FIRST INVESTORS SERIES FUND II INC, 497, 1996-02-16

FIRST INVESTORS SERIES FUND II INC
497, 1996-02-16

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First Investors Series Fund II, Inc.
Growth & Income Fund
U.S.A. Mid-Cap Opportunity Fund
Utilities Income Fund

95 Wall Street, New York, New York 10005/1-800-423-4026

This is a Prospectus for First Investors Series Fund II, Inc. ("Series
Fund II"), an open-end diversified management investment company. The Fund
offers three separate investment series, each of which has different investment
objectives and policies: First Investors Growth & Income Fund, First Investors
U.S.A. Mid-Cap Opportunity Fund and First Investors Utilities Income Fund (each
a "Fund"). Each Fund sells two classes of shares. Investors may select Class A
or Class B shares, each with a public offering price that reflects different
sales charges and expense levels. See "Alternative Purchase Plans."

Growth & Income Fund seeks long-term growth of capital and current income.
This Fund seeks to achieve its objective by investing, under normal market
conditions, at least 65% of its total assets in securities that provide the
potential for growth and offer income, such as dividend-paying stocks and
securities convertible into common stock.

U.S.A. Mid-Cap Opportunity Fund seeks long-term capital growth. This Fund
seeks to achieve its objective by investing, under normal market conditions, at
least 75% of its total assets in common and preferred stocks of companies that
its investment adviser considers to have potential for capital growth. In
addition, under normal market conditions, at least 65% of the Fund's total
assets will be invested in securities of companies that have a medium market
capitalization and are incorporated and have their principal place of business
in the United States.

Utilities Income Fund primarily seeks high current income. Long-term
capital appreciation is a secondary objective. This Fund seeks to achieve its
objectives by investing, under normal market conditions, at least 65% of its
total assets in equity and debt securities issued by companies primarily engaged
in the public utilities industry.

There can be no assurance that any Fund will achieve its investment
objective.

This Prospectus sets forth concisely the information about the Funds that
a prospective investor should know before investing and should be retained for
future reference. First Investors Management Company, Inc. ("FIMCO" or
"Adviser") serves as investment adviser to the Funds and First Investors
Corporation ("FIC" or "Underwriter") serves as distributor of the Funds' shares.
A Statement of Additional Information ("SAI"), dated February 15, 1996 (which is
incorporated by reference herein), has been filed with the Securities and
Exchange Commission. The SAI is available at no charge upon request to the Funds
at the address or telephone number indicated above.

An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured or protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other government agency.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

The date of this Prospectus is February 15, 1996

<PAGE>

FEE TABLE

The following table is intended to assist investors in understanding the
expenses associated with investing in each class of shares of a Fund. Shares of
the Funds issued prior to January 12, 1995 have been designated as Class A
shares.

Shareholder Transaction Expenses

Class A Class B
Shares Shares
<S> <C> <C>

Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................... 6.25% None
Deferred Sales Load
(as a percentage of the lower of original purchase
price or redemption proceeds).......................... None* 4% in the first year;
declining to 0% after
the sixth year
</TABLE>

Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>

U.S.A. Mid-Cap
Growth & Income Fund Opportunity Fund Utilities Income Fund
Class A Class B(1) Class A Class B(1) Class A Class B(1)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>

Management Fees(2).................. 0.60% 0.60% 0.75% 0.75% 0.60% 0.60%
12b-1 Fees(3)....................... 0.30 1.00 0.30 1.00 0.30 1.00
Other Expenses(4)................... 0.54 0.54 0.45 0.45 0.30 0.30
Total Fund Operating Expenses(5) 1.44 2.14 1.50 2.20 1.20 1.90

</TABLE>

* A contingent deferred sales charge ("CDSC") of 1.00% will be assessed
on certain redemptions of Class A shares that are purchased without a
sales charge. See "How to Buy Shares."
(1) Other Expenses and Total Fund Operating Expenses are based on estimated
amounts for the fiscal year ending October 31, 1996.
(2) Management Fees have been restated to reflect the maximum Management
Fees that may be incurred by each Fund for a minimum period ending
October 31, 1996. Actual fees, after fee waivers, for the fiscal year
ended October 31, 1995 were as follows: Growth & Income Fund - 0.53%;
U.S.A. Mid-Cap Opportunity Fund - 0.58%; and Utilities Income Fund -
0.46%. The Adviser will waive 0.25% of Management Fees for U.S.A.
Mid-Cap Opportunity Fund for a minimum period ending October 31, 1996.
Otherwise, such fee could be 1.00%.
(3) 12b-1 Fees have been restated to reflect the maximum distribution
expenses that may be incurred by each Fund for a minimum period ending
October 31, 1996. Actual fees for the fiscal year ended October 31,
1995 were 1.00% for each Fund with respect to Class B shares; and,
after fee waivers, 0.13% for Growth & Income Fund and 0.26% for each
other Fund with respect to Class A shares.
(4) Other Expenses for U.S.A. Mid-Cap Opportunity Fund and Utilities Income
Fund are net of reimbursed expenses. Otherwise, Other Expenses for each
class of shares would have been as follows: U.S.A. Mid-Cap Opportunity
Fund- 1.02% and Utilities Income Fund-0.52%. Through October 31, 1996,
the Adviser intends to reimburse U.S.A. Mid-Cap Opportunity Fund for
Other Expenses in excess of 0.45% of its average net assets and
Utilities Income Fund for Other Expenses in excess of 0.30% of its
average net assets.
(5) Net of waived Management Fees and/or reimbursed expenses. If certain
Management Fees and Other Expenses were not waived or reimbursed, Total
Fund Operating Expenses would have been 2.07% for U.S.A. Mid-Cap
Opportunity Fund and 1.57% for Utilities Income Fund for Class A shares
and are estimated to be 2.77% for U.S.A. Mid-Cap Opportunity Fund and
2.27% for Utilities Income Fund for Class B shares.

<PAGE>

For a more complete description of the various costs and expenses, see
"Alternative Purchase Plans," "How to Buy Shares," "How to Redeem Shares,"
"Management" and "Distribution Plans." Due to the imposition of 12b-1 fees, it
is possible that long-term shareholders of a Fund may pay more in total sales
charges than the economic equivalent of the maximum front-end sales charge
permitted by the rules of the National Association of Securities Dealers, Inc.

The Example below is based on Class A and Class B expense data for each
Fund's fiscal year ended October 31, 1995, except that certain Operating
Expenses have been restated, as noted above.

EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:

One Year Three Years Five Years Ten Years
Growth & Income Fund
Class A............................ $76 $105 $136 $224
Class B............................ 62 97 135 228*

U.S.A. Mid-Cap Opportunity Fund
Class A............................ 77 107 139 230
Class B............................ 62 99 138 236*

Utilities Income Fund
Class A............................ 74 98 124 199
Class B............................ 59 90 123 204*

You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) no redemption at the end of each time period:

One Year Three Years Five Years Ten Years
Growth & Income Fund
Class A........................... $76 $105 $136 $224
Class B........................... 22 67 115 229*

U.S.A. Mid-Cap Opportunity Fund
Class A........................... 77 107 139 230
Class B........................... 22 69 118 234*

Utilities Income Fund
Class A........................... 74 98 124 199
Class B........................... 19 60 103 204*

* Assumes conversion to Class A shares eight years after purchase.

The expenses in the Example should not be considered a representation by
the Funds of past or future expenses. Actual expenses in future years may be
greater or less than those shown.

<PAGE>

FINANCIAL HIGHLIGHTS

The table below sets forth the per share operating performance data for a
share outstanding, total return, ratios to average net assets and other
supplemental data for each period indicated. The table has been derived from
financial statements which have been examined by Tait, Weller & Baker,
independent certified public accountants, whose report thereon appears in the
SAI. This information should be read in conjunction with the Financial
Statements and Notes thereto, which also appear in the SAI, available at no
charge upon request to the Funds.

-------------------------------------------------------------------------------------
PER SHARE DATA
Income From Investment Operations Less Distributions from
Net Realized Total
Net Asset Value Net and Unrealized from Net Net
Beginning of Investment Gain (Loss) Investment Investment Realized Total Net Asset Value
Period Income Investments Operations Income Gain Distributions End of Period
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

GROWTH & INCOME FUND
-------------------------------------------------------------------------------------
CLASS A
10/4/93* to 10/31/93......... $ 6.56 $ .005 $ -- $ .005 $ .005 $ -- $ .005 $ 6.56
11/1/93 to 10/31/94.......... 6.56 .128 .109 .237 .107 -- .107 6.69
11/1/94 to 10/31/95.......... 6.69 .163 1.125 1.288 .168 -- .168 7.81
CLASS B
1/12/95* to 10/31/95......... 6.43 .084 1.372 1.456 .106 -- .106 7.78

U.S.A. MID-CAP
OPPORTUNITY FUND****
CLASS A
8/24/92* to 10/31/92......... 11.64 .036 .050 .086 .026 -- .026 11.70
11/1/92 to 10/31/93.......... 11.70 .122 .373 .495 .045 -- .045 12.15
11/1/93 to 10/31/94.......... 12.15 .078 (.326) (.248) .122 -- .122 11.78
11/1/94 to 10/31/95.......... 11.78 .083 2.796 2.879 .079 -- .079 14.58
CLASS B
1/12/95* to 10/31/95......... 12.03 (.011) 2.491 2.480 -- -- -- 14.51

UTILITIES INCOME FUND
CLASS A
2/22/93* to 10/31/93......... 5.59 .118 .317 .435 .105 -- .105 5.92
11/1/93 to 10/31/94.......... 5.92 .239 (.839) (.600) .227 .013 .240 5.08
11/1/94 to 10/31/95.......... 5.08 .233 .822 1.055 .235 -- .235 5.90
CLASS B
1/12/95* to 10/31/95......... 4.95 .144 .930 1.074 .164 -- .164 5.86

</TABLE>

* Commencement of operations of Class A shares or date Class B shares were
first offered
** Calculated without sales charges
*** Prior to February 15, 1996, known as Made In The U.S.A. Fund
+ Annualized
++ Some or all expenses have been waived or assumed from commencement of
operations through October 31, 1995
4

<PAGE>

RATIOS / SUPPLEMENTAL DATA
Ratio to Average Net Assets Before
Ratio to Average Net Assets++ Expenses Waived or Assumed
Net Assets Net Net Portfolio
Total End of Period Investment Investment Turnover
Return**(%) (in thousands) Expenses(%) Income(%) Expenses(%) Income(%) Rate(%)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

.99+ $ 3,407 -- 1.02+ 1.37+ (.35)+ 0
3.67 34,489 .67 2.26 1.83 1.11 6
19.51 63,493 .98 2.34 1.59 1.74 19

22.73 3,602 1.90+ 2.23+ 2.61+ 1.52+ 19

3.86+ 8,150 .06+ 1.87+ 2.64+ (.72)+ 0
4.23 15,586 .81 .96 2.03 (.26) 52
(2.05) 7,651 .90 .45 2.32 (.97) 29
24.59 8,818 1.34 .48 2.36 (.55) 106

20.62 298 2.29+ (.03)+ 3.79+ (1.53)+ 106

11.28+ 58,373 .35+ 3.84+ 1.80+ 2.39+ 17
(10.15) 62,671 .80 4.59+ 1.59 3.80 58
21.35 83,691 1.04 4.37 1.57 3.84 16

21.99 3,209 1.82+ 4.93+ 2.53+ 4.21+ 16
</TABLE>

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Growth & Income Fund

The investment objective of Growth & Income Fund is to seek long-term
growth of capital and current income. The Fund seeks its objective by investing,
under normal market conditions, at least 65% of its total assets in securities
that provide the potential for growth and offer income, such as dividend-paying
stocks and securities convertible into common stock. The portion of the Fund's
assets invested in equity securities and in debt securities may vary from time
to time due to changes in interest rates and economic and other factors. The
Fund is not designed for investors seeking a steady flow of income
distributions. Rather, the Fund's policy of investing in income producing
securities is intended to provide investors with a more consistent total return
than may be achieved by investing solely in growth stocks.

The convertible securities in which the Fund may invest are not subject to
any limitations as to ratings and may include high, medium, lower and unrated
securities. However, the Fund may not invest more than 20% of its total assets
in convertible securities rated below Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Ratings Group ("S&P") (including
convertible securities that have been downgraded), or in unrated convertible
securities that are of comparable quality as determined by the Fund's
subadviser, Wellington Management Company ("WMC" or "Subadviser"). Convertible
securities rated lower than BBB by S&P or Baa by Moody's, commonly referred to
as "junk bonds," are speculative and generally involve a higher risk of loss of
principal and income than higher-rated securities. See "Debt Securities-Risk
Factors" below, and Appendix A to the SAI for a description of convertible
security ratings.

The Fund may invest up to 35% of its total assets in the following
instruments: money market instruments, including U.S. bank certificates of
deposit, bankers' acceptances, commercial paper issued by domestic corporations
and repurchase agreements; fixed income securities, including obligations issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities ("U.S. Government Obligations"), including mortgage-backed
securities, and corporate debt securities rated at least Baa by Moody's or BBB
by S&P, commonly known as "investment grade securities" or unrated securities
that are of comparable quality as determined by the Subadviser; and common stock
and securities convertible into common stock of companies that are not paying a
dividend if there exists the potential for growth of capital or future income.
See "Description of Certain Securities, Other Investment Policies and Risk
Factors," below, and the SAI for additional information concerning these
securities. It is the Fund's policy to attempt to sell, within a reasonable time
period, a debt security which has been downgraded below investment grade (other
than convertible securities, as previously discussed), provided that such
disposition is in the best interests of the Fund and its shareholders. See "Debt
Securities-Risk Factors," below, and Appendix A to the SAI for a description of
corporate bond ratings.

Generally, the prices of equity securities could be affected by such
factors as a change in a company's earnings, fluctuations in interest rates or
changes in the rate of economic growth. To the extent the Fund invests in
issuers with small capitalizations, the Fund would be subject to greater risk
than may be involved in investing in companies with larger capitalizations.
These securities generally include newer and less seasoned companies which are
more speculative than securities issued by well-established issuers. Other risks
may include less available information about the

<PAGE>

issuer, the absence of a business history or historical pattern of performance,
as well as normal risks which accompany the development of new products, markets
or services.

The Fund may invest up to 20% of its total assets in securities of
well-established foreign companies in developed countries which are traded on a
recognized domestic or foreign securities exchange. Although such foreign
securities may be denominated in foreign currencies, the Fund anticipates that
the majority of its foreign investments will be in American Depository Receipts
("ADRs") and Global Depository Receipts ("GDRs"). See "Foreign Securities-Risk
Factors" and "American Depository Receipts and Global Depository Receipts." The
Fund may enter into forward currency contracts to protect against uncertainty in
the level of future exchange rates. The Subadviser will not attempt to time
actively either short-term market trends or short-term currency trends in any
market. See "Hedging and Option Income Strategies" in the SAI.

The Fund may also borrow money for temporary or emergency purposes in
amounts not exceeding 5% of its net assets, make loans of portfolio securities
and invest in securities issued on a "when-issued" or delayed delivery basis. In
addition, in any period of market weakness or of uncertain market or economic
conditions, the Fund may establish a temporary defensive position to preserve
capital by having up to 100% of its assets invested in short-term fixed income
securities or retained in cash or cash equivalents. See "Description of Certain
Securities, Other Investment Policies and Risk Factors" for additional
information concerning these securities.

U.S.A. Mid-Cap Opportunity Fund

U.S.A. Mid-Cap Opportunity Fund seeks long-term capital growth by
investing, under normal market conditions, at least 75% of its total assets in
common and preferred stocks of companies that the Adviser considers to have
potential for capital growth. In addition, under normal market conditions, at
least 65% of the Fund's total assets will be invested in securities of companies
that have a medium market capitalization and are incorporated and have their
principal place of business in the United States, irrespective of whether they
have most of their operations in the United States. This could result in the
Fund investing in companies that do not actually manufacture products or perform
services in the United States. An investment in the Fund will not necessarily
promote manufacturing or employment in the United States since many companies
that are incorporated and have their principal place of business in the United
States have significant operations outside of the United States.

The Fund seeks to invest in growth equity securities, including securities
of companies with above-average earnings growth as compared to the average of
the stocks in the Standard & Poor's 500 Composite Stock Price Index, other
companies that the Adviser believes demonstrate changing or accelerating growth
records, and companies with outstanding growth records and potential based on
the Adviser's fundamental analysis of the company. The companies in which the
Fund invests will be primarily those with medium market capitalization (often
known as "mid-cap"), which is currently defined as those with a market
capitalization of between $750 million and $5 billion. Market capitalization is
the total market value of a company's outstanding common stock. Growth equity
securities tend to have above-average price/earnings ratios and
less-than-average current yields compared to non-growth equity securities. The
payment of dividend income will not be a primary consideration in the selection
of equity investments.

<PAGE>

Although the companies in which the Fund will invest will be primarily
mid-cap companies, the Fund may also invest in companies with small market
capitalizations, as discussed under "Investment Objectives and Policies - Growth
& Income Fund."

The majority of the Fund's equity investments are securities listed on the
New York Stock Exchange ("NYSE"), other national securities exchanges or
securities that have an established over-the-counter ("OTC") market, although
the depth and liquidity of the OTC market may vary from time to time and from
security to security. The Fund's policy of investing in seasoned companies with
above-average earnings growth, other companies with changing or accelerating
growth profiles and companies with outstanding growth records and potential
subjects the Fund to greater risk than may be involved in investing in
securities that are not selected for such growth characteristics.

The Fund may invest up to 25% of its total assets in U.S. Government
Obligations, including mortgage-backed securities, and investment grade debt
securities or unrated securities that are of comparable quality as determined by
the Adviser, repurchase agreements, investment grade securities convertible into
common stock, warrants to purchase common stock and zero coupon and pay-in-kind
securities. See "Description of Certain Securities, Other Investment Policies
and Risk Factors," below, and "Investment Policies" in the SAI for information
on these securities. The Fund may borrow money for temporary or emergency
purposes in an amount not exceeding 5% of its net assets, invest in securities
issued on a "when-issued" or delayed delivery basis and engage in short sales
"against the box." The Adviser continually monitors the investments in the
Fund's portfolio and carefully evaluates on a case-by-case basis whether to
dispose of or retain a debt security that has been downgraded below investment
grade. No more than 5% of the Fund's net assets will remain invested in such
downgraded securities. See Appendix A to the SAI for a description of corporate
bond ratings.

In any period of market weakness or of uncertain market or economic
conditions, the Fund may establish a temporary defensive position to preserve
capital by having all or part of its assets invested in short-term fixed income
securities or retained in cash or cash equivalents, including U.S. Government
Obligations, mortgage-backed securities, bank certificates of deposit, bankers'
acceptances and commercial paper issued by domestic corporations. See
"Description of Certain Securities, Other Investment Policies and Risk Factors."

Utilities Income Fund

The primary investment objective of Utilities Income Fund is to seek high
current income. Long-term capital appreciation is a secondary objective. The
Fund seeks its objectives by investing, under normal market conditions, at least
65% of its total assets in equity and debt securities issued by companies
primarily engaged in the public utilities industry. Equity securities in which
the Fund may invest include common stocks, preferred stocks, securities
convertible into common stocks or preferred stocks and warrants to purchase
common or preferred stocks. Debt securities in which the Fund may invest will be
rated at the time of investment at least A by Moody's or S&P or will be of
comparable quality as determined by the Adviser. The Fund's policy is to attempt
to sell, within a reasonable time period, a debt security in its portfolio which
has been downgraded below A, provided that such disposition is in the best
interests of the Fund and its shareholders. See Appendix A to the SAI for a
description of corporate bond ratings. The portion of the Fund's assets invested
in equity securities and in debt securities will vary from time to time due to
changes in interest rates and economic and other factors.

<PAGE>

The utilities companies in which the Fund will invest include companies
primarily engaged in the ownership or operation of facilities used to provide
electricity, gas, water or telecommunications (including telephone, telegraph
and satellite, but not companies engaged in public broadcasting or cable
television). For these purposes, "primarily engaged" means that (1) more than
50% of the company's assets are devoted to the ownership or operation of one or
more facilities as described above, or (2) more than 50% of the company's
operating revenues are derived from the business or combination of any of the
businesses described above. It should be noted that based on this definition,
the Fund may invest in companies which are also involved to a significant degree
in non-public utilities activities.

Utilities stocks generally offer dividend yields that exceed those of
industrial companies and their prices tend to be less volatile than stocks of
industrial companies. However, utilities stocks can still be affected by the
risks of the stock of industrial companies. Because the Fund concentrates its
investments in public utilities companies, the value of its shares will be
especially affected by factors peculiar to the utilities industry, and may
fluctuate more widely than the value of shares of a fund that invests in a
broader range of industries. See "Utilities Industries--Risk Factors."

The Fund may invest up to 35% of its total assets in the following
instruments: debt securities (rated at least A by Moody's or S&P) and common and
preferred stocks of non-utilities companies; U.S. Government Obligations;
mortgage-backed securities; cash; and money market instruments consisting of
prime commercial paper, bankers' acceptances, certificates of deposit and
repurchase agreements. The Fund may invest in securities on a "when-issued" or
delayed delivery basis, engage in short sales "against the box" and make loans
of portfolio securities. The Fund may invest up to 10% of its net assets in
ADRs. The Fund may borrow money for temporary or emergency purposes in amounts
not exceeding 5% of its net assets. The Fund also may invest in zero coupon and
pay-in-kind securities. In addition, in any period of market weakness or of
uncertain market or economic conditions, the Fund may establish a temporary
defensive position to preserve capital by having up to 100% of its assets
invested in short-term fixed income securities or retained in cash or cash
equivalents. See "Description of Certain Securities, Other Investment Policies
and Risk Factors," below, and "Investment Policies" in the SAI for a description
of these securities.

General. Each Fund's net asset value fluctuates based mainly upon changes
in the value of its portfolio securities. Each Fund's investment objective and
certain investment policies set forth in the SAI that are designated fundamental
policies may not be changed without shareholder approval. There can be no
assurance that any Fund will achieve its investment objective.

Description of Certain Securities, Other Investment Policies and Risk Factors

American Depository Receipts and Global Depository Receipts. Growth &
Income Fund may invest in sponsored and unsponsored ADRs and GDRs. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities of foreign issuers, and other forms of depository
receipts for securities of foreign issuers. Generally, ADRs, in registered form,
are denominated in U.S. dollars and are designed for use in the U.S. securities
markets. Thus, these securities are not denominated in the same currency as the
securities into which they may be converted. In addition, the issuers of the
securities underlying unsponsored ADRs are not obligated to disclose material
information in the United States and, therefore, there may be less information
available regarding such issuers and there may not be a correlation between such
information and the market value to the ADRs. GDRs are issued globally and
evidence a

<PAGE>

similar ownership arrangement. Generally, GDRs are designed for trading in
non-U.S. securities markets. ADRs and GDRs are considered to be foreign
securities by the Fund. See "Foreign Securities--Risk Factors."

Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or
dividends paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying stock because they have
fixed income characteristics, and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases.
Lower-rated and certain unrated convertible securities are subject to certain
risks that may not be present with investments in higher-grade securities. See
"Debt Securities-Risk Factors," below, and "Risk Factors of High Yield
Securities" in the SAI.

Debt Securities--Risk Factors. The market value of debt securities,
including convertible securities, is influenced primarily by changes in the
level of interest rates. Generally, as interest rates rise, the market value of
debt securities decreases. Conversely, as interest rates fall, the market value
of debt securities increases. Factors which could result in a rise in interest
rates, and a decrease in the market value of debt securities, include an
increase in inflation or inflation expectations, an increase in the rate of U.S.
economic growth, an expansion in the Federal budget deficit, or an increase in
the price of commodities such as oil. In addition to interest rate risk, there
is also credit risk involved in investing in debt securities. Debt obligations
rated lower than Baa by Moody's or BBB by S&P, commonly referred to as "junk
bonds," are speculative and generally involve a higher risk of loss of principal
and income than higher-rated securities. See Appendix A to the SAI for a
description of corporate bond and convertible security ratings.

The prices of lower-rated debt obligations, including convertible
securities, tend to be less sensitive to interest rate changes than higher-rated
investments, but may be more sensitive to adverse economic changes or individual
corporate developments. Thus, there could be a higher incidence of default. This
would affect the value of such securities and thus a Fund's net asset value.
Further, if the issuer of a security owned by a Fund defaults, the Fund might
incur additional expenses to seek recovery. Generally, when interest rates rise,
the value of fixed rate debt obligations tends to decrease; when interest rates
fall, the value of fixed rate debt obligations tends to increase. If a Fund
experiences unexpected net redemptions in a rising interest rate market, it
might be forced to sell certain securities, regardless of investment merit. This
could result in decreasing the assets to which Fund expenses could be allocated
and in a reduced rate of return for the Fund. While it is impossible to protect
entirely against this risk, diversification of a Fund's portfolio and the
careful analysis by the Adviser or the Subadviser, as applicable, of prospective
portfolio securities should minimize the impact of a decrease in value of a
particular security or group of securities in a Fund's portfolio.

The credit ratings issued by credit rating services may not fully reflect
the true risks of an investment. For example, credit ratings typically evaluate
the safety of principal and interest payments, not market value risk, of
lower-rated debt securities. Also, credit rating agencies may fail to change on
a timely basis a credit rating to reflect changes in economic or company
conditions that

<PAGE>

affect a security's market value. Although the Adviser or the Subadviser
consider ratings of recognized rating services such as Moody's and S&P, the
Adviser or the Subadviser primarily rely on their own credit analyses, which
include a study of existing debt, capital structure, ability to service debt and
to pay dividends, the issuers sensitivity to economic conditions, its operating
history and the current trend of earnings. Growth & Income Fund may invest in
securities rated B by S&P or Moody's or, if unrated, deemed to be of comparable
quality by the Subadviser. Debt obligations with these ratings, while currently
having the capacity to meet interest payments and principal repayments, have a
greater vulnerability to default. The Subadviser continually monitors the
investments in the Fund's portfolio and carefully evaluates whether to dispose
of or retain lower-rated debt securities whose credit ratings have changed. See
Appendix A to the SAI for a description of corporate bond ratings.

Lower-rated debt securities are typically traded among a smaller number of
broker-dealers than in a broad secondary market. Purchasers of such securities
tend to be institutions, rather than individuals, which is a factor that further
limits the secondary market. To the extent that no established retail secondary
market exists, many lower-rated debt securities may not be as liquid as
higher-grade securities. A less active and thinner market for such securities
than that available for higher quality securities may result in more volatile
valuations of a Fund's holdings and more difficulty in executing trades at fair
value during unsettled market conditions. The ability of a Fund to value or sell
lower-rated debt securities will be adversely affected to the extent that such
securities are thinly traded or illiquid. See "Risks Factors of High Yield
Securities" in the SAI.

Foreign Securities--Risk Factors. Growth & Income Fund may sell a security
denominated in a foreign currency and retain the proceeds in that foreign
currency to use at a future date (to purchase other securities denominated in
that currency) or the Fund may buy foreign currency outright to purchase
securities denominated in that foreign currency at a future date. Because the
Fund does not presently intend to hedge its foreign investments against the risk
of foreign currency fluctuations, changes in the value of these currencies can
significantly affect the Fund's share price. In addition, the Fund will be
affected by changes in exchange control regulations and fluctuations in the
relative rates of exchange between the currencies of different nations, as well
as by economic and political developments. Other risks involved in foreign
securities include the following: there may be less publicly available
information about foreign companies comparable to the reports and ratings that
are published about companies in the United States; foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S. companies;
some foreign stock markets have substantially less volume than U.S. markets, and
securities of some foreign companies are less liquid and more volatile than
securities of comparable U.S. companies; there may be less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies than exist in the United States; and there may be the possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments which could affect assets of the Fund held in foreign
countries.

Hedging and Option Income Strategies. Utilities Income Fund may attempt to
reduce the overall risk of its investments (hedge) by using options and futures
contracts and may engage in certain strategies involving options to attempt to
enhance income. Growth & Income Fund may use forward currency contracts to
protect against uncertainty in the level of future exchange rates. A Fund's
ability to use these instruments may be limited by market conditions, regulatory
limits and

<PAGE>

tax considerations. Neither Fund presently intends to engage in these
strategies. See the SAI for more information regarding hedging and option income
strategies.

Money Market Instruments. Investments in commercial paper are limited to
obligations rated Prime-1 by Moody's or A-1 by S&P. Commercial paper includes
notes, drafts, or similar instruments payable on demand or having a maturity at
the time of issuance not exceeding nine months, exclusive of days of grace or
any renewal thereof. Investments in certificates of deposit will be made only
with domestic institutions with assets in excess of $500 million. See the SAI
for more information regarding money market instruments and Appendix B to the
SAI for a description of commercial paper ratings.

Mortgage-Backed Securities. Mortgage loans often are assembled into pools,
the interests in which are issued and guaranteed by an agency or instrumentality
of the U.S. Government, though not necessarily by the U.S. Government itself.
Interests in such pools are referred to herein as "mortgage-backed securities."
The market value of these securities can and will fluctuate as interest rates
and market conditions change. In addition, prepayment of principal by the
mortgagees which often occurs with mortgage-backed securities when interest
rates decline, can significantly change the realized yield of these securities.
See the SAI for more information concerning mortgage-backed securities.

Preferred Stock. A preferred stock is a blend of the characteristics of a
bond and common stock. It can offer the higher yield of a bond and has priority
over common stock in equity ownership, but does not have the seniority of a bond
and, unlike common stock, its participation in the issuer's growth may be
limited. Preferred stock has preference over common stock in the receipt of
dividends and in any residual assets after payment to creditors should the
issuer be dissolved. Although the dividend is set at a fixed annual rate, in
some circumstances it can be changed or omitted by the issuer.

Repurchase Agreements. Repurchase agreements are transactions in which a
Fund purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Each Fund's risk is limited
to the ability of the seller to repurchase the securities at the agreed-upon
price upon the delivery date. See the SAI for more information regarding
repurchase agreements.

Restricted and Illiquid Securities. Each Fund may invest up to 15% of its
net assets in illiquid securities, including (1) securities that are illiquid
due to the absence of a readily available market or due to legal or contractual
restrictions on resale and (2) repurchase agreements maturing in more than seven
days. However, illiquid securities for purposes of this limitation do not
include securities eligible for resale under Rule 144A under the Securities Act
of 1933, as amended, which the Board of Directors or the Adviser or the
Subadviser, as applicable, has determined are liquid under Board-approved
guidelines. See the SAI for more information regarding restricted and illiquid
securities.

U.S. Government Obligations. Securities issued or guaranteed as to
principal and interest by the U.S. Government include (1) U.S. Treasury
obligations which differ only in their interest rates, maturities and times of
issuance as follows: U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years) and U.S. Treasury bonds
(generally

<PAGE>

maturities of greater than ten years), and (2) obligations issued or guaranteed
by U.S. Government agencies and instrumentalities that are backed by the full
faith and credit of the U.S., such as securities issued by the Federal Housing
Administration, Government National Mortgage Association, the Department of
Housing and Urban Development, the Export-Import Bank, the General Services
Administration and the Maritime Administration and certain securities issued by
the Farmers Home Administration and the Small Business Administration. The range
of maturities of U.S. Government Obligations is usually three months to thirty
years.

Utilities Industries--Risk Factors. Many utilities companies, especially
electric and gas and other energy-related utilities companies, have historically
been subject to the risk of increases in fuel and other operating costs, changes
in interest rates on borrowings for capital improvement programs, changes in
applicable laws and regulations, and costs and operating constraints associated
with compliance with environmental regulations. In particular, regulatory
changes with respect to nuclear and conventionally-fueled power generating
facilities could increase costs or impair the ability of utilities companies to
operate such facilities or obtain adequate return on invested capital.

Certain utilities, especially gas and telephone utilities, have in recent
years been affected by increased competition, which could adversely affect the
profitability of such utilities companies. In addition, expansion by companies
engaged in telephone communication services of their non-regulated activities
into other businesses (such as cellular telephone services, data processing,
equipment retailing, computer services and financial services) has provided the
opportunity for increases in earnings and dividends at faster rates than have
been allowed in traditional regulated businesses. However, technological
innovations and other structural changes also could adversely affect the
profitability of such companies.

Because securities issued by utilities companies are particularly
sensitive to movement in interest rates, the equity securities of such companies
are more affected by movement in interest rates than are the equity securities
of other companies.

Each of these risks could adversely affect the ability and inclination of
public utilities companies to declare or pay dividends and the ability of
holders of common stock, such as Utilities Income Fund, to realize any value
from the assets of the company upon liquidation or bankruptcy.

Portfolio Turnover. U.S.A. Mid-Cap Opportunity Fund had an increase in
trading activity in 1995 because the Adviser restructured the Fund's portfolio
to increase the diversity of the Fund's holdings. This resulted in a portfolio
turnover rate of 106% for the Fund for the fiscal year ended October 31, 1995. A
high rate of portfolio turnover generally leads to increased transaction costs
and may result in a greater number of taxable transactions. See the SAI for the
portfolio turnover rates for Growth & Income Fund and Utilities Income Fund and
for more information on portfolio turnover.

ALTERNATIVE PURCHASE PLANS

Each Fund has two classes of shares, Class A and Class B, which represent
interests in the same portfolio of securities and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that each class (i) is subject to a different sales charge and bears its
separate distribution and certain other class expenses; (ii) has exclusive
voting rights with respect to matters affecting only that class; and (iii) has
different exchange privileges.

<PAGE>

Class A Shares. Class A shares are sold with an initial sales charge of up
to 6.25% of the amount invested with discounts available for volume purchases.
Class A shares pay a 12b-1 fee at the annual rate of 0.30% of each Fund's
average daily net assets attributable to Class A shares, of which no more than
0.25% may be paid as a service fee and the balance thereof paid as an
asset-based sales charge. The initial sales charge is waived for certain
purchases and a CDSC may be imposed on such purchases. See "How to Buy Shares."

Class B Shares. Class B shares are sold without an initial sales charge,
but are generally subject to a CDSC which declines in steps from 4% to 0% during
a six-year period and bear a higher 12b-1 fee than Class A shares. Class B
shares pay a 12b-1 fee at the annual rate of 1.00% of each Fund's average daily
net assets attributable to Class B shares, of which no more than 0.25% may be
paid as a service fee and the balance thereof paid as an asset-based sales
charge. Class B shares automatically convert into Class A shares after eight
years. See "How to Buy Shares."

Factors to Consider in Choosing a Class of Shares. In deciding which
alternative is most suitable, an investor should consider several factors, as
discussed below. Regardless of whether an investor purchases Class A or Class B
shares, your Representative, as defined under "How to Buy Shares," receives
compensation for selling shares of a Fund, which may differ for each class.

The principal advantages of purchasing Class A shares are the lower
overall expenses, the availability of quantity discounts on volume purchases and
certain account privileges which are not offered to Class B shareholders. If an
investor plans to make a substantial investment, the sales charge on Class A
shares may either be lower due to the reduced sales charges available on volume
purchases of Class A shares or waived for certain eligible purchasers. Because
of the reduced sales charge available on quantity purchases of Class A shares,
it is recommended that investments of $250,000 or more be made in Class A
shares. Investments in excess of $1,000,000 will only be accepted as purchases
of Class A shares. Distributions paid by each Fund with respect to Class A
shares will also generally be greater than those paid with respect to Class B
shares because expenses attributable to Class A shares will generally be lower.

The principal advantage of purchasing Class B shares is that, since no
initial sales charge is paid, all of an investor's money is put to work from the
outset. Furthermore, although any investment in a Fund should only be viewed as
a long-term investment, if a redemption must be made soon after purchase, an
investor will pay a lower sales charge than if Class A shares had been
purchased. Conversely, because Class B shares are subject to a higher
asset-based sales charge, long-term Class B shareholders may pay more in an
asset-based sales charge than the economic equivalent of the maximum sales
charge on Class A shares. The automatic conversion of Class B shares into Class
A shares is designed to reduce the probability of this occurring.

HOW TO BUY SHARES

You may buy shares of a Fund through a First Investors registered
representative ("FIC Representative") or through a registered representative
("Dealer Representative") of an unaffiliated broker-dealer ("Dealer") which is
authorized to sell shares of a Fund. Your FIC Representative or Dealer
Representative (each, a "Representative") may help you complete and submit an
application to open an account with a Fund. Applications accompanied by checks
drawn on U.S. banks made payable to "FIC" received in FIC's Woodbridge offices
by the close of regular trading on the NYSE, generally 4:00 P.M. (New York City
time), will be processed and shares will be purchased at the

<PAGE>

public offering price determined at the close of regular trading on the NYSE on
that day. Orders given to Representatives before the close of regular trading on
the NYSE and received by FIC at their Woodbridge offices before the close of its
business day, generally 5:00 P.M. (New York City time), will be executed at the
public offering price determined at the close of regular trading on the NYSE on
that day. It is the responsibility of Representatives to promptly transmit
orders they receive to FIC. The "public offering price" is defined in this
Prospectus as net asset value plus the applicable sales charge for Class A
shares and net asset value for Class B shares. Each Fund reserves the right to
reject any application or order for its shares for any reason and to suspend the
offering of its shares.

Due to emergency conditions, such as snowstorms, the Transfer Agent's
offices may not be open for business on a day when the NYSE is open for regular
trading and, therefore, would be unable to execute purchase orders. Should this
occur, purchase orders will be executed at the public offering price determined
at the close of regular trading on the NYSE on the next business day that the
Transfer Agent's offices are open for business.

When you open a Fund account, you must specify which class of shares you
wish to purchase. If you do not specify which class of shares you wish to
purchase, your order will be processed according to procedures established by
the Adviser. For more information, see the SAI.

Initial Investment in a Fund. You may open a Fund account with as little
as $1,000. This account minimum is waived if you open an account for a
particular class of shares through a full exchange of shares of the same class
of another "Eligible Fund," as defined below. Class A share accounts opened
through an exchange of shares from First Investors Cash Management Fund, Inc. or
First Investors Tax-Exempt Money Market Fund, Inc. (collectively, "Money Market
Funds") may be subject to an initial sales charge. You may open a Fund account
with $250 for individual retirement accounts ("IRAs") or, at the Fund's
discretion, a lesser amount for Simplified Employee Pension Plans ("SEPs"),
salary reduction SEPs ("SARSEPs") and qualified or other retirement plans.
Automatic investment plans allow you to open an account with as little as $50,
provided you invest at least $600 a year. See "Systematic Investing."

Additional Purchases. After you make your first investment in a Fund, you
may purchase additional shares of a Fund by mailing a check made payable to FIC,
directly to First Investors Corporation, 581 Main Street, Woodbridge, NJ
07095-1198, Attn: Dept. CP. Include your account number on the face of the
check. There is no minimum on additional purchases of Fund shares.

Eligible Funds. The funds in the First Investors family of funds, except
as noted below, are eligible to participate in certain shareholder privileges
noted in this Prospectus and the SAI (singularly, "Eligible Fund" and,
collectively, "Eligible Funds"). First Investors Special Bond Fund, Inc., First
Investors Life Series Fund and First Investors U.S. Government Plus Fund are not
deemed to be Eligible Funds. The Money Market Funds, unless otherwise noted, are
not deemed to be Eligible Funds. The series of Executive Investors Trust
("Executive Investors") are deemed to be Eligible Funds provided the shares of
any such series either have been (a) acquired through an exchange from an
Eligible Fund which imposes a maximum sales charge of 6.25%, or (b) held for at
least one year from their date of purchase.

Systematic Investing. You may arrange for automatic investments in a Fund
on a systematic basis through First Investors Money Line and through automatic
payroll investments. You may also

<PAGE>

elect to invest in Class A shares of a Fund at net asset value all the cash
distributions or Systematic Withdrawal Plan payments from the same class of
shares of another Eligible Fund. If you wish to participate in any of these
systematic investment plans, please call Shareholder Services at 1-800- 423-4026
or see the SAI.

Class A Shares. Class A shares of each Fund are sold at the public
offering price, which will vary with the size of the purchase, as shown in the
following table:

Sales Charge as % of Concession to
Offering Net Amount Dealers as % of
Amount of Investment Price Invested Offering Price
- -------------------- --------- ------------- ---------------
Less than $25,000.................. 6.25% 6.67% 5.13%
$25,000 but under $50,000.......... 5.75 6.10 4.72
$50,000 but under $100,000......... 5.50 5.82 4.51
$100,000 but under $250,000........ 4.50 4.71 3.69
$250,000 but under $500,000........ 3.50 3.63 2.87
$500,000 but under $1,000,000...... 2.50 2.56 2.05

There is no sales charge on transactions of $1 million or more, including
transactions of this amount which are subject to the Cumulative Purchase
Privilege or a Letter of Intent. The Underwriter will pay from its own resources
a sales commission to FIC Representatives and a concession equal to 0.90% of the
amount invested to Dealers on such purchases. If shares are redeemed within 24
months of purchase (this holding period is 18 months for shares purchased prior
to May 1, 1995), a CDSC of 1.00% will be deducted from the redemption proceeds.
The CDSC will be applied in the same manner as the CDSC on the Class B shares.
See "Class B Shares."

Cumulative Purchase Privilege and Letters of Intent. You may purchase
Class A shares of a Fund at a reduced sales charge through the Cumulative
Purchase Privilege or by executing a Letter of Intent. For more information, see
the SAI, call your Representative or call Shareholder Services at
1-800-423-4026.

Waivers of Class A Sales Charges. Sales charges on Class A shares do not
apply to: (1) any purchase by an officer, director, trustee or full-time
employee (who has completed the introductory period) of a Fund, the Underwriter,
the Adviser, or their affiliates, by a Representative, or by the spouse, or by
the children and grandchildren under the age of 21 of any such person; (2) any
purchase by a former officer, director, trustee or full-time employee of Series
Fund II, the Underwriter, the Adviser, or their affiliates, or by a former FIC
Representative; provided they had acted as such for at least five years and had
retired or otherwise terminated the relationship in good standing; (3) the
proceeds of any settlement reached with FIC, FIMCO and/or certain First
Investors funds; (4) any reinvestment of the loan repayments by a participant in
a loan program of any First Investors sponsored qualified retirement plan; and
(5) a purchase with proceeds from the liquidation of a First Investors Life
Variable Annuity Fund A contract or a First Investors Life Variable Annuity Fund
C contract during the one-year period preceding the maturity date of the
contract.

The sales charge will be waived on any purchases of Class A shares by a
participant in a Qualified Plan account, as defined under "Retirement Plans," if
the purchase is made with the proceeds from a redemption of shares of a fund in
another fund group on which either an initial sales charge or a CDSC has been
paid.

<PAGE>

Additionally, policyholders of participating life insurance policies
issued by First Investors Life Insurance Company ("FIL"), an affiliate of the
Adviser and Underwriter, may elect to invest dividends earned on such policies
in Class A shares of a Fund at net asset value, provided the annual dividend is
at least $50 and the policyholder has an existing account with the Fund.

Holders of certain unit trusts ("Unitholders") who have elected to invest
the entire amount of cash distributions from either principal, interest income
or capital gains or any combination thereof ("Unit Distributions") from the
following trusts may invest such Unit Distributions in Class A shares of a Fund
at a reduced sales charge. Unitholders of various series of New York Insured
Municipals-Income Trust sponsored by Van Kampen Merritt Inc. (the "New York
Trust"); Unitholders of various series of the Multistate Tax Exempt Trust
sponsored by Advest Inc.; and Unitholders of various series of the Municipal
Insured National Trust, J.C. Bradford & Co. as agent, may purchase Class A
shares of a Fund with Unit Distributions at an offering price which is the net
asset value per share plus a sales charge of 1.5%. Unitholders of various series
of tax-exempt trusts, other than the New York Trust, sponsored by Van Kampen
Merritt Inc. may purchase Class A shares of a Fund with Unit Distributions at an
offering price which is the net asset value per share plus a sales charge of
1.0%. Each Fund's initial minimum investment requirement is waived for purchases
of Class A shares with Unit Distributions. Shares of a Fund purchased by
Unitholders may be exchanged for Class A shares of any Eligible Fund subject to
the terms and conditions set forth under "How to Exchange Shares."

Retirement Plans. You may invest in shares of a Fund through an IRA, SEP,
SARSEP or any other retirement plan. Participant-directed plans, such as 401(k)
plans, profit sharing and money purchase plans and 403(b) plans, that are
subject to Title I of ERISA (each, a "Qualified Plan") are entitled to a reduced
sales charge provided the number of employees eligible to participate is 99 or
less, as follows:

Sales Charge as % of Concession to
Offering Net Amount Dealers as % of
Price Invested Offering Price
3.00% 3.09% 2.55%

There is no sales charge on purchases through a Qualified Plan with 100 or
more eligible employees. A CDSC of 1.00% will be deducted from the redemption
proceeds of such accounts for redemptions made within 24 months of purchase. The
CDSC will be applied in the same manner as the CDSC on Class B shares. See
"Class B Shares." The Underwriter will pay from its own resources a sales
commission to FIC Representatives and a concession equal to 0.90% of the amount
invested to Dealers on such purchases. These sales charges will be available
regardless of whether the account is registered with the Transfer Agent in the
name of the individual participant or the sponsoring employer or plan trustee. A
Qualified Plan account will be subject to the lower of the sales charge for
Qualified Plans or the sales charge for the purchase of Fund shares (see page
16).

Class B Shares. The public offering price of Class B shares of each Fund
is the next determined net asset value, with no initial sales charge imposed. A
CDSC, however, is imposed upon most redemptions of Class B shares at the rates
set forth below:

<PAGE>

Contingent Deferred Sales Charge
Year Since Purchase as a Percentage of Dollars Invested
Payment Made or Redemption Proceeds

First........................ 4%
Second....................... 4
Third........................ 3
Fourth....................... 3
Fifth........................ 2
Sixth........................ 1
Seventh and thereafter....... 0

The CDSC will not be imposed on (1) the redemption of Class B shares
acquired as dividends or other distributions, or (2) any increase in the net
asset value of redeemed shares above their initial purchase price (in other
words, the CDSC will be imposed on the lower of net asset value or purchase
price). In determining whether a CDSC is payable on any redemption, it will be
assumed that the redemption is made first of any Class B shares acquired as
dividends or distributions, second of Class B shares that have been held for a
sufficient period of time such that the CDSC no longer is applicable to such
shares and finally of Class B shares held longest during the period of time that
a CDSC is applicable to such shares. This will result in your paying the lowest
possible CDSC.

As an example, assume an investor purchased 100 shares of Class B shares
at $10 per share for a total cost of $1,000 and in the second year after
purchase, the net asset value per share is $12 and, during such time, the
investor has acquired 10 additional Class B shares as dividends. If at such time
the investor makes his or her first redemption of 50 shares (proceeds of $600),
10 shares will not be subject to a CDSC charge because redemptions are first
made of shares acquired through dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4.00% (the
applicable rate in the second year after purchase).

For purposes of determining the CDSC on Class B shares, all purchases made
during a calendar month will be deemed to have been made on the first business
day of that month at the average cost of all purchases made during that month.
The holding period of Class B shares acquired through an exchange with another
Eligible Fund will be calculated from the first business day of the month that
the Class B shares were initially acquired in the other Eligible Fund. The
amount of any CDSC will be paid to FIC. The CDSC imposed on the purchase of
Class B shares will be waived under certain circumstances. See "Waivers of CDSC
on Class B Shares" in the SAI.

Conversion of Class B Shares. A shareholder's Class B shares will
automatically convert to Class A shares approximately eight years after the date
of purchase, together with a pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class B shares. The Class B
shares so converted will no longer be subject to the higher expenses borne by
Class B shares. The conversion will be effected at the relative net asset values
per share of the two classes on the first business day of the month following
that in which the eighth anniversary of the purchase of the Class B shares
occurs. If a shareholder effects one or more exchanges between Class B shares of
the Eligible Funds during the eight-year period, the holding period for the
shares so exchanged will commence upon the date of the purchase of the original
shares. Because the per

<PAGE>

share net asset value of the Class A shares may be higher than that of the Class
B shares at the time of conversion, a shareholder may receive fewer Class A
shares than the number of Class B shares converted. See "Determination of Net
Asset Value."

General. The Underwriter may at times agree to reallow to Dealers up to an
additional 0.25% of the dollar amount of shares of the Funds and/or certain
other First Investors funds sold by such Dealers during a specific period of
time. From time to time, the Underwriter also will pay, through additional
reallowances or other sources, a bonus or other compensation to Dealers which
employ a Dealer Representative who sells a minimum dollar amount of the shares
of the Funds and/or certain other First Investors or Executive Investors funds
during a specific period of time. Such bonus or other compensation may take the
form of reimbursement of certain seminar expenses, co-operative advertising, or
payment for travel expenses, including lodging incurred in connection with trips
taken by qualifying Dealer Representatives to the Underwriter's principal office
in New York City.

HOW TO EXCHANGE SHARES

Should your investment needs change, you may exchange, at net asset value,
shares of a Fund for shares of any Eligible Fund, including the Money Market
Funds. In addition, Class A shares of a Fund may be exchanged at net asset value
for units of any single payment plan ("plan") sponsored by the Underwriter.
Shares of a particular class may be exchanged only for shares of the same class
of another fund. Exchanges can only be made into accounts registered to
identical owners. If your exchange is into a new account, it must meet the
minimum investment and other requirements of the fund or plan into which the
exchange is being made. Additionally, the fund or plan must be available for
sale in the state where you reside. Before exchanging Fund shares for shares of
another fund or plan, you should read the Prospectus of the fund or plan into
which the exchange is to be made. You may obtain Prospectuses and information
with respect to which funds or plans qualify for the exchange privilege free of
charge by calling Shareholder Services at 1-800- 423-4026. Exchange requests
received in "good order" by the Transfer Agent before the close of regular
trading on the NYSE will be processed at the net asset value determined as of
the close of regular trading on the NYSE on that day; exchange requests received
after that time will be processed on the following trading day.

Exchanges By Mail. To exchange shares by mail, you should mail requests to
Administrative Data Management Corp. (the "Transfer Agent"), 581 Main Street,
Woodbridge, NJ 07095-1198. Shares will be exchanged after the request is
received in "good order" by the Transfer Agent. "Good order" means that an
exchange request must include: (1) the names of the funds, account numbers (if
existing accounts), the dollar amount, number of shares or percentage of the
account you wish to exchange; and (2) the signature of all registered owners
exactly as the account is registered. If the request is not in good order or
information is missing, the Transfer Agent will seek additional information from
you and process the exchange on the day it receives such information. Certain
account registrations may require additional legal documentation in order to
exchange. To review these requirements, please call Shareholder Services at
1-800-423-4026.

Exchanges By Telephone. See "Telephone Transactions."

Additional Exchange Information. Exchanges should be made for investment
purposes only. A pattern of frequent exchanges may be contrary to the best
interests of a Fund's other shareholders. Accordingly, each Fund has the right,
at its sole discretion, to limit the amount of an exchange, reject

<PAGE>

any exchange, or, upon 60 days' notice, materially modify or discontinue the
exchange privilege. Each Fund will consider all relevant factors in determining
whether a particular frequency of exchanges is contrary to the best interests of
the Fund and/or a class of the Fund and its other shareholders. Any such
restriction will be made by a Fund on a prospective basis only, upon notice to
the shareholder not later than ten days following such shareholder's most recent
exchange.

HOW TO REDEEM SHARES

You may redeem your Fund shares at the next determined net asset value,
less any applicable CDSC, on any day the NYSE is open, directly through the
Transfer Agent. Your Representative may help you with this transaction. Shares
may be redeemed by mail or telephone (provided written authorization for
telephone transactions is on file). Redemption requests received in "good order"
by the Transfer Agent before the close of regular trading on the NYSE, will be
processed at the net asset value, less any applicable CDSC, determined as of the
close of regular trading on the NYSE on that day. Payment of redemption proceeds
will be made within three days. If the shares being redeemed were recently
purchased by check, payment may be delayed to verify that the check has been
honored, normally not more than fifteen days.

Due to emergency conditions, such as snowstorms, the Transfer Agent's
offices may not be open for business on a day when the NYSE is open for regular
trading and, therefore, would be unable to execute redemption requests. Should
this occur, redemption requests will be executed at the public offering price
determined at the close of regular trading on the NYSE on the next business day
that the Transfer Agent's offices are open for business.

Redemptions By Mail. Written redemption requests should be mailed to
Administrative Data Management Corp., 581 Main Street, Woodbridge, NJ
07095-1198. For your redemption request to be in good order, you must include:
(1) the name of the Fund; (2) your account number; (3) the dollar amount, number
of shares or percentage of the account you want redeemed; (4) share
certificates, if issued; (5) the original signatures of all registered owners
exactly as the account is registered; (6) signature guarantees as described
below; and (7) additional documents required for redemptions by corporations,
trusts, partnerships, organizations, retirement, pension or profit sharing plans
and for requests from anyone other than the shareholder(s) of record. If your
redemption request is not in good order or information is missing, the Transfer
Agent will seek additional information and process the redemption on the day it
receives such information. Certain account registrations may require additional
legal documentation in order to redeem. To review these requirements, please
call Shareholder Services at 1-800-423-4026.

Signature Guarantees. In order to protect you, the Funds and their agents,
each Fund reserves the right to require signature guarantees in order to process
certain exchange or redemption requests. Members of the STAMP (Securities
Transfer Agents Medallion Program), MSP (New York Stock Exchange Medallion
Signature Program), SEMP (Stock Exchanges Medallion Program) and FIC are
eligible signature guarantors. A notary public is not an acceptable guarantor.
See the SAI or call Shareholder Services at 1-800-423-4026 for instances when
signature guarantees are required.

Redemptions By Telephone. See "Telephone Transactions."

Systematic Withdrawal Plan. If you own noncertificated shares, you may set
up a plan for redemptions to be made automatically at regular intervals. You may
elect to have the payments
20

<PAGE>

automatically (a) sent directly to you or persons you designate; or (b) invested
in shares of the same class of any other Eligible Fund, including the Money
Market Funds; or (c) paid to FIL for the purchase of a life insurance policy or
a variable annuity. See the SAI for more information on the Systematic
Withdrawal Plan. To establish a Systematic Withdrawal Plan, call Shareholder
Services at 1-800-423-4026.

Repurchase through Underwriter. You may redeem Class A shares for which a
certificate has been issued through a Dealer. In this event, the Underwriter,
acting as agent for each Fund, will offer to repurchase or accept an offer to
sell such shares at a price equal to the net asset value next determined after
the making of such offer. The Dealer may charge you an added commission for
handling any redemption transaction.

Redemption of Low Balance Accounts. Because each Fund incurs certain fixed
costs in maintaining shareholder accounts, each Fund may redeem without your
consent, on at least 60 days' prior written notice (which may appear on your
account statement), any Fund account of Class A or Class B shares which has a
net asset value of less than $500. To avoid such redemption, you may, during
such 60-day period, purchase additional Fund shares of the same class so as to
increase your account balance to the required minimum. There will be no CDSC
imposed on such redemptions of Class B shares. A Fund will not redeem accounts
that fall below $500 solely as a result of a reduction in net asset value.
Accounts established under a Systematic Investment Plan which have been
discontinued prior to meeting the $1,000 minimum are subject to this policy.

Additional information concerning how to redeem shares of the Fund is
available upon request to your Representative or Shareholder Services at
1-800-423-4026.

TELEPHONE TRANSACTIONS

You may redeem or exchange noncertificated shares of a Fund by calling the
Special Services Department at 1-800-342-6221 weekdays (except holidays) between
9:00 A.M. and 5:00 P.M. (New York City time). Exchange or redemption requests
received before the close of regular trading on the NYSE, will be processed at
the net asset value, less any applicable CDSC, determined as of the close of
business on that day. For more information on telephone privileges, please call
Shareholder Services at 1-800-423-4026 or see the SAI.

Telephone Exchanges. Exchange requests may be made by telephone (for
shares held on deposit only). You are limited to one telephone exchange within
any 30-day period for each account authorized. Telephone exchanges to Money
Market Funds are not available if your address of record has changed within 60
days prior to the exchange request. Telephone exchange instructions will be
accepted from any one owner.

<PAGE>

Telephone Redemptions. The telephone redemption privilege may be used
provided: (1) the redemption proceeds are being mailed to the address of record;
(2) your address of record has not changed within the past 60 days; (3) the
shares to be redeemed have not been issued in certificate form; (4) the proceeds
of the redemption do not exceed $50,000; and (5) shares have not been redeemed
by telephone from the account in the past 30 days. For joint accounts, telephone
redemption instructions will be accepted from any one owner.

Additional Information. Series Fund II, the Adviser, the Underwriter and
their officers, directors and employees will not be liable for any loss, damage,
cost or expense arising out of any instruction (or any interpretation of such
instruction) received by telephone which they reasonably believe to be
authentic. In acting upon telephone instructions, these parties use procedures
which are reasonably designed to ensure that such instructions are genuine. This
policy places the entire risk of loss for unauthorized or fraudulent
transactions on the shareholder, except that if Series Fund II, the Adviser, the
Underwriter and their officers, directors and employees do not follow reasonable
procedures, some or all of them may be liable for any such losses. For more
information on telephone transactions see the SAI. Each Fund has the right, at
its sole discretion, upon 60 days' notice, to materially modify or discontinue
the telephone exchange and redemption privilege. During times of drastic
economic or market changes, telephone exchanges or redemptions may be difficult
to implement. If you experience difficulty in making a telephone exchange or
redemption, your exchange or redemption request may be made by regular or
express mail, and it will be implemented at the next determined net asset value,
less any applicable CDSC, following receipt by the Transfer Agent.

MANAGEMENT

Board of Directors. Series Fund II's Board of Directors, as part of its
overall management responsibility, oversees various organizations responsible
for each Fund's day-to-day management.

Adviser. First Investors Management Company, Inc. supervises and manages
each Fund's investments, supervises all aspects of each Fund's operations and,
for U.S.A. Mid-Cap Opportunity Fund and Utilities Income Fund, determines those
Funds' portfolio transactions. The Adviser is a New York corporation located at
95 Wall Street, New York, NY 10005. The Adviser presently acts as investment
adviser to 14 mutual funds. First Investors Consolidated Corporation ("FICC")
owns all of the voting common stock of the Adviser and all of the outstanding
stock of FIC and the Transfer Agent. Mr. Glenn O. Head (and members of his
family) and Mrs. Julie W. Grayson (as executrix of the estate of her deceased
husband, David D. Grayson) are controlling persons of FICC and, therefore,
jointly control the Adviser.

As compensation for its services, the Adviser receives an annual fee from
each of the Funds, which is payable monthly. For the fiscal year ended October
31, 1995, advisory fees, net of waiver for Growth & Income Fund, U.S.A. Mid-Cap
Opportunity Fund and Utilities Income Fund were 0.53%, 0.58% and 0.46%,
respectively, of each Fund's average daily net assets.

Each Fund bears all expenses of its operations other than those incurred
by the Adviser or Underwriter under the terms of its advisory or underwriting
agreements. Fund expenses include, but are not limited to: the advisory fee;
shareholder servicing fees and expenses; custodian fees and expenses; legal and
auditing fees; expenses of communicating to existing shareholders, including

<PAGE>

preparing, printing and mailing prospectuses and shareholder reports to such
shareholders; and proxy and shareholder meeting expenses.

Subadviser-Growth & Income Fund. Wellington Management Company has been
retained by the Adviser and Series Fund II as the investment subadviser to
Growth & Income Fund. The Adviser has delegated discretionary trading authority
to WMC with respect to all of the Fund's assets, subject to the continuing
oversight and supervision by the Adviser. As compensation for its services, WMC
is paid by the Adviser, and not by the Fund, a fee which is computed daily and
paid monthly.

WMC, located at 75 State Street, Boston, MA 02109, is a Massachusetts
general partnership of which Robert W. Doran, Duncan M. McFarland and John R.
Ryan are Managing Partners. WMC is a professional investment counseling firm
which provides investment services to investment companies, employee benefit
plans, endowment funds, foundations and other institutions and individuals. As
of December 31, 1995, WMC held investment management authority with respect to
approximately $109.2 billion of assets. Of that amount, WMC acted as investment
adviser or subadviser to approximately 110 registered investment companies or
series of such companies, with net assets of approximately $76.1 billion as of
December 31, 1995. WMC is not affiliated with the Adviser or any of its
affiliates.

For the fiscal year ended October 31, 1995, the Subadviser's fees amounted
to 0.32% of Growth & Income Fund's average daily net assets, all of which was
paid by the Adviser and not by the Fund.

Portfolio Managers. Patricia D. Poitra, Director of Equities, has been
primarily responsible for the day-to-day management of the U.S.A. Mid-Cap
Opportunity Fund since October 1994. Ms. Poitra is assisted by a team of
portfolio analysts. Ms. Poitra also is responsible for the management of the
Special Situation Series, the Blue Chip Series and the small capitalization
equity portion of the Total Return Series, all Series of First Investors Series
Fund. In addition, Ms. Poitra is responsible for the management of the Blue Chip
Fund and Discovery Fund of First Investors Life Series Fund and the Blue Chip
Fund of Executive Investors Trust. Ms. Poitra joined FIMCO in 1985 as a Senior
Equity Analyst.

Margaret R. Haggerty has been Portfolio Manager for Utilities Income Fund
since its inception in February 1993. Ms. Haggerty joined FIMCO in 1990 as an
analyst for several First Investors equity funds. In addition, she monitored the
management of several First Investors funds for which WMC was the subadviser.
Ms. Haggerty has been Portfolio Manager of the Utilities Income Fund of First
Investors Life Series Fund since its inception in November 1993.

Growth & Income Fund has been managed since its inception in 1993 by Laura
J. Allen, Vice President of WMC. Ms. Allen joined WMC in 1981 as a portfolio
assistant and became a portfolio manager in 1984.

Brokerage. Each Fund may allocate brokerage commissions, if any, to
broker-dealers in consideration of Fund share distribution, but only when
execution and price are comparable to that offered by other broker-dealers. See
the SAI for more information on allocation of portfolio brokerage.

<PAGE>

Underwriter. Series Fund II has entered into an Underwriting Agreement
with First Investors Corporation, 95 Wall Street, New York, NY 10005, as
Underwriter. The Underwriter receives all sales charges in connection with the
sale of each Fund's Class A shares and all contingent deferred sales charges in
connection with each Fund's Class B shares and may receive payments under a plan
of distribution. See "How to Buy Shares" and "Distribution Plans."

DISTRIBUTION PLANS

Pursuant to separate distribution plans pertaining to each Fund's Class A
and Class B shares ("Class A Plan" or "Class B Plan," and collectively,
"Plans"), each Fund is authorized to compensate the Underwriter for certain
expenses incurred in the distribution of that Fund's shares ("distribution
fees") and the servicing or maintenance of existing Fund shareholder accounts
("service fees"). Pursuant to the Plans, distribution fees are paid for
activities relating to the distribution of Fund shares, including costs of
printing and dissemination of sales material or literature, prospectuses and
reports used in connection with the sale of Fund shares. Service fees are paid
for the ongoing maintenance and servicing of existing shareholder accounts,
including payments to Representatives who provide shareholder liaison services
to their customers who are holders of that Fund, provided they meet certain
criteria.

Pursuant to the Class A Plan, each Fund is authorized to pay the
Underwriter a distribution fee at the annual rate of 0.05% of that Fund's
average daily net assets attributable to Class A shares and a service fee of
0.25% of that Fund's average daily net assets attributable to Class A shares.
Pursuant to the Class B Plan, each Fund is authorized to pay the Underwriter a
distribution fee at the annual rate of 0.75% of that Fund's average daily net
assets attributable to Class B shares and a service fee of 0.25% of that Fund's
average daily net assets attributable to Class B shares. Payments made to the
Underwriter under the Plans represent compensation for distribution and service
activities, not reimbursement for specific expenses incurred.

Although Class B shares are sold without an initial sales charge, the
Underwriter pays from its own resources a sales commission to FIC
Representatives and a concession equal to 3.5% of the amount invested to Dealers
who sell Class B shares. In addition, the Underwriter will make quarterly
payments of service fees to Representatives commencing after the thirteenth
month following the initial sale of Class B shares. The Underwriter will make
such payments at an annual rate of up to 0.25% of the average net asset value of
Class B shares which are attributable to shareholders for whom the
Representatives are designated as dealer of record.

A Fund may suspend or modify payments under the Plans at any time, and
payments are subject to the continuation of each Plan, the terms of any dealer
agreements between Dealers and the Underwriter and any applicable limits imposed
by the NASD. Each Fund will not carry over any fees under the Plans to the next
fiscal year. See "Distribution Plans" in the SAI for a full discussion of the
various Plans.

DETERMINATION OF NET ASSET VALUE

The net asset value of each Fund's shares fluctuates and is determined
separately for each class of shares. The per share net asset value of the Class
B shares will generally be lower than that of the Class A shares because of the
higher expenses borne by the Class B shares. The net asset value of shares of a
given class of each Fund is determined as of the close of regular trading on the
NYSE

<PAGE>

(generally 4:00 P.M., New York City time) on each day the NYSE is open for
trading, and at such other times as the Board of Directors deems necessary, by
dividing the market value of the securities held by such Fund, plus any cash and
other assets, less all liabilities, by the number of shares of the applicable
class outstanding. If there is no available market value, securities will be
valued at their fair value as determined in good faith pursuant to procedures
adopted by the Board of Directors. The NYSE currently observes the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

DIVIDENDS AND OTHER DISTRIBUTIONS

Dividends from net investment income are generally declared and paid
quarterly by Growth & Income Fund and Utilities Income Fund and annually by
U.S.A. Mid-Cap Opportunity Fund. Unless you direct the Transfer Agent otherwise,
dividends declared on a class of shares of a Fund are paid in additional shares
of that class at the net asset value generally determined as of the close of
business on the business day immediately following the record date of the
dividend. Net investment income includes interest, earned discount, dividends
and other income earned on portfolio securities less expenses.

Each Fund also distributes with its regular dividend at the end of each
year substantially all of its net capital gain (the excess of net long-term
capital gain over net short-term capital loss) and net short-term capital gain,
if any, after deducting any available capital loss carryovers and, for Growth &
Income Fund, any net realized gains from foreign currency transactions. Unless
you direct the Transfer Agent otherwise, these distributions are paid in
additional shares of the same class of the distributing Fund at the net asset
value generally determined as of the close of business on the business day
immediately following the record date of the distribution. A Fund may make an
additional distribution in any year if necessary to avoid a Federal excise tax
on certain undistributed income and capital gain.

Dividends and other distributions paid on both classes of a Fund's shares
are calculated at the same time and in the same manner. Dividends on Class B
shares of a Fund are expected to be lower than those for its Class A shares
because of the higher distribution fees borne by the Class B shares. Dividends
on each class also might be affected differently by the allocation of other
class-specific expenses.

In order to be eligible to receive a dividend or other distribution, you
must own Fund shares as of the close of business on the record date of the
distribution. You may elect to receive dividends and/or other distributions in
cash by notifying the Transfer Agent by telephone or in writing prior to the
record date of any such distribution. If you elect this form of payment, the
payment date generally is two weeks following the record date of any such
distribution. Your election remains in effect until you revoke it by written
notice to the Transfer Agent.

You may elect to invest the entire amount of any cash distribution on
Class A shares in shares of the same class of any Eligible Fund, including the
Money Market Funds, by notifying the Transfer Agent. See the SAI or call
Shareholder Services at 1-800-423-4026 for more information. The investment will
be made at the net asset value per share of the other fund, generally determined
as of the close of business, on the business day immediately following the
record date of any such distribution.

<PAGE>

A dividend or other distribution paid on a class of shares of a Fund will
be paid in additional shares of that class and not in cash if any of the
following events occurs: (1) the total amount of the distribution is under $5,
(2) the Fund has received notice of your death on an individual account (until
written alternate payment instructions and other necessary documents are
provided by your legal representative), or (3) a distribution check is returned
to the Transfer Agent, marked as being undeliverable, by the U.S. Postal Service
after two consecutive mailings.

TAXES

Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended, so that
it will be relieved of Federal income tax on that part of its investment company
taxable income (consisting generally of net investment income, net short-term
capital gain and, for Growth & Income Fund, net gains from certain foreign
currency transactions) and net capital gain that is distributed to its
shareholders.

Dividends from a Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits,
whether paid in cash or in additional Fund shares. Distributions of a Fund's net
capital gain, when designated as such, are taxable to you as long-term capital
gain, whether paid in cash or in additional Fund shares, regardless of the
length of time you have owned your shares. If you purchase shares shortly before
the record date for a dividend or other distribution, you will pay full price
for the shares and receive some portion of the price back as a taxable
distribution. You will receive an annual statement following the end of each
calendar year describing the tax status of distributions paid by your Fund
during that year.

Each Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to you (if you are an individual
or certain other non-corporate shareholder) if the Fund is not furnished with
your correct taxpayer identification number, and that percentage of dividends
and such distributions in certain other circumstances.

Your redemption of Fund shares will result in a taxable gain or loss to
you, depending on whether the redemption proceeds are more or less than your
adjusted basis for the redeemed shares (which normally includes any initial
sales charge paid on Class A shares). An exchange of Fund shares for shares of
any Eligible Fund generally will have similar tax consequences. However, special
tax rules apply when a shareholder (1) disposes of Class A shares through a
redemption or exchange within 90 days of purchase and (2) subsequently acquires
Class A shares of an Eligible Fund without paying a sales charge due to the
90-day reinvestment privilege or exchange privilege. In these cases, any gain on
the disposition of the original Class A shares will be increased, or loss
decreased, by the amount of the sales charge paid when the shares were acquired,
and that amount will increase the basis of the Eligible Fund's shares
subsequently acquired. In addition, if you purchase Fund shares within 30 days
before or after redeeming other shares of that Fund (regardless of class) at a
loss, all or a portion of the loss will not be deductible and will increase the
basis of the newly purchased shares. No gain or loss will be recognized to a
shareholder as a result of a conversion of Class B shares into Class A shares.

The foregoing is only a summary of some of the important Federal tax
considerations generally affecting each Fund and its shareholders; see the SAI
for a further discussion. There may be other Federal, state and local tax
considerations applicable to a particular investor. You therefore are urged to
consult you own tax adviser.

<PAGE>

PERFORMANCE INFORMATION

For purposes of advertising, each Fund's performance may be calculated for
each class of its shares based on average annual total return and total return.
Each of these figures reflects past performance and does not necessarily
indicate future results. Average annual total return shows the average annual
percentage change in an assumed $1,000 investment. It reflects the hypothetical
annually compounded return that would have produced the same total return if a
Fund's performance had been constant over the entire period. Because average
annual total return tends to smooth out variations in a Fund's return, you
should recognize that it is not the same as actual year-by-year results. Average
annual total return includes the effect of paying the maximum sales charge (in
the case of Class A shares) or the deduction of any applicable CDSC (in the case
of Class B shares) and payment of dividends and other distributions in
additional shares. One, five and ten year periods will be shown unless the class
has been in existence for a shorter period. Total return is computed using the
same calculations as average annual total return. However, the rate expressed is
the percentage change from the initial $1,000 invested to the value of the
investment at the end of the stated period. Total return calculations assume
reinvestment of dividends and other distributions.

Each of the above performance calculations may be based on investment at
reduced sales charge levels or at net asset value. Any quotation of performance
figures not reflecting the maximum sales charge will be greater than if the
maximum sales charge were used. Additional performance information is contained
in the Funds' Annual Report which may be obtained without charge by contacting
the Funds at 1-800-423-4026.

GENERAL INFORMATION

Organization. Series Fund II is a Maryland corporation organized on April
1, 1992. Prior to February 15, 1996, U.S.A. Mid-Cap Opportunity Fund was called
Made In The U.S.A. Fund. Series Fund II is authorized to issue 400 million
shares of common stock, $0.001 par value, in such separate and distinct series
and classes of shares as Series Fund II's Board of Directors shall from time to
time establish. The shares of common stock of Series Fund II are presently
divided into three separate and distinct series, each having two classes,
designated Class A shares and Class B shares. Each class of a Fund represents
interests in the same assets of that Fund. The classes differ in that (1) each
class has exclusive voting rights on matters affecting only that class, (2)
Class A shares are subject to an initial sales charge and relatively lower
ongoing distribution fees, (3) Class B shares bear higher ongoing distribution
fees, are subject to a CDSC upon certain redemptions and will automatically
convert to Class A shares approximately eight years after purchase, (4) each
class may bear differing amounts of certain other class-specific expenses, and
(5) each class has different exchange privileges. The Board of Directors
anticipates that there will not be any conflicts among the interests of the
holders of the different classes of each Fund's shares. On an ongoing basis, the
Board of Directors will consider whether any such conflict exists and, if so,
take appropriate action. Series Fund II does not hold annual shareholder
meetings. If requested to do so by the holders of at least 10% of Series Fund
II's outstanding shares, the Board of Directors will call a special meeting of
shareholders for any purpose, including the removal of Directors. Each share of
each Fund has equal voting rights except as noted above. Each share of a Fund is
entitled to participate equally in dividends and other distributions and the
proceeds of any liquidation except that, due to the higher expenses borne by the
Class B shares, such dividends and proceeds are likely to be lower for the Class
B shares than for the Class A shares.

<PAGE>

Custodian. The Bank of New York, 48 Wall Street, New York, NY 10286, is
custodian of the securities and cash of each Fund and may employ foreign
sub-custodians to provide custody of Growth & Income Fund's foreign assets.

Transfer Agent. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as transfer and
dividend disbursing agent for each Fund and as redemption agent for regular
redemptions. The Transfer Agent's telephone number is 1-800-423-4026.

Share Certificates. The Funds do not issue certificates for Class B shares
or for Class A shares purchased under any retirement account. The Funds,
however, will issue share certificates on Class A shares at the shareholder's
request. Ownership of shares of each Fund is recorded on a stock register by the
Transfer Agent and shareholders have the same rights of ownership with respect
to such shares as if certificates had been issued.

Confirmations and Statements. You will receive confirmations of purchases
and redemptions of shares of a Fund. A statement of shares owned will be sent to
you following a transaction in the account, including payment of a dividend or
capital gain distribution in additional shares or cash.

Shareholder Inquiries. Shareholder inquiries can be made by calling
Shareholder Services at 1-800-423-4026.

Annual and Semi-Annual Reports to Shareholders. It is the Funds' 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
in writing or by telephone by any shareholder. The Funds will mail an additional
copy of such reports to any shareholder who subsequently changes his or her
mailing address.

<PAGE>

TABLE OF CONTENTS
- --------------------------------------------------------------------------

Fee Table......................................................... 2
Financial Highlights.............................................. 4
Investment Objectives and Policies................................ 6
Alternative Purchase Plans........................................ 13
How to Buy Shares................................................. 14
How to Exchange Shares............................................ 19
How to Redeem Shares.............................................. 20
Telephone Transactions............................................ 21
Management........................................................ 22
Distribution Plans................................................ 24
Determination of Net Asset Value.................................. 24
Dividends and Other Distributions................................. 25
Taxes............................................................. 26
Performance Information........................................... 27
General Information............................................... 27

Investment Adviser Custodian
First Investors Management The Bank of New York
Company, Inc. 48 Wall Street
95 Wall Street New York, NY 10286
New York, NY 10005
Auditors
Underwriter Tait, Weller & Baker
First Investors Corporation Two Penn Center Plaza
95 Wall Street Philadelphia, PA 19102-1707
New York, NY 10005
Legal Counsel
Transfer Agent Kirkpatrick & Lockhart LLP
Administrative Data 1800 Massachusetts
Management Corp. Avenue, N.W.
581 Main Street Washington, D.C. 20036
Woodbridge, NJ 07095-1198

No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus or the Statement of Additional Information, and if given or made,
such information and representation must not be relied upon as having been
authorized by the Fund, First Investors Corporation, or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the shares offered hereby in any state to any person to whom
it is unlawful to make such offer in such state.

<PAGE>

First Investors
Series Fund II, Inc.

- ---------------------------

Growth & Income Fund
U.S.A. Mid-Cap Opportunity Fund
Utilities Income Fund

- ---------------------------

Prospectus

- ----------------------------

February 15, 1996

First Investors Logo

Logo is described as follows: the Arabic numeral one separated
into seven vertical segments followed by the words "First
Investors."

Vertical line from top to bottom in center of page about 1/2 inch
in thickness

The following language appears to the left of the above language in the printed
piece:

The words "BULK RATE U.S. POSTAGE PAID PERMIT NO. 7379" in a box
to the right of a circle containing the words "MAILED FROM ZIP
CODE 11201" appears on the righthand side.

The following language appears on the lefthand side:

FIRST INVESTORS SERIES FUND II, INC.
95 WALL STREET
NEW YORK, NY 10005

First Investors Logo (as described above)
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK

FISF 005

<PAGE>

FIRST INVESTORS SERIES FUND II, INC.
Growth & Income Fund
U.S.A. Mid-Cap Opportunity Fund
Utilities Income Fund

95 Wall Street 1-800-423-4026
New York, New York 10005

Statement of Additional Information
dated February 15, 1996

This is a Statement of Additional Information ("SAI") for First
Investors Series Fund II, Inc. ("Series Fund II"), an open-end diversified
management investment company. Series Fund II offers three separate series, each
of which has different investment objectives and policies: First Investors
Growth & Income Fund, First Investors U.S.A. Mid-Cap Opportunity Fund and First
Investors Utilities Income Fund (each, a "Fund"). The investment objective of
each Fund is as follows:

Growth & Income Fund seeks long-term growth of capital and current
income.

U.S.A. Mid-Cap Opportunity Fund seeks long-term capital growth. Prior
to the date of this SAI, the Fund was known as Made In The U.S.A. Fund.

Utilities Income Fund primarily seeks high current income. Long-term
capital appreciation is a secondary objective.

There can be no assurance that any Fund will achieve its investment
objective.

This SAI is not a prospectus. It should be read in conjunction with the
Funds' Prospectus dated February 15, 1996, which may be obtained free of cost
from the Funds at the address or telephone number noted above.

<PAGE>

TABLE OF CONTENTS

Page

Investment Policies.................................................... 3
Hedging and Option Income Strategies................................... 9
Investment Restrictions................................................ 17
Directors and Officers................................................. 22
Management............................................................. 24
Underwriter............................................................ 27
Distribution Plans..................................................... 27
Determination of Net Asset Value....................................... 29
Allocation of Portfolio Brokerage...................................... 30
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services............................ 31
Taxes.................................................................. 38
Performance Information................................................ 41
General Information.................................................... 44
Appendix A............................................................. 46
Appendix B............................................................. 48
Appendix C............................................................. 49
Financial Statements................................................... 51

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INVESTMENT POLICIES

Bankers' Acceptances. Each Fund may invest in bankers' acceptances.
Bankers' acceptances are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an asset
or it may be sold in the secondary market at the going rate of interest for a
specific maturity. Although maturities for acceptances can be as long as 270
days, most acceptances have maturities of six months or less.

Certificates of Deposit. Each Fund may invest in bank certificates of
deposit ("CDs") subject to the restrictions set forth in the Prospectus. The
Federal Deposit Insurance Corporation is an agency of the U.S. Government which
insures the deposits of certain banks and savings and loan associations up to
$100,000 per deposit. The interest on such deposits may not be insured if this
limit is exceeded. Current Federal regulations also permit such institutions to
issue insured negotiable CDs in amounts of $100,000 or more, without regard to
the interest rate ceilings on other deposits. To remain fully insured, these
investments currently must be limited to $100,000 per insured bank or savings
and loan association.

Convertible Securities. While no securities investment is without some
risk, investments in convertible securities generally entail less risk than the
issuer's common stock, although the extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells above
its value as a fixed income security. First Investors Management Company, Inc.
("FIMCO" or "Adviser"), or for Growth & Income Fund, its subadviser, Wellington
Management Company ("WMC" or "Subadviser"), will decide to invest based upon a
fundamental analysis of the long-term attractiveness of the issuer and the
underlying common stock, the evaluation of the relative attractiveness of the
current price of the underlying common stock, and the judgment of the value of
the convertible security relative to the common stock at current prices.

Loans of Portfolio Securities. Growth & Income Fund and Utilities
Income Fund may loan securities to qualified broker-dealers or other
institutional investors provided: the borrower pledges to a Fund and agrees to
maintain at all times with the Fund collateral equal to not less than 100% of
the value of the securities loaned (plus accrued interest or dividend, if any);
the loan is terminable at will by the Fund; the Fund pays only reasonable
custodian fees in connection with the loan; and the Adviser or the Subadviser
monitors the creditworthiness of the borrower throughout the life of the loan.
Such loans may be terminated by a Fund at any time and the Fund may vote the
proxies if a material event affecting the investment is to occur. The market
risk applicable to any security loaned remains a risk of the Fund. The borrower
must add to the collateral whenever the market value of the securities rises
above the level of such collateral. A Fund could incur a loss if the borrower
should fail financially at a time when the value of the loaned securities is
greater than the collateral.

Mortgage-Backed Securities. Each Fund may invest in mortgage-backed
securities, including those representing an undivided ownership interest in a
pool of mortgage loans. Each of the certificates described below is
characterized by monthly payments to the security holder, reflecting the monthly
payments made by the mortgagees of the underlying mortgage loans. The payments
to the security holders (such as a Fund), like the payments on the underlying
loans, represent both principal and interest. Although the underlying mortgage
loans are for specified periods of time, such as twenty to thirty years,

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the borrowers can, and typically do, repay them sooner. Thus, the security
holders frequently receive prepayments of principal, in addition to the
principal which is part of the regular monthly payments. A borrower is more
likely to prepay a mortgage which bears a relatively high rate of interest.
Thus, in times of declining interest rates, some higher yielding mortgages might
be repaid resulting in larger cash payments to a Fund, and the Fund will be
forced to accept lower interest rates when that cash is used to purchase
additional securities.

Interest rate fluctuations may significantly alter the average maturity
of mortgage-backed securities, due to the level of refinancing by homeowners.
When interest rates rise, prepayments often drop, which should increase the
average maturity of the mortgage-backed security. Conversely, when interest
rates fall, prepayments often rise, which should decrease the average maturity
of the mortgage-backed security.

GNMA Certificates. Government National Mortgage Association
("GNMA") certificates ("GNMA Certificates") are mortgage-backed securities,
which evidence an undivided interest in a pool of mortgage loans. GNMA
Certificates differ from bonds in that principal is paid back monthly by the
borrower over the term of the loan rather than returned in a lump sum at
maturity. GNMA Certificates that the Fund purchase are the "modified
pass-through" type. "Modified pass-through" GNMA Certificates entitle the holder
to receive a share of all interest and principal payments paid and owed on the
mortgage pool net of fees paid to the "issuer" and GNMA, regardless of whether
or not the mortgagor actually makes the payment.

GNMA Guarantee. The National Housing Act authorizes GNMA to
guarantee the timely payment of principal and interest on securities backed by a
pool of mortgages insured by the Federal Housing Administration ("FHA") or the
Farmers' Home Administration ("FMHA"), or guaranteed by the Department of
Veteran Affairs ("VA"). The GNMA guarantee is backed by the full faith and
credit of the U.S. Government. GNMA also is empowered to borrow without
limitation from the U.S. Treasury if necessary to make any payments required
under its guarantee.

Life of GNMA Certificates. The average life of a GNMA
Certificate is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities. Prepayments of principal by mortgagors
and mortgage foreclosures will usually result in the return of the greater part
of principal investment long before maturity of the mortgages in the pool. A
Fund normally will not distribute principal payments (whether regular or
prepaid) to its shareholders. Rather, it will invest such payments in additional
mortgage-backed securities of the types described above. Interest received by
the Fund will, however, be distributed to shareholders. Foreclosures impose no
risk to principal investment because of the GNMA guarantee. As prepayment rates
of the individual mortgage pools vary widely, it is not possible to predict
accurately the average life of a particular issue of GNMA Certificates.

Yield Characteristics of GNMA Certificates. The coupon rate of
interest on GNMA Certificates is lower than the interest rate paid on the
VA-guaranteed or FHA-insured mortgages underlying the Certificates by the amount
of the fees paid to GNMA and the issuer. The coupon rate by itself, however,
does not indicate the yield which will be earned on GNMA Certificates. First,
Certificates may trade in the secondary market at a premium or discount. Second,
interest is earned monthly, rather than semi-annually as with traditional bonds;
monthly compounding raises the effective yield earned. Finally, the actual yield
of a GNMA Certificate is influenced by the prepayment experience of the mortgage
pool underlying it. For example, if the higher-yielding mortgages from the pool
are prepaid, the yield on the remaining pool will be reduced.

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FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") issues two types of mortgage pass-through securities, mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro rata
share of all interest and principal payments made and owed on the underlying
pool.

FNMA Securities. The Federal National Mortgage Association
("FNMA") issues guaranteed mortgage pass-through certificates ("FNMA
Certificates"). FNMA Certificates resemble GNMA Certificates in that each FNMA
Certificate represents a pro rata share of all interest and principal payments
made and owed on the underlying pool. FNMA guarantees timely payment of interest
on FNMA Certificates and the full return of principal.

Risk of foreclosure of the underlying mortgages is greater with FHLMC
and FNMA securities because, unlike GNMA Certificates, FHLMC and FNMA securities
are not guaranteed by the full faith and credit of the U.S. Government.

Portfolio Turnover. Although each Fund generally will not invest for
short-term trading purposes, portfolio securities may be sold from time to time
without regard to the length of time they have been held when, in the opinion of
the Adviser or the Subadviser investment considerations warrant such action.
Portfolio turnover rate is calculated by dividing (1) the lesser of purchases or
sales of portfolio securities for the fiscal year by (2) the monthly average of
the value of portfolio securities owned during the fiscal year. A 100% turnover
rate would occur if all the securities in a Fund's portfolio, with the exception
of securities whose maturities at the time of acquisition were one year or less,
were sold and either repurchased or replaced within one year. A high rate of
portfolio turnover generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Allocation of Portfolio Brokerage."

For the fiscal year ended October 31, 1994, the portfolio turnover rate
for Growth & Income Fund, U.S.A. Mid-Cap Opportunity Fund and Utilities Income
Fund was 6%, 29% and 58%, respectively. For the fiscal year ended October 31,
1995, the portfolio turnover rate for Growth & Income Fund and Utilities Income
Fund was 19% and 16%, respectively. See the Prospectus for the portfolio
turnover rate for U.S.A. Mid-Cap Opportunity Fund.

Repurchase Agreements. Although each Fund may enter into repurchase
agreements with banks which are members of the Federal Reserve System or
securities dealers who are members of a national securities exchange or are
market makers in government securities, U.S.A. Mid-Cap Opportunity Fund and
Utilities Income Fund do not currently intend to do so. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will a Fund invest in repurchase agreements with more than one year in
time to maturity. The securities which are subject to repurchase agreements,
however, may have maturity dates in excess of one year from the effective date
of the repurchase agreement. Each Fund will always receive, as collateral,
securities whose market value, including accrued interest, will at all times be
at least equal to 100% of the dollar amount invested by the Fund in each
agreement, and the Fund will make payment for such securities only upon physical
delivery or evidence of book entry transfer to the account of the Fund's
custodian. If the seller defaults, a Fund might incur a loss if the value of the
collateral securing the repurchase agreement declines, and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy or similar proceedings are commenced with respect to the seller of
the security, realization upon the collateral by

<PAGE>

a Fund may be delayed or limited. Repurchase agreements maturing in more than
seven days are considered illiquid.

Restricted and Illiquid Securities. No Fund will purchase or otherwise
acquire any security if, as a result, more than 15% of its net assets (taken at
current value) would be invested in securities that are illiquid by virtue of
the absence of a readily available market or legal or contractual restrictions
on resale. This policy includes foreign issuers' unlisted securities with a
limited trading market and repurchase agreements maturing in more than seven
days. This policy does not include restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, as amended ("1933 Act"),
which the Board of Directors or the Adviser or the Subadviser has determined
under Board-approved guidelines are liquid.

Restricted securities which are illiquid may be sold only in privately
negotiated transactions or in public offerings with respect to which a
registration statement is in effect under the 1933 Act. Such securities include
those that are subject to restrictions contained in the securities laws of other
countries. Securities that are freely marketable in the country where they are
principally traded, but would not be freely marketable in the United States,
will not be subject to this 15% limit. Where registration is required, a Fund
may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, a Fund might obtain a less favorable price than prevailed when it
decided to sell.

In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are either themselves exempt from registration or sold in
transactions not requiring registration. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.

Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by a Fund, however, could affect adversely the marketability of
such portfolio securities and a Fund might be unable to dispose of such
securities promptly or at reasonable prices.

Risk Factors of High Yield Securities. High yield, high risk securities
(commonly referred to as "junk bonds"), are subject to certain risks that may
not be present with investments of higher grade securities. These risks also
apply to lower-rated and certain unrated convertible securities.

Effect of Interest Rate and Economic Changes. The prices of High Yield
Securities tend to be less sensitive to interest rate changes than higher-rated
investments, but may be more sensitive

<PAGE>

to adverse economic changes or individual corporate developments. Periods of
economic uncertainty and changes generally result in increased volatility in the
market prices and yields of High Yield Securities and thus in a Fund's net asset
value. A strong economic downturn or a substantial period of rising interest
rates could severely affect the market for High Yield Securities. In these
circumstances, highly leveraged companies might have greater difficulty in
making principal and interest payments, meeting projected business goals, and
obtaining additional financing. Thus, there could be a higher incidence of
default. This would affect the value of such securities and thus a Fund's net
asset value. Further, if the issuer of a security owned by a Fund defaults, that
Fund might incur additional expenses to seek recovery.

Generally, when interest rates rise, the value of fixed rate debt
obligations, including High Yield Securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a High Yield Security containing a redemption or call provision
exercises either provision in a declining interest rate market, a Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if a Fund experiences unexpected net redemptions in a
rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to
which Fund expenses could be allocated and in a reduced rate of return for that
Fund. While it is impossible to protect entirely against this risk,
diversification of a Fund's portfolio and the Adviser's careful analysis of
prospective portfolio securities should minimize the impact of a decrease in
value of a particular security or group of securities in a Fund's portfolio.

The High Yield Securities Market. The market for below
investment grade bonds expanded rapidly in recent years and its growth
paralleled a long economic expansion. In the past, the prices of many
lower-rated debt securities declined substantially, reflecting an expectation
that many issuers of such securities might experience financial difficulties. As
a result, the yields on lower-rated debt securities rose dramatically. However,
such higher yields did not reflect the value of the income streams that holders
of such securities expected, but rather the risk that holders of such securities
could lose a substantial portion of their value as a result of the issuers'
financial restructuring or default. There can be no assurance that such declines
in the below investment grade market will not reoccur. The market for below
investment grade bonds generally is thinner and less active than that for higher
quality bonds, which may limit a Fund's ability to sell such securities at fair
value in response to changes in the economy or the financial markets. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower rated securities,
especially in a thinly traded market.

Liquidity and Valuation. Lower-rated bonds are typically
traded among a smaller number of broker-dealers than in a broad secondary
market. Purchasers of High Yield Securities tend to be institutions, rather than
individuals, which is a factor that further limits the secondary market. To the
extent that no established retail secondary market exists, many High Yield
Securities may not be as liquid as higher-grade bonds. A less active and thinner
market for High Yield Securities than that available for higher quality
securities may result in more volatile valuations of a Fund's holdings and more
difficulty in executing trades at favorable prices during unsettled market
conditions.

The ability of a Fund to value or sell High Yield Securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. During such periods, there may be less reliable objective information
available and thus the responsibility of the Board of Directors to value High
Yield Securities becomes more difficult, with judgment playing a greater role.
Further, adverse publicity about the economy or a particular issuer may
adversely affect the public's perception of the value, and thus liquidity,

<PAGE>

of a High Yield Security, whether or not such perceptions are based on a
fundamental analysis. See "Determination of Net Asset Value."

Legislation. Provisions of the Revenue Reconciliation Act of
1989 limit a corporate issuer's deduction for a portion of the original issue
discount on "high yield discount" obligations (including certain pay-in-kind
securities). This limitation could have a materially adverse impact on the
market for certain High Yield Securities. From time to time, legislators and
regulators have proposed other legislation that would limit the use of high
yield debt securities in leveraged buyouts, mergers and acquisitions. It is not
certain whether such proposals, which also could adversely affect High Yield
Securities, will be enacted into law.

Short Sales. Although they do not intend to do so in the foreseeable
future, U.S.A. Mid-Cap Opportunity Fund and Utilities Income Fund may borrow
securities for cash sale to others. This type of transaction is commonly known
as a "short sale." Each Fund will only make short sales "against the box," which
occurs when a Fund enters into a short sale with a security identical to one it
already owns or has the immediate and unconditional right, at no cost, to obtain
the identical security.

Warrants. Each Fund may purchase warrants, which are instruments that
permit a Fund to acquire, by subscription, the capital stock of a corporation at
a set price, regardless of the market price for such stock. Warrants may be
either perpetual or of limited duration. There is a greater risk that warrants
might drop in value at a faster rate than the underlying stock. Each Fund's
investments in warrants and stock rights will be limited to 5% of its total
assets, of which no more than 2% may not be listed on the New York or American
Stock Exchange.

When-Issued Securities. Each Fund may invest up to 10% of its net
assets in securities issued on a when-issued or delayed delivery basis at the
time the purchase is made. A Fund generally would not pay for such securities or
start earning interest on them until they are issued or received. However, when
a Fund purchases debt obligations on a when-issued basis, it assumes the risks
of ownership, including the risk of price fluctuation, at the time of purchase,
not at the time of receipt. Failure of the issuer to deliver a security
purchased by the Fund on a when-issued basis may result in the Fund's incurring
a loss or missing an opportunity to make an alternative investment. When a Fund
enters into a commitment to purchase securities on a when-issued basis, it
establishes a separate account with its custodian consisting of cash or liquid
high-grade debt securities equal to the amount of the Fund's commitment, which
are valued at their fair market value. If on any day the market value of this
segregated account falls below the value of the Fund's commitment, the Fund will
be required to deposit additional cash or qualified securities into the account
until equal to the value of the Fund's commitment. When the securities to be
purchased are issued, a Fund will pay for the securities from available cash,
the sale of securities in the segregated account, sales of other securities and,
if necessary, from sale of the when-issued securities themselves although this
is not ordinarily expected. Securities purchased on a when-issued basis are
subject to the risk that yields available in the market, when delivery takes
place, may be higher than the rate to be received on the securities a Fund is
committed to purchase. Sale of securities in the segregated account or other
securities owned by a Fund and when-issued securities may cause the realization
of a capital gain or loss.

Zero Coupon and Pay-In-Kind Securities. Although there is no intention
to do so in the foreseeable future, U.S.A. Mid-Cap Opportunity Fund and
Utilities Income Fund may each invest in zero coupon and pay-in-kind securities.
Zero coupon securities are debt obligations that do not entitle the

<PAGE>

holder to any periodic payment of interest prior to maturity or a specified date
when the securities begin paying current interest. They are issued and traded at
a discount from their face amount or par value, which discount varies depending
on the time remaining until cash payments begin, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer.
Pay-in-kind securities are those that pay interest through the issuance of
additional securities. The market prices of zero coupon and pay-in-kind
securities generally are more volatile than the prices of securities that pay
interest periodically and in cash and are likely to respond to changes in
interest rates to a greater degree than do other types of debt securities having
similar maturities and credit quality. Original issue discount earned on zero
coupon securities and the "interest" on pay-in-kind securities must be included
in a Fund's income. Thus, to continue to qualify for tax treatment as a
regulated investment company and to avoid a certain excise tax on undistributed
income, a Fund may be required to distribute as a dividend an amount that is
greater than the total amount of cash it actually receives. See "Taxes." These
distributions must be made from a Fund's cash assets or, if necessary, from the
proceeds of sales of portfolio securities. Each Fund will not be able to
purchase additional income-producing securities with cash used to make such
distributions, and its current income ultimately could be reduced as a result.

HEDGING AND OPTION INCOME STRATEGIES

Utilities Income Fund - Options and Futures Contracts

Although it does not intend to engage in these strategies in the coming
year, Utilities Income Fund may engage in certain options and futures contract
strategies to hedge its portfolio and in other circumstances permitted by the
Commodity Futures Trading Commission ("CFTC") and may engage in certain options
strategies to enhance income. The instruments described below are sometimes
referred to collectively as "Hedging Instruments" and are defined in Appendix C.
Certain special characteristics of and risks associated with using Hedging
Instruments are discussed below. In addition to the investment guidelines
(described below) adopted by the Board of Directors to govern the Fund's
investments in Hedging Instruments, use of these instruments is subject to the
applicable regulations of the Securities and Exchange Commission ("SEC"), the
several options and futures exchanges upon which options and futures contracts
are traded, the CFTC and various state regulatory authorities. In addition, the
Fund's ability to use Hedging Instruments will be limited by tax considerations.
See "Taxes."

Participation in the options or futures markets involves investment
risks and transaction costs to which the Fund would not be subject absent the
use of these strategies. If the Adviser's prediction of movements in the
direction of the securities and interest rate markets are inaccurate, the
adverse consequences to the Fund may leave the Fund in a worse position than if
such strategies were not used. The Fund might not employ any of the strategies
described below, and there can be no assurance that any strategy will succeed.
The use of these strategies involve certain special risks, including (1)
dependence on the Adviser's ability to predict correctly movements in the
direction of interest rates and securities prices; (2) imperfect correlation
between the price of options, futures contracts and options thereon and
movements in the prices of the securities being hedged; (3) the fact that skills
needed to use these strategies are different from those needed to select
portfolio securities; (4) the possible absence of a liquid secondary market for
any particular instrument at any time; and (5) the possible need to defer
closing out certain hedged positions to avoid adverse tax consequences.

<PAGE>

The Fund may buy and sell put and call options on stock indices and
securities that are traded on national securities exchanges or in the
over-the-counter ("OTC") market to enhance income or to hedge the Fund's
portfolio. The Fund also may write put and covered call options to generate
additional income through the receipt of premiums, purchase put options in an
effort to protect the value of a security that it owns against a decline in
market value and purchase call options in an effort to protect against an
increase in the price of securities it intends to purchase. The Fund also may
purchase put and call options to offset previously written put and call options
of the same Fund. The Fund also may write put and call options to offset
previously purchased put and call options of the same Fund. Other than to effect
closing transactions, the Fund will write only covered call options, including
options on futures contracts.

The Fund may buy and sell financial futures contracts and options
thereon that are traded on a commodities exchange or board of trade for hedging
purposes. These futures contracts and related options may be on stock indices,
financial indices or debt securities. However, as a non-fundamental policy,
Series Fund II has undertaken to a certain state securities commission that the
Fund will not purchase interest rate futures contracts or options thereon.

Cover for Hedging and Option Income Strategies. The Fund will not use
leverage in its hedging and option income strategies. In the case of each
transaction entered into as a short hedge, the Fund will hold securities, or
other options or futures positions whose values are expected to offset ("cover")
its obligations hereunder. The Fund will not enter into a hedging or option
income strategy that exposes the Fund to an obligation to another party unless
it owns either (1) an offsetting ("covered") position in securities, or other
options or futures contracts or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations. The Fund will comply with guidelines established by the SEC with
respect to coverage of hedging and option income strategies by mutual funds and,
if required, will set aside cash and/or liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount. Securities or
other options or futures positions used for cover and securities held in a
segregated account cannot be sold or closed out while the hedging or option
income strategy is outstanding unless they are replaced with similar assets. As
a result, there is a possibility that the use of cover or segregation involving
a large percentage of the Fund's assets could impede portfolio management or the
Fund's ability to meet redemption requests or other current obligations.

Options Strategies. The Fund may purchase call options on securities
that the Adviser intends to include in the Fund's portfolio in order to fix the
cost of a future purchase. Call options also may be used as a means of
participating in an anticipated price increase of a security. In the event of a
decline in the price of the underlying security, use of this strategy would
serve to limit the Fund's potential loss to the option premium paid; conversely,
if the market price of the underlying security increases above the exercise
price and the Fund either sells or exercises the option, any profit eventually
realized will be reduced by the premium. The Fund may purchase put options in
order to hedge against a decline in the market value of securities held in its
portfolio. The put option enables the Fund to sell the underlying security at
the predetermined exercise price; thus the potential for loss to the Fund below
the exercise price is limited to the option premium paid. If the market price of
the underlying security is higher than the exercise price of the put option, any
profit the Fund realizes on the sale of the security will be reduced by the
premium paid for the put option less any amount for which the put option may be
sold.

The Fund may write covered call options on securities to increase
income in the form of premiums received from the purchasers of the options.
Because it can be expected that a call option will be

<PAGE>

exercised if the market value of the underlying security increases to a level
greater than the exercise price, the Fund will write covered call options on
securities generally when the Adviser believes that the premium received by the
Fund, plus anticipated appreciation in the market price of the underlying
security up to the exercise price of the option, will be greater than the total
appreciation in the price of the security. The strategy may be used to provide
limited protection against a decrease in the market price of the security in an
amount equal to the premium received for writing the call option less any
transaction costs. Thus, if the market price of the underlying security held by
the Fund declines, the amount of such decline will be offset wholly or in part
by the amount of the premium received by the Fund. If, however, there is an
increase in the market price of the underlying security and the option is
exercised, the Fund will be obligated to sell the security at less than its
market value. The Fund gives up the ability to sell the portfolio securities
used to cover the call option while the call option is outstanding. Such
securities may also be considered illiquid in the case of OTC options written by
the Fund and therefore subject to investment restrictions. See "Restricted and
Illiquid Securities." In addition, the Fund could lose the ability to
participate in an increase in the value of such securities above the exercise
price of the call option because such an increase would likely be offset by an
increase in the cost of closing out the call option (or could be negated if the
buyer chose to exercise the call option at an exercise price below the
securities' current market value).

The Fund may purchase put and call options and write covered call
options on stock indices in much the same manner as the more traditional equity
and debt options discussed above, except that stock index options may serve as a
hedge against overall fluctuations in the securities markets (or a market
sector) rather than anticipated increases or decreases in the value of a
particular security. A stock index assigns relative values to the stock included
in the index and fluctuates with changes in such values. Stock index options
operate in the same way as the more traditional equity options, except that
settlements of stock index options are effected with cash payments and do not
involve delivery of securities. Thus, upon settlement of a stock index option,
the purchaser will realize, and the writer will pay, an amount based on the
difference between the exercise price and the closing price of the stock index.
The effectiveness of hedging techniques using stock index options will depend on
the extent to which price movements in the stock index selected correlate with
price movements of the securities in which the Fund invests.

The Fund may write put options on securities or on a stock index. A put
option on a security gives the purchaser of the option the right to sell, and
the writer (seller) the obligation to buy, the underlying security at the
exercise price during the option period. So long as the obligation of the writer
continues, the writer may be assigned an exercise notice by the broker-dealer
through which such option was sold, requiring it to make payment of the exercise
price against delivery of the underlying security. A written put option on a
stock index is similar to a written put option on a security except that, on
exercise, the writer pays the buyer a settlement payment in cash equal to the
difference between the exercise price and the value of the index. The operation
of put options in other respects, including their related risks and rewards, is
substantially identical to that of call options. The Fund may write covered put
options in circumstances when the Adviser believes that the market price of the
securities will not decline below the exercise price less the premiums received.
If the put option is not exercised, the Fund will realize income in the amount
of the premium received. This technique could be used to enhance current return
during periods of market uncertainty. The risk in such a transaction would be
that the market price of the underlying security would decline below the
exercise price less the premiums received, in which case the Fund would expect
to suffer a loss.

<PAGE>

Currently, many options on equity securities are exchange-traded,
whereas options on debt securities are primarily traded on the OTC market.
Exchange-traded options in the U.S. are issued by a clearing organization
affiliated with the exchange on which the option is listed which, in effect,
guarantees completion of every exchange-traded option transaction. In contrast,
OTC options are contracts between the Fund and the opposite party with no
clearing organization guarantee. Thus, when the Fund purchases an OTC option, it
relies on the dealer from which it has purchased the OTC option to make or take
delivery of the securities underlying the option. Failure by the dealer to do so
would result in the loss of the premium paid by the Fund as well as the loss of
the expected benefit of the transaction.

Options Guidelines. In view of the risks involved in using options, the
Board of Directors has adopted non-fundamental investment guidelines to govern
the Fund's use of options that may be modified by the Board without shareholder
vote: (1) options will be purchased or written only when the Adviser believes
that there exists a liquid secondary market in such options; and (2) the Fund
may not purchase a put or call option if the value of the option's premium, when
aggregated with the premiums on all other options held by the Fund, exceeds 5%
of the Fund's total assets. However, this does not limit the amount of the
Fund's assets at risk to 5%.

Special Characteristics and Risks of Options Trading. The Fund may
effectively terminate its right or obligation under an option by entering into a
closing transaction. If the Fund wishes to terminate its obligation to sell
securities under a call option it has written, the Fund may purchase a call
option of the same series (that is, a call option identical in its terms to the
call option previously written); this is known as a closing purchase
transaction. Conversely, in order to terminate its right to purchase or sell
specified securities under a call or put option it has purchased, the Fund may
write an option of the same series, as the option held; this is known as a
closing sale transaction. Closing transactions essentially permit the Fund to
realize profits or limit losses on its options positions prior to the exercise
or expiration of the option.

The value of an option position will reflect, among other things, the
current market price of the underlying security or stock index, the time
remaining until expiration, the relationship of the exercise price to the market
price, the historical price volatility of the underlying security or stock index
and general market conditions. For this reason, the successful use of options
depends upon the Adviser's ability to forecast the direction of price
fluctuations in the underlying securities or, in the case of stock index
options, fluctuations in the market sector represented by the index selected.

Options normally have expiration dates of up to nine months. Unless an
option purchased by the Fund is exercised or unless a closing transaction is
effected with respect to that position, a loss will be realized in the amount of
the premium paid and any transaction costs.

A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. The ability to
establish and close out positions on the exchanges is subject to the maintenance
of a liquid secondary market. Although the Fund intends to purchase or write
only those exchange-traded options for which there appears to be a liquid
secondary market, there is no assurance that a liquid secondary market will
exist for any particular option at any particular time. Closing transactions may
be effected with respect to options traded in the OTC markets (currently the
primary markets for options on debt securities) only by negotiating directly
with the other party to the option contract or in a secondary market for the
option if such market exists. Although the Fund will enter into OTC options only
with dealers that agree to enter into, and that are expected to be capable of

<PAGE>

entering into, closing transactions with the Fund, there is no assurance that
the Fund will be able to liquidate an OTC option at a favorable price at any
time prior to expiration. In the event of insolvency of the opposite party, the
Fund may be unable to liquidate an OTC option. Accordingly, it may not be
possible to effect closing transactions with respect to certain options, with
the result that the Fund would have to exercise those options that it has
purchased in order to realize any profit. With respect to options written by the
Fund, the inability to enter into a closing transaction may result in material
losses to the Fund. For example, because the Fund must maintain a covered
position with respect to any call option it writes, the Fund may not sell the
underlying assets used to cover an option during the period it is obligated
under the option. This requirement may impair the Fund's ability to sell a
portfolio security or make an investment at a time when such a sale or
investment might be advantageous.

Stock index options are settled exclusively in cash. If the Fund
purchases an option on a stock index, the option is settled based on the closing
value of the index on the exercise date. Thus, a holder of a stock index option
who exercises it before the closing index value for that day is available runs
the risk that the level of the underlying index may subsequently change. For
example, in the case of a call option, if such a change causes the closing index
value to fall below the exercise price of the option on the index, the
exercising holder will be required to pay the difference between the closing
index value and the exercise price of the option.

The Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs; however, the Fund also
may save on commissions by using options as a hedge rather than buying or
selling individual securities in anticipation or as a result of market
movements.

Futures Strategies. The Fund may engage in futures strategies to
attempt to reduce the overall investment risk that would normally be expected to
be associated with ownership of the securities in which it invests. The Fund may
sell stock index futures contracts in anticipation of a general market or market
sector decline that could adversely affect the market value of the Fund's
portfolio. To the extent that a portion of the Fund's portfolio correlates with
a given stock index, the sale of futures contracts on that index could reduce
the risks associated with a market decline and thus provide an alternative to
the liquidation of securities positions. The Fund may purchase a stock index
futures contract if a significant market or market sector advance is
anticipated. Such a purchase would serve as a temporary substitute for the
purchase of individual stocks, which stocks may then be purchased in an orderly
fashion. This strategy may minimize the effect of all or part of an increase in
the market price of securities that the Fund intends to purchase. A rise in the
price of the securities should be partially or wholly offset by gains in the
futures position.

The Fund may purchase a call option on a stock index future to hedge
against a market advance in equity securities that the Fund plans to purchase at
a future date. The Fund may also write put options on a stock index futures
contract as a partial hedge against a market advance in equity securities the
Fund plans to purchase at a future date. The Fund may write covered call options
on stock index futures as a partial hedge against a decline in the prices of
stocks held in the Fund's portfolio. The Fund also may purchase put options on
stock index futures contracts.

The Fund may use interest rate futures contracts and options thereon to
hedge the debt portion of its portfolio against changes in the general level of
interest rates. The Fund may purchase an interest rate futures contract when it
intends to purchase debt securities but has not yet done so. This strategy may
minimize the effect of all or part of an increase in the market price of those
securities because a rise in

<PAGE>

the price of the securities prior to their purchase may either be offset by an
increase in the value of the futures contract purchased by the Fund or avoided
by taking delivery of the debt securities under the futures contract.
Conversely, a fall in the market price of the underlying debt securities may
result in a corresponding decrease in the value of the futures position. The
Fund may sell an interest rate futures contract in order to continue to receive
the income from a debt security, while endeavoring to avoid part or all of the
decline in the market value of that security that would accompany an increase in
interest rates.

The Fund may purchase a call option on an interest rate futures
contract to hedge against a market advance in debt securities that the Fund
plans to acquire at a future date. The seller may also write a put option on an
interest rate futures contract as a partial hedge against a market advance in
debt securities that the Fund plans to acquire at a future date. The Fund also
may write covered call options on interest rate futures contracts as a partial
hedge against a decline in the price of debt securities held in the Fund's
portfolio or purchase put options on interest rate futures contracts in order to
hedge against a decline in the value of debt securities held in the Fund's
portfolio. Series Fund II, on behalf of the Fund, has undertaken to a certain
state securities commission that the Fund will not purchase interest rate
futures contracts or options thereon.

Futures Guidelines. In view of the risks involved in using futures
strategies described above, the Board of Directors has adopted non-fundamental
investment guidelines to govern the Fund's use of such investments that may be
modified by the Board without shareholder vote. The Fund will not purchase or
sell futures contracts or related options if, immediately thereafter, the sum of
the amount of initial margin deposits on the Fund's existing futures positions
and initial margin and premiums paid for related options would exceed 5% of the
market value of the Fund's total assets. The value of all futures sold will not
exceed the total market value of the Fund's portfolio.

Special Characteristics and Risks of Futures Trading. No price is paid
upon entering into futures contracts. Instead, upon entering into a futures
contract, the Fund is required to deposit with its custodian in a segregated
account in the name of the futures broker through which the transaction is
effected an amount of cash, U.S. Government securities or other liquid,
high-grade debt instruments generally equal to 10% or less of the contract
value. This amount is known as "initial margin." When writing a call or put
option on a futures contract, margin also must be deposited in accordance with
applicable exchange rules. Initial margin on futures contracts is in the nature
of a performance bond or good-faith deposit that is returned to the Fund upon
termination of the transaction, assuming all obligations have been satisfied.
Under certain circumstances, such as periods of high volatility, the Fund may be
required by an exchange to increase the level of its initial margin payment.
Additionally, initial margin requirements may be increased generally in the
future by regulatory action. Subsequent payments, called "variation margin," to
and from the broker, are made on a daily basis as the value of the futures
position varies, a process known as "marking to market." Variation margin does
not involve borrowing to finance the futures transactions, but rather represents
a daily settlement of the Fund's obligation to or from a clearing organization.

Holders and writers of futures positions and options thereon can enter
into offsetting closing transactions, similar to closing transactions on options
on securities, by selling or purchasing, respectively, a futures position or
options position with the same terms as the position or option held or written.
Positions in futures contracts and options thereon may be closed only on an
exchange or board of trade providing a secondary market for such futures or
options.

<PAGE>

Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures contract or related option may
vary either up or down from the previous day's settlement price. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit. The daily limit governs only price movements
during a particular trading day and therefore does not limit potential losses
because prices could move to the daily limit for several consecutive trading
days with little or no trading and thereby prevent prompt liquidation of
unfavorable positions. In such event, it may not be possible for the Fund to
close a position and, in the event of adverse price movements the Fund would
have to make daily cash payments of variation margin (except in the case of
purchased options). However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the contracts
can be terminated. In such circumstances, an increase in the price of the
securities, if any, may partially or completely offset losses on the futures
contract. However, there is no guarantee that the price of the securities will,
in fact, correlate with the price movements in the contracts and thus provide an
offset to losses on the contracts.

Successful use by the Fund of futures contracts and related options
will depend upon the Adviser's ability to predict movements in the direction of
the overall securities and interest rate markets, which requires different
skills and techniques than predicting changes in the prices of individual
securities. Moreover, futures contracts relate not to the current price level of
the underlying instrument but to the anticipated levels at some point in the
future. There is, in addition, the risk that the movements in the price of the
futures contract or related option will not correlate with the movements in
prices of the securities being hedged. In addition, if the Fund has insufficient
cash, it may have to sell assets from its portfolio to meet daily variation
margin requirements. Any such sale of assets may or may not be made at prices
that reflect the rising market. Consequently, the Fund may need to sell assets
at a time when such sales are disadvantageous to the Fund. If the price of the
futures contract or related option moves more than the price of the underlying
securities, the Fund will experience either a loss or a gain on the futures
contract or related option that may or may not be completely offset by movements
in the price of the securities that are the subject of the hedge.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between price movements in the futures
position or related option and the securities being hedged, movements in the
prices of futures contracts and related options may not correlate perfectly with
movements in the prices of the hedged securities because of price distortions in
the futures market. As a result, a correct forecast of general market trends may
not result in successful hedging through the use of futures contracts or related
options over the short term.

Positions in futures contracts and related options may be closed out
only on an exchange or board of trade that provides a secondary market for such
futures contracts or related options. Although the Fund intends to purchase or
sell futures and related options only on exchanges or boards of trade where
there appears to be a liquid secondary market, there is no assurance that such a
market will exist for any particular contract or option at any particular time.
In such event, it may not be possible to close a futures or option position and,
in the event of adverse price movements, the Fund would continue to be required
to make variation margin payments.

Like options on securities, options on futures contracts have a limited
life. A purchased option that expires unexercised has no value.

<PAGE>

Purchasers of options on futures contracts pay a premium in cash at the
time of purchase. This amount and the transaction costs are all that is at risk.
Sellers of options on a futures contract, however, must post initial margin and
are subject to additional margin calls that could be substantial in the event of
adverse price movements. In addition, although the maximum amount at risk when
the Fund purchases an option is the premium paid for the option and the
transaction costs, there may be circumstances when the purchase of an option on
a futures contract would result in a loss to the Fund when the use of a futures
contract would not, such as when there is no movement in the level of the
underlying stock index or the value of the securities being hedged.

The Fund's activities in the futures and related options markets may
result in a higher portfolio turnover rate and additional transaction costs in
the form of added brokerage commissions; however, the Fund also may save on
commissions by using futures and related options as a hedge rather than buying
or selling individual securities in anticipation or as a result of market
movements.

Growth & Income Fund - Forward Currency Contracts

Growth & Income Fund may use forward currency contracts to protect
against uncertainty in the level of future exchange rates. The Fund will not
speculate with forward currency contracts or foreign currency exchange rates.

The Fund may enter into forward currency contracts with respect to
specific transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Fund anticipates the receipt in a foreign currency of dividend or interest
payments on a security that it holds, the Fund may desire to "lock-in" the U.S.
dollar price of the security or the U.S. dollar equivalent of such payment, as
the case may be, by entering into a forward contract for the purchase or sale,
for a fixed amount of U.S. dollars or foreign currency, of the amount of foreign
currency involved in the underlying transaction. The Fund will thereby be able
to protect itself against a possible loss resulting from an adverse change in
the relationship between the currency exchange rates during the period between
the date on which the security is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.

The precise matching of the forward currency contract amounts and the
value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. Accordingly,
it may be necessary for the Fund to purchase additional foreign currency on the
spot (i.e., cash) market and bear the expense of such purchase if the market
value of the security is less than the amount of foreign currency the Fund is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Forward currency contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transactions costs. The Fund may
enter into formal contracts or maintain a net exposure to such contracts only if
the Fund maintains cash, U.S. Government securities or liquid, high-grade debt
securities in a segregated account in an amount not less

<PAGE>

than the value of the Fund's total assets committed to the consummation of the
contract, as marked to market daily.

At or before the maturity date of a forward contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use the
sale proceeds to make delivery of the currency or retain the security and offset
its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Fund will obtain, on the same maturity date, the
same amount of the currency that it is obligated to deliver. Similarly, the Fund
may close out a forward contract requiring it to purchase a specified currency
by entering into a second contract entitling it to sell the same amount of the
same currency on the maturity date of the first contract. The Fund would realize
a gain or loss as a result of entering into an offsetting forward currency
contract under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates of the first
contract and the offsetting contract. There can be no assurance that new forward
currency contracts or offsets always will be available for the Fund. Forward
currency contracts also involve a risk that the other party to the contract may
fail to deliver currency when due, which could result in substantial losses to
the Fund. The cost to the Fund of engaging in forward currency contracts varies
with factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward currency contracts
are usually entered into on a principal basis, no fees or commissions are
involved.

INVESTMENT RESTRICTIONS

The investment restrictions set forth below have been adopted by the
respective Fund and, unless identified as non-fundamental policies, may not be
changed without the affirmative vote of a majority of the outstanding voting
securities of that Fund, voting separately from any other series of Series Fund
II. As provided in the Investment Company Act of 1940, as amended ("1940 Act"),
a "vote of a majority of the outstanding voting securities of the Fund" means
the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund or (2) 67% or more of the shares of the Fund present at a
meeting, if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy. Changes in values of a particular Fund's assets
or the assets of Series Fund II as a whole will not cause a violation of the
following investment restrictions so long as percentage restrictions are
observed by each Fund at the time it purchases any security.

Growth & Income Fund. Growth & Income Fund will not:

(1) Issue senior securities or borrow money, except that the Fund may
borrow money from a bank for temporary or emergency purposes in amounts not
exceeding 5% (taken at the lower of cost or current value) of its net assets
(not including the amount borrowed).

(2) Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if as a result, with respect to
75% of the Fund's total assets, more than 5% of such assets would then be
invested in securities of a single issuer.

(3) With respect to 75% of its total assets, purchase more than 10% of
the outstanding voting securities of any one issuer or more than 10% of any
class of securities of one issuer (all debt and all preferred stock of an issuer
are each considered a single class for this purpose).

<PAGE>

(4) Pledge, mortgage or hypothecate any of its assets, except that the
Fund may pledge its assets to secure borrowings made in accordance with
paragraph (1) above, provided the Fund maintains asset coverage of at least 300%
for all such borrowings.

(5) Buy or sell commodities or commodity contracts, or real estate or
interests in real estate, except that the Fund may purchase and sell securities
that are secured by real estate, securities of companies which invest or deal in
real estate, and interests in real estate investment trusts. As non-fundamental
policies, Series Fund II, on behalf of the Fund, has undertaken to certain state
securities commissions that the Fund will not invest in real estate partnership
interests or invest more than 10% of its net assets in real estate investment
trusts.

(6) Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws.

(7) Make loans, except loans of portfolio securities and repurchase
agreements.

The following investment restrictions are not fundamental and may be
changed without shareholder approval. The Fund will not:

(1) Invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days or in other illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions as to resale. Securities that have
legal or contractual restrictions as to resale but have a readily available
market and securities eligible for resale under Rule 144A under the 1933 Act,
are not deemed illiquid for purposes of this limitation.

(2) Invest more than 5% of its total assets in securities of companies
(including predecessors) which have been in operation for less than three years.

(3) Invest in securities of other registered investment companies,
except by purchases in the open market involving only customary brokerage
commissions and as a result of which not more than 5% of its total assets would
be invested in such securities, or except as part of a merger, consolidation or
other acquisition.

(4) Purchase oil, gas or other mineral leases. However, the Fund may
purchase and sell the securities of companies engaged in the exploration,
development, production, refining, transporting and marketing of oil, gas or
minerals.

(5) Purchase warrants if as a result the Fund would then have more than
5% of its total assets, valued at the lower of cost or market, invested in
warrants (of which no more than 2% may be warrants not listed on the New York or
American Stock Exchange).

(6) Make short sales of securities.

(7) Make investments for the purpose of exercising control or
management.

(8) Purchase any securities on margin.

<PAGE>

(9) Purchase or sell portfolio securities from or to the Adviser or any
director or officer thereof or of Series Fund II, as principals.

(10) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer or director of Series Fund II or of the Adviser owns more than
1/2 of 1% of the outstanding securities of such issuer, and such officers or
directors who own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.

U.S.A. Mid-Cap Opportunity Fund. U.S.A. Mid-Cap Opportunity Fund will not:

(2) Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if as a result: (a) as to 75% of
the Fund's total assets more than 5% of such assets would then be invested in
securities of a single issuer, or (b) 25% or more of the Fund's total assets
would be invested in a single industry.

(3) Purchase more than 10% of the outstanding voting securities of any
one issuer or more than 10% of any class of securities of one issuer (all debt
and all preferred stock of an issuer are each considered a single class for this
purpose).

(5) Buy or sell commodities or commodity contracts, including futures
contracts, or real estate or interests in real estate, although it may purchase
and sell securities which are secured by real estate, securities of companies
which invest or deal in real estate, and interests in real estate investment
trusts. As a non-fundamental policy, Series Fund II, on behalf of the Fund, has
undertaken to certain state securities commissions that the Fund will not invest
in real estate limited partnership interests or in real estate investment trusts
that are not readily marketable.

(6) Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, it may be deemed to be an
underwriter under certain Federal securities laws.

(7) Make investments for the purpose of exercising control or
management.
(8) Purchase any securities on margin.

(9) Make loans, except through repurchase agreements.

(10) Purchase or sell portfolio securities from or to the Adviser or
any director or officer thereof or of Series Fund II, as principals.

<PAGE>

(11) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer or director of Series Fund II or of the Adviser owns more than
1/2 of 1% of the outstanding securities of such issuer, and such officers or
directors who own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.

The following investment restrictions are not fundamental and may be
changed without shareholder approval. The Fund will not:

(1) Invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days or in other illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions as to resale. Securities that have
legal or contractual restrictions as to resale but have a readily available
market and securities eligible for resale under Rule 144A under the Securities
Act of 1933, as amended, are not deemed illiquid for purposes of this
limitation; the Adviser will monitor the liquidity of such restricted securities
under the supervision of the Board of Directors.

(2) Purchase any security if as a result the Fund would then have more
than 5% of its total assets invested in securities of companies (including
predecessors) less than three years old.

(5) Write, purchase or sell options (puts, calls or combinations
thereof).

(6) Purchase warrants if as a result the Fund would then have more than
5% of its total assets, valued at the lower of cost or market, invested in
warrants (of which no more than 2% may be warrants not listed on the New York or
American Stock Exchange).

(7) Make short sales of securities, except short sales "against the
box."
Utilities Income Fund. Utilities Income Fund will not:

(2) Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if as a result as to 75% of the
Fund's total assets more than 5% of such assets would then be invested in
securities of a single issuer.

<PAGE>

(5) Buy or sell commodities or commodity contracts, or real estate or
interests in real estate, except that the Fund may purchase and sell futures
contracts, options on futures contracts, securities that are secured by real
estate, securities of companies which invest or deal in real estate, and
interests in real estate investment trusts.

(6) Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws.

(7) Make investments for the purpose of exercising control or
management.

(8) Purchase any securities on margin, except the Fund may make
deposits of margin in connection with futures contracts and options.

(9) Make loans, except loans of portfolio securities and repurchase
agreements.

(10) Purchase or sell portfolio securities from or to the Adviser or
any director or officer thereof or of Series Fund II, as principals.

The following investment restrictions are not fundamental and may be
changed without shareholder approval. The Fund will not:

(2) Invest more than 5% of its total assets in securities of companies
(including predecessors) which have been in operation for less than three years.

<PAGE>

(6) Make short sales of securities, except short sales "against the
box."

Series Fund II, on behalf of the Fund, has filed the following
undertakings with various state securities commissions, which may be changed
without shareholder approval:

(1) The Fund will not invest in small emerging growth companies.

(2) The Fund will not purchase interest rate futures contracts or
options thereon.

(3) The Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if by reason of that purchase, the value of the Fund's
investments in all such securities exceeds 5% of the Fund's total assets.

(4) The Fund will not invest in real estate limited partnership
interests or in real estate investment trusts that are not readily marketable.

DIRECTORS AND OFFICERS

The following table lists the Directors and executive officers of
Series Fund II, their business address and principal occupations during the past
five years. Unless otherwise noted, an individual's business address is 95 Wall
Street, New York, New York 10005.

Glenn O. Head*+ (70), President and Director. Chairman of the Board and
Director, Administrative Data Management Corp. ("ADM"), FIMCO, Executive
Investors Management Company, Inc. ("EIMCO"), First Investors Corporation
("FIC"), Executive Investors Corporation ("EIC") and First Investors
Consolidated Corporation ("FICC").

James J. Coy (81), Director, 90 Buell Lane, East Hampton, NY 11937. Retired;
formerly Senior Vice President, James Talcott, Inc. (financial institution).

Roger L. Grayson* (39), Director. Director, FIC and FICC; President and
Director, First Investors Resources, Inc.; Commodities Portfolio Manager.

Kathryn S. Head*+ (40), Director, 581 Main Street, Woodbridge, NJ 07095.
President, FICC, EIMCO and FIMCO; President, ADM; Vice President, Chief
Financial Officer and Director, FIC and EIC; President and Director, First
Financial Savings Bank, S.L.A.

<PAGE>

Rex R. Reed (73), Director, 1381 Fairway Oaks, Kiawah Island, SC 29455. Retired;
formerly Senior Vice President, American Telephone & Telegraph Company.

Herbert Rubinstein (74), Director, 145 Elm Drive, Roslyn, NY 11576. Retired;
formerly President, Belvac International Industries, Ltd. and President, Central
Dental Supply.

James M. Srygley (63), Director, 33 Hampton Road, Chatham, NJ 07982. Principal,
Hampton Properties, Inc. (property investment company).

John T. Sullivan* (64), Director and Chairman of the Board; Director, FIMCO,
FIC, FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.

Robert F. Wentworth (66), Director, RR1, Box 2554, Upland Downs Road, Manchester
Center, VT 05255. Retired; formerly financial and planning executive with
American Telephone & Telegraph Company.

Joseph I. Benedek (38), Treasurer, 581 Main Street, Woodbridge, NJ 07095.
Treasurer, FIC FIMCO, EIMCO and EIC; Comptroller and Treasurer, FICC.

Concetta Durso (61), Vice President and Secretary. Vice President, FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary, FIC and EIC.

Patricia D. Poitra (40), Vice President. Vice President, First Investors Series
Fund, First Investors U.S. Government Plus Fund and Executive Investors Trust;
Director of Equities, FIMCO.

Margaret Haggerty (30), Vice President. Portfolio Manager since November 1993;
Analyst from 1990 to 1993.

Carol Lerner Brown (42), Assistant Secretary. Secretary, FIMCO, EIMCO, FICC, EIC
and ADM; Assistant Secretary, FIC.

* These Directors may be deemed to be "interested persons," as defined in the
1940 Act.
+ Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.

All of the officers and Directors, except for Ms. Haggerty and Ms.
Poitra, hold identical or similar positions with Executive Investors Trust and
13 other registered investment companies in the First Investors Family of Funds.
Mr. Head is also an officer and/or Director of First Investors Asset Management
Company, Inc., First Investors Credit Funding Corporation, First Investors
Leverage Corporation, First Investors Realty Company, Inc., First Investors
Resources, Inc., N.A.K. Realty Corporation, Real Property Development
Corporation, Route 33 Realty Corporation, First Investors Life Insurance
Company, First Financial Savings Bank, S.L.A., First Investors Credit
Corporation and School Financial Management Services, Inc. Ms. Head is also an
officer and/or Director of First Investors Life Insurance Company, First
Investors Credit Corporation, School Financial Management Services, Inc., First
Investors Credit Funding Corporation, N.A.K. Realty Corporation, Real Property
Development Corporation, First Investors Leverage Corporation and Route 33
Realty Corporation.

<PAGE>

The following table lists compensation paid to the Series Fund II
Directors for the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>

Total
Compensation
Pension or Estimated From First
Aggregate Retirement Benefits Annual Benefits Investors Family
Compensation Accrued as Part of Upon of Funds
Director From Fund* Fund Expenses Retirement Paid to Directors*
- -------- ------------ -------------------- ----------------- ------------------
<S> <C> <C> <C> <C>

James J. Coy $1,800 $-0- $-0- $37,200
Roger L. Grayson -0- -0- -0- -0-
Glenn O. Head -0- -0- -0- -0-
Kathryn S. Head -0- -0- -0- -0-
Rex R. Reed 1,800 -0- -0- 37,200
Herbert Rubinstein 1,800 -0- -0- 37,200
James M. Srygley 1,500 -0- -0- 31,000
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth 1,800 -0- -0- 37,200
</TABLE>

* Compensation to officers and interested Directors of Series Fund II is paid by
the Adviser. In addition, compensation to non-interested Directors of Series
Fund II is currently voluntarily paid by the Adviser.

MANAGEMENT

Adviser. Investment advisory services to each Fund are provided by
First Investors Management Company, Inc. pursuant to an Investment Advisory
Agreement ("Advisory Agreement") dated June 13, 1994. The Advisory Agreement was
approved by the Board of Directors, including a majority of the Directors who
are not parties to the Funds' Advisory Agreement or "interested persons" (as
defined in the 1940 Act) of any such party ("Independent Directors"), in person
at a meeting called for such purpose and by a majority of the public
shareholders of each Fund.

Pursuant to the Advisory Agreement, FIMCO shall supervise and manage
each Fund's investments, determine each Fund's portfolio transactions and
supervise all aspects of each Fund's operations, subject to review by the
Directors. However, with respect to Growth & Income Fund, FIMCO has delegated
these duties to Wellington Management Company. See "Subadviser." The Advisory
Agreement also provides that FIMCO shall provide the Funds with certain
executive, administrative and clerical personnel, office facilities and
supplies, conduct the business and details of the operation of Series Fund II
and each Fund and assume certain expenses thereof, other than obligations or
liabilities of the Funds. The Advisory Agreement may be terminated at any time,
with respect to a Fund, without penalty by the Directors or by a majority of the
outstanding voting securities of such Fund, or by FIMCO, in each instance on not
less than 60 days' written notice, and shall automatically terminate in the
event of its assignment (as defined in the 1940 Act). The Advisory Agreement
also provides that it will continue in effect, with respect to a Fund, for a
period of over two years only if such continuance is approved annually either by
the Directors or by a majority of the outstanding voting securities of such
Fund, and, in either case, by a vote

<PAGE>

of a majority of the Independent Directors voting in person at a meeting called
for the purpose of voting on such approval.

Under the Advisory Agreement, each Fund pays the Adviser an annual fee,
paid monthly, according to the following schedules:

U.S.A. Mid-Cap Opportunity Fund
Annual
Average Daily Net Assets Rate
- ------------------------ -----
Up to $200 million............................................ 1.00%
In excess of $200 million up to $500 million.................. 0.75
In excess of $500 million up to $750 million.................. 0.72
In excess of $750 million up to $1.0 billion.................. 0.69
Over $1.0 billion............................................. 0.66

Growth & Income Fund, Utilities Income Fund
Annual
Average Daily Net Assets Rate
- ------------------------ -----
Up to $300 million............................................ 0.75%
In excess of $300 million up to $500 million.................. 0.72
In excess of $500 million up to $750 million.................. 0.69
Over $750 million............................................. 0.66

The SEC staff takes the position that annual advisory fees of 0.75% or greater
are higher than those paid by most investment companies.

For the fiscal year ended October 31, 1993, U.S.A. Mid-Cap Opportunity
Fund paid $42,072 in advisory fees. For the same period, the Adviser voluntarily
waived an additional $115,451 in advisory fees. In addition, for the same
period, expenses in the amount of $36,570 were voluntarily assumed or reimbursed
by the Adviser. For the period August 24, 1993 (commencement of operations)
through October 31, 1993, Utilities Income Fund paid $44,554 in advisory fees.
For the same period, the Adviser voluntarily waived an additional $113,242 in
advisory fees. In addition, for the same period, expenses in the amount of
$14,518 were voluntarily assumed or reimbursed by the Adviser. For the period
October 4, 1993 (commencement of operations) through October 31, 1993, Growth &
Income Fund's advisory fees amounted to $540, all of which were voluntarily
waived by the Adviser. In addition, for the same period, expenses in the amount
of $559 were voluntarily assumed or reimbursed by the Adviser.

For the fiscal year ended October 31, 1994, U.S.A. Mid-Cap Opportunity
Fund paid $31,266 in advisory fees. For the same period, the Adviser voluntarily
waived an additional $72,955 in advisory fees. For the fiscal year ended October
31, 1994, Growth & Income Fund paid $61,035 in advisory fees. For the same
period, the Adviser voluntarily waived an additional $95,778 in advisory fees.
For the fiscal year ended October 31, 1994, Utilities Income Fund paid $194,914
in advisory fees. For the same period, the Adviser voluntarily waived an
additional $266,649 in advisory fees. In addition, for the fiscal year ended
October 31, 1994, the Adviser voluntarily assumed or reimbursed expenses for
Growth & Income Fund, U.S.A. Mid-Cap Opportunity Fund and Utilities Income Fund
in the amounts of $10,831, $73,772 and $140,086, respectively.

<PAGE>

For the fiscal year ended October 31, 1995, U.S.A. Mid-Cap Opportunity
Fund paid $46,846 in advisory fees. For the same period, the Adviser voluntarily
waived an additional $33,991 in advisory fees. For the fiscal year ended October
31, 1995, Growth & Income Fund paid $261,607 in advisory fees. For the same
period, the Adviser voluntarily waived an additional $105,515 in advisory fees.
For the fiscal year ended October 31, 1995, Utilities Income Fund paid $334,586
in advisory fees. For the same period, the Adviser voluntarily waived an
additional $207,605 in advisory fees. In addition, for the fiscal year ended
October 31, 1995, the Adviser voluntarily assumed or reimbursed expenses for
Growth & Income Fund, U.S.A. Mid-Cap Opportunity Fund and Utilities Income Fund
in the amounts of $114,393, $46,369 and $105,954, respectively.

Pursuant to certain state regulations, the Adviser has agreed to
reimburse a Fund if and to the extent that Fund's aggregate operating and
management expenses, including advisory fees but generally excluding interest,
taxes, brokerage commissions and extraordinary expenses, exceed any limitation
on expenses applicable to that Fund for any full fiscal year (unless a waiver of
such expense limitation is obtained). The amount of any such reimbursement is
limited to the amount of the advisory fees paid or accrued to the Adviser for
the fiscal year. For the fiscal year ended October 31, 1995, no reimbursement to
any Fund was required pursuant to these regulations.

The Adviser has an Investment Committee composed of George V. Ganter,
Margaret Haggerty, Glenn O. Head, Nancy W. Jones, Patricia D. Poitra, Michael
O'Keefe, Clark D. Wagner and Richard Guinnessey. The Committee usually meets
weekly to discuss the composition of the portfolio of each Fund and to review
additions to and deletions from the portfolios.

Subadviser. Wellington Management Company has been retained by the
Adviser and Series Fund II as the investment subadviser to Growth & Income Fund
under a subadvisory agreement dated June 13, 1994 ("Subadvisory Agreement"). The
Subadvisory Agreement was approved by the Board of Directors, including a
majority of Independent Directors in person at a meeting called for such purpose
and by a majority of the shareholders of the Growth & Income Fund.

The Subadvisory Agreement provides that it will continue for a period
of more than two years from the date of execution only so long as such
continuance is approved annually by either the Board of Directors or a majority
of the outstanding voting securities of the Growth & Income Fund and, in either
case, by a vote of a majority of the Independent Directors voting in person at a
meeting called for the purpose of voting on such approval. The Subadvisory
Agreement provides that it will terminate automatically if assigned or upon the
termination of the Advisory Agreement, and that it may be terminated at any time
without penalty by the Board of Directors or a vote of a majority of the
outstanding voting securities of the Growth & Income Fund or by the Subadviser
upon not more than 60 days' nor less than 30 days' written notice. The
Subadvisory Agreement provides that WMC will not be liable for any error of
judgment or for any loss suffered by the Growth & Income Fund in connection with
the matters to which the Subadvisory Agreement relates, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation or
from willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties.

Under the Subadvisory Agreement, the Adviser will pay to the Subadviser
a fee at an annual rate of 0.325% of the average daily net assets of Growth &
Income Fund up to and including $50 million; 0.275% of the average daily net
assets in excess of $50 million up to and including $150 million; 0.225% of the
average daily net assets in excess of $150 million up to and including $500
million; and 0.200%

<PAGE>

of the average daily net assets in excess of $500 million. For the fiscal year
ended October 31, 1995 the Adviser paid the Subadviser fees of $157,067.

UNDERWRITER

Series Fund II has entered into an Underwriting Agreement
("Underwriting Agreement") with First Investors Corporation ("Underwriter" or
"FIC") which requires the Underwriter to use its best efforts to sell shares of
the Funds. Pursuant to the Underwriting Agreement, the Underwriter shall bear
all expenses of sales material or literature, including prospectuses and proxy
materials, to the extent such materials are used in connection with the sale of
the Funds' shares, unless the Funds have agreed to bear such costs pursuant to a
plan of distribution. See "Distribution Plans." The Underwriting Agreement was
approved by the Board of Directors, including a majority of the Independent
Directors. The Underwriting Agreement provides that it will continue in effect
from year to year, with respect to a Fund, only so long as such continuance is
specifically approved at least annually by the Board of Directors or by a vote
of a majority of the outstanding voting securities of such Fund, and in either
case by the vote of a majority of the Independent Directors, voting in person at
a meeting called for the purpose of voting on such approval. The Underwriting
Agreement will terminate automatically in the event of its assignment.

For the fiscal year ended October 31, 1993, FIC received underwriting
commissions with respect to U.S.A. Mid-Cap Opportunity Fund of $485,701. For the
same period, FIC allowed an additional $7,653, to unaffiliated dealers. For the
period February 22, 1993 (commencement of operations) through October 31, 1993,
FIC received underwriting commissions with respect to Utilities Income Fund of
$2,518,361. For the same period, FIC allowed an additional $23,008 to
unaffiliated dealers. For the period October 4, l993 (commencement of
operations) through October 31, 1993, FIC received underwriting commissions with
respect to Growth & Income Fund of $187,995, none of which was allowed to
unaffiliated dealers.

For the fiscal year ended October 31, 1994, FIC received underwriting
commissions with respect to Growth & Income Fund, U.S.A. Mid-Cap Opportunity
Fund and Utilities Income Fund of $1,187,272, $32,881 and $1,045,980,
respectively. For the same period, FIC allowed an additional $257 with respect
to Growth & Income Fund and $588 with respect to U.S.A. Mid-Cap Opportunity Fund
to unaffiliated dealers.

For the fiscal year ended October 31, 1995, FIC received underwriting
commissions with respect to Growth & Income Fund, U.S.A. Mid-Cap Opportunity
Fund and Utilities Income Fund of $1,958,002, $88,203 and $1,614,848,
respectively. For the same period, FIC allowed to unaffiliated dealers an
additional $7,252 with respect to Growth & Income Fund, $5,486 with respect to
U.S.A. Mid-Cap Opportunity Fund and $7,080 with respect to Utilities Income
Fund.

DISTRIBUTION PLANS

As stated in the Funds' Prospectus, pursuant to a separate plan of
distribution for each class of shares adopted by Series Fund II pursuant to Rule
12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan" and, collectively,
"Plans"), each Fund is authorized to compensate the Underwriter for certain

<PAGE>

expenses incurred in the distribution of that Fund's shares and the servicing or
maintenance of existing Fund shareholder accounts.

Each Plan was approved by the Board of Directors, including a majority
of the Independent Directors, and by a majority of the outstanding voting
securities of the relevant class of each Fund. Each Plan will continue in effect
from year to year, with respect to a Fund, as long as its continuance is
approved annually be either the Board of Directors or by a vote of a majority of
the outstanding voting securities of the relevant class of shares of such Fund.
In either case, to continue, each Plan must be approved by the vote of a
majority of the Independent Directors. The Board reviews quarterly and annually
a written report provided by the Treasurer of the amounts expended under the
applicable Plan and the purposes for which such expenditures were made. While
each Plan is in effect, the selection and nomination of the Independent
Directors will be committed to the discretion of such Independent Directors then
in office.

Each Plan can be terminated at any time, with respect to a Fund, by a
vote of a majority of the Independent Directors or by a vote of a majority of
the outstanding voting securities of the relevant class of shares of that Fund.
Any change to the Class B Plan that would materially increase the costs to that
class of shares of a Fund or any material change to the Class A Plan may not be
instituted without the approval of the outstanding voting securities of the
relevant class of shares of that Fund. Such changes also require approval by a
majority of the Independent Directors.

In reporting amounts expended under the Plans to the Directors, FIMCO
will allocate expenses attributable to the sale of each class of a Fund's shares
to such class based on the ratio of sales of such class to the sales of both
classes of shares. The fees paid by one class of a Fund's shares will not be
used to subsidize the sale of any other class of that Fund's shares.

In approving each Fund's overall system of distribution, the Board of
Directors considered several factors, including that implementation of the
system would (1) enable investors to choose the purchasing option better suited
to their individual situation, thereby encouraging current shareholders to make
additional investments in a Fund and attracting new investors and assets to that
Fund to the benefit of the Fund and its shareholders; (2) facilitate
distribution of each Fund's shares; and (3) maintain the competitive position of
each Fund in relation to other funds that have implemented or are seeking to
implement similar distribution arrangements.

In adopting the Class B Plan, the Board of Directors considered all the
features of the distribution system, including (1) the conditions under which a
contingent differed sales charge ("CDSC") would be imposed and the amount of
such charge, (2) the advantage to investors in having no initial sales charges
deducted from a Fund's purchase payments and instead having the entire amount of
their purchase payments immediately invested in Fund shares, (3) the
Underwriter's belief that the ability to receive sales commissions and service
fees under the Class B Plan would prove attractive to Representatives, resulting
in greater growth of each Fund than might otherwise be the case, (4) the
advantages to the shareholders of a Fund of economies of scale resulting from
growth in such Fund's assets, and (5) the Underwriter's shareholder service and
distribution-related expenses and costs.

In adopting the Class A Plan, the Board of Directors considered all
relevant information and determined that there is a reasonable likelihood that
the Class A Plan will benefit each Fund and their shareholders. The Board
believes that the amounts spent pursuant to the Fund's Class A Plan have
assisted

<PAGE>

each Fund in providing ongoing servicing to shareholders, in competing with
other providers of financial services and in promoting sales, thereby increasing
the net assets of each Fund.

For the fiscal year ended October 31, 1995, Growth & Income Fund,
U.S.A. Mid-Cap Opportunity Fund and Utilities Income Fund accrued $143,005,
$23,924 and $213,442, respectively, in fees pursuant to the Class A Plan. Of
such amounts, $79,348, $3,061 and $26,822, respectively, was voluntarily waived
by the Underwriter. For the fiscal year ended October 31, 1995, Growth & Income
Fund, U.S.A. Mid-Cap Opportunity Fund and Utilities Income Fund accrued $12,812,
$1,096 and $11,449, respectively, in fees pursuant to the Class B Plan.

The Underwriter incurred the following Class A Plan-related expenses
for the fiscal year ended October 31, 1995:

Compensation Compensation to
Fund Advertising to sales personnel* Underwriter**
<S> <C> <C> <C>

U.S.A. Mid-Cap Opportunity Fund $-0- $ 7,151 $ 16,773
Growth & Income Fund -0- 45,644 97,361
Utilities Income Fund -0- 67,049 146,393
</TABLE>

* Represents service fees.
** Represents distribution fees.

The Underwriter incurred the following Class B Plan-related expenses
for the period January 12, 1995 (commencement of offering of Class B shares) to
October 31, 1995:

Compensation Compensation to
Fund Advertising to sales personnel* Underwriter**
<S> <C> <C> <C>

U.S.A. Mid-Cap Opportunity Fund $-0- $-0- $ 1,096
Growth & Income Fund -0- -0- 12,812
Utilities Income Fund -0- -0- 11,449
</TABLE>

* Represents service fees.
** Represents distribution fees.

DETERMINATION OF NET ASSET VALUE

Except as provided herein, a security listed or traded on an exchange
or the Nasdaq national market system is valued at its last sale price on the
exchange or market system where the security is primarily traded, and lacking
any sales on a particular day, the security is valued at the mean between the
closing bid and asked prices on that day. Each security traded in the market
(including securities listed on exchanges whose primary market is believed to be
OTC) is valued at the mean between the last bid and asked prices based upon
quotes furnished by a market maker for such securities. In the absence of market
quotations, a Fund will determine the value of bonds based upon quotes furnished
by market makers, if available, or in accordance with the procedures described
herein. In that connection, the Board of Directors has determined that a Fund
may use an outside pricing service. The pricing service uses

<PAGE>

quotations obtained from investment dealers or brokers for the particular
securities being evaluated, information with respect to market transactions in
comparable securities and other available information in determining value. This
service is furnished by Interactive Data Corporation. Short-term debt securities
that mature in 60 days or less are valued at amortized cost if their original
term to maturity from the date of purchase was 60 days or less, or by amortizing
their value on the 61st day prior to maturity if their term to maturity from the
date of purchase exceeded 60 days, unless the Board of Directors determines that
such valuation does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Series Fund II's officers in a
manner specifically authorized by the Board of Directors.

With respect to each Fund, "when-issued securities" are reflected in
the assets of the Fund as of the date the securities are purchased. Such
investments are valued thereafter at the mean between the most recent bid and
asked prices obtained from recognized dealers in such securities. For valuation
purposes, with respect to Growth & Income Fund, quotations of foreign securities
in foreign currencies are converted into U.S. dollar equivalents using the
foreign exchange equivalents in effect.

The Board of Directors may suspend the determination of a Fund's net
asset value per share separately for each class of shares for the whole or any
part of any period (1) during which trading on the New York Stock Exchange
("NYSE") is restricted as determined by the SEC or the NYSE is closed for other
than weekend and holiday closings, (2) during which an emergency, as defined by
rules of the SEC in respect to the U.S. market, exists as a result of which
disposal by a Fund of securities owned by it is not reasonably practicable for
the Fund fairly to determine the value of its net assets, or (3) for such other
period as the SEC has by order permitted.

ALLOCATION OF PORTFOLIO BROKERAGE

Purchases and sales of portfolio securities by the Fund may be
principal transactions. In principal transactions, portfolio securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. There will usually be no brokerage commissions paid by
a Fund for such purchases. Purchases from underwriters will include the
underwriter's commission or concession and purchases from dealers serving as
market makers will include the spread between the bid and asked price. Certain
money market instruments may be purchased by a Fund directly from an issuer, in
which no commission or discounts are paid. Each Fund may purchase fixed income
securities on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer.

Each Fund may deal in securities which are not listed on a national
securities exchange or the Nasdaq national market system but are traded in the
OTC market. Each Fund also may purchase listed securities through the "third
market." When transactions are executed in the OTC market, a Fund seeks to deal
with the primary market makers, but when advantageous it utilizes the services
of brokers.

In effecting portfolio transactions, the Adviser or the Subadviser
seeks best execution of trades either (1) at the most favorable and competitive
rate of commission charged by any broker or member of an exchange, or (2) with
respect to agency transactions, at a higher rate of commission if reasonable in
relation to brokerage and research services provided to a Fund or the Adviser or
the Subadviser by such member or broker. Such services may include, but are not
limited to, any one or more of the following:

<PAGE>

information as to the availability of securities for purchase or sale and
statistical or factual information or opinions pertaining to investments. The
Adviser or Subadviser may use research and services provided to it by brokers in
servicing all the funds in the First Investors Group of Funds; however, not all
such services may be used by the Adviser or the Subadviser in connection with a
Fund. No portfolio orders are placed with an affiliated broker, nor does any
affiliated broker-dealer participate in these commissions.

The Adviser or Subadviser may combine transaction orders placed on
behalf of a Fund and any other fund in the First Investors Group of Funds, any
Fund of Executive Investors Trust and First Investors Life Insurance Company,
affiliates of the Funds for the purpose of negotiating brokerage commissions or
obtaining a more favorable transaction price; and where appropriate, securities
purchased or sold may be allocated, in terms of price and amount, to a Fund
according to the proportion that the size of the transaction order actually
placed by a Fund bears to the aggregate size of the transaction orders
simultaneously made by other participants in the transaction.

For the fiscal year ended October 31, 1993, U.S.A. Mid-Cap Opportunity
Fund paid $51,648 in brokerage commissions. For the period February 22, 1993
(commencement of operations) through October 31, 1993, Utilities Income Fund
paid $139,950 in brokerage commissions. Of that amount, $600 was paid in
brokerage commissions to brokers who furnished research services on portfolio
transactions in the amount of $200,850. For the period October 4, 1993
(commencement of operations) through October 31, 1993, Growth & Income Fund did
not pay any brokerage commissions.

For the fiscal year ended October 31, 1994, U.S.A. Mid-Cap Opportunity
Fund and Utilities Income Fund paid $24,767 and $236,585, respectively, in
brokerage commissions. For the fiscal year ended October 31, 1994, Growth &
Income Fund paid $23,249 in brokerage commissions. Of that amount $6,732 was
paid in brokerage commissions to brokers who furnished research services on
portfolio transactions in the amount of $4,704,802.

For the fiscal year ended October 31, 1995 Growth & Income Fund paid
$40,513 in brokerage commissions. Of that amount, $4,973 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $3,545,732. For the fiscal year ended October 31, 1995, U.S.A.
Mid-Cap Opportunity Fund paid $16,178 in brokerage commissions. Of that amount,
$2,345 was paid in brokerage commissions to brokers who furnished research
services on portfolio transactions in the amount of $1,387,834. For the fiscal
year ended October 31, 1995, Utilities Income Fund paid $76,984 in brokerage
commissions. Of that amount, $20,160 was paid in brokerage commissions to
brokers who furnished research services on portfolio transactions in the amount
of $8,245,784.

REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND
REDEMPTION INFORMATION AND OTHER SERVICES

Reduced Sales Charges--Class A Shares

Reduced sales charges are applicable to purchases made at one time of
Class A shares of any one or more of the Funds or of any one or more of the
Eligible Funds, as defined in the Prospectus, by "any person," which term shall
include an individual, or an individual, his or her spouse and children under
the

<PAGE>

age of 21, or a trustee or other fiduciary of a single trust, estate or
fiduciary account (including a pension, profit-sharing or other employee benefit
trust created pursuant to a plan qualified under section 401 of the Internal
Revenue Code of 1986, as amended (the "Code")), although more than one
beneficiary is involved; provided, however, that the term "any person" shall not
include a group of individuals whose funds are combined, directly or indirectly,
for the purchase of redeemable securities of a registered investment company,
nor shall it include a trustee, agent, custodian or other representative of such
a group of individuals.

Ownership of Class A and Class B shares of any Eligible Fund, except as
noted below, qualify for a reduced sales charge on the purchase of Class A
shares. Class A shares purchased at net asset value, Class A shares of the Money
Market Funds, or shares owned under a Contractual Plan are not eligible for the
purchase of Class A shares of a Fund at a reduced sales charge through a Letter
of Intent or the Cumulative Purchase Privilege.

Letter of Intent. Any of the eligible persons described above may,
within 90 days of their investment, sign a statement of intent ("Letter of
Intent") in the form provided by the Underwriter, covering purchases of Class A
shares of any one or more of the Funds and of the other Eligible Funds to be
made within a period of thirteen months, provided said shares are currently
being offered to the general public and only in those states where such shares
may be legally sold, and thereby become eligible for the reduced sales charge
applicable to the total amount purchased. A Letter of Intent filed after the
date of investment is considered retroactive to the date of investment for
determination of the thirteen-month period. The Letter of Intent is not a
binding obligation on either the investor or the Fund. During the term of a
Letter of Intent, Administrative Data Management Corp. ("Transfer Agent") will
hold Class A shares representing 5% of each purchase in escrow, which shares
will be released upon completion of the intended investment.

Purchases of Class A Shares made under a Letter of Intent are made at
the sales charge applicable to the purchase of the aggregate amount of shares
covered by the Letter of Intent as if they were purchased in a single
transaction. The applicable quantity discount will be based on the sum of the
then current value at public offering price (i.e., net asset value plus
applicable sales charge) of all Class A shares and the net asset value of all
Class B shares of a Fund and of the other Eligible Funds, including Class B
shares of the Money Market Funds, currently owned, together with the aggregate
offering price of purchases to be made under the Letter of Intent. If all such
shares are not so purchased, a price adjustment is made, depending upon the
actual amount invested within such period, by the redemption of sufficient Class
A shares held in escrow in the name of the investor (or by the investor paying
the commission differential). A Letter of Intent can be amended (1) during the
thirteen-month period if the purchaser files an amended Letter of Intent with
the same expiration date as the original Letter of Intent, or (2) automatically
after the end of the period, if total purchases credited to the Letter of Intent
qualify for an additional reduction in the sales charge. The Letter of Intent
privilege may be modified or terminated at any time by the Underwriter.

Cumulative Purchase Privilege. Upon written notice to FIC, Class A
shares of a Fund are also available at a quantity discount on new purchases if
the then current value at the current public offering price (i.e., net asset
value plus applicable sales charge) of all Class A shares and the net asset
value of all Class B shares of a Fund and of the other Eligible Funds, including
Class B shares of the Money Market Funds, previously purchased and then owned,
plus the value of Class A shares being purchased at the

<PAGE>

current public offering price, amount to $25,000 or more. Such quantity
discounts may be modified or terminated at any time by the Underwriter.

Purchase of Shares. When you open a Fund account, you must specify
which class of shares you wish to purchase. If not, your order will be processed
as follows: (1) if you are opening an account with a new registration with First
Investors your order will not be processed until the Fund receives notification
of which class of shares to purchase; (2) if you have existing First Investors
accounts solely in either Class A shares or Class B shares with the identical
registration, your investment in the Fund will be made in the same class of
shares as your existing account(s); (3) if you are an existing First Investors
shareholder and own a combination of Class A and Class B shares with an
identical registration, your investment in the Fund will be made in Class B
shares; and (4) if you own in the aggregate at least $250,000 in any combination
of classes, your investment will be made in Class A shares.

Systematic Investing

First Investors Money Line. This service allows you to invest in a Fund
through automatic deductions from your bank checking account. Scheduled
investments may be made on a bi-weekly, semi-monthly, monthly, quarterly,
semi-annual or annual basis provided a minimum total of $600 is invested per
year. Shares of the Fund are purchased at the public offering price determined
at the close of business on the day your designated bank account is debited and
a confirmation will be sent to you after every transaction. You may decrease the
amount or discontinue this service at any time by calling Shareholder Services
or writing to Administrative Data Management Corp., 581 Main Street, Woodbridge,
NJ 07095- 1198, Attn: Control Dept. To increase the amount, send a written
request to the Transfer Agent at the address noted above, which may take up to
five days to process. Money Line application forms are available from your
Representative or by calling Shareholder Services at 1-800-423-4026.

Automatic Payroll Investment. You also may arrange for automatic
investments into a Fund on a systematic basis through salary deductions,
provided your employer has direct deposit capabilities. Shares of the Fund are
purchased at the public offering price determined as of the close of business on
the day the electronic fund transfer is received by the Fund, and a confirmation
will be sent to you after every transaction. You may change the amount or
discontinue the service by contacting your employer. An application is available
from your Representative or by calling Shareholder Services at 1-800-423- 4026.
Arrangements must also be made with your employer's payroll department.

Cross-Investment of Cash Distributions. You may elect to invest in
Class A shares of a Fund at net asset value all the cash distributions from the
same class of shares of another Eligible Fund. The investment will be made at
the net asset value per share of the Fund, generally determined as of the close
of business, on the business day immediately following the record date of any
such distribution. You may also elect to invest cash distributions of a Fund's
Class A shares into the same class of another Eligible Fund, including the Money
Market Funds. If your distributions are to be invested in a new account, you
must invest a minimum of $600 per year. See "Dividends and Other Distributions"
in the Prospectus. To arrange for cross-investing, call Shareholder Services at
1-800-423-4026.

Investment of Systematic Withdrawal Plan Payments. You may elect to
invest in Class A shares of a Fund at net asset value through payments from a
Systematic Withdrawal Plan you maintain with any other Eligible Fund. Scheduled
investments may be made on a monthly, quarterly, semi-annual or annual basis.
You may also elect to invest Systematic Withdrawal Plan payments of Class A
shares

<PAGE>

from a Fund into the same class of another Eligible Fund, including the Money
Market Funds. If your Systematic Withdrawal Payments are to be invested in a new
account, you must invest a minimum of $600 per year. See "Systematic Withdrawal
Plan," below. To arrange for Systematic Withdrawal Plan investments, call
Shareholder Services at 1-800-423-4026.

Systematic Withdrawal Plan. Shareholders who own noncertificated shares
may establish a Systematic Withdrawal Plan ("Withdrawal Plan"). If you have a
Fund account with a net asset value of at least $5,000, you may elect to receive
monthly, quarterly, semi-annual or annual checks for any designated amount
(minimum $25). You may have the payments sent directly to you or persons you
designate. Regardless of the amount of your Fund account, you may also elect to
the have the Systematic Plan payments automatically (i) invested at net asset
value in shares of the same class of any other Eligible Fund, including the
Money Market Funds, or (ii) paid to First Investors Life Insurance Company for
the purchase of a life insurance policy or a variable annuity. If your
Systematic Plan payments are to be invested in a new Eligible Fund account, you
must invest a minimum of $600 per year. If you own Class B shares in a
retirement account and qualify to receive distributions under the Code, you may
elect to receive redemptions at regular intervals. The redemption proceeds, less
any applicable CDSC, will be automatically sent to you directly. Dividends and
other distributions, if any, are reinvested in additional shares of the same
class of the Fund. Shareholders may add shares to the Withdrawal Plan or
terminate the Withdrawal Plan at any time. Withdrawal Plan payments will be
suspended when a distributing Fund has received notice of a shareholder's death
on an individual account. Payments may recommence upon receipt of written
alternate payment instructions and other necessary documents from the deceased's
legal representative. Withdrawal payments will also be suspended when a payment
check is returned to the Transfer Agent marked as undeliverable by the U.S.
Postal Service after two consecutive mailings.

Class B shareholders may establish a Plan and elect to receive up to 8%
of the net asset value of their account (calculated as set forth below) each
year without incurring any CDSC. Shares not subject to a CDSC (such as shares
representing reinvestment of distributions) will be redeemed first and will
count toward the 8% limitation. If the shares not subject to a CDSC are
insufficient for this purpose, then shares subject to the lowest CDSC will be
redeemed next until the 8% limit is reached. The 8% figure is calculated on a
pro rata basis at the time of the first payment made pursuant to the Plan and
recalculated thereafter on a pro rata basis at the time of each Plan payment.
Therefore, shareholders who have chosen the Plan based on a percentage of the
net asset value of their account of up to 8% will be able to receive Plan
payments without incurring a CDSC. However, shareholders who have chosen a
specific dollar amount (for example, $100 per month) for their periodic Plan
payment should be aware that the amount of that payment not subject to a CDSC
may vary over time depending on the net asset value of their account. For
example, if the net asset value of the account is $15,000 at the time of
payment, the shareholder will receive $100 free of the CDSC (8% of $15,000
divided by 12 monthly payments). However, if at the time of a payment the net
asset value of the account has fallen to $14,000, the shareholder will receive
$93.33 free of any CDSC (8% of $14,000 divided by 12 monthly payments) and $6.67
subject to the lowest applicable CDSC. This privilege may be revised or
terminated at any time.

The withdrawal payments derived from the redemption of sufficient
shares in the account to meet designated payments in excess of dividends and
other distributions may deplete or possibly extinguish the initial investment,
particularly in the event of a market decline, and may result in a capital gain
or loss depending on the shareholder's cost. Purchases of additional shares of a
Fund concurrent with withdrawals are ordinarily disadvantageous to shareholders
because of tax liabilities and sales charges. To establish a Withdrawal Plan,
call Shareholder Services at 1-800-423-4026.

<PAGE>

Conversion of Class B Shares. Class B Shares of a Fund will
automatically convert to Class A shares of that Fund, based on the relative net
asset values per share of the two classes, as of the close of business on the
first business day of the month in which the eighth anniversary of the initial
purchase of such Class B shares occurs. For these purposes, the date of initial
purchase shall mean (1) the first business day of the month in which such Class
B shares were issued, or (2) for Class B shares obtained through an exchange or
a series of exchanges, the first business day of the month in which the original
Class B shares were issued. For conversion purposes, Class B shares purchased
through the reinvestment of dividends and other distributions paid in respect of
Class B shares will be held in a separate sub-account. Each time any Class B
shares in the shareholder's regular account (other than those in the
sub-account) convert to Class A shares, a pro rata portion of the Class B shares
in the sub-account also will convert to Class A shares. The portion will be
determined by the ratio that the shareholder's Class B shares converting to
Class A shares bears to the shareholder's total Class B shares not acquired
through dividends and other distributions.

The availability of the conversion feature is subject to the continuing
applicability of a ruling of the Internal Revenue Service ("IRS"), or an opinion
of counsel, that: (1) the dividends and other distributions paid on Class A and
Class B shares will not result in "preferential dividends" under the Code; and
(2) the conversion of shares does not constitute a taxable event. If the
conversion feature ceased to be available, the Class B shares of the Fund would
not be converted and would continue to be subject to the higher ongoing expenses
of the Class B shares beyond eight years from the date of purchase. FIMCO has no
reason to believe that these conditions for the availability of the conversion
feature will not continue to be met.

If a Fund implements any amendments to its Class A Plan that would
increase materially the costs that may be borne under such Plan by Class A
shareholders, Class B shares will stop converting into Class A shares unless a
majority of Class B shareholders, voting separately as a class, approve the
proposal.

Waivers of CDSC on Class B Shares. The CDSC imposed on Class B shares
does not apply to: (a) any redemption pursuant to the tax-free return of an
excess contribution to an IRA or other qualified retirement plan if the Fund is
notified at the time of such request; (b) any redemption of a lump-sum or other
distribution from qualified retirement plans or accounts provided the
shareholder has attained the minimum age of 70 1/2 years and has held the Class
B shares for a minimum period of three years; (c) any redemption by advisory
accounts managed by the Adviser or any of its affiliates or for shares held by
the Adviser or any of its affiliates; (d) any redemption by a tax-exempt
employee benefit plan if continuance of the investment would be improper under
applicable laws or regulations; and (e) any redemption or transfer of ownership
of Class B shares following the death or disability, as defined in Section
72(m)(7) of the Code, of a shareholder if the Fund is provided with proof of
death or disability and with all documents required by the Transfer Agent within
one year after the death or disability. For more information on what specific
documents are required, call Shareholder Services at 1-800-423-4026.

Signature Guarantees. The words "Signature Guaranteed" must appear in
direct association with the signature of the guarantor. Although each Fund
reserves the right to require signature guarantees at any other time, signature
guarantees are required whenever: (1) the amount of the redemption is $50,000 or
more, (2) an exchange in the amount of $50,000 or more is made into the Money
Market Funds, (3) a redemption check is to be made payable to someone other than
the registered accountholder, other than institutions on behalf of the
shareholder, (4) a redemption check is to be mailed to an address other than the
address of record, other than to another financial institution for the benefit
of a shareholder, (5) an

<PAGE>

account registration is being transferred to another owner, (6) an account,
other than an individual, joint, UGMA or UTMA nonretirement account or a
trustee-to-trustee transfer of a retirement account, is being exchanged or
redeemed, (7) the redemption request is for certificated shares, or (8) your
address of record has changed within 60 days prior to a redemption request.

Reinvestment after Redemption. If you redeem Class A or Class B shares
in your Fund account, you can reinvest within ninety days from the date of
redemption all or any part of the proceeds in shares of the same class of the
same Fund or any other Eligible Fund (including the Money Market Funds), at net
asset value, on the date the Transfer Agent receives your purchase request. If
you reinvest the entire proceeds of a redemption of Class B shares for which a
CDSC has been paid, you will be credited for the amount of the CDSC. If you
reinvest less than the entire proceeds, you will be credited with a pro rata
portion of the CDSC. All credits will be paid in Class B shares of the fund into
which the reinvestment is being made. The period you owned the original Class B
shares prior to redemption will be added to the period of time you own Class B
shares acquired through reinvestment for purposes of determining (a) the
applicable CDSC upon a subsequent redemption and (b) the date on which Class B
shares automatically convert to class A shares. If your reinvestment is into a
new account, other than the Money Market Funds, it must meet the minimum
investment and other requirements of the fund into which the reinvestment is
being made. If you reinvest into a new Money Market Fund within one year from
the date of redemption, the minimum investment is $500. To take advantage of
this option, send your reinvestment check along with a written request to the
Transfer Agent within 90 days from the date of your redemption. Include your
account number and a statement that you are taking advantage of the
"Reinvestment Privilege."

Telephone Transactions. To exchange or redeem noncertificated Fund
shares by telephone, you must select this option on your original Account
Application or complete the telephone privileges authorization section on the
Special Services Application. You may use the privilege five days after the
Transfer Agent has processed your Account Application or Special Services
Application. Telephone exchanges are available between nonretirement accounts
and between IRA accounts of the same class of shares registered in the same
name. Telephone exchanges are also available from an individually registered
nonretirement account to an IRA account of the same class of shares in the same
name (provided an IRA application is on file). Telephone exchanges are not
available for exchanges of Fund shares for plan units.

As stated in the Fund's Prospectus, Series Fund II, the Adviser, the
Underwriter and their officers, directors and employees will not be liable for
any loss, damage, cost or expense arising out of any instruction (or any
interpretation of such instruction) received by telephone which they reasonably
believe to be authentic. In acting upon telephone instructions, these parties
use procedures which are reasonably designed to ensure that such instructions
are genuine, such as (1) obtaining some or all of the following information:
account number; name(s) and social security number registered to the account;
and personal identification; (2) recording all telephone transactions; and (3)
sending written confirmation of each transaction to the registered owner.

Retirement Plans

Profit-Sharing/Money Purchase Pension Plans. FIC offers prototype
Profit-Sharing, Money Purchase Pension and 401(k) Retirement Plans ("Retirement
Plans") approved by the IRS for corporations, sole proprietorships and
partnerships. The Custodial Agreement for the above captioned Money Purchase

<PAGE>

Pension and Profit Sharing Plan provides that First Financial Savings Bank,
S.L.A. ("First Financial Savings"), an affiliate of FIC, will furnish all
required custodial services.

FIC offers additional versions of prototype qualified retirement plans
for eligible employers, including 401(k), money purchase, profit sharing and
target benefit plans.

Currently, there are no annual service fees chargeable to participants
in connection with a Retirement Plan account. Participants are, however, charged
$5.00 for opening a Retirement Plan account, other than a 401(k) Retirement Plan
account. Each Fund currently pays the annual $10.00 custodian fee for each
Retirement Plan account, if applicable, maintained with such Fund. This policy
may be changed at any time by a Fund on 45 days' written notice. First Financial
Savings has reserved the right to waive its fees at any time or to change the
fees on 45 days' prior written notice.

The Retirement Plan documents contain further specific information
about the Retirement Plans and may be obtained from your First Investors
Representative. Prior to establishing a Retirement Plan, you are advised to
consult with your legal and tax advisers.

Individual Retirement Accounts. A qualified individual may purchase
shares of a Fund through an individual retirement account ("IRA") or, as an
employee of a qualified employer, through a Simplified Employee Pension-IRA
("SEP-IRA") or a Salary Reduction Simplified Employee Pension-IRA ("SARSEP-IRA")
furnished by FIC. Under the related Custodial Agreements, First Financial
Savings acts as custodian of each of these retirement plans.

The Funds offer IRA accounts with specific provisions tailored to meet
the needs of certain groups of investors. The custodian fees are disclosed in
the IRA documents provided to investors in such accounts.

A taxpayer generally may make an annual IRA contribution no greater
than the lesser of: (a) 100% of his or her compensation, or (b) $2,000 (or
$2,250 when also contributing to a spousal IRA). However, contributions are
deductible only under certain conditions. The requirements as to SEP-IRAs and
SARSEP-IRAs are described in IRS Form 5305-SEP and 5305A-SEP, respectively,
which is provided to employers. Employers are required to provide copies of
Forms 5305-SEP and 5305A-SEP to their eligible employees. A disclosure statement
setting forth complete details of the IRA is given to each participant before
the contribution is invested.

Currently, there are no annual service fees chargeable to a participant
in connection with an IRA, SEP-IRA or SARSEP-IRA. Each Fund currently pays the
annual $10.00 custodian fee for each IRA account maintained with such Fund. This
policy may be changed at any time by a Fund on 45 days' written notice to the
holder of any IRA, SEP-IRA or SARSEP-IRA. First Financial Savings has reserved
the right to waive its fees at any time or to change the fees on 45 days' prior
written notice to the holder of any IRA.

An application and other documents necessary to establish an IRA,
SEP-IRA or SARSEP-IRA, are available from your Representative. Prior to
establishing an IRA, SEP-IRA or SARSEP-IRA, you are advised to consult with your
legal and tax advisers.

<PAGE>

Retirement Benefit Plans for Employees of Eligible Organizations. FIC
makes available model custodial accounts under Section 403(b)(7) of the Code
("Custodial Accounts") to provide retirement benefits for employees of certain
eligible public educational institutions and other eligible non-profit
charitable, religious and humane organizations. The Custodial Accounts are
designed to permit contributions (up to a "maximum exclusion allowance") by
employees through salary reduction. First Financial Savings acts as custodian of
these accounts.

Contributions may be made to a Custodial Account under the Optional
Retirement Program for Employees of Texas Institutions of Higher Education
("ORP"), either by salary reduction agreement or otherwise, in accordance with
the terms and conditions of the ORP, and under the Texas Deferred Compensation
Plan Program for eligible state employees by salary reduction agreement.

Currently, there are no annual service fees chargeable to participants
in connection with a Custodial Account. Each Fund currently pays the annual
$10.00 custodian fee for each Custodial Account maintained with such Fund. This
policy may be changed at any time by a Fund on 45 days' written notice to a
Custodial Account participant. First Financial Savings has reserved the right to
waive its fees at any time or to change the fees on 45 days' prior written
notice to a Custodial Account participant.

An application and other documents necessary to establish a Custodial
Account are available from your Representative. Persons desiring to create a
Custodial Account are advised to confer with their legal and tax advisers
concerning the specifics of this type of retirement benefit plan.

Mandatory income tax withholding, at the rate of 20%, may be required
for Federal income tax purposes on "eligible rollover" distributions made from
any of the foregoing retirement plans (other than IRAs, including SEP-IRAs and
SARSEP-IRAs). If the recipient elects to directly transfer an eligible rollover
distribution to an "eligible retirement plan" that permits acceptance of such
distributions, no withholding will apply. For distributions that are not
"eligible rollover" distributions, the recipient can elect, in writing, not to
require any withholding. This election must be submitted immediately before, or
must accompany, the distribution request. The amount, if any, of any such
optional withholding depends on the amount and type of the distribution.
Appropriate election forms are available from the Custodian or Shareholder
Services. Other types of withholding nonetheless may apply.

Distribution Fees. A participant/shareholder's account under any of the
foregoing retirement plans (including IRAs) may be charged a distribution fee
(at the time of withdrawal) of $7.00 for a single distribution of the entire
account and $1.00 for each periodic distribution therefrom.

TAXES

In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Code, a Fund -- each Fund being treated as a separate
corporation for these purposes -- must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (consisting
generally of net investment income, net short-term capital gain and, for Growth
& Income Fund, net gains from certain foreign currency transactions)
("Distribution Requirement") and must meet several additional requirements. For
each Fund these requirements include the following: (1) the Fund must derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of securities or, for Growth & Income

<PAGE>

Fund, foreign currencies, or other income (including gains from options, futures
or forward contracts) derived with respect to its business of investing in
securities or, for Growth & Income Fund, those currencies ("Income
Requirement"); (2) the Fund must derive less than 30% of its gross income each
taxable year from the sale or other disposition of securities, or any of the
following, that were held for less than three months -- options or futures, or
foreign currencies (or forward contracts thereon) that are not directly related
to the Fund's principal business of investing in securities (or options and
futures with respect thereto) ("Short-Short Limitation"); (3) at the close of
each quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RICs and other securities, with those other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities; and (4) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its total
assets may be invested in securities (other than U.S. Government securities or
the securities of other RICs) of any one issuer.

Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

A portion of the dividends from a Fund's investment company taxable
income may be eligible for the dividends-received deduction allowed to
corporations. The eligible portion may not exceed the aggregate dividends
received by the Fund from U.S. corporations. However, dividends received by a
corporate shareholder and deducted by it pursuant to the dividends-received
deduction are subject indirectly to the alternative minimum tax.

If shares of a Fund are sold at a loss after being held for six months
or less, the loss will be treated as long-term, instead of short-term, capital
loss to the extent of any capital gain distributions received on those shares.

Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.

Dividends and interest received by Growth & Income Fund may be subject
to income, withholding or other taxes imposed by foreign countries that would
reduce the yield on its securities. Tax conventions between certain countries
and the United States may reduce or eliminate these foreign taxes, however, and
many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors.

Growth & Income Fund may invest in the stock of "passive foreign
investment companies" ("PFICs"). A PFIC is a foreign corporation that, in
general, meets either of the following tests: (1) at least 75% of its gross
income is passive or (2) an average of at least 50% of its assets produce, or
are held for the production of, passive income. Under certain circumstances, if
the Fund holds stock of a PFIC, it will be subject to Federal income tax on a
portion of any "excess distribution" received on the stock or of any gain on
disposition of the stock (collectively "PFIC income"), plus interest thereon,
even if the Fund

<PAGE>

distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders.

If Growth & Income Fund invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) -- which probably would have to be distributed to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax --even if those
earnings and gain were not received by the Fund. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.

Proposed regulations have been published pursuant to which open-end
RICs, such as Growth & Income Fund, would be entitled to elect to
"mark-to-market" their stock in certain PFICs. "Marking-to-market," in this
context, means recognizing as gain for each taxable year the excess, as of the
end of that year, of the fair market value of such a PFIC's stock over the
adjusted basis in that stock (including mark-to-market gain for each prior year
for which an election was in effect).

For Growth & Income Fund, income from foreign currencies (except
certain gains therefrom that may be excluded by future regulations) will qualify
as permissible income under the Income Requirement. Income from the Fund's
disposition of foreign currencies and forward currency contracts that are not
directly related to its principal business of investing in securities will be
subject to the Short-Short Limitation if they are held for less than three
months.

U.S.A. Mid-Cap Opportunity Fund and Utilities Income Fund may acquire
zero coupon or other securities issued with original issue discount. As the
holder of those securities, each such Fund must include in its income the
original issue discount that accrues on the securities during the taxable year,
even if the Fund receives no corresponding payment on the securities during the
year. Similarly, each such Fund must include in its gross income securities it
receives as "interest" on pay-in-kind securities. Because each Fund annually
must distribute substantially all of its investment company taxable income,
including any original issue discount and other non-cash income to satisfy the
Distribution Requirement and to avoid imposition of the Excise Tax, the Fund may
be required in a particular year to distribute as a dividend an amount that is
greater than the total amount of cash it actually receives. Those distributions
will be made from a Fund's cash assets or from the proceeds of sales of
portfolio securities, if necessary. Each Fund may realize capital gains or
losses from those sales, which would increase or decrease its investment company
taxable income and/or net capital gain. In addition, any such gains may be
realized on the disposition of securities held for less than three months.
Because of the Short-Short Limitation, any such gains would reduce a Fund's
ability to sell other securities, or options, futures or certain forward
contracts held for less than three months that it might wish to sell in the
ordinary course of its portfolio management.

The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the gains and losses Utilities Income Fund and Growth &
Income Fund realize in connection therewith. Income from transactions in options
and futures derived by a Fund with respect to its business of investing in
securities, will qualify as permissible income under the Income Requirement.
However, income from Utilities Income Fund's disposition of options

<PAGE>

and futures contracts will be subject to the Short-Short Limitation if they are
held for less than three months.

If a Fund satisfies certain requirements, then any increase in value of
a position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Fund intends that, when it engages in hedging strategies, it will qualify for
this treatment, but at the present time it is not clear whether this treatment
will be available for all of the Fund's hedging transactions. To the extent this
treatment is not available, a Fund may be forced to defer the closing out of
options or futures beyond the time when it otherwise would be advantageous to do
so, in order for the Fund to continue to qualify as a RIC.

PERFORMANCE INFORMATION

A Fund may advertise its performance of each of its classes in various
ways.

The "average annual total return" ("T") of each class is an average
annual compounded rate of return. The calculation produces an average annual
total return for the number of years measured. It is the rate of return based on
factors which include a hypothetical initial investment of $1,000 ("P") over a
number of years ("n") with an Ending Redeemable Value ("ERV") of that
investment, according to the following formula:

T=[(ERV/P)1/n]-1

The "total return" uses the same factors, but does not average the rate
of return on an annual basis. Total return is determined as follows:

[ERV-P]/P = TOTAL RETURN

Total return is calculated by finding the average annual change in the
value of an initial $1,000 investment over the period. In calculating the ending
redeemable value for Class A shares, each Fund will deduct the maximum sales
charge of 6.25% (as a percentage of the offering price) from the initial $1,000
payment and, for Class B shares, the applicable CDSC imposed on a redemption of
Class B shares held for the period is deducted. All dividends and other
distributions are assumed to have been reinvested at net asset value on the
initial investment ("P"). Average annual total return and total return may also
be based on investment at reduced sales charge levels or at net asset value. Any
quotation of return not reflecting the maximum sales charge will be greater than
if the maximum sales charge were used.

Return information may be useful to investors in reviewing a Fund's
performance. However, certain factors should be taken into account before using
this information as a basis for comparison with alternative investments. No
adjustment is made for taxes payable on distributions. Return will fluctuate
over time and return for any given past period is not an indication or
representation by a Fund of future rates of return on its shares. At times, the
Adviser may reduce its compensation or assume expenses of a Fund in order to
reduce the Fund's expenses. Any such waiver or reimbursement would increase the
Fund's return during the period of the waiver or reimbursement.

<PAGE>

AVERAGE ANNUAL TOTAL RETURN

Class A Shares
Year Inception1
Ended to
October 31, 1995 October 31, 1995
---------------- ----------------
U.S.A. Mid-Cap Opportunity Fund 16.76% 5.91%
Utilities Income Fund 13.74 3.70
Growth & Income Fund 11.98 7.51

TOTAL RETURN
Class B Shares
Inception2
to
October 31, 1995
U.S.A. Mid-Cap Opportunity Fund 15.80%
Utilities Income Fund 17.02
Growth & Income Fund 17.78

Each Fund may include in advertisements and sales literature,
information, examples and statistics to illustrate the effect of compounding
income at a fixed rate of return to demonstrate the growth of an investment over
a stated period of time resulting from the payment of dividends and capital gain
distributions in additional shares. These examples may also include hypothetical
returns comparing taxable versus tax-deferred growth which would pertain to an
IRA, section 403(b)(7) Custodial Account or other qualified retirement program.
The examples used will be for illustrative purposes only and are not
representations by the Funds of past or future yield or return.

From time to time, in reports and promotional literature, the Funds may
compare their performance to, or cite the historical performance of, Overnight
Government repurchase agreements, U.S. Treasury bills, notes and bonds,
certificates of deposit, and six-month money market certificates or indices of
broad groups of unmanaged securities considered to be representative of, or
similar to, the Funds' portfolio holdings, such as:

Lipper Analytical Services, Inc. ("Lipper") is a widely-recognized
independent service that monitors and ranks the performance of
regulated investment companies. The Lipper performance analysis
includes the reinvestment of capital gain distributions and income
dividends but does not take sales charges into consideration. The
method of calculating total return data on indices utilizes actual
dividends on ex-dividend dates accumulated for the quarter and
reinvested at quarter
- --------
1 The inception dates for Class A shares of the Funds are as follows: U.S.A.
Mid-Cap Opportunity Fund - August 24, 1992; Utilities Income Fund - February 22,
1993; and Growth & Income Fund - October 4, 1993.
2 The commencement date for the offering of Class B shares is January 12, 1995.

<PAGE>

end. This calculation is at variance with SEC release 327 of August 8,
1972, which utilizes latest 12 month dividends. The latter method is
the one used by S&P.

Morningstar Mutual Funds ("Morningstar"), a semi-monthly publication of
Morningstar, Inc. Morningstar proprietary ratings reflect historical
risk-adjusted performance and are subject to change every month. Funds
with at least three years of performance history are assigned ratings
from one star (lowest) to five stars (highest). Morningstar ratings are
calculated from the funds' three-, five-, and ten-year average annual
returns (when available) and a risk factor that reflects fund
performance relative to three-month Treasury bill monthly returns.
Fund's returns are adjusted for fees and sales loads. Ten percent of
the funds in an investment category receive five stars, 22.5% receive
four stars, 35% receive three stars, 22.5% receive two stars, and the
bottom 10% receive one star.

Salomon Brothers Inc., "Market Performance," a monthly publication
which tracks principal return, total return and yield on the Salomon
Brothers Broad Investment-Grade Bond Index and the components of the
Index.

Telerate Systems, Inc., a computer system to which the Adviser
subscribes which daily tracks the rates on money market instruments,
public corporate debt obligations and public obligations of the U.S.
Treasury and agencies of the U.S. Government.

The Wall Street Journal, a daily newspaper publication which lists the
yields and current market values on money market instruments, public
corporate debt obligations, public obligations of the U.S. Treasury and
agencies of the U.S. Government as well as common stocks, preferred
stocks, convertible preferred stocks, options and commodities; in
addition to indices prepared by the research departments of such
financial organizations as Lehman Bros., Merrill Lynch, Pierce, Fenner
and Smith, Inc., First Boston, Salomon Brothers, Morgan Stanley,
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette, Value Line,
Datastream International, James Capel, S.G. Warburg Securities, County
Natwest and UBS UK Limited, including information provided by the
Federal Reserve Board, Moody's, and the Federal Reserve Bank.

Merrill Lynch, Pierce, Fenner & Smith, Inc., "Taxable Bond Indices," a
monthly corporate government index publication which lists principal,
coupon and total return on over 100 different taxable bond indices
which Merrill Lynch tracks. They also list the par weighted
characteristics of each Index.

Lehman Brothers, Inc., "The Bond Market Report," a monthly publication
which tracks principal, coupon and total return on the Lehman
Govt./Corp. Index and Lehman Aggregate Bond Index, as well as all the
components of these Indices.

Standard & Poor's 500 Composite Stock Price Index and the Dow Jones
Industrial Average of 30 stocks are unmanaged lists of common stocks
frequently used as general measures of stock market performance. Their
performance figures reflect changes of market prices and quarterly
reinvestment of all distributions but are not adjusted for commissions
or other costs.

<PAGE>

The Consumer Price Index, prepared by the U.S. Bureau of Labor
Statistics, is a commonly used measure of inflation. The Index shows
changes in the cost of selected consumer goods and does not represent a
return on an investment vehicle.

The NYSE composite of component indices--unmanaged indices of all
industrial, utilities, transportation, and finance stocks listed on the
NYSE.

The Russell 2500 Index, prepared by the Frank Russell Company, consists
of U.S. publicly traded stocks of domestic companies that rank from 500
to 3000 by market capitalization. The Russell 2500 tracks the return on
these stocks based on price appreciation or depreciation and does not
include dividends and income or changes in market values caused by
other kinds of corporate changes.

The Russell 2000 Index, prepared by the Frank Russell Company, consists
of U.S. publicly traded stocks of domestic companies that rank from
1000 to 3000 by market capitalization. The Russell 2000 tracks the
return on these stocks based on price appreciation or depreciation and
does not include dividends and income or changes in market values
caused by other kinds of corporate changes.

Reuters, a wire service that frequently reports on global business.

Standard & Poor's Utilities Index is an unmanaged capitalization
weighted index comprising common stock in approximately 40 electric,
natural gas distributors and pipelines, and telephone companies. The
Index assumes the reinvestment of dividends.

Moody's Stock Index, an unmanaged index of utility stock performance.

From time to time, in reports and promotional literature, performance
rankings and ratings reported periodically in national financial publications
such as MONEY, FORBES, BUSINESS WEEK, BARRON'S, FINANCIAL TIMES and FORTUNE may
also be used. In addition, quotations from articles and performance ratings and
ratings appearing in daily newspaper publications such as THE WALL STREET
JOURNAL, THE NEW YORK TIMES and NEW YORK DAILY NEWS may be cited.

GENERAL INFORMATION

Audits And Reports. The accounts of the Funds are audited twice a year
by Tait, Weller & Baker, independent certified public accountants, Two Penn
Center Plaza, Philadelphia, PA, 19102-1707. Shareholders of each Fund receive
semi-annual and annual reports, including audited financial statements, and a
list of securities owned.

Transfer Agent. Administrative Data Management Corp., 10 Woodbridge
Center Drive, Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as
transfer agent for the Funds and as redemption agent for regular redemptions.
The fees charged to each Fund by the Transfer Agent are $5.00 to open an
account; $3.00 for each certificate issued; $.65 per account per month; $10.00
for each legal transfer of shares; $.45 per account per dividend declared; $5.00
for each exchange of shares into a Fund; $5.00 for each partial withdrawal or
complete liquidation; and $1.00 per account per report required by

<PAGE>

any governmental authority. Additional fees charged to the Funds by the Transfer
Agent are assumed by the Underwriter. The Transfer Agent reserves the right to
change the fees on prior notice to the Funds. The $5 administrative fee for
exchange transactions into a Fund, which is generally to be charged to the
shareholder, is being borne on a voluntary basis by the Fund for an indefinite
period. Upon request from shareholders, the Transfer Agent will provide an
account history. For account histories covering the most recent three year
period, there is no charge. The Transfer Agent charges a $5.00 administrative
fee for each account history covering the period 1983 through 1990 and $10.00
per year for each account history covering the period 1974 through 1982. Account
histories prior to 1974 will not be provided. For the fiscal year ended October
31, 1995, Growth & Income Fund, U.S.A. Mid-Cap Opportunity Fund and Utilities
Income Fund paid $134,247, $30,814 and $186,056, respectively, in transfer agent
fees. The Transfer Agent's telephone number is 1-800-423-4026.

5% Shareholders. As of December 26, 1995, the following persons
beneficially owned more than 5% of the outstanding Class B shares of U.S.A.
Mid-Cap Opportunity Fund:

Shareholder % of Shares

Leslie Dunbar 7.8%
3400 Cynder Avenue
Brooklyn, NY 11203

Rocco Luongo 7.4
44 Pullaski Drive
N. Arlington, NJ 07031

Brian K. Holloway 15.2
9 Hartman Drive
Hamilton Square, NJ 08690

Diane R. Napoli 14.9
1114 Gilham Street
Philadelphia, PA 191

Joann E. Taylor 5.8
14660 F. Pearthshire
Houston, TX 77079

Trading by Portfolio Managers and Other Access Persons. Pursuant to
Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, Series Fund II and the
Adviser have adopted Codes of Ethics restricting personal securities trading by
portfolio managers and other access persons of the Fund. Among other things,
access persons, other than the disinterested Directors of Series Fund II: (a)
must have all trades pre-cleared by the Adviser; (b) are restricted from
short-term trading; (c) must have duplicate statements and transactions
confirmations reviewed by a compliance officer; and (d) are prohibited from
purchasing securities of initial public offerings.

<PAGE>

APPENDIX A
DESCRIPTION OF CORPORATE BOND AND
CONVERTIBLE SECURITY RATINGS

STANDARD & POOR'S RATINGS GROUP

The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.

The ratings are based, in varying degrees, on the following
considerations:

1. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;

2. Nature of and provisions of the obligation;

3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.

AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.

AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B, CCC, CC, C Debt rated "BB," "B," "CCC," "CC" and "C" is
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal. "BB" indicates the least degree of speculation
and "C" the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.

BB Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic

<PAGE>

conditions which could lead to inadequate capacity to meet timely interest and
principal payments. The "BB" rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied "BBB-" rating.

B Debt rated "B" has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.

CCC Debt rated "CCC" has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.

CC The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.

C The rating "C" typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

CI The rating "CI" is reserved for income bonds on which no interest is
being paid.

D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major categories.

MOODY'S INVESTORS SERVICE, INC.

Aaa Bonds which are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat greater than the Aaa securities.

<PAGE>

A Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future.

Baa Bonds which are rated "Baa" are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa Bonds which are rated "Caa" are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.

Ca Bonds which are rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C Bonds which are rated "C" are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

APPENDIX B
DESCRIPTION OF COMMERCIAL PAPER RATINGS

STANDARD & POOR'S RATINGS GROUP

S&P's commercial paper rating is a current assessment of the likelihood
of timely payment of debt considered short-term in the relevant market. Ratings
are graded into several categories, ranging from "A-1" for the highest quality
obligations to "D" for the lowest.

A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) designation.

<PAGE>

MOODY'S INVESTORS SERVICE, INC.

Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of indemnity are excluded unless explicitly rated.

Prime-1 Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:

- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.

APPENDIX C

Although it does not presently intend to engage in these strategies in coming
year, Utilities Income Fund may use some or all of the following hedging
instruments:

Options on Equity and Debt Securities--A call option is a short-term
contract pursuant to which the purchaser of the option, in return for a premium,
has the right to buy the security underlying the option at a specified price at
any time during the term of the option. The writer of the call option, who
receives the premium, has the obligation, upon exercise of the option during the
option term, to deliver the underlying security against payment of the exercise
price. A put option is a similar contract that gives its purchaser, in return
for a premium, the right to sell the underlying security at a specified price
during the option term. The writer of the put option, who receives the premium,
has the obligation, upon exercise of the option during the option term, to buy
the underlying security at the exercise price.

Options on Stock Indexes--A stock index assigns relative values to the
stocks included in the index and fluctuates with changes in the market values of
those stocks. A stock index option operates in the same way as a more
traditional stock option, except that exercise of a stock index option is
effected with cash payment and does not involve delivery of securities. Thus,
upon exercise of a stock index option, the purchaser will realize, and the
writer will pay, an amount based on the difference between the exercise price
and the closing price of the stock index.

Stock Index Futures Contracts--A stock index futures contract is a
bilateral agreement pursuant to which one party agrees to accept, and the other
party agrees to make, delivery of an amount of cash equal to a specified dollar
amount times the difference between the stock index value at the close of
trading of the contract and the price at which the futures contract is
originally struck. No physical

<PAGE>

delivery of the stocks comprising the index is made. Generally, contracts are
closed out prior to the expiration date of the contract.

Interest Rate Futures Contracts--Interest rate futures contracts are
bilateral agreements pursuant to which one party agrees to make, and the other
party agrees to accept, delivery of a specified type of debt security at a
specified future time and at a specified price. Although such futures contracts
by their terms call for actual delivery or acceptance of debt securities, in
most cases the contracts are closed out before the settlement date without the
making or taking of delivery.

Options on Futures Contracts--Options on futures contracts are similar
to options on securities, except that an option on a futures contract gives the
purchaser the right, in return for the premium, to assume a position in a
futures contract (a long position if the option is a call and a short position
if the option is a put), rather than to purchase or sell a security, at a
specified price at any time during the option term. Upon exercise of the option,
the delivery of the futures position to the holder of the option will be
accompanied by delivery of the accumulated balance that represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
future. The writer of an option, upon exercise, will assume a short position in
the case of a call and a long position in the case of a put.

<PAGE>

Financial Statements
as of October 31, 1995

<PAGE>

Portfolio of Investments
FIRST INVESTORS GROWTH & INCOME FUND
(A Series of First Investors Series Fund II, Inc.)
October 31, 1995

- -------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--83.4%
Automotive--.8%
19,592 Ford Motor Company $ 563,270 $ 84
- -------------------------------------------------------------------------------------
Banks--8.7%
20,000 Crestar Financial Corporation 1,140,000 170
25,000 First Bank System, Inc. 1,243,750 185
12,000 First Fidelity Bancorp. 784,500 117
11,500 J.P. Morgan & Company 886,937 132
12,000 Republic New York Corporation 703,500 105
25,000 Wachovia Corporation 1,103,125 165
- -------------------------------------------------------------------------------------
5,861,812 874
- -------------------------------------------------------------------------------------
Business Services--.8%
17,000 Sysco Corporation 516,375 77
- -------------------------------------------------------------------------------------
Chemicals--5.7%
19,000 Air Products and Chemicals, Inc. 980,875 146
10,000 Du Pont (E.I.) de Nemours & Company 623,750 93
45,000 Engelhard Corporation 1,119,375 167
15,000 Loctite Corporation 708,750 106
15,000 Witco Chemical Corporation 423,750 63
- -------------------------------------------------------------------------------------
3,856,500 575
- -------------------------------------------------------------------------------------
Computers & Office Equipment--1.4%
10,000 Hewlett-Packard Company 926,250 138
- -------------------------------------------------------------------------------------
Drugs--8.2%
9,500 American Home Products Corporation 841,938 125
12,000 Bristol-Myers Squibb Company 915,000 136
12,000 Johnson & Johnson 978,000 146
21,000 Pfizer, Inc. 1,204,875 180
12,000 Smithkline Beecham PLC (ADR) 622,500 93
16,238 Zeneca Group PLC (ADR) 915,417 136
- -------------------------------------------------------------------------------------
5,477,730 816
- -------------------------------------------------------------------------------------
Electric Utilities--3.0%
30,000 Baltimore Gas & Electric Company 802,500 120
15,000 DQE, Inc. 412,500 61
27,000 Pacific Gas & Electric Company 793,125 119
- -------------------------------------------------------------------------------------
2,008,125 300
- -------------------------------------------------------------------------------------
Electrical Equipment--3.2%
15,000 General Electric Company 948,750 141
27,000 York International Corporation 1,181,250 176
- -------------------------------------------------------------------------------------
2,130,000 317
- -------------------------------------------------------------------------------------
Electronics--.8%
13,000 AMP, Inc. 510,250 76
- -------------------------------------------------------------------------------------
Energy Services--2.2%
35,000 Dresser Industries, Inc. 726,250 108
12,000 Schlumberger, Ltd. 747,000 112
- -------------------------------------------------------------------------------------
1,473,250 220
- -------------------------------------------------------------------------------------
Energy Sources--4.8%
17,500 Amoco Corporation 1,117,813 167
15,000 Exxon Corporation 1,145,624 171
35,000 Unocal Corporation 918,750 137
- -------------------------------------------------------------------------------------
3,182,187 475
- -------------------------------------------------------------------------------------
Financial Services--1.6%
27,000 American Express Company 1,096,875 163
- -------------------------------------------------------------------------------------
Food/Beverage/Tobacco--1.0%
20,000 Cadbury Schweppes PLC (ADR) 667,500 99
- -------------------------------------------------------------------------------------
Household Products--5.6%
15,000 Avon Products, Inc. 1,066,875 159
12,000 Colgate-Palmolive Company 831,000 124
20,000 Dial Corporation 487,500 73
19,000 Kimberly-Clark Corporation 1,379,875 206
- -------------------------------------------------------------------------------------
3,765,250 562
- -------------------------------------------------------------------------------------
Insurance--3.8%
21,000 Ace Ltd. 714,000 106
15,000 American International Group, Inc. 1,265,625 190
7,000 Marsh & McLennan Companies, Inc. 573,125 85
- -------------------------------------------------------------------------------------
2,552,750 381
- -------------------------------------------------------------------------------------
Machinery & Manufacturing--3.1%
10,000 Illinois Tool Works, Inc. 581,250 87
12,000 Ingersoll-Rand Company 424,500 63
19,000 Minnesota Mining & Manufacturing Company 1,080,625 161
- -------------------------------------------------------------------------------------
2,086,375 311
- -------------------------------------------------------------------------------------
Media--6.4%
18,000 Gannett Company 978,750 146
16,000 Knight-Ridder, Inc. 888,000 132
10,000 *Scholastic Corporation 617,500 92
24,000 *Viacom, Inc.- Class "B" 1,200,000 179
15,000 Vodafone Group PLC (ADR) 613,125 91
- -------------------------------------------------------------------------------------
4,297,375 640
- -------------------------------------------------------------------------------------
Medical Products--1.8%
30,000 Abbott Laboratories 1,192,500 178
- -------------------------------------------------------------------------------------
Paper & Forest Products--1.8%
6,600 Georgia-Pacific Corporation 544,500 81
18,000 International Paper Company 666,000 99
- -------------------------------------------------------------------------------------
1,210,500 180
- -------------------------------------------------------------------------------------
Real Estate Investment Trusts--1.1%
30,000 Mark Centers Trust 322,500 48
13,300 Storage USA, Inc. 389,025 58
- -------------------------------------------------------------------------------------
711,525 106
- -------------------------------------------------------------------------------------
Retail--5.9%
12,800 Intimate Brands, Inc. 214,400 32
20,000 J.C. Penney Company 842,500 126
27,000 May Department Stores Company 1,059,750 158
35,000 Talbots, Inc. 848,750 126
46,000 Wal-Mart Stores, Inc. 994,750 148
- -------------------------------------------------------------------------------------
3,960,150 590
- -------------------------------------------------------------------------------------
Software & Services--2.4%
10,000 Automatic Data Processing, Inc. 715,000 106
25,000 *BMC Software, Inc. 890,625 133
- -------------------------------------------------------------------------------------
1,605,625 239
- -------------------------------------------------------------------------------------
Telephone--6.7%
22,000 A T & T Corp. 1,408,000 210
10,000 BCE, Inc. 336,250 50
15,000 NYNEX Corporation 705,000 105
16,000 SBC Communications, Inc. 894,000 133
24,500 US West Communications Group 1,166,813 174
- -------------------------------------------------------------------------------------
4,510,063 672
- -------------------------------------------------------------------------------------
Transportation--1.9%
40,000 Canadian Pacific Ltd. 640,000 95
10,000 Union Pacific Corporation 653,750 98
- -------------------------------------------------------------------------------------
1,293,750 193
- -------------------------------------------------------------------------------------
Travel & Leisure--.7%
12,000 McDonald's Corporation 492,000 73
- -------------------------------------------------------------------------------------
Total Value of Common Stocks
(cost $47,435,152) 55,947,987 8,339
- -------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------
Amount
Invested
Shares or For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONVERTIBLE PREFERRED STOCKS--1.9%
Energy Sources--1.3%
5,000 Unocal Corporation 7% (Note 5) $ 256,250 $ 37
12,000 Valero Energy Corporation 6 1/4% 609,000 91
- -------------------------------------------------------------------------------------
865,250 128
- -------------------------------------------------------------------------------------
Real Estate Investment Trusts--.6%
18,000 Security Capital Pacific Trust "A" 7% 427,500 64
- -------------------------------------------------------------------------------------
Total Value of Convertible
Preferred Stocks (cost $1,315,959) 1,292,750 192
- -------------------------------------------------------------------------------------
CONVERTIBLE BONDS--4.2%
Communications Equipment--.9%
$ 600M General Instrument Corporation,
5%, 6/15/00 603,000 90
- -------------------------------------------------------------------------------------
Energy Sources--1.4%
1,000M Noble Affiliates, 4 1/4%, 11/1/03 947,500 141
- -------------------------------------------------------------------------------------
Household Products--.6%
485M McKesson Corporation, 4 1/2%, 3/1/04 431,650 64
- -------------------------------------------------------------------------------------
Travel & Leisure--1.3%
900M AMR Corporation, 61/8%, 11/1/24 868,500 130
- -------------------------------------------------------------------------------------
Total Value of Convertible Bonds
(cost $3,091,138) 2,850,650 425
- -------------------------------------------------------------------------------------
EQUITY-LINKED SECURITIES--.2%
Computers & Office Equipment
1,000 Salomon Inc. (Hewlett-Packard)
5 1/4%, 1/1/97 (cost $76,375) 100,500 15
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--9.0%
$ 6,054M Swiss Bank Capital Markets, Inc.,
5.87%, 11/1/95 (collateralized by
$6,140M U.S. Treasury Note,
5 3/4%, 9/30/97) (cost $6,054,000) 6,054,000 902
- -------------------------------------------------------------------------------------
Total Value of Investments (cost $57,972,624) 98.7% 66,245,887 9,873
Other Assets, Less Liabilities 1.3 849,239 127
- -------------------------------------------------------------------------------------
Net Assets 100.0% $67,095,126 $10,000
=====================================================================================

*Non-income producing

See notes to financial statements

</TABLE>

Portfolio of Investments
FIRST INVESTORS MADE IN THE U.S.A. FUND
(A Series of First Investors Series Fund II, Inc.)
October 31, 1995

- -------------------------------------------------------------------------------------
Amount
Invested
Shares or For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Technology (continued)
4,800 *Intersolv $ 75,600 $ 83
2,400 *LSI Logic Corporation 113,100 124
2,000 *Microsoft Corporation 200,000 219
5,000 National Semiconductor Corporation 121,875 134
1,700 *NETCOM On-Line Communication Services, Inc. 99,025 109
2,800 Nokia Corp. AB 156,100 171
6,800 *Quantum Corporation 118,150 130
2,900 *Symantec Corporation 70,506 77
4,100 U.S. West Communications Group 195,263 214
5,000 *VLSI Technology, Inc. 117,500 129
- -------------------------------------------------------------------------------------
2,697,075 2,959
- -------------------------------------------------------------------------------------
Telecommunications--.9%
1,200 *Ascend Communications, Inc. 78,000 86
- -------------------------------------------------------------------------------------
Total Value of Common Stocks
(cost $5,615,721) 6,588,250 7,227
- -------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--25.3%
$ 300M A T & T Corp., 5.65%, 11/14/95 299,388 328
460M A T & T Corp., 5.73%, 11/21/95 458,535 503
450M BellSouth Telecommunications Inc.,
5.70%, 11/3/95 449,858 493
250M Chevron Oil, Inc., 5.68%, 11/16/95 249,408 274
150M Chevron Oil, Inc., 5.65%, 11/30/95 149,318 164
300M GTE North, 5.75%, 11/7/95 299,712 329
400M Nestles Capital, 5.69%, 11/9/95 399,495 438
- -------------------------------------------------------------------------------------
Total Value of Short-Term
Corporate Notes (cost $2,305,714) 2,305,714 2,529
- -------------------------------------------------------------------------------------
Total Value of Investments (cost $7,921,435) 97.6% 8,893,964 9,756
Other Assets, Less Liabilities 2.4 222,132 244
- -------------------------------------------------------------------------------------
Net Assets 100.0% $9,116,096 $10,000
=====================================================================================

*Non-income producing

See notes to financial statements

</TABLE>

Portfolio of Investments
FIRST INVESTORS UTILITIES INCOME FUND
(A Series of First Investors Series Fund II, Inc.)
October 31, 1995

- -------------------------------------------------------------------------------------
Amount
Invested
Shares or For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telephone/Utilities--19.3%
40,000 Ameritech Corporation $ 2,160,000 $ 249
40,000 Bell Atlantic Corporation 2,545,000 293
35,000 BellSouth Corporation 2,677,500 308
30,000 Frontier Corporation 810,000 93
65,000 GTE Corporation 2,681,250 309
25,000 NYNEX Corporation 1,175,000 135
40,000 SBC Communications, Inc. 2,235,000 257
15,000 Telefonica De Espana (ADR) 564,375 65
40,000 US West Communications Group 1,905,000 219
- -------------------------------------------------------------------------------------
16,753,125 1,928
- -------------------------------------------------------------------------------------
Telecommunications/Long Distance--1.5%
20,000 A T & T Corp. 1,280,000 147
- -------------------------------------------------------------------------------------
Total Value of Common Stocks
(cost $68,280,382) 76,897,125 8,849
- -------------------------------------------------------------------------------------
PREFERRED STOCKS--.1%
Financial Services
5,000 US West Financing 7.96% (cost $125,000) 126,875 15
- -------------------------------------------------------------------------------------
CORPORATE BONDS--6.4%
Electric & Gas Utilities--4.3%
$ 500M Baltimore Gas & Electric Co.,
7.52%, 2000 521,845 60
500M Consolidated Edison Co. of New York,
6 5/8%, 2002 505,599 58
500M Duke Power Co., 5 7/8%, 2003 478,709 55
500M Idaho Power Co., 6.4%, 2003 492,620 57
700M Pennsylvania Power & Light Co.,
6 7/8%, 2003 711,931 82
500M SCE Capital Corp., 7 3/8%, 2003 517,339 60
500M Union Electric Co., 6 3/4%, 2008 506,285 58
- -------------------------------------------------------------------------------------
3,734,328 430
- -------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telephone--1.5%
$ 500M BellSouth Telecommunications Inc.,
6 3/8%, 2004 $ 499,546 $ 56
250M Southern Bell Telephone &
Telegraph Co., Inc., 8 1/8%, 2017 259,561 30
500M United Telephone of Florida,
6 1/4%, 2003 491,305 57
- -------------------------------------------------------------------------------------
1,250,412 143
- -------------------------------------------------------------------------------------
Telecommunications/Long Distance--.6%
500M A T & T Corp., 7 1/2%, 2006 536,368 62
- -------------------------------------------------------------------------------------
Total Value of Corporate Bonds
(cost $5,544,603) 5,521,108 635
- -------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--4.1%
500M Appalachian Power Company,
5 3/4%, 11/7/95 499,521 58
1,500M GTE South, Inc., 5 3/4%, 11/9/95 1,498,083 172
1,600M Nestle Capital Corporation,
5.7%, 11/2/95 1,599,747 184
- -------------------------------------------------------------------------------------
Total Value of Short-Term
Corporate Notes (cost $3,597,351) 3,597,351 414
- -------------------------------------------------------------------------------------
Total Value of Investments (cost $77,547,336) 99.1% 86,142,459 9,913
Other Assets, Less Liabilities .9 757,536 87
- -------------------------------------------------------------------------------------
Net Assets 100.0% $86,899,995 $10,000
=====================================================================================

See notes to financial statements

</TABLE>

Statement of Assets and Liabilities
First Investors SERIES Fund II, Inc.
October 31, 1995

- -------------------------------------------------------------------------------------
FIRST INVESTORS
------------------------------------------
GROWTH & MADE IN THE UTILITIES
INCOME FUND U.S.A. FUND INCOME FUND
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in securities:
At identified cost $57,972,624 $7,921,435 $77,547,336
=========== ========== ===========
At value (Note 1A) $66,245,887 $8,893,964 $86,142,459
Cash 188,838 182,162 246,870
Receivables:
Capital shares sold 643,339 56,428 356,231
Dividends and interest 175,294 5,027 496,695
Deferred organization expenses (Note 1E) 9,250 -- 7,250
----------- ---------- -----------
Total Assets 67,262,608 9,137,581 87,249,505
----------- ---------- -----------

Liabilities
Payable for capital shares redeemed 94,360 4,107 255,521
Accrued expenses 40,003 11,739 58,167
Accrued advisory fee 33,119 5,639 35,822
----------- ---------- -----------
Total Liabilities 167,482 21,485 349,510
----------- ---------- -----------
Net Assets $67,095,126 $9,116,096 $86,899,995
=========== =========== ===========

Net Assets Consist of:
Capital paid in $58,808,093 $7,586,506 $82,784,809
Undistributed net investment income 125,227 35,596 322,202
Accumulated net realized gain (loss)
on investment transactions (111,457) 521,465 (4,802,139)
Net unrealized appreciation
in value of investments 8,273,263 972,529 8,595,123
----------- ----------- -----------
Total $67,095,126 $9,116,096 $86,899,995
=========== =========== ===========

Capital shares outstanding (Note 4):
Class A 8,127,781 604,898 14,173,985
Class B 463,153 20,535 547,115

Net asset value and redemption
price per share--Class A $ 7.81 $14.58 $ 5.90
Maximum offering price per share--Class A
(Net asset value/.9375)* $ 8.33 $15.55 $ 6.29

Net asset value and offering
price per share--Class B $ 7.78 $14.51 $ 5.86

*On purchases of $25,000 or more, the sales charge is reduced.

See notes to financial statements

</TABLE>

Statement of Operations
FIRST INVESTORS SERIES FUND II, INC.
Year Ended October 31, 1995

- ---------------------------------------------------------------------------------------
FIRST INVESTORS
- ---------------------------------------------------------------------------------------
GROWTH & MADE IN THE UTILITIES
INCOME FUND U.S.A. FUND INCOME FUND
------------ ----------- -----------
<S> <C> <C> <C>
Investment Income

Income:
Dividends $1,311,468 $ 54,841 $ 3,365,225
Interest 324,373 92,192 562,837
---------- ---------- -----------
Total income 1,635,841 147,033 3,928,062
---------- ---------- -----------
Expenses (Notes 1E and 3):
Advisory fee 367,122 80,837 542,191
Shareholder servicing costs 180,916 41,186 260,465
Distribution plan expenses-Class A 143,005 23,924 213,442
Distribution plan expenses-Class B 12,812 1,096 11,449
Professional fees 27,000 19,388 38,457
Reports and notices to shareholders 30,500 8,413 37,278
Custodian fees 13,655 5,790 12,064
Amortization of organization expenses 3,000 4,055 3,000
Other expenses 11,227 7,838 28,550
---------- ---------- -----------
Total expenses 789,237 192,527 1,146,896
Less: Expenses waived or assumed (299,256) (83,421) (385,381)
Custodian fees paid indirectly (5,055) (5,454) (11,984)
---------- ---------- -----------
Net expenses 484,926 103,652 749,531
---------- ---------- -----------
Net investment income 1,150,915 43,381 3,178,531
---------- ---------- -----------
Realized and Unrealized Gain (Loss)
on Investments (Note 2):
Net realized gain (loss)
on investments 59,975 1,220,064 (725,427)
Net unrealized appreciation
of investments 7,741,415 460,706 12,245,737
---------- ---------- -----------
Net gain on investments 7,801,390 1,680,770 11,520,310
---------- ---------- -----------
Net Increase in Net Assets
Resulting from Operations $8,952,305 $1,724,151 $14,698,841
========== ========== ===========

See notes to financial statements

</TABLE>

Statement of Changes in Net Assets
FIRST INVESTORS SERIES FUND II, INC.

- ------------------------------------------------------------------------
FIRST INVESTORS
- ------------------------------------------------------------------------
GROWTH &
INCOME FUND
--------------------------
Year Ended October 31, 1995 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 1,150,915 $ 472,794
Net realized gain (loss)
on investments 59,975 (171,432)
Net unrealized appreciation
(depreciation) of investments 7,741,415 531,848
----------- -----------
Net increase (decrease) in net
assets resulting from operations 8,952,305 833,210
----------- -----------
Distributions to Shareholders from:
Net investment income--Class A (1,115,624) (363,271)
Net investment income--Class B (25,337) --
Net realized gains--Class A -- --
----------- -----------
Total distributions (1,140,961) (363,271)
----------- -----------
Capital Share Transactions(a)
Class A:
Proceeds from shares sold 27,027,606 32,133,753
Value of distributions reinvested 1,092,153 356,387
Cost of shares redeemed (6,745,463) (1,877,923)
----------- -----------
21,374,296 30,612,217
----------- -----------
Class B:
Proceeds from shares sold 3,403,974 --
Value of distributions reinvested 25,204 --
Cost of shares redeemed (9,090) --
----------- -----------
3,420,088 --
----------- -----------
Net increase (decrease)
from capital share transactions 24,794,384 30,612,217
----------- -----------
Net increase (decrease)
in net assets 32,605,728 31,082,156
Net Assets
Beginning of year 34,489,398 3,407,242
----------- -----------
End of year+ $67,095,126 $34,489,398
=========== ===========

+Includes undistributed
net investment income of $ 125,227 $ 112,273
=========== ===========

(a) Capital Shares Issued
and Redeemed
Class A:
Sold 3,750,649 4,869,140
Issued for distributions
reinvested 151,589 54,795
Redeemed (932,605) (285,184)
----------- -----------
Net increase (decrease)
in Class A capital shares
outstanding 2,969,633 4,638,751
=========== ===========
Class B:
Sold 461,042 --
Issued for distributions
reinvested 3,305 --
Redeemed (1,194) --
----------- -----------
Net increase in Class B
capital shares outstanding 463,153 --
=========== ===========

<CAPTION>
Statement of Changes in Net Assets (cont.)

- ------------------------------------------------------------------------------------------
FIRST INVESTORS
- ------------------------------------------------------------------------------------------
MADE IN THE UTILITIES
U.S.A. FUND INCOME FUND
--------------------------------------------------------
Year Ended October 31 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 43,381 $ 47,052 $ 3,178,531 $ 2,822,358
Net realized gain (loss)
on investments 1,220,064 78,601 (725,427) (4,076,712)
Net unrealized appreciation
(depreciation) of investments 460,706 (529,046) 12,245,737 (5,288,144)
---------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting
from operations 1,724,151 (403,393) 14,698,841 (6,542,498)
---------- ----------- ----------- -----------
Distributions to Shareholders from:
Net investment income--Class A (47,512) (133,361) (3,123,462) (2,645,975)
Net investment income--Class B -- -- (49,998) --
Net realized gains--Class A -- -- -- (144,159)
---------- ----------- ----------- -----------
Total distributions (47,512) (133,361) (3,173,460) (2,790,134)
---------- ----------- ----------- -----------
Capital Share Transactions(a)
Class A:
Proceeds from shares sold 1,771,094 690,866 19,911,865 23,969,216
Value of distributions
reinvested 47,031 132,333 2,975,959 2,643,337
Cost of shares redeemed (2,312,636) (8,221,415 (13,152,876) (12,981,948)
---------- ----------- ----------- -----------
(494,511) (7,398,216) 9,734,948 13,630,605
---------- ----------- ----------- -----------
Class B:
Proceeds from shares sold 297,505 -- 2,987,201 --
Value of distributions reinvested -- -- 48,361 --
Cost of shares redeemed (15,000) -- (66,853) --
---------- ----------- ----------- -----------
282,505 -- 2,968,709 --
---------- ----------- ----------- -----------
Net increase (decrease)
from capital share transactions (212,006) (7,398,216) 12,703,657 13,630,605
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets 1,464,633 (7,934,970) 24,229,038 4,297,973
Net Assets
Beginning of year 7,651,463 15,586,433 62,670,957 58,372,984
---------- ----------- ----------- -----------
End of year+ $9,116,096 $ 7,651,463 $86,899,995 $62,670,957
========== =========== =========== ===========

+Includes undistributed
net investment income of $ 35,596 $ 35,672 $ 322,202 $ 314,131
========== =========== =========== ===========

(a) Capital Shares Issued
and Redeemed
Class A:
Sold 130,597 59,608 3,733,022 4,434,791
Issued for distributions
reinvested 3,962 11,130 557,233 509,896
Redeemed (179,150) (703,703) (2,460,412) (2,454,714)
---------- ----------- ----------- -----------
Net increase (decrease)
in Class A capital shares
outstanding (44,591) (632,965) 1,829,843 2,489,973
========== =========== =========== ===========

Class B:
Sold 21,568 -- 550,886 --
Issued for distributions
reinvested -- -- 8,714 --
Redeemed (1,033) -- (12,485) --
---------- ----------- ----------- -----------
Net increase in Class B
capital shares outstanding 20,535 -- 547,115 --
========== =========== =========== ===========

See notes to financial statements

</TABLE>

Notes to Financial Statements
FIRST INVESTORS SERIES FUND II, INC.

1. Significant Accounting Policies--First Investors Series Fund II, Inc.
(the "Fund"), a Maryland corporation, is registered under the Investment
Company Act of 1940 (the "1940 Act") as a diversified, open-end
management investment company. The Fund consists of three Series, First
Investors Growth & Income Fund, First Investors Made In The U.S.A. Fund
and First Investors Utilities Income Fund, and accounts separately for
the assets, liabilities and operations of each Series. The objective of
each Series is as follows:

Growth & Income Fund seeks long-term growth of capital and current
income. This Series seeks to achieve its objective by investing at least
65% of its total assets in securities that provide the potential for
growth and offer income, such as dividend-paying stocks and securities
convertible into common stocks.

Made In The U.S.A. Fund seeks long-term capital growth. This Series
seeks to achieve its objective by investing at least 75% of its total
assets in common and preferred stocks of companies that its investment
adviser considers to have potential for capital growth. In addition, at
least 65% of the Series' total assets normally will be invested in
securities of issuers that (1) have at least two-thirds of their
employees located in the United States, or (2) produce in the United
States at least two-thirds of the value of the parts constituting the
products sold by the issuer, or (3) provide in the United States at
least two-thirds of the value of the services provided by the issuer.

Utilities Income Fund primarily seeks high current income. Long-term
capital appreciation is a secondary objective. This Series seeks to
achieve its objectives by investing at least 65% of its total assets in
equity and debt securities issued by companies primarily engaged in the
public utilities industry.

A. Security Valuation--Except as provided below, a security listed or
traded on an exchange or the NASDAQ National Market System is valued at
its last sale price on the exchange or system where the security is
principally traded, and lacking any sales, the security is valued at the
mean between the closing bid and asked prices. Each security traded in
the over-the-counter market (including securities listed on exchanges
whose primary market is believed to be over-the- counter) is valued at
the mean between the last bid and asked prices based upon quotes
furnished by a market maker for such securities. Securities may also be
priced by a pricing service. The pricing service uses quotations
obtained from investment dealers or brokers, information with respect to
market transactions in comparable securities and other available
information in determining value. Short-term corporate notes which are
purchased at a discount are valued at amortized cost. Securities for
which market quotations are not readily available 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 Directors.

B. Federal Income Taxes--No provision has been made for federal income
taxes on net income or capital gains, since it is the policy of each
Series to continue to comply with the special provisions of the Internal
Revenue Code applicable to investment companies and to make sufficient
distributions of income and capital gains (in excess of any available
capital loss carryovers) to relieve it from all, or substantially all,
such taxes.

At October 31, 1995, capital loss carryovers were as follows:

Year Capital
Loss Carryovers Expire
----------------------
Total 2002 2003
---------- ---------- ---------
GROWTH &
INCOME FUND $ 111,457 $ 111,457 $ --

UTILITIES
INCOME FUND 4,727,380 3,991,114 736,266

C. Distributions to Shareholders--Dividends from net investment income
of the Growth & Income Fund and Utilities Income Fund are declared and
paid quarterly and dividends from net investment income of the Made In
The U.S.A. Fund are declared and paid annually. Distributions from net
realized capital gains of all Series are normally 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 capital loss carryforwards,
deferral of wash sales and amortization of deferred organization
expenses.

D. Expense Allocation--Expenses directly charged or
attributable to a Series are paid from the assets of that Series.
General expenses of the Fund are allocated among and charged to the
assets of each Series on a fair and equitable basis, which may be based
on the relative assets of each Series or the nature of the services
performed and relative applicability to each Series.

E. Deferred Organization Expenses--The organization expenses of each
Series are being amortized over a five year period. Investors purchasing
shares of a Series bear such expenses only as they are amortized against
the investment income of that Series.

First Investors Management Company,Inc. ("FIMCO"), the Fund's investment
adviser, has agreed that in the event any of the initial Class A shares
of a Series purchased by FIMCO are redeemed during the amortization
period, the redemption proceeds will be reduced by a pro rata portion
of any unamortized organization expenses in the same proportion as the
number of initial Class A shares of the Series being redeemed bears to
the number of initial Class A shares of the Series outstanding at the
time of redemption.

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 and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and estimated expenses are accrued daily.

2. Purchases
and Sales of Securities--For the year ended October 31, 1995, purchases
and sales of securities, excluding U.S. Treasury Bills and short-term
corporate notes, were as follows:

Cost of Proceeds
Purchases of Sales
----------- -----------
GROWTH & INCOME FUND $29,152,887 $ 8,569,978
MADE IN THE U.S.A. FUND 6,735,922 9,162,458
UTILITIES INCOME FUND 23,335,212 11,079,946

At October 31, 1995, aggregate cost and net unrealized appreciation of
securities for federal income tax purposes were as follows:

Gross Gross Net
Aggregate Unrealized Unrealized Unrealized
Cost Appreciation Depreciation Appreciation
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
GROWTH & INCOME FUND $57,972,624 $9,228,364 $955,101 $8,273,263
MADE IN THE U.S.A. FUND 7,921,435 1,409,673 437,144 972,529
UTILITIES INCOME FUND 77,622,095 9,154,206 633,842 8,520,364

</TABLE>

3. Advisory Fee and Other Transactions With Affiliates--Certain officers
and directors of the Fund are officers and directors of its investment
adviser, FIMCO, its underwriter, First Investors Corporation ("FIC"),
its transfer agent, Administrative Data Management Corp. ("ADM") and/or
First Financial Savings Bank, S.L.A. ("FFS"), custodian of the Fund's
Individual Retirement Accounts. Officers and directors of the Fund
received no remuneration from the Fund for serving in such capacities.
Their remuneration (together with certain other expenses of the Fund) is
paid by FIMCO or FIC.

The Investment Advisory Agreement provides as compensation to FIMCO for
each Series other than the Made In The U.S.A. Fund, an annual fee,
payable monthly, at the rate of .75% on the first $300 million of each
Series' 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. The annual fee for the Made In The U.S.A. Fund is payable
monthly, at the rate of 1.00% on the first $200 million of the Series'
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. For the year ended October 31, 1995, total
advisory fees accrued to FIMCO were $990,150 of which $347,111 was
waived. In addition, expenses of $311,716 were assumed by FIMCO.

Pursuant to certain state regulations, FIMCO has agreed to reimburse
each Series if and to the extent that the Series' aggregate operating
expenses, including advisory fees but generally excluding interest,
taxes, brokerage commissions and extraordinary expenses, exceed any
limitation on expenses applicable to that Series in those states (unless
waivers of such limitations have been obtained). The amount of any such
reimbursement is limited to the Series' yearly advisory fee. For the
year ended October 31, 1995, no reimbursement was required pursuant to
these provisions.

For the year ended October 31, 1995, FIC, as underwriter, received
$3,661,053 in commissions from the sale of Fund shares, after allowing
$19,818 to other dealers. Shareholder servicing costs included $351,117
in transfer agent fees and out of pocket expenses accrued to ADM and
$131,450 in custodian fees paid to FFS.

Pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940
Act, each Series 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 fiscal 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 Series. For the year ended October 31, 1995,
these fees on the Class A shares amounted to $380,371 (of which $109,231
was waived by FIC) and $25,357 on the Class B shares.

Wellington Management Company serves as an investment sub-adviser to the
Growth & Income Fund. The subadviser is paid by FIMCO and not by the
Series.

The Fund's Custodian has provided credits in the amount of $22,493
against custodian charges based on the uninvested cash balances of the
Fund. The Fund could possibly have used these cash balances to produce
income for the Fund if they were not used to offset custodian charges of
the Fund.

4. Capital--Each Series 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 12b-1 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% during 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 12b-1 fees
and certain other class expenses) are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
Of the 100,000,000 shares originally designated, the Fund has classified
50,000,000 shares as Class A and 50,000,000 shares as Class B.

5. Rule 144A Securities--Rule 144A provides a non-exclusive safe harbor
exemption from the registration requirements of the Securities Act of
1933 for specified resales of restricted securities to qualified
investors. At October 31, 1995, the Growth & Income Fund held one 144A
security with a value of $256,250, representing less than 1% of the
Series' net assets. This security is valued as disclosed in Note 1A.

Independent Auditor's Report

To the Shareholders and Board of Directors of
First Investors Series Fund II, Inc.

We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of First Investors Growth &
Income Fund, First Investors Made In The U.S.A. Fund and First Investors
Utilities Income Fund (comprising First Investors Series Fund II, Inc.),
as of October 31, 1995, 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 October 31, 1995, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of First Investors Growth & Income Fund, First
Investors Made In The U.S.A. Fund and First Investors Utilities Income
Fund as of October 31, 1995, 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
November 30, 1995