFree Holdings Corporation 2,956,500 140
28,900 *Children's Place Retail Stores, Inc. 148,112 7
29,000 *Coleman Company, Inc. 465,812 22
6,800 *Computer Learning Centers, Inc. 416,500 20
34,000 *dELiA*s, Inc. 756,500 36
54,200 *Eagle Hardware & Garden, Inc. 1,050,125 50
63,400 *Extended Stay America, Inc. 788,537 37
33,800 *Federated Department Stores, Inc. 1,455,512 69
65,100 Innkeepers USA Trust 1,009,050 48
61,400 *International Comfort Products Corporation 514,225 24
37,500 *Just For Feet, Inc. 492,187 23
3,400 *Lamar Advertising Company 135,150 6
20,550 *NCO Group, Inc. 529,162 25
50,700 *Neiman Marcus Group, Inc. 1,533,675 73
70,100 Oakwood Homes Corporation 2,326,444 110
64,300 *OfficeMax, Inc. 916,275 43
- ---------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
CONSUMER CYCLICALS (continued)
88,900 Ogden Corporation $ 2,505,869 $ 119
16,900 *Outdoor Systems, Inc. 648,537 31
34,000 *Pegasystems, Inc. 686,375 33
24,000 *Petco Animal Supplies, Inc. 576,000 27
70,600 *PETsMART, Inc. 511,850 24
40,800 *PMT Services, Inc. 566,100 27
79,583 *Prime Hospitality Corporation 1,621,504 77
27,400 *Proffitt's, Inc. 779,188 37
90,900 *Saks Holdings, Inc. 1,880,494 89
47,700 *Scientific Games Holdings Corporation 965,925 46
17,000 *Signature Resorts, Inc. 371,875 18
36,400 *Stage Stores, Inc. 1,360,450 65
71,300 *Travis Boats & Motors, Inc. 1,720,113 82
90,300 *U.S. Office Products Company 1,772,138 84
13,500 *Universal Outdoor Holdings, Inc. 702,000 33
84,600 Wolverine World Wide, Inc. 1,914,075 91
- ---------------------------------------------------------------------------------------
38,931,722 1,846
- ---------------------------------------------------------------------------------------
CONSUMER STAPLES--9.0%
48,000 Apple South, Inc. 630,000 30
64,000 *Cinar Films, Inc. - Class "B" 2,488,000 118
30,600 *Emmis Broadcasting Corporation - Class "A" 1,396,125 66
166,400 *Four Media Company 1,497,600 71
44,300 *Jones Intercable, Inc. - Class "A" 778,019 37
137,700 *Metromedia International Group, Inc. 1,308,150 62
34,100 *Pre-Paid Legal Services, Inc. 1,165,794 55
59,400 Richfood Holdings, Inc. 1,678,050 80
51,500 Rite Aid Corporation 3,022,406 143
46,300 Rival Company 607,688 29
35,700 *Steiner Leisure, Ltd. 1,102,238 52
92,250 *Tele-Communications, Inc. Liberty Media Group -
Series "A" 3,344,063 159
- ---------------------------------------------------------------------------------------
19,018,133 902
- ---------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS SPECIAL SITUATIONS FUND
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
ENERGY--7.2%
22,800 *EVI, Inc. $ 1,179,900 $ 56
81,400 *Global Industries, Ltd. 1,383,800 66
62,300 *Nabors Industries, Inc. 1,958,556 93
73,400 *Patterson Energy, Inc. 2,839,663 135
76,400 *Precision Drilling Corporation - Class "A" 1,862,250 88
49,800 *R&B Falcon Corporation 1,746,113 83
31,300 Tosco Corporation 1,183,531 56
22,600 *Trico Marine Services, Inc. 663,875 31
58,800 *Veritas DGC, Inc. 2,322,600 110
- ---------------------------------------------------------------------------------------
15,140,288 718
- ---------------------------------------------------------------------------------------
FINANCIAL--11.8%
17,000 Astoria Financial Corporation 947,750 45
27,600 Centura Banks, Inc. 1,904,400 90
33,495 Charter One Financial, Inc. 2,114,372 100
51,750 Commercial Federal Corporation 1,840,359 87
34,060 Conseco, Inc. 1,547,601 73
31,100 Dime Bancorp, Inc. 940,775 45
18,700 GreenPoint Financial Corporation 1,356,919 64
52,100 *HealthCare Financial Partners, Inc. 1,849,550 88
89,100 *Imperial Credit Industries, Inc. 1,826,550 87
47,700 *LINC Capital, Inc. 936,113 44
45,462 Mercantile Bancorporation, Inc. 2,795,913 133
44,600 Money Store, Inc. 936,600 44
25,800 *New Century Financial Corporation 264,450 13
20,400 Peoples Heritage Financial Group, Inc. 938,400 45
54,075 Resources Bancshares Mortgage Group, Inc. 882,098 42
54,400 TCF Financial Corporation 1,846,200 88
27,500 Washington Federal, Inc. 864,531 41
69,100 Westfield America, Inc. 1,174,700 56
- ---------------------------------------------------------------------------------------
24,967,281 1,185
- ---------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
HEALTHCARE--7.7%
51,000 *Acuson Corporation $ 844,688 $ 40
102,200 *American Oncology Resources, Inc. 1,635,200 78
95,600 *Cardiovascular Dynamics, Inc. 525,800 25
23,900 *Centocor, Inc. 794,675 38
75,600 *FPA Medical Management, Inc. 1,408,050 67
27,200 *Gilead Sciences, Inc. 1,040,400 49
39,000 *Health Care and Retirement Corporation 1,569,750 74
71,800 *Health Systems Design Corporation 735,950 35
13,400 *IMPATH, Inc. 438,850 21
64,800 Jones Medical Industries, Inc. 2,478,600 118
60,200 *Kensey Nash Corporation 1,000,825 47
36,000 *Ligand Pharmaceuticals - Class "B" 463,500 22
58,900 Mylan Laboratories, Inc. 1,233,219 59
43,200 *Pediatric Services of America, Inc. 826,200 39
71,600 *PharMerica, Inc. 742,850 35
52,300 *US Bioscience, Inc. 473,969 22
- ---------------------------------------------------------------------------------------
16,212,526 769
- ---------------------------------------------------------------------------------------
TECHNOLOGY--14.9%
53,300 *ACE*COMM Corporation 629,606 30
60,200 *Adaptec, Inc. 2,234,925 106
21,900 *Adtran, Inc. 602,250 29
26,600 *Altera Corporation 881,125 42
41,400 *Bay Networks, Inc. 1,058,288 50
28,200 *Cisco Systems, Inc. 1,572,150 75
62,200 *Cymer, Inc. 933,000 44
102,000 *EMC Corporation 2,798,625 133
54,300 *Envoy Corporation 1,581,488 75
34,700 *Etec Systems, Inc. 1,613,550 77
73,700 *Hybrid Networks, Inc. 819,913 39
27,900 *Information Management Resources, Inc. 1,046,250 50
38,200 *Integrated Device Technology, Inc. 360,513 17
16,000 Intel Corporation 1,124,000 53
24,300 Motorola, Inc. 1,386,619 66
- ---------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS SPECIAL SITUATIONS FUND
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
TECHNOLOGY (continued)
24,360 National Data Corporation $ 880,005 $ 42
35,600 *Network Appliance, Inc. 1,263,800 60
35,233 *Network Associates, Inc. 1,862,945 88
78,300 *PairGain Technologies, Inc. 1,517,063 72
70,400 *Saville Systems Ireland PLC (ADR) 2,921,600 139
39,400 *Sterling Commerce, Inc. 1,514,438 72
28,600 *Synopsys, Inc. 1,022,450 49
54,000 *Transcrypt International, Inc. 1,343,250 64
84,900 *Turbodyne Technologies, Inc. 328,988 16
- ---------------------------------------------------------------------------------------
31,296,841 1,488
- ---------------------------------------------------------------------------------------
TRANSPORTATION--2.3%
13,500 *Budget Group, Inc. - Class "A" 466,594 22
15,500 Caliber System, Inc. 754,656 36
63,600 Interpool, Inc. 942,075 45
21,500 *Landstar System, Inc. 567,063 27
18,700 *Tower Automotive, Inc. 786,569 37
167,000 Transportacion Maritima Mexicana SA de C.V. -
Class "L" (ADR) 1,231,625 58
- ---------------------------------------------------------------------------------------
4,748,582 225
- ---------------------------------------------------------------------------------------
TOTAL VALUE OF COMMON STOCKS (cost $147,566,818) 185,187,153 8,790
- ---------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS--.7%
FINANCIAL
52,700 Excel Realty Trust, Inc., "A" $2.125 (cost
$1,317,500) 1,564,531 74
- ---------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM CORPORATE NOTES--14.4%
$ 8,800M Bell Atlantic Financial Services, Inc., 6%,
1/21/98 $ 8,770,667 $ 416
5,900M Bell Atlantic Network Funding, Inc., 5.88%,
1/13/98 5,888,436 280
7,100M Dresser Industries, Inc., 5.90%, 1/6/98 7,094,181 337
8,500M Hartford Steam Boiler Insp. & Ins. Co., 6.50%,
1/2/98 8,498,466 403
- ---------------------------------------------------------------------------------------
TOTAL VALUE OF SHORT-TERM CORPORATE NOTES (cost
$30,251,750) 30,251,750 1,436
- ---------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $179,136,068) 103.0% 217,003,434 10,300
EXCESS OF LIABILITIES OVER OTHER ASSETS (3.0) (6,311,879) (300)
- ---------------------------------------------------------------------------------------
NET ASSETS 100.0% $210,691,555 $10,000
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
See notes to financial statements
35
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS TOTAL RETURN FUND
December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--55.1%
BASIC MATERIALS--1.2%
4,300 Boise Cascade Corporation $ 130,075 $ 19
6,600 Du Pont (E.I.) de Nemours & Company 396,412 57
17,200 Louisiana-Pacific Corporation 326,800 47
- --------------------------------------------------------------------------------------
853,287 123
- --------------------------------------------------------------------------------------
CAPITAL GOODS--5.5%
5,000 Aeroquip-Vickers, Inc. 245,312 35
4,400 Boeing Company 215,325 31
23,100 *Checkpoint Systems, Inc. 404,250 58
9,200 Corning, Inc. 341,550 49
19,400 *Corporate Express, Inc. 249,775 36
12,600 General Electric Company 924,525 134
30,400 *Miller Industries, Inc. 326,800 47
8,100 Thomas & Betts Corporation 382,725 55
2,600 Tyco International, Ltd. 117,162 17
15,900 *USA Waste Services, Inc. 624,075 90
- --------------------------------------------------------------------------------------
3,831,499 552
- --------------------------------------------------------------------------------------
COMMUNICATION SERVICES--3.5%
3,600 Bell Atlantic Corporation 327,600 47
4,800 BellSouth Corporation 270,300 39
7,600 *Brooks Fiber Properties, Inc. 418,000 60
8,700 Century Telephone Enterprises, Inc. 433,369 63
7,000 GTE Corporation 365,750 53
11,700 *LCI International, Inc. 359,775 52
3,500 SBC Communications, Inc. 256,375 37
- --------------------------------------------------------------------------------------
2,431,169 351
- --------------------------------------------------------------------------------------
CONSUMER CYCLICALS--6.7%
13,700 *Bed Bath & Beyond, Inc. 527,450 76
25,900 *CheckFree Holdings Corporation 699,300 101
8,600 *Federated Department Stores, Inc. 370,337 53
6,450 Home Depot, Inc. 379,744 55
- --------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
CONSUMER CYCLICALS (continued)
17,100 Innkeepers USA Trust $ 265,050 $ 38
7,300 *Lear Corporation 346,750 50
4,300 Masco Corporation 218,762 32
9,700 Ogden Corporation 273,419 39
54,571 *Prime Hospitality Corporation 1,111,884 161
3,200 Tribune Company 199,200 29
6,800 Wal-Mart Stores, Inc. 268,175 39
- --------------------------------------------------------------------------------------
4,660,071 673
- --------------------------------------------------------------------------------------
CONSUMER STAPLES--8.9%
5,200 Anheuser-Busch Companies, Inc. 228,800 33
5,600 Coca-Cola Company 373,100 54
8,000 ConAgra, Inc. 262,500 38
5,900 *Corrections Corporation of America 218,669 32
2,800 CPC International, Inc. 301,700 44
8,000 Dole Food Company, Inc. 366,000 53
10,200 Flower Industries, Inc. 209,737 30
3,800 Gillette Company 381,662 55
4,200 Kimberly-Clark Corporation 207,112 30
10,100 McCormick & Company, Inc. 282,800 41
8,000 Newell Company 340,000 49
8,700 PepsiCo, Inc. 317,006 46
4,700 Philip Morris Companies, Inc. 212,969 31
4,800 Procter & Gamble Company 383,100 55
12,600 Richfood Holdings, Inc. 355,950 51
11,650 *Tele-Communications, Inc. Liberty Media Group -
Series "A" 422,312 61
6,000 Unilever N.V. 374,625 54
4,200 Walt Disney Company 416,062 60
17,900 Whitman Corporation 466,519 67
- --------------------------------------------------------------------------------------
6,120,623 884
- --------------------------------------------------------------------------------------
ENERGY--6.3%
2,500 Amoco Corporation 212,812 31
4,100 Chevron Corporation 315,700 46
- --------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS TOTAL RETURN FUND
December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
ENERGY (continued)
28,500 *Comstock Resources, Inc. $ 340,219 $ 49
8,000 Exxon Corporation 489,500 71
5,400 Mobil Corporation 389,812 56
13,900 Occidental Petroleum Corporation 407,444 59
6,600 *Precision Drilling Corporation - Class "A" 160,875 23
8,000 Royal Dutch Petroleum Company 433,500 63
4,300 Schlumberger, Ltd. 346,150 50
10,000 Tosco Corporation 378,125 55
8,900 *Veritas DGC, Inc. 351,550 51
17,300 Williams Companies, Inc. 490,887 71
- --------------------------------------------------------------------------------------
4,316,574 625
- --------------------------------------------------------------------------------------
FINANCIAL--9.3%
3,400 American Express Company 303,450 44
11,800 American Financial Group, Inc. 475,687 69
4,800 American International Group, Inc. 522,000 75
5,000 BankAmerica Corporation 365,000 53
3,000 BankBoston Corporation 281,813 41
5,775 Charter One Financial, Inc. 364,547 53
4,900 Chase Manhattan Corporation 536,550 77
4,800 Citicorp 606,900 88
6,600 Conseco, Inc. 299,888 43
8,100 Fannie Mae 462,206 67
7,400 First Union Corporation 379,250 55
5,700 Freddie Mac 239,044 35
15,500 *Imperial Credit Industries, Inc. 317,750 46
19,500 Money Store, Inc. 409,500 59
11,400 Norwest Corporation 440,325 64
20,800 USF&G Corporation 458,900 66
- --------------------------------------------------------------------------------------
6,462,810 935
- --------------------------------------------------------------------------------------
HEALTHCARE--6.4%
4,600 Abbott Laboratories 301,588 44
3,000 Bristol-Myers Squibb Company 283,875 41
- --------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
HEALTHCARE (continued)
5,300 *Centocor, Inc. $ 176,225 $ 25
11,600 *CompDent Corporation 235,263 34
9,800 Eli Lilly and Company 682,325 99
9,750 *Health Management Associates, Inc. - Class "A" 246,188 36
5,600 Johnson & Johnson 368,900 53
6,900 Jones Medical Industries, Inc. 263,925 38
12,700 *MedPartners, Inc. 284,163 41
4,600 Merck & Company, Inc. 488,750 71
9,000 Mylan Laboratories, Inc. 188,438 27
6,700 Pharmacia & Upjohn, Inc. 245,388 35
10,000 *Quorom Health Group, Inc. 261,250 38
2,900 Warner-Lambert Company 359,600 52
- --------------------------------------------------------------------------------------
4,385,878 634
- --------------------------------------------------------------------------------------
TECHNOLOGY--5.7%
12,000 *Adaptec, Inc. 445,500 64
6,200 *Ascend Communications, Inc. 151,900 22
13,500 AVX Corporation 248,906 36
4,000 *Cadence Design Systems, Inc. 98,000 14
5,850 *Cisco Systems, Inc. 326,138 47
6,900 *Commonwealth Telephone Enterprises, Inc. 178,538 26
8,000 *Compuware Corporation 256,000 37
7,800 *Credence Systems Corporation 231,075 33
19,800 *EMC Corporation 543,263 78
4,600 Hewlett-Packard Company 287,500 42
6,800 Intel Corporation 477,700 69
7,200 Motorola, Inc. 410,850 59
7,500 *Sun Microsystems, Inc. 299,063 43
- --------------------------------------------------------------------------------------
3,954,433 570
- --------------------------------------------------------------------------------------
TRANSPORTATION--.3%
2,400 Burlington Northern Santa Fe Corporation 223,050 32
- --------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS TOTAL RETURN FUND
December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
SHARES INVESTED
OR FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
UTILITIES--1.3%
4,700 FPL Group, Inc. $ 278,181 $ 40
15,700 Sierra Pacific Resources 588,750 85
- --------------------------------------------------------------------------------------
866,931 125
- --------------------------------------------------------------------------------------
TOTAL VALUE OF COMMON STOCKS (cost $27,446,399) 38,106,325 5,504
- --------------------------------------------------------------------------------------
CORPORATE BONDS--22.4%
AUTOMOTIVE--.7%
$ 500M Titan International, Inc., 8.75%, 2007 526,250 76
- --------------------------------------------------------------------------------------
CHEMICALS--1.1%
650M Huntsman Polymers Corp., 11.75%, 2004 736,125 106
- --------------------------------------------------------------------------------------
CONTAINERS/PACKAGING--.8%
500M PrintPack, Inc., 9.875%, 2004 531,250 77
- --------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--.9%
600M Essex Group, Inc., 10%, 2003 621,000 90
- --------------------------------------------------------------------------------------
ENERGY--.9%
600M Falcon Drilling, Inc., 8.875%, 2003 640,500 93
- --------------------------------------------------------------------------------------
ENERGY EXPLORATION/PRODUCTS--1.6%
1,000M Gulf Canada Resources, Ltd., 8.35%, 2006 1,110,495 160
- --------------------------------------------------------------------------------------
ENTERTAINMENT/LEISURE--1.5%
1,000M AMC Entertainment, Inc., 9.50%, 2009 1,040,000 150
- --------------------------------------------------------------------------------------
FINANCIAL SERVICES--.8%
500M NationsBank Corp., 8.125%, 2002 536,832 78
- --------------------------------------------------------------------------------------
FOOD/BEVERAGE/TOBACCO--.9%
600M Universal Corp., 9.25%, 2001 647,758 94
- --------------------------------------------------------------------------------------
GAS TRANSMISSION--2.9%
1,000M Columbia Gas Systems, Inc., 6.61%, 2002 1,013,675 146
1,000M Enron Corp., 7.125%, 2007 1,036,622 150
- --------------------------------------------------------------------------------------
2,050,297 296
- --------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
HEALTHCARE--1.6%
$ 600M Healthsouth Rehabilitation Corp., 9.50%, 2001 $ 633,000 $ 91
425M Tenet Healthcare Corp., 10.125%, 2005 463,250 67
- --------------------------------------------------------------------------------------
1,096,250 158
- --------------------------------------------------------------------------------------
INSURANCE--1.5%
1,000M First Colony Corp., 6.625%, 2003 1,017,902 147
- --------------------------------------------------------------------------------------
INVESTMENT/FINANCE COMPANIES--2.9%
1,000M Ford Motor Credit Co., 6.625%, 2003 1,009,816 146
1,000M International Lease Finance Corp., 6.375%, 2002 1,003,435 145
- --------------------------------------------------------------------------------------
2,013,251 291
- --------------------------------------------------------------------------------------
MISCELLANEOUS--.4%
250M Iron Mountain, Inc., 10.125%, 2006 275,000 40
- --------------------------------------------------------------------------------------
RETAIL-GENERAL MERCHANDISE--1.5%
1,000M Federated Department Stores, Inc., 8.125%, 2002 1,069,231 154
- --------------------------------------------------------------------------------------
TELECOMMUNICATIONS--.9%
553M WorldCom, Inc., 8.875%, 2006 597,240 86
- --------------------------------------------------------------------------------------
TRANSPORTATION--1.5%
1,000M Norfolk Southern Corp., 6.95%, 2002 1,025,679 148
- --------------------------------------------------------------------------------------
TOTAL VALUE OF CORPORATE BONDS (cost $15,082,557) 15,535,060 2,244
- --------------------------------------------------------------------------------------
MUNICIPAL BONDS--5.7%
ELECTRIC POWER--1.5%
1,000M Southern California Public Power Auth., 6.93%,
2017 1,042,500 150
- --------------------------------------------------------------------------------------
TRANSPORTATION--4.2%
3,000M Massachusetts State Turnpike Auth., 5.00%, 2037 2,906,250 420
- --------------------------------------------------------------------------------------
TOTAL VALUE OF MUNICIPAL BONDS (cost $3,852,130) 3,948,750 570
- --------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
PORTFOLIO OF INVESTMENTS
FIRST INVESTORS TOTAL RETURN FUND
December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--6.1%
$ 4,000M U.S. Treasury Note, 6.625%, 2007 (cost
$4,182,734) $ 4,236,252 $ 612
- --------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--9.1%
1,500M Archer-Daniels-Midland Co., 6.20%, 1/6/98 1,498,709 217
400M General Electric Capital Corp., 5.60%, 1/23/98 398,569 58
1,000M Lubrizol Corp., 6.25%, 1/12/98 998,090 144
1,450M Lubrizol Corp., 6.25%, 1/13/98 1,446,979 209
1,700M Northern Illinois Gas Co., 5.90%, 2/5/98 1,690,249 244
250M Walt Disney Co., 6.40%, 1/5/98 249,822 36
- --------------------------------------------------------------------------------------
TOTAL VALUE OF SHORT-TERM CORPORATE NOTES (cost
$6,282,418) 6,282,418 908
- --------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL NOTES--.7%
500M Montgomery Alabama Spl. Care Facs. Fing. Auth.
Rev. Adjustable Rate Note 6%** (cost $500,000) 500,000 72
- --------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $57,346,238) 99.1% 68,608,805 9,910
OTHER ASSETS, LESS LIABILITIES .9 625,358 90
- --------------------------------------------------------------------------------------
NET ASSETS 100.0% $69,234,163 $10,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
** Interest rates on Adjustable Rate Notes are determined and reset weekly by
the issuer. Interest rate shown is the rate in effect at December 31, 1997.
See notes to financial statements
42
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
FIRST INVESTORS SERIES FUND
December 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
INSURED
INTERMEDIATE INVESTMENT SPECIAL TOTAL
BLUE CHIP TAX EXEMPT GRADE SITUATIONS RETURN
FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in securities:
At identified cost......................... $ 277,512,551 $ 7,720,293 $ 45,790,670 $ 179,136,068 $ 57,346,238
------------- ------------ ------------ ------------- ------------
------------- ------------ ------------ ------------- ------------
At value (Note 1A)......................... $ 385,619,419 $ 8,183,344 $ 47,502,320 $ 217,003,434 $ 68,608,805
Cash......................................... 2,256,573 6,045 121,986 1,145,950 429,372
Receivables:
Interest and dividends..................... 402,608 106,033 804,694 144,425 449,087
Trust shares sold.......................... 942,775 1,176 80,609 552,405 168,423
Investment securities sold................. -- -- -- 2,455,431 --
------------- ------------ ------------ ------------- ------------
Total Assets................................. 389,221,375 8,296,598 48,509,609 221,301,645 69,655,687
------------- ------------ ------------ ------------- ------------
LIABILITIES
Payables:
Trust shares redeemed...................... 363,147 126,825 71,700 249,700 46,989
Investment securities purchased............ 500,695 -- -- 9,480,175 253,562
Distributions payable...................... 267,666 12,899 70,358 659,267 41,624
Accrued advisory fee......................... 238,165 2,740 26,007 129,008 42,579
Accrued expenses............................. 98,989 2,092 16,062 91,940 36,770
------------- ------------ ------------ ------------- ------------
Total Liabilities............................ 1,468,662 144,556 184,127 10,610,090 421,524
------------- ------------ ------------ ------------- ------------
NET ASSETS................................... $ 387,752,713 $ 8,152,042 $ 48,325,482 $ 210,691,555 $ 69,234,163
------------- ------------ ------------ ------------- ------------
------------- ------------ ------------ ------------- ------------
NET ASSETS CONSIST OF:
Capital paid in.............................. $ 278,538,912 $ 7,861,047 $ 46,601,488 $ 172,827,229 $ 57,949,716
Undistributed net investment income.......... 158,778 2,793 18,908 -- 55,028
Accumulated net realized gain (loss) on
investment transactions.................... 948,155 (174,849) (6,564) (3,040) (33,148)
Net unrealized appreciation in value
of investments............................. 108,106,868 463,051 1,711,650 37,867,366 11,262,567
------------- ------------ ------------ ------------- ------------
Total........................................ $ 387,752,713 $ 8,152,042 $ 48,325,482 $ 210,691,555 $ 69,234,163
------------- ------------ ------------ ------------- ------------
------------- ------------ ------------ ------------- ------------
NET ASSETS:
Class A.................................... $ 350,720,579 $ 7,344,228 $ 45,007,338 $ 194,189,019 $ 66,714,419
Class B.................................... $ 37,032,134 $ 807,814 $ 3,318,144 $ 16,502,536 $ 2,519,744
TRUST SHARES OUTSTANDING (Note 4):
Class A.................................... 15,355,577 1,239,400 4,430,167 8,753,317 4,855,875
Class B.................................... 1,636,663 136,161 326,359 760,912 184,874
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE - CLASS A............................ $ 22.84 $ 5.93 $ 10.16 $ 22.18 $ 13.74
------ ----- ------ ------ ------
------ ----- ------ ------ ------
MAXIMUM OFFERING PRICE PER SHARE - CLASS A
(Net asset value/.9375)*................... $ 24.36 $ 6.33 $ 10.84 $ 23.66 $ 14.66
------ ----- ------ ------ ------
------ ----- ------ ------ ------
NET ASSET VALUE AND OFFERING PRICE PER
SHARE - CLASS B (Note 4)................... $ 22.63 $ 5.93 $ 10.17 $ 21.69 $ 13.63
------ ----- ------ ------ ------
------ ----- ------ ------ ------
</TABLE>
* On purchases of $25,000 or more, the sales charge is reduced.
See notes to financial statements
43
<PAGE>
STATEMENT OF OPERATIONS
FIRST INVESTORS SERIES FUND
Year Ended December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
INSURED
INTERMEDIATE INVESTMENT SPECIAL TOTAL
BLUE CHIP TAX EXEMPT GRADE SITUATIONS RETURN
FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest................................... $ 1,341,840 $ 446,391 $ 3,421,906 $ 997,320 $ 1,575,603
Dividends.................................. 4,474,750 -- -- 1,006,997 566,856
Consent fees............................... -- -- 19,042 -- 17,668
------------ ------------ ----------- ------------ ------------
Total income................................. 5,816,590 446,391 3,440,948 2,004,317 2,160,127
------------ ------------ ----------- ------------ ------------
Expenses (Notes 1 and 3):
Advisory fee............................... 3,268,373 47,937 354,373 1,882,098 632,459
Shareholder servicing costs................ 909,844 8,671 136,884 756,777 203,221
Distribution plan expenses - Class A....... 899,594 22,096 133,624 526,165 184,754
Distribution plan expenses - Class B....... 269,725 7,246 27,081 128,214 16,619
Reports and notices to shareholders........ 68,960 564 7,072 53,736 14,400
Professional fees.......................... 36,143 11,248 14,530 27,660 19,423
Custodian fees............................. 39,183 2,231 10,183 26,350 24,764
Other expenses............................. 48,990 2,983 10,881 37,228 15,021
------------ ------------ ----------- ------------ ------------
Total expenses............................... 5,540,812 102,976 694,628 3,438,228 1,110,661
Less: Expenses waived or assumed............. (817,093) (53,041) (152,831) (470,525) (158,115)
Custodian fees paid indirectly.......... (39,183) (2,231) (3,124) (26,350) (6,419)
------------ ------------ ----------- ------------ ------------
Net expenses................................. 4,684,536 47,704 538,673 2,941,353 946,127
------------ ------------ ----------- ------------ ------------
Net investment income (loss)................. 1,132,054 398,687 2,902,275 (937,036) 1,214,000
------------ ------------ ----------- ------------ ------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(Note 2):
Net realized gain on investments............. 26,645,071 50,171 145,546 17,709,890 5,053,532
Net unrealized appreciation of investments... 44,536,413 137,858 1,059,248 10,188,540 3,974,842
------------ ------------ ----------- ------------ ------------
Net gain on investments...................... 71,181,484 188,029 1,204,794 27,898,430 9,028,374
------------ ------------ ----------- ------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................. $ 72,313,538 $ 586,716 $ 4,107,069 $ 26,961,394 $ 10,242,374
------------ ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ------------
</TABLE>
See notes to financial statements
44
<PAGE>
(This page has been left blank intentionally.)
45
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FIRST INVESTORS SERIES FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
INSURED
BLUE CHIP INTERMEDIATE
FUND TAX EXEMPT FUND
----------------------------- -------------------------
YEAR ENDED DECEMBER 31 1997 1996 1997 1996
- ---------------------------------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss).......... $ 1,132,054 $ 1,571,720 $ 398,687 $ 369,402
Net realized gain (loss) on
investments......................... 26,645,071 13,853,283 50,171 (13,642)
Net unrealized appreciation
(depreciation) of investments....... 44,536,413 25,028,855 137,858 (65,142)
------------- ------------- ----------- -----------
Net increase in net assets resulting
from operations................... 72,313,538 40,453,858 586,716 290,618
------------- ------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income - Class A....... (1,008,850) (1,797,674) (369,696) (348,573)
Net investment income - Class B....... -- (32,262) (28,946) (20,249)
Net realized gains - Class A.......... (23,224,732) (12,932,431) -- --
Net realized gains - Class B.......... (2,472,186) (920,852) -- --
------------- ------------- ----------- -----------
Total distributions................. (26,705,768) (15,683,219) (398,642) (368,822)
------------- ------------- ----------- -----------
TRUST SHARE TRANSACTIONS(a)
Class A:
Proceeds from shares sold............. 83,933,830 59,240,476 1,296,789 1,414,425
Value of distributions reinvested..... 23,979,379 14,593,546 252,840 259,914
Cost of shares redeemed............... (39,561,111) (27,930,727) (1,789,778) (1,203,575)
------------- ------------- ----------- -----------
68,352,098 45,903,295 (240,149) 470,764
------------- ------------- ----------- -----------
Class B:
Proceeds from shares sold............. 17,001,914 10,411,903 280,224 341,636
Value of distributions reinvested..... 2,448,261 949,486 18,802 8,017
Cost of shares redeemed............... (2,520,555) (924,914) (123,256) (108,807)
------------- ------------- ----------- -----------
16,929,620 10,436,475 175,770 240,846
------------- ------------- ----------- -----------
Net increase (decrease) from trust
share transactions.................. 85,281,718 56,339,770 (64,379) 711,610
------------- ------------- ----------- -----------
Net increase (decrease) in net
assets............................ 130,889,488 81,110,409 123,695 633,406
NET ASSETS
Beginning of year..................... 256,863,225 175,752,816 8,028,347 7,394,941
------------- ------------- ----------- -----------
End of year+.......................... $ 387,752,713 $ 256,863,225 $ 8,152,042 $ 8,028,347
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
+Includes undistributed net investment
income of.............................. $ 158,778 $ 35,574 $ 2,793 $ 2,748
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
(a)TRUST SHARES ISSUED AND REDEEMED
Class A:
Sold................................ 3,767,172 3,180,586 223,924 245,693
Issued for distributions
reinvested........................ 1,051,211 752,243 43,437 45,078
Redeemed............................ (1,783,673) (1,501,552) (308,527) (209,235)
------------- ------------- ----------- -----------
Net increase (decrease) in Class A
shares outstanding................ 3,034,710 2,431,277 (41,166) 81,536
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Class B:
Sold................................ 764,680 559,282 48,220 58,860
Issued for distributions
reinvested........................ 108,187 49,071 3,220 1,391
Redeemed............................ (114,584) (49,439) (21,066) (19,041)
------------- ------------- ----------- -----------
Net increase in Class B shares
outstanding....................... 758,283 558,914 30,374 41,210
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>
See notes to financial statements
46
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE SPECIAL SITUATIONS TOTAL RETURN
FUND FUND FUND
--------------------------- ----------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
- ---------------------------------------- ------------ ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss).......... $ 2,902,275 $ 3,033,842 $ (937,036) $ (248,261) $ 1,214,000 $ 1,630,129
Net realized gain (loss) on
investments......................... 145,546 108,990 17,709,890 9,162,648 5,053,532 4,564,414
Net unrealized appreciation
(depreciation) of investments....... 1,059,248 (2,054,202) 10,188,540 7,926,160 3,974,842 (470,679)
------------ ------------ ------------- ------------- ------------ ------------
Net increase in net assets resulting
from operations................... 4,107,069 1,088,630 26,961,394 16,840,547 10,242,374 5,723,864
------------ ------------ ------------- ------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income - Class A....... (2,740,532) (2,965,537) -- -- (1,227,991) (1,672,752)
Net investment income - Class B....... (148,190) (95,970) -- -- (26,544) (20,249)
Net realized gains - Class A.......... (145,340) (79,969) (15,341,882) (8,473,398) (4,841,852) (4,504,684)
Net realized gains - Class B.......... (10,710) (4,021) (1,322,522) (552,560) (184,600) (82,687)
------------ ------------ ------------- ------------- ------------ ------------
Total distributions................. (3,044,772) (3,145,497) (16,664,404) (9,025,958) (6,280,987) (6,280,372)
------------ ------------ ------------- ------------- ------------ ------------
TRUST SHARE TRANSACTIONS(a)
Class A:
Proceeds from shares sold............. 6,253,282 8,590,879 41,394,544 41,811,559 9,720,765 5,275,595
Value of distributions reinvested..... 2,236,906 2,386,687 14,688,933 8,052,244 6,023,569 6,135,139
Cost of shares redeemed............... (10,870,685) (12,567,534) (30,181,586) (24,410,399) (9,501,874) (9,794,345)
------------ ------------ ------------- ------------- ------------ ------------
(2,380,497) (1,589,968) 25,901,891 25,453,404 6,242,460 1,616,389
------------ ------------ ------------- ------------- ------------ ------------
Class B:
Proceeds from shares sold............. 1,206,438 1,459,481 6,513,410 5,717,918 1,430,563 746,950
Value of distributions reinvested..... 110,137 78,964 1,315,908 551,266 207,161 102,924
Cost of shares redeemed............... (402,070) (325,873) (1,904,821) (865,479) (169,088) (59,781)
------------ ------------ ------------- ------------- ------------ ------------
914,505 1,212,572 5,924,497 5,403,705 1,468,636 790,093
------------ ------------ ------------- ------------- ------------ ------------
Net increase (decrease) from trust
share transactions.................. (1,465,992) (377,396) 31,826,388 30,857,109 7,711,096 2,406,482
------------ ------------ ------------- ------------- ------------ ------------
Net increase (decrease) in net
assets............................ (403,695) (2,434,263) 42,123,378 38,671,698 11,672,483 1,849,974
NET ASSETS
Beginning of year..................... 48,729,177 51,163,440 168,568,177 129,896,479 57,561,680 55,711,706
------------ ------------ ------------- ------------- ------------ ------------
End of year+.......................... $ 48,325,482 $ 48,729,177 $ 210,691,555 $ 168,568,177 $ 69,234,163 $ 57,561,680
------------ ------------ ------------- ------------- ------------ ------------
------------ ------------ ------------- ------------- ------------ ------------
+Includes undistributed net investment
income of............................. $ 18,908 $ 9,294 $ -- $ -- $ 55,028 $ 101,523
------------ ------------ ------------- ------------- ------------ ------------
------------ ------------ ------------- ------------- ------------ ------------
(a)TRUST SHARES ISSUED AND REDEEMED
Class A:
Sold................................ 628,030 863,456 1,821,611 2,056,926 683,584 403,915
Issued for distributions
reinvested........................ 224,425 240,179 662,260 388,434 437,106 476,189
Redeemed............................ (1,095,164) (1,264,529) (1,367,038) (1,193,114) (680,904) (737,036)
------------ ------------ ------------- ------------- ------------ ------------
Net increase (decrease) in Class A
shares outstanding................ (242,709) (160,894) 1,116,833 1,252,246 439,786 143,068
------------ ------------ ------------- ------------- ------------ ------------
------------ ------------ ------------- ------------- ------------ ------------
Class B:
Sold................................ 120,858 147,002 287,155 282,350 100,991 56,645
Issued for distributions
reinvested........................ 11,021 7,948 60,669 26,957 15,167 8,057
Redeemed............................ (40,307) (32,903) (87,818) (42,387) (12,388) (4,468)
------------ ------------ ------------- ------------- ------------ ------------
Net increase in Class B shares
outstanding....................... 91,572 122,047 260,006 266,920 103,770 60,234
------------ ------------ ------------- ------------- ------------ ------------
------------ ------------ ------------- ------------- ------------ ------------
</TABLE>
See notes to financial statements
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FIRST INVESTORS SERIES FUND
1. SIGNIFICANT ACCOUNTING POLICIES--The Fund, a Massachusetts business trust, is
registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management investment company. The Fund operates as a
series fund, issuing shares of beneficial interest in the Blue Chip Fund,
Insured Intermediate Tax Exempt Fund, Investment Grade Fund, Special Situations
Fund and Total Return Fund (each a "Fund") and accounts separately for the
assets, liabilities and operations of each Fund. The objective of each Fund is
as follows:
BLUE CHIP FUND seeks to provide investors with high total investment return
consistent with the preservation of capital.
INSURED INTERMEDIATE TAX EXEMPT FUND seeks to provide a high level of interest
income which is exempt from federal income tax.
INVESTMENT GRADE FUND seeks to generate a maximum level of income consistent
with investment in investment grade debt securities.
SPECIAL SITUATIONS FUND seeks long-term growth of capital.
TOTAL RETURN FUND seeks to provide investors with high long-term total
investment return consistent with moderate investment risk.
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 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 services use quotations obtained from investment dealers or
brokers, 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 and other
assets are valued on a consistent basis at fair value as determined in good
faith by or under the supervision of the Fund's officers in a manner
specifically authorized by the Board of Trustees of the Fund.
The municipal bonds in which the Insured Intermediate Tax Exempt Fund and the
Total Return Fund invest are traded primarily in the over-the-counter markets.
Such securities are valued daily at their fair value on the basis of valuations
provided by a pricing service approved by the Board of Trustees. The pricing
service considers security type, rating, market condition and yield data, as
well as market quotations and prices provided by market makers. "When Issued
Securities" are reflected in the assets of the Funds as of the date the
securities are purchased.
The municipal bonds held by the Insured Intermediate Tax Exempt Fund are insured
as to payment of principal and interest by the issuer or under insurance
policies written by independent insurance companies. The Fund may retain any
insured municipal bond which is in default in the payment of principal or
interest until the default has been cured, or the principal and interest
outstanding are paid by an insurer or the issuer of any letter of credit or
other guarantee supporting such municipal bond. In such case, it is the Fund's
policy to value the defaulted bond daily based upon the value of a comparable
bond which is insured and not in
48
<PAGE>
default. In selecting a comparable bond, the Fund will consider security type,
rating, market condition and yield. The Fund may invest up to 35% of its assets
in portfolio securities not covered by the insurance feature.
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 December 31, 1997, the
Insured Intermediate Tax Exempt Fund had capital loss carryovers of $174,849, of
which $109,885 expires in 2002, $51,323 expires in 2003 and $13,641 expires in
2004.
C. Distributions to Shareholders--Dividends from net investment income to
shareholders of the Insured Intermediate Tax Exempt Fund and the Investment
Grade Fund are generally declared daily and paid monthly. Dividends from net
investment income of the Blue Chip Fund and the Total Return Fund are generally
declared and paid quarterly and dividends from net investment income, if any, of
the Special Situations Fund are generally declared and paid annually.
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 net operating losses, tax-exempt interest, capital loss
carryforwards, and post-October capital losses.
D. Expense Allocation--Expenses directly charged or attributable to a Fund are
paid from the assets of that Fund. General expenses of the First Investors
Series Fund are allocated among and charged to the assets of each Fund on a fair
and equitable basis, which may be based on the relative assets of each Fund or
the nature of the services performed and relative applicability to each 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.
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. Interest income
and estimated expenses are accrued daily. The Funds' custodian has provided
credits in the amount of $77,307 against custodian charges based on the
uninvested cash balances of the Funds.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FIRST INVESTORS SERIES FUND
2. SECURITY TRANSACTIONS--For the year ended December 31, 1997, purchases and
sales of securities and long-term U.S. Government obligations, excluding U.S.
Treasury bills and short-term corporate notes, were as follows:
<TABLE>
<CAPTION>
Long-Term U.S.
Securities Government Obligations
-------------------------- ------------------------
Cost of Proceeds Cost of Proceeds
Purchases of Sales Purchases of Sales
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Blue Chip Fund......................... $242,511,258 $185,074,960 $ -- $ --
Insured Intermediate Tax Exempt Fund... 7,343,545 7,302,295 -- --
Investment Grade Fund.................. 9,892,381 10,750,667 5,661,506 5,834,687
Special Situations Fund................ 139,883,619 139,643,421 -- --
Total Return Fund...................... 58,077,451 60,867,368 26,638,340 23,701,741
</TABLE>
At December 31, 1997, aggregate cost and net unrealized appreciation of
securities for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Aggregate Unrealized Unrealized Unrealized
Cost Appreciation Depreciation Appreciation
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Blue Chip Fund......................... $277,522,044 $109,645,710 $ 1,548,335 $108,097,375
Insured Intermediate Tax Exempt Fund... 7,720,293 488,199 25,148 463,051
Investment Grade Fund.................. 45,790,670 1,820,817 109,167 1,711,650
Special Situations Fund................ 179,139,108 45,838,918 7,974,592 37,864,326
Total Return Fund...................... 57,379,386 11,818,798 589,379 11,229,419
</TABLE>
3. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES--Certain officers and
trustees 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 trustees of the Fund
received no remuneration from the Fund for serving in such capacities. Their
remuneration (together with certain other expenses of the Fund) was paid by
FIMCO or FIC. Effective January 1, 1998, independent trustees will be
remunerated by the Fund.
The Investment Advisory Agreement provides as compensation to FIMCO for each
Fund other than the Insured Intermediate Tax Exempt Fund and the Investment
Grade Fund, an annual fee, payable monthly, at the rate of 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. The annual fee for the Insured Intermediate Tax
Exempt Fund is payable
50
<PAGE>
monthly, at the rate of .60% of the Fund's average daily net assets. The annual
fee for the Investment Grade Fund is payable monthly, at the rate of .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 net assets
over $750 million. Total advisory fees accrued to FIMCO for the year ended
December 31, 1997 were $6,185,240 of which $1,509,164 was waived. In addition,
expenses of $120,345 were assumed by FIMCO.
For the year ended December 31, 1997, FIC, as underwriter, received $5,872,931
in commissions from the sale of Fund shares, after allowing $49,808 to other
dealers. Shareholder servicing costs included $1,362,719 in transfer agent fees
accrued to ADM and $443,567 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 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 that Fund. Total distribution plan fees accrued
to FIC amounted to $2,215,118 (of which $22,096 was waived).
4. 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 of each class. The Fund has established an
unlimited number of shares of beneficial interest for both Class A and Class B
shares.
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 sold to qualified institutional investors. At December 31, 1997, the
Investment Grade Fund held one 144A security, with a value of $714,875. This
security represents 1.5% of the Fund's net assets and is valued as set forth in
Note 1A.
51
<PAGE>
FINANCIAL HIGHLIGHTS
FIRST INVESTORS SERIES FUND
The following table sets forth the per share operating performance data for a
share of beneficial interest 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>
BLUE CHIP FUND
CLASS A
1993........................ $ 15.29 $ .10 $ 1.08 $ 1.18 $ .10 $ .79 $ .89
1994........................ 15.58 .11 (.58) (.47) .09 1.56 1.65
1995........................ 13.46 .19 4.37 4.56 .20 .60 .80
1996........................ 17.22 .14 3.39 3.53 .17 1.11 1.28
1997........................ 19.47 .09 4.98 5.07 .08 1.62 1.70
CLASS B
1/12/95* to 12/31/95........ 13.51 .10 4.31 4.41 .16 .60 .76
1996........................ 17.16 .06 3.32 3.38 .06 1.11 1.17
1997........................ 19.37 (.03) 4.91 4.88 -- 1.62 1.62
- --------------------------------------------------------------------------------------------------------------------
INSURED INTERMEDIATE TAX EXEMPT FUND
CLASS A
11/22/93* to 12/31/93....... $ 5.79 $ -- $ -- $ -- $ -- $ -- $ --
1994........................ 5.79 .24 (.36) (.12) .24 -- .24
1995........................ 5.43 .30 .42 .72 .30 -- .30
1996........................ 5.85 .29 (.06) .23 .29 -- .29
1997........................ 5.79 .29 .14 .43 .29 -- .29
CLASS B
1/12/95* to 12/31/95........ 5.45 .25 .41 .66 .26 -- .26
1996........................ 5.85 .23 (.05) .18 .23 -- .23
1997........................ 5.80 .23 .13 .36 .23 -- .23
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE FUND
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
CLASS B
1/12/95* to 12/31/95........ 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
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
The following table sets forth the per share operating performance data for a
share of beneficial interest 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
ASSETS BEFORE
RATIO TO AVERAGE EXPENSES
NET ASSETS++ WAIVED OR ASSUMED
NET ASSET -------------------- --------------------
VALUE TOTAL NET NET PORTFOLIO AVERAGE
--------- RETURN NET ASSETS INVESTMENT INVESTMENT TURNOVER COMMISSION
END ** END OF PERIOD EXPENSES INCOME EXPENSES INCOME RATE RATE
OF PERIOD (%) (IN THOUSANDS) (%) (%) (%) (%) (%) +++
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BLUE CHIP FUND
CLASS A
1993........................ $ 15.58 7.77 $ 117,929 1.48 .66 1.73 .41 39 $ --
1994........................ 13.46 (3.02) 123,694 1.54 .80 1.79 .55 82 --
1995........................ 17.22 34.01 170,271 1.49 1.23 1.74 .98 25 --
1996........................ 19.47 20.55 239,851 1.44 .78 1.67 .55 45 .0689
1997........................ 22.84 26.05 350,721 1.39 .40 1.64 .15 63 .0649
CLASS B
1/12/95* to 12/31/95........ 17.16 32.76 5,481 2.20+ .52+ 2.46+ .26+ 25 --
1996........................ 19.37 19.71 17,012 2.22 -- 2.37 (.16) 45 .0689
1997........................ 22.63 25.19 37,032 2.09 (.30) 2.34 (.55) 63 .0649
- -----------------------------------------------------------------------------------------------------------------------------------
INSURED INTERMEDIATE TAX EXEMPT FUND
CLASS A
11/22/93* to 12/31/93....... $ 5.79 .00 $ 1,615 -- .54+ 1.78+ (1.24)+ 0 $ --
1994........................ 5.43 (2.05) 5,688 .14 4.52 .96 3.70 210 --
1995........................ 5.85 13.50 7,017 .35 5.32 1.22 4.45 47 --
1996........................ 5.79 4.07 7,415 .49 5.05 1.24 4.30 82 --
1997........................ 5.93 7.68 7,344 .53 5.02 1.21 4.34 91 --
CLASS B
1/12/95* to 12/31/95........ 5.85 12.27 378 1.35+ 4.32+ 1.92+ 3.75+ 47 --
1996........................ 5.80 3.17 613 1.49 4.05 1.94 3.60 82 --
1997........................ 5.93 6.39 808 1.53 4.02 1.91 3.64 91 --
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE FUND
CLASS A
1993........................ $ 10.33 11.82 $ 48,507 .86 6.27 1.40 5.73 38 $ --
1994........................ 9.24 (4.62) 46,179 .95 6.46 1.47 5.94 17 --
1995........................ 10.34 19.40 49,997 1.10 6.43 1.43 6.10 27 --
1996........................ 9.93 2.39 46,396 1.11 5.96 1.42 5.65 22 --
1997........................ 10.16 9.14 45,007 1.11 6.18 1.43 5.86 34 --
CLASS B
1/12/95* to 12/31/95........ 10.35 18.08 1,167 1.80+ 5.73+ 2.13+ 5.40+ 27 --
1996........................ 9.94 1.64 2,333 1.81 5.26 2.12 4.95 22 --
1997........................ 10.17 8.40 3,318 1.81 5.48 2.13 5.16 34 --
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
FIRST INVESTORS SERIES FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
P E R S H A R E D A T A
------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------
NET
REALIZED LESS DISTRIBUTIONS
NET ASSET AND FROM
VALUE UNREALIZED ----------------------
--------- NET GAIN (LOSS) TOTAL FROM NET NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAIN DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SPECIAL SITUATIONS FUND
CLASS A
1993...................... $ 15.62 $ (.08) $ 3.29 $ 3.21 $ -- $ .83 $ .83
1994...................... 18.00 (.04) (.62) (.66) -- .91 .91
1995...................... 16.43 (.01) 3.94 3.93 -- .73 .73
1996...................... 19.63 (.01) 2.28 2.27 -- 1.17 1.17
1997...................... 20.73 (.09) 3.44 3.35 -- 1.90 1.90
CLASS B
1/12/95* to 12/31/95...... 16.40 (.01) 3.85 3.84 -- .73 .73
1996...................... 19.51 (.14) 2.25 2.11 -- 1.17 1.17
1997...................... 20.45 (.15) 3.29 3.14 -- 1.90 1.90
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND
CLASS A
1993...................... $ 12.49 $ .26 $ .63 $ .89 $ .26 $ 1.24 $ 1.50
1994...................... 11.88 .21 (.62) (.41) .19 .39 .58
1995...................... 10.89 .39 2.50 2.89 .37 .44 .81
1996...................... 12.97 .39 .97 1.36 .41 1.12 1.53
1997...................... 12.80 .26 2.04 2.30 .28 1.08 1.36
CLASS B
1/12/95* to 12/31/95...... 10.90 .25 2.54 2.79 .33 .44 .77
1996...................... 12.92 .32 .94 1.26 .34 1.12 1.46
1997...................... 12.72 .21 1.97 2.18 .19 1.08 1.27
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations of Class A shares or date Class B shares first
offered
** Calculated without sales charges
+ Annualized
++ Net of expenses waived or assumed (Note 3)
+++ Average commission rate (per share of security) as required by amended
disclosure requirements effective in 1996
See notes to financial statements
54
<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 AVERAGE
--------- RETURN NET ASSETS INVESTMENT INVESTMENT TURNOVER COMMISSION
END ** END OF PERIOD EXPENSES INCOME EXPENSES INCOME RATE RATE
OF PERIOD (%) (IN THOUSANDS) (%) (%) (%) (%) (%) +++
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPECIAL SITUATIONS FUND
CLASS A
1993...................... $ 18.00 20.52 $ 59,148 1.55 (.63) 1.89 (.96) 71 $ --
1994...................... 16.43 (3.66) 89,906 1.65 (.26) 1.90 (.51) 53 --
1995...................... 19.63 23.92 125,331 1.60 (.08) 1.85 (.33) 80 --
1996...................... 20.73 11.56 158,326 1.59 (.13) 1.84 (.38) 99 .0689
1997...................... 22.18 16.15 194,189 1.53 (.45) 1.78 (.70) 84 .0643
CLASS B
1/12/95* to 12/31/95...... 19.51 23.42 4,566 2.33+ (.81)+ 2.59+ (1.07)+ 80 --
1996...................... 20.45 10.81 10,242 2.38 (.92) 2.55 (1.09) 99 .0689
1997...................... 21.69 15.34 16,503 2.23 (1.15) 2.48 (1.40) 84 .0643
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND
CLASS A
1993...................... $ 11.88 7.18 $ 58,176 1.45 2.00 1.83 1.62 131 $ --
1994...................... 10.89 (3.45) 50,714 1.63 1.91 1.88 1.66 124 --
1995...................... 12.97 26.71 55,442 1.58 3.08 1.83 2.83 135 --
1996...................... 12.80 10.62 56,530 1.53 2.93 1.78 2.68 146 .0691
1997...................... 13.74 18.08 66,714 1.49 1.94 1.74 1.69 138 .0677
CLASS B
1/12/95* to 12/31/95...... 12.92 25.74 270 2.41+ 2.24+ 2.67+ 1.98+ 135 --
1996...................... 12.72 9.86 1,032 2.32 2.14 2.49 1.97 146 .0691
1997...................... 13.63 17.24 2,520 2.19 1.24 2.44 .99 138 .0677
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations of Class A shares or date Class B shares first
offered
** Calculated without sales charges
+ Annualized
++ Net of expenses waived or assumed (Note 3)
+++ Average commission rate (per share of security) as required by amended
disclosure requirements effective in 1996
See notes to financial statements
55
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees of
First Investors Series Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of the Blue Chip, Insured Intermediate Tax
Exempt, Investment Grade, Special Situations and Total Return Funds (comprising
First Investors Series Fund), as of December 31, 1997, 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 periods indicated thereon. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with 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, 1997, 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
Blue Chip, Insured Intermediate Tax Exempt, Investment Grade, Special Situations
and Total Return Funds (comprising First Investors Series Fund) at December 31,
1997, 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
January 30, 1998
56
<PAGE>
(This page has been left blank intentionally.)
57
<PAGE>
FIRST INVESTORS SERIES FUND
DIRECTORS
- -------------------------------------------
JAMES J. COY (Emeritus)
ROGER L. GRAYSON
GLENN O. HEAD
KATHRYN S. HEAD
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
PATRICIA D. POITRA
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
58
<PAGE>
FIRST INVESTORS SERIES FUND
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 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.
59
<PAGE>
FIRST INVESTORS SERIES FUND
95 WALL STREET
NEW YORK, NY 10005
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
FIBC-103
The words "BULK RATE U.S. POSTAGE PAID PERMIT NO. 7379" appear in a box to the
right of a circle containing the words "MAILED FROM ZIP CODE 11201" which
appears to the right of the above language in the printed piece.
Vertically reading from bottom to top in the center of the page the words "FIRST
INVESTORS" appear in the printed piece.
FIRST
INVESTORS
SERIES FUND
Blue Chip Fund
Insured Intermediate
Tax Exempt Fund
Investment Grade Fund
Special Situations Fund
Total Return Fund
ANNUAL
REPORT
DECEMBER 31, 1997
