ITEM B.11.a LEGAL PROCEDINGS FIRST INVESTORS EQUITY FUNDS 9/30/2018
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 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, 2018. 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, 2018. 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.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Trustees and Shareholders
First Investors Equity Funds
40 Wall Street
New York, New York 10005
In planning and performing our audits of the financial statements of First Investors Equity Funds (comprising, respectively, 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, Premium Income Fund, Select Growth Fund, Special Situations Fund and Total Return Fund Fund) (the "Funds"),as of and for the year ended September 30, 2018, in accordance with the standards of the Public Company Accounting Oversight Board (United States),we considered its internal control over financial reporting, including controls over safeguarding securities, as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements and to comply with the requirements of Form N-CEN, 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.
The management of the Funds is responsible for establishing and maintaining effective internal control over financial reporting. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controls. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company's assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.
Board of Trustees and Shareholders
First Investors Equity Funds
Page Two
Our consideration of the Funds' internal control over financial reporting was for the limited purpose described in the first paragraph and would not necessarily disclose all deficiencies in internal control that might be material weaknesses under standards established by the Public Company Accounting Oversight Board (United States). However, we noted no deficiencies in the Funds' internal control over financial reporting and its operation, including controls for safeguarding securities, which we consider to be material weaknesses, as defined above, as of September 30, 2018.
This report is intended solely for the information and use of management, Shareholders, the Board of Trustees of First Investors Equity Funds and the Securities and Exchange Commission, and is not intended to be and should not be used by anyone other than these specified parties.
| TAIT, WELLER & BAKER LLP |
Philadelphia, Pennsylvania
November 29, 2018
Responses to N-CEN for the year ended 9/30/18
Equity Funds
Item G.1.a.v
Information required to be filed pursuant to existing exemptive orders.
The First Investors Equity Funds relied on the manager of managers exemptive order issued to it by the Securities and Exchange Commission on June 20, 2007, Release No. 27868 when it hired Muzinich & Co, Inc. as a subadvisor to a portion of the assets in the First Investors Total Return Fund. Pursuant to the order, the First Investors Income Funds and First Investors Equity Funds sent a Notice of Availability of Information Statement to shareholders of the above mentioned funds as of a record date and made the Information Statement available via an internet website. The notice and the information statement were filed with the Securities and Exchange Commission via EDGAR on March 28, 2018 (Accession No. 0000898432-18-000486), and is hereby incorporated by reference as part of the response to Item G.1.a.v of Form N-CEN.
Responses to N-CEN for the year ended 9/30/18
Equity Funds
Item G.1.a.vi
Polices with respect to security investments
During the period covered by this report the First Investors Total Return Fund added investments in high yield securities as part of its principal investment strategies. The portion of the fund that is invested in high yield securities is managed by Muzinich & Co., Inc. The fund also disclosed that it may invest in exchange-traded funds. These changes were disclosed in the statutory prospectus dated January 31, 2018 for the Equity Funds which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 485(b) on January 29, 2018 (Accession No. 0000898432-18-000115), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
During the period covered by this report the First Investors Global Fund disclosed that it may invest in forward foreign currency contracts. This strategy was described in the statutory prospectus dated January 31, 2018 for the Equity Funds which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 485(b) on January 29, 2018 (Accession No. 0000898432-18-000115), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
During the period covered by this report the First Investors Growth & Income Fund disclosed that it will invest primarily in large size companies and made other changes to its investment strategies and risks to reflect the funds value investment approach. These changes were described in the statutory prospectus dated January 31, 2018 for the Equity Funds which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 485(b) on January 29, 2018 (Accession No. 0000898432-18-000115), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
During the period covered by this report the First Investors Growth & Income Fund changed its broad based index to the Russell 1000 Value Index. The change was described in a supplement dated March 14, 2018 to the Equity Funds Prospectus which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 497 on March 14, 2018 (Accession No. 0000898432-18-000340), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
During the period covered by this report the First Investors Special Situations Fund changed its broad based index to the Russell 2000 Value Index. The change was described in a supplement dated March 14, 2018 to the Equity Funds Prospectus which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 497 on March 14, 2018 (Accession No. 0000898432-18-000340), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
During the period covered by this report the First Investors Equity Income Fund changed its primary broad based securities index to the Russell 1000 Value Index from the S&P 500 Index. The change was described in a supplement dated May 4, 2018 to the First Investors Income and Equity Funds Prospectus which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 497 on May 4, 2018 (Accession No. 0000898432-18-000602), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
During the period covered by this report the First Investors Total Return Fund disclosed that it normally invests at least 50% of its net assets in stocks and at least 30% in bonds, cash and money market instruments. The change was described in a supplement dated May 4, 2018 to the First Investors Income and Equity Funds Prospectus which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 497 on May 4, 2018 (Accession No. 0000898432-18-000602), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
During the period covered by this report the First Investors Global Fund disclosed that security selection within the fund is based on any one or more of the following characteristics: profitability; return on invested capital; relative valuation; risk/return profile; quality of assets; industry structure/dynamics; earnings growth as a result of positive changes; hidden or unappreciated value; quality of management and/or a strong business model. The disclosure was made in a supplement dated June 1, 2018 to the First Investors Income and Equity Funds Prospectus which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 497 on June 1, 2018 (Accession No. 0000898432-18-000687), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
Item G.1.a.vi
Terms of new or amended securities
During the period covered by this report the Board of Trustees of the Equity Funds approved the creation of a new series, designated as the First Investors Premium Income Fund. A description of the Fund’s shares was contained in the Fund’s Prospectus and Statement of Additional Information dated April 2, 2018, which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 485(b) on March 28, 2018 (Accession No. 0000898432-18-000369), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
During the period covered by this report the Board of Trustees of the Equity Funds, upon the recommendation of Foresters Investment Management Company, Inc., the investment adviser for the First Investors Funds, approved a plan to liquidate and terminate the First Investors Real Estate Fund, a series of the Equity Trust. Pursuant to the plan of liquidation, the Fund closed on September 22, 2018. The approval of the plan of liquidation was disclosed in a supplement dated May 18, 2018 to the First Investors Income and Equity Funds Prospectus and the First Investors Real Estate fund summary prospectus, which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 497 on May 18, 2018 (Accession No. 0000898432-18-000623), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
During the period covered by this report the Board of Trustees of the First Investors Equity Funds, upon the recommendation of Foresters Investment Management Company, Inc., the investment adviser for the First Investors Funds, approved a plan to liquidate and terminate the First Investors Long Short Fund, a series of the Equity Trust. Pursuant to the plan of liquidation the Fund was closed on September 26, 2018. The approval of the plan of liquidation was disclosed in a supplement dated August 21, 2018 to the First Investors Income and Equity Funds Prospectus and the First Investors Long Short fund summary prospectus, which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 497 on August 22, 2018 (Accession No. 0000898432-18-000928), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
Item G.1.a.vi
Mergers
During the period covered by this report the Board of Trustees of the Income Trust approved an Agreement and Plan of Reorganization and Termination (the “Agreement”) pursuant to which the First Investors Balanced Income Fund, a series of the Income Trust, would be reorganized into the First Investors Total Return Fund, a series of the Equity Trust. Pursuant to the Agreement, and upon shareholder approval, the Balanced Income Fund reorganized into the Limited Duration Bond Fund on September 21, 2018. Approval of the Agreement was disclosed in supplements dated May 4, 2018 to the registration statement for the Income Funds and summary prospectus for First Investors Balanced Income Fund which were filed with the SEC via EDGAR pursuant to Rule 497 on May 4, 2018 (Accession No.0000898432-18-000597 and 0000898432-18-000598 respectively), and are hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN. The Agreement was filed with the Securities and Exchange Commission via EDGAR as part of the registration statement on Form N-14 filed pursuant to Rule 497 on August 1, 2018 (Accession No. 0000898432-18-000880), and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
Item G.1.a.vi
Exhibits
The Subadvisory Agreement among FIMCO, Ziegler Capital Management, LLC, First Investors Equity Funds and First Investors Life Series Funds is incorporated by reference to Post-Effective Amendment No. 112 to the Premium Income Fund Registration Statement, which was filed by the Equity Fund with the Securities and Exchange Commission via EDGAR pursuant to Rule 485(b) on March 28, 2018, (Accession No. 0000898432-18-000369) and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
The Amended and Restated Schedule A to the Investment Advisory Agreement between Registrant and First Investors Management Company, Inc., is incorporated by reference to Post-Effective Amendment No. 112 to the Premium Income Funds Registration Statement, which was filed by the Equity Funds with the Securities and Exchange Commission via EDGAR pursuant to Rule 485(b) on March 28, 2018, (Accession No. 0000898432-18-000369) and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.
The Amended Subadvisory Agreement FIMCO, Muzinich & Co, Inc., the First Investors Income Funds, the First Investors Equity Funds and the First Investors Life Series Funds is filed as an exhibit to the registration statement for the Income Funds dated January 31, 2018, which was filed with the Securities and Exchange Commission via EDGAR pursuant to Rule 485(b) on January 29, 2018 (Accession No. 0000898432-18-000114) and is hereby incorporated by reference as part of the response to Item G.1.a.vi of Form N-CEN.