| UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| WASHINGTON, D.C. 20549 |
| -------- |
| FORM N-CSR |
| -------- |
| CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT |
| INVESTMENT COMPANIES |
| INVESTMENT COMPANY ACT FILE NUMBER 811-6618 |
FIRST INVESTORS EQUITY FUNDS
(Exact name of registrant as specified in charter)
40 Wall Street
New York, NY 10005
(Address of principal executive offices) (Zip code)
Joseph I. Benedek
Foresters Investment Management Company, Inc.
Raritan Plaza I
Edison, NJ 08837-3620
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
1-212-858-8000
DATE OF FISCAL YEAR END: SEPTEMBER 30
DATE OF REPORTING PERIOD: SEPTEMBER 30, 2017
Item 1. Reports to Stockholders
| The annual report to stockholders follows | ||
| FOREWORD |
This report is for the information of the shareholders of the Funds. It is the policy of each Fund described in this report to mail only one copy of a Fund’s prospectus, annual report, semi-annual report and proxy statements to all shareholders who share the same mailing address and share the same last name and have invested in a Fund covered by the same document. You are deemed to consent to this policy unless you specifically revoke this policy and request that separate copies of such documents be mailed to you. In such case, you will begin to receive your own copies within 30 days after our receipt of the revocation. You may request that separate copies of these disclosure documents be mailed to you by writing to us at: Foresters Investor Services, Inc., Raritan Plaza I, Edison, NJ 08837-3620 or calling us at 1-800-423-4026.
The views expressed in the portfolio manager letters reflect those views of the portfolio managers only through the end of the period covered. Any such views are subject to change at any time based upon market or other conditions and we disclaim any responsibility to update such views. These views may not be relied on as investment advice.
You may obtain a free prospectus for any of the Funds by contacting your representative, calling 1-800-423-4026, writing to us at the following address: Foresters Financial Services, Inc., 40 Wall Street, New York, NY 10005, or by visiting our website at www.foresters.com. You should consider the investment objectives, risks, charges and expenses of a Fund carefully before investing. The prospectus contains this and other information about the Fund, and should be read carefully before investing.
An investment in a Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the Government Cash Management Fund* seeks to preserve a net asset value at $1.00 per share, it is possible to lose money by investing in it, just as it is possible to lose money by investing in any of the other Funds. Past performance is no guarantee of future results. There is no guarantee that a Fund’s investment objective will be achieved.
A Statement of Additional Information (“SAI”) for any of the Funds may also be obtained, without charge, upon request by calling 1-800-423-4026, writing to us at our address or by visiting our website listed above. The SAI contains more detailed information about the Funds, including information about its Trustees.
* Effective October 3, 2016, the Cash Management Fund changed its name to the Government Cash Management Fund.
Foresters FinancialTM and ForestersTM are the trade names and trademarks of The Independent Order of Foresters (Foresters), a fraternal benefit society, 789 Don Mills Road, Toronto, Canada M3C 1T9 and its subsidiaries.
Portfolio Managers’ Letter
BALANCED INCOME FUND
Dear Investor:
This is the annual report for the First Investors Balanced Income Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 5.11% for Class A shares, 5.42% for Advisor Class shares and 5.46% for Institutional Class shares, including dividends of 23.0 cents per share for Class A shares, 24.3 cents per share for Advisor Class shares and 25.7 cents per share for Institutional Class shares. In addition, the Fund distributed capital gains of 0.9 cents per share on each class of shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018. The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July
| 1 |
Portfolio Managers’ Letter (continued)
BALANCED INCOME FUND
and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Equity Market
U.S. equities had strong performance during the past twelve months, posting several new records. The Dow Jones Industrial Average (DJIA) hit four major psychological milestones of 19,000 (on November 22nd), 20,000 (on January 25th), 21,000 (on March 1st) and 22,000 (on August 2nd). The S&P 500 Index and the DJIA returned 18.61% and 25.45% for the period, respectively. Market volatility remained at historically low levels for most of the period despite elevated political uncertainty.
Small-caps (measured by the Russell 2000 Index), growth stocks (the S&P 500 Growth Index) and value stocks (the S&P 500 Value Index) posted similar strong returns of 20.74%, 19.90% and 16.47%, respectively. However, they experienced significant intra-period differences as market leaders moved out of favor. In the fourth quarter of 2016, small-caps and value stocks rallied the most following the Trump victory as investors focused on the expected benefits from possible tax cuts, increased infrastructure spending and reduced financial regulations. Small-caps and several value sectors, including Financials, would be the greatest beneficiaries of these business friendly policies. In January, the “Trump Trade” faded and investors switched their focus to an improving economic outlook, which benefited most growth stocks and large-caps for most of 2017. In September, there was another rotation to small-caps and value stocks in the continuation of the “Trump-Trade” fueled by investors’ renewed hopes for pro-business policies from Washington.
Higher-yielding stocks lagged the general market, with the Dow Jones US Select Dividend Index returning 13.21%. Real estate as a whole came under pressure due to the rising interest rate environment, and as well publicized retail bankruptcies and store closures resulted in a sell-off of retail REITs. The Dow Jones US Select REIT Index lost 0.83%.
Ten out of eleven S&P 500 sectors ended the review period in positive territory. Financials, which would be one of the greatest beneficiaries from the combination of the higher interest rates and Trump’s pro-growth policies, was the strongest sector at 36.21%. Information Technology was the second strongest sector, up 28.88% as investors focused on an improving economic outlook. A stronger economy could magnify this sector’s growth potential. Conversely, Telecom Services was the weakest sector with a marginal loss of 0.14%, followed by Energy which was marginally positive at 0.16%.
| 2 |
International equities posted strong double-digit returns across all regions, supported by improving corporate earnings and economic data pointing to a healthy global economy. Developed markets (measured by the MSCI EAFE Index) and emerging markets (measured by the MSCI EM Index) returned 19.65% and 22.91%, respectively. Overall, the currency exchange effect was slightly positive.
The Bond Market
The U.S. fixed income markets had mixed performance for the past 12 months. The broad U.S. bond market (measured by the BofA ML U.S. Broad Market Index) was flat at 0.01% during the review period.
In the fourth quarter of 2016, fixed income markets, especially Treasuries, experienced one of their worst sell-offs. This sell-off was triggered by a combination of a rising interest rate environment and Donald Trump’s unexpected victory. Fixed income had positive performance for most of 2017 while struggling again in September on renewed expectations of rising rates and pro-growth policies from the White House. Overall, Treasuries (measured by the BofA ML Treasury Index) were the weakest domestic fixed income market for the past 12 months, down 1.74%. Longer-dated Treasuries with 15+ years maturity underperformed with a loss of 6.33% while shorter-dated Treasuries were slightly positive.
Yields rose across whole yield curve. The sharpest rise happened in the fourth quarter of 2016, while longer-term rates fell for most of 2017 before rising again in September. There is an inverse relationship between bond prices and yields. The 2-year U.S. Treasury yield, which is very sensitive to changes in Fed policy, rose by 72 basis points to 1.49%. The 10-year Treasury yield, which is controlled by other factors such as GDP, inflation and investor sentiment, rose 74 basis points to 2.33%.
Credit sensitive fixed income benefited from a narrowing in credit spreads. With record issuance and record demand, investment grade corporate bonds (measured by the BofA ML Corporate Master Index) were positive at 2.26% for the review period. The demand was boosted by overseas buyers in their search for yields that were higher than those available locally. BBB-rated bonds continued to be the strongest performing sector in terms of credit quality among investment grade corporate bonds.
The high yield bond market (measured by the BofA ML U.S. Cash Pay HY Constrained Index) was the strongest domestic fixed income market for the period, returning 9.03%. Leveraged loans (measured by the Credit Suisse Leveraged Loan Index) were also strong with a return of 5.36%.
Municipal bonds (measured by the BofA ML Municipal Master Index) recouped all losses from the fourth quarter sell-off and returned 0.95%. New muni issuance is still below expectations for the year while demand has remained steady.
| 3 |
Portfolio Managers’ Letter (continued)
BALANCED INCOME FUND
Most sovereign bond markets, including the Eurozone markets, UK, Canada and Japan, had negative performance as yields in those countries rose. The majority of these losses occurred in the fourth quarter of 2016, sparked by investor concerns that central banks are preparing to gradually reduce monetary stimulus and from Trump’s victory. The appreciating dollar hurt their U.S. dollar denominated returns even further during the fourth quarter of 2016. Non-U.S. sovereign bonds (measured by the Citi World Government ex U.S. Bond Index) lost 3.14% for the past 12 months, recovering a large portion of its 10.84% loss from the fourth quarter of 2016.
Emerging market debt (measured by the BofA ML Global Emerging Markets Sovereign Index) held up much better, returning 6.64%, benefiting from improving growth within emerging markets.
The Fund—Bonds
During the review period, the Fund had average bond and cash allocations of 57.6% and 9.5%, respectively. As a percentage of the Fund’s total assets, investment grade corporate bonds were the largest bond allocation at 41.8%, followed by mortgage-backed securities at 10.2%, U.S. government securities at 3.1%, and high yield bonds at 2.5%.
The Fund’s fixed income holdings returned 2.22%, outperforming the 1.47% return of its benchmark, the The BofA Merrill Lynch US Broad Market Index. The Fund’s overweight in corporate bonds was a positive contributor to performance. As well, the Fund typically holds longer-maturity bonds to meet its income objective. During the review period, longer-maturity bonds outperformed the broad bond market. Lastly, the Fund’s high yield allocation was a positive contributor as high yield was the best performing sector of the U.S. bond market.
The Fund—Equities
During the past year, the Fund’s results were driven by a generally favorable market backdrop characterized by extreme low volatility—a near repeat of last year, as the past 12 months witnessed no major corrections, nor hardly any memorable one day advances.
Absolute performance of the Fund was positive, but relative returns lagged and were reflective of the challenges of implementing the strategy during the period under review. The Fund emphasizes high dividend yield as the key determinant, and follows a disciplined growth-at-a-reasonable price, and a catalyst-focused investment process seeking out exceptional long-term total return.
As of period end, the Fund’s investments reflected a 3.2% dividend yield, well above the 1.9% yield of the S&P 500 Index. Among market capitalization segments, the Fund had allocated 65% of its holdings to large-cap, 15% to mid-cap and 20% to small-cap stocks (ranges defined by Lipper) as of September 30, 2017. Among key contributors to performance among sectors were: Industrial, Healthcare and Technology, which
| 4 |
represented bright spots for the Fund contributing most to return, aided by overweights and solid stock selection. Investments in the Financials, Consumer Discretionary, Materials and Real Estate sectors lagged, as stock selection hurt overall relative performance.
Among notable performing individual investments, within Industrials: long-time holding and small-cap Triton International, the leading lessor of ocean-going shipping containers rallied 170% on improved pricing and global trade activity and market share gains versus competitors. Additionally, shares of defense contractor Lockheed Martin rose 33%, on renewed global tensions and increased procurement of additional defense needs globally. Industrial conglomerates 3M Cos, and Honeywell also contributed +19% and +22% respectively on strong earnings performance. Within Healthcare, strong pharmaceutical results from leading arthritis drug Humira buoyed AbbVie, which returned +46% for the year. Within Technology, global leaders, Apple Computer (+39%), Microsoft (+32%) and Western Digital (+51%) rallied strongly reflecting solid smartphone innovation as well as a rebound in enterprise computing and semiconductor spending.
Among laggards, stock selection within the Consumer Discretionary and Real Estate sectors were the major disappointments for review period. Among Consumer names, shares of women’s retailer L Brands dropped 41% on weak lingerie sales at their flagship Victoria’s Secret chain, and a restructuring of product offerings and exiting mail order hurt sales and profits. Within Real Estate, shares of strip mall operator Brixmor Property Group declined 29% and Tanger Factory Outlets dropped 35%, as worries of proliferating Internet shopping via Amazon.com and weakened grocery chain and general retail traffic impacted investor valuations of this sector. Additionally, large-cap communications chip maker Qualcomm dropped 21%, as its legal dispute with Apple Computer over royalties due for its cellphone chip continued to mount and remained unresolved.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 5 |
Understanding Your Fund’s Expenses (unaudited)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
As a mutual fund shareholder, you incur two types of costs: (1) transaction costs, including a sales charge (load) on purchase payments (on Class A shares only) and a contingent deferred sales charge on redemptions (on Class B shares and, under certain circumstances when a Class A load was waived, on Class A shares); and (2) ongoing costs, including advisory fees; distribution and service fees (12b-1) (on Class A and Class B shares only); and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 in each Fund at the beginning of the period, April 1, 2017, and held for the entire six-month period ended September 30, 2017. The calculations assume that no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
Actual Expenses Example:
These amounts help you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the “Expenses Paid During Period” shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To estimate the expenses you paid on your account during this period, simply divide your ending account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period”.
Hypothetical Expenses Example:
These amounts provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares of a Fund, and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight and help you compare your ongoing costs only and do not reflect any transaction costs, such as front-end or contingent deferred sales charges (loads) or account fees that are charged to certain types of accounts, such as an annual custodial fee of $15 for certain IRA accounts and certain other retirement accounts or an annual custodial fee of $30 for 403(b) custodial accounts (subject to exceptions and certain waivers as described in the Funds’ Statement of Additional Information). Therefore, the hypothetical expenses example is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
| 6 |
Fund Expenses (unaudited)
BALANCED INCOME FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.15% | |||
| Actual | $1,000.00 | $1,042.60 | $5.89 | |
| Hypothetical** | $1,000.00 | $1,019.30 | $5.82 | |
| Advisor Class Shares | 0.82% | |||
| Actual | $1,000.00 | $1,054.19 | $4.22 | |
| Hypothetical** | $1,000.00 | $1,020.96 | $4.15 | |
| Institutional Class Shares | 0.69% | |||
| Actual | $1,000.00 | $1,054.57 | $3.55 | |
| Hypothetical** | $1,000.00 | $1,021.61 | $3.50 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived and/or assumed. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 7 |
Cumulative Performance Information (unaudited)
BALANCED INCOME FUND
Comparison of change in value of $10,000 investment in the First Investors Balanced Income Fund (Class A shares), the Bank of America (“BofA”) Merrill Lynch U.S. Corporate, Government & Mortgage Index and the Standard & Poor’s 500 Index.
The graph compares a $10,000 investment in the First Investors Total Return Fund (Class A shares) beginning 10/1/15 (commencement of operations) with theoretical investments in the BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index and the Standard & Poor’s 500 Index (the “Indices”). The BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index tracks the performance of U.S. dollar denominated investment grade debt publicly issued in the U.S. domestic market, including U.S. Treasuries, quasi-government securities, corporates, covered bonds and residential mortgage pass-through securities. The Standard & Poor’s 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic
| 8 |
economy through changes in the aggregate market value of such stocks, which represent all major industries. It is not possible to invest directly in these Indices. In addition, the Indices do not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Advisor Class shares and Institutional Class shares performance may be greater than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the current maximum sales charge of 4% and assume the current sales charge of 4% was in effect at the beginning of the stated periods (prior to 6/12/17, the maximum sales charge was 5.75%). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 0.47% and 3.95%, respectively and the S.E.C. 30-Day Yield for September 2017 would have been 0.31%. The Advisor Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 5.09% and 6.46%, respectively and the S.E.C. 30-Day Yield for September 2017 would have been 0.57%. The Institutional Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 4.99% and 5.83%, respectively and the S.E.C. 30-Day Yield for September 2017 would have been 0.75%.
Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index figures are from Bank of America Merrill Lynch & Co. and Standard & Poor’s 500 Index figures are from Standard & Poor’s and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Class A shares, Advisor Class shares and Institutional Class shares are for the period beginning 10/1/15 (commencement of operations).
***The S.E.C. 30-Day Yield shown is for September 2017.
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Portfolio of Investments
BALANCED INCOME FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| CORPORATE BONDS—43.6% | ||||
| Aerospace/Defense—.4% | ||||
| $200M | Rolls-Royce, PLC, 3.625%, 10/14/2025 (a) | $ 207,207 | ||
| Automotive—1.1% | ||||
| 500M | O’Reilly Automotive, Inc., 3.55%, 3/15/2026 | 502,048 | ||
| Chemicals—1.1% | ||||
| 200M | Agrium, Inc., 3.375%, 3/15/2025 | 201,539 | ||
| 300M | Dow Chemical Co., 3.5%, 10/1/2024 | 309,862 | ||
| 511,401 | ||||
| Consumer Non-Durables—.9% | ||||
| 400M | Newell Brands, Inc., 4.2%, 4/1/2026 | 421,656 | ||
| Energy—4.2% | ||||
| 500M | BP Capital Markets, PLC, 3.216%, 11/28/2023 | 512,620 | ||
| 300M | Magellan Midstream Partners, LP, 5%, 3/1/2026 | 334,361 | ||
| 465M | Marathon Oil Corp., 3.85%, 6/1/2025 | 462,518 | ||
| 500M | Valero Energy Corp., 6.625%, 6/15/2037 | 632,756 | ||
| 1,942,255 | ||||
| Financial Services—4.1% | ||||
| 300M | American International Group, Inc., 3.75%, 7/10/2025 | 310,318 | ||
| 200M | Assured Guaranty U.S. Holding, Inc., 5%, 7/1/2024 | 218,241 | ||
| 500M | Ford Motor Credit Co., LLC, 2.875%, 10/1/2018 | 505,156 | ||
| 300M | GE Capital International Funding Services, Ltd., 4.418%, 11/15/2035 | 326,840 | ||
| 300M | General Motors Financial Co., Inc., 5.25%, 3/1/2026 | 326,211 | ||
| 250M | Key Bank NA, 3.4%, 5/20/2026 | 249,252 | ||
| 1,936,018 | ||||
| Financials—10.4% | ||||
| Bank of America Corp.: | ||||
| 500M | 4.1%, 7/24/2023 | 533,096 | ||
| 400M | 5.875%, 2/7/2042 | 514,562 | ||
| 400M | Capital One Financial Corp., 3.75%, 4/24/2024 | 413,667 | ||
| 500M | Citigroup, Inc., 3.7%, 1/12/2026 | 513,545 | ||
| 200M | Deutsche Bank AG, 3.7%, 5/30/2024 | 203,183 | ||
| 500M | Goldman Sachs Group, Inc., 3.625%, 1/22/2023 | 518,679 | ||
| JPMorgan Chase & Co.: | ||||
| 300M | 3.54%, 5/1/2028 | 303,101 | ||
| 100M | 6.4%, 5/15/2038 | 133,489 | ||
| 10 |
| Principal | ||||
| Amount | Security | Value | ||
| Financials (continued) | ||||
| Morgan Stanley: | ||||
| $100M | 5.5%, 7/28/2021 | $ 111,020 | ||
| 500M | 4%, 7/23/2025 | 527,663 | ||
| U.S. Bancorp: | ||||
| 200M | 3.6%, 9/11/2024 | 208,239 | ||
| 200M | 3.1%, 4/27/2026 | 199,288 | ||
| 300M | Visa, Inc., 3.15%, 12/14/2025 | 307,675 | ||
| 300M | Wells Fargo & Co., 5.606%, 1/15/2044 | 363,945 | ||
| 4,851,152 | ||||
| Food/Beverage/Tobacco—1.9% | ||||
| Anheuser-Busch InBev Finance, Inc.: | ||||
| 100M | 3.65%, 2/1/2026 | 103,632 | ||
| 200M | 4.7%, 2/1/2036 | 221,187 | ||
| 100M | 4.9%, 2/1/2046 | 113,407 | ||
| 500M | PepsiCo, Inc., 3.45%, 10/6/2046 | 475,676 | ||
| 913,902 | ||||
| Food/Drug—.9% | ||||
| 400M | CVS Health Corp., 3.875%, 7/20/2025 | 417,887 | ||
| Information Technology—2.0% | ||||
| 200M | Apple, Inc., 2.5%, 2/9/2025 | 196,921 | ||
| 300M | Microsoft Corp., 3.7%, 8/8/2046 | 303,329 | ||
| Oracle Corp.: | ||||
| 100M | 2.95%, 5/15/2025 | 100,939 | ||
| 350M | 2.65%, 7/15/2026 | 344,196 | ||
| 945,385 | ||||
| Media-Broadcasting—.7% | ||||
| 300M | Comcast Corp., 4.25%, 1/15/2033 | 323,145 | ||
| Media-Diversified—.4% | ||||
| 200M | Time Warner, Inc., 3.6%, 7/15/2025 | 201,043 | ||
| Real Estate—6.8% | ||||
| 300M | Alexandria Real Estate Equities, Inc., 3.95%, 1/15/2028 | 306,176 | ||
| 450M | Boston Properties, LP, 2.75%, 10/1/2026 | 425,359 | ||
| 200M | ERP Operating, LP, 3.375%, 6/1/2025 | 204,518 | ||
| 300M | Essex Portfolio, LP, 3.875%, 5/1/2024 | 312,352 | ||
| 300M | Prologis, LP, 3.75%, 11/1/2025 | 314,479 | ||
| 500M | Realty Income Corp., 3.25%, 10/15/2022 | 512,394 | ||
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Portfolio of Investments (continued)
BALANCED INCOME FUND
September 30, 2017
| Principal | ||||
| Amount or | ||||
| Shares | Security | Value | ||
| Real Estate (continued) | ||||
| $200M | Simon Property Group, LP, 3.375%, 10/1/2024 | $ 204,771 | ||
| 500M | Tanger Properties, LP, 3.125%, 9/1/2026 | 470,611 | ||
| 400M | Welltower, Inc., 4%, 6/1/2025 | 417,677 | ||
| 3,168,337 | ||||
| Retail-General Merchandise—2.8% | ||||
| Amazon.com, Inc.: | ||||
| 200M | 4.8%, 12/5/2034 | 227,212 | ||
| 400M | 4.05%, 8/22/2047 (a) | 409,408 | ||
| 500M | Home Depot, Inc., 5.875%, 12/16/2036 | 650,674 | ||
| 1,287,294 | ||||
| Telecommunications—1.1% | ||||
| 200M | AT&T, Inc., 5.15%, 3/15/2042 | 202,837 | ||
| 300M | Verizon Communications, Inc., 4.272%, 1/15/2036 | 295,647 | ||
| 498,484 | ||||
| Transportation—2.1% | ||||
| 400M | Burlington Northern Santa Fe, LLC, 5.15%, 9/1/2043 | 477,052 | ||
| 200M | Cummins, Inc., 4.875%, 10/1/2043 | 230,191 | ||
| 300M | Southwest Airlines Co., 3%, 11/15/2026 | 293,598 | ||
| 1,000,841 | ||||
| Utilities—2.7% | ||||
| 200M | Dominion Resources, Inc., 3.9%, 10/1/2025 | 208,811 | ||
| 200M | Duke Energy Progress, Inc., 4.15%, 12/1/2044 | 213,849 | ||
| 500M | Entergy Arkansas, Inc., 4.95%, 12/15/2044 | 519,883 | ||
| 100M | Oklahoma Gas & Electric Co., 4%, 12/15/2044 | 100,406 | ||
| 200M | South Carolina Electric & Gas Co., 5.45%, 2/1/2041 | 235,906 | ||
| 1,278,855 | ||||
| Total Value of Corporate Bonds (cost $20,262,492) | 20,406,910 | |||
| COMMON STOCKS—38.5% | ||||
| Consumer Discretionary—3.9% | ||||
| 4,400 | Acushnet Holdings Corp. | 78,144 | ||
| 341 | Adient, PLC | 28,640 | ||
| 4,100 | Coach, Inc. | 165,148 | ||
| 7,100 | DSW, Inc. – Class “A” | 152,508 | ||
| 3,400 | Ford Motor Co. | 40,698 | ||
| 2,500 | HSN, Inc. | 97,625 | ||
| 12 |
| Shares | Security | Value | ||
| Consumer Discretionary (continued) | ||||
| 3,500 | L Brands, Inc. | $ 145,635 | ||
| 1,100 | Newell Brands, Inc. | 46,937 | ||
| 3,900 | Nordstrom, Inc. | 183,885 | ||
| 8,200 | Regal Entertainment Group – Class “A” | 131,200 | ||
| 3,800 | Tupperware Brands Corp. | 234,916 | ||
| 650 | Whirlpool Corp. | 119,886 | ||
| 3,100 | Williams-Sonoma, Inc. | 154,566 | ||
| 2,200 | Wyndham Worldwide Corp. | 231,902 | ||
| 1,811,690 | ||||
| Consumer Staples—5.6% | ||||
| 7,100 | Altria Group, Inc. | 450,282 | ||
| 5,700 | B&G Foods, Inc. | 181,545 | ||
| 4,300 | Coca-Cola Co. | 193,543 | ||
| 8,500 | Koninklijke Ahold Delhaize NV (ADR) | 158,695 | ||
| 2,100 | Nu Skin Enterprises, Inc. – Class “A” | 129,108 | ||
| 3,300 | PepsiCo, Inc. | 367,719 | ||
| 5,000 | Philip Morris International, Inc. | 555,050 | ||
| 1,800 | Procter & Gamble Co. | 163,764 | ||
| 3,500 | Sysco Corp. | 188,825 | ||
| 3,100 | Wal-Mart Stores, Inc. | 242,234 | ||
| 2,630,765 | ||||
| Energy—2.1% | ||||
| 800 | Chevron Corp. | 94,000 | ||
| 1,550 | ExxonMobil Corp. | 127,069 | ||
| 3,400 | Marathon Petroleum Corp. | 190,672 | ||
| 850 | Occidental Petroleum Corp. | 54,578 | ||
| 3,400 | PBF Energy, Inc. – Class “A” | 93,874 | ||
| 800 | Phillips 66 | 73,288 | ||
| 2,200 | Royal Dutch Shell, PLC – Class “A” (ADR) | 133,276 | ||
| 750 | Schlumberger, Ltd. | 52,320 | ||
| 4,400 | Suncor Energy, Inc. | 154,132 | ||
| 973,209 | ||||
| Financials—4.8% | ||||
| 2,000 | Ameriprise Financial, Inc. | 297,020 | ||
| 3,100 | Berkshire Hills Bancorp, Inc. | 120,125 | ||
| 327 | * | Brighthouse Financial, Inc. | 19,882 | |
| 1,300 | Chubb, Ltd. | 185,315 | ||
| 3,700 | Discover Financial Services | 238,576 | ||
| 13 |
Portfolio of Investments (continued)
BALANCED INCOME FUND
September 30, 2017
| Shares | Security | Value | ||
| Financials (continued) | ||||
| 3,300 | Hamilton Lane, Inc. – Class “A” | $ 88,605 | ||
| 3,300 | JPMorgan Chase & Co. | 315,183 | ||
| 3,600 | MetLife, Inc. | 187,020 | ||
| 1,700 | PNC Financial Services Group, Inc. | 229,109 | ||
| 4,600 | U.S. Bancorp | 246,514 | ||
| 8,300 | Waddell & Reed Financial, Inc. – Class “A” | 166,581 | ||
| 2,600 | Wells Fargo & Co. | 143,390 | ||
| 2,237,320 | ||||
| Health Care—5.2% | ||||
| 5,800 | Abbott Laboratories | 309,488 | ||
| 5,500 | AbbVie, Inc. | 488,730 | ||
| 6,800 | GlaxoSmithKline, PLC (ADR) | 276,080 | ||
| 3,300 | Johnson & Johnson | 429,033 | ||
| 6,100 | Koninklijke Philips NV (ADR) | 251,320 | ||
| 4,100 | Merck & Co., Inc. | 262,523 | ||
| 12,000 | Pfizer, Inc. | 428,400 | ||
| 2,445,574 | ||||
| Industrials—4.8% | ||||
| 1,900 | 3M Co. | 398,810 | ||
| 8,900 | General Electric Co. | 215,202 | ||
| 2,200 | Honeywell International, Inc. | 311,828 | ||
| 5,264 | Johnson Controls International, PLC | 212,087 | ||
| 1,400 | Lockheed Martin Corp. | 434,406 | ||
| 3,900 | Mobile Mini, Inc. | 134,355 | ||
| 12,100 | * | Triton International, Ltd. | 402,688 | |
| 1,300 | United Technologies Corp. | 150,904 | ||
| 2,260,280 | ||||
| Information Technology—5.3% | ||||
| 3,300 | Apple, Inc. | 508,596 | ||
| 9,800 | Cisco Systems, Inc. | 329,574 | ||
| 4,600 | Intel Corp. | 175,168 | ||
| 6,400 | Maxim Integrated Products, Inc. | 305,344 | ||
| 7,300 | Microsoft Corp. | 543,777 | ||
| 4,900 | QUALCOMM, Inc. | 254,016 | ||
| 8,200 | Travelport Worldwide, Ltd. | 128,740 | ||
| 2,900 | Western Digital Corp. | 250,560 | ||
| 2,495,775 | ||||
| 14 |
| Shares or | ||||
| Principal | ||||
| Amount | Security | Value | ||
| Materials—1.1% | ||||
| 4,000 | International Paper Co. | $ 227,280 | ||
| 1,150 | Praxair, Inc. | 160,701 | ||
| 2,200 | RPM International, Inc. | 112,948 | ||
| 500,929 | ||||
| Real Estate—2.1% | ||||
| 12,200 | Brixmor Property Group, Inc. (REIT) | 229,360 | ||
| 4,600 | Chesapeake Lodging Trust (REIT) | 124,062 | ||
| 6,604 | RLJ Lodging Trust (REIT) | 145,288 | ||
| 8,700 | Tanger Factory Outlet Centers, Inc. (REIT) | 212,454 | ||
| 5,500 | Urstadt Biddle Properties, Inc. – Class “A” (REIT) | 119,350 | ||
| 9,400 | Whitestone REIT (REIT) | 122,670 | ||
| 953,184 | ||||
| Telecommunication Services—1.4% | ||||
| 8,700 | AT&T, Inc. | 340,779 | ||
| 5,800 | Verizon Communications, Inc. | 287,042 | ||
| 627,821 | ||||
| Utilities—2.2% | ||||
| 2,900 | Black Hills Corp. | 199,723 | ||
| 3,500 | Duke Energy Corp. | 293,720 | ||
| 4,400 | Exelon Corp. | 165,748 | ||
| 6,200 | NiSource, Inc. | 158,658 | ||
| 1,500 | SCANA Corp. | 72,735 | ||
| 2,500 | WEC Energy Group, Inc. | 156,950 | ||
| 1,047,534 | ||||
| Total Value of Common Stocks (cost $16,194,858) | 17,984,081 | |||
| RESIDENTIAL MORTGAGE-BACKED | ||||
| SECURITIES—5.1% | ||||
| Fannie Mae: | ||||
| $ 961M | 3.5%, 9/1/2045 – 11/1/2046 | 992,631 | ||
| 1,003M | 4%, 11/1/2045 – 7/1/2046 | 1,058,836 | ||
| 240M | 4.5%, 1/1/2047 | 257,487 | ||
| 64M | 5%, 8/1/2039 | 70,016 | ||
| Total Value of Residential Mortgage-Backed Securities (cost $2,383,230) | 2,378,970 | |||
| 15 |
Portfolio of Investments (continued)
BALANCED INCOME FUND
September 30, 2017
| Shares or | |||||||
| Principal | |||||||
| Amount | Security | Value | |||||
| Exchange Traded Funds—2.5% | |||||||
| 13,250 | iShares iBoxx USD High Yield Corporate Bond ETF (ETF) | ||||||
| (cost $1,122,628) | $ 1,176,070 | ||||||
| SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—7.5% | |||||||
| Federal Home Loan Bank: | |||||||
| $500M | 1.005%, 10/17/2017 | 499,796 | |||||
| 750M | 1.015%, 10/19/2017 | 749,652 | |||||
| 750M | 1.02%, 10/20/2017 | 749,632 | |||||
| 750M | 1.021%, 10/27/2017 | 749,489 | |||||
| 500M | 1.015%, 11/6/2017 | 499,519 | |||||
| 250M | 1.025%, 11/9/2017 | 249,739 | |||||
| Total Value of Short-Term U.S. Government Agency Obligations (cost $3,497,653) | 3,497,827 | ||||||
| Total Value of Investments (cost $43,460,861) | 97.2 | % | 45,443,858 | ||||
| Other Assets, Less Liabilities | 2.8 | 1,316,392 | |||||
| Net Assets | 100.0 | % | $46,760,250 | ||||
| * | Non-income producing | |
| (a) | Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4). | |
| Summary of Abbreviations: | ||
| ADR | American Depositary Receipts | |
| ETF | Exchange Traded Fund | |
| REIT | Real Estate Investment Trust | |
Futures contracts outstanding at September 30, 2017:
| Value at | |||||||||
| Number of | Value at | September 30, | Unrealized | ||||||
| Contracts | Type | Expiration | Trade Date | 2017 | Appreciation | ||||
| 5 | 5 Year U.S. | Dec. 2017 | $ 591,719 | $ 595,874 | $ 4,155 | ||||
| Treasury Note | |||||||||
| 19 | 10 Year U.S. | Dec. 2017 | 2,406,023 | 2,430,868 | 24,845 | ||||
| Treasury Note | |||||||||
| 7 | U.S. Treasury | Dec. 2017 | 1,086,750 | 1,103,724 | 16,974 | ||||
| Long Bond | |||||||||
| (Premium received $394) | $45,974 | ||||||||
| 16 |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Corporate Bonds | $ | — | $ | 20,406,910 | $ | — | $ | 20,406,910 | ||||
| Common Stocks | 17,984,081 | — | — | 17,984,081 | ||||||||
| Residential Mortgage-Backed | ||||||||||||
| Securities | — | 2,378,970 | — | 2,378,970 | ||||||||
| Exchange Traded Funds | 1,176,070 | — | — | 1,176,070 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 3,497,827 | — | 3,497,827 | ||||||||
| Total Investments in Securities* | $ | 19,160,151 | $ | 26,283,707 | $ | — | $ | 45,443,858 | ||||
| Other Assets | ||||||||||||
| Futures Contracts | $ | 46,368 | $ | — | $ | — | $ | 46,368 | ||||
| * | The Portfolio of Investments provides information on the industry categorization for corporate bonds |
| and common stocks. | |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| See notes to financial statements | 17 |
Portfolio Manager’s Letter
FLOATING RATE FUND
Dear Investor:
This is the annual report for the First Investors Floating Rate Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 3.47% for Class A shares, 3.70% for Advisor Class shares and 3.87% for Institutional Class shares, including dividends of 31.0 cents per share on Class A shares, 32.2 cents per share on Advisor Class shares and 33.7 cents per share on Institutional Class shares.
The Market
Historically, over time, returns in the U.S. loan market come from the market’s coupon-derived yield—that is, most gains come from the steady collection of contractual obligations paid by corporate borrowers to their investors. Results from year to year, of course, may vary more widely. In 2017, the U.S. senior loan market represented by this Fund’s combined benchmarks over the period (the JP Morgan BB/B Leveraged Loan Index and the Credit Suisse Leveraged Loan Index, 6 months each) delivered investors a total return of 4.43%. In this positive return environment, the Fund delivered gains, but slightly underperformed its blended benchmark, gross of fees, over the year. Specifically, the Fund slightly lagged the broad market during the first half of its fiscal year, but has outperformed more recently.
Loans performed at a level just above coupon in this Fund’s fiscal year by delivering attractive returns in each quarter. Just June and August 2017 saw slight market declines (–0.06% and –0.14%, respectively)—each triggered by the setting in of some market uncertainty with regard to future interest rate increases. Loans offer floating rate coupons which increase as short-term interest rates increase. As a result, loans tend to be most strongly sought after by investors who anticipate a rising interest rate environment. As the pace of increase appeared to be slowing—and as new issuance continued unabated—these months saw a little less demand from investors amidst increasing loan supply. Both of these pauses were more-than-fully recovered by the loan market in the following month. Loan market corrections were shallow and short, as institutional buyers with cash on the sidelines moved into the market quickly when prices have fell and yields increased to levels more competitive with high-yield bonds.
We believe that the market remains fundamentally attractive to many investors—despite a slowing in interest rate increases—for the following reasons:
1.) The asset class boasts a contractual yield level which remains competitive with many other global market opportunities. As of September 30, 2017, the benchmark loan market offers an average current yield of about 5%.
2.) Further, as noted above, the floating rate nature of these instruments protects (and increases) yield as interest rates rise, thereby protecting the underlying price of the loan itself. This differs from traditional fixed-coupon investments in which rising rates can lead to price decreases.
| 18 |
3.) Most companies borrowing in the loan market today appear to have fundamentally healthy balance sheets at this time. Default rates for loans are below 1% per annum and are, therefore, below long-term average rates. Further, loans are typically “senior” in a company’s capital structure, giving them a high or even first claim on a company’s assets in the case of default. This has led historically to higher investor recovery rates than investors have had in similarly rated high-yield bonds. Loan prices, overall, are historically less volatile than high-yield bond prices—both to the downside and, we note, the upside.
4.) Generally positive, measured growth in the U.S. economy appears to now be leading the appearance of growth increases globally, yet inflation continues to remain in check. Growth, coupled with mild inflation, tends to favor borrowers who get to pay back the money they have borrowed with money that is worth just a little less. U.S. companies borrowing by issuing loans become “price setters” for the goods and services they produce in a growth environment, helping to secure cash flow.
In this generally benign environment then, loans have largely delivered the yield for which investors buy them, with little price volatility and few true surprises. Sometimes, little news is also “good” news.
The Fund
In April 2017, the Fund switched benchmarks to the current Credit Suisse Index, reflecting a modest, but we believe important and productive, repositioning of the Fund’s portfolio commenced at this time. The repositioning was designed to make the Fund more aligned with market opportunities, while still retaining key core disciplines around risk management, diversification, and individual credit analysis. A portion of the portfolio was transitioned from the BB-rated segment of the market to the lower-rated B segment of the market. In addition, the Fund’s minority high-yield allocation, typically less than 10% of the portfolio, has been managed more dynamically with choices that emphasize yield. Results of this effort have been promising, with the portfolio outperforming the market since its transition.
From an industry perspective, the Fund’s most significant gains over the period under review came in the Healthcare and Industrial sectors. The portfolio’s largest consistent commitments over the period were Media and Telecommunications (particularly in the second half of the year), plus Technology—where we were under-risked compared to the market from a ratings and concentration perspective—and Food and Beverages. We note just a small decline in the Retail sector, where our underweighting and under-risking versus the market have helped preserve capital as online retail encroaches on the profitability of traditional models. The Fund has used a strong new issue environment extensively this summer to add loans we believe are priced attractively relative to the market. Most recently, we have added in Consumer Products and Transportation.
| 19 |
Portfolio Manager’s Letter (continued)
FLOATING RATE FUND
Outlook
Going forward, the Fund remains modestly overweight B-rated credits versus higher-rated BB credits. The portfolio is positioned well with yields and spreads competitive with those of the benchmark, reflecting our constructive view of fundamental and technical factors as described earlier in this letter.
On balance, market and economic data has been rather positive these last few weeks leading up to the end of the period under review. Global economic data is increasingly positive and largely synchronized and risk-assets have been outperforming. Within global corporate credit, the default outlook is generally benign, impending debt maturities are limited, and spreads are tightening across almost all segments of the global corporate credit market. Within corporate credit asset classes, we see less investor differentiation and volatility remains contained. On the one hand, this makes sense, given positive economic data.
On the other hand, valuations are beginning to indicate a complacency settling into the markets. We are carefully monitoring our portfolios and remain wary in assuming greater risk. While we could certainly see spreads trade-range bound for several years, it is important for investors to be vigilant. The recent default by the U.S. high-yield toy retailer, Toys”R”US, highlights the dangers of complacency. Just the day before the company defaulted, Toys”R”US bonds were trading in the $90s. In the last few days of September, they were trading in the $20-to-$30 range, a large decline in a matter of days. We believe an emphasis on bottom-up fundamental credit research can help reduce exposure to these types of problems. Even “good” markets require serious work.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 20 |
Fund Expenses (unaudited)
FLOATING RATE FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.10% | |||
| Actual | $1,000.00 | $1,020.44 | $5.57 | |
| Hypothetical** | $1,000.00 | $1,019.55 | $5.57 | |
| Advisor Class Shares | 0.90% | |||
| Actual | $1,000.00 | $1,036.98 | $4.60 | |
| Hypothetical** | $1,000.00 | $1,020.56 | $4.56 | |
| Institutional Class Shares | 0.70% | |||
| Actual | $1,000.00 | $1,038.66 | $3.58 | |
| Hypothetical** | $1,000.00 | $1,021.56 | $3.55 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived and/or assumed. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 21 |
Cumulative Performance Information (unaudited)
FLOATING RATE FUND
Comparison of change in value of $10,000 investment in the First Investors Floating Rate Fund (Class A shares), The Credit Suisse Leveraged Loan Index† and the J.P. Morgan BB/B Leveraged Loan Index.
The graph compares a $10,000 investment in the First Investors Floating Rate Fund (Class A shares) beginning 10/21/13 (commencement of operations) with theoretical investments in the Credit Suisse Leveraged Loan Index and the J.P. Morgan BB/B Leveraged Loan Index (the “Indices”). The Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. Loans included in the index must be issued from companies in developed countries, rated below investment grade by at least one ratings provider, and be fully funded term loans with a remaining term of at least one year. The J.P. Morgan BB/B Leveraged Loan Index is a subset of the J.P. Morgan Leveraged Loan Index, which is designed to represent the investable universe of the U.S. dollar-denominated leveraged loan market. The Index includes U.S. dollar-denominated institutional term loans and fully funded delayed draw term loans which have
| 22 |
high yield ratings. However, the most aggressively rated loans and non-rated loans are excluded. Loans can be rated as high as Baa1 and as low as BB3 by Moody’s and also as high as BBB+ and as low as B- by Standard & Poor’s. A loan with the highest allowable rating from each agency will only be included if the company’s overall rating is below investment grade. Loans must be issued by companies domiciled in a developed market, and defaulted loans may remain in the Index only if they remain current on loan obligation payments throughout the default process. It is not possible to invest directly in these Indices. In addition, the Indices do not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table it is assumed that all dividends and distributions were reinvested. Advisor Class shares and Institutional Class shares performance will be greater than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the current maximum sales charge of 2.5% and assume the current sales charge of 2.5% was in effect at the beginning of the stated periods (prior to 6/12/17, the maximum sales charge was 5.75%). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for one year and Since Inception would have been 0.71% and 1.16%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 0.89%. The Advisor Class “S.E.C. Standardized” Average Annual Total Return for one year and Since Inception would have been 3.68% and 2.26%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 1.27%. The Institutional Class “S.E.C. Standardized” Average Annual Total Return for one year and Since Inception would have been 3.76% and 2.28%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 1.38%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Credit Suisse and J.P. Morgan and all other figures are from Foresters Investment Management Company, Inc.
† During the fiscal year, the fund changed its primary broad-based index to the Credit Suisse Leveraged Loan Index since it more closely reflects the Fund’s investment strategy. After this fiscal year we will not show a comparison to the J.P. Morgan BB/B Leveraged Loan Index.
**The Since Inception returns for Class A shares, Advisor Class shares and Institutional Class shares are for the period beginning 10/21/13 (commencement of operations).
***The S.E.C. 30-Day Yield shown is for September 2017.
| 23 |
Portfolio of Investments
FLOATING RATE FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| LOAN PARTICIPATIONS†—92.7% | ||||
| Aerospace/Defense—.9% | ||||
| TransDigm, Inc.: | ||||
| $ 346M | 4.2675%, 5/14/2022 | $ 347,046 | ||
| 1,349M | 4.2566%, 2/28/2020 | 1,352,765 | ||
| 1,699,811 | ||||
| Automotive—3.8% | ||||
| DexKo Global, Inc.: | ||||
| 3,000M | 5.3125%, 7/12/2024 | 3,030,945 | ||
| 500M | 9.5625%, 7/11/2025 | 502,500 | ||
| 836M | Key Safety Systems, Inc., 5.82%, 8/29/2021 | 842,456 | ||
| 1,072M | Superior Industries International, Inc., 5.7356%, 3/22/2024 | 1,058,832 | ||
| Truck Hero, Inc.: | ||||
| 1,097M | 5.3261%, 5/16/2024 | 1,095,193 | ||
| 500M | 9.5761%, 5/16/2025 | 499,063 | ||
| 7,028,989 | ||||
| Chemicals—4.8% | ||||
| 863M | A. Schulman, Inc., 4.49%, 6/1/2022 | 866,451 | ||
| 1,500M | Archroma Finance Sarl, 4.25%, 7/11/2024 (b) | 1,507,500 | ||
| 3,000M | Avantor Performance Materials Holdings, Inc., 5%, 9/22/2024 (b) | 3,007,770 | ||
| 284M | ColourOz Investment 1, LLC, 4%, 9/7/2021 (b) | 280,055 | ||
| 1,716M | ColourOz Investment 2, LLC, 4%, 9/7/2021 (b) | 1,681,953 | ||
| 660M | Methanol Holdings Trinidad Ltd, 4.735%, 6/30/2022 | 664,761 | ||
| 950M | Venator Finance Sarl, 4.3119%, 6/29/2024 | 955,344 | ||
| 8,963,834 | ||||
| Consumer Durables—.8% | ||||
| 1,400M | Traeger Grills TGP Holdings III, LLC, 6%, 9/21/2024 (b) | 1,408,750 | ||
| Consumer Non-Durables—1.5% | ||||
| 1,575M | Kronos Acquisiton Intermediate, Inc., 5.7367%, 8/26/2022 | 1,592,963 | ||
| 1,224M | Reynolds Group Holdings, Inc., 4.235%, 2/5/2023 | 1,229,656 | ||
| 2,822,619 | ||||
| 24 |
| Principal | ||||
| Amount | Security | Value | ||
| Energy—1.8% | ||||
| Granite Acquisition, Inc.: | ||||
| $ 841M | 5.2964%, 12/17/2021 | $ 847,995 | ||
| 38M | 5.3328%, 12/17/2021 | 38,253 | ||
| 925M | Jonah Energy, LLC, 9.75%, 5/12/2021 | 925,291 | ||
| 623M | Summit Midstream Partners Holdings, LLC, 7.235%, 5/16/2022 | 632,789 | ||
| 1,000M | Ultra Resources, Inc., 4.3091%, 4/5/2024 | 1,000,000 | ||
| 3,444,328 | ||||
| Financial Services—6.4% | ||||
| 2,736M | Alliant Holdings Intermediate, LLC, 4.5639%, 8/12/2022 | 2,750,052 | ||
| 1,919M | EIG Investors Corp., 5.3178%, 2/9/2023 | 1,942,106 | ||
| 2,736M | NFP Corp., 4.735%, 1/8/2024 | 2,760,157 | ||
| USI Holdings Corp.: | ||||
| 1,325M | 3%, 5/16/2024 (b) | 1,319,481 | ||
| 3,250M | 4.3142%, 4/5/2024 | 3,245,271 | ||
| 12,017,067 | ||||
| Financials—4.0% | ||||
| 2,000M | AssuredPartners, Inc., 3.5%, 10/22/2024 (b) | 2,007,080 | ||
| 998M | Geronimo Intermediate Parent, Inc., 4.485%, 6/26/2022 | 1,007,475 | ||
| 1,840M | Jaguar Holding Co. I, LLC, 4.0365%, 8/18/2022 | 1,852,751 | ||
| 1,012M | Lightstone Holdco, LLC, 5.7385%, 1/30/2024 | 1,009,488 | ||
| Telenet Financing USD, LLC: | ||||
| 1,225M | 3.9844%, 6/2/2025 | 1,230,145 | ||
| 375M | 3.9844%, 6/30/2025 | 376,575 | ||
| 7,483,514 | ||||
| Food/Beverage/Tobacco—2.8% | ||||
| 1,067M | Chobani, LLC, 5.485%, 10/9/2023 | 1,077,191 | ||
| 2,593M | Coveris Holdings SA, 5.5828%, 6/26/2022 | 2,578,714 | ||
| 900M | Post Holdings, Inc., 3.49%, 5/16/2024 | 903,096 | ||
| 700M | Refresco Group NV, 2.75%, 9/27/2024 (b) | 703,500 | ||
| 5,262,501 | ||||
| Forest Products/Containers—1.3% | ||||
| 1,746M | BWAY Holding Co., 4.4811%, 3/22/2024 | 1,752,529 | ||
| 694M | Coveris Holdings SA, 5.5828%, 5/8/2019 | 690,063 | ||
| 2,442,592 | ||||
| 25 |
Portfolio of Investments (continued)
FLOATING RATE FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Gaming/Leisure—11.1% | ||||
| AMC Entertainment Holdings, Inc.: | ||||
| $ 872M | 3.4844%, 12/15/2022 | $ 871,555 | ||
| 373M | 3.4844%, 12/15/2023 | 372,519 | ||
| 2,000M | Caesars Entertainment Operating Co., Inc., 4.5%, 4/4/2024 (b) | 2,005,000 | ||
| 2,993M | Cyan Blue Holdco 2, Ltd., 3.5%, 7/26/2024 | 3,007,463 | ||
| Delta 2 (Lux) Sarl: | ||||
| 2,550M | 4.235%, 2/24/2024 | 2,567,799 | ||
| 325M | 4.235%, 2/23/2024 | 327,269 | ||
| 2,500M | Dorna Sports SL, 3.25%, 4/12/2024 (b) | 2,510,937 | ||
| 3,900M | Golden Nugget, Inc., 4%, 10/4/2023 (b) | 3,924,862 | ||
| 1,106M | Landry’s, Inc., 4%, 10/4/2028 | 1,117,985 | ||
| 1,306M | La Quinta Intermediate Holdings, LLC, 4.0539%, 4/14/2021 | 1,315,353 | ||
| 486M | Lions Gate Entertainment Corp., 4.235%, 10/13/2023 | 489,469 | ||
| 1,458M | Live Nation Entertainment, Inc., 3.5%, 10/31/2023 | 1,463,090 | ||
| 865M | Seminole Hard Rock Entertainment, Inc., 4.0828%, 5/14/2020 | 868,416 | ||
| 20,841,717 | ||||
| Health Care—8.7% | ||||
| 250M | Albany Molecular Research, Inc., 8.3328%, 7/28/2025 | 254,062 | ||
| Air Medical Group Holdings, Inc.: | ||||
| 175M | 5.25%, 9/25/2024 (b) | 175,328 | ||
| 1,322M | 5.2372%, 4/28/2022 | 1,322,764 | ||
| 1,100M | Air Methods Corp., 4.8328%, 4/22/2024 | 1,083,956 | ||
| 1,995M | American Renal Holdings, Inc., 4.485%, 6/14/2024 | 1,990,022 | ||
| 1,325M | Canyon Valor Cos., Inc., 5.5828%, 6/16/2023 | 1,341,231 | ||
| 923M | Endo Luxembourg Finance Co., I Sarl, 5.5%, 4/12/2024 | 933,261 | ||
| 1,067M | Envision Healthcare Corp., 4.24%, 11/17/2023 | 1,075,606 | ||
| 995M | ExamWorks Group, Inc., 4.485%, 7/27/2023 | 1,002,227 | ||
| 528M | Mallinckrodt International Finance SA, 4.0828%, 3/19/2021 | 529,188 | ||
| 505M | MPH Acquisition Holdings, LLC, 4.3328%, 6/7/2023 | 509,034 | ||
| 1,400M | Nature’s Bounty Co., 3.5%, 8/11/2024 (b) | 1,383,669 | ||
| 217M | Onex Carestream Finance, LP, 5.3328%, 6/7/2019 | 217,907 | ||
| 350M | Parexel International Corp., 3%, 8/11/2024 (b) | 352,713 | ||
| 750M | PharMerica Corp., 4.5%, 9/26/2024 (b) | 755,389 | ||
| 1,493M | Sterigenics-Nordion Holdings, LLC, 4.235%, 5/15/2022 | 1,494,366 | ||
| 574M | U.S. Anesthesia Partners, Inc., 4.485%, 6/16/2024 | 570,695 | ||
| 1,323M | Valeant Pharmaceuticals International, Inc., 5.99%, 12/11/2019 | 1,348,972 | ||
| 16,340,390 | ||||
| 26 |
| Principal | ||||
| Amount | Security | Value | ||
| Information Technology—7.6% | ||||
| $1,713M | Avast Holdings BV, 4.5828%, 9/30/2022 | $ 1,723,462 | ||
| 871M | Change Heathcare Holdings, Inc., 3.985%, 2/2/2024 | 874,073 | ||
| 975M | Digicel International Finance, Ltd., 5.07%, 5/10/2024 | 981,859 | ||
| 3,275M | DigiCert Holdings, Inc., 5.75%, 9/19/2024 (b) | 3,311,335 | ||
| Harland Clarke Holdings Corp.: | ||||
| 75M | 6.5%, 2/9/2022 (b) | 75,539 | ||
| 1,185M | 6.8328%, 2/9/2022 | 1,193,419 | ||
| 673M | Hyland Software, Inc., 4.4889%, 7/1/2022 | 680,799 | ||
| 2,325M | Project Leopard Holdings, Inc., 6.8328%, 6/20/2023 | 2,342,926 | ||
| 1,555M | Quest Software U.S. Holdings, Inc., 7.235%, 9/7/2023 | 1,580,031 | ||
| 624M | TKC Holdings, Inc., 5.5222%, 2/1/2023 | 629,077 | ||
| 731M | Western Digital Corp., 3.985%, 4/29/2023 | 736,533 | ||
| 14,129,053 | ||||
| Manufacturing—6.8% | ||||
| 3,491M | Brand Energy & Infrastructure Services, Inc., 5.522%, 6/16/2024 | 3,512,198 | ||
| 620M | Douglas Dynamics, LLC, 4.24%, 12/31/2021 | 622,647 | ||
| Engineered Machinery Holdings, Inc.: | ||||
| 27M | 4.25%, 7/24/2024 (b) | 26,604 | ||
| 885M | 4.5561%, 7/11/2024 | 886,609 | ||
| 88M | 4.5828%, 7/24/2024 | 88,662 | ||
| 969M | Filtration Group Corp., 4.235%, 11/23/2020 | 976,732 | ||
| 993M | Gardner Denver, Inc., 4.0828%, 7/30/2024 | 994,906 | ||
| 2,487M | HII Holding Corp., 4.5828%, 12/20/2019 | 2,399,915 | ||
| 888M | Husky Injection Molding Systems, Ltd., 4.485%, 6/30/2021 | 895,540 | ||
| 1,040M | RBS Global, Inc., 4.0601%, 8/21/2020 | 1,045,080 | ||
| 1,174M | U.S. Farathane, LLC, 5%, 12/23/2021 | 1,180,851 | ||
| 12,629,744 | ||||
| Media-Broadcasting—4.3% | ||||
| 1,222M | Altice Financing SA, 4.0539%, 6/22/2025 | 1,224,614 | ||
| Altice U.S. Finance I Corp.: | ||||
| 2,244M | 3.485%, 1/31/2026 | 2,253,072 | ||
| 1,347M | 2.75%, 6/22/2025 | 1,342,626 | ||
| CBS Radio, Inc.: | ||||
| 125M | 2.75%, 11/1/2023 (b) | 125,547 | ||
| 553M | 4.7372%, 10/17/2023 | 557,842 | ||
| 27 |
Portfolio of Investments (continued)
FLOATING RATE FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Media-Broadcasting (continued) | ||||
| $ 102M | Mission Broadcasting, Inc., 3.7372%, 9/26/2023 | $ 101,878 | ||
| 838M | Nexstar Broadcasting, Inc., 3.7372%, 9/26/2023 | 841,298 | ||
| 1,652M | VFH Parent, LLC, 5.0606%, 12/2/2021 | 1,670,761 | ||
| 8,117,638 | ||||
| Media-Cable TV—6.2% | ||||
| 3,775M | Atlantic Broadband Finance, LLC, 2.375%, 8/11/2024 (b) | 3,757,541 | ||
| 1,866M | CSC Holdings, LLC, 3.4844%, 10/9/2022 (b) | 1,858,064 | ||
| 744M | Gray Television, Inc., 3.7372%, 2/28/2024 | 747,941 | ||
| 1,748M | Midcontinent Communications, Inc., 3.4811%, 11/29/2023 | 1,757,150 | ||
| 1,500M | Raycom TV Broadcasting, LLC, 3.9872%, 8/18/2024 | 1,511,250 | ||
| 1,400M | WideOpenWest Finance, LLC, 4.4844%, 8/18/2023 | 1,400,175 | ||
| 600M | Ziggo Secured Finance Partnership, 3.7344%, 4/15/2025 | 600,225 | ||
| 11,632,346 | ||||
| Media-Diversified—.3% | ||||
| 462M | Tribune Media Co., 4.235%, 12/27/2020 | 464,314 | ||
| Metals/Mining—3.3% | ||||
| 1,244M | Arch Coal, Inc., 4.485%, 10/4/2021 | 1,252,307 | ||
| 1,375M | Big River Steel, LLC, 6.3328%, 8/15/2023 | 1,395,625 | ||
| 1,294M | Foresight Energy, LLC, 7.0828%, 3/14/2022 | 1,214,816 | ||
| 1,400M | MRC Global (U.S.), Inc., 4.7344%, 9/14/2024 | 1,408,750 | ||
| 848M | TMS International Corp., 4.3091%, 10/16/2020 | 852,358 | ||
| 6,123,856 | ||||
| Retail-General Merchandise—7.1% | ||||
| 1,444M | 1011778 B.C. Unlimited Liability Co., 3.5232%, 12/10/2021 | 1,444,426 | ||
| 1,673M | 84 Lumber Co., 6.9872%, 10/25/2023 | 1,692,626 | ||
| 1,375M | Bass Pro Group, LLC, 6.235%, 11/4/2023 | 1,298,797 | ||
| 1,297M | BJ’s Wholesale Club, Inc., 4.9817%, 1/27/2024 | 1,243,797 | ||
| 911M | CNT Holdings III Corp., 4.53%, 1/22/2023 | 900,361 | ||
| 750M | Hanesbrands, Inc., 3.735%, 4/29/2022 | 756,618 | ||
| 1,523M | Harbor Freight Tools USA, Inc., 4.485%, 8/18/2023 | 1,530,017 | ||
| 1,042M | Party City Holdings, Inc., 4.3213%, 8/19/2022 | 1,048,608 | ||
| 3,325M | Staples, Inc., 5%, 8/14/2024 (b) | 3,314,609 | ||
| 13,229,859 | ||||
| 28 |
| Principal | ||||
| Amount | Security | Value | ||
| Services—2.4% | ||||
| $ 534M | GW Honos Security Corp., 5.3154%, 5/12/2024 | $ 539,459 | ||
| HD Supply, Inc.: | ||||
| 630M | 3.5828%, 8/13/2021 | 632,584 | ||
| 546M | 3.8328%, 10/17/2023 | 549,287 | ||
| 941M | Monitronics International, Inc., 6.8328%, 9/30/2022 | 935,854 | ||
| 325M | Multi-Color Corp., 2.25%, 9/20/2024 (b) | 326,627 | ||
| 1,516M | TKC Holdings, Inc., 5.4889%, 1/31/2023 | 1,528,442 | ||
| 4,512,253 | ||||
| Telecommunications—1.5% | ||||
| 1,675M | Cincinnati Bell, Inc., 4.75%, 8/17/2024 (b) | 1,686,934 | ||
| 1,075M | GCI Holdings, Inc., 3%, 2/2/2022 | 1,079,726 | ||
| 2,766,660 | ||||
| Transportation—.4% | ||||
| 798M | Avolon TLB Borrower 1 (U.S.), LLC, 3.9861%, 1/20/2022 | 800,825 | ||
| Utilities—1.8% | ||||
| 954M | Calpine Corp., 4.09%, 5/27/2022 | 952,583 | ||
| 431M | Dynegy, Inc., 4.485%, 6/27/2023 | 433,737 | ||
| 988M | NRG Energy, Inc., 3.5828%, 6/30/2023 | 989,618 | ||
| 1,067M | Talen Energy Supply, LLC, 5.235%, 10/18/2023 | 1,045,612 | ||
| 3,421,550 | ||||
| Waste Management—.5% | ||||
| 942M | Advanced Disposal Services, Inc., 3.9472%, 11/10/2023 | 949,430 | ||
| Wireless Communications—2.6% | ||||
| 1,600M | Intelsat Jackson Holdings SA, 4.0711%, 6/30/2019 | 1,597,248 | ||
| 1,443M | Sprint Communications, Inc., 3.75%, 1/31/2024 | 1,445,636 | ||
| 1,734M | Telesat Canada, 4.24%, 11/17/2023 | 1,750,033 | ||
| 4,792,917 | ||||
| Total Value of Loan Participations (cost $172,231,726) | 173,326,557 | |||
| 29 |
Portfolio of Investments (continued)
FLOATING RATE FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| CORPORATE BONDS—5.5% | ||||
| Aerospace/Defense—.2% | ||||
| $ 325M | Bombardier, Inc., 8.75%, 12/1/2021 (a) | $ 350,025 | ||
| Energy—1.2% | ||||
| 750M | Oasis Petroleum, Inc., 6.5%, 11/1/2021 | 768,750 | ||
| 400M | Precision Drilling Corp., 6.5%, 12/15/2021 | 407,000 | ||
| 1,000M | Targa Resources Partners, LP, 4.125%, 11/15/2019 | 1,011,250 | ||
| 2,187,000 | ||||
| Financials—.8% | ||||
| DAE Funding, LLC: | ||||
| 300M | 4%, 8/1/2020 (a) | 306,750 | ||
| 350M | 4.5%, 8/1/2022 (a) | 359,581 | ||
| 850M | Icahn Enterprises, LP, 6.25%, 2/1/2022 | 888,250 | ||
| 1,554,581 | ||||
| Health Care—.9% | ||||
| 800M | Centene Corp., 5.625%, 2/15/2021 | 834,160 | ||
| 450M | Endo Finance, LLC, 7.25%, 1/15/2022 (a) | 423,000 | ||
| 450M | Molina Healthcare, Inc., 5.375%, 11/15/2022 | 466,020 | ||
| 1,723,180 | ||||
| Media-Cable TV—1.0% | ||||
| 750M | CSC Holdings, LLC, 10.125%, 1/15/2023 (a) | 867,188 | ||
| 500M | DISH DBS Corp., 7.875%, 9/1/2019 | 547,500 | ||
| 425M | Numericable Group SA, 6.25%, 5/15/2024 (a) | 450,394 | ||
| 1,865,082 | ||||
| Metals/Mining—.3% | ||||
| 100M | Aleris International, Inc., 9.5%, 4/1/2021 (a) | 107,000 | ||
| 325M | Teck Resources, Ltd., 8.5%, 6/1/2024 (a) | 373,750 | ||
| 480,750 | ||||
| Services—.3% | ||||
| 450M | Cimpress NV, 7%, 4/1/2022 (a) | 468,563 | ||
| Telecommunications—.5% | ||||
| 650M | GCI, Inc., 6.875%, 4/15/2025 | 702,000 | ||
| 225M | Wind Acquisition Finance SA, 4.75%, 7/15/2020 (a) | 228,024 | ||
| 930,024 | ||||
| 30 |
| Principal | |||||||
| Amount | Security | Value | |||||
| Utilities—.2% | |||||||
| $ 430M | Calpine Corp., 6%, 1/15/2022 (a) | $ 446,662 | |||||
| Wireless Communications—.1% | |||||||
| 250M | T-Mobile USA, Inc., 6.125%, 1/15/2022 | 260,625 | |||||
| Total Value of Corporate Bonds (cost $10,132,160) | 10,266,492 | ||||||
| SHORT-TERM CORPORATE NOTES—8.0% | |||||||
| Federal Home Loan Bank: | |||||||
| 5,000M | 1.005%, 10/17/2017 | 4,997,960 | |||||
| 10,000M | 1.015%, 10/19/2017 | 9,995,370 | |||||
| Total Value of Short-Term Corporate Notes (cost $14,992,688) | 14,993,330 | ||||||
| Total Value of Investments (cost $197,356,574) | 106.2 | % | 198,586,379 | ||||
| Excess of Liabilities Over Other Assets | (6.2 | ) | (11,582,765) | ||||
| Net Assets | 100.0 | % | $187,003,614 | ||||
| (a) | Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4). |
| (b) | A portion or all of the security purchased on a when-issued or delayed delivery basis (see Note 1G). |
| † | Interest rates are determined and reset periodically. The interest rates above are the rates in effect |
| at September 30, 2017. |
| 31 |
Portfolio of Investments (continued)
FLOATING RATE FUND
September 30, 2017
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Loan Participations | $ | — | $ | 173,326,557 | $ | — | $ | 173,326,557 | ||||
| Corporate Bonds | — | 10,266,492 | — | 10,266,492 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 14,993,330 | — | 14,993,330 | ||||||||
| Total Investments in Securities* | $ | — | $ | 198,586,379 | $ | — | $ | 198,586,379 |
| * | The Portfolio of Investments provides information on the industry categorization of loan |
| participations and corporate bonds. | |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 32 | See notes to financial statements |
Portfolio Manager’s Letter
FUND FOR INCOME
Dear Investor:
This is the annual report for the First Investors Fund For Income for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 6.79% for Class A shares, 6.15% for Class B shares, 7.05% for Advisor Class shares and 7.59% for Institutional class shares, including dividends of 12.4 cents per share on Class A shares, 10.0 cents on Class B shares, 13.0 cents on Advisor Class shares and 13.4 cents on Institutional Class shares.
The Market
High yield performed well, and delivered above coupon, during the Fund’s fiscal year by delivering attractive returns in each quarter for the period under review. Just November 2016 and March 2017 saw market declines—each triggered prior to Federal Reserve (“the Fed”) meetings which the market widely and correctly anticipated would result in a rate increase. Both of these dips were more-than-fully recovered by the high-yield market in the following month. High-yield market corrections were shallow and short, as institutional buyers with cash on the sidelines moved into the market quickly when prices fell and yields increased. We believe that the market’s ongoing interest in the asset class stems from several factors:
1.) The asset class boasts a contractual yield level which, though falling as prices increase, remains competitive with many other global market opportunities. As of September 30, 2017, the high-yield market offered average yields of about 5.4%. This is the highest yield per unit of duration (sensitivity to changes in interest rates) available in the public markets versus other fixed-rate, fixed-income products. Thus, bonds with higher yields are less subject to price deterioration than lower-yielding bonds should the Fed further raise short-term rates.
2.) Most companies borrowing in the high-yield market appear to have fundamentally healthy balance sheets at this time. Default rates for high yield are just over 2% per annum and are, therefore, below long-term average rates. Commodity prices, most notably for oil, appeared more stable, as 2017 progressed, helping provide stability to sectors of the high-yield market that were particularly challenged in 2015.
3.) Generally positive, measured growth in the U.S. economy appears to now be leading the appearance of growth shoots globally, yet inflation continues to remain in check. Growth, coupled with mild inflation, tends to favor borrowers who get to pay back the money they have borrowed with money that is worth just a little less. U.S. high-yield companies become “price setters” for the goods and services they produce in a growth environment, helping to secure cash flow.
| 33 |
Portfolio Manager’s Letter (continued)
FUND FOR INCOME
Thus, prices for high-yield bonds have continued to increase incrementally throughout the year. The market is well supported from a technical supply/demand perspective. The high-yield market has, in fact, been shrinking, as companies get upgraded to investment grade or borrow more cheaply in other markets, even as demand remains strong.
Against this positive backdrop, the Fund outperformed the market largely due to better-than-market credit selection. That is, within each industry sector, the Fund’s bond choices outperformed the full Index, while our allocations between industries cost the Fund modestly—we remained conservatively positioned versus the benchmark in the Energy sector awaiting greater demonstration of a stabilization in oil prices. The Fund outperformed the benchmark across a range of industry sectors including most notably Healthcare, Telecommunications, Chemicals, Services, and Food and Drug Retail.
The Fund
Historically, some 90% of all gains in the U.S. high-yield market come from coupon-derived yield—that is, most gains come from the steady collection of contractual obligations paid by corporate borrowers to their investors. Results from year-to-year, of course, may vary more widely. In 2017, the high yield market represented by this Fund’s benchmark (the BofA ML BB-B U.S. Cash Pay High Yield Constrained Index) delivered investors coupon earnings of about 6.2%, plus additional price appreciation of about 1.7%, leading to a total return of 7.91%. In this positive return environment, the Fund outperformed its benchmark before the deduction of fees and expenses.
Outlook
Going forward, the Fund remains modestly overweight B-rated credits versus higher-rated BB credits, as we view credit fundamentals as supportive of current market valuations. The portfolio is positioned as well with yields and spreads slightly above those of the benchmark, reflecting our constructive view of fundamental and technical factors as described earlier in this letter. On a sector basis, we have been adding to Financials as we see improving credit trends and potential to benefit from higher rates. We have added modestly to Energy on improving, albeit slowly, supply demand balances. We reduced Utilities (as valuations normalized in our view) and Retail (where we have ongoing credit concerns due to the heavy-handed encroachment of web retail into traditional business models).
| 34 |
On balance, market and economic data has been rather positive these last few weeks leading up to the end of the period under review. Global economic data is increasingly positive and largely synchronized and risk-assets have been outperforming. Within global corporate credit, the default outlook is generally benign, impending debt maturities are limited, and spreads are tightening across almost all segments of the global corporate credit market. Within corporate credit asset classes, we see less investor differentiation and volatility remains contained. On the one hand, this makes sense, given positive economic data. On the other hand, valuations are beginning to indicate a complacency settling into the markets. We are carefully monitoring our portfolios and remain wary in assuming greater risk. While we could certainly see spreads trade-range bound for several years, it is important for investors to be vigilant. The recent default by the U.S. toy retailer, Toys”R’’US, highlights the dangers of complacency. Just the day before the company defaulted, Toys”R”US bonds were trading in the $90s. In the last few days of September, they were trading in the $20-to-$30 range, a large decline in a matter of days. We believe an emphasis on bottom-up fundamental credit research can help reduce exposure to these types of problems. Even “good” markets require serious work.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 35 |
Fund Expenses (unaudited)
FUND FOR INCOME
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.21% | |||
| Actual | $1,000.00 | $1,045.14 | $6.20 | |
| Hypothetical** | $1,000.00 | $1,019.00 | $6.12 | |
| Class B Shares | 2.01% | |||
| Actual | $1,000.00 | $1,061.51 | $10.39 | |
| Hypothetical** | $1,000.00 | $1,014.99 | $10.15 | |
| Advisor Class Shares | 0.93% | |||
| Actual | $1,000.00 | $1,070.51 | $4.83 | |
| Hypothetical** | $1,000.00 | $1,020.41 | $4.71 | |
| Institutional Class Shares | 0.78% | |||
| Actual | $1,000.00 | $1,075.89 | $4.06 | |
| Hypothetical** | $1,000.00 | $1,021.16 | $3.95 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived. | |
| ** | Assumed rate of return of 5% before expenses |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total value of investments. |
| 36 |
Cumulative Performance Information (unaudited)
FUND FOR INCOME
Comparison of change in value of $10,000 investment in the First Investors Fund For Income (Class A shares), the Bank of America (“BofA”) Merrill Lynch BB-B U.S. Cash Pay High Yield Constrained Index.
The graph compares a $10,000 investment in the First Investors Fund For Income (Class A shares) beginning 9/30/07 with a theoretical investment in the BofA Merrill Lynch BB-B U.S. Cash Pay High Yield Constrained Index (the “Index”). The Index contains all securities in the BofA Merrill Lynch U.S. Cash Pay High Yield Index rated BB1 through B3, based on an average of Moody’s, S&P and Fitch, but caps issuer exposure at 2%. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table it is assumed that all dividends and
| 37 |
Cumulative Performance Information (unaudited) (continued)
FUND FOR INCOME
distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the current maximum sales charge of 4% and assume the current sales charge of 4% was in effect at the beginning of the stated periods (prior to 6/12/17, the maximum sales charge was 5.75%). The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been 2.63%, 3.83% and 4.36%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 3.72%. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been 2.13%, 3.56% and 4.16%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 3.05%. The Advisor Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 7.03% and 4.24%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 4.20%. The Institutional Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 7.57% and 4.58%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 4.32%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. The issuers of high yield bonds, in which the Fund primarily invests, pay higher interest rates because they have a greater likelihood of financial difficulty, which could result in their inability to repay the bonds fully when due. Prices of high yield bonds are also subject to greater fluctuations. Index figures are from Bank of America Merrill Lynch and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
***The S.E.C. 30-Day Yield shown is for September 2017.
† The Index return is for ten years. The Index return since inception of the Advisor Class shares and Institutional Class shares is 5.57%.
| 38 |
Portfolio of Investments
FUND FOR INCOME
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| CORPORATE BONDS—93.1% | ||||
| Aerospace/Defense—1.6% | ||||
| Bombardier, Inc.: | ||||
| $ 2,600M | 8.75%, 12/1/2021 (a) | $ 2,800,200 | ||
| 2,300M | 7.5%, 3/15/2025 (a) | 2,310,120 | ||
| Meccanica Holdings USA, Inc.: | ||||
| 1,871M | 7.375%, 7/15/2039 (a) | 2,296,653 | ||
| 750M | 6.25%, 1/15/2040 (a) | 851,250 | ||
| 3,225M | TransDigm, Inc., 6.375%, 6/15/2026 | 3,311,688 | ||
| 11,569,911 | ||||
| Automotive—4.8% | ||||
| 1,775M | Adient Global Holdings, Ltd., 4.875%, 8/15/2026 (a) | 1,823,812 | ||
| 1,475M | American Axle & Manufacturing, Inc., 6.25%, 4/1/2025 (a) | 1,508,187 | ||
| 1,725M | Asbury Automotive Group, Inc., 6%, 12/15/2024 | 1,811,250 | ||
| 1,700M | Avis Budget Group, Inc., 6.375%, 4/1/2024 (a) | 1,780,750 | ||
| 1,900M | Cooper Standard Automotive, Inc., 5.625%, 11/15/2026 (a) | 1,947,500 | ||
| 1,000M | Dana Financing Luxembourg Sarl, 6.5%, 6/1/2026 (a) | 1,082,500 | ||
| Dana Holding Corp.: | ||||
| 2,000M | 6%, 9/15/2023 | 2,115,000 | ||
| 700M | 5.5%, 12/15/2024 | 738,500 | ||
| 2,350M | Fiat Chrysler Automobiles NV, 5.25%, 4/15/2023 | 2,514,500 | ||
| Group 1 Automotive, Inc.: | ||||
| 1,700M | 5%, 6/1/2022 | 1,770,125 | ||
| 1,425M | 5.25%, 12/15/2023 (a) | 1,449,937 | ||
| Hertz Corp.: | ||||
| 1,650M | 7.625%, 6/1/2022 (a) | 1,705,687 | ||
| 875M | 5.5%, 10/15/2024 (a) | 791,875 | ||
| 3,650M | LKQ Corp., 4.75%, 5/15/2023 | 3,787,276 | ||
| 3,725M | Meritor, Inc., 6.25%, 2/15/2024 | 3,981,094 | ||
| 3,050M | Omega U.S. Sub, LLC, 8.75%, 7/15/2023 (a) | 3,248,250 | ||
| 2,550M | ZF North America Capital. Inc., 4.75%, 4/29/2025 (a) | 2,699,813 | ||
| 34,756,056 | ||||
| Building Materials—.7% | ||||
| 2,600M | Building Materials Corp., 5.375%, 11/15/2024 (a) | 2,776,280 | ||
| 1,950M | Griffon Corp., 5.25%, 3/1/2022 | 1,989,000 | ||
| 4,765,280 | ||||
| 39 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Chemicals—3.4% | ||||
| $ 2,000M | A. Schulman, Inc., 6.875%, 6/1/2023 | $ 2,085,000 | ||
| 1,225M | CF Industries, Inc., 4.95%, 6/1/2043 | 1,139,250 | ||
| 1,050M | CVR Partners, LP, 9.25%, 6/15/2023 (a) | 1,122,187 | ||
| 1,625M | Chemours Co., 6.625%, 5/15/2023 | 1,736,719 | ||
| 1,000M | Evolution Escrow Issurer, LLC, 7.5%, 3/15/2022 (a) | 1,058,750 | ||
| 1,750M | Nova Chemicals Corp., 5.25%, 6/1/2027 (a) | 1,771,875 | ||
| 1,925M | PolyOne Corp., 5.25%, 3/15/2023 | 2,050,125 | ||
| 1,600M | PQ Corp., 6.75%, 11/15/2022 (a) | 1,740,000 | ||
| Rain CII Carbon, LLC: | ||||
| 1,867M | 8.25%, 1/15/2021 (a) | 1,939,346 | ||
| 5,600M | 7.25%, 4/1/2025 (a) | 5,922,000 | ||
| 1,850M | Rayonier AM Products, Inc., 5.5%, 6/1/2024 (a) | 1,801,438 | ||
| 225M | TPC Group, Inc., 8.75%, 12/15/2020 (a) | 219,375 | ||
| 525M | W.R. Grace & Co., 5.625%, 10/1/2024 (a) | 578,812 | ||
| 23,164,877 | ||||
| Consumer Non-Durables—1.3% | ||||
| 1,225M | American Greetings Corp., 7.875%, 2/15/2025 (a) | 1,332,187 | ||
| 1,125M | First Quality Finance Co., 5%, 7/1/2025 (a) | 1,162,969 | ||
| 2,700M | Kronos Acquisition, Inc., 9%, 8/15/2023 (a) | 2,639,250 | ||
| Reynolds Group Holdings, Inc.: | ||||
| 1,800M | 5.75%, 10/15/2020 | 1,833,840 | ||
| 850M | 5.125%, 7/15/2023 (a) | 888,123 | ||
| 1,375M | Standard Industries, Inc., 5.5%, 2/15/2023 (a) | 1,459,219 | ||
| 9,315,588 | ||||
| Energy—11.8% | ||||
| Antero Resources Corp.: | ||||
| 950M | 5.375%, 11/1/2021 | 978,500 | ||
| 475M | 5.125%, 12/1/2022 | 488,062 | ||
| 400M | 5%, 3/1/2025 | 408,000 | ||
| 1,725M | Baytex Energy Corp., 5.125%, 6/1/2021 (a) | 1,617,187 | ||
| 1,375M | Blue Racer Midstream, LLC, 6.125%, 11/15/2022 (a) | 1,433,437 | ||
| 425M | Callon Petroleum Co., 6.125%, 10/1/2024 | 442,000 | ||
| Carrizo Oil & Gas, Inc.: | ||||
| 1,000M | 6.25%, 4/15/2023 | 1,020,000 | ||
| 600M | 8.25%, 7/15/2025 | 654,750 | ||
| 2,175M | Chesapeake Energy Corp., 8%, 1/15/2025 (a)(b) | 2,202,187 | ||
| 1,675M | Concho Resources, Inc., 5.5%, 4/1/2023 | 1,723,659 | ||
| 2,350M | CONSOL Energy, Inc., 5.875%, 4/15/2022 | 2,385,250 | ||
| 40 |
| Principal | ||||
| Amount | Security | Value | ||
| Energy (continued) | ||||
| Consolidated Energy Finance SA: | ||||
| $ 1,700M | 6.75%, 10/15/2019 (a) | $ 1,731,875 | ||
| 1,400M | 6.875%, 6/15/2025 (a) | 1,471,750 | ||
| Continental Resources, Inc.: | ||||
| 3,575M | 3.8%, 6/1/2024 | 3,467,750 | ||
| 475M | 4.9%, 6/1/2044 | 433,437 | ||
| 825M | Covey Park Energy, LLC, 7.5%, 5/15/2025 (a) | 856,969 | ||
| Crestwood Midstream Partners, LP: | ||||
| 2,175M | 6.25%, 4/1/2023 | 2,253,844 | ||
| 1,375M | 5.75%, 4/1/2025 | 1,409,375 | ||
| 1,775M | Delek Logistics Partners, LP, 6.75%, 5/15/2025 (a) | 1,797,187 | ||
| 500M | Diamondback Energy, Inc., 4.75%, 11/1/2024 | 512,500 | ||
| 1,600M | Endeavor Energy Resources, LP, 7%, 8/15/2021 (a) | 1,662,000 | ||
| 2,767M | Exterran Partners, LP, 6%, 10/1/2022 | 2,704,742 | ||
| 1,950M | Forum Energy Technologies, Inc., 6.25%, 10/1/2021 | 1,964,625 | ||
| Genesis Energy, LP: | ||||
| 1,400M | 6.75%, 8/1/2022 | 1,438,500 | ||
| 500M | 5.625%, 6/15/2024 | 487,500 | ||
| 1,150M | Gulfport Energy Corp., 6.375%, 5/15/2025 | 1,168,687 | ||
| 1,175M | Hilcorp Energy I, LP, 5.75%, 10/1/2025 (a) | 1,194,094 | ||
| 3,700M | Jonah Energy, LLC, 7.25%, 10/15/2025 (a)(b) | 3,737,000 | ||
| 2,600M | Laredo Petroleum, Inc., 5.625%, 1/15/2022 | 2,632,500 | ||
| 1,400M | Matador Resources Co., 6.875%, 4/15/2023 | 1,489,250 | ||
| 1,900M | MEG Energy Corp., 6.5%, 1/15/2025 (a) | 1,862,000 | ||
| Murphy Oil Corp.: | ||||
| 1,425M | 4.7%, 12/1/2022 | 1,428,563 | ||
| 1,225M | 6.875%, 8/15/2024 | 1,309,207 | ||
| 1,100M | 5.75%, 8/15/2025 | 1,135,640 | ||
| 2,300M | Newfield Exploration Co., 5.375%, 1/1/2026 | 2,429,375 | ||
| 875M | NGPL Pipeco, LLC, 4.875%, 8/15/2027 (a) | 919,056 | ||
| 1,750M | Oasis Petroleum, Inc., 6.875%, 1/15/2023 | 1,785,000 | ||
| Parsley Energy, LLC: | ||||
| 425M | 6.25%, 6/1/2024 (a) | 449,438 | ||
| 1,775M | 5.25%, 8/15/2025 (a) | 1,812,719 | ||
| 1,250M | PDC Energy, Inc., 6.125%, 9/15/2024 | 1,312,500 | ||
| 1,700M | Precision Drilling Corp., 6.5%, 12/15/2021 | 1,729,750 | ||
| 1,350M | QEP Resources, Inc., 6.875%, 3/1/2021 | 1,427,625 | ||
| 1,825M | Range Resources Corp., 4.875%, 5/15/2025 | 1,806,750 | ||
| 1,650M | Rice Energy, Inc., 6.25%, 5/1/2022 | 1,726,313 | ||
| 1,250M | Rowan Cos., Inc., 4.875%, 6/1/2022 | 1,178,125 | ||
| 700M | RSP Permian, Inc., 5.25%, 1/15/2025 (a) | 714,000 | ||
| 575M | SESI, LLC, 7.75%, 9/15/2024 (a) | 596,563 | ||
| 41 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Energy (continued) | ||||
| $ 1,025M | SM Energy Co., 5%, 1/15/2024 | $ 971,188 | ||
| Southwestern Energy Co.: | ||||
| 1,025M | 6.7%, 1/23/2025 | 1,042,938 | ||
| 1,300M | 7.75%, 10/1/2027 | 1,350,375 | ||
| 700M | Suburban Propane Partners, LP, 5.875%, 3/1/2027 | 696,500 | ||
| Sunoco, LP: | ||||
| 1,100M | 6.25%, 4/15/2021 | 1,155,385 | ||
| 900M | 6.375%, 4/1/2023 | 960,750 | ||
| Targa Resources Partners, LP: | ||||
| 900M | 5.25%, 5/1/2023 | 920,250 | ||
| 2,800M | 4.25%, 11/15/2023 | 2,789,500 | ||
| Tesoro Logistics, LP: | ||||
| 1,650M | 6.25%, 10/15/2022 | 1,763,438 | ||
| 825M | 6.375%, 5/1/2024 | 899,250 | ||
| 1,025M | Unit Corp., 6.625%, 5/15/2021 | 1,032,688 | ||
| Weatherford Bermuda, PLC: | ||||
| 600M | 4.5%, 4/15/2022 | 561,000 | ||
| 625M | 6.5%, 8/1/2036 | 539,063 | ||
| Whiting Petroleum Corp.: | ||||
| 700M | 5%, 3/15/2019 | 703,710 | ||
| 1,100M | 6.25%, 4/1/2023 | 1,087,625 | ||
| 1,725M | WPX Energy, Inc., 6%, 1/15/2022 | 1,791,844 | ||
| 87,654,745 | ||||
| Financials—5.4% | ||||
| Ally Financial, Inc.: | ||||
| 1,600M | 8%, 3/15/2020 | 1,805,024 | ||
| 2,750M | 8%, 11/1/2031 | 3,560,975 | ||
| 1,300M | Arch Merger Sub, Inc., 8.5%, 9/15/2025 (a) | 1,267,500 | ||
| 1,825M | Argos Merger Sub, Inc., 7.125%, 3/15/2023 (a) | 1,427,697 | ||
| 1,200M | AssuredPartners, Inc., 7%, 8/15/2025 (a) | 1,231,500 | ||
| 1,525M | Credit Suisse Group AG, 7.5%, 12/11/2023 (a) | 1,727,335 | ||
| 2,575M | CSTN Merger Sub, Inc., 6.75%, 8/15/2024 (a) | 2,571,781 | ||
| 3,600M | DAE Funding, LLC, 5%, 8/1/2024 (a) | 3,699,000 | ||
| Icahn Enterprises, LP: | ||||
| 2,225M | 6.25%, 2/1/2022 | 2,325,125 | ||
| 2,075M | 6.75%, 2/1/2024 | 2,196,906 | ||
| 3,425M | Intesa Sanpaolo SpA, 5.017%, 6/26/2024 (a) | 3,486,808 | ||
| 42 |
| Principal | ||||
| Amount | Security | Value | ||
| Financials (continued) | ||||
| Ladder Capital Finance Holdings, LLLP: | ||||
| $ 1,350M | 5.25%, 3/15/2022 (a) | $ 1,380,375 | ||
| 2,700M | 5.25%, 10/1/2025 (a) | 2,681,451 | ||
| 2,425M | LPL Holdings, Inc., 5.75%, 9/15/2025 (a) | 2,520,060 | ||
| 825M | Radian Group, Inc., 4.5%, 10/1/2024 | 843,563 | ||
| 1,575M | Royal Bank of Scotland Group, PLC, 8.625%, 8/15/2021 | 1,750,219 | ||
| 1,225M | Springleaf Finance Corp., 7.75%, 10/1/2021 | 1,388,476 | ||
| 3,325M | UniCredit SpA, 5.861%, 6/19/2032 (a) | 3,493,135 | ||
| 39,356,930 | ||||
| Food/Beverage/Tobacco—1.5% | ||||
| 1,225M | Barry Callebault Services SA, 5.5%, 6/15/2023 (a) | 1,337,823 | ||
| Lamb Weston Holdings, Inc.: | ||||
| 875M | 4.625%, 11/1/2024 (a) | 916,562 | ||
| 625M | 4.875%, 11/1/2026 (a) | 657,812 | ||
| Pilgrim’s Pride Corp.: | ||||
| 250M | 5.75%, 3/15/2025 (a) | 258,750 | ||
| 1,025M | 5.875%, 9/30/2027 (a) | 1,049,344 | ||
| Post Holdings, Inc.: | ||||
| 1,725M | 5.5%, 3/1/2025 (a) | 1,794,000 | ||
| 2,800M | 5.75%, 3/1/2027 (a) | 2,898,000 | ||
| 1,700M | Vector Group, Ltd., 6.125%, 2/1/2025 (a) | 1,763,750 | ||
| 10,676,041 | ||||
| Forest Products/Containers—2.6% | ||||
| Ardagh Holdings USA, Inc.: | ||||
| 525M | 4.625%, 5/15/2023 (a) | 541,249 | ||
| 4,750M | 7.25%, 5/15/2024 (a) | 5,227,945 | ||
| 525M | Berry Plastics Group, Inc., 5.125%, 7/15/2023 | 550,594 | ||
| 2,825M | BWAY Holding Co., 7.25%, 4/15/2025 (a) | 2,916,812 | ||
| 925M | Crown Americas, LLC, 4.25%, 9/30/2026 | 936,562 | ||
| 775M | Louisiana-Pacific Corp., 4.875%, 9/15/2024 | 800,466 | ||
| Mercer International, Inc.: | ||||
| 1,400M | 7.75%, 12/1/2022 | 1,491,000 | ||
| 1,175M | 6.5%, 2/1/2024 | 1,224,938 | ||
| Owens-Brockway Glass Container, Inc.: | ||||
| 1,875M | 5.375%, 1/15/2025 (a) | 2,020,313 | ||
| 450M | 6.375%, 8/15/2025 (a) | 509,906 | ||
| 2,175M | Sealed Air Corp., 6.875%, 7/15/2033 (a) | 2,561,063 | ||
| 18,780,848 | ||||
| 43 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Gaming/Leisure—2.9% | ||||
| $ 1,925M | CRC Escrow Issuer 5.25% 10/15/2025 (a)(b)(c) | $ 1,925,000 | ||
| 2,825M | Golden Nugget, Inc., 8.75%, 10/1/2025 (a) | 2,881,500 | ||
| International Game Technology, PLC: | ||||
| 225M | 5.625%, 2/15/2020 (a) | 238,781 | ||
| 900M | 6.25%, 2/15/2022 (a) | 999,450 | ||
| 1,350M | 6.5%, 2/15/2025 (a) | 1,523,812 | ||
| 3,450M | Landry’s, Inc., 6.75%, 10/15/2024 (a) | 3,497,437 | ||
| 1,025M | Lions Gate Entertainment Corp., 5.875%, 11/1/2024 (a) | 1,081,375 | ||
| 1,075M | Regal Entertainment Group, 5.75%, 3/15/2022 | 1,112,625 | ||
| 3,275M | Scientific Games International, Inc., 7%, 1/1/2022 (a) | 3,483,781 | ||
| 1,125M | Silversea Cruise Finance, Ltd., 7.25%, 2/1/2025 (a) | 1,209,375 | ||
| 2,900M | Viking Cruises, Ltd., 6.25%, 5/15/2025 (a) | 3,005,125 | ||
| 20,958,261 | ||||
| Health Care—8.4% | ||||
| 2,725M | Centene Corp., 6.125%, 2/15/2024 | 2,953,219 | ||
| CHS/Community Health Systems, Inc.: | ||||
| 1,125M | 7.125%, 7/15/2020 | 1,019,531 | ||
| 950M | 5.125%, 8/1/2021 | 940,500 | ||
| 2,450M | 6.25%, 3/31/2023 | 2,416,312 | ||
| 2,125M | DaVita, Inc., 5.125%, 7/15/2024 | 2,134,297 | ||
| Endo Finance, LLC: | ||||
| 1,350M | 7.25%, 1/15/2022 (a) | 1,269,000 | ||
| 1,575M | 6%, 7/15/2023 (a) | 1,307,250 | ||
| 375M | 6%, 2/1/2025 (a) | 305,625 | ||
| Fresenius Medical Care U.S. Finance II, Inc.: | ||||
| 1,150M | 5.625%, 7/31/2019 (a) | 1,220,625 | ||
| 675M | 4.75%, 10/15/2024 (a) | 731,610 | ||
| HCA, Inc.: | ||||
| 1,800M | 6.5%, 2/15/2020 | 1,964,250 | ||
| 3,600M | 6.25%, 2/15/2021 | 3,906,000 | ||
| 2,425M | 5.875%, 5/1/2023 | 2,643,250 | ||
| 375M | 5.375%, 2/1/2025 | 396,094 | ||
| 2,400M | 5.875%, 2/15/2026 | 2,583,000 | ||
| HealthSouth Corp.: | ||||
| 1,150M | 5.125%, 3/15/2023 | 1,194,217 | ||
| 1,325M | 5.75%, 11/1/2024 | 1,362,266 | ||
| LifePoint Health, Inc.: | ||||
| 2,900M | 5.875%, 12/1/2023 | 3,074,870 | ||
| 1,175M | 5.375%, 5/1/2024 | 1,226,406 | ||
| 44 |
| Principal | ||||
| Amount | Security | Value | ||
| Health Care (continued) | ||||
| Mallinckrodt Finance SB: | ||||
| $ 2,575M | 5.75%, 8/1/2022 (a) | $ 2,529,938 | ||
| 1,025M | 5.5%, 4/15/2025 (a) | 930,188 | ||
| Molina Healthcare, Inc.: | ||||
| 2,925M | 5.375%, 11/15/2022 | 3,029,130 | ||
| 1,750M | 4.875%, 6/15/2025 (a) | 1,732,500 | ||
| 775M | MPH Operating Partnership, LP, 7.125%, 6/1/2024 (a) | 835,062 | ||
| 700M | RegionalCare Hospital Partners Holdings Inc., 8.25%, 5/1/2023 (a) | 739,375 | ||
| 3,575M | Tenet Healthcare Corp., 6%, 10/1/2020 | 3,818,851 | ||
| 575M | Universal Health Services, Inc., 5%, 6/1/2026 (a) | 608,063 | ||
| 675M | Universal Hospital Services, Inc., 7.625%, 8/15/2020 | 686,813 | ||
| Valeant Pharmaceuticals International, Inc.: | ||||
| 6,300M | 6.375%, 10/15/2020 (a) | 6,331,500 | ||
| 400M | 6.5%, 3/15/2022 (a) | 424,000 | ||
| 1,125M | 7%, 3/15/2024 (a) | 1,203,851 | ||
| 4,600M | 6.125%, 4/15/2025 (a) | 4,048,000 | ||
| 1,175M | West Street Merger Sub, Inc., 6.375%, 9/1/2025 (a) | 1,175,000 | ||
| 60,740,593 | ||||
| Information Technology—3.9% | ||||
| 2,025M | Alliance Data Systems Corp., 5.375%, 8/1/2022 (a) | 2,095,875 | ||
| 1,650M | CDW, LLC, 5%, 9/1/2025 | 1,740,750 | ||
| 1,625M | CommScope Technologies, LLC, 6%, 6/15/2025 (a) | 1,744,844 | ||
| 1,825M | Diamond 1 Finance Corp., 6.02%, 6/15/2026 (a) | 2,030,152 | ||
| 2,625M | Equinix, Inc., 5.875%, 1/15/2026 | 2,890,781 | ||
| 625M | J2 Cloud Services, LLC, 6%, 7/15/2025 (a) | 657,031 | ||
| 825M | Match Group, Inc., 6.375%, 6/1/2024 | 901,313 | ||
| 547M | Microsemi Corp., 9.125%, 4/15/2023 (a) | 626,999 | ||
| 1,250M | MSCI, Inc., 5.75%, 8/15/2025 (a) | 1,370,313 | ||
| 1,375M | Nuance Communications, Inc., 6%, 7/1/2024 | 1,495,725 | ||
| 1,000M | NXP BV, 3.875%, 9/1/2022 (a) | 1,045,000 | ||
| 1,300M | Open Text Corp., 5.625%, 1/15/2023 (a) | 1,368,250 | ||
| 2,275M | Rackspace Hosting, Inc., 8.625%, 11/15/2024 (a) | 2,433,340 | ||
| 1,800M | Radiate Holdco, LLC, 6.625%, 2/15/2025 (a) | 1,764,000 | ||
| 1,225M | Sensata Technologies U.K. Financing Co., 6.25%, 2/15/2026 (a) | 1,347,500 | ||
| 1,575M | Solera, LLC, 10.5%, 3/1/2024 (a) | 1,800,934 | ||
| 750M | Verisign, Inc., 4.75%, 7/15/2027 | 776,250 | ||
| 2,075M | Western Digital Corp., 10.5%, 4/1/2024 | 2,443,313 | ||
| 28,532,370 | ||||
| 45 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Manufacturing—3.3% | ||||
| $ 2,525M | ATS Automation Tooling Systems, Inc., 6.5%, 6/15/2023 (a) | $ 2,648,094 | ||
| 700M | Boise Cascade Co., 5.625%, 9/1/2024 (a) | 739,375 | ||
| 1,400M | Brand Energy & Infrastructure Services, Inc., 8.5%, 7/15/2025 (a) | 1,519,000 | ||
| 1,575M | Cloud Crane, LLC, 10.125%, 8/1/2024 (a) | 1,752,187 | ||
| 2,550M | Gates Global, LLC, 6%, 7/15/2022 (a) | 2,632,875 | ||
| 425M | GrafTech International, Ltd., 6.375%, 11/15/2020 | 415,437 | ||
| 2,925M | Grinding Media, Inc., 7.375%, 12/15/2023 (a) | 3,180,937 | ||
| 2,050M | H&E Equipment Services, Inc., 5.625%, 9/1/2025 (a) | 2,167,875 | ||
| 1,300M | Park-Ohio Industries, Inc., 6.625%, 4/15/2027 | 1,407,250 | ||
| United Rentals, Inc.: | ||||
| 975M | 4.625%, 10/15/2025 | 989,625 | ||
| 875M | 5.875%, 9/15/2026 | 953,750 | ||
| 1,225M | 5.5%, 5/15/2027 | 1,309,219 | ||
| 2,250M | Wabash National Corp., 5.5%, 10/1/2025 (a) | 2,297,813 | ||
| 2,050M | Zekelman Industries, Inc., 9.875%, 6/15/2023 (a) | 2,316,500 | ||
| 24,329,937 | ||||
| Media-Broadcasting—2.0% | ||||
| Belo Corp.: | ||||
| 725M | 7.75%, 6/1/2027 | 824,687 | ||
| 150M | 7.25%, 9/15/2027 | 169,500 | ||
| 2,225M | LIN Television Corp., 5.875%, 11/15/2022 | 2,330,687 | ||
| Nexstar Broadcasting, Inc.: | ||||
| 1,625M | 6.125%, 2/15/2022 (a) | 1,702,188 | ||
| 1,350M | 5.625%, 8/1/2024 (a) | 1,400,625 | ||
| Sinclair Television Group, Inc.: | ||||
| 4,075M | 5.375%, 4/1/2021 | 4,187,063 | ||
| 900M | 5.125%, 2/15/2027 (a) | 878,625 | ||
| Sirius XM Radio, Inc.: | ||||
| 1,325M | 3.875%, 8/1/2022 (a) | 1,361,703 | ||
| 1,250M | 6%, 7/15/2024 (a) | 1,348,438 | ||
| 100M | 5%, 8/1/2027 (a) | 102,500 | ||
| 14,306,016 | ||||
| Media-Cable TV—9.6% | ||||
| Altice Financing SA: | ||||
| 400M | 6.5%, 1/15/2022 (a) | 417,000 | ||
| 2,525M | 6.625%, 2/15/2023 (a) | 2,682,812 | ||
| 1,150M | 7.5%, 5/15/2026 (a) | 1,267,875 | ||
| 46 |
| Principal | ||||
| Amount | Security | Value | ||
| Media-Cable TV (continued) | ||||
| Altice Finco SA: | ||||
| $ 970M | 8.125%, 1/15/2024 (a) | $ 1,052,450 | ||
| 900M | 7.625%, 2/15/2025 (a) | 952,875 | ||
| Altice U.S. Finance I Corp.: | ||||
| 2,300M | 5.375%, 7/15/2023 (a) | 2,438,000 | ||
| 1,000M | 5.5%, 5/15/2026 (a) | 1,057,190 | ||
| 775M | AMC Networks, Inc., 4.75%, 8/1/2025 | 784,687 | ||
| 1,250M | Block Communications, Inc., 6.875%, 2/15/2025 (a) | 1,362,875 | ||
| 1,625M | Cable One, Inc., 5.75%, 6/15/2022 (a) | 1,702,187 | ||
| CCO Holdings, LLC: | ||||
| 2,950M | 5.125%, 2/15/2023 | 3,053,250 | ||
| 3,675M | 5.875%, 4/1/2024 (a) | 3,909,281 | ||
| 1,350M | 5.125%, 5/1/2027 (a) | 1,371,937 | ||
| 2,250M | 5.875%, 5/1/2027 (a) | 2,362,500 | ||
| 975M | 5%, 2/1/2028 (a) | 976,511 | ||
| Cequel Communications Holdings I, LLC: | ||||
| 3,207M | 6.375%, 9/15/2020 (a) | 3,283,166 | ||
| 1,700M | 7.75%, 7/15/2025 (a) | 1,887,000 | ||
| Clear Channel Worldwide Holdings, Inc.: | ||||
| 200M | 7.625%, 3/15/2020 – Series “A” | 198,000 | ||
| 1,525M | 7.625%, 3/15/2020 – Series “B” | 1,511,656 | ||
| 750M | 6.5%, 11/15/2022 – Series “A” | 773,437 | ||
| 2,375M | 6.5%, 11/15/2022 – Series “B” | 2,458,125 | ||
| CSC Holdings, LLC: | ||||
| 900M | 6.75%, 11/15/2021 | 996,750 | ||
| 4,950M | 10.125%, 1/15/2023 (a) | 5,723,438 | ||
| 1,250M | 6.625%, 10/15/2025 (a) | 1,371,875 | ||
| 1,575M | 10.875%, 10/15/2025 (a) | 1,951,031 | ||
| DISH DBS Corp.: | ||||
| 2,300M | 7.875%, 9/1/2019 | 2,518,500 | ||
| 950M | 5%, 3/15/2023 | 973,156 | ||
| 1,750M | 5.875%, 11/15/2024 | 1,840,781 | ||
| 725M | 7.75%, 7/1/2026 | 834,236 | ||
| 2,725M | Gray Television, Inc., 5.875%, 7/15/2026 (a) | 2,813,562 | ||
| 1,125M | Mediacom Broadband. LLC, 5.5%, 4/15/2021 | 1,151,719 | ||
| 4,005M | Midcontinent Communications & Finance Corp., 6.875%, 8/15/2023 (a) | 4,335,413 | ||
| 2,125M | Netflix, Inc., 5.5%, 2/15/2022 | 2,326,875 | ||
| Numericable Group SA: | ||||
| 1,575M | 6%, 5/15/2022 (a) | 1,647,844 | ||
| 3,225M | 6.25%, 5/15/2024 (a) | 3,417,694 | ||
| 2,375M | Virgin Media Finance, PLC, 6.375%, 4/15/2023 (a) | 2,490,781 | ||
| 69,896,469 | ||||
| 47 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Media-Diversified—1.2% | ||||
| $ 750M | E.W. Scripps Co., 5.125%, 5/15/2025 (a) | $ 766,875 | ||
| 1,700M | Gannett Co., Inc., 5.125%, 7/15/2020 | 1,746,750 | ||
| 625M | Lamar Media Corp., 5.75%, 2/1/2026 | 680,469 | ||
| 500M | LSC Communications, Inc., 8.75%, 10/15/2023 (a) | 516,875 | ||
| 2,100M | Outdoor Americas Capital, LLC, 5.875%, 3/15/2025 | 2,207,625 | ||
| 2,775M | Tribune Media Co., 5.875%, 7/15/2022 | 2,899,875 | ||
| 8,818,469 | ||||
| Metals/Mining—7.8% | ||||
| 3,300M | AK Steel Corp., 7%, 3/15/2027 | 3,378,375 | ||
| 1,550M | Alcoa Nederland Holding BV, 7%, 9/30/2026 (a) | 1,763,125 | ||
| Aleris International, Inc.: | ||||
| 1,840M | 7.875%, 11/1/2020 | 1,849,200 | ||
| 650M | 9.5%, 4/1/2021 (a) | 695,500 | ||
| 1,275M | Alliance Resourse Operating Partners, LP, 7.5%, 5/1/2025 (a) | 1,327,594 | ||
| ArcelorMittal SA: | ||||
| 1,875M | 6.125%, 6/1/2025 | 2,165,625 | ||
| 1,125M | 7.75%, 10/15/2039 | 1,355,625 | ||
| 325M | 7.25%, 3/1/2041 | 386,344 | ||
| 1,175M | Big River Steel, LLC, 7.25%, 9/1/2025 (a) | 1,249,612 | ||
| 2,800M | Cliffs Natural Resources, Inc., 5.75%, 3/1/2025 (a) | 2,698,500 | ||
| Commercial Metals Co.: | ||||
| 1,725M | 4.875%, 5/15/2023 | 1,811,250 | ||
| 1,100M | 5.375%, 7/15/2027 | 1,157,750 | ||
| 1,500M | Constellium NV, 8%, 1/15/2023 (a) | 1,593,750 | ||
| 4,075M | First Quantum Minerals, Ltd., 7.25%, 5/15/2022 (a) | 4,192,156 | ||
| Freeport-McMoRan, Inc.: | ||||
| 1,800M | 3.1%, 3/15/2020 | 1,810,350 | ||
| 1,775M | 4.55%, 11/14/2024 | 1,785,650 | ||
| 1,400M | 5.45%, 3/15/2043 | 1,315,125 | ||
| HudBay Minerals, Inc.: | ||||
| 1,425M | 7.25%, 1/15/2023 (a) | 1,524,750 | ||
| 450M | 7.625%, 1/15/2025 (a) | 489,384 | ||
| 1,250M | Joseph T. Ryerson & Son, Inc., 11%, 5/15/2022 (a) | 1,403,125 | ||
| 3,250M | Natural Resource Partners, LP, 10.5%, 3/15/2022 | 3,453,125 | ||
| Novelis, Inc.: | ||||
| 2,750M | 6.25%, 8/15/2024 (a) | 2,874,300 | ||
| 3,975M | 5.875%, 9/30/2026 (a) | 4,044,563 | ||
| 975M | Peabody Energy Corp., 6.375%, 3/31/2025 (a) | 1,005,469 | ||
| 4,200M | SunCoke Energy Partners, LP, 7.5%, 6/15/2025 (a) | 4,357,500 | ||
| 48 |
| Principal | ||||
| Amount | Security | Value | ||
| Metals/Mining (continued) | ||||
| Teck Resources, Ltd.: | ||||
| $ 850M | 8.5%, 6/1/2024 (a) | $ 977,500 | ||
| 2,150M | 6%, 8/15/2040 | 2,343,500 | ||
| 3,900M | TMS International Corp., 7.25%, 8/15/2025 (a) | 3,997,500 | ||
| 57,006,247 | ||||
| Real Estate—2.2% | ||||
| 1,150M | Communications Sales & Leasing, Inc., 7.125%, 12/15/2024 (a) | 980,375 | ||
| 1,950M | Dupont Fabros Technology, LP, 5.625%, 6/15/2023 | 2,081,040 | ||
| Geo Group, Inc.: | ||||
| 400M | 5.125%, 4/1/2023 | 407,000 | ||
| 1,575M | 6%, 4/15/2026 | 1,663,594 | ||
| 2,875M | Iron Mountain, Inc., 5.75%, 8/15/2024 | 2,979,219 | ||
| 1,350M | Lennar Corp., 4.875%, 12/15/2023 | 1,432,687 | ||
| MPT Operating Partnership, LP: | ||||
| 375M | 6.375%, 3/1/2024 | 406,406 | ||
| 875M | 5.25%, 8/1/2026 | 907,813 | ||
| 1,425M | 5%, 10/15/2027 | 1,464,188 | ||
| 1,100M | Realogy Group/Co-Issuer, 5.25%, 12/1/2021 (a) | 1,146,750 | ||
| 1,500M | Sabra Health Care, LP, 5.125%, 8/15/2026 | 1,541,345 | ||
| 1,325M | Starwood Property Trust, Inc., 5%, 12/15/2021 | 1,386,281 | ||
| 16,396,698 | ||||
| Retail-General Merchandise—2.0% | ||||
| 1,750M | 1011778 B.C. Unlimited Liability Co., 5%, 10/15/2025 (a)(b) | 1,780,450 | ||
| AmeriGas Partners, LP: | ||||
| 775M | 5.625%, 5/20/2024 | 820,531 | ||
| 2,400M | 5.5%, 5/20/2025 | 2,478,000 | ||
| 1,825M | 5.875%, 8/20/2026 | 1,907,125 | ||
| KFC Holding Co., LLC: | ||||
| 1,075M | 5%, 6/1/2024 (a) | 1,135,469 | ||
| 1,975M | 5.25%, 6/1/2026 (a) | 2,095,969 | ||
| 575M | 4.75%, 6/1/2027 (a) | 593,687 | ||
| L Brands, Inc.: | ||||
| 625M | 6.875%, 11/1/2035 | 609,375 | ||
| 3,125M | 6.75%, 7/1/2036 | 3,038,437 | ||
| 14,459,043 | ||||
| 49 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Services—2.4% | ||||
| $ 1,900M | ADT Corp., 3.5%, 7/15/2022 | $ 1,909,500 | ||
| AECOM: | ||||
| 2,025M | 5.875%, 10/15/2024 | 2,253,217 | ||
| 1,475M | 5.125%, 3/15/2027 | 1,528,469 | ||
| 2,300M | APX Group, Inc., 8.75%, 12/1/2020 | 2,377,625 | ||
| 1,475M | Aramark Services, Inc., 5.125%, 1/15/2024 | 1,569,031 | ||
| 1,270M | Cimpress NV, 7%, 4/1/2022 (a) | 1,322,387 | ||
| 2,250M | GW Honos Security Corp., 8.75%, 5/15/2025 (a) | 2,404,687 | ||
| 675M | KAR Auction Services, Inc., 5.125%, 6/1/2025 (a) | 703,687 | ||
| 1,725M | Monitronics International, Inc., 9.125%, 4/1/2020 | 1,543,875 | ||
| 1,700M | Prime Security Services Borrower, LLC, 9.25%, 5/15/2023 (a) | 1,880,302 | ||
| 17,492,780 | ||||
| Telecommunications—4.0% | ||||
| 650M | CenturyLink, Inc., 5.8%, 3/15/2022 | 650,292 | ||
| Frontier Communications Corp.: | ||||
| 1,925M | 6.25%, 9/15/2021 | 1,587,547 | ||
| 525M | 7.125%, 1/15/2023 | 405,562 | ||
| 1,400M | 11%, 9/15/2025 | 1,193,500 | ||
| 1,400M | 9%, 8/15/2031 | 1,095,500 | ||
| GCI, Inc.: | ||||
| 2,623M | 6.75%, 6/1/2021 | 2,691,854 | ||
| 3,125M | 6.875%, 4/15/2025 | 3,375,000 | ||
| 1,575M | Qwest Corp., 7.25%, 9/15/2025 | 1,745,412 | ||
| 2,575M | Sprint Capital Corp., 6.875%, 11/15/2028 | 2,890,438 | ||
| 3,575M | Telecom Italia SpA, 5.303%, 5/30/2024 | 3,901,219 | ||
| 2,550M | Telesat Canada, 8.875%, 11/15/2024 (a) | 2,878,313 | ||
| 2,000M | Wind Acquisition Finance SA, 4.75%, 7/15/2020 (a) | 2,026,880 | ||
| 625M | Windstream Services, LLC, 7.75%, 10/1/2021 | 465,625 | ||
| Zayo Group, LLC: | ||||
| 1,075M | 6.375%, 5/15/2025 | 1,162,484 | ||
| 2,525M | 5.75%, 1/15/2027 (a) | 2,682,813 | ||
| 28,752,439 | ||||
| Transportation—1.4% | ||||
| Avolon TLB Borrower 1 (U.S.), LLC: | ||||
| 600M | 5.25%, 8/15/2022 (a) | 626,250 | ||
| 725M | 5.5%, 2/15/2024 (a) | 763,063 | ||
| 1,000M | BCD Acquisition, Inc., 9.625%, 9/15/2023 (a) | 1,105,000 | ||
| 50 |
| Principal | ||||
| Amount | Security | Value | ||
| Transportation (continued) | ||||
| Fly Leasing, Ltd.: | ||||
| $ 1,675M | 6.75%, 12/15/2020 | $ 1,748,281 | ||
| 925M | 6.375%, 10/15/2021 | 970,094 | ||
| 1,025M | 5.25%, 10/15/2024 (b)(c) | 1,025,000 | ||
| 1,750M | Mobile Mini, Inc., 5.875%, 7/1/2024 | 1,837,500 | ||
| 2,300M | XPO Logistics, Inc., 6.125%, 9/1/2023 (a) | 2,409,250 | ||
| 10,484,438 | ||||
| Utilities—3.7% | ||||
| AES Corp.: | ||||
| 1,325M | 7.375%, 7/1/2021 | 1,520,570 | ||
| 1,225M | 5.5%, 3/15/2024 | 1,281,656 | ||
| 650M | 5.125%, 9/1/2027 | 667,875 | ||
| 1,750M | Avantor, Inc., 9%, 10/1/2025 (a)(b) | 1,792,665 | ||
| Calpine Corp.: | ||||
| 1,750M | 5.375%, 1/15/2023 | 1,710,887 | ||
| 1,550M | 5.75%, 1/15/2025 | 1,470,562 | ||
| 1,625M | 5.25%, 6/1/2026 (a) | 1,625,000 | ||
| 2,550M | Cheniere Energy Partners, LP, 5.25%, 10/1/2025 (a) | 2,613,750 | ||
| Dynegy, Inc.: | ||||
| 2,100M | 7.375%, 11/1/2022 | 2,191,875 | ||
| 1,750M | 8%, 1/15/2025 (a) | 1,820,000 | ||
| 1,351M | FirstLight Hydro Generation Co., 8.812%, 10/15/2026 | 1,411,487 | ||
| 372M | Indiantown Cogeneration Utilities, LP, 9.77%, 12/15/2020 | 400,033 | ||
| 775M | InterGen NV, 7%, 6/30/2023 (a) | 759,500 | ||
| NRG Energy, Inc.: | ||||
| 850M | 7.25%, 5/15/2026 | 915,875 | ||
| 1,525M | 6.625%, 1/15/2027 | 1,605,063 | ||
| 1,350M | NRG Yield Operating, LLC, 5%, 9/15/2026 | 1,410,750 | ||
| 2,539M | NSG Holdings, LLC, 7.75%, 12/15/2025 (a) | 2,761,640 | ||
| 1,150M | Targa Resources Partners, LP, 5.125%, 2/1/2025 | 1,188,813 | ||
| 27,148,001 | ||||
| Waste Management—.5% | ||||
| 2,200M | Covanta Holding Corp., 5.875%, 7/1/2025 | 2,169,750 | ||
| 1,175M | GFL Environmental, Inc., 5.625%, 5/1/2022 (a) | 1,227,875 | ||
| 3,397,625 | ||||
| 51 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Wireless Communications—4.7% | ||||
| $ 1,100M | CB Escrow Corp., 8%, 10/15/2025 (a)(b) | $ 1,111,000 | ||
| Hughes Satellite Systems Corp.: | ||||
| 625M | 5.25%, 8/1/2026 | 652,344 | ||
| 950M | 6.625%, 8/1/2026 | 1,018,875 | ||
| Inmarsat Finance, PLC: | ||||
| 775M | 4.875%, 5/15/2022 (a) | 794,375 | ||
| 1,450M | 6.5%, 10/1/2024 (a) | 1,566,000 | ||
| Intelsat Jackson Holdings SA: | ||||
| 1,025M | 5.5%, 8/1/2023 | 873,812 | ||
| 2,600M | 8%, 2/15/2024 (a) | 2,801,500 | ||
| 1,300M | 9.75%, 7/15/2025 (a) | 1,316,250 | ||
| Level 3 Financing, Inc.: | ||||
| 1,125M | 5.125%, 5/1/2023 | 1,146,797 | ||
| 675M | 5.25%, 3/15/2026 | 693,353 | ||
| 2,775M | SBA Communications Corp., 4.875%, 9/1/2024 | 2,861,719 | ||
| Sprint Communications, Inc.: | ||||
| 600M | 7%, 3/1/2020 (a) | 657,750 | ||
| 3,125M | 7%, 8/15/2020 | 3,422,250 | ||
| 4,350M | 6%, 11/15/2022 | 4,667,637 | ||
| 3,275M | 7.875%, 9/15/2023 | 3,807,188 | ||
| T-Mobile USA, Inc.: | ||||
| 2,475M | 6%, 3/1/2023 | 2,614,219 | ||
| 2,725M | 6.625%, 4/1/2023 | 2,874,930 | ||
| 300M | 6.5%, 1/15/2024 | 320,400 | ||
| 1,075M | 6%, 4/15/2024 | 1,143,531 | ||
| 34,343,930 | ||||
| Total Value of Corporate Bonds (cost $653,953,346) | 677,103,592 | |||
| LOAN PARTICIPATIONS†—5.2% | ||||
| Automotive—.9% | ||||
| 3,491M | Superior Industries International, Inc., 5.7356%, 3/22/2024 | 3,447,360 | ||
| 3,017M | Truck Hero, Inc., 5.3261%, 4/21/2024 | 3,011,780 | ||
| 6,459,140 | ||||
| Energy—.3% | ||||
| 2,225M | Jonah Energy, LLC, 9.75%, 5/12/2021 | 2,225,701 | ||
| Financials—.3% | ||||
| 2,448M | Lightstone Holdco, LLC, 5.735%, 1/30/2024 | 2,441,979 | ||
| 52 |
| Principal | |||||||
| Amount | Security | Value | |||||
| Gaming/Leisure—.5% | |||||||
| $ 3,250M | Dorna Sports SL, 3.5%, 4/12/2024 (b) | $ 3,264,219 | |||||
| Health Care—.2% | |||||||
| 1,426M | ExamWorks Group, Inc., 4.485%, 7/27/2023 (b) | 1,436,319 | |||||
| Information Technology—.8% | |||||||
| 1,900M | DigiCert Holdings, Inc., 5.75%, 9/19/2024 (b) | 1,921,080 | |||||
| 3,500M | Project Leopard Holdings, Inc., 6.8328%, 6/20/2023 | 3,526,985 | |||||
| 5,448,065 | |||||||
| Metals/Mining—.4% | |||||||
| 2,700M | Big River Steel, LLC, 6.3328%, 8/15/2023 | 2,740,500 | |||||
| 528M | Peabody Energy Corp., 4.735%, 2/8/2022 | 531,628 | |||||
| 3,272,128 | |||||||
| Retail-General Merchandise—1.8% | |||||||
| 3,450M | Bass Pro Group, LLC, 6.235%, 11/4/2023 | 3,258,801 | |||||
| 3,341M | Harbor Freight Tools USA, Inc., 4.485%, 8/18/2023 | 3,356,167 | |||||
| 6,450M | Staples, Inc., 5%, 8/14/2024 (b) | 6,429,844 | |||||
| 13,044,812 | |||||||
| Total Value of Loan Participations (cost $37,434,190) | 37,592,363 | ||||||
| PASS-THROUGH CERTIFICATES—.4% | |||||||
| Transportation | |||||||
| 2,989M | American Airlines 13-2 B PTT, 5.60%, 1/15/2022 (3,041,295) (a) | 3,138,402 | |||||
| SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—2.1% | |||||||
| 15,000M | Federal Home Loan Bank, 1.005%, 10/17/2017 (cost $14,993,296) | 14,993,880 | |||||
| Total Value of Investments (cost $709,422,127) | 100.8 | % | 732,828,237 | ||||
| Excess of Liabilities Over Other Assets | (.8 | ) | (5,654,363) | ||||
| Net Assets | 100.0 | % | $727,173,874 | ||||
| (a) | Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4). |
| (b) | A portion or all of the security purchased on a when-issued or delayed delivery basis (see Note 1G). |
| (c) | Securities valued at fair value (see Note 1A) |
| † | Interest rates are determined and reset periodically. The interest rates above are the rates in effect |
| at September 30, 2017. |
| 53 |
Portfolio of Investments (continued)
FUND FOR INCOME
September 30, 2017
| Summary of Abbreviations: | ||
| LLLP | Limited Liability Limited Partnership | |
| PTT | Pass-Through Trust | |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Corporate Bonds | $ | — | $ | 677,103,592 | $ | — | $ | 677,103,592 | ||||
| Loan Participations | — | 37,592,363 | — | 37,592,363 | ||||||||
| Pass-Through Certificates | — | 3,138,402 | — | 3,138,402 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 14,993,880 | — | 14,993,880 | ||||||||
| Total Investments in Securities* | $ | — | $ | 732,828,237 | $ | — | $ | 732,828,237 |
| * | The Portfolio of Investments provides information on the industry categorization of corporate bonds, |
| loan participations and pass-through certificates. | |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 54 |
The dollar weighted average of credit ratings of all bonds held by the Fund during the fiscal year ended September 30, 2017, computed on a monthly basis, are set forth below. This information reflects the average composition of the Fund’s assets during the 2017 fiscal year and is not necessarily representative of the Fund as of the end of its 2017 fiscal year, the current fiscal year or at any other time in the future.
| Comparable Quality of | ||
| Rated by | Unrated Securities to | |
| Moody’s | Bonds Rated by Moody’s | |
| Aaa | 0.76% | 0.00% |
| Baa1 | 0.02 | 0.00 |
| Baa2 | 0.35 | 0.00 |
| Baa3 | 0.92 | 0.00 |
| Ba1 | 7.24 | 0.00 |
| Ba2 | 10.39 | 0.00 |
| Ba3 | 19.63 | 0.00 |
| BBB- | 0.00 | 0.58 |
| BB | 0.00 | 0.27 |
| BB- | 0.00 | 0.15 |
| B+ | 0.00 | 0.15 |
| B | 0.00 | 0.25 |
| B1 | 21.05 | 0.00 |
| B2 | 12.85 | 0.00 |
| B3 | 18.30 | 0.00 |
| Caa1 | 5.70 | 0.00 |
| Caa2 | 1.39 | 0.00 |
| Caa | 0.96 | 0.00 |
| See notes to financial statements | 55 |
Portfolio Manager’s Letter
GOVERNMENT FUND
Dear Investor:
This is the annual report for the First Investors Government Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was –1.92% for Class A shares, –2.67% for Class B shares, –1.61% for Advisor Class shares, –1.18% for Institutional Class shares, including dividends of 20.1 cents per share on Class A shares, 11.0 cents per share on Class B shares, 23.3 cents per share on Advisor Class shares and 25.0 cents per share on Institutional Class shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018. The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July
| 56 |
and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Bond Market
The U.S. fixed income markets had mixed performance for the past 12 months. The broad U.S. bond market (measured by the BofA ML U.S. Broad Market Index) was flat at 0.01% during the review period.
In the fourth quarter of 2016, fixed income markets, especially Treasuries, experienced one of their worst sell-offs. This sell-off was triggered by a combination of a rising interest rate environment and Donald Trump’s unexpected victory. Fixed income had positive performance for most of 2017 while struggling again in September on renewed expectations of rising rates and pro-growth policies from the White House. Overall, Treasuries (measured by the BofA ML Treasury Index) were the weakest domestic fixed income market for the past 12 months, down 1.74%. Longer-dated Treasuries with 15+ years maturity underperformed with a loss of 6.33% while shorter-dated Treasuries were slightly positive.
Yields rose across whole yield curve. The sharpest rise happened in the fourth quarter of 2016, while longer-term rates fell for most of 2017 before rising again in September. There is an inverse relationship between bond prices and yields. The 2-year U.S. Treasury yield, which is very sensitive to changes in Fed policy, rose by 72 basis points to 1.49%. The 10-year Treasury yield, which is controlled by other factors such as GDP, inflation and investor sentiment, rose 74 basis points to 2.33%.
Credit sensitive fixed income benefited from a narrowing in credit spreads. With record issuance and record demand, investment grade corporate bonds (measured by the BofA ML Corporate Master Index) were positive at 2.26% for the review period. The demand was boosted by overseas buyers in their search for yields that were higher than those available locally. BBB-rated bonds continued to be the strongest performing sector in terms of credit quality among investment grade corporate bonds.
The high yield bond market (measured by the BofA ML U.S. Cash Pay HY Constrained Index) was the strongest domestic fixed income market for the period, returning 9.03%. Leveraged loans (measured by the Credit Suisse Leveraged Loan Index) were also strong with a return of 5.36%.
| 57 |
Portfolio Manager’s Letter (continued)
GOVERNMENT FUND
Municipal bonds (measured by the BofA ML Municipal Master Index) recouped all losses from the fourth quarter sell-off and returned 0.95%. New muni issuance is still below expectations for the year while demand has remained steady.
Most sovereign bond markets, including the Eurozone markets, UK, Canada and Japan, had negative performance as yields in those countries rose. The majority of these losses occurred in the fourth quarter of 2016, sparked by investor concerns that central banks are preparing to gradually reduce monetary stimulus and from Trump’s victory. The appreciating dollar hurt their U.S. dollar denominated returns even further during the fourth quarter of 2016. Non-U.S. sovereign bonds (measured by the Citi World Government ex U.S. Bond Index) lost 3.14% for the past 12 months, recovering a large portion of its 10.84% loss from the fourth quarter of 2016.
Emerging market debt (measured by the BofA ML Global Emerging Markets Sovereign Index) held up much better, returning 6.64%, benefiting from improving growth within emerging markets.
The Fund
The Fund generally invests in agency MBS, agency CMBS, Agencies and Treasuries. The majority of the Fund’s assets were invested in agency MBS.
The Fund underperformed its benchmark, the Citigroup Government and Mortgage Index, during the period under review. The primary factor that contributed to the Fund’s underperformance was the Fund’s overweight in 10-year maturities relative to the Index. The first half of the review period experienced higher yields, with 10-year yields significantly increasing. In addition, the Fund added exposure to Treasury Inflation Protected Securities (“TIPS”) during the second half of the period under review. TIPS underperformed during the second half of the review period, as falling oil prices reduced the risk of a continued uptick in inflation.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 58 |
Fund Expenses (unaudited)
GOVERNMENT FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.06% | |||
| Actual | $1,000.00 | $ 972.69 | $5.24 | |
| Hypothetical** | $1,000.00 | $1,019.76 | $5.37 | |
| Class B Shares | 1.93% | |||
| Actual | $1,000.00 | $ 973.29 | $9.55 | |
| Hypothetical** | $1,000.00 | $1,015.39 | $9.75 | |
| Advisor Class Shares | 0.83% | |||
| Actual | $1,000.00 | $ 983.88 | $4.13 | |
| Hypothetical** | $1,000.00 | $1,020.91 | $4.20 | |
| Institutional Class Shares | 0.62% | |||
| Actual | $1,000.00 | $ 988.19 | $3.09 | |
| Hypothetical** | $1,000.00 | $1,021.96 | $3.14 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY SECTOR
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total value of investments. |
| 59 |
Cumulative Performance Information (unaudited)
GOVERNMENT FUND
Comparison of change in value of $10,000 investment in the First Investors Government Fund (Class A shares) and the Citigroup U.S. Government/Mortgage Index.
The graph compares a $10,000 investment in the First Investors Government Fund (Class A shares) beginning 9/30/07 with a theoretical investment in the Citigroup U.S. Government/Mortgage Index (the “Index”). The Index is an unmanaged index that is a combination of the Citigroup U.S. Government Index and the Citigroup Mortgage Index. The Citigroup U.S. Government Index tracks the performance of the U.S. Treasury and U.S. Government-sponsored indices within the Citigroup U.S. Broad Investment Grade Bond Index. The Citigroup Mortgage Index tracks the performance of the
| 60 |
mortgage component of the Citigroup U.S. Broad Investment Grade Bond Index, which is comprised of 30- and 15-year GNMA, FNMA and FHLMC pass-throughs and FNMA and FHLMC balloon mortgages. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the current maximum sales charge of 4% and assume the current sales charge of 4% was in effect at the beginning of the stated periods (prior to 6/12/17, the maximum sales charge was 5.75%). The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (5.94%), (0.62%) and 2.39%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 0.93%. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (6.65%), (1.00%) and 2.19%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 0.02%. The Advisor Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been (1.74%) and 0.54%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 1.20%. The Institutional Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been (1.30%) and 0.83%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 1.18%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Citigroup and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
***The S.E.C. 30-Day Yield shown is for September 2017.
† The Index return is for ten years. The Index return since inception of the Advisor Class shares and Institutional Class shares is 1.74%.
| 61 |
Portfolio of Investments
GOVERNMENT FUND
September 30, 2017
| Principal | |||
| Amount | Security | Value | |
| RESIDENTIAL MORTGAGE-BACKED | |||
| SECURITIES—42.5% | |||
| Fannie Mae—29.5% | |||
| $15,897M | 3%, 12/1/2028 – 6/1/2046 | $ 16,247,858 | |
| 26,135M | 3.5%, 4/1/2033 – 4/1/2046 | 27,102,789 | |
| 23,932M | 4%, 8/1/2026 – 4/1/2047 | 25,383,176 | |
| 5,663M | 4.5%, 11/1/2040 – 1/1/2042 | 6,171,811 | |
| 1,836M | 5%, 8/1/2039 – 11/1/2039 | 2,017,386 | |
| 1,709M | 5.5%, 7/1/2033 – 10/1/2039 | 1,913,365 | |
| 78,836,385 | |||
| Freddie Mac—4.6% | |||
| 271M | 3%, 6/1/2021 | 279,105 | |
| 4,670M | 3.5%, 9/1/2032 – 2/1/2046 | 4,846,436 | |
| 5,539M | 4%, 6/1/2047 | 5,836,962 | |
| 1,108M | 5%, 8/1/2039 | 1,232,868 | |
| 12,195,371 | |||
| Government National Mortgage Association I | |||
| Program—8.4% | |||
| 599M | 4%, 6/15/2042 | 652,497 | |
| 6,679M | 4.5%, 9/15/2033 – 6/15/2040 | 7,260,737 | |
| 6,805M | 5%, 6/15/2033 – 4/15/2040 | 7,573,189 | |
| 2,453M | 5.5%, 3/15/2033 – 10/15/2039 | 2,797,177 | |
| 2,456M | 6%, 3/15/2033 – 11/15/2039 | 2,835,495 | |
| 1,368M | 7%, 6/15/2023 – 4/15/2034 | 1,467,967 | |
| 22,587,062 | |||
| Total Value of Residential Mortgage-Backed Securities (cost $112,869,509) | 113,618,818 | ||
| COMMERCIAL MORTGAGE-BACKED | |||
| SECURITIES—19.8% | |||
| Fannie Mae—12.7% | |||
| 2,737M | 2.27%, 1/1/2023 | 2,742,940 | |
| 5,500M | 2.369%, 7/25/2026 | 5,338,174 | |
| 4,800M | 2.4994%, 9/25/2026 | 4,701,144 | |
| 1,300M | 2.96%, 11/1/2018 | 1,313,893 | |
| 5,167M | 2.995%, 11/1/2022 | 5,323,723 | |
| 6,900M | 3.34%, 2/1/2027 | 7,250,803 | |
| 2,700M | 3.4%, 6/1/2031 | 2,750,450 | |
| 4,500M | 3.84%, 5/1/2018 | 4,515,314 | |
| 33,936,441 | |||
| 62 |
| Principal | ||||
| Amount | Security | Value | ||
| Federal Home Loan Mortgage Corporation—7.1% | ||||
| Multi-Family Structured Pass Throughs: | ||||
| $ 3,700M | 1.6072%, 5/25/2024 † | $ 3,709,340 | ||
| 4,500M | 1.6717%, 8/25/2027 † | 4,507,034 | ||
| 1,830M | 2.454%, 8/25/2023 | 1,837,142 | ||
| 4,330M | 2.849%, 3/25/2026 | 4,335,352 | ||
| 4,700M | 3.08%, 1/25/2031 | 4,726,151 | ||
| 19,115,019 | ||||
| Total Value of Commercial Mortgage-Backed Securities (cost $54,321,703) | 53,051,460 | |||
| U.S. GOVERNMENT OBLIGATIONS—14.5% | ||||
| U.S. Treasury Bonds: | ||||
| 2,350M | 2.75%, 8/15/2047 | 2,299,374 | ||
| 4,300M | 3%, 5/15/2047 | 4,425,556 | ||
| 1,500M | 4.5%, 2/15/2036 | 1,929,961 | ||
| U.S. Treasury Notes: | ||||
| 2,000M | 1.125%, 8/31/2021 | 1,949,648 | ||
| 13,230M | 1.375%, 10/31/2020 | 13,122,242 | ||
| 5,100M | 1.5%, 3/31/2023 | 4,965,727 | ||
| 5,000M | 1.75%, 5/31/2022 | 4,968,065 | ||
| 2,560M | 1.875%, 8/31/2022 | 2,553,851 | ||
| 2,700M | 1.875%, 8/31/2024 | 2,652,275 | ||
| Total Value of U.S. Government Obligations (cost $39,112,986) | 38,866,699 | |||
| U.S. GOVERNMENT AGENCY | ||||
| OBLIGATIONS—6.7% | ||||
| Fannie Mae: | ||||
| 1,700M | 1.375%, 2/26/2021 | 1,679,903 | ||
| 5,000M | 1.5%, 2/28/2020 | 4,989,875 | ||
| Freddie Mac: | ||||
| 4,300M | 1.375%, 5/28/2019 | 4,293,885 | ||
| 5,000M | 3.75%, 3/27/2019 | 5,166,165 | ||
| 1,800M | Federal Farm Credit Bank, 3%, 9/13/2029 | 1,785,679 | ||
| Total Value of U.S. Government Agency Obligations (cost $18,279,308) | 17,915,507 | |||
| 63 |
Portfolio of Investments (continued)
GOVERNMENT FUND
September 30, 2017
| Principal | |||||||
| Amount | Security | Value | |||||
| COVERED BONDS—5.8% | |||||||
| Financial Services | |||||||
| $ 4,750M | Canadian Imperial Bank of Commerce, 2.35%, 7/27/2022 (a) | $ 4,739,203 | |||||
| 5,000M | Royal Bank of Canada, 2.3%, 3/22/2021 | 5,019,655 | |||||
| 5,700M | Toronto-Dominion Bank, 2.5%, 1/18/2022 (a) | 5,738,908 | |||||
| Total Value of Covered Bonds (cost $15,456,502) | 15,497,766 | ||||||
| TAXABLE MUNICIPAL BONDS—5.6% | |||||||
| 4,700M | New York City, NY Trans. Fin. Auth. Rev., 3.21%, 5/1/2029 | 4,649,710 | |||||
| 4,500M | New York State Urban Dev. Corp. Rev., 3.27%, 3/15/2027 | 4,553,100 | |||||
| 1,900M | Texas State Wtr. Dev. Brd. Rev., 3.7%, 10/15/2047 (b) | 1,900,323 | |||||
| 3,895M | University of North Carolina at Chapel Hill Rev., 3.326%, 12/1/2038 | 3,819,437 | |||||
| Total Value of Taxable Municipal Bonds (cost $15,015,475) | 14,922,570 | ||||||
| COLLATERALIZED MORTGAGE | |||||||
| OBLIGATIONS—2.2% | |||||||
| 5,539M | Fannie Mae, 4%, 2/25/2025 (cost $5,849,301) | 5,836,469 | |||||
| Total Value of Investments (cost $260,904,784) | 97.1 | % | 259,709,289 | ||||
| Other Assets, Less Liabilities | 2.9 | 7,743,697 | |||||
| Net Assets | 100.0 | % | $267,452,986 | ||||
| (a) | Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4). |
| (b) | A portion or all of the security purchased on a when-issued or delayed delivery basis (see Note 1G). |
| † | Interest rates are determined and reset periodically. The interest rates above are the rates in effect |
| at September 30, 2017. |
| 64 |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Residential Mortgage-Backed | ||||||||||||
| Securities | $ | — | $ | 113,618,818 | $ | — | $ | 113,618,818 | ||||
| Commercial Mortgage-Backed | ||||||||||||
| Securities | — | 53,051,460 | — | 53,051,460 | ||||||||
| U.S. Government Obligations | — | 38,866,699 | — | 38,866,699 | ||||||||
| U.S. Government Agency | ||||||||||||
| Obligations | — | 17,915,507 | — | 17,915,507 | ||||||||
| Corporate Bonds | — | 15,497,766 | — | 15,497,766 | ||||||||
| Taxable Municipal Bonds | — | 14,922,570 | — | 14,922,570 | ||||||||
| Collateralized Mortgage | ||||||||||||
| Obligations | — | 5,836,469 | — | 5,836,469 | ||||||||
| Total Investments in Securities | $ | — | $ | 259,709,289 | $ | — | $ | 259,709,289 |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| See notes to financial statements | 65 |
Portfolio Manager’s Letter
GOVERNMENT CASH MANAGEMENT FUND
Dear Investor:
This is the annual report for the First Investors Government Cash Management Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 0.08% for Class A shares, 0.00% for Class B shares and 0.07% for Institutional shares, including dividends of 0.08 cents per share for Class A shares, none for Class B shares and 0.07 cents per share for Institutional Class shares. The Fund maintained a $1.00 net asset value per share for each class of shares throughout the year.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018. The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
| 66 |
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Fund
Short-term interest rates have risen by more than 100 basis points (1%) over the last twenty-two months since the Fed exited its zero interest rate policy. The Fed has maneuvered through the onset of this cycle in a very modest and measured pace, raising its benchmark short-term interest rate only four times, 25 basis points (.25%) each time. Historically, the Fed has raised short-term interest rates in an effort to reduce inflationary pressures in the economy. The rate of increases during this cycle has been slower than many past tightening cycles because inflation has remained stubbornly below 2%, the Fed’s longer-run objective. However, the economy continues to grow at a moderate pace and unemployment remains low, registering below 5% since May 2016. Given this economic backdrop and despite slower-than-desired inflation, the Fed is projected to continue to raise rates at a measured pace through the middle of 2019.
Regulatory reforms have caused structural changes in the money markets, as many money market funds, including yours, were driven to invest 100% of their investors’ assets into U.S. Treasury and government securities. Although these reform-driven-changes have likely suppressed returns for those who operate in these low-risk products, these reforms have also undeniably reduced certain types of risks to the investor. The Fund also maintained a weighted-average maturity of fewer than 60 days during the period in order to comply with current SEC rules designed to limit interest rate risk. Foresters Investment Management Company (“FIMCO”) continued to waive certain expenses during the period.
FIMCO expects that the yield to shareholders may continue to increase in the near term. However, the yield is likely to remain low, reflecting the projected interest rate environment.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 67 |
Fund Expenses (unaudited)
GOVERNMENT CASH MANAGEMENT FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 0.40% | |||
| Actual | $1,000.00 | $1,000.00 | $2.01 | |
| Hypothetical** | $1,000.00 | $1,023.06 | $2.03 | |
| Class B Shares | 0.40% | |||
| Actual | $1,000.00 | $1,000.00 | $2.01 | |
| Hypothetical** | $1,000.00 | $1,023.06 | $2.03 | |
| Institutional Class Shares | 0.40% | |||
| Actual | $1,000.00 | $1,000.00 | $2.01 | |
| Hypothetical** | $1,000.00 | $1,023.06 | $2.03 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived and/or assumed. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY SECTOR
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 68 |
Portfolio of Investments (continued)
GOVERNMENT CASH MANAGEMENT FUND
September 30, 2017
| Principal | Interest | ||||||
| Amount | Security | Rate | * | Value | |||
| U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—47.5% | |||||||
| Fannie Mae: | |||||||
| $ 8,000M | 10/23/2017 | 0.95 | % | $ 7,995,354 | |||
| 7,000M | 11/8/2017 | 1.03 | 6,992,416 | ||||
| 5,000M | 12/27/2017 | 1.02 | 4,987,669 | ||||
| Federal Home Loan Bank: | |||||||
| 6,000M | 11/3/2017 | 1.06 | 5,994,160 | ||||
| 4,000M | 11/17/2017 | 1.03 | 3,994,617 | ||||
| 9,000M | 11/21/2017 | 1.01 | 8,987,175 | ||||
| 4,500M | 12/6/2017 | 1.03 | 4,491,495 | ||||
| 5,000M | 12/8/2017 | 1.04 | 4,990,216 | ||||
| 6,000M | 12/11/2017 | 1.04 | 5,987,684 | ||||
| 2,140M | 12/20/2017 | 1.05 | 2,135,029 | ||||
| 5,000M | 12/20/2017 | 1.06 | 4,988,262 | ||||
| Total Value of U.S. Government Agency Obligations (cost $61,544,077) | 61,544,077 | ||||||
| VARIABLE AND FLOATING RATE NOTES—16.0% | |||||||
| Federal Home Loan Bank: | |||||||
| 5,000M | 10/20/2017 | 0.93 | 5,000,000 | ||||
| 10,800M | 1/26/2018 | 1.04 | 10,799,459 | ||||
| 5,000M | 2/26/2018 | 1.16 | 5,000,776 | ||||
| Total Value of Variable and Floating Rate Notes (cost $20,800,235) | 20,800,235 | ||||||
| SHORT-TERM U.S. GOVERNMENT | |||||||
| OBLIGATIONS—36.2% | |||||||
| U.S. Treasury Bills: | |||||||
| 5,000M | 10/12/2017 | 0.87 | 4,998,675 | ||||
| 6,000M | 10/19/2017 | 0.93 | 5,997,209 | ||||
| 4,000M | 11/9/2017 | 1.02 | 3,995,590 | ||||
| 6,000M | 11/9/2017 | 1.04 | 5,993,257 | ||||
| 11,000M | 11/16/2017 | 0.95 | 10,986,620 | ||||
| 5,000M | 11/30/2017 | 1.01 | 4,991,542 | ||||
| 10,000M | 12/14/2017 | 1.02 | 9,978,982 | ||||
| Total Value of Short-Term U.S. Government Obligations (cost $46,941,875) | 46,941,875 | ||||||
| Total Value of Investments (cost $129,286,187)** | 99.7 | % | 129,286,187 | ||||
| Other Assets, Less Liabilities | .3 | 348,501 | |||||
| Net Assets | 100.0 | % | $129,634,688 | ||||
| 69 |
Portfolio of Investments (continued)
GOVERNMENT CASH MANAGEMENT FUND
September 30, 2017
| * | The interest rates shown are the effective rates at the time of purchase by the Fund. The inter- |
| est rates shown on floating rate notes are adjusted periodically; the rates shown are the rates in | |
| effect at September 30, 2017. | |
| ** | Aggregate cost for federal income tax purposes is the same. |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| U.S. Government Agency | ||||||||||||
| Obligations | $ | — | $ | 61,544,077 | $ | — | $ | 61,544,077 | ||||
| Variable and Floating Rate Notes: | ||||||||||||
| U.S. Government Agency | ||||||||||||
| Obligations | — | 20,800,235 | — | 20,800,235 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Obligations | — | 46,941,875 | — | 46,941,875 | ||||||||
| Total Investments in Securities | $ | — | $ | 129,286,187 | $ | — | $ | 129,286,187 |
| There were no transfers into or from Level 1 or Level 2 by the Fund for the year ended September 30, |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 70 | See notes to financial statements |
Portfolio Managers’ Letter
INTERNATIONAL OPPORTUNITIES BOND FUND
Dear Investor:
This is the annual report for the First Investors International Opportunities Bond Fund for the year ended September 30, 2017. During the period the Fund’s return on a net asset value basis was 4.70% for Class A shares, 5.07% for Advisor class shares and 5.27% for Institutional class shares, including dividends of 15.3 cents per share on Class A shares, 15.9 cents per share for Advisor class shares and 18.9 cents per share for Institutional class shares.
The Fund
In the fourth quarter of 2016, a major sell-off in global fixed income markets unfolded in response to the expected pro-growth agenda of the newly elected Trump administration and evidence of stronger growth in developed countries. Although the Fund had only minimal U.S. dollar exposure, the resultant surge in the U.S. dollar had a significant impact on foreign exchange markets and weighed on results at the onset of the period under review. Dollar strength was indiscriminant at the end of last year, appreciating against most developed- and emerging-market currencies. However, for the remainder of the period, global conditions rebounded into a relatively strong and broad synchronized expansion accompanied by benign inflation, upticks in manufacturing and exports, and a recovery in commodity prices. Dollar stability and better global growth were ideal for emerging bond markets and their currencies. The Fund’s tilt toward these markets explains the favorable performance for the period under review.
In a reversal from the first three months, one of the major alpha drivers for the remainder of the period was broad weakness in the U.S. dollar. The Fund was well positioned for this trend, and currency positions were the greatest contributors to both absolute and relative performance, led by unhedged exposure to the Brazilian real, Mexican peso, and Polish zloty. The peso bottomed around the U.S. inauguration, after which it rallied steadily. Similarly, the real and zloty were helped by the improving backdrop for global growth and emerging economies. A lack of exposure to Japanese government bonds and the yen was also favorable to results for the period.
The Fund maintained a significant underweight to the euro which proved the largest detractor from performance. The euro rallied on positive economic data, European Central Bank rhetoric, and optimism created by signs of a new alliance between French President Macron and German Chancellor Merkel. The Fund expressed an alternative, constructive view of Europe by being long on a basket of currencies, which included peripheral European and Scandinavian currencies, and the British pound. Within this basket, the Norwegian krone was particularly responsive to gains in oil prices, the Swedish krona advanced after inflation drew closer to target, and pound sterling,
| 71 |
Portfolio Managers’ Letter (continued)
INTERNATIONAL OPPORTUNITIES BOND FUND
which fell precipitously in the wake of the Brexit vote, surged against strong economic data. Other developed market currencies contributed favorably to returns against the improved economic backdrop and stronger commodity prices, including the Canadian dollar, which hit a two-year high against the U.S. dollar, and the Aussie dollar.
Overweight exposures to medium- and long-duration bonds in higher-yielding, commodity-producing emerging markets, particularly Brazil and Indonesia, also contributed to performance. In both countries, bonds rallied due to synchronized global growth, a weaker U.S. dollar, stabilizing commodity prices, and robust export demand, while needed economic reforms provided further impetus. Overweight exposure to shorter-duration Portuguese government bonds benefited from stronger domestic growth and employment, and a shrinking budget deficit. Southern Europe emerged as a major contributor to growth, and Portuguese bonds received an added boost after the country’s credit rating was upgraded during the period under review.
Looking ahead, our economic view lends itself to longer-duration bonds in higher-yielding, commodity-producing emerging markets like Brazil, South Africa, and Indonesia. In emerging markets, real yields are high and inflation is falling, which is in contrast to the negative real yields in the developed market. Our research validates these markets from a valuation viewpoint and based on our macroeconomic outlook for gradual normalization, a steady-to-weaker U.S. dollar, stable, low inflation, and self-sustaining growth—conditions that are ideal for many fixed income markets in the developing world. Our view is one of a gradual synchronized global economic recovery led by growth that is relatively faster in the rest of the world. We feel the Fund is well positioned if the business cycle normalizes slowly and sustainable global growth continues, backed by ongoing interest rate convergence and dollar weakness. Similar to business cycles of the past, rates rising initially in tandem with increasing economic prosperity will not be an impediment, in our view, but a necessary condition for the business cycle.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 72 |
Fund Expenses (unaudited)
INTERNATIONAL OPPORTUNITIES BOND FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.40% | |||
| Actual | $1,000.00 | $1,030.41 | $7.13 | |
| Hypothetical** | $1,000.00 | $1,018.05 | $7.08 | |
| Advisor Class Shares | 1.08% | |||
| Actual | $1,000.00 | $1,050.69 | $5.55 | |
| Hypothetical** | $1,000.00 | $1,019.66 | $5.47 | |
| Institutional Class Shares | 0.94% | |||
| Actual | $1,000.00 | $1,052.65 | $4.84 | |
| Hypothetical** | $1,000.00 | $1,020.36 | $4.76 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived and/or assumed. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY SECTOR
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total value of investments. |
| 73 |
Cumulative Performance Information (unaudited)
INTERNATIONAL OPPORTUNITIES BOND FUND
Comparison of change in value of $10,000 investment in the First Investors International Opportunities Bond Fund (Class A shares) and the Citigroup World Government Bond ex-U.S. Index (Unhedged).
The graph compares a $10,000 investment in the First Investors International Opportunities Bond Fund (Class A shares) beginning 8/20/12 (commencement of operations) with a theoretical investment in the Citigroup World Government Bond ex-U.S. Index (Unhedged) (the “Index”). The Index encompasses an all-inclusive universe of institutionally traded bonds, including all fixed-rate bonds with remaining maturities of one year or longer with amounts outstanding of at least the equivalent of $25 million. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the
| 74 |
graph and the accompanying table it is assumed that all dividends and distributions were reinvested. Advisor Class shares and Institutional Class shares performance will be greater than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the current maximum sales charge of 4% and assume the current sales charge of 4% was in effect at the beginning of the stated periods (prior to 6/12/17, the maximum sales charge was 5.75%). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for Five Years and Since Inception would have been (0.10%) and 0.37%, respectively. The Advisor Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been (0.05%). Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Citigroup and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Class A shares are for the period beginning 8/17/12 (commencement of operations). The returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
***The S.E.C. 30-Day Yield shown is for September 2017.
† The Index return is since the inception of Class A shares. The Index return since inception of the Advisor Class and Institutional Class shares is 0.20%.
| 75 |
Portfolio of Investments (continued)
INTERNATIONAL OPPORTUNITIES BOND FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| SOVEREIGN BONDS—60.2% | ||||
| Mexico—13.0% | ||||
| United Mexican States: | ||||
| 288M | MXN | 7.75%, 11/23/2034 | $ 1,679,984 | |
| 1,180M | MXN | 7.75%, 11/13/2042 | 6,871,021 | |
| 724M | MXN | 8.5%, 5/31/2029 | 4,468,324 | |
| 760M | MXN | 8.5%, 11/18/2038 | 4,757,491 | |
| 17,776,820 | ||||
| Poland—7.7% | ||||
| Republic of Poland: | ||||
| 4,985M | PLN | 2.5%, 7/25/2026 | 1,285,868 | |
| 3,675M | PLN | 3.25%, 7/25/2019 | 1,035,526 | |
| 19,495M | PLN | 3.25%, 7/25/2025 | 5,377,553 | |
| 9,720M | PLN | 4%, 10/25/2023 | 2,822,902 | |
| 10,521,849 | ||||
| Malaysia—7.5% | ||||
| Federation of Malaysia: | ||||
| 14,190M | MYR | 3.48%, 3/15/2023 | 3,314,290 | |
| 1,750M | MYR | 3.62%, 11/30/2021 | 414,639 | |
| 7,020M | MYR | 3.659%, 10/15/2020 | 1,674,991 | |
| 5,045M | MYR | 3.882%, 3/10/2022 | 1,209,211 | |
| 5,330M | MYR | 3.899%, 11/16/2027 | 1,258,481 | |
| 890M | MYR | 3.9%, 11/30/2026 | 209,731 | |
| 2,405M | MYR | 3.955%, 9/15/2025 | 569,011 | |
| 6,540M | MYR | 4.048%, 9/30/2021 | 1,575,950 | |
| 10,226,304 | ||||
| Australia—5.6% | ||||
| 3,765M | AUD | New South Wales Treasury Corp., 5%, 8/20/2024 | 3,358,651 | |
| 3,700M | AUD | Queensland Treasury Corp., 4%, 6/21/2019 (b) | 2,998,528 | |
| 1,490M | AUD | Western Australia Treasury Corp., 7%, 10/15/2019 | 1,281,347 | |
| 7,638,526 | ||||
| 76 |
| Principal | ||||
| Amount | Security | Value | ||
| Brazil—5.1% | ||||
| Nota Do Tesouro Nacional: | ||||
| 3M | BRL | 10%, 1/1/2025 | $ 1,068,563 | |
| 18M | BRL | 10%, 1/1/2027 (c) | 5,881,416 | |
| 6,949,979 | ||||
| Portugal—4.4% | ||||
| Obrigacoes Do Tesouro: | ||||
| 1,940M | EUR | 2.875%, 10/15/2025 | 2,444,088 | |
| 2,750M | EUR | 4.10%, 4/15/2037 | 3,570,596 | |
| 6,014,684 | ||||
| United Kingdom—4.4% | ||||
| 4,430M | GBP | United Kingdom Gilt, 1.25%, 7/22/2018 | 5,977,470 | |
| Indonesia—4.1% | ||||
| Republic of Indonesia: | ||||
| 15,300,000M | IDR | 9%, 3/15/2029 | 1,336,445 | |
| 52,000,000M | IDR | 8.375%, 3/15/2034 | 4,259,336 | |
| 5,595,781 | ||||
| South Africa—3.8% | ||||
| Republic of South Africa: | ||||
| 46,785M | ZAR | 6.5%, 2/28/2041 | 2,452,811 | |
| 4,745M | ZAR | 6.75%, 3/31/2021 | 342,642 | |
| 35,875M | ZAR | 8.75%, 2/28/2048 (c) | 2,399,687 | |
| 5,195,140 | ||||
| Peru—2.0% | ||||
| 8,570M | PEN | Bonos De Tesoreria, 6.15%, 8/12/2032 (b) | 2,777,883 | |
| Spain—1.4% | ||||
| 1,090M | EUR | Bonos Y Obligaciones Del Estado, 5.15%, 10/31/2044 | 1,872,567 | |
| Turkey—1.2% | ||||
| 6,140M | TRY | Republic of Turkey, 10.6%, 2/11/2026 | 1,718,121 | |
| Total Value of Sovereign Bonds (cost $89,347,551) | 82,265,124 | |||
| 77 |
Portfolio of Investments (continued)
INTERNATIONAL OPPORTUNITIES BOND FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| CORPORATE BONDS—14.5% | ||||
| United States—12.1% | ||||
| Apple, Inc.: | ||||
| $ 235M | USD | 4.5%, 2/23/2036 | $ 264,925 | |
| 1,815M | USD | 4.65%, 2/23/2046 | 2,061,433 | |
| 1,650M | USD | Citigroup, Inc., 2.0941%, 1/10/2020 (a) | 1,662,837 | |
| 2,055M | USD | Ford Motor Credit Co., LLC, 2.3041%, 1/9/2020 (a) | 2,072,772 | |
| 2,505M | USD | General Motors Financial Co., Inc., 2.2335%, 4/13/2020 (a) | 2,519,083 | |
| 1,505M | USD | HP Enterprise Co., 6.35%, 10/15/2045 | 1,600,467 | |
| 735M | USD | JP Morgan Chase Bank NA, 1.7761%, 9/21/2018 (a) | 736,985 | |
| 1,410M | USD | Metropolitan Life Global Funding I, 1.5439%, 9/19/2019 (a)(b) | 1,411,452 | |
| 2,410M | USD | NBCUniversal Enterprise, Inc., 1.6986%, 4/1/2021 (a)(b) | 2,417,008 | |
| 1,760M | USD | Wells Fargo & Co., 2.3389%, 7/26/2021 (a) | 1,795,888 | |
| 16,542,850 | ||||
| Australia—2.1% | ||||
| 1,395M | USD | Macquarie Bank, Ltd., 1.6856%, 4/4/2019 (a)(b)(c) | 1,395,200 | |
| 1,500M | USD | National Australia Bank, Ltd., 1.8247%, 5/22/2020 (a)(b) | 1,506,977 | |
| 2,902,177 | ||||
| United Kingdom—.3% | ||||
| 380M | USD | BP Capital Markets, PLC, 3.506%, 3/17/2025 | 392,596 | |
| Total Value of Corporate Bonds (cost $19,430,058) | 19,837,623 | |||
| U.S. GOVERNMENT OBLIGATIONS—14.0% | ||||
| United States | ||||
| U.S. Treasury Notes: | ||||
| 6,840M | USD | 1.1128%, 7/31/2019 (a) | 6,841,553 | |
| 12,240M | USD | 1.1228%, 4/30/2019 (a) | 12,248,935 | |
| Total Value of U.S. Government Obligations (cost $19,082,893) | 19,090,488 | |||
| SUPRANATIONALS—4.7% | ||||
| India—3.9% | ||||
| 345,000M | INR | International Finance Corp., 6.45%, 10/30/2018 | 5,345,725 | |
| Venezuela—.8% | ||||
| 1,075M | USD | Corp. Andina De Formento, 2%, 5/10/2019 | 1,075,637 | |
| Total Value of Supranationals (cost $6,532,467) | 6,421,362 | |||
| 78 |
| Principal | |||||||
| Amount | Security | Value | |||||
| GOVERNMENT REGIONAL AGENCY—1.4% | |||||||
| Norway | |||||||
| $ 1,872M | USD | Kommunalbanken AS, 1.6511%, 6/16/2020 | |||||
| (cost $1,880,822) (a)(b) | $ 1,888,154 | ||||||
| GOVERNMENT GUARANTEED | |||||||
| PROGRAM—1.0% | |||||||
| France | |||||||
| 1,400M | USD | Dexia Credit Local SA of New York, NY, 1.5161%, | |||||
| 6/5/2018 (cost $1,400,000) (a)(b) | 1,400,104 | ||||||
| Total Value of Investments (cost $137,673,791) | 95.8 | % | 130,902,855 | ||||
| Other Assets, Less Liabilities | 4.2 | 5,709,609 | |||||
| Net Assets | 100.0 | % | $136,612,464 | ||||
| (a) | Interest rates are determined and reset periodically. The interest rates above are the rates in effect |
| at September 30, 2017. | |
| (b) | Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4). |
| (c) | A portion or all of the security purchased on a when-issued or delayed delivery basis (see Note 1G). |
| 79 |
Portfolio of Investments (continued)
INTERNATIONAL OPPORTUNITIES BOND FUND
September 30, 2017
At September 30, 2017, International Opportunities Bond Fund had open foreign currency contracts as described below.
The unrealized apprecation (depreciation) on the open contracts reflected in the accompanying financial statements were as follows:
| International Opportunities Bond | |||||||||||||||||||
| Unrealized | |||||||||||||||||||
| Settlement | Foreign | Receive | Appreciation | ||||||||||||||||
| Counterparty | Date | Currency | (Deliver) | Asset | Liability | (Depreciation) | |||||||||||||
| HSBC | 10/12/17 | NOK | 47,500,000 | $5,963,965 | $5,674,589 | $289,376 | |||||||||||||
| HSBC | 10/23/17 | SEK | 28,100,000 | 3,450,012 | 3,414,110 | 35,902 | |||||||||||||
| CITI | 11/2/17 | JPY | 449,000,000 | 3,990,224 | 4,062,521 | (72,297) | |||||||||||||
| CITI | 11/2/17 | JPY | (449,000,000) | 4,074,994 | 3,990,224 | 84,770 | |||||||||||||
| GS | 11/6/17 | CAD | 10,130,000 | 8,118,613 | 8,120,305 | (1,692) | |||||||||||||
| GS | 11/6/17 | CAD | (1,890,000) | 1,500,075 | 1,514,727 | (14,652) | |||||||||||||
| GS | 11/6/17 | CAD | (1,420,000) | 1,123,602 | 1,138,048 | (14,446) | |||||||||||||
| CITI | 11/10/17 | EUR | (1,940,000) | 2,297,319 | 2,292,873 | 4,446 | |||||||||||||
| JPM | 11/10/17 | EUR | (3,410,000) | 4,074,329 | 4,030,256 | 44,073 | |||||||||||||
| JPM | 11/10/17 | EUR | (1,040,000) | 1,234,714 | 1,229,169 | 5,545 | |||||||||||||
| HSBC | 11/15/17 | NOK | 40,100,000 | 5,034,842 | 5,061,246 | (26,404) | |||||||||||||
| MSD | 11/17/17 | AUD | 4,900,000 | 3,843,559 | 3,849,072 | (5,513) | |||||||||||||
| HSBC | 12/11/17 | SEK | 52,700,000 | 6,470,307 | 6,663,927 | (193,620) | |||||||||||||
| CITI | 12/14/17 | GBP | 5,790,000 | 7,758,586 | 7,705,129 | 53,457 | |||||||||||||
| CITI | 12/14/17 | GBP | 1,940,000 | 2,599,595 | 2,637,246 | (37,651) | |||||||||||||
| Net Unrealized gain on open foreign exchange contracts | $151,294 | ||||||||||||||||||
A summary of abbreviations for counterparties to foreign exchange contracts are as follows:
| BCI | Barclays Capital, Inc. | HSBC | HSBC Bank USA N.A. |
| CITI | Citigroup Global Markets | JPM | J.P. Morgan Securities, Inc. |
| GS | Goldman Sachs & Co. | MSD | Morgan Stanley |
| 80 |
| Summary of Abbreviations: | |
| AUD | Australian Dollar |
| BRL | Brazillian Real |
| CAD | Canadian Dollar |
| EUR | Euro |
| GBP | British Pound |
| IDR | Indonesian Rupiah |
| INR | Indian Rupee |
| JPY | Japanese Yen |
| MXN | Mexican Peso |
| MYR | Malaysian Ringgit |
| NOK | Norwegian Krone |
| PEN | Peruvian Sol |
| PLN | Polish Zloty |
| SEK | Swedish Krona |
| TRY | Turkish Lira |
| USD | United States Dollar |
| ZAR | South African Rand |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
| See notes to financial statements | 81 |
Portfolio of Investments (continued)
INTERNATIONAL OPPORTUNITIES BOND FUND
September 30, 2017
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Sovereign Bonds | ||||||||||||
| Mexico | $ | — | $ | 17,776,820 | $ | — | $ | 17,776,820 | ||||
| Poland | — | 10,521,849 | — | 10,521,849 | ||||||||
| Malaysia | — | 10,226,304 | — | 10,226,304 | ||||||||
| Australia | — | 7,638,526 | — | 7,638,526 | ||||||||
| Brazil | — | 6,949,979 | — | 6,949,979 | ||||||||
| Portugal | — | 6,014,684 | — | 6,014,684 | ||||||||
| United Kingdom | — | 5,977,470 | — | 5,977,470 | ||||||||
| Indonesia | — | 5,595,781 | — | 5,595,781 | ||||||||
| South Africa | — | 5,195,140 | — | 5,195,140 | ||||||||
| Peru | — | 2,777,883 | — | 2,777,883 | ||||||||
| Spain | — | 1,872,567 | — | 1,872,567 | ||||||||
| Turkey | — | 1,718,121 | — | 1,718,121 | ||||||||
| Corporate Bonds | ||||||||||||
| United States | — | 16,542,850 | — | 16,542,850 | ||||||||
| Australia | — | 2,902,177 | — | 2,902,177 | ||||||||
| United Kingdom | — | 392,596 | — | 392,596 | ||||||||
| U.S. Government Obligations | ||||||||||||
| United States | — | 19,090,488 | — | 19,090,488 | ||||||||
| Supranational | ||||||||||||
| India | — | 5,345,725 | — | 5,345,725 | ||||||||
| Venezuela | — | 1,075,637 | — | 1,075,637 | ||||||||
| Government Regional Agency | ||||||||||||
| Norway | — | 1,888,154 | — | 1,888,154 | ||||||||
| Government Guaranteed Program | ||||||||||||
| France | — | 1,400,104 | — | 1,400,104 | ||||||||
| Total Investments in Securities | $ | — | $ | 130,902,855 | $ | — | $ | 130,902,855 | ||||
| Other Financial Instruments* | $ | — | $ | 151,294 | $ | — | $ | 151,294 |
| * | Other financial instruments are foreign exchange contracts and are considered derivative instruments, |
| which are valued at the net unrealized appreciation on the instrument. | |
| During the year ended September 30, 2017, there were no transfers between Level 1 investments and | |
| Level 2 investments that had a material impact to the Fund. This does not include transfers between | |
| Level 1 investments and Level 2 investments due to the Fund utilizing international fair value pricing | |
| during the period (see Note 1A). Transfers, if any, between Levels are recognized at the end of the | |
| reporting period. |
| 82 | See notes to financial statements |
Portfolio Manager’s Letter
INVESTMENT GRADE FUND
Dear Investor:
This is the annual report for the First Investors Investment Grade Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 0.97% for Class A shares, 0.12% for Class B shares, 1.32% for Advisor Class shares and 1.41% for Institutional Class shares, including dividends of 33.0 cents per share on Class A shares, 22.8 cents per share on Class B shares, 35.4 cents per share on Advisor Class shares and 37.2 cents per share on Institutional Class shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018. The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July and September. The Bank of England has suggested that it will
| 83 |
Portfolio Manager’s Letter (continued)
INVESTMENT GRADE FUND
raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Bond Market
The U.S. fixed income markets had mixed performance for the past 12 months. The broad U.S. bond market (measured by the BofA ML U.S. Broad Market Index) was flat at 0.01% during the review period.
In the fourth quarter of 2016, fixed income markets, especially Treasuries, experienced one of their worst sell-offs. This sell-off was triggered by a combination of a rising interest rate environment and Donald Trump’s unexpected victory. Fixed income had positive performance for most of 2017 while struggling again in September on renewed expectations of rising rates and pro-growth policies from the White House. Overall, Treasuries (measured by the BofA ML Treasury Index) were the weakest domestic fixed income market for the past 12 months, down 1.74%. Longer-dated Treasuries with 15+ years maturity underperformed with a loss of 6.33% while shorter-dated Treasuries were slightly positive.
Yields rose across whole yield curve. The sharpest rise happened in the fourth quarter of 2016, while longer-term rates fell for most of 2017 before rising again in September. There is an inverse relationship between bond prices and yields. The 2-year U.S. Treasury yield, which is very sensitive to changes in Fed policy, rose by 72 basis points to 1.49%. The 10-year Treasury yield, which is controlled by other factors such as GDP, inflation and investor sentiment, rose 74 basis points to 2.33%.
Credit sensitive fixed income benefited from a narrowing in credit spreads. With record issuance and record demand, investment grade corporate bonds (measured by the BofA ML Corporate Master Index) were positive at 2.26% for the review period. The demand was boosted by overseas buyers in their search for yields that were higher than those available locally. BBB-rated bonds continued to be the strongest performing sector in terms of credit quality among investment grade corporate bonds.
The high yield bond market (measured by the BofA ML U.S. Cash Pay HY Constrained Index) was the strongest domestic fixed income market for the period, returning 9.03%. Leveraged loans (measured by the Credit Suisse Leveraged Loan Index) were also strong with a return of 5.36%.
Municipal bonds (measured by the BofA ML Municipal Master Index) recouped all losses from the fourth quarter sell-off and returned 0.95%. New muni issuance is still below expectations for the year while demand has remained steady.
| 84 |
Most sovereign bond markets, including the Eurozone markets, UK, Canada and Japan, had negative performance as yields in those countries rose. The majority of these losses occurred in the fourth quarter of 2016, sparked by investor concerns that central banks are preparing to gradually reduce monetary stimulus and from Trump’s victory. The appreciating dollar hurt their U.S. dollar denominated returns even further during the fourth quarter of 2016. Non-U.S. sovereign bonds (measured by the Citi World Government ex U.S. Bond Index) lost 3.14% for the past 12 months, recovering a large portion of its 10.84% loss from the fourth quarter of 2016.
Emerging market debt (measured by the BofA ML Global Emerging Markets Sovereign Index) held up much better, returning 6.64%, benefiting from improving growth within emerging markets.
The Fund
The Fund invests in investment grade fixed-income securities. The majority of the Fund’s assets were invested in investment grade corporate bonds. The Fund also had as much as 4.8% of its assets invested in high yield securities and less than 1.0% invested in U.S. Treasuries.
The Fund underperformed the BofA ML Corporate Index during the review period. The relative underperformance was predominantly a function of the Fund’s underweight in corporate bonds with maturities greater than 10 years, which had the highest returns during the review period. The Fund benefited from its overweight in the Basic Materials sector, particularly metals and mining issuers, which had the highest returns among different industry groups.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 85 |
Fund Expenses (unaudited)
INVESTMENT GRADE FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.04% | |||
| Actual | $1,000.00 | $ 994.84 | $5.20 | |
| Hypothetical** | $1,000.00 | $1,019.86 | $5.27 | |
| Class B Shares | 1.89% | |||
| Actual | $1,000.00 | $1,001.16 | $9.48 | |
| Hypothetical** | $1,000.00 | $1,015.59 | $9.55 | |
| Advisor Class Shares | 0.70% | |||
| Actual | $1,000.00 | $1,013.23 | $3.53 | |
| Hypothetical** | $1,000.00 | $1,021.56 | $3.55 | |
| Institutional Class Shares | 0.62% | |||
| Actual | $1,000.00 | $1,014.07 | $3.13 | |
| Hypothetical** | $1,000.00 | $1,021.96 | $3.14 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total value of investments. |
| 86 |
Cumulative Performance Information (unaudited)
INVESTMENT GRADE FUND
Comparison of change in value of $10,000 investment in the First Investors Investment Grade Fund (Class A shares) and the Bank of America (“BofA”) Merrill Lynch U.S. Corporate Master Index.
The graph compares a $10,000 investment in the First Investors Investment Grade Fund (Class A shares) beginning 9/30/07 with a theoretical investment in the BofA Merrill Lynch U.S. Corporate Master Index (the “Index”). The Index includes publicly-issued, fixed rate, non-convertible investment grade dollar-denominated, S.E.C.-registered corporate debt having at least one year to maturity and an outstanding par value of at least $250 million. Bonds must be rated investment grade based on a composite of Moody’s and S&P. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund
| 87 |
Cumulative Performance Information (unaudited) (continued)
INVESTMENT GRADE FUND
portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the current maximum sales charge of 4% and assume the current sales charge of 4% was in effect at the beginning of the stated periods (prior to 6/12/17, the maximum sales charge was 5.75%). The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (3.15%), 1.68% and 4.11%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 1.63%. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been (3.90%), 1.24% and 3.92%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 0.83%. The Advisor Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 1.21% and 2.65%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 2.06%. The Institutional Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 1.30% and 2.82%, respectively, and the S.E.C. 30-Day Yield for September 2017 would have been 2.12%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Bank of America Merrill Lynch & Co. and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class share are for the periods beginning 4/1/13 (commencement of operations for those classes).
***The S.E.C. 30-day yield shown is for September 2017.
† The Index return is for ten years. The Index return since inception of the Advisor Class shares and Institutional Class shares is 3.63%.
| 88 |
Portfolio of Investments
INVESTMENT GRADE FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| CORPORATE BONDS—97.5% | ||||
| Aerospace/Defense—1.5% | ||||
| $ 5,000M | Rockwell Collins, Inc., 3.2%, 3/15/2024 | $ 5,099,740 | ||
| 4,000M | Rolls-Royce, PLC, 3.625%, 10/14/2025 (a) | 4,144,148 | ||
| 9,243,888 | ||||
| Automotive—.6% | ||||
| 4,000M | O’Reilly Automotive, Inc., 3.55%, 3/15/2026 | 4,016,384 | ||
| Chemicals—2.8% | ||||
| 4,000M | Agrium, Inc., 3.375%, 3/15/2025 | 4,030,780 | ||
| 4,020M | Dow Chemical Co., 3.5%, 10/1/2024 | 4,152,153 | ||
| 4,000M | LYB International Finance Co. BV, 3.5%, 3/2/2027 | 3,986,456 | ||
| 5,000M | LyondellBasell Industries NV, 6%, 11/15/2021 | 5,645,810 | ||
| 17,815,199 | ||||
| Consumer Non-Durables—.3% | ||||
| 1,800M | Newell Brands, Inc., 4.2%, 4/1/2026 | 1,897,454 | ||
| Energy—11.8% | ||||
| 8,600M | BP Capital Markets, PLC, 3.216%, 11/28/2023 | 8,817,064 | ||
| 5,000M | Canadian Oil Sands, Ltd., 7.75%, 5/15/2019 (a) | 5,415,285 | ||
| 5,000M | Continental Resources, Inc., 5%, 9/15/2022 | 5,100,000 | ||
| 3,000M | DCP Midstream Operating, LP, 2.5%, 12/1/2017 | 3,002,175 | ||
| 4,000M | Enable Midstream Partners, LP, 4.4%, 3/15/2027 | 4,076,108 | ||
| 5,000M | Enbridge Energy Partners, LP, 4.2%, 9/15/2021 | 5,230,040 | ||
| 1,800M | EQT Corp., 2.5%, 10/1/2020 (b) | 1,807,960 | ||
| Kinder Morgan Energy Partners, LP: | ||||
| 3,000M | 3.5%, 3/1/2021 | 3,076,620 | ||
| 5,000M | 3.45%, 2/15/2023 | 5,061,720 | ||
| Magellan Midstream Partners, LP: | ||||
| 5,000M | 5%, 3/1/2026 | 5,572,680 | ||
| 2,700M | 4.2%, 10/3/2047 (b) | 2,678,646 | ||
| 1,800M | Marathon Oil Corp., 3.85%, 6/1/2025 | 1,790,393 | ||
| 4,300M | Noble Energy, Inc., 3.85%, 1/15/2028 | 4,317,393 | ||
| 4,000M | ONEOK Partners, LP, 3.375%, 10/1/2022 | 4,044,644 | ||
| 5,800M | Spectra Energy, LLC, 6.2%, 4/15/2018 | 5,924,242 | ||
| Valero Energy Corp.: | ||||
| 4,000M | 9.375%, 3/15/2019 | 4,405,456 | ||
| 3,000M | 6.625%, 6/15/2037 | 3,796,533 | ||
| 74,116,959 | ||||
| 89 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Financial Services—12.7% | ||||
| $ 2,000M | American Express Co., 7%, 3/19/2018 | $ 2,050,092 | ||
| American International Group, Inc.: | ||||
| 3,700M | 3.75%, 7/10/2025 | 3,827,261 | ||
| 2,000M | 4.7%, 7/10/2035 | 2,153,430 | ||
| 5,400M | Assured Guaranty U.S. Holding, Inc., 5%, 7/1/2024 | 5,892,507 | ||
| 4,300M | Berkshire Hathaway, Inc., 3.4%, 1/31/2022 | 4,514,966 | ||
| 4,500M | Brookfield Finance, Inc., 4%, 4/1/2024 | 4,667,449 | ||
| 2,400M | Compass Bank, 6.4%, 10/1/2017 | 2,400,000 | ||
| 3,750M | ERAC USA Finance, LLC, 4.5%, 8/16/2021 (a) | 4,006,342 | ||
| 6,200M | Ford Motor Credit Co., LLC, 8.125%, 1/15/2020 | 6,986,693 | ||
| 5,000M | GE Capital International Funding Services, Ltd., | |||
| 4.418%, 11/15/2035 | 5,447,335 | |||
| 6,400M | General Electric Capital Corp., 4.65%, 10/17/2021 | 7,012,320 | ||
| 4,000M | General Motors Financial Co., Inc., 5.25%, 3/1/2026 | 4,349,480 | ||
| 4,500M | International Lease Finance Corp., 8.25%, 12/15/2020 | 5,269,563 | ||
| 5,000M | Key Bank NA, 3.4%, 5/20/2026 | 4,985,035 | ||
| 4,000M | Liberty Mutual Group, Inc., 4.95%, 5/1/2022 (a) | 4,372,436 | ||
| 3,000M | National City Corp., 6.875%, 5/15/2019 | 3,229,554 | ||
| 4,550M | Protective Life Corp., 7.375%, 10/15/2019 | 4,996,400 | ||
| 3,000M | Prudential Financial, Inc., 7.375%, 6/15/2019 | 3,272,901 | ||
| 79,433,764 | ||||
| Financials—25.2% | ||||
| Bank of America Corp.: | ||||
| 5,925M | 5%, 5/13/2021 | 6,452,331 | ||
| 5,250M | 4.1%, 7/24/2023 | 5,597,508 | ||
| 4,725M | 5.875%, 2/7/2042 | 6,078,264 | ||
| Barclays Bank, PLC: | ||||
| 2,000M | 5.125%, 1/8/2020 | 2,128,406 | ||
| 3,800M | 3.75%, 5/15/2024 | 3,948,409 | ||
| 3,200M | Capital One Financial Corp., 3.75%, 4/24/2024 | 3,309,334 | ||
| Citigroup, Inc.: | ||||
| 2,250M | 8.5%, 5/22/2019 | 2,483,251 | ||
| 6,200M | 4.5%, 1/14/2022 | 6,676,148 | ||
| 5,000M | 3.7%, 1/12/2026 | 5,135,455 | ||
| 4,000M | 3.4%, 5/1/2026 | 4,016,052 | ||
| Deutsche Bank AG: | ||||
| 2,700M | 3.375%, 5/12/2021 | 2,754,130 | ||
| 3,000M | 3.7%, 5/30/2024 | 3,047,748 | ||
| 90 |
| Principal | ||||
| Amount | Security | Value | ||
| Financials (continued) | ||||
| Goldman Sachs Group, Inc.: | ||||
| $ 1,800M | 2.35%, 11/15/2021 | $ 1,786,343 | ||
| 5,900M | 5.75%, 1/24/2022 | 6,616,561 | ||
| 3,000M | 3.625%, 1/22/2023 | 3,112,074 | ||
| 2,000M | 2.905%, 7/24/2023 | 2,003,670 | ||
| 2,700M | 3.272%, 9/29/2025 | 2,707,714 | ||
| 4,700M | 3.5%, 11/16/2026 | 4,717,700 | ||
| 4,550M | 6.125%, 2/15/2033 | 5,729,228 | ||
| JPMorgan Chase & Co.: | ||||
| 3,200M | 6%, 1/15/2018 | 3,240,864 | ||
| 5,000M | 4.5%, 1/24/2022 | 5,420,750 | ||
| 9,450M | 3.54%, 5/1/2028 | 9,547,666 | ||
| 3,000M | 6.4%, 5/15/2038 | 4,004,670 | ||
| Morgan Stanley: | ||||
| 11,500M | 5.5%, 7/28/2021 | 12,767,277 | ||
| 3,000M | 4%, 7/23/2025 | 3,165,978 | ||
| 3,600M | 3.625%, 1/20/2027 | 3,653,204 | ||
| U.S. Bancorp: | ||||
| 4,000M | 3.6%, 9/11/2024 | 4,164,776 | ||
| 2,700M | 3.1%, 4/27/2026 | 2,690,391 | ||
| 4,000M | UBS AG, 4.875%, 8/4/2020 | 4,293,944 | ||
| 3,000M | UBS Group Funding (Switzerland) AG, 4.253%, 3/23/2028 (a) | 3,153,162 | ||
| 5,000M | Visa, Inc., 3.15%, 12/14/2025 | 5,127,920 | ||
| Wells Fargo & Co.: | ||||
| 8,600M | 3.45%, 2/13/2023 | 8,818,199 | ||
| 6,500M | 4.75%, 12/7/2046 | 7,153,647 | ||
| 2,350M | Wells Fargo Bank NA, 5.85%, 2/1/2037 | 2,949,741 | ||
| 158,452,515 | ||||
| Food/Beverage/Tobacco—4.8% | ||||
| Anheuser-Busch InBev Finance, Inc.: | ||||
| 4,000M | 3.65%, 2/1/2026 | 4,145,276 | ||
| 4,000M | 4.9%, 2/1/2046 | 4,536,276 | ||
| 4,000M | Anheuser-Busch InBev Worldwide, Inc., 3.75%, 1/15/2022 | 4,234,864 | ||
| 5,225M | Bunge Limited Finance Corp., 8.5%, 6/15/2019 | 5,773,374 | ||
| 6,000M | Ingredion, Inc., 4.625%, 11/1/2020 | 6,406,686 | ||
| 5,000M | PepsiCo, Inc., 3.45%, 10/6/2046 | 4,756,755 | ||
| 29,853,231 | ||||
| Food/Drug—.7% | ||||
| 4,000M | CVS Health Corp., 3.875%, 7/20/2025 | 4,178,872 | ||
| 91 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Forest Products/Containers—.4% | ||||
| $ 2,500M | Rock-Tenn Co., 4.9%, 3/1/2022 | $ 2,722,377 | ||
| Health Care—1.9% | ||||
| 3,100M | Biogen, Inc., 6.875%, 3/1/2018 | 3,166,647 | ||
| 4,050M | Express Scripts Holding Co., 4.75%, 11/15/2021 | 4,398,264 | ||
| 4,000M | Laboratory Corp. of America Holdings, 3.75%, 8/23/2022 | 4,163,476 | ||
| 11,728,387 | ||||
| Information Technology—2.0% | ||||
| 8,550M | Diamond 1 Finance Corp., 4.42%, 6/15/2021 (a) | 8,984,272 | ||
| 3,500M | Oracle Corp., 2.4%, 9/15/2023 | 3,483,060 | ||
| 12,467,332 | ||||
| Manufacturing—2.1% | ||||
| CRH America, Inc.: | ||||
| 5,000M | 8.125%, 7/15/2018 | 5,240,000 | ||
| 2,250M | 3.4%, 5/9/2027 (a) | 2,264,726 | ||
| 5,000M | Johnson Controls International, PLC, 5%, 3/30/2020 | 5,327,710 | ||
| 12,832,436 | ||||
| Media-Broadcasting—2.0% | ||||
| 1,800M | ABC, Inc., 8.75%, 8/15/2021 | 2,171,333 | ||
| 3,950M | British Sky Broadcasting Group, PLC, 9.5%, 11/15/2018 (a) | 4,270,558 | ||
| 5,800M | Comcast Corp., 4.25%, 1/15/2033 | 6,247,470 | ||
| 12,689,361 | ||||
| Media-Diversified—.6% | ||||
| 4,000M | Time Warner, Inc., 3.6%, 7/15/2025 | 4,020,868 | ||
| Metals/Mining—3.1% | ||||
| 5,000M | Arconic, Inc., 6.15%, 8/15/2020 | 5,479,970 | ||
| Glencore Funding, LLC: | ||||
| 4,000M | 4.125%, 5/30/2023 (a) | 4,169,444 | ||
| 5,000M | 4.625%, 4/29/2024 (a) | 5,307,500 | ||
| 4,200M | Newmont Mining Corp., 5.125%, 10/1/2019 | 4,421,836 | ||
| 19,378,750 | ||||
| 92 |
| Principal | ||||
| Amount | Security | Value | ||
| Real Estate—9.1% | ||||
| $ 4,600M | Alexandria Real Estate Equities, Inc., 3.95%, 1/15/2028 | $ 4,694,696 | ||
| 4,000M | Boston Properties, LP, 5.875%, 10/15/2019 | 4,277,492 | ||
| Digital Realty Trust, LP: | ||||
| 2,700M | 5.25%, 3/15/2021 | 2,934,436 | ||
| 2,700M | 4.75%, 10/1/2025 | 2,930,691 | ||
| 2,800M | Duke Realty Corp., 3.25%, 6/30/2026 | 2,774,159 | ||
| 4,000M | ERP Operating, LP, 3.375%, 6/1/2025 | 4,090,356 | ||
| 3,500M | Essex Portfolio, LP, 3.875%, 5/1/2024 | 3,644,112 | ||
| 2,200M | HCP, Inc., 4.25%, 11/15/2023 | 2,337,867 | ||
| Prologis, LP: | ||||
| 2,000M | 3.35%, 2/1/2021 | 2,072,244 | ||
| 1,125M | 3.75%, 11/1/2025 | 1,179,295 | ||
| Realty Income Corp.: | ||||
| 5,528M | 3.25%, 10/15/2022 | 5,665,028 | ||
| 1,800M | 4.125%, 10/15/2026 | 1,867,592 | ||
| 3,000M | Simon Property Group, LP, 3.375%, 10/1/2024 | 3,071,562 | ||
| 5,000M | Tanger Properties, LP, 3.125%, 9/1/2026 | 4,706,105 | ||
| 4,000M | Ventas Realty, LP, 4.75%, 6/1/2021 | 4,282,436 | ||
| 6,500M | Welltower, Inc., 4%, 6/1/2025 | 6,787,248 | ||
| 57,315,319 | ||||
| Retail-General Merchandise—2.3% | ||||
| Amazon.com, Inc.: | ||||
| 1,800M | 3.15%, 8/22/2027 | 1,816,603 | ||
| 4,000M | 4.8%, 12/5/2034 | 4,544,236 | ||
| 1,300M | 4.05%, 8/22/2047 (a) | 1,330,577 | ||
| 5,300M | Home Depot, Inc., 5.875%, 12/16/2036 | 6,897,144 | ||
| 14,588,560 | ||||
| Telecommunications—2.3% | ||||
| AT&T, Inc.: | ||||
| 4,500M | 4.25%, 3/1/2027 | 4,640,521 | ||
| 2,700M | 5.3%, 8/14/2058 | 2,740,740 | ||
| 7,100M | Verizon Communications, Inc., 4.272%, 1/15/2036 | 6,996,979 | ||
| 14,378,240 | ||||
| 93 |
Portfolio of Investments (continued)
INVESTMENT GRADE FUND
September 30, 2017
| Principal | |||||||
| Amount | Security | Value | |||||
| Transportation—2.5% | |||||||
| $ 4,000M | Burlington Northern Santa Fe, LLC, 5.15%, 9/1/2043 | $ 4,770,524 | |||||
| 3,000M | Penske Truck Leasing Co., LP, 4.875%, 7/11/2022 (a) | 3,270,396 | |||||
| 5,800M | Southwest Airlines Co., 3%, 11/15/2026 | 5,676,234 | |||||
| 1,800M | Union Pacific Corp., 3.6%, 9/15/2037 | 1,825,292 | |||||
| 15,542,446 | |||||||
| Utilities—8.8% | |||||||
| 5,000M | Duke Energy Progress, Inc., 4.15%, 12/1/2044 | 5,346,220 | |||||
| 3,000M | E.ON International Finance BV, 5.8%, 4/30/2018 (a) | 3,067,776 | |||||
| 3,000M | Electricite de France SA, 3.625%, 10/13/2025 (a) | 3,086,700 | |||||
| 3,150M | Entergy Arkansas, Inc., 4.95%, 12/15/2044 | 3,275,263 | |||||
| 4,000M | Exelon Generation Co., LLC, 3.4%, 3/15/2022 | 4,101,240 | |||||
| 6,246M | Great River Energy, 4.478%, 7/1/2030 (a) | 6,756,669 | |||||
| 3,000M | MidAmerican Energy Co., 3.95%, 8/1/2047 | 3,127,461 | |||||
| 3,850M | Ohio Power Co., 5.375%, 10/1/2021 | 4,286,752 | |||||
| 4,550M | Oklahoma Gas & Electric Co., 4%, 12/15/2044 | 4,568,487 | |||||
| 4,000M | ONEOK, Inc., 7.5%, 9/1/2023 | 4,797,160 | |||||
| 1,800M | Peco Energy Co., 3.7%, 9/15/2047 | 1,806,466 | |||||
| 1,736M | San Diego Gas & Electric Co., 1.914%, 2/1/2022 | 1,725,637 | |||||
| 4,000M | Sempra Energy, 9.8%, 2/15/2019 | 4,411,380 | |||||
| 4,000M | South Carolina Electric & Gas Co., 5.45%, 2/1/2041 | 4,718,112 | |||||
| 55,075,323 | |||||||
| Total Value of Corporate Bonds (cost $594,169,410) | 611,747,665 | ||||||
| PASS-THROUGH CERTIFICATES—.7% | |||||||
| Transportation | |||||||
| 4,500M | American Airlines 17-2 AA PTT, 3.35%, 10/15/2029 | ||||||
| (cost $4,500,000) | 4,579,200 | ||||||
| Total Value of Investments (cost $598,669,410) | 98.2 | % | 616,326,865 | ||||
| Other Assets, Less Liabilities | 1.8 | 11,294,954 | |||||
| Net Assets | 100.0 | % | $627,621,819 | ||||
| (a) | Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4). | |
| (b) | A portion or all of the security purchased on a when-issued or delayed delivery basis (see Note 1G). | |
| Summary of Abbreviations: | ||
| PTT | Pass-Through Trust | |
| 94 |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Corporate Bonds | $ | — | $ | 611,747,665 | $ | — | $ | 611,747,665 | ||||
| Pass-Through Certificates | — | 4,579,200 | — | 4,579,200 | ||||||||
| Total Investments in Securities* | $ | — | $ | 616,326,865 | $ | — | $ | 616,326,865 |
| * | The Portfolio of Investments provides information on the industry categorization for corporate bonds |
| and pass-through certificates. | |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| See notes to financial statements | 95 |
Portfolio Managers’ Letter
LIMITED DURATION HIGH QUALITY BOND FUND
Dear Investor:
This is the annual report for the First Investors Limited Duration High Quality Bond Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 0.22% for Class A shares, 0.54% for Advisor Class shares and 0.77% for Institutional Class shares, including dividends of 21.0 cents per share on Class A shares, 24.0 cents per share on Advisor Class shares and 25.2 cents per share on Institutional Class shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018. The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
| 96 |
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Bond Market
The U.S. fixed income markets had mixed performance for the past 12 months. The broad U.S. bond market (measured by the BofA ML U.S. Broad Market Index) was flat at 0.01% during the review period.
In the fourth quarter of 2016, fixed income markets, especially Treasuries, experienced one of their worst sell-offs. This sell-off was triggered by a combination of a rising interest rate environment and Donald Trump’s unexpected victory. Fixed income had positive performance for most of 2017 while struggling again in September on renewed expectations of rising rates and pro-growth policies from the White House. Overall, Treasuries (measured by the BofA ML Treasury Index) were the weakest domestic fixed income market for the past 12 months, down 1.74%. Longer-dated Treasuries with 15+ years maturity underperformed with a loss of 6.33% while shorter-dated Treasuries were slightly positive.
Yields rose across whole yield curve. The sharpest rise happened in the fourth quarter of 2016, while longer-term rates fell for most of 2017 before rising again in September. There is an inverse relationship between bond prices and yields. The 2-year U.S. Treasury yield, which is very sensitive to changes in Fed policy, rose by 72 basis points to 1.49%. The 10-year Treasury yield, which is controlled by other factors such as GDP, inflation and investor sentiment, rose 74 basis points to 2.33%.
Credit sensitive fixed income benefited from a narrowing in credit spreads. With record issuance and record demand, investment grade corporate bonds (measured by the BofA ML Corporate Master Index) were positive at 2.26% for the review period. The demand was boosted by overseas buyers in their search for yields that were higher than those available locally. BBB-rated bonds continued to be the strongest performing sector in terms of credit quality among investment grade corporate bonds.
The high yield bond market (measured by the BofA ML U.S. Cash Pay HY Constrained Index) was the strongest domestic fixed income market for the period, returning 9.03%. Leveraged loans (measured by the Credit Suisse Leveraged Loan Index) were also strong with a return of 5.36%.
Municipal bonds (measured by the BofA ML Municipal Master Index) recouped all losses from the fourth quarter sell-off and returned 0.95%. New muni issuance is still below expectations for the year while demand has remained steady.
Most sovereign bond markets, including the Eurozone markets, UK, Canada and Japan, had negative performance as yields in those countries rose. The majority of these losses occurred in the fourth quarter of 2016, sparked by investor concerns that central banks are preparing to gradually reduce monetary stimulus and from Trump’s victory. The
| 97 |
Portfolio Managers’ Letter (continued)
LIMITED DURATION HIGH QUALITY BOND FUND
appreciating dollar hurt their U.S. dollar denominated returns even further during the fourth quarter of 2016. Non-U.S. sovereign bonds (measured by the Citi World Government ex U.S. Bond Index) lost 3.14% for the past 12 months, recovering a large portion of its 10.84% loss from the fourth quarter of 2016.
Emerging market debt (measured by the BofA ML Global Emerging Markets Sovereign Index) held up much better, returning 6.64%, benefiting from improving growth within emerging markets.
The Fund
The 1–5 year broad bond market returned 0.40%, according to the BofA ML1–5 Year US Broad Market Index. Low-rated bonds outperformed higher-rated bonds within the 1–5 year broad investment grade market, especially 3–5 year maturities. As such, yield curve positioning, as well as the level of credit risk taken by an investor, were key performance drivers during the review period. 1–5 year investment grade corporate bonds had returns of 1.82%, 0–5 year mortgage-backed bonds posted returns of –0.06%. AAA-A fixed rate asset-backed securities had total returns of 1.31%, 1–5 year Treasuries had total returns of –0.06% and 1–5 year agency bonds had total returns gaining 0.38%.
The Fund underperformed the BofA ML1-5 Year US Broad Market Index during the period under review. The Fund’s underperformance was driven by three main factors. First, the Fund was overweight asset-backed securities relative to the Index. Second, the Fund’s exposure to the 15-year agency MBS sector was a drag on relative performance, as lower coupon agency MBS (2.5% and 3%) lagged due to extension risk, as intermediate yields rose by more than 75 basis points during the review period. Lastly, the Fund had less exposure to 3–5 year BBB investment grade corporate securities for a greater part of the period under review. BBBs had the best performance within the investment grade universe, especially 3–5 year maturities.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 98 |
Fund Expenses (unaudited)
LIMITED DURATION HIGH QUALITY BOND FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.05% | |||
| Actual | $1,000.00 | $ 992.65 | $5.25 | |
| Hypothetical** | $1,000.00 | $1,019.81 | $5.32 | |
| Advisor Class Shares | 0.75% | |||
| Actual | $1,000.00 | $1,005.36 | $3.77 | |
| Hypothetical** | $1,000.00 | $1,021.31 | $3.80 | |
| Institutional Class Shares | 0.60% | |||
| Actual | $1,000.00 | $1,007.70 | $3.02 | |
| Hypothetical** | $1,000.00 | $1,022.06 | $3.04 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived and/or assumed. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 99 |
Cumulative Performance Information (unaudited)
LIMITED DURATION HIGH QUALITY BOND FUND
Comparison of change in value of $10,000 investment in the First Investors Limited Duration High Quality Bond Fund (Class A shares) and the Bank of America (“BofA”) Merrill Lynch 1–5 Year U.S. Broad Market Index.
The graph compares a $10,000 investment in the First Investors Limited Duration Fund (Class A shares) beginning 5/19/14 (commencement of operations) with a theoretical investment in the BofA Merrill Lynch 1-5 Year U.S. Broad Market Index (the “Index”). The Index is a subset of the BofA Merrill Lynch U.S. Broad Market Index which tracks the performance of U.S. dollar-denominated investment grade debt publicly issued in the U.S. domestic market, including U.S. Treasury, quasi-government, corporate, securitized and collateralized securities. The Index includes all securities with a remaining term to final maturity or an average life less than 5 years. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table it is assumed that all dividends and distributions were reinvested. Advisor Class and Institutional
| 100 |
Class shares performance will be greater than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the current maximum sales charge of 2.5% and assume the current sales charge of 2.5% was in effect at the beginning of the stated periods (prior to 6/12/17, the maximum sales charge was 5.75%). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been (2.48%) and (1.16%), respectively and the S.E.C. 30-Day Yield for September 2017 would have been 0.92%. The Advisor Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 0.27% and 0.49%, respectively and the S.E.C. 30-Day Yield for September 2017 would have been 1.13%. The Institutional Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 0.55% and 0.00%, respectively and the S.E.C. 30-Day Yield for September 2017 would have been 1.36%.
Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Bank of America Merrill Lynch and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Class A shares, Advisor Class shares and Institutional Class shares are for the period beginning 5/19/14 (commencement of operations).
***The S.E.C. 30-Day Yield shown is for September 2017.
| 101 |
Portfolio of Investments (continued)
LIMITED DURATION HIGH QUALITY BOND FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| CORPORATE BONDS—74.0% | ||||
| Aerospace/Defense—.7% | ||||
| $1,000M | Honeywell International, Inc., 1.85%, 11/1/2021 | $ 988,521 | ||
| Automotive—3.7% | ||||
| 900M | BMW U.S. Capital, LLC, 1.85%, 9/15/2021 (a) | 884,719 | ||
| Daimler Finance NA, LLC: | ||||
| 1,000M | 2.25%, 7/31/2019 (a) | 1,004,568 | ||
| 1,000M | 2.45%, 5/18/2020 (a) | 1,007,406 | ||
| 2,000M | O’Reilly Automotive, Inc., 4.625%, 9/15/2021 | 2,149,746 | ||
| 5,046,439 | ||||
| Chemicals—.8% | ||||
| 1,000M | Dow Chemical Co., 4.25%, 11/15/2020 | 1,056,608 | ||
| Energy—2.2% | ||||
| 1,998M | BP Capital Markets, PLC, 3.216%, 11/28/2023 | 2,048,430 | ||
| 1,000M | Shell International Finance BV, 1.375%, 5/10/2019 | 996,659 | ||
| 3,045,089 | ||||
| Financial Services—9.0% | ||||
| 500M | American Express Co., 7%, 3/19/2018 | 512,523 | ||
| 1,000M | Ameriprise Financial, Inc., 5.3%, 3/15/2020 | 1,075,510 | ||
| 1,000M | BlackRock, Inc., 5%, 12/10/2019 | 1,067,303 | ||
| 1,000M | Capital One NA, 2.25%, 9/13/2021 | 987,281 | ||
| 500M | ERAC USA Finance, LLC, 6.375%, 10/15/2017 (a) | 500,774 | ||
| 1,825M | Ford Motor Credit Co., LLC, 5%, 5/15/2018 | 1,861,580 | ||
| 1,500M | Protective Life Corp., 7.375%, 10/15/2019 | 1,647,165 | ||
| 700M | Prudential Financial, Inc., 7.375%, 6/15/2019 | 763,677 | ||
| Siemens Financieringsmaatschappij NV: | ||||
| 750M | 1.45%, 5/25/2018 (a) | 749,780 | ||
| 1,000M | 1.7%, 9/15/2021 (a) | 982,892 | ||
| 1,025M | State Street Bank & Trust Co., 5.25%, 10/15/2018 | 1,060,490 | ||
| 1,000M | UnitedHealth Group, Inc., 2.7%, 7/15/2020 | 1,020,299 | ||
| 12,229,274 | ||||
| Financials—30.6% | ||||
| Bank of America Corp.: | ||||
| 1,400M | 5.65%, 5/1/2018 | 1,432,172 | ||
| 1,000M | 2.369%, 7/21/2021 | 1,000,748 | ||
| 500M | 2.881%, 4/24/2023 | 502,701 | ||
| 102 |
| Principal | ||||
| Amount | Security | Value | ||
| Financials (continued) | ||||
| $ 900M | Bank of Montreal, 1.9%, 8/27/2021 | $ 888,227 | ||
| 900M | Bank of New York Mellon Corp., 2.05%, 5/3/2021 | 896,413 | ||
| 1,950M | Bank of Nova Scotia, 1.875%, 9/20/2021 (a) | 1,913,911 | ||
| 700M | Barclays Bank, PLC, 6.75%, 5/22/2019 | 753,147 | ||
| 2,000M | Capital One Financial Corp., 3.05%, 3/9/2022 | 2,024,888 | ||
| Citigroup, Inc.: | ||||
| 500M | 6.125%, 11/21/2017 | 502,999 | ||
| 250M | 8.5%, 5/22/2019 | 275,917 | ||
| 1,000M | 2.65%, 10/26/2020 | 1,011,018 | ||
| 1,000M | 2.75%, 4/25/2022 | 1,005,861 | ||
| 1,000M | 2.876%, 7/24/2023 | 1,002,390 | ||
| 1,850M | Citizens Bank, 2.25%, 3/2/2020 | 1,853,493 | ||
| Danske Bank A/S: | ||||
| 1,000M | 2%, 9/8/2021 (a) | 985,353 | ||
| 800M | 2.7%, 3/2/2022 (a) | 804,880 | ||
| 1,900M | Deutsche Bank AG of New York, 2.7%, 7/13/2020 | 1,908,976 | ||
| 1,000M | DNB Bank ASA, 2.375%, 6/2/2021 (a) | 996,930 | ||
| Goldman Sachs Group, Inc.: | ||||
| 1,000M | 2.6%, 12/27/2020 | 1,008,629 | ||
| 1,000M | 5.75%, 1/24/2022 | 1,121,451 | ||
| 1,000M | 2.36611%, 6/5/2023 | 1,006,422 | ||
| 1,000M | ING Groep NV, 3.15%, 3/29/2022 | 1,020,090 | ||
| JPMorgan Chase & Co.: | ||||
| 750M | 6%, 1/15/2018 | 759,578 | ||
| 2,000M | 4.5%, 1/24/2022 | 2,168,300 | ||
| Lloyds Bank, PLC: | ||||
| 1,000M | 6.375%, 1/21/2021 | 1,125,193 | ||
| 800M | 3%, 1/11/2022 | 807,428 | ||
| Morgan Stanley: | ||||
| 3,000M | 5.5%, 7/28/2021 | 3,330,594 | ||
| 500M | 2.48694%, 1/20/2022 | 507,275 | ||
| 1,000M | Northern Trust Co., 6.5%, 8/15/2018 | 1,040,608 | ||
| 1,340M | Santander U.K., PLC, 2%, 8/24/2018 | 1,342,657 | ||
| 1,300M | U.S. Bank NA, 2.125%, 10/28/2019 | 1,309,429 | ||
| UBS AG: | ||||
| 600M | 5.875%, 12/20/2017 | 605,603 | ||
| 1,000M | 1.8%, 3/26/2018 | 1,001,694 | ||
| 2,000M | UBS Group Funding (Switzerland) AG, 3.491%, 5/23/2023 (a) | 2,049,888 | ||
| 1,500M | Wells Fargo & Co., 3.45%, 2/13/2023 | 1,538,058 | ||
| 41,502,921 | ||||
| 103 |
Portfolio of Investments (continued)
LIMITED DURATION HIGH QUALITY BOND FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Food/Beverage/Tobacco—4.6% | ||||
| $ 900M | Anheuser-Busch InBev Finance, Inc., 1.9%, 2/1/2019 | $ 902,620 | ||
| 2,500M | Bunge Limited Finance Corp., 8.5%, 6/15/2019 | 2,762,380 | ||
| 1,000M | Ingredion, Inc., 4.625%, 11/1/2020 | 1,067,781 | ||
| 900M | Mead Johnson Nutrition Co., 3%, 11/15/2020 | 925,036 | ||
| 500M | Philip Morris International, Inc., 5.65%, 5/16/2018 | 512,744 | ||
| 6,170,561 | ||||
| Forest Products/Containers—.7% | ||||
| 900M | Georgia-Pacific, LLC, 3.163%, 11/15/2021 (a) | 920,549 | ||
| Health Care—1.4% | ||||
| 900M | AstraZeneca, PLC, 2.375%, 6/12/2022 | 893,328 | ||
| 1,000M | Gilead Sciences, Inc., 2.55%, 9/1/2020 | 1,018,207 | ||
| 1,911,535 | ||||
| Information Technology—4.8% | ||||
| 900M | Apple, Inc., 2.5%, 2/9/2022 | 912,465 | ||
| 2,000M | Cisco Systems, Inc., 2.2%, 9/20/2023 | 1,974,370 | ||
| Diamond 1 Finance Corp.: | ||||
| 750M | 3.48%, 6/1/2019 (a) | 765,201 | ||
| 900M | 4.42%, 6/15/2021 (a) | 945,713 | ||
| 1,000M | Oracle Corp., 1.9%, 9/15/2021 | 993,266 | ||
| 900M | QUALCOMM, Inc., 2.6%, 1/30/2023 | 902,786 | ||
| 6,493,801 | ||||
| Manufacturing—.2% | ||||
| 250M | CRH America, Inc., 8.125%, 7/15/2018 | 262,000 | ||
| Real Estate—5.5% | ||||
| 870M | American Tower Trust I, 3.07%, 3/15/2023 (a) | 873,563 | ||
| 1,000M | Boston Properties, LP, 5.875%, 10/15/2019 | 1,069,373 | ||
| 900M | Digital Realty Trust, LP, 2.75%, 2/1/2023 | 897,127 | ||
| 1,250M | Realty Income Corp., 3.25%, 10/15/2022 | 1,280,985 | ||
| 650M | Ventas Realty, LP, 4%, 4/30/2019 | 666,850 | ||
| 1,500M | WEA Finance, LLC, 3.15%, 4/5/2022 (a) | 1,518,930 | ||
| 1,000M | Welltower, Inc., 6.125%, 4/15/2020 | 1,097,710 | ||
| 7,404,538 | ||||
| Retail-General Merchandise—1.4% | ||||
| 1,900M | Amazon.com, Inc., 2.4%, 2/22/2023 (a) | 1,897,733 | ||
| 104 |
| Principal | ||||
| Amount | Security | Value | ||
| Telecommunications—1.8% | ||||
| AT&T, Inc.: | ||||
| $ 500M | 5.875%, 10/1/2019 | $ 537,461 | ||
| 500M | 2.45%, 6/30/2020 | 503,887 | ||
| 1,400M | Verizon Communications, Inc., 1.75%, 8/15/2021 | 1,371,656 | ||
| 2,413,004 | ||||
| Transportation—1.5% | ||||
| 1,000M | Heathrow Funding, Ltd., 4.875%, 7/15/2021 (a) | 1,073,657 | ||
| 1,000M | Southwest Airlines Co., 2.65%, 11/5/2020 | 1,014,094 | ||
| 2,087,751 | ||||
| Utilities—5.1% | ||||
| 500M | Arizona Public Service Co., 8.75%, 3/1/2019 | 546,292 | ||
| 500M | Consolidated Edison Co. of New York, 7.125%, 12/1/2018 | 530,072 | ||
| 500M | Entergy Gulf States Louisiana, LLC, 6%, 5/1/2018 | 512,447 | ||
| Exelon Generation Co., LLC: | ||||
| 1,000M | 6.2%, 10/1/2017 | 1,000,000 | ||
| 1,000M | 3.4%, 3/15/2022 | 1,025,310 | ||
| 1,000M | Ohio Power Co., 6.05%, 5/1/2018 | 1,025,267 | ||
| 500M | Public Service Electric and Gas Co., 1.8%, 6/1/2019 | 500,225 | ||
| 501M | San Diego Gas & Electric Co., 1.914%, 2/1/2022 | 498,517 | ||
| 500M | Sempra Energy, 9.8%, 2/15/2019 | 551,423 | ||
| 700M | Wisconsin Public Service Corp., 1.65%, 12/4/2018 | 699,094 | ||
| 6,888,647 | ||||
| Total Value of Corporate Bonds (cost $100,136,436) | 100,318,971 | |||
| RESIDENTIAL MORTGAGE-BACKED | ||||
| SECURITIES—12.0% | ||||
| Fannie Mae—8.4% | ||||
| 1,526M | 2.5%, 5/1/2030 – 8/1/2030 | 1,542,004 | ||
| 4,562M | 3%, 8/1/2026 – 5/1/2032 | 4,696,387 | ||
| 4,848M | 3.5%, 12/1/2025 – 12/1/2029 | 5,074,562 | ||
| 11,312,953 | ||||
| Freddie Mac—3.6% | ||||
| 4,396M | 3%, 8/1/2027 – 12/1/2031 (b) | 4,521,506 | ||
| 377M | 3.5%, 12/1/2025 | 396,146 | ||
| 4,917,652 | ||||
| Total Value of Residential Mortgage-Backed Securities (cost $16,322,549) | 16,230,605 | |||
| 105 |
Portfolio of Investments (continued)
LIMITED DURATION HIGH QUALITY BOND FUND
September 30, 2017
| Principal | |||||||
| Amount | Security | Value | |||||
| COVERED BONDS—7.5% | |||||||
| Financials | |||||||
| $1,500M | Canadian Imperial Bank of Commerce, 2.35%, 7/27/2022 (a) | $ 1,496,590 | |||||
| 3,500M | Royal Bank of Canada, 2.2%, 9/23/2019 | 3,519,313 | |||||
| 2,750M | Stadshypotek AB, 1.875%, 10/2/2019 (a) | 2,741,420 | |||||
| 2,500M | Toronto-Dominion Bank, 1.95%, 4/2/2020 (a) | 2,493,958 | |||||
| Total Value of Covered Bonds (cost $10,298,520) | 10,251,281 | ||||||
| U.S. GOVERNMENT OBLIGATIONS—4.6% | |||||||
| U.S. Treasury Notes: | |||||||
| 1,680M | 1%, 3/15/2019 | 1,670,123 | |||||
| 2,000M | 1.125%, 7/31/2021 | 1,951,640 | |||||
| 2,220M | 1.375%, 4/30/2020 | 2,209,291 | |||||
| 420M | 1.75%, 6/30/2022 | 416,989 | |||||
| Total Value of U.S. Government Obligations (cost $6,309,406) | 6,248,043 | ||||||
| U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—1.5% | |||||||
| 1,000M | Federal Farm Credit Bank, 2.22%, 11/25/2022 | 998,377 | |||||
| 1,000M | Freddie Mac, 1.375%, 5/1/2020 | 994,917 | |||||
| Total Value of U.S. Government Agency Obligations (cost $1,992,721) | 1,993,294 | ||||||
| Total Value of Investments (cost $135,059,632) | 99.6 | % | 135,042,194 | ||||
| Other Assets, Less Liabilities | .4 | 501,979 | |||||
| Net Assets | 100.0 | % | $135,544,173 | ||||
| (a) | Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4). |
| (b) | A portion or all of the security purchased on a when-issued or delayed delivery basis (see Note 1G). |
| 106 |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Corporate Bonds | $ | — | $ | 100,318,971 | $ | — | $ | 100,318,971 | ||||
| Residential Mortgage-Backed | ||||||||||||
| Securities | — | 16,230,605 | — | 16,230,605 | ||||||||
| Covered Bonds | — | 10,251,281 | — | 10,251,281 | ||||||||
| U.S. Government Obligations | — | 6,248,043 | — | 6,248,043 | ||||||||
| U.S. Government Agency | ||||||||||||
| Obligations | — | 1,993,294 | — | 1,993,294 | ||||||||
| Total Investments in Securities* | $ | — | $ | 135,042,194 | $ | — | $ | 135,042,194 |
| * | The Portfolio of Investments provides information on the industry categorization for corporate bonds |
| and covered bonds. | |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| See notes to financial statements | 107 |
Portfolio Manager’s Letter
STRATEGIC INCOME FUND
Dear Investor:
This is the annual report for the First Investors Strategic Income Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 3.73% for Class A shares and 4.14% for Advisor Class shares, including dividends of 29.7 cents per share on Class A shares and 33.4 cents per share on Advisor Class shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018. The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
| 108 |
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Bond Market
The U.S. fixed income markets had mixed performance for the past 12 months. The broad U.S. bond market (measured by the BofA ML U.S. Broad Market Index) was flat at 0.01% during the review period.
In the fourth quarter of 2016, fixed income markets, especially Treasuries, experienced one of their worst sell-offs. This sell-off was triggered by a combination of a rising interest rate environment and Donald Trump’s unexpected victory. Fixed income had positive performance for most of 2017 while struggling again in September on renewed expectations of rising rates and pro-growth policies from the White House. Overall, Treasuries (measured by the BofA ML Treasury Index) were the weakest domestic fixed income market for the past 12 months, down 1.74%. Longer-dated Treasuries with 15+ years maturity underperformed with a loss of 6.33% while shorter-dated Treasuries were slightly positive.
Yields rose across whole yield curve. The sharpest rise happened in the fourth quarter of 2016, while longer-term rates fell for most of 2017 before rising again in September. There is an inverse relationship between bond prices and yields. The 2-year U.S. Treasury yield, which is very sensitive to changes in Fed policy, rose by 72 basis points to 1.49%. The 10-year Treasury yield, which is controlled by other factors such as GDP, inflation and investor sentiment, rose 74 basis points to 2.33%.
Credit sensitive fixed income benefited from a narrowing in credit spreads. With record issuance and record demand, investment grade corporate bonds (measured by the BofA ML Corporate Master Index) were positive at 2.26% for the review period. The demand was boosted by overseas buyers in their search for yields that were higher than those available locally. BBB-rated bonds continued to be the strongest performing sector in terms of credit quality among investment grade corporate bonds.
The high yield bond market (measured by the BofA ML U.S. Cash Pay HY Constrained Index) was the strongest domestic fixed income market for the period,
| 109 |
Portfolio Manager’s Letter (continued)
STRATEGIC INCOME FUND
returning 9.03%. Leveraged loans (measured by the Credit Suisse Leveraged Loan Index) were also strong with a return of 5.36%.
Municipal bonds (measured by the BofA ML Municipal Master Index) recouped all losses from the fourth quarter sell-off and returned 0.95%. New muni issuance is still below expectations for the year while demand has remained steady.
Most sovereign bond markets, including the Eurozone markets, UK, Canada and Japan, had negative performance as yields in those countries rose. The majority of these losses occurred in the fourth quarter of 2016, sparked by investor concerns that central banks are preparing to gradually reduce monetary stimulus and from Trump’s victory. The appreciating dollar hurt their U.S. dollar denominated returns even further during the fourth quarter of 2016. Non-U.S. sovereign bonds (measured by the Citi World Government ex U.S. Bond Index) lost 3.14% for the past 12 months, recovering a large portion of its 10.84% loss from the fourth quarter of 2016.
Emerging market debt (measured by the BofA ML Global Emerging Markets Sovereign Index) held up much better, returning 6.64%, benefiting from improving growth within emerging markets.
The Fund
The Fund can invest through institutional class shares in a number of First Investors Funds (“Underlying Funds”). The average allocations to Underlying Funds as a percentage of the Fund’s net assets, the total returns for the review period and the allocations as a percentage of net assets as of the end of the period were:
| Average Allocations, | Allocations, | |||||
| Review Period | Total Return | 9/30/17 | ||||
| Covered Call Strategy Fund | 2.9% | 9.77% | 3.1% | |||
| Equity Income Fund | 0.8% | 14.84% | 0.0% | |||
| Floating Rate Fund | 12.0% | 3.87% | 12.5% | |||
| Fund For Income | 37.4% | 7.59% | 37.6% | |||
| Government Fund | 2.6% | -1.18% | 0.0% | |||
| International Opportunities | ||||||
| Bond Fund | 4.3% | 5.27% | 4.9% | |||
| Investment Grade Fund | 18.3% | 1.41% | 14.9% | |||
| Limited Duration High | ||||||
| Quality Bond Fund | 16.3% | 0.77% | 25.0% | |||
| Tax Exempt Income Fund | 0.6% | 0.45% | 0.0% | |||
| Cash | 4.8% | 0.00% | 2.0% | |||
| 110 |
For the review period, the Fund returned 3.73% on Class A shares, compared to .02% for its benchmark, the BofA ML US Broad Market Index. In general, the Fund benefited from an overweight in underlying funds that performed well in an environment of stable economic growth, and an underweight in underlying funds that performed relatively poorly in a rising interest rate environment. Specifically, the Fund’s largest investment during the review period was in the First Investors Fund For Income, a high yield bond fund. High yield bonds were the best performing sector of the fixed income market. The Fund also benefited from its investment in the First Investors Floating Rate Fund. The Floating Rate Fund performed well in a rising interest rate environment due to its minimal interest rate risk.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 111 |
Fund Expenses (unaudited)
STRATEGIC INCOME FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 0.57% | |||
| Actual* | $1,000.00 | $1,024.88 | $2.89 | |
| Hypothetical** | $1,000.00 | $1,022.21 | $2.89 | |
| Advisor Class Shares | 0.19% | |||
| Actual* | $1,000.00 | $1,044.13 | $0.97 | |
| Hypothetical** | $1,000.00 | $1,024.12 | $0.96 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY FIRST INVESTORS UNDERLYING FUNDS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total value of investments. |
| 112 |
Cumulative Performance Information (unaudited)
STRATEGIC INCOME FUND
Comparison of change in value of $10,000 investment in the First Investors Strategic Income Fund (Class A shares) and the Bank of America (“BofA”) Merrill Lynch U.S. Broad Market Index.
The graph compares a $10,000 investment in the First Investors Strategic Income Fund (Class A shares) beginning 4/3/13 (commencement of operations) with a theoretical investment in the BofA Merrill Lynch U.S. Broad Market Index (the “Index”). The Index tracks the performance of U.S. dollar-denominated investment grade debt publicly issued in the U.S. domestic market, including U.S. Treasury, quasi-government, corporate, securitized and collateralized securities. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table it is assumed that all dividends and distributions were reinvested. Advisor Class shares performance will be greater than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
| 113 |
Cumulative Performance Information (unaudited) (continued)
STRATEGIC INCOME FUND
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the current maximum sales charge of 4% and assume the current sales charge of 4% was in effect at the beginning of the stated periods (prior to 6/12/17, the maximum sales charge was 5.75%). The Advisor Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since this class is sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 1.25%. The Advisor Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 2.55%.
Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Citigroup and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Class A shares and Advisor Class shares are for the period beginning 4/3/13 (commencement of operations).
| 114 |
Portfolio of Investments
STRATEGIC INCOME FUND
September 30, 2017
| Shares or | |||||||
| Principal | |||||||
| Amount | Security | Value | |||||
| MUTUAL FUNDS—97.9% | |||||||
| First Investors Income Funds—94.8% | |||||||
| 2,116,830 | Floating Rate Fund – Institutional Class Shares | $ 20,469,742 | |||||
| 24,252,191 | Fund For Income – Institutional Class Shares | 61,600,564 | |||||
| 838,186 | International Opportunities Bond Fund- Institutional Class Shares | 8,038,209 | |||||
| 2,513,571 | Investment Grade Fund – Institutional Class Shares | 24,331,372 | |||||
| 4,292,273 | Limited Duration High Quality Bond Fund – Institutional | ||||||
| Class Shares | 40,862,439 | ||||||
| 155,302,326 | |||||||
| First Investors Equity Funds—3.1% | |||||||
| 446,068 | Covered Call Strategy Fund – Institutional Class Shares | 4,982,580 | |||||
| Total Value of Mutual Funds (cost $163,005,182) | 160,284,906 | ||||||
| SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—.9% | |||||||
| Federal Home Loan Bank: | |||||||
| $1,000M | 1.01%, 10/10/2017 | 999,782 | |||||
| 500M | 1.005%, 10/17/2017 | 499,796 | |||||
| Total Value of Short-Term U.S. Government Agency Obligations (cost $1,499,524) | 1,499,578 | ||||||
| SHORT-TERM U.S. GOVERNMENT | |||||||
| OBLIGATIONS—.5% | |||||||
| 750M | U.S. Treasury Bills, 0.935%, 10/26/2017 (cost $749,513) | 749,534 | |||||
| Total Value of Investments (cost $165,254,219) | 99.3 | % | 162,534,018 | ||||
| Other Assets, Less Liabilities | .7 | 1,217,974 | |||||
| Net Assets | 100.0 | % | $163,751,992 | ||||
| 115 |
Portfolio of Investments (continued)
STRATEGIC INCOME FUND
September 30, 2017
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Mutual Funds | ||||||||||||
| First Investors Income Funds | $ | 155,302,326 | $ | — | $ | — | $ | 155,302,326 | ||||
| First Investors Equity Funds | 4,982,580 | — | — | 4,982,580 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 1,499,578 | — | 1,499,578 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Obligations | — | 749,534 | — | 749,534 | ||||||||
| Total Investments in Securities | $ | 160,284,906 | $ | 2,249,112 | $ | — | $ | 162,534,018 |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 116 | See notes to financial statements |
Portfolio Managers’ Letter
COVERED CALL STRATEGY FUND
Dear Investor:
This is the annual report for the First Investors Covered Call Strategy Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 9.17% for Class A shares, 9.62% for Advisor Class shares and 9.77% for Institutional Class shares, including dividends of 11.0 cents per share for Class A shares, 15.2 cents per share for Advisor Class shares and 16.8 cents per share for Institutional Class shares. In addition, the Fund distributed capital gains of 1.7 cents per share on each class of shares.
Market Environment
S&P 500 earnings growth has been strong in recent quarters, up nearly 20% year-over-year. Due to the “earnings recession” last year, the 2-year annualized growth rate of quarterly earnings is more informative of underlying strength, growing near 5% annually over the period, close to its historical average. The post-election “Trump trades” have largely unwound, as the slow political process has reduced market expectations of accomplishing campaign promises (tax reform, infrastructure, healthcare legislation). The market does not appear to expect any significant progress on corporate tax reform, as high effective tax rate stocks have underperformed the market by a wide margin this year, giving up all of their post-election gains.
Despite the political dysfunction in Washington, the S&P 500 has returned 14.2% this year, supported by strong earnings growth, which is expected to continue, as well as deregulation. The underlying fundamentals have remained strong, with unemployment at 4.2% (the lowest in 17 years), consumer confidence remaining near 14-year highs this year, and the ISM Manufacturing Index at the highest level since 2004.
The market’s valuation does pose some potential risk, as the S&P 500 trailing P/E ratio is an above average 21.6. We believe this risk can be somewhat alleviated by moving ones equity allocation into more attractively valued stocks, and writing call options for downside protection. The S&P 500 Growth Index’s trailing P/E ratio was 24.9 at quarter-end (36.6% above its 10-year average), while the S&P 500 Value Index had a trailing P/E ratio of 18.5 (13.6% above its 10-year average). Reasonably priced large-cap value stocks can offer an attractive risk/reward profile, especially when combined with call premiums that can help stabilize returns and provide downside protection. This covered call strategy should be considered a core equity holding. It can be used to help reduce the volatility of an overall equity allocation, or to allow more optimistic investors to allocate to more aggressive equity strategies in a low beta/high beta approach.
| 117 |
Portfolio Managers’ Letter (continued)
COVERED CALL STRATEGY FUND
The Fund
During the third quarter, the First Investors Covered Call Strategy Fund returned 2.90% gross of fees, an excess return of 36 basis points over the covered call benchmark (BXM Index) return of 2.54%. The excess return was due entirely to call option selection, as the call options in the Fund outperformed the call options in the benchmark by 135 basis points. The benchmark writes index call options, which had an implied volatility of 6.6% at quarter-end, the lowest level since our data for implied volatility began in 2005. In contrast, the covered call fund writes single stock call options, which tend to provide more income and downside protection (the average implied volatility of the call options in the Fund was 18.9% at quarter-end). The stocks in the Fund, being more value-oriented, performed in line with the large-cap value index during the quarter, but underperformed the S&P 500 by 100 basis points. During the quarter, stock selection made a positive contribution to returns in the Materials sector, but detracted from returns in Technology and Healthcare. Allocation made a positive contribution overall during the third quarter, as the Fund was underweight the worst performing sectors: Consumer Staples and Consumer Discretionary.
Year-to-date, the stocks in the Fund outperformed the S&P 500 Value Index by 44 bps, due to positive sector allocation. However, the value oriented stocks in the Fund underperformed the S&P 500 by 532 basis points this year, as the S&P 500 Value Index underperformed by 574 basis points. Growth stocks have outperformed this year, but valuations of such stocks have become unattractive. As a result, the Fund is underweight these stocks. The call options in the Fund outperformed the benchmark call options by 335 basis points year-to-date due to positive strike price selection and the income advantages of single stock call options.
Outlook
Given the stock market rally, market valuations, and uncertainties from Congress, we are likely to keep call option strike prices closer to existing stock prices on most of the portfolio in order to gain somewhat more call income and downside protection. At the beginning of the year, the call option portfolio was 3.9% above existing stock prices, while at March 31st the number was 2.8%, and at the beginning of the fourth quarter it was 0.3%. However, stocks which have more upside potential, such as bank stocks and certain undervalued stocks, will have strike prices further above existing stock prices. The Trump administration has been pursuing deregulation unilaterally, which is likely to benefit financial companies, and all banks passed the latest Federal Reserve “stress tests,” meaning more capital will be returned to shareholders.
In addition to an overweight in Financials, we have positioned the portfolio toward stocks likely to benefit from a gradually improving economy, higher interest rates,
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and the industrial/manufacturing recovery that has gained traction. The S&P 500’s valuation is likely to be a headwind to stock price appreciation unless Congress can agree upon tax policy changes, which would boost earnings. The ten largest “low volatility” U.S. equity funds have an above average trailing P/E ratio of 22.2 versus the S&P 500 at 21.6 and our Fund at 18.6. We continue to believe reasonably priced large-cap stocks offer the best risk/reward potential, especially when combined with call premiums that can help stabilize returns and provide downside protection. Over the past 20 years, the most opportune times to invest in covered call strategies have been when the market’s valuation was above-average, as it is now.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
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Fund Expenses (unaudited)
COVERED CALL STRATEGY FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17-9/30/17)* |
| Class A Shares | 1.29% | |||
| Actual | $1,000.00 | $1,082.19 | $6.73 | |
| Hypothetical** | $1,000.00 | $1,018.60 | $6.53 | |
| Advisor Class Shares | 0.96% | |||
| Actual | $1,000.00 | $1,096.20 | $5.04 | |
| Hypothetical** | $1,000.00 | $1,020.26 | $4.86 | |
| Institutional Class Shares | 0.84% | |||
| Actual | $1,000.00 | $1,097.74 | $4.42 | |
| Hypothetical** | $1,000.00 | $1,020.86 | $4.26 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY SECTOR
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total value of investments. |
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Cumulative Performance Information (unaudited)
COVERED CALL STRATEGY FUND
Comparison of change in value of $10,000 investment in the First Investors Covered Call Strategy Fund (Class A shares) and the Cboe S&P 500 BuyWrite Index.
The graph compares a $10,000 investment in the First Investors Covered Call Strategy Fund (Class A shares) beginning 4/1/16 (commencement of operations) with a theoretical investment in the Cboe S&P 500 BuyWrite Index (the “Index”). The Index is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index. The Index is a passive total return index based on (1) buying an S&P 500 stock index portfolio, and (2) “writing” (or selling) the near-term S&P 500 Index (“SPX”) “covered” call option, generally on the third Friday of each month. The SPX call written will have about one month remaining to expiration, with an exercise price just above the prevailing index level (i.e., slightly out of the money). The SPX call is held until expiration and cash settled, at which time a new one-month, near-the-money call is written. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the
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Cumulative Performance Information (unaudited) (continued)
COVERED CALL STRATEGY FUND
accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 2.86% and 4.29%, respectively. The Advisor Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 9.53% and 8.76%, respectively. The Institutional Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 9.65% and 9.02%, respectively. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Cboe and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Class A shares, Advisor Class shares and Institutional Class shares are for the period beginning 4/1/16 (commencement of operations).
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Portfolio of Investments
COVERED CALL STRATEGY FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—101.6% | ||||
| Consumer Discretionary—7.2% | ||||
| 12,800 | * | AutoZone, Inc. | $ 7,617,408 | |
| 93,200 | CBS Corp. – Class “B” | 5,405,600 | ||
| 40,500 | Whirlpool Corp. | 7,469,820 | ||
| 20,492,828 | ||||
| Consumer Staples—4.9% | ||||
| 202,700 | Mondelez International, Inc. | 8,241,782 | ||
| 73,000 | Walgreens Boots Alliance, Inc. | 5,637,060 | ||
| 13,878,842 | ||||
| Energy—10.6% | ||||
| 73,600 | Chevron Corp. | 8,648,000 | ||
| 68,600 | ExxonMobil Corp. | 5,623,828 | ||
| 177,800 | Halliburton Co. | 8,184,134 | ||
| 97,400 | Valero Energy Corp. | 7,492,982 | ||
| 29,948,944 | ||||
| Financials—23.6% | ||||
| 115,400 | American Express Co. | 10,439,084 | ||
| 527,700 | Bank of America Corp. | 13,371,918 | ||
| 23,000 | BlackRock, Inc. | 10,283,070 | ||
| 144,700 | JPMorgan Chase & Co. | 13,820,297 | ||
| 243,300 | Morgan Stanley | 11,719,761 | ||
| 138,400 | U.S. Bancorp | 7,416,856 | ||
| 67,050,986 | ||||
| Health Care—13.8% | ||||
| 50,000 | Allergan, PLC | 10,247,500 | ||
| 105,900 | Bristol-Myers Squibb Co. | 6,750,066 | ||
| 149,300 | Medtronic, PLC | 11,611,061 | ||
| 292,700 | Pfizer, Inc. | 10,449,390 | ||
| 39,058,017 | ||||
| Industrials—17.6% | ||||
| 121,700 | Delta Air Lines, Inc. | 5,868,374 | ||
| 23,100 | General Dynamics Corp. | 4,748,898 | ||
| 287,600 | General Electric Co. | 6,954,168 | ||
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Portfolio of Investments (continued)
COVERED CALL STRATEGY FUND
September 30, 2017
| Shares | Security | Value | |||||
| Industrials (continued) | |||||||
| 92,400 | Honeywell International, Inc. | $ 13,096,776 | |||||
| 22,600 | Lockheed Martin Corp. | 7,012,554 | |||||
| 51,900 | Union Pacific Corp. | 6,018,843 | |||||
| 51,500 | United Parcel Service, Inc. – Class “B” | 6,184,635 | |||||
| 49,884,248 | |||||||
| Information Technology—16.4% | |||||||
| 81,700 | Apple, Inc. | 12,591,604 | |||||
| 32,600 | Broadcom, Ltd. | 7,906,804 | |||||
| 195,300 | Cisco Systems, Inc. | 6,567,939 | |||||
| 242,100 | Intel Corp. | 9,219,168 | |||||
| 215,100 | Oracle Corp. | 10,400,085 | |||||
| 46,685,600 | |||||||
| Materials—7.5% | |||||||
| 223,600 | DowDuPont, Inc. | 15,479,828 | |||||
| 104,600 | Nucor Corp. | 5,861,784 | |||||
| 21,341,612 | |||||||
| Total Value of Common Stocks (cost $268,738,091) | 101.6 | % | 288,341,077 | ||||
| Excess of Liabilities Over Other Assets | (1.6 | ) | (4,551,170) | ||||
| Net Assets | 100.0 | % | $283,789,907 | ||||
| * | Non-income producing |
| 124 |
| Expiration | Exercise | |||
| CALL OPTIONS WRITTEN—3.0% | Date | Price | Contracts | Value |
| Allergan, PLC | 10/20/17 | $230.00 | 468 | $ 10,296 |
| Allergan, PLC | 10/20/17 | 220.00 | 32 | 2,112 |
| American Express Co. | 10/20/17 | 89.00 | 1,154 | 260,804 |
| Apple, Inc. | 10/20/17 | 155.00 | 817 | 181,374 |
| AutoZone, Inc. | 10/20/17 | 570.00 | 85 | 256,955 |
| AutoZone, Inc. | 12/15/17 | 600.00 | 43 | 120,486 |
| Bank of America Corp. | 10/20/17 | 27.00 | 1,827 | 10,962 |
| Bank of America Corp. | 10/20/17 | 25.50 | 3,450 | 151,800 |
| BlackRock, Inc. | 10/20/17 | 420.00 | 33 | 95,766 |
| BlackRock, Inc. | 1/19/18 | 440.00 | 15 | 32,100 |
| BlackRock, Inc. | 1/19/18 | 420.00 | 182 | 637,546 |
| Bristol-Myers Squibb Co. | 10/20/17 | 62.50 | 261 | 45,675 |
| Bristol-Myers Squibb Co. | 12/15/17 | 60.00 | 798 | 379,050 |
| Broadcom, Ltd. | 10/20/17 | 240.00 | 326 | 221,680 |
| CBS Corp. | 10/20/17 | 60.00 | 60 | 3,300 |
| CBS Corp. | 12/15/17 | 67.50 | 872 | 28,776 |
| Chevron Corp. | 12/15/17 | 120.00 | 47 | 7,614 |
| Chevron Corp. | 12/15/17 | 110.00 | 689 | 566,358 |
| Cisco Systems, Inc. | 11/3/17 | 33.50 | 1,953 | 95,697 |
| Delta Air Lines, Inc. | 10/20/17 | 49.00 | 1,217 | 104,662 |
| DowDuPont, Inc. | 11/17/17 | 70.00 | 2,236 | 292,916 |
| ExxonMobil Corp. | 1/19/18 | 87.50 | 452 | 18,984 |
| ExxonMobil Corp. | 1/19/18 | 85.00 | 234 | 23,166 |
| General Dynamics Corp. | 10/20/17 | 200.00 | 216 | 129,600 |
| General Dynamics Corp. | 1/19/18 | 210.00 | 15 | 7,800 |
| General Electric Co | 10/20/17 | 25.00 | 2,876 | 37,388 |
| Halliburton Co. | 10/20/17 | 45.00 | 1,778 | 266,700 |
| Honeywell International, Inc. | 12/15/17 | 140.00 | 924 | 415,800 |
| Intel Corp. | 11/17/17 | 37.00 | 2,421 | 384,939 |
| JPMorgan Chase & Co. | 12/15/17 | 95.00 | 1,447 | 441,335 |
| Lockheed Martin Corp. | 10/20/17 | 310.00 | 15 | 6,300 |
| Lockheed Martin Corp. | 10/20/17 | 300.00 | 211 | 236,320 |
| Medtronic, PLC | 10/20/17 | 80.00 | 96 | 2,976 |
| Medtronic, PLC | 10/27/17 | 83.00 | 1,397 | 9,779 |
| Mondelez International, Inc. | 10/20/17 | 41.00 | 2,027 | 99,323 |
| Morgan Stanley | 10/20/17 | 48.00 | 2,433 | 287,094 |
| Nucor Corp. | 10/20/17 | 57.50 | 979 | 61,677 |
| Nucor Corp. | 10/20/17 | 55.00 | 67 | 12,730 |
| Oracle Corp. | 11/17/17 | 50.00 | 2,151 | 107,550 |
| Pfizer, Inc. | 11/17/17 | 36.00 | 2,927 | 158,058 |
| U.S. Bancorp | 11/3/17 | 54.00 | 89 | 7,387 |
| U.S. Bancorp | 11/17/17 | 55.00 | 1,295 | 84,175 |
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Portfolio of Investments (continued)
COVERED CALL STRATEGY FUND
September 30, 2017
| Expiration | Exercise | |||
| CALL OPTIONS WRITTEN—3.0% | Date | Price | Contracts | Value |
| Union Pacific Corp. | 12/15/17 | $105.00 | 519 | $ 622,800 |
| United Parcel Service, Inc. | 10/13/17 | 116.00 | 482 | 208,465 |
| United Parcel Service, Inc. | 11/3/17 | 118.00 | 33 | 12,210 |
| Valero Energy Corp. | 12/15/17 | 75.00 | 63 | 24,192 |
| Valero Energy Corp. | 12/15/17 | 70.00 | 587 | 449,642 |
| Valero Energy Corp. | 12/15/17 | 67.50 | 324 | 315,900 |
| Walgreens Boots Alliance, Inc. | 10/20/17 | 82.50 | 683 | 4,098 |
| Walgreens Boots Alliance, Inc. | 10/20/17 | 80.00 | 47 | 1,269 |
| Whirlpool Corp. | 10/20/17 | 175.00 | 405 | 432,338 |
| Total Value of Call Options Written (premium received $6,258,541) | $8,375,924 | |||
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets and liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Assets | ||||||||||||
| Common Stocks* | $ | 288,341,077 | $ | — | $ | — | $ | 288,341,077 | ||||
| Liabilities | ||||||||||||
| Call Options Written | $ | (8,375,924) | $ | — | $ | — | $ | (8,375,924) |
| * | The Portfolio of Investments provides information on the industry categorization for common stocks. |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 126 | See notes to financial statements |
Portfolio Manager’s Letter
EQUITY INCOME FUND
Dear Investor:
This is the annual report for the First Investors Equity Income Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 14.46% for Class A shares, 13.48% for Class B shares, 14.87% for Advisor Class shares and 14.84% for Institutional Class shares, including dividends of 21.3 cents per share for Class A shares, 11.6 cents per share for Class B shares, 21.3 cents per share for Advisor Class shares and 30.6 cents per share for Institutional Class shares. In addition, the Fund distributed capital gains of 17.8 cents per share on each class of shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018.
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Portfolio Manager’s Letter (continued)
EQUITY INCOME FUND
The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Equity Market
U.S. equities had strong performance during the past twelve months, posting several new records. The Dow Jones Industrial Average (DJIA) hit four major psychological milestones of 19,000 (on November 22nd), 20,000 (on January 25th), 21,000 (on March 1st) and 22,000 (on August 2nd). The S&P 500 Index and the DJIA returned 18.61% and 25.45% for the period, respectively. Market volatility remained at historically low levels for most of the period despite elevated political uncertainty.
Small-caps (measured by the Russell 2000 Index), growth stocks (the S&P 500 Growth Index) and value stocks (the S&P 500 Value Index) posted similar strong returns of 20.74%, 19.90% and 16.47%, respectively. However, they experienced significant intra-period differences as market leaders moved out of favor. In the fourth quarter of 2016, small-caps and value stocks rallied the most following the Trump victory as investors focused on the expected benefits from possible tax cuts, increased infrastructure spending and reduced financial regulations. Small-caps and several value sectors, including Financials, would be the greatest beneficiaries of these business friendly policies. In January, the “Trump Trade” faded and investors switched their focus to an improving economic outlook, which benefited most growth stocks and large-caps for most of 2017. In September, there was another rotation to small-caps and value stocks in the continuation of the “Trump-Trade” fueled by investors’ renewed hopes for pro-business policies from Washington.
Higher-yielding stocks lagged the general market, with the Dow Jones US Select Dividend Index returning 13.21%. Real estate as a whole came under pressure due to the rising interest rate environment, and as well publicized retail bankruptcies and store closures resulted in a sell-off of retail REITs. The Dow Jones US Select REIT Index lost 0.83%.
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Ten out of eleven S&P 500 sectors ended the review period in positive territory. Financials, which would be one of the greatest beneficiaries from the combination of the higher interest rates and Trump’s pro-growth policies, was the strongest sector at 36.21%. Information Technology was the second strongest sector, up 28.88% as investors focused on an improving economic outlook. A stronger economy could magnify this sector’s growth potential. Conversely, Telecom Services was the weakest sector with a marginal loss of 0.14%, followed by Energy which was marginally positive at 0.16%.
International equities posted strong double-digit returns across all regions, supported by improving corporate earnings and economic data pointing to a healthy global economy. Developed markets (measured by the MSCI EAFE Index) and emerging markets (measured by the MSCI EM Index) returned 19.65% and 22.91%, respectively. Overall, the currency exchange effect was slightly positive.
The Fund
The First Investors Equity Income Fund invests in both higher-yielding, dividend-paying stocks and dividend-growth stocks. This year, with increased interest rate volatility, the Fund’s highest-yielding stocks underperformed as the yield on the 10-year U.S. Treasury note rose from 1.59% in September of 2016 to a high of 2.33% in September of 2017.
The Fund’s investments in Energy had strong performance relative to the Index. With oil up roughly 10% over the last 12 months, the returns of our Energy names outperformed the underlying commodity. Royal Dutch Shell was up over 28%, while paying us over $3.00 a share in dividends. The company has taken advantage of the rise in crude oil prices and refining margins. Recent storm disruptions in the Gulf of Mexico have forced a temporary shutdown in refining capacity and led to a rise in margins across the industry. Royal Dutch has also benefited from strong global demand from their chemical division especially in Asia where consumer, construction and packaging sectors are all increasing their demand for chemicals. Marathon Petroleum was up over 42%, also benefiting from increasing margins and growing earnings and cash flow. Marathon recently raised their dividend by 11% and the board recently expanded the share repurchase authorization of $3 billion.
In anticipation of rising interest rates the Fund has expanded its commitment to regional banks over the past year-and-a-half. Rising rates allow banks to expand their margins and a growing economy leads to opportunities to grow loans over time and our mandate allows us to invest in small- and mid-cap banking stocks which have a higher likelihood of being acquired. Citizens Financial, a mid-cap bank with over $150 billion in assets primarily in the Northeast and Midwest, was up over 55% in
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Portfolio Manager’s Letter (continued)
EQUITY INCOME FUND
the past 12 months. The stock price appreciation began in earnest after the election but solid earnings and loan growth have helped to keep earnings growing.
Domestic banks will also be one of the biggest beneficiaries of lower tax rates if the current administration can pass tax reform. PNC Financial, a large-cap bank with over $260 billion in assets, was up 52% in the past year. Core retail banking drives the bulk of its earnings but PNC also benefits from its strong asset management business. PNC also has a hidden asset in owning almost 25% of BlackRock, the world’s largest publicly traded asset management firm.
Two-small cap banks, Sterling Bancorp and Berkshire Hills Bancorp, both returned more than 40% this past year. These two banks have solid management teams and both have clearly laid out plans to grow their business effectively over time while paying us a nice dividend.
Our investments in semiconductor manufacturers early in 2016 have performed very well for the Fund. Lam Research was our highest relative performer compared to the Index, and Applied Materials was the third-highest contributor to Fund returns. We were able to correctly identify a new spending cycle for semiconductor equipment: 3D NAND and the adoption of OLED (organic light-emitting diode) display for mobile devices and television. 3D NAND is the next generation of memory chips that will allow for both faster and greater capacity in flash storage. 3D NAND is being widely adopted as the industry standard and we expect this growth to continue for several years. OLED is widely recognized as the best display for both mobile devices and TVs. Apple has recently adopted OLED for iPhone X and Samsung is currently using OLED in its mobile devices. Improving manufacturing yields and lower prices will lead to a large adoption of OLED televisions in the coming years. The new paradigm shift we are now seeing is demand from China. Historically, China has not been a player in semiconductor manufacturing, but they are spending heavily to become a factor in global foundry production. With this new market to sell into, and the adaptation of new technologies such as Artificial Intelligence and Autonomous Cars, the new peak for earnings for these companies should be materially higher than at any point in their past.
The Fund’s biggest underperformance came from our underweight in Apple compared to the Index and from not owning three large-cap non-dividend-paying Technology stocks that are in the top 10 in terms of size in the S&P 500 Index. The S&P 500 Index currently has Apple weighted at over 3.5% of the Index. While we like Apple, and the stock has done well, we don’t feel it is worthy of that type of weighting.
Amazon, on the other hand, was up over 15% this past year, Facebook 33% and Google over 23%. These stocks provided outperformance for the S&P 500 Index, but
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they do not pay a dividend. Our focus remains on investing for both capital appreciation and yield. The Fund continues with its new strategy of selling covered calls on securities we own and are looking to sell at specific prices. Selling covered calls allows the Fund to take in cash for securities we would otherwise be selling in the marketplace; and that cash is added to the total return of the security. We have been able to selectively sell calls and take in premium to modestly enhance returns.
We believe dividend-paying stocks should be a focus for any investor. Dividend-paying stocks tend to outperform non-dividend-paying stocks when interest rates are either rising or falling. If we look at stock returns since the 1970’s, dividend-paying stocks have outperformed the S&P 500 Index. The Fund is focused on finding those stocks that have the potential to provide, not only yield and stability, but also dividend growth and appreciation.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 131 |
Fund Expenses (unaudited)
EQUITY INCOME FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.20% | |||
| Actual | $1,000.00 | $1,121.89 | $6.38 | |
| Hypothetical** | $1,000.00 | $1,019.05 | $6.07 | |
| Class B Shares | 2.03% | |||
| Actual | $1,000.00 | $1,134.82 | $10.86 | |
| Hypothetical** | $1,000.00 | $1,014.89 | $10.25 | |
| Advisor Class Shares | 0.83% | |||
| Actual | $1,000.00 | $1,148.65 | $4.47 | |
| Hypothetical** | $1,000.00 | $1,020.91 | $4.20 | |
| Institutional Class Shares | 0.79% | |||
| Actual | $1,000.00 | $1,148.43 | $4.25 | |
| Hypothetical** | $1,000.00 | $1,021.11 | $4.00 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 132 |
Cumulative Performance Information (unaudited)
EQUITY INCOME FUND
Comparison of change in value of $10,000 investment in the First Investors Equity Income Fund (Class A shares) and the Standard & Poor’s 500 Index.
The graph compares a $10,000 investment in the First Investors Equity Income Fund (Class A shares) beginning 9/30/07 with a theoretical investment in the Standard & Poor’s 500 Index (the “Index”). The Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of such stocks, which represent all major industries. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
| 133 |
Cumulative Performance Information (unaudited) (continued)
EQUITY INCOME FUND
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Advisor Class were waived or assumed. If such expenses had been paid by the Fund, the Advisor Class“S.E.C. Standardized” Average Annual Total Return Since Inception would have been 9.65%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Standard & Poor’s and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
† The Index return is for ten years. The Index return since inception of the Advisor Class shares and Institutional Class shares is 13.45%.
| 134 |
Portfolio of Investments
EQUITY INCOME FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—95.3% | ||||
| Consumer Discretionary—8.5% | ||||
| 86,000 | Acushnet Holdings Corp. | $ 1,527,360 | ||
| 65,000 | American Eagle Outfitters, Inc. | 929,500 | ||
| 18,000 | Big Lots, Inc. | 964,260 | ||
| 45,568 | CBS Corp. – Class “B” | 2,642,944 | ||
| 40,000 | Coach, Inc. | 1,611,200 | ||
| 185,400 | Comcast Corp. – Class “A” | 7,134,192 | ||
| 25,000 | Delphi Automotive, PLC | 2,460,000 | ||
| 218,500 | Ford Motor Co. | 2,615,445 | ||
| 42,200 | Home Depot, Inc. | 6,902,232 | ||
| 42,100 | HSN, Inc. | 1,644,005 | ||
| 25,000 | L Brands, Inc. | 1,040,250 | ||
| 31,100 | McDonald’s Corp. | 4,872,748 | ||
| 48,950 | Newell Brands, Inc. | 2,088,697 | ||
| 23,300 | Oxford Industries, Inc. | 1,480,482 | ||
| 122,300 | Regal Entertainment Group – Class “A” | 1,956,800 | ||
| 57,933 | Time Warner, Inc. | 5,935,236 | ||
| 18,500 | Tupperware Brands Corp. | 1,143,670 | ||
| 21,900 | Walt Disney Co. | 2,158,683 | ||
| 6,800 | Whirlpool Corp. | 1,254,192 | ||
| 39,100 | Wyndham Worldwide Corp. | 4,121,531 | ||
| 54,483,427 | ||||
| Consumer Staples—9.2% | ||||
| 120,000 | Altria Group, Inc. | 7,610,400 | ||
| 82,500 | B&G Foods, Inc. | 2,627,625 | ||
| 92,200 | Coca-Cola Co. | 4,149,922 | ||
| 61,700 | CVS Health Corp. | 5,017,444 | ||
| 22,500 | Dr. Pepper Snapple Group, Inc. | 1,990,575 | ||
| 33,300 | Kimberly-Clark Corp. | 3,918,744 | ||
| 109,117 | Koninklijke Ahold Delhaize NV (ADR) | 2,037,214 | ||
| 18,066 | Kraft Heinz Co. | 1,401,018 | ||
| 18,000 | Molson Coors Brewing Co. | 1,469,520 | ||
| 63,500 | PepsiCo, Inc. | 7,075,805 | ||
| 84,500 | Philip Morris International, Inc. | 9,380,345 | ||
| 71,400 | Procter & Gamble Co. | 6,495,972 | ||
| 74,400 | Wal-Mart Stores, Inc. | 5,813,616 | ||
| 58,988,200 | ||||
| 135 |
Portfolio of Investments (continued)
EQUITY INCOME FUND
September 30, 2017
| Shares | Security | Value | |
| Energy—7.5% | |||
| 89,400 | Chevron Corp. | $ 10,504,500 | |
| 81,500 | ConocoPhillips | 4,079,075 | |
| 83,000 | Devon Energy Corp. | 3,046,930 | |
| 77,900 | ExxonMobil Corp. | 6,386,242 | |
| 29,600 | Halliburton Co. | 1,362,488 | |
| 70,400 | Marathon Petroleum Corp. | 3,948,032 | |
| 92,500 | Occidental Petroleum Corp. | 5,939,425 | |
| 82,200 | PBF Energy, Inc. – Class “A” | 2,269,542 | |
| 75,500 | Royal Dutch Shell, PLC – Class “A” (ADR) | 4,573,790 | |
| 35,000 | Schlumberger, Ltd. | 2,441,600 | |
| 106,300 | Suncor Energy, Inc. | 3,723,689 | |
| 48,275,313 | |||
| Financials—18.3% | |||
| 151,800 | AllianceBernstein Holding, LP (MLP) | 3,688,740 | |
| 48,000 | American Express Co. | 4,342,080 | |
| 40,000 | American International Group, Inc. | 2,455,600 | |
| 26,300 | Ameriprise Financial, Inc. | 3,905,813 | |
| 85,000 | Bank of New York Mellon Corp. | 4,506,700 | |
| 103,400 | Berkshire Hills Bancorp, Inc. | 4,006,750 | |
| 66,010 | Chubb, Ltd. | 9,409,726 | |
| 82,000 | Citizens Financial Group, Inc. | 3,105,340 | |
| 50,000 | Comerica, Inc. | 3,813,000 | |
| 65,000 | Discover Financial Services | 4,191,200 | |
| 150,000 | Financial Select Sector SPDR Fund (ETF) | 3,879,000 | |
| 48,800 | IBERIABANK Corp. | 4,008,920 | |
| 72,100 | Invesco, Ltd. | 2,526,384 | |
| 110,000 | iShares U.S. Preferred Stock ETF (ETF) | 4,269,100 | |
| 132,800 | JPMorgan Chase & Co. | 12,683,728 | |
| 110,000 | MetLife, Inc. | 5,714,500 | |
| 47,900 | PNC Financial Services Group, Inc. | 6,455,483 | |
| 60,000 | Prosperity Bancshares, Inc. | 3,943,800 | |
| 69,000 | SPDR S&P Regional Banking (ETF) | 3,916,440 | |
| 154,300 | Sterling Bancorp | 3,803,495 | |
| 27,800 | Travelers Cos., Inc. | 3,406,056 | |
| 108,300 | U.S. Bancorp | 5,803,797 | |
| 90,000 | Waddell & Reed Financial, Inc. – Class “A” | 1,806,300 | |
| 215,500 | Wells Fargo & Co. | 11,884,825 | |
| 117,526,777 | |||
| 136 |
| Shares | Security | Value | ||
| Health Care—12.3% | ||||
| 96,100 | Abbott Laboratories | $ 5,127,896 | ||
| 81,100 | AbbVie, Inc. | 7,206,546 | ||
| 43,468 | Baxter International, Inc. | 2,727,617 | ||
| 45,500 | Gilead Sciences, Inc. | 3,686,410 | ||
| 52,400 | GlaxoSmithKline, PLC (ADR) | 2,127,440 | ||
| 101,900 | Johnson & Johnson | 13,248,019 | ||
| 85,000 | Koninklijke Philips NV (ADR) | 3,502,000 | ||
| 55,094 | Medtronic, PLC | 4,284,660 | ||
| 170,211 | Merck & Co., Inc. | 10,898,610 | ||
| 384,124 | Pfizer, Inc. | 13,713,227 | ||
| 75,000 | Phibro Animal Health Corp. – Class “A” | 2,778,750 | ||
| 18,500 | Thermo Fisher Scientific, Inc. | 3,500,200 | ||
| 16,000 | UnitedHealth Group, Inc. | 3,133,600 | ||
| 44,452 | Zoetis, Inc. | 2,834,260 | ||
| 78,769,235 | ||||
| Industrials—11.1% | ||||
| 28,600 | 3M Co. | 6,003,140 | ||
| 25,400 | A.O. Smith Corp. | 1,509,522 | ||
| 65,000 | Eaton Corp., PLC | 4,991,350 | ||
| 16,800 | General Dynamics Corp. | 3,453,744 | ||
| 261,400 | General Electric Co. | 6,320,652 | ||
| 61,900 | Honeywell International, Inc. | 8,773,706 | ||
| 70,000 | Industrial Select Sector SPDR Fund (ETF) | 4,970,000 | ||
| 51,100 | Ingersoll-Rand, PLC | 4,556,587 | ||
| 31,450 | ITT, Inc. | 1,392,291 | ||
| 128,461 | Johnson Controls International, PLC | 5,175,694 | ||
| 19,000 | Lockheed Martin Corp. | 5,895,510 | ||
| 115,100 | Schneider National, Inc. | 2,912,030 | ||
| 8,000 | Snap-On, Inc. | 1,192,080 | ||
| 120,800 | Triton International, Ltd. | 4,020,224 | ||
| 43,700 | United Parcel Service, Inc. – Class “B” | 5,247,933 | ||
| 42,500 | United Technologies Corp. | 4,933,400 | ||
| 71,347,863 | ||||
| Information Technology—13.4% | ||||
| 45,900 | Apple, Inc. | 7,074,108 | ||
| 80,000 | Applied Materials, Inc. | 4,167,200 | ||
| 28,600 | Automatic Data Processing, Inc. | 3,126,552 | ||
| 14,500 | Broadcom, Ltd. | 3,516,830 | ||
| 342,100 | Cisco Systems, Inc. | 11,504,823 | ||
| 75,000 | HP Enterprise Co. | 1,103,250 | ||
| 137 |
Portfolio of Investments (continued)
EQUITY INCOME FUND
September 30, 2017
| Shares | Security | Value | ||
| Information Technology (continued) | ||||
| 140,000 | HP, Inc. | $ 2,794,400 | ||
| 174,700 | Intel Corp. | 6,652,576 | ||
| 60,000 | Juniper Networks, Inc. | 1,669,800 | ||
| 18,400 | Lam Research Corp. | 3,404,736 | ||
| 52,600 | Microchip Technology, Inc. | 4,722,428 | ||
| 185,000 | Microsoft Corp. | 13,780,664 | ||
| 25,000 | * | NXP Semiconductors NV | 2,827,250 | |
| 60,300 | QUALCOMM, Inc. | 3,125,952 | ||
| 50,000 | Silicon Motion Technology Corp. (ADR) | 2,401,500 | ||
| 108,300 | Symantec Corp. | 3,553,323 | ||
| 39,200 | TE Connectivity, Ltd. | 3,255,952 | ||
| 57,000 | Technology Select Sector SPDR Fund (ETF) | 3,368,700 | ||
| 45,000 | Western Digital Corp. | 3,888,000 | ||
| 85,938,044 | ||||
| Materials—5.5% | ||||
| 147,923 | DowDuPont, Inc. | 10,240,709 | ||
| 28,400 | Eastman Chemical Co. | 2,569,916 | ||
| 31,600 | FMC Corp. | 2,822,196 | ||
| 70,500 | International Paper Co. | 4,005,810 | ||
| 33,700 | * | Louisiana-Pacific Corp. | 912,596 | |
| 36,700 | LyondellBasell Indst NV – Class “A” | 3,635,135 | ||
| 28,000 | Praxair, Inc. | 3,912,720 | ||
| 53,600 | Sealed Air Corp. | 2,289,792 | ||
| 82,500 | WestRock Co. | 4,680,225 | ||
| 35,069,099 | ||||
| Real Estate—2.4% | ||||
| 161,400 | Brixmor Property Group, Inc. (REIT) | 3,034,320 | ||
| 88,000 | Chesapeake Lodging Trust (REIT) | 2,373,360 | ||
| 15,000 | Federal Realty Investment Trust (REIT) | 1,863,150 | ||
| 46,000 | iShares U.S. Real Estate ETF (ETF) | 3,674,480 | ||
| 65,000 | Sunstone Hotel Investors, Inc. (REIT) | 1,044,550 | ||
| 161,800 | Urstadt Biddle Properties, Inc. (REIT) | 3,511,060 | ||
| 15,500,920 | ||||
| Telecommunication Services—3.2% | ||||
| 240,730 | AT&T, Inc. | 9,429,394 | ||
| 222,800 | Verizon Communications, Inc. | 11,026,372 | ||
| 20,455,766 | ||||
| 138 |
| Shares or | ||||
| Principal | ||||
| Amount | Security | Value | ||
| Utilities—3.9% | ||||
| 36,500 | American Electric Power Co., Inc. | $ 2,563,760 | ||
| 100,000 | CenterPoint Energy, Inc. | 2,921,000 | ||
| 35,000 | Dominion Energy, Inc. | 2,692,550 | ||
| 35,000 | Duke Energy Corp. | 2,937,200 | ||
| 128,000 | Exelon Corp. | 4,821,760 | ||
| 17,100 | NextEra Energy, Inc. | 2,506,005 | ||
| 105,000 | PPL Corp. | 3,984,750 | ||
| 41,200 | Vectren Corp. | 2,709,724 | ||
| 25,136,749 | ||||
| Total Value of Common Stocks (cost $404,316,533) | 611,491,393 | |||
| PREFERRED STOCKS—1.6% | ||||
| Financials—.6% | ||||
| 800 | Citizens Financial Group, Inc., Series A, 5.5%, 2049 | 836,000 | ||
| 102,800 | JPMorgan Chase & Co., Series Y, 6.125%, 2020 | 2,749,900 | ||
| 3,585,900 | ||||
| Health Care—.3% | ||||
| 2,600 | Allergan, PLC, Series A, 5.5%, 2018 | 1,918,332 | ||
| Real Estate—.7% | ||||
| 50,500 | Digital Realty Trust, Inc., (REIT) Series G,5.875%, 2049 | 1,270,580 | ||
| Urstadt Biddle Properties, Inc., (REIT): | ||||
| 46,000 | Series F, 7.125%, 2049 | 1,167,020 | ||
| 49,000 | Series G, 6.75%, 2049 | 1,289,435 | ||
| 41,700 | Series H, 6.25%, 2022 | 1,077,528 | ||
| 4,804,563 | ||||
| Total Value of Preferred Stocks (cost $10,671,779) | 10,308,795 | |||
| SHORT-TERM U.S. GOVERNMENT AGENCY | ||||
| OBLIGATIONS—2.1% | ||||
| Federal Home Loan Bank: | ||||
| $1,500M | 1.01%, 10/10/2017 | 1,499,673 | ||
| 500M | 1.005%, 10/17/2017 | 499,796 | ||
| 1,000M | 1.021%, 10/27/2017 | 999,319 | ||
| 10,500M | 1.025%, 11/9/2017 | 10,489,028 | ||
| Total Value of Short-Term Corporate Notes (cost $13,486,990) | 13,487,816 | |||
| 139 |
Portfolio of Investments (continued)
EQUITY INCOME FUND
September 30, 2017
| Principal | |||||||
| Amount | Security | Value | |||||
| SHORT-TERM U.S. GOVERNMENT | |||||||
| OBLIGATIONS—.3% | |||||||
| $2,000M | U.S. Treasury Bills, 0.935%, 10/26/2017 (cost $1,998,701) | $ 1,998,758 | |||||
| Total Value of Investments (cost $430,474,003) | 99.3 | % | 637,286,762 | ||||
| Other Assets, Less Liabilities | .7 | 4,448,030 | |||||
| Net Assets | 100.0 | % | $641,734,792 | ||||
| * | Non-income producing | |
| Summary of Abbreviations: | ||
| ADR | American Depositary Receipts | |
| ETF | Exchange Traded Fund | |
| MLP | Master Limited Partnership | |
| REIT | Real Estate Investment Trust | |
| Expiration | Exercise | |||
| CALL OPTIONS WRITTEN—0.0% | Date | Price | Contracts | Value |
| General Electric Co. | 10/6/17 | $ 24.00 | 100 | $3,100 |
| Johnson & Johnson | 10/6/17 | 135.00 | 50 | 150 |
| PepsiCo, Inc. | 10/6/17 | 115.00 | 50 | 700 |
| 3M Co. | 10/6/17 | 207.50 | 10 | 2,570 |
| Total Value of Call Options Written (premium received $18,984) | $6,520 | |||
| 140 |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Common Stocks | $ | 611,491,393 | $ | — | $ | — | $ | 611,491,393 | ||||
| Preferred Stocks | 10,308,795 | — | — | 10,308,795 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 13,487,816 | — | 13,487,816 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Obligations | — | 1,998,758 | — | 1,998,758 | ||||||||
| Total Investments in Securities* | $ | 621,800,188 | $ | 15,486,574 | $ | — | $ | 637,286,762 | ||||
| Liabilities | ||||||||||||
| Call Options Written | $ | (6,520) | $ | — | $ | — | $ | (6,520) | ||||
| * | The Portfolio of Investments provides information on the industry categorization for common stocks |
| and preferred stocks. | |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| See notes to financial statements | 141 |
Portfolio Manager’s Letter
GLOBAL FUND
Dear Investor:
This is the annual report for the First Investors Global Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 17.99% for Class A shares, 16.98% for Class B shares, 18.46% for Advisor Class shares and 18.38% for Institutional Class shares, including dividends of 1.1 cents per share for Class A shares, 0.1 cents per share for Class B shares, 1.8 cents per share for Advisor Class shares and 1.9 cents per share for Institutional Class shares.
The Fund
Global equities advanced strongly during the trailing twelve-month period ending September 30, 2017, rising in every calendar quarter during the period under review. Stocks rallied in the fourth quarter of 2016 following Donald Trump’s election as U.S. President. The rise of the S&P 500 Index reflected hopes that the new administration would reduce regulatory restrictions and increase fiscal stimulus by cutting taxes and boosting infrastructure spending.
Moving into the beginning of 2017, the “animal spirits” dynamic remained intact as investors bid up risk assets amid increasing optimism about global economic growth. Although the upcoming French presidential election was a source of anxiety in Europe, solid fourth quarter European GDP growth and strengthening global manufacturing data helped to boost risk appetites. Market participants breathed a sigh of relief in May after independent centrist Emmanuel Macron won the French presidential election by a large margin, a victory widely seen as supportive for the stability of the European Union (“EU”). Meanwhile, continued evidence of an upswing in global growth helped to maintain bullish sentiment. European growth indicators signaled strong regional momentum and Chinese manufacturing and services data surprised to the upside.
Positive momentum continued into the second half of 2017, as a broad-based expansion of economic growth, supportive monetary policy, and benign inflation helped drive equity markets higher. Eurozone confidence reached a decade-high in September on the back of solid employment and manufacturing data and a reacceleration in the Services sector. The U.S. economy continued on an upward trajectory, and signs of firming inflation increased investors’ expectation of further monetary policy tightening at the end of the year. In Europe, Angela Merkel was reelected for a fourth term as German Chancellor. Global geopolitical tensions were elevated by North Korean missile tests and a new Russian sanctions bill signed by U.S. President Donald Trump.
The Fund performed in line with the MSCI All Country World Index for the period. Stronger security selection in the Information Technology, Industrials, and Consumer Discretionary sectors contributed to relative performance during the period under review. Airbus, a France-based company that manufactures and services aircrafts, was the top contributor to performance within Industrial names and the Fund overall. Shares posted strong gains, as the company’s earnings results exceeded consensus expectations during the year and the market started to appreciate the potential of the company’s narrow body jet business.
| 142 |
Weaker selection within the Energy, Consumer Staples, and Healthcare sectors partially offset these results. Within Energy, the stock price of U.S.-based pipeline transportation and energy storage company, Kinder Morgan, remained under pressure alongside uncertain energy markets. We believe the market underestimates Kinder Morgan’s ability to sustain returns on capital driven by its exposure to North American energy infrastructure, which should drive growth over the next several years. Additionally, Kinder Morgan is in the process of reducing its debt burden and improving its risk profile.
Sector allocation, a residual result of our bottom-up stock selection process, contributed to relative performance. An overweight allocation to the Financials sector and underweight allocations to the Materials sector somewhat offset these results. A frictional cash position also detracted from relative performance in a strongly up market. On a regional basis, security selection within emerging markets and Israel, as well as an overweight allocation to Europe (ex UK), contributed most to relative performance. These results were somewhat offset by weaker security selection within the United States and Japan.
In general, we have a constructive outlook on the economy. Low inflation enables central banks globally to maintain accommodative monetary policies and manufacturing indicators continue to strengthen in both the U.S. and Europe, reaching their highest levels in several years. Markets have almost fully recognized the cyclical recovery in Europe; the next leg of upside depends on France and Germany working together to enable secular European growth. The exception is the UK where we are concerned that inflation data is accelerating and the current account deficit has widened, leaving it vulnerable as it enters Brexit negotiations. The portfolio’s UK positions are multinational companies less exposed to the domestic economy and the UK is underweight as a whole. In Asia, we have a positive outlook on China in the mid-term, as politics in the form of upcoming elections are likely to be uneventful. Japan’s market has lagged Europe and the U.S. and we see select opportunities in attractively valued companies that could benefit from a better cycle, but the portfolio’s Japan exposure remains underweight, as well. From a sector perspective, as of the end of the period under review, the Fund was most overweight in the Information Technology and Financial sectors, and most underweight in Consumer Staples and Materials.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 143 |
Fund Expenses (unaudited)
GLOBAL FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.43% | |||
| Actual | $1,000.00 | $1,179.45 | $7.81 | |
| Hypothetical** | $1,000.00 | $1,017.90 | $7.23 | |
| Class B Shares | 2.22% | |||
| Actual | $1,000.00 | $1,169.78 | $12.08 | |
| Hypothetical** | $1,000.00 | $1,013.94 | $11.21 | |
| Advisor Class Shares | 1.02% | |||
| Actual | $1,000.00 | $1,184.58 | $5.59 | |
| Hypothetical** | $1,000.00 | $1,019.96 | $5.17 | |
| Institutional Class Shares | 0.99% | |||
| Actual | $1,000.00 | $1,183.79 | $5.42 | |
| Hypothetical** | $1,000.00 | $1,020.11 | $5.01 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 144 |
Cumulative Performance Information (unaudited)
GLOBAL FUND
Comparison of change in value of $10,000 investment in the First Investors Global Fund (Class A shares) and the Morgan Stanley Capital International (“MSCI”) All Country World Index.
The graph compares a $10,000 investment in the First Investors Global Fund (Class A shares) beginning 9/30/07 with a theoretical investment in the MSCI All Country World Index (the “Index”). The Index is a free float-adjusted market capitalization weighted index designed to measure the equity market performance of developed and emerging market country indices. The Index consists of 47 country indices including 23 developed and 24 emerging market country indices. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater
| 145 |
Cumulative Performance Information (unaudited) (continued)
GLOBAL FUND
than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been 11.08%, 9.15% and 3.27%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for One Year, Five Years and Ten Years would have been 12.93%, 9.29% and 3.26%, respectively. The Advisor Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 18.40% and 10.20%, respectively. The Institutional Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 18.32% and 10.29%, respectively. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Morgan Stanley & Co., Inc. and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
† The Index return is for ten years. The Index return since inception of the Advisor Class shares and Institutional Class shares is 9.75%.
| 146 |
Portfolio of Investments
GLOBAL FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—97.3% | ||||
| United States—60.3% | ||||
| 90,365 | Abbott Laboratories | $ 4,821,876 | ||
| 28,039 | Accenture, PLC – Class “A” | 3,787,228 | ||
| 45,153 | Activision Blizzard, Inc. | 2,912,820 | ||
| 30,295 | Aetna, Inc. | 4,817,208 | ||
| 22,516 | Agilent Technologies, Inc. | 1,445,527 | ||
| 110,698 | Air Lease Corp. | 4,717,949 | ||
| 5,118 | Allergan, PLC | 1,048,934 | ||
| 4,320 | * | Alphabet, Inc. – Class “C” | 4,143,355 | |
| 4,286 | * | Amazon.com, Inc. | 4,120,346 | |
| 130,205 | Aramark Holdings Corp. | 5,287,625 | ||
| 110,013 | * | ArcelorMittal SA | 2,833,935 | |
| 54,921 | Assured Guaranty, Ltd. | 2,073,268 | ||
| 75,605 | * | Atlassian Corp., PLC – Class “A” | 2,657,516 | |
| 30,000 | Ball Corp. | 1,239,000 | ||
| 134,175 | Bank of America Corp. | 3,399,994 | ||
| 13,793 | BlackRock, Inc. | 6,166,712 | ||
| 18,498 | * | bluebird bio, Inc. | 2,540,700 | |
| 101,756 | Bristol-Myers Squibb Co. | 6,485,927 | ||
| 40,193 | Broadcom, Ltd. | 9,748,410 | ||
| 12,529 | * | CBRE Group, Inc. – Class “A” | 474,599 | |
| 50,239 | * | Celgene Corp. | 7,325,851 | |
| 222,575 | Citigroup, Inc. | 16,190,106 | ||
| 70,250 | Cognizant Technology Solutions Corp. – Class “A” | 5,095,935 | ||
| 154,439 | Coty, Inc. – Class “A” | 2,552,877 | ||
| 42,931 | Delphi Automotive, PLC | 4,224,410 | ||
| 83,799 | Delta Air Lines, Inc. | 4,040,788 | ||
| 30,173 | * | Diamondback Energy, Inc. | 2,955,747 | |
| 42,800 | Edison International | 3,302,876 | ||
| 32,191 | * | Electronic Arts, Inc. | 3,800,469 | |
| 88,752 | EOG Resources, Inc. | 8,585,868 | ||
| 25,282 | Equifax, Inc. | 2,679,639 | ||
| 34,441 | Expedia, Inc. | 4,957,438 | ||
| 81,045 | * | Facebook, Inc. – Class “A” | 13,848,159 | |
| 30,115 | * | FleetCor Technologies, Inc. | 4,660,899 | |
| 31,579 | Fortune Brands Home & Security, Inc. | 2,123,056 | ||
| 21,943 | General Dynamics Corp. | 4,511,042 | ||
| 191,981 | General Motors Corp. | 7,752,193 | ||
| 48,735 | Global Payments, Inc. | 4,631,287 | ||
| 42,679 | * | Guidewire Software, Inc. | 3,322,987 | |
| 30,900 | Hess Corp. | 1,448,901 | ||
| 48,738 | Hilton Worldwide Holdings, Inc. | 3,384,854 | ||
| 147 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2017
| Shares | Security | Value | ||
| United States (continued) | ||||
| 130,407 | * | Hologic, Inc. | $ 4,784,633 | |
| 25,461 | Honeywell International, Inc. | 3,608,842 | ||
| 102,485 | * | IHS Markit, Ltd. | 4,517,539 | |
| 23,070 | * | Incyte Corp. | 2,693,192 | |
| 111,571 | Intercontinental Exchange, Inc. | 7,664,928 | ||
| 131,343 | * | JetBlue Airways Corp. | 2,433,786 | |
| 518,949 | Kinder Morgan, Inc. | 9,953,442 | ||
| 300 | KLA-Tencor Corp. | 31,800 | ||
| 106,650 | Knight-Swift Transportation Holdings, Inc. | 4,431,308 | ||
| 43,006 | L Brands, Inc. | 1,789,480 | ||
| 49,872 | Marriott International, Inc. | 5,498,887 | ||
| 182,992 | MetLife, Inc. | 9,506,434 | ||
| 30,855 | * | Micron Technology, Inc. | 1,213,527 | |
| 25,412 | * | Netflix, Inc. | 4,608,466 | |
| 128,997 | NIKE, Inc. – Class “ B” | 6,688,494 | ||
| 43,364 | Northern Trust Corp. | 3,986,453 | ||
| 14,190 | NVIDIA Corp. | 2,536,746 | ||
| 34,642 | Old Dominion Freight Line, Inc. | 3,814,431 | ||
| 63,170 | * | Post Holdings, Inc. | 5,576,016 | |
| 55,590 | PPG Industries, Inc. | 6,040,409 | ||
| 3,220 | * | Priceline Group, Inc. | 5,895,240 | |
| 26,459 | Public Storage (REIT) | 5,661,961 | ||
| 84,550 | QUALCOMM, Inc. | 4,383,072 | ||
| 9,182 | * | Regeneron Pharmaceuticals, Inc. | 4,105,456 | |
| 58,922 | * | salesforce.com, Inc. | 5,504,493 | |
| 46,765 | * | ServiceNow, Inc. | 5,496,290 | |
| 47,300 | * | Spirit Airlines, Inc. | 1,580,293 | |
| 60,870 | * | Splunk, Inc. | 4,043,594 | |
| 75,560 | Teradyne, Inc. | 2,817,632 | ||
| 17,838 | * | Tesaro, Inc. | 2,302,886 | |
| 34,025 | Thermo Fisher Scientific, Inc. | 6,437,530 | ||
| 25,985 | * | TripAdvisor, Inc. | 1,053,172 | |
| 5,110 | * | Ulta Beauty, Inc. | 1,155,167 | |
| 9,049 | * | Ultimate Software Group, Inc. | 1,715,690 | |
| 40,506 | UnitedHealth Group, Inc. | 7,933,100 | ||
| 71,460 | Visa, Inc. – Class “A” | 7,520,450 | ||
| 31,762 | * | Workday, Inc. – Class “A” | 3,347,397 | |
| 348,450,547 | ||||
| 148 |
| Shares | Security | Value | ||
| France—6.2% | ||||
| 98,139 | * | Airbus SE | $ 9,326,743 | |
| 308,439 | AXA SA | 9,328,630 | ||
| 40,148 | BNP Paribas SA | 3,238,507 | ||
| 93,448 | Compagnie de Saint-Gobain SA | 5,568,666 | ||
| 53,596 | Safran SA | 5,475,521 | ||
| 39,864 | Valeo SA | 2,957,880 | ||
| 35,895,947 | ||||
| Japan—4.9% | ||||
| 173,140 | Itochu Corp. | 2,835,788 | ||
| 153,630 | Seven & I Holdings Co., Ltd. | 5,932,214 | ||
| 108,200 | SoftBank Group Corp. | 8,734,848 | ||
| 76,830 | Sumitomo Mitsui Financial Group, Inc. | 2,949,617 | ||
| 192,900 | Tokio Marine Holdings, Inc. | 7,546,286 | ||
| 27,998,753 | ||||
| China—4.7% | ||||
| 29,599 | * | Alibaba Group Holding, Ltd. (ADR) | 5,112,043 | |
| 76,660 | * | Ctrip.com International, Ltd. (ADR) | 4,043,048 | |
| 12,807 | NetEase, Inc. (ADR) | 3,378,615 | ||
| 60,144 | New Oriental Education & Technology Group, Inc. (ADR) | 5,308,309 | ||
| 352,000 | Ping An Insurance (Group) Co. of China, Ltd. | 2,701,418 | ||
| 157,610 | Tencent Holdings, Ltd. | 6,783,307 | ||
| 27,326,740 | ||||
| Spain—3.8% | ||||
| 1,434,995 | Banco Santander Central Hispano SA | 10,018,338 | ||
| 1,531,335 | Iberdrola SA | 11,894,497 | ||
| 21,912,835 | ||||
| United Kingdom—3.8% | ||||
| 287,037 | Aviva, PLC | 1,978,916 | ||
| 162,502 | British American Tobacco, PLC | 10,173,387 | ||
| 169,645 | * | Fiat Chrysler Automobiles NV | 3,039,615 | |
| 1,428,009 | * | Glencore, PLC | 6,544,268 | |
| 21,736,186 | ||||
| 149 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2017
| Shares | Security | Value | ||
| Switzerland—3.3% | ||||
| 162,067 | ABB, Ltd. | $ 4,006,696 | ||
| 63,476 | Nestle SA | 5,316,160 | ||
| 577,490 | * | UBS Group AG | 9,869,840 | |
| 19,192,696 | ||||
| Germany—1.9% | ||||
| 338,826 | Deutsche Bank AG | 5,858,674 | ||
| 123,871 | Vonovia SE | 5,270,483 | ||
| 11,129,157 | ||||
| Italy—1.9% | ||||
| 59,705 | Banca Generali SpA | 2,071,081 | ||
| 237,342 | FinecoBank Banca Fineco SpA | 2,103,847 | ||
| 309,639 | * | UniCredit SpA | 6,594,604 | |
| 10,769,532 | ||||
| Taiwan—1.8% | ||||
| 281,472 | Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | 10,569,274 | ||
| South Korea—1.5% | ||||
| 3,757 | Samsung Electronics Co., Ltd. | 8,410,484 | ||
| Hong Kong—1.0% | ||||
| 206,124 | Hong Kong Exchanges & Clearing, Ltd. | 5,541,252 | ||
| Netherlands—.9% | ||||
| 100,816 | * | AerCap Holdings NV | 5,152,706 | |
| India—.8% | ||||
| 1,101,964 | ICICI Bank, Ltd. | 4,666,308 | ||
| Canada—.5% | ||||
| 58,056 | Magna International, Inc. | 3,098,336 | ||
| Total Value of Common Stocks (cost $478,808,114) | 561,850,753 | |||
| 150 |
| Principal | |||||||
| Amount | Security | Value | |||||
| SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—1.6% | |||||||
| United States | |||||||
| Federal Home Loan Bank: | |||||||
| $7,500M | 1.02%, 10/20/2017 | $ 7,496,325 | |||||
| 1,500M | 1.025%, 11/9/2017 | 1,498,433 | |||||
| Total Value of Short-Term U.S. Government Agency Obligations (cost $8,994,294) | 8,994,758 | ||||||
| SHORT-TERM U.S. GOVERNMENT | |||||||
| OBLIGATIONS—.6% | |||||||
| United States | |||||||
| 3,500M | U.S. Treasury Bills, 0.935%, 10/26/2017 (cost $3,497,727) | 3,497,827 | |||||
| Total Value of Investments (cost $491,300,135) | 99.5 | % | 574,343,338 | ||||
| Other Assets, Less Liabilities | .5 | 3,113,753 | |||||
| Net Assets | 100.0 | % | $577,457,091 | ||||
| * | Non-income producing | |
| Summary of Abbreviations: | ||
| ADR | American Depositary Receipts | |
| REIT | Real Estate Investment Trust | |
The Global Fund had no open foreign exchange contracts at September 30, 2017.
| 151 |
Portfolio of Investments (continued)
GLOBAL FUND
September 30, 2017
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Common Stocks | ||||||||||||
| United States | $ | 348,450,547 | $ | — | $ | — | $ | 348,450,547 | ||||
| France | 35,895,947 | — | — | 35,895,947 | ||||||||
| Japan | 27,998,753 | — | — | 27,998,753 | ||||||||
| China | 27,326,740 | — | — | 27,326,740 | ||||||||
| Spain | 21,912,835 | — | — | 21,912,835 | ||||||||
| United Kingdom | 21,736,186 | — | — | 21,736,186 | ||||||||
| Switzerland | 19,192,696 | — | — | 19,192,696 | ||||||||
| Germany | 11,129,157 | — | — | 11,129,157 | ||||||||
| Italy | 10,769,532 | — | — | 10,769,532 | ||||||||
| Taiwan | 10,569,274 | — | — | 10,569,274 | ||||||||
| South Korea | 8,410,484 | — | — | 8,410,484 | ||||||||
| Hong Kong | 5,541,252 | — | — | 5,541,252 | ||||||||
| Netherlands | 5,152,706 | — | — | 5,152,706 | ||||||||
| India | 4,666,308 | — | — | 4,666,308 | ||||||||
| Canada | 3,098,336 | — | — | 3,098,336 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 8,994,758 | — | 8,994,758 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Obligations | — | 3,497,827 | — | 3,497,827 | ||||||||
| Total Investments in Securities | $ | 561,850,753 | $ | 12,492,585 | $ | — | $ | 574,343,338 |
| During the year ended September 30, 2017, there were no transfers between Level 1 investments |
| and Level 2 investments that had a material inpact to the Fund. This does not include transfers |
| between Level 1 investments and Level 2 investments due to the Fund utilizing international fair |
| value pricing during the period (see Note 1A). Transfers, if any, between Levels are recognized at |
| the end of the reporting period. |
| 152 | See notes to financial statements |
Portfolio Manager’s Letter
GROWTH & INCOME FUND
Dear Investor:
This is the annual report for the First Investors Growth & Income Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 13.99% for Class A shares, 13.14% for Class B shares, 14.42% for Advisor Class shares and 14.47% for Institutional Class shares, including dividends of 36.6 cents per share for Class A shares, 13.4 cents per share for Class B shares, 47.5 cents per share for Advisor Class shares and 45.3 cents per share for Institutional Class shares. In addition, the Fund distributed capital gains of 75.4 cents per share on each class of shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018. The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July
| 153 |
Portfolio Manager’s Letter (continued)
GROWTH & INCOME FUND
and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Equity Market
U.S. equities had strong performance during the past twelve months, posting several new records. The Dow Jones Industrial Average (DJIA) hit four major psychological milestones of 19,000 (on November 22nd), 20,000 (on January 25th), 21,000 (on March 1st) and 22,000 (on August 2nd). The S&P 500 Index and the DJIA returned 18.61% and 25.45% for the period, respectively. Market volatility remained at historically low levels for most of the period despite elevated political uncertainty.
Small-caps (measured by the Russell 2000 Index), growth stocks (the S&P 500 Growth Index) and value stocks (the S&P 500 Value Index) posted similar strong returns of 20.74%, 19.90% and 16.47%, respectively. However, they experienced significant intra-period differences as market leaders moved out of favor. In the fourth quarter of 2016, small-caps and value stocks rallied the most following the Trump victory as investors focused on the expected benefits from possible tax cuts, increased infrastructure spending and reduced financial regulations. Small-caps and several value sectors, including Financials, would be the greatest beneficiaries of these business friendly policies. In January, the “Trump Trade” faded and investors switched their focus to an improving economic outlook, which benefited most growth stocks and large-caps for most of 2017. In September, there was another rotation to small-caps and value stocks in the continuation of the “Trump-Trade” fueled by investors’ renewed hopes for pro-business policies from Washington.
Higher-yielding stocks lagged the general market, with the Dow Jones US Select Dividend Index returning 13.21%. Real estate as a whole came under pressure due to the rising interest rate environment, and as well publicized retail bankruptcies and store closures resulted in a sell-off of retail REITs. The Dow Jones US Select REIT Index lost 0.83%.
Ten out of eleven S&P 500 sectors ended the review period in positive territory. Financials, which would be one of the greatest beneficiaries from the combination of the higher interest rates and Trump’s pro-growth policies, was the strongest sector at 36.21%. Information Technology was the second strongest sector, up 28.88% as investors focused on an improving economic outlook. A stronger economy could magnify this sector’s growth potential. Conversely, Telecom Services was the weakest sector with a marginal loss of 0.14%, followed by Energy which was marginally positive at 0.16%.
| 154 |
International equities posted strong double-digit returns across all regions, supported by improving corporate earnings and economic data pointing to a healthy global economy. Developed markets (measured by the MSCI EAFE Index) and emerging markets (measured by the MSCI EM Index) returned 19.65% and 22.91%, respectively. Overall, the currency exchange effect was slightly positive.
The Fund
During the past year, the Fund’s results were driven by a generally favorable market backdrop characterized by extreme low volatility—a near repeat of last year, as the past 12 months witnessed no major corrections, nor hardly any memorable one day advances. After some brief volatility heading into last fall’s Presidential election, the markets have been on a steady grind upward since November.
While absolute performance was positive, relative performance of the Fund trailed the market benchmark. Stock selection was mixed, and sector allocations proved problematic as well. Among the sectors, Financial, Technology and Industrial represented the bright spots for the Fund, contributing most to absolute return for the review period. Investments in the Healthcare and Energy sectors also contributed to relative returns. Among the lagging contributors, underweights versus the benchmark hurt in the allocations within the Industrial and Financial sectors, and poor stock selection plagued performance in the Consumer Discretionary, Technology, Real Estate and Material sectors. Among market capitalization segments, the Fund’s large- and small-cap stocks underperformed the benchmark, while the mid-cap segments were in line. The Fund had allocated 68% of its holdings to large-cap, 16% to mid-cap and 16% to small-cap stocks (ranges defined by Lipper) as of September 30, 2017.
Among top individual performers was a long-time holding, Triton International, the leading lessor of ocean-going shipping containers, which rallied 170% on improved pricing, global trade activity, and market-share gains versus competitors. Within Technology, shares of global leaders advanced: Apple Computer (+47%), Microsoft (+32%), Applied Materials (+74%), and Western Digital (+47%), strongly reflecting solid smartphone innovation, as well as a rebound in enterprise computing and semiconductor spending. Financial firms benefited from improved capital markets activity and better lending margins. Shares of mega-cap stocks: JP Morgan Chase (+47%), PNC Financial (+53%) and American Express (+44%) led performance. Additionally, mid-cap names Ameriprise Financial (+53%) and Citizens Financial (+55%) also contributed positively.
Among top sector contributors, Healthcare names were most notable. Strong pharmaceutical results from leading arthritis drug, Humira, buoyed AbbVie (+46%) for the review period. Large-cap life science firm Thermo Fisher returned +19%, while diversified medical firm Abbott Labs returned +26% amidst healthy volumes and progress with the integration of its St. Jude medical acquisition. Animal Healthcare names also performed well, as positions in Zoetis (+23%) and Animal Health (+36%) contributed positively.
| 155 |
Portfolio Manager’s Letter (continued)
GROWTH & INCOME FUND
Among laggards, stock selection within the Consumer Discretionary and Real Estate sectors was the major disappointment this past year and hurt returns. Among Consumer names, shares of women’s retailer L Brands dropped 41% on weak lingerie sales at their flagship Victoria’s Secret chain, and a restructuring of product offerings and exiting mail order hurt sales and profits. Additionally, consumer goods firm Newell Brands dropped (–19%) late in the fiscal year, as hurricane related disruptions affected their supply chain, and the firm decided to accelerate new product investments. This had the effect of reducing near-term earnings, impacting share performance.
The Real Estate sector did not fare well: shares of strip-mall operator, Brixmor Property Group (–32%) and Tanger Factory Outlets (–37%) declined, as worries of proliferating Internet shopping via Amazon.com and weakened grocery chain and general retail traffic impacted investor valuations of this sector. Additionally, large-cap communications chip maker Qualcomm dropped (–24%), as its legal dispute with Apple Computer over royalties due for its cellphone chip continued to mount and remained unresolved. At the same time, its merger with fund holding semiconductor maker NXP Inc. is still held up with antitrust regulatory bodies, which delayed integration benefits and earnings accretion. This had the effect of keeping investors on the sidelines during a strong year of returns for Technology shares.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 156 |
Fund Expenses (unaudited)
GROWTH & INCOME FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.15% | |||
| Actual | $1,000.00 | $1,119.03 | $6.11 | |
| Hypothetical** | $1,000.00 | $1,019.30 | $5.82 | |
| Class B Shares | 1.92% | |||
| Actual | $1,000.00 | $1,131.44 | $10.26 | |
| Hypothetical** | $1,000.00 | $1,015.44 | $9.70 | |
| Advisor Class Shares | 0.77% | |||
| Actual | $1,000.00 | $1,144.19 | $4.14 | |
| Hypothetical** | $1,000.00 | $1,021.21 | $3.90 | |
| Institutional Class Shares | 0.74% | |||
| Actual | $1,000.00 | $1,144.73 | $3.98 | |
| Hypothetical** | $1,000.00 | $1,021.36 | $3.75 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 157 |
Cumulative Performance Information (unaudited)
GROWTH & INCOME FUND
Comparison of change in value of $10,000 investment in the First Investors Growth & Income Fund (Class A shares) and the Standard & Poor’s 500 Index.
The graph compares a $10,000 investment in the First Investors Growth & Income Fund (Class A shares) beginning 9/30/07 with a theoretical investment in the Standard & Poor’s 500 Index (the “Index”). The Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of such stocks, which represent all major industries. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
| 158 |
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Advisor Class and Institutional Class were waived or assumed. If such expenses had been paid by the Fund, the Advisor Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 10.45% and the Institutional Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 10.50%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Standard & Poor’s and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
† The Index return is for ten years. The Index return since inception of the Advisor Class shares and Institutional Class shares is 13.45%.
| 159 |
Portfolio of Investments
GROWTH & INCOME FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—98.4% | ||||
| Consumer Discretionary—14.5% | ||||
| 393,500 | Acushnet Holdings Corp. | $ 6,988,560 | ||
| 40,053 | Adient, PLC | 3,364,051 | ||
| 200,000 | Aramark Holdings Corp. | 8,122,000 | ||
| 325,000 | Big Lots, Inc. | 17,410,250 | ||
| 220,000 | BorgWarner, Inc. | 11,270,600 | ||
| 400,000 | CBS Corp. – Class “B” | 23,200,000 | ||
| 211,500 | Coach, Inc. | 8,519,220 | ||
| 100,000 | Delphi Automotive, PLC | 9,840,000 | ||
| 478,200 | DSW, Inc. – Class “A” | 10,271,736 | ||
| 250,000 | Ford Motor Co. | 2,992,500 | ||
| 180,000 | Home Depot, Inc. | 29,440,800 | ||
| 95,600 | HSN, Inc. | 3,733,180 | ||
| 255,000 | L Brands, Inc. | 10,610,550 | ||
| 50,000 | Lear Corp. | 8,654,000 | ||
| 230,000 | Magna International, Inc. | 12,277,400 | ||
| 300,000 | * | Michaels Cos., Inc. | 6,441,000 | |
| 327,550 | Newell Brands, Inc. | 13,976,558 | ||
| 144,800 | Oxford Industries, Inc. | 9,200,592 | ||
| 124,000 | Penske Automotive Group, Inc. | 5,898,680 | ||
| 21,500 | Ross Stores, Inc. | 1,388,255 | ||
| 176,900 | * | Select Comfort Corp. | 5,492,745 | |
| 292,300 | Tupperware Brands Corp. | 18,069,986 | ||
| 160,000 | Walt Disney Co. | 15,771,200 | ||
| 65,000 | Whirlpool Corp. | 11,988,600 | ||
| 4,200 | Williams-Sonoma, Inc. | 209,412 | ||
| 142,000 | Wyndham Worldwide Corp. | 14,968,220 | ||
| 270,100,095 | ||||
| Consumer Staples—9.4% | ||||
| 480,000 | Altria Group, Inc. | 30,441,600 | ||
| 355,000 | B&G Foods, Inc. | 11,306,750 | ||
| 360,000 | Coca-Cola Co. | 16,203,600 | ||
| 290,000 | CVS Health Corp. | 23,582,800 | ||
| 631,904 | Koninklijke Ahold Delhaize NV (ADR) | 11,797,648 | ||
| 150,000 | Nu Skin Enterprises, Inc. – Class “A” | 9,222,000 | ||
| 165,000 | PepsiCo, Inc. | 18,385,950 | ||
| 295,000 | Philip Morris International, Inc. | 32,747,950 | ||
| 105,000 | Procter & Gamble Co. | 9,552,900 | ||
| 160,000 | Wal-Mart Stores, Inc. | 12,502,400 | ||
| 175,743,598 | ||||
| 160 |
| Shares | Security | Value | ||
| Energy—6.0% | ||||
| 138,000 | Anadarko Petroleum Corp. | $ 6,741,300 | ||
| 35,000 | Chevron Corp. | 4,112,500 | ||
| 230,000 | ConocoPhillips | 11,511,500 | ||
| 175,000 | Devon Energy Corp. | 6,424,250 | ||
| 200,000 | ExxonMobil Corp. | 16,396,000 | ||
| 100,000 | Hess Corp. | 4,689,000 | ||
| 300,000 | Marathon Oil Corp. | 4,068,000 | ||
| 385,000 | Marathon Petroleum Corp. | 21,590,800 | ||
| 100,000 | Occidental Petroleum Corp. | 6,421,000 | ||
| 100,000 | PBF Energy, Inc. – Class “A” | 2,761,000 | ||
| 115,000 | Phillips 66 | 10,535,150 | ||
| 48,300 | Schlumberger, Ltd. | 3,369,408 | ||
| 379,000 | Suncor Energy, Inc. | 13,276,370 | ||
| 111,896,278 | ||||
| Financials—16.3% | ||||
| 275,000 | American Express Co. | 24,876,500 | ||
| 170,000 | American International Group, Inc. | 10,436,300 | ||
| 157,900 | Ameriprise Financial, Inc. | 23,449,729 | ||
| 21,818 | * | Brighthouse Financial, Inc. | 1,326,534 | |
| 130,000 | Chubb, Ltd. | 18,531,500 | ||
| 515,000 | Citizens Financial Group, Inc. | 19,503,050 | ||
| 75,000 | Comerica, Inc. | 5,719,500 | ||
| 325,000 | Discover Financial Services | 20,956,000 | ||
| 550,000 | Financial Select Sector SPDR Fund (ETF) | 14,223,000 | ||
| 143,700 | Hamilton Lane, Inc. – Class “A” | 3,858,345 | ||
| 179,200 | IBERIABANK Corp. | 14,721,280 | ||
| 55,000 | iShares Russell 2000 ETF (ETF) | 8,149,900 | ||
| 431,730 | JPMorgan Chase & Co. | 41,234,532 | ||
| 240,000 | MetLife, Inc. | 12,468,000 | ||
| 56,300 | Morgan Stanley | 2,711,971 | ||
| 150,000 | PNC Financial Services Group, Inc. | 20,215,500 | ||
| 250,000 | SPDR S&P Regional Banking (ETF) | 14,190,000 | ||
| 480,000 | Sterling Bancorp | 11,832,000 | ||
| 355,000 | U.S. Bancorp | 19,024,450 | ||
| 287,050 | Wells Fargo & Co. | 15,830,808 | ||
| 303,258,899 | ||||
| 161 |
Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2017
| Shares | Security | Value | ||
| Health Care—15.7% | ||||
| 425,000 | Abbott Laboratories | $ 22,678,000 | ||
| 335,000 | AbbVie, Inc. | 29,768,100 | ||
| 20,000 | Allergan, PLC | 4,099,000 | ||
| 190,000 | * | AMN Healthcare Services, Inc. | 8,683,000 | |
| 168,669 | Baxter International, Inc. | 10,583,980 | ||
| 96,000 | * | Centene Corp. | 9,289,920 | |
| 220,000 | Gilead Sciences, Inc. | 17,824,400 | ||
| 91,300 | Hill-Rom Holdings, Inc. | 6,756,200 | ||
| 270,625 | Johnson & Johnson | 35,183,956 | ||
| 200,000 | Koninklijke Philips NV (ADR) | 8,240,000 | ||
| 9,375 | * | Mallinckrodt, PLC | 350,344 | |
| 125,000 | Medtronic, PLC | 9,721,250 | ||
| 325,000 | Merck & Co., Inc. | 20,809,750 | ||
| 869,301 | Pfizer, Inc. | 31,034,046 | ||
| 298,100 | Phibro Animal Health Corp. – Class “A” | 11,044,605 | ||
| 64,162 | Shire, PLC (ADR) | 9,825,769 | ||
| 200,000 | Thermo Fisher Scientific, Inc. | 37,840,000 | ||
| 100,000 | * | VWR Corp. | 3,311,000 | |
| 260,000 | Zoetis, Inc. | 16,577,600 | ||
| 293,620,920 | ||||
| Industrials—11.1% | ||||
| 125,000 | 3M Co. | 26,237,500 | ||
| 60,000 | Apogee Enterprises, Inc. | 2,895,600 | ||
| 223,200 | * | Gardner Denver Holdings, Inc. | 6,142,464 | |
| 525,000 | General Electric Co. | 12,694,500 | ||
| 209,700 | Honeywell International, Inc. | 29,722,878 | ||
| 55,000 | Ingersoll-Rand, PLC | 4,904,350 | ||
| 505,530 | Johnson Controls International, PLC | 20,367,804 | ||
| 20,000 | Lockheed Martin Corp. | 6,205,800 | ||
| 80,000 | ManpowerGroup, Inc. | 9,425,600 | ||
| 340,100 | Masco Corp. | 13,267,301 | ||
| 63,200 | * | MasTec, Inc. | 2,932,480 | |
| 110,100 | Owens Corning | 8,516,235 | ||
| 431,000 | Schneider National, Inc. – Class “B” | 10,904,300 | ||
| 65,000 | Snap-On, Inc. | 9,685,650 | ||
| 45,000 | Stanley Black & Decker, Inc. | 6,793,650 | ||
| 585,000 | * | Triton International, Ltd. | 19,468,800 | |
| 150,000 | United Technologies Corp. | 17,412,000 | ||
| 207,576,912 | ||||
| 162 |
| Shares | Security | Value | ||
| Information Technology—18.0% | ||||
| 310,000 | Apple, Inc. | $ 47,777,200 | ||
| 325,000 | Applied Materials, Inc. | 16,929,250 | ||
| 390,700 | * | ARRIS International, PLC | 11,131,043 | |
| 41,300 | Belden, Inc. | 3,325,889 | ||
| 60,000 | Broadcom, Ltd. | 14,552,400 | ||
| 900,000 | Cisco Systems, Inc. | 30,267,000 | ||
| 105,887 | * | Dell Technologies, Inc. – Class “V” | 8,175,535 | |
| 36,509 | DXC Technology Co. | 3,135,392 | ||
| 250,000 | * | eBay, Inc. | 9,615,000 | |
| 80,000 | * | FleetCor Technologies, Inc. | 12,381,600 | |
| 583,775 | Intel Corp. | 22,230,152 | ||
| 75,000 | Methode Electronics, Inc. | 3,176,250 | ||
| 625,000 | Microsoft Corp. | 46,556,250 | ||
| 230,000 | NetApp, Inc. | 10,064,800 | ||
| 125,000 | * | NXP Semiconductors NV | 14,136,250 | |
| 350,000 | Oracle Corp. | 16,922,500 | ||
| 320,000 | QUALCOMM, Inc. | 16,588,800 | ||
| 400,000 | Symantec Corp. | 13,124,000 | ||
| 85,400 | TE Connectivity, Ltd. | 7,093,324 | ||
| 85,000 | * | Tech Data Corp. | 7,552,250 | |
| 280,000 | Travelport Worldwide, Ltd. | 4,396,000 | ||
| 185,000 | Western Digital Corp. | 15,984,000 | ||
| 335,114,885 | ||||
| Materials—2.4% | ||||
| 2,900 | Eastman Chemical Co. | 262,421 | ||
| 275,000 | International Paper Co. | 15,625,500 | ||
| 60,000 | Praxair, Inc. | 8,384,400 | ||
| 135,000 | RPM International, Inc. | 6,930,900 | ||
| 200,000 | Sealed Air Corp. | 8,544,000 | ||
| 79,500 | Trinseo SA | 5,334,450 | ||
| 45,081,671 | ||||
| Real Estate—1.8% | ||||
| 725,000 | Brixmor Property Group, Inc. (REIT) | 13,630,000 | ||
| 76,530 | Real Estate Select Sector SPDR Fund (ETF) | 2,467,327 | ||
| 389,200 | Tanger Factory Outlet Centers, Inc. (REIT) | 9,504,264 | ||
| 373,500 | Urstadt Biddle Properties, Inc. – Class “A” (REIT) | 8,104,950 | ||
| 33,706,541 | ||||
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Portfolio of Investments (continued)
GROWTH & INCOME FUND
September 30, 2017
| Shares or | |||||||
| Principal | |||||||
| Amount | Security | Value | |||||
| Telecommunication Services—2.2% | |||||||
| 530,000 | AT&T, Inc. | $ 20,760,100 | |||||
| 425,000 | Verizon Communications, Inc. | 21,033,250 | |||||
| 41,793,350 | |||||||
| Utilities—1.0% | |||||||
| 450,000 | Exelon Corp. | 16,951,500 | |||||
| 81,200 | NiSource, Inc. | 2,077,908 | |||||
| 19,029,408 | |||||||
| Total Value of Common Stocks (cost $1,092,241,910) | 1,836,922,557 | ||||||
| SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—1.1% | |||||||
| Federal Home Loan Bank: | |||||||
| $1,500M | 1.005%, 10/17/2017 | 1,499,388 | |||||
| 3,500M | 1.015%, 10/19/2017 | 3,498,380 | |||||
| 6,000M | 1.02%, 10/20/2017 | 5,997,060 | |||||
| 5,000M | 1.021%, 10/27/2017 | 4,996,595 | |||||
| 2,500M | 1.02%, 10/30/2017 | 2,498,095 | |||||
| 3,000M | 1.025%, 11/9/2017 | 2,996,865 | |||||
| Total Value of Short-Term Corporate Notes (cost $21,485,242) | 21,486,383 | ||||||
| SHORT-TERM CORPORATE NOTES—.2% | |||||||
| 4,000M | Coca-Cola Co., 1.26%, 12/8/2017 (cost $3,990,457) (a) | 3,991,094 | |||||
| SHORT-TERM U.S. GOVERNMENT | |||||||
| OBLIGATIONS—.2% | |||||||
| 3,000M | U.S. Treasury Bills, 0.935%, 10/26/2017 (cost $2,998,052) | 2,998,138 | |||||
| Total Value of Investments (cost $1,120,715,661) | 99.9 | % | 1,865,398,172 | ||||
| Other Assets, Less Liabilities | .1 | 2,192,389 | |||||
| Net Assets | 100.0 | % | $1,867,590,561 | ||||
| * | Non-income producing | |
| (a) | Security exempt from registration under Section 4(2) of the Securities Act of 1933 (see Note 4). | |
| Summary of Abbreviations: | ||
| ADR | American Depositary Receipts | |
| ETF | Exchange Traded Fund | |
| REIT | Real Estate Investment Trust | |
| 164 |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Common Stocks | $ | 1,836,922,557 | $ | — | $ | — | $ | 1,836,922,557 | ||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 21,486,383 | — | 21,486,383 | ||||||||
| Short-Term Corporate Notes | — | 3,991,094 | — | 3,991,094 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Obligations | — | 2,998,138 | — | 2,998,138 | ||||||||
| Total Investments in Securities* | $ | 1,836,922,557 | $ | 28,475,615 | $ | — | $ | 1,865,398,172 |
| * | The Portfolio of Investments provides information on the industry categorization for common stocks. |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| See notes to financial statements | 165 |
Portfolio Managers’ Letter
HEDGED U.S. EQUITY OPPORTUNITIES FUND
Dear Investor:
This is the annual report for the First Investors Hedged U.S. Equity Opportunities Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 8.68% for Class A shares, 9.11% for Advisor Class shares and 9.21% for Institutional Class shares, including dividends of 0.2 cents per share for Advisor Class shares, 0.2 cents per share for Institutional Class and none on Class A shares.
The Fund
U.S. equities rose for the eighth-straight quarter. Despite continued White House turmoil and heightened U.S. tensions with Russia and North Korea, strong employment data and corporate earnings helped propel equity indices. The persistently low rate of inflation growth has been a concern for the Federal Reserve (“the Fed”) even though the economic landscape has remained largely positive. Core consumer price inflation (“CPI”) rose 0.2% in August after five consecutive months of downside surprises, providing some relief for the Fed and increasing expectations for interest-rate increases at the end of the year and in 2018. In a widely anticipated move, the Fed announced that its balance-sheet normalization program would begin in October, reiterating that the process would be gradual and predictable. In the wake of their failure to repeal the Affordable Care Act, Republicans pivoted to tax reform and unveiled a long-awaited blueprint in September. Economic data released during the most recent quarter was generally encouraging.
The Fund underperformed its custom benchmark (70% Russell 3000, 30% BofA ML U.S. 3-Month Treasury Bill Index) for the period under review. Security selection, particularly within the Healthcare, Financial, and Industrial sectors, detracted from relative performance. Medical device company, Dexcom, was a top detractor during the period. The stock fell sharply after Abbott announced the launch of a competitive product. We maintained a favorable view on Dexcom’s differentiated technology and R&D partnerships, including collaborations with Insulet and Google, and remained invested in the stock as of the end of the review period. Overweight exposure to the Consumer Staples and Utilities sectors also detracted from relative results. Positive selection within the Consumer Discretionary, Materials, and Consumer Staples sectors partially offset these results.
The beta hedge, which is designed to reduce the Fund’s equity exposure through selling futures on U.S. indices, detracted from results as the U.S. indices were up during the period under review. The Fund’s tail risk management strategy, which is designed to reduce the risk of loss during sharp market declines, detracted from results as the S&P 500 Index advanced during the period.
| 166 |
As the U.S. continues to trend toward later stages of the economic cycle, stable growth is driving market gain. Corporate fundamentals, including earnings momentum, remain strong. A number of drivers are providing comfort to current conditions, including continued low inflation, market stability, higher-profit margins and the optionality of tax reform and increased rates.
Conversely, ongoing geopolitical concerns, Fed leadership uncertainty, and a sustained low-volatility environment are helping to offset positive sentiment. From a factor perspective, we favor value in the U.S. on a relative basis. We are also cautious on traditional growth strategies following the sustained and narrow market leadership of technology “FANG” (Facebook, Amazon, Netflix, and Alphabet (Google)) stocks in the U.S. Low volatility looks expensive, having begun resurgence late in the second quarter, but without a clear and immediate catalyst for reversion, we believe it remains a good way to reduce risk with overweight value and growth strategies. As factor leadership rotates, factor breadth (measured by the number of factors needed to explain at least 60% of variance) has continued to increase. At the stock level, the number of stocks outperforming the market by more than 25% on a rolling 12-month basis (a measure of broader market breadth) has come off of its lows, but remains narrow. Together, these suggest an improving environment for fundamental stock pickers.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 167 |
Fund Expenses (unaudited)
HEDGED U.S. EQUITY OPPORTUNITIES FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.75% | |||
| Actual | $1,000.00 | $1,086.78 | $9.15 | |
| Hypothetical** | $1,000.00 | $1,016.30 | $8.85 | |
| Advisor Class Shares | 1.42% | |||
| Actual | $1,000.00 | $1,091.06 | $7.44 | |
| Hypothetical** | $1,000.00 | $1,017.95 | $7.18 | |
| Institutional Class Shares | 1.31% | |||
| Actual | $1,000.00 | $1,092.05 | $6.87 | |
| Hypothetical** | $1,000.00 | $1,018.50 | $6.63 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total value of investments. |
| 168 |
Cumulative Performance Information (unaudited)
HEDGED U.S. EQUITY OPPORTUNITIES FUND
Comparison of change in value of $10,000 investment in the First Investors Hedged U.S. Equity Opportunities Fund (Class A shares), the Russell 3000 Index and The BofA Merrill Lynch U.S. T-Bill 0-3 Month Index.
The graph compares a $10,000 investment in the First Investors Hedged U.S. Equity Opportunities Fund (Class A shares) beginning 8/1/16 (commencement of operations) with theoretical investments in the Russell 3000 Index and the BofA Merrill Lynch U.S. T-Bill 0-3 Month Index (the “Indices”). The Russell 3000 Index is a market capitalization weighted equity index that provides exposure to the entire U.S. stock market. The index tracks the performance of the 3,000 largest U.S.-traded stocks which represent about 98% of all U.S incorporated equity securities. The BofA Merrill Lynch U.S. T-Bill 0-3 Month Index tracks the performance of the U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market with a remaining term to final maturity of less than 3 months. It is not possible to invest directly in these Indices. In addition, the Indices do not reflect fees and expenses
| 169 |
Cumulative Performance Information (unaudited) (continued)
HEDGED U.S. EQUITY OPPORTUNITIES FUND
associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 2.12% and (0.93%), respectively. The Advisor Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 8.76% and 4.94%, respectively. The Institutional Class “S.E.C. Standardized” Average Annual Total Return for One Year and Since Inception would have been 8.74% and 4.99%, respectively. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from FTSE Russell and Bank of America and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Class A shares, Advisor Class shares and Institutional Class shares are for the period beginning 8/1/16 (commencement of operations).
| 170 |
Portfolio of Investments (continued)
HEDGED U.S. EQUITY OPPORTUNITIES FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—92.7% | ||||
| Consumer Discretionary—10.6% | ||||
| 5,152 | * | CarMax, Inc. | $ 390,573 | |
| 4,734 | Choice Hotels International, Inc. | 302,503 | ||
| 2,355 | Coach, Inc. | 94,859 | ||
| 5,820 | D.R. Horton, Inc. | 232,393 | ||
| 1,985 | Expedia, Inc. | 285,721 | ||
| 3,900 | General Motors Corp. | 157,482 | ||
| 404,339 | * | Global Brands Group Holding, Ltd. (Hong Kong) | 38,821 | |
| 5,212 | Goodyear Tire & Rubber Co. | 173,299 | ||
| 3,910 | Harley-Davidson, Inc. | 188,501 | ||
| 6,709 | Hilton, Inc. | 465,940 | ||
| 1,051 | John Wiley & Sons, Inc. – Class “A” | 56,229 | ||
| 2,025 | L Brands, Inc. | 84,260 | ||
| 2,496 | Las Vegas Sands Corp. | 160,143 | ||
| 2,327 | McDonald’s Corp. | 364,594 | ||
| 2,380 | * | Netflix, Inc. | 431,613 | |
| 14,299 | NIKE, Inc. – Class “B” | 741,403 | ||
| 2,957 | * | Norwegian Cruise Line Holdings, Ltd. | 159,826 | |
| 232 | * | NVR, Inc. | 662,360 | |
| 1,389 | Omnicom Group, Inc. | 102,883 | ||
| 352 | * | Priceline Group, Inc. | 644,449 | |
| 6,752 | SES SA (Luxembourg) | 147,712 | ||
| 2,557 | Time Warner, Inc. | 261,965 | ||
| 5,984 | TJX Companies, Inc. | 441,200 | ||
| 3,644 | Toll Brothers, Inc. | 151,117 | ||
| 906 | * | Ulta Beauty, Inc. | 204,810 | |
| 1,476 | VF Corp. | 93,829 | ||
| 3,657 | Walt Disney Co. | 360,470 | ||
| 3,236 | * | Wayfair, Inc. – Class “A” | 218,106 | |
| 3,989 | Wynn Resorts, Ltd. | 594,042 | ||
| 2,054 | Yum! Brands, Inc. | 151,195 | ||
| 8,362,298 | ||||
| Consumer Staples—7.7% | ||||
| 5,198 | Altria Group, Inc. | 329,657 | ||
| 3,147 | British American Tobacco, PLC (United Kingdom) | 197,017 | ||
| 1,610 | Campbell Soup Co. | 75,380 | ||
| 810 | Clorox Co. | 106,847 | ||
| 9,504 | Coca-Cola Co. | 427,775 | ||
| 7,105 | Colgate-Palmolive Co. | 517,599 | ||
| 2,709 | Costco Wholesale Corp. | 445,062 | ||
| 6,597 | Coty, Inc. – Class “A” | 109,048 | ||
| 171 |
Portfolio of Investments (continued)
HEDGED U.S. EQUITY OPPORTUNITIES FUND
September 30, 2017
| Shares | Security | Value | ||
| Consumer Staples (continued) | ||||
| 17,310 | Diageo, PLC (United Kingdom) | $ 568,982 | ||
| 1,172 | Dr. Pepper Snapple Group, Inc. | 103,687 | ||
| 2,656 | General Mills, Inc. | 137,475 | ||
| 1,743 | Hershey Co. | 190,283 | ||
| 3,498 | * | Hostess Brands, Inc. | 47,783 | |
| 1,366 | Kimberly-Clark Corp. | 160,751 | ||
| 2,483 | Kraft Heinz Co. | 192,557 | ||
| 8,106 | Kroger Co. | 162,606 | ||
| 880 | McCormick & Co., Inc. | 90,323 | ||
| 7,459 | * | Monster Beverage Corp. | 412,110 | |
| 3,408 | PepsiCo, Inc. | 379,753 | ||
| 5,080 | Procter & Gamble Co. | 462,178 | ||
| 5,597 | * | Simply Good Foods Co. | 65,541 | |
| 7,359 | Walgreens Boots Alliance, Inc. | 568,262 | ||
| 3,688 | Wal-Mart Stores, Inc. | 288,180 | ||
| 6,038,856 | ||||
| Energy—2.1% | ||||
| 2,845 | Anadarko Petroleum Corp. | 138,978 | ||
| 3,189 | Canadian Natural Resources, Ltd. (Canada) | 106,800 | ||
| 1,070 | Cimarex Energy Co. | 121,627 | ||
| 3,797 | * | Diamondback Energy, Inc. | 371,954 | |
| 3,257 | Halliburton Co. | 149,920 | ||
| 1,089 | Helmerich & Payne, Inc. | 56,748 | ||
| 1,482 | Hess Corp. | 69,491 | ||
| 3,678 | HollyFrontier Corp. | 132,298 | ||
| 5,800 | * | Laredo Petroleum, Inc. | 74,994 | |
| 4,826 | Marathon Oil Corp. | 65,441 | ||
| 6,865 | * | Newfield Exploration Co. | 203,685 | |
| 516 | Pioneer Natural Resources Co. | 76,131 | ||
| 5,130 | * | Southwestern Energy Co. | 31,344 | |
| 9,831 | * | Trican Well Service, Ltd. (Canada) | 35,928 | |
| 1,715 | World Fuel Services Corp. | 58,156 | ||
| 1,693,495 | ||||
| Financials—16.6% | ||||
| 1,927 | Aflac, Inc. | 156,839 | ||
| 237 | * | Alleghany Corp. | 131,300 | |
| 1,701 | Allstate Corp. | 156,339 | ||
| 7,171 | American Express Co. | 648,689 | ||
| 868 | American Financial Group, Inc. | 89,795 | ||
| 3,255 | American International Group, Inc. | 199,824 | ||
| 172 |
| Shares | Security | Value | ||
| Financials (continued) | ||||
| 1,328 | Aon, PLC | $ 194,021 | ||
| 3,782 | Arthur J. Gallagher & Co. | 232,782 | ||
| 1,685 | * | Berkshire Hathaway, Inc. – Class “B” | 308,894 | |
| 1,114 | BlackRock, Inc. | 498,058 | ||
| 718 | * | Brighthouse Financial, Inc. | 43,654 | |
| 4,854 | Chubb, Ltd. | 691,938 | ||
| 11,894 | Citigroup, Inc. | 865,170 | ||
| 10,321 | CNO Financial Group, Inc. | 240,892 | ||
| 4,358 | Comerica, Inc. | 332,341 | ||
| 844 | * | Credit Acceptance Corp. | 236,463 | |
| 1,410 | FactSet Research Systems, Inc. | 253,955 | ||
| 449 | Fairfax Financial Holdings, Ltd. (Canada) | 233,660 | ||
| 287 | First Citizens BancShares, Inc. | 107,306 | ||
| 2,241 | First Republic Bank | 234,095 | ||
| 2,990 | IBERIABANK Corp. | 245,628 | ||
| 2,367 | Loews Corp. | 113,285 | ||
| 4,612 | M&T Bank Corp. | 742,716 | ||
| 612 | * | Markel Corp. | 653,604 | |
| 5,394 | Marsh & McLennan Cos., Inc. | 452,071 | ||
| 7,501 | MetLife, Inc. | 389,677 | ||
| 719 | Moody’s Corp. | 100,092 | ||
| 4,496 | * | Ocelot Partners, Ltd. (Virgin Islands) | 44,106 | |
| 7,956 | PNC Financial Services Group, Inc. | 1,072,230 | ||
| 1,426 | Principal Financial Group, Inc. | 91,749 | ||
| 3,297 | Progressive Corp. | 159,641 | ||
| 744 | Raymond James Financial, Inc. | 62,742 | ||
| 2,102 | Reinsurance Group of America, Inc. | 293,292 | ||
| 539 | RenaissanceRe Holdings, Ltd. | 72,840 | ||
| 13,238 | TD Ameritrade Holding Corp. | 646,014 | ||
| 999 | Torchmark Corp. | 80,010 | ||
| 1,255 | Travelers Cos., Inc. | 153,763 | ||
| 6,335 | Unum Group | 323,909 | ||
| 989 | W.R. Berkley Corp. | 66,006 | ||
| 6,591 | Wells Fargo & Co. | 363,494 | ||
| 211 | White Mountain Insurance Group | 180,827 | ||
| 12,708 | XL Group, Ltd. | 501,331 | ||
| 7,382 | Zions Bancorp. | 348,283 | ||
| 13,013,325 | ||||
| 173 |
Portfolio of Investments (continued)
HEDGED U.S. EQUITY OPPORTUNITIES FUND
September 30, 2017
| Shares | Security | Value | ||
| Health Care—12.9% | ||||
| 3,823 | * | Acadia Healthcare Co., Inc. | $ 182,586 | |
| 3,701 | Agilent Technologies, Inc. | 237,604 | ||
| 2,064 | * | Alder Biopharmaceuticals, Inc. | 25,284 | |
| 4,352 | * | Alkermes, PLC (Ireland) | 221,256 | |
| 668 | Allergan, PLC | 136,907 | ||
| 1,680 | * | AMN Healthcare Services, Inc. | 76,776 | |
| 8,240 | AstraZeneca, PLC (ADR) (United Kingdom) | 279,171 | ||
| 3,775 | Baxter International, Inc. | 236,881 | ||
| 891 | Becton, Dickinson & Co. | 174,591 | ||
| 176 | * | BeiGene, Ltd. (China) | 18,209 | |
| 348 | * | Biogen, Inc. | 108,966 | |
| 22,562 | Bristol-Myers Squibb Co. | 1,438,102 | ||
| 402 | C.R. Bard, Inc. | 128,841 | ||
| 6,505 | Cardinal Health, Inc. | 435,315 | ||
| 2,235 | Danaher Corp. | 191,718 | ||
| 5,366 | * | DexCom, Inc. | 262,532 | |
| 3,538 | * | Edwards Lifesciences Corp. | 386,739 | |
| 737 | Eli Lilly & Co. | 63,043 | ||
| 5,659 | * | Envision Healthcare Corp. | 254,372 | |
| 3,100 | * | Exact Sciences Corp. | 146,072 | |
| 11,346 | * | Hologic, Inc. | 416,285 | |
| 1,494 | * | Incyte Corp. | 174,410 | |
| 4,630 | * | Ionis Pharmaceuticals, Inc. | 234,741 | |
| 4,265 | Johnson & Johnson | 554,493 | ||
| 1,826 | * | Laboratory Corp. of America Holdings | 275,671 | |
| 4,098 | McKesson Corp. | 629,494 | ||
| 7,124 | Medtronic, PLC | 554,033 | ||
| 4,441 | Merck & Co., Inc. | 284,357 | ||
| 397 | Mettler Toledo International, Inc. | 248,586 | ||
| 4,635 | * | Mylan NV (Netherlands) | 145,400 | |
| 12,848 | Pfizer, Inc. | 458,674 | ||
| 937 | Quest Diagnostics, Inc. | 87,741 | ||
| 653 | * | Regeneron Pharmaceuticals, Inc. | 291,969 | |
| 1,114 | STERIS, PLC | 98,478 | ||
| 238 | Teleflex, Inc. | 57,589 | ||
| 1,925 | * | Tesaro, Inc. | 248,517 | |
| 1,845 | UnitedHealth Group, Inc. | 361,343 | ||
| 10,126,746 | ||||
| 174 |
| Shares | Security | Value | ||
| Industrials—12.2% | ||||
| 1,433 | 3M Co. | $ 300,787 | ||
| 2,618 | Alaska Air Group, Inc. | 199,675 | ||
| 5,134 | Allison Transmission Holdings, Inc. | 192,679 | ||
| 946 | AMERCO | 354,655 | ||
| 8,456 | Canadian National Railway Co. (Canada) | 700,606 | ||
| 2,330 | Cintas Corp. | 336,172 | ||
| 3,799 | * | Clean Harbors, Inc. | 215,403 | |
| 8,043 | CSX Corp. | 436,413 | ||
| 200 | Dun & Bradstreet Corp. | 23,282 | ||
| 1,289 | Eaton Corp., PLC | 98,982 | ||
| 1,044 | Equifax, Inc. | 110,654 | ||
| 3,218 | Fastenal Co. | 146,676 | ||
| 1,062 | General Dynamics Corp. | 218,326 | ||
| 11,331 | * | Genesee & Wyoming, Inc. – Class “A” | 838,607 | |
| 3,063 | Herman Miller, Inc. | 109,962 | ||
| 2,346 | Honeywell International, Inc. | 332,522 | ||
| 3,217 | IDEX Corp. | 390,769 | ||
| 919 | J. B. Hunt Transport Services, Inc. | 102,083 | ||
| 6,367 | Knight-Swift Transportation Holdings, Inc. | 264,549 | ||
| 2,443 | Lennox International, Inc. | 437,224 | ||
| 1,207 | Lockheed Martin Corp. | 374,520 | ||
| 6,900 | Milacron Holdings Corp. | 116,334 | ||
| 1,090 | * | Moog, Inc. | 90,939 | |
| 672 | Northrop Grumman Corp. | 193,348 | ||
| 3,985 | PACCAR, Inc. | 288,275 | ||
| 1,198 | Raytheon Co. | 223,523 | ||
| 1,596 | Republic Services, Inc. | 105,432 | ||
| 7,743 | Sanwa Holdings Corp. (Japan) | 88,835 | ||
| 7,749 | Steelcase, Inc. | 119,335 | ||
| 5,195 | * | TransUnion | 245,516 | |
| 1,125 | UniFirst Corp. | 170,438 | ||
| 4,246 | Union Pacific Corp. | 492,409 | ||
| 5,921 | United Parcel Service, Inc. – Class “B” | 711,053 | ||
| 2,576 | United Technologies Corp. | 299,022 | ||
| 1,422 | * | Verisk Analytics, Inc. | 118,296 | |
| 2,027 | Waste Management, Inc. | 158,653 | ||
| 9,605,954 | ||||
| 175 |
Portfolio of Investments (continued)
HEDGED U.S. EQUITY OPPORTUNITIES FUND
September 30, 2017
| Shares | Security | Value | |
| Information Technology—17.9% | |||
| 6,032 | * | Acacia Communications, Inc. | $ 284,107 |
| 3,798 | Accenture, PLC – Class “A” | 512,996 | |
| 2,663 | * | Adobe Systems, Inc. | 397,266 |
| 21,253 | * | Advanced Micro Devices, Inc. | 270,976 |
| 1,482 | * | Alibaba Group Holding, Ltd. (China) | 255,956 |
| 653 | * | Alphabet, Inc. – Class “C” | 626,299 |
| 1,170 | Amdocs, Ltd. | 75,254 | |
| 1,679 | Amphenol Corp. | 142,111 | |
| 1,594 | * | Arista Networks, Inc. | 302,238 |
| 2,518 | * | Arrow Electronics, Inc. | 202,472 |
| 2,534 | * | Autodesk, Inc. | 284,467 |
| 2,299 | * | Black Knight Financial Services, Inc. – Class “A” | 98,972 |
| 5,477 | Booz Allen Hamilton Holdings Corp. | 204,785 | |
| 3,936 | CDW Corp. | 259,776 | |
| 3,378 | Cisco Systems, Inc. | 113,602 | |
| 4,644 | * | CommScope Holding Co., Inc. | 154,227 |
| 2,686 | * | CoStar Group, Inc. | 720,519 |
| 4,510 | * | Facebook, Inc. – Class “A” | 770,624 |
| 1,854 | Fidelity National Information Services, Inc. | 173,145 | |
| 1,105 | * | Fiserv, Inc. | 142,501 |
| 1,707 | * | FleetCor Technologies, Inc. | 264,192 |
| 13,039 | Genpact, Ltd. | 374,871 | |
| 2,644 | Global Payments, Inc. | 251,259 | |
| 2,300 | * | GoDaddy, Inc. – Class “A” | 100,073 |
| 2,257 | Harris Corp. | 297,202 | |
| 28,881 | * | Just Eat, PLC (United Kingdom) | 258,713 |
| 2,600 | * | Keysight Technologies, Inc. | 108,316 |
| 4,733 | Microchip Technology, Inc. | 424,929 | |
| 9,720 | Microsoft Corp. | 724,043 | |
| 2,059 | Motorola Solutions, Inc. | 174,747 | |
| 2,680 | NVIDIA Corp. | 479,104 | |
| 7,063 | * | PayPal Holdings, Inc. | 452,244 |
| 5,541 | QUALCOMM, Inc. | 287,245 | |
| 6,117 | * | ServiceNow, Inc. | 718,931 |
| 5,733 | Silicon Motion Technology Corp. (ADR) (Taiwan) | 275,356 | |
| 492 | Skyworks Solutions, Inc. | 50,135 | |
| 5,738 | * | Trimble, Inc. | 225,216 |
| 4,432 | * | VeriSign, Inc. | 471,520 |
| 4,166 | Visa, Inc. | 438,430 | |
| 1,722 | Western Digital Corp. | 148,781 | |
| 5,536 | Workday, Inc. – Class “A” | 583,439 | |
| 176 |
| Shares | Security | Value | ||
| Information Technology (continued) | ||||
| 7,624 | * | Yandex NV – Class “A” (Russia) | $ 251,211 | |
| 7,051 | * | Zillow Group, Inc. – Class “A” | 283,098 | |
| 9,410 | * | Zillow Group, Inc. – Class “C” | 378,376 | |
| 14,013,724 | ||||
| Materials—4.4% | ||||
| 4,100 | * | Alcoa Corp. | 191,142 | |
| 4,419 | Ball Corp. | 182,505 | ||
| 4,659 | Celanese Corp. – Class “A” | 485,794 | ||
| 2,993 | CRH, PLC (Ireland) | 113,781 | ||
| 1,176 | Ecolab, Inc. | 151,245 | ||
| 7,815 | International Paper Co. | 444,048 | ||
| 2,053 | Packaging Corp. of America | 235,438 | ||
| 24,685 | * | Platform Specialty Products Corp. | 275,238 | |
| 983 | PPG Industries, Inc. | 106,813 | ||
| 2,188 | Praxair, Inc. | 305,751 | ||
| 4,746 | Reliance Steel & Aluminum Co. | 361,503 | ||
| 658 | Sherwin-Williams Co. | 235,590 | ||
| 5,025 | Silgan Holdings, Inc. | 147,886 | ||
| 1,520 | Southern Copper Corp. (Peru) | 60,435 | ||
| 1,678 | Westlake Chemical Corp. | 139,425 | ||
| 3,436,594 | ||||
| Real Estate—2.6% | ||||
| 2,286 | American Tower Corp. (REIT) | 312,450 | ||
| 5,092 | Columbia Property Trust, Inc. (REIT) | 110,853 | ||
| 8,733 | Host Hotels & Resorts, Inc. (REIT) | 161,473 | ||
| 2,159 | PS Business Park, Inc. (REIT) | 288,226 | ||
| 2,925 | Public Storage (REIT) | 625,921 | ||
| 511 | Simon Property Group, Inc. (REIT) | 82,276 | ||
| 16,875 | STORE Capital Corp. (REIT) | 419,681 | ||
| 833 | Taubman Centers, Inc. (REIT) | 41,400 | ||
| 2,042,280 | ||||
| Telecommunication Services—.4% | ||||
| 2,000 | Nippon Telegraph & Telephone Corp. (Japan) | 91,660 | ||
| 4,090 | Verizon Communications, Inc. | 202,414 | ||
| 294,074 | ||||
| 177 |
Portfolio of Investments (continued)
HEDGED U.S. EQUITY OPPORTUNITIES FUND
September 30, 2017
| Shares | Security | Value | ||
| Utilities—5.3% | ||||
| 4,807 | Alliant Energy Corp. | $ 199,827 | ||
| 1,714 | Ameren Corp. | 99,138 | ||
| 2,197 | American Electric Power Co., Inc. | 154,317 | ||
| 1,248 | American Water Works Co., Inc. | 100,976 | ||
| 923 | Atmos Energy Corp. | 77,384 | ||
| 3,950 | CenterPoint Energy, Inc. | 115,379 | ||
| 2,025 | CMS Energy Corp. | 93,798 | ||
| 1,601 | Consolidated Edison, Inc. | 129,169 | ||
| 3,045 | Dominion Energy, Inc. | 234,252 | ||
| 1,069 | DTE Energy Co. | 114,768 | ||
| 3,021 | Duke Energy Corp. | 253,522 | ||
| 1,661 | Edison International | 128,179 | ||
| 1,258 | Entergy Corp. | 96,061 | ||
| 1,886 | Eversourse Energy | 113,990 | ||
| 5,226 | Exelon Corp. | 196,863 | ||
| 2,763 | Iberdrola SA | 85,681 | ||
| 1,518 | NextEra Energy, Inc. | 222,463 | ||
| 2,987 | NiSource, Inc. | 76,437 | ||
| 3,636 | OGE Energy Corp. | 131,005 | ||
| 2,974 | PG&E Corp. | 202,500 | ||
| 938 | Pinnacle West Capital Corp. | 79,317 | ||
| 3,423 | PPL Corp. | 129,903 | ||
| 2,826 | Public Service Enterprise Group, Inc. | 130,702 | ||
| 960 | Sempra Energy | 109,565 | ||
| 4,826 | Southern Co. | 237,150 | ||
| 8,089 | UGI Corp. | 379,051 | ||
| 1,866 | WEC Energy Group, Inc. | 117,147 | ||
| 2,734 | Xcel Energy, Inc. | 129,373 | ||
| 4,137,917 | ||||
| Total Value of Common Stocks (cost $64,817,623) | $72,765,263 | |||
| PUT OPTIONS PURCHASED—.5% | |||||
| Exercise | Notional | ||||
| Contracts | S&P 500 Index | Price | Amount | Value | |
| 27 | Expiration 12/15/2017 | 2,275.00 | 6,142,500 | $ 21,600 | |
| 27 | Expiration 3/16/2018 | 2,175.00 | 5,872,500 | 48,735 | |
| 23 | Expiration 6/15/2018 | 2,150.00 | 4,945,000 | 72,496 | |
| 31 | Expiration 9/21/2018 | 2,325.00 | 7,207,500 | 240,870 | |
| Total Value of Put Options Purchased (premium paid $726,822) | $383,701 | ||||
| 178 |
| Shares | Security | Value | |||||
| WARRANTS—.0% | |||||||
| Financials | |||||||
| 4,496 | * | Ocelot Partners, Ltd. (Expires 3/8/2020) (cost $45) | $ 2,248 | ||||
| Total Value of Investments (cost $65,544,490) | 93.2 | % | 73,151,212 | ||||
| Other Assets, Less Liabilities | 6.8 | 5,318,544 | |||||
| Net Assets | 100.0 | % | $78,469,756 | ||||
| * | Non-income producing |
At September 30, 2017, Hedged U.S. Equity Opportunities Fund had open foreign currency contracts as described below.
The unrealized appreciation (depreciation) on the open contracts reflected in the accompanying financial statements were as follows:
Hedged U.S. Equity Opportunities
| Settlement | Foreign | Receive | Unrealized | ||||||||||||
| Counterparty | Date | Currency | (Deliver) | Asset | Liability | Appreciation | |||||||||
| BCI | 12/20/17 | JPY | (8,518,000) | ($75,699) | ($77,651) | $1,952 | |||||||||
| CITI | 12/20/17 | EUR | (89,000) | (105,188) | (106,722) | 1,534 | |||||||||
| Net Unrealized gain on open foreign exchange contracts | $3,486 | ||||||||||||||
A summary of abbreviations for counterparties to foreign exhange contracts are as follows:
| BCI | Barclays Capital, Inc. |
| CITI | Citigroup Global Markets |
Summary of Abbreviations:
| ADR | American Depositary Receipts |
| EUR | Euro |
| JPY | Japanese Yen |
| REIT | Real Estate Investment Trust |
| 179 |
Portfolio of Investments (continued)
HEDGED U.S. EQUITY OPPORTUNITIES FUND
September 30, 2017
| PUT OPTIONS WRITTEN—(.2)% | |||||
| Exercise | Notional | ||||
| Contracts | S&P 500 Index | Price | Amount | Value | |
| (14) | Expiration 12/15/2017 | 2,050.00 | (2,870,000) | $ (3,262) | |
| (27) | Expiration 3/16/2018 | 1,950.00 | (5,265,000) | (20,655) | |
| (23) | Expiration 6/15/2018 | 1,925.00 | (4,427,500) | (33,580) | |
| (31) | Expiration 9/21/2018 | 2,075.00 | (6,432,500) | (119,505) | |
| Total Value of Put Options Written (premium paid $342,648) | $(177,002) | ||||
Futures contracts outstanding at September 30, 2017:
| Value at | Unrealized | ||||||
| Number of | Notional | September 30, | Appreciation | ||||
| Contracts | Type | Expiration | Amounts | 2017 | (Depreciation) | ||
| 60 | E-mini | Dec. 2017 | $4,208,100 | $3,937,375 | $(270,725) | ||
| Russell 2000 | |||||||
| Index | |||||||
| 40 | E-mini | Dec. 2017 | 4,882,400 | 4,779,817 | (102,583) | ||
| S&P 500 | |||||||
| 23 | MSCI EAFE | Dec. 2017 | 2,263,140 | 2,251,076 | (12,064) | ||
| Index | |||||||
| 13 | E-mini S&P | Dec. 2017 | 2,233,595 | 2,132,754 | (100,841) | ||
| MidCap 400 | |||||||
| 13 | MSCI EM | Dec. 2017 | 722,940 | 737,811 | 14,871 | ||
| Index | |||||||
| (Premium received $301) | $(471,342) | ||||||
| 180 |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets and liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Assets | ||||||||||||
| Common Stocks* | $ | 72,765,263 | $ | — | $ | — | $ | 72,765,263 | ||||
| Put Options Purchased | $ | 383,701 | $ | — | $ | — | $ | 383,701 | ||||
| Warrants* | $ | 2,248 | $ | — | $ | — | $ | 2,248 | ||||
| $ | 73,151,212 | $ | — | $ | — | $ | 73,151,212 | |||||
| Other Assets | ||||||||||||
| Liabilities | ||||||||||||
| Put Options Written | $ | (177,002) | $ | — | $ | — | $ | (177,002) | ||||
| Futures Contracts | $ | (471,041) | $ | — | $ | — | $ | (471,041) | ||||
| $ | (648,043) | $ | — | $ | — | $ | (648,043) |
| * | The Portfolio of Investments provides information on the industry categorization for common stocks |
| and warrants. | |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| See notes to financial statements | 181 |
Portfolio Manager’s Letter
INTERNATIONAL FUND
Dear Investor:
This is the annual report for the First Investors International Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 15.00% for Class A shares, 14.12% for Class B shares, 15.50% for Advisor Class shares and 15.54% for Institutional Class shares, including dividends of 6.8 cents per share for Class A shares, 4.6 cents per share for Class B shares, 7.8 cents per share for Advisor Class shares and 8.7 cents per share for Institutional Class shares.
The Fund
In the fourth quarter of 2016, European equities finished the quarter slightly negative (in U.S. dollars) against a backdrop of political uncertainty and growing sentiment that the effectiveness of extraordinary monetary policy measures may have been reached. The European Central Bank announced its intention to continue quantitative easing through 2017. Emerging market equities came under pressure. Concerns about rising interest rates, a stronger U.S. dollar, and potential changes to U.S. policy resulted in significant capital outflows from emerging markets, and renewed concern about dollar-denominated debt.
European equities had a strong first quarter of 2017, as investors looked beyond rising political uncertainty and stayed optimistic given largely positive economic figures coming out of the region. Emerging market equities posted double-digit returns for the quarter, driven by a recovery from the sell-off in the fourth quarter of 2016 and strong emerging market currencies against the U.S. dollar. On the back of investment funds returning, EM currencies rallied alongside the markets, lifting returns in U.S. dollar terms. Asian stocks were among the top performers given a recovery in sentiment in India, as the demonetization impact on corporate earnings had been less severe than feared.
In the second quarter of 2017, investors took notice of the Eurozone recovery. Positive economic data, improving corporate earnings and reduced political risks contributed to optimistic sentiment. Emerging markets were a top performer with returns aided by a weakening U.S. dollar and solid growth. China and Korea were notable drivers of returns.
Across the globe, almost all equity markets registered positive returns for the third quarter of 2017. The broad macro backdrop was reasonably steady with wage growth, inflation, household leverage and housing markets at reasonable levels in most major economies, supported by low interest rates and energy prices. This stable backdrop was certainly good enough for companies with structural growth drivers to continue growing earnings and adding value for shareholders. Emerging markets continued their bull run in the third quarter, outpacing their developed market counterparts. Important drivers for the benchmark’s performance were Chinese e-commerce companies and Brazilian banks, as well as a lift for dollar investors from rising exchange rates against the U.S. dollar, which are common accompanying market inflows. Rising corporate earnings and growth across the major EM economies helped sustain a healthy outlook.
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While the tide appears to be turning in Europe, we are always looking at what could go wrong. And we believe what is starting to go against European companies is the euro, despite some weakness toward the end of the quarter. A strengthening currency will, at minimum, hurt reported earnings for multinationals and exporters. A fast, sharp change in currency can cause problems for an economy. For now, this is something we are monitoring, but does not change the overall stable environment. In the intermediate term, the level of interest rates remains an open question. At some point monetary policy will have to normalize, but from what we’ve seen so far from Japan, to the U.S. and Europe, it will likely take longer than many expect. But over the longer term, European markets are good hunting grounds for truly excellent companies. While growth overall in Europe isn’t likely going to be setting world records, it is home to a group of truly world class companies, many of which are multinational companies with long histories and durable competitive advantages.
In emerging markets, stocks have increased in valuation compared to a year and half ago, but they are now supported by a further improved growth outlook. Going forward, we think that the impending Federal Reserve action to shrink its balance sheet makes for a potentially tricky backdrop. However, we believe the current solid emerging markets macro fundamentals should be able to absorb some resulting negative pressures, at least for some time. Most major EMs have lowered vulnerability to foreign debt and improved growth in the past few years.
We believe that the currencies of the countries that we are invested in should weather any unexpected tightening of financial conditions, which might happen following the tightening actions by the developed market central banks. We continue to be extra wary of economies that rely almost solely on commodities or a single commodity. While there could be well-run businesses there, the earnings stream could be volatile when translated into U.S. dollars or other hard currencies in which our investors expect to see their investment returns.
Overall, the global outlook isn’t of particularly booming economies, but it’s steady enough, which we believe is sufficient for companies that have strong competitive advantages and structural growth drivers to continue growing earnings and consequently deliver investment returns to shareholders—not a particularly bad investing environment.
The following discussion highlights specific stocks—those that provided the largest contribution to absolute performance and those that were the largest detractors for the fiscal year. As bottom-up stock pickers, we hope that you find this useful and gain a greater understanding of how we invest your capital.
Top Contributors
HDFC Bank continued to perform well as the bank reported strong results for the fiscal quarter ended in June. HDFC Bank is a prime beneficiary of continued healthy deposit growth, as India’s middle income group accumulates savings, as well as the recent surge in deposits due to the monetization push, providing funding to cater to the strong demand for credit from a variety of consumers and small-to-medium sized businesses. HDFC Bank
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Portfolio Manager’s Letter (continued)
INTERNATIONAL FUND
is a high-quality Indian private sector bank which has been a cornerstone investment in the portfolio for many years. The bank has delivered solid growth while maintaining high credit and underwriting standards. HDFC Bank has a strong deposit franchise and powerful technology backbone that should allow it to grow at a faster rate than the industry.
Alibaba reported strong results for the first quarter that exceeded both top line and bottom line expectations. The key drivers continue to be better data-driven personalization providing more relevant and engaging ads, and improving conversion rates for merchants on their core e-commerce business. Alibaba is the leading e-commerce platform operator in China with a dominant market share in terms of overall Gross Merchandise Volume (“GMV”). It is multiples larger in GMV than the second biggest player in China, JD.com. Alibaba’s key advantage versus competitors is that it has the largest number of vendors, which in turn attracts a massive pool of buyers. Other markets like Japan and the U.S. have shown that it is difficult to displace a player who has a significant supplier/merchant advantage. This allows buyers to have access to the widest base of vendors and available inventory at the most competitive prices in almost any category. Further, by segmenting the market to lower-priced merchants like Taobao, and more established merchants like Tmall, Alibaba can cater to a wider base of consumers. There is also the tailwind from e-commerce penetration in China still being in relatively early stages. Given the fast take-up of smartphone penetration, there is the potential for this to increase significantly, and we believe Alibaba is in prime position to benefit from this trend.
Bottom Contributors
Novo Nordisk detracted from portfolio returns. We exited our position in Novo Nordisk, as the insulin market in the U.S. was becoming more competitive. Novo had been a long-term investment for us and the company created a lot of value over the long haul. But over the past year, the competitive pressures have risen significantly and the company no longer offers the predictable earnings growth profile it once had.
Japan Tobacco detracted from portfolio returns. The launch of competitors’ heat-not-burn products in Japan removed visibility so we reallocated capital to better opportunities.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
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Fund Expenses (unaudited)
INTERNATIONAL FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.56% | |||
| Actual | $1,000.00 | $1,147.92 | $8.40 | |
| Hypothetical** | $1,000.00 | $1,017.25 | $7.89 | |
| Class B Shares | 2.39% | |||
| Actual | $1,000.00 | $1,141.24 | $12.83 | |
| Hypothetical** | $1,000.00 | $1,013.09 | $12.06 | |
| Advisor Class Shares | 1.17% | |||
| Actual | $1,000.00 | $1,154.98 | $6.32 | |
| Hypothetical** | $1,000.00 | $1,019.20 | $5.92 | |
| Institutional Class Shares | 1.08% | |||
| Actual | $1,000.00 | $1,155.36 | $5.84 | |
| Hypothetical** | $1,000.00 | $1,019.66 | $5.47 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY SECTOR
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
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Cumulative Performance Information (unaudited)
INTERNATIONAL FUND
Comparison of change in value of $10,000 investment in the First Investors International Fund (Class A shares), the Morgan Stanley Capital International (“MSCI”) EAFE Index (Gross) and the Morgan Stanley Capital International (“MSCI”) EAFE Index (Net).
The graph compares a $10,000 investment in the First Investors International Fund (Class A shares) beginning 9/30/07 with theoretical investments in the MSCI EAFE Index (Gross) and the MSCI EAFE Index (Net) (the “Indices”). The Indices are free float-adjusted market capitalization indices that measure developed foreign market equity performance, excluding the U.S. and Canada. The Indices consist of 21 developed market country indices. The MSCI EAFE Index (Gross) is calculated on a total-return basis with the maximum possible dividend reinvestment (before taxes). The MSCI EAFE Index (Net) is calculated on a total-return basis with the minimum possible dividend reinvestment (after taxes). The Indices are unmanaged and it is not possible to invest directly in these Indices. In addition, the Indices do not reflect fees and expenses associated with the active management of
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a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Advisor Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 5.25% and the Institutional Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 5.44%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Indices figures are from Morgan Stanley & Co., Inc. and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
† The Index return is for ten years. The MSCI EAFE Index (Gross) return and MSCI EAFE Index (Net) return since inception of the Advisor Class shares and Institutional Class shares are 7.13% and 6.62%, respectively.
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Portfolio of Investments
INTERNATIONAL FUND
September 30, 2017
| Shares | Security | Value | |
| COMMON STOCKS—95.6% | |||
| United Kingdom—14.6% | |||
| 239,050 | British American Tobacco, PLC | $ 14,965,651 | |
| 57,095 | DCC, PLC | 5,542,944 | |
| 187,153 | Diageo, PLC | 6,151,745 | |
| 1,377,711 | Domino’s Pizza Group, PLC | 5,726,694 | |
| 134,817 | Reckitt Benckiser Group, PLC | 12,307,988 | |
| 335,264 | RELX NV | 7,136,396 | |
| 51,831,418 | |||
| United States—13.8% | |||
| 45,135 | Accenture, PLC – Class “A” | 6,096,384 | |
| 112,266 | Mastercard, Inc. – Class “A” | 15,851,959 | |
| 102,564 | Philip Morris International, Inc. | 11,385,630 | |
| 4,575 | * | Priceline Group, Inc. | 8,376,002 |
| 70,000 | Visa, Inc. – Class “A” | 7,366,800 | |
| 49,076,775 | |||
| India—8.6% | |||
| 655,678 | HDFC Bank, Ltd. | 18,125,502 | |
| 467,995 | Housing Development Finance Corp., Ltd. | 12,481,897 | |
| 30,607,399 | |||
| Canada—6.8% | |||
| 220,341 | Alimentation Couche-Tard, Inc. – Class “B” | 10,048,009 | |
| 87,126 | Canadian National Railway Co. | 7,218,662 | |
| 12,451 | Constellation Software, Inc. | 6,792,942 | |
| 24,059,613 | |||
| Switzerland—5.8% | |||
| 120,787 | Nestle SA | 10,115,997 | |
| 26,607 | Roche Holding AG – Genusscheine | 6,792,224 | |
| 217,759 | UBS Group AG | 3,721,703 | |
| 20,629,924 | |||
| 188 |
| Shares | Security | Value | ||
| France—5.6% | ||||
| 32,838 | Essilor International SA | $ 4,065,454 | ||
| 16,559 | L’Oreal SA | 3,520,818 | ||
| 16,367 | LVMH Moet Hennessy Louis Vuitton SE | 4,515,868 | ||
| 27,937 | Sodexo SA | 3,483,458 | ||
| 28,546 | Teleperformance | 4,261,151 | ||
| 19,846,749 | ||||
| Japan—5.0% | ||||
| 30,710 | Daito Trust Construction Co., Ltd. | 5,594,801 | ||
| 7,977 | Keyence Corp. | 4,235,732 | ||
| 38,500 | Shimano, Inc. | 5,128,771 | ||
| 128,100 | Unicharm Corp. | 2,932,554 | ||
| 17,891,858 | ||||
| Netherlands—4.6% | ||||
| 277,172 | Unilever NV – CVA | 16,392,491 | ||
| Ireland—4.6% | ||||
| 1,174,693 | Allied Irish Banks, PLC | 7,059,820 | ||
| 91,481 | Paddy Power Betfair, PLC | 9,127,557 | ||
| 16,187,377 | ||||
| Spain—4.5% | ||||
| 39,700 | Aena SA | 7,167,208 | ||
| 178,153 | Grifols SA – Class “A” | 5,190,251 | ||
| 91,231 | Industria de Diseno Textil SA | 3,438,010 | ||
| 15,795,469 | ||||
| China—3.3% | ||||
| 68,249 | * | Alibaba Group Holding, Ltd. (ADR) | 11,787,285 | |
| Germany—3.3% | ||||
| 106,608 | SAP SE | 11,678,874 | ||
| Belgium—2.8% | ||||
| 82,988 | Anheuser-Busch InBev SA | 9,935,805 | ||
| South Africa—2.2% | ||||
| 36,135 | Naspers, Ltd. | 7,793,496 | ||
| 12,498 | Novus Holdings, Ltd. | 6,028 | ||
| 7,799,524 | ||||
| 189 |
Portfolio of Investments (continued)
INTERNATIONAL FUND
September 30, 2017
| Shares or | |||||||
| Principal | |||||||
| Amount | Security | Value | |||||
| Australia—2.1% | |||||||
| 31,593 | CSL, Ltd. | $ 3,319,736 | |||||
| 81,449 | Ramsay Health Care, Ltd. | 3,978,981 | |||||
| 7,298,717 | |||||||
| Taiwan—2.0% | |||||||
| 184,008 | Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | 6,909,500 | |||||
| Hong Kong—1.7% | |||||||
| 140,927 | Tencent Holdings, Ltd. | 6,065,295 | |||||
| Israel—1.5% | |||||||
| 48,109 | Check Point Software Technologies, Inc. | 5,485,388 | |||||
| Brazil—1.5% | |||||||
| 785,970 | Ambev SA (ADR) | 5,179,542 | |||||
| Mexico—1.3% | |||||||
| 48,733 | Fomento Economico Mexicana SAB de CV – Class “B” (ADR) | 4,655,464 | |||||
| Total Value of Common Stocks (cost $239,587,979) | 339,114,467 | ||||||
| SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—2.5% | |||||||
| United States | |||||||
| Federal Home Loan Bank: | |||||||
| $2,500M | 1.01%, 10/10/2017 | 2,499,455 | |||||
| 1,500M | 1.02%, 10/20/2017 | 1,499,265 | |||||
| 5,000M | 1.035%, 11/17/2017 | 4,993,675 | |||||
| Total Value of Short-Term U.S. Government Agency Obligations (cost $8,991,803) | 8,992,395 | ||||||
| SHORT-TERM U.S. GOVERNMENT | |||||||
| OBLIGATIONS—1.3% | |||||||
| United States | |||||||
| 4,500M | U.S. Treasury Bills, 0.935%, 10/26/2017 (cost $4,497,078) | 4,497,206 | |||||
| Total Value of Investments (cost $253,076,860) | 99.4 | % | 352,604,068 | ||||
| Other Assets, Less Liabilities | .6 | 2,238,852 | |||||
| Net Assets | 100.0 | % | $354,842,920 | ||||
| * | Non-income producing | |
| Summary of Abbreviations: | ||
| ADR | American Depositary Receipts | |
| 190 |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Common Stocks | ||||||||||||
| United Kingdom | $ | 51,831,418 | $ | — | $ | — | $ | 51,831,418 | ||||
| United States | 49,076,775 | — | — | 49,076,775 | ||||||||
| India | 30,607,399 | — | — | 30,607,399 | ||||||||
| Canada | 24,059,613 | — | — | 24,059,613 | ||||||||
| Switzerland | 20,629,924 | — | — | 20,629,924 | ||||||||
| France | 19,846,749 | — | — | 19,846,749 | ||||||||
| Japan | 17,891,858 | — | — | 17,891,858 | ||||||||
| Netherlands | 16,392,491 | — | — | 16,392,491 | ||||||||
| Ireland | 16,187,377 | — | — | 16,187,377 | ||||||||
| Spain | 15,795,469 | — | — | 15,795,469 | ||||||||
| China | 11,787,285 | — | — | 11,787,285 | ||||||||
| Germany | 11,678,874 | — | — | 11,678,874 | ||||||||
| Belgium | 9,935,805 | — | — | 9,935,805 | ||||||||
| South Africa | 7,799,524 | — | — | 7,799,524 | ||||||||
| Australia | 7,298,717 | — | — | 7,298,717 | ||||||||
| Taiwan | 6,909,500 | — | — | 6,909,500 | ||||||||
| Hong Kong | 6,065,295 | — | — | 6,065,295 | ||||||||
| Israel | 5,485,388 | — | — | 5,485,388 | ||||||||
| Brazil | 5,179,542 | — | — | 5,179,542 | ||||||||
| Mexico | 4,655,464 | — | — | 4,655,464 |
| 191 |
Portfolio of Investments (continued)
INTERNATIONAL FUND
September 30, 2017
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | $ | — | $ | 8,992,395 | $ | — | $ | 8,992,395 | ||||
| Short-Term U.S. Government | ||||||||||||
| Obligations | — | 4,497,206 | — | 4,497,206 | ||||||||
| Total Investments in Securities | $ | 339,114,467 | $ | 13,489,601 | $ | — | $ | 352,604,068 |
| During the year ended September 30, 2017, there were no transfers between Level 1 investments |
| and Level 2 investments that had a material inpact to the Fund. This does not include transfers |
| between Level 1 investments and Level 2 investments due to the Fund utilizing international fair |
| value pricing during the year (see Note 1A). Transfers, if any, between Levels are recognized at the |
| end of the reporting period. |
| 192 | See notes to financial statements |
Portfolio Managers’ Letter
LONG SHORT FUND
Dear Investor:
This is the annual report for the First Investors Long Short Fund for the fiscal year ended September 30, 2017. The fund was launched on December 1, 2016 and the comments below reflect the period December 1, 2016 through September 30, 2017. During the period, the Fund’s return on a net asset value basis was 4.30% for Class A shares, 4.60% for Advisor Class shares and 4.70% for Institutional Class shares.
Market Overview
The S&P 500 Index rose strongly from December 1, 2016 through September 30, 2017, driven by broadening global growth and expectations for fiscal stimulus, tax reform, and lower regulations in the United States. These expectations were tested in 2017, as Congress was unable to accomplish any major legislative initiatives, as geopolitical insecurity, especially about Korea, rose, and hurricanes made landfall in the United States. However, investors continued to bid up stocks, as strong corporate earnings and economic data in 2017 helped offset uncertainty. Many market observers expect the Federal Reserve will raise short-term rates in December, which appears to highlight central bank officials’ confidence that the economy is—despite weak wage gains in the third quarter—healthy.
Portfolio Review
A long position in Intercontinental Exchange helped returns, as shares rose after the company’s futures volumes showed signs of improvement and management offered more details around the outlook for its data business. The portfolio also benefited from its long position in Alphabet, as quarterly results showed solid growth in its core business, disciplined expense management, and increased optimism around more nascent growth initiatives such as cloud. A long position in Rockwell Automation also helped returns, as shares rose after the company reported quarterly earnings above expectations and management raised its guidance for the year, driven by strong organic revenue growth. We continue to own Rockwell, as we expect the company to benefit from secular tailwinds driven by increasing adoption of factory automation technologies.
In contrast, a long position in AutoZone detracted from performance, as shares fell after the company reported quarterly earnings below expectations, hurt by weaker revenues. We sold our position after the announcement in May, as we saw opportunities with better risk-reward profiles elsewhere. A short position in Wal-Mart also hurt returns, as shares rose after the company reported quarterly earnings above expectations, driven by stronger sales and store traffic. We covered our position in August, as our thesis was broken. The portfolio was also hurt by a long position in
| 193 |
Portfolio Managers’ Letter (continued)
LONG SHORT FUND
Molson Coors, as shares fell after management did a poor job of communicating medium-term EBITDA targets and, as a result, consensus estimates came down.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 194 |
Fund Expenses (unaudited)
LONG SHORT FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 3.18% | |||
| Actual | $1,000.00 | $1,043.00 | $16.29 | |
| Hypothetical** | $1,000.00 | $1,009.13 | $16.02 | |
| Advisor Class Shares | 2.89% | |||
| Actual | $1,000.00 | $1,046.00 | $14.82 | |
| Hypothetical** | $1,000.00 | $1,010.58 | $14.57 | |
| Institutional Class Shares | 2.78% | |||
| Actual | $1,000.00 | $1,047.00 | $14.27 | |
| Hypothetical** | $1,000.00 | $1,011.13 | $14.02 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived and/or assumed. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY SECTOR
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 195 |
Portfolio of Investments
LONG SHORT FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—89.5% | ||||
| Consumer Discretionary—11.2% | ||||
| 46,670 | Comcast Corp. (a) | $ 1,795,862 | ||
| 27,360 | * | Floor & Decor Holdings, Inc. | 1,065,125 | |
| 22,489 | Lowe’s Cos., Inc. (a) | 1,797,771 | ||
| 16,997 | * | Lululemon Athletica, Inc. | 1,058,063 | |
| 5,716,821 | ||||
| Consumer Staples—1.3% | ||||
| 6,038 | Molson Coors Brewing Co. (a) | 492,942 | ||
| 2,063 | Walgreens Boots Alliance, Inc. (a) | 159,305 | ||
| 652,247 | ||||
| Energy—4.1% | ||||
| 31,350 | ConocoPhillips | 1,569,068 | ||
| 21,158 | * | NCS Multistage Holdings, Inc. (a) | 509,485 | |
| 2,078,553 | ||||
| Financials—16.4% | ||||
| 21,381 | Citigroup, Inc. (a) | 1,555,254 | ||
| 35,309 | Citizens Financial Group, Inc. | 1,337,152 | ||
| 20,532 | Comerica, Inc. (a) | 1,565,770 | ||
| 37,671 | Intercontinental Exchange, Inc. (a) | 2,587,998 | ||
| 21,852 | SunTrust Banks, Inc. (a) | 1,306,094 | ||
| 8,352,268 | ||||
| Health Care—11.8% | ||||
| 9,078 | * | Agios Pharmaceuticals, Inc. | 605,957 | |
| 2,500 | Allergan, PLC | 512,375 | ||
| 1,852 | * | Biogen, Inc. | 579,898 | |
| 2,933 | * | BioMarin Pharmaceutical, Inc (a) | 272,974 | |
| 8,888 | * | Celgene Corp. (a) | 1,296,048 | |
| 3,226 | Humana, Inc. (a) | 785,950 | ||
| 15,044 | Medtronic, PLC (a) | 1,169,972 | ||
| 4,028 | Thermo Fisher Scientific, Inc. (a) | 762,098 | ||
| 5,985,272 | ||||
| Industrials—17.0% | ||||
| 6,700 | Alaska Air Group, Inc. | 511,009 | ||
| 4,585 | Deere & Co. | 575,830 | ||
| 11,525 | Dover Corp. (a) | 1,053,270 | ||
| 196 |
| Shares | Security | Value | ||
| Industrials (continued) | ||||
| 10,344 | Eaton Corp., PLC (a) | $ 794,316 | ||
| 7,667 | Honeywell International, Inc. (a) | 1,086,721 | ||
| 17,707 | Johnson Controls International, PLC (a) | 713,415 | ||
| 7,073 | Parker Hannifin Corp. (a) | 1,237,916 | ||
| 8,959 | Rockwell Automation, Inc. (a) | 1,596,583 | ||
| 9,087 | United Parcel Service, Inc. (a) | 1,091,258 | ||
| 8,660,318 | ||||
| Information Technology—21.6% | ||||
| 813 | * | Alphabet, Inc. (a) | 779,756 | |
| 10,583 | Applied Materials, Inc. (a) | 551,268 | ||
| 32,802 | Cisco Systems, Inc. (a) | 1,103,131 | ||
| 63,787 | Cypress Semiconductor Corp. (a) | 958,081 | ||
| 13,798 | DXC Technology Co. (a) | 1,184,972 | ||
| 36,584 | * | eBay, Inc. (a) | 1,407,021 | |
| 3,420 | * | Facebook, Inc. (a) | 584,375 | |
| 3,442 | * | FleetCor Technologies, Inc. | 532,718 | |
| 25,051 | Motorola Solutions, Inc. (a) | 2,126,078 | ||
| 3,837 | * | Palo Alto Networks, Inc. | 552,912 | |
| 4,901 | Skyworks Solutions, Inc. (a) | 499,412 | ||
| 7,031 | Visa, Inc. (a) | 739,942 | ||
| 11,019,666 | ||||
| Real Estate—2.1% | ||||
| 16,545 | Prologis, Inc. (REIT) | 1,049,946 | ||
| Telecommunication Services—4.0% | ||||
| 51,687 | AT&T, Inc. (a) | 2,024,580 | ||
| Total Value of Common Stocks (cost $42,110,608) | 45,539,671 | |||
| SECURITIES SOLD SHORT—(60.3)% | ||||
| Consumer Discretionary—(10.2)% | ||||
| (7,753) | Adient, PLC | (651,174) | ||
| (13,448) | Cheesecake Factory, Inc. | (566,430) | ||
| (3,705) | Children’s Place Retail Stores, Inc. | (437,746) | ||
| (17,711) | Hanesbrands, Inc. | (436,399) | ||
| (24,096) | Macy’s, Inc. | (525,775) | ||
| (7,786) | Polaris Industries, Inc. | (814,649) | ||
| (2,456) | PVH Corp. | (309,603) | ||
| 197 |
Portfolio of Investments (continued)
LONG SHORT FUND
September 30, 2017
| Shares | Security | Value | ||
| Consumer Discretionary (continued) | ||||
| (6,182) | Tractor Supply Co. | $ (391,259) | ||
| (15,300) | Urban Outfitters, Inc. | (365,670) | ||
| (13,373) | Williams-Sonoma, Inc. | (666,778) | ||
| (5,165,483) | ||||
| Consumer Staples—(3.3)% | ||||
| (2,224) | Casey’s General Stores, Inc. | (243,417) | ||
| (4,941) | Craker Barrel Old Country Store, Inc. | (749,154) | ||
| (18,569) | Snyders-Lance, Inc. | (708,222) | ||
| (1,700,793) | ||||
| Financials—(15.4)% | ||||
| (11,759) | Charles Schwab Corp. | (514,339) | ||
| (14,765) | Federated Investors, Inc. | (438,521) | ||
| (11,059) | Franklin Resources, Inc. | (492,236) | ||
| (7,453) | Glacier Bancorp, Inc. | (281,425) | ||
| (74,892) | New York Community Bancorp, Inc. | (965,358) | ||
| (57,604) | People’s United Financial, Inc. | (1,044,937) | ||
| (2,935) | Signature Bank | (375,797) | ||
| (12,312) | Synchrony Financial | (382,288) | ||
| (6,081) | T. Rowe Price Group, Inc. | (551,243) | ||
| (36,617) | Umpqua Holdings Corp. | (714,398) | ||
| (11,288) | United Bankshares, Inc. | (419,349) | ||
| (12,314) | Voya Financial, Inc. | (491,205) | ||
| (20,443) | Waddell & Reed Financial, Inc. | (410,291) | ||
| (14,183) | Wells Fargo & Co. | (782,192) | ||
| (7,863,579) | ||||
| Health Care—(9.5)% | ||||
| (14,084) | Acorda Therapeutics, Inc. | (333,087) | ||
| (5,322) | DexCom, Inc. | (260,379) | ||
| (12,683) | Fresenius Medical Care AG & Co. KGaA | (620,072) | ||
| (6,344) | Glaukos Corp. | (209,352) | ||
| (6,545) | LifePoint Health, Inc. | (378,956) | ||
| (1,623) | McKesson Corp. | (249,309) | ||
| (4,736) | Merck & Co., Inc. | (303,246) | ||
| (15,972) | Roche Holdings, Inc. | (511,104) | ||
| (6,161) | Sanofi | (306,756) | ||
| (7,361) | Seattle Genetic, Inc. | (400,512) | ||
| 198 |
| Shares | Security | Value | ||
| Health Care (continued) | ||||
| (20,609) | Teva Pharmaceutical Industries, Ltd. (ADR) | $ (362,718) | ||
| (3,100) | United Therapeutics Corp. | (363,289) | ||
| (2,904) | Waters Corp. | (521,326) | ||
| (4,820,106) | ||||
| Industrials—(7.0)% | ||||
| (3,959) | Carlisle Companies, Inc. | (397,048) | ||
| (4,813) | Expeditors International of Washington, Inc. | (288,106) | ||
| (12,849) | Fluor Corp. | (540,943) | ||
| (19,699) | General Electric Co. | (476,322) | ||
| (2,324) | Graco, Inc. | (287,456) | ||
| (8,749) | HD Supply Holdings. Inc. | (315,576) | ||
| (27,100) | JetBlue Airways Corp. | (502,163) | ||
| (3,333) | MSC Industrial Direct Co., Inc. | (251,875) | ||
| (3,338) | Stericycle, Inc. | (239,068) | ||
| (1,432) | W.W. Grainger, Inc. | (257,402) | ||
| (3,555,959) | ||||
| Information Technology—(13.2)% | ||||
| (10,895) | Acxiom Corp. | (268,453) | ||
| (1,818) | Alliance Data Systems Corp. | (402,778) | ||
| (8,031) | Amdocs, Ltd. | (516,554) | ||
| (11,286) | Appian Corp. | (321,200) | ||
| (101,753) | AU Optronics Corp. | (411,082) | ||
| (4,536) | Blackline, Inc. | (154,768) | ||
| (27,039) | Infinera Corp. | (239,836) | ||
| (14,264) | Intel Corp. | (543,173) | ||
| (3,400) | International Business Machines Corp. | (493,272) | ||
| (29,486) | LG Display Co., Ltd. | (395,702) | ||
| (5,785) | Manhattan Associates, Inc. | (240,482) | ||
| (11,288) | Mulesoft, Inc. | (227,340) | ||
| (26,481) | ON Semiconductor Corp. | (489,104) | ||
| (9,144) | Paychex, Inc. | (548,274) | ||
| (30,088) | Teradata Corp. | (1,016,674) | ||
| (15,900) | TrueCar, Inc. | (251,061) | ||
| (5,973) | Zendesk, Inc. | (173,874) | ||
| (6,693,627) | ||||
| 199 |
Portfolio of Investments (continued)
LONG SHORT FUND
September 30, 2017
| Shares | Security | Value | |||||
| Materials—(1.7)% | |||||||
| (5,000) | International Paper Co. | $ (284,100) | |||||
| (14,721) | Mosaic Co. | (317,826) | |||||
| (5,000) | WestRock Co. | (283,650) | |||||
| (885,576) | |||||||
| Total Value of Securities Sold Short (proceeds $29,790,598) | (30,685,123) | ||||||
| Total Value of Investments | |||||||
| (cost and short proceeds $12,320,010) | 29.2 | % | 14,854,548 | ||||
| Other Assets, Less Liabilities | 70.8 | 36,047,903 | |||||
| Net Assets | 100.0 | % | $50,902,451 | ||||
| * | Non-income producing | |
| (a) | A portion or all of the security has been pledged to cover collateral requirements on securities | |
| sold short. | ||
| Summary of Abbreviations: | ||
| ADR | American Depositary Receipts | |
| REIT | Real Estate Investment Trust | |
| 200 |
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Assets | ||||||||||||
| Common Stocks* | $ | 45,539,671 | $ | — | $ | — | $ | 45,539,671 | ||||
| Liabilities | ||||||||||||
| Securities Sold Short* | $ | (30,685,123) | $ | — | $ | — | $ | (30,685,123) |
| * | The Portfolio of Investments provides information on the industry categorization for common stocks |
| and securities sold short. | |
| There were no transfers into or from Level 1 or Level 2 by the Fund for the period ended | |
| September 30, 2017. Transfers, if any, between Levels are recognized at the end of the | |
| reporting period. |
| See notes to financial statements | 201 |
Portfolio Managers’ Letter
OPPORTUNITY FUND
Dear Investor:
This is the annual report for the First Investors Opportunity Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 16.99% for Class A shares, 16.12% for Class B shares, 17.37% for Advisor Class shares and 17.49% for Institutional Class shares, including dividends of 22.0 cents per share for Class A shares, 17.7 cents per share for Class B shares, 24.3 cents per share for Advisor Class shares and 25.9 cents per share for Institutional Class shares. In addition, the Fund distributed capital gains of $1.35 per share on each class of shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018.
| 202 |
The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Equity Market
U.S. equities had strong performance during the past twelve months, posting several new records. The Dow Jones Industrial Average (DJIA) hit four major psychological milestones of 19,000 (on November 22nd), 20,000 (on January 25th), 21,000 (on March 1st) and 22,000 (on August 2nd). The S&P 500 Index and the DJIA returned 18.61% and 25.45% for the period, respectively. Market volatility remained at historically low levels for most of the period despite elevated political uncertainty.
Small-caps (measured by the Russell 2000 Index), growth stocks (the S&P 500 Growth Index) and value stocks (the S&P 500 Value Index) posted similar strong returns of 20.74%, 19.90% and 16.47%, respectively. However, they experienced significant intra-period differences as market leaders moved out of favor. In the fourth quarter of 2016, small-caps and value stocks rallied the most following the Trump victory as investors focused on the expected benefits from possible tax cuts, increased infrastructure spending and reduced financial regulations. Small-caps and several value sectors, including Financials, would be the greatest beneficiaries of these business friendly policies. In January, the “Trump Trade” faded and investors switched their focus to an improving economic outlook, which benefited most growth stocks and large-caps for most of 2017. In September, there was another rotation to small-caps and value stocks in the continuation of the “Trump-Trade” fueled by investors’ renewed hopes for pro-business policies from Washington.
Higher-yielding stocks lagged the general market, with the Dow Jones US Select Dividend Index returning 13.21%. Real estate as a whole came under pressure due to the rising interest rate environment, and as well publicized retail bankruptcies and store closures resulted in a sell-off of retail REITs. The Dow Jones US Select REIT Index lost 0.83%.
| 203 |
Portfolio Managers’ Letter (continued)
OPPORTUNITY FUND
Ten out of eleven S&P 500 sectors ended the review period in positive territory. Financials, which would be one of the greatest beneficiaries from the combination of the higher interest rates and Trump’s pro-growth policies, was the strongest sector at 36.21%. Information Technology was the second strongest sector, up 28.88% as investors focused on an improving economic outlook. A stronger economy could magnify this sector’s growth potential. Conversely, Telecom Services was the weakest sector with a marginal loss of 0.14%, followed by Energy which was marginally positive at 0.16%.
International equities posted strong double-digit returns across all regions, supported by improving corporate earnings and economic data pointing to a healthy global economy. Developed markets (measured by the MSCI EAFE Index) and emerging markets (measured by the MSCI EM Index) returned 19.65% and 22.91%, respectively. Overall, the currency exchange effect was slightly positive.
The Fund
On a relative basis, the Fund outperformed the S&P 400 Mid-Cap Index primarily due to stock selection in Consumer Discretionary and the Materials sector. In Consumer Discretionary, Fox Factory Holding Corporation—a maker of suspension products for mountain bikes and automotive vehicles—benefited from demand for its high-end shocks in off-road vehicles. Also, in Consumer Discretionary, Service-Master Global Holdings—which offers pest control (Terminix), home warranties, and home cleaning services—announced the spin-off of its home warranty business, which was news welcomed by investors. Also, its home cleaning business is anticipated to do well in the wake of Hurricanes Harvey and Irma. In the Materials sector, Summit Materials, Inc.—a maker of cement, concrete and asphalt—grew sales and volumes, notably in Austin and North Texas. Also in the Materials sector, FMC Corporation—a maker of agricultural products and lithium—had a strong year in both of its businesses. The company also announced an accretive acquisition of DuPont’s crop protection business.
The Fund’s absolute performance was mainly attributable to investments in Information Technology, Financial and Material stocks. Among our Information Technology stocks, Lam Research Corporation—a supplier of capital equipment to the semiconductor industry—benefited from another year of increased industry spending, particularly for 3D NAND, which is the latest generation of high-density storage drives. Among our financial stocks, Citizens Financial Group—a commercial bank serving the New England, mid-Atlantic, and Midwest regions—has benefited from strong loan growth and expense management. The bank is also positioned to benefit from higher interest rates and a reduction in regulations. Finally, among our stocks in the
| 204 |
Materials sector, Summit Materials, Inc. and FMC Corporation—discussed above—both delivered strong results on an absolute basis as well during the review period.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 205 |
Fund Expenses (unaudited)
OPPORTUNITY FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.20% | |||
| Actual | $1,000.00 | $1,158.60 | $6.49 | |
| Hypothetical** | $1,000.00 | $1,019.05 | $6.07 | |
| Class B Shares | 1.96% | |||
| Actual | $1,000.00 | $1,161.24 | $10.62 | |
| Hypothetical** | $1,000.00 | $1,015.24 | $9.90 | |
| Advisor Class Shares | 0.85% | |||
| Actual | $1,000.00 | $1,173.72 | $4.63 | |
| Hypothetical** | $1,000.00 | $1,020.81 | $4.31 | |
| Institutional Class Shares | 0.77% | |||
| Actual | $1,000.00 | $1,052.65 | $3.96 | |
| Hypothetical** | $1,000.00 | $1,021.21 | $3.90 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY SECTOR
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 206 |
Cumulative Performance Information (unaudited)
OPPORTUNITY FUND
Comparison of change in value of $10,000 investment in the First Investors Opportunity Fund (Class A shares) and the Standard & Poor’s MidCap 400 Index.
The graph compares a $10,000 investment in the First Investors Opportunity Fund (Class A shares) beginning 9/30/07 with a theoretical investment in the Standard & Poor’s MidCap 400 Index (the “Index”). The Index is an unmanaged capitalization-weighted index of 400 stocks designed to measure performance of the mid-range sector of the U.S. stock market. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
| 207 |
Cumulative Performance Information (unaudited) (continued)
OPPORTUNITY FUND
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Advisor Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 11.73% and the Institutional Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 11.90%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Standard & Poor’s and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
† The Index return is for ten years. The Index return since inception of the Advisor Class shares and Institutional Class shares is 12.05%.
| 208 |
Portfolio of Investments (continued)
OPPORTUNITY FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—96.0% | ||||
| Consumer Discretionary—20.9% | ||||
| 330,000 | Acushnet Holdings Corp. | $ 5,860,800 | ||
| 170,000 | Aramark Holdings Corp. | 6,903,700 | ||
| 175,000 | * | Belmond, Ltd. – Class “A” | 2,388,750 | |
| 225,000 | Big Lots, Inc. | 12,053,250 | ||
| 130,000 | BorgWarner, Inc. | 6,659,900 | ||
| 211,500 | Coach, Inc. | 8,519,220 | ||
| 100,500 | Dana Holding Corp. | 2,809,980 | ||
| 70,000 | Delphi Automotive, PLC | 6,888,000 | ||
| 353,200 | DSW, Inc. – Class “A” | 7,586,736 | ||
| 185,000 | * | Fox Factory Holding Corp. | 7,973,500 | |
| 124,700 | * | Helen of Troy, Ltd. | 12,083,430 | |
| 95,600 | HSN, Inc. | 3,733,180 | ||
| 145,000 | L Brands, Inc. | 6,033,450 | ||
| 40,000 | Lear Corp. | 6,923,200 | ||
| 160,000 | * | LKQ Corp. | 5,758,400 | |
| 165,000 | Magna International, Inc. | 8,807,700 | ||
| 360,000 | * | Michaels Cos., Inc. | 7,729,200 | |
| 165,000 | Newell Brands, Inc. | 7,040,550 | ||
| 95,000 | Nordstrom, Inc. | 4,479,250 | ||
| 104,800 | Oxford Industries, Inc. | 6,658,992 | ||
| 129,000 | Penske Automotive Group, Inc. | 6,136,530 | ||
| 25,000 | Ralph Lauren Corp. | 2,207,250 | ||
| 21,500 | Ross Stores, Inc. | 1,388,255 | ||
| 200,000 | Ruth’s Hospitality Group, Inc. | 4,190,000 | ||
| 166,200 | * | Select Comfort Corp. | 5,160,510 | |
| 340,000 | * | ServiceMaster Holdings, Inc. | 15,888,200 | |
| 159,300 | * | Taylor Morrison Home Corp. – Class “A” | 3,512,565 | |
| 500,000 | * | TRI Pointe Group, Inc. | 6,905,000 | |
| 209,000 | Tupperware Brands Corp. | 12,920,380 | ||
| 45,500 | Whirlpool Corp. | 8,392,020 | ||
| 475,000 | * | William Lyon Homes – Class “A” | 10,920,250 | |
| 3,000 | Williams-Sonoma, Inc. | 149,580 | ||
| 122,300 | Wolverine World Wide, Inc. | 3,528,355 | ||
| 102,000 | Wyndham Worldwide Corp. | 10,751,820 | ||
| 228,941,903 | ||||
| Consumer Staples—5.4% | ||||
| 270,000 | B&G Foods, Inc. | 8,599,500 | ||
| 513,725 | Koninklijke Ahold Delhaize NV (ADR) | 9,591,246 | ||
| 21,700 | McCormick & Co., Inc. | 2,227,288 | ||
| 110,000 | Nu Skin Enterprises, Inc. – Class “A” | 6,762,800 | ||
| 209 |
Portfolio of Investments (continued)
OPPORTUNITY FUND
September 30, 2017
| Shares | Security | Value | ||
| Consumer Staples (continued) | ||||
| 289,000 | * | Performance Food Group Co. | $ 8,164,250 | |
| 175,000 | Pinnacle Foods, Inc. | 10,004,750 | ||
| 101,661 | Tootsie Roll Industries, Inc. | 3,863,118 | ||
| 365,000 | * | U.S. Foods Holding Corp. | 9,745,500 | |
| 58,958,452 | ||||
| Energy—2.4% | ||||
| 30,100 | * | Dril-Quip, Inc. | 1,328,915 | |
| 80,000 | EOG Resources, Inc. | 7,739,200 | ||
| 90,000 | EQT Corp. | 5,871,600 | ||
| 85,000 | Hess Corp. | 3,985,650 | ||
| 80,000 | National Oilwell Varco, Inc. | 2,858,400 | ||
| 180,000 | PBF Energy, Inc. – Class “A” | 4,969,800 | ||
| 26,753,565 | ||||
| Financials—14.9% | ||||
| 75,600 | Ameriprise Financial, Inc. | 11,227,356 | ||
| 220,000 | Berkshire Hills Bancorp, Inc. | 8,525,000 | ||
| 500,000 | Citizens Financial Group, Inc. | 18,935,000 | ||
| 65,000 | Comerica, Inc. | 4,956,900 | ||
| 230,000 | Discover Financial Services | 14,830,400 | ||
| 400,000 | Financial Select Sector SPDR Fund (ETF) | 10,344,000 | ||
| 150,500 | First Republic Bank | 15,721,230 | ||
| 91,250 | Great Western Bancorp, Inc. | 3,766,800 | ||
| 139,200 | IBERIABANK Corp. | 11,435,280 | ||
| 75,000 | iShares Core S&P Mid-Cap ETF (ETF) | 13,417,500 | ||
| 90,000 | iShares Russell 2000 ETF (ETF) | 13,336,200 | ||
| 120,000 | Nasdaq, Inc. | 9,308,400 | ||
| 225,000 | SPDR S&P Regional Banking | 12,771,000 | ||
| 440,000 | Sterling Bancorp | 10,846,000 | ||
| 225,000 | Waddell & Reed Financial, Inc. – Class “A” | 4,515,750 | ||
| 163,936,816 | ||||
| Health Care—11.9% | ||||
| 35,000 | Allergan, PLC | 7,173,250 | ||
| 110,000 | * | AMN Healthcare Services, Inc. | 5,027,000 | |
| 225,000 | * | Centene Corp. | 21,773,250 | |
| 100,000 | * | Charles River Laboratories International, Inc. | 10,802,000 | |
| 75,000 | Dentsply Sirona, Inc. | 4,485,750 | ||
| 140,000 | Gilead Sciences, Inc. | 11,342,800 | ||
| 210 |
| Shares | Security | Value | ||
| Health Care (continued) | ||||
| 151,200 | Hill-Rom Holdings, Inc. | $ 11,188,800 | ||
| 350,500 | Phibro Animal Health Corp. – Class “A” | 12,986,025 | ||
| 230,000 | * | Prestige Brands, Inc. | 11,520,700 | |
| 75,000 | Quest Diagnostics, Inc. | 7,023,000 | ||
| 105,000 | Thermo Fisher Scientific, Inc. | 19,866,000 | ||
| 240,000 | * | VWR Corp. | 7,946,400 | |
| 131,134,975 | ||||
| Industrials—13.6% | ||||
| 260,000 | A.O. Smith Corp. | 15,451,800 | ||
| 150,000 | Apogee Enterprises, Inc. | 7,239,000 | ||
| 157,500 | * | Atkore International Group Co. | 3,072,825 | |
| 55,000 | * | Dycom Industries, Inc. | 4,723,400 | |
| 195,000 | ESCO Technologies, Inc. | 11,690,250 | ||
| 223,200 | * | Gardner Denver Holdings, Inc. | 6,142,464 | |
| 65,000 | Ingersoll-Rand, PLC | 5,796,050 | ||
| 82,500 | J. B. Hunt Transport Services, Inc. | 9,164,100 | ||
| 247,200 | Korn/Ferry International | 9,747,096 | ||
| 75,000 | ManpowerGroup, Inc. | 8,836,500 | ||
| 377,000 | Masco Corp. | 14,706,770 | ||
| 53,200 | * | MasTec, Inc. | 2,468,480 | |
| 70,000 | Owens Corning | 5,414,500 | ||
| 29,000 | Roper Technologies, Inc. | 7,058,600 | ||
| 438,000 | Schneider National, Inc. | 11,081,400 | ||
| 40,000 | Snap-On, Inc. | 5,960,400 | ||
| 50,000 | Stanley Black & Decker, Inc. | 7,548,500 | ||
| 410,000 | Triton International, Ltd. | 13,644,800 | ||
| 149,746,935 | ||||
| Information Technology—14.0% | ||||
| 219,700 | * | ARRIS International, PLC | 6,259,253 | |
| 41,400 | Belden, Inc. | 3,333,942 | ||
| 50,000 | Broadcom, Ltd. | 12,127,000 | ||
| 33,000 | Cypress Semiconductor Corp. | 495,660 | ||
| 90,000 | * | Fiserv, Inc. | 11,606,400 | |
| 75,000 | * | FleetCor Technologies, Inc. | 11,607,750 | |
| 50,000 | Juniper Networks, Inc. | 1,391,500 | ||
| 70,000 | Lam Research Corp. | 12,952,800 | ||
| 15,000 | Methode Electronics, Inc. | 635,250 | ||
| 118,300 | * | Microsemi Corp. | 6,090,084 | |
| 211 |
Portfolio of Investments (continued)
OPPORTUNITY FUND
September 30, 2017
| Shares | Security | Value | ||
| Information Technology (continued) | ||||
| 220,000 | NetApp, Inc. | $ 9,627,200 | ||
| 104,200 | * | NETGEAR, Inc. | 4,959,920 | |
| 85,000 | Silicon Motion Technology Corp. (ADR) | 4,082,550 | ||
| 265,000 | Symantec Corp. | 8,694,650 | ||
| 36,900 | TE Connectivity, Ltd. | 3,064,914 | ||
| 70,000 | * | Tech Data Corp. | 6,219,500 | |
| 225,000 | Technology Select Sector SPDR Fund (ETF) | 13,297,500 | ||
| 628,000 | Travelport Worldwide, Ltd. | 9,859,600 | ||
| 185,000 | Western Digital Corp. | 15,984,000 | ||
| 100,000 | * | Zebra Technologies Corp. – Class “A” | 10,858,000 | |
| 153,147,473 | ||||
| Materials—7.0% | ||||
| 200,000 | * | Berry Global Group, Inc. | 11,330,000 | |
| 36,400 | Eastman Chemical Co. | 3,293,836 | ||
| 185,600 | * | Ferro Corp. | 4,138,880 | |
| 150,000 | FMC Corp. | 13,396,500 | ||
| 115,000 | Greif, Inc. | 6,732,100 | ||
| 40,000 | Praxair, Inc. | 5,589,600 | ||
| 160,000 | Sealed Air Corp. | 6,835,200 | ||
| 470,580 | * | Summit Materials, Inc. – Class “A” | 15,072,677 | |
| 149,000 | Trinseo SA | 9,997,900 | ||
| 76,386,693 | ||||
| Real Estate—3.8% | ||||
| 540,000 | Brixmor Property Group, Inc. (REIT) | 10,152,000 | ||
| 150,000 | Douglas Emmett, Inc. (REIT) | 5,913,000 | ||
| 55,000 | Federal Realty Investment Trust (REIT) | 6,831,550 | ||
| 55,658 | Real Estate Select Sector SPDR Fund (ETF) | 1,794,414 | ||
| 367,200 | RLJ Lodging Trust (REIT) | 8,078,400 | ||
| 47,044 | Sunstone Hotel Investors, Inc. (REIT) | 755,997 | ||
| 334,200 | Tanger Factory Outlet Centers, Inc. (REIT) | 8,161,164 | ||
| 41,686,525 | ||||
| 212 |
| Shares or | |||||||
| Principal | |||||||
| Amount | Security | Value | |||||
| Utilities—2.1% | |||||||
| 4,100 | Black Hills Corp. | $ 282,367 | |||||
| 69,000 | NiSource, Inc. | 1,765,710 | |||||
| 144,800 | Portland General Electric Co. | 6,608,672 | |||||
| 37,900 | SCANA Corp. | 1,837,771 | |||||
| 200,000 | WEC Energy Group, Inc. | 12,556,000 | |||||
| 23,050,520 | |||||||
| Total Value of Common Stocks (cost $701,633,515) | 1,053,743,857 | ||||||
| SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—2.9% | |||||||
| Federal Home Loan Bank: | |||||||
| $1,750M | 1.005%, 10/17/2017 | 1,749,286 | |||||
| 8,000M | 1.015%, 10/19/2017 | 7,996,296 | |||||
| 3,500M | 1.02%, 10/20/2017 | 3,498,285 | |||||
| 9,000M | 1.02%, 10/30/2017 | 8,993,142 | |||||
| 9,500M | 1.025%, 11/9/2017 | 9,490,073 | |||||
| Total Value of Short-Term U.S. Government Agency Obligations (cost $31,725,314) 31,727,082 | |||||||
| SHORT-TERM U.S. GOVERNMENT | |||||||
| OBLIGATIONS—.9% | |||||||
| 9,500M | U.S. Treasury Bills, 0.935%, 10/26/2017 (cost $9,493,831) | 9,494,100 | |||||
| Total Value of Investments (cost $742,852,660) | 99.8 | % | 1,094,965,039 | ||||
| Other Assets, Less Liabilities | .2 | 2,661,064 | |||||
| Net Assets | 100.0 | % | $1,097,626,103 | ||||
| * | Non-income producing | |
| Summary of Abbreviations: | ||
| ADR | American Depositary Receipts | |
| ETF | Exchange Traded Fund | |
| REIT | Real Estate Investment Trust | |
| 213 |
Portfolio of Investments (continued)
OPPORTUNITY FUND
September 30, 2017
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Common Stocks | $ | 1,053,743,857 | $ | — | $ | — | $ | 1,053,743,857 | ||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 31,727,082 | — | 31,727,082 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Obligations | — | 9,494,100 | — | 9,494,100 | ||||||||
| Total Investments in Securities* | $ | 1,053,743,857 | $ | 41,221,182 | $ | — | $ | 1,094,965,039 | ||||
| * | The Portfolio of Investments provides information on the industry categorization for common stocks. |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 214 | See notes to financial statements |
Portfolio Manager’s Letter
REAL ESTATE FUND
Dear Investor:
This is the annual report for the First Investors Real Estate Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was –5.77% for Class A shares, –5.54% for Advisor Class shares and –5.45% for Institutional Class shares, including dividends of 12.8 cents per share for Class A shares, 18.0 cents per share for Advisor Class shares and 18.9 cents per share for Institutional Class shares. In addition, the Fund distributed capital gains of 14.3 cents per share on each class of shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018. The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
| 215 |
Portfolio Manager’s Letter (continued)
REAL ESTATE FUND
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Equity Market
U.S. equities had strong performance during the past twelve months, posting several new records. The Dow Jones Industrial Average (DJIA) hit four major psychological milestones of 19,000 (on November 22nd), 20,000 (on January 25th), 21,000 (on March 1st) and 22,000 (on August 2nd). The S&P 500 Index and the DJIA returned 18.61% and 25.45% for the period, respectively. Market volatility remained at historically low levels for most of the period despite elevated political uncertainty.
Small-caps (measured by the Russell 2000 Index), growth stocks (the S&P 500 Growth Index) and value stocks (the S&P 500 Value Index) posted similar strong returns of 20.74%, 19.90% and 16.47%, respectively. However, they experienced significant intra-period differences as market leaders moved out of favor. In the fourth quarter of 2016, small-caps and value stocks rallied the most following the Trump victory as investors focused on the expected benefits from possible tax cuts, increased infrastructure spending and reduced financial regulations. Small-caps and several value sectors, including Financials, would be the greatest beneficiaries of these business friendly policies. In January, the “Trump Trade” faded and investors switched their focus to an improving economic outlook, which benefited most growth stocks and large-caps for most of 2017. In September, there was another rotation to small-caps and value stocks in the continuation of the “Trump-Trade” fueled by investors’ renewed hopes for pro-business policies from Washington.
Higher-yielding stocks lagged the general market, with the Dow Jones US Select Dividend Index returning 13.21%. Real estate as a whole came under pressure due to the rising interest rate environment, and as well publicized retail bankruptcies and store closures resulted in a sell-off of retail REITs. The Dow Jones US Select REIT Index lost 0.83%.
Ten out of eleven S&P 500 sectors ended the review period in positive territory. Financials, which would be one of the greatest beneficiaries from the combination
| 216 |
of the higher interest rates and Trump’s pro-growth policies, was the strongest sector at 36.21%. Information Technology was the second strongest sector, up 28.88% as investors focused on an improving economic outlook. A stronger economy could magnify this sector’s growth potential. Conversely, Telecom Services was the weakest sector with a marginal loss of 0.14%, followed by Energy which was marginally positive at 0.16%.
International equities posted strong double-digit returns across all regions, supported by improving corporate earnings and economic data pointing to a healthy global economy. Developed markets (measured by the MSCI EAFE Index) and emerging markets (measured by the MSCI EM Index) returned 19.65% and 22.91%, respectively. Overall, the currency exchange effect was slightly positive.
The Fund
The Fund strategy is to invest in quality real estate companies with attractive valuations. For the review period, that led to overweight positions in Retail and underweights in Industrial and Data Centers.
Our thesis in Retail is simple—we believe that physical retail will not be extinct; and that retail will continue to be omni-channel in nature. E-commerce has lowered the barrier to entry for retailers to scale.
The traditional way to reach more customers was to open more stores. Now, anyone can open an online store and reach millions, even billions of customers. Apparel stores in a mall mostly compete with the other 20–30 apparel stores in the same mall. In e-commerce, any brand is one among thousands. Hence, we believe that brands need well-located physical stores to differentiate and stay relevant with consumers. Negative news headlines and perception have placed immense pressure on retail names, exacerbated by passive funds selling. We believe that this broad-brush selling has created opportunities for the Fund to invest in high-quality retail real estate.
Sector allocation in the Specialized and Real Estate Service sector, as well as stock selection in the Residential sector, contributed positively to the Fund’s performance relative to the benchmark, Dow Jones U.S. Select REIT Total Return Index. Most of the negative effects were from sector allocation in Industrial and Retail, and stock selection in the Specialized and Retail sectors also contributed to negative performance.
In Office, overweight positions in Tier REIT, Inc. and Corporate Office Properties contributed to relative performance during the review period. In our view, office demand is supported by robust employment growth. Manhattan, a key office market, may have excess supply in the next 2–3 years, as Hudson Yards and the Freedom Tower area finish new building construction.
| 217 |
Portfolio Manager’s Letter (continued)
REAL ESTATE FUND
In the Healthcare sector, our overweight position in Omega Healthcare Investors helped relative performance, as the stock benefited from dividend yield compression. The Fund’s underweight position in the Healthcare Realty Trust detracted from relative performance, as medical office buildings continued to become more expensive.
The Fund’s underweight positions in the Industrial sector hurt relative performance. The continued growth of e-commerce drove demand for industrial real estate. Capital is flowing into this sector. Speculative developments—construction without tenants—have been the norm for the past 3 years. We believe the threat of new supply is being ignored by investors.
New supply in coastal markets has depressed rental rates in the Residential sector. Demand is still healthy, driven by strong employment. But supply is suppressing rental market growth. The Fund’s underweight in American Campus Communities helped relative performance, while our overweight in AvalonBay Communities negatively impacted performance.
In Retail, the Fund’s overweight position in Tanger Factory Outlet and Taubman Centers hurt relative performance. However, there are several positive signs. First, online-only retailers are opening physical stores (Warby Parker, Bonobos, and Casper, to name a few). Second, malls are replacing retailers with food, entertainment and service-oriented tenants like restaurants and fitness centers. The average occupancy of listed malls is above 90%. Third, Amazon, after buying Whole Foods, is investing and expanding physical stores, not closing them. Fourth, a recent $3.2 billion, 10-mall transaction between Forest City and QIC confirmed that private market value for malls is 40-50% higher than current stock prices.
At the end of the review period, the Fund maintained an overweight exposure to Specialized, Retail and underweight Industrial and Residential.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 218 |
Fund Expenses (unaudited)
REAL ESTATE FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.45% | |||
| Actual | $1,000.00 | $ 928.77 | $7.01 | |
| Hypothetical** | $1,000.00 | $1,017.80 | $7.33 | |
| Advisor Class Shares | 1.12% | |||
| Actual | $1,000.00 | $ 944.65 | $5.46 | |
| Hypothetical** | $1,000.00 | $1,019.45 | $5.67 | |
| Institutional Class Shares | 0.98% | |||
| Actual | $1,000.00 | $ 945.49 | $4.78 | |
| Hypothetical** | $1,000.00 | $1,020.16 | $4.96 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived and/or assumed. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 219 |
Cumulative Performance Information (unaudited)
REAL ESTATE FUND
Comparison of change in value of $10,000 investment in the First Investors Real Estate Fund (Class A shares) and the Dow Jones U.S. Select REIT Index.
The graph compares a $10,000 investment in the First Investors Real Estate Fund (Class A shares) beginning 4/6/15 (commencement of operations) with a theoretical investment in the Dow Jones U.S. Select REIT Index (the “Index”). The Index intends to measure the performance of publicly traded REITs and REIT-like securities. The index is a subset of the Dow Jones U.S. Select Real Estate Securities Index (RESI), which represents equity real estate investment trusts (REITs) and real estate operating companies (REOCs) traded in the U.S. The indices are designed to serve as proxies for direct real estate investment, in part by excluding companies whose performance may be driven by factors other than the value of real estate. It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for
| 220 |
Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return Since Inception would have been (3.50%). The Advisor Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been (0.66%). The Institutional Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been (0.79%). Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from Standard & Poor’s and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Class A shares, Advisor Class shares and Institutional Class shares are for the period beginning 4/6/15 (commencement of operations).
| 221 |
Portfolio of Investments
REAL ESTATE FUND
September 30, 2017
| Shares | Security | Value | |
| COMMON STOCKS—96.6% | |||
| Apartments REITs—12.1% | |||
| 18,517 | Apartment Investment & Management Co. – Class “A” | $ 812,156 | |
| 26,967 | AvalonBay Communities, Inc. | 4,811,452 | |
| 8,927 | Camden Property Trust | 816,374 | |
| 62,581 | Equity Residential Properties | 4,125,965 | |
| 5,741 | Essex Property Trust, Inc. | 1,458,386 | |
| 18,696 | Mid-America Apartment Communities, Inc. | 1,998,228 | |
| 8,351 | UDR, Inc. | 317,589 | |
| 14,340,150 | |||
| Diversified REITs—4.1% | |||
| 7,564 | CoreCivic, Inc. | 202,488 | |
| 2,812 | Digital Realty Trust, Inc. | 332,744 | |
| 30,516 | Duke Realty Corp. | 879,471 | |
| 35,370 | Forest City Realty Trust, Inc. | 902,289 | |
| 33,458 | Vornado Realty Trust | 2,572,251 | |
| 4,889,243 | |||
| Health Care REITs—11.8% | |||
| 78,341 | HCP, Inc. | 2,180,230 | |
| 1,630 | Healthcare Realty Trust, Inc. | 52,714 | |
| 3,260 | Healthcare Trust of America, Inc. | 97,148 | |
| 3,528 | LTC Properties, Inc. | 165,745 | |
| 54,230 | Omega Heathcare Investors, Inc. | 1,730,479 | |
| 19,176 | * | Quality Care Properties, Inc. | 297,228 |
| 90,183 | Sabra Health Care REIT, Inc. | 1,978,615 | |
| 43,379 | Senior Housing Properties Trust | 848,059 | |
| 50,604 | Ventas, Inc. | 3,295,839 | |
| 48,051 | Welltower, Inc. | 3,377,024 | |
| 14,023,081 | |||
| Hotels REITs—2.2% | |||
| 16,612 | Hospitality Properties Trust | 473,276 | |
| 81,104 | Host Hotels & Resorts, Inc. | 1,499,613 | |
| 17,324 | LaSalle Hotel Properties | 502,742 | |
| 7,948 | Sunstone Hotel Investors, Inc. | 127,724 | |
| 2,603,355 | |||
| 222 |
| Shares | Security | Value | ||
| Industrial REITs—.1% | ||||
| 2,737 | Liberty Property Trust | $ 112,381 | ||
| Infrastructure REITs—4.9% | ||||
| 3,048 | CorEnergy Infrastructure Trust, Inc. | 107,747 | ||
| 1,700 | Crown Castle International Corp. | 169,966 | ||
| 376,531 | Uniti Group, Inc. | 5,519,944 | ||
| 5,797,657 | ||||
| Manufactured Homes REITs—2.2% | ||||
| 20,759 | Equity LifeStyle Properties, Inc. | 1,766,176 | ||
| 10,371 | Sun Communities, Inc. | 888,587 | ||
| 2,654,763 | ||||
| Office Property REITs—8.3% | ||||
| 9,051 | Alexandria Real Estate Equities, Inc. | 1,076,797 | ||
| 33,194 | Boston Properties, Inc. | 4,078,879 | ||
| 5,700 | Brandywine Realty Trust | 99,693 | ||
| 14,800 | City Office REIT, Inc. | 203,796 | ||
| 17,825 | Corporate Office Properties Trust | 585,195 | ||
| 5,120 | Douglas Emmett, Inc. | 201,830 | ||
| 7,040 | Empire State Realty Trust, Inc. – Class “A” | 144,602 | ||
| 20,515 | * | Equity Commonwealth | 623,656 | |
| 424 | Franklin Street Properties Corp. | 4,503 | ||
| 16,729 | JBG SMITH Properties | 572,299 | ||
| 10,665 | Mack-Cali Realty Corp. | 252,867 | ||
| 43,470 | New York REIT, Inc. | 341,240 | ||
| 14,867 | Paramount Group, Inc. | 237,872 | ||
| 12,680 | Piedmont Office Realty Trust, Inc. – Class “A” | 255,629 | ||
| 5,912 | SL Green Realty Corp. | 599,004 | ||
| 29,565 | Tier REIT, Inc. | 570,605 | ||
| 9,848,467 | ||||
| Real Estate Services—3.2% | ||||
| 140,831 | * | Marcus & Millichap, Inc. | 3,801,029 | |
| Regional Malls REITs—25.7% | ||||
| 167,794 | CBL & Associates Properties, Inc. | 1,407,792 | ||
| 278,420 | GGP, Inc | 5,782,783 | ||
| 74,142 | Macerich Co. | 4,075,586 | ||
| 64,870 | Pennsylvania REIT | 680,486 | ||
| 70,585 | Simon Property Group, Inc. | 11,364,891 | ||
| 223 |
Portfolio of Investments (continued)
REAL ESTATE FUND
September 30, 2017
| Shares | Security | Value | ||
| Regional Malls REITs (continued) | ||||
| 155,653 | Tanger Factory Outlet Centers, Inc. | $ 3,801,046 | ||
| 60,555 | Taubman Centers, Inc. | 3,009,584 | ||
| 56,320 | Washington Prime Group, Inc. | 469,146 | ||
| 30,591,314 | ||||
| Shopping Centers REITs—2.5% | ||||
| 1,282 | Acadia Realty Trust | 36,691 | ||
| 13,400 | Brixmor Property Group, Inc. | 251,920 | ||
| 5,800 | Cedar Realty Trust, Inc. | 32,596 | ||
| 68,076 | DDR Corp. | 623,576 | ||
| 3,713 | Federal Realty Investment Trust | 461,192 | ||
| 16,971 | Kimco Realty Corp. | 331,783 | ||
| 7,090 | Kite Realty Group Trust | 143,573 | ||
| 2,580 | Ramco-Gershenson Properties Trust | 33,566 | ||
| 5,202 | Regency Centers Corp. | 322,732 | ||
| 57,523 | Retail Properties of America, Inc. – Class “A” | 755,277 | ||
| 995 | Weingarten Realty Investors | 31,581 | ||
| 3,024,487 | ||||
| Single Tenant REITs—2.6% | ||||
| 104,862 | Select Income REIT | 2,455,868 | ||
| 20,266 | Spirit Realty Capital, Inc. | 173,680 | ||
| 13,922 | STORE Capital Corp. | 346,240 | ||
| 8,000 | VEREIT, Inc. | 66,320 | ||
| 3,042,108 | ||||
| Storage REITs—15.5% | ||||
| 126,146 | CubeSmart | 3,274,750 | ||
| 39,661 | Extra Space Storage, Inc. | 3,169,707 | ||
| 1,459 | Iron Mountain, Inc. | 56,755 | ||
| 51,832 | Life Storage, Inc. | 4,240,376 | ||
| 36,012 | Public Storage | 7,706,208 | ||
| 18,447,796 | ||||
| Student Housing REITs—.3% | ||||
| 7,292 | American Campus Communities, Inc. | 321,942 | ||
| 224 |
| Shares | Security | Value | |||||
| Warehouse/Industrial REITs—1.1% | |||||||
| 1,260 | DCT Industrial Trust, Inc. | $ 72,979 | |||||
| 684 | EastGroup Properties, Inc. | 60,274 | |||||
| 3,320 | First Industrial Realty Trust, Inc. | 99,899 | |||||
| 17,840 | Prologis, Inc. | 1,132,126 | |||||
| 1,365,278 | |||||||
| Total Value of Common Stocks (cost $119,177,322) | 96.6 | % | 114,863,051 | ||||
| Other Assets, Less Liabilities | 3.4 | 4,045,535 | |||||
| Net Assets | 100.0 | % | $118,908,586 | ||||
| * | Non-income producing | |
| Summary of Abbreviations: | ||
| REITs | Real Estate Investment Trusts | |
| 225 |
Portfolio of Investments (continued)
REAL ESTATE FUND
September 30, 2017
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Common Stocks* | $ | 114,863,051 | $ | — | $ | — | $ | 114,863,051 |
| * | The Portfolio of Investments provides information on the industry categorization for common stocks. |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 226 | See notes to financial statements |
Portfolio Manager’s Letter
SELECT GROWTH FUND
Dear Investor:
This is the annual report for the First Investors Select Growth Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 24.16% for Class A shares, 23.13% for Class B shares, 24.61% for Advisor Class shares and 24.61% for Institutional Class shares, including dividends of 3.0 per share for Class A shares, 1.5 cents per share for Class B shares, 4.2 cents per share for Advisor Class shares and 4.4 cents per share for Institutional Class shares. In addition, the Fund distributed capital gains of $1.55 per share on each class of shares.
Market Overview
The fiscal year can be characterized as the return of more robust economic growth. While this expansion has seen fairly steady economic growth, it has been below growth rates typically experienced after a severe recession. The election, however, provided a catalyst for the market to take off. The S&P 500 Index closed at 2,139.6 on November 8, 2016, and then rallied to close at 2,519.4 at the end of the fiscal year, posting a gain of 17.8% since the election.
While some enthusiasm is warranted based on more business-friendly initiatives, including a push for overall tax-reform to allow consumers more disposable income, there are signs of an improving overall economic environment. The U.S. economy is showing stronger GDP readings, the unemployment rate is ticking lower, and labor participation is improving.
Internationally, economies show improvement as well, with Europe, Japan, and emerging markets posting better than expected economic data, and China showing signs of a soft landing. The overall brightening outlook for business has translated into improving earnings for U.S. companies. Where earnings growth over the last several years had been achieved through improving efficiency and share buybacks, more recently companies have seen earnings growth in conjunction with positive revenue surprises. Smith Group attempts to identify companies that have the potential to sustainably deliver earnings in excess of expectations, and the return of more robust economic growth should provide better opportunities to find such companies. Thus, the Fund’s return of 24.15% for Class A shares, almost 2.3% better than the benchmark return of 21.87% is a reflection of an environment where the market recognizes companies that deliver stronger earnings.
The Fund
The Fund’s performance for the year was helped by the Information Technology and Healthcare sectors. In the Information Technology sector, strong earnings trends propelled the Fund’s holdings in the sector to a 44.6% return, much better than the
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Portfolio Manager’s Letter (continued)
SELECT GROWTH FUND
benchmark’s return of 30.9%. Take-Two Interactive, a video-game and entertainment software developer with titles such as NBA-2K and Grand Theft Auto, and Arista Networks, a cloud networking solutions provider, gaining 126.4% and 121.9%, respectively, were the largest contributors to the performance. The Healthcare sector saw significant gains in Centene, a managed care company for those on Medicaid, and C.R. Bard, a surgical technology company acquired by Becton Dickinson, as the shares of the companies increased 44.5% and 37.4%, respectively.
On the negative side, the Fund’s holdings in Energy reversed from being the best contributor in the previous fiscal year to the worst this year as commodity prices moderated. SM Energy, an exploration and production company, and Helmerich & Payne, a drilling company, declined 42.2% and 10.6%, respectively, before the positions were sold.
In last year’s commentary, we noted that we were optimistic as the market seemed to respond more favorably to better economic data and that business fundamentals could have better impact on stock performance. The Fund’s better performance for the 2017 fiscal year showed better returns for companies delivering solid results. We continue to believe that equities should be able to generate healthy returns going forward as robust economic growth should provide a solid foundation for strong earnings growth by the companies held by the Fund. We continue to believe our focus on high quality companies where earnings will exceed market expectations is the key to generating excess returns over the long term.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
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Fund Expenses (unaudited)
SELECT GROWTH FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.24% | |||
| Actual | $1,000.00 | $1,201.06 | $6.84 | |
| Hypothetical** | $1,000.00 | $1,018.85 | $6.28 | |
| Class B Shares | 2.02% | |||
| Actual | $1,000.00 | $1,231.30 | $11.30 | |
| Hypothetical** | $1,000.00 | $1,014.94 | $10.20 | |
| Advisor Class Shares | 0.84% | |||
| Actual | $1,000.00 | $1,246.05 | $4.73 | |
| Hypothetical** | $1,000.00 | $1,020.86 | $4.26 | |
| Institutional Class Shares | 0.81% | |||
| Actual | $1,000.00 | $1,246.06 | $4.56 | |
| Hypothetical** | $1,000.00 | $1,021.01 | $4.10 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY SECTOR
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
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Cumulative Performance Information (unaudited)
SELECT GROWTH FUND
Comparison of change in value of $10,000 investment in the First Investors Select Growth Fund (Class A shares) and the Russell 3000 Growth Index.
The graph compares a $10,000 investment in the First Investors Select Growth Fund (Class A shares) beginning 9/30/07 with a theoretical investment in the Russell 3000 Growth Index (the “Index”). The Index is an unmanaged index that measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values (the Russell 3000 Index is an unmanaged index that measures the performance of the 3,000 largest U.S. companies based on total market capitalization). It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or
| 230 |
less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Advisor Class and Institutional Class were waived or assumed. If such expenses had been paid by the Fund, the Advisor Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 14.55% and the Institutional Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 14.68%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from FTSE Russell and Company and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
† The Index return is for ten years. The Index return since inception of the Advisor Class shares and Institutional Class shares is 14.89%.
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Portfolio of Investments
SELECT GROWTH FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—98.9% | ||||
| Consumer Discretionary—15.4% | ||||
| 113,000 | Home Depot, Inc. | $ 18,482,280 | ||
| 77,800 | Lear Corp. | 13,465,624 | ||
| 89,800 | McDonald’s Corp. | 14,069,864 | ||
| 211,900 | Nordstrom, Inc. | 9,991,085 | ||
| 104,500 | PVH Corp. | 13,173,270 | ||
| 122,500 | Wyndham Worldwide Corp. | 12,912,725 | ||
| 82,094,848 | ||||
| Consumer Staples—6.1% | ||||
| 78,110 | Procter & Gamble Co. | 7,106,448 | ||
| 264,000 | Sysco Corp. | 14,242,800 | ||
| 147,600 | Wal-Mart Stores, Inc. | 11,533,464 | ||
| 32,882,712 | ||||
| Energy—1.0% | ||||
| 44,200 | Chevron Corp. | 5,193,500 | ||
| Financials—10.7% | ||||
| 243,900 | Bank of New York Mellon Corp. | 12,931,578 | ||
| 128,800 | Discover Financial Services | 8,305,024 | ||
| 137,400 | JPMorgan Chase & Co. | 13,123,074 | ||
| 187,800 | SunTrust Banks, Inc. | 11,224,806 | ||
| 215,800 | U.S. Bancorp | 11,564,722 | ||
| 57,149,204 | ||||
| Health Care—18.3% | ||||
| 229,300 | Baxter International, Inc. | 14,388,575 | ||
| 43,400 | * | Biogen, Inc. | 13,589,408 | |
| 112,800 | * | Celgene Corp. | 16,448,496 | |
| 186,400 | * | Centene Corp. | 18,037,928 | |
| 173,300 | Merck & Co., Inc. | 11,096,399 | ||
| 115,900 | * | Varian Medical Systems, Inc. | 11,596,954 | |
| 70,400 | * | Waters Corp. | 12,638,208 | |
| 97,795,968 | ||||
| Industrials—11.7% | ||||
| 52,600 | Boeing Co. | 13,371,446 | ||
| 149,200 | Eaton Corp., PLC | 11,457,068 | ||
| 191,600 | Emerson Electric Co. | 12,040,144 | ||
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| Shares or | |||||||
| Principal | |||||||
| Amount | Security | Value | |||||
| Industrials (continued) | |||||||
| 55,000 | Huntington Ingalls Industries, Inc. | $ 12,454,200 | |||||
| 76,300 | Parker Hannifin Corp. | 13,354,026 | |||||
| 62,676,884 | |||||||
| Information Technology—33.1% | |||||||
| 148,000 | * | Adobe Systems, Inc. | 22,078,640 | ||||
| 13,600 | * | Alphabet, Inc. – Class “A” | 13,242,592 | ||||
| 77,500 | Apple, Inc. | 11,944,300 | |||||
| 102,100 | * | Arista Networks, Inc. | 19,359,181 | ||||
| 568,600 | * | Cadence Design Systems, Inc. | 22,442,642 | ||||
| 120,000 | * | Facebook, Inc. – Class “A” | 20,504,400 | ||||
| 65,200 | * | FleetCor Technologies, Inc. | 10,091,004 | ||||
| 312,800 | NetApp, Inc. | 13,688,128 | |||||
| 173,100 | PayPal Holdings, Inc. | 11,083,593 | |||||
| 187,800 | * | Take-Two Interactive Software, Inc. | 19,198,794 | ||||
| 119,600 | VMware, Inc. | 13,059,124 | |||||
| 176,692,398 | |||||||
| Materials—2.6% | |||||||
| 131,300 | Celanese Corp. – Class “A” | 13,690,651 | |||||
| Total Value of Common Stocks (cost $415,883,304) | 528,176,165 | ||||||
| SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—.8% | |||||||
| Federal Home Loan Bank: | |||||||
| $1,500M | 1.02%, 10/20/2017 | 1,499,265 | |||||
| 1,500M | 1.02%, 10/30/2017 | 1,498,857 | |||||
| 1,500M | 1.025%, 11/9/2017 | 1,498,432 | |||||
| Total Value of Short-Term U.S. Government Agency Obligations (cost $4,496,292) | 4,496,554 | ||||||
| SHORT-TERM U.S. GOVERNMENT | |||||||
| OBLIGATIONS—.1% | |||||||
| 500M | U.S. Treasury Bills, 0.935%, 10/26/2017 (cost $499,675) | 499,690 | |||||
| Total Value of Investments (cost $420,879,271) | 99.8 | % | 533,172,409 | ||||
| Other Assets, Less Liabilities | .2 | 1,077,074 | |||||
| Net Assets | 100.0 | % | $534,249,483 | ||||
| * Non-income producing |
| 233 |
Portfolio of Investments (continued)
SELECT GROWTH FUND
September 30, 2017
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Common Stocks | $ | 528,176,165 | $ | — | $ | — | $ | 528,176,165 | ||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 4,496,554 | — | 4,496,554 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Obligations | — | 499,690 | — | 499,690 | ||||||||
| Total Investments in Securities* | $ | 528,176,165 | $ | 4,996,244 | $ | — | $ | 533,172,409 |
| * | The Portfolio of Investments provides information on the industry categorization for common stocks. |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 234 | See notes to financial statements |
Portfolio Manager’s Letter
SPECIAL SITUATIONS FUND
Dear Investor:
This is the annual report for the First Investors Special Situations Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 20.06% for Class A shares, 19.13% for Class B shares, 20.41% for Advisor Class shares and 20.56% for Institutional Class shares, including dividends of 16.0 cents per share for Class A shares, 12.7 cents per share for Class B shares, 17.8 cents per share for Advisor Class shares and 18.4 for Institutional Class shares. In addition, the Fund distributed capital gains of 23.7 cents per share on each class of shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018. The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July
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Portfolio Manager’s Letter (continued)
SPECIAL SITUATIONS FUND
and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Equity Market
U.S. equities had strong performance during the past twelve months, posting several new records. The Dow Jones Industrial Average (DJIA) hit four major psychological milestones of 19,000 (on November 22nd), 20,000 (on January 25th), 21,000 (on March 1st) and 22,000 (on August 2nd). The S&P 500 Index and the DJIA returned 18.61% and 25.45% for the period, respectively. Market volatility remained at historically low levels for most of the period despite elevated political uncertainty.
Small-caps (measured by the Russell 2000 Index), growth stocks (the S&P 500 Growth Index) and value stocks (the S&P 500 Value Index) posted similar strong returns of 20.74%, 19.90% and 16.47%, respectively. However, they experienced significant intra-period differences as market leaders moved out of favor. In the fourth quarter of 2016, small-caps and value stocks rallied the most following the Trump victory as investors focused on the expected benefits from possible tax cuts, increased infrastructure spending and reduced financial regulations. Small-caps and several value sectors, including Financials, would be the greatest beneficiaries of these business friendly policies. In January, the “Trump Trade” faded and investors switched their focus to an improving economic outlook, which benefited most growth stocks and large-caps for most of 2017. In September, there was another rotation to small-caps and value stocks in the continuation of the “Trump-Trade” fueled by investors’ renewed hopes for pro-business policies from Washington.
Higher-yielding stocks lagged the general market, with the Dow Jones US Select Dividend Index returning 13.21%. Real estate as a whole came under pressure due to the rising interest rate environment, and as well publicized retail bankruptcies and store closures resulted in a sell-off of retail REITs. The Dow Jones US Select REIT Index lost 0.83%.
Ten out of eleven S&P 500 sectors ended the review period in positive territory. Financials, which would be one of the greatest beneficiaries from the combination of the higher interest rates and Trump’s pro-growth policies, was the strongest sector at 36.21%. Information Technology was the second strongest sector, up 28.88% as investors focused on an improving economic outlook. A stronger economy could magnify this sector’s growth potential. Conversely, Telecom Services was the weakest sector with a marginal loss of 0.14%, followed by Energy which was marginally positive at 0.16%.
| 236 |
International equities posted strong double-digit returns across all regions, supported by improving corporate earnings and economic data pointing to a healthy global economy. Developed markets (measured by the MSCI EAFE Index) and emerging markets (measured by the MSCI EM Index) returned 19.65% and 22.91%, respectively. Overall, the currency exchange effect was slightly positive.
The Fund
The Fund’s absolute performance was mainly attributable to investments in Consumer Discretionary, Industrial and Financial stocks. In Consumer Discretionary, Fox Factory Holding Corporation—a maker of suspension products for mountain bikes and automotive vehicles—benefited from demand for its high-end shocks in off-road vehicles.
In the Industrial sector, Orbital ATK, Inc., a defense contractor that supplies ammunitions and space systems, agreed to be acquired by Northrop Grumman Corporation for a significant premium. The acquisition of Orbital ATK lifted the Fund’s relative performance, as well as its absolute performance.
Finally, in the Financial sector, American Financial Group—an underwriter of specialty commercial property and casualty insurance—has benefited from a stable pricing environment. Additionally, its annuity business is positioned to benefit from higher interest rates and a reduction in regulations.
On a relative basis, the Fund outperformed the Russell 2000 Index primarily due to stock selection in the Basic Material and Industrial sectors. In basic materials, Summit Materials Inc.—a maker of cement, concrete and asphalt—grew sales and volumes, notably in Austin and North Texas. Also in basic materials, Ferro Corporation—a maker of pigments and coatings—benefited from new customer wins and accretive acquisitions.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 237 |
Fund Expenses (unaudited)
SPECIAL SITUATIONS FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.30% | |||
| Actual | $1,000.00 | $1,196.56 | $7.16 | |
| Hypothetical** | $1,000.00 | $1,018.55 | $6.58 | |
| Class B Shares | 2.09% | |||
| Actual | $1,000.00 | $1,191.32 | $11.48 | |
| Hypothetical** | $1,000.00 | $1,014.59 | $10.56 | |
| Advisor Class Shares | 0.94% | |||
| Actual | $1,000.00 | $1,204.49 | $5.19 | |
| Hypothetical** | $1,000.00 | $1,020.36 | $4.76 | |
| Institutional Class Shares | 0.86% | |||
| Actual | $1,000.00 | $1,206.03 | $4.76 | |
| Hypothetical** | $1,000.00 | $1,020.76 | $4.36 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid during the | |
| period are net of expenses waived. | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
BY SECTOR
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
| 238 |
Cumulative Performance Information (unaudited)
SPECIAL SITUATIONS FUND
Comparison of change in value of $10,000 investment in the First Investors Special Situations Fund (Class A shares) and the Russell 2000 Index.
The graph compares a $10,000 investment in the First Investors Special Situations Fund (Class A shares) beginning 9/30/07 with a theoretical investment in the Russell 2000 Index (the “Index”). The Index is an unmanaged Index that measures the performance of the small-cap segment of the U.S. equity universe. The Index consists of the smallest 2,000 companies in the Russell 3000 Index (which represents approximately 98% of the investable U.S. equity market). It is not possible to invest directly in this Index. In addition, the Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
| 239 |
Cumulative Performance Information (unaudited) (continued)
SPECIAL SITUATIONS FUND
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During some of the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Class A “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 10.93% and 7.07%, respectively. The Class B “S.E.C. Standardized” Average Annual Total Return for Five Years and Ten Years would have been 11.10% and 7.08%, respectively. The Advisor Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 11.53%. The Institutional Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 11.73%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Index figures are from FTSE Russell and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
† The Index return is for ten years. The Index return since inception of the Advisor Class shares and Institutional Class shares is 12.02%.
| 240 |
Portfolio of Investments
SPECIAL SITUATIONS FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—99.4% | ||||
| Consumer Discretionary—16.3% | ||||
| 300,500 | * | 1-800-FLOWERS.COM, Inc. | $ 2,959,925 | |
| 159,500 | Acushnet Holdings Corp. | 2,832,720 | ||
| 27,500 | American Eagle Outfitters, Inc. | 393,250 | ||
| 214,500 | * | Belmond, Ltd. | 2,927,925 | |
| 318,500 | * | Century Communities, Inc. | 7,866,950 | |
| 139,000 | DSW, Inc. – Class “A” | 2,985,720 | ||
| 299,500 | Entravision Communications Corp. – Class “A” | 1,707,150 | ||
| 386,500 | * | Fox Factory Holding Corp. | 16,658,150 | |
| 36,500 | * | Helen of Troy, Ltd. | 3,536,850 | |
| 202,000 | * | Live Nation Entertainment, Inc. | 8,797,100 | |
| 90,500 | * | LKQ Corp. | 3,257,095 | |
| 113,000 | * | Michaels Cos., Inc. | 2,426,110 | |
| 109,000 | * | Motorcar Parts of America, Inc. | 3,211,140 | |
| 95,600 | Newell Brands, Inc. | 4,079,252 | ||
| 68,500 | Oxford Industries, Inc. | 4,352,490 | ||
| 82,000 | Penske Automotive Group, Inc. | 3,900,740 | ||
| 231,000 | Regal Entertainment Group – Class “A” | 3,696,000 | ||
| 135,000 | Ruth’s Hospitality Group, Inc. | 2,828,250 | ||
| 200,500 | * | ServiceMaster Holdings, Inc. | 9,369,365 | |
| 105,500 | * | Taylor Morrison Home Corp. – Class “A” | 2,326,275 | |
| 368,500 | * | TRI Pointe Group, Inc. | 5,088,985 | |
| 69,500 | Tupperware Brands Corp. | 4,296,490 | ||
| 53,000 | * | Visteon Corp. | 6,559,810 | |
| 207,500 | * | William Lyon Homes – Class “A” | 4,770,425 | |
| 110,828,167 | ||||
| Consumer Staples—3.5% | ||||
| 161,500 | B&G Foods, Inc. | 5,143,775 | ||
| 146,000 | * | Performance Food Group Co. | 4,124,500 | |
| 108,500 | Pinnacle Foods, Inc. | 6,202,945 | ||
| 101,500 | Tootsie Roll Industries, Inc. | 3,857,000 | ||
| 178,500 | * | U.S. Foods Holding Corp. | 4,765,950 | |
| 24,094,170 | ||||
| Energy—2.4% | ||||
| 40,500 | Andeavor Logistics, LP | 4,177,575 | ||
| 46,000 | Delek U.S. Holdings, Inc. | 1,229,580 | ||
| 54,500 | * | Dril-Quip, Inc. | 2,406,175 | |
| 241 |
Portfolio of Investments (continued)
SPECIAL SITUATIONS FUND
September 30, 2017
| Shares | Security | Value | ||
| Energy (continued) | ||||
| 28,000 | Energy Select Sector SPDR Fund (ETF) | $ 1,917,440 | ||
| 280,500 | * | Jagged Peak Energy, Inc. | 3,831,630 | |
| 100,000 | PBF Energy, Inc. – Class “A” | 2,761,000 | ||
| 16,323,400 | ||||
| Financials—20.2% | ||||
| 159,000 | AllianceBernstein Holding, LP (MLP) | 3,863,700 | ||
| 153,500 | American Financial Group, Inc. | 15,879,575 | ||
| 44,500 | Aspen Insurance Holdings, Ltd. | 1,797,800 | ||
| 191,500 | * | Atlas Financial Holdings, Inc. | 3,619,350 | |
| 228,500 | Berkshire Hills Bancorp, Inc. | 8,854,375 | ||
| 157,500 | Brown & Brown, Inc. | 7,589,925 | ||
| 78,000 | * | Capstar Financial Holdings, Inc. | 1,527,240 | |
| 165,500 | Citizens Financial Group, Inc. | 6,267,485 | ||
| 107,000 | * | FCB Financial Holdings, Inc. – Class “A” | 5,168,100 | |
| 305,500 | Financial Select Sector SPDR Fund (ETF) | 7,900,230 | ||
| 122,500 | Great Western Bancorp, Inc. | 5,056,800 | ||
| 195,000 | * | Green Bancorp, Inc. | 4,611,750 | |
| 128,000 | Guaranty Bancorp | 3,558,400 | ||
| 81,000 | IBERIABANK Corp. | 6,654,150 | ||
| 22,000 | iShares Russell 2000 ETF (ETF) | 3,259,960 | ||
| 211,000 | OceanFirst Financial Corp. | 5,800,390 | ||
| 100,500 | Prosperity Bancshares, Inc. | 6,605,865 | ||
| 61,500 | QCR Holdings, Inc. | 2,798,250 | ||
| 173,000 | * | Seacoast Banking Corp. | 4,132,970 | |
| 90,500 | Simmons First National Corp. – Class “A” | 5,239,950 | ||
| 141,000 | SPDR S&P Regional Banking (ETF) | 8,003,160 | ||
| 500,500 | Sterling Bancorp | 12,337,325 | ||
| 379,500 | TCF Financial Corp. | 6,466,680 | ||
| 54,000 | Waddell & Reed Financial, Inc. – Class “A” | 1,083,780 | ||
| 138,077,210 | ||||
| Health Care—10.6% | ||||
| 68,500 | * | ANI Pharmaceuticals, Inc. | 3,595,565 | |
| 54,000 | * | Cambrex Corp. | 2,970,000 | |
| 165,000 | * | Centene Corp. | 15,967,050 | |
| 43,500 | * | Charles River Laboratories International, Inc. | 4,698,870 | |
| 114,000 | Hill-Rom Holdings, Inc. | 8,436,000 | ||
| 36,500 | * | ICON, PLC | 4,156,620 | |
| 178,000 | * | Integra LifeSciences Holdings Corp. | 8,985,440 | |
| 129,500 | PerkinElmer, Inc. | 8,931,615 | ||
| 242 |
| Shares | Security | Value | ||
| Health Care (continued) | ||||
| 195,000 | Phibro Animal Health Corp. – Class “A” | $ 7,224,750 | ||
| 51,600 | * | Varex Imaging Corp. | 1,746,144 | |
| 167,000 | * | VWR Corp. | 5,529,370 | |
| 72,241,424 | ||||
| Industrials—15.7% | ||||
| 196,500 | A.O. Smith Corp. | 11,677,995 | ||
| 64,000 | Apogee Enterprises, Inc. | 3,088,640 | ||
| 108,500 | * | Atkore International Group Co. | 2,116,835 | |
| 101,500 | Comfort Systems USA, Inc. | 3,623,550 | ||
| 144,500 | ESCO Technologies, Inc. | 8,662,775 | ||
| 121,500 | * | Gardner Denver Holdings, Inc. | 3,343,680 | |
| 58,500 | Industrial Select Sector SPDR Fund (ETF) | 4,153,500 | ||
| 81,000 | ITT, Inc. | 3,585,870 | ||
| 41,400 | Korn/Ferry International | 1,632,402 | ||
| 114,000 | Masco Corp. | 4,447,140 | ||
| 386,500 | * | NCI Building Systems, Inc. | 6,029,400 | |
| 121,500 | Orbital ATK, Inc. | 16,178,940 | ||
| 46,000 | Owens Corning | 3,558,100 | ||
| 62,500 | * | Patrick Industries, Inc. | 5,256,250 | |
| 47,000 | Regal Beloit Corp. | 3,713,000 | ||
| 234,000 | Schneider National, Inc. – Class “B” | 5,920,200 | ||
| 32,000 | Snap-On, Inc. | 4,768,320 | ||
| 135,000 | * | SPX Corp. | 3,960,900 | |
| 47,500 | Standex International Corp. | 5,044,500 | ||
| 191,500 | Triton International, Ltd. | 6,373,120 | ||
| 107,135,117 | ||||
| Information Technology—13.4% | ||||
| 179,100 | * | ARRIS International, PLC | 5,102,559 | |
| 214,000 | * | Autobytel, Inc. | 1,474,460 | |
| 121,000 | * | Axcelis Technologies, Inc. | 3,309,350 | |
| 7,500 | Belden, Inc. | 603,975 | ||
| 184,000 | * | CommScope Holding Co., Inc. | 6,110,640 | |
| 283,000 | * | Extreme Networks, Inc. | 3,364,870 | |
| 67,000 | * | IAC/InterActiveCorp | 7,877,860 | |
| 44,500 | Lam Research Corp. | 8,234,280 | ||
| 21,000 | LogMeIn, Inc. | 2,311,050 | ||
| 152,000 | * | Microsemi Corp. | 7,824,960 | |
| 96,500 | MKS Instruments, Inc. | 9,114,425 | ||
| 113,000 | NetApp, Inc. | 4,944,880 | ||
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Portfolio of Investments (continued)
SPECIAL SITUATIONS FUND
September 30, 2017
| Shares | Security | Value | ||
| Information Technology (continued) | ||||
| 149,500 | * | Orbotech, Ltd. | $ 6,310,395 | |
| 167,000 | * | Perficient, Inc. | 3,284,890 | |
| 68,200 | Silicon Motion Technology Corp. (ADR) | 3,275,646 | ||
| 308,500 | Travelport Worldwide, Ltd. | 4,843,450 | ||
| 79,500 | Western Digital Corp. | 6,868,800 | ||
| 62,500 | * | Zebra Technologies Corp. – Class “A” | 6,786,250 | |
| 91,642,740 | ||||
| Materials—9.7% | ||||
| 121,500 | AptarGroup, Inc. | 10,486,665 | ||
| 100,500 | * | Berry Global Group, Inc. | 5,693,325 | |
| 428,500 | * | Ferro Corp. | 9,555,550 | |
| 68,500 | Greif, Inc. | 4,009,990 | ||
| 174,000 | * | Louisiana-Pacific Corp. | 4,711,920 | |
| 42,100 | * | PQ Group Holdings, Inc. | 726,225 | |
| 68,500 | Sealed Air Corp. | 2,926,320 | ||
| 62,500 | Sensient Technologies Corp. | 4,807,500 | ||
| 268,500 | * | Summit Materials, Inc. – Class “A” | 8,600,055 | |
| 147,500 | Trinseo SA | 9,897,250 | ||
| 82,000 | WestRock Co. | 4,651,860 | ||
| 66,066,660 | ||||
| Real Estate—5.1% | ||||
| 249,000 | Brixmor Property Group, Inc. (REIT) | 4,681,200 | ||
| 207,500 | Douglas Emmett, Inc. (REIT) | 8,179,650 | ||
| 52,500 | Federal Realty Investment Trust (REIT) | 6,521,025 | ||
| 179,500 | RLJ Lodging Trust (REIT) | 3,949,000 | ||
| 200,500 | Sunstone Hotel Investors, Inc. (REIT) | 3,222,035 | ||
| 193,500 | Tanger Factory Outlet Centers, Inc. (REIT) | 4,725,270 | ||
| 145,000 | Urstadt Biddle Properties, Inc.- Class “A” (REIT) | 3,146,500 | ||
| 34,424,680 | ||||
| Utilities—2.5% | ||||
| 49,000 | Pinnacle West Capital Corp. | 4,143,440 | ||
| 121,500 | Portland General Electric Co. | 5,545,260 | ||
| 42,600 | SCANA Corp. | 2,065,674 | ||
| 85,000 | WEC Energy Group, Inc. | 5,336,300 | ||
| 17,090,674 | ||||
| Total Value of Common Stocks (cost $491,072,560) | 677,924,242 | |||
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| Principal | |||||||
| Amount | Security | Value | |||||
| SHORT-TERM U.S. GOVERNMENT AGENCY | |||||||
| OBLIGATIONS—.7% | |||||||
| Federal Home Loan Bank: | |||||||
| $1,000M | 1.01%, 10/10/2017 | $ 999,782 | |||||
| 1,000M | 1.02%, 10/20/2017 | 999,510 | |||||
| 3,000M | 1.025%, 11/9/2017 | 2,996,865 | |||||
| Total Value of Short-Term U.S. Government Agency Obligations (cost $4,995,875) | 4,996,157 | ||||||
| Total Value of Investments (cost $496,068,435) | 100.1 | % | 682,920,399 | ||||
| Excess of Liabilities Over Other Assets | (.1 | ) | (434,890) | ||||
| Net Assets | 100.0 | % | $682,485,509 | ||||
| * | Non-income producing | |
| Summary of Abbreviations: | ||
| ADR | American Depositary Receipts | |
| ETF | Exchange Traded Fund | |
| MLP | Master Limited Partnership | |
| REIT | Real Estate Investment Trust | |
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Portfolio of Investments (continued)
SPECIAL SITUATIONS FUND
September 30, 2017
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Common Stocks | $ | 677,942,242 | $ | — | $ | — | $ | 677,942,242 | ||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 4,996,157 | — | 4,996,157 | ||||||||
| Total Investments in Securities* | $ | 677,942,242 | $ | 4,996,157 | $ | — | $ | 682,938,399 |
| * | The Portfolio of Investments provides information on the industry categorization for common stocks. |
| There were no transfers into or from Level 1 and Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 246 | See notes to financial statements |
Portfolio Managers’ Letter
TOTAL RETURN FUND
Dear Investor:
This is the annual report for the First Investors Total Return Fund for the fiscal year ended September 30, 2017. During the period, the Fund’s return on a net asset value basis was 8.09% for Class A shares, 7.23% for Class B shares, 8.69% for Advisor Class shares and 8.50% for Institutional Class shares, including dividends of 32.4 cents per share for Class A shares, 16.7 cents per share for Class B shares, 37.8 cents per share for Advisor Class shares and 36.9 cents per share for Institutional Class shares. In addition, the Fund distributed capital gains of 30.0 cents per share on each class of shares.
Economic Overview
The past 12 months ending September 30th have been filled with multiple key political events, including elections in the United States, France, the United Kingdom and Germany, as well as the start of Donald Trump’s Presidency. This time period was also characterized by elevated geopolitical tensions with North Korea, coupled with the devastating effects of several hurricanes. Despite these events, corporate earnings rose and economic data was mostly positive, fueling the global equity rally. The actions and messaging of central bankers played an important role in market performance as well.
The U.S. economy expanded at an annualized rate of 3.1% in the second quarter of 2017, the strongest growth rate in more than two years. The domestic labor market continued to tighten and at the end of the period was approaching full employment. The unemployment rate reached 4.2% in September, the lowest jobless rate since February 2001. Annual wage growth has picked up to 2.9%. Although September inflation figures increased to 2.2%, inflation remains lower than the reading from early 2017. Consumer sentiment and business activity were strong for the majority of the period. The September ISM Manufacturing PMI rose to 60.8, the highest reading since May of 2004, boosted by a rise in new orders, production and employment. Corporate earnings continued to rebound from a weak 2015. Second quarter S&P 500 operating earnings per share rose 18.72% from a year ago.
International markets also enjoyed improved economic data, including dramatically rising employment numbers and stronger PMIs across all regions. The Euro area experienced the highest consumer confidence reading since April of 2001 and its business confidence rose to its highest level in 6.5 years.
The Federal Reserve (“the Fed”) increased the federal funds rate three times during the review period, in December, March and June. At its September meeting, it suggested one more hike this year in December and several additional hikes for 2018.
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Portfolio Managers’ Letter (continued)
TOTAL RETURN FUND
The Fed is also moving ahead with the reduction of its $4.5 trillion dollar balance sheet, starting in October.
Several other major central banks indicated their intentions to gradually reduce the level of monetary stimulus in place. The Bank of Canada has already raised rates twice, in July and September. The Bank of England has suggested that it will raise interest rates by the end of 2017. The European Central Bank is expected to announce a further slowdown in the pace of its quantitative easing purchases.
The U.S. dollar experienced a strong rally during the fourth quarter of 2016, while it significantly depreciated for most of 2017, reflecting both political uncertainty in the U.S. and accelerating growth overseas. Overall, the Bloomberg U.S. Dollar Index lost 2.50% during the review period, erasing all of its post-election gains.
The Equity Market
U.S. equities had strong performance during the past twelve months, posting several new records. The Dow Jones Industrial Average (DJIA) hit four major psychological milestones of 19,000 (on November 22nd), 20,000 (on January 25th), 21,000 (on March 1st) and 22,000 (on August 2nd). The S&P 500 Index and the DJIA returned 18.61% and 25.45% for the period, respectively. Market volatility remained at historically low levels for most of the period despite elevated political uncertainty.
Small-caps (measured by the Russell 2000 Index), growth stocks (the S&P 500 Growth Index) and value stocks (the S&P 500 Value Index) posted similar strong returns of 20.74%, 19.90% and 16.47%, respectively. However, they experienced significant intra-period differences as market leaders moved out of favor. In the fourth quarter of 2016, small-caps and value stocks rallied the most following the Trump victory as investors focused on the expected benefits from possible tax cuts, increased infrastructure spending and reduced financial regulations. Small-caps and several value sectors, including Financials, would be the greatest beneficiaries of these business friendly policies. In January, the “Trump Trade” faded and investors switched their focus to an improving economic outlook, which benefited most growth stocks and large-caps for most of 2017. In September, there was another rotation to small-caps and value stocks in the continuation of the “Trump-Trade” fueled by investors’ renewed hopes for pro-business policies from Washington.
Higher-yielding stocks lagged the general market, with the Dow Jones US Select Dividend Index returning 13.21%. Real estate as a whole came under pressure due to the rising interest rate environment, and as well publicized retail bankruptcies and store closures resulted in a sell-off of retail REITs. The Dow Jones US Select REIT Index lost 0.83%.
| 248 |
Ten out of eleven S&P 500 sectors ended the review period in positive territory. Financials, which would be one of the greatest beneficiaries from the combination of the higher interest rates and Trump’s pro-growth policies, was the strongest sector at 36.21%. Information Technology was the second strongest sector, up 28.88% as investors focused on an improving economic outlook. A stronger economy could magnify this sector’s growth potential. Conversely, Telecom Services was the weakest sector with a marginal loss of 0.14%, followed by Energy which was marginally positive at 0.16%.
International equities posted strong double-digit returns across all regions, supported by improving corporate earnings and economic data pointing to a healthy global economy. Developed markets (measured by the MSCI EAFE Index) and emerging markets (measured by the MSCI EM Index) returned 19.65% and 22.91%, respectively. Overall, the currency exchange effect was slightly positive.
The Bond Market
The U.S. fixed income markets had mixed performance for the past 12 months. The broad U.S. bond market (measured by the BofA ML U.S. Broad Market Index) was flat at 0.01% during the review period.
In the fourth quarter of 2016, fixed income markets, especially Treasuries, experienced one of their worst sell-offs. This sell-off was triggered by a combination of a rising interest rate environment and Donald Trump’s unexpected victory. Fixed income had positive performance for most of 2017 while struggling again in September on renewed expectations of rising rates and pro-growth policies from the White House. Overall, Treasuries (measured by the BofA ML Treasury Index) were the weakest domestic fixed income market for the past 12 months, down 1.74%. Longer-dated Treasuries with 15+ years maturity underperformed with a loss of 6.33% while shorter-dated Treasuries were slightly positive.
Yields rose across whole yield curve. The sharpest rise happened in the fourth quarter of 2016, while longer-term rates fell for most of 2017 before rising again in September. There is an inverse relationship between bond prices and yields. The 2-year U.S. Treasury yield, which is very sensitive to changes in Fed policy, rose by 72 basis points to 1.49%. The 10-year Treasury yield, which is controlled by other factors such as GDP, inflation and investor sentiment, rose 74 basis points to 2.33%.
Credit sensitive fixed income benefited from a narrowing in credit spreads. With record issuance and record demand, investment grade corporate bonds (measured by the BofA ML Corporate Master Index) were positive at 2.26% for the review period. The demand was boosted by overseas buyers in their search for yields that were
| 249 |
Portfolio Managers’ Letter (continued)
TOTAL RETURN FUND
higher than those available locally. BBB-rated bonds continued to be the strongest performing sector in terms of credit quality among investment grade corporate bonds.
The high yield bond market (measured by the BofA ML U.S. Cash Pay HY Constrained Index) was the strongest domestic fixed income market for the period, returning 9.03%. Leveraged loans (measured by the Credit Suisse Leveraged Loan Index) were also strong with a return of 5.36%.
Municipal bonds (measured by the BofA ML Municipal Master Index) recouped all losses from the fourth quarter sell-off and returned 0.95%. New muni issuance is still below expectations for the year while demand has remained steady.
Most sovereign bond markets, including the Eurozone markets, UK, Canada and Japan, had negative performance as yields in those countries rose. The majority of these losses occurred in the fourth quarter of 2016, sparked by investor concerns that central banks are preparing to gradually reduce monetary stimulus and from Trump’s victory. The appreciating dollar hurt their U.S. dollar denominated returns even further during the fourth quarter of 2016. Non-U.S. sovereign bonds (measured by the Citi World Government ex U.S. Bond Index) lost 3.14% for the past 12 months, recovering a large portion of its 10.84% loss from the fourth quarter of 2016.
Emerging market debt (measured by the BofA ML Global Emerging Markets Sovereign Index) held up much better, returning 6.64%, benefiting from improving growth within emerging markets.
The Fund—Equities
During the past year, the Fund’s results were driven by a generally favorable market backdrop characterized by extreme low volatility—a near repeat of last year, as the past 12 months witnessed no major corrections, nor hardly any memorable one day advances. After some brief volatility heading into last fall’s Presidential election, the markets have been on a steady grind upward since November.
While absolute performance was positive, relative performance of the Fund trailed the market benchmark. Stock selection was mixed, and sector allocations proved problematic as well. Among the sectors, Financial, Technology and Industrial represented the bright spots for the Fund, contributing most to absolute return for the review period. Investments in the Healthcare and Energy sectors also contributed to relative returns. Among the lagging contributors, underweights versus the benchmark hurt in the allocations within the Industrial and Financial sectors, and poor stock selection plagued performance in the Consumer Discretionary, Technology, Real Estate and Material sectors. Among market capitalization segments, the Fund’s large- and small-cap stocks underperformed the benchmark, while the
| 250 |
mid-cap segments were in line. The Fund had allocated 68% of its holdings to large-cap, 16% to mid-cap and 16% to small-cap stocks (ranges defined by Lipper) as of September 30, 2017.
Among top individual performers was a long-time holding, Triton International, the leading lessor of ocean-going shipping containers, which rallied 170% on improved pricing, global trade activity, and market-share gains versus competitors.
Within Technology, shares of global leaders advanced: Apple Computer (+47%), Microsoft (+32%), Applied Materials (+74%) and Western Digital (+47%), strongly reflecting solid smartphone innovation, as well as a rebound in enterprise computing and semiconductor spending. Financial firms benefited from improved capital markets activity and better lending margins. Shares of mega-cap stocks: JP Morgan Chase (+47%), PNC Financial (+53%) and American Express (+44%) led performance. Additionally, mid-cap names Ameriprise Financial (+53%) and Citizens Financial (+55%) also contributed positively.
Among top sector contributors, Healthcare names were most notable. Strong pharmaceutical results from leading arthritis drug, Humira, buoyed AbbVie +46% for the review period. Large-cap life science firm Thermo Fisher returned +19%, while diversified medical firm Abbott Labs returned +26% amidst healthy volumes and progress with the integration of its St. Jude medical acquisition. Animal Healthcare names also performed well, as positions in Zoetis (+23%) and Animal Health (+36%) contributed positively.
Among laggards, stock selection within the Consumer Discretionary and Real Estate sectors was the major disappointment this past year and hurt returns. Among Consumer names, shares of women’s retailer L Brands dropped 41% on weak lingerie sales at their flagship Victoria’s Secret chain, and a restructuring of product offerings and exiting mail order hurt sales and profits. Additionally, consumer goods firm Newell Brands dropped 19% late in the fiscal year, as hurricane related disruptions affected their supply chain, and the firm decided to accelerate new product investments. This had the effect of reducing near-term earnings, impacting share performance.
The Real Estate sector did not fare well: shares of strip-mall operator, Brixmor Property Group (–32%) and Tanger Factory Outlets (–37%) declined, as worries of proliferating Internet shopping via Amazon.com and weakened grocery chain and general retail traffic impacted investor valuations of this sector. Additionally, large-cap communications chip maker Qualcomm dropped 24%, as its legal dispute with Apple Computer over royalties due for its cellphone chip continued to mount and remained unresolved. At the same time, its merger with fund holding semiconductor
| 251 |
Portfolio Managers’ Letter (continued)
TOTAL RETURN FUND
maker NXP Inc. is still held up with antitrust regulatory bodies, which delayed integration benefits and earnings accretion. This had the effect of keeping investors on the sidelines during a strong year of returns for Technology shares.
The Fund—Bonds
During the review period, the Fund had average bond and cash allocations of 36.3% and 7.6%, respectively. As a percentage of the Fund’s total assets, investment grade corporate bonds were the largest bond allocation at 22.5%, followed by U.S. government securities at 8.8%, mortgage-backed securities at 5.7%, and municipal bonds at 0.6%.
The Fund’s fixed income holdings returned 1.13%, outperforming the 0.20% return of its benchmark, the BofA Merrill Lynch Broad Market Index. The Fund’s overweight in corporate bonds was a key positive contributor to performance as corporate bonds outperformed the broad bond market. Security selection, in general, added to performance as it was based on expectations for higher interest rates.
Thank you for placing your trust in Foresters Financial. As always, we appreciate the opportunity to serve your investment needs.
| 252 |
Fund Expenses (unaudited)
TOTAL RETURN FUND
The examples below show the ongoing costs (in dollars) of investing in your Fund and will help you in comparing these costs with costs of other mutual funds. Please refer to page 6 for a detailed explanation of the information presented in these examples.
| Annualized | Beginning | Ending | Expenses Paid | |
| Expense | Account Value | Account Value | During Period | |
| Expense Example | Ratio | (4/1/17) | (9/30/17) | (4/1/17–9/30/17)* |
| Class A Shares | 1.18% | |||
| Actual | $1,000.00 | $1,062.78 | $6.10 | |
| Hypothetical** | $1,000.00 | $1,019.15 | $5.97 | |
| Class B Shares | 1.92% | |||
| Actual | $1,000.00 | $1,072.30 | $9.97 | |
| Hypothetical** | $1,000.00 | $1,015.44 | $9.70 | |
| Advisor Class Shares | 0.81% | |||
| Actual | $1,000.00 | $1,086.87 | $4.24 | |
| Hypothetical** | $1,000.00 | $1,021.01 | $4.10 | |
| Institutional Class Shares | 0.76% | |||
| Actual | $1,000.00 | $1,084.97 | $3.97 | |
| Hypothetical** | $1,000.00 | $1,021.26 | $3.85 | |
| * | Expenses are equal to the annualized expense ratio, multiplied by the average account value over |
| the period, multiplied by 183/365 (to reflect the one-half year period). | |
| ** | Assumed rate of return of 5% before expenses. |
Portfolio Composition
TOP TEN SECTORS
| Portfolio holdings and allocations are subject to change. Percentages are as of September 30, 2017, |
| and are based on the total market value of investments. |
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Cumulative Performance Information (unaudited)
TOTAL RETURN FUND
Comparison of change in value of $10,000 investment in the First Investors Total Return Fund (Class A shares), the Bank of America (“BofA”) Merrill Lynch U.S. Corporate, Government & Mortgage Index and the Standard & Poor’s 500 Index.
The graph compares a $10,000 investment in the First Investors Total Return Fund (Class A shares) beginning 9/30/07 with theoretical investments in the BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index and the Standard & Poor’s 500 Index (the “Indices”). The BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index tracks the performance of U.S. dollar
| 254 |
denominated investment grade debt publicly issued in the US domestic market, including U.S. Treasuries, quasi-government securities, corporates, covered bonds and residential mortgage pass-through securities. The Standard & Poor’s 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of such stocks, which represent all major industries. It is not possible to invest directly in these Indices. In addition, the Indices do not reflect fees and expenses associated with the active management of a mutual fund portfolio. For purposes of the graph and the accompanying table, unless otherwise indicated, it has been assumed that the maximum sales charge was deducted from the initial $10,000 investment in the Fund and all dividends and distributions were reinvested. Class B shares, Advisor Class shares and Institutional Class shares performance may be greater than or less than that shown in the line graph above for Class A shares based on differences in sales loads and fees paid by shareholders investing in the different classes.
*Average Annual Total Return figures (for the periods ended 9/30/17) include the reinvestment of all dividends and distributions. “N.A.V. Only” returns are calculated without sales charges. The Class A “S.E.C. Standardized” returns shown are based on the maximum sales charge of 5.75%. The Class B “S.E.C. Standardized” returns are adjusted for the applicable deferred sales charge (maximum of 4% in the first year). The Advisor Class and Institutional Class “S.E.C. Standardized” returns shown are the same as the N.A.V. Only returns since these classes are sold without sales charges. During the periods shown, some of the expenses of the Fund were waived or assumed. If such expenses had been paid by the Fund, the Advisor Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 6.77%. The Institutional Class “S.E.C. Standardized” Average Annual Total Return Since Inception would have been 6.87%. Results represent past performance and do not indicate future results. The graph and the returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index figures are from Bank of America Merrill Lynch & Co. and Standard & Poor’s 500 Index figures are from Standard & Poor’s and all other figures are from Foresters Investment Management Company, Inc.
**The Since Inception returns for Advisor Class shares and Institutional Class shares are for the periods beginning 4/1/13 (commencement of operations for those classes).
† The Index return is for ten years. The S&P 500 Index return and BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index return since inception of the Advisor Class shares and Institutional Class shares are 13.45% and 2.31%, respectively.
| 255 |
Portfolio of Investments
TOTAL RETURN FUND
September 30, 2017
| Shares | Security | Value | ||
| COMMON STOCKS—60.1% | ||||
| Consumer Discretionary—8.9% | ||||
| 117,200 | Acushnet Holdings Corp. | $ 2,081,472 | ||
| 12,197 | Adient, PLC | 1,024,426 | ||
| 59,700 | Aramark Holdings Corp. | 2,424,417 | ||
| 95,800 | Big Lots, Inc. | 5,132,006 | ||
| 66,130 | BorgWarner, Inc. | 3,387,840 | ||
| 119,875 | CBS Corp. – Class “B” | 6,952,750 | ||
| 63,200 | Coach, Inc. | 2,545,696 | ||
| 31,300 | Delphi Automotive, PLC | 3,079,920 | ||
| 141,000 | DSW, Inc. – Class “A” | 3,028,680 | ||
| 74,350 | Ford Motor Co. | 889,969 | ||
| 53,830 | Home Depot, Inc. | 8,804,435 | ||
| 27,600 | HSN, Inc. | 1,077,780 | ||
| 77,045 | L Brands, Inc. | 3,205,842 | ||
| 16,500 | Lear Corp. | 2,855,820 | ||
| 69,700 | Magna International, Inc. | 3,720,586 | ||
| 90,900 | * | Michaels Cos., Inc. | 1,951,623 | |
| 105,422 | Newell Brands, Inc. | 4,498,357 | ||
| 42,700 | Oxford Industries, Inc. | 2,713,158 | ||
| 38,600 | Penske Automotive Group, Inc. | 1,836,202 | ||
| 6,500 | Ross Stores, Inc. | 419,705 | ||
| 55,600 | * | Select Comfort Corp. | 1,726,380 | |
| 89,710 | Tupperware Brands Corp. | 5,545,872 | ||
| 48,800 | Walt Disney Co. | 4,810,216 | ||
| 19,675 | Whirlpool Corp. | 3,628,857 | ||
| 1,300 | Williams-Sonoma, Inc. | 64,818 | ||
| 42,690 | Wyndham Worldwide Corp. | 4,499,953 | ||
| 81,906,780 | ||||
| Consumer Staples—5.8% | ||||
| 146,350 | Altria Group, Inc. | 9,281,517 | ||
| 103,600 | B&G Foods, Inc. | 3,299,660 | ||
| 105,890 | Coca-Cola Co. | 4,766,109 | ||
| 87,960 | CVS Health Corp. | 7,152,907 | ||
| 189,930 | Koninklijke Ahold Delhaize NV (ADR) | 3,545,993 | ||
| 46,100 | Nu Skin Enterprises, Inc. | 2,834,228 | ||
| 49,360 | PepsiCo, Inc. | 5,500,185 | ||
| 90,310 | Philip Morris International, Inc. | 10,025,313 | ||
| 31,400 | Procter & Gamble Co. | 2,856,772 | ||
| 46,870 | Wal-Mart Stores, Inc. | 3,662,422 | ||
| 52,925,106 | ||||
| 256 |
| Shares | Security | Value | ||
| Energy—3.5% | ||||
| 37,375 | Anadarko Petroleum Corp. | $ 1,825,769 | ||
| 9,400 | Chevron Corp. | 1,104,500 | ||
| 61,800 | ConocoPhillips | 3,093,090 | ||
| 51,575 | Devon Energy Corp. | 1,893,318 | ||
| 59,902 | ExxonMobil Corp. | 4,910,766 | ||
| 26,500 | Hess Corp. | 1,242,585 | ||
| 80,101 | Marathon Oil Corp. | 1,086,170 | ||
| 115,650 | Marathon Petroleum Corp. | 6,485,652 | ||
| 26,150 | Occidental Petroleum Corp. | 1,679,091 | ||
| 31,000 | PBF Energy, Inc. – Class “A” | 855,910 | ||
| 34,450 | Phillips 66 | 3,155,964 | ||
| 14,700 | Schlumberger, Ltd. | 1,025,472 | ||
| 114,260 | Suncor Energy, Inc. | 4,002,528 | ||
| 32,360,815 | ||||
| Financials—9.9% | ||||
| 76,670 | American Express Co. | 6,935,568 | ||
| 50,800 | American International Group, Inc. | 3,118,612 | ||
| 48,325 | Ameriprise Financial, Inc. | 7,176,746 | ||
| 6,400 | * | Brighthouse Financial, Inc. | 389,120 | |
| 39,100 | Chubb, Ltd. | 5,573,705 | ||
| 157,300 | Citizens Financial Group, Inc. | 5,956,951 | ||
| 22,500 | Comerica, Inc. | 1,715,850 | ||
| 97,610 | Discover Financial Services | 6,293,893 | ||
| 167,600 | Financial Select Sector SPDR Fund (ETF) | 4,334,136 | ||
| 43,100 | * | Hamilton Lane, Inc. – Class “A” | 1,157,235 | |
| 53,200 | IBERIABANK Corp. | 4,370,380 | ||
| 16,800 | iShares Russell 2000 ETF (ETF) | 2,489,424 | ||
| 129,880 | JPMorgan Chase & Co. | 12,404,839 | ||
| 70,400 | MetLife, Inc. | 3,657,280 | ||
| 15,730 | Morgan Stanley | 757,714 | ||
| 44,625 | PNC Financial Services Group, Inc. | 6,014,111 | ||
| 75,900 | SPDR S&P Regional Banking (ETF) | 4,308,084 | ||
| 142,200 | Sterling Bancorp | 3,505,230 | ||
| 107,345 | U.S. Bancorp | 5,752,619 | ||
| 86,120 | Wells Fargo & Co. | 4,749,518 | ||
| 90,661,015 | ||||
| 257 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2017
| Shares | Security | Value | ||
| Health Care—9.7% | ||||
| 127,360 | Abbott Laboratories | $ 6,795,930 | ||
| 99,500 | AbbVie, Inc. | 8,841,570 | ||
| 6,376 | Allergan, PLC | 1,306,761 | ||
| 57,700 | * | AMN Healthcare Services, Inc. | 2,636,890 | |
| 49,569 | Baxter International, Inc. | 3,110,455 | ||
| 30,700 | * | Centene Corp. | 2,970,839 | |
| 66,980 | Gilead Sciences, Inc. | 5,426,720 | ||
| 27,300 | Hill-Rom Holdings, Inc. | 2,020,200 | ||
| 81,400 | Johnson & Johnson | 10,582,814 | ||
| 59,000 | Koninklijke Philips NV (ADR) | 2,430,800 | ||
| 2,791 | * | Mallinckrodt, PLC | 104,300 | |
| 39,000 | Medtronic, PLC | 3,033,030 | ||
| 99,745 | Merck & Co., Inc. | 6,386,672 | ||
| 266,729 | Pfizer, Inc. | 9,522,225 | ||
| 93,475 | Phibro Animal Health Corp. – Class “A” | 3,463,249 | ||
| 19,515 | Shire, PLC (ADR) | 2,988,527 | ||
| 60,295 | Thermo Fisher Scientific, Inc. | 11,407,814 | ||
| 29,900 | * | VWR Corp. | 989,989 | |
| 78,215 | Zoetis, Inc. | 4,986,988 | ||
| 89,005,773 | ||||
| Industrials—6.8% | ||||
| 37,185 | 3M Co. | 7,805,131 | ||
| 18,000 | Apogee Enterprises, Inc. | 868,680 | ||
| 66,700 | * | Gardner Denver Holdings, Inc. | 1,835,584 | |
| 157,750 | General Electric Co. | 3,814,395 | ||
| 63,000 | Honeywell International, Inc. | 8,929,620 | ||
| 16,000 | Ingersoll-Rand, PLC | 1,426,720 | ||
| 153,073 | Johnson Controls International, PLC | 6,167,311 | ||
| 6,020 | Lockheed Martin Corp. | 1,867,946 | ||
| 24,300 | ManpowerGroup, Inc. | 2,863,026 | ||
| 101,100 | Masco Corp. | 3,943,911 | ||
| 18,900 | * | MasTec, Inc. | 876,960 | |
| 32,600 | Owens Corning | 2,521,610 | ||
| 128,500 | Schneider National, Inc. – Class “B” | 3,251,050 | ||
| 20,230 | Snap-On, Inc. | 3,014,472 | ||
| 13,400 | Stanley Black & Decker, Inc. | 2,022,998 | ||
| 176,400 | Triton International, Ltd. | 5,870,592 | ||
| 46,030 | United Technologies Corp. | 5,343,162 | ||
| 62,423,168 | ||||
| 258 |
| Shares | Security | Value | |
| Information Technology—11.0% | |||
| 93,905 | Apple, Inc. | $ 14,472,639 | |
| 95,500 | Applied Materials, Inc. | 4,974,595 | |
| 118,575 | * | ARRIS International, PLC | 3,378,202 |
| 12,500 | Belden, Inc. | 1,006,625 | |
| 17,925 | Broadcom, Ltd. | 4,347,530 | |
| 270,300 | Cisco Systems, Inc. | 9,090,189 | |
| 32,568 | * | Dell Technologies, Inc. – Class “V” | 2,514,575 |
| 10,875 | DXC Technology Co. | 933,945 | |
| 76,200 | * | eBay, Inc. | 2,930,652 |
| 23,800 | * | FleetCor Technologies, Inc. | 3,683,526 |
| 175,675 | Intel Corp. | 6,689,704 | |
| 24,080 | Methode Electronics, Inc. | 1,019,788 | |
| 190,085 | Microsoft Corp. | 14,159,432 | |
| 68,900 | NetApp, Inc. | 3,015,064 | |
| 37,340 | * | NXP Semiconductors NV | 4,222,781 |
| 106,790 | Oracle Corp. | 5,163,296 | |
| 96,620 | QUALCOMM, Inc. | 5,008,781 | |
| 117,550 | Symantec Corp. | 3,856,815 | |
| 23,610 | TE Connectivity, Ltd. | 1,961,047 | |
| 25,200 | * | Tech Data Corp. | 2,239,020 |
| 83,300 | Travelport Worldwide, Ltd. | 1,307,810 | |
| 54,772 | Western Digital Corp. | 4,732,301 | |
| 100,708,317 | |||
| Materials—1.4% | |||
| 900 | Eastman Chemical Co. | 81,441 | |
| 82,500 | International Paper Co. | 4,687,650 | |
| 17,930 | Praxair, Inc. | 2,505,538 | |
| 41,310 | RPM International, Inc. | 2,120,855 | |
| 58,800 | Sealed Air Corp. | 2,511,936 | |
| 22,585 | Trinseo SA | 1,515,453 | |
| 13,422,873 | |||
| Real Estate—1.1% | |||
| 216,025 | Brixmor Property Group, Inc. (REIT) | 4,061,270 | |
| 23,320 | Real Estate Select Sector SPDR Fund (ETF) | 751,837 | |
| 121,400 | Tanger Factory Outlet Centers, Inc. (REIT) | 2,964,588 | |
| 112,430 | Urstadt Biddle Properties, Inc. – Class “A” (REIT) | 2,439,731 | |
| 10,217,426 | |||
| 259 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2017
| Shares or | ||||
| Principal | ||||
| Amount | Security | Value | ||
| Telecommunication Services—1.4% | ||||
| 158,400 | AT&T, Inc. | $ 6,204,528 | ||
| 130,725 | Verizon Communications, Inc. | 6,469,580 | ||
| 12,674,108 | ||||
| Utilities—.6% | ||||
| 133,400 | Exelon Corp. | 5,025,178 | ||
| 24,445 | NiSource, Inc. | 625,548 | ||
| 5,650,726 | ||||
| Total Value of Common Stocks (cost $344,683,449) | 551,956,107 | |||
| CORPORATE BONDS—22.1% | ||||
| Aerospace/Defense—.5% | ||||
| $ 2,500M | Rockwell Collins, Inc., 3.2%, 3/15/2024 | 2,549,870 | ||
| 1,500M | Rolls-Royce, PLC, 3.625%, 10/14/2025 (a) | 1,554,056 | ||
| 4,103,926 | ||||
| Automotive—.5% | ||||
| 2,000M | General Motors Financial Co., Inc., 5.25%, 3/1/2026 | 2,174,740 | ||
| 2,000M | O’Reilly Automotive, Inc., 3.55%, 3/15/2026 | 2,008,192 | ||
| 4,182,932 | ||||
| Chemicals—1.0% | ||||
| 2,000M | Agrium, Inc., 3.375%, 3/15/2025 | 2,015,390 | ||
| 2,000M | Dow Chemical Co., 3.5%, 10/1/2024 | 2,065,748 | ||
| 3,000M | LYB International Finance Co. BV, 3.5%, 3/2/2027 | 2,989,842 | ||
| 2,100M | LyondellBasell Industries NV, 6%, 11/15/2021 | 2,371,240 | ||
| 9,442,220 | ||||
| Consumer Non-Durables—.2% | ||||
| 2,000M | Newell Brands, Inc., 4.2%, 4/1/2026 | 2,108,282 | ||
| Energy—1.7% | ||||
| 3,600M | BP Capital Markets, PLC, 3.216%, 11/28/2023 | 3,690,864 | ||
| 1,600M | Canadian Oil Sands, Ltd., 7.75%, 5/15/2019 (a) | 1,732,891 | ||
| 1,000M | DCP Midstream Operating, LP, 2.5%, 12/1/2017 | 1,000,725 | ||
| 1,500M | Enbridge Energy Partners, LP, 4.2%, 9/15/2021 | 1,569,012 | ||
| Kinder Morgan Energy Partners, LP: | ||||
| 1,000M | 3.5%, 3/1/2021 | 1,025,540 | ||
| 1,100M | 3.45%, 2/15/2023 | 1,113,578 | ||
| 1,000M | Magellan Midstream Partners, LP, 5%, 3/1/2026 | 1,114,536 | ||
| 260 |
| Principal | ||||
| Amount | Security | Value | ||
| Energy (continued) | ||||
| $ 1,000M | ONEOK Partners, LP, 3.375%, 10/1/2022 | $ 1,011,161 | ||
| 1,500M | Spectra Energy, LLC, 6.2%, 4/15/2018 | 1,532,132 | ||
| 1,600M | Valero Energy Corp., 9.375%, 3/15/2019 | 1,762,182 | ||
| 15,552,621 | ||||
| Financial Services—2.7% | ||||
| 1,100M | American Express Co., 7%, 3/19/2018 | 1,127,551 | ||
| American International Group, Inc.: | ||||
| 1,000M | 3.75%, 7/10/2025 | 1,034,395 | ||
| 1,000M | 4.7%, 7/10/2035 | 1,076,715 | ||
| 1,000M | Ameriprise Financial, Inc., 5.3%, 3/15/2020 | 1,075,510 | ||
| 1,000M | Assured Guaranty U.S. Holding, Inc., 5%, 7/1/2024 | 1,091,205 | ||
| 1,100M | BlackRock, Inc., 5%, 12/10/2019 | 1,174,033 | ||
| ERAC USA Finance, LLC: | ||||
| 1,000M | 6.375%, 10/15/2017 (a) | 1,001,549 | ||
| 1,000M | 4.5%, 8/16/2021 (a) | 1,068,358 | ||
| 1,000M | 3.3%, 10/15/2022 (a) | 1,026,162 | ||
| 2,000M | Ford Motor Credit Company, LLC, 8.125%, 1/15/2020 | 2,253,772 | ||
| 1,500M | GE Capital International Funding Services, Ltd., 4.418%, 11/15/2035 | 1,634,201 | ||
| 1,000M | General Electric Capital Corp., 4.65%, 10/17/2021 | 1,095,675 | ||
| 2,100M | Key Bank NA, 3.4%, 5/20/2026 | 2,093,715 | ||
| 2,000M | Liberty Mutual Group, Inc., 4.95%, 5/1/2022 (a) | 2,186,218 | ||
| 1,000M | Protective Life Corp., 7.375%, 10/15/2019 | 1,098,110 | ||
| 2,000M | Prudential Financial, Inc., 7.375%, 6/15/2019 | 2,181,934 | ||
| 2,000M | State Street Corp., 3.55%, 8/18/2025 | 2,089,460 | ||
| 24,308,563 | ||||
| Financials—5.9% | ||||
| Bank of America Corp.: | ||||
| 5,600M | 4.1%, 7/24/2023 | 5,970,675 | ||
| 1,000M | 5.875%, 2/7/2042 | 1,286,405 | ||
| Barclays Bank, PLC: | ||||
| 1,100M | 6.75%, 5/22/2019 | 1,183,518 | ||
| 1,000M | 125%, 1/8/2020 | 1,064,203 | ||
| 1,000M | Capital One Financial Corp., 3.75%, 4/24/2024 | 1,034,167 | ||
| Citigroup, Inc.: | ||||
| 3,600M | 6.125%, 11/21/2017 | 3,621,596 | ||
| 1,000M | 8.5%, 5/22/2019 | 1,103,667 | ||
| 1,000M | 4.5%, 1/14/2022 | 1,076,798 | ||
| 1,100M | 3.4%, 5/1/2026 | 1,104,414 | ||
| 1,500M | Deutsche Bank AG, 3.7%, 5/30/2024 | 1,523,874 | ||
| 261 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Financials (continued) | ||||
| Goldman Sachs Group, Inc.: | ||||
| $ 2,700M | 5.375%, 3/15/2020 | $ 2,901,531 | ||
| 1,000M | 3.625%, 1/22/2023 | 1,037,358 | ||
| 2,000M | 4%, 3/3/2024 | 2,113,538 | ||
| 1,000M | 6.125%, 2/15/2033 | 1,259,171 | ||
| 2,000M | HSBC Holdings, PLC, 2.65%, 1/5/2022 | 2,008,556 | ||
| JPMorgan Chase & Co.: | ||||
| 3,100M | 6%, 1/15/2018 | 3,139,587 | ||
| 1,000M | 4.5%, 1/24/2022 | 1,084,150 | ||
| 1,000M | 3.54%, 5/1/2028 | 1,010,335 | ||
| Morgan Stanley: | ||||
| 5,550M | 5.5%, 7/28/2021 | 6,161,599 | ||
| 2,000M | 4%, 7/23/2025 | 2,110,652 | ||
| U.S. Bancorp: | ||||
| 1,000M | 3.6%, 9/11/2024 | 1,041,194 | ||
| 1,000M | 3.1%, 4/27/2026 | 996,441 | ||
| 1,500M | UBS AG, 4.875%, 8/4/2020 | 1,610,229 | ||
| 3,000M | UBS Group Funding (Switzerland) AG, 4.253%, 3/23/2028 (a) | 3,153,162 | ||
| 5,100M | Wells Fargo & Co., 3.45%, 2/13/2023 | 5,229,397 | ||
| 53,826,217 | ||||
| Food/Beverage/Tobacco—.9% | ||||
| Anheuser-Busch InBev Finance, Inc.: | ||||
| 1,500M | 3.65%, 2/1/2026 | 1,554,478 | ||
| 1,000M | 4.9%, 2/1/2046 | 1,134,069 | ||
| 1,000M | Anheuser-Busch InBev Worldwide, Inc., 3.75%, 1/15/2022 | 1,058,716 | ||
| 1,750M | Bunge Limited Finance Corp., 8.5%, 6/15/2019 | 1,933,666 | ||
| 1,500M | Diageo Capital, PLC, 5.75%, 10/23/2017 | 1,503,623 | ||
| 1,000M | Ingredion, Inc., 4.625%, 11/1/2020 | 1,067,781 | ||
| 8,252,333 | ||||
| Food/Drug—.2% | ||||
| 2,000M | CVS Health Corp., 3.875%, 7/20/2025 | 2,089,436 | ||
| Forest Products/Containers—.2% | ||||
| 2,000M | Rock-Tenn Co., 4.9%, 3/1/2022 | 2,177,902 | ||
| 262 |
| Principal | ||||
| Amount | Security | Value | ||
| Healthcare—.5% | ||||
| $ 1,100M | Biogen, Inc., 6.875%, 3/1/2018 | $ 1,123,649 | ||
| 2,100M | Express Scripts Holding Co., 4.75%, 11/15/2021 | 2,280,581 | ||
| 1,500M | Laboratory Corp. of America Holdings, 3.75%, 8/23/2022 | 1,561,304 | ||
| 4,965,534 | ||||
| Higher Education—.2% | ||||
| 1,750M | Yale University, 2.086%, 4/15/2019 | 1,763,165 | ||
| Information Technology—.9% | ||||
| 1,500M | Apple, Inc., 2.5%, 2/9/2025 | 1,476,909 | ||
| 3,000M | Diamond 1 Finance Corp., 4.42%, 6/15/2021 (a) | 3,152,376 | ||
| 2,000M | Oracle Corp., 2.4%, 9/15/2023 | 1,990,320 | ||
| 2,000M | Visa, Inc., 3.15%, 12/14/2025 | 2,051,168 | ||
| 8,670,773 | ||||
| Manufacturing—.2% | ||||
| 1,000M | CRH America, Inc., 8.125%, 7/15/2018 | 1,048,000 | ||
| 1,100M | Johnson Controls International, PLC, 5%, 3/30/2020 | 1,172,096 | ||
| 2,220,096 | ||||
| Media-Broadcasting—.5% | ||||
| 1,000M | British Sky Broadcasting Group, PLC, 9.5%, 11/15/2018 (a) | 1,081,154 | ||
| Comcast Corp.: | ||||
| 1,600M | 5.15%, 3/1/2020 | 1,723,371 | ||
| 2,000M | 4.25%, 1/15/2033 | 2,154,300 | ||
| 4,958,825 | ||||
| Media-Diversified—.1% | ||||
| 1,000M | Time Warner, Inc., 3.6%, 7/15/2025 | 1,005,217 | ||
| Metals/Mining—.5% | ||||
| Glencore Funding, LLC: | ||||
| 1,000M | 4.125%, 5/30/2023 (a) | 1,042,361 | ||
| 1,500M | 4.625%, 4/29/2024 (a) | 1,592,250 | ||
| 1,500M | Newmont Mining Corp., 5.125%, 10/1/2019 | 1,579,227 | ||
| 4,213,838 | ||||
| 263 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| Real Estate—2.2% | ||||
| $ 2,000M | Alexandria Real Estate Equities, Inc., 3.95%, 1/15/2028 | $ 2,041,172 | ||
| 1,000M | Boston Properties, LP, 5.875%, 10/15/2019 | 1,069,373 | ||
| 500M | Digital Realty Trust, LP, 5.25%, 3/15/2021 | 543,414 | ||
| 1,000M | ERP Operating, LP, 3.375%, 6/1/2025 | 1,022,589 | ||
| 1,500M | Essex Portfolio, LP, 3.875%, 5/1/2024 | 1,561,763 | ||
| 1,000M | HCP, Inc., 4.25%, 11/15/2023 | 1,062,667 | ||
| 1,000M | Prologis, LP, 3.35%, 2/1/2021 | 1,036,122 | ||
| 2,000M | Realty Income Corp., 3.25%, 10/15/2022 | 2,049,576 | ||
| 2,000M | Simon Property Group, LP, 3.375%, 10/1/2024 | 2,047,708 | ||
| 3,000M | Tanger Properties, LP, 3.125%, 9/1/2026 | 2,823,663 | ||
| 1,600M | Ventas Realty, LP, 4.75%, 6/1/2021 | 1,712,974 | ||
| 3,000M | Welltower, Inc., 4%, 6/1/2025 | 3,132,576 | ||
| 20,103,597 | ||||
| Retail-General Merchandise—.5% | ||||
| 1,000M | Amazon.com, Inc., 4.8%, 12/5/2034 | 1,136,059 | ||
| 3,000M | Home Depot, Inc., 5.875%, 12/16/2036 | 3,904,044 | ||
| 5,040,103 | ||||
| Telecommunications—.7% | ||||
| AT&T, Inc.: | ||||
| 1,500M | 3.8%, 3/15/2022 | 1,564,100 | ||
| 3,000M | 4.25%, 3/1/2027 | 3,093,680 | ||
| 1,500M | Verizon Communications, Inc., 4.272%, 1/15/2036 | 1,478,235 | ||
| 6,136,015 | ||||
| Transportation—.4% | ||||
| 1,000M | Burlington Northern Santa Fe, LLC, 5.15%, 9/1/2043 | 1,192,631 | ||
| 1,000M | Penske Truck Leasing Co., LP, 4.875%, 7/11/2022 (a) | 1,090,132 | ||
| 1,000M | Southwest Airlines Co., 3%, 11/15/2026 | 978,661 | ||
| 3,261,424 | ||||
| Utilities—1.6% | ||||
| 2,000M | Duke Energy Progress, Inc., 4.15%, 12/1/2044 | 2,138,488 | ||
| 1,000M | E.ON International Finance BV, 5.8%, 4/30/2018 (a) | 1,022,592 | ||
| 1,000M | Electricite de France SA, 3.625%, 10/13/2025 (a) | 1,028,900 | ||
| 2,000M | Entergy Arkansas, Inc., 4.95%, 12/15/2044 | 2,079,532 | ||
| 1,500M | Exelon Generation Co., LLC, 3.4%, 3/15/2022 | 1,537,965 | ||
| 2,000M | Ohio Power Co., 5.375%, 10/1/2021 | 2,226,884 | ||
| 264 |
| Principal | ||||
| Amount | Security | Value | ||
| Utilities (continued) | ||||
| $ 2,000M | Oklahoma Gas & Electric Co., 4%, 12/15/2044 | $ 2,008,126 | ||
| 1,100M | Sempra Energy, 9.8%, 2/15/2019 | 1,213,130 | ||
| 1,000M | South Carolina Electric & Gas Co., 5.45%, 2/1/2041 | 1,179,528 | ||
| 14,435,145 | ||||
| Total Value of Corporate Bonds (cost $198,905,710) | 202,818,164 | |||
| RESIDENTIAL MORTGAGE-BACKED | ||||
| SECURITIES—5.6% | ||||
| Fannie Mae—4.7% | ||||
| 1,561M | 2.5%, 2/1/2030 – 7/1/2031 | 1,574,985 | ||
| 4,200M | 3%, 3/1/2027 – 2/1/2031 | 4,326,462 | ||
| 6,290M | 3.5%, 11/1/2028 – 11/1/2046 | 6,510,428 | ||
| 22,945M | 4%, 12/1/2040 – 4/1/2047 | 24,221,297 | ||
| 2,161M | 4.5%, 9/1/2040 – 1/1/2047 | 2,334,526 | ||
| 1,940M | 5%, 4/1/2040 – 3/1/2042 | 2,137,721 | ||
| 687M | 5.5%, 5/1/2033 – 10/1/2039 | 769,536 | ||
| 560M | 6%, 5/1/2036 – 10/1/2040 | 636,579 | ||
| 236M | 6.5%, 11/1/2033 – 6/1/2036 | 261,181 | ||
| 545M | 7%, 3/1/2032 – 8/1/2032 | 589,691 | ||
| 43,362,406 | ||||
| Freddie Mac—.9% | ||||
| 1,768M | 3.5%, 8/1/2026 – 7/1/2044 | 1,847,151 | ||
| 904M | 4%, 7/1/2044 – 4/1/2045 | 952,527 | ||
| 4,024M | 4.5%, 10/1/2040 – 5/1/2044 | 4,347,868 | ||
| 925M | 5.5%, 5/1/2038 – 10/1/2039 | 1,034,489 | ||
| 8,182,035 | ||||
| Total Value of Residential Mortgage-Backed Securities (cost $51,278,414) | 51,544,441 | |||
| U.S. GOVERNMENT OBLIGATIONS—3.3% | ||||
| 5,000M | U.S. Treasury Bonds, 3.125%, 8/15/2044 | 5,276,170 | ||
| U.S. Treasury Notes: | ||||
| 13,000M | 0.375%, 1/15/2027 (TIPS) | 13,023,737 | ||
| 3,000M | 1.1228%, 4/30/2019 † | 3,002,190 | ||
| 2,500M | 1.1928%, 1/31/2019 † | 2,504,345 | ||
| 6,000M | 2.375%, 5/15/2027 | 6,025,896 | ||
| Total Value of U.S. Government Obligations (cost $30,049,096) | 29,832,338 | |||
| 265 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2017
| Principal | ||||
| Amount | Security | Value | ||
| TAXABLE MUNICIPAL BONDS—.6% | ||||
| $ 2,425M | Katy, TX Indpt. Sch. Dist. GO, 5%, 2/15/2042 | $ 2,846,974 | ||
| 2,850M | New York, NY GO, 2.9%, 10/1/2027 (b) | 2,830,877 | ||
| Total Value of Taxable Municipal Bonds (cost $5,674,908) | 5,677,851 | |||
| VARIABLE AND FLOATING RATE NOTES—.3% | ||||
| U.S. Government Agency Obligations | ||||
| 1,000M | Federal Farm Credit Bank, 1.3347%, 5/22/2018 † | 1,001,262 | ||
| 1,500M | Federal Home Loan Bank, 1.039%, 1/26/2018 † | 1,499,762 | ||
| Total Value of Variable and Floating Rate Notes (cost $2,501,160) | 2,501,024 | |||
| SHORT-TERM U.S. GOVERNMENT AGENCY | ||||
| OBLIGATIONS—5.7% | ||||
| Federal Home Loan Bank: | ||||
| 5,000M | 1.01%, 10/10/2017 | 4,998,910 | ||
| 10,000M | 1.015%, 10/19/2017 | 9,995,370 | ||
| 7,000M | 1.02%, 10/20/2017 | 6,996,570 | ||
| 2,500M | 1.021%, 10/27/2017 | 2,498,297 | ||
| 14,500M | 1.02%, 10/30/2017 | 14,488,951 | ||
| 9,500M | 1.025%, 11/9/2017 | 9,490,073 | ||
| 4,000M | 1.035%, 11/17/2017 | 3,994,940 | ||
| Total Value of Short-Term U.S. Government Agency Obligations | ||||
| (cost $52,460,160) | 52,463,111 | |||
| SHORT-TERM CORPORATE NOTES—2.0% | ||||
| Food/Beverage/Tobacco—.5% | ||||
| 5,000M | Coca-Cola Co., 1.26%, 12/8/2017 (c) | 4,988,868 | ||
| Information Technology—1.1% | ||||
| 5,000M | Apple, Inc., 1.2%, 11/8/2017 (c) | 4,993,822 | ||
| 5,000M | Microsoft Corp., 1.2%, 11/2/2017 (c) | 4,994,768 | ||
| 9,988,590 | ||||
| 266 |
| Principal | |||||||
| Amount | Security | Value | |||||
| Media-Diversified—.4% | |||||||
| $ 4,000M | Walt Disney Co., 1.18%, 11/17/2017 (c) | $ 3,993,750 | |||||
| Total Value of Short-Term Corporate Notes (cost $18,970,198) | 18,971,208 | ||||||
| Total Value of Investments (cost $704,523,095) | 99.7 | % | 915,764,244 | ||||
| Other Assets, Less Liabilities | .3 | 3,026,607 | |||||
| Net Assets | 100.0 | % | $918,790,851 | ||||
| * | Non-income producing | |
| (a) | Security exempt from registration under Rule 144A of the Securities Act of 1933 (see Note 4). | |
| (b) | A portion or all of the security purchased on a when-issued or delayed delivery basis (see Note 1G). | |
| (c) | Security exempt from registration under Section 4(2) of the Securities Act of 1933 (see Note 4). | |
| † | Interest rates on adjustable rate bonds are determined and reset periodically. The interest rates | |
| shown are the rates in effect of September 30, 2017. | ||
| Summary of Abbreviations: | ||
| ADR | American Depositary Receipts | |
| ETF | Exchange Traded Fund | |
| REIT | Real Estate Investment Trust | |
| GO | General Obligation | |
| TIPS | Treasury Inflation-Protected Securities | |
| 267 |
Portfolio of Investments (continued)
TOTAL RETURN FUND
September 30, 2017
The Fund’s assets and liabilities are classified into the following three levels based on the inputs used to value the assets or liabilities:
| Level 1 — Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access. |
| Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, U.S. Government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The following is a summary, by category of Level, of inputs used to value the Fund’s investments as of September 30, 2017:
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Common Stocks | $ | 551,956,107 | $ | — | $ | — | $ | 551,956,107 | ||||
| Corporate Bonds | — | 202,818,164 | — | 202,818,164 | ||||||||
| Residential Mortgage-Backed | ||||||||||||
| Securities | — | 51,544,441 | — | 51,544,441 | ||||||||
| U.S. Government Obligations | — | 29,832,338 | — | 29,832,338 | ||||||||
| Taxable Municipal Bonds | — | 5,677,851 | — | 5,677,851 | ||||||||
| Variable and Floating Rate Notes | ||||||||||||
| U.S. Government Agency | ||||||||||||
| Obligations | — | 2,501,024 | — | 2,501,024 | ||||||||
| Short-Term U.S. Government | ||||||||||||
| Agency Obligations | — | 52,463,111 | — | 52,463,111 | ||||||||
| Short-Term Corporate Notes | — | 18,971,208 | — | 18,971,208 | ||||||||
| Total Investments in Securities* | $ | 551,956,107 | $ | 363,808,137 | $ | — | $ | 915,764,244 |
| * | The Portfolio of Investments provides information on the industry categorization for common |
| stocks, corporate bonds and asset backed securities. | |
| There were no transfers into or from Level 1 or Level 2 by the Fund for the year ended September 30, | |
| 2017. Transfers, if any, between Levels are recognized at the end of the reporting period. |
| 268 | See notes to financial statements |
| This page left intentionally blank. |
| 269 |
Statements of Assets and Liabilities
FIRST INVESTORS INCOME FUNDS
September 30, 2017
| GOVERNMENT | |||||||||||||||
| BALANCED | FLOATING | FUND FOR | CASH | ||||||||||||
| INCOME | RATE | INCOME | GOVERNMENT | MANAGEMENT | |||||||||||
| Assets | |||||||||||||||
| Investments in securities | |||||||||||||||
| At identified cost | $ | 43,461,255 | $ | 197,356,574 | $ | 709,422,127 | $ | 260,904,784 | $ | 129,286,187 | |||||
| At value (Note 1A) | $ | 45,490,226 | $ | 198,586,379 | $ | 732,828,237 | $ | 259,709,289 | $ | 129,286,187 | |||||
| Cash | 965,978 | 11,402,426 | 8,124,116 | 9,022,516 | 1,237,853 | ||||||||||
| Receivables: | |||||||||||||||
| Investment securities sold | 413,327 | 15,772,267 | 6,498,650 | — | — | ||||||||||
| Deposits at broker for futures contracts | 29,350 | — | — | — | — | ||||||||||
| Interest and dividends | 255,229 | 680,030 | 11,138,231 | 845,007 | 36,119 | ||||||||||
| Shares sold | 70,078 | 447,278 | 686,828 | 267,812 | 1,099 | ||||||||||
| Due from broker-variation margin futures | 156,174 | — | — | — | — | ||||||||||
| Other assets | 1,546 | 8,512 | 33,115 | 15,270 | 4,952 | ||||||||||
| Total Assets | 47,381,908 | 226,896,892 | 759,309,177 | 269,859,894 | 130,566,210 | ||||||||||
| Liabilities | |||||||||||||||
| Payables: | |||||||||||||||
| Investment securities purchased | 464,967 | 39,469,648 | 29,885,400 | 1,900,000 | — | ||||||||||
| Shares redeemed. | 43,079 | 115,200 | 785,628 | 239,810 | 811,095 | ||||||||||
| Dividends payable | 4,539 | 74,780 | 813,985 | 45,387 | 1,784 | ||||||||||
| Accrued advisory fees | 11,584 | 72,023 | 414,458 | 112,014 | 12,801 | ||||||||||
| Accrued shareholder servicing costs | 5,452 | 24,526 | 95,713 | 53,067 | 40,450 | ||||||||||
| Accrued expenses | 92,037 | 137,101 | 140,119 | 56,630 | 65,392 | ||||||||||
| Total Liabilities | 621,658 | 39,893,278 | 32,135,303 | 2,406,908 | 931,522 | ||||||||||
| Net Assets | $ | 46,760,250 | $ | 187,003,614 | $ | 727,173,874 | $ | 267,452,986 | $ | 129,634,688 | |||||
| Net Assets Consist of: | |||||||||||||||
| Capital paid in | $ | 44,323,997 | $ | 189,856,725 | $ | 856,031,526 | $ | 287,228,079 | $ | 129,634,688 | |||||
| Undistributed net investment income (deficit) | (26,875 | ) | (163,792 | ) | (2,583,260 | ) | 8,390 | — | |||||||
| Accumulated net realized gain (loss) on investments and futures contracts | 434,157 | (3,919,124 | ) | (149,680,502 | ) | (18,587,988 | ) | — | |||||||
| Net unrealized appreciation (depreciation) in value on investments and | |||||||||||||||
| futures contracts | 2,028,971 | 1,229,805 | 23,406,110 | (1,195,495 | ) | — | |||||||||
| Total | $ | 46,760,250 | $ | 187,003,614 | $ | 727,173,874 | $ | 267,452,986 | $ | 129,634,688 | |||||
| 270 | See notes to financial statements | 271 |
Statements of Assets and Liabilities
FIRST INVESTORS INCOME FUNDS
September 30, 2017
| GOVERNMENT | |||||||||||||||
| BALANCED | FLOATING | FUND FOR | CASH | ||||||||||||
| INCOME | RATE | INCOME | GOVERNMENT | MANAGEMENT | |||||||||||
| Net Assets: | |||||||||||||||
| Class A | $ | 46,607,992 | $ | 66,769,135 | $ | 572,630,587 | $ | 232,982,478 | $ | 127,079,405 | |||||
| Class B | N/A | N/A | $ | 2,355,916 | $ | 1,043,389 | $160,792 | ||||||||
| Advisor Class | $ | 11,175 | $ | 98,957,892 | $ | 73,403,203 | $ | 32,889,119 | N/A | ||||||
| Institutional Class | $ | 141,083 | $ | 21,276,587 | $ | 78,784,168 | $ | 538,000 | $ | 2,394,491 | |||||
| Shares outstanding (Note 7): | |||||||||||||||
| Class A | 4,238,157 | 6,904,207 | 226,825,818 | 22,309,549 | 127,079,405 | ||||||||||
| Class B | N/A | N/A | 931,789 | 100,085 | 160,792 | ||||||||||
| Advisor Class | 1,011 | 10,226,108 | 29,082,824 | 3,144,856 | N/A | ||||||||||
| Institutional Class | 12,774 | 2,200,217 | 31,071,239 | 51,210 | 2,394,491 | ||||||||||
| Net asset value and redemption price per share — Class A | $ | 11.00 | $ | 9.67 | $ | 2.52 | $ | 10.44 | $ | 1.00 | # | ||||
| Maximum offering price per share — Class A* | $ | 11.46 | † | $ | 9.92 | †† | $ | 2.63 | † | $ | 10.88 | † | N/A | ||
| Net asset value and offering price per share — Class B** | N/A | N/A | $ | 2.53 | $ | 10.43 | $ | 1.00 | |||||||
| Net asset value, offering price and redemption price | |||||||||||||||
| per share — Advisor Class | $ | 11.05 | $ | 9.68 | $ | 2.52 | $ | 10.46 | N/A | ||||||
| Net asset value, offering price and redemption price | |||||||||||||||
| per share — Institutional Class | $ | 11.04 | $ | 9.67 | $ | 2.54 | $ | 10.51 | $ | 1.00 | |||||
| # | Also maximum offering price per share. |
| * | On purchases of $100,000 or more, the sales charge is reduced (Note 7). |
| † | Net asset value/.96 |
| †† | Net asset value/.975 |
| ** | Redemption price is equal to net asset value less contingent deferred sales charges, if applicable |
| (Note 7). |
| 272 | See notes to financial statements | 273 |
Statements of Assets and Liabilities
FIRST INVESTORS INCOME FUNDS
September 30, 2017
| INTERNATIONAL | LIMITED | |||||||||||
| OPPORTUNITIES | INVESTMENT | DURATION HIGH | STRATEGIC | |||||||||
| BOND | GRADE | QUALITY BOND | INCOME | |||||||||
| Assets | ||||||||||||
| Investments in securities: | ||||||||||||
| Cost — Unaffiliated issuers | $ | 137,673,791 | $ | 598,669,410 | $ | 135,059,632 | $ | 2,249,037 | ||||
| Cost — Affiliated issuers (Note 2) | — | — | — | 163,005,182 | ||||||||
| Total cost of investments | $ | 137,673,791 | $ | 598,669,410 | $ | 135,059,632 | $ | 165,254,219 | ||||
| Value — Unaffiliated issuers (Note 1A) | $ | 130,902,855 | $ | 616,326,865 | $ | 135,042,194 | $ | 2,249,112 | ||||
| Value — Affiliated issuers (Note 2) | — | — | — | 160,284,906 | ||||||||
| Total value of investments | 130,902,855 | 616,326,865 | 135,042,194 | 162,534,018 | ||||||||
| Cash | 4,328,580 | 9,037,014 | 2,476,164 | 774,164 | ||||||||
| Receivables: | ||||||||||||
| Investment securities sold | 3,766,543 | 3,902,246 | — | — | ||||||||
| Dividends and interest | 1,585,292 | 7,052,751 | 1,097,508 | 538,891 | ||||||||
| Shares sold | 228,585 | 877,893 | 259,967 | 76,027 | ||||||||
| Unrealized gain on foreign exchange contracts (Note 5) | 517,668 | — | — | — | ||||||||
| Other assets | 5,779 | 27,653 | 5,843 | 7,074 | ||||||||
| Total Assets | 141,335,302 | 637,224,422 | 138,881,676 | 163,930,174 | ||||||||
| Liabilities | ||||||||||||
| Payables: | ||||||||||||
| Investment securities purchased | 4,030,952 | 8,492,354 | 3,017,780 | — | ||||||||
| Shares redeemed. | 124,491 | 517,608 | 113,401 | 63,268 | ||||||||
| Dividends payable | — | 158,726 | 90,496 | 37,457 | ||||||||
| Unrealized loss on foreign exchange contracts (Note 5) | 366,374 | — | — | — | ||||||||
| Accrued advisory fees | 85,060 | 283,862 | 43,422 | 6,710 | ||||||||
| Accrued shareholder servicing costs. | 27,774 | 77,612 | 25,118 | 17,725 | ||||||||
| Accrued expenses | 88,187 | 72,441 | 47,286 | 53,022 | ||||||||
| Total Liabilities | 4,722,838 | 9,602,603 | 3,337,503 | 178,182 | ||||||||
| Net Assets | $ | 136,612,464 | $ | 627,621,819 | $ | 135,544,173 | $ | 163,751,992 | ||||
| Net Assets Consist of: | ||||||||||||
| Capital paid in | $ | 145,043,136 | $ | 626,594,980 | $ | 139,923,275 | $ | 168,519,043 | ||||
| Undistributed net investment income (deficit) | 2,584,441 | (12,385,857 | ) | (2,192,436 | ) | 180,943 | ||||||
| Accumulated net realized loss on investments, futures contracts | ||||||||||||
| and foreign currency transactions | (4,401,047 | ) | (4,244,759 | ) | (2,169,228 | ) | (2,227,793 | ) | ||||
| Net unrealized appreciation (depreciation) in value of investments | ||||||||||||
| and foreign currency transactions | (6,614,066 | ) | 17,657,455 | (17,438 | ) | (2,720,201 | ) | |||||
| Total | $ | 136,612,464 | $ | 627,621,819 | $ | 135,544,173 | $ | 163,751,992 | ||||
| 274 | See notes to financial statements | 275 |
Statements of Assets and Liabilities
FIRST INVESTORS INCOME FUNDS
September 30, 2017
| LIMITED | ||||||||||||
| INTERNATIONAL | DURATION | |||||||||||
| OPPORTUNITIES | INVESTMENT | HIGH QUALITY | STRATEGIC | |||||||||
| BOND | GRADE | BOND | INCOME | |||||||||
| Net Assets: | ||||||||||||
| Class A | $ | 59,781,585 | $ | 462,998,610 | $ | 62,840,971 | $ | 162,788,692 | ||||
| Class B | N/A | $ | 2,180,920 | N/A | N/A | |||||||
| Advisor Class | $ | 68,162,285 | $ | 136,315,580 | $ | 31,638,480 | $ | 963,300 | ||||
| Institutional Class | $ | 8,668,594 | $ | 26,126,709 | $ | 41,064,722 | N/A | |||||
| Shares outstanding (Note 7): | ||||||||||||
| Class A | 6,298,423 | 47,931,968 | 6,633,373 | 17,076,103 | ||||||||
| Class B | N/A | 226,964 | N/A | N/A | ||||||||
| Advisor Class | 7,132,311 | 14,033,024 | 3,330,748 | 101,188 | ||||||||
| Institutional Class | 904,356 | 2,697,817 | 4,315,662 | N/A | ||||||||
| Net asset value and redemption price per share — Class A | $ | 9.49 | $ | 9.66 | $ | 9.47 | $ | 9.53 | ||||
| Maximum offering price per share — Class A* | $ | 9.89 | † | $ | 10.06 | † | $ | 9.71 | †† | $ | 9.93 | † |
| Net asset value and offering price per share — Class B** | N/A | $ | 9.61 | N/A | N/A | |||||||
| Net asset value, offering price and redemption price | ||||||||||||
| per share — Advisor Class | $ | 9.56 | $ | 9.71 | $ | 9.50 | $ | 9.52 | ||||
| Net asset value, offering price and redemption price | ||||||||||||
| per share — Institutional Class | $ | 9.59 | $ | 9.68 | $ | 9.52 | N/A | |||||
| * | On purchases of $100,000 or more, the sales charge is reduced (Note 7). |
| † | Net asset value/.96 |
| †† | Net asset value/.975 |
| ** | Redemption price is equal to net asset value less contingent deferred sales charges, if applicable |
| (Note 7). |
| 276 | See notes to financial statements | 277 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
| HEDGED U.S. | |||||||||||||||||
| COVERED CALL | EQUITY | GROWTH & | EQUITY | ||||||||||||||
| STRATEGY | INCOME | GLOBAL | INCOME | OPPORTUNITIES | INTERNATIONAL | ||||||||||||
| Assets | |||||||||||||||||
| Investments in securities | |||||||||||||||||
| At identified cost | $ | 268,738,091 | $ | 430,474,003 | $ | 491,300,135 | $ | 1,120,715,661 | $ | 65,544,490 | $ | 253,076,860 | |||||
| At value (Note 1A) | $ | 288,341,077 | $ | 637,286,762 | $ | 574,343,338 | $ | 1,865,398,172 | $ | 73,151,212 | $ | 352,604,068 | |||||
| Cash | 3,182,690 | 3,695,206 | 654,659 | 1,313,210 | 4,883,819 | 1,277,136 | |||||||||||
| Receivables: | |||||||||||||||||
| Investment securities sold | — | 1,029,901 | 4,570,528 | 653,886 | 111,215 | — | |||||||||||
| Options contracts sold | — | — | — | — | — | — | |||||||||||
| Deposits at broker for futures contracts | — | — | — | — | 1,010,170 | — | |||||||||||
| Dividends and interest | 409,901 | 983,073 | 1,068,668 | 2,325,763 | 65,630 | 1,192,507 | |||||||||||
| Shares sold | 762,509 | 378,317 | 483,810 | 1,081,729 | 124,517 | 449,168 | |||||||||||
| Unrealized gain on foreign exchange, options and futures contracts (Note 5) | — | — | — | — | 3,486 | — | |||||||||||
| Other assets | 6,090 | 27,203 | 24,039 | 80,243 | 2,270 | 14,067 | |||||||||||
| Total Assets | 292,702,267 | 643,400,462 | 581,145,042 | 1,870,853,003 | 79,352,319 | 355,536,946 | |||||||||||
| Liabilities | |||||||||||||||||
| Options written, at value (Note 5) | 8,375,924 | (a) | 6,520 | (b) | — | — | 177,002 | (c) | — | ||||||||
| Payables: | |||||||||||||||||
| Investment securities purchased | — | 806,794 | 2,691,056 | 186,159 | 83,189 | 3,802 | |||||||||||
| Shares redeemed. | 307,698 | 328,162 | 374,951 | 1,652,378 | 52,097 | 255,141 | |||||||||||
| Unrealized loss on futures contracts (Note 5) | — | — | — | — | 471,342 | — | |||||||||||
| Accrued advisory fees | 148,790 | 377,659 | 422,158 | 1,020,097 | 8,460 | 283,968 | |||||||||||
| Accrued shareholder servicing costs. | 33,364 | 79,551 | 72,486 | 242,511 | 21,630 | 58,549 | |||||||||||
| Accrued expenses | 46,584 | 66,984 | 127,300 | 161,297 | 68,843 | 92,566 | |||||||||||
| Total Liabilities | 8,912,360 | 1,665,670 | 3,687,951 | 3,262,442 | 882,563 | 694,026 | |||||||||||
| Net Assets | $ | 283,789,907 | $ | 641,734,792 | $ | 577,457,091 | $ | 1,867,590,561 | $ | 78,469,756 | $ | 354,842,920 | |||||
| Net Assets Consist of: | |||||||||||||||||
| Capital paid in | $ | 267,413,298 | $ | 419,425,476 | $ | 457,121,721 | $ | 1,050,912,260 | $ | 72,830,295 | $ | 268,342,525 | |||||
| Undistributed net investment income (deficit) | 31,723 | — | 1,961,440 | 4,376,571 | (51,731 | ) | 522,354 | ||||||||||
| Accumulated net realized gain (loss) on investments, options and futures | |||||||||||||||||
| contracts, and foreign currency transactions | (1,140,717 | ) | 15,484,093 | 35,319,014 | 67,619,219 | (1,613,431 | ) | (13,553,922 | ) | ||||||||
| Net unrealized appreciation in value of investments, options and futures | |||||||||||||||||
| contracts, and foreign currency transactions | 17,485,603 | 206,825,223 | 83,054,916 | 744,682,511 | 7,304,623 | 99,531,963 | |||||||||||
| Total | $ | 283,789,907 | $ | 641,734,792 | $ | 577,457,091 | $ | 1,867,590,561 | $ | 78,469,756 | $ | 354,842,920 | |||||
| (a) Premiums received from written options $6,258,541 |
| (b) Premiums received from written options $18,984 |
| (c) Premiums received from written options $342,648 |
| 278 | See notes to financial statements | 279 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
| HEDGED U.S. | |||||||||||||||||
| COVERED CALL | EQUITY | GROWTH & | EQUITY | ||||||||||||||
| STRATEGY | INCOME | GLOBAL | INCOME | OPPORTUNITIES | INTERNATIONAL | ||||||||||||
| Net Assets: | |||||||||||||||||
| Class A | $ | 167,096,442 | $ | 564,918,433 | $ | 379,176,408 | $ | 1,675,590,180 | $ | 44,228,180 | $ | 238,769,737 | |||||
| Class B | N/A | $ | 3,011,668 | $ | 2,641,686 | $ | 14,310,283 | N/A | $ | 1,465,065 | |||||||
| Advisor Class | $ | 109,359,652 | $ | 71,611,290 | $ | 191,838,578 | $ | 166,850,797 | $ | 33,769,738 | $ | 111,333,821 | |||||
| Institutional Class | $ | 7,333,813 | $ | 2,193,402 | $ | 3,800,419 | $ | 10,839,301 | $ | 471,838 | $ | 3,274,297 | |||||
| Shares outstanding (Note 7): | |||||||||||||||||
| Class A | 14,940,451 | 52,753,708 | 44,082,595 | 71,908,224 | 4,105,844 | 15,226,013 | |||||||||||
| Class B | N/A | 286,964 | 386,933 | 661,957 | N/A | 100,141 | |||||||||||
| Advisor Class | 9,801,783 | 6,649,763 | 21,855,668 | 7,112,860 | 3,124,283 | 6,993,310 | |||||||||||
| Institutional Class | 656,737 | 204,558 | 430,781 | 463,326 | 43,592 | 205,136 | |||||||||||
| Net asset value and redemption price per share — Class A | $ | 11.18 | $ | 10.71 | $ | 8.60 | $ | 23.30 | $ | 10.77 | $ | 15.68 | |||||
| Maximum offering price per share — Class A (Net asset value/.9425)* | $ | 11.86 | $ | 11.36 | $ | 9.12 | $ | 24.72 | $ | 11.43 | $ | 16.64 | |||||
| Net asset value and offering price per share — Class B** | N/A | $ | 10.49 | $ | 6.83 | $ | 21.62 | N/A | $ | 14.63 | |||||||
| Net asset value, offering price and redemption price | |||||||||||||||||
| per share — Advisor Class | $ | 11.16 | $ | 10.77 | $ | 8.78 | $ | 23.46 | $ | 10.81 | $ | 15.92 | |||||
| Net asset value, offering price and redemption price | |||||||||||||||||
| per share — Institutional Class | $ | 11.17 | $ | 10.72 | $ | 8.82 | $ | 23.39 | $ | 10.82 | $ | 15.96 | |||||
| * | On purchases of $100,000 or more, the sales charge is reduced (Note 7). |
| ** | Redemption price is equal to net asset value less contingent deferred sales charges, if applicable |
| (Note 7). |
| 280 | See notes to financial statements | 281 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
| REAL | SELECT | SPECIAL | TOTAL | ||||||||||||||
| LONG SHORT | OPPORTUNITY | ESTATE | GROWTH | SITUATIONS | RETURN | ||||||||||||
| Assets | |||||||||||||||||
| Investments in securities: | |||||||||||||||||
| At identified cost | $ | 42,110,608 | $ | 742,852,660 | $ | 119,177,322 | $ | 420,879,271 | $ | 496,068,435 | $ | 704,523,095 | |||||
| At value (Note 1A) | $ | 45,539,671 | $ | 1,094,965,039 | $ | 114,863,051 | $ | 533,172,409 | $ | 682,920,399 | $ | 915,764,244 | |||||
| Cash | 7,229,040 | 2,844,376 | 3,007,507 | 1,385,186 | 429,427 | 3,664,189 | |||||||||||
| Cash held at broker for securities sold short | 28,472,205 | — | — | — | — | — | |||||||||||
| Receivables: | |||||||||||||||||
| Investment securities sold | 304,617 | 1,389,613 | 546,725 | — | — | 2,376,017 | |||||||||||
| Dividends and interest | 12,428 | 976,770 | 525,466 | 182,879 | 584,257 | 3,187,638 | |||||||||||
| Shares sold | 74,980 | 698,173 | 191,083 | 396,021 | 497,720 | 345,897 | |||||||||||
| Other assets | 763 | 35,634 | 4,140 | 20,974 | 25,822 | 41,821 | |||||||||||
| Total Assets | 81,633,704 | 1,100,909,605 | 119,137,972 | 535,157,469 | 684,457,625 | 925,379,806 | |||||||||||
| Liabilities | |||||||||||||||||
| Securities sold short (at value) | 30,685,123 | (d) | — | — | — | — | — | ||||||||||
| Payables: | |||||||||||||||||
| Investment securities purchased | — | 1,208,714 | — | — | 719,470 | 5,089,104 | |||||||||||
| Shares redeemed | 263 | 1,194,763 | 40,594 | 467,974 | 663,906 | 720,662 | |||||||||||
| Accrued advisory fees | — | 617,374 | 81,459 | 316,860 | 426,508 | 518,973 | |||||||||||
| Accrued shareholder servicing costs. | 4,344 | 145,965 | 25,374 | 62,963 | 90,483 | 149,434 | |||||||||||
| Accrued expenses | 41,523 | 116,686 | 81,959 | 60,189 | 71,749 | 110,782 | |||||||||||
| Total Liabilities | 30,731,253 | 3,283,502 | 229,386 | 907,986 | 1,972,116 | 6,588,955 | |||||||||||
| Net Assets | $ | 50,902,451 | $ | 1,097,626,103 | $ | 118,908,586 | $ | 534,249,483 | $ | 682,485,509 | $ | 918,790,851 | |||||
| Net Assets Consist of: | |||||||||||||||||
| Capital paid in | $ | 49,923,159 | $ | 684,409,336 | $ | 121,883,835 | $ | 374,081,938 | $ | 478,729,797 | $ | 698,643,635 | |||||
| Undistributed net investment income (deficit) | — | 2,423,730 | 680,829 | 212,578 | 70,074 | (5,718,473 | ) | ||||||||||
| Accumulated net realized gain (loss) on investments | (1,555,247 | ) | 58,680,658 | 658,193 | 47,661,829 | 16,833,674 | 14,624,540 | ||||||||||
| Net unrealized appreciation (depreciation) in value of investments | 2,534,539 | 352,112,379 | (4,314,271 | ) | 112,293,138 | 186,851,964 | 211,241,149 | ||||||||||
| Total | $ | 50,902,451 | $ | 1,097,626,103 | $ | 118,908,586 | $ | 534,249,483 | $ | 682,485,509 | $ | 918,790,851 | |||||
| (d) Proceeds from securities sold short $29,790,598 |
| 282 | See notes to financial statements | 283 |
Statements of Assets and Liabilities
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
| REAL | SELECT | SPECIAL | TOTAL | ||||||||||||||
| LONG SHORT | OPPORTUNITY | ESTATE | GROWTH | SITUATIONS | RETURN | ||||||||||||
| Net Assets: | |||||||||||||||||
| Class A | $ | 10,697,433 | $ | 1,002,618,300 | $ | 40,935,206 | $ | 444,933,364 | $ | 549,780,124 | $ | 877,311,121 | |||||
| Class B | N/A | $ | 7,557,484 | N/A | $ | 3,163,262 | $ | 3,080,711 | $ | 6,939,476 | |||||||
| Advisor Class | $ | 40,034,056 | $ | 81,772,517 | $ | 77,398,438 | $ | 81,202,735 | $ | 120,912,178 | $ | 995,667 | |||||
| Institutional Class | $ | 170,962 | $ | 5,677,802 | $ | 574,942 | $ | 4,950,122 | $ | 8,712,496 | $ | 33,544,587 | |||||
| Shares outstanding (Note 7): | |||||||||||||||||
| Class A | 1,025,080 | 23,951,216 | 4,422,281 | 36,958,486 | 17,632,141 | 44,138,121 | |||||||||||
| Class B | N/A | 230,723 | N/A | 310,802 | 130,606 | 354,801 | |||||||||||
| Advisor Class | 3,827,251 | 1,921,162 | 8,347,470 | 6,638,940 | 3,841,740 | 49,839 | |||||||||||
| Institutional Class | 16,325 | 133,614 | 62,088 | 402,695 | 275,160 | 1,673,119 | |||||||||||
| Net asset value and redemption price per share — Class A | $ | 10.44 | $ | 41.86 | $ | 9.26 | $ | 12.04 | $ | 31.18 | $ | 19.88 | |||||
| Maximum offering price per share — Class A (Net asset value/.9425)* | $ | 11.08 | $ | 44.41 | $ | 9.82 | $ | 12.77 | $ | 33.08 | $ | 21.09 | |||||
| Net asset value and offering price per share — Class B** | N/A | $ | 32.76 | N/A | $ | 10.18 | $ | 23.59 | $ | 19.56 | |||||||
| Net asset value, offering price and redemption price | |||||||||||||||||
| per share — Advisor Class | $ | 10.46 | $ | 42.56 | $ | 9.27 | $ | 12.23 | $ | 31.47 | $ | 19.98 | |||||
| Net asset value, offering price and redemption price | |||||||||||||||||
| per share — Institutional Class | $ | 10.47 | $ | 42.49 | $ | 9.26 | $ | 12.29 | $ | 31.66 | $ | 20.05 | |||||
| * | On purchases of $100,000 or more, the sales charge is reduced (Note 7). |
| ** | Redemption price is equal to net asset value less contingent deferred sales charges, if applicable |
| (Note 7). |
| 284 | See notes to financial statements | 285 |
Statements of Operations
FIRST INVESTORS INCOME FUNDS
Year Ended September 30, 2017
| GOVERNMENT | |||||||||||||||
| BALANCED | FLOATING | FUND FOR | CASH | ||||||||||||
| INCOME | RATE | INCOME | GOVERNMENT | MANAGEMENT | |||||||||||
| Investment Income | |||||||||||||||
| Interest | $ | 676,859 | $ | 6,413,146 | $ | 40,371,990 | $ | 7,343,472 | $ | 892,883 | |||||
| Dividends | 501,230 | (a) | — | — | — | — | |||||||||
| Total income | 1,178,089 | 6,413,146 | 40,371,990 | 7,343,472 | 892,883 | ||||||||||
| Expenses (Notes 1 and 3): | |||||||||||||||
| Advisory fees | 284,424 | 966,926 | 5,050,879 | 1,992,197 | 656,492 | ||||||||||
| Distribution plan expenses – Class A | 121,111 | 194,938 | 1,698,939 | 728,156 | N/A | ||||||||||
| Distribution plan expenses – Class B | N/A | N/A | 26,155 | 15,088 | 1,708 | ||||||||||
| Shareholder servicing costs – Class A | 57,339 | 109,622 | 872,591 | 417,962 | 484,148 | ||||||||||
| Shareholder servicing costs – Class B | N/A | N/A | 5,956 | 4,582 | 849 | ||||||||||
| Shareholder servicing costs – Advisor Class | 24 | 114,478 | 116,323 | 108,918 | N/A | ||||||||||
| Shareholder servicing costs – Institutional Class | 70 | 6,028 | 19,776 | 1,308 | 851 | ||||||||||
| Professional fees. | 32,401 | 58,626 | 92,700 | 57,074 | 59,000 | ||||||||||
| Custodian fees | 10,080 | 67,753 | 29,935 | 20,813 | 11,895 | ||||||||||
| Registration fees | 89,999 | 56,201 | 77,000 | 75,499 | 70,000 | ||||||||||
| Reports to shareholders | 15,199 | 17,167 | 37,951 | 20,210 | 20,408 | ||||||||||
| Trustees' fees | 2,184 | 9,031 | 39,635 | 17,316 | 7,471 | ||||||||||
| Other expenses | 13,145 | 70,126 | 118,872 | 45,945 | 29,215 | ||||||||||
| Total expenses | 625,976 | 1,670,896 | 8,186,712 | 3,505,068 | 1,342,037 | ||||||||||
| Less: Expenses waived and/or assumed (Note 3) | (160,828 | ) | (131,427 | ) | (160,365 | ) | (378,142 | ) | (545,376 | ) | |||||
| Expenses paid indirectly (Note 1G) | (1,271 | ) | (3,815 | ) | (18,473 | ) | (7,485 | ) | (3,921 | ) | |||||
| Net expenses | 463,877 | 1,535,654 | 8,007,874 | 3,119,441 | 792,740 | ||||||||||
| Net investment income | 714,212 | 4,877,492 | 32,364,116 | 4,224,031 | 100,143 | ||||||||||
| Realized and Unrealized Gain (Loss) on Investments and | |||||||||||||||
| Futures Contracts (Notes 2 and 5): | |||||||||||||||
| Net realized gain (loss) on: | |||||||||||||||
| Investments | 417,126 | 506,695 | 14,665,726 | (2,583,708 | ) | — | |||||||||
| Futures contracts | 120,720 | — | — | (7,474 | ) | — | |||||||||
| Net realized gain (loss) on investments and futures contracts | 537,846 | 506,695 | 14,665,726 | (2,591,182 | ) | — | |||||||||
| Net unrealized appreciation (depreciation) on: | |||||||||||||||
| Investments | 935,478 | 191,917 | 1,058,678 | (7,974,036 | ) | — | |||||||||
| Futures contracts | 31,762 | — | — | — | — | ||||||||||
| Net unrealized appreciation (depreciation) on investments and | |||||||||||||||
| futures contracts | 967,240 | 191,917 | 1,058,678 | (7,974,036 | ) | — | |||||||||
| Net gain (loss) on investments and futures contracts | 1,505,086 | 698,612 | 15,724,404 | (10,565,218 | ) | — | |||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 2,219,298 | $ | 5,576,104 | $ | 48,088,520 | $ | (6,341,187 | ) | $ | 100,143 | ||||
| (a) Net of $3,130 foreign taxes withheld |
| 286 | See notes to financial statements | 287 |
Statements of Operations
FIRST INVESTORS INCOME FUNDS
Year Ended September 30, 2017
| INTERNATIONAL | LIMITED | |||||||||||
| OPPORTUNITIES | INVESTMENT | DURATION HIGH | STRATEGIC | |||||||||
| BOND | GRADE | QUALITY BOND | INCOME | |||||||||
| Investment Income | ||||||||||||
| Interest | $ | 4,709,331 | (b) | $ | 22,420,344 | $ | 2,417,248 | $ | 40,913 | |||
| Dividends from affiliate (Note 2) | — | — | — | 5,948,509 | ||||||||
| Total income | 4,709,331 | 22,420,344 | 2,417,248 | 5,989,422 | ||||||||
| Expenses (Notes 1 and 3): | ||||||||||||
| Advisory fees | 938,397 | 3,946,566 | 843,077 | 78,609 | ||||||||
| Distribution plan expenses – Class A | 179,334 | 1,391,757 | 173,760 | 469,651 | ||||||||
| Distribution plan expenses – Class B | N/A | 25,319 | N/A | N/A | ||||||||
| Shareholder servicing costs – Class A | 115,000 | 684,343 | 80,000 | 200,458 | ||||||||
| Shareholder servicing costs – Class B | N/A | 7,603 | N/A | N/A | ||||||||
| Shareholder servicing costs – Advisor Class | 109,920 | 122,108 | 106,851 | 278 | ||||||||
| Shareholder servicing costs – Institutional Class | 2,147 | 9,398 | 7,994 | N/A | ||||||||
| Professional fees. | 45,300 | 79,001 | 37,600 | 60,500 | ||||||||
| Custodian fees | 50,612 | 20,444 | 10,318 | 12,405 | ||||||||
| Registration fees | 66,000 | 82,000 | 55,000 | 43,500 | ||||||||
| Reports to shareholders | 14,065 | 27,955 | 13,621 | 10,250 | ||||||||
| Trustees’ fees | 7,086 | 34,057 | 7,112 | 8,865 | ||||||||
| Other expenses | 30,791 | 53,002 | 30,187 | 12,730 | ||||||||
| Total expenses | 1,558,652 | 6,483,553 | 1,365,520 | 897,246 | ||||||||
| Less: Expenses waived and/or assumed (Note 3) | — | (640,864 | ) | (274,706 | ) | — | ||||||
| Expenses paid indirectly (Note 1G) | (1,023 | ) | (8,677 | ) | (3,072 | ) | (3,600 | ) | ||||
| Net expenses | 1,557,629 | 5,834,012 | 1,087,742 | 893,646 | ||||||||
| Net investment income. | 3,151,702 | 16,586,332 | 1,329,506 | 5,095,776 | ||||||||
| Realized and Unrealized Gain (Loss) on Investments, Affiliate, | ||||||||||||
| Futures Contracts and Foreign Currency Transactions (Notes 2 and 5): | ||||||||||||
| Net realized gain (loss) on: | ||||||||||||
| Investments | (421,126 | ) | 2,274,276 | (152,663 | ) | (778 | ) | |||||
| Capital gain distribution from affiliate | — | — | — | 77,283 | ||||||||
| Affiliate | — | — | — | (22,875 | ) | |||||||
| Futures contracts. | — | — | — | (220,013 | ) | |||||||
| Foreign currency transactions | 2,397,565 | — | — | — | ||||||||
| Net realized gain (loss) on investments, affiliate, futures contracts and | ||||||||||||
| foreign currency transactions | 1,976,439 | 2,274,276 | (152,663 | ) | (166,383 | ) | ||||||
| Net unrealized appreciation (depreciation) on: | ||||||||||||
| Investments | 1,561,049 | (11,799,740 | ) | (639,208 | ) | (376 | ) | |||||
| Affiliate | — | — | — | 958,425 | ||||||||
| Foreign currency transactions | (283,551 | ) | — | — | — | |||||||
| Net unrealized appreciation (depreciation) on investments, affiliate | ||||||||||||
| and foreign currency transactions | 1,277,498 | (11,799,740 | ) | (639,208 | ) | 958,049 | ||||||
| Net gain (loss) on investments, affiliate, futures contracts and | ||||||||||||
| foreign currency transactions | 3,253,937 | (9,525,464 | ) | (791,871 | ) | 791,666 | ||||||
| Net Increase in Net Assets Resulting from Operations | $ | 6,405,639 | $ | 7,060,868 | $ | 537,635 | $ | 5,887,442 | ||||
| (b) Net of $38,662 foreign taxes withheld. |
| 288 | See notes to financial statements | 289 |
Statements of Operations
FIRST INVESTORS EQUITY FUNDS
Year Ended September 30, 2017
| HEDGED U.S. | ||||||||||||||||||
| COVERED CALL | EQUITY | GROWTH & | EQUITY | |||||||||||||||
| STRATEGY | INCOME | GLOBAL | INCOME | OPPORTUNITIES | INTERNATIONAL | |||||||||||||
| Investment Income | ||||||||||||||||||
| Dividends | $ | 4,931,295 | $ | 17,045,630 | (a) | $ | 9,396,181 | (b) | $ | 40,835,935 | (c) | $ | 968,778 | (d) | $ | 5,391,316 | (e) | |
| Interest | — | 160,832 | 64,897 | 111,257 | — | 46,047 | ||||||||||||
| Total income | 4,931,295 | 17,206,462 | 9,461,078 | 40,947,192 | 968,778 | 5,437,363 | ||||||||||||
| Expenses (Notes 1 and 3): | ||||||||||||||||||
| Advisory fees | 1,588,611 | 4,494,959 | 5,172,953 | 12,187,801 | 727,634 | 3,022,991 | ||||||||||||
| Distribution plan expenses – Class A | 304,904 | 1,639,984 | 1,065,850 | 4,858,924 | 83,938 | 635,691 | ||||||||||||
| Distribution plan expenses – Class B | N/A | 31,784 | 27,352 | 153,005 | N/A | 14,138 | ||||||||||||
| Shareholder servicing costs – Class A | 198,834 | 729,630 | 619,843 | 2,272,895 | 52,255 | 467,871 | ||||||||||||
| Shareholder servicing costs – Class B | N/A | 8,418 | 7,356 | 33,520 | N/A | 4,823 | ||||||||||||
| Shareholder servicing costs – Advisor Class | 105,723 | 41,185 | 122,180 | 98,138 | 32,368 | 112,003 | ||||||||||||
| Shareholder servicing costs – Institutional Class | 1,816 | 1,164 | 1,066 | 3,297 | 99 | 839 | ||||||||||||
| Professional fees. | 77,888 | 60,925 | 53,850 | 154,299 | 103,230 | 37,800 | ||||||||||||
| Custodian fees | 16,016 | 26,250 | 166,840 | 55,022 | 90,515 | 66,697 | ||||||||||||
| Registration fees | 101,581 | 80,999 | 81,000 | 103,000 | 99,795 | 78,001 | ||||||||||||
| Reports to shareholders | 11,213 | 28,087 | 28,301 | 89,306 | 5,324 | 24,426 | ||||||||||||
| Trustees’ fees | 10,364 | 34,968 | 30,669 | 101,932 | 3,232 | 17,428 | ||||||||||||
| Other expenses | 22,287 | 50,738 | 19,842 | 116,062 | 22,984 | 41,390 | ||||||||||||
| Total expenses | 2,439,237 | 7,229,091 | 7,397,102 | 20,227,201 | 1,221,374 | 4,524,098 | ||||||||||||
| Less: Expenses waived and/or assumed (Note 3) | (137,942 | ) | — | (272,261 | ) | — | (214,831 | ) | — | |||||||||
| Expenses paid indirectly (Note 1G) | (3,458 | ) | (12,763 | ) | (4,283 | ) | (20,834 | ) | (1,644 | ) | (1,852 | ) | ||||||
| Net expenses | 2,297,837 | 7,216,328 | 7,120,558 | 20,206,367 | 1,004,899 | 4,522,246 | ||||||||||||
| Net investment income (loss) | 2,633,458 | 9,990,134 | 2,340,520 | 20,740,825 | (36,121 | ) | 915,117 | |||||||||||
| Realized and Unrealized Gain (Loss) on Investments, Options and | ||||||||||||||||||
| Future Contracts and Foreign Currency Transactions (Notes 2 and 5): | ||||||||||||||||||
| Net realized gain (loss) on: | ||||||||||||||||||
| Investments | 3,054,002 | 18,426,959 | 57,711,808 | 79,625,849 | 739,420 | 18,913,605 | ||||||||||||
| Options contracts | (3,691,558 | ) | 209,895 | — | — | (356,306 | ) | — | ||||||||||
| Futures contracts. | — | — | — | — | (1,988,811 | ) | — | |||||||||||
| Foreign currency transactions | — | — | (379,070 | ) | — | (15,699 | ) | (260,434 | ) | |||||||||
| Net realized gain (loss) on investments, options and futures contracts, and | ||||||||||||||||||
| foreign currency transactions | (637,556 | ) | 18,636,854 | 57,332,738 | 79,625,849 | (1,621,396 | ) | 18,653,171 | ||||||||||
| Net unrealized appreciation (depreciation) of: | ||||||||||||||||||
| Investments | 17,733,818 | 54,881,290 | 32,270,314 | 135,711,245 | 7,836,362 | 26,377,950 | ||||||||||||
| Options contracts | (2,202,281 | ) | 12,463 | — | — | (506,133 | ) | — | ||||||||||
| Futures contracts | — | — | — | — | 3,486 | — | ||||||||||||
| Foreign currency transactions | — | — | 16,466 | — | 117 | 21,349 | ||||||||||||
| Net unrealized appreciation on investments, options and futures contracts, and | ||||||||||||||||||
| foreign currency transactions | 15,531,537 | 54,893,753 | 32,286,780 | 135,711,245 | 7,333,832 | 26,399,299 | ||||||||||||
| Net gain on investments, options and futures contracts | ||||||||||||||||||
| and foreign currency transactions | 14,893,981 | 73,530,607 | 89,619,518 | 215,337,094 | 5,712,436 | 45,052,470 | ||||||||||||
| Net Increase in Net Assets Resulting from Operations. | $ | 17,527,439 | $ | 83,520,741 | $ | 91,960,038 | $ | 236,077,919 | $ | 5,676,315 | $ | 45,967,587 | ||||||
| (a) Net of $79,918 foreign taxes withheld |
| (b) Net of $662,412 foreign taxes withheld |
| (c) Net of $162,884 foreign taxes withheld |
| (d) Net of $7,469 foreign taxes withheld |
| (e) Net of $511,790 foreign taxes withheld |
| 290 | See notes to financial statements | 291 |
Statements of Operations
FIRST INVESTORS EQUITY FUNDS
Year Ended September 30, 2017
| REAL | SELECT | SPECIAL | TOTAL | |||||||||||||||
| LONG SHORT | OPPORTUNITY | ESTATE | GROWTH | SITUATIONS | RETURN | |||||||||||||
| Investment Income | ||||||||||||||||||
| Dividends | $ | 322,971 | (f) | $ | 14,890,352 | (g) | $ | 3,186,313 | $ | 5,976,602 | $ | 7,753,451 | $ | 12,307,489 | (h) | |||
| Interest | 9,182 | 230,088 | — | 40,340 | 71,520 | 9,377,760 | ||||||||||||
| Total income | 332,153 | 15,120,440 | 3,186,313 | 6,016,942 | 7,824,971 | 21,685,249 | ||||||||||||
| Expenses (Notes 1 and 3): | ||||||||||||||||||
| Advisory fees | 333,851 | 7,220,258 | 759,867 | 3,544,751 | 4,786,219 | 6,237,752 | ||||||||||||
| Distribution plan expenses – Class A | 11,824 | 2,793,538 | 108,959 | 1,197,528 | 1,526,764 | 2,569,300 | ||||||||||||
| Distribution plan expenses – Class B | N/A | 78,909 | N/A | 31,433 | 31,317 | 72,551 | ||||||||||||
| Shareholder servicing costs – Class A | 8,138 | 1,479,486 | 88,281 | 642,146 | 848,717 | 1,282,149 | ||||||||||||
| Shareholder servicing costs – Class B | N/A | 17,089 | N/A | 7,009 | 8,195 | 14,320 | ||||||||||||
| Shareholder servicing costs – Advisor Class | 14,881 | 104,291 | 108,462 | 39,648 | 110,374 | 706 | ||||||||||||
| Shareholder servicing costs – Institutional Class | 32 | 1,630 | 168 | 1,328 | 2,397 | 10,098 | ||||||||||||
| Professional fees. | 100,100 | 93,870 | 33,200 | 49,030 | 54,777 | 87,584 | ||||||||||||
| Custodian fees | 14,375 | 37,941 | 11,273 | 18,916 | 36,834 | 42,011 | ||||||||||||
| Registration fees | 69,844 | 111,000 | 85,000 | 88,999 | 85,000 | 88,769 | ||||||||||||
| Reports to shareholders | 9,651 | 52,215 | 12,787 | 26,042 | 34,940 | 42,723 | ||||||||||||
| Trustees’ fees | 1,268 | 57,813 | 5,606 | 26,805 | 33,842 | 51,011 | ||||||||||||
| Dividend expense | 290,180 | — | — | — | — | — | ||||||||||||
| Other expenses | 6,853 | 90,247 | 14,304 | 38,867 | 48,628 | 83,527 | ||||||||||||
| Total expenses | 860,997 | 12,138,287 | 1,227,907 | 5,712,502 | 7,608,004 | 10,582,501 | ||||||||||||
| Less: Expenses (waived and/or assumed) repaid to adviser (Note 3) | (159,364 | ) | — | 28,712 | — | — | — | |||||||||||
| Expenses paid indirectly (Note 1G) | (5 | ) | (16,149 | ) | (2,546 | ) | (6,996 | ) | (12,188 | ) | (16,373 | ) | ||||||
| Net expenses | 701,628 | 12,122,138 | 1,254,073 | 5,705,506 | 7,595,816 | 10,566,128 | ||||||||||||
| Net investment income (loss) | (369,475 | ) | 2,998,302 | 1,932,240 | 311,436 | 229,155 | 11,119,121 | |||||||||||
| Realized and Unrealized Gain (Loss) on Investments (Note 2): | ||||||||||||||||||
| Net realized gain (loss) on investments | (1,552,452 | ) | 58,838,680 | 877,331 | 53,073,004 | 17,392,867 | 20,432,642 | |||||||||||
| Net unrealized appreciation (depreciation) of investments | 2,534,539 | 99,884,040 | (8,194,394 | ) | 52,198,026 | 92,338,759 | 38,301,406 | |||||||||||
| Net gain (loss) on investments | 982,087 | 158,722,720 | (7,317,063 | ) | 105,271,030 | 109,731,626 | 58,734,048 | |||||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 612,612 | $ | 161,721,022 | $ | (5,384,823 | ) | $ | 105,582,466 | $ | 109,960,781 | $ | 69,853,169 | |||||
| (f) Net of $4,228 foreign taxes paid |
| (g) Net of $71,417 foreign taxes withheld |
| (h) Net of $45,107 foreign taxes withheld |
| 292 | See notes to financial statements | 293 |
| Statements of Changes in Net Assets |
| FIRST INVESTORS INCOME FUNDS |
| FUND | ||||||||||||||||||||||||
| BALANCED INCOME | FLOATING RATE | FOR INCOME | GOVERNMENT | |||||||||||||||||||||
| Year Ended September 30 | 2017 | 2016 | * | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Increase (Decrease) in Net Assets From Operations | ||||||||||||||||||||||||
| Net investment income | $ | 714,212 | $ | 269,808 | $ | 4,877,492 | $ | 3,778,705 | $ | 32,364,116 | $ | 32,248,704 | $ | 4,224,031 | $ | 4,891,623 | ||||||||
| Net realized gain (loss) on investments | ||||||||||||||||||||||||
| and futures contracts | 537,846 | 46,865 | 506,695 | (1,259,700 | ) | 14,665,726 | (26,419,006 | ) | (2,591,182 | ) | 1,505,888 | |||||||||||||
| Net unrealized appreciation (depreciation) of investments and | ||||||||||||||||||||||||
| futures contracts | 967,240 | 1,061,731 | 191,917 | 2,509,338 | 1,058,678 | 52,455,579 | (7,974,036 | ) | 1,038,417 | |||||||||||||||
| Net increase (decrease) in net assets resulting | ||||||||||||||||||||||||
| from operations | 2,219,298 | 1,378,404 | 5,576,104 | 5,028,343 | 48,088,520 | 58,285,277 | (6,341,187 | ) | 7,435,928 | |||||||||||||||
| Distributions to Shareholders | ||||||||||||||||||||||||
| Net investment income – Class A | (867,757 | ) | (252,943 | ) | (2,083,709 | ) | (1,721,284 | ) | (28,276,744 | ) | (28,095,986 | ) | (4,643,274 | ) | (5,098,278 | ) | ||||||||
| Net investment income – Class B | N/A | N/A | N/A | N/A | (104,124 | ) | (122,232 | ) | (15,507 | ) | (25,367 | ) | ||||||||||||
| Net investment income – Advisor Class | (1,558 | ) | (1,621 | ) | (2,514,716 | ) | (1,732,407 | ) | (3,365,654 | ) | (2,868,632 | ) | (1,155,252 | ) | (1,234,888 | ) | ||||||||
| Net investment income – Institutional Class | (4,535 | ) | (2,135 | ) | (695,405 | ) | (397,164 | ) | (3,563,174 | ) | (2,837,180 | ) | (110,625 | ) | (345,265 | ) | ||||||||
| Net realized gains – Class A | (33,013 | ) | — | — | — | — | — | — | — | |||||||||||||||
| Net realized gains – Class B | N/A | N/A | N/A | N/A | — | — | — | — | ||||||||||||||||
| Net realized gains – Advisor Class | (95 | ) | — | — | — | — | — | — | — | |||||||||||||||
| Net realized gains – Institutional Class | (197 | ) | — | — | — | — | — | — | — | |||||||||||||||
| Total distributions | (907,155 | ) | (256,699 | ) | (5,293,830 | ) | (3,850,855 | ) | (35,309,696 | ) | (33,924,030 | ) | (5,924,658 | ) | (6,703,798 | ) | ||||||||
| Share Transactions | ||||||||||||||||||||||||
| Class A: | ||||||||||||||||||||||||
| Proceeds from shares sold | 23,655,494 | 29,666,925 | 19,572,438 | 13,988,494 | 48,739,034 | 44,844,582 | 30,162,048 | 37,665,852 | ||||||||||||||||
| Reinvestment of distributions | 877,264 | 249,169 | 1,995,483 | 1,656,758 | 24,445,941 | 24,326,941 | 4,414,386 | 4,827,126 | ||||||||||||||||
| Cost of shares redeemed | (8,907,180 | ) | (1,345,357 | ) | (16,136,415 | ) | (12,013,129 | ) | (81,958,579 | ) | (85,357,155 | ) | (50,584,990 | ) | (50,293,578 | ) | ||||||||
| 15,625,578 | 28,570,737 | 5,431,506 | 3,632,123 | (8,773,604 | ) | (16,185,632 | ) | (16,008,556 | ) | (7,800,600 | ) | |||||||||||||
| Class B: | ||||||||||||||||||||||||
| Proceeds from shares sold | N/A | N/A | N/A | N/A | 107,501 | 153,274 | 180,893 | 229,389 | ||||||||||||||||
| Reinvestment of distributions | N/A | N/A | N/A | N/A | 83,643 | 98,032 | 15,070 | 24,407 | ||||||||||||||||
| Cost of shares redeemed | N/A | N/A | N/A | N/A | (799,349 | ) | (808,011 | ) | (1,137,367 | ) | (712,548 | ) | ||||||||||||
| N/A | N/A | N/A | N/A | (608,205 | ) | (556,705 | ) | (941,404 | ) | (458,752 | ) | |||||||||||||
| Advisor Class: | ||||||||||||||||||||||||
| Proceeds from shares sold | — | 100,010 | 44,356,222 | 19,186,634 | 21,499,769 | 28,446,083 | 18,019,685 | 22,608,318 | ||||||||||||||||
| Reinvestment of distributions | 1,653 | 1,622 | 2,506,209 | 1,726,808 | 3,331,094 | 2,860,325 | 1,145,374 | 1,230,638 | ||||||||||||||||
| Cost of shares redeemed | (99,978 | ) | — | (9,907,811 | ) | (9,702,326 | ) | (20,618,681 | ) | (7,394,038 | ) | (48,045,052 | ) | (9,845,019 | ) | |||||||||
| (98,325 | ) | 101,632 | 36,954,620 | 11,211,116 | 4,212,182 | 23,912,370 | (28,879,993 | ) | 13,993,937 | |||||||||||||||
| Institutional Class: | ||||||||||||||||||||||||
| Proceeds from shares sold | 157,282 | 146,631 | 13,827,603 | 4,679,951 | 37,313,292 | 19,288,098 | 15,534,065 | 4,623,534 | ||||||||||||||||
| Reinvestment of distributions | 4,689 | 2,135 | 24,082 | 7,919 | 170,801 | 154,245 | 12,625 | 13,151 | ||||||||||||||||
| Cost of shares redeemed | (182,559 | ) | (1,398 | ) | (4,060,363 | ) | (3,845,745 | ) | (22,408,501 | ) | (10,511,393 | ) | (22,925,163 | ) | (10,762,966 | ) | ||||||||
| (20,588 | ) | 147,368 | 9,791,322 | 842,125 | 15,075,592 | 8,930,950 | (7,378,473 | ) | (6,126,281 | ) | ||||||||||||||
| Net increase (decrease) from share transactions | 15,506,665 | 28,819,737 | 52,177,448 | 15,685,364 | 9,905,965 | 16,100,983 | (53,208,426 | ) | (391,696 | ) | ||||||||||||||
| Net increase (decrease) in net assets | 16,818,808 | 29,941,442 | 52,459,722 | 16,862,852 | 22,684,789 | 40,462,230 | (65,474,271 | ) | 340,434 | |||||||||||||||
| Net Assets | ||||||||||||||||||||||||
| Beginning of year | 29,941,442 | — | 134,543,892 | 117,681,040 | 704,489,085 | 664,026,855 | 332,927,257 | 332,586,823 | ||||||||||||||||
| End of year† | $ | 46,760,250 | $ | 29,941,442 | $ | 187,003,614 | $ | 134,543,892 | $ | 727,173,874 | $ | 704,489,085 | $ | 267,452,986 | $ | 332,927,257 | ||||||||
| †Includes undistributed net investment income (deficit) of | $ | (26,875 | ) | $ | 23,213 | $ | (163,792 | ) | $ | 25,946 | $ | (2,583,260 | ) | $ | (2,746,245 | ) | $ | 8,390 | $ | 2,611 | ||||
| *From October 1, 2015 (commencement of operations) to September 30, 2016. |
| 294 | See notes to financial statements | 295 |
| Statements of Changes in Net Assets |
| FIRST INVESTORS INCOME FUNDS |
| FUND | |||||||||||||||||
| BALANCED INCOME | FLOATING RATE | FOR INCOME | GOVERNMENT | ||||||||||||||
| Year Ended September 30 | 2017 | 2016 | * | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||
| Shares Issued and Redeemed | |||||||||||||||||
| Class A: | |||||||||||||||||
| Sold | 2,211,121 | 2,877,326 | 2,022,863 | 1,468,052 | 19,557,429 | 18,679,753 | 2,866,271 | 3,482,260 | |||||||||
| Issued for distributions reinvested | 81,486 | 23,750 | 206,256 | 173,895 | 9,789,318 | 10,132,558 | 420,873 | 446,507 | |||||||||
| Redeemed | (827,142 | ) | (128,384 | ) | (1,668,028 | ) | (1,258,018 | ) | (32,899,756 | ) | (35,594,874 | ) | (4,807,201 | ) | (4,653,033 | ) | |
| Net increase (decrease) in Class A shares outstanding | 1,465,465 | 2,772,692 | 561,091 | 383,929 | (3,553,009 | ) | (6,782,563 | ) | (1,520,057 | ) | (724,266 | ) | |||||
| Class B: | |||||||||||||||||
| Sold | N/A | N/A | N/A | N/A | 43,176 | 64,132 | 16,975 | 21,319 | |||||||||
| Issued for dividends reinvested | N/A | N/A | N/A | N/A | 33,479 | 40,884 | 1,439 | 2,263 | |||||||||
| Redeemed | N/A | N/A | N/A | N/A | (324,958 | ) | (339,786 | ) | (108,761 | ) | (65,981 | ) | |||||
| Net decrease in Class B shares outstanding | N/A | N/A | N/A | N/A | (248,303 | ) | (234,770 | ) | (90,347 | ) | (42,399 | ) | |||||
| Advisor Class: | |||||||||||||||||
| Sold | — | 10,001 | 4,584,134 | 2,011,796 | 8,615,120 | 11,961,264 | 1,712,468 | 2,086,604 | |||||||||
| Issued for distributions reinvested | 154 | 156 | 259,046 | 181,286 | 1,334,256 | 1,188,864 | 108,989 | 113,619 | |||||||||
| Redeemed | (9,300 | ) | — | (1,024,184 | ) | (1,017,251 | ) | (8,402,016 | ) | (3,075,131 | ) | (4,598,626 | ) | (908,097 | ) | ||
| Net increase (decrease) in Advisor Class | |||||||||||||||||
| shares outstanding | (9,146 | ) | 10,157 | 3,818,996 | 1,175,831 | 1,547,360 | 10,074,997 | (2,777,169 | ) | 1,292,126 | |||||||
| Institutional Class: | |||||||||||||||||
| Sold | 14,709 | 14,537 | 1,430,225 | 496,651 | 14,940,723 | 7,917,239 | 1,475,253 | 427,044 | |||||||||
| Issued for distributions reinvested | 436 | 204 | 2,492 | 832 | 68,143 | 63,982 | 1,195 | 1,211 | |||||||||
| Redeemed | (16,981 | ) | (131 | ) | (420,736 | ) | (401,689 | ) | (9,005,052 | ) | (4,457,424 | ) | (2,154,908 | ) | (988,228 | ) | |
| Net increase (decrease) in Institutional Class | |||||||||||||||||
| shares outstanding | (1,836 | ) | 14,610 | 1,011,981 | 95,794 | 6,003,814 | 3,523,797 | (678,460 | ) | (559,973 | ) | ||||||
| *From October 1, 2015 (commencement of operations) to September 30, 2016. |
| 296 | See notes to financial statements | 297 |
| Statements of Changes in Net Assets |
| FIRST INVESTORS INCOME FUNDS |
| GOVERNMENT | INTERNATIONAL | LIMITED DURATION | |||||||||||||||||||||||
| CASH MANAGEMENT | OPPORTUNITIES BOND | INVESTMENT GRADE | HIGH QUALITY BOND | ||||||||||||||||||||||
| Year Ended September 30 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Increase (Decrease) in Net Assets From Operations | |||||||||||||||||||||||||
| Net investment income (loss) | $ | 100,143 | $ | — | $ | 3,151,702 | $ | 3,193,580 | $ | 16,586,332 | $ | 15,869,016 | $ | 1,329,506 | $ | (38,935 | ) | ||||||||
| Net realized gain (loss) on investments and foreign | |||||||||||||||||||||||||
| currency transactions | — | — | 1,976,439 | (1,947,020 | ) | 2,274,276 | 1,076,502 | (152,663 | ) | 1,040,722 | |||||||||||||||
| Net unrealized appreciation (depreciation) of investments and | |||||||||||||||||||||||||
| foreign currency transactions. | — | — | 1,277,498 | 9,375,479 | (11,799,740 | ) | 19,080,145 | (639,208 | ) | 554,240 | |||||||||||||||
| Net increase in net assets resulting from operations | |||||||||||||||||||||||||
| 100,143 | — | 6,405,639 | 10,622,039 | 7,060,868 | 36,025,663 | 537,635 | 1,556,027 | ||||||||||||||||||
| Dividends to Shareholders | |||||||||||||||||||||||||
| Net investment income – Class A | (98,406 | ) | — | (949,007 | ) | (989,781 | ) | (15,914,378 | ) | (17,167,268 | ) | (1,275,364 | ) | (832,049 | ) | ||||||||||
| Net investment income – Class B | — | — | N/A | N/A | (60,406 | ) | (89,798 | ) | N/A | N/A | |||||||||||||||
| Net investment income – Advisor Class | N/A | N/A | (1,108,952 | ) | (838,724 | ) | (3,815,384 | ) | (2,761,769 | ) | (1,124,965 | ) | (1,167,608 | ) | |||||||||||
| Net investment income – Institutional Class | (1,737 | ) | — | (170,411 | ) | (195,704 | ) | (1,164,966 | ) | (855,941 | ) | (668,870 | ) | (476,781 | ) | ||||||||||
| Total dividends | (100,143 | ) | — | (2,228,370 | ) | (2,024,209 | ) | (20,955,134 | ) | (20,874,776 | ) | (3,069,199 | ) | (2,476,438 | ) | ||||||||||
| Share Transactions | |||||||||||||||||||||||||
| Class A: | |||||||||||||||||||||||||
| Proceeds from shares sold | 237,067,138 | 220,000,674 | 6,893,066 | 6,401,813 | 61,465,866 | 72,485,945 | 28,509,300 | 29,155,089 | |||||||||||||||||
| Reinvestment of dividends | 94,891 | — | 912,178 | 949,631 | 14,913,130 | 16,052,698 | 1,246,526 | 809,386 | |||||||||||||||||
| Cost of shares redeemed | (232,120,074 | ) | (207,529,163 | ) | (15,017,955 | ) | (15,650,271 | ) | (78,881,456 | ) | (82,482,076 | ) | (14,203,767 | ) | (8,134,265 | ) | |||||||||
| 5,041,955 | 12,471,511 | (7,212,711 | ) | (8,298,827 | ) | (2,502,460 | ) | 6,056,567 | 15,552,059 | 21,830,210 | |||||||||||||||
| Class B: | |||||||||||||||||||||||||
| Proceeds from shares sold | 234,482 | 508,240 | N/A | N/A | 401,194 | 415,040 | N/A | N/A | |||||||||||||||||
| Reinvestment of dividends | — | — | N/A | N/A | 58,469 | 86,756 | N/A | N/A | |||||||||||||||||
| Cost of shares redeemed | (321,734 | ) | (547,558 | ) | N/A | N/A | (1,116,565 | ) | (1,299,936 | ) | N/A | N/A | |||||||||||||
| (87,252 | ) | (39,318 | ) | N/A | N/A | (656,902 | ) | (798,140 | ) | N/A | N/A | ||||||||||||||
| Advisor Class: | |||||||||||||||||||||||||
| Proceeds from shares sold | N/A | N/A | 23,297,688 | 20,843,533 | 62,781,202 | 31,066,280 | 13,309,489 | 17,582,400 | |||||||||||||||||
| Reinvestment of dividends | N/A | N/A | 1,107,823 | 836,307 | 3,804,200 | 2,752,476 | 1,109,557 | 1,160,847 | |||||||||||||||||
| Cost of shares redeemed | N/A | N/A | (9,400,690 | ) | (25,621,311 | ) | (12,364,180 | ) | (15,965,377 | ) | (32,421,165 | ) | (8,132,877 | ) | |||||||||||
| N/A | N/A | 15,004,821 | (3,941,471 | ) | 54,221,222 | 17,853,379 | (18,002,119 | ) | 10,610,370 | ||||||||||||||||
| Institutional Class: | |||||||||||||||||||||||||
| Proceeds from shares sold | 981,622 | 1,575,243 | 4,726,374 | 773,078 | 2,672,181 | 19,457,559 | 19,542,286 | 18,700,486 | |||||||||||||||||
| Reinvestment of dividends | 1,737 | — | 12,245 | 8,650 | 67,704 | 69,861 | 5,615 | 3,113 | |||||||||||||||||
| Cost of shares redeemed | (1,432,697 | ) | (997,942 | ) | (4,589,624 | ) | (12,047,796 | ) | (7,256,733 | ) | (3,784,887 | ) | (305,440 | ) | (3,041,711 | ) | |||||||||
| (449,338 | ) | 577,301 | 148,995 | (11,266,068 | ) | (4,516,848 | ) | 15,742,533 | 19,242,461 | 15,661,888 | |||||||||||||||
| Net increase (decrease) from share transactions | 4,505,365 | 13,009,494 | 7,941,105 | (23,506,366 | ) | 46,545,012 | 38,854,339 | 16,792,401 | 48,102,468 | ||||||||||||||||
| Net increase (decrease) in net assets | 4,505,365 | 13,009,494 | 12,118,374 | (14,908,536 | ) | 32,650,746 | 54,005,226 | 14,260,837 | 47,182,057 | ||||||||||||||||
| Net Assets | |||||||||||||||||||||||||
| Beginning of year | 125,129,323 | 112,119,829 | 124,494,090 | 139,402,626 | 594,971,073 | 540,965,847 | 121,283,336 | 74,101,279 | |||||||||||||||||
| End of year† | $ | 129,634,688 | $ | 125,129,323 | $ | 136,612,464 | $ | 124,494,090 | $ | 627,621,819 | $ | 594,971,073 | $ | 135,544,173 | $ | 121,283,336 | |||||||||
| †Includes undistributed net investment income (deficit) of | $ | — | $ | — | $ | 2,584,441 | $ | (1,227,648 | ) | $ | (12,385,857 | ) | $ | (13,492,471 | ) | $ | (2,192,436 | ) | $ | (1,760,669 | ) | ||||
| 298 | See notes to financial statements | 299 |
| Statements of Changes in Net Assets |
| FIRST INVESTORS INCOME FUNDS |
| GOVERNMENT | INTERNATIONAL | LIMITED DURATION | ||||||||||||||
| CASH MANAGEMENT | OPPORTUNITIES BOND | INVESTMENT GRADE | HIGH QUALITY BOND | |||||||||||||
| Year Ended September 30 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||
| Shares Issued and Redeemed | ||||||||||||||||
| Class A: | ||||||||||||||||
| Sold | 237,067,138 | 220,000,674 | 755,813 | 722,896 | 6,384,045 | 7,462,492 | 2,993,642 | 3,007,505 | ||||||||
| Issued for dividends reinvested | 94,891 | — | 96,323 | 110,382 | 1,548,716 | 1,653,812 | 131,129 | 83,518 | ||||||||
| Redeemed | (232,120,074 | ) | (207,529,163 | ) | (1,658,321 | ) | (1,771,836 | ) | (8,193,164 | ) | (8,501,494 | ) | (1,493,876 | ) | (838,923 | ) |
| Net increase (decrease) in Class A shares outstanding | 5,041,955 | 12,471,511 | (806,185 | ) | (938,558 | ) | (260,403 | ) | 614,810 | 1,630,895 | 2,252,100 | |||||
| Class B: | ||||||||||||||||
| Sold | 234,482 | 508,240 | N/A | N/A | 41,679 | 43,568 | N/A | N/A | ||||||||
| Issued for dividends reinvested | — | — | N/A | N/A | 6,110 | 9,020 | N/A | N/A | ||||||||
| Redeemed | (321,734 | ) | (547,558 | ) | N/A | N/A | (116,646 | ) | (135,398 | ) | N/A | N/A | ||||
| Net decrease in Class B shares outstanding | (87,252 | ) | (39,318 | ) | N/A | N/A | (68,857 | ) | (82,810 | ) | N/A | N/A | ||||
| Advisor Class: | ||||||||||||||||
| Sold | N/A | N/A | 2,556,618 | 2,351,297 | 6,505,014 | 3,183,454 | 1,394,264 | 1,807,222 | ||||||||
| Issued for dividends reinvested | N/A | N/A | 116,124 | 96,941 | 392,866 | 282,150 | 116,326 | 119,401 | ||||||||
| Redeemed | N/A | N/A | (1,024,846 | ) | (2,853,135 | ) | (1,278,296 | ) | (1,633,088 | ) | (3,404,372 | ) | (835,583 | ) | ||
| Net increase (decrease) in Advisor Class | ||||||||||||||||
| shares outstanding | N/A | N/A | 1,647,896 | (404,897 | ) | 5,619,584 | 1,832,516 | (1,893,782 | ) | 1,091,040 | ||||||
| Institutional Class: | ||||||||||||||||
| Sold | 981,622 | 1,575,243 | 524,480 | 87,003 | 277,663 | 1,984,468 | 2,049,150 | 1,922,294 | ||||||||
| Issued for dividends reinvested | 1,737 | — | 1,279 | 1,000 | 7,013 | 7,178 | 588 | 320 | ||||||||
| Redeemed | (1,432,697 | ) | (997,942 | ) | (513,536 | ) | (1,397,456 | ) | (750,208 | ) | (383,038 | ) | (31,987 | ) | (312,617 | ) |
| Net increase (decrease) in Institutional Class | ||||||||||||||||
| shares outstanding | (449,338 | ) | 577,301 | 12,223 | (1,309,453 | ) | (465,532 | ) | 1,608,608 | 2,017,751 | 1,609,997 | |||||
| 300 | See notes to financial statements | 301 |
Statements of Changes in Net Assets
FIRST INVESTORS INCOME FUNDS
| STRATEGIC INCOME | ||||||||||||||
| Year Ended September 30 | 2017 | 2016 | ||||||||||||
| Increase (Decrease) in Net Assets From Operations | ||||||||||||||
| Net investment income | $ | 5,095,776 | $ | 4,461,910 | ||||||||||
| Net realized loss on investments, affiliate and | ||||||||||||||
| futures contracts (Note 2) | (243,666 | ) | (2,090,537 | ) | ||||||||||
| Capital gain distributions from affiliate (Note 2) | 77,283 | 245,434 | ||||||||||||
| Net unrealized appreciation of investments and affiliate | ||||||||||||||
| (Note 2) | 958,049 | 5,220,510 | ||||||||||||
| Net increase in net assets resulting from operations | 5,887,442 | 7,837,317 | ||||||||||||
| Distributions to Shareholders | ||||||||||||||
| Net investment income – Class A | (4,937,441 | ) | (4,718,986 | ) | ||||||||||
| Net investment income – Class B | N/A | N/A | ||||||||||||
| Net investment income – Advisor Class | (24,178 | ) | (13,306 | ) | ||||||||||
| Net investment income – Institutional Class | N/A | N/A | ||||||||||||
| Net realized gains – Class A | — | (253,425 | ) | |||||||||||
| Net realized gains – Class B | N/A | N/A | ||||||||||||
| Net realized gains – Advisor Class | — | (571 | ) | |||||||||||
| Net realized gains – Institutional Class | N/A | N/A | ||||||||||||
| Total distributions | (4,961,619 | ) | (4,986,288 | ) | ||||||||||
| Share Transactions | ||||||||||||||
| Class A: | ||||||||||||||
| Proceeds from shares sold | 34,639,076 | 32,016,312 | ||||||||||||
| Reinvestment of distributions | 4,732,036 | 4,778,695 | ||||||||||||
| Cost of shares redeemed | (26,691,084 | ) | (22,181,166 | ) | ||||||||||
| 12,680,028 | 14,613,841 | |||||||||||||
| Class B: | ||||||||||||||
| Proceeds from shares sold | N/A | N/A | ||||||||||||
| Reinvestment of distributions | N/A | N/A | ||||||||||||
| Cost of shares redeemed | N/A | N/A | ||||||||||||
| N/A | N/A | |||||||||||||
| Advisor Class: | ||||||||||||||
| Proceeds from shares sold | 673,565 | 165,581 | ||||||||||||
| Reinvestment of distributions | 18,696 | 13,877 | ||||||||||||
| Cost of shares redeemed | (151,144 | ) | (78,602 | ) | ||||||||||
| 541,117 | 100,856 | |||||||||||||
| Institutional Class: | ||||||||||||||
| Proceeds from shares sold | N/A | N/A | ||||||||||||
| Reinvestment of distributions | N/A | N/A | ||||||||||||
| Cost of shares redeemed | N/A | N/A | ||||||||||||
| N/A | N/A | |||||||||||||
| Net increase from share transactions | 13,221,145 | 14,714,697 | ||||||||||||
| Net increase in net assets | 14,146,968 | 17,565,726 | ||||||||||||
| Net Assets | ||||||||||||||
| Beginning of year | 149,605,024 | 132,039,298 | ||||||||||||
| End of year† | $ | 163,751,992 | $ | 149,605,024 | ||||||||||
| †Includes undistributed net investment income of | $ | 180,943 | $ | 46,786 | ||||||||||
| STRATEGIC INCOME | ||||||||||||||
| Year Ended September 30 | 2017 | 2016 | ||||||||||||
| Shares Issued and Redeemed | ||||||||||||||
| Class A: | ||||||||||||||
| Sold | 3,665,904 | 3,429,263 | ||||||||||||
| Issued for distributions reinvested | 499,484 | 513,348 | ||||||||||||
| Redeemed | (2,820,332 | ) | (2,380,044 | ) | ||||||||||
| Net increase in Class A shares outstanding | 1,345,056 | 1,562,567 | ||||||||||||
| Class B: | ||||||||||||||
| Sold | N/A | N/A | ||||||||||||
| Issued for distributions reinvested | N/A | N/A | ||||||||||||
| Redeemed | N/A | N/A | ||||||||||||
| Net increase in Class B shares outstanding | N/A | N/A | ||||||||||||
| Advisor Class: | ||||||||||||||
| Sold | 71,470 | 17,852 | ||||||||||||
| Issued for distributions reinvested | 1,974 | 1,492 | ||||||||||||
| Redeemed | (16,057 | ) | (8,463 | ) | ||||||||||
| Net increase in Advisor Class shares outstanding | 57,387 | 10,881 | ||||||||||||
| Institutional Class: | ||||||||||||||
| Sold | N/A | N/A | ||||||||||||
| Issued for distributions reinvested | N/A | N/A | ||||||||||||
| Redeemed | N/A | N/A | ||||||||||||
| Net increase in Institutional Class shares outstanding | N/A | N/A | ||||||||||||
| 302 | See notes to financial statements | 303 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
| COVERED CALL | ||||||||||||||||||||||||
| STRATEGY | EQUITY INCOME | GLOBAL | GROWTH & INCOME | |||||||||||||||||||||
| Year Ended September 30 | 2017 | 2016 | * | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Increase (Decrease) in Net Assets From Operations | ||||||||||||||||||||||||
| Net investment income | $ | 2,633,458 | $ | 391,730 | $ | 9,990,134 | $ | 10,005,109 | $ | 2,340,520 | $ | 1,025,873 | $ | 20,740,825 | $ | 22,490,759 | ||||||||
| Net realized gain (loss) on investments, options contracts | ||||||||||||||||||||||||
| and foreign currency transactions | (637,556 | ) | (265,660 | ) | 18,636,854 | 10,909,617 | 57,332,738 | (22,092,772 | ) | 79,625,849 | 56,987,271 | |||||||||||||
| Net unrealized appreciation of investments, options contracts | ||||||||||||||||||||||||
| and foreign currency transactions | 15,531,537 | 1,954,066 | 54,893,753 | 54,327,047 | 32,286,780 | 50,367,989 | 135,711,245 | 110,786,808 | ||||||||||||||||
| Net increase in net assets resulting | ||||||||||||||||||||||||
| from operations | 17,527,439 | 2,080,136 | 83,520,741 | 75,241,773 | 91,960,038 | 29,301,090 | 236,077,919 | 190,264,838 | ||||||||||||||||
| Distributions to Shareholders | ||||||||||||||||||||||||
| Net investment income – Class A | (1,362,794 | ) | (122,166 | ) | (11,273,714 | ) | (8,682,440 | ) | (511,315 | ) | (128,304 | ) | (26,399,032 | ) | (17,472,549 | ) | ||||||||
| Net investment income – Class B | N/A | N/A | (36,046 | ) | (33,687 | ) | (608 | ) | — | (106,278 | ) | (74,135 | ) | |||||||||||
| Net investment income – Advisor Class | (1,157,434 | ) | (229,075 | ) | (1,323,504 | ) | (969,565 | ) | (438,669 | ) | (177,083 | ) | (3,214,231 | ) | (2,011,454 | ) | ||||||||
| Net investment income – Institutional Class | (97,118 | ) | (26,358 | ) | (92,288 | ) | (109,638 | ) | (8,341 | ) | (4,497 | ) | (211,869 | ) | (141,364 | ) | ||||||||
| Net realized gains – Class A | (139,400 | ) | — | (9,458,693 | ) | (19,115,339 | ) | — | (18,139,773 | ) | (54,318,955 | ) | (68,462,248 | ) | ||||||||||
| Net realized gains – Class B | N/A | N/A | (60,661 | ) | (145,747 | ) | — | (220,201 | ) | (594,347 | ) | (899,318 | ) | |||||||||||
| Net realized gains – Advisor Class | (90,537 | ) | — | (1,034,281 | ) | (1,660,873 | ) | — | (6,790,693 | ) | (4,880,138 | ) | (6,915,132 | ) | ||||||||||
| Net realized gains – Institutional Class | (7,569 | ) | — | (114,200 | ) | (325,937 | ) | — | (159,100 | ) | (354,035 | ) | (430,015 | ) | ||||||||||
| Total distributions | (2,854,852 | ) | (377,599 | ) | (23,393,387 | ) | (31,043,226 | ) | (958,933 | ) | (25,619,651 | ) | (90,078,885 | ) | (96,406,215 | ) | ||||||||
| Share Transactions | ||||||||||||||||||||||||
| Class A: | ||||||||||||||||||||||||
| Proceeds from shares sold | 120,901,915 | 48,782,331 | 59,467,706 | 61,467,757 | 30,039,159 | 35,052,068 | 134,434,194 | 151,969,755 | ||||||||||||||||
| Reinvestment of distributions | 1,481,088 | 120,752 | 20,445,699 | 27,486,375 | 503,982 | 18,063,683 | 80,062,251 | 85,343,880 | ||||||||||||||||
| Cost of shares redeemed | (12,548,151 | ) | (982,520 | ) | (97,241,265 | ) | (84,852,696 | ) | (49,742,939 | ) | (45,984,668 | ) | (259,016,736 | ) | (231,283,130 | ) | ||||||||
| Class B: | ||||||||||||||||||||||||
| Proceeds from shares sold | N/A | N/A | 388,601 | 242,709 | 264,229 | 239,411 | 1,251,634 | 1,453,400 | ||||||||||||||||
| Reinvestment of distributions | N/A | N/A | 96,533 | 179,411 | 608 | 220,201 | 698,021 | 971,884 | ||||||||||||||||
| Cost of shares redeemed | N/A | N/A | (1,230,597 | ) | (1,092,424 | ) | (990,232 | ) | (864,944 | ) | (5,872,934 | ) | (5,559,988 | ) | ||||||||||
| N/A | N/A | (745,463 | ) | (670,304 | ) | (725,395 | ) | (405,332 | ) | (3,923,279 | ) | (3,134,704 | ) | |||||||||||
| Advisor Class: | ||||||||||||||||||||||||
| Proceeds from shares sold | 76,007,680 | 48,595,028 | 26,199,816 | 20,703,026 | 56,793,376 | 58,533,768 | 59,881,381 | 60,847,247 | ||||||||||||||||
| Reinvestment of distributions | 1,187,791 | 228,031 | 2,338,792 | 2,609,004 | 436,620 | 6,964,959 | 8,040,009 | 8,881,725 | ||||||||||||||||
| Cost of shares redeemed | (12,464,429 | ) | (10,671,187 | ) | (17,859,121 | ) | (10,774,411 | ) | (66,051,439 | ) | (13,225,742 | ) | (45,818,902 | ) | (85,290,088 | ) | ||||||||
| 64,731,042 | 38,151,872 | 10,679,487 | 12,537,619 | (8,821,443 | ) | 52,272,985 | 22,102,488 | (15,561,116 | ) | |||||||||||||||
| Institutional Class: | ||||||||||||||||||||||||
| Proceeds from shares sold | 2,958,902 | 4,081,405 | 4,873,757 | 3,761,509 | 483,915 | 328,204 | 954,437 | 942,301 | ||||||||||||||||
| Reinvestment of distributions | 26,464 | 2,023 | 109,108 | 273,351 | 8,341 | 163,598 | 565,904 | 571,379 | ||||||||||||||||
| Cost of shares redeemed | (291,292 | ) | (1,048 | ) | (5,789,919 | ) | (11,837,447 | ) | (558,623 | ) | (201,119 | ) | (2,140,286 | ) | (882,614 | ) | ||||||||
| 2,694,074 | 4,082,380 | (807,054 | ) | (7,802,587 | ) | (66,367 | ) | 290,683 | (619,945 | ) | 631,066 | |||||||||||||
| Net increase (decrease) from share transactions | 177,259,968 | 90,154,815 | (8,200,890 | ) | 8,166,164 | (28,813,003 | ) | 59,289,419 | (26,961,027 | ) | (12,034,249 | ) | ||||||||||||
| Net increase in net assets | 191,932,555 | 91,857,352 | 51,926,464 | 52,364,711 | 62,188,102 | 62,970,858 | 119,038,007 | 81,824,374 | ||||||||||||||||
| Net Assets | ||||||||||||||||||||||||
| Beginning of year | 91,857,352 | — | 589,808,329 | 537,443,618 | 515,268,989 | 452,298,131 | 1,748,552,554 | 1,666,728,180 | ||||||||||||||||
| End of year† | $ | 283,789,907 | $ | 91,857,352 | $ | 641,734,793 | $ | 589,808,329 | $ | 577,457,091 | $ | 515,268,989 | $ | 1,867,590,561 | $ | 1,748,552,554 | ||||||||
| †Includes undistributed net investment income of | $ | 31,723 | $ | 14,131 | $ | — | $ | 2,657,078 | $ | 1,961,440 | $ | 958,923 | $ | 4,376,571 | $ | 13,567,156 | ||||||||
| *From April 1, 2016 (commencement of operations) to September 30, 2016. | ||||||||||||||||||||||||
| 304 | See notes to financial statements | 305 |
| Statements of Changes in Net Assets |
| FIRST INVESTORS EQUITY FUNDS |
| COVERED CALL | ||||||||||||||||
| STRATEGY | EQUITY INCOME | GLOBAL | GROWTH & INCOME | |||||||||||||
| Year Ended September 30 | 2017 | 2016 | * | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||
| Shares Issued and Redeemed | ||||||||||||||||
| Class A: | ||||||||||||||||
| Sold | 11,272,774 | 4,767,539 | 5,839,599 | 6,555,770 | 3,825,654 | 4,915,279 | 6,090,140 | 7,381,569 | ||||||||
| Issued for distributions reinvested | 135,329 | 11,707 | 2,010,968 | 2,962,868 | 68,944 | 2,460,992 | 3,713,906 | 4,133,027 | ||||||||
| Redeemed | (1,151,656 | ) | (95,242 | ) | (9,559,888 | ) | (9,037,443 | ) | (6,357,116 | ) | (6,463,775 | ) | (11,744,645 | ) | (11,210,394 | ) |
| Net increase (decrease) in Class A shares outstanding | 10,256,447 | 4,684,004 | (1,709,321 | ) | 481,195 | (2,462,518 | ) | 912,496 | (1,940,599 | ) | 304,202 | |||||
| Class B: | ||||||||||||||||
| Sold | N/A | N/A | 39,050 | 26,441 | 42,603 | 41,598 | 61,214 | 76,305 | ||||||||
| Issued for distributions reinvested | N/A | N/A | 9,780 | 19,752 | 104 | 37,322 | 35,415 | 50,645 | ||||||||
| Redeemed | N/A | N/A | (123,729 | ) | (120,318 | ) | (159,084 | ) | (150,696 | ) | (288,223 | ) | (291,680 | ) | ||
| Net decrease in Class B shares outstanding | N/A | N/A | (74,899 | ) | (74,125 | ) | (116,377 | ) | (71,776 | ) | (191,594 | ) | (164,730 | ) | ||
| Advisor Class | ||||||||||||||||
| Sold | 7,060,934 | 4,818,883 | 2,551,165 | 2,188,222 | 7,098,039 | 8,092,269 | 2,680,319 | 2,931,409 | ||||||||
| Issued for distributions reinvested | 109,184 | 22,348 | 229,751 | 280,602 | 58,764 | 936,150 | 367,930 | 427,659 | ||||||||
| Redeemed | (1,152,999 | ) | (1,056,567 | ) | (1,735,500 | ) | (1,138,072 | ) | (8,060,119 | ) | (1,838,151 | ) | (2,050,426 | ) | (4,145,892 | ) |
| Net increase (decrease) in Advisor Class shares outstanding | 6,017,119 | 3,784,664 | 1,045,416 | 1,330,752 | (903,316 | ) | 7,190,268 | 997,823 | (786,824 | ) | ||||||
| Institutional Class: | ||||||||||||||||
| Sold | 274,157 | 407,074 | 506,702 | 391,950 | 59,751 | 46,001 | 43,161 | 46,308 | ||||||||
| Issued for distributions reinvested | 2,423 | 196 | 10,632 | 29,340 | 1,117 | 21,901 | 26,082 | 27,620 | ||||||||
| Redeemed | (27,013 | ) | (100 | ) | (563,132 | ) | (1,251,685 | ) | (70,450 | ) | (27,423 | ) | (96,837 | ) | (42,961 | ) |
| Net increase (decrease) in Institutional Class | ||||||||||||||||
| shares outstanding | 249,567 | 407,170 | (45,798 | ) | (830,395 | ) | (9,582 | ) | 40,479 | (27,594 | ) | 30,967 | ||||
| *From April 1, 2016 (commencement of operations) to September 30, 2016. |
| 306 | See notes to financial statements | 307 |
Statements of Changes in Net Assets
FIRST INVESTORS EQUITY FUNDS
| HEDGED U.S. EQUITY | |||||||||||||||||||||
| OPPORTUNITIES | INTERNATIONAL | LONG SHORT | OPPORTUNITY | ||||||||||||||||||
| Year Ended September 30 | 2017 | 2016 | * | 2017 | 2016 | 2017 | ** | 2017 | 2016 | ||||||||||||
| Increase (Decrease) in Net Assets From Operations | |||||||||||||||||||||
| Net investment income (loss) | $ | (36,121 | ) | $ | 6,571 | $ | 915,117 | $ | 1,529,442 | $ | (369,475 | ) | $ | 2,998,302 | $ | 5,121,358 | |||||
| Net realized gain (loss) on investments, options and futures | |||||||||||||||||||||
| contracts, and foreign currency transactions | (1,621,396 | ) | (7,443 | ) | 18,653,171 | (2,746,531 | ) | (1,552,452 | ) | 58,838,680 | 34,586,627 | ||||||||||
| Net unrealized appreciation (depreciation) of investments, | |||||||||||||||||||||
| options and futures contracts, and foreign | |||||||||||||||||||||
| currency transactions | 7,333,832 | (29,209 | ) | 26,399,299 | 24,791,949 | 2,534,539 | 99,884,040 | 26,978,713 | |||||||||||||
| Net increase (decrease) in net assets resulting | |||||||||||||||||||||
| from operations | 5,676,315 | (30,081 | ) | 45,967,587 | 23,574,860 | 612,612 | 161,721,022 | 66,686,698 | |||||||||||||
| Distributions to Shareholders | |||||||||||||||||||||
| Net investment income – Class A | — | — | (1,018,350 | ) | (811,325 | ) | — | (5,116,339 | ) | (932,093 | ) | ||||||||||
| Net investment income – Class B | N/A | N/A | (5,219 | ) | (4,061 | ) | — | (47,551 | ) | — | |||||||||||
| Net investment income – Advisor Class | (6,858 | ) | — | (498,093 | ) | (315,211 | ) | — | (497,612 | ) | (93,491 | ) | |||||||||
| Net investment income – Institutional Class | (21 | ) | — | (15,915 | ) | (12,370 | ) | — | (34,340 | ) | (9,572 | ) | |||||||||
| Net realized gains – Class A | — | — | — | — | — | (31,438,505 | ) | (69,557,929 | ) | ||||||||||||
| Net realized gains – Class B | N/A | N/A | — | — | — | (364,203 | ) | (945,973 | ) | ||||||||||||
| Net realized gains – Advisor Class | — | — | — | — | — | (2,762,934 | ) | (4,434,485 | ) | ||||||||||||
| Net realized gains – Institutional Class | — | — | — | — | — | (178,958 | ) | (363,565 | ) | ||||||||||||
| Total distributions | (6,879 | ) | — | (1,537,577 | ) | (1,142,967 | ) | — | (40,440,442 | ) | (76,337,108 | ) | |||||||||
| Share Transactions | |||||||||||||||||||||
| Class A: | |||||||||||||||||||||
| Proceeds from shares sold | 35,240,953 | 9,273,891 | 33,297,820 | 28,098,007 | 10,941,882 | 117,186,485 | 124,866,504 | ||||||||||||||
| Reinvestment of distributions | — | — | 1,009,767 | 804,813 | — | 36,264,899 | 69,999,981 | ||||||||||||||
| Cost of shares redeemed | (3,201,304 | ) | (10,686 | ) | (34,179,761 | ) | (31,080,873 | ) | (400,013 | ) | (141,149,197 | ) | (124,056,665 | ) | |||||||
| 32,039,649 | 9,263,205 | 127,826 | (2,178,053 | ) | 10,541,869 | 12,302,187 | 70,809,820 | ||||||||||||||
| Class B: | |||||||||||||||||||||
| Proceeds from shares sold | N/A | N/A | 226,279 | 132,109 | N/A | 723,577 | 788,145 | ||||||||||||||
| Reinvestment of distributions | N/A | N/A | 5,219 | 4,038 | N/A | 407,984 | 940,954 | ||||||||||||||
| Cost of shares redeemed | N/A | N/A | (541,783 | ) | (760,543 | ) | N/A | (2,946,112 | ) | (2,435,194 | ) | ||||||||||
| N/A | N/A | (310,285 | ) | (624,396 | ) | N/A | (1,814,551 | ) | (706,095 | ) | |||||||||||
| Advisor Class: | |||||||||||||||||||||
| Proceeds from shares sold | 15,554,353 | 24,590,674 | 35,045,544 | 27,538,775 | 40,714,739 | 27,637,225 | 33,137,811 | ||||||||||||||
| Reinvestment of distributions | 6,857 | — | 494,244 | 314,171 | — | 3,240,840 | 4,476,994 | ||||||||||||||
| Cost of shares redeemed | (9,051,079 | ) | (20,518 | ) | (20,173,738 | ) | (9,640,858 | ) | (1,132,783 | ) | (32,403,469 | ) | (12,691,626 | ) | |||||||
| 6,510,131 | 24,570,156 | 15,366,050 | 18,212,088 | 39,581,956 | (1,525,404 | ) | 24,923,179 | ||||||||||||||
| Institutional Class: | |||||||||||||||||||||
| Proceeds from shares sold | 387,153 | 100,010 | 677,943 | 368,590 | 166,014 | 917,940 | 1,029,771 | ||||||||||||||
| Reinvestment of distributions | 22 | — | 15,915 | 12,370 | — | 213,296 | 373,137 | ||||||||||||||
| Cost of shares redeemed | (39,925 | ) | — | (496,317 | ) | (245,254 | ) | — | (1,078,669 | ) | (645,729 | ) | |||||||||
| 347,250 | 100,010 | 197,541 | 135,706 | 166,014 | 52,567 | 757,179 | |||||||||||||||
| Net increase from share transactions | 38,897,030 | 33,933,371 | 15,381,132 | 15,545,345 | 50,289,839 | 9,014,799 | 95,784,083 | ||||||||||||||
| Net increase in net assets | 44,566,466 | 33,903,290 | 59,811,142 | 37,977,238 | 50,902,451 | 130,295,379 | 86,133,673 | ||||||||||||||
| Net Assets | |||||||||||||||||||||
| Beginning of year | 33,903,290 | — | 295,031,778 | 257,054,540 | — | 967,330,724 | 881,197,051 | ||||||||||||||
| End of year† | $ | 78,469,756 | $ | 33,903,290 | $ | 354,842,920 | $ | 295,031,778 | $ | 50,902,451 | $ | 1,097,626,103 | $ | 967,330,724 | |||||||
| †Includes undistributed net investment income (deficit) of | $ | (51,731 | ) | $ | 6,862 | $ | 522,354 | $ | 1,405,248 | $ | — | $ | 2,423,730 | $ | 5,121,270 | ||||||
| *From August 1, 2016 (commencement of operations) to September 30, 2016. | |||||||||||||||||||||
| **From December 1, 2016 (commencement of operations) to September 30, 2017. | |||||||||||||||||||||
| 308 | See notes to financial statements | 309 |
| Statements of Changes in Net Assets |
| FIRST INVESTORS EQUITY FUNDS |
| HEDGED U.S. EQUITY | |||||||||||||||
| OPPORTUNITIES | INTERNATIONAL | LONG SHORT | OPPORTUNITY | ||||||||||||
| Year Ended September 30 | 2017 | 2016 | * | 2017 | 2016 | 2017 | ** | 2017 | 2016 | ||||||
| Shares Issued and Redeemed | |||||||||||||||
| Class A: | |||||||||||||||
| Sold | 3,477,221 | 936,023 | 2,349,634 | 2,127,784 | 1,063,585 | 3,018,607 | 3,446,512 | ||||||||
| Issued for distributions reinvested | — | — | 81,828 | 60,467 | — | 972,249 | 1,920,966 | ||||||||
| Redeemed | (306,330 | ) | (1,070 | ) | (2,465,649 | ) | (2,343,185 | ) | (38,505 | ) | (3,647,153 | ) | (3,431,848 | ) | |
| Net increase (decrease) in Class A shares outstanding | 3,170,891 | 934,953 | (34,187 | ) | (154,934 | ) | 1,025,080 | 343,703 | 1,935,630 | ||||||
| Class B: | |||||||||||||||
| Sold | N/A | N/A | 16,786 | 10,638 | N/A | 23,735 | 27,316 | ||||||||
| Issued for distributions reinvested | N/A | N/A | 451 | 321 | N/A | 13,901 | 32,258 | ||||||||
| Redeemed | N/A | N/A | (41,880 | ) | (61,282 | ) | N/A | (96,871 | ) | (83,444 | ) | ||||
| Net decrease in Class B shares outstanding | N/A | N/A | (24,643 | ) | (50,323 | ) | N/A | (59,235 | ) | (23,870 | ) | ||||
| Advisor Class: | |||||||||||||||
| Sold | 1,514,819 | 2,477,541 | 2,454,155 | 2,058,313 | 3,935,899 | 701,161 | 903,793 | ||||||||
| Issued for distributions reinvested | 687 | — | 39,571 | 23,393 | — | 85,668 | 121,493 | ||||||||
| Redeemed | (866,689 | ) | (2,075 | ) | (1,377,242 | ) | (720,035 | ) | (108,648 | ) | (809,965 | ) | (346,735 | ) | |
| Net increase (decrease) in Advisor Class | 648,817 | 2,475,466 | 1,116,484 | 1,361,671 | 3,827,251 | (23,136 | ) | 678,551 | |||||||
| shares outstanding | |||||||||||||||
| Institutional Class: | |||||||||||||||
| Sold | 37,331 | 10,001 | 47,081 | 27,762 | 16,325 | 23,312 | 28,565 | ||||||||
| Issued for distributions reinvested | 2 | — | 1,272 | 920 | — | 5,652 | 10,159 | ||||||||
| Redeemed | (3,742 | ) | — | (37,030 | ) | (18,468 | ) | — | (27,264 | ) | (17,889 | ) | |||
| Net increase in Institutional Class | |||||||||||||||
| shares outstanding | 33,591 | 10,001 | 11,323 | 10,214 | 16,325 | 1,700 | 20,835 | ||||||||
| *From August 1, 2016 (commencement of operations) to September 30, 2016. |
| **From December 1, 2016 (commencement of operations) to September 30, 2017. |
| 310 | See notes to financial statements | 311 |
| Statements of Changes in Net Assets |
| FIRST INVESTORS EQUITY FUNDS |
| REAL ESTATE | SELECT GROWTH | SPECIAL SITUATIONS | TOTAL RETURN | |||||||||||||||||||||
| Year Ended September 30 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| Increase (Decrease) in Net Assets From Operations | ||||||||||||||||||||||||
| Net investment income | $ | 1,932,240 | $ | 1,847,064 | $ | 311,436 | $ | 1,158,454 | $ | 229,155 | $ | 3,521,096 | $ | 11,119,121 | $ | 10,963,683 | ||||||||
| Net realized gain on investments. | 877,331 | 1,257,211 | 53,073,004 | 55,974,501 | 17,392,867 | 5,047,355 | 20,432,642 | 15,428,099 | ||||||||||||||||
| Net unrealized appreciation (depreciation) of investments | (8,194,394 | ) | 6,328,298 | 52,198,026 | (29,597,382 | ) | 92,338,759 | 42,543,717 | 38,301,406 | 42,876,523 | ||||||||||||||
| Net increase (decrease) in net assets resulting | ||||||||||||||||||||||||
| from operations | (5,384,823 | ) | 9,432,573 | 105,582,466 | 27,535,573 | 109,960,781 | 51,112,168 | 69,853,169 | 69,268,305 | |||||||||||||||
| Distributions to Shareholders | ||||||||||||||||||||||||
| Net investment income – Class A | (476,967 | ) | (374,698 | ) | (980,941 | ) | (632,707 | ) | (2,826,286 | ) | (320,349 | ) | (14,323,503 | ) | (12,018,647 | ) | ||||||||
| Net investment income – Class B | N/A | N/A | (4,818 | ) | (352 | ) | (19,506 | ) | — | (63,441 | ) | (57,057 | ) | |||||||||||
| Net investment income – Advisor Class | (1,184,480 | ) | (1,064,535 | ) | (256,691 | ) | (144,240 | ) | (407,771 | ) | (61,500 | ) | (20,752 | ) | (17,508 | ) | ||||||||
| Net investment income – Institutional Class | (9,862 | ) | (22,157 | ) | (14,719 | ) | (10,456 | ) | (49,172 | ) | (10,970 | ) | (628,895 | ) | (532,976 | ) | ||||||||
| Net realized gains – Class A | (483,384 | ) | (35,427 | ) | (50,530,233 | ) | (34,595,217 | ) | (4,182,726 | ) | (24,838,426 | ) | (13,217,287 | ) | (18,715,227 | ) | ||||||||
| Net realized gains – Class B | N/A | N/A | (489,800 | ) | (437,191 | ) | (36,300 | ) | (251,921 | ) | (120,124 | ) | (193,359 | ) | ||||||||||
| Net realized gains – Advisor Class | (846,808 | ) | (111,064 | ) | (9,424,580 | ) | (4,961,052 | ) | (543,887 | ) | (2,451,492 | ) | (16,705 | ) | (24,883 | ) | ||||||||
| Net realized gains – Institutional Class | (6,438 | ) | (2,496 | ) | (515,355 | ) | (349,535 | ) | (63,359 | ) | (334,021 | ) | (511,002 | ) | (709,203 | ) | ||||||||
| Total distributions | (3,007,939 | ) | (1,610,377 | ) | (62,217,137 | ) | (41,130,750 | ) | (8,129,007 | ) | (28,268,679 | ) | (28,901,709 | ) | (32,268,860 | ) | ||||||||
| Share Transactions | ||||||||||||||||||||||||
| Class A: | ||||||||||||||||||||||||
| Proceeds from shares sold | 20,509,861 | 18,454,657 | 47,219,387 | 53,942,655 | 59,202,042 | 57,114,576 | 92,125,136 | 119,860,031 | ||||||||||||||||
| Reinvestment of distributions | 932,353 | 395,757 | 51,034,443 | 34,969,346 | 6,946,846 | 24,976,809 | 27,179,030 | 30,372,755 | ||||||||||||||||
| Cost of shares redeemed | (5,378,540 | ) | (4,353,175 | ) | (62,537,793 | ) | (56,220,661 | ) | (74,959,984 | ) | (61,105,843 | ) | (126,717,199 | ) | (124,013,108 | ) | ||||||||
| 16,063,674 | 14,497,239 | 35,716,037 | 32,691,340 | (8,811,096 | ) | 20,985,542 | (7,413,033 | ) | 26,219,678 | |||||||||||||||
| Class B: | ||||||||||||||||||||||||
| Proceeds from shares sold | N/A | N/A | 273,477 | 384,843 | 342,733 | 340,490 | 617,192 | 743,681 | ||||||||||||||||
| Reinvestment of distributions | N/A | N/A | 483,108 | 428,944 | 55,728 | 251,791 | 181,959 | 249,778 | ||||||||||||||||
| Cost of shares redeemed | N/A | N/A | (1,142,221 | ) | (1,280,290 | ) | (1,111,237 | ) | (961,049 | ) | (1,954,537 | ) | (1,817,144 | ) | ||||||||||
| N/A | N/A | (385,636 | ) | (466,503 | ) | (712,776 | ) | (368,768 | ) | (1,155,386 | ) | (823,685 | ) | |||||||||||
| Advisor Class: | ||||||||||||||||||||||||
| Proceeds from shares sold | 32,609,296 | 18,737,198 | 25,744,123 | 24,704,923 | 60,722,551 | 21,179,680 | 502,073 | 913,254 | ||||||||||||||||
| Reinvestment of distributions | 2,023,957 | 1,170,197 | 9,596,890 | 5,025,297 | 948,283 | 2,498,447 | 32,818 | 37,391 | ||||||||||||||||
| Cost of shares redeemed | (6,988,569 | ) | (11,348,437 | ) | (27,553,052 | ) | (8,735,085 | ) | (14,035,967 | ) | (6,267,393 | ) | (802,922 | ) | (743,012 | ) | ||||||||
| 27,644,684 | 8,558,958 | 7,787,961 | 20,995,135 | 47,634,867 | 17,410,734 | (268,031 | ) | 207,633 | ||||||||||||||||
| Institutional Class | ||||||||||||||||||||||||
| Proceeds from shares sold | 347,100 | 511,240 | 895,148 | 632,475 | 1,184,681 | 802,716 | 447,742 | 1,087,423 | ||||||||||||||||
| Reinvestment of distributions | 16,299 | 24,653 | 530,075 | 359,991 | 112,531 | 344,991 | 1,139,897 | 1,242,180 | ||||||||||||||||
| Cost of shares redeemed | (361,956 | ) | (1,019,222 | ) | (835,332 | ) | (594,620 | ) | (848,107 | ) | (472,929 | ) | (2,149,845 | ) | (1,865,316 | ) | ||||||||
| 1,443 | (483,329 | ) | 589,891 | 397,846 | 449,105 | 674,778 | (562,206 | ) | 464,287 | |||||||||||||||
| Net increase (decrease) from share transactions | 43,709,801 | 22,572,868 | 43,708,253 | 53,617,818 | 38,560,100 | 38,702,286 | (9,398,656 | ) | 26,067,913 | |||||||||||||||
| Net increase in net assets | 35,317,039 | 30,395,064 | 87,073,582 | 40,022,641 | 140,391,874 | 61,545,775 | 31,552,804 | 63,067,358 | ||||||||||||||||
| Net Assets | ||||||||||||||||||||||||
| Beginning of year | 83,591,547 | 53,196,483 | 447,175,901 | 407,153,260 | 542,093,635 | 480,547,860 | 887,238,047 | 824,170,689 | ||||||||||||||||
| End of year† | $ | 118,908,586 | $ | 83,591,547 | $ | 534,249,483 | $ | 447,175,901 | $ | 682,485,509 | $ | 542,093,635 | $ | 918,790,851 | $ | 887,238,047 | ||||||||
| †Includes undistributed net investment income (deficit) of | $ | 680,829 | $ | 418,336 | $ | 212,578 | $ | 1,158,311 | $ | 70,074 | $ | 3,143,654 | $ | (5,718,473 | ) | $ | (4,119,893 | ) | ||||||
| 312 | See notes to financial statements | 313 |
| Statements of Changes in Net Assets |
| FIRST INVESTORS EQUITY FUNDS |
| REAL ESTATE | SELECT GROWTH | SPECIAL SITUATIONS | TOTAL RETURN | ||||||||||||||
| Year Ended September 30 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||
| Shares Issued and Redeemed | |||||||||||||||||
| Class A: | |||||||||||||||||
| Sold | 2,145,744 | 1,855,661 | 4,294,908 | 4,874,467 | 2,073,735 | 2,313,645 | 4,792,452 | 6,498,557 | |||||||||
| Reinvestment of distributions. | 98,721 | 39,622 | 5,154,994 | 3,125,053 | 248,456 | 1,003,488 | 1,425,706 | 1,652,437 | |||||||||
| Redeemed | (564,924 | ) | (426,479 | ) | (5,689,031 | ) | (5,093,990 | ) | (2,636,533 | ) | (2,472,288 | ) | (6,585,924 | ) | (6,721,953 | ) | |
| Net increase (decrease) in Class A shares outstanding | 1,679,541 | 1,468,804 | 3,760,871 | 2,905,530 | (314,342 | ) | 844,845 | (367,766 | ) | 1,429,041 | |||||||
| Class B: | |||||||||||||||||
| Sold | N/A | N/A | 29,073 | 38,378 | 15,897 | 18,036 | 32,703 | 41,142 | |||||||||
| Reinvestment of distributions. | N/A | N/A | 57,376 | 43,725 | 2,619 | 13,148 | 9,767 | 13,816 | |||||||||
| Redeemed | N/A | N/A | (121,992 | ) | (132,379 | ) | (51,787 | ) | (50,124 | ) | (103,501 | ) | (100,497 | ) | |||
| Net increase (decrease) in Class B shares outstanding | N/A | N/A | (35,543 | ) | (50,276 | ) | (33,271 | ) | (18,940 | ) | (61,031 | ) | (45,539 | ) | |||
| Advisor Class: | |||||||||||||||||
| Sold | 3,422,585 | 1,916,747 | 2,306,144 | 2,202,432 | 2,064,158 | 854,224 | 25,816 | 47,824 | |||||||||
| Reinvestment of distributions. | 213,906 | 117,391 | 957,774 | 445,505 | 33,687 | 99,938 | 1,714 | 2,025 | |||||||||
| Redeemed | (728,074 | ) | (1,140,297 | ) | (2,480,897 | ) | (782,048 | ) | (487,241 | ) | (251,602 | ) | (41,389 | ) | (39,591 | ) | |
| Net increase (decrease) in Advisor Class shares | |||||||||||||||||
| outstanding | 2,908,417 | 893,841 | 783,021 | 1,865,889 | 1,610,604 | 702,560 | (13,859 | ) | 10,258 | ||||||||
| Institutional Class: | |||||||||||||||||
| Sold | 36,276 | 49,689 | 81,566 | 57,585 | 40,888 | 32,960 | 23,175 | 58,841 | |||||||||
| Reinvestment of distributions. | 1,725 | 2,490 | 52,639 | 31,802 | 3,976 | 13,745 | 59,362 | 67,216 | |||||||||
| Redeemed | (38,418 | ) | (97,131 | ) | (74,392 | ) | (53,039 | ) | (29,155 | ) | (19,072 | ) | (109,856 | ) | (100,652 | ) | |
| Net increase (decrease) in Institutional Class | |||||||||||||||||
| shares outstanding | (417 | ) | (44,952 | ) | 59,813 | 36,348 | 15,709 | 27,633 | (27,319 | ) | 25,405 | ||||||
| 314 | See notes to financial statements | 315 |
| Statement of Cash Flows |
| LONG SHORT FUND |
| For the Period December 1, 2016* through September 30, 2017 |
| Increase / decrease in cash | |||
| Cash flows from operating activities: | |||
| Net increase in assets from operations. | $ | 612,612 | |
| Adjustments to reconcile net increase in net assets from | |||
| operations to net cash used in operating activities: | |||
| Purchases of investment securities. | (64,431,668 | ) | |
| Proceeds from sale of investment securities | 21,842,775 | ||
| Proceeds from short sales | 55,035,089 | ||
| Closed short transactions | (26,318,657 | ) | |
| Increase in cash deposited with broker for securities sold short. | (28,472,205 | ) | |
| Increase in receivables for securities sold | (304,617 | ) | |
| Increase in dividends receivable | (54,649 | ) | |
| Increase in interest receivable | (7,723 | ) | |
| Increase in fund shares sold | (74,980 | ) | |
| Increase in other assets. | (763 | ) | |
| Increase in dividends on securities sold short payable | 49,944 | ||
| Increase in fund shares redeemed | 263 | ||
| Increase in accrued expenses | 45,867 | ||
| Net realized (gain) loss on investments | 1,552,452 | ||
| Net change in unrealized (appreciation) depreciation on securities | (2,534,539 | ) | |
| Net cash used by operating activities | (43,060,799 | ) | |
| Cash flows from financing activities: | |||
| Proceeds from sale of shares. | 51,822,635 | ||
| Redemption of shares | (1,532,796 | ) | |
| Net cash provided by financing activities | 50,289,839 | ||
| Net increase in cash | 7,229,040 | ||
| Cash: | |||
| Beginning balance | — | ||
| Ending balance | $ | 7,229,040 | |
| *Commencement of Operations |
| 316 | See notes to financial statements |
Notes to Financial Statements
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
1. Significant Accounting Policies—First Investors Income Funds (“Income Funds”) and First Investors Equity Funds (“Equity Funds”), each a Delaware statutory trust (each a “Trust”, collectively, “the Trusts”), are registered under the Investment Company Act of 1940 (the “1940 Act”) as open-end management investment companies and operate as series funds. Each Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standard Board (FASB) Accounting Standard Codification Topic 946 “Financial Services—Investment Companies” including FASB Accounting Standard Update ASU 2013-08. The Income Funds issue shares of beneficial interest in the Balanced Income Fund, Floating Rate Fund, Fund For Income, Government Fund, Government Cash Management Fund, International Opportunities Bond Fund, Investment Grade Fund, Limited Duration High Quality Bond Fund and Strategic Income Fund. All of the Income Funds are diversified funds except International Opportunities Bond Fund which is a non-diversified fund. The Equity Funds issue shares of beneficial interest in the Covered Call Strategy Fund, Equity Income Fund, Global Fund, Growth & Income Fund, Hedged U.S. Equity Opportunities Fund, International Fund, Long Short Fund (commenced operations on December 1, 2016), Opportunity Fund, Real Estate Fund, Select Growth Fund, Special Situations Fund and Total Return Fund (each a “Fund”, collectively, “the Funds”). All of the Equity Funds are diversified funds, except Long Short Fund and Real Estate Fund which are non-diversified funds. The Trusts account separately for the assets, liabilities and operations of each Fund. The objective of each Fund as of September 30, 2017, is as follows:
Balanced Income Fund seeks income as its primary objective and has a secondary objective of capital appreciation.
Floating Rate Fund seeks a high level of current income.
Fund For Income seeks high current income.
Government Fund seeks to achieve a significant level of current income which is consistent with security and liquidity of principal.
Government Cash Management Fund seeks to earn a high rate of current income consistent with the preservation of capital and maintenance of liquidity.
International Opportunities Bond Fund seeks total return consisting of income and capital appreciation.
Investment Grade Fund seeks to generate a maximum level of income consistent with investment in investment grade debt securities.
| 317 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
Limited Duration High Quality Bond Fund seeks current income consistent with low volatility of principal.
Strategic Income Fund seeks a high level of current income.
Covered Call Strategy Fund seeks long-term capital appreciation.
Equity Income Fund seeks total return.
Global Fund seeks long-term capital growth.
Growth & Income Fund seeks long-term growth of capital and current income.
Hedged U.S. Equity Opportunities Fund seeks total return and, secondarily, capital appreciation.
International Fund primarily seeks long-term capital growth.
Long Short Fund seeks capital appreciation.
Opportunity Fund seeks long-term capital growth.
Real Estate Fund seeks total return.
Select Growth Fund seeks long-term growth of capital.
Special Situations Fund seeks long-term growth of capital.
Total Return Fund seeks high, long-term total investment return consistent with moderate investment risk.
A. Security Valuation—Except as provided below, a security listed or traded on an exchange or the Nasdaq Stock Market is valued at its last sale price on the exchange or market where the security is principally traded, and lacking any sales, the security is valued at the mean between the closing bid and asked prices. Securities traded in the over-the-counter (“OTC”) market (including securities listed on exchanges whose primary market is believed to be OTC) are valued at the mean between the last bid and asked prices based on quotes furnished by a market maker for such securities or an authorized pricing service. Fixed income securities, other than short-term debt securities held by the Government Cash Management Fund, are priced based upon evaluated prices that are provided by a pricing service approved by the Trusts’ Board of Trustees (the “Board”). Other securities may also be priced based upon valuations that are provided by pricing services approved by the Board. The pricing services consider security type, rating, market condition and yield data as well as market quotations, prices provided by market makers and other available information in determining evaluated prices. The
| 318 |
net asset value of the Strategic Income Fund is derived from the net asset values of the underlying Funds in which it invests.
The Funds monitor for significant events occurring prior to the close of trading on the New York Stock Exchange that could have a material impact on the value of any securities that are held by the Funds. Examples of such events include trading halts, natural disasters, political events and issuer-specific developments. If the Valuation Committee of Foresters Investment Management Company, Inc. (“FIMCO”) decides that such events warrant using fair value estimates, it will take such events into consideration in determining the fair values of such securities. If market quotations or prices are not readily available or are deemed to be unreliable, the securities may be valued at fair value as determined in good faith pursuant to procedures adopted by the Board. The Funds also use evaluated prices from a pricing service to fair value foreign equity securities in the event that fluctuation in U.S. securities markets exceed a predetermined level or if a foreign market is closed. For valuation purposes, where applicable, quotations of foreign securities in foreign currencies are translated to U.S. dollar equivalents using the foreign exchange quotation in effect. At September 30, 2017, the Fund For Income held two securities that were fair valued at an aggregate value of $2,950,000 representing .4% of the Fund’s net assets.
The Government Cash Management Fund values its portfolio securities in accordance with the amortized cost method of valuation under Rule 2a-7 of the 1940 Act. Amortized cost is an approximation of market value of an instrument, whereby the difference between its acquisition cost and market value at maturity is amortized on a straight-line basis over the remaining life of the instrument. The effect of changes in the market value of a security as a result of fluctuating interest rates is not taken into account and thus the amortized cost method of valuation may result in the value of a security being higher or lower than its actual market value.
In accordance with Accounting Standards Codification 820 “Fair Value Measurements and Disclosures” (“ASC 820”), investments held by the Funds are carried at “fair value”. As defined by ASC 820, fair value is the price that a fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment under current market conditions. Various inputs are used in determining the value of the fund’s investments.
In addition to defining fair value, ASC 820 established a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below:
Level 1—Unadjusted quoted prices in active markets for identical securities that the Fund has the ability to access.
| 319 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
Level 2—Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3—Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
Equity securities traded on an exchange or the Nasdaq Stock Market are categorized in Level 1 of the fair value hierarchy to the extent that they are actively traded and valuation adjustments are not applied. The underlying Funds in which Strategic Income Fund invests are also categorized in Level 1. Foreign securities that are fair valued in the event that fluctuations in U.S. securities markets exceed a predetermined level or if a foreign market is closed are categorized in Level 2. Variable and floating rate, corporate, sovereign and municipal bonds, asset backed, U.S. Government and U.S. Government Agency securities, pass-through certificates and loan participations are categorized in Level 2 to the extent that the inputs are observable and timely, otherwise they would be categorized in Level 3. Short-term notes that are valued at amortized cost by the Government Cash Management Fund are categorized in Level 2. Foreign exchange contracts that are considered derivative instruments and are valued at the net unrealized appreciation or depreciation on the instruments are categorized in Level 2. Securities that are fair valued by the Valuation Committee may be categorized in either Level 2 or Level 3 of the fair value hierarchy depending on the relative significance of the unobservable valuation inputs.
The aggregate value by input level, as of September 30, 2017, for each Fund’s investments is included following each Fund’s portfolio of investments.
B. Federal Income Taxes—No provision has been made for federal income taxes on net income or capital gains since it is the policy of each Fund to continue to comply with the special provisions of the Internal Revenue Code applicable to investment companies, and to make sufficient distributions of income and capital gains (in excess of any available capital loss carryovers) to relieve it from all, or substantially all, such taxes. At September 30, 2017, capital loss carryovers were as follows:
| 320 |
| Capital Loss Carryovers | ||||||||||
| Year Capital Loss | Not Subject | |||||||||
| Carryforwards Expire | to Expiration | |||||||||
| Long | Short | |||||||||
| Fund | Total | 2018 | 2019 | Term | Term | |||||
| Floating Rate | $ 3,919,125 | $ — | $ — | $ 3,201,056 | $ 718,069 | |||||
| Fund For Income | 149,609,253 | 110,622,886 | — | 34,750,808 | 4,235,559 | |||||
| Government | 18,571,459 | — | 40,595 | — | 18,530,864 | |||||
| International Opportunities Bond | 4,401,046 | — | — | 6,764 | 4,394,282 | |||||
| Investment Grade | 4,244,754 | — | — | 4,244,754 | — | |||||
| Limited Duration High Quality Bond | 2,169,228 | — | — | 1,213,489 | 955,739 | |||||
| Strategic Income | 2,225,804 | — | — | 2,167,668 | 58,136 | |||||
| Hedged U.S. Equity Opportunities | 1,874,861 | — | — | 1,769,414 | 105,447 | |||||
| International | 13,051,390 | 10,860,148 | 2,191,242 | — | — | |||||
| Long Short | 1,404,177 | — | — | — | 1,404,177 | |||||
During the year ended September 30, 2017, the following Funds had utilized/expired capital loss carryovers of:
| Fund | Utilized | Expired | |||||
| Floating Rate | $ 61,094 | $ — | |||||
| Fund For Income | 725,932 | 23,949,720 | |||||
| International Opportunities Bond | 262,423 | — | |||||
| Investment Grade | — | 2,299,840 | |||||
| Covered Call Strategy | 224,724 | — | |||||
| Global | 2,232,649 | — | |||||
| International | 16,358,735 | — | |||||
As a result of the passage of the Regulated Investment Company Modernization Act of 2010 (“the Modernization Act of 2010”), losses incurred in fiscal year 2010 and beyond retain their character as short-term or long-term, have no expiration date and are utilized prior to capital loss carryovers occurring prior to the enactment of the Modernization Act of 2010.
The Funds recognize the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Funds’ tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2014–2016, or expected to be taken in the Funds’ 2017 tax returns. The Funds identify their major tax jurisdictions as U.S. Federal, New York State, New York City and foreign jurisdictions where the Funds make
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Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
significant investments; however, the Funds are not aware of any tax position for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
C. Distributions to Shareholders—Dividends from net investment income of Balanced Income Fund, Floating Rate Fund, Fund For Income, Government Fund, Investment Grade Fund, Limited Duration High Quality Bond Fund, and Strategic Income Fund are generally declared daily and paid monthly. The Government Cash Management Fund declares distributions, if any, daily and pays distributions monthly, from the total of net investment income plus or minus all realized short-term gains and losses on investments. Prior to March 31, 2016, dividends from net investment income of International Opportunities Bond Fund were generally declared daily and paid monthly. Effective April 1, 2016, dividends from net investment income, if any, of International Opportunities Bond Fund are declared and paid quarterly. Dividends from net investment income, if any, of Covered Call Strategy Fund, Equity Income Fund, Growth & Income Fund, Real Estate Fund and Total Return Fund are declared and paid quarterly. Dividends from net investment income, if any, of Global Fund, Hedged U.S. Equity Opportunities Fund, International Fund, Long Short Fund, Opportunity Fund, Select Growth Fund and Special Situations Fund are declared and paid annually. Distributions from net realized capital gains, if any, of each of the Funds are normally declared and paid annually. Income dividends and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for capital loss carryforwards, deferral of wash sales losses, post-October capital losses, late loss deferrals, net operating losses and foreign currency transactions.
D. Expense Allocation—Expenses directly charged or attributable to a Fund are paid from the assets of that Fund. General expenses of the Trusts are allocated among and charged to the assets of each Fund on a fair and equitable basis, which may be based on the relative assets of each Fund or the nature of the services performed and relative applicability to each Fund.
E. Use of Estimates—The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.
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F. Foreign Currency Translations—The accounting records of all of the Funds are maintained in U.S. dollars, including those Funds that invest in foreign securities. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated to U.S. dollars at the date of valuation. Purchases and sales of foreign investment securities, dividend income and certain expenses are translated to U.S. dollars at the rates of exchange prevailing on the respective dates of such transactions.
International Opportunities Bond Fund, Global Fund, Hedged U.S. Equity Opportunities Fund and International Fund do not isolate that portion of gains and losses on foreign investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. These changes are included with the net realized and unrealized gains and losses from investments.
Net realized and unrealized gains and losses on foreign currency transactions include gains and losses from the sales of foreign currency and gains and losses on accrued foreign dividends and related withholding taxes.
G. Other—Security transactions are generally accounted for on the first business day following the date the securities are purchased or sold, except for financial reporting purposes, which is trade date. Investments in securities issued on a when-issued or delayed delivery basis are generally reflected in the assets of the Funds on the first business day following the date the securities are purchased and the Funds segregate assets for these transactions. Cost of securities is determined and gains and losses are based on the identified cost basis for both financial statement and federal income tax purposes. Dividend income is recorded on the ex-dividend date or for certain foreign dividends, as soon as the Fund becomes aware of the dividends. Interest income and estimated expenses are accrued daily. Bond discounts and premiums are accreted or amortized using the interest method. Withholding taxes on foreign dividends have been provided in accordance with the Funds’ understanding of the applicable country’s tax rules and rates. The Bank of New York Mellon serves as custodian for the Funds and may provide credits against custodian charges based on uninvested cash balance of the Funds. For the year ended September 30, 2017, the Income Funds and Equity Funds received credits in the amount of $51,084 and $65,043, respectively. Certain of the Income and Equity Funds reduced expenses through brokerage service arrangements. For the year ended September 30, 2017, expenses were reduced by a total of $253 for certain of the Income Funds and $34,048 for certain of the Equity Funds under these arrangements.
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Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
2. Security Transactions—For the year ended September 30, 2017, purchases and sales of securities and long-term U.S. Government obligations (excluding U.S. Treasury bills, short-term securities and foreign currencies) were as follows:
| Long-Term U.S. | ||||||||
| Securities | Government Obligations | |||||||
| Cost of | Proceeds | Cost of | Proceeds | |||||
| Fund | Purchases | of Sales | Purchases | of Sales | ||||
| Balanced Income | $ 28,884,599 | $ 16,608,795 | $ 2,904,182 | $ 2,203,821 | ||||
| Floating Rate | 190,535,721 | 137,188,129 | — | — | ||||
| Fund For Income | 473,255,340 | 448,273,101 | — | — | ||||
| Government | 129,394,031 | 156,004,052 | 48,560,329 | 79,254,225 | ||||
| International Opportunities | ||||||||
| Bond | 55,373,329 | 40,033,782 | 47,476,406 | 50,866,018 | ||||
| Investment Grade | 352,403,069 | 310,294,603 | — | — | ||||
| Limited Duration | ||||||||
| High Quality Bond | 93,339,103 | 75,205,176 | 1,707,324 | — | ||||
| Strategic Income | 73,118,198 | 55,011,006 | — | — | ||||
| Covered Call Strategy | 414,163,535 | 236,642,175 | — | — | ||||
| Equity Income | 90,403,578 | 107,945,732 | — | — | ||||
| Global | 622,245,249 | 653,173,289 | — | — | ||||
| Growth & Income | 276,901,374 | 388,306,358 | — | — | ||||
| Hedged U.S. Equity | ||||||||
| Opportunities | 76,826,631 | 44,605,065 | — | — | ||||
| International | 120,537,327 | 114,977,871 | — | — | ||||
| Long Short | 64,431,668 | 21,842,775 | — | — | ||||
| Opportunity | 311,476,552 | 336,396,644 | — | — | ||||
| Real Estate | 58,889,736 | 16,626,138 | — | — | ||||
| Select Growth | 273,649,487 | 290,408,936 | — | — | ||||
| Special Situations | 202,868,581 | 161,814,033 | — | — | ||||
| Total Return | 282,136,580 | 335,790,533 | 37,240,311 | 37,782,570 | ||||
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At September 30, 2017, aggregate cost and net unrealized appreciation (depreciation) of securities for federal income tax purposes were as follows:
| Gross | Gross | Net Unrealized | ||||||
| Aggregate | Unrealized | Unrealized | Appreciation | |||||
| Fund | Cost | Appreciation | Depreciation | (Depreciation) | ||||
| Balanced Income | $ 43,523,240 | $ 2,659,821 | $ 692,835 | $ 1,966,986 | ||||
| Floating Rate | 197,535,004 | 1,469,234 | 417,860 | 1,051,374 | ||||
| Fund For Income | 712,202,556 | 24,726,955 | 4,101,274 | 20,625,681 | ||||
| Government | 260,921,313 | 2,022,257 | 3,234,281 | (1,212,024) | ||||
| International Opportunities | ||||||||
| Bond | 138,328,410 | 3,336,790 | 10,762,342 | (7,425,552) | ||||
| Investment Grade | 611,216,157 | 13,841,314 | 8,730,606 | 5,110,708 | ||||
| Limited Duration | ||||||||
| High Quality Bond | 137,272,832 | 279,145 | 2,509,783 | (2,230,638) | ||||
| Strategic Income | 165,256,208 | 456,153 | 3,178,343 | (2,722,190) | ||||
| Covered Call Strategy | 268,785,117 | 25,066,115 | 5,510,155 | 19,555,960 | ||||
| Equity Income | 430,576,632 | 214,564,375 | 7,854,245 | 206,710,130 | ||||
| Global | 492,952,732 | 89,838,289 | 8,447,683 | 81,390,606 | ||||
| Growth & Income | 1,125,735,917 | 769,531,860 | 29,869,605 | 739,662,255 | ||||
| Hedged U.S. Equity | ||||||||
| Opportunities | 65,931,930 | 8,890,950 | 1,671,669 | 7,219,281 | ||||
| International | 253,579,391 | 100,646,905 | 1,622,228 | 99,024,677 | ||||
| Long Short | 12,471,080 | 4,387,553 | 2,004,085 | 2,383,468 | ||||
| Opportunity | 743,056,003 | 370,398,785 | 18,489,749 | 351,909,036 | ||||
| Real Estate | 119,380,146 | 5,494,872 | 10,011,967 | (4,517,095) | ||||
| Select Growth | 420,879,271 | 115,184,144 | 2,891,006 | 112,293,138 | ||||
| Special Situations | 496,605,490 | 200,935,473 | 14,620,564 | 186,314,909 | ||||
| Total Return | 711,149,906 | 217,937,631 | 13,323,293 | 204,614,338 | ||||
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Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
The Strategic Income Fund may invest in Institutional Class shares of the Floating Rate Fund, Fund For Income, Government Fund, Government Cash Management Fund, International Opportunities Bond Fund, Investment Grade Fund, Limited Duration High Quality Bond Fund, Covered Call Strategy Fund, Equity Income Fund, Real Estate Fund, Tax Exempt Income Fund and Tax Exempt Opportunities Fund. During the year ended September 30, 2017, purchases and sales of shares, dividends, capital gain distributions received and realized gains (losses) recognized by Strategic Income Fund from investments in these Funds were as follows:
| Balance | Balance | Realized | ||||||||||||||
| of Shares | of Shares | Gain (Loss) | ||||||||||||||
| Held | Purchases/ | Sales/ | Held | Value | Dividend | Capital Gain | on Security | |||||||||
| Fund | 9/30/2016 | Additions | Reductions | 9/30/2017 | 9/30/2017 | Income | Distributions | Transactions | ||||||||
| Floating Rate | 1,158,454 | 1,371,382 | (413,006) | 2,116,830 | $ 20,469,742 | $ 671,361 | $ — | $ 17,739 | ||||||||
| Fund For Income | 23,873,743 | 3,489,235 | (3,110,787) | 24,252,191 | 61,600,564 | 3,121,698 | — | 118,162 | ||||||||
| Government | 683,229 | 1,463,836 | (2,147,065) | — | — | 97,982 | — | (36,159) | ||||||||
| International | ||||||||||||||||
| Opportunities Bond | 829,735 | 506,035 | (497,584) | 838,186 | 8,038,209 | 158,166 | — | (483,137) | ||||||||
| Investment Grade | 2,983,095 | 255,171 | (724,695) | 2,513,571 | 24,331,372 | 1,097,333 | — | 32,219 | ||||||||
| Limited Duration | ||||||||||||||||
| High Quality Bond | 2,280,447 | 2,037,743 | (25,917) | 4,292,273 | 40,862,439 | 663,291 | — | 1,037 | ||||||||
| Covered Call Strategy | 363,379 | 90,225 | (7,536) | 446,068 | 4,982,580 | 72,217 | 6,216 | 7,913 | ||||||||
| Equity Income | — | 464,670 | (464,670) | — | — | 26,314 | 71,067 | 335,367 | ||||||||
| Tax Exempt Income | — | 405,515 | (405,515) | — | — | 40,147 | — | (16,016) | ||||||||
| 32,172,082 | 10,083,812 | (7,796,775) | 34,459,119 | $160,284,906 | $5,948,509 | $77,283 | $(22,875) |
The Strategic Income Fund operates as a fund of funds — also referred to as a multi-manager investment — an investment strategy in which a fund invests in other types of funds. This strategy invests in a portfolio that contains different underlying assets instead of investing directly in bonds, stocks and other types of securities.
The financial statements of each of the Funds in which Strategic Income had investments during the period September 30, 2017 are included in this report except Tax Exempt Income Fund, whose most recent financial statements as of June 30, 2017 are available and can be viewed by visiting our website www.foresters.com, by calling 1-800-423-4026 or by writing to us at the following address: Foresters Financial Services, Inc., 40 Wall Street, New York, NY 10005.
3. Advisory Fee and Other Transactions With Affiliates—Certain officers of the Trusts are officers of the Trusts’ investment adviser, FIMCO, their underwriter, Foresters Financial Services, Inc. (“FFS”) and their transfer agent, Foresters Investor Services, Inc. (“FIS”). Trustees of the Trusts who are not officers or directors of FIMCO or its affiliates are remunerated by the Funds. For the year ended September 30, 2017, total
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trustees fees accrued by the Income Funds and Equity Funds amounted to $132,757 and $374,938, respectively.
The Investment Advisory Agreements provide as compensation to FIMCO for each Fund, an annual fee, payable monthly, at the following rates:
Balanced Income Fund—.70% on the first $300 million of the Fund’s average daily net assets, .65% on the next $200 million, .60% on the next $500 million, .55% on the next $1 billion, declining by .05% on each $1 billion thereafter down to .45% on average daily net assets over $3 billion. For the year ended September 30, 2017, FIMCO has waived, pursuant to an expense limitation agreement, $131,907 in advisory fees and assumed $28,921 in other expenses to limit the Fund’s overall expense ratio (exclusive of certain expenses) to 1.15% on Class A shares, .82% on Advisor Class shares and .69% on Institutional Class shares.
Floating Rate Fund—.60% on the first $250 million of the Fund’s average daily net assets, .55% on the next $250 million, .50% on the next $500 million, .45% on the next $1 billion and .40% on average daily net assets over $2 billion. For the year ended September 30, 2017, FIMCO has waived, pursuant to an expense limitation agreement, $35,212 in advisory fees and assumed $96,215 in other expenses to limit the Fund’s overall expense ratio (exclusive of certain expenses) to 1.10% on Class A shares, .90% on Advisor Class shares and .70% on Institutional Class shares.
Fund For Income and International Opportunities Bond Fund—.75% on the first $250 million of each Fund’s average daily net assets, .72% on the next $250 million, .69% on the next $250 million, .66% on the next $500 million, declining by .02% on each $500 million thereafter, down to .60% on average daily net assets over $2.25 billion. For the year ended September 30, 2017, FIMCO has voluntarily waived $160,365 in advisory fees on Fund For Income to limit the advisory fee to .70% of its average daily net assets.
Government, Investment Grade, and Limited Duration High Quality Bond—.66% on the first $500 million of each Fund’s average daily net assets, declining by .02% on each $500 million thereafter, down to .60% on average daily net assets over $1.5 billion. For the periods October 1, 2016 through May 31, 2017 and June 1, 2017 through September 30, 2017, FIMCO has voluntarily waived $378,142 in advisory fees on Government Fund to limit the advisory fee to .55% and .50%, respectively, of its average daily net assets. For the year ended September 30, 2017, FIMCO has voluntarily waived $640,864 in advisory fees on Investment Grade Fund to limit the advisory fee to .55% of its average daily net assets. For the year ended September 30, 2017, FIMCO has waived, pursuant to an expense limitation agreement, $212,614 in advisory fees and assumed $62,092 in other expenses to limit the Limited Duration High Quality
| 327 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
Bond Fund’s overall expense ratio (exclusive of certain expenses) to 1.05% on Class A shares, .75% on Advisor Class shares and .60% on Institutional Class shares.
Government Cash Management Fund— .50% of the Fund’s average daily net assets. For the year ended September 30, 2017, FIMCO has voluntarily waived $499,136 in advisory fees and assumed $1,627 of other Fund expenses to prevent a negative yield on the Fund’s shares.
Strategic Income Fund—.05% of the Fund’s average daily net assets.
Covered Call Strategy Fund—.80% on the first $300 million of each Fund’s average daily net assets, .75% on the next $200 million, .70% on the next $500 million, declining by .05% on each $1 billion thereafter, down to .55% on average daily net assets of $3 billion. For the year ended September 30, 2017, FIMCO has waived, pursuant to an expense limitation agreement $103,001 in advisory fees and assumed $34,941 in other expenses to limit the Covered Call Strategy Fund’s overall expense ratio (exclusive of certain expenses) to 1.30% on Class A shares, .97% on Advisor Class shares and .84% on Institutional Class shares.
Equity Income, Growth & Income, Opportunity, Real Estate and Select Growth Funds—.75% on the first $300 million of each Fund’s average daily net assets, .72% on the next $200 million, .69% on the next $250 million, .66% on the next $500 million, declining by .02% on each $500 million thereafter, down to .60% on average daily net assets over $2.25 billion.
Global Fund—.95% on the first $600 million, .92% on the next $400 million, .90% on the next $500 million and .88% on average daily net assets over $1.5 billion. For the year ended September 30, 2017, FIMCO has voluntarily waived $272,261 in advisory fees to limit the advisory fee to .90% of the Fund’s average daily net assets.
Hedged U.S. Equity Opportunities Fund—1.15% on the first $100 million of each Fund’s average daily net assets, 1.10% on the next $400 million, 1.05% on the next $500 million, declining by .05% on each $1 billion thereafter, down to .90% on average daily net assets of $3 billion. For the year ended September 30, 2017, FIMCO has waived, pursuant to an expense limitation agreement, $211,271 in advisory fees and assumed $3,560 in other expenses to limit the Hedged U.S. Equity Opportunities Fund’s overall expense ratio (exclusive of certain expenses) to 1.75% on Class A shares, 1.42% on Advisor Class shares and 1.31% on Institutional Class shares.
International Fund—.98% on the first $300 million of the Fund’s average daily net assets, .95% on the next $300 million, .92% on the next $400 million, .90% on the next $500 million and .88% on average daily net assets over $1.5 billion.
| 328 |
Long Short Fund—1.40% of the Fund’s average daily net assets. For the period December 1, 2016 to September 30, 2017, FIMCO has waived, pursuant to an expense limitation agreement $152,972 in advisory fees and assumed $6,392 in other expenses to limit the Long Short Fund’s overall expense ratio (exclusive of certain expenses) to 1.95% on Class A shares, 1.67% on Advisor Class shares and 1.54% on Institutional Class shares.
Special Situations Fund—.90% on the first $200 million of the Fund’s average daily net assets, .75% on the next $300 million, .72% on the next $250 million, .69% on the next $250 million, .66% on the next $500 million and .64% on average daily net assets over $1.5 billion.
Total Return Fund—.75% on the first $300 million of the Fund’s average daily net assets, .70% on the next $200 million, .65% on the next $500 million, .60% on the next $1 billion, .55% on the next $1 billion, down to .50% on average daily net assets over $3 billion.
For the year ended September 30, 2017, total advisory fees accrued to FIMCO by the Income Funds and Equity Funds were $14,757,567 and $50,077,647, respectively, of which $2,058,240 and $739,505, respectively, was waived by FIMCO as noted above.
FIMCO has entered into an expense limitation agreement with the Balanced Income Fund (“BIF”) to limit BIF’s total annual fund operating expenses (exclusive of interest expenses, taxes, brokerage commissions, acquired fund fees and expenses, dividend costs related to short sales, and extraordinary expenses, such as litigation expenses, if any) to 1.15% of the average daily net assets on Class A shares, .82% of the average daily net assets on Advisor Class shares and .69% of the average daily net assets on Institutional Class shares. The agreement expires on January 31, 2018. For the year ended September 30, 2017, FIMCO assumed $160,828 under terms of the agreement. FIMCO and BIF have agreed that any expenses of BIF assumed by FIMCO pursuant to this agreement be repaid to FIMCO by BIF within three years after the date the fee limitation and/or expense reimbursement has been made by FIMCO, provided that such repayment does not cause the expenses of BIF’s Class A shares, Advisor Class shares and Institutional Class shares to exceed the applicable expense ratio in place at the time the expenses are waived or assumed or the current limits established under the expense limitation agreement. For the period October 1, 2015 (commencement of operations) through September 30, 2017, FIMCO assumed $337,396 under the terms of the agreement of which $176,568 expires on September 30, 2019 and $160,828 expires on September 30, 2020. The expense limitation agreement may be terminated or amended prior to January 31, 2018, with the approval of the Board.
| 329 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
FIMCO has entered into an expense limitation agreement with the Floating Rate Fund (“FRF”) to limit FRF’s total annual fund operating expenses (exclusive of interest expenses, taxes, brokerage commissions, acquired fund fees and expenses, dividend costs related to short sales, and extraordinary expenses, such as litigation expenses, if any) to 1.10% of the average daily net assets on Class A shares, .90% of the average daily net assets on Advisor Class shares and .70% of the average daily net assets on Institutional Class shares. The agreement expires on January 31, 2018. For the year ended September 30, 2017, FIMCO assumed $131,427, under the terms of the agreement. FIMCO and FRF have agreed that any expenses of FRF assumed by FIMCO pursuant to this agreement be repaid to FIMCO by FRF within three years after the date the fee limitation and/or expense reimbursement has been made by FIMCO, provided that such repayment does not cause the expenses of FRF’s Class A shares, Advisor Class shares and Institutional Class shares to exceed the applicable expense ratio in place at the time the expenses are waived or assumed or the current limits established under the expense limitation agreement. For the period October 21, 2013 (commencement of operations) through September 30, 2017, FIMCO assumed $715,005 under the terms of the agreement of which $223,534 expired on September 30, 2017, $198,431 expires on September 30, 2018, $161,613 expires on September 30, 2019 and $131,427 expires on September 30, 2020. The expense limitation agreement may be terminated or amended prior to January 31, 2018, with the approval of the Board.
FIMCO had entered into an expense limitation agreement with the International Opportunities Bond Fund (“IOBF”) to limit IOBF’s total annual fund operating expenses (exclusive of interest expenses, taxes, brokerage commissions, acquired fund fees and expenses, dividend costs related to short sales, and extraordinary expenses, such as litigation expenses, if any) to 1.30% of the average daily net assets on Class A shares. The agreement expired on January 31, 2016. FIMCO and IOBF have agreed that any expenses of IOBF assumed by FIMCO pursuant to this agreement be repaid to FIMCO by IOBF within three years after the date the fee limitation and/or expense reimbursement has been made by FIMCO, provided that such repayment does not cause the expenses of IOBF’s Class A shares to exceed the applicable expense ratio in place at the time the expenses are waived or assumed or the current limits established under the expense limitation agreement. For the period August 20, 2012 (commencement of operations) to January 31, 2016 (expiration of the expense limitation agreement), FIMCO assumed $684,479 under the terms of the agreement of which $278,248 expired on September 30, 2015, $228,243 expired on September 30, 2016, $94,746 expired on September 30, 2017, $62,359 expires on September 30, 2018, and $20,883 expires on September 30, 2019.
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FIMCO has entered into an expense limitation agreement with the Limited Duration High Quality Bond Fund (“LDHQ”) to limit LDHQ’s total annual fund operating expenses (exclusive of interest expenses, taxes, brokerage commissions, acquired fund fees and expenses, dividend costs related to short sales, and extraordinary expenses, such as litigation expenses, if any) to 1.05% of the average daily net assets on Class A shares, .75% of the average daily net assets on Advisor Class shares and .60% of the average daily net assets on Institutional Class shares. The agreement expires on January 31, 2018. For the year ended September 30, 2017, FIMCO assumed $274,706, under the terms of the agreement. FIMCO and LDHQ have agreed that any expenses of LDHQ assumed by FIMCO pursuant to this agreement be repaid to FIMCO by LDHQ within three years after the date the fee limitation and/or expense reimbursement has been made by FIMCO, provided that such repayment does not cause the expenses of LDHQ’s Class A shares, Advisor Class shares and Institutional Class shares to exceed the applicable expense ratio in place at the time the expenses are waived or assumed or the current limits established under the expense limitation agreement. For the period May 19, 2014 (commencement of operations) to September 30, 2017, FIMCO assumed $821,270 under the terms of the agreement of which $143,148 expired on September 30, 2017, $179,140 expires on September 30, 2018, $224,276 expires on September 30, 2019 and $274,706 expires on September 30, 2020. The expense limitation agreement may be terminated or amended prior to January 31, 2018, with the approval of the Board.
FIMCO has entered into an expense limitation agreement with the Covered Call Strategy Fund (“CCS”) to limit CCS’s total annual fund operating expenses (exclusive of interest expenses, taxes, brokerage commissions, acquired fund fees and expenses, dividend costs related to short sales, and extraordinary expenses, such as litigation expenses, if any) to 1.30% of the average daily net assets on Class A shares, .97% of the average daily net assets on Advisor Class shares and .84% of the average daily net assets on Institutional Class shares. The agreement expires on January 31, 2018. For the year ended September 30, 2017, FIMCO assumed $137,941 under the terms of the agreement. FIMCO and CCS have agreed that any expenses of CCS assumed by FIMCO pursuant to this agreement be repaid to FIMCO by CCS within three years after the date the fee limitation and/or expense reimbursement has been made by FIMCO, provided that such repayment does not cause the expenses of CCS’s Class A shares, Advisor Class shares and Institutional Class shares to exceed the applicable expense ratio in place at the time the expenses are waived or assumed or the current limits established under the expense limitation agreement. For the period April 1, 2016 (commencement of operations) through September 30, 2017, FIMCO assumed $268,443 under the terms of the agreement of which $130,501 expires on September 30, 2019 and $137,942
| 331 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
expires on September 30, 2020. The expense limitation agreement may be terminated or amended prior to January 31, 2018, with the approval of the Board.
FIMCO has entered into an expense limitation agreement with the Hedged U.S. Equity Opportunities Fund (“HUSEO”) to limit HUSEO’s total annual fund operating expenses (exclusive of interest expenses, taxes, brokerage commissions, acquired fund fees and expenses, dividend costs related to short sales, and extraordinary expenses, such as litigation expenses, if any) to 1.75% of the average daily net assets on Class A shares, 1.42% of the average daily net assets on Advisor Class shares and 1.31% of the average daily net assets on Institutional Class shares. The agreement expires on January 31, 2018. For the year ended September 30, 2017, FIMCO assumed $214,831 under terms of the agreement. FIMCO and HUSEO have agreed that any expenses of HUSEO assumed by FIMCO pursuant to this agreement be repaid to FIMCO by HUSEO within three years after the date the fee limitation and/or expense reimbursement has been made by FIMCO, provided that such repayment does not cause the expenses of HUSEO’s Class A shares, Advisor Class shares and Institutional Class shares to exceed the applicable expense ratio in place at the time the expenses are waived or assumed or the current limits established under the expense limitation agreement. For the period August 1, 2016 (commencement of operations) through September 30, 2017, FIMCO assumed $274,086 under the terms of the agreement of which $59,255 expires on September 30, 2019 and $214,831 expires on September 30, 2020. The expense limitation agreement may be terminated or amended prior to January 31, 2018, with the approval of the Board.
FIMCO has entered into an expense limitation agreement with the Long Short Fund (“LSF”) to limit LSF’s total annual fund operating expenses (exclusive of interest expenses, taxes, brokerage commissions, acquired fund fees and expenses, dividend costs related to short sales, including dividend and borrowing expenses, and extraordinary expenses, such as litigation expenses, if any) to 1.95% of the average daily net assets on Class A shares, 1.67% of the average daily net assets on Advisor Class shares and 1.54% of the average daily net assets on Institutional Class shares. The agreement expires on January 31, 2018. For the year ended September 30, 2017, FIMCO assumed $159,364 under the terms of the agreement. FIMCO and LSF have agreed that any expenses of LSF assumed by FIMCO pursuant to this agreement be repaid to FIMCO by LSF within three years after the date the fee limitation and/or expense reimbursement has been made by FIMCO, provided that such repayment does not cause the expenses of LSF’s Class A shares, Advisor Class shares and Institutional Class shares to exceed the applicable expense ratio in place at the time the expenses are waived or assumed or the current limits established under the expense limitation agreement. For the period December 1, 2016 (commencement of operations) through September 30,
| 332 |
2017, FIMCO assumed $159,364 under the terms of the agreement of which $159,364 expires on September 30, 2020. The expense limitation agreement may be terminated or amended prior to January 31, 2018, with the approval of the Board.
FIMCO has entered into an expense limitation agreement with the Real Estate Fund (“REIT”) to limit REIT’s total annual fund operating expenses (exclusive of interest expenses, taxes, brokerage commissions, acquired fund fees and expenses, dividend costs related to short sales, and extraordinary expenses, such as litigation expenses, if any) to 1.45% of the average daily net assets on the Class A shares, 1.12% of the average daily net assets on Advisor Class shares and 1.00% of the average daily net assets on Institutional Class shares. The agreement expires on January 31, 2018. For the year ended September 30, 2017, REIT repaid FIMCO $28,712, under the terms of the agreement. FIMCO and REIT have agreed that any expenses of REIT assumed by FIMCO pursuant to this agreement be repaid to FIMCO by REIT within three years after the date the fee limitation and/or expense reimbursement has been made by FIMCO, provided that such repayment does not cause the expenses of REIT’s Class A shares, Advisor Class shares and Institutional Class shares to exceed the applicable expense ratio in place at the time the expenses are waived or assumed or the current limits established under the expense limitation agreement. For the period April 6, 2015 (commencement of operations) through September 30, 2017, FIMCO assumed $138,595 under the terms of the agreement of which $77,565 expires on September 30, 2018 and $61,030 expires on September 30, 2019. The expense limitation agreement may be terminated or amended prior to January 31, 2018, with the approval of the Board.
For the year ended September 30, 2017, FFS, as underwriter, received from the Income Funds and Equity Funds $5,571,812 and $21,965,105, respectively, in commissions in connection with the sale of shares of the Funds, after allowing $62,800 and $332,389, respectively, to other dealers. For the year ended September 30, 2017, shareholder servicing costs for the Income Funds and Equity Funds included $3,263,266 and $8,560,781, respectively, in transfer agent fees accrued to FIS, of which FIS voluntarily waived $44,613 on the Government Cash Management Fund.
Pursuant to Distribution Plans adopted under Rule 12b-1 of the 1940 Act, each Fund, other than the Government Cash Management Fund, is authorized to pay FFS a fee up to .30% (and for certain Funds, up to .25%) of the average daily net assets of the Class A shares and 1% of the average daily net assets of the Class B shares on an annualized basis each fiscal year, payable monthly. The Government Cash Management Fund is authorized to pay FFS a fee up to 1% of the average daily net assets of the Class B shares. The fee consists of a distribution fee and a service fee. The service fee is paid for the ongoing servicing of clients who are shareholders of that Fund. For the
| 333 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
period ended September 30, 2017, total distribution plan fees accrued to FFS by the Income Funds and Equity Funds amounted to $5,025,916 and $17,237,693, respectively.
Brandywine Global Investment Management, LLC, serves as investment subadviser to International Opportunities Bond Fund. Muzinich & Co., Inc., serves as investment subadviser to Floating Rate Fund and Fund For Income. Ziegler Capital Management, LLC serves as investment subadviser to Covered Call Strategy Fund. Wellington Management Company, LLP serves as investment subadviser to Global Fund and Hedged U.S. Equity Opportunities Fund. Vontobel Asset Management, Inc. serves as investment subadviser to International Fund. Effective December 1, 2016 (commencement of operations), Lazard Asset Management, LLC serves as investment subadviser to Long Short Fund. Smith Asset Management Group, L.P. serves as investment subadviser to Select Growth Fund. The subadvisers are paid by FIMCO and not by the Funds.
4. Restricted Securities—Certain restricted securities are exempt from the registration requirements under Rule 144A of the Securities Act of 1933 and may only be sold to qualified institutional investors. Unless otherwise noted, these 144A securities are deemed to be liquid. At September 30, 2017, the Balanced Income Fund held 2 144A securities with an aggregate value of $616,615 representing 1.3% of the Fund’s net assets, Floating Rate Fund held eleven 144A securities with an aggregate value of $4,380,937 representing 2.3% of the Fund’s net assets, Fund For Income held one hundred ninety-five 144A securities with an aggregate value of $352,750,388 representing 48.5% of the Fund’s net assets, Government Fund held two 144A securities with an aggregate value of $10,478,111 representing 3.9% of the Fund’s net assets, International Opportunities Bond Fund held eight 144A securities with an aggregate value of $15,795,306 representing 11.6% of the Fund’s net assets, Investment Grade Fund held fifteen 144A securities with an aggregate value of $63,599,991 representing 10.1% of the Fund’s net assets, Limited Duration High Quality Bond Fund held twenty-one 144A securities with an aggregate value of $26,608,415 representing 19.6% of the Fund’s net assets and Total Return Fund held fourteen 144A securities with an aggregate value of $21,732,161 representing 2.4% of the Fund’s net assets. These securities are valued as set forth in Note 1A. Certain restricted securities are exempt from the registration requirements under Section 4(2) of the Securities Act of 1933 and may only be sold to qualified investors. Unless otherwise noted, the Section 4(2) securities are deemed to be liquid. At September 30, 2017, Growth & Income Fund held one Section 4(2) security with a value of $3,991,094 representing .2% of the Fund’s net assets and Total Return Fund held four Section 4(2) securities with an aggregate value of $18,971,208 representing 2.1% of the Fund’s net assets.
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5. Derivatives—Some of the Funds may invest in various derivatives. A derivative is a financial instrument which has a value that is based on—or “derived from”—the values of other assets, reference rates, or indices. The Funds may invest in derivatives for hedging purposes.
Derivatives may relate to a wide variety of underlying references, such as commodities, stocks, bonds, interest rates, currency exchange rates, and related indices. Derivatives include futures contracts and options on futures contracts, forward-commitment transactions, options on securities, caps, floors, collars, swap contracts, and other financial instruments. Some derivatives, such as futures contracts and certain options, are traded on U.S. commodity and securities exchanges, while other derivatives, such as swap contracts, are privately negotiated and entered into in the over-the-counter market (“OTC”). The risks associated with the use of derivatives are different from, and possibly greater than, the risks associated with investing directly in securities and other traditional investments.
The use of a derivative involves the risk that a loss may be sustained as a result of the insolvency or bankruptcy of the other party to the contract (usually referred to as a “counterparty”) or the failure of the counterparty to make required payments or otherwise comply with the terms of the contract. Additionally, the use of credit derivatives can result in losses if FIMCO, or a Fund’s subadviser, as applicable, does not correctly evaluate the creditworthiness of the issuer on which the credit derivative is based.
Derivatives may be subject to liquidity risk, which exists when a particular derivative is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is relatively illiquid (as is the case with many OTC derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.
Derivatives may be subject to pricing or “basis” risk, which exists when a particular derivative becomes extraordinarily expensive relative to historical prices or the prices of corresponding cash market instruments. Under certain market conditions, it may not be economically feasible to initiate a transaction or liquidate a position in time to avoid a loss or take advantage of an opportunity.
Because many derivatives have leverage or borrowing components, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment.
Like most other investments, derivative instruments are subject to the risk that the market value of the instrument will change in a way detrimental to the Funds’ interest.
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Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
The Funds bear the risk that FIMCO will incorrectly forecast future market trends or the values of assets, reference rates, indices, or other financial or economic factors in establishing derivative positions for the Funds. If FIMCO attempts to use a derivative as a hedge against, or as a substitute for, a portfolio investment, the Funds will be exposed to the risk that the derivative will have or will develop an imperfect or no correlation with the portfolio investment. This could cause substantial losses for the Funds. While hedging strategies involving derivative instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other investments. Many derivatives, in particular OTC derivatives, are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a Fund.
The following provides more information on specific types of derivatives and activity in the Funds. The use of derivative instruments by the Funds for the period ended September 30, 2017 was related to the use of written and purchased options.
Options Contracts—Some of the Funds may write covered call and put options on securities, derivative instruments, or currencies the Fund owns or in which it may invest. Writing put options tends to increase a Fund’s exposure to the underlying instrument. Writing call options tends to decrease a Fund’s exposure to the underlying instrument. When a Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. These liabilities are reflected as written options outstanding in the Statement of Assets and Liabilities. Payments received or made, if any, from writing options with premiums to be determined on a future date are reflected as such on the Statement of Assets and Liabilities. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying future, swap, security or currency transaction to determine the realized gain or loss. A Fund, as a writer of an option, has no control over whether the underlying future, swap, security or currency may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the future, swap, security or currency underlying the written option. The risk exists that a Fund may not be able to enter into a closing transaction because of an illiquid market.
Some of the Funds may also purchase put and call options. Purchasing call options tends to increase a Fund’s exposure to the underlying instrument. Purchasing put options tends to decrease a Fund’s exposure to the underlying instrument. A Fund pays a premium which is included in its Statement of Assets and Liabilities as an investment and subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. The
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risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying future, swap, security or currency transaction to determine the realized gain or loss.
The premium amount and the number of option contracts written or purchased by the Funds during the year ended September 30, 2017, were as follows:
| Covered Call Strategy | Equity Income | Hedged U.S. Equity Opportunities | ||||||||||||||
| Call Options | Call Options | Put Options | ||||||||||||||
| Number of | Premium | Number of | Premium | Number of | Premium | Number of | Premium | |||||||||
| Contracts | Amount | Contracts | Amount | Contracts | Amount | Contracts | Amount | |||||||||
| Options outstanding at | ||||||||||||||||
| beginning of period | (13,914) | $ (2,150,687) | — | $ — | 45 | $ 237,357 | (34) | $ (89,006) | ||||||||
| Put options written | — | — | — | — | — | — | (198) | (625,090) | ||||||||
| Put options purchased to cover | — | — | — | — | — | — | 82 | 241,191 | ||||||||
| Put options written expirations | — | — | — | — | — | — | 55 | 130,257 | ||||||||
| Put options purchased | — | — | — | — | 189 | 1,180,818 | — | — | ||||||||
| Put options sold | — | — | — | — | (50) | (340,391) | — | — | ||||||||
| Put options purchased expired | — | — | — | — | (76) | (350,962) | — | — | ||||||||
| Call options written | (324,578) | (37,352,387) | (5,885) | (502,303) | — | — | — | — | ||||||||
| Call options exercised | 4,592 | 827,202 | 3,177 | 296,419 | — | — | — | — | ||||||||
| Call options purchased to cover | 225,838 | 27,177,367 | — | — | — | — | — | — | ||||||||
| Call options expirations | 64,304 | 5,239,964 | 2,498 | 186,900 | — | — | — | — | ||||||||
| Balance at September 30, 2017 | (43,758) | $ (6,258,541) | (210) | $ (18,984) | 108 | $ 726,822 | (95) | $(342,648) | ||||||||
Derivative Investment Holdings Categorized by Risk Exposure —The following table sets forth the fair value and the location in the Statement of Assets and Liabilities of the Funds’ derivative contracts by primary risk exposure as of September 30, 2017:
| Asset derivatives | Liability Derivatives | |||||||||
| Statements | Statements | Statements | ||||||||
| of Assets and | of Assets and | of Assets and | ||||||||
| Liabilities | Liabilities | Liabilities | ||||||||
| Risk exposure category | Location | Value | Location | Value | Location | Value | ||||
| Written options, | Purchased Options, | |||||||||
| Equity Contracts: | NA | at value | at value | |||||||
| Covered Call Strategy | N/A | N/A | $8,375,924 | N/A | ||||||
| Equity Income | N/A | N/A | $ 6,520 | N/A | ||||||
| Hedged U.S. Equity | ||||||||||
| Opportunities | N/A | N/A | $ 177,002 | N/A | ||||||
| 337 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
The following table sets forth the Funds’ realized gain (loss), as reflected in the Statement of Operations, by primary risk exposure and by type of derivative contract for the year ended September 30, 2017:
| Purchased | ||||||||||||
| Risk exposure category | Written options | options | ||||||||||
| Equity Contracts: | ||||||||||||
| Covered Call Strategy | $ | (3,691,558) | N/A | |||||||||
| Equity Income | $ | 209,895 | N/A | |||||||||
| Hedged U.S. Equity | ||||||||||||
| Opportunities | $ | (356,306) | $ | — | ||||||||
The following table sets forth the Funds’ change in unrealized appreciation (depreciation) by primary risk exposure and by type of derivative contract for the year ended September 30, 2017:
| Hedged | ||||||||||||
| Covered Call | U.S. Equity | |||||||||||
| Risk exposure category | Strategy | Equity Income | Opportunities | |||||||||
| Option contracts | $ | (2,202,281) | $ | 12,436 | $ | (506,133) | ||||||
Interest Rate Futures Contracts—The Funds may enter into interest rate futures contracts on U.S. Treasury obligations and options thereon that are traded on a U.S. exchange. An interest rate futures contract provides for the future sale by one party and the purchase by another party of a specified amount of a particular financial instrument (debt security) at a specified price, date, time and place. Such investments may be used for, among other purposes, the purpose of hedging against changes in the value of a Fund’s portfolio securities due to anticipated changes in interest rates and market conditions. A public market exists for interest rate futures contracts covering a number of debt securities, including long-term U.S. Treasury Bonds, 10-year U.S. Treasury Notes and three-month U.S. Treasury Bills. No price is paid upon entering into futures contracts. Instead, upon entering into a futures contract, a 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 or U.S. Government securities generally equal to 3%-5% or less of the contract value. This amount is known as “initial margin.”
An option on an interest rate futures contract generally gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract at a specified exercise price at any time prior to the expiration date of the option. The Funds may purchase put and call options on interest rate futures contracts on U.S. Treasury obligations which are traded on a U.S. exchange as a hedge against changes in interest rates, and may enter into closing transactions with respect to such options to terminate existing
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positions. There is no guarantee such closing transactions can be effected. 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 a Fund upon termination of the transaction, assuming all obligations have been satisfied. Under certain circumstances, such as periods of high volatility, a Fund may be required by an exchange to increase the level of its initial margin payment. 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 a Fund’s obligation to or from a clearing organization. A Fund is also obligated to make initial and variation margin payments when it writes options on futures contracts.
To the extent that a Fund participates in the futures or options markets, it will incur investment risks and transaction costs to which it would not be subject absent the use of these strategies. The use of these strategies involves certain special risks, including: (1) dependence on the ability of the Funds’ investment adviser, FIMCO, or a Fund’s subadviser, as applicable, to predict correctly movements in the direction of interest rates and securities prices; (2) imperfect correlation between the price of futures contracts and options thereon and movements in the prices of the securities or currencies being hedged; (3) the fact that skills needed to use these strategies are different from those needed to select portfolio securities; (4) the leverage (if any) that is created by investing in the option or futures contract; and (5) the possible absence of a liquid secondary market for any particular instrument at any time. If FIMCO’s, or a Fund’s subadviser, as applicable, prediction of movements in the direction of the securities and interest rate markets is inaccurate, the adverse consequences to that Fund may leave it in a worse position than if such strategies were not used. Derivatives may be difficult to sell, unwind or value.
The following table summarizes the value of the Funds’ futures contracts held as of September 30, 2017, and the related location in the accompanying Statement of Assets and Liabilities.
| Statement of | |||||||
| Operations Location | |||||||
| Unrealized appreciation | |||||||
| (depreciation) in value | |||||||
| Futures Contracts | of investments | ||||||
| Balanced Income | $ | 31,762 | |||||
| Hedged U.S. Equity | |||||||
| Opportunities | $ | 3,486 | |||||
| 339 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
The amount of realized gains (losses) on futures contracts recognized by the Funds in the accompanying Statement of Operations for the year ended September 30, 2017 are summarized in the following table:
| Statement of Operations | |||
| Interest Rate | |||
| Realized Gain (Loss) | Futures Contracts | ||
| Balanced Income | $ | 120,720 | |
| Government | $ | (7,474) | |
| Strategic Income | $ | (220,013) | |
| Hedged U.S. Equity | |||
| Opportunities | $ | (1,988,811) | |
Short Sales—The Long Short Fund may sell securities short. A short sale is a transaction in which a Fund sells securities it does not own but has borrowed in anticipation of a decline in the market price of the securities. The initial amount of a short sale is recorded as a liability which is marked-to-market daily. Fluctuations in the value of the short liability are recorded as unrealized gains or losses. The Fund realizes a gain or loss upon closing of the short sale (returning the security to the counterparty by way of purchase or delivery of a long position owned). Short sales by the Fund involves certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security because losses from short sales may be unlimited, whereas losses from purchases cannot exceed the total amount invested. The use of short sales may also involve counterparty risk and leverage risk. The Fund is liable to the buyer for any dividends payable on securities while those securities are in a short position. These dividends are an expense of the Fund. The Fund designates collateral consisting of cash, U.S. Government securities or other liquid assets sufficient to collateralize the market value of short positions.
Proceeds from short sales are generally retained in cash accounts or invested in securities that are cash equivalents. With regard to securities borrowed as of September 30, 2017 pursuant to short sale arrangements, the Fund has a right to set off any assets held (including the borrowed securities) or obligations owed to the lender, in the event of the lender’s default, against any obligations owed by the lender to the Funds under any agreement or collateral document, including the collateral value of the Securities Loan Collateral, as that term is defined in the Securities Lending and Services Agreement between the Fund and the lender. At September 30, 2017, Long Short Fund had pledged $40,681,346 of securities and cash as collateral under such arrangement.
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For the year ended September 30, 2017, the Long Short Fund received proceeds from securities sold short and paid funds for securities purchased to cover short positions in the amounts of $55,035,089 and $26,318,657, respectively.
Foreign Exchange Contracts—The International Opportunities Bond Fund, Global Fund and Hedged U.S. Equity Opportunities Fund may enter into foreign exchange contracts for the purchase or sale of foreign currencies at negotiated rates at future dates. These contracts are considered derivative instruments and a Fund may invest in them in order to hedge its currency exposure in bond positions or to gain currency exposure held by the Fund. A Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. Foreign exchange contracts are “marked-to-market” daily at the applicable translation rate and the resulting unrealized gains and losses are reflected in the Funds’ assets. During the period, the Funds used currency forwards to hedge currency exposure from certain bonds as well as to gain currency exposure in certain countries.
Disclosures about Offsetting Assets and Liabilities—Disclosures about Offsetting Assets and Liabilities requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance requires retrospective application for all comparative periods presented.
A Fund may mitigate credit risk with respect to OTC derivative counterparties through credit support annexes included with an International Swaps and Derivatives Association, Inc. Master Agreements or other Master Netting Agreements which are the standard contracts governing most derivative transactions between the Fund and each of its counterparties. These agreements may allow the Fund and each counterparty to offset certain derivative financial instruments’ payables and/or receivables against each other and/or with collateral, which is generally held by the Fund’s custodian. The amount of collateral moved to/from applicable counterparties is based upon minimum transfer amounts specified in the agreement. To the extent amounts due to the Fund from its counterparties are not fully collateralized contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance.
The Funds’ Statement of Assets and Liabilities (“SOAL”) presents financial instruments on a gross basis, therefore there are no net amounts and no offset amounts within the SOAL to present below. Gross amounts of the financial instruments, amounts related to financial instruments/cash collateral not offset in the SOAL and net amounts are presented below:
| 341 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
| International Opportunities Bond | ||||||||
| Description/Financial | Gross Amounts | |||||||
| Instrument/Statement | Presented in | |||||||
| of Assets and Liabilities | Statement of Assets | Financial | ||||||
| Category | Counterparty | and Liabilities | Instruments* | Net Amount | ||||
| Unrealized gain on foreign | ||||||||
| exchange contracts | CITI | $142,772 | $(110,047) | $ 32,725 | ||||
| GS | — | (30,790) | (30,790) | |||||
| HSBC | 325,278 | (220,024) | 105,254 | |||||
| JPM | 49,618 | — | 49,618 | |||||
| MSD | — | (5,513) | (5,513) | |||||
| Total | $517,668 | $(366,374) | $151,294 | |||||
| Unrealized loss on foreign | ||||||||
| exchange contracts | CITI | $(110,047) | $110,047 | $ — | ||||
| GS | (30,790) | 30,790 | — | |||||
| HSBC | (220,024) | 220,024 | — | |||||
| JPM | — | — | — | |||||
| MSD | (5,513) | 5,513 | — | |||||
| Total | $(366,374) | $366,374 | $ — | |||||
| Hedged U.S. Equity Opportunities | ||||||||
| Description/Financial | Gross Amounts | |||||||
| Instrument/Statement | Presented in | |||||||
| of Assets and Liabilities | Statement of Assets | Financial | ||||||
| Category | Counterparty | and Liabilities | Instruments* | Net Amount | ||||
| Unrealized gain on foreign | ||||||||
| exchange contracts | BCI | $1,952 | $ — | $1,952 | ||||
| CITI | 1,534 | — | 1,534 | |||||
| Total | $3,486 | $ — | $3,486 | |||||
| Unrealized loss on foreign | ||||||||
| exchange contracts | BCI | $ — | $ — | $ — | ||||
| CITI | — | — | — | |||||
| Total | $ — | $ — | $ — | |||||
| * | Amounts related to master netting arrangements (for example, ISDA) which have been determined by the |
| Fund to be legally enforceable in the event of default and where certain other criteria are met in accordance | |
| with applicable offsetting accounting guidance. |
| 342 |
During the year ended September 30, 2017, the volume of derivative activity for the Funds based on average monthly market values for forward foreign currency contracts (to buy) and for forward foreign currency contracts (to sell) were as follows:
| Forward Foreign Currency Contracts | ||||||||
| (to Buy) | (to Sell) | |||||||
| International Opportunities Bond | $20,257,334 | $20,378,800 | ||||||
| Global | 2,834,856 | 2,805,363 | ||||||
| Hedged U.S. Equity Opportunities | 40,714 | 39,468 | ||||||
Fair Value of Derivative Instruments—The fair value of derivative instruments held by the Funds as of September 30, 2017, was as follows:
| Assets Derivatives | Liability Derivatives | |||||||||
| Derivatives not accounted | ||||||||||
| for as hedging instruments | Statements of Assets | Statements of Assets | ||||||||
| under ASC 815 | and Liabilities Location | and Liabilities Location | ||||||||
| Unrealized appreciation | Unrealized depreciation | |||||||||
| of foreign exchange, | of foreign exchange, | |||||||||
| Foreign exchange, options | options and futures | options and futures | ||||||||
| and futures contracts: | contracts | Value | contracts | Value | ||||||
| International Opportunities | ||||||||||
| Bond | $ | 517,668 | $ | 366,374 | ||||||
| Hedged U.S. Equity | ||||||||||
| Opportunities | $ | 3,486 | $ | 471,342 | ||||||
The effect of the Funds’ derivative instruments on the Statement of Operations are as follows:
| Amount of Realized Gain or Loss Recognized on Derivatives | ||||
| Derivatives not accounted | Net Realized Gain (Loss) | |||
| for as hedging instruments | on Foreign Exchange | |||
| under ASC 815 | Transactions | |||
| Foreign exchange transactions: | ||||
| International Opportunities Bond | $ | 2,397,565 | ||
| Global | $ | (379,070) | ||
| Hedged U.S. Equity Opportunities | $ | (15,699) | ||
| International | $ | (260,434) | ||
| 343 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
| Amount of Change in Unrealized Appreciation or Depreciation Recognized on Derivatives | ||||
| Derivatives not accounted | Net Unrealized Appreciation | |||
| for as hedging instruments | (Depreciation) on Foreign | |||
| under ASC 815 | Exchange Transactions | |||
| Foreign exchange transactions: | ||||
| International Opportunities Bond | $ | (283,551) | ||
| Global | $ | 16,466 | ||
| Hedged U.S. Equity Opportunities | $ | 117 | ||
| International | $ | 21,349 | ||
6. High Yield Credit Risk—The investments of Floating Rate Fund and Fund For Income in high yield securities, whether rated or unrated, may be considered speculative and subject to greater market fluctuations and risks of loss of income and principal than lower-yielding, higher-rated, fixed-income securities. The risk of loss due to default by the issuer may be significantly greater for holders of high-yielding securities, because such securities are generally unsecured and are often subordinated to other creditors of the issuer.
7. Capital—The Trusts are authorized to issue an unlimited number of shares of beneficial interest without par value. The Trusts consist of the Funds listed on the cover page, each of which is a separate and distinct series of the Trusts. Each Fund has designated four classes of shares, Class A, Class B, Advisor Class and Institutional Class shares (each, a “Class”) except for Government Cash Management Fund which has designated only Class A, Class B and Institutional Class shares, Strategic Income Fund which has designated only Class A and Advisor Class shares and Balanced Income Fund, Floating Rate Fund, International Opportunities Bond Fund, Limited Duration High Quality Bond Fund, Covered Call Strategy Fund, Hedged U.S. Equity Opportunities Fund, Long Short Fund and Real Estate Fund which have designated only Class A, Advisor Class and Institutional Class shares. Advisor Class and Institutional Class shares became available for sale to the public, for those Funds in existence, in May 2013 and October 2013, respectively. Not all classes of shares of each Fund may be available in all jurisdictions. Each share of each Class has an equal beneficial interest in the assets, has identical voting, dividend, liquidation and other rights and is subject to the same terms and conditions except that expenses allocated to a Class may be borne solely by that Class as determined by the Board and a Class may have exclusive voting rights with respect to matters affecting only that Class. Government Cash Management Fund’s Class A, Class B and Institutional Class shares are sold without an initial sales charge; however, its Class B shares may only be acquired through an exchange of Class B shares from another First Investors eligible Fund or through the reinvestment of dividends on Class B shares and are generally subject to a
| 344 |
contingent deferred sales charge at the rate of 4% in the first year and declining to 0% over a six-year period, which is payable to FFS as underwriter of the Trusts. The shares sold by the other Funds have 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 4% for the First Investors Income Funds, except for Floating Rate Fund and Limited Duration High Quality Bond Fund which have an initial sales charge of up to 2.5% (effective June 12, 2017, the maximum sales charge on Class A shares was changed from 5.75% to 4% on the Income Funds, except for Floating Rate Fund and Limited Duration High Quality Bond Fund which was changed to 2.5%) and 5.75% for the First Investors Equity Funds and together with the Class B shares are subject to distribution plan fees as described in Note 3. Class B shares are sold without an initial sales charge, but are generally subject to a contingent deferred sales charge which declines in steps from 4% to 0% over a six-year period. Class B shares automatically convert into Class A shares after eight years. There are no sales charges associated with the purchase of Advisor Class and Institutional Class shares. Realized and unrealized gains or losses, investment income and expenses (other than distribution plan fees and shareholder servicing costs) are allocated daily to each class of shares based upon the relative proportion of net assets to each class.
8. Litigation—The Blue Chip and Equity Income Funds have been named, and have received notice that they may be putative members of the proposed defendant class of shareholders, in a lawsuit filed in the United States Bankruptcy Court for the District of Delaware on November 1, 2010, by the Official Committee of Unsecured Creditors of Tribune Company (the “Committee”). The Committee is seeking to recover all payments made to beneficial owners of common stock in connection with a leveraged buyout of the Tribune Company (“LBO”), including payments made in connection with a 2007 tender offer into which the Blue Chip and Equity Income Funds tendered their shares of common stock of the Tribune Company. On December 9, 2011, the Blue Chip Fund was reorganized into the Growth & Income Fund pursuant to a Plan of Reorganization and Termination, whereby all of the assets of the Blue Chip Fund were transferred to the Growth & Income Fund, the Growth & Income Fund assumed all of the liabilities of the Blue Chip Fund, including any contingent liabilities with respect to pending or threatened litigation or actions, and shareholders of Blue Chip Fund became shareholders of Growth & Income Fund. The adversary proceeding brought by the Committee has been transferred to the Southern District of New York and administratively consolidated with other similar suits as discussed below. In addition, on June 2, 2011, the Blue Chip and Equity Income Funds were named as defendants in a lawsuit brought in connection with the Tribune Company’s LBO by Deutsche Bank Trust Company Americas, in its capacity as successor indenture trustee for a certain series of Senior Notes, Law Debenture Trust Company of New York, in its capacity as successor indenture trustee for a certain series of Senior Notes, and Wilmington
| 345 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
Trust Company, in its capacity as successor indenture trustee for the PHONES Notes (together, the “Bondholder Plaintiffs”) in the Supreme Court of the State of New York. The Blue Chip and Equity Income Funds have also been named in a similar suit filed on behalf of participants in Tribune defined-compensation plans (the “Retiree Plaintiffs”). As with the Bondholder Plaintiffs and the Committee, the Retiree Plaintiffs seek to recover payments of the proceeds of the LBO. (All of these suits have been removed to the United States District Court for the Southern District of New York and administratively consolidated with other substantially similar suits against other former Tribune shareholders (the “MDL Proceeding”)). On September 23, 2013, the Judge in the MDL Proceeding dismissed various state law constructive fraudulent transfer suits, resulting in the Funds being dismissed from the Bondholder and Retiree Plaintiffs’ actions. On September 30, 2013, counsel for the plaintiffs in those suits appealed the MDL Judge’s dismissal ruling to the Second Circuit. On March 24, 2016, the Second Circuit Court of Appeals affirmed the MDL Judge’s dismissal of the various state law constructive fraudulent transfer suits. In September 2016, the Bondholder and Retiree Plaintiffs petitioned the U.S. Supreme Court to review the Second Circuit’s decision. The Supreme Court has not yet ruled on that request. On January 9, 2017, the Tribune MDL judge granted the defendants’ motion to dismiss the Committee lawsuit alleging a single claim for intentional fraudulent transfer. An appeal of that decision to the Second Circuit is expected, but has not yet been made. The extent of the Funds’ potential liability in any such actions has not been determined. The Funds have been advised by counsel that the Funds could be held liable to return all or part of the proceeds received in any of these actions, as well as interest and court costs, even though the Funds had no knowledge of, or participation in, any misconduct. The Equity Income Fund received proceeds of $1,526,566 in connection with the LBO, representing 0.24% of its net assets as of September 30, 2017. The Blue Chip Fund received proceeds of $790,772 in connection with the LBO, representing 0.04% of the net assets of Growth & Income Fund as of September 30, 2017. The Equity Income and Growth & Income Funds cannot predict the outcomes of these proceedings, and thus have not accrued any of the amounts sought in the various actions in the accompanying financial statements.
9. Conversion of Cash Management Fund to Government Cash Management Fund—Effective October 3, 2016, the name of the First Investors Cash Management Fund changed to the First Investors Government Cash Management Fund and the Fund converted to a “government money market fund” as defined in Rule 2a-7 under the Investment Company Act of 1940. As a government money market fund, the Fund has a policy to invest at least 99.5% of its total assets in U.S. Government Securities, cash
| 346 |
and/or repurchase agreements that are collateralized fully by cash and/or U.S. Government Securities. In addition, the Fund has a policy to invest, under normal circumstances, at least 80% of its net assets, including any borrowings for investment purposes, in U.S. Government Securities and repurchase agreements collateralized fully by cash or U.S. Government Securities.
10. Tax Components of Capital and Distributions to Shareholders—The tax character of distributions declared for the years ended September 30, 2017 and September 30, 2016 were as follows:
| Year Ended September 30, 2017 | Year Ended September 30, 2016 | ||||||||||||||
| Distributions | Distributions | ||||||||||||||
| Declared from | Declared from | ||||||||||||||
| Long-Term | Long-Term | ||||||||||||||
| Ordinary | Capital | Return of | Ordinary | Capital | Return of | ||||||||||
| Fund | Income | Gain | Capital | Total | Income | Gain | Capital | Total | |||||||
| Balanced Income | $ 873,850 | $ 33,305 | $— | $ 907,155 | $ 256,699 | $ — | $ — | $ 256,699 | |||||||
| Floating Rate | 5,293,830 | — | — | 5,293,830 | 3,850,855 | — | — | 3,850,855 | |||||||
| Fund For Income | 35,309,696 | — | — | 35,309,696 | 33,924,030 | — | — | 33,924,030 | |||||||
| Government | 5,924,658 | — | — | 5,924,658 | 6,703,798 | — | — | 6,703,798 | |||||||
| Government Cash | 100,143 | — | — | 100,143 | — | — | — | — | |||||||
| Management | |||||||||||||||
| International Opportunities | 2,228,370 | — | — | 2,228,370 | 1,839,254 | — | 184,955 | 2,024,209 | |||||||
| Bond | |||||||||||||||
| Investment Grade | 20,955,134 | — | — | 20,955,134 | 20,874,776 | — | — | 20,874,776 | |||||||
| Limited Duration High | 3,069,199 | — | — | 3,069,199 | 2,476,438 | — | — | 2,476,438 | |||||||
| Quality Bond | |||||||||||||||
| Strategic Income | 4,961,619 | — | — | 4,961,619 | 4,986,288 | — | — | 4,986,288 | |||||||
| Covered Call Strategy | 2,617,346 | 237,506 | — | 2,854,852 | 377,599 | — | — | 377,599 | |||||||
| Equity Income | 12,725,552 | 10,667,835 | — | 23,393,387 | 9,795,330 | 21,247,896 | — | 31,043,226 | |||||||
| Global | 958,933 | — | — | 958,933 | 309,884 | 25,309,767 | — | 25,619,651 | |||||||
| Growth & Income | 29,931,410 | 60,147,475 | — | 90,078,885 | 19,699,502 | 76,706,713 | — | 96,406,215 | |||||||
| Hedged U.S. Equity | 6,879 | — | — | 6,879 | — | — | — | — | |||||||
| Opportunities | |||||||||||||||
| International | 1,537,577 | — | — | 1,537,577 | 1,142,967 | — | — | 1,142,967 | |||||||
| Long Short | — | — | — | — | N/A | N/A | N/A | N/A | |||||||
| Opportunity | 5,695,841 | 34,744,601 | — | 40,440,442 | 2,323,990 | 74,013,118 | — | 76,337,108 | |||||||
| Real Estate | 1,671,309 | 1,336,630 | — | 3,007,939 | 1,508,321 | 102,056 | — | 1,610,377 | |||||||
| Select Growth | 1,257,169 | 60,959,968 | — | 62,217,137 | 787,755 | 40,342,995 | — | 41,130,750 | |||||||
| Special Situations | 3,302,735 | 4,826,272 | — | 8,129,007 | 392,819 | 27,875,860 | — | 28,268,679 | |||||||
| Total Return | 15,036,591 | 13,865,118 | — | 28,901,709 | 13,557,014 | 18,711,846 | — | 32,268,860 | |||||||
| 347 |
Notes to Financial Statements (continued)
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
September 30, 2017
As of September 30, 2017, the components of distributable earnings (deficit) on a tax basis were as follows:
| Total | |||||||||||
| Undistributed | Undistributed | Capital | Other | Unrealized | Distributable | ||||||
| Ordinary | Capital | Losses | Accumulated | Appreciation | Earnings | ||||||
| Fund | Income | Gains | Carryover | Losses* | (Depreciation) | (Deficit)** | |||||
| Balanced Income | $ 131,913 | $ 387,867 | $ — | $ (4,539) | $ 1,921,012 | ††† | $ 2,436,253 | ||||
| Floating Rate | 89,420 | — | (3,919,125) | (74,780) | 1,051,374 | (2,853,111) | |||||
| Fund For Income | 939,905 | — | (149,609,253) | (813,985) | 20,625,681 | (128,857,652) | |||||
| Government | 53,777 | — | (18,571,459) | (45,387) | (1,212,024) | (19,775,093) | |||||
| International Opportunities | |||||||||||
| Bond | 3,390,355 | — | (4,401,046) | — | (7,419,981) | † | (8,430,672) | ||||
| Investment Grade | 319,611 | — | (4,244,754) | (158,726) | 5,110,708 | 1,026,839 | |||||
| Limited Duration High | |||||||||||
| Quality Bond | 111,710 | — | (2,169,228) | (90,946) | (2,230,638) | (4,379,102) | |||||
| Strategic Income | 218,400 | — | (2,225,804) | (37,457) | (2,722,190) | (4,767,051) | |||||
| Covered Call Strategy | 31,722 | — | — | (1,093,690) | 17,438,577 | †† | 16,376,609 | ||||
| Equity Income | 5,080,575 | 10,506,149 | — | — | 206,722,593 | †† | 222,309,317 | ||||
| Global | 4,406,141 | 34,526,910 | — | — | 81,402,319 | † | 120,335,370 | ||||
| Growth & Income | 14,522,192 | 62,493,854 | — | — | 739,662,255 | 816,678,301 | |||||
| Hedged U.S. Equity | |||||||||||
| Opportunities | — | — | (1,874,861) | (48,245) | 7,562,567 | ††† | 5,639,461 | ||||
| International | 522,354 | — | (13,051,390) | — | 99,029,431 | † | 86,500,395 | ||||
| Long Short | — | — | (1,404,177) | — | 2,383,468 | 979,291 | |||||
| Opportunity | 6,176,038 | 55,131,693 | — | — | 351,909,036 | 413,216,767 | |||||
| Real Estate | 907,043 | 634,803 | — | — | (4,517,095) | (2,975,249) | |||||
| Select Growth | 212,578 | 47,661,829 | — | — | 112,293,138 | 160,167,545 | |||||
| Special Situations | 3,240,232 | 14,200,571 | — | — | 186,314,909 | 203,755,712 | |||||
| Total Return | 1,366,467 | 14,166,410 | — | — | 204,614,339 | 220,147,216 |
| * | Other accumulated losses consist primarily of late loss deferral, post-October loss deferrals and capital loss |
| carryovers that cannot yet be utilized. | |
| ** | Differences between book distributable earnings and tax distributable earnings consist primarily of wash |
| sales and amortization of bond premium and discounts. | |
| † | Includes currency appreciation (depreciation) for International Opportunities Bond, Global, Hedged |
| U.S. Equity Opportunities and International Funds in the amounts of $5,571, $11,713, $164 and | |
| $4,754, respectively. | |
| †† | Includes options appreciation (depreciation) for Covered Call Strategy and Equity Income Funds in the |
| amounts of $(2,117,383) and $12,463, respectively. | |
| ††† | Includes appreciation for futures, option and currency contracts recognized for tax purposes for Balanced |
| Income, International Opportunities Bond and Hedged U.S. Equity Opportunities Funds in the amounts of | |
| $45,974, $151,294 and $(648,817), respectively. |
| 348 |
For the year ended September 30, 2017, the following reclassifications were made to reflect permanent differences between book and tax reporting which are primarily due to the differences between book and tax treatment of investments in real estate trusts, bond premium amortization, foreign currency transactions, paydowns on securities, fund organization expenses and expiration of capital loss carryovers.
| Undistributed | Accumulated | |||||
| Ordinary Income | Capital Gains | |||||
| Fund | Capital Paid In | (Deficit) | (Losses) | |||
| Balanced Income | $ (2,405) | $ 40,922 | $ (38,517) | |||
| Floating Rate | (571) | 571 | — | |||
| Fund For Income | (23,949,720) | 24,014 | 23,925,706 | |||
| Government | — | 1,706,406 | (1,706,406) | |||
| International Opportunities Bond | — | 2,397,565 | (2,397,565) | |||
| Investment Grade | (2,299,840) | 2,816 | 2,297,024 | |||
| Limited Duration | ||||||
| High Quality Bond | — | 114,058 | (114,058) | |||
| Covered Call Strategy | (1,485) | 1,480 | 5 | |||
| Equity Income | — | 78,340 | (78,340) | |||
| Global | — | (379,070) | 379,070 | |||
| Hedged U.S. Equity Opportunities | (106) | (15,593) | 15,699 | |||
| International | — | (260,434) | 260,434 | |||
| Long Short | (366,680) | 369,475 | (2,795) | |||
| Real Estate | (1,562) | 1,562 | — | |||
| Total Return | — | 481,269 | (481,269) |
11. Subsequent Events—Subsequent events occurring after September 30, 2017 have been evaluated for potential impact to this report through the date the financial statements were issued. There were no subsequent events to report that would have a material impact on the Funds’ financial statements.
| 349 |
Financial Highlights
FIRST INVESTORS INCOME FUNDS
The following table 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 fiscal year ended
September 30 unless otherwise indicated.
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net Realized | Net Asset | ||||||||||||||||||||||||||||||
| Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
| Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
| of Period | Income | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | Income | Expenses | *** | Income | Rate | |||||||||||||
| BALANCED INCOME FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2016(f) | $10.00 | $.17 | (c) | $ .68 | $ .85 | $.15 | $— | $.15 | $10.70 | 8.55 | %†† | $29,676 | 1.15 | %† | 1.15 | %† | 1.61 | %† | 2.21 | %† | .55 | %† | 57 | %†† | ||||||||
| 2017 | 10.70 | .18 | (c) | .36 | .54 | .23 | .01 | .24 | 11.00 | 5.11 | 46,608 | 1.15 | 1.15 | 1.75 | 1.54 | 1.36 | 51 | |||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2016(f) | 10.00 | .20 | (c) | .69 | .89 | .16 | — | .16 | 10.73 | 8.97 | †† | 109 | .82 | † | .82 | † | 1.91 | † | 1.98 | † | .75 | † | 57 | †† | ||||||||
| 2017 | 10.73 | .48 | (c) | .09 | .57 | .24 | .01 | .25 | 11.05 | 5.42 | 11 | .82 | .82 | 1.93 | 1.14 | 1.61 | 51 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2016(f) | 10.00 | .21 | (c) | .69 | .90 | .17 | — | .17 | 10.73 | 9.08 | †† | 157 | .69 | † | .69 | † | 2.04 | † | 1.93 | † | .80 | † | 57 | †† | ||||||||
| 2017 | 10.73 | .28 | (c) | .30 | .58 | .26 | .01 | .27 | 11.04 | 5.46 | 141 | .69 | .69 | 2.15 | 1.14 | 1.71 | 51 | |||||||||||||||
| FLOATING RATE FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2014(h) | $10.00 | $.21 | (c) | $(.10 | ) | $ .11 | $.23 | — | $.23 | $ 9.88 | 1.12 | %†† | $50,361 | 1.10 | %† | 1.10 | %† | 2.21 | %† | 1.58 | %† | 1.73 | %† | 26 | %†† | |||||||
| 2015 | 9.88 | .26 | (c) | (.27 | ) | (.01 | ) | .29 | — | .29 | 9.58 | (.08 | ) | 57,101 | 1.10 | 1.10 | 2.72 | 1.33 | 2.49 | 49 | ||||||||||||
| 2016 | 9.58 | .27 | (c) | .09 | .36 | .28 | — | .28 | 9.66 | 3.69 | 61,243 | 1.10 | 1.10 | 2.86 | 1.27 | 2.69 | 38 | |||||||||||||||
| 2017 | 9.66 | .27 | (c) | .05 | .32 | .31 | — | .31 | 9.67 | 3.47 | 66,769 | 1.10 | 1.10 | 2.90 | 1.24 | 2.76 | 89 | |||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2014(h) | 10.00 | .25 | (c) | (.11 | ) | .14 | .26 | — | .26 | 9.88 | 1.43 | †† | 34,942 | .90 | † | .90 | † | 2.63 | † | .95 | † | 2.58 | † | 26 | †† | |||||||
| 2015 | 9.88 | .28 | (c) | (.26 | ) | .02 | .32 | — | .32 | 9.58 | .18 | 50,122 | .90 | .90 | 2.92 | 1.03 | 2.79 | 49 | ||||||||||||||
| 2016 | 9.58 | .29 | (c) | .08 | .37 | .30 | — | .30 | 9.65 | 3.92 | 61,844 | .90 | .90 | 3.06 | .98 | 2.98 | 38 | |||||||||||||||
| 2017 | 9.65 | .26 | (c) | .09 | .35 | .32 | — | .32 | 9.68 | 3.70 | 98,958 | .90 | .90 | 3.07 | .92 | 3.05 | 89 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2014(h) | 10.00 | .27 | (c) | (.13 | ) | .14 | .28 | — | .28 | 9.86 | 1.36 | †† | 5,329 | .70 | † | .70 | † | 2.76 | † | 1.06 | † | 2.40 | † | 26 | †† | |||||||
| 2015 | 9.86 | .30 | (c) | (.25 | ) | .05 | .34 | — | .34 | 9.57 | .47 | 10,458 | .70 | .70 | 3.17 | .90 | 2.97 | 49 | ||||||||||||||
| 2016 | 9.57 | .31 | (c) | .08 | .39 | .32 | — | .32 | 9.64 | 4.14 | 11,456 | .70 | .70 | 3.27 | .83 | 3.14 | 38 | |||||||||||||||
| 2017 | 9.64 | .26 | (c) | .11 | .37 | .34 | — | .34 | 9.67 | 3.87 | 21,277 | .70 | .70 | 3.23 | .80 | 3.13 | 89 | |||||||||||||||
| 350 | 351 |
Financial Highlights (continued)
FIRST INVESTORS INCOME FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Assets Before Expenses | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Waived, Assumed | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | or Reimbursed | |||||||||||||||||||||||||||||
| Net Asset | Net Realized | Net Asset | ||||||||||||||||||||||||||||||
| Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
| Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
| of Period | Income | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | Income | Expenses | *** | Income | Rate | |||||||||||||
| FUND FOR INCOME | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $2.60 | $.15 | $(.01 | ) | $.14 | $.15 | — | $.15 | $2.59 | 5.55 | % | $647,603 | 1.23 | % | 1.23 | % | 5.17 | % | 1.25 | % | 5.15 | % | 60 | % | ||||||||
| 2014 | 2.59 | .12 | (c) | .02 | .14 | .14 | — | .14 | 2.59 | 5.38 | 621,618 | 1.21 | 1.21 | 4.67 | 1.23 | 4.65 | 47 | |||||||||||||||
| 2015 | 2.59 | .11 | (c) | (.18 | ) | (.07 | ) | .13 | — | .13 | 2.39 | (2.85 | ) | 567,249 | 1.21 | 1.21 | 4.39 | 1.23 | 4.37 | 47 | ||||||||||||
| 2016 | 2.39 | .11 | (c) | .10 | .21 | .12 | — | .12 | 2.48 | 9.07 | 571,028 | 1.22 | 1.22 | 4.76 | 1.24 | 4.74 | 55 | |||||||||||||||
| 2017 | 2.48 | .11 | (c) | .05 | .16 | .12 | — | .12 | 2.52 | 6.79 | 572,631 | 1.21 | 1.21 | 4.57 | 1.23 | 4.55 | 65 | |||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 2.60 | .13 | (.01 | ) | .12 | .13 | — | .13 | 2.59 | 4.84 | 5,001 | 1.99 | 1.99 | 4.42 | 2.01 | 4.40 | 60 | |||||||||||||||
| 2014 | 2.59 | .10 | (c) | .02 | .12 | .12 | — | .12 | 2.59 | 4.67 | 4,690 | 2.02 | 2.02 | 3.86 | 2.04 | 3.84 | 47 | |||||||||||||||
| 2015 | 2.59 | .09 | (c) | (.18 | ) | (.09 | ) | .11 | — | .11 | 2.39 | (3.65 | ) | 3,376 | 2.01 | 2.01 | 3.60 | 2.03 | 3.58 | 47 | ||||||||||||
| 2016 | 2.39 | .09 | (c) | .10 | .19 | .10 | — | .10 | 2.48 | 7.99 | 2,923 | 2.04 | 2.05 | 3.94 | 2.07 | 3.92 | 55 | |||||||||||||||
| 2017 | 2.48 | .10 | (c) | .05 | .15 | .10 | — | .10 | 2.53 | 6.15 | 2,356 | 1.98 | 1.98 | 3.79 | 2.00 | 3.77 | 65 | |||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(j) | 2.66 | .06 | (.05 | ) | .01 | .08 | — | .08 | 2.59 | .23 | †† | 1 | 1.03 | † | 1.03 | † | 4.59 | † | 5.13 | † | .49 | † | 60 | †† | ||||||||
| 2014 | 2.59 | .12 | (c) | .02 | .14 | .14 | — | .14 | 2.59 | 5.42 | 31,132 | .91 | .91 | 4.83 | .93 | 4.81 | 47 | |||||||||||||||
| 2015 | 2.59 | .12 | (c) | (.18 | ) | (.06 | ) | .14 | — | .14 | 2.39 | (2.47 | ) | 41,699 | .93 | .93 | 4.65 | .95 | 4.63 | 47 | ||||||||||||
| 2016 | 2.39 | .12 | (c) | .10 | .22 | .13 | — | .13 | 2.48 | 9.34 | 68,198 | .93 | .94 | 5.02 | .96 | 5.00 | 55 | |||||||||||||||
| 2017 | 2.48 | .12 | (c) | .05 | .17 | .13 | — | .13 | 2.52 | 7.05 | 73,403 | .94 | .94 | 4.84 | .96 | 4.82 | 65 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(j) | 2.66 | .03 | (.01 | ) | .02 | .08 | — | .08 | 2.60 | .66 | †† | 18,575 | .81 | † | .81 | † | 4.93 | † | .83 | † | 4.91 | † | 60 | †† | ||||||||
| 2014 | 2.60 | .13 | (c) | .02 | .15 | .15 | — | .15 | 2.60 | 5.59 | 42,941 | .78 | .78 | 5.07 | .80 | 5.05 | 47 | |||||||||||||||
| 2015 | 2.60 | .12 | (c) | (.17 | ) | (.05 | ) | .15 | — | .15 | 2.40 | (2.28 | ) | 51,704 | .78 | .78 | 4.81 | .80 | 4.79 | 47 | ||||||||||||
| 2016 | 2.40 | .12 | (c) | .10 | .22 | .13 | — | .13 | 2.49 | 9.58 | 62,340 | .79 | .79 | 5.19 | .81 | 5.17 | 55 | |||||||||||||||
| 2017 | 2.49 | .13 | (c) | .05 | .18 | .13 | — | .13 | 2.54 | 7.59 | 78,784 | .78 | .78 | 4.99 | .80 | 4.97 | 65 | |||||||||||||||
| 352 | 353 |
Financial Highlights (continued)
FIRST INVESTORS INCOME FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net Realized | Net Asset | Net | |||||||||||||||||||||||||||||
| Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Investment | Portfolio | ||||||||||||||||||||
| Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Investment | Income | Turnover | ||||||||||||||||||
| of Period | Income | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | Income | Expenses | *** | (Loss | ) | Rate | ||||||||||||
| GOVERNMENT FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $11.52 | $.17 | $(.43 | ) | $(.26 | ) | $.32 | — | $.32 | $10.94 | (2.29 | )% | $355,264 | 1.10 | % | 1.10 | % | 1.57 | % | 1.21 | % | 1.46 | % | 101 | % | |||||||
| 2014 | 10.94 | .19 | (c) | — | .19 | .26 | — | .26 | 10.87 | 1.71 | 289,928 | 1.07 | 1.07 | 1.76 | 1.18 | 1.65 | 138 | |||||||||||||||
| 2015 | 10.87 | .17 | (c) | .04 | .21 | .25 | — | .25 | 10.83 | 1.90 | 265,856 | 1.08 | 1.08 | 1.60 | 1.19 | 1.49 | 82 | |||||||||||||||
| 2016 | 10.83 | .15 | (c) | .08 | .23 | .21 | — | .21 | 10.85 | 2.16 | 258,545 | 1.08 | 1.08 | 1.40 | 1.19 | 1.29 | 97 | |||||||||||||||
| 2017 | 10.85 | .14 | (c) | (.35 | ) | (.21 | ) | .20 | — | .20 | 10.44 | (1.92 | ) | 232,982 | 1.08 | 1.08 | 1.35 | 1.21 | 1.22 | 61 | ||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 11.51 | .07 | (.42 | ) | (.35 | ) | .24 | — | .24 | 10.92 | (3.06 | ) | 4,717 | 1.84 | 1.84 | .82 | 1.95 | .71 | 101 | |||||||||||||
| 2014 | 10.92 | .10 | (c) | (.01 | ) | .09 | .17 | — | .17 | 10.84 | .86 | 3,255 | 1.89 | 1.89 | .94 | 2.00 | .83 | 138 | ||||||||||||||
| 2015 | 10.84 | .08 | (c) | .03 | .11 | .15 | — | .15 | 10.80 | 1.04 | 2,514 | 1.91 | 1.91 | .78 | 2.02 | .67 | 82 | |||||||||||||||
| 2016 | 10.80 | .06 | (c) | .09 | .15 | .12 | — | .12 | 10.83 | 1.38 | 2,062 | 1.89 | 1.90 | .59 | 2.01 | .48 | 97 | |||||||||||||||
| 2017 | 10.83 | .07 | (c) | (.36 | ) | (.29 | ) | .11 | — | .11 | 10.43 | (2.67 | ) | 1,043 | 1.92 | 1.92 | .51 | 2.04 | .39 | 61 | ||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(j) | 11.29 | .10 | (.30 | ) | (.20 | ) | .15 | — | .15 | 10.94 | (1.75 | )†† | 1 | .95 | † | .95 | † | 1.68 | † | 5.17 | † | (2.54 | )† | 101 | †† | |||||||
| 2014 | 10.94 | .23 | (c) | (.04 | ) | .19 | .27 | — | .27 | 10.86 | 1.73 | 33,699 | .73 | .73 | 2.06 | .84 | 1.95 | 138 | ||||||||||||||
| 2015 | 10.86 | .21 | (c) | .03 | .24 | .26 | — | .26 | 10.84 | 2.21 | 50,190 | .78 | .78 | 1.89 | .89 | 1.78 | 82 | |||||||||||||||
| 2016 | 10.84 | .18 | (c) | .09 | .27 | .24 | — | .24 | 10.87 | 2.50 | 64,370 | .78 | .78 | 1.70 | .89 | 1.59 | 97 | |||||||||||||||
| 2017 | 10.87 | .23 | (c) | (.41 | ) | (.18 | ) | .23 | — | .23 | 10.46 | (1.61 | ) | 32,889 | .82 | .82 | 1.64 | .94 | 1.52 | 61 | ||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(j) | 11.29 | .14 | (.31 | ) | (.17 | ) | .16 | — | .16 | 10.96 | (1.54 | )†† | 4,656 | .68 | † | .68 | † | 2.14 | † | .81 | † | 2.01 | † | 101 | †† | |||||||
| 2014 | 10.96 | .24 | (c) | (.01 | ) | .23 | .29 | — | .29 | 10.90 | 2.08 | 10,753 | .65 | .65 | 2.17 | .76 | 2.06 | 138 | ||||||||||||||
| 2015 | 10.90 | .22 | (c) | .04 | .26 | .28 | — | .28 | 10.88 | 2.38 | 14,027 | .65 | .65 | 2.03 | .76 | 1.92 | 82 | |||||||||||||||
| 2016 | 10.88 | .20 | (c) | .08 | .28 | .26 | — | .26 | 10.90 | 2.62 | 7,951 | .65 | .65 | 1.85 | .76 | 1.74 | 97 | |||||||||||||||
| 2017 | 10.90 | .10 | (c) | (.24 | ) | (.14 | ) | .25 | — | .25 | 10.51 | (1.18 | ) | 538 | .63 | .63 | 1.67 | .77 | 1.53 | 61 | ||||||||||||
| 354 | 355 |
Financial Highlights (continued)
FIRST INVESTORS INCOME FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net Realized | Net Asset | Net | Net | ||||||||||||||||||||||||||||
| Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Investment | Investment | Portfolio | ||||||||||||||||||||
| Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Income | Income | Turnover | ||||||||||||||||||
| of Period | Income | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | (Loss | ) | Expenses | *** | (Loss | ) | Rate | |||||||||||
| GOVERNMENT CASH MANAGEMENT FUND(e) | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $ 1.00 | — | — | — | $ — | — | $ — | $1.00 | 0.00 | % | $130,272 | .11 | % | .11 | % | .00 | % | .97 | % | (.86 | )% | N/A | ||||||||||
| 2014 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 108,088 | .08 | .08 | .00 | 1.02 | (.94 | ) | N/A | |||||||||||||||
| 2015 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 109,566 | .10 | .10 | .00 | 1.08 | (.98 | ) | N/A | |||||||||||||||
| 2016 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 122,037 | .33 | .33 | .00 | 1.05 | (.72 | ) | N/A | |||||||||||||||
| 2017 | 1.00 | — | — | — | .00 | (d) | — | .00 | (d) | 1.00 | 0.08 | 127,079 | .60 | .60 | .08 | 1.02 | (.34 | ) | N/A | |||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 571 | .12 | .12 | .00 | 1.72 | (1.60 | ) | N/A | |||||||||||||||
| 2014 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 404 | .08 | .08 | .00 | 1.64 | (1.56 | ) | N/A | |||||||||||||||
| 2015 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 287 | .10 | .10 | .00 | 1.72 | (1.62 | ) | N/A | |||||||||||||||
| 2016 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 248 | .33 | .33 | .00 | 1.77 | (1.44 | ) | N/A | |||||||||||||||
| 2017 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 161 | .64 | .64 | .00 | 1.76 | (1.12 | ) | N/A | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(j) | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | †† | 1 | .15† | .15 | † | .00 | † | 2.60 | † | (2.45 | )† | N/A | |||||||||||
| 2014 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 2,595 | .08 | .08 | .00 | .66 | (.58 | ) | N/A | |||||||||||||||
| 2015 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 2,267 | .10 | .10 | .00 | .67 | (.57 | ) | N/A | |||||||||||||||
| 2016 | 1.00 | — | — | — | — | — | — | 1.00 | 0.00 | 2,844 | .33 | .33 | .00 | .68 | (.35 | ) | N/A | |||||||||||||||
| 2017 | 1.00 | — | — | — | .00 | (d) | — | .00 | (d) | 1.00 | 0.07 | 2,394 | .60 | .60 | .06 | .68 | (.02 | ) | N/A | |||||||||||||
| INTERNATIONAL OPPORTUNITIES BOND FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $10.22 | $.25 | $ (.32 | ) | $(.07 | ) | $.30 | $.01 | $.31 | $9.84 | (.72 | )% | $ 99,161 | 1.30 | % | 1.30 | % | .68 | % | 1.83 | % | .15 | % | 53 | % | |||||||
| 2014 | 9.84 | .21 | (c) | .07 | .28 | .27 | — | .27 | 9.85 | 2.84 | 80,197 | 1.30 | 1.30 | 2.06 | 1.41 | 1.95 | 76 | |||||||||||||||
| 2015 | 9.85 | .12 | (c) | (1.06 | ) | (.94 | ) | .28 | — | .28 | 8.63 | (9.72 | ) | 69,394 | 1.30 | 1.30 | 1.29 | 1.38 | 1.21 | 61 | ||||||||||||
| 2016 | 8.63 | .20 | (c) | .51 | .71 | .13 | — | .13 | 9.21 | 8.30 | 65,456 | 1.38 | 1.38 | 2.29 | 1.41 | 2.26 | 72 | |||||||||||||||
| 2017 | 9.21 | .22 | (c) | .21 | .43 | .15 | — | .15 | 9.49 | 4.70 | 59,782 | 1.41 | 1.41 | 2.35 | N/A | N/A | 76 | |||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(j) | 10.23 | .08 | (.31 | ) | (.23 | ) | .15 | — | .15 | 9.85 | (2.26 | )†† | 1 | 1.07 | † | 1.07 | † | (1.43 | )† | 5.23 | † | (5.59 | )† | 53 | †† | |||||||
| 2014 | 9.85 | .24 | (c) | .04 | .28 | .28 | — | .28 | 9.85 | 2.81 | 33,851 | 1.10 | 1.10 | 2.21 | N/A | N/A | 76 | |||||||||||||||
| 2015 | 9.85 | .14 | (c) | (1.06 | ) | (.92 | ) | .29 | — | .29 | 8.64 | (9.51) | 50,912 | 1.04 | 1.04 | 1.56 | N/A | N/A | 61 | |||||||||||||
| 2016 | 8.64 | .23 | (c) | .51 | .74 | .13 | — | .13 | 9.25 | 8.70 | 50,749 | 1.08 | 1.08 | 2.60 | N/A | N/A | 72 | |||||||||||||||
| 2017 | 9.25 | .24 | (c) | .23 | .47 | .16 | — | .16 | 9.56 | 5.07 | 68,162 | 1.11 | 1.11 | 2.66 | N/A | N/A | 76 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(j) | 10.23 | .12 | (.35 | ) | (.23 | ) | .15 | — | .15 | 9.85 | (2.26 | )†† | 6,998 | .96 | † | .96 | † | (1.31 | )† | N/A | N/A | 53 | †† | |||||||||
| 2014 | 9.85 | .25 | (c) | .06 | .31 | .28 | — | .28 | 9.88 | 3.19 | 16,014 | .93 | .93 | 2.43 | N/A | N/A | 76 | |||||||||||||||
| 2015 | 9.88 | .17 | (c) | (1.08 | ) | (.91 | ) | .30 | — | .30 | 8.67 | (9.36 | ) | 19,097 | .90 | .90 | 1.69 | N/A | N/A | 61 | ||||||||||||
| 2016 | 8.67 | .24 | (c) | .52 | .76 | .14 | — | .14 | 9.29 | 8.85 | 8,289 | .93 | .93 | 2.75 | N/A | N/A | 72 | |||||||||||||||
| 2017 | 9.29 | .22 | (c) | .27 | .49 | .19 | — | .19 | 9.59 | 5.27 | 8,669 | .94 | .95 | 2.80 | N/A | N/A | 76 | |||||||||||||||
| 356 | 357 |
Financial Highlights (continued)
FIRST INVESTORS INCOME FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net Realized | Net Asset | Net | |||||||||||||||||||||||||||||
| Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Investment | Portfolio | ||||||||||||||||||||
| Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Investment | Income | Turnover | ||||||||||||||||||
| of Period | Income | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | Income | Expenses | *** | (Loss | ) | Rate | ||||||||||||
| INVESTMENT GRADE FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $10.27 | $.35 | $(.46 | ) | $(.11 | ) | $.38 | — | $.38 | $9.78 | (1.10 | )% | $543,955 | 1.07 | % | 1.07 | % | 3.20 | % | 1.18 | % | 3.09 | % | 33 | % | |||||||
| 2014 | 9.78 | .31 | (c) | .22 | .53 | .39 | — | .39 | 9.92 | 5.50 | 475,090 | 1.05 | 1.05 | 3.11 | 1.16 | 3.00 | 49 | |||||||||||||||
| 2015 | 9.92 | .28 | (c) | (.17 | ) | .11 | .39 | — | .39 | 9.64 | 1.12 | 458,704 | 1.04 | 1.04 | 2.85 | 1.15 | 2.74 | 36 | ||||||||||||||
| 2016 | 9.64 | .27 | (c) | .35 | .62 | .36 | — | .36 | 9.90 | 6.55 | 477,010 | 1.04 | 1.05 | 2.78 | 1.15 | 2.68 | 37 | |||||||||||||||
| 2017 | 9.90 | .26 | (c) | (.17 | ) | .09 | .33 | — | .33 | 9.66 | .97 | 462,999 | 1.04 | 1.04 | 2.68 | 1.15 | 2.57 | 52 | ||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 10.26 | .27 | (.45 | ) | (.18 | ) | .32 | — | .32 | 9.76 | (1.82 | ) | 6,161 | 1.84 | 1.84 | 2.42 | 1.94 | 2.32 | 33 | |||||||||||||
| 2014 | 9.76 | .22 | (c) | .22 | .44 | .33 | — | .33 | 9.87 | 4.53 | 4,727 | 1.92 | 1.92 | 2.24 | 2.03 | 2.13 | 49 | |||||||||||||||
| 2015 | 9.87 | .20 | (c) | (.17 | ) | .03 | .33 | — | .33 | 9.57 | .27 | 3,623 | 1.92 | 1.92 | 1.98 | 2.03 | 1.87 | 36 | ||||||||||||||
| 2016 | 9.57 | .19 | (c) | .34 | .53 | .27 | — | .27 | 9.83 | 5.61 | 2,907 | 1.92 | 1.92 | 1.91 | 2.03 | 1.80 | 37 | |||||||||||||||
| 2017 | 9.83 | .19 | (c) | (.18 | ) | .01 | .23 | — | .23 | 9.61 | .12 | 2,181 | 1.90 | 1.90 | 1.84 | 2.01 | 1.73 | 52 | ||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(j) | 10.23 | .08 | (.34 | ) | (.26 | ) | .19 | — | .19 | 9.78 | (2.53 | )†† | 1 | .95 | † | .95 | † | 2.64 | † | 5.17 | † | (1.58 | )† | 33 | †† | |||||||
| 2014 | 9.78 | .34 | (c) | .20 | .54 | .40 | — | .40 | 9.92 | 5.61 | 44,351 | .69 | .69 | 3.38 | .80 | 3.27 | 49 | |||||||||||||||
| 2015 | 9.92 | .31 | (c) | (.16 | ) | .15 | .40 | — | .40 | 9.67 | 1.53 | 63,614 | .73 | .73 | 3.17 | .84 | 3.06 | 36 | ||||||||||||||
| 2016 | 9.67 | .30 | (c) | .34 | .64 | .37 | — | .37 | 9.94 | 6.78 | 83,659 | .74 | .74 | 3.08 | .85 | 2.97 | 37 | |||||||||||||||
| 2017 | 9.94 | .26 | (c) | (.14 | ) | .12 | .35 | — | .35 | 9.71 | 1.32 | 136,316 | .72 | .72 | 2.99 | .82 | 2.89 | 52 | ||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(j) | 10.23 | .14 | (.38 | ) | (.24 | ) | .20 | — | .20 | 9.79 | (2.37 | )†† | 9,326 | .66 | † | .66 | † | 3.06 | † | .77 | † | 2.95 | † | 33 | †† | |||||||
| 2014 | 9.79 | .35 | (c) | .23 | .58 | .43 | — | .43 | 9.94 | 5.98 | 22,269 | .63 | .63 | 3.51 | .74 | 3.40 | 49 | |||||||||||||||
| 2015 | 9.94 | .32 | (c) | (.17 | ) | .15 | .43 | — | .43 | 9.66 | 1.48 | 15,025 | .63 | .63 | 3.26 | .74 | 3.15 | 36 | ||||||||||||||
| 2016 | 9.66 | .31 | (c) | .35 | .66 | .40 | — | .40 | 9.92 | 6.97 | 31,395 | .63 | .63 | 3.17 | .74 | 3.06 | 37 | |||||||||||||||
| 2017 | 9.92 | .31 | (c) | (.18 | ) | .13 | .37 | — | .37 | 9.68 | 1.41 | 26,127 | .63 | .63 | 3.10 | .74 | 2.99 | 52 | ||||||||||||||
| 358 | 359 |
Financial Highlights (continued)
FIRST INVESTORS INCOME FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net | Net Realized | Net Asset | Net | Net | |||||||||||||||||||||||||||
| Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Investment | Investment | Portfolio | ||||||||||||||||||||
| Beginning | Income | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Income | Income | Turnover | ||||||||||||||||||
| of Period | (Loss | ) | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | (Loss | ) | Expenses | *** | (Loss | ) | Rate | ||||||||||
| LIMITED DURATION HIGH QUALITY BOND FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2014(g) | $10.00 | $ — | (c) | $(.05 | ) | $ (.05 | ) | $.06 | — | $.06 | $9.89 | (.50 | )%†† | $8,911 | 1.05 | %† | 1.05 | %† | .15 | %† | 3.37 | %† | (2.17 | )%† | 19 | %†† | ||||||
| 2015 | 9.89 | .03 | (c) | .04 | .07 | .20 | — | .20 | 9.76 | .67 | 26,852 | 1.05 | 1.05 | .37 | 1.32 | .10 | 57 | |||||||||||||||
| 2016 | 9.76 | (.03 | )(c) | .15 | .12 | .22 | — | .22 | 9.66 | 1.21 | 48,342 | 1.05 | 1.05 | (.25 | ) | 1.23 | (.43 | ) | 54 | |||||||||||||
| 2017 | 9.66 | .08 | (c) | (.06 | ) | .02 | .21 | — | .21 | 9.47 | .22 | 62,841 | 1.05 | 1.05 | .85 | 1.22 | .68 | 60 | ||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2014(g) | 10.00 | .02 | (c) | (.05 | ) | (.03 | ) | .06 | — | .06 | 9.91 | (.28 | )†† | 25,649 | .75 | † | .75 | † | .46 | † | 1.02 | † | .19 | † | 19 | †† | ||||||
| 2015 | 9.91 | .06 | (c) | .05 | .11 | .22 | — | .22 | 9.80 | 1.08 | 40,502 | .75 | .75 | .66 | 1.09 | .32 | 57 | |||||||||||||||
| 2016 | 9.80 | — | (c) | .14 | .14 | .25 | — | .25 | 9.69 | 1.47 | 50,645 | .75 | .75 | .04 | 1.01 | (.22 | ) | 54 | ||||||||||||||
| 2017 | 9.69 | .13 | (c) | (.08 | ) | .05 | .24 | — | .24 | 9.50 | .54 | 31,638 | .75 | .75 | 1.14 | 1.02 | .87 | 60 | ||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2014(g) | 10.00 | .02 | (c) | (.03 | ) | (.01 | ) | .07 | — | .07 | 9.92 | (.14 | )†† | 5,125 | .60 | † | .60 | † | .53 | † | 3.32 | † | (2.19 | )† | 19 | †† | ||||||
| 2015 | 9.92 | .08 | (c) | .04 | .12 | .23 | — | .23 | 9.81 | 1.21 | 6,747 | .60 | .60 | .81 | .92 | .49 | 57 | |||||||||||||||
| 2016 | 9.81 | .02 | (c) | .14 | .16 | .27 | — | .27 | 9.70 | 1.64 | 22,296 | .60 | .60 | .20 | .82 | (.02 | ) | 54 | ||||||||||||||
| 2017 | 9.70 | .11 | (c) | (.04 | ) | .07 | .25 | — | .25 | 9.52 | .77 | 41,065 | .60 | .60 | 1.30 | .82 | 1.08 | 60 | ||||||||||||||
| STRATEGIC INCOME FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013(i) | $10.00 | $ .14 | (a) | $(.23 | ) | $(.09 | ) | $.13 | $ — | $.13 | $9.78 | (.87 | )%†† | $ 47,344 | 1.30 | %†(b) | 1.30 | %†(b) | 2.88 | %†(a) | 2.10 | %†(b) | 2.08 | %†(a) | 19 | %†† | ||||||
| 2014 | 9.78 | .32 | (a)(c) | .12 | .44 | .28 | .00 | (d) | .28 | 9.94 | 4.55 | 101,540 | .80 | (b) | .80 | (b) | 3.18 | (a) | .68 | (b) | 3.30 | (a) | 20 | |||||||||
| 2015 | 9.94 | .34 | (a)(c) | (.57 | ) | (.23 | ) | .34 | .07 | .41 | 9.30 | (2.37) | 131,734 | .59 | (b) | .59 | (b) | 3.55 | (a) | N/A | N/A | 40 | ||||||||||
| 2016 | 9.30 | .30 | (a)(c) | .22 | .52 | .32 | .02 | .34 | 9.48 | 5.64 | 149,190 | .58 | (b) | .58 | (b) | 3.19 | (a) | N/A | N/A | 49 | ||||||||||||
| 2017 | 9.48 | .30 | (a)(c) | .05 | .35 | .30 | — | .30 | 9.53 | 3.73 | 162,789 | .57 | (b) | .57 | (b) | 3.24 | (a) | N/A | N/A | 37 | ||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(i) | 10.00 | .14 | (a) | (.22 | ) | (.08 | ) | .15 | — | .15 | 9.77 | (.79 | )†† | 1 | 1.00 | †(b) | 1.00 | †(b) | 2.89 | †(a) | 14.79 | †(b) | (10.90 | )†(a) | 19 | †† | ||||||
| 2014 | 9.77 | .36 | (a)(c) | .11 | .47 | .32 | .00 | (d) | .32 | 9.92 | 4.82 | 323 | .36 | (b) | .36 | (b) | 3.62 | (a) | .29 | (b) | 3.69 | (a) | 20 | |||||||||
| 2015 | 9.92 | .38 | (a)(c) | (.56 | ) | (.18 | ) | .38 | .07 | .45 | 9.29 | (1.93 | ) | 306 | .19 | (b) | .19 | (b) | 3.95 | (a) | N/A | N/A | 40 | |||||||||
| 2016 | 9.29 | .33 | (a)(c) | .23 | .56 | .36 | .02 | .38 | 9.47 | 6.14 | 415 | .17 | (b) | .17 | (b) | 3.59 | (a) | N/A | N/A | 49 | ||||||||||||
| 2017 | 9.47 | .29 | (a)(c) | .09 | .38 | .33 | — | .33 | 9.52 | 4.14 | 963 | .18 | (b) | .18 | (b) | 3.66 | (a) | N/A | N/A | 37 | ||||||||||||
| 360 | See notes to financial statements | 361 |
Financial Highlights (continued)
FIRST INVESTORS INCOME FUNDS
| * | Calculated without sales charges. |
| ** | Net of expenses waived or assumed (Note 3). |
| *** | The ratios do not include a reduction of expenses from cash balances maintained with the custodian or from |
| brokerage service arrangements (Note1G). | |
| † | Annualized |
| †† | Not annualized |
| (a) | Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends |
| by the underlying investment companies in which the Fund invests. The ratio does not include net | |
| investment income of the investment companies in which the Fund invests. | |
| (b) | Does not include expenses of the investment companies in which the Fund invests. |
| (c) | Based on average shares during the period. |
| (d) | Due to rounding, amount is less than .005 per share. |
| (e) | Prior to October 3, 2016, known as Cash Management Fund. |
| (f) | For the period October 1, 2015 (commencement of operations) to September 30, 2016. |
| (g) | For the period May 19, 2014 (commencement of operations) to September 30, 2014. |
| (h) | For the period October 21, 2013 (commencement of operations) to September 30, 2014. |
| (i) | For the period April 3, 2013 (commencement of operations) to September 30, 2013. |
| (j) | For the period April 1, 2013 (commencement of operations) to September 30, 2013. |
| This page left intentionally blank. |
| 362 | 363 |
Financial Highlights
FIRST INVESTORS EQUITY FUNDS
The following table 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 fiscal year ended
September 30, except as otherwise indicated.
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net Realized | Net Asset | Net | |||||||||||||||||||||||||||||
| Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Investment | Portfolio | ||||||||||||||||||||
| Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Investment | Income | Turnover | ||||||||||||||||||
| of Period | Income | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | Income | Expenses | *** | (Loss | ) | Rate | ||||||||||||
| COVERED CALL STRATEGY FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2016(e) | $10.00 | $.06 | (a) | $ .33 | $ .39 | $.03 | $ — | $.03 | $10.36 | 3.94 | %†† | $ 48,514 | 1.30 | %† | 1.30 | %† | 1.19 | %† | 1.73 | %† | .76 | %† | 83 | %†† | ||||||||
| 2017 | 10.36 | .10 | (a) | .85 | .95 | .11 | .02 | .13 | 11.18 | 9.17 | 167,096 | 1.30 | 1.30 | 1.18 | 1.36 | 1.12 | 121 | |||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2016(e) | 10.00 | .08 | (a) | .32 | .40 | .06 | — | .06 | 10.34 | 4.05 | †† | 39,129 | .97 | † | .97 | † | 1.64 | † | 1.50 | † | 1.11 | † | 83 | †† | ||||||||
| 2017 | 10.34 | .13 | (a) | .86 | .99 | .15 | .02 | .17 | 11.16 | 9.62 | 109,360 | .97 | .97 | 1.53 | 1.06 | 1.44 | 121 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2016(e) | 10.00 | .09 | (a) | .33 | .42 | .07 | — | .07 | 10.35 | 4.18 | †† | 4,214 | .84 | † | .84 | † | 1.76 | † | 1.25 | † | 1.35 | † | 83 | †† | ||||||||
| 2017 | 10.35 | .16 | (a) | .85 | 1.01 | .17 | .02 | .19 | 11.17 | 9.77 | 7,334 | .84 | .84 | 1.65 | .96 | 1.53 | 121 | |||||||||||||||
| EQUITY INCOME FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $ 7.67 | $.14 | $1.32 | $1.46 | $.14 | $ — | $.14 | $ 8.99 | 19.14 | % | $475,422 | 1.28 | % | 1.28 | % | 1.66 | % | N/A | N/A | 32 | % | |||||||||||
| 2014 | 8.99 | .13 | (a) | 1.16 | 1.29 | .14 | .15 | .29 | 9.99 | 14.48 | 510,981 | 1.21 | 1.22 | 1.33 | N/A | N/A | 27 | |||||||||||||||
| 2015 | 9.99 | .15 | (a) | (.54 | ) | (.39 | ) | .15 | .46 | .61 | 8.99 | (4.31 | ) | 485,342 | 1.21 | 1.21 | 1.52 | N/A | N/A | 23 | ||||||||||||
| 2016 | 8.99 | .16 | (a) | 1.08 | 1.24 | .16 | .35 | .51 | 9.72 | 14.16 | 529,327 | 1.22 | 1.22 | 1.72 | N/A | N/A | 22 | |||||||||||||||
| 2017 | 9.72 | .16 | (a) | 1.22 | 1.38 | .21 | .18 | .39 | 10.71 | 14.46 | 564,918 | 1.20 | 1.20 | 1.58 | N/A | N/A | 15 | |||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 7.55 | .09 | 1.28 | 1.37 | .08 | — | .08 | 8.84 | 18.21 | 6,337 | 2.05 | 2.05 | .90 | N/A | N/A | 32 | ||||||||||||||||
| 2014 | 8.84 | .05 | (a) | 1.13 | 1.18 | .05 | .15 | .20 | 9.82 | 13.49 | 5,721 | 2.06 | 2.06 | .49 | N/A | N/A | 27 | |||||||||||||||
| 2015 | 9.82 | .06 | (a) | (.53 | ) | (.47 | ) | .07 | .46 | .53 | 8.82 | (5.16 | ) | 3,847 | 2.06 | 2.06 | .67 | N/A | N/A | 23 | ||||||||||||
| 2016 | 8.82 | .08 | (a) | 1.06 | 1.14 | .09 | .35 | .44 | 9.52 | 13.20 | 3,446 | 2.07 | 2.07 | .87 | N/A | N/A | 22 | |||||||||||||||
| 2017 | 9.52 | .08 | (a) | 1.19 | 1.27 | .12 | .18 | .30 | 10.49 | 13.48 | 3,012 | 2.03 | 2.03 | .76 | N/A | N/A | 15 | |||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 8.40 | .08 | .58 | .66 | .07 | — | .07 | 8.99 | 7.87 | †† | 1 | 1.01 | † | 1.01 | † | 1.78 | † | 4.68 | %† | (1.89 | )%† | 32 | †† | |||||||||
| 2014 | 8.99 | .17 | (a) | 1.13 | 1.30 | .15 | .15 | .30 | 9.99 | 14.57 | 32,160 | .81 | .81 | 1.71 | N/A | N/A | 27 | |||||||||||||||
| 2015 | 9.99 | .19 | (a) | (.55 | ) | (.36 | ) | .17 | .46 | .63 | 9.00 | (3.96) | 38,482 | .84 | .84 | 1.90 | N/A | N/A | 23 | |||||||||||||
| 2016 | 9.00 | .20 | (a) | 1.08 | 1.28 | .19 | .35 | .54 | 9.74 | 14.63 | 54,576 | .85 | .85 | 2.08 | N/A | N/A | 22 | |||||||||||||||
| 2017 | 9.74 | .19 | (a) | 1.23 | 1.42 | .21 | .18 | .39 | 10.77 | 14.87 | 71,611 | .84 | .84 | 1.94 | N/A | N/A | 15 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 8.40 | .04 | .63 | .67 | .05 | — | .05 | 9.02 | 7.95 | †† | 4,717 | .86 | † | .86 | † | 1.74 | † | .86 | † | 1.74 | † | 32 | †† | |||||||||
| 2014 | 9.02 | .17 | (a) | 1.16 | 1.33 | .17 | .15 | .32 | 10.03 | 14.88 | 7,399 | .80 | .80 | 1.76 | N/A | N/A | 27 | |||||||||||||||
| 2015 | 10.03 | .19 | (a) | (.55 | ) | (.36 | ) | .17 | .46 | .63 | 9.04 | (3.97 | ) | 9,773 | .81 | .81 | 1.93 | N/A | N/A | 23 | ||||||||||||
| 2016 | 9.04 | .20 | (a) | 1.09 | 1.29 | .20 | .35 | .55 | 9.78 | 14.67 | 2,448 | .78 | .78 | 2.08 | N/A | N/A | 22 | |||||||||||||||
| 2017 | 9.78 | .37 | (a) | 1.06 | 1.43 | .31 | .18 | .49 | 10.72 | 14.84 | 2,193 | .80 | .80 | 2.02 | N/A | N/A | 15 | |||||||||||||||
| 364 | 365 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distribution | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net | Net Realized | Net Asset | Net | Net | |||||||||||||||||||||||||||
| Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Investment | Investment | Portfolio | ||||||||||||||||||||
| Beginning | Income | Gain on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Income | Income | Turnover | ||||||||||||||||||
| of Period | (Loss | ) | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | (Loss | ) | Expenses | *** | (Loss | ) | Rate | ||||||||||
| GLOBAL FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $6.79 | $ .05 | $1.20 | $1.25 | $.03 | $ — | $ .03 | $8.01 | 18.56 | % | $317,329 | 1.60 | % | 1.61 | % | .66 | % | 1.62 | % | .65 | % | 92 | % | |||||||||
| 2014 | 8.01 | — | (a) | .80 | .80 | .04 | .11 | .15 | 8.66 | 10.00 | 332,416 | 1.49 | 1.49 | .03 | 1.54 | (.02 | ) | 154 | ||||||||||||||
| 2015 | 8.66 | — | (a) | .11 | .11 | — | 1.51 | 1.51 | 7.26 | .87 | 331,382 | 1.47 | 1.47 | (.01 | ) | 1.52 | (.06 | ) | 97 | |||||||||||||
| 2016 | 7.26 | .01 | (a) | .43 | .44 | .00 | (b) | .40 | .40 | 7.30 | 6.03 | 339,956 | 1.47 | 1.47 | .09 | 1.52 | .04 | 94 | ||||||||||||||
| 2017 | 7.30 | .02 | (a) | 1.29 | 1.31 | .01 | — | .01 | 8.60 | 17.99 | 379,176 | 1.44 | 1.44 | .30 | 1.49 | .25 | 117 | |||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 5.86 | (.07 | ) | 1.09 | 1.02 | .02 | — | .02 | 6.86 | 17.55 | 4,419 | 2.36 | 2.36 | (.10 | ) | 2.38 | (.12 | ) | 92 | |||||||||||||
| 2014 | 6.86 | (.06 | )(a) | .69 | .63 | — | .11 | .11 | 7.38 | 9.18 | 4,023 | 2.31 | 2.31 | (.79 | ) | 2.36 | (.84 | ) | 154 | |||||||||||||
| 2015 | 7.38 | (.05 | )(a) | .10 | .05 | — | 1.51 | 1.51 | 5.92 | .09 | 3,405 | 2.28 | 2.28 | (.82 | ) | 2.33 | (.87 | ) | 97 | |||||||||||||
| 2016 | 5.92 | (.04 | )(a) | .36 | .32 | — | .40 | .40 | 5.84 | 5.29 | 2,937 | 2.27 | 2.27 | (.72 | ) | 2.32 | (.77 | ) | 94 | |||||||||||||
| 2017 | 5.84 | (.03 | )(a) | 1.02 | .99 | .00 | (b) | — | .00 | (b) | 6.83 | 16.98 | 2,642 | 2.24 | 2.24 | (.52 | ) | 2.29 | (.57 | ) | 117 | |||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 7.28 | .06 | .67 | .73 | — | — | — | 8.01 | 10.03 | †† | 1 | 1.27 | † | 1.27 | † | 1.46 | † | 4.88 | † | (2.15 | )† | 92 | †† | |||||||||
| 2014 | 8.01 | — | (a) | .82 | .82 | — | .11 | .11 | 8.72 | 10.24 | 66,590 | 1.06 | 1.06 | .53 | 1.11 | .48 | 154 | |||||||||||||||
| 2015 | 8.72 | .03 | (a) | .12 | .15 | — | 1.51 | 1.51 | 7.36 | 1.37 | 114,556 | 1.06 | 1.06 | .43 | 1.11 | .38 | 97 | |||||||||||||||
| 2016 | 7.36 | .04 | (a) | .44 | .48 | .01 | .40 | .41 | 7.43 | 6.48 | 169,088 | 1.05 | 1.05 | .53 | 1.10 | .48 | 94 | |||||||||||||||
| 2017 | 7.43 | .06 | (a) | 1.31 | 1.37 | .02 | — | .02 | 8.78 | 18.46 | 191,839 | 1.04 | 1.04 | .70 | 1.09 | .65 | 117 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 7.28 | .06 | .68 | .74 | — | — | — | 8.02 | 10.17 | †† | 1 | 1.14 | † | 1.14 | † | 1.55 | † | 4.59 | † | (1.90 | )† | 92 | †† | |||||||||
| 2014 | 8.02 | — | (a) | .84 | .84 | — | .11 | .11 | 8.75 | 10.48 | 3,001 | 1.03 | 1.03 | .48 | 1.08 | .43 | 154 | |||||||||||||||
| 2015 | 8.75 | .04 | (a) | .11 | .15 | — | 1.51 | 1.51 | 7.39 | 1.37 | 2,955 | 1.02 | 1.02 | .45 | 1.07 | .40 | 97 | |||||||||||||||
| 2016 | 7.39 | .04 | (a) | .45 | .49 | .01 | .40 | .41 | 7.47 | 6.61 | 3,288 | 1.01 | 1.01 | .55 | 1.06 | .50 | 94 | |||||||||||||||
| 2017 | 7.47 | .06 | (a) | 1.31 | 1.37 | .02 | — | .02 | 8.82 | 18.38 | 3,800 | 1.00 | 1.00 | .74 | 1.05 | .69 | 117 | |||||||||||||||
| 366 | 367 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net Realized | Net Asset | ||||||||||||||||||||||||||||||
| Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
| Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
| of Period | Income | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | Income | Expenses | *** | Loss | Rate | |||||||||||||
| GROWTH & INCOME FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $16.66 | $.20 | $ 3.90 | $ 4.10 | $.22 | $ — | $ .22 | $20.54 | 24.86 | % | $1,538,582 | 1.22 | % | 1.22 | % | 1.11 | % | N/A | N/A | 20 | % | |||||||||||
| 2014 | 20.54 | .18 | (a) | 2.92 | 3.10 | .20 | .68 | .88 | 22.76 | 15.26 | 1,632,920 | 1.15 | 1.15 | .80 | N/A | N/A | 22 | |||||||||||||||
| 2015 | 22.76 | .20 | (a) | (1.37 | ) | (1.17 | ) | .19 | 1.05 | 1.24 | 20.35 | (5.62 | ) | 1,496,803 | 1.15 | 1.15 | .89 | N/A | N/A | 23 | ||||||||||||
| 2016 | 20.35 | .26 | (a) | 2.07 | 2.33 | .24 | .93 | 1.17 | 21.51 | 11.72 | 1,588,423 | 1.16 | 1.16 | 1.28 | N/A | N/A | 23 | |||||||||||||||
| 2017 | 21.51 | .25 | (a) | 2.66 | 2.91 | .37 | .75 | 1.12 | 23.30 | 13.99 | 1,675,590 | 1.15 | 1.15 | 1.13 | N/A | N/A | 16 | |||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 15.64 | .06 | 3.67 | 3.73 | .11 | — | .11 | 19.26 | 24.02 | 27,762 | 1.96 | 1.96 | .37 | N/A | N/A | 20 | ||||||||||||||||
| 2014 | 19.26 | — | (a) | 2.73 | 2.73 | — | .68 | .68 | 21.31 | 14.32 | 25,497 | 1.93 | 1.93 | .02 | N/A | N/A | 22 | |||||||||||||||
| 2015 | 21.31 | .02 | (a) | (1.27 | ) | (1.25 | ) | .04 | 1.05 | 1.09 | 18.97 | (6.33 | ) | 19,316 | 1.93 | 1.93 | .11 | N/A | N/A | 23 | ||||||||||||
| 2016 | 18.97 | .10 | (a) | 1.91 | 2.01 | .08 | .93 | 1.01 | 19.97 | 10.82 | 17,047 | 1.94 | 1.94 | .50 | N/A | N/A | 23 | |||||||||||||||
| 2017 | 19.97 | .08 | (a) | 2.45 | 2.53 | .13 | .75 | .88 | 21.62 | 13.14 | 14,310 | 1.93 | 1.93 | .35 | N/A | N/A | 16 | |||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 18.49 | .13 | 2.00 | 2.13 | .08 | — | .08 | 20.54 | 11.53 | †† | 1 | .97 | † | .97† | 1.31 | † | 4.60 | %† | (2.32 | )%† | 20 | †† | ||||||||||
| 2014 | 20.54 | .27 | (a) | 2.91 | 3.18 | .20 | .68 | .88 | 22.84 | 15.67 | 123,039 | .74 | .74 | 1.17 | N/A | N/A | 22 | |||||||||||||||
| 2015 | 22.84 | .29 | (a) | (1.38 | ) | (1.09 | ) | .24 | 1.05 | 1.29 | 20.46 | (5.24 | ) | 141,229 | .75 | .75 | 1.29 | N/A | N/A | 23 | ||||||||||||
| 2016 | 20.46 | .35 | (a) | 2.08 | 2.43 | .29 | .93 | 1.22 | 21.67 | 12.18 | 132,486 | .77 | .77 | 1.68 | N/A | N/A | 23 | |||||||||||||||
| 2017 | 21.67 | .33 | (a) | 2.69 | 3.02 | .48 | .75 | 1.23 | 23.46 | 14.42 | 166,851 | .78 | .78 | 1.50 | N/A | N/A | 16 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 18.49 | .15 | 2.00 | 2.15 | .09 | — | .09 | 20.55 | 11.64 | †† | 1 | .78 | † | .78 | † | 1.50 | † | 4.19 | † | (1.91 | )† | 20 | †† | |||||||||
| 2014 | 20.55 | .27 | (a) | 2.92 | 3.19 | .28 | .68 | .96 | 22.78 | 15.75 | 9,746 | .74 | .74 | 1.21 | N/A | N/A | 22 | |||||||||||||||
| 2015 | 22.78 | .29 | (a) | (1.39 | ) | (1.10 | ) | .24 | 1.05 | 1.29 | 20.39 | (5.27 | ) | 9,380 | .75 | .75 | 1.29 | N/A | N/A | 23 | ||||||||||||
| 2016 | 20.39 | .35 | (a) | 2.07 | 2.42 | .30 | .93 | 1.23 | 21.58 | 12.18 | 10,596 | .74 | .74 | 1.70 | N/A | N/A | 23 | |||||||||||||||
| 2017 | 21.58 | .34 | (a) | 2.67 | 3.01 | .45 | .75 | 1.20 | 23.39 | 14.47 | 10,839 | .74 | .74 | 1.54 | N/A | N/A | 16 | |||||||||||||||
| 368 | 369 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net | Net Realized | Net Asset | Net | ||||||||||||||||||||||||||||
| Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Investment | Net | Portfolio | ||||||||||||||||||||
| Beginning | Income | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Income | Investment | Turnover | ||||||||||||||||||
| of Period | (Loss | ) | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | (Loss | ) | Expenses | *** | Loss | Rate | |||||||||||
| HEDGED U.S. EQUITY OPPORTUNITIES FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2016(d) | $10.00 | $ — | (a) | $ (.09 | ) | $ (.09 | ) | $ — | — | $ — | $ 9.91 | (.90 | )%†† | $ 9,265 | 1.75 | %† | 1.75 | %† | (.02 | )%† | 4.24 | %† | (2.51 | )%† | 7 | %†† | ||||||
| 2017 | 9.91 | (.02 | )(a) | .88 | .86 | — | — | — | 10.77 | 8.68 | 44,228 | 1.75 | 1.75 | (.21 | ) | 2.09 | (.55 | ) | 75 | |||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2016(d) | 10.00 | — | (a) | (.09 | ) | (.09 | ) | — | — | — | 9.91 | (.90 | )†† | 24,539 | 1.42 | † | 1.42 | † | .26 | † | 3.37 | † | (1.69 | )† | 7 | †† | ||||||
| 2017 | 9.91 | .01 | (a) | .89 | .90 | .00 | (b) | — | .00 | (b) | 10.81 | 9.11 | 33,770 | 1.42 | 1.42 | .10 | 1.76 | (.24 | ) | 75 | ||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2016(d) | 10.00 | .01 | (a) | (.10 | ) | (.09 | ) | — | — | — | 9.91 | (.90 | )†† | 99 | 1.31 | † | 1.31 | † | .30 | † | 3.24 | † | (1.63 | )† | 7 | †† | ||||||
| 2017 | 9.91 | .02 | (a) | .89 | .91 | .00 | (b) | — | .00 | (b) | 10.82 | 9.21 | 472 | 1.31 | 1.31 | .23 | 1.74 | (.20 | ) | 75 | ||||||||||||
| INTERNATIONAL FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $11.68 | $ .04 | $ .81 | $ .85 | $ — | — | $ — | $12.53 | 7.28 | % | $215,873 | 1.71 | % | 1.71 | % | .34 | % | N/A | N/A | 31 | % | |||||||||||
| 2014 | 12.53 | .05 | (a) | .50 | .55 | .02 | — | .02 | 13.06 | 4.43 | 193,174 | 1.66 | 1.66 | .39 | N/A | N/A | 34 | |||||||||||||||
| 2015 | 13.06 | .05 | (a) | (.41 | ) | (.36 | ) | .05 | — | .05 | 12.65 | (2.78 | ) | 194,991 | 1.64 | 1.64 | .40 | N/A | N/A | 27 | ||||||||||||
| 2016 | 12.65 | .06 | (a) | 1.05 | 1.11 | .05 | — | .05 | 13.71 | 8.80 | 209,205 | 1.61 | 1.61 | .45 | N/A | N/A | 28 | |||||||||||||||
| 2017 | 13.71 | .02 | (a) | 2.02 | 2.04 | .07 | — | .07 | 15.68 | 15.00 | 238,770 | 1.58 | 1.58 | .17 | N/A | N/A | 38 | |||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 11.25 | (.11 | ) | .84 | .73 | — | — | — | 11.98 | 6.49 | 3,200 | 2.46 | 2.46 | (.45 | ) | N/A | N/A | 31 | ||||||||||||||
| 2014 | 11.98 | (.05 | )(a) | .47 | .42 | — | — | — | 12.40 | 3.51 | 2,893 | 2.49 | 2.49 | (.42 | ) | N/A | N/A | 34 | ||||||||||||||
| 2015 | 12.40 | (.06 | )(a) | (.38 | ) | (.44 | ) | — | — | — | 11.96 | (3.55 | ) | 2,094 | 2.47 | 2.47 | (.49 | ) | N/A | N/A | 27 | |||||||||||
| 2016 | 11.96 | (.06 | )(a) | 1.00 | .94 | .03 | — | .03 | 12.87 | 7.83 | 1,607 | 2.45 | 2.45 | (.45 | ) | N/A | N/A | 28 | ||||||||||||||
| 2017 | 12.87 | (.09 | )(a) | 1.90 | 1.81 | .05 | — | .05 | 14.63 | 14.12 | 1,465 | 2.40 | 2.40 | (.68 | ) | N/A | N/A | 38 | ||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 12.79 | .06 | (.30 | ) | (.24 | ) | — | — | — | 12.55 | (1.88 | )†† | 1 | 1.45 | † | 1.45 | † | .97 | † | 5.30 | %† | (2.88 | )%† | 31 | †† | |||||||
| 2014 | 12.55 | .14 | (a) | .44 | .58 | — | — | — | 13.13 | 4.62 | 35,249 | 1.27 | 1.27 | .98 | N/A | N/A | 34 | |||||||||||||||
| 2015 | 13.13 | .11 | (a) | (.43 | ) | (.32 | ) | .05 | — | .05 | 12.76 | (2.45 | ) | 57,623 | 1.24 | 1.24 | .83 | N/A | N/A | 27 | ||||||||||||
| 2016 | 12.76 | .11 | (a) | 1.06 | 1.17 | .06 | — | .06 | 13.87 | 9.22 | 81,525 | 1.23 | 1.24 | .85 | N/A | N/A | 28 | |||||||||||||||
| 2017 | 13.87 | .08 | (a) | 2.05 | 2.13 | .08 | — | .08 | 15.92 | 15.50 | 111,334 | 1.18 | 1.18 | .59 | N/A | N/A | 38 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 12.79 | .08 | (.31 | ) | (.23 | ) | — | — | — | 12.56 | (1.80 | )†† | 1 | 1.19 | † | 1.19 | † | 1.23 | † | 4.84 | † | (2.42 | )† | 31 | †† | |||||||
| 2014 | 12.56 | .12 | (a) | .51 | .63 | — | — | — | 13.19 | 5.02 | 2,357 | 1.17 | 1.17 | .93 | N/A | N/A | 34 | |||||||||||||||
| 2015 | 13.19 | .12 | (a) | (.43 | ) | (.31 | ) | .10 | — | .10 | 12.78 | (2.33 | ) | 2,347 | 1.14 | 1.14 | .89 | N/A | N/A | 27 | ||||||||||||
| 2016 | 12.78 | .13 | (a) | 1.07 | 1.20 | .07 | — | .07 | 13.91 | 9.39 | 2,695 | 1.12 | 1.12 | .95 | N/A | N/A | 28 | |||||||||||||||
| 2017 | 13.91 | .09 | (a) | 2.05 | 2.14 | .09 | — | .09 | 15.96 | 15.54 | 3,274 | 1.09 | 1.09 | .65 | N/A | N/A | 38 | |||||||||||||||
| 370 | 371 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net | Net Realized | Net Asset | Net | ||||||||||||||||||||||||||||
| Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Investment | Net | Portfolio | ||||||||||||||||||||
| Beginning | Income | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Income | Investment | Turnover | ||||||||||||||||||
| of Period | (Loss | ) | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | (Loss | ) | Expenses | *** | Loss | Rate | |||||||||||
| LONG SHORT FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2017(c) | $10.00 | $(.11 | )(a) | $ .55 | $ .44 | — | — | — | $ 10.44 | 4.40 | %†† | $ 10,697 | 3.21 | %† | 3.21 | %† | (1.77 | )%† | 3.99 | %† | (2.55 | )%† | 89 | %†† | ||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2017(c) | $10.00 | (.09 | )(a) | .55 | .46 | — | — | — | 10.46 | 4.60 | †† | 40,038 | 2.87 | † | 2.87 | † | (1.50 | )† | 3.52 | † | (2.15 | )† | 89 | †† | ||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2017(c) | $10.00 | (.11 | )(a) | .58 | .47 | — | — | — | 10.47 | 4.70 | †† | 171 | 2.74 | † | 2.74 | † | (1.41 | )† | 3.61 | † | (2.28 | )† | 89 | †† | ||||||||
| OPPORTUNITY FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $29.37 | $ .18 | $9.64 | $9.82 | $.26 | $ .80 | $1.06 | $38.13 | 34.47 | % | $726,942 | 1.28 | % | 1.28 | % | .56 | % | N/A | N/A | 40 | % | |||||||||||
| 2014 | 38.13 | .07 | (a) | 5.29 | 5.36 | .16 | 2.43 | 2.59 | 40.90 | 14.20 | 805,113 | 1.20 | 1.20 | .16 | N/A | N/A | 34 | |||||||||||||||
| 2015 | 40.90 | .04 | (a) | (.39 | ) | (.35 | ) | .06 | 2.70 | 2.76 | 37.79 | (1.16 | ) | 818,955 | 1.20 | 1.20 | .11 | N/A | N/A | 37 | ||||||||||||
| 2016 | 37.79 | .20 | (a) | 2.52 | 2.72 | .04 | 3.18 | 3.22 | 37.29 | 7.39 | 880,274 | 1.22 | 1.22 | .54 | N/A | N/A | 36 | |||||||||||||||
| 2017 | 37.29 | .11 | (a) | 6.03 | 6.14 | .22 | 1.35 | 1.57 | 41.86 | 16.99 | 1,002,618 | 1.20 | 1.20 | .27 | N/A | N/A | 32 | |||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 25.15 | (.12 | ) | 8.26 | 8.14 | .22 | .80 | 1.02 | 32.27 | 33.49 | 13,677 | 2.02 | 2.02 | (.18 | ) | N/A | N/A | 40 | ||||||||||||||
| 2014 | 32.27 | (.21 | )(a) | 4.47 | 4.26 | — | 2.43 | 2.43 | 34.10 | 13.32 | 12,145 | 1.99 | 1.99 | (.63 | ) | N/A | N/A | 34 | ||||||||||||||
| 2015 | 34.10 | (.23 | )(a) | (.29 | ) | (.52 | ) | — | 2.70 | 2.70 | 30.88 | (1.94) | 9,691 | 1.97 | 1.97 | (.67 | ) | N/A | N/A | 37 | ||||||||||||
| 2016 | 30.88 | (.07 | )(a) | 2.05 | 1.98 | — | 3.18 | 3.18 | 29.68 | 6.58 | 8,606 | 1.99 | 1.99 | (.22 | ) | N/A | N/A | 36 | ||||||||||||||
| 2017 | 29.68 | (.16 | )(a) | 4.77 | 4.61 | .18 | 1.35 | 1.53 | 32.76 | 16.12 | 7,557 | 1.96 | 1.96 | (.49 | ) | N/A | N/A | 32 | ||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 33.13 | .16 | 4.89 | 5.05 | — | — | — | 38.18 | 15.24 | †† | 1 | .98 | † | .98 | † | .91 | † | 4.48 | %† | (2.59 | )%† | 40 | †† | |||||||||
| 2014 | 38.18 | .23 | (a) | 5.22 | 5.45 | — | 2.43 | 2.43 | 41.20 | 14.43 | 35,733 | .90 | .90 | .51 | N/A | N/A | 34 | |||||||||||||||
| 2015 | 41.20 | .16 | (a) | (.40 | ) | (.24 | ) | .08 | 2.70 | 2.78 | 38.18 | (.87 | ) | 48,322 | .91 | .91 | .40 | N/A | N/A | 37 | ||||||||||||
| 2016 | 38.18 | .30 | (a) | 2.56 | 2.86 | .07 | 3.18 | 3.25 | 37.79 | 7.69 | 73,477 | .93 | .93 | .83 | N/A | N/A | 36 | |||||||||||||||
| 2017 | 37.79 | .24 | (a) | 6.12 | 6.36 | .24 | 1.35 | 1.59 | 42.56 | 17.37 | 81,773 | .88 | .88 | .59 | N/A | N/A | 32 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 33.13 | .19 | 4.89 | 5.08 | — | — | — | 38.21 | 15.33 | †† | 1 | .85 | † | .85 | † | 1.06 | † | 4.17 | † | (2.26 | )† | 40 | †† | |||||||||
| 2014 | 38.21 | .24 | (a) | 5.30 | 5.54 | .17 | 2.43 | 2.60 | 41.15 | 14.66 | 3,838 | .79 | .79 | .58 | N/A | N/A | 34 | |||||||||||||||
| 2015 | 41.15 | .22 | (a) | (.40 | ) | (.18 | ) | .20 | 2.70 | 2.90 | 38.07 | (.74 | ) | 4,228 | .78 | .78 | .52 | N/A | N/A | 37 | ||||||||||||
| 2016 | 38.07 | .36 | (a) | 2.54 | 2.90 | .08 | 3.18 | 3.26 | 37.71 | 7.84 | 4,975 | .79 | .79 | .98 | N/A | N/A | 36 | |||||||||||||||
| 2017 | 37.71 | .27 | (a) | 6.12 | 6.39 | .26 | 1.35 | 1.61 | 42.49 | 17.49 | 5,678 | .78 | .78 | .70 | N/A | N/A | 32 | |||||||||||||||
| 372 | 373 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net | Net Realized | Net Asset | Net | Net | |||||||||||||||||||||||||||
| Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Investment | Investment | Portfolio | ||||||||||||||||||||
| Beginning | Income | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Income | Income | Turnover | ||||||||||||||||||
| of Period | (Loss | ) | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | (Loss | ) | Expenses | *** | (Loss | ) | Rate | ||||||||||
| REAL ESTATE FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2015(f) | $10.00 | $ .09 | (a) | $(1.06 | ) | $(.97 | ) | $.07 | $ — | $ .07 | $ 8.96 | (9.67 | )%†† | $ 11,410 | 1.45 | %† | 1.45 | %† | 1.99 | %† | 2.31 | %† | 1.13 | %† | 18 | %†† | ||||||
| 2016 | 8.96 | .24 | (a) | 1.11 | 1.35 | .18 | .02 | .20 | 10.11 | 15.19 | 27,741 | 1.45 | 1.45 | 2.47 | 1.54 | 2.38 | 31 | |||||||||||||||
| 2017 | 10.11 | .14 | (a) | (.72 | ) | (.58 | ) | .13 | .14 | .27 | 9.26 | (5.77 | ) | 40,935 | 1.45 | 1.45 | 1.58 | 1.45 | 1.58 | 17 | ||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2015(f) | 10.00 | .11 | (a) | (1.06 | ) | (.95 | ) | .07 | — | .07 | 8.98 | (9.45 | )†† | 40,824 | 1.12 | † | 1.12 | † | 2.36 | † | 1.63 | † | 1.85 | † | 18 | †† | ||||||
| 2016 | 8.98 | .27 | (a) | 1.13 | 1.40 | .21 | .02 | .23 | 10.15 | 15.66 | 55,218 | 1.12 | 1.12 | 2.75 | 1.21 | 2.66 | 31 | † | ||||||||||||||
| 2017 | 10.15 | .18 | (a) | (.74 | ) | (.56 | ) | .18 | .14 | .32 | 9.27 | (5.54 | ) | 77,398 | 1.12 | 1.12 | 2.09 | 1.08 | 2.13 | 17 | ||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2015(f) | 10.00 | .09 | (a) | (1.04 | ) | (.95 | ) | .09 | — | .09 | 8.96 | (9.45 | )†† | 963 | 1.00 | † | 1.00 | † | 2.08 | † | 2.18 | † | .90 | † | 18 | †† | ||||||
| 2016 | 8.96 | .28 | (a) | 1.13 | 1.41 | .21 | .02 | .23 | 10.14 | 15.89 | 634 | 1.00 | 1.00 | 2.87 | 1.06 | 2.81 | 31 | |||||||||||||||
| 2017 | 10.14 | .22 | (a) | (.77 | ) | (.55 | ) | .19 | .14 | .33 | 9.26 | (5.45 | ) | 575 | 1.00 | 1.00 | 2.38 | .94 | 2.44 | 17 | ||||||||||||
| SELECT GROWTH FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $ 7.98 | $ .02 | $1.24 | $1.26 | $ — | $ — | $ — | $ 9.24 | 15.79 | % | $315,833 | 1.35 | % | 1.35 | % | .25 | % | N/A | N/A | 71 | % | |||||||||||
| 2014 | 9.24 | — | (a) | 1.73 | 1.73 | .00 | (b) | — | .00 | (b) | 10.97 | 18.77 | 330,595 | 1.27 | 1.27 | .03 | N/A | N/A | 33 | |||||||||||||
| 2015 | 10.97 | .02 | (a) | .65 | .67 | .00 | (b) | — | .00 | (b) | 11.64 | 6.12 | 352,651 | 1.25 | 1.25 | .16 | N/A | N/A | 48 | |||||||||||||
| 2016 | 11.64 | .02 | (a) | .73 | .75 | .02 | 1.13 | 1.15 | 11.24 | 6.50 | 373,279 | 1.27 | 1.27 | .22 | N/A | N/A | 59 | |||||||||||||||
| 2017 | 11.24 | — | (a) | 2.38 | 2.38 | .03 | 1.55 | 1.58 | 12.04 | 24.16 | 444,933 | 1.25 | 1.25 | .00 | N/A | N/A | 58 | |||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 7.25 | (.06 | ) | 1.15 | 1.09 | — | — | — | 8.34 | 15.03 | 5,308 | 2.10 | 2.10 | (.48 | ) | N/A | N/A | 71 | ||||||||||||||
| 2014 | 8.34 | (.07 | )(a) | 1.55 | 1.48 | — | — | — | 9.82 | 17.75 | 4,868 | 2.06 | 2.06 | (.76 | ) | N/A | N/A | 33 | ||||||||||||||
| 2015 | 9.82 | (.07 | )(a) | .59 | .52 | — | — | — | 10.34 | 5.30 | 4,101 | 2.03 | 2.03 | (.63 | ) | N/A | N/A | 48 | ||||||||||||||
| 2016 | 10.34 | (.06 | )(a) | .65 | .59 | .00 | (b) | 1.13 | 1.13 | 9.80 | 5.71 | 3,393 | 2.03 | 2.03 | (.56 | ) | N/A | N/A | 59 | |||||||||||||
| 2017 | 9.80 | (.07 | )(a) | 2.02 | 1.95 | .02 | 1.55 | 1.57 | 10.18 | 23.13 | 3,163 | 2.01 | 2.01 | (.75 | ) | N/A | N/A | 58 | ||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 8.46 | .01 | .79 | .80 | — | — | — | 9.26 | 9.46 | †† | 1 | 1.02 | † | 1.02 | † | .25 | † | 4.63 | %† | (3.36 | )%† | 71 | †† | |||||||||
| 2014 | 9.26 | .06 | (a) | 1.69 | 1.75 | — | — | — | 11.01 | 18.90 | 31,902 | .83 | .83 | .51 | N/A | N/A | 33 | |||||||||||||||
| 2015 | 11.01 | .07 | (a) | .66 | .73 | .01 | — | .01 | 11.73 | 6.61 | 46,793 | .84 | .84 | .57 | N/A | N/A | 48 | |||||||||||||||
| 2016 | 11.73 | .07 | (a) | .73 | .80 | .03 | 1.13 | 1.16 | 11.37 | 6.93 | 66,588 | .85 | .86 | .62 | N/A | N/A | 59 | |||||||||||||||
| 2017 | 11.37 | .05 | (a) | 2.40 | 2.45 | .04 | 1.55 | 1.59 | 12.23 | 24.61 | 81,203 | .84 | .84 | .40 | N/A | N/A | 58 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 8.46 | .02 | .79 | .81 | — | — | — | 9.27 | 9.57 | †† | 1 | .89 | † | .89 | † | .39 | † | 4.32 | † | (3.04 | )† | 71 | †† | |||||||||
| 2014 | 9.27 | .05 | (a) | 1.74 | 1.79 | — | — | — | 11.06 | 19.31 | 3,057 | .83 | .83 | .48 | N/A | N/A | 33 | |||||||||||||||
| 2015 | 11.06 | .07 | (a) | .66 | .73 | .02 | — | .02 | 11.77 | 6.56 | 3,608 | .82 | .82 | .59 | N/A | N/A | 48 | |||||||||||||||
| 2016 | 11.77 | .07 | (a) | .74 | .81 | .03 | 1.13 | 1.16 | 11.42 | 7.00 | 3,915 | .83 | .83 | .66 | N/A | N/A | 59 | |||||||||||||||
| 2017 | 11.42 | .05 | (a) | 2.41 | 2.46 | .04 | 1.55 | 1.59 | 12.29 | 24.61 | 4,950 | .82 | .82 | .43 | N/A | N/A | 58 | |||||||||||||||
| 374 | 375 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net | Net Realized | Net Asset | Net | Net | |||||||||||||||||||||||||||
| Value, | Investment | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Investment | Investment | Portfolio | ||||||||||||||||||||
| Beginning | Income | Gain on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Income | Income | Turnover | ||||||||||||||||||
| of Period | (Loss | ) | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | (Loss | ) | Expenses | *** | (Loss | ) | Rate | ||||||||||
| SPECIAL SITUATIONS FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $24.40 | $ .11 | $4.68 | $4.79 | $.12 | $1.00 | $1.12 | $28.07 | 20.47 | % | $412,102 | 1.39 | % | 1.39 | % | .42 | % | 1.47 | % | .34 | % | 110 | % | |||||||||
| 2014 | 28.07 | .02 | (a) | 3.16 | 3.18 | — | 4.60 | 4.60 | 26.65 | 11.65 | 425,957 | 1.33 | 1.33 | .06 | 1.38 | .01 | 55 | |||||||||||||||
| 2015 | 26.65 | .02 | (a) | .07 | .09 | .04 | 1.43 | 1.47 | 25.27 | .12 | 432,235 | 1.32 | 1.32 | .07 | 1.33 | .06 | 43 | |||||||||||||||
| 2016 | 25.27 | .17 | (a) | 2.36 | 2.53 | .02 | 1.44 | 1.46 | 26.34 | 10.35 | 472,720 | 1.33 | 1.34 | .68 | 1.34 | .68 | 39 | |||||||||||||||
| 2017 | 26.34 | — | (a) | 5.24 | 5.24 | .16 | .24 | .40 | 31.18 | 20.06 | 549,780 | 1.31 | 1.31 | (.01 | ) | N/A | N/A | 27 | ||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 20.67 | (.10 | ) | 3.96 | 3.86 | .08 | 1.00 | 1.08 | 23.45 | 19.62 | 4,932 | 2.13 | 2.13 | (.29 | ) | 2.21 | (.37 | ) | 110 | |||||||||||||
| 2014 | 23.45 | (.17 | )(a) | 2.62 | 2.45 | — | 4.60 | 4.60 | 21.30 | 10.71 | 4,441 | 2.16 | 2.16 | (.77 | ) | 2.21 | (.82 | ) | 55 | |||||||||||||
| 2015 | 21.30 | (.16 | )(a) | .08 | (.08 | ) | — | 1.43 | 1.43 | 19.79 | (.67 | ) | 3,618 | 2.13 | 2.13 | (.74 | ) | 2.14 | (.75 | ) | 43 | |||||||||||
| 2016 | 19.79 | (.02 | )(a) | 1.81 | 1.79 | — | 1.44 | 1.44 | 20.14 | 9.43 | 3,301 | 2.14 | 2.14 | (.12 | ) | 2.15 | (.13 | ) | 39 | |||||||||||||
| 2017 | 20.14 | (.19 | )(a) | 4.01 | 3.82 | .13 | .24 | .37 | 23.59 | 19.13 | 3,081 | 2.10 | 2.10 | (.80 | ) | N/A | N/A | 27 | ||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 25.71 | .01 | 2.37 | 2.38 | — | — | — | 28.09 | 9.26 | †† | 1 | 1.16 | † | 1.16 | † | .08 | † | 4.82 | † | (3.58 | )† | 110 | †† | |||||||||
| 2014 | 28.09 | .12 | (a) | 3.10 | 3.22 | — | 4.60 | 4.60 | 26.71 | 11.82 | 26,458 | 1.01 | 1.01 | .39 | 1.06 | .34 | 55 | |||||||||||||||
| 2015 | 26.71 | .10 | (a) | .08 | .18 | .08 | 1.43 | 1.51 | 25.38 | .46 | 38,790 | 1.02 | 1.03 | .37 | 1.04 | .36 | 43 | |||||||||||||||
| 2016 | 25.38 | .23 | (a) | 2.39 | 2.62 | .04 | 1.44 | 1.48 | 26.52 | 10.67 | 59,159 | 1.03 | 1.03 | .94 | 1.04 | .93 | 39 | |||||||||||||||
| 2017 | 26.52 | .08 | (a) | 5.29 | 5.37 | .18 | .24 | .42 | 31.47 | 20.41 | 120,912 | .97 | .97 | .34 | N/A | N/A | 27 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 25.71 | .06 | 2.37 | 2.43 | — | — | — | 28.14 | 9.45 | †† | 1 | .84 | † | .84 | † | .42 | † | 4.43 | † | (3.17 | )† | 110 | †† | |||||||||
| 2014 | 28.14 | .14 | (a) | 3.16 | 3.30 | — | 4.60 | 4.60 | 26.84 | 12.10 | 5,750 | .89 | .89 | .51 | .94 | .46 | 55 | |||||||||||||||
| 2015 | 26.84 | .14 | (a) | .08 | .22 | .16 | 1.43 | 1.59 | 25.47 | .60 | 5,905 | .88 | .88 | .51 | .89 | .50 | 43 | |||||||||||||||
| 2016 | 25.47 | .28 | (a) | 2.39 | 2.67 | .05 | 1.44 | 1.49 | 26.65 | 10.84 | 6,914 | .88 | .89 | 1.11 | .90 | 1.10 | 39 | |||||||||||||||
| 2017 | 26.65 | .12 | (a) | 5.31 | 5.43 | .18 | .24 | .42 | 31.66 | 20.56 | 8,712 | .87 | .87 | .42 | N/A | N/A | 27 | |||||||||||||||
| 376 | 377 |
Financial Highlights (continued)
FIRST INVESTORS EQUITY FUNDS
| P E R S H A R E D A T A | R A T I O S / S U P P L E M E N T A L D A T A | |||||||||||||||||||||||||||||||
| Ratio to Average Net | ||||||||||||||||||||||||||||||||
| Less Distributions | Ratio to Average | Assets Before Expenses | ||||||||||||||||||||||||||||||
| Investment Operations | from | Net Assets** | Waived or Assumed | |||||||||||||||||||||||||||||
| Net Asset | Net Realized | Net Asset | ||||||||||||||||||||||||||||||
| Value, | Net | and Unrealized | Total from | Net | Net | Value, | Net Assets | Net Expenses | Net Expenses | Net | Net | Portfolio | ||||||||||||||||||||
| Beginning | Investment | Gain (Loss) on | Investment | Investment | Realized | Total | End of | Total | End of Period | After Fee | Before Fee | Investment | Investment | Turnover | ||||||||||||||||||
| of Period | Income | Investments | Operations | Income | Gain | Distributions | Period | Return | * | (in thousands | ) | Credits | Credits | *** | Income | Expenses | *** | Loss | Rate | |||||||||||||
| TOTAL RETURN FUND | ||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||
| 2013 | $16.81 | $.27 | $1.99 | $2.26 | $.34 | $.24 | $.58 | $18.49 | 13.77 | % | $664,054 | 1.26 | % | 1.26 | % | 1.45 | % | N/A | N/A | 32 | % | |||||||||||
| 2014 | 18.49 | .22 | (a) | 1.65 | 1.87 | .31 | .42 | .73 | 19.63 | 10.18 | 767,354 | 1.19 | 1.19 | 1.14 | N/A | N/A | 44 | |||||||||||||||
| 2015 | 19.63 | .21 | (a) | (.68 | ) | (.47 | ) | .28 | .67 | .95 | 18.21 | (2.65 | ) | 784,281 | 1.18 | 1.18 | 1.05 | N/A | N/A | 40 | ||||||||||||
| 2016 | 18.21 | .23 | (a) | 1.26 | 1.49 | .27 | .43 | .70 | 19.00 | 8.36 | 845,726 | 1.19 | 1.19 | 1.27 | N/A | N/A | 63 | |||||||||||||||
| 2017 | 19.00 | .23 | (a) | 1.27 | 1.50 | .32 | .30 | .62 | 19.88 | 8.09 | 877,311 | 1.19 | 1.19 | 1.22 | N/A | N/A | 39 | |||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||
| 2013 | 16.53 | .15 | 1.95 | 2.10 | .22 | .24 | .46 | 18.17 | 12.98 | 10,207 | 2.01 | 2.01 | .71 | N/A | N/A | 32 | ||||||||||||||||
| 2014 | 18.17 | .07 | (a) | 1.61 | 1.68 | .16 | .42 | .58 | 19.27 | 9.29 | 10,016 | 1.97 | 1.97 | .36 | N/A | N/A | 44 | |||||||||||||||
| 2015 | 19.27 | .06 | (a) | (.68 | ) | (.62 | ) | .06 | .67 | .73 | 17.92 | (3.44 | ) | 8,270 | 1.96 | 1.96 | .27 | N/A | N/A | 40 | ||||||||||||
| 2016 | 17.92 | .09 | (a) | 1.25 | 1.34 | .13 | .43 | .56 | 18.70 | 7.61 | 7,774 | 1.96 | 1.96 | .50 | N/A | N/A | 63 | |||||||||||||||
| 2017 | 18.70 | .09 | (a) | 1.24 | 1.33 | .17 | .30 | .47 | 19.56 | 7.23 | 6,939 | 1.93 | 1.93 | .48 | N/A | N/A | 39 | |||||||||||||||
| Advisor Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 17.62 | .09 | .95 | 1.04 | .17 | — | .17 | 18.49 | 5.89 | †† | 1 | 1.01 | † | 1.01 | † | 1.40 | † | 4.76 | %† | (2.35 | )%† | 32 | †† | |||||||||
| 2014 | 18.49 | .29 | (a) | 1.60 | 1.89 | .32 | .42 | .74 | 19.64 | 10.34 | 2,106 | .78 | .78 | 1.46 | N/A | N/A | 44 | |||||||||||||||
| 2015 | 19.64 | .29 | (a) | (.69 | ) | (.40 | ) | .31 | .67 | .98 | 18.26 | (2.24 | ) | 976 | .78 | .78 | 1.44 | N/A | N/A | 40 | ||||||||||||
| 2016 | 18.26 | .26 | (a) | 1.27 | 1.53 | .32 | .43 | .75 | 19.04 | 8.55 | 1,213 | .82 | .82 | 1.63 | N/A | N/A | 63 | |||||||||||||||
| 2017 | 19.04 | .32 | (a) | 1.30 | 1.62 | .38 | .30 | .68 | 19.98 | 8.69 | 996 | .80 | .80 | 1.61 | N/A | N/A | 39 | |||||||||||||||
| Institutional Class | ||||||||||||||||||||||||||||||||
| 2013(g) | 17.62 | .10 | .95 | 1.05 | .17 | — | .17 | 18.50 | 5.98 | †† | 1 | .82 | † | .82 | † | 1.48 | † | 4.35 | † | (2.05 | )† | 32 | †† | |||||||||
| 2014 | 18.50 | .30 | (a) | 1.63 | 1.93 | .36 | .42 | .78 | 19.65 | 10.55 | 2,885 | .78 | .78 | 1.55 | N/A | N/A | 44 | |||||||||||||||
| 2015 | 19.65 | .29 | (a) | (.70 | ) | (.41 | ) | .28 | .67 | .95 | 18.29 | (2.28 | ) | 30,644 | .77 | .77 | 1.47 | N/A | N/A | 40 | ||||||||||||
| 2016 | 18.29 | .31 | (a) | 1.28 | 1.59 | .32 | .43 | .75 | 19.13 | 8.88 | 32,525 | .77 | .77 | 1.68 | N/A | N/A | 63 | |||||||||||||||
| 2017 | 19.13 | .32 | (a) | 1.27 | 1.59 | .37 | .30 | .67 | 20.05 | 8.50 | 33,545 | .77 | .77 | 1.65 | N/A | N/A | 39 | |||||||||||||||
| * | Calculated without sales charges. |
| ** | Net of expenses waived or assumed (Note 3). |
| *** | The ratios do not include a reduction of expenses from cash balances maintained |
| with the custodian or from brokerage service arrangements (Note 1G). | |
| † | Annualized |
| †† | Not annualized |
| (a) | Based on average shares during the period. |
| (b) | Due to rounding, amount is less than .005 per share. |
| (c) | For the period December 1, 2016 (commencement of operations) to September 30, 2017. |
| (d) | For the period August 1, 2016 (commencement of operations) to September 30, 2016. |
| (e) | For the period April 1, 2016 (commencement of operations) to September 30, 2016. |
| (f) | For the period April 6, 2015 (commencement of operations) to September 30, 2015. |
| (g) | For the period April 1, 2013 (commencement of operations) to September 30, 2013. |
| 378 | See notes to financial statements | 379 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
First Investors Income Funds and First Investors Equity Funds
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments of the Balanced Income Fund, Floating Rate Fund, Fund For Income, Government Fund, Government Cash Management Fund, International Opportunities Bond Fund, Investment Grade Fund, Limited Duration High Quality Bond Fund and Strategic Income Fund (each a series of First Investors Income Funds), and the Covered Call Strategy Fund, Equity Income Fund, Global Fund, Growth & Income Fund, Hedged U.S. Equity Opportunities Fund, International Fund, Long Short Fund, Opportunity Fund, Real Estate Fund, Select Growth Fund, Special Situations Fund and Total Return Fund (each a series of First Investors Equity Funds), as of September 30, 2017, the related statements of operations, the statements of changes in net assets, and the financial highlights for each of the periods indicated thereon. These financial statements and financial highlights are the responsibility of the Funds’ 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Funds are not required to have, nor were we engaged to perform, an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. 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 September 30, 2017, by correspondence with the custodian and brokers. Where brokers have not replied to our confirmation requests, we have carried out other appropriate auditing procedures. 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.
| 380 |
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Balanced Income Fund, Floating Rate Fund, Fund For Income, Government Fund, Government Cash Management Fund, International Opportunities Bond Fund, Investment Grade Fund, Limited Duration High Quality Bond Fund, Strategic Income Fund, Covered Call Strategy Fund, Equity Income Fund, Global Fund, Growth & Income Fund, Hedged U.S. Equity Opportunities Fund, International Fund, Long Short Fund, Opportunity Fund, Real Estate Fund, Select Growth Fund, Special Situations Fund and Total Return Fund, as of September 30, 2017, and the results of their operations, changes in their net assets, and their financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
| Tait, Weller & Baker LLP |
| Philadelphia, Pennsylvania |
| November 28, 2017 |
| 381 |
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
Trustees and Officers*
| Length of | ||||
| Time Served | Number of | Other | ||
| Position | (including with | Portfolios in | Trusteeships/ | |
| Name, Year of Birth | Held with | Predecessor | Fund Complex | Directorships |
| and Address | Funds | Funds) | Overseen | Held |
| DISINTERESTED TRUSTEES | ||||
| Susan E. Artmann (1954) | Trustee | Since 11/1/12 | 50 | None |
| c/o First Investors Funds, | ||||
| Legal Department | ||||
| 40 Wall Street | ||||
| New York, NY 10005 | ||||
| Principal Occupation During Past 5 Years: | ||||
| Retired. Executive Vice President and Chief Financial Officer of HSBC Insurance North America (2012-2013). | ||||
| Mary J. Barneby (1952) | Trustee | Since 11/1/12 | 50 | None |
| c/o First Investors Funds, | ||||
| Legal Department | ||||
| 40 Wall Street | ||||
| New York, NY 10005 | ||||
| Principal Occupation During Past 5 Years: | ||||
| Chief Executive Officer, Girl Scouts of Connecticut (since October 2012); Executive Director of UBS Financial | ||||
| Services, Inc. and Head of Stamford Private Wealth Office (2002-2012). | ||||
| Charles R. Barton, III (1965) | Trustee | Since 1/1/06 | 50 | None |
| c/o First Investors Funds, | ||||
| Legal Department | ||||
| 40 Wall Street | ||||
| New York, NY 10005 | ||||
| Principal Occupation During Past 5 Years: | ||||
| Chief Operating Officer (since 2007), Board Director (since 1989, currently Ex-Officio) and Trustee (since 1994) | ||||
| of The Barton Group/Barton Mines Corporation (mining and industrial abrasives distribution); President of Noe | ||||
| Pierson Corporation (land holding and management services provider) (since 2004). | ||||
| 382 |
| Length of | ||||
| Time Served | Number of | Other | ||
| Position(s) | (including with | Portfolios in | Trusteeships/ | |
| Name, Year of Birth | Held with | Predecessor | Fund Complex | Directorships |
| and Address | Funds | Funds) | Overseen | Held |
| DISINTERESTED TRUSTEES (continued) | ||||
| Arthur M. Scutro, Jr. (1941) | Trustee and | Trustee since | 50 | None |
| c/o First Investors Funds, | Chairman | 1/1/06 and | ||
| Legal Department | Chairman | |||
| 40 Wall Street | since 1/1/13 | |||
| New York, NY 10005 | ||||
| Principal Occupation During Past 5 Years: | ||||
| None/Retired | ||||
| Mark R. Ward (1952) | Trustee | Since 1/1/10 | 50 | None |
| c/o First Investors Funds, | ||||
| Legal Department | ||||
| 40 Wall Street | ||||
| New York, NY 10005 | ||||
| Principal Occupation During Past 5 Years: | ||||
| Self-employed, consultant (since 2008) | ||||
| *Each Trustee serves for an indefinite term with the Funds, until his/her successor is elected. |
| 383 |
FIRST INVESTORS INCOME FUNDS
FIRST INVESTORS EQUITY FUNDS
Trustees and Officers* (continued)
| Length of | ||||
| Time Served | Number of | Other | ||
| Position | (including with | Portfolios in | Trusteeships/ | |
| Name, Year of Birth | Held with | Predecessor | Fund Complex | Directorships |
| and Address | Funds | Funds) | Overseen | Held |
| OFFICER(S) WHO ARE NOT TRUSTEES | ||||
| Clark D. Wagner (1959) | President | May 2017 | N/A | None |
| c/o First Investors Funds, | ||||
| Legal Department | ||||
| 40 Wall Street | ||||
| New York, NY 10005 | ||||
| Principal Occupation During Past 5 Years: | ||||
| President, Foresters Investment Management Company, Inc. (since May 2016); Chief Investment Officer, Foresters | ||||
| Financial (since February 2016); Portfolio Manager and Co-Portfolio Manager of certain First Investors Funds and | ||||
| FIMCO (since 1991); Director of Fixed Income, FIMCO (2001-2016). | ||||
| Joseph I. Benedek (1957) | Treasurer | Since 1988 | N/A | None |
| c/o Foresters Investment | ||||
| Management Company, Inc. | ||||
| Raritan Plaza I | ||||
| Edison, NJ 08837 | ||||
| Principal Occupation During Past 5 Years: | ||||
| Treasurer of Foresters Investment Management Company, Inc. | ||||
| Mary Carty (1950) | Secretary | Since 2010 | N/A | None |
| c/o First Investors Funds, | ||||
| Legal Department | ||||
| 40 Wall Street | ||||
| New York, NY 10005 | ||||
| Principal Occupation During Past 5 Years: | ||||
| Chief Legal and Regulatory Officer of Foresters Investment Management Company, Inc. and various affiliated | ||||
| companies since May 2017; General Counsel of Foresters Investment Management Company, Inc. and various | ||||
| affiliated companies since May 2017; Assistant Counsel of Foresters Investment Management Company, Inc. | ||||
| (2010-2012). | ||||
| Marc S. Milgram (1957) | Chief | Since 2010 | N/A | None |
| c/o First Investors Funds, | Compliance | |||
| Legal Department | Officer | |||
| 40 Wall Street | ||||
| New York, NY 10005 | ||||
| Principal Occupation During Past 5 Years: | ||||
| Chief Compliance Officer of Foresters Investment Management Company, Inc. | ||||
| 384 |
Board Considerations of Advisory Contracts and Fees
(unaudited)
FIRST INVESTORS INCOME FUNDS
Annual Consideration of the Investment Advisory Agreements and the Sub-Advisory Agreements with Muzinich & Co., Inc. and Brandywine Global Investment Management, LLC.
The First Investors Income Funds’ (the “Trust”) investment advisory agreements with the Trust’s investment adviser and, as applicable, sub-advisers, on behalf of each of the Trust’s funds, can remain in effect after an initial term of no greater than two years only if they are renewed at least annually thereafter (i) by the vote of the Trustees or by a vote of the shareholders of each fund and (ii) by the vote of a majority of the Trustees who are not parties to the advisory agreement (and sub-advisory agreement, as applicable) or “interested persons” of any party thereto (the “Independent Trustees”), cast in person at a meeting called specifically for the purpose of voting on such approval.
The Board of Trustees (the “Board”) has four regularly scheduled and two informal meetings each year and takes into account throughout the year matters bearing on the approval of the advisory agreement (and sub-advisory agreements, as applicable). In particular, the Board and its standing committees also consider at each meeting at least certain of the factors that are relevant to the annual renewal of each fund’s advisory agreement (and sub-advisory agreements, as applicable), including investment performance, sub-adviser updates and reviews, reports with respect to brokerage and portfolio transactions, portfolio turnover rates, compliance monitoring, and the services and support provided to each fund and its shareholders. In addition the Board meets with representatives of each sub-adviser in person at least once per year.
On April 18, 2017 (the “April Meeting”), the Independent Trustees met in person with senior management personnel of Foresters Investment Management Company, Inc. (“FIMCO”), the Trust’s investment adviser, Trust counsel, independent legal counsel to the Independent Trustees (“Independent Legal Counsel”) and others to give preliminary consideration to information bearing on the continuation of the advisory agreement (and sub-advisory agreements, as applicable) with respect to each fund. The primary purpose of the April Meeting was to ensure that the Independent Trustees had ample opportunity to consider matters they deemed relevant in determining whether to continue the advisory agreement (or sub-advisory agreements, as applicable), and to request any additional information they considered reasonably necessary to their deliberations. The Independent Trustees also met in executive session with Independent Legal Counsel on April 18, 2017, immediately prior to the April Meeting, to consider the continuation of the advisory agreement (or sub-advisory agreements, as applicable) outside the presence of management. As part of the April Meeting, the Independent Trustees asked FIMCO to respond to certain additional questions prior to the contract approval meeting of the Board to be held
| 385 |
Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS INCOME FUNDS
on May 18, 2017 (the “May Meeting”). In addition, Independent Legal Counsel, in conjunction with the Board, and personnel from FIMCO reviewed each sub-adviser’s response in connection with the request for information with respect to the applicable sub-advisory agreements and requested follow-up information or clarifications from each sub-adviser, as applicable, which was provided prior to the May Meeting.
At the May Meeting, the Board, including a majority of the Independent Trustees, approved the renewal of the investment advisory agreement (the “Advisory Agreement”) between FIMCO and each of the following funds (each a “Fund” and collectively the “Funds”): Balanced Income Fund, Floating Rate Fund, Fund For Income, Government Fund, Government Cash Management Fund, International Opportunities Bond Fund, Investment Grade Fund, Limited Duration High Quality Bond Fund and Strategic Income Fund. In addition, at the May Meeting, the Board, including a majority of the Independent Trustees, approved the renewal of the sub-advisory agreements (each, a “Sub-Advisory Agreement” and collectively, the “Sub-Advisory Agreements”) with: (1) Muzinich & Co., Inc. (“Muzinich”) with respect to the Fund For Income and Floating Rate Fund; and (2) Brandywine Global Investment Management, LLC (“Brandywine”) with respect to the International Opportunities Bond Fund. The Fund For Income, Floating Rate Fund and International Opportunities Bond Fund are collectively referred to as the “Sub-Advised Funds.”
In reaching its decisions to approve the continuation of the Advisory Agreement for each Fund and the Sub-Advisory Agreements for the Sub-Advised Funds, the Board considered information furnished and discussed throughout the year at regularly scheduled Board and Committee meetings as well as a wide range of information provided specifically in relation to the renewal of the Advisory Agreement and Sub-Advisory Agreements for the April Meeting and May Meeting. Information furnished at Board and/or Committee meetings throughout the year included FIMCO’s analysis of each Fund’s investment performance and the performance of the sub-advisers to the respective Sub-Advised Funds, presentations given by representatives of FIMCO, Muzinich and Brandywine and various reports on compliance and other services provided by FIMCO and its affiliates.
In preparation for the April Meeting and/or May Meeting, the Independent Trustees requested and received information compiled by Broadridge Financial Solutions, Inc. (formerly, Lipper, Inc.) (hereinafter, “Broadridge”), an independent provider of investment company data, that included, among other things: (1) the investment performance over various time periods and the fees and expenses of each Fund as compared to a comparable group of funds as determined by Broadridge (“Peer Group”); and (2) comparative information on each Fund’s volatility versus total return. The Board also considered that FIMCO charges different fee rates to various
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mutual funds that have similar investment mandates and FIMCO’s explanation for these differences.
Additionally, in response to specific requests from the Independent Trustees in connection with the April Meeting and/or May Meeting, FIMCO furnished, and the Board considered, information concerning various aspects of its operations, including: (1) the nature, extent and quality of services provided by FIMCO and its affiliates to the Funds, including investment advisory and administrative services to the Funds and, as applicable, services in connection with selecting, overseeing and evaluating the sub-advisers; (2) the actual management fees paid by each Fund to FIMCO; (3) the costs of providing services to each Fund and the profitability of FIMCO and its affiliate, Foresters Investor Services, Inc. (“FIS”), the Funds’ affiliated transfer agent, from the relationship with each Fund; and (4) any “fall out” or ancillary benefits accruing to FIMCO or its affiliates as a result of the relationship with each Fund. FIMCO also provided, and the Board considered, an analysis of the overall profitability of the First Investors mutual fund business that included various entities affiliated with FIMCO as well as comparative profitability information based on analysis performed by FIMCO of the financial statements of certain publicly-traded mutual fund asset managers. The Board also considered FIMCO’s and each sub-adviser’s personnel and methods, including the education, experience of key personnel, and the number of their advisory and analytical personnel; general information regarding the compensation of FIMCO’s and each sub-adviser’s advisory personnel; FIMCO’s and each sub-adviser’s investment management process; FIMCO’s and each sub-adviser’s compliance program; the time and attention of FIMCO’s and each sub-adviser’s personnel devoted to the management of the Funds; FIMCO and each sub-adviser’s cybersecurity practices and related controls and business continuity plans; and material pending, threatened or settled litigation involving FIMCO and each sub-adviser, and any ongoing or completed audits, investigations or examinations by the Securities and Exchange Commission. The Board also considered information provided by FIMCO on management’s initiatives for increasing Fund assets and new product development, which included enhanced sales and marketing efforts (including selling Fund shares through independent channels and increasing the size of the sales force); continuing efforts as deemed practicable to reduce expenses and improve performance of the Funds; and improving the efficiency of back-office operations and services (including a major initiative to process new business electronically). The Independent Trustees also considered a proposal at the May Meeting to increase the fees for transfer agency services provided by FIS to all classes of the funds except the Institutional Class and the resulting impact on overall expenses and profitability. In addition to evaluating, among other considerations, the written information provided
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Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS INCOME FUNDS
by FIMCO, the Board also evaluated the answers to questions posed by the Board to representatives of FIMCO.
In addition, in response to specific requests from the Independent Trustees in connection with the April Meeting and/or May Meeting, Muzinich and Brandywine furnished, and the Board reviewed, information concerning various aspects of their respective operations, including: (1) the nature, extent and quality of services provided by Muzinich and Brandywine to the applicable Sub-Advised Funds; (2) the sub-advisory fee rates charged by Muzinich and Brandywine and a comparison of those fee rates to the fee rates of Muzinich and Brandywine for providing advisory services to other investment companies or accounts or compared to their standard fee schedule, as applicable, with an investment mandate similar to the applicable Sub-Advised Funds; (3) profitability and/or financial information provided by Muzinich and Brandywine; and (4) any “fall out” or ancillary benefits accruing to Muzinich and Brandywine as a result of the relationship with each applicable Sub-Advised Fund. The Board also considered FIMCO’s representations that it found the sub-adviser responses to the information request in connection with the renewal of the Sub-Advisory Agreements to be satisfactory and raising no issues of general concern.
In considering the information and materials described above, the Independent Trustees took into account management style, investment strategies and prevailing market conditions. Moreover, the Independent Trustees received assistance from and met separately with Independent Legal Counsel during both the April Meeting and May Meeting and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to approvals of advisory agreements (and sub-advisory agreements, as applicable). Although the Advisory Agreement for all of the Funds and the Sub-Advisory Agreements for the Sub-Advised Funds were considered at the same Board meeting, the Independent Trustees addressed each Fund separately during the April Meeting and May Meeting.
Based on all of the information presented, the Board, including a majority of its Independent Trustees, determined on a Fund-by-Fund basis that the fees charged under the Advisory Agreement and each Sub-Advisory Agreement are reasonable in relation to the services that are provided under each Agreement. The Board did not identify any single factor as being of paramount importance in reaching its conclusions and determinations with respect to the continuance of the Advisory Agreement for each Fund and Sub-Advisory Agreements and different Trustees may have given different weight to different factors. Although not meant to be all-inclusive, the following describes some of the factors that were considered by the Board in deciding to approve the continuance of the Advisory Agreement for each Fund and the Sub-Advisory Agreements with Muzinich and Brandywine.
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Nature, Extent and Quality of Services
In examining the nature, extent and quality of the services provided by FIMCO, the Board recognized that FIMCO is dedicated to providing investment management services exclusively to the Funds and the other funds in the First Investors fund complex and that, unlike many other mutual fund managers, FIMCO is not in the business of providing management services to hedge funds, pension funds or private accounts. In this connection, the Board was advised that certain key FIMCO personnel provide separately managed account services to a FIMCO-affiliated investment adviser, but that these personnel spend most of their time serving their FIMCO clients. As a result, the Board considered that FIMCO’s personnel devote substantially all of their time to serving the funds in the First Investors fund complex. The Board also considered management’s explanation regarding the significant costs involved in providing the level of personal service that the First Investors fund complex seeks to deliver to its shareholders, which are primarily shareholders in the broad middle market.
The Board noted that FIMCO has undertaken extensive responsibilities as manager of the Funds, including: (1) the provision of investment advice to the Funds; (2) implementing policies and procedures designed to ensure compliance with each Fund’s investment objectives and policies; (3) the review of brokerage arrangements; (4) oversight of general portfolio compliance with applicable laws; (5) the provision of certain administrative services to the Funds, including fund accounting; (6) the implementation of Board directives as they relate to the Funds; and (7) evaluating and monitoring any sub-advisers on an ongoing basis, including, but not limited to, monitoring each sub-adviser’s investment performance, evaluating each sub-adviser’s compliance program on an annual basis and monitoring investments for compliance purposes, including monitoring each sub-adviser’s soft dollar practices (as applicable), portfolio allocation and best execution. The Board noted that FIMCO provided the same sorts of administrative and other services, except for direct management of the portfolio, for the Sub-Advised Funds as it does for the other funds that do not employ a sub-adviser. The Board noted that FIMCO provides not only advisory services, but historically also has provided certain administrative personnel and services that many other advisers do not provide without imposition of separate fees. The Board also noted the steps that FIMCO has taken to encourage strong performance, including the manner in which portfolio managers and analysts are compensated based on Fund performance. In addition, the Board considered information regarding the overall financial strength of FIMCO and its affiliates and the resources and staffing in place with respect to the services provided to the Funds.
The Board also considered the nature, extent and quality of the services provided to the Funds by FIMCO’s affiliates, including transfer agency and distribution services.
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Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS INCOME FUNDS
The Board took into account the fact that FIS is dedicated to providing transfer agency services exclusively to the Funds and the other funds in the First Investors fund complex. As a result, FIS can tailor its processes and services to satisfy the needs of the Funds’ shareholder base. The Board noted that the Funds’ shares are distributed primarily through Foresters Financial Services, Inc. (“FFS”), which is an affiliate of FIMCO.
Furthermore, the Board considered the nature, extent and quality of the investment management services provided by Muzinich and Brandywine to the applicable Sub-Advised Funds. The Board considered Muzinich’s and Brandywine’s investment management process in managing the applicable Sub-Advised Funds and the experience and capability of its personnel responsible for the portfolio management of the applicable Sub-Advised Funds. The Board also considered information regarding the resources and staffing in place with respect to the services provided by each sub-adviser. Additionally, with respect to the Sub-Advised Funds, the Board considered the differences in fees paid by each Sub-Advised Fund to FIMCO and the fees paid by FIMCO to each sub-adviser, as well as representations by FIMCO that these fee differentials are warranted by its ongoing services and assumption of risks.
Based on the information considered, the Board concluded that the nature, extent and quality of the services provided to each Fund by FIMCO and the applicable Sub-Advised Funds by Muzinich and Brandywine were appropriate and consistent with the terms of the Advisory Agreement and Sub-Advisory Agreements, as applicable, and supported approval of the Advisory Agreement and each Sub-Advisory Agreement.
Investment Performance
The Board placed significant emphasis on the investment performance of each of the Funds. While consideration was given to performance reports and discussions held at prior Board or Committee meetings, as applicable, particular attention was given to the performance information compiled by Broadridge. In particular, the Board reviewed the total return of each Fund over the most recent calendar year (“1-year period”) and the annualized total return over the most recent three calendar year period (“3-year period”) and five calendar year period (“5-year period”). In addition, the Board considered the total return information provided by FIMCO for each Fund through April 30, 2017. The Board also reviewed the annual yield of each Fund for each of the past five calendar years (or shorter period as applicable). With regard to the total return and yield information, the Board considered the total return and yield of each Fund on a percentile and quintile basis as compared to its Peer Group. For purposes of the data provided, the first quintile is defined as 20% of the funds in the applicable Peer Group with the highest performance or yield, as applicable, and the fifth quintile is defined as 20% of the funds in the applicable Peer Group with the
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lowest performance or yield. The Board also considered FIMCO’s representations that it monitors to ensure portfolio managers invest in a manner consistent with the mandate for the Fund or Funds they manage.
On a Fund-by-Fund basis, the total return performance reports indicated, and the Board noted, that: (i) the Balanced Income Fund fell within the second quintile for the 1-year period (the only period for which information was provided due to the short operating history of the Fund); (ii) the Floating Rate Fund fell within the fifth quintile for the 1-year period and 3-year period (the only periods for which information was provided due to the relatively short operating history of the Fund); (iii) the Fund For Income fell within the fifth quintile, fourth quintile and fourth quintile for the 1-year period, 3-year period and 5-year period, respectively; (iv) the Government Fund fell within the fifth quintile for each of the performance periods shown by Broadridge; (v) the Government Cash Management Fund fell within the fourth quintile for each of the performance periods shown by Broadridge; (vi) the International Opportunities Bond Fund fell within the third quintile and fourth quintile for the 1-year period and 3-year period, respectively (the only periods for which information was provided due to the relatively short operating history of the Fund); (vii) the Investment Grade Fund fell within the fourth quintile, fourth quintile and third quintile for the 1-year period, 3-year period and 5-year period, respectively; (viii) the Limited Duration High Quality Bond Fund fell within the fifth quintile for the 1-year period (the only period for which information was provided due to the short operating history of the Fund); and (ix) the Strategic Income Fund fell within the fourth quintile and fifth quintile for the 1-year period and 3-year period, respectively (the only periods for which information was provided due to the relatively short operating history of the Fund). The Board also considered that FIMCO changed the portfolio manager on the Government Fund at the end of 2012 and considered management’s special performance report and explanation for the various periods of underperformance of the Government Fund and Floating Rate Fund.
The Board also reviewed the yields of the Funds and noted that the yield for: (i) the Balanced Income Fund fell within the top three quintiles for the past calendar year, which was the only period for which information was provided due to the short operating history of the Fund; (ii) the Floating Rate Fund fell outside of the top three quintiles for each of the past three calendar years, which was the only information available due to its relatively short operating history; (iii) the Fund For Income fell within one of the top three quintiles for two of the past five calendar years; (iv) the Government Fund fell within one of the top two quintiles for each of the past five calendar years; (v) the Government Cash Management Fund fell outside of the top three quintiles for each of the past five calendar years; (vi) the International Opportunities Bond Fund fell within the top three quintiles for each of the past four calendar years,
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Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS INCOME FUNDS
which was the only information available due to its relatively short operating history; (vii) the Investment Grade Fund fell within one of the top two quintiles for each of the past five calendar years; (viii) the Limited Duration High Quality Bond Fund fell within the top three quintiles for one of the past two calendar years, which was the only information available due to its short operating history; and (ix) the Strategic Income Fund fell within one of the top three quintiles for two of the past three calendar years, which was the only information available due to its relatively short operating history. Moreover, the Board considered the volatility versus total return data provided by Broadridge as well as FIMCO’s representation that it believes that the Funds use a more conservative investment style than many of their peers. The Trustees also considered that, in the current market and interest-rate environment, comparative information regarding performance and fees of money market funds such as the Government Cash Management Fund is of relatively limited utility. Additionally, the Board considered FIMCO’s representation that it believes that the Funds use a more conservative investment style than many of their peers.
Based on the information considered, the Board concluded that the investment performance of each Fund was either (a) acceptable or better, or (b) subject to reasonable steps to monitor or address certain periods of underperformance.
Fund Expenses, Costs of Services, Economies of Scale and Related Benefits
Management Fees and Expenses. The Board also gave substantial consideration to the fees payable under each Fund’s Advisory Agreement as well as under the Sub-Advisory Agreements for the Sub-Advised Funds.
The Board reviewed the information compiled by Broadridge comparing each Fund’s contractual management fee rate (at common asset levels) and actual management fee rate (which included the effect of any fee waivers) as a percentage of average net assets to other funds in its Peer Group. In this regard, the Board considered the contractual and actual management fees of each Fund on a quintile basis as compared to its Peer Group and noted the relative position of each Fund within the Peer Group. The Board also considered that FIMCO provides not only advisory services but also certain administrative personnel to the Funds under each Fund’s Advisory Agreement and that many other advisers do not provide such administrative personnel under their advisory agreements and that FIMCO also provides certain administrative services without the imposition of a separate fee. The Board considered that FIMCO informed the Board that it intends to: (i) extend, on a voluntary basis, the existing total expense cap limitation for the Government Cash Management Fund until May 31, 2018; and (ii) extend, on a voluntary basis, the existing management fee caps for the Fund For Income, Government Fund and Investment Grade Fund respectively until May 31, 2018. Moreover, at the Board’s request, FIMCO agreed to voluntarily waive
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an additional 5 basis points of its management fee on the Government Fund until May 31, 2018. The Board also noted that it had previously approved the continuation of the contractual total expense caps on the Balanced Income Fund, Floating Rate Fund and Limited Duration High Quality Bond Fund until January 31, 2018. The Board also considered that, with respect to the Government Cash Management Fund, FIMCO was waiving all of its management fees and reimbursing a portion of other expenses to avoid a negative return for shareholders due to the historically low interest rate environment. In particular, the Board noted that: (i) the Balanced Income Fund’s and Government Cash Management Fund’s contractual management fee was in the fourth quintile and actual management fee was in the first quintile of their respective Peer Groups; (ii) the Floating Rate Fund’s and Strategic Income Fund’s contractual and actual management fees were in the first quintile of their respective Peer Groups; and (iii) the contractual and actual management fees for the Fund For Income, Government Fund, International Opportunities Bond Fund, Investment Grade Fund and Limited Duration High Quality Bond Fund were outside of the top three quintiles of their respective Peer Groups.
The Board also reviewed the information compiled by Broadridge comparing each Fund’s Class A share total expense ratio, taking into account FIMCO’s expense waivers (as applicable), and the ratio of the sum of actual management and other non-management fees (i.e., fees other than management, transfer agency and 12b-1/non-12b-1 fees) to other funds in its Peer Group, including on a quintile basis. In particular, the Board noted that: (i) the total expense ratio for each Fund except the Strategic Income Fund was not in the top three quintiles of their respective Peer Groups; and (ii) the ratio of the sum of actual management and other non-management fees for each Fund except the Floating Rate Fund, Government Cash Management Fund and Strategic Income Fund was not in the top three quintiles of their respective Peer Groups. In considering the level of the total expense ratio and the ratio of the sum of actual management and other non-management fees, the Board took into account management’s explanation that: (i) the average account size of many of the First Investors funds is small by comparison to the industry average account size and that funds with small average account sizes generally have higher expenses ratios than funds with larger average account sizes; (ii) there are significant costs involved in providing the level of personal service that the First Investors fund complex seeks to deliver to its shareholders; (iii) overall Fund expenses cover certain check-writing and wiring privileges for Government Cash Management Fund shareholders at no additional cost; and (iv) Broadridge expense comparisons do not take into account the size of a fund complex, and as a result, in most cases the First Investors funds are compared to funds in complexes that are much larger than First Investors. The Board also noted that Broadridge’s customized expense groups
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Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS INCOME FUNDS
tend to be fairly small in number and the funds included in the Peer Group generally change from year to year, thereby introducing an element of randomness that affects comparative results each year. While recognizing the limitations inherent in Broadridge’s methodology, the Board believed that the data provided by Broadridge was a generally appropriate measure of comparative expenses.
In considering the sub-advisory fee rates charged by and costs and profitability of Muzinich and Brandywine with regard to the respective Sub-Advised Funds, the Board noted that FIMCO pays Muzinich or Brandywine, as the case may be, a sub-advisory fee from its own advisory fee rather than each Fund paying Muzinich or Brandywine a fee directly. The Board also considered arrangements pursuant to which Muzinich (but not its Sub-Advised Funds) pays a portion of its sub-advisory fee to a solicitor that introduced Muzinich to FIMCO. Muzinich and Brandywine provided, and the Board reviewed, information comparing the fees charged by Muzinich and Brandywine for services to the respective Sub-Advised Funds versus the fee rates of Muzinich and Brandywine for providing advisory services to other comparable investment companies or accounts or compared to their standard fee schedule, as applicable. Based on a review of this information, the Board noted that the fees charged by Muzinich and Brandywine, as the case may be, for services to each applicable Sub-Advised Fund appeared competitive to the fees Muzinich and Brandywine charge to their other comparable investment companies or accounts or compared to their standard fee schedule, as applicable.
The foregoing comparisons assisted the Trustees by providing them with a basis for evaluating each Fund’s management fee and expense ratio on a relative basis and the Board concluded that each Fund’s management fees appeared reasonable in relation to the services and benefits provided to each Fund.
Profitability. The Board reviewed the materials it received from FIMCO regarding its revenues and costs in providing investment management and certain administrative services to the Funds. In particular, the Board considered the analysis of FIMCO’s profitability with respect to each Fund, calculated for the year ended December 31, 2016, as well as overall profitability information relating to the past five calendar years. The Board also considered the information provided by FIMCO comparing the profitability of certain publicly-traded mutual fund asset managers as analyzed by FIMCO based on publicly available financial statements and noted FIMCO’s analysis that its profit margin is significantly lower than the average of, and lower overall than any of, such publicly-traded managers. In reviewing the profitability information, the Board also considered the “fall-out” or ancillary benefits that may accrue to FIMCO and its affiliates as a result of their relationship with the Funds, which are discussed below. Based on the information provided, the Board also noted that
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FIMCO operates the Balanced Income Fund, Government Cash Management Fund and Strategic Income Fund at a loss. The Board acknowledged that, as a business matter, FIMCO was entitled to earn reasonable profits for its services to the Funds and concluded that the level of profitability to FIMCO of its contractual arrangements with each Fund did not appear so high as to call into question the appropriateness of the fees paid to FIMCO by any Fund or otherwise to preclude the proposed continuation of the Advisory Agreement for any of the Funds. The Board also considered the profitability and/or financial information provided by Muzinich and Brandywine.
Economies of Scale. With respect to whether economies of scale are realized by FIMCO and the extent to which any economies of scale are reflected in the level of management fee rates charged, the Board considered that the Advisory Agreement fee schedule for each Fund, except the Strategic Income Fund and Government Cash Management Fund, includes breakpoints to account for management economies of scale as each Fund’s assets increase. With respect to the Strategic Income Fund and Government Cash Management Fund, the Board concluded that the fee structure is appropriate at current asset levels.
“Fall Out” or Ancillary Benefits. The Board considered the “fall-out” or ancillary benefits that may accrue to FIMCO, Muzinich and Brandywine as a result of their relationship with the Funds. In that regard, the Board considered the fact that FIMCO and Brandywine (but not Muzinich) may receive research from broker-dealers that execute brokerage transactions for the funds in the First Investors fund complex. However, the Board noted that FIMCO and the sub-advisers must select brokers based on each Fund’s requirements for seeking best execution. The Board also considered the profits earned or losses incurred by FIS (including the proposed increase in transfer agency fees) and the income received by FFS as a result of FIMCO’s management of the First Investors funds.
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In summary, based on all relevant information and factors, none of which was individually determinative of the outcome, the Board, including a majority of the Independent Trustees, approved the renewal of the Advisory Agreement and each Sub-Advisory Agreement.
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Board Considerations of Advisory Contracts and Fees
(unaudited)
FIRST INVESTORS EQUITY FUNDS
Annual Consideration of the Investment Advisory Agreements and the Sub-Advisory Agreements with Wellington Management Company, LLP, Smith Group Asset Management, LP, Vontobel Asset Management, Inc. and Ziegler Capital Management, LLC
The First Investors Equity Funds’ (the “Trust”) investment advisory agreements with the Trust’s investment adviser and, as applicable, sub-advisers, on behalf of each of the Trust’s funds, can remain in effect after an initial term of no greater than two years only if they are renewed at least annually thereafter (i) by the vote of the Trustees or by a vote of the shareholders of each fund and (ii) by the vote of a majority of the Trustees who are not parties to the advisory agreement (and sub-advisory agreements, as applicable) or “interested persons” of any party thereto (the “Independent Trustees”), cast in person at a meeting called specifically for the purpose of voting on such approval.
The Board of Trustees (the “Board”) has four regularly scheduled and two informal meetings each year and takes into account throughout the year matters bearing on the approval of the advisory agreement (and sub-advisory agreements, as applicable). In particular, the Board and its standing committees also consider at each meeting at least certain of the factors that are relevant to the annual renewal of each fund’s advisory agreement (and sub-advisory agreements, as applicable), including investment performance, sub-adviser updates and reviews, reports with respect to brokerage and portfolio transactions, use of soft dollars for research products and services, portfolio turnover rates, compliance monitoring, and the services and support provided to each fund and its shareholders. In addition, the Board meets with representatives of each sub-adviser in person at least once per year.
On April 18, 2017 (the “April Meeting”), the Independent Trustees met in person with senior management personnel of Foresters Investment Management Company, Inc. (“FIMCO”), the Trust’s investment adviser, Trust counsel, independent legal counsel to the Independent Trustees (“Independent Legal Counsel”) and others to give preliminary consideration to information bearing on the continuation of the advisory agreement (and sub-advisory agreements, as applicable) with respect to each fund. The primary purpose of the April Meeting was to ensure that the Independent Trustees had ample opportunity to consider matters they deemed relevant in determining whether to continue the advisory agreement (or sub-advisory agreements, as applicable), and to request any additional information they considered reasonably necessary to their deliberations. The Independent Trustees also met in executive session with Independent Legal Counsel on April 18, 2017, immediately prior to the April Meeting, to consider the continuation of the advisory agreement (or sub-advisory agreements, as applicable) outside the presence of management. As part
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of the April Meeting, the Independent Trustees asked FIMCO to respond to certain additional questions prior to the contract approval meeting of the Board to be held on May 18, 2017 (the “May Meeting”). In addition, Independent Legal Counsel, in conjunction with the Board, and personnel from FIMCO reviewed each sub-adviser’s response in connection with the request for information with respect to the applicable sub-advisory agreements and requested follow-up information or clarifications from each sub-adviser, as applicable, which was provided prior to the May Meeting.
At the May Meeting, the Board, including a majority of the Independent Trustees, approved the renewal of the investment advisory agreement (the “Advisory Agreement”) between FIMCO and each of the following funds (each a “Fund” and collectively the “Funds”): Covered Call Strategy Fund, Equity Income Fund, Global Fund, Growth & Income Fund, International Fund, Opportunity Fund, Real Estate Fund, Select Growth Fund, Special Situations Fund and Total Return Fund. In addition, at the May Meeting, the Board, including a majority of the Independent Trustees, approved the renewal of the sub-advisory agreements (each a “Sub-Advisory Agreement” and collectively the “Sub-Advisory Agreements”) with: (1) Wellington Management Company, LLP (“WMC”) with respect to the Global Fund; (2) Smith Group Asset Management, LP (“Smith Group”) with respect to the Select Growth Fund; (3) Vontobel Asset Management, Inc. (“Vontobel”) with respect to the International Fund; and (4) Ziegler Capital Management, LLC (“Ziegler”) with respect to the Covered Call Strategy Fund. The Global Fund, Select Growth Fund, International Fund and Covered Call Strategy Fund are collectively referred to as the “Sub-Advised Funds.”
In reaching its decisions to approve the continuation of the Advisory Agreement for each Fund and the Sub-Advisory Agreements for the Sub-Advised Funds, the Board considered information furnished and discussed throughout the year at regularly scheduled Board and Committee meetings as well as a wide range of information provided specifically in relation to the renewal of the Advisory Agreement and Sub-Advisory Agreements for the April Meeting and May Meeting. Information furnished at Board and/or Committee meetings throughout the year included FIMCO’s analysis of each Fund’s investment performance and the performance of the sub-advisers to the respective Sub-Advised Funds, presentations given by representatives of FIMCO, WMC, Smith Group, Vontobel and Ziegler and various reports on compliance and other services provided by FIMCO and its affiliates.
In preparation for the April Meeting and/or May Meeting, the Independent Trustees requested and received information compiled by Broadridge Financial Solutions, Inc. (formerly, Lipper, Inc.) (hereinafter, “Broadridge”), an independent provider of investment company data, that included, among other things: (1) the investment
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Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS EQUITY FUNDS
performance over various time periods and the fees and expenses of each Fund as compared to a comparable group of funds as determined by Broadridge (“Peer Group”); and (2) comparative information on each Fund’s volatility versus total return. The Board also considered that FIMCO charges different fee rates to various mutual funds that have similar investment mandates and FIMCO’s explanation for these differences.
Additionally, in response to specific requests from the Independent Trustees in connection with the April Meeting and/or May Meeting, FIMCO furnished, and the Board considered, information concerning various aspects of its operations, including: (1) the nature, extent and quality of services provided by FIMCO and its affiliates to the Funds, including investment advisory and administrative services to the Funds and, as applicable, services in connection with selecting, overseeing and evaluating the sub-advisers; (2) the actual management fees paid by each Fund to FIMCO; (3) the costs of providing services to each Fund and the profitability of FIMCO and its affiliate, Foresters Investor Services, Inc. (“FIS”), the Funds’ affiliated transfer agent, from the relationship with each Fund; and (4) any “fall out” or ancillary benefits accruing to FIMCO or its affiliates as a result of the relationship with each Fund. FIMCO also provided, and the Board considered, an analysis of the overall profitability of the First Investors mutual fund business that included various entities affiliated with FIMCO as well as comparative profitability information based on analysis performed by FIMCO of the financial statements of certain publicly-traded mutual fund asset managers. The Board also considered FIMCO’s and each sub-adviser’s personnel and methods, including the education, experience of key personnel, and the number of their advisory and analytical personnel; general information regarding the compensation of FIMCO’s and each sub-adviser’s advisory personnel; FIMCO’s and each sub-adviser’s investment management process; FIMCO’s and each sub-adviser’s compliance program; the time and attention of FIMCO’s and each sub-adviser’s personnel devoted to the management of the Funds; FIMCO and each sub-adviser’s cybersecurity practices and related controls and business continuity plans; and material pending, threatened or settled litigation involving FIMCO and each sub-adviser, and any ongoing or completed audits, investigations or examinations by the Securities and Exchange Commission. The Board also considered information provided by FIMCO on management’s initiatives for increasing Fund assets and new product development, which included enhanced sales and marketing efforts (including selling Fund shares through independent channels and increasing the size of the sales force); continuing efforts as deemed practicable to reduce expenses and improve performance of the Funds; and improving the efficiency of back-office operations and services (including a major initiative to process new business electronically). The Independent Trustees also considered a proposal at the May Meeting to increase the
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fees for transfer agency services provided by FIS to all classes of the funds except the Institutional Class and the resulting impact on overall expenses and profitability. In addition to evaluating, among other considerations, the written information provided by FIMCO, the Board also evaluated the answers to questions posed by the Board to representatives of FIMCO.
In addition, in response to specific requests from the Independent Trustees in connection with the April Meeting and/or May Meeting, WMC, Smith Group, Vontobel and Ziegler furnished, and the Board reviewed, information concerning various aspects of their respective operations, including: (1) the nature, extent and quality of services provided by WMC, Smith Group, Vontobel and Ziegler to the applicable Sub-Advised Funds; (2) the sub-advisory fee rates charged by WMC, Smith Group, Vontobel and Ziegler and a comparison of those fee rates to the fee rates of WMC, Smith Group, Vontobel and Ziegler for providing advisory services to other investment companies or accounts or compared to their standard fee schedule, as applicable, with an investment mandate similar to the applicable Sub-Advised Funds; (3) profitability and/or financial information provided by WMC, Smith Group, Vontobel and Ziegler; and (4) any “fall out” or ancillary benefits accruing to WMC, Smith Group, Vontobel and Ziegler as a result of the relationship with each applicable Sub-Advised Fund. The Board also considered FIMCO’s representations that it found the sub-adviser responses to the information request in connection with the renewal of the Sub-Advisory Agreements to be satisfactory and raising no issues of general concern.
In considering the information and materials described above, the Independent Trustees took into account management style, investment strategies and prevailing market conditions. Moreover, the Independent Trustees received assistance from and met separately with Independent Legal Counsel during both the April Meeting and May Meeting and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to approvals of advisory agreements (and sub-advisory agreements, as applicable). Although the Advisory Agreement for all of the Funds and the Sub-Advisory Agreements for the Sub-Advised Funds were considered at the same Board meeting, the Independent Trustees addressed each Fund separately during the April Meeting and May Meeting.
Based on all of the information presented, the Board, including a majority of its Independent Trustees, determined on a Fund-by-Fund basis that the fees charged under the Advisory Agreement and each Sub-Advisory Agreement are reasonable in relation to the services that are provided under each Agreement. The Board did not identify any single factor as being of paramount importance in reaching its conclusions and determinations with respect to the continuance of the Advisory Agreement for
| 399 |
Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS EQUITY FUNDS
each Fund and Sub-Advisory Agreements and different Trustees may have given different weight to different factors. Although not meant to be all-inclusive, the following describes some of the factors that were considered by the Board in deciding to approve the continuance of the Advisory Agreement for each Fund and Sub-Advisory Agreements with WMC, Smith Group, Vontobel and Ziegler.
Nature, Extent and Quality of Services
In examining the nature, extent and quality of the services provided by FIMCO, the Board recognized that FIMCO is dedicated to providing investment management services exclusively to the Funds and the other funds in the First Investors fund complex and that, unlike many other mutual fund managers, FIMCO is not in the business of providing management services to hedge funds, pension funds or private accounts. In this connection, the Board was advised that certain key FIMCO personnel provide separately managed account services to a FIMCO-affiliated investment adviser, but that these personnel spend most of their time serving their FIMCO clients. As a result, the Board considered that FIMCO’s personnel devote substantially all of their time to serving the funds in the First Investors fund complex. The Board also considered management’s explanation regarding the significant costs involved in providing the level of personal service that the First Investors fund complex seeks to deliver to its shareholders, which are primarily shareholders in the broad middle market.
The Board noted that FIMCO has undertaken extensive responsibilities as manager of the Funds, including: (1) the provision of investment advice to the Funds; (2) implementing policies and procedures designed to ensure compliance with each Fund’s investment objectives and policies; (3) the review of brokerage arrangements; (4) oversight of general portfolio compliance with applicable laws; (5) the provision of certain administrative services to the Funds, including fund accounting; (6) the implementation of Board directives as they relate to the Funds; and (7) evaluating and monitoring any sub-advisers on an ongoing basis, including, but not limited to, monitoring each sub-adviser’s investment performance, evaluating each sub-adviser’s compliance program on an annual basis and monitoring investments for compliance purposes, including monitoring each sub-adviser’s soft dollar practices (as applicable), portfolio allocation and best execution. The Board also noted that FIMCO provided the same sorts of administrative and other services, except for direct management of the portfolio, for the Sub-Advised Funds as it does for the other funds that do not employ a sub-adviser. The Board noted that FIMCO provides not only advisory services, but historically also has provided certain administrative personnel and services that many other advisers do not provide without imposition of separate fees. The Board also noted the steps that FIMCO has taken to encourage strong performance, including the manner in which portfolio managers and analysts
| 400 |
are compensated based on Fund performance. In addition, the Board considered information regarding the overall financial strength of FIMCO and its affiliates and the resources and staffing in place with respect to the services provided to the Funds.
The Board also considered the nature, extent and quality of the services provided to the Funds by FIMCO’s affiliates, including transfer agency and distribution services. The Board took into account the fact that FIS is dedicated to providing transfer agency services exclusively to the Funds and the other funds in the First Investors fund complex. As a result, FIS can tailor its processes and services to satisfy the needs of the Funds’ shareholder base. The Board noted that the Funds’ shares are distributed primarily through Foresters Financial Services, Inc. (“FFS”), which is an affiliate of FIMCO.
Furthermore, the Board considered the nature, extent and quality of the investment management services provided by WMC, Smith Group, Vontobel and Ziegler to the applicable Sub-Advised Funds. The Board considered WMC’s, Smith Group’s, Vontobel’s and Ziegler’s investment management process in managing the applicable Sub-Advised Funds and the experience and capability of their respective personnel responsible for the portfolio management of the applicable Sub-Advised Funds. The Board also considered information regarding the resources and staffing in place with respect to the services provided by each sub-adviser. Additionally, with respect to the Sub-Advised Funds, the Board considered the differences in fees paid by each Sub-Advised Fund to FIMCO and the fees paid by FIMCO to each sub-adviser, as well as representations by FIMCO that these fee differentials are warranted by its ongoing services and assumption of risks.
Based on the information considered, the Board concluded that the nature, extent and quality of the services provided to each Fund by FIMCO and the applicable Sub-Advised Funds by WMC, Smith Group, Vontobel and Ziegler were appropriate and consistent with the terms of the Advisory Agreement and Sub-Advisory Agreements, as applicable, and supported approval of the Advisory Agreement and each Sub-Advisory Agreement.
Investment Performance
The Board placed significant emphasis on the investment performance of each of the Funds. While consideration was given to performance reports and discussions held at prior Board or Committee meetings, as applicable, particular attention was given to the performance information compiled by Broadridge. In particular, the Board reviewed the performance of each Fund over the most recent calendar year (“1-year period”) and the annualized performance over the most recent three calendar year period (“3-year period”) and five calendar year period (“5-year period”). In
| 401 |
Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS EQUITY FUNDS
addition, the Board considered the performance information provided by FIMCO for each Fund through April 30, 2017. With regard to the performance information, the Board considered the performance of each Fund on a percentile and quintile basis as compared to its Peer Group. For purposes of the performance data provided, the first quintile is defined as 20% of the funds in the applicable Peer Group with the highest performance and the fifth quintile is defined as 20% of the funds in the applicable Peer Group with the lowest performance. The Board also considered FIMCO’s representations that it monitors to ensure portfolio managers invest in a manner consistent with the mandate for the Fund or Funds they manage.
On a Fund-by-Fund basis, the performance reports indicated, and the Board noted, that each Fund except the Covered Call Strategy Fund (which did not have a full year of performance yet) fell within one of the top three quintiles for at least one of the performance periods provided by Broadridge. In particular, the Board noted that: (i) the Equity Income Fund, Global Fund, Select Growth Fund and Total Return Fund fell within the top three quintiles for the 1-year period, 3-year period and 5-year period; (ii) the Growth & Income Fund and Real Estate Fund fell within the top three quintiles for the 1-year period; (iii) the International Fund fell within the first quintile for the 3-year period; (iv) the Special Situations Fund fell within one of the top three quintiles for the 3-year period; and (v) the Opportunity Fund fell within one of the top three quintiles for the 5-year period. The Board also considered management’s special performance report and explanation for the various periods of underperformance of the Opportunity Fund. With respect to the Covered Call Strategy Fund, the Board noted that the Fund was relatively new with less than one calendar year of performance history and, as a result, Broadridge did not provide any comparative performance information for the various time periods. The Board also considered the volatility versus total return data provided by Broadridge as well as FIMCO’s representation that it believes that the Funds use a more conservative investment style than many of their peers.
Based on the information considered, the Board concluded that the investment performance of each Fund was either (a) acceptable or better, or (b) subject to reasonable steps to monitor or address certain periods of underperformance.
Fund Expenses, Costs of Services, Economies of Scale and Related Benefits
Management Fees and Expenses. The Board also gave substantial consideration to the fees payable under each Fund’s Advisory Agreement as well as under the Sub-Advisory Agreements for the Sub-Advised Funds.
The Board reviewed the information compiled by Broadridge comparing each Fund’s contractual management fee rate (at common asset levels) and actual management
| 402 |
fee rate (which included the effect of any fee waivers) as a percentage of average net assets to other funds in its Peer Group. In this regard, the Board considered the contractual and actual management fees of each Fund on a quintile basis as compared to its Peer Group and noted the relative position of each Fund within the Peer Group. The Board also considered that FIMCO provides not only advisory services but also certain administrative personnel to the Funds under each Fund’s Advisory Agreement and that many other advisers do not provide such administrative personnel under their advisory agreements and that FIMCO also provides certain administrative services without the imposition of a separate fee. The Board also considered that FIMCO informed the Board that it intends to extend, on a voluntary basis, the existing management fee cap for the Special Situations Fund and Global Fund until May 31, 2018 and the contractual total expense cap for the Covered Call Strategy Fund until January 31, 2018 (which was previously approved by the Board). In particular, the Board noted that: (i) the contractual and actual management fees for all of the Funds except the International Fund, Total Return Fund, Equity Income Fund and Global Fund were in the top three quintiles of their respective Peer Groups; (ii) the Equity Income Fund’s and Global Fund’s contractual management fee was in the fourth quintile and actual management fee was in the fifth quintile of their respective Peer Groups; and (iii) the International Fund’s and Total Return Fund’s contractual and actual management fees were in the fifth quintile of their respective Peer Group.
The Board also reviewed the information compiled by Broadridge comparing each Fund’s Class A share total expense ratio, taking into account FIMCO’s expense waivers (as applicable), and the ratio of the sum of actual management and other non-management fees (i.e., fees other than management, transfer agency and 12b-1/non-12b-1 fees) to other funds in its Peer Group, including on a quintile basis. In particular, the Board noted that: (i) the total expense ratio for each Fund except the Covered Call Strategy Fund, Growth & Income Fund, Opportunity Fund, Real Estate Fund and Special Situations Fund was not in the top three quintiles of their respective Peer Groups; and (ii) the ratio of the sum of actual management and other non-management fees was in the top three quintiles for all of the Funds except the Equity Income Fund, Global Fund and International Fund. In considering the level of the total expense ratio and the ratio of the sum of actual management and other non-management fees, the Board took into account management’s explanation that: (i) the Funds have average account sizes that are relatively small compared with the industry average and that funds with small average account sizes generally have higher expense ratios than funds with larger average account sizes; (ii) there are significant costs involved in providing the level of personal service that the First Investors fund complex seeks to deliver to its shareholders; and (iii) Broadridge expense comparisons do not take into account the size of a fund complex, and as a result, in
| 403 |
Board Considerations of Advisory Contracts and Fees (continued)
(unaudited)
FIRST INVESTORS EQUITY FUNDS
certain cases the First Investors funds are compared to funds in complexes that are much larger than First Investors. The Board also noted that Broadridge’s customized expense groups tend to be fairly small in number and the funds included in the Peer Group generally change from year to year, thereby introducing an element of randomness that affects comparative results each year. While recognizing the limitations inherent in Broadridge’s methodology, the Board believed that the data provided by Broadridge was a generally appropriate measure of comparative expenses.
In considering the sub-advisory fee rates charged by and costs and profitability of WMC, Smith Group, Vontobel and Ziegler with regard to the respective Sub-Advised Funds, the Board noted that FIMCO pays WMC, Smith Group, Vontobel or Ziegler, as the case may be, a sub-advisory fee from its own advisory fee rather than each Fund paying WMC, Smith Group, Vontobel or Ziegler a fee directly. The Board also considered an arrangement pursuant to which Smith Group and Vontobel (but not the Sub-Advised Funds) each pays a portion of its sub-advisory fee to a solicitor that introduced each such subadviser to FIMCO. WMC, Smith Group, Vontobel and Ziegler provided, and the Board reviewed, information comparing the fees charged by WMC, Smith Group, Vontobel and Ziegler for services to the respective Sub-Advised Funds versus the fee rates of WMC, Smith Group, Vontobel and Ziegler for providing advisory services to other comparable investment companies or accounts or compared to their standard fee schedule, as applicable. Based on a review of this information, the Board noted that the fees charged by WMC, Smith Group, Vontobel and Ziegler, as the case may be, for services to each applicable Sub-Advised Fund appeared competitive to the fees WMC, Smith Group, Vontobel and Ziegler charge to their other comparable investment companies or accounts or compared to their standard fee schedule, as applicable.
The foregoing comparisons assisted the Trustees by providing them with a basis for evaluating each Fund’s management fee and expense ratio on a relative basis and the Board concluded that each Fund’s management fees appeared reasonable in relation to the services and benefits provided to each Fund.
Profitability. The Board reviewed the materials it received from FIMCO regarding its revenues and costs in providing investment management and certain administrative services to the Funds. In particular, the Board considered the analysis of FIMCO’s profitability with respect to each Fund, calculated for the year ended December 31, 2016, as well as overall profitability information relating to the past five calendar years. The Board also considered the information provided by FIMCO comparing the profitability of certain publicly-traded mutual fund asset managers as analyzed by FIMCO based on publicly available financial statements and noted FIMCO’s analysis that its profit margin is significantly lower than the average of, and lower overall than
| 404 |
any of, such publicly-traded managers. In reviewing the profitability information, the Board also considered the “fall-out” or ancillary benefits that may accrue to FIMCO and its affiliates as a result of their relationship with the Funds, which are discussed below. The Board acknowledged that, as a business matter, FIMCO was entitled to earn reasonable profits for its services to the Funds and concluded that the level of profitability to FIMCO of its contractual arrangements with each Fund did not appear so high as to call into question the appropriateness of the fees paid to FIMCO by any Fund or otherwise to preclude the proposed continuation of the Advisory Agreement for any of the Funds. The Board also considered the profitability and/or financial information provided by WMC, Smith Group, Vontobel and Ziegler.
Economies of Scale. With respect to whether economies of scale are realized by FIMCO and the extent to which any economies of scale are reflected in the level of management fee rates charged, the Board considered that the Advisory Agreement fee schedule for each Fund includes breakpoints to account for management economies of scale as each Fund’s assets increase.
“Fall Out” or Ancillary Benefits. The Board considered the “fall-out” or ancillary benefits that may accrue to FIMCO, WMC, Smith Group, Vontobel and Ziegler as a result of their relationship with the Funds. In that regard, the Board considered the fact that FIMCO and each sub-adviser (except Ziegler) may receive research from broker-dealers that execute brokerage transactions for the funds in the First Investors fund complex. However, the Board noted that FIMCO and the sub-advisers must select brokers based on each Fund’s requirements for seeking best execution. The Board also considered the profits earned or losses incurred by FIS (including the proposed increase in transfer agency fees) and the income received by FFS as a result of FIMCO’s management of the First Investors funds.
| * * * |
In summary, based on all relevant information and factors, none of which was individually determinative of the outcome, the Board, including a majority of the Independent Trustees, approved the renewal of the Advisory Agreement and each Sub-Advisory Agreement.
| 405 |
| Shareholder Information | ||
| Investment Adviser | Subadviser | |
| Foresters Investment Management | (Long Short Fund) | |
| Company, Inc. | Lazard Asset Management, LLC | |
| 40 Wall Street | 30 Rockefeller Plaza | |
| New York, NY 10005 | New York, NY 10112 | |
| Subadviser | Subadviser | |
| (Covered Call Strategy Fund) | (Select Growth Fund) | |
| Ziegler Capital Management, LLC | Smith Asset Management Group, L.P. | |
| 70 W. Madison Street | 100 Crescent Court | |
| Chicago, IL 60602 | Dallas, TX 75201 | |
| Subadviser | Underwriter | |
| (Floating Rate Fund and Fund For Income) | Foresters Financial Services, Inc. | |
| Muzinich & Co., Inc. | 40 Wall Street | |
| 450 Park Avenue | New York, NY 10005 | |
| New York, NY 10022 | ||
| Custodian | ||
| Subadviser | The Bank of New York Mellon | |
| (Global Fund and Hedged U.S. Equity | 225 Liberty Street | |
| Opportunity Fund) | New York, NY 10286 | |
| Wellington Management Company, | ||
| LLP | Transfer Agent | |
| 280 Congress Street | Foresters Investor Services, Inc. | |
| Boston, MA 02210 | Raritan Plaza I – 8th Floor | |
| Edison, NJ 08837-3620 | ||
| Subadviser | ||
| (International Fund) | Independent Registered Public | |
| Vontobel Asset Management, Inc. | Accounting Firm | |
| 1540 Broadway | Tait, Weller & Baker LLP | |
| New York, NY 10036 | 1818 Market Street | |
| Philadelphia, PA 19103 | ||
| Subadviser | ||
| (International Opportunities Bond Fund) | Legal Counsel | |
| Brandywine Global Investment | K&L Gates LLP | |
| Management, LLC | 1601 K Street, N.W. | |
| 2929 Arch Street | Washington, D.C. 20006 | |
| Philadelphia, PA 19104 | ||
| 406 |
A description of the policies and procedures that the Funds use to vote proxies relating to a portfolio’s securities is available, without charge, upon request by calling toll free 1-800-423-4026 or can be viewed online or downloaded from the EDGAR database on the U.S. Securities and Exchange Commission’s (“SEC”) internet website at http://www.sec.gov. In addition, information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, is available, without charge, upon request in writing or by calling 1-800-423-4026 and on the SEC’s internet website at http://www.sec.gov.
The Funds file their complete schedule of portfolio holdings with the SEC on Form N-Q for the first and third quarters of each fiscal year. The Funds’ Form N-Q is available on the SEC’s website at http://www.sec.gov; and may also be reviewed and copied at the SEC’s Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The schedule of portfolio holdings is available, without charge, upon request in writing or by calling 1-800-423-4026.
| 407 |
NOTES
| 408 |
NOTES
| 409 |
Item 2. Code of Ethics
The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer and principal financial officer. On June 1, 2017, revisions were made to the code of ethics to reflect the appointment of a new President of the First Investors Funds.
For the year ended September 30, 2017, there were no waivers granted from a provision of the code of ethics.
A copy of the Registrant's code of ethics is filed under Item 12(a)(1).
Item 3. Audit Committee Financial Expert
The Registrant's Board has determined that it had at least one "audit committee financial expert" serving on its audit committee. Arthur M. Scutro, Jr. and Mark R. Ward were the "audit committee financial experts" during all or part of the period and were considered to be "independent" as defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
| Fiscal Year Ended | |||||||
| September 30, | |||||||
| ----------------- | |||||||
| 2017 | 2016 | ||||||
| ---- | ---- | ||||||
| (a) Audit Fees | |||||||
| First Investors Equity Funds | $ | 326,900 | $ | 298,400 | |||
| (b) Audit-Related Fees | |||||||
| First Investors Equity Funds | $ | 0 | $ | 0 | |||
| (c) Tax Fees | |||||||
| First Investors Equity Funds | $ | 61,200 | $ | 55,000 | |||
| Nature of services: tax returns preparation and tax compliance | |||||||
| (d) All Other Fees | |||||||
| First Investors Equity Funds | $ | 0 | $ | 0 | |||
(e)(1) Audit committee's pre-approval policies
The Charter of the Audit Committee requires the Audit Committee (a) to pre-approve, and to recommend to the full Board, the selection, retention or termination of the independent auditors to provide audit, review or attest services to the First Investors Funds (“Funds”) and, in connection therewith, evaluate the independence of the auditors and to obtain the auditors’ specific representations as to their independence; (b) to pre-approve all non-audit services to be provided to the Funds by the independent auditor; and (c) to pre-approve all non-audit services to be provided by the Funds’ independent auditor to the Funds’ investment adviser or to any entity that controls, is controlled by or is under common control with the Funds’ investment adviser and that provides ongoing services to the Funds, if the engagement relates directly to the operations and financial reporting of the Funds. The Audit Committee has not adopted pre-approval policies or procedures to permit the services in (b) and (c) above to be pre-approved by other means.
(e)(2) None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and All Other Fees paid by the Registrant and Related Entities disclosed above were approved by the Audit Committee pursuant to paragraph(c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit review or attest services, if certain conditions are satisfied).
(f) Not Applicable
(g) Aggregate non-audit fees billed by the Registrant's accountant for services rendered to the Registrant and the Registrant's investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant for the two fiscal years ended September 30, 2017 and 2016 were $183,750 and $177,650 respectively.
(h) Not Applicable
Item 5. Audit Committee of Listed Registrants
| Not applicable | ||
Item 6. Schedule of Investments
| (a) Schedule is included as part of the report to shareholders filed under Item 1 of | |
| this Form. | |
| (b) Not applicable | |
Item 7. Disclosure of Proxy Voting Policies & Procedures for
Closed-End Management Investment Companies
| Not applicable | |
Item 8. Portfolio Managers of Closed-End Management Investment Companies
| Not applicable | |
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Companies and Affiliated Purchasers
| Not applicable | |
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedure by which shareholders may recommend nominees to the Registrant's Board of Trustees.
Item 11. Controls and Procedures
(a) The Registrant's President and Principal Executive Officer and Principal Financial Officer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective, based on their evaluation of these disclosure controls and procedures as of a date within 90 days of the filing date of this report.
(b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics - Filed herewith
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 - Filed herewith
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 - Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
First Investors Equity Funds
| By | /s/ Clark D. Wagner |
| Clark D. Wagner | |
| President and Principal Executive Officer | |
| Date: | November 28, 2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By | / s/ Clark D. Wagner |
| Clark D. Wagner | |
| President and Principal Executive Officer | |
| By | /s/ Joseph I. Benedek |
| Joseph I. Benedek | |
| Treasurer and Principal Financial Officer | |
| Date: | November 28, 2017 |