As filed with the Securities and Exchange Commission on April , 1997
Registration No. 2-38309
811-2107
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 63 X
-
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 63 X
-
FIRST INVESTORS FUND FOR INCOME, INC.
(Exact name of Registrant as specified in charter)
Ms. Concetta Durso
Secretary and Vice President
First Investors Fund For Income, Inc.
95 Wall Street
New York, New York 10005
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement
It is proposed that this filing will become effective on April 30, 1997 pursuant
to paragraph (b) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously elected to register an indefinite number of shares of common stock,
par value $1.00 per share, under the Securities Act of 1933. Registrant filed a
Rule 24f-2 Notice for its fiscal year ending December 31, 1996 on February 27,
1997.
<PAGE>
FIRST INVESTORS FUND FOR INCOME, INC.
CROSS-REFERENCE SHEET
N-1A Item No. Location
- ------------- --------
PART A: PROSPECTUS
1. Cover Page................................. Cover Page
2. Synopsis................................... Fee Table
3. Condensed Financial Information............ Financial Highlights
4. General Description of Registrant.......... Investment Objectives and
Policies; General
Information
5. Management of the Fund..................... Management
5A. Management's Discussion of
Fund Performance.......................... Performance Information
6. Capital Stock and Other Securities......... Description of Shares;
Dividends and Other
Distributions; Taxes;
Determination of Net
Asset Value
7. Purchase of Securities Being Offered....... Alternative Purchase
Plan; How to Buy Shares
8. Redemption or Repurchase................... How to Exchange Shares;
How to Redeem
Shares; Telephone
Transactions
9. Pending Legal Proceedings.................. Not Applicable
PART B: STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of Contents
12. General Information and History............ General Information
13. Investment Objectives and Policies......... Investment Policies;
Investment Restrictions
14. Management of the Fund..................... Directors and Officers
15. Control Persons and Principal
Holders of Securities.....................
16. Investment Advisory and Other Services..... Management
17. Brokerage Allocation....................... Allocation of Portfolio
Brokerage
18. Capital Stock and Other Securities......... Determination of Net
Asset Value
19. Purchase, Redemption and Pricing
of Securities Being Offered............... Reduced Sales Charges,
Additional Exchange and
Redemption Information
and Other Services;
Determination of Net
Asset Value
<PAGE>
20. Tax Status................................. Taxes
21. Underwriters............................... Underwriter
22. Performance Data........................... Performance Information
23. Financial Statements....................... Financial Statements;
Report of Independent
Accountants
PART C: OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item so numbered, in Part C hereof.
<PAGE>
FIRST INVESTORS HIGH YIELD FUND, INC.
FIRST INVESTORS FUND FOR INCOME, INC.
95 Wall Street, New York, New York 10005/1-800-423-4026
This is a Prospectus for FIRST INVESTORS HIGH YIELD FUND, INC. ("HIGH
YIELD FUND") and FIRST INVESTORS FUND FOR INCOME, INC. ("INCOME FUND"), each of
which is an open-end diversified management investment company. HIGH YIELD FUND
and INCOME FUND are referred to herein collectively as "Funds." Each Fund sells
two classes of shares. Investors may select Class A or Class B shares, each with
a public offering price that reflects different sales charges and expense
levels. See "Alternative Purchase Plans."
HIGH YIELD FUND primarily seeks high current income and secondarily seeks
capital appreciation. The Fund seeks its objectives by investing, under normal
market conditions, at least 65% of its total assets in high risk, high yield
securities, commonly referred to as "junk bonds" ("High Yield Securities").
INCOME FUND primarily seeks to earn a high level of current income and, to
the extent possible, in view of that objective, secondarily seeks growth of
capital. The Fund seeks its objective by emphasizing investment in High Yield
Securities.
Because the price of lower-grade debt securities tends to fluctuate more
than the price of investment grade debt securities, the net asset value of each
Fund's shares has fluctuated significantly in recent years. Because of the
emphasis placed upon High Yield Securities by the Funds, investors in either
Fund should differentiate between it and investment companies emphasizing
high-grade debt securities and commit only that portion of their resources that
they wish to invest in a portfolio which is accompanied by higher risk. There is
no assurance that either Fund will achieve its investment objectives.
INVESTMENTS IN HIGH YIELD, HIGH RISK SECURITIES, COMMONLY REFERRED TO AS "JUNK
BONDS," ENTAIL RISKS THAT ARE DIFFERENT AND MORE PRONOUNCED THAN THOSE INVOLVED
IN HIGHER-RATED SECURITIES. SEE "HIGH YIELD SECURITIES-RISK FACTORS."
This Prospectus sets forth concisely the information about each Fund that
a prospective investor should know before investing and should be retained for
future reference. First Investors Management Company, Inc. ("FIMCO" or
"Adviser") serves as investment adviser to the Funds and First Investors
Corporation ("FIC" or "Underwriter") serves as distributor of the Funds' shares.
A Statement of Additional Information ("SAI"), dated April 30, 1997 (which is
incorporated by reference herein), has been filed with the Securities and
Exchange Commission. The SAI is available at no charge upon request to the Funds
at the address or telephone number indicated above.
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured or protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other government agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is April 30, 1997
<PAGE>
FEE TABLE
The following table is intended to assist investors in understanding the
expenses associated with investing in each class of shares of a Fund. Shares of
either Fund issued prior to January 12, 1995 have been designated as Class A
shares.
SHAREHOLDER TRANSACTION EXPENSES
Class A Class B
Shares Shares
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..................... 6.25% None
Deferred Sales Load
(as a percentage of the lower of original purchase
price or redemption proceeds)........................... None* 4% in the
first
year;
declining
to 0%
after
the sixth
year
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
High Yield Fund Income Fund
Class A Class B Class A Class B
Shares Shares Shares Shares
------- ------- ------- -------
Management Fees(1) 0.80%+ 0.80%+ 0.74% 0.74%
12b-1 Fees(2) 0.30 1.00 0.30 1.00
Other Expenses 0.37 0.37 0.27 0.27
Total Fund Operating Expenses(3)+ 1.47 2.17 1.31 2.01
- ----------
* A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge.
See "How to Buy Shares."
+ Net of waiver
(1) Management Fees have been restated for HIGH YIELD FUND to reflect current
fees. For the fiscal year ended December 31, 1996, the Adviser waived
Management Fees for HIGH YIELD FUND in excess of 0.85%. Absent the waiver,
such fees would have been 1.00%. The Adviser will waive Management Fees
for HIGH YIELD FUND in excess of 0.80% for a minimum period ending
December 31, 1997.
(2) Through February 1, 1998, the Underwriter has agreed to cap its right to
claim Class A 12b-1 Fees for each Fund at the annual rate of 0.15% and has
agreed to cap its right to claim Class B 12b-1 Fees for each Fund at the
annual rate of 0.85%. After such date, each Fund will pay 12b-1 Fees at
the rates listed in the table.
(3) If Management Fees had not been waived, Total Fund Operating Expenses for
HIGH YIELD FUND would have been 1.67% for Class A shares and 2.37% for
Class B shares. Each Fund has an expense offset arrangement that may
reduce the Fund's custodian fee based on the amount of cash maintained by
the Fund with its custodian. Any such fee reductions are not reflected
under Total Fund Operating Expenses.
For a more complete description of the various costs and expenses, see
"Alternative Purchase Plans," "How to Buy Shares," "How to Redeem Shares,"
"Management" and "Distribution Plans." Due to the imposition of Rule 12b-1 fees,
it is possible that long-term shareholders of a Fund may pay more in total sales
charges than the economic equivalent of the maximum front-end sales
2
<PAGE>
charge permitted by the rules of the National Association of Securities Dealers,
Inc. The Fee Table does not reflect the costs incurred by shareholders who
purchase shares of the Funds through First Investors Contractual Plans.
The Example below is based on Class A and Class B expense data for each
Fund's fiscal year ended December 31, 1996, except that certain Operating
Expenses have been restated, as noted above.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
HIGH YIELD FUND
Class A................... $77 $106 $138 $227
Class B................... 62 98 136 233*
INCOME FUND
Class A................... 75 101 130 211
Class B................... 60 93 128 216*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) no redemption at the end of each time period:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
HIGH YIELD FUND
Class A................... $77 $106 $138 $227
Class B................... 22 68 116 233*
INCOME FUND
Class A................... 75 101 130 211
Class B................... 20 63 108 216*
* Assumes conversion to Class A shares eight years after purchase.
THE EXPENSES IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION BY
THE FUNDS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES IN FUTURE YEARS MAY BE
GREATER OR LESS THAN THOSE SHOWN.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables set forth the per share operating performance data
for a share outstanding, total return, ratios to average net assets and other
supplemental data for each year indicated. The tables have been derived from
financial statements which have been examined by Tait, Weller & Baker,
independent certified public accountants, whose reports thereon appear in the
SAI. This information should be read in conjunction with the Financial
Statements and Notes thereto, which also appear in the SAI, available at no
charge upon request to the Funds.
4
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
HIGH YIELD FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CLASS A
---------------------------------------------------------
Year Ended December 31 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value,
Beginning of Year . . . . . . . $5.22 $4.84 $5.30 $4.97 $4.59
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net investment income . . . . . . .47 .47 .48 .47 .53
Net realized and unrealized gain (loss)
on investments . . . . . . . . .20 .39 (.46) .34 .31
----- ----- ----- ----- -----
Total from Investment
Operations . . . . . . . .67 .86 .02 .81 .84
----- ----- ----- ----- -----
LESS DISTRIBUTIONS FROM:
Net investment income . . . . . . .49 .48 .48 .48 .46
Capital surplus . . . . . . . . -- -- -- -- --
----- ----- ----- ----- -----
Total Distributions . . . . .49 .48 .48 .48 .46
----- ----- ----- ----- -----
Net Asset Value,
End of Year . . . . . . . . . . . $5.40 $5.22 $4.84 $5.30 $4.97
===== ===== ===== ===== =====
TOTAL RETURN (%) + . . . . . . . . . 13.35 18.43 .39 16.95 18.94
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (in millions) $202 $187 $170 $191 $192
RATIO TO AVERAGE NET ASSETS: (%)
Expenses . . . . . . . . . . . . 1.37 1.45 1.56 1.69 1.39
Net investment income . . . . . . 8.99 9.22 9.48 8.96 10.65
RATIO TO AVERAGE NET ASSETS BEFORE EXPENSES WAIVED: (%)
Expenses . . . . . . . . . . . . 1.52 1.55 1.59 N/A N/A
Net investment income . . . . . . 8.84 9.12 9.44 N/A N/A
Portfolio Turnover Rate (%) . . . . . 29 42 32 87 43
</TABLE>
+ Calculated without sales charge
* For the period 1/12/95 (date Class B shares first offered) to 12/31/95
(a) Annualized
5
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
CLASS A CLASS B
1991 1990 1989 1988 1987 1996 1995*
- -------------- ------------ ------------ ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
$3.83 $5.26 $6.52 $6.51 $7.40 $5.23 $4.84
----- ----- ----- ----- ----- ----- -----
.53 .61 .78 .81 .81 .44 .42
.75 (1.44) (1.26) -- (.87) .18 .40
----- ----- ----- ----- ----- ----- -----
1.28 (.83) (.48) .81 (.06) .62 .82
----- ----- ----- ----- ----- ----- -----
.52 .60 .78 .80 .82 .45 .43
----- ----- ----- ----- ----- ----- -----
.52 .60 .78 .80 .83 .45 .43
----- ----- ----- ----- ----- ----- -----
$4.59 $3.83 $5.26 $6.52 $6.51 $5.40 $5.23
===== ===== ===== ===== ===== ===== =====
35.87 (17.25) (8.07) 12.86 (1.38) 12.41 17.40(a)
$211 $297 $754 $637 $228 $4 $1
1.58 1.48 1.23 1.30 1.28 2.07 2.22(a)
12.36 13.18 12.85 12.08 11.42 8.28 8.45(a)
N/A N/A N/A N/A 1.30 2.22 2.32(a)
N/A N/A N/A N/A 11.40 8.13 8.35(a)
45 26 45 82 80 29 42
</TABLE>
6
<PAGE>
INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------ --------------------------------------------------
CLASS A
--------------------------------------------------
Year Ended December 31 1996 1995 1994 1993 1992
- ------------------------------------------------ --------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Year . . . . . $4.13 $3.81 $4.17 $3.89 $3.69
----- ----- ----- ----- -----
Income from Investment Operations
Net investment income . . . . . . . .39 .38 .37 .39 .41
Net realized and unrealized gain (loss)
on investments . . . . . . .14 .30 (.35) .29 .19
----- ----- ----- ----- -----
Total from Investment Operations . . .53 .68 .02 .68 .60
----- ----- ----- ----- -----
Less Distributions from:
Net investment income . . . . . . . . . . . .37 .36 .38 .40 .40
----- ----- ----- ----- -----
Capital surplus . . . . . . . . . . . . . -- -- -- -- --
----- ----- ----- ----- -----
Total distributions . . . . . . . . . .37 .36 .38 .40 .40
----- ----- ----- ----- -----
Net Asset Value, End of Year . . . . . . . . $4.29 $4.13 $3.81 $4.17 $3.89
===== ===== ===== ===== =====
TOTAL RETURN (%)+ . . . . . . . . . . . . . . 13.40 18.54 .58 18.06 16.70
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (in millions) . . . . $432 $425 $401 $431 $414
Ratio to Average Net Assets: (%)
Expenses . . . . . . . . . . . . . . . . . 1.16 1.18 1.22 1.32 1.03
Net investment income . . . . . . . . . . . 9.27 9.53 9.34 9.54 10.63
Portfolio Turnover Rate (%) . . . . . . . . . 30 33 39 76 51
</TABLE>
+ Calculated without sales charge
* For the period 1/12/95 (date Class B shares first offered) to 12/31/95
(a) Annualized
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------ -----------------------
CLASS A CLASS B
- ------------------------------------------------------------------ -----------------------
1991 1990 1989 1988 1987 1996 1995*
- -------------- ------------ ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
$2.98 $4.16 $5.19 $5.15 $5.87 $4.13 $3.81
----- ----- ----- ----- ----- ----- -----
.42 .53 .64 .69 .66 .38 .31
.78 (1.19) (1.01) .01 (.71) .12 .33
----- ----- ----- ----- ----- ----- -----
1.20 (.66) (.37) .70 (.05) .50 .64
----- ----- ----- ----- ----- ----- -----
.41 .52 .66 .66 .67 .35 .32
----- ----- ----- ----- ----- ----- -----
.08 -- -- -- -- -- --
----- ----- ----- ----- ----- ----- -----
.49 .52 .66 .66 .67 .35 .32
----- ----- ----- ----- ----- ----- -----
$3.69 $2.98 $4.16 $5.19 $5.15 $4.28 $4.13
===== ===== ===== ===== ===== ===== =====
42.84 (17.23) (8.05) 14.22 (1.25) 12.51 17.46
$429 $527 $1,321 $1,739 $1,620 $3 $2
1.18 1.27 1.02 .99 1.08 1.86 1.92(a)
12.49 14.39 13.19 13.03 11.56 8.57 8.78(a)
50 21 44 74 74 30 33
</TABLE>
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
HIGH YIELD FUND primarily seeks high current income and secondarily seeks
capital appreciation by investing, under normal market conditions, at least 65%
of its total assets in high risk, high yield securities, commonly referred to as
"junk bonds" ("High Yield Securities"). INCOME FUND primarily seeks to earn a
high level of current income and, to the extent possible, in view of that
objective, secondarily seeks growth of capital by emphasizing, under normal
market conditions, investments in High Yield Securities. High Yield Securities
include the following instruments: fixed, variable or floating rate debt
obligations (including bonds, debentures and notes) which are rated below Baa by
Moody's Investors Service, Inc. ("Moody's") or below BBB by Standard & Poor's
Ratings Group ("S&P"), or are unrated and deemed to be of comparable quality by
the Adviser; preferred stocks and dividend-paying common stocks that have yields
comparable to those of high yielding debt securities; any of the foregoing
securities of companies that are financially troubled, in default or undergoing
bankruptcy or reorganization ("Deep Discount Securities"); and any securities
convertible into any of the foregoing. See "High Yield Securities--Risk Factors"
and "Deep Discount Securities."
GENERAL POLICIES
Each Fund may invest up to 5% of its total assets in debt securities
issued by foreign governments and companies located outside the United States
and denominated in U.S. or foreign currency. Each Fund also may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets,
invest in restricted securities (which may not be publicly marketable) and
invest in zero coupon and pay-in-kind securities. In addition, HIGH YIELD FUND
may make loans of portfolio securities. See the SAI for more information
concerning these securities.
HIGH YIELD FUND may invest up to 35% of its total assets, and INCOME FUND
may invest without limitation, in the following instruments: common and
preferred stocks, other than those considered to be High Yield Securities; debt
obligations of all types (including bonds, debentures and notes) rated A or
better by Moody's or S&P; securities issued by the U.S. Government or its
agencies or instrumentalities ("U.S. Government Obligations"); warrants and
money market instruments consisting of prime commercial paper, certificates of
deposit of domestic branches of U.S. banks, bankers' acceptances and repurchase
agreements.
In any period of market weakness or of uncertain market or economic
conditions, each Fund may establish a temporary defensive position to preserve
capital by having all or part of its assets invested in short-term fixed income
securities or retained in cash or cash equivalents, including bank certificates
of deposit, bankers' acceptances, U.S. Government Obligations and commercial
paper issued by domestic corporations. See the SAI for more information
concerning these securities.
The medium- to lower-rated, and certain of the unrated securities in which
each Fund invests tend to offer higher yields than higher-rated securities with
the same maturities because the historical financial condition of the issuers of
such securities may not be as strong as that of other issuers. Debt obligations
rated lower than A by Moody's or S&P tend to have speculative
9
<PAGE>
characteristics or are speculative, and generally involve more risk of loss of
principal and income than higher-rated securities. Also, their yields and market
value tend to fluctuate more than higher quality securities. The greater risks
and fluctuations in yield and value occur because investors generally perceive
issuers of lower-rated and unrated securities to be less creditworthy. These
risks cannot be eliminated, but may be reduced by diversifying holdings to
minimize the portfolio impact of any single investment. In addition,
fluctuations in market value do not affect the cash income from the securities,
but are reflected in the computation of a Fund's net asset value. When interest
rates rise, the net asset value of the Funds tends to decrease. When interest
rates decline, the net asset value of the Funds tends to increase.
Variable or floating rate debt obligations in which the Funds may invest
periodically adjust their interest rates to reflect changing economic
conditions. Thus, changing economic conditions specified by the terms of the
security would serve to change the interest rate and the return offered to the
investor. This reduces the effect of changing market conditions on the
security's underlying market value.
A High Yield Security may itself be convertible into or exchangeable for
equity securities, or may carry with it the right to acquire equity securities
evidenced by warrants attached to the security or acquired as part of a unit
with the security. Although each Fund invests primarily in High Yield
Securities, securities received upon conversion or exercise of warrants and
securities remaining upon the break-up of units or detachment of warrants may be
retained to permit orderly disposition, to establish a long-term holding basis
for Federal income tax purposes, or to seek capital appreciation.
Because of the greater number of investment considerations involved in
investing in High Yield Securities, the achievement of either Fund's investment
objectives depends more on the Adviser's research abilities than would be the
case if a Fund were investing primarily in securities in the higher rated
categories. Because medium- to lower-rated securities generally involve greater
risks of loss of income and principal than higher-rated securities, investors
should consider carefully the relative risks associated with investments in
securities that carry medium to lower ratings or are unrated. See "High Yield
Securities--Risk Factors" and Appendix A for a description of corporate bond
ratings.
Each Fund actively seeks to achieve its secondary objective to the extent
consistent with its primary objective. There can be no assurance that either
Fund will be able to achieve its investment objectives. Each Fund's net asset
value fluctuates based mainly upon changes in the value of its portfolio
securities. Each Fund's investment objectives and certain investment policies
set forth in the SAI that are designated fundamental policies may not be changed
without shareholder approval.
The dollar weighted average of credit ratings (based on ratings by
Mooyd's) of all bonds held by each Fund during the 1996 fiscal year, and the
dollar weighted average of the total of each Fund's investment in zero coupon
and pay-in-kind bonds during the 1996 fiscal year, computed on a monthly basis,
are set forth below. This information reflects the average composition of each
Fund's assets during the 1996 fiscal year and is not necessarily representative
of either Fund as of the end of its 1996 fiscal year, the current fiscal year or
at any other time in the future.
10
<PAGE>
HIGH YIELD FUND
---------------
COMPARABLE QUALITY
OF UNRATED SECURITIES
RATED BY MOODY'S TO BONDS RATED BY MOODY'S
A.................... 0.13% 0.00%
Baa ................. 1.58 0.00
Ba................... 19.28 0.31
B.................... 61.76 0.63
Caa.................. 2.33 1.64
Ca................... 0.01 0.13
Total......... 85.09% 2.71%
Zero Coupon Bonds 14.13%
Pay-In-Kind Bonds 0.19%
INCOME FUND
-----------
COMPARABLE QUALITY
OF UNRATED SECURITIES
RATED BY MOODY'S TO BONDS RATED BY MOODY'S
Aaa.................. 1.02% 0.00%
A.................... 0.10 0.00
Baa.................. 1.50 0.00
Ba................... 15.12 0.49
B.................... 64.85 0.00
Caa.................. 3.05 3.04
Ca................... 0.01 0.00
Total......... 85.65% 3.53%
Zero Coupon Bonds 10.68%
DESCRIPTION OF CERTAIN SECURITIES, OTHER INVESTMENT POLICIES AND RISK FACTORS
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or
dividends paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying stock because they have
fixed income characteristics, and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. See
the SAI for more information on convertible securities.
DEBT SECURITIES--RISK FACTORS. The market value of debt securities is
influenced primarily by changes in the level of interest rates. Generally, as
interest rates rise, the market value of debt securities decreases. Conversely,
as interest rates fall, the market value of debt securities
11
<PAGE>
increases. Factors which could result in a rise in interest rates, and a
decrease in the market value of debt securities, include an increase in
inflation or inflation expectations, an increase in the rate of U.S. economic
growth, an expansion in the Federal budget deficit or an increase in the price
of commodities such as oil. In addition, the market value of debt securities is
influenced by perceptions of the credit risks associated with such securities.
Credit risk is the risk that adverse changes in economic conditions can affect
an issuer's ability to pay principal and interest. See Appendix A for a
description of corporate bond ratings.
DEEP DISCOUNT SECURITIES. Each Fund may invest up to 15% of its total
assets in securities of companies that are financially troubled, in default or
undergoing bankruptcy or reorganization. Such securities are usually available
at a deep discount from the face value of the instrument. A Fund will invest in
Deep Discount Securities when the Adviser believes that there exist factors that
are likely to restore the company to a healthy financial condition. Such factors
include a restructuring of debt, management changes, existence of adequate
assets or other unusual circumstances. Debt instruments purchased at deep
discounts may pay very high effective yields. In addition, if the financial
condition of the issuer improves, the underlying value of the security may
increase, resulting in a capital gain. If the company defaults on its
obligations or remains in default, or if the plan of reorganization is
insufficient for debtholders, the Deep Discount Securities may stop paying
interest and lose value or become worthless. The Adviser will attempt to balance
the benefits of investing in Deep Discount Securities with their risks. While a
diversified portfolio may reduce the overall impact of a Deep Discount Security
that is in default or loses its value, the risk cannot be eliminated. See "High
Yield Securities--Risk Factors."
HIGH YIELD SECURITIES--RISK FACTORS. High Yield Securities are subject to
certain risks that may not be present with investments in higher grade
securities.
EFFECT OF INTEREST RATE AND ECONOMIC CHANGES. Debt obligations rated
lower than Baa by Moody's or BBB by S&P, commonly referred to as "junk bonds,"
are speculative and generally involve a higher risk or loss of principal and
income than higher-rated securities. The prices of High Yield Securities tend to
be less sensitive to interest rate changes than higher-rated investments, but
may be more sensitive to adverse economic changes or individual corporate
developments. Periods of economic uncertainty and changes generally result in
increased volatility in the market prices and yields of High Yield Securities
and thus in a Fund's net asset value. A strong economic downturn or a
substantial period of rising interest rates could severely affect the market for
High Yield Securities. In these circumstances, highly leveraged companies might
have greater difficulty in making principal and interest payments, meeting
projected business goals, and obtaining additional financing. Thus, there could
be a higher incidence of default. This would affect the value of such securities
and thus a Fund's net asset value. Further, if the issuer of a security owned by
a Fund defaults, that Fund might incur additional expenses to seek recovery.
Generally, when interest rates rise, the value of fixed rate debt
obligations, including High Yield Securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a High Yield Security containing a redemption or call provision
exercises either provision in a declining interest rate market, a Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if a Fund experiences unexpected net redemptions in a
rising interest rate market, it might be forced to
12
<PAGE>
sell certain securities, regardless of investment merit. This could result in
decreasing the assets to which Fund expenses could be allocated and in a reduced
rate of return for that Fund. While it is impossible to protect entirely against
this risk, diversification of a Fund's portfolio and the Adviser's careful
analysis of prospective portfolio securities should minimize the impact of a
decrease in value of a particular security or group of securities in a Fund's
portfolio.
THE HIGH YIELD SECURITIES MARKET. The market for below investment
grade bonds expanded rapidly in recent years and its growth paralleled a long
economic expansion. In the past, the prices of many lower-rated debt securities
declined substantially, reflecting an expectation that many issuers of such
securities might experience financial difficulties. As a result, the yields on
lower-rated debt securities rose dramatically. However, such higher yields did
not reflect the value of the income streams that holders of such securities
expected, but rather the risk that holders of such securities could lose a
substantial portion of their value as a result of the issuers' financial
restructuring or default. There can be no assurance that such declines in the
below investment grade market will not reoccur. The market for below investment
grade bonds generally is thinner and less active than that for higher quality
bonds, which may limit a Fund's ability to sell such securities at fair value in
response to changes in the economy or the financial markets. Adverse publicity
and investor perceptions, whether or not based on fundamental analysis, may also
decrease the values and liquidity of lower rated securities, especially in a
thinly traded market.
CREDIT RATINGS. The credit ratings issued by credit rating services
may not fully reflect the true risks of an investment. For example, credit
ratings typically evaluate the safety of principal and interest payments, not
market value risk, of High Yield Securities. Also, credit rating agencies may
fail to change on a timely basis a credit rating to reflect changes in economic
or company conditions that affect a security's market value. Although the
Adviser considers ratings of recognized rating services such as Moody's and S&P,
the Adviser primarily relies on its own credit analysis, which includes a study
of existing debt, capital structure, ability to service debt and to pay
dividends, the issuer's sensitivity to economic conditions, its operating
history and the current trend of earnings. Each Fund may invest in securities
rated as low as D by S&P or C by Moody's or, if unrated, deemed to be of
comparable quality by the Adviser. Debt obligations with these ratings either
have defaulted or are in great danger of defaulting and are considered to be
highly speculative. See "Deep Discount Securities." The Adviser continually
monitors the investments in a Fund's portfolio and carefully evaluates whether
to dispose of or retain High Yield Securities whose credit ratings have changed.
See Appendix A for a description of corporate bond ratings.
LIQUIDITY AND VALUATION. Lower-rated bonds are typically traded among
a smaller number of broker-dealers than in a broad secondary market. Purchasers
of High Yield Securities tend to be institutions, rather than individuals, which
is a factor that further limits the secondary market. To the extent that no
established retail secondary market exists, many High Yield Securities may not
be as liquid as higher-grade bonds. A less active and thinner market for High
Yield Securities than that available for higher quality securities may result in
more volatile valuations of a Fund's holdings and more difficulty in executing
trades at favorable prices during unsettled market conditions.
13
<PAGE>
The ability of a Fund to value or sell High Yield Securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. During such periods, there may be less reliable objective information
available and thus the responsibility of each Fund's Board of Directors to value
High Yield Securities becomes more difficult, with judgment playing a greater
role. Further, adverse publicity about the economy or a particular issuer may
adversely affect the public's perception of the value, and thus liquidity, of a
High Yield Security, whether or not such perceptions are based on a fundamental
analysis.
LEGISLATION. Provisions of the Revenue Reconciliation Act of 1989
limit a corporate issuer's deduction for a portion of the original issue
discount on "high yield discount" obligations (including certain pay-in-kind
securities). This limitation could have a materially adverse impact on the
market for certain High Yield Securities. From time to time, legislators and
regulators have proposed other legislation that would limit the use of high
yield debt securities in leveraged buyouts, mergers and acquisitions. It is not
certain whether such proposals, which also could adversely affect High Yield
Securities, will be enacted into law.
MONEY MARKET INSTRUMENTS. Investments in commercial paper are limited to
obligations rated Prime-1 by Moody's or A-1 by S&P. Commercial paper includes
notes, drafts, or similar instruments payable on demand or having a maturity at
the time of issuance not exceeding nine months, exclusive of days of grace or
any renewal thereof. Investments in certificates of deposit will be made only
with domestic institutions with assets in excess of $500 million. See the SAI
for more information regarding money market instruments and Appendix A to the
SAI for a description of commercial paper ratings.
PREFERRED STOCK. A preferred stock is a blend of the characteristics of a
bond and common stock. It can offer the higher yield of a bond and has priority
over common stock in equity ownership, but does not have the seniority of a bond
and, unlike common stock, its participation in the issuer's growth may be
limited. Preferred stock has preference over common stock in the receipt of
dividends and in any residual assets after payment to creditors should the
issuer be dissolved. Although the dividend is set at a fixed annual rate, in
some circumstances it can be changed or omitted by the issuer.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
Fund purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Each Fund's risk is limited
primarily to the ability of the seller to repurchase the securities at the
agreed-upon price upon the delivery date. See the SAI for more information
regarding repurchase agreements.
RESTRICTED AND ILLIQUID SECURITIES. Each Fund may invest up to 15% of its
net assets in illiquid securities, including (1) securities that are illiquid
due to the absence of a readily available market or due to legal or contractual
restrictions on resale and (2) repurchase agreements maturing in more than seven
days. However, illiquid securities for purposes of this limitation do not
include securities eligible for resale under Rule 144A under the Securities Act
of 1933, as
14
<PAGE>
amended, which the applicable Fund's Board of Directors or the Adviser has
determined are liquid under Board-approved guidelines. See the SAI for more
information regarding restricted and illiquid securities.
ZERO COUPON AND PAY-IN-KIND SECURITIES. Zero coupon securities are debt
obligations that do not entitle the holder to any periodic payment of interest
prior to maturity or a specified date when the securities begin paying current
interest. They are issued and traded at a discount from their face amount or par
value, which discount varies depending on the time remaining until cash payments
begin, prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind securities are those that pay interest
through the issuance of additional securities. The market prices of zero coupon
and pay-in-kind securities generally are more volatile than the prices of
securities that pay interest periodically and in cash and are likely to respond
to changes in interest rates to a greater degree than do other types of debt
securities having similar maturities and credit quality. Original issue discount
earned on zero coupon securities and the "interest" on pay-in-kind securities
must be included in a Fund's income. Thus, to continue to qualify for tax
treatment as a regulated investment company and to avoid a certain excise tax on
undistributed income, a Fund may be required to distribute as a dividend an
amount that is greater than the total amount of cash it actually receives. See
"Taxes" in the SAI. These distributions must be made from a Fund's cash assets
or, if necessary, from the proceeds of sales of portfolio securities. Each Fund
will not be able to purchase additional income-producing securities with cash
used to make such distributions, and its current income ultimately could be
reduced as a result.
ALTERNATIVE PURCHASE PLANS
Each Fund has two classes of shares, Class A and Class B, which represent
interests in the same portfolio of securities and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that each class (i) is subject to a different sales charge and bears its
separate distribution and certain other class expenses; (ii) has exclusive
voting rights with respect to matters affecting only that class; and (iii) has
different exchange privileges.
CLASS A SHARES. Class A shares are sold with an initial sales charge of up
to 6.25% of the offering price with discounts available for volume purchases.
Class A shares are subject to a maximum 12b-1 fee at the annual rate of 0.15% of
each Fund's average daily net assets attributable to Class A shares. The initial
sales charge is waived for certain purchases and a contingent deferred sales
charge ("CDSC") may be imposed on such purchases. See "How to Buy Shares."
CLASS B SHARES. Class B shares are sold without an initial sales charge,
but are generally subject to a CDSC which declines in steps from 4% to 0% during
a six-year period and bear a higher 12b-1 fee than Class A shares. Class B
shares pay a 12b-1 fee at the annual rate of 0.85% of each Fund's average daily
net assets attributable to Class B shares, of which no more than 0.25% may be
paid as a service fee and the balance thereof paid as an asset-based sales
charge. Class B shares automatically convert into Class A shares after eight
years. See "How to Buy Shares."
15
<PAGE>
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES. In deciding which
alternative is most suitable, an investor should consider several factors, as
discussed below. Regardless of whether an investor purchases Class A or Class B
shares, your Representative, as defined under "How to Buy Shares," receives
compensation for selling shares of a Fund, which may differ for each class.
The principal advantages of purchasing Class A shares are the lower
overall expenses, the availability of quantity discounts on volume purchases and
certain account privileges which are not offered to Class B shareholders. If an
investor plans to make a substantial investment, the sales charge on Class A
shares may either be lower due to the reduced sales charges available on volume
purchases of Class A shares or waived for certain eligible purchasers. Because
of the reduced sales charge available on quantity purchases of Class A shares,
it is recommended that investments of $250,000 or more be made in Class A
shares. Investments in excess of $1,000,000 must be made in Class A shares.
Distributions paid by each Fund with respect to Class A shares will also
generally be greater than those paid with respect to Class B shares because
expenses attributable to Class A shares will generally be lower.
The principal advantage of purchasing Class B shares is that, since no
initial sales charge is paid, all of an investor's money is put to work from the
outset. Furthermore, although any investment in a Fund should only be viewed as
a long-term investment, if a redemption must be made soon after purchase, an
investor will pay a lower sales charge than if Class A shares had been
purchased. Conversely, because Class B shares are subject to a higher
asset-based sales charge, long-term Class B shareholders may pay more in
asset-based sales charges than the economic equivalent of the maximum sales
charge on Class A shares. The automatic conversion of Class B shares into Class
A shares after eight years is designed to reduce the probability of this
occurring.
HOW TO BUY SHARES
You may buy shares of a Fund through a First Investors registered
representative ("FIC Representative") or through a registered representative
("Dealer Representative") of an unaffiliated broker-dealer ("Dealer") which is
authorized to sell shares of a Fund. Your FIC Representative or Dealer
Representative (each, a "Representative") may help you complete and submit an
application to open an account with a Fund. Certain accounts may require
additional documentation. Applications accompanied by checks drawn on U.S. banks
made payable to "FIC" and received in FIC's Woodbridge offices by the close of
regular trading on the NYSE, generally 4:00 P.M. (New York City time), will be
processed and shares will be purchased at the public offering price determined
at the close of regular trading on the NYSE on that day. Orders received by
Representatives before the close of regular trading on the NYSE and received by
FIC at their Woodbridge offices before the close of its business day, generally
5:00 P.M. (New York City time), will be executed at the public offering price
determined at the close of regular trading on the NYSE on that day. It is the
responsibility of Representatives to promptly transmit orders they receive to
FIC. The "public offering price" is the net asset value plus the applicable
sales charge for Class A shares and the net asset value for Class B shares. For
a discussion of pricing practices when FIC's Woodbridge offices are unable to
open for business due to an emergency, see the SAI. Each Fund reserves the right
to reject any application or order for its shares for any reason and to suspend
the offering of its shares.
16
<PAGE>
WHEN YOU OPEN A FUND ACCOUNT, YOU MUST SPECIFY WHICH CLASS OF SHARES YOU
WISH TO PURCHASE. If you do not specify which class of shares you wish to
purchase, your order will be processed according to procedures established by
FIC. For more information, see the SAI.
INITIAL INVESTMENT IN A FUND. You may open a Fund account with as little
as $1,000. This account minimum is waived if you open an account for a
particular class of shares through a full exchange of shares of the same class
of another "Eligible Fund," as defined below. Class A share accounts opened
through an exchange of shares from First Investors Cash Management Fund, Inc. or
First Investors Tax-Exempt Money Market Fund, Inc. (collectively, "Money Market
Funds") may be subject to an initial sales charge. You may open a Fund account
with $250 for individual retirement accounts ("IRAs") or, at the Fund's
discretion, a lesser amount for Simplified Employee Pension Plans ("SEPs"),
salary reduction SEPs ("SARSEPs"), SIMPLE-IRAs and qualified or other retirement
plans. Automatic investment plans allow you to open an account with as little as
$50, provided you invest at least $600 a year. See "Systematic Investing."
ADDITIONAL PURCHASES. After you make your first investment in a Fund, you
may purchase additional shares of a Fund by mailing a check made payable to FIC,
directly to First Investors Corporation, 581 Main Street, Woodbridge, NJ
07095-1198, Attn: Dept. CP. Include your account number on the face of the
check. There is no minimum on additional purchases of Fund shares.
ELIGIBLE FUNDS. With respect to certain shareholder privileges noted in
this Prospectus and the SAI, each fund in the First Investors family of funds,
except as noted below, is an "Eligible Fund" (collectively, "Eligible Funds").
First Investors Special Bond Fund, Inc., First Investors Life Series Fund and
First Investors U.S. Government Plus Fund are not Eligible Funds. The Money
Market Funds, unless otherwise noted, are not Eligible Funds. The funds of
Executive Investors Trust ("Executive Investors") are Eligible Funds provided
the shares of any such fund either have been (a) acquired through an exchange
from an Eligible Fund which imposes a maximum sales charge of 6.25%, or (b) held
for at least one year from their date of purchase.
SYSTEMATIC INVESTING. Shareholders who have an account with a U.S. bank,
or other financial institution that is an Automated Clearing House member, may
arrange for automatic investments in a Fund on a systematic basis through First
Investors Money Line and through automatic payroll investments. You may also
elect to invest in Class A or Class B shares of a Fund at net asset value all
the cash distributions or Systematic Withdrawal Plan payments from the same
class of shares of an existing account in another Eligible Fund. If you wish to
participate in any of these systematic investment plans, please call Shareholder
Services at 1-800-423-4026 or see the SAI.
FUND/SERV PURCHASES. If there is a Dealer of record on your Fund account,
the Fund is authorized to execute electronic purchase orders received directly
from this Dealer. Electronic purchase orders may be processed through the
services of the National Securities Clearing Corp. ("NSCC") "Fund/SERV" system.
Purchase orders received by a Dealer before the close of regular trading on the
NYSE and received by FIC at its Woodbridge offices in accordance with NSCC rules
and procedures will be executed at the net asset value, plus any applicable
sales charge,
17
<PAGE>
determined at the close of regular trading on the NYSE on that day. It is the
responsibility of the Dealer to transmit purchase orders to FIC promptly and
accurately. FIC will not be liable for any change in the purchase price due to
the failure of FIC to receive such purchase orders. Any such disputes must be
settled between you and the Dealer.
CLASS A SHARES. Class A shares of each Fund are sold at the public
offering price, which will vary with the size of the purchase, as shown in the
following table:
SALES CHARGE AS % OF CONCESSION TO
OFFERING NET AMOUNT DEALERS AS % OF
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------- --------- ------------ --------------
Less than $25,000................. 6.25% 6.67% 5.13%
$25,000 but under $50,000......... 5.75 6.10 4.72
$50,000 but under $100,000........ 5.50 5.82 4.51
$100,000 but under $250,000....... 4.50 4.71 3.69
$250,000 but under $500,000....... 3.50 3.63 2.87
$500,000 but under $1,000,000..... 2.50 2.56 2.05
There is no sales charge on transactions of $1 million or more.
Additionally, there is no sales charge on purchases that qualify for the
Cumulative Purchase Privilege if they total at least $1 million or on purchases
made pursuant to a Letter of Intent in the minimum amount of $1 million. The
Underwriter will pay from its own resources a sales commission to FIC
Representatives and a concession equal to 0.90% of the amount invested to
Dealers on such purchases. If shares are redeemed within 24 months of purchase a
CDSC of 1.00% will be deducted from the redemption proceeds. The CDSC will be
applied in the same manner as the CDSC on Class B shares. See "Class B Shares."
CUMULATIVE PURCHASE PRIVILEGE AND LETTER OF INTENT. You may purchase Class
A shares of a Fund at a reduced sales charge through the Cumulative Purchase
Privilege or by executing a Letter of Intent. For more information, see the SAI,
call your Representative or call Shareholder Services at 1-800-423-4026.
WAIVERS OF CLASS A SALES CHARGES. Sales charges on Class A shares do not
apply to: (1) any purchase by an officer, director or employee (who has
completed the introductory employment period) of the Funds, the Underwriter, the
Adviser, or their affiliates, by a Representative, or by the spouse, or by the
children and grandchildren under the age of 21 of any such person; (2) any
purchase by a former officer, director or employee of the Funds, the
Underwriter, the Adviser, or their affiliates, or by a former FIC
Representative; provided they had acted as such for at least five years and had
retired or otherwise terminated the relationship in good standing; (3) any
reinvestment of the loan repayments by a participant in a loan program of any
First Investors sponsored qualified retirement plan; (4) a purchase with
proceeds from the liquidation of a First Investors Life Variable Annuity Fund A
contract or a First Investors Life Variable Annuity Fund C contract during the
one-year period preceding the maturity date of the contract; (5) any purchase by
a participant in a Group Qualified Plan account, as defined under "Retirement
Plans," if the purchase is made with the proceeds from a redemption of shares of
a fund in another fund group on which either an initial sales charge or a CDSC
has been paid; and (6) any purchase in an IRA account if the purchase is made
with the proceeds of a distribution from a First Investors Fund
18
<PAGE>
under a Group Qualified Plan, as defined under "Retirement Plans." With respect
to items (5) and (6) above, if shares are redeemed within 24 months of purchase,
a CDSC of 1.00% will be deducted from the redemption proceeds.
Additionally, policyholders of participating life insurance policies
issued by First Investors Life Insurance Company ("FIL"), an affiliate of the
Adviser and Underwriter, may elect to invest dividends earned on such policies
in Class A shares of a Fund at net asset value, provided the annual dividend is
at least $50 and the policyholder has an existing account with the Fund.
Holders of certain unit trusts ("Unitholders") who have elected to invest
the entire amount of cash distributions from either principal, interest income
or capital gains or any combination thereof ("Unit Distributions") from the
following trusts may invest such Unit Distributions in Class A shares of a Fund
at a reduced sales charge. Unitholders of various series of New York Insured
Municipals-Income Trust sponsored by Van Kampen Merritt Inc. (the "New York
Trust"); Unitholders of various series of the Multistate Tax Exempt Trust
sponsored by Advest Inc.; and Unitholders of various series of the Municipal
Insured National Trust, J.C. Bradford & Co. as agent, may purchase Class A
shares of a Fund with Unit Distributions at an offering price which is the net
asset value per share plus a sales charge of 1.5%. Unitholders of various series
of tax-exempt trusts, other than the New York Trust, sponsored by Van Kampen
Merritt Inc. may purchase Class A shares of a Fund with Unit Distributions at an
offering price which is the net asset value per share plus a sales charge of
1.0%. Each Fund's initial minimum investment requirement is waived for purchases
of Class A shares with Unit Distributions. Shares of a Fund purchased by
Unitholders may be exchanged for Class A shares of any Eligible Fund subject to
the terms and conditions set forth under "How to Exchange Shares."
RETIREMENT PLANS. You may invest in shares of a Fund through an IRA, SEP,
SARSEP, SIMPLE-IRA or any other retirement plan. Participant-directed plans,
such as 401(k) plans, profit sharing and money purchase plans and 403(b) plans,
that are subject to Title I of ERISA (each, a "Group Qualified Plan") are
entitled to a reduced sales charge provided the number of employees eligible to
participate is 99 or less. The sales charge as a percentage of the offering
price and net amount invested is 3.00% and 3.09%, respectively, and the
concession to Dealers as a percentage of the offering price is 2.55%.
There is no sales charge on purchases through a Group Qualified Plan with
100 or more eligible employees. A CDSC of 1.00% will be deducted from the
redemption proceeds of such accounts for redemptions made within 24 months of
purchase. The CDSC will be applied in the same manner as the CDSC on Class B
shares. See "Class B Shares." The Underwriter will pay from its own resources a
sales commission to FIC Representatives and a concession equal to 0.90% of the
amount invested to Dealers on such purchases. These sales charges will be
available regardless of whether the account is registered with the Transfer
Agent in the name of the individual participant or the sponsoring employer or
plan trustee. A Group Qualified Plan account will be subject to the lower of the
sales charge for Group Qualified Plans or the sales charge for the purchase of
Fund shares.
19
<PAGE>
CLASS B SHARES. The public offering price of Class B shares of each Fund
is the next determined net asset value, with no initial sales charge imposed. A
CDSC, however, is imposed upon most redemptions of Class B shares at the rates
set forth below:
CONTINGENT DEFERRED SALES CHARGE
YEAR SINCE PURCHASE AS A PERCENTAGE OF DOLLARS INVESTED
PAYMENT MADE OR REDEMPTION PROCEEDS
First........................... 4%
Second.......................... 4
Third........................... 3
Fourth.......................... 3
Fifth........................... 2
Sixth........................... 1
Seventh and thereafter.......... 0
The CDSC will not be imposed on (1) the redemption of Class B shares
acquired as dividends or other distributions, or (2) any increase in the net
asset value of redeemed shares above their initial purchase price (in other
words, the CDSC will be imposed on the lower of net asset value or purchase
price). In determining whether a CDSC is payable on any redemption, it will be
assumed that the redemption is made first of any Class B shares acquired as
dividends or distributions, second of Class B shares that have been held for a
sufficient period of time such that the CDSC no longer is applicable to such
shares and finally of Class B shares held longest during the period of time that
a CDSC is applicable to such shares. This will result in you paying the lowest
possible CDSC.
As an example, assume an investor purchased 100 shares of Class B shares
at $10 per share for a total cost of $1,000 and in the second year after
purchase, the net asset value per share is $12 and, during such time, the
investor has acquired 10 additional Class B shares as dividends. If at such time
the investor makes his or her first redemption of 50 shares (proceeds of $600),
10 shares will not be subject to a CDSC charge because redemptions are first
made of shares acquired through dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4.00% (the
applicable rate in the second year after purchase).
For purposes of determining the CDSC on Class B shares, all purchases made
during a calendar month will be deemed to have been made on the first business
day of that month at the average cost of all purchases made during that month.
The holding period of Class B shares acquired through an exchange with another
Eligible Fund will be calculated from the first business day of the month that
the Class B shares were initially acquired in the other Eligible Fund. The
amount of any CDSC will be paid to FIC. The CDSC imposed on the purchase of
Class B shares will be waived under certain circumstances. See "Waivers of CDSC
on Class B Shares" in the SAI.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares approximately eight years after the date
of purchase, together with a pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class
20
<PAGE>
B shares. The Class B shares so converted will no longer be subject to the
higher expenses borne by Class B shares. The conversion will be effected at the
relative net asset values per share of the two classes on the first business day
of the month following the month in which the eighth anniversary of the purchase
of the Class B shares occurs. If a shareholder effects one or more exchanges
between Class B shares of the Eligible Funds during the eight-year period, the
holding period for the shares so exchanged will commence upon the date of the
purchase of the original shares. Because the per share net asset value of the
Class A shares may be higher than that of the Class B shares at the time of
conversion, a shareholder may receive fewer Class A shares than the number of
Class B shares converted. See "Determination of Net Asset Value."
GENERAL. The Underwriter may at times agree to reallow to Dealers up to an
additional 0.25% of the dollar amount of shares of the Funds and/or certain
other First Investors Funds sold by such Dealers during a specific period of
time. From time to time, the Underwriter also will pay, through additional
reallowances or other sources, a bonus or other compensation to Dealers that
employ a Dealer Representative who sells a minimum dollar amount of the shares
of the Funds and/or certain other First Investors Funds during a specific period
of time. Such bonus or other compensation may take the form of reimbursement of
certain seminar expenses, co-operative advertising, or payment for travel
expenses, including lodging incurred in connection with trips taken by
qualifying Dealer Representatives to the Underwriter's principal office in New
York City. FIC Representatives generally are more highly compensated for sales
of First Investors mutual funds than for sales of other mutual funds.
HOW TO EXCHANGE SHARES
Should your investment needs change, you may exchange, at net asset value,
shares of a Fund for shares of any Eligible Fund, including the Money Market
Funds. In addition, Class A shares of a Fund may be exchanged at net asset value
for units of any single payment plan ("plan") sponsored by the Underwriter.
SHARES OF A PARTICULAR CLASS MAY BE EXCHANGED ONLY FOR SHARES OF THE SAME CLASS
OF ANOTHER FUND. Exchanges can only be made into accounts registered to
identical owners. If your exchange is into a new account, it must meet the
minimum investment and other requirements of the fund or plan into which the
exchange is being made. Additionally, the fund or plan must be available for
sale in the state where you reside. Before exchanging Fund shares for shares of
another fund or plan, you should read the Prospectus of the fund or plan into
which the exchange is to be made. You may obtain Prospectuses and information
with respect to which funds or plans qualify for the exchange privilege free of
charge by calling Shareholder Services at 1-800-423-4026. Exchange requests
received in "good order," as defined below, by the Transfer Agent before the
close of regular trading on the NYSE will be processed at the net asset value
determined as of the close of regular trading on the NYSE on that day; exchange
requests received after that time will be processed on the following trading
day.
EXCHANGES BY MAIL. To exchange shares by mail, you should mail requests to
Administrative Data Management Corp., 581 Main Street, Woodbridge, NJ
07095-1198. Shares will be exchanged after the request is received in "good
order" by the Transfer Agent. "Good order" means that an exchange request must
include: (1) the names of the funds, account number(s), the dollar amount,
number of shares or percentage of the account you wish to exchange; (2) share
21
<PAGE>
certificates, if issued; (3) the signature of all registered owners exactly as
the account is registered; and (4) signature guarantees, if required (see "How
to Redeem Shares-Signature Guarantees"). If the request is not in good order or
information is missing, the Transfer Agent will seek additional information from
you and process the exchange on the day it receives such information. Certain
account registrations may require additional legal documentation in order to
exchange. To review these requirements, please call Shareholder Services at
1-800-423-4026.
EXCHANGES BY TELEPHONE. See "Telephone Transactions."
ADDITIONAL EXCHANGE INFORMATION. Exchanges should be made for investment
purposes only. A pattern of frequent exchanges may be contrary to the best
interests of a Fund's other shareholders. Accordingly, each Fund has the right,
at its sole discretion, to limit the amount of an exchange, reject any exchange,
or, upon 60 days' notice, materially modify or discontinue the exchange
privilege. Each Fund will consider all relevant factors in determining whether a
particular frequency of exchanges is contrary to the best interests of the Fund
and/or a class of the Fund and its other shareholders. Any such restriction will
be made by a Fund on a prospective basis only, upon notice to the shareholder
not later than ten days following such shareholder's most recent exchange.
HOW TO REDEEM SHARES
You may redeem your Fund shares at the next determined net asset value,
less any applicable CDSC, on any day the NYSE is open, directly through the
Transfer Agent. Your Representative may help you with this transaction. Shares
in a non-retirement account may be redeemed by mail or telephone. Shares in a
retirement account may only be redeemed by mail. Certain account registrations
may require additional legal documentation in order to redeem. Redemption
requests received in "good order" by the Transfer Agent before the close of
regular trading on the NYSE, will be processed at the net asset value, less any
applicable CDSC, determined as of the close of regular trading on the NYSE on
that day. Payment of redemption proceeds generally will be made within seven
days. If the shares being redeemed were recently purchased by check, payment may
be delayed to verify that the check has been honored, normally not more than
fifteen days. For a discussion of pricing practices when FIC's Woodbridge
offices are unable to open due to an emergency, see the SAI.
REDEMPTIONS BY MAIL. Written redemption requests should be mailed to
Administrative Data Management Corp., 581 Main Street, Woodbridge, NJ
07095-1198. For your redemption request to be in good order, you must include:
(1) the name of the Fund; (2) your account number; (3) the dollar amount, number
of shares or percentage of the account you want redeemed; (4) share
certificates, if issued; (5) the original signatures of all registered owners
exactly as the account is registered; and (6) signature guarantees, if required.
If your redemption request is not in good order or information is missing, the
Transfer Agent will seek additional information and process the redemption on
the day it receives such information. To review these requirements, please call
Shareholder Services at 1-800-423-4026.
22
<PAGE>
SIGNATURE GUARANTEES. In order to protect you, the Funds and their agents,
each Fund reserves the right to require signature guarantees in order to process
certain exchange or redemption requests. See the SAI or call Shareholder
Services at 1-800-423-4026 for instances when signature guarantees are required.
REDEMPTIONS BY TELEPHONE. See "Telephone Transactions."
ELECTRONIC FUND TRANSFER. Shareholders who have established Electronic
Fund Transfer may have redemption proceeds electronically transferred to a
predesignated bank account. Each Fund has the right, at its sole discretion, to
limit or terminate your ability to exercise the electronic fund transfer
privilege at any time. For additional information, see the SAI. Applications to
establish Electronic Fund Transfer are available from your FIC Representative or
by calling Shareholder Services at 1-800-423-4026.
FUND/SERV REDEMPTIONS. If there is a Dealer of record on your Fund
account, the Fund is authorized to execute electronic redemption requests
received directly from this Dealer. Electronic requests may be processed through
the services of the NSCC "Fund/SERV" system. Redemption requests received by a
Dealer before the close of regular trading on the NYSE and received by FIC at
its Woodbridge offices in accordance with NSCC rules and procedures will be
executed at the net asset value, less any applicable sales charge, determined at
the close of regular trading on the NYSE on that day. It is the responsibility
of the Dealer to transmit redemption requests to FIC promptly and accurately.
FIC will not be liable for any change in the redemption price due to the failure
of FIC to receive such redemption requests. Any such disputes must be settled
between you and the Dealer.
SYSTEMATIC WITHDRAWAL PLAN. If you own noncertificated shares, you may set
up a plan for redemptions to be made automatically at regular intervals. See the
SAI for more information on the Systematic Withdrawal Plan or call Shareholder
Services at 1-800-423-4026.
REINVESTMENT AFTER REDEMPTION. If you redeem Class A or Class B shares in
your Fund account, you can reinvest within six months from the date of
redemption all or any part of the proceeds in shares of the same class of the
same Fund or any other Eligible Fund, including the Money Market Funds, at net
asset value, on the date the Transfer Agent receives your purchase request. For
more information on the reinvestment privilege, please see the SAI or call
Shareholder Services at 1-800-423-4026.
REPURCHASE THROUGH UNDERWRITER. You may redeem Fund shares through a
Dealer. In this event, the Underwriter, acting as agent for each Fund, will
offer to repurchase or accept an offer to sell such shares at a price equal to
the net asset value next determined after the making of such offer, less any
applicable CDSC. The Dealer may charge you an added commission for handling any
redemption transaction.
REDEMPTION OF LOW BALANCE ACCOUNTS. Because each Fund incurs certain fixed
costs in maintaining shareholder accounts, each Fund may redeem without your
consent, on at least 60 days' prior written notice (which may appear on your
account statement), any Fund account of Class A or Class B shares which has a
net asset value of less than $500. To avoid such redemption,
23
<PAGE>
you may, during such 60-day period, purchase additional Fund shares of the same
class so as to increase your account balance to the required minimum. There will
be no CDSC imposed on such redemptions of Class B shares. A Fund will not redeem
accounts that fall below $500 solely as a result of a reduction in net asset
value. Accounts established under a Systematic Investment Plan that have been
discontinued prior to meeting the $1,000 minimum are subject to this policy.
Additional information concerning how to redeem shares of a Fund is
available upon request to your Representative or Shareholder Services at
1-800-423-4026.
TELEPHONE TRANSACTIONS
Unless you specifically decline to have telephone privileges, you, or any
person who we reasonably believe is authorized to act on your behalf, may redeem
or exchange noncertificated shares of a Fund by calling the Special Services
Department at 1-800-342-6221 weekdays (except holidays) between 9:00 A.M. and
5:00 P.M. (New York City time). Certain accounts, however, are required to
complete additional documents in order to activate telephone privileges.
Exchange or redemption requests received before the close of regular trading on
the NYSE will be processed at the net asset value, less any applicable CDSC,
determined as of the close of business on that day. For more information on
telephone privileges, please call Shareholder Services at 1-800-423-4026 or see
the SAI.
TELEPHONE EXCHANGES. Exchange requests may be made by telephone (for
shares held on deposit only). Telephone exchanges to Money Market Funds are not
available if your address of record has changed within 60 days prior to the
exchange request.
TELEPHONE REDEMPTIONS. The telephone redemption privilege may be used
provided: (1) the redemption proceeds are being mailed to the address of record
or to a predesignated bank account; (2) your address of record has not changed
within the past 60 days; (3) the shares to be redeemed have not been issued in
certificate form; (4) each redemption does not exceed $50,000; and (5) the
proceeds of the redemption, together with all redemptions made from the account
during the prior 30-day period, do not exceed $100,000. TELEPHONE REDEMPTION
INSTRUCTIONS WILL BE ACCEPTED FROM ANY ONE OWNER OR AUTHORIZED INDIVIDUAL.
ADDITIONAL INFORMATION. The Funds, the Adviser, the Underwriter and their
officers, directors and employees will not be liable for any loss, damage, cost
or expense arising out of any instruction (or any interpretation of such
instruction) received by telephone or which they reasonably believe to be
authentic. This policy places the entire risk of loss for unauthorized or
fraudulent transactions on the shareholder, except that if the above-referenced
parties do not follow reasonable procedures, some or all of them may be liable
for any such losses. For more information on telephone transactions see the SAI.
The Funds have the right, at their sole discretion, upon 60 days' notice, to
materially modify or discontinue the telephone exchange and redemption
privilege. During times of drastic economic or market changes, telephone
exchanges or redemptions may be difficult to implement. If you experience
difficulty in making a telephone exchange or redemption, your exchange or
redemption request may be made by regular or express mail, and it will be
implemented at the next determined net asset value, less any applicable CDSC,
following receipt by the Transfer Agent.
24
<PAGE>
MANAGEMENT
BOARD OF DIRECTORS. Each Fund's Board of Directors, as part of its overall
management responsibility, oversees various organizations responsible for that
Fund's day-to-day management.
ADVISER. First Investors Management Company, Inc. supervises and manages
each Fund's investments, supervises all aspects of each Fund's operations and
determines the Fund's portfolio transactions. The Adviser is a New York
corporation located at 95 Wall Street, New York, NY 10005. The Adviser presently
acts as investment adviser to 14 mutual funds. First Investors Consolidated
Corporation ("FICC") owns all of the voting common stock of the Adviser and all
of the outstanding stock of FIC and the Transfer Agent. Mr. Glenn O. Head
controls FICC and, therefore, controls the Adviser.
As compensation for its services, the Adviser receives an annual fee from
each of the Funds, which is payable monthly. For the fiscal year ended December
31, 1996, advisory fees, net of waiver, for HIGH YIELD Fund were 0.85% of its
average daily net assets and advisory fees for INCOME FUND were 0.74% of its
average daily net assets.
PORTFOLIO MANAGERS. George V. Ganter has been Portfolio Manager for the
HIGH YIELD FUND since 1989. Mr. Ganter joined FIMCO in 1985 as an Analyst. Mr.
Ganter is also Portfolio Manager for First Investors Special Bond Fund, Inc, the
High Yield Series of First Investors Life Series Fund and Executive Investors
High Yield Fund.
Nancy Jones has been Portfolio Manager for INCOME FUND since 1989. Ms.
Jones joined FIMCO in 1983 as Director of Research in the High Yield Department.
Ms. Jones is also Portfolio Manager for Investment Grade Series of First
Investors Series Fund and Investment Grade Series of First Investors Life Series
Fund, and she manages the fixed income corporate securities portion of the Total
Return Series of First Investors Series Fund.
BROKERAGE. Each Fund may allocate brokerage commissions, if any, to
broker-dealers in consideration of Fund share distribution, but only when
execution and price are comparable to that offered by other broker-dealers.
Brokerage may be directed to brokers who provide research. See the SAI for more
information on allocation of portfolio brokerage.
UNDERWRITER. Each Fund has entered into an Underwriting Agreement with
First Investors Corporation, 95 Wall Street, New York, NY 10005, as Underwriter.
The Underwriter receives all sales charges in connection with the sale of each
Fund's Class A shares and all CDSCs in connection with each Fund's Class B
shares and may receive other payments under a plan of distribution. See "How to
Buy Shares" and "Distribution Plans."
DISTRIBUTION PLANS
Pursuant to separate distribution plans pertaining to each Fund's Class A
and Class B shares ("Class A Plan" or "Class B Plan," and collectively,
"Plans"), each Fund may reimburse or compensate, as applicable, the Underwriter
for certain expenses incurred in the distribution of that Fund's shares
("distribution fees") and the servicing or maintenance of existing Fund
shareholder
25
<PAGE>
accounts ("service fees"). Pursuant to the Plans, distribution fees are paid for
activities relating to the distribution of Fund shares, including costs of
printing and dissemination of sales material or literature, prospectuses and
reports used in connection with the sale of Fund shares. Service fees are paid
for the ongoing maintenance and servicing of existing shareholder accounts,
including payments to Representatives who provide shareholder liaison services
to their customers who are holders of that Fund, provided they meet certain
criteria.
Pursuant to each Class A Plan, each Fund's Board of Directors, in its sole
discretion, may periodically allocate the portion of distribution fees and
services fees that Fund may spend, provided the aggregate of such fees paid by
the Fund may not exceed an annual rate of 0.30% of the Fund's average daily net
assets attributable to Class A shares in any one fiscal year. Of that amount, no
more than 0.25% of a Fund's average daily net assets attributable to Class A
shares may be paid as service fees. Payments made to the Underwriter under each
Class A Plan may only be made for reimbursement of specific expenses incurred in
connection with distribution and service activities.
Pursuant to each Class B Plan, each Fund is authorized to pay the
Underwriter a distribution fee at the annual rate of 0.75% of that Fund's
average daily net assets attributable to Class B shares and a service fee of
0.25% of the Fund's average daily net assets attributable to Class B shares.
Payments made to the Underwriter under each Class B Plan will represent
compensation for distribution and service activities, not reimbursement for
specific expenses incurred.
Although Class B shares are sold without an initial sales charge, the
Underwriter pays from its own resources a sales commission to FIC
Representatives and a concession equal to 3.5% of the amount invested to Dealers
who sell Class B shares. In addition, the Underwriter will make quarterly
payments of service fees to Representatives commencing after the thirteenth
month following the initial sale of Class B shares. The Underwriter will make
such payments at an annual rate of up to 0.25% of the average net asset value of
Class B shares which are attributable to shareholders for whom the
Representatives are designated as dealer of record.
Pursuant to settlements entered into with various state regulators, for a
period ending on or about February 1, 1998, each Fund is permitted to pay up to
a maximum of 0.15% of that Fund's average daily net assets attributable to its
Class A shares and up to a maximum of 0.85% of its average daily net assets
attributable to its Class B shares for service and distribution fees.
The Funds may suspend or modify payments under the Plans at any time, and
payments are subject to the continuation of each Plan, the terms of any dealer
agreements between Dealers and the Underwriter and any applicable limits imposed
by the National Association of Securities Dealers, Inc. Each Fund will not carry
over any fees under the Plans to the next fiscal year. See "Distribution Plans"
in the SAI for a full discussion of the various Plans.
26
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund's shares fluctuates and is determined
separately for each class of shares. The net asset value of shares of a given
class of each Fund is determined as of the close of regular trading on the NYSE
(generally 4:00 P.M., New York City time) on each day the NYSE is open for
trading, and at such other times as each Fund's Board of Directors deems
necessary, by dividing the market value of the securities held by such Fund,
plus any cash and other assets, less all liabilities attributable to that class,
by the number of shares of the applicable class outstanding. If there is no
available market value, securities will be valued at their fair value as
determined in good faith pursuant to procedures adopted by each Fund's Board of
Directors. Expenses (other than 12b-1 fees and certain other class expenses) are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class. The per share net asset value of the Class B shares
will generally be lower than that of the Class A shares because of the higher
expenses borne by the Class B shares. The NYSE currently observes the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividends from net investment income are generally declared daily and paid
monthly by each Fund. Unless you direct the Transfer Agent otherwise, dividends
declared on a class of shares of a Fund are paid in additional shares of the
same class of the distributing Fund at the net asset value generally determined
as of the close of business on the first business day of the following month. If
you redeem all of your shares of a Fund at any time during a month, you are paid
all dividends declared through the day prior to the date of the redemption,
together with the proceeds of your redemption, less any applicable CDSC. Net
investment income includes interest and dividends, earned discount and other
income earned on portfolio securities less expenses.
Each Fund also distributes with its regular dividend at the end of each
year substantially all of (a) its net capital gain (the excess of net long-term
capital gain over net short-term capital loss) and net short-term capital gain,
if any, after deducting any available capital loss carryovers, and (b) any net
realized gains from foreign currency transactions. Unless you direct the
Transfer Agent otherwise, these distributions are paid in additional shares of
the same class of the distributing Fund at the net asset value generally
determined as of the close of business on the business day immediately following
the record date of the distribution. A Fund may make an additional distribution
in any year if necessary to avoid a Federal excise tax on certain undistributed
income and capital gain.
Dividends and other distributions paid on both classes of a Fund's shares
are calculated at the same time and in the same manner. Dividends on Class B
shares of a Fund are expected to be lower than those for its Class A shares
because of the higher distribution fees borne by the Class B shares. Dividends
on each class also might be affected differently by the allocation of other
class-specific expenses.
27
<PAGE>
In order to be eligible to receive a dividend or other distribution, you
must own Fund shares as of the close of business on the record date of the
distribution. You may elect to receive dividends and/or other distributions in
cash by notifying the Transfer Agent by telephone or in writing prior to the
record date of any such distribution. If you elect this form of payment, the
payment date generally is two weeks following the record date of any such
distribution. Your election remains in effect until you revoke it by notifying
the Transfer Agent.
You may elect to invest the entire amount of any cash distribution on
Class A or Class B shares of a Fund in the same class of shares of any Eligible
Fund, including the Money Market Funds, by notifying the Transfer Agent. See
"Cross-Investment of Cash Distributions" in the SAI.
A dividend or other distribution paid on a class of shares of a Fund will
be paid in additional shares of that class and not in cash if any of the
following events occurs: (1) the total amount of the distribution is under $5,
(2) the Fund has received notice of your death on an individual account (until
written alternate payment instructions and other necessary documents are
provided by your legal representative), or (3) a distribution check is returned
to the Transfer Agent, marked as being undeliverable, by the U.S. Postal Service
after two consecutive mailings.
TAXES
Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of Federal income
tax on that part of its investment company taxable income (consisting generally
of net investment income, net short-term capital gain and net gains from certain
foreign currency transactions) and net capital gain that is distributed to its
shareholders.
Dividends from a Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits,
whether paid in cash or in additional Fund shares. Distributions of a Fund's net
capital gain, when designated as such, are taxable to you as long-term capital
gain, whether paid in cash or in additional Fund shares, regardless of the
length of time you have owned your shares. If you purchase shares shortly before
the record date for a dividend or other distribution, you will pay full price
for the shares and receive some portion of the price back as a taxable
distribution. You will receive an annual statement following the end of each
calendar year describing the tax status of distributions paid by the Fund during
that year.
Each Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to you (if you are an individual
or certain other non-corporate shareholder) if the Fund is not furnished with
your correct taxpayer identification number, and the same percentage of
dividends and such distributions in certain other circumstances.
Your redemption of Fund shares will result in a taxable gain or loss to
you, depending on whether the redemption proceeds are more or less than your
adjusted basis for the redeemed shares (which normally includes any initial
sales charge paid on Class A shares). An exchange of Fund shares for shares of
any Eligible Fund generally will have similar tax consequences. However, special
tax rules apply if you (1) dispose of Class A shares through a redemption or
exchange within 90 days of your purchase and (2) subsequently acquire Class A
shares of the same
28
<PAGE>
Fund or an Eligible Fund without paying a sales charge due to the reinvestment
privilege or exchange privilege. In these cases, any gain on your disposition of
the original Class A shares will be increased, or loss decreased, by the amount
of the sales charge you paid when the shares were acquired, and that amount will
increase the basis of the Eligible Fund's shares you subsequently acquired. In
addition, if you purchase Fund shares within 30 days before or after redeeming
other shares of that Fund (regardless of class) at a loss, all or a portion of
the loss will not be deductible and will increase the basis of the newly
purchased shares.
No gain or loss will be recognized to a shareholder as a result of a
conversion of Class B shares into Class A shares.
The foregoing is only a summary of some of the important Federal tax
considerations generally affecting each Fund and its shareholders; see the SAI
for a further discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You therefore are urged to
consult your own tax adviser.
PERFORMANCE INFORMATION
For purposes of advertising, each Fund's performance may be calculated for
each class of its shares based on average annual total return and total return.
Each of these figures reflects past performance and does not necessarily
indicate future results. Average annual total return shows the average annual
percentage change in an assumed $1,000 investment. It reflects the hypothetical
annually compounded return that would have produced the same total return if a
Fund's performance had been constant over the entire period. Because average
annual total return tends to smooth out variations in a Fund's return, you
should recognize that it is not the same as actual year-by-year results. Average
annual total return includes the effect of paying the maximum sales charge (in
the case of Class A shares) or the deduction of any applicable CDSC (in the case
of Class B shares) and payment of dividends and other distributions in
additional shares. One, five and ten year periods will be shown unless the class
has been in existence for a shorter period. Total return is computed using the
same calculations as average annual total return. However, the rate expressed is
the percentage change from the initial $1,000 invested to the value of the
investment at the end of the stated period. Total return calculations assume
reinvestment of dividends and other distributions.
Each Fund also may advertise its yield for each class of shares. Yield
reflects investment income net of expenses over a 30-day (or one-month) period
on a Fund share, expressed as an annualized percentage of the maximum offering
price per share for Class A shares and the net asset value per share for Class B
shares at the end of the period. Yield computations differ from other accounting
methods and therefore may differ from dividends actually paid or reported net
income. Each Fund may also advertise its "actual distribution rate" for each
class of shares. This is computed in the same manner as yield except that actual
income dividends declared per share during the period in question are
substituted for net investment income per share. In addition, each Fund
calculates its "actual distribution rate" based upon net asset value for
dissemination to existing shareholders.
29
<PAGE>
Each of the above performance calculations may be based on investment at
reduced sales charge levels or at net asset value. Any quotation of performance
figures not reflecting the maximum sales charge or CDSC will be greater than if
the maximum sales charge or CDSC were used. Each class of shares of a Fund has
different expenses which will affect its performance. Additional performance
information is contained in the Funds' Annual Reports which may be obtained
without charge by contacting the Funds at 1-800-423-4026.
30
<PAGE>
Cumulative Performance Information
FIRST INVESTORS HIGH YIELD FUND, INC.
Comparison of change in value of $10,000 investment in the First Investors High
Yield Fund, Inc. (Class A shares) and the First Boston High Yield Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
<S> <C> <C> <C>
High Yield Fund First Boston High Yield Index
Jan-87 $9,375.00 $10,000.00
Dec-87 9263 12319
Dec-88 10431 14001
Dec-89 9589 14054
Dec-90 7956 13157
Dec-91 10782 18914
Dec-92 12824 22065
Dec-93 14998 26237
Dec-94 15057 25983
Dec-95 17832 30498
Dec-96 20213 34286
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
Class A shares
One Year 13.35% 6.23%
Five Years 13.39% 11.92%
Ten Years 7.99% 7.29%
S.E.C. 30-Day Yield 6.67%
Class B shares
One Year 12.41% 7.88%
Since Inception 15.13% 12.79%
S.E.C. 30-Day Yield 6.43%
</TABLE>
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS HIGH YIELD FUND,
INC. (CLASS A SHARES) BEGINNING 1/1/87 WITH A THEORETICAL INVESTMENT IN THE
FIRST BOSTON HIGH YIELD INDEX. THE FIRST BOSTON HIGH YIELD INDEX IS DESIGNED TO
MEASURE THE PERFORMANCE OF THE HIGH YIELD BOND MARKET. THE INDEX CONSISTS OF 852
DIFFERENT ISSUES, 706 OF WHICH ARE CASH PAY, 127 ARE ZERO-COUPON, 9 ARE STEP
BONDS, 1 IS A PAYMENT-IN-KIND BOND AND THE REMAINING 9 ARE IN DEFAULT. THE BONDS
INCLUDED IN THE INDEX HAVE AN AVERAGE LIFE OF 7.8 YEARS, AN AVERAGE MATURITY OF
7.8 YEARS, AN AVERAGE DURATION OF 4.2 YEARS AND AN AVERAGE COUPON OF 10.6%. IT
IS NOT POSSIBLE TO INVEST DIRECTLY IN THIS INDEX. IN ADDITION, THE INDEX DOES
NOT TAKE INTO ACCOUNT FEES AND EXPENSES. FOR PURPOSES OF THE GRAPH AND THE
ACCOMPANYING TABLE, UNLESS OTHERWISE INDICATED, IT HAS BEEN ASSUMED THAT THE
MAXIMUM SALES CHARGE WAS DEDUCTED FROM THE INITIAL $10,000 INVESTMENT IN THE
FUND AND ALL DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED. CLASS B SHARES
PERFORMANCE MAY BE GREATER THAN OR LESS THAN THAT SHOWN IN THE LINE GRAPH ABOVE
BASED ON DIFFERENCES IN SALES LOADS AND FEES PAID BY SHAREHOLDERS INVESTING IN
THE DIFFERENT CLASSES.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/96) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE CLASS A "S.E.C. STANDARDIZED" RETURNS
SHOWN ARE BASED ON THE MAXIMUM SALES CHARGE OF 6.25% (PRIOR TO 7/1/93 AND
12/29/89, THE MAXIMUM SALES CHARGES WERE 6.9% AND 8.5%, RESPECTIVELY). THE
CLASS B "S.E.C. STANDARDIZED" RETURNS ARE ADJUSTED FOR THE APPLICABLE DEFERRED
SALES CHARGE (MAXIMUM OF 4% IN THE FIRST YEAR). SOME OR ALL OF THE EXPENSES OF
THE FUND WERE WAIVED OR ASSUMED. IF SUCH EXPENSES HAD BEEN PAID BY THE FUND,
THE CLASS A SHARES "S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN FOR ONE
YEAR, FIVE YEARS AND TEN YEARS WOULD HAVE BEEN 5.99%, 11.80% AND 7.20%,
RESPECTIVELY, AND THE S.E.C. 30-DAY YIELD FOR DECEMBER 1996 WOULD HAVE BEEN
6.53%. THE CLASS B SHARES "S.E.C. STANDARDIZED" AVERAGE ANNUAL TOTAL RETURN
FOR ONE YEAR AND SINCE INCEPTION WOULD HAVE BEEN 7.63% AND 12.55%,
RESPECTIVELY, AND THE S.E.C. 30-DAY YIELD FOR DECEMBER 1996 WOULD HAVE BEEN
6.28%. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS.
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL COST. THE UNUSUALLY HIGH CURRENT YIELDS OFFERED REFLECT THE
SUBSTANTIAL RISKS ASSOCIATED WITH INVESTMENTS IN HIGH YIELD BONDS. THE ISSUERS
OF THE BONDS 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. THE FUND WAS CLOSED TO NEW INVESTMENTS FROM 11/9/90 TO 7/27/92.
FIRST BOSTON HIGH YIELD INDEX FIGURES FROM CS FIRST BOSTON AND ALL OTHER
FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
31
<PAGE>
Cumulative Performance Information
FIRST INVESTORS FUND FOR INCOME, INC.
Comparison of change in value of $10,000 investment in the First Investors Fund
For Income, Inc. (Class A shares) and the First Boston High Yield Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
FUND FOR INCOME FIRST BOSTON HIGH YIELD INDEX
Jan-87 $9,375 $10,000
Dec-87 9,247 12,319
Dec-88 10,520 14,001
Dec-89 9,692 14,054
Dec-90 8,025 13,157
Dec-91 11,463 18,914
Dec-92 13,378 22,065
Dec-93 15,794 26,237
Dec-94 15,886 25,983
Dec-95 18,831 30,498
Dec-96 21,366 34,286
Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
Class A shares
One Year 13.40% 6.20%
Five Years 13.25% 11.78%
Ten Years 8.59% 7.88%
S.E.C. 30-Day Yield 6.84%
Class B shares
One Year 12.51% 8.06%
Since Inception
(1/12/95) 15.22% 12.83%
S.E.C. 30-Day Yield 6.61%
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS FUND FOR INCOME,
INC. (CLASS A SHARES) BEGINNING 1/1/87 WITH A THEORETICAL INVESTMENT IN THE
FIRST BOSTON HIGH YIELD INDEX. THE FIRST BOSTON HIGH YIELD INDEX IS DESIGNED TO
MEASURE THE PERFORMANCE OF THE HIGH YIELD BOND MARKET. THE INDEX CONSISTS OF 852
DIFFERENT ISSUES, 706 OF WHICH ARE CASH PAY, 127 OF WHICH ARE ZERO-COUPON, 9 OF
WHICH ARE STEP BONDS, 1 IS A PAYMENT-IN-KIND BOND AND THE REMAINING 9 ARE IN
DEFAULT. THE BONDS INCLUDED IN THE INDEX HAVE AN AVERAGE LIFE OF 7.8 YEARS, AN
AVERAGE MATURITY OF 7.8 YEARS, AN AVERAGE DURATION OF 4.2 YEARS AND AN AVERAGE
COUPON OF 10.6%. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THIS INDEX. IN
ADDITION, THE INDEX DOES NOT TAKE INTO ACCOUNT FEES AND EXPENSES. FOR PURPOSES
OF THE GRAPH AND THE ACCOMPANYING TABLE, UNLESS OTHERWISE INDICATED, IT HAS BEEN
ASSUMED THAT THE MAXIMUM SALES CHARGE WAS DEDUCTED FROM THE INITIAL $10,000
INVESTMENT IN THE FUND AND ALL DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED.
CLASS B SHARES PERFORMANCE MAY BE GREATER THAN OR LESS THAN THAT SHOWN IN THE
LINE GRAPH ABOVE BASED ON DIFFERENCES IN SALES LOADS AND FEES PAID BY
SHAREHOLDERS INVESTING IN THE DIFFERENT CLASSES.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE PERIOD ENDED 12/31/96) INCLUDE
THE REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE CLASS A "S.E.C. STANDARDIZED" RETURNS
SHOWN ARE BASED ON THE MAXIMUM SALES CHARGE OF 6.25% (PRIOR TO 7/1/93 AND
12/29/89, THE MAXIMUM SALES CHARGES WERE 6.9% AND 8.5%, RESPECTIVELY). THE
CLASS B "S.E.C. STANDARDIZED" RETURNS ARE ADJUSTED FOR THE APPLICABLE DEFERRED
SALES CHARGE (MAXIMUM OF 4% IN THE FIRST YEAR). RESULTS REPRESENT PAST
PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE UNUSUALLY
HIGH CURRENT YIELDS OFFERED REFLECT THE SUBSTANTIAL RISKS ASSOCIATED WITH
INVESTMENTS IN HIGH YIELD BONDS. THE ISSUERS OF THE BONDS 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. THE FUND WAS CLOSED
TO NEW INVESTMENTS FROM 11/9/90 TO 7/27/92. FIRST BOSTON HIGH YIELD INDEX
FIGURES FROM CS FIRST BOSTON AND ALL OTHER FIGURES FROM FIRST INVESTORS
MANAGEMENT COMPANY, INC.
32
<PAGE>
GENERAL INFORMATION
ORGANIZATION. HIGH YIELD FUND and INCOME FUND were incorporated in the
state of Maryland on November 14, 1984 and August 20, 1970, respectively. HIGH
YIELD FUND'S authorized capital stock consists of 500 million shares of common
stock, all of one series, with a par value per share of $0.01. INCOME FUND's
authorized capital stock consists of 1 billion shares of common stock, all of
one series, with a par value per share of $1.00. Each Fund is authorized to
issue shares of common stock in such separate and distinct series and classes of
series as the particular Fund's Board of Directors shall from time to time
establish. The shares of common stock of each Fund are presently divided into
two classes, designated Class A shares and Class B shares. Each class of a Fund
represents interests in the same assets of that Fund. The Funds do not hold
annual shareholder meetings. If requested to do so by the holders of at least
10% of a Fund's outstanding shares, such Fund's Board of Directors will call a
special meeting of shareholders for any purpose, including the removal of
Directors. Each share of each Fund has equal voting rights except as noted
above.
CUSTODIAN. The Bank of New York, 48 Wall Street, New York, NY 10286, is
custodian of the securities and cash of each Fund.
TRANSFER AGENT. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as transfer and
dividend disbursing agent for each Fund and as redemption agent for regular
redemptions. The Transfer Agent's telephone number is 1-800-423-4026.
SHARE CERTIFICATES. The Funds do not issue certificates for Class B shares
or for Class A shares purchased under any retirement account. The Funds,
however, will issue share certificates for Class A shares at the shareholder's
request. Ownership of shares of each Fund is recorded on a stock register by the
Transfer Agent and shareholders have the same rights of ownership with respect
to such shares as if certificates had been issued.
CONFIRMATIONS AND STATEMENTS. You will receive confirmations of purchases
and redemptions of shares of a Fund. Generally, confirmation statements will be
sent to you following a transaction in the account, including payment of a
dividend or capital gain distribution in additional shares or cash. However,
systematic investments made through First Investors Money Line or automatic
payroll deductions will only be confirmed in your monthly or quarterly
statement, showing all transactions occurring during the period.
SHAREHOLDER INQUIRIES. Shareholder inquiries can be made by calling
Shareholder Services at 1-800-423-4026.
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. It is each Fund's practice
to mail only one copy of its annual and semi-annual reports to any address at
which more than one shareholder with the same last name has indicated that mail
is to be delivered. Additional copies of the reports will be mailed if requested
in writing or by telephone by any shareholder.
33
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S RATINGS GROUP
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
ccordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C Debt rated "BB," "B," "CCC," "CC" and "C" is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
34
<PAGE>
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
CCC Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
CC The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together
35
<PAGE>
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities, fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat greater than the Aaa securities.
A Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa Bonds which are rated "Caa" are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca Bonds which are rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated "C" are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
36
<PAGE>
TABLE OF CONTENTS
Fee Table............................................................... 2
Financial Highlights.................................................... 4
Investment Objectives and Policies...................................... 10
Alternative Purchase Plans.............................................. 16
How to Buy Shares....................................................... 17
How to Exchange Shares.................................................. 22
How to Redeem Shares.................................................... 23
Telephone Transactions.................................................. 25
Management.............................................................. 26
Distribution Plans...................................................... 26
Determination of Net Asset Value........................................ 28
Dividends and Other Distributions....................................... 28
Taxes................................................................... 29
Performance Information................................................. 30
General Information..................................................... 34
Appendix A.............................................................. 35
INVESTMENT ADVISER CUSTODIAN
First Investors Management The Bank of New York
Company, Inc. 48 Wall Street
95 Wall Street New York, NY 10286
New York, NY 10005
TRANSFER AGENT
UNDERWRITER Administrative Data
First Investors Corporation Management Corp.
95 Wall Street 581 Main Street
New York, NY 10005 Woodbridge, NJ 07095-1198
LEGAL COUNSEL AUDITORS
Kirkpatrick & Lockhart LLP Tait, Weller & Baker
1800 Massachusetts Avenue, N.W. Two Penn Center Plaza
Washington, D.C. 20036 Philadelphia, PA 19102-1707
This Prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by either Fund of the securities of the other Fund whose securities are also
offered by this Prospectus. Neither Fund intends to make any representation as
to the accuracy or completeness of the disclosure in this Prospectus relating to
the other Fund. No dealer, salesman or any other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus or the Statement of Additional Information, and if given or
made, such information and representation must not be relied upon as having been
authorized by either Fund, First Investors Corporation, or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the shares offered hereby in any state to any person
to whom it is unlawful to make such offer in such state.
<PAGE>
First Investors
High Yield Fund, Inc.
- ---------------------------
First Investors Fund
For Income, Inc.
- ---------------------------
Prospectus
- ----------------------------
April 30, 1997
First Investors Logo
Logo is described as follows: the arabic numeral one separated into seven
vertical segments followed by the words "First Investors."
Verticle line from top to bottom in center of page about 1/2 inch in thickness
The following language appears to the left of the above language in the printed
piece:
The words "BULK RATE U.S. POSTAGE PAID PERMIT NO. 7379" in a box to the right of
a circle containing the words "MAILED FROM ZIP CODE 11201" appears on the
righthand side.
The following language appears on the lefthand side:
FIRST INVESTORS HIGH YIELD FUND, INC.
FIRST INVESTORS FUND FOR INCOME, INC.
95 WALL STREET
NEW YORK, NY 10005
First Investors Logo (as described above)
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK
FYFI001
<PAGE>
FIRST INVESTORS HIGH YIELD FUND, INC
FIRST INVESTORS FUND FOR INCOME, INC.
95 Wall Street 1-800-423-4026
New York, New York 10005
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 30, 1997
This is a Statement of Additional Information ("SAI") for FIRST
INVESTORS HIGH YIELD FUND, INC. ("HIGH YIELD FUND") and FIRST INVESTORS FUND FOR
INCOME, INC. ("INCOME FUND"), each of which is an open-end diversified
management investment company. HIGH YIELD FUND and INCOME FUND are referred to
herein collectively as "Funds."
HIGH YIELD FUND primarily seeks high current income and secondarily
seeks capital appreciation.
INCOME FUND primarily seeks to earn a high level of current income and,
to the extent possible, in view of that objective, secondarily seeks growth of
capital.
This SAI is not a prospectus. It should be read in conjunction with the
Funds' Prospectus dated April 30, 1997, which may be obtained free of cost from
the Funds at the address or telephone number noted above.
TABLE OF CONTENTS
Page
Investment Policies....................................................... 2
Hedging Strategies........................................................ 5
Investment Restrictions................................................... 8
Directors and Officers.................................................... 11
Management................................................................ 13
Underwriter............................................................... 15
Distribution Plans........................................................ 15
Determination of Net Asset Value.......................................... 16
Allocation of Portfolio Brokerage......................................... 17
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services............................... 18
Taxes..................................................................... 25
Performance Information................................................... 27
General Information....................................................... 31
Appendix A................................................................ 33
Appendix B................................................................ 34
Financial Statements...................................................... 40
<PAGE>
INVESTMENT POLICIES
BANKERS' ACCEPTANCES. Each Fund may invest in bankers' acceptances.
Bankers' acceptances are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an asset
or it may be sold in the secondary market at the going rate of interest for a
specific maturity. Although maturities for acceptances can be as long as 270
days, most acceptances have maturities of six months or less.
CERTIFICATES OF DEPOSIT. Each Fund may invest in bank certificates of
deposit ("CDs") subject to the restrictions set forth in the Prospectus. The
Federal Deposit Insurance Corporation is an agency of the U.S. Government which
insures the deposits of certain banks and savings and loan associations up to
$100,000 per deposit. The interest on such deposits may not be insured if this
limit is exceeded. Current Federal regulations also permit such institutions to
issue insured negotiable CDs in amounts of $100,000 or more, without regard to
the interest rate ceilings on other deposits. To remain fully insured, these
investments currently must be limited to $100,000 per insured bank or savings
and loan association.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities.
While no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock, although
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed income
security. The Funds' investment adviser, First Investors Management Company,
Inc. ("Adviser" or "FIMCO"), will decide to invest based upon a fundamental
analysis of the long-term attractiveness of the issuer and the underlying common
stock, the evaluation of the relative attractiveness of the current price of the
underlying common stock and the judgment of the value of the convertible
security relative to the common stock at current prices.
FOREIGN GOVERNMENT OBLIGATIONS. The Funds may invest in foreign
government obligations, which generally consist of obligations supported by
national, state or provincial governments or similar political subdivisions.
Investments in foreign government debt obligations involve special risks. The
issuer of the debt may be unable or unwilling to pay interest or repay principal
when due in accordance with the terms of such debt, and a Fund may have limited
legal resources in the event of default. Political conditions, especially a
sovereign entity's willingness to meet the terms of its debt obligations, are of
considerable significance.
FOREIGN SECURITIES--RISK FACTORS. A Fund may sell a security
denominated in a foreign currency and retain the proceeds in that foreign
currency to use at a future date (to purchase other securities denominated in
that currency) or the Fund may buy foreign currency outright to purchase
securities denominated in that foreign currency at a future date. Investing in
foreign securities involves more risk than investing in securities of U.S.
companies. Because each Fund does not intend to hedge its foreign investments
against the risk of foreign currency fluctuations, changes in the value of these
currencies can significantly affect a Fund's share price. In addition, a Fund
will be affected by changes in exchange control regulations and fluctuations in
the relative rates of exchange between the currencies of different nations, as
well as by economic and political developments. Other risks involved in foreign
securities include the following: there may be less publicly available
information about foreign companies comparable to the reports and ratings that
are published about companies in the United States; foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S. companies;
some foreign stock markets have substantially less volume than U.S. markets, and
securities of some foreign companies are less liquid and more volatile than
securities of comparable U.S. companies; there may be less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies
2
<PAGE>
than exist in the United States; and there may be the possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments which could affect assets of a Fund held in foreign
countries.
LOANS OF PORTFOLIO SECURITIES. HIGH YIELD FUND may loan securities to
qualified broker-dealers or other institutional investors provided: the borrower
pledges to the Fund and agrees to maintain at all times with the Fund collateral
equal to not less than 100% of the value of the securities loaned (plus accrued
interest or dividend, if any); the loan is terminable at will by the Fund; the
Fund pays only reasonable custodian fees in connection with the loan; and the
Adviser monitors the creditworthiness of the borrower throughout the life of the
loan. Such loans may be terminated by the Fund at any time and the Fund may vote
the proxies if a material event affecting the investment is to occur. The market
risk applicable to any security loaned remains a risk of the Fund. The borrower
must add to the collateral whenever the market value of the securities rises
above the level of such collateral. The Fund could incur a loss if the borrower
should fail financially at a time when the value of the loaned securities is
greater than the collateral. HIGH YIELD FUND may make loans of portfolio
securities, together with illiquid securities, not in excess of 15% of its net
assets.
REPURCHASE AGREEMENTS. A repurchase agreement essentially is a
short-term collateralized loan. The lender (a Fund) agrees to purchase a
security from a borrower (typically a broker-dealer) at a specified price. The
borrower simultaneously agrees to repurchase that same security at a higher
price on a future date (which typically is the next business day). The
difference between the purchase price and the repurchase price effectively
constitutes the payment of interest. In a standard repurchase agreement, the
securities which serve as collateral are transferred to a Fund's custodian bank.
In a "tri-party" repurchase agreement, these securities would be held by a
different bank for the benefit of the Fund as buyer and the broker-dealer as
seller. In a "quad-party" repurchase agreement, the Fund's custodian bank also
is made a party to the agreement. Each Fund may enter into repurchase agreements
with banks which are members of the Federal Reserve System or securities dealers
who are members of a national securities exchange or are market makers in
government securities. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will a Fund invest in
repurchase agreements with more than one year in time to maturity. The
securities which are subject to repurchase agreements, however, may have
maturity dates in excess of one year from the effective date of the repurchase
agreement. Each Fund will always receive, as collateral, securities whose market
value, including accrued interest, which will at all times be at least equal to
100% of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian. If the seller defaults, a
Fund might incur a loss if the value of the collateral securing the repurchase
agreement declines, and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy or similar proceedings
are commenced with respect to the seller of the security, realization upon the
collateral by a Fund may be delayed or limited. Neither Fund will enter into a
repurchase agreement with more than seven days to maturity if, as a result, more
than 15% of such Fund's net assets would be invested in such repurchase
agreements and other illiquid investments.
RESTRICTED AND ILLIQUID SECURITIES. No Fund will purchase or otherwise
acquire any security if, as a result, more than 15% of its net assets (taken at
current value) would be invested in securities that are illiquid by virtue of
the absence of a readily available market or legal or contractual restrictions
on resale. This policy includes foreign issuers' unlisted securities with a
limited trading market and repurchase agreements maturing in more than seven
days. This policy does not include restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, as amended ("1933 Act"),
which each Fund's Board of Directors or the Adviser has determined under
Board-approved guidelines are liquid.
Restricted securities which are illiquid may be sold only in privately
negotiated transactions or in public offerings with respect to which a
registration statement is in effect under the 1933 Act. Such
3
<PAGE>
securities include those that are subject to restrictions contained in the
securities laws of other countries. Securities that are freely marketable in the
country where they are principally traded, but would not be freely marketable in
the United States, will not be subject to this 15% limitation, as noted above.
Where registration is required, a Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the time
of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, a Fund might obtain a less favorable
price than prevailed when it decided to sell.
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are either themselves exempt from registration or sold in
transactions not requiring registration. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by a Fund, however, could affect adversely the marketability of
such portfolio securities and a Fund might be unable to dispose of such
securities promptly or at reasonable prices.
SHORT SALES. Although HIGH YIELD FUND does not presently intend to do
so, it may borrow securities for cash sale to others for hedging purposes only.
In this type of transaction, known as a "short sale," the Fund borrows a
security from a lender and is obligated to replace the security (not its cash
value) at a date in the future. The Fund may make short sales "against the box."
A short sale against the box occurs when the Fund enters into a short sale with
a security identical to the one it already owns or has the immediate or
unconditional right, at no cost, to obtain the identical security.
U.S. GOVERNMENT OBLIGATIONS. Securities issued or guaranteed as to
principal and interest by the U.S. Government include (1) U.S. Treasury
obligations which differ only in their interest rates, maturities and times of
issuance as follows: U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years) and U.S. Treasury bonds
(generally maturities of greater than ten years), and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are backed by
the full faith and credit of the United States, such as securities issued by the
Federal Housing Administration, Government National Mortgage Association, the
Department of Housing and Urban Development, the Export-Import Bank, the General
Services Administration and the Maritime Administration and certain securities
issued by the Farmers Home Administration and the Small Business Administration.
The range of maturities of U.S. Government Obligations is usually three months
to thirty years.
WARRANTS. Each Fund may purchase warrants, which are instruments that
permit a Fund to acquire, by subscription, the capital stock of a corporation at
a set price, regardless of the market price for such stock. Warrants may be
either perpetual or of limited duration. There is greater risk that warrants
might drop in value at a faster rate than the underlying stock. HIGH YIELD
FUND's investment in warrants is limited to 5% of its net assets, with no more
than 2% in warrants not listed on either the New York or American Stock
Exchange. INCOME FUND's investment in warrants is limited to 2% of its net
assets.
4
<PAGE>
WHEN-ISSUED SECURITIES. Although they have no intention of doing so in
the coming year, each Fund many invest up to 10% of its net assets in securities
issued on a when-issued or delayed delivery basis at the time the purchase is
made. A Fund generally would not pay for such securities or start earning
interest on them until they are issued or received. However, when a Fund
purchases debt obligations on a when-issued basis, it assumes the risks of
ownership, including the risk of price fluctuation, at the time of purchase, not
at the time of receipt. Failure of the issuer to deliver a security purchased by
a Fund on a when-issued basis may result in such Fund incurring a loss or
missing an opportunity to make an alternative investment. When a Fund enters
into a commitment to purchase securities on a when-issued basis, it establishes
a separate account with its custodian consisting of cash or liquid high-grade
debt securities equal to the amount of the Fund's commitment, which are valued
at their fair market value. If on any day the market value of this segregated
account falls below the value of the Fund's commitment, the Fund will be
required to deposit additional cash or qualified securities into the account
until equal to the value of the Fund's commitment. When the securities to be
purchased are issued, the Fund will pay for the securities from available cash,
the sale of securities in the segregated account, sales of other securities and,
if necessary, from sale of the when-issued securities themselves although this
is not ordinarily expected. Securities purchased on a when-issued basis are
subject to the risk that yields available in the market, when delivery takes
place, may be higher than the rate to be received on the securities a Fund is
committed to purchase. Sale of securities in the segregated account or sale of
the when-issued securities may cause the realization of a capital gain or loss.
PORTFOLIO TURNOVER. Although each Fund generally will not invest for
short-term trading purposes, portfolio securities may be sold from time to time
without regard to the length of time they have been held when, in the opinion of
the Adviser, investment considerations warrant such action. Portfolio turnover
rate is calculated by dividing (1) the lesser of purchases or sales of portfolio
securities for the fiscal year by (2) the monthly average of the value of
portfolio securities owned during the fiscal year. A 100% turnover rate would
occur if all the securities in a Fund's portfolio, with the exception of
securities whose maturities at the time of acquisition were one year or less,
were sold and either repurchased or replaced within one year. A high rate of
portfolio turnover generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Allocation of Portfolio Brokerage."
For the fiscal years ended December 31, 1995 and 1996, HIGH YIELD FUND'S
portfolio turnover rate was 42% and 29%, respectively and INCOME FUND'S
portfolio turnover rate was 33% and 30%, respectively.
HEDGING STRATEGIES
Although it presently does not intend to engage in these strategies in
the coming year, HIGH YIELD FUND may engage in certain futures strategies to
hedge its investment portfolio and in other circumstances permitted by the
Commodities Futures Trading Commission ("CFTC"). Certain special characteristics
of and risks associated with using Hedging Instruments are discussed below. In
addition to the investment guidelines (described below) adopted by the Fund's
Board of Directors to govern its investments in Hedging Instruments, use of
these instruments is subject to the applicable regulations of the Securities and
Exchange Commission ("SEC"), the several futures exchanges upon which futures
contracts are traded, the CFTC and various state regulatory authorities. In
addition, the Fund's ability to use Hedging Instruments will be limited by tax
considerations.
See "Taxes."
Participation in the futures markets involves investment risks and
transaction costs to which the Fund would not be subject absent the use of these
strategies. If the Adviser's prediction of movements in the direction of the
securities and interest rate markets are inaccurate, the adverse consequences to
the Fund may leave the Fund in a worse position than if such strategies were not
used. The Fund might not employ any of the strategies described below, and there
can be no assurance that any strategy will succeed. The use of these strategies
involve certain special risks, including
5
<PAGE>
(1) dependence on the Adviser's ability to predict correctly movements in the
direction of interest rates and securities prices; (2) imperfect correlation
between the price of futures contracts and movements in the prices of the
securities being hedged; (3) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
and (5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences.
COVER FOR HEDGING STRATEGIES. The Fund will not use leverage in its
hedging strategies. In the case of each transaction entered into as a hedge, the
Fund will hold securities or futures positions whose values are expected to
offset ("cover") its obligations thereunder. The Fund will not enter into a
hedging strategy that exposes the Fund to an obligation to another party unless
it owns either (1) an offsetting ("covered") position in securities or futures
contracts, or (2) cash, receivables and short-term debt securities with a value
sufficient at all times to cover its potential obligations. The Fund will comply
with guidelines established by the SEC with respect to coverage of hedging
strategies by mutual funds and, if required, will set aside cash and/or liquid,
high-grade debt securities in a segregated account with its custodian in the
prescribed amount. Securities or futures positions used for cover and assets
held in a segregated account cannot be sold or closed out while the hedging
strategy is outstanding unless they are replaced with similar assets. As a
result, there is a possibility that the use of cover or segregation involving a
large percentage of the Fund's assets could impede portfolio management or the
Fund's ability to meet redemption requests or other current obligations.
INTEREST RATE FUTURES CONTRACTS. Interest rate futures contracts are
bilateral agreements pursuant to which one party agrees to make, and the other
party agrees to accept, delivery of a specified type of debt security at a
specified future time and at a specified price. Although such futures contracts
by their terms call for actual delivery or acceptance of debt securities, in
most cases the contracts are closed out before the settlement date without the
making or taking of delivery. The Fund may buy and sell interest rate futures
contracts which are traded on a board of trade as a hedge against adverse
changes in interest rates.
FUTURES STRATEGIES. The Fund may engage in futures strategies to
attempt to reduce the overall investment risk that would normally be expected to
be associated with ownership of the securities in which it invests. The Fund may
use interest rate futures contracts to hedge its portfolio against changes in
the general level of interest rates. The Fund may purchase an interest rate
futures contract when it intends to purchase debt securities but has not yet
done so. This strategy may minimize the effect of all or part of an increase in
the market price of those securities because a rise in the price of the
securities prior to their purchase may either be offset by an increase in the
value of the futures contract purchased by the Fund or avoided by taking
delivery of the debt securities under the futures contract. Conversely, a fall
in the market price of the underlying debt securities may result in a
corresponding decrease in the value of the futures position. The Fund may sell
an interest rate futures contract in order to continue to receive the income
from a debt security, while endeavoring to avoid part or all of the decline in
the market value of that security that would accompany an increase in interest
rates.
FUTURES GUIDELINES. In view of the risks involved in using futures
strategies described above, the Fund's Board of Directors has adopted
non-fundamental investment guidelines to govern the Fund's use of such
investments that may be modified by the Board without shareholder vote. In the
event that the Fund enters into futures contracts or options thereon other than
for bona fide hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums required to establish these positions (excluding the
in-the-money amount for options that are in-the-money at the time of purchase)
will not exceed 5% of the Fund's net assets. This does not limit the Fund's
assets at risk to 5%. The fund may not purchase furtures contracts if
immediately thereafter more than 30% of the Fund's total assets would be so
invested.
6
<PAGE>
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES TRADING. No price is paid
upon entering into futures contracts. Instead, upon entering into a futures
contract, the Fund is required to deposit with its custodian in a segregated
account in the name of the futures broker through which the transaction is
effected an amount of cash, U.S. Government securities or other liquid,
high-grade debt instruments generally equal to 10% or less of the contract
value. This amount is known as "initial margin." Initial margin on futures
contracts is in the nature of a performance bond or good-faith deposit that is
returned to the Fund upon termination of the transaction, assuming all
obligations have been satisfied. Under certain circumstances, such as periods of
high volatility, the Fund may be required by an exchange to increase the level
of its initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. Subsequent payments,
called "variation margin," to and from the broker, are made on a daily basis as
the value of the futures position varies, a process known as "marking to
market." Variation margin does not involve borrowing to finance the futures
transactions, but rather represents a daily settlement of the Fund's obligation
to or from a clearing organization. The Fund is also obligated to make initial
and variation margin payments when it writes options on futures contracts.
Holders and writers of futures positions can enter into offsetting
closing transactions, similar to closing transactions on options on securities,
by selling or purchasing, respectively, a futures position with the same terms
as the position held or written. Positions in futures contracts thereon may be
closed only on an exchange or board of trade providing a secondary market for
such futures or options.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures contract may vary either up or
down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because
prices could move to the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation of unfavorable
positions. In such event, it may not be possible for the Fund to close a
position and, in the event of adverse price movements the Fund would have to
make daily cash payments of variation margin. However, in the event futures
contracts have been used to hedge portfolio securities, such securities will not
be sold until the contracts can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. However, there is no guarantee that the
price of the securities will, in fact, correlate with the price movements in the
contracts and thus provide an offset to losses on the contracts.
Successful use by the Fund of futures contracts will depend upon the
Adviser's ability to predict movements in the direction of the overall interest
rate markets, which requires different skills and techniques than predicting
changes in the prices of individual securities. Moreover, futures contracts
relate not to the current price level of the underlying instrument but to the
anticipated levels at some point in the future. There is, in addition, the risk
that the movements in the price of the futures contract will not correlate with
the movements in prices of the securities being hedged. In addition, if the Fund
has insufficient cash, it may have to sell assets from its portfolio to meet
daily variation margin requirements. Any such sale of assets may or may not be
made at prices that reflect the rising market. Consequently, the Fund may need
to sell assets at a time when such sales are disadvantageous to the Fund. If the
price of the futures contract moves more than the price of the underlying
securities, the Fund will experience either a loss or a gain on the futures
contract that may or may not be completely offset by movements in the price of
the securities that are the subject of the hedge.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between price movements in the futures
position and the securities being hedged, movements in the prices of futures
contracts may not correlate perfectly with movements in the prices of the hedged
securities because of price distortions in the futures market. As a result, a
correct forecast of general
7
<PAGE>
market trends may not result in successful hedging through the use of futures
contracts over the short term.
Positions in futures contracts may be closed out only on an exchange or
board of trade that provides a secondary market for such futures contracts.
Although the Fund intends to purchase or sell futures only on exchanges or
boards of trade where there appears to be a liquid secondary market, there is no
assurance that such a market will exist for any particular contract at any
particular time. In such event, it may not be possible to close a futures
position and, in the event of adverse price movements, the Fund would continue
to be required to make variation margin payments.
The Fund's activities in the futures markets may result in a higher
portfolio turnover rate and additional transaction costs in the form of added
brokerage commissions; however, the Fund also may save on commissions by using
futures as a hedge rather than buying or selling individual securities in
anticipation or as a result of market movements.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below have been adopted by the
respective Fund and, unless identified as non-fundamental policies, may not be
changed without the affirmative vote of a majority of the outstanding voting
securities of that Fund. As provided in the Investment Company Act of 1940, as
amended ("1940 Act"), a "vote of a majority of the outstanding voting securities
of the Fund" means the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares of the Fund or (2) 67% or more of the shares present at a
meeting, if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy. Except with respect to borrowing, changes in
values of a particular Fund's assets will not cause a violation of the following
investment restrictions so long as percentage restrictions are observed by such
Fund at the time it purchases any security.
HIGH YIELD FUND. HIGH YIELD FUND will not:
(1) Borrow money, except from banks and only for temporary or emergency
purposes and then in amounts not in excess of 5% of its total assets.
(2) Engage in "short sales" in excess of 10% of the Fund's total
assets. As a matter of non-fundamental policy, the Fund has undertaken to a
certain state securities commission that the Fund will not engage in short sales
other than (a) short sales against the box and (b) the sale of financial futures
contracts and options thereon.
(3) Pledge, mortgage or hypothecate any of its assets, except that the
Fund may pledge its assets to secure borrowings made in accordance with
paragraphs (1) and (2) above and for margin to secure its obligations under
interest rate futures contracts, provided the Fund maintains asset coverage of
at least 300% for pledged assets.
(4) Make loans, except by purchase of debt obligations and through
repurchase agreements. However, the Board of Directors may, on the request of
broker-dealers or other institutional investors which they deem qualified,
authorize the Fund to loan securities to cover the borrower's short position;
provided, however, the borrower pledges to the Fund and agrees to maintain at
all times with the Fund cash collateral equal to not less than 100% of the value
of the securities loaned, the loan is terminable at will by the Fund, the Fund
receives interest on the loan as well as any distributions upon the securities
loaned, the Fund retains voting rights associated with the securities, the Fund
pays only reasonable custodian fees in connection with the loan, and the Adviser
monitors the creditworthiness of the borrower throughout the life of the loan;
provided further, that such loans will not be made if the value of all
repurchase agreements with more than seven days to maturity, and other illiquid
assets is greater than an amount equal to 15% of the Fund's net assets.
8
<PAGE>
(5) With respect to 75% of the Fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.
(6) Purchase the securities of an issuer if such purchase, at the time
thereof, would cause more than 5% value of the Fund's total assets to be
invested in securities of issuers which, including predecessors, have a record
of less than three years' continuous operation.
(7) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under Federal securities laws.
(8) Purchase or sell real estate or commodities or commodity contracts.
However, the Fund may purchase interests in real estate investment trusts whose
securities are registered under the Act and are readily marketable and may
invest in interest rate futures contracts and options thereon (provided the
margin required does not violate the investment restrictions pertaining to
pledging assets).
(9) Invest in companies for the purpose of exercising control or
management.
(10) Invest in securities of other investment companies, except in
connection with a merger of another investment company.
(11) Purchase any securities on margin (however, the Fund's engaging in
"hedging transactions" and the margins required thereon shall not be considered
a violation of this provision).
(12) Purchase or retain securities of any issuer if any officer or
Director of the Fund or the Adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer or if all such officers and Directors together own
more than 5% of the securities of such issuer.
(13) Invest 25% or more of the value of its total assets in a
particular industry at any one time.
(14) Invest more than 5% of the value of its net assets in warrants,
with no more than 2% in warrants not listed on either the New York or American
Stock Exchange.
(15) Purchase or sell portfolio securities from or to the Adviser or
any Director or officer thereof or of the Fund, as principals.
(16) Invest more than 15% of the value of its total assets, at the time
of purchase, in deep discount securities of companies that are financially
troubled, in default or in bankruptcy or reorganization.
(17) Issue senior securities.
(18) Invest any of its assets in interests in oil, gas or other mineral
exploration or development programs, or in puts, calls, straddles or any
combination thereof.
(19) Invest more than 10% of its net assets in when-issued securities
at the time such purchase is made.
9
<PAGE>
The Fund has also filed the following undertaking to comply with
requirements of a certain state in which shares of the Fund are sold, which may
be changed without shareholder approval: Not withstanding investment restriction
(8) above, the Fund will not invest in real estate limited partnership interests
or interests in real estate investment trusts that are not readily marketable.
The Fund has adopted the following non-fundamental investment
restriction which may be changed without shareholder approval. This investment
restriction provides that the Fund will not:
Purchase any security if, as a result, more than 15% of its net assets
would be invested in illiquid securities, including repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
any securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market. The Directors, or the
Fund's investment adviser acting pursuant to authority delegated by the
Directors, may determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, or any other applicable rule, and therefore that such securities are
not subject to the foregoing limitation.
INCOME FUND. INCOME FUND will not:
(1) Borrow money except from banks and only for temporary or emergency
purposes and then in amounts not in excess of 5% of its total assets taken at
cost or value, whichever is the lesser.
(2) Make loans to other persons except that the Board of Directors may,
on the request of broker-dealers or other institutional investors that it deems
qualified, authorize the Fund to lend securities for the purpose of covering
short positions of the borrower, but only when the borrower pledges cash
collateral to the Fund and agrees to maintain such collateral so that it amounts
at all times to at least 100% of the value of the securities. Such security
loans will not be made if as a result the aggregate of such loans exceeds 10% of
the value of the Fund's total assets. The Fund may terminate such loans at any
time and vote the proxies if a material event affecting the investment is about
to occur. The market risk applicable to any security loaned remains a risk of
the Fund. The borrower must add to collateral whenever the market value of the
securities rises above the level of such collateral. The primary objective of
such loaning function is to supplement the Fund's income through investment of
the cash collateral in short-term interest-bearing obligations. The purchase of
a portion of an issue of publicly distributed debt securities is not considered
the making of a loan.
(3) With respect to 75% of the Fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.
(4) Invest more than 5% of the value of its total assets in securities
of issuers, including the operations of predecessors, that have been in business
for less than three years.
(5) Invest 25% or more of the value of its total assets in a particular
industry at one time.
(6) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under Federal securities laws.
(7) Purchase or sell real estate or commodities or commodity contracts.
However, the Fund may purchase interests in real estate investment trusts whose
securities are registered under the 1933 Act and are readily marketable.
(8) Invest in companies for the purpose of exercising control or
management.
10
<PAGE>
(9) Invest in securities of other investment companies, except in
connection with a merger of another investment company.
(10) Purchase any securities on margin or sell any securities short.
(11) Purchase or retain securities of any issuer if any officer or
Director of the Fund or the Adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the securities of
such issuer.
(12) Purchase or sell portfolio securities from or to the Adviser or
any Director or officer thereof or of the Fund, as principals.
(13) Issue senior securities.
The following undertakings, which may be changed without shareholder
approval, have been filed to comply with requirements of certain states in which
shares of the Fund are sold:
(1) Notwithstanding fundamental investment restriction (7) above, the
Fund will not invest in real estate limited partnership interests or in
interests in real estate investment trusts that are not readily marketable.
(2) The Fund will not write, purchase or sell puts, calls, straddles or
any combinations thereof.
(3) In reference to the investment power of the Fund to invest in
warrants and rights in connection with the purchase of securities, the
investment in warrants taken at the lower of cost or market will not exceed 2%
of the Fund's net assets. Warrants initially attached to securities and acquired
by the Fund upon the original issuance thereof shall be deemed for the above 2%
determination to be without value.
The Fund has adopted the following non-fundamental investment
restrictions, which may be changed without shareholder approval. These
investment restrictions provide that the Fund will not:
(1) Purchase any security if, as a result, more than 15% of its net
assets would be invested in illiquid securities, including repurchase agreements
not entitling the holder to payment of principal and interest within seven days
and any securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market. The
Directors, or the Fund's investment adviser acting pursuant to authority
delegated by the Directors, may determine that a readily available market exists
for securities eligible for resale pursuant to Rule 144A under the Securities
Act of 1933, as amended, or any other applicable rule, and therefore that such
securities are not subject to the foregoing limitation.
(2) Pledge, mortgage or hypothecate any of its assets, except that the
Fund may pledge its assets to secure borrowings made in accordance with
fundamental investment restriction (1) above, provided the Fund maintains asset
coverage of at least 300% for all such borrowings.
DIRECTORS AND OFFICERS
The following table lists the Directors and executive officers of the
Funds, their age, business address and principal occupations during the past
five years. Unless otherwise noted, an individual's business address is 95 Wall
Street, New York, New York 10005.
11
<PAGE>
GLENN O. HEAD*+ (71), President and Director. Chairman of the Board and
Director, Administrative Data Management Corp. ("ADM"), FIMCO, Executive
Investors Management Company, Inc. ("EIMCO"), First Investors Corporation
("FIC"), Executive Investors Corporation ("EIC") and First Investors
Consolidated Corporation ("FICC").
ROGER L. GRAYSON* (40), Director. Director, FIC and FICC; President and
Director, First Investors Resources, Inc.; Commodities Portfolio Manager.
KATHRYN S. HEAD*+ (41), Director, 581 Main Street, Woodbridge, NJ 07095.
President, FICC, EIMCO, ADM and FIMCO; Vice President, Chief Financial Officer
and Director, FIC and EIC; President and Director, First Financial Savings Bank,
S.L.A.
REX R. REED (75), Director, 259 Governors Drive, Kiawah Island, SC 29455.
Retired; formerly Senior Vice President, American Telephone & Telegraph Company.
HERBERT RUBINSTEIN (75), Director, 145 Elm Drive, Roslyn, NY 11576. Retired;
formerly President, Belvac International Industries, Ltd. and President, Central
Dental Supply.
NANCY SCHAENEN (65), Director, 56 Midwood Terrace, Madison, NJ 07940. Trustee,
Drew University and DePauw University.
JAMES M. SRYGLEY (64), Director, 33 Hampton Road, Chatham, NJ 07982. Principal,
Hampton Properties, Inc. (property investment company).
JOHN T. SULLIVAN* (65), Director and Chairman of the Board; Director, FIMCO,
FIC, FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.
ROBERT F. WENTWORTH (67), Director, RR1, Box 2554, Upland Downs Road, Manchester
Center, VT 05255. Retired; formerly financial and planning executive with
American Telephone & Telegraph Company.
JOSEPH I. BENEDEK (39), Treasurer, 581 Main Street, Woodbridge, NJ 07095.
Treasurer, FIC, FIMCO, EIMCO and EIC; Comptroller and Treasurer, FICC.
CONCETTA DURSO (62), Vice President and Secretary. Vice President, FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary, FIC and EIC.
NANCY W. JONES (53), Vice President, INCOME FUND. Vice President, First
Investors Asset Management Company, Inc. and First Investors Series Fund;
Portfolio Manager, FIMCO.
GEORGE V. GANTER (44), Vice President, HIGH YIELD FUND. Vice President, First
Investors Asset Management Company, Inc., First Investors Special Bond Fund,
Inc., and Executive Investors Trust; Portfolio Manager, FIMCO.
- ----------
* These Directors may be deemed to be "interested persons," as defined in
the 1940 Act.
+ Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.
All of the officers and Directors, except for Ms. Jones and Mr. Ganter,
hold identical or similar positions with 14 other registered investment
companies in the First Investors Family of Funds. Mr. Head is also an officer
and/or Director of First Investors Asset Management Company, Inc., First
Investors Credit Funding Corporation, First Investors Leverage Corporation,
First Investors Realty Company, Inc., First Investors Resources, Inc., N.A.K.
Realty Corporation, Real Property Development Corporation, Route 33 Realty
Corporation, First Investors Life Insurance Company, First Financial Savings
Bank, S.L.A., First Investors Credit Corporation, School Financial Management
Services, Inc.
12
<PAGE>
and Specialty Insurance Group, Inc. Ms. Head is also an officer and/or Director
of First Investors Life Insurance Company, First Investors Credit Corporation,
School Financial Management Services, Inc., First Investors Credit Funding
Corporation, N.A.K. Realty Corporation, Real Property Development Corporation,
First Investors Leverage Corporation, Route 33 Realty Corporation and Specialty
Insurance Group, Inc.
The following table lists compensation paid to the Directors of HIGH
YIELD FUND for the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT ESTIMATED FROM FIRST INVESTORS
AGGREGATE BENEFITS ACCRUED ANNUAL FAMILY OF FUNDS
COMPENSATION AS PART OF BENEFITS UPON PAID TO
DIRECTOR** FROM FUND* FUND EXPENSES RETIREMENT DIRECTORS*
- ---------- ---------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
James J. Coy*** $4,200 $-0- $-0- $37,200
Roger L. Grayson -0- -0- -0- -0-
Glenn O. Head -0- -0- -0- -0-
Kathryn S. Head -0- -0- -0- -0-
Rex R. Reed 4,200 -0- -0- 37,200
Herbert Rubinstein 4,200 -0- -0- 37,200
James M. Srygley 3,850 -0- -0- 34,100
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth 4,200 -0- -0- 37,200
The following table lists compensation paid to the Directors of INCOME
FUND for the fiscal year ended December 31, 1996.
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT ESTIMATED FROM FIRST INVESTORS
AGGREGATE BENEFITS ACCRUED ANNUAL FAMILY OF FUNDS
COMPENSATION AS PART OF BENEFITS UPON PAID TO
DIRECTOR** FROM FUND* FUND EXPENSES RETIREMENT DIRECTORS*
- ---------- ---------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
James J. Coy*** $4,200 $-0- $-0- $37,200
Roger L. Grayson -0- -0- -0- -0-
Glenn O. Head -0- -0- -0- -0-
Kathryn S. Head -0- -0- -0- -0-
Rex R. Reed 4,200 -0- -0- 37,200
Herbert Rubinstein 4,200 -0- -0- 37,200
James M. Srygley 3,850 -0- -0- 34,100
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth 4,200 -0- -0- 37,200
</TABLE>
* Compensation to officers and interested Directors of the Funds is paid
by the Adviser. In addition, compensation to non-interested Directors
of the Funds is currently voluntarily paid by the Adviser.
** Nancy Schaenen was not a Director in 1996.
*** On March 27, 1997 Mr. Coy resigned as a Director of the Funds. Mr. Coy
did not resign due to a disagreement with the Funds' management on any
matter relating to the Funds' operations, policies or practices. Mr.
Coy currently serves as an emeritus Director.
MANAGEMENT
Investment advisory services to each Fund are provided by First
Investors Management Company, Inc. pursuant to separate Investment Advisory
Agreements (each, an "Advisory Agreement") dated June 13, 1994. Each Advisory
Agreement was approved by the Board of Directors of the
13
<PAGE>
applicable Fund, including a majority of the Directors who are not parties to
such Fund's Advisory Agreement or "interested persons" (as defined in the 1940
Act) of any such party ("Independent Directors"), in person at a meeting called
for such purpose and by a majority of the public shareholders of the applicable
Fund.
Pursuant to each Advisory Agreement, FIMCO shall supervise and manage
each Fund's investments, determine each Fund's portfolio transactions and
supervise all aspects of each Fund's operations, subject to review by the
applicable Fund's Directors. Each Advisory Agreement also provides that FIMCO
shall provide the applicable Fund with certain executive, administrative and
clerical personnel, office facilities and supplies, conduct the business and
details of the operation of such Fund and assume certain expenses thereof, other
than obligations or liabilities of such Fund. Each Advisory Agreement may be
terminated at any time without penalty by the applicable Fund's Directors or by
a majority of the outstanding voting securities of such Fund, or by FIMCO, in
each instance on not less than 60 days' written notice, and shall automatically
terminate in the event of its assignment (as defined in the 1940 Act). Each
Advisory Agreement also provides that it will continue in effect, with respect
to the applicable Fund, for a period of over two years only if such continuance
is approved annually either by such Fund's Directors or by a majority of the
outstanding voting securities of such Fund, and, in either case, by a vote of a
majority of such Fund's Independent Directors voting in person at a meeting
called for the purpose of voting on such approval.
Under each Advisory Agreement, the applicable Fund pays the Adviser an
annual fee, paid monthly, according to the following schedules:
HIGH YIELD FUND
Annual
Average Daily Net Assets Rate
Up to $200 million........................................... 1.00%
In excess of $200 million up to $500 million................. 0.75
In excess of $500 million up to $750 million................. 0.72
In excess of $750 million up to $1.0 billion................. 0.69
Over $1.0 billion............................................ 0.66
INCOME FUND
Annual
Average Daily Net Assets Rate
Up to $250 million........................................... 0.75%
In excess of $250 million up to $500 million................. 0.72
In excess of $500 million up to $750 million................. 0.69
Over $750 million............................................ 0.66
For the fiscal years ended December 31, 1994, 1995 and 1996, HIGH YIELD
FUND paid the Adviser $1,735,499, $1,634,213 and $1,647,509, respectively, in
advisory fees. For the same periods, the Adviser voluntarily waived an
additional $66,131, $181,579 and $290,139, respectively, in advisory fees. For
the fiscal years ended December 31, 1994, 1995 and 1996, INCOME FUND paid the
Adviser $3,060,320, $3,083,269 and $3,153,822, respectively, in advisory fees.
Each Fund bears all expenses of its operations other than those
incurred by the Adviser or Underwriter under the terms of its advisory or
underwriting agreements. Fund expenses include, but are not limited to: the
advisory fee; shareholder servicing fees and expenses; custodian fees and
expenses; legal and auditing fees; expenses of communicating to existing
shareholders, including
14
<PAGE>
preparing, printing and mailing prospectuses and shareholder reports to such
shareholders; and proxy and shareholder meeting expenses.
The Adviser has an Investment Committee composed of George V. Ganter,
Margaret Haggerty, Glenn O. Head, Nancy W. Jones, Patricia D. Poitra, Michael
O'Keefe, Clark D. Wagner and Richard Guinnessey. The Committee usually meets
weekly to discuss the composition of the portfolio of each Fund and to review
additions to and deletions from the portfolios.
UNDERWRITER
Each Fund has entered into an Underwriting Agreement ("Underwriting
Agreement") with First Investors Corporation ("Underwriter" or "FIC") which
requires the Underwriter to use its best efforts to sell shares of the Funds.
Pursuant to each Underwriting Agreement, the Underwriter shall bear all fees and
expenses incident to the registration and qualification of the applicable Fund's
shares. In addition, the Underwriter shall bear all expenses of sales material
or literature, including prospectuses and proxy materials, to the extent such
materials are used in connection with the sale of the Fund's shares, unless the
Fund has agreed to bear such costs pursuant to a plan of distribution. See
"Distribution Plans." Each Underwriting Agreement was approved by the applicable
Fund's Board of Directors, including a majority of the Independent Directors.
Each Underwriting Agreement provides that it will continue in effect from year
to year only so long as such continuance is specifically approved at least
annually by the applicable Fund's Board of Directors or by a vote of a majority
of the outstanding voting securities of such Fund, and in either case by the
vote of a majority of such Fund's Independent Directors, voting in person at a
meeting called for the purpose of voting on such approval. Each Underwriting
Agreement will terminate automatically in the event of its assignment.
For the fiscal years ended December 31, 1994, 1995 and 1996, FIC
received underwriting commissions with respect to HIGH YIELD FUND of $171,682,
$310,680 and $499,411, respectively. For the same periods, FIC reallowed an
additional $3,102, $80,463 and $284,181, respectively, to unaffiliated dealers.
For the fiscal years ended December 31, 1994, 1995 and 1996, FIC received
underwriting commissions with respect to INCOME FUND of $413,039, $359,115 and
$339,449, respectively. For the same periods, FIC reallowed an additional
$28,996, $34,668 and $15,512, respectively, to unaffiliated dealers.
DISTRIBUTION PLANS
As stated in the Funds' Prospectus, pursuant to a separate plan of
distribution for each class of shares adopted by each Fund pursuant to Rule
12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan" and, collectively,
"Plans"), each Fund may reimburse or compensate, as applicable, the Underwriter
for certain expenses incurred in the distribution of that Fund's shares and the
servicing or maintenance of existing Fund shareholder accounts.
Each Plan was approved by the applicable Fund's Board of Directors,
including a majority of the Independent Directors, and by a majority of the
outstanding voting securities of the relevant class of such Fund. Each Plan will
continue in effect from year to year as long as its continuance is approved
annually be either the applicable Fund's Board of Directors or by a vote of a
majority of the outstanding voting securities of the relevant class of shares of
such Fund. In either case, to continue, each Plan must be approved by the vote
of a majority of the Independent Directors of the applicable Fund. Each Fund's
Board reviews quarterly and annually a written report provided by the Treasurer
of the amounts expended under the applicable Plan and the purposes for which
such expenditures were made. While each Plan is in effect, the selection and
nomination of the applicable Fund's Independent Directors will be committed to
the discretion of such Independent Directors then in office.
Each Plan can be terminated at any time by a vote of a majority of the
applicable Fund's Independent Directors or by a vote of a majority of the
outstanding voting securities of the relevant
15
<PAGE>
class of shares of such Fund. Any change to the Class B Plan that would
materially increase the costs to that class of shares of a Fund or any material
change to the Class A Plan may not be instituted without the approval of the
outstanding voting securities of the relevant class of shares of such Fund. Such
changes also require approval by a majority of the applicable Fund's Independent
Directors.
In adopting each Plan, the Board of Directors of each Fund considered
all relevant information and determined that there is a reasonable likelihood
that each Plan will benefit each Fund and their class of shareholders. The
Boards believe that amounts spent pursuant to each Plan have assisted each Fund
in providing ongoing servicing to shareholders, in competing with other
providers of financial services and in promoting sales, thereby increasing the
net assets of each Fund.
In reporting amounts expended under the Plans to the Directors, FIMCO
will allocate expenses attributable to the sale of each class of a Fund's shares
to such class based on the ratio of sales of such class to the sales of both
classes of shares. The fees paid by one class of a Fund's shares will not be
used to subsidize the sale of any other class of the Fund's shares.
For the fiscal year ended December 31, 1996, HIGH YIELD FUND and INCOME
FUND paid $287,850 and $637,627, respectively, pursuant to their respective
Class A Plan. For the same period, the Underwriter incurred the following Class
A Plan-related expenses with respect to each Fund:
COMPENSATION TO COMPENSATION TO COMPENSATION TO
FUND UNDERWRITER DEALERS SALES PERSONNEL
HIGH YIELD FUND $192,967 -0- $ 94,883
INCOME FUND 435,788 -0- 201,839
For the fiscal year ended December 31, 1996, HIGH YIELD FUND and INCOME
FUND paid $16,818 and $21,497, respectively, pursuant to their respective Class
B Plan. For the same period, the Underwriter incurred the following Class B
Plan-related expenses with respect to each Fund:
COMPENSATION TO COMPENSATION TO COMPENSATION TO
FUND UNDERWRITER DEALERS SALES PERSONNEL
HIGH YIELD FUND $11,896` $4,879 $ 43
INCOME FUND 18,551 2,654 292
DETERMINATION OF NET ASSET VALUE
Except as provided herein, a security listed or traded on an exchange
or the Nasdaq Stock Market is valued at its last sale price on the exchange or
system where the security is principally traded, and lacking any sales, the
security is valued at the mean between the closing bid and asked prices on that
day. Each security traded in the over-the-counter ("OTC") market (including
securities listed on exchanges whose primary market is believed to be OTC) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by a market maker for such securities. The U.S. Government securities
in which the Funds invest are traded primarily in the OTC markets. In the
absence of market quotations, a Fund will determine the value of bonds based
upon quotes furnished by market makers, if available, or in accordance with the
procedures described herein. The Boards of Directors have determined that
securities may also be priced by a pricing service. The pricing service uses
quotations obtained from investment dealers or brokers and other available
information in determining value. This service is furnished by Interactive Data
Corporation. Short-term debt securities that mature in 60 days or less are
valued at amortized cost if their original term to maturity from the date of
purchase was 60 days or less, or by amortizing their value on the 61st day prior
to
16
<PAGE>
maturity if their term to maturity from the date of purchase exceeded 60 days,
unless the Board of Directors determines that such valuation does not represent
fair value. Securities for which market quotations are not readily available and
other assets are valued on a consistent basis at fair value as determined in
good faith by or under the supervision of a Fund's officers in a manner
specifically authorized by the Board of Directors of that Fund. "When-issued
securities" are reflected in the assets of the Fund as of the date the
securities are purchased. For valuation purposes, quotations of foreign
securities in foreign currencies are converted into U.S. dollar equivalents
using the foreign exchange equivalents in effect.
Each Fund's Board of Directors may suspend the determination of a
Fund's net asset value per share separately for each class of shares for the
whole or any part of any period (1) during which trading on the New York Stock
Exchange ("NYSE") is restricted as determined by the SEC or the NYSE is closed
for other than weekend and holiday closings, (2) during which an emergency, as
defined by rules of the SEC in respect to the U.S. market, exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (3) for such
other period as the SEC has by order permitted.
ALLOCATION OF PORTFOLIO BROKERAGE
Purchases and sales of portfolio securities by a Fund may be principal
transactions. In principal transactions, portfolio securities are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. There will usually be no brokerage commissions paid by a Fund
for such purchases. Purchases from underwriters will include the underwriter's
commission or concession and purchases from dealers serving as market makers
will include the spread between the bid and asked price.
Each Fund may deal in securities which are not listed on a national
securities exchange or the Nasdaq Stock Market but are traded in the OTC market.
Each Fund also may purchase listed securities through the "third market." When
transactions are executed in the OTC market, each Fund seeks to deal with the
primary market makers, but when advantageous it utilizes the services of
brokers.
In effecting portfolio transactions, the Adviser seeks best execution
of trades either (1) at the most favorable and competitive rate of commission
charged by any broker or member of an exchange, or (2) with respect to agency
transactions, at a higher rate of commission if reasonable in relation to
brokerage and research services provided to a Fund or the Adviser by such member
or broker. In addition, upon the instructions of each Fund's Board of Directors,
the Adviser may use dealer concessions available in fixed-price underwritings to
pay for research services. Such services may include, but are not limited to,
any one or more of the following: information as to the availability of
securities for purchase or sale and statistical or factual information or
opinions pertaining to investments. The Adviser may use research and services
provided to it by brokers in servicing all the funds in the First Investors
Group of Funds; however, not all such services may be used by the Adviser in
connection with a Fund. No portfolio orders are placed with an affiliated
broker, nor does any affiliated broker-dealer participate in these commissions.
The Adviser may combine transaction orders placed on behalf of a Fund
and any other Fund in the First Investors Group of Funds, any fund of Executive
Investors Trust and First Investors Life Insurance Company, affiliates of the
Funds, for the purpose of negotiating brokerage commissions or obtaining a more
favorable transaction price; and where appropriate, securities purchased or sold
may be allocated in accordance with written procedures approved by each Fund's
Board of Directors.
For the fiscal year ended December 31, 1994, HIGH YIELD FUND paid
$2,312 in brokerage commissions. Of that amount $2,187 was paid in brokerage
commissions to brokers who furnished
17
<PAGE>
research services on portfolio transactions in the amount of $264,375. For the
fiscal year ended December 31, 1994, INCOME FUND did not pay brokerage
commissions.
For the fiscal year ended December 31, 1995, HIGH YIELD FUND paid
$1,117 in brokerage commissions, all of which was paid to brokers who furnished
research services on portfolio transactions in the amount of $475,388. For the
fiscal year ended December 31, 1995, INCOME FUND paid $4,860 in brokerage
commissions, all of which was paid to brokers who furnished research services on
portfolio transactions in the amount of $798,496.
For the fiscal year ended December 31, 1996, HIGH YIELD FUND paid
$5,096 in brokerage commissions. Of that amount $4,731 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $733,093. For the fiscal year ended December 31, 1996, INCOME
FUND paid $9,315 in brokerage commissions. Of that amount, $8,534 was paid in
brokerage commissions to brokers who furnished research services on portfolio
transactions in the amount of $1,007,112.
REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND
REDEMPTION INFORMATION AND OTHER SERVICES
REDUCED SALES CHARGES--CLASS A SHARES
Reduced sales charges are applicable to purchases made at one time of
Class A shares of any one or more of the Funds or of any one or more of the
Eligible Funds, as defined in the Prospectus, by "any person," which term shall
include an individual, or an individual's spouse and children under the age of
21, or a trustee or other fiduciary of a single trust, estate or fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under section 401 of the Internal Revenue
Code of 1986, as amended (the "Code")), although more than one beneficiary is
involved; provided, however, that the term "any person" shall not include a
group of individuals whose funds are combined, directly or indirectly, for the
purchase of redeemable securities of a registered investment company, nor shall
it include a trustee, agent, custodian or other representative of such a group
of individuals.
Ownership of Class A and Class B shares of any Eligible Fund, except as
noted below, qualify for a reduced sales charge on the purchase of Class A
shares. Class A shares purchased at net asset value, Class A shares of the Money
Market Funds, or shares owned under a Contractual Plan are not eligible for the
purchase of Class A shares of a Fund at a reduced sales charge through a Letter
of Intent or the Cumulative Purchase Privilege.
LETTER OF INTENT. Any of the eligible persons described above may,
within 90 days of their investment, sign a statement of intent ("Letter of
Intent") in the form provided by the Underwriter, covering purchases of Class A
shares of any one or more of the Funds and of the other Eligible Funds to be
made within a period of thirteen months, provided said shares are currently
being offered to the general public and only in those states where such shares
may be legally sold, and thereby become eligible for the reduced sales charge
applicable to the total amount purchased. A Letter of Intent filed within 90
days of the date of investment is considered retroactive to the date of
investment for determination of the thirteen-month period. The Letter of Intent
is not a binding obligation on either the investor or the Fund. During the term
of a Letter of Intent, Administrative Data Management Corp. ("Transfer Agent")
will hold Class A shares representing 5% of each purchase in escrow, which
shares will be released upon completion of the intended investment.
Purchases of Class A Shares made under a Letter of Intent are made at
the sales charge applicable to the purchase of the aggregate amount of shares
covered by the Letter of Intent as if they were purchased in a single
transaction. The applicable quantity discount will be based on the sum of the
then current public offering price (i.e., net asset value plus applicable sales
charge) of all Class A
18
<PAGE>
shares and the net asset value of all Class B shares of a
Fund and of the other Eligible Funds, including Class B shares of the Money
Market Funds, currently owned, together with the aggregate offering price of
purchases to be made under the Letter of Intent. If all such shares are not so
purchased, a price adjustment is made, depending upon the actual amount invested
within such period, by the redemption of sufficient Class A shares held in
escrow in the name of the investor (or by the investor paying the commission
differential). A Letter of Intent can be amended (1) during the thirteen-month
period if the purchaser files an amended Letter of Intent with the same
expiration date as the original Letter of Intent, or (2) automatically after the
end of the period, if total purchases credited to the Letter of Intent qualify
for an additional reduction in the sales charge. The Letter of Intent privilege
may be modified or terminated at any time by the Underwriter.
CUMULATIVE PURCHASE PRIVILEGE. Upon written notice to FIC, Class A
shares of a Fund are also available at a quantity discount on new purchases if
the then current public offering price (i.e., net asset value plus applicable
sales charge) of all Class A shares and the net asset value of all Class B
shares of a Fund and of the other Eligible Funds, including Class B shares of
the Money Market Funds, previously purchased and then owned, plus the value of
Class A shares being purchased at the current public offering price, amount to
$25,000 or more. Such quantity discounts may be modified or terminated at any
time by the Underwriter.
PURCHASE OF SHARES. When you open a Fund account, you must specify
which class of shares you wish to purchase. If not, your order will be processed
as follows: (1) if you are opening an account with a new registration with First
Investors your order will not be processed until the Fund receives notification
of which class of shares to purchase; (2) if you have existing First Investors
accounts solely in either Class A shares or Class B shares with the identical
registration, your investment in the Fund will be made in the same class of
shares as your existing account(s); (3) if you are an existing First Investors
shareholder and own a combination of Class A and Class B shares with an
identical registration, your investment in the Fund will be made in Class B
shares; and (4) if you own in the aggregate at least $250,000 in any combination
of classes, your investment will be made in Class A shares.
SYSTEMATIC INVESTING
FIRST INVESTORS MONEY LINE. This service allows you to invest in a Fund
through automatic deductions from your bank checking account. Scheduled
investments in the minimum amount of $50 may be made on a bi-weekly,
semi-monthly, monthly, quarterly, semi-annual or annual basis. The maximum
amount which may be invested through First Investors Money Line is $10,000 a
month. Shares of the Fund are purchased at the public offering price determined
at the close of business on the day your designated bank account is debited. You
may change the amount or discontinue this service at any time by calling
Shareholder Services or writing to Administrative Data Management Corp., 581
Main Street, Woodbridge, NJ 07095-1198, Attn: Control Dept. It takes between
three and five business days to process any changes you request be made to your
Money Line service. Money Line application forms are available from your
Representative or by calling Shareholder Services at 1-800-423-4026.
AUTOMATIC PAYROLL INVESTMENT. You also may arrange for automatic
investments in the minimum amount of $50 into a Fund on a systematic basis
through salary deductions, provided your employer has direct deposit
capabilities. Shares of the Fund are purchased at the public offering price
determined as of the close of business on the day the electronic fund transfer
is received by the Fund. You may change the amount or discontinue the service by
contacting your employer. An application is available from your Representative
or by calling Shareholder Services at 1-800-423-4026. Arrangements must also be
made with your employer's payroll department.
CROSS-INVESTMENT OF CASH DISTRIBUTIONS. You may elect to invest in
Class A or Class B shares of a Fund at net asset value all the cash
distributions from the same class of shares of another Eligible Fund. The
investment will be made at the net asset value per share of the Fund, generally
19
<PAGE>
determined as of the close of business, on the business day immediately
following the record date of any such distribution. You may also elect to invest
cash distributions of a Fund's Class A or Class B shares into the same class of
another Eligible Fund, including the Money Market Funds. The investment will be
made at the net asset value per share of the other fund, generally determined as
of the close of business, on the business day immediately following the record
date of any such distribution. Cash distributions from a Fund's Class B shares
may only be invested into an existing Class B share account. If your
distributions are to be invested in Class A shares in a new account, you must
invest a minimum of $50 per month. To arrange for cross-investing, call
Shareholder Services at 1-800-423-4026.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own noncertificated Class
A or Class B shares may establish a Systematic Withdrawal Plan ("Withdrawal
Plan"). If you have a Fund account with a value of at least $5,000, you may
elect to receive monthly, quarterly, semi-annual or annual checks for any
designated amount (minimum $25). You may have the payments sent directly to you
or persons you designate. The $5,000 minimum account balance is currently being
waived for required minimum distributions on retirement plan accounts.
Additionally, regardless of the amount of your Class A or Class B Fund account,
you may also elect to have the Systematic Plan payments automatically (i)
invested at net asset value in the same class of shares of any other Eligible
Fund, including the Money Market Funds, or (ii) paid to First Investors Life
Insurance Company for the purchase of a life insurance policy or a variable
annuity. If your Systematic Plan payments are to be invested in a new Class A
Eligible Fund account, you must invest a minimum of $600 per year. Systematic
Plan payments from a Class B account must be invested in an existing Class B
Eligible Fund account. Dividends and other distributions, if any, are reinvested
in additional shares of the same class of the Fund. Shareholders may add shares
to the Withdrawal Plan or terminate the Withdrawal Plan at any time. Withdrawal
Plan payments will be suspended when a distributing Fund has received notice of
a shareholder's death on an individual account. Payments may recommence upon
receipt of written alternate payment instructions and other necessary documents
from the deceased's legal representative. Withdrawal payments will also be
suspended when a payment check is returned to the Transfer Agent marked as
undeliverable by the U.S. Postal Service after two consecutive mailings.
Shareholders who own Class B shares may establish a Withdrawal Plan and
elect to receive up to 8% of the value of their account (calculated as set forth
below) each year without incurring any CDSC. Shares not subject to a CDSC (such
as shares representing reinvestment of distributions) will be redeemed first and
will count toward the 8% limitation. If the shares not subject to a CDSC are
insufficient for this purpose, then shares subject to the lowest CDSC will be
redeemed next until the 8% limit is reached. The 8% figure is calculated on a
pro rata basis at the time of the first payment made pursuant to the Plan and
recalculated thereafter on a pro rata basis at the time of each Plan payment.
Therefore, shareholders who have chosen the Plan based on a percentage of the
value of their account of up to 8% will be able to receive Plan payments without
incurring a CDSC. However, shareholders who have chosen a specific dollar amount
(for example, $100 per month) for their periodic Plan payment should be aware
that the amount of that payment not subject to a CDSC may vary over time
depending on the value of their account. For example, if the value of the
account is $15,000 at the time of payment, the shareholder will receive $100
free of the CDSC (8% of $15,000 divided by 12 monthly payments). However, if at
the time of a payment the value of the account has fallen to $14,000, the
shareholder 67 subject to the lowest applicable CDSC. This privilege may be
revised or terminated at any time.
The withdrawal payments derived from the redemption of sufficient
shares in the account to meet designated payments in excess of dividends and
other distributions may deplete or possibly extinguish the initial investment,
particularly in the event of a market decline, and may result in a capital gain
or loss depending on the shareholder's cost. Purchases of additional shares of a
Fund concurrent with withdrawals are ordinarily disadvantageous to shareholders
because of tax liabilities and sales charges. To establish a Withdrawal Plan,
call Shareholder Services at 1-800-423-4026.
20
<PAGE>
ELECTRONIC FUND TRANSFER. Shareholders may establish Electronic Fund
Transfers ("EFT") between Fund accounts and a predesignated bank account by
completing an application and having all shareholders' signatures guaranteed. If
the bank account registration is not identical to the Fund account, a signature
guarantee of the bank account holder is required for Money Line purchases.
Shareholders may choose EFT privileges for Money Line purchases or redemptions
or both. The minimum EFT amount is $500 and the maximum is $50,000. The total
EFT redemptions during a 30 day period may not exceed $100,000. Each Fund has
the right, at its sole discretion, to limit or terminate your ability to
exercise the EFT privileges at any time. Fund shares will be purchased on the
day the Fund receives the funds, which is normally two days after the EFT is
initiated. The EFT normally will be initiated on the next bank business day
after the redemption request is received and will ordinarily be received by the
predesignated bank account within two days after transmission. However, once the
funds are transmitted, the time of receipt and the availability of the funds are
not within the Funds' control. No dividends are paid on the proceeds of redeemed
shares awaiting EFT.
CONVERSION OF CLASS B SHARES. Class B Shares of a Fund will
automatically convert to Class A shares of that Fund, based on the relative net
asset values per share of the two classes, as of the close of business on the
first business day of the month in which the eighth anniversary of the initial
purchase of such Class B shares occurs. For these purposes, the date of initial
purchase shall mean (1) the first business day of the month in which such Class
B shares were issued, or (2) for Class B shares obtained through an exchange or
a series of exchanges, the first business day of the month in which the original
Class B shares were issued. For conversion purposes, Class B shares purchased
through the reinvestment of dividends and other distributions paid in respect of
Class B shares will be held in a separate sub-account. Each time any Class B
shares in the shareholder's regular account (other than those in the
sub-account) convert to Class A shares, a pro rata portion of the Class B shares
in the sub-account also will convert to Class A shares. The portion will be
determined by the ratio that the shareholder's Class B shares converting to
Class A shares bears to the shareholder's total Class B shares not acquired
through dividends and other distributions.
The availability of the conversion feature is subject to the continuing
applicability of a ruling of the Internal Revenue Service ("IRS"), or the
availability of an opinion of counsel, that: (1) the dividends and other
distributions paid on Class A and Class B shares will not result in
"preferential dividends" under the Code; and (2) the conversion of shares does
not constitute a taxable event. If the conversion feature ceased to be
available, the Class B shares of the Fund would not be converted and would
continue to be subject to the higher ongoing expenses of the Class B shares
beyond eight years from the date of purchase. FIMCO has no reason to believe
that these conditions for the availability of the conversion feature will not
continue to be met.
If either Fund implements any amendments to its Class A Plan that would
increase materially the costs that may be borne under such Plan by Class A
shareholders, a new target class into which Class B shares will convert will be
established, unless a majority of Class B shareholders, voting separately as a
class, approve the proposal.
WAIVERS OF CDSC ON CLASS B SHARES. The CDSC imposed on Class B shares
does not apply to: (a) any redemption pursuant to the tax-free return of an
excess contribution to an individual retirement account ("IRA") or other
qualified retirement plan if the Fund is notified at the time of such request;
(b) any redemption of a lump-sum or other distribution from qualified retirement
plans or accounts provided the shareholder has attained the minimum age of 70
1/2 years and has held the Class B shares for a minimum period of three years;
(c) any redemption by advisory accounts managed by the Adviser or any of its
affiliates or for shares held by the Adviser or any of its affiliates; (d) any
redemption by a tax-exempt employee benefit plan if continuance of the
investment would be improper under applicable laws or regulations; (e) any
redemption or transfer of ownership of Class B shares following the death or
disability, as defined in Section 72(m)(7) of the Code, of a shareholder if the
Fund is provided with proof of death or disability and with all documents
required by the Transfer Agent within one year after the death or disability;
(f) any redemption of shares purchased during the period
21
<PAGE>
April 29, 1996 through June 30, 1996 with the proceeds from a redemption of
shares of a fund in another fund group for which no sales charge was paid, other
than a money market fund or shares held in a retirement plan account; and (g)
certain redemptions pursuant to a Withdrawal Plan (see "Systematic Withdrawal
Plan"). For more information on what specific documents are required, call
Shareholder Services at 1-800-423-4026.
SIGNATURE GUARANTEES. The words "Signature Guaranteed" must appear in
direct association with the signature of the guarantor. Members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange
Medallion Signature Program), SEMP (Stock Exchanges Medallion Program) and FIC
are eligible signature guarantors. A notary public is not an acceptable
guarantor. Although each Fund reserves the right to require signature guarantees
at any other time, signature guarantees are required whenever: (1) the amount of
the redemption is over $50,000, (2) an exchange in the amount over $50,000 is
made into the Money Market Funds, (3) a redemption check is to be made payable
to someone other than the registered accountholder, other than major financial
institutions, as determined solely by the Fund and its agent, on behalf of the
shareholder, (4) a redemption check is to be mailed to an address other than the
address of record, preauthorized bank account, or to a major financial
institution for the benefit of a shareholder, (5) an account registration is
being transferred to another owner, (6) a transaction requires additional legal
documentation; (7) the redemption request is for certificated shares; (8) your
address of record has changed within 60 days prior to a redemption request; (9)
multiple owners have a dispute or give inconsistent instructions; (10) the
authority of a representative of a corporation, partnership, association or
other entity has not been established to the satisfaction of a Fund or its
agents; and (11) you elect EFT privileges. ERISA Title I 403(b) Plans and 401(k)
Plans are exempt from the signature guarantee requirement except for exchanges
or redemption in amounts greater than $50,000.
REINVESTMENT AFTER REDEMPTION. If you redeem Class A or Class B shares
in your Fund account, you can reinvest within six months from the date of
redemption all or any part of the proceeds in shares of the same class of the
same Fund or any other Eligible Fund (including the Money Market Funds), at net
asset value, on the date the Transfer Agent receives your purchase request. If
you reinvest the entire proceeds of a redemption of Class B shares for which a
CDSC has been paid, you will be credited for the amount of the CDSC. If you
reinvest less than the entire proceeds, you will be credited with a pro rata
portion of the CDSC. All credits will be paid in Class B shares of the fund into
which the reinvestment is being made. The period you owned the original Class B
shares prior to redemption will be added to the period of time you own Class B
shares acquired through reinvestment for purposes of determining (a) the
applicable CDSC upon a subsequent redemption and (b) the date on which Class B
shares automatically convert to Class A shares. If your reinvestment is into a
new account, other than the Money Market Funds, it must meet the minimum
investment and other requirements of the fund into which the reinvestment is
being made. If you reinvest into a new Money Market Fund account within one year
from the date of redemption, the minimum investment is $500. To take advantage
of this option, send your reinvestment check along with a written request to the
Transfer Agent within six months from the date of your redemption. Include your
account number and a statement that you are taking advantage of the
"Reinvestment Privilege."
TELEPHONE TRANSACTIONS. Fund shares not held in certificate form may be
exchanged or redeemed by telephone provided you have not declined telephone
privileges. Telephone exchanges are available between non-retirement accounts.
Telephone exchanges are also available between participant directed 401(k)
accounts where First Financial Savings (as defined below) acts as Custodian, IRA
accounts or 403(b) accounts of the same class of shares registered in the same
name. Telephone exchanges are also available from an individually registered
non-retirement account to an IRA account of the same class of shares in the same
name (provided an IRA application is on file). Telephone exchanges are not
available for exchanges of Fund shares for plan units.
As stated in the Funds' Prospectus, the Funds, the Adviser, the
Underwriter and their officers, directors and employees will not be liable for
any loss, damage, cost or expense arising out of any
22
<PAGE>
instruction (or any interpretation of such instruction) received by telephone
which they reasonably believe to be authentic. In acting upon telephone
instructions, these parties use procedures which are reasonably designed to
ensure that such instructions are genuine, such as (1) obtaining some or all of
the following information: account number, address, social security number and
such other information as may be deemed necessary; (2) recording all telephone
instructions; and (3) sending written confirmation of each transaction to the
shareholder's address of record.
CANCELLED CHECKS. Copies of cancelled purchase, liquidation or dividend
checks will be provided to shareholders upon request. Shareholders will be
charged $10.00 per check.
EMERGENCY PRICING PROCEDURES. In the event that the Funds must halt
operations during any day that they would normally be required to price under
Rule 22c-1 under the Investment Company of 1940 due to an emergency ("Emergency
Closed Day"), the Funds will apply the following procedures:
1. The Funds will make every reasonable effort to segregate orders
received on the Emergency Closed Day and give them the price that they would
have received but for the closing. The Emergency Closed Day price will be
calculated as soon as practicable after operations have resumed and will be
applied equally to sales, redemptions and repurchases that were in fact received
in the mail or otherwise on the Emergency Closed Day.
2. For purposes of paragraph 1, an order will be deemed to have been
received by the Funds on an Emergency Closed Day, even if neither the Funds nor
the Transfer Agent is able to perform the mechanical processing of pricing on
that day, under the following circumstances:
(a) In the case of a mail order, the order will be considered
received by a Fund when the postal service has delivered it to FIC's Woodbridge
offices prior to the close of regular trading on the NYSE, or such other time as
may be prescribed in the Funds' Prospectus; and
(b) In the case of a wire order, including a Fund/SERV order, the
order will be considered received when it is received in good form by a FIC
branch office or an authorized dealer prior to the close of regular trading on
the NYSE, or such other time as may be prescribed in the Funds' Prospectus.
3. If the Funds are unable to segregate orders received on the
Emergency Closed Day from those received on the next day the Funds are open for
business, the Funds may give all orders the next price calculated after
operations resume.
4. Notwithstanding the foregoing, on business days in which the NYSE is
not open for regular trading, the Funds may determine not to price their
portfolio securities if such prices would lead to a distortion of the net asset
value for the Funds and their shareholders.
RETIREMENT PLANS
PROFIT-SHARING/MONEY PURCHASE PENSION/401(K) PLANS. FIC offers
prototype Profit-Sharing, Money Purchase Pension and 401(k) Retirement Plans
("Retirement Plans"), approved by the IRS for corporations, sole proprietorships
and partnerships. Custodial Agreements can be utilized for such Retirement Plans
that provide that First Financial Savings Bank, S.L.A. ("First Financial
Savings"), an affiliate of FIC, will furnish all required custodial services.
FIC offers additional versions of prototype qualified retirement plans
for eligible employers, including 401(k), money purchase and profit-sharing
plans.
23
<PAGE>
Currently, there are no annual service fees chargeable to participants
in connection with a Retirement Plan account. Each Fund currently pays the
annual $10.00 custodian fee for each Retirement Plan account, if applicable,
maintained with such Fund. This policy may be changed at any time by a Fund on
45 days' written notice. First Financial Savings has reserved the right to waive
its fees at any time or to change the fees on 45 days' prior written notice.
The Retirement Plan documents contain further specific information
about the Retirement Plans and may be obtained from your Representative. Prior
to establishing a Retirement Plan, you are advised to consult with your legal
and tax advisers.
INDIVIDUAL RETIREMENT ACCOUNTS. A qualified individual may purchase
shares of a Fund through an IRA or, as an employee of a qualified employer,
through a simplified employee pension-IRA ("SEP-IRA") or a salary reduction
simplified employee pension-IRA ("SARSEP-IRA") furnished by FIC. Under the
related Custodial Agreements, First Financial Savings acts as custodian of each
of these retirement plans.
Effective January 1, 1997, legislation enables certain eligible
employees to establish a Savings Incentive Match Plan for Employees of Small
Employers ("SIMPLE-IRAs"). FIC intends to offer a prototype SIMPLE-IRA plan for
eligible employers. First Financial Savings will act as Custodian for the
SIMPLE-IRA plan.
The Funds offer IRA accounts with specific provisions tailored to meet
the needs of certain groups of investors. The custodian fees are disclosed in
the IRA documents provided to investors in such accounts.
A taxpayer generally may make an annual individual IRA contribution no
greater than the lesser of (a) 100% of his or her compensation or (b) $2,000 (or
$4,000 when also contributing to a spousal IRA). However, contributions are
deductible only under certain conditions. The requirements as to SEP-IRAs,
SARSEP-IRAs and SIMPLE-IRAs are described in IRS Forms 5305-SEP, 5305A-SEP and
5305-SIMPLE, respectively, which are provided to employers. Employers are
required to provide copies of these forms to their eligible employees. A
disclosure statement setting forth complete details of the IRA should be given
to each participant before the contribution is invested.
Currently, there are no annual service fees chargeable to a participant
in connection with an IRA, SEP-IRA or SARSEP-IRA. Each Fund currently pays the
annual $10.00 custodian fee for each IRA account maintained with such Fund. This
policy may be changed at any time by a Fund on 45 days' written notice to the
holder of any IRA, SEP-IRA or SARSEP-IRA. First Financial Savings has reserved
the right to waive its fees at any time or to change the fees on 45 days' prior
written notice to the holder of any IRA.
An application and other documents necessary to establish an IRA,
SEP-IRA or SARSEP-IRA, are available from your Representative. SIMPLE-IRA
applications will also be available. Prior to establishing an IRA, SEP-IRA,
SARSEP-IRA or SIMPLE-IRA, you are advised to consult with your legal and tax
advisers.
RETIREMENT BENEFIT PLANS FOR EMPLOYEES OF ELIGIBLE ORGANIZATIONS. FIC
makes available model custodial accounts under Section 403(b)(7) of the Code
("Custodial Accounts") to provide retirement benefits for employees of certain
eligible public educational institutions and other eligible non-profit
charitable, religious and humane organizations. The Custodial Accounts are
designed to permit contributions (up to a "maximum exclusion allowance") by
employees through salary reduction. First Financial Savings acts as custodian of
these accounts.
Contributions may be made to a Custodial Account under the Optional
Retirement Program for Employees of Texas Institutions of Higher Education
("ORP"), either by salary reduction agreement or
24
<PAGE>
otherwise, in accordance with the terms and conditions of the ORP, and under the
Texas Deferred Compensation Plan Program for eligible state employees by salary
reduction agreement. In addition, contributions may also be made to other
deferred compensation plans maintained by state or local governments, or their
agencies, commonly referred to as Section 457 plans.
Currently, there are no annual service fees chargeable to participants
in connection with a Custodial Account. Each Fund currently pays the annual
$10.00 custodian fee for each Custodial Account maintained with such Fund. This
policy may be changed at any time by a Fund on 45 days' written notice to a
Custodial Account participant. First Financial Savings has reserved the right to
waive its fees at any time or to change the fees on 45 days' prior written
notice to a Custodial Account participant.
An application and other documents necessary to establish a Custodial
Account are available from your Representative. Persons desiring to create a
Custodial Account are advised to confer with their legal and tax advisers
concerning the specifics of this type of retirement benefit plan.
Mandatory income tax withholding, at the applicable rate may be
required on "eligible rollover" distributions made from any of the foregoing
retirement plans (other than IRAs, including SEP-IRAs, SARSEP-IRAs and
SIMPLE-IRAs). If the recipient elects to directly transfer an eligible rollover
distribution to an "eligible retirement plan" that permits acceptance of such
distributions, no withholding will apply. For distributions that are not
"eligible rollover" distributions, the recipient can elect, in writing, not to
require any withholding. This election must be submitted immediately before, or
must accompany, the distribution request. The amount, if any, of any such
optional withholding depends on the amount and type of the distribution.
Appropriate election forms are available from the Custodian or Shareholder
Services. Other types of withholding nonetheless may apply.
DISTRIBUTION FEES. A participant/shareholder's account under any of the
foregoing retirement plans (including IRAs) may be charged a distribution fee
(at the time of withdrawal) of $7.00 for a single distribution of the entire
account and $1.00 for each periodic distribution therefrom.
TAXES
In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Code, a Fund must distribute to its shareholders for
each taxable year at least 90% of its investment company taxable income
(consisting generally of net investment income, net short-term capital gain and
net gains from certain foreign currency transactions) ("Distribution
Requirement") and must meet several additional requirements. For each Fund these
requirements include the following: (1) the Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans and gains from the sale or other disposition of securities
or foreign currencies, or other income (including gains from futures contracts)
derived with respect to its business of investing in securities or those
currencies ("Income Requirement"); (2) the Fund must derive less than 30% of its
gross income each taxable year from the sale or other disposition of securities,
or any of the following, that were held for less than three months -- futures
contracts or foreign currencies that are not directly related to the Fund's
principal business of investing in securities (or futures with respect thereto)
("Short-Short Limitation"); (3) at the close of each quarter of the Fund's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. Government securities, securities of other RICs and
other securities, with those other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of the Fund's total
assets and that does not represent more than 10% of the issuer's outstanding
voting securities; and (4) at the close of each quarter of the Fund's taxable
year, not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities or the securities of other
RICs) of any one issuer.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have
25
<PAGE>
been paid by the Fund and received by the shareholders on December 31 of that
year if the distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year in
which that December 31 falls.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
A portion of the dividends from a Fund's investment company taxable
income may be eligible for the dividends-received deduction allowed to
corporations. The eligible portion may not exceed the aggregate dividends
received by a Fund from U.S. corporations. However, dividends received by a
corporate shareholder and deducted by it pursuant to the dividends-received
deduction are subject indirectly to the Federal alternative minimum tax.
Although each Fund is authorized to hold equity securities, it is expected that
any dividend income received by either Fund will be minimal; accordingly, very
little, if any, of the distributions made by the Funds will be eligible for the
dividends-received deduction.
If shares of a Fund are sold at a loss after being held for six months
or less, the loss will be treated as long-term, instead of short-term, capital
loss to the extent of any capital gain distributions received on those shares.
Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries that would reduce the
yield on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.
Each Fund may acquire zero coupon securities issued with original issue
discount. As a holder of those securities, each such Fund must include in its
income the portion of the original issue discount that accrues on the securities
during the taxable year, even if it receives no corresponding payment on them
during the year. Similarly, each such Fund must include in its gross income
securities it receives as "interest" on pay-in-kind securities. Because each
Fund annually must distribute substantially all of its investment company
taxable income, including any original issue discount and other non-cash income,
to satisfy the Distribution Requirement and avoid imposition of the Excise Tax,
a Fund may be required in a particular year to distribute as a dividend an
amount that is greater than the total amount of cash it actually receives. Those
distributions will be made from a Fund's cash assets or from the proceeds of
sales of portfolio securities, if necessary. A Fund may realize capital gains or
losses from those sales, which would increase or decrease its investment company
taxable income and/or net capital gain. In addition, any such gains may be
realized on the disposition of securities held for less than three months.
Because of the Short-Short Limitation, any such gains would reduce a Fund's
ability to sell other securities or futures contracts or foreign currency
positions, held for less than three months that it might wish to sell in the
ordinary course of its portfolio management.
The use of hedging strategies, such as selling (writing) and purchasing
futures contracts, involves complex rules that will determine for income tax
purposes the character and timing of recognition of the gains and losses HIGH
YIELD FUND realizes in connection therewith. Gains from futures contracts
derived by the Fund with respect to its business of investing in securities or
foreign currencies will qualify as permissible income under the Income
Requirement. However, income from the Fund's disposition of futures contracts
will be subject to the Short-Short Limitation if they are held for less than
three months.
If a HIGH YIELD FUND satisfies certain requirements, then any increase
in value of a position that is part of a "designated hedge" will be offset by
any decrease in value (whether realized or not) of
26
<PAGE>
the offsetting hedging position during the period of the hedge for purposes of
determining whether the Fund satisfies the Short-Short Limitation. Thus, only
the net gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. The Fund intends that, when it engages in
hedging strategies, it will qualify for this treatment, but at the present time
it is not clear whether this treatment will be available for all of the Fund's
hedging transactions. To the extent this treatment is not available, the Fund
may be forced to defer the closing out of certain futures contracts and foreign
currency positions beyond the time when it otherwise would be advantageous to do
so, in order for the Fund to continue to qualify as a RIC.
PERFORMANCE INFORMATION
A Fund may advertise its performance in various ways.
Each Fund's "average annual total return" ("T") is an average annual
compounded rate of return. The calculation produces an average annual total
return for the number of years measured. It is the rate of return based on
factors which include a hypothetical initial investment of $1,000 ("P") over a
number of years ("n") with an Ending Redeemable Value ("ERV") of that
investment, according to the following formula:
T=[(ERV/P)caret(1/n)]-1
The "total return" uses the same factors, but does not average the rate
of return on an annual basis. Total return is determined as follows:
(ERV-P)/P = TOTAL RETURN
Total return is calculated by finding the average annual change in the
value of an initial $1,000 investment over the period. In calculating the ending
redeemable value for Class A shares, each Fund will deduct the maximum sales
charge of 6.25% (as a percentage of the offering price) from the initial $1,000
payment and, for Class B shares, the applicable CDSC imposed on a redemption of
Class B shares held for the period is deducted. All dividends and other
distributions are assumed to have been reinvested at net asset value on the
initial investment ("P").
Return information may be useful to investors in reviewing a Fund's
performance. However, certain factors should be taken into account before using
this information as a basis for comparison with alternative investments. No
adjustment is made for taxes payable on distributions. Return will fluctuate
over time and return for any given past period is not an indication or
representation by a Fund of future rates of return on its shares. At times, the
Adviser may reduce its compensation or assume expenses of a Fund in order to
reduce the Fund's expenses. Any such waiver or reimbursement would increase the
Fund's return during the period of the waiver or reimbursement.
Average annual return and total return computed at the public offering
price (maximum sales charge for Class A shares and applicable CDSC for Class B
shares) for the periods ended December 31, 1996 are set forth in the tables
below:
27
<PAGE>
AVERAGE ANNUAL TOTAL RETURN1
High Yield Fund2 Income Fund2
Class A Class B Class A Class B
Shares Shares Shares Shares
One Year 6.23% 7.88% 6.20% 8.06%
Five Years 11.92 N/A 11.78 N/A
Ten Years 7.29 N/A 7.88 N/A
Life of Fund3 N/A 12.79 N/A 12.83
TOTAL RETURN1
High Yield Fund2 Income Fund2
Class A Class B Class A Class B
Shares Shares Shares Shares
One Year 6.23% 7.88% 6.20% 8.06%
Five Years 75.62 N/A 74.48 N/A
Ten Years 102.15 N/A 113.56 N/A
Life of Fund3 N/A 26.73 N/A 26.83
Average annual total return and total return may also be based on
investment at reduced sales charge levels or at net asset value. Any quotation
of return not reflecting the maximum sales charge will be greater than if the
maximum sales charge were used. Average annual total return and total return
computed at net asset value for the periods ended December 31, 1996 are set
forth in the tables below:
AVERAGE ANNUAL TOTAL RETURN1
High Yield Fund2 Income Fund2
Class A Class B Class A Class B
Shares Shares Shares Shares
One Year 13.35% 12.41% 13.40% 12.51%
Five Years 13.39 N/A 13.25 N/A
Ten Years 7.99 N/A 8.59 N/A
Life of Fund3 N/A 15.13 N/A 15.22
- ----------
1 All return figures assume the maximum sales charge of 6.25% and dividends
reinvested at net asset value. Prior to July 1, 1993, the maximum sales
charge was 6.90%. Prior to December 29, 1989, the maximum sales charge was
7.25% for HIGH YIELD FUND and 8.50% for INCOME FUND. Prior to December 18,
1990, HIGH YIELD FUND'S dividends were paid in additional shares at the
public offering price.
2 Certain expenses of HIGH YIELD FUND have been waived from commencement of
operations through December 31, 1996. Certain Expenses of INCOME FUND have
been waived for the period February 1, 1994 through December 31, 1996.
Accordingly, return figures are higher than they would have been had such
expenses not been waived.
3 The commencement date for the offering of Class B shares is January 12, 1995.
28
<PAGE>
TOTAL RETURN1
High Yield Fund2 Income Fund2
Class A Class B Class A Class B
Shares Shares Shares Shares
------- ------- ------- -------
One Year 13.35% 12.41% 13.40% 12.51%
Five Years 87.48 N/A 86.30 N/A
Ten Years 115.70 N/A 127.93 N/A
Life of Fund3 N/A 31.97 N/A 32.16
- ----------
1 All return figures assume the maximum sales charge of 6.25% and dividends
reinvested at net asset value. Prior to July 1, 1993, the maximum sales
charge was 6.90%. Prior to December 29, 1989, the maximum sales charge was
7.25% for HIGH YIELD FUND and 8.50% for INCOME FUND. Prior to December 18,
1990, HIGH YIELD FUND'S dividends were paid in additional shares at the
public offering price.
2 Certain expenses of HIGH YIELD FUND have been waived from commencement of
operations through December 31, 1996. Certain Expenses of INCOME FUND have
been waived for the period February 1, 1994 through December 31, 1996.
Accordingly, return figures are higher than they would have been had such
expenses not been waived.
3 The commencement date for the offering of Class B shares is January 12, 1995.
Yield is presented for a specified thirty-day period ("base period").
Yield is based on the amount determined by (i) calculating the aggregate amount
of dividends and interest earned by a Fund during the base period less expenses
accrued for that period (net of reimbursement), and (ii) dividing that amount by
the product of (A) the average daily number of shares of the Fund outstanding
during the base period and entitled to receive dividends and (B) the per share
maximum public offering price for Class A shares or the net asset value for
Class B shares of the Fund on the last day of the base period. The result is
annualized by compounding on a semi-annual basis to determine the Fund's yield.
For this calculation, interest earned on debt obligations held by the Fund is
generally calculated using the yield to maturity (or first expected call date)
of such obligations based on their market values (or, in the case of
receivables-backed securities such as GNMA Certificates, based on cost).
Dividends on equity securities are accrued daily at their estimated stated
dividend rates.
For the 30 days ended December 31, 1996, the yield for Class A shares
and Class B shares of HIGH YIELD FUND was 6.76% and 6.43%, respectively. For the
30 days ended December 31, 1996, the yield for Class A and Class B shares of
INCOME FUND was 6.84% and 6.61%, respectively. During this period certain
expenses of the Funds were waived. Accordingly, yield is higher than it would
have been if such expenses had not been waived.
The distribution rate for each Fund is presented for a twelve-month
period. It is calculated by adding the dividends for the last twelve months and
dividing the sum by a Fund's offering price per share at the end of that period.
The distribution rate is also calculated by using a Fund's net asset value.
Distribution rate calculations do not include capital gain distributions, if
any, paid. The distribution rate for the twelve-month period ended December 31,
1996 for Class A shares of HIGH YIELD FUND and INCOME FUND calculated using the
offering price was 8.42% and 8.08%, respectively. The distribution rate for the
same period for Class A shares of HIGH YIELD FUND and INCOME FUND calculated
using net asset value was 8.98% and 8.62%, respectively. The distribution rate
for the same period for Class B shares of HIGH YIELD FUND and INCOME FUND
calculated using net asset value was 8.35% and 8.08%, respectively. During this
period certain expenses of the Funds were waived. Accordingly, the distribution
rates are higher than they would have been had such expenses not been waived.
29
<PAGE>
Each Fund may include in advertisements and sales literature,
information, examples and statistics to illustrate the effect of compounding
income at a fixed rate of return to demonstrate the growth of an investment over
a stated period of time resulting from the payment of dividends and capital gain
distributions in additional shares. These examples may also include hypothetical
returns comparing taxable versus tax-deferred growth which would pertain to an
IRA, section 403(b)(7) Custodial Account or other qualified retirement program.
The examples used will be for illustrative purposes only and are not
representations by the Fund of past or future yield or return. Examples of
typical graphs and charts depicting such historical performance, compounding and
hypothetical returns are included in Appendix B.
From time to time, in reports and promotional literature, each Fund may
compare its performance to, or cite the historical performance of, Overnight
Government repurchase agreements, U.S. Treasury bills, notes and bonds,
certificates of deposit, and six-month money market certificates or indices of
broad groups of unmanaged securities considered to be representative of, or
similar to, that Fund's portfolio holdings, such as:
Lipper Analytical Services, Inc. ("Lipper") is a widely-recognized
independent service that monitors and ranks the performance of
regulated investment companies. The Lipper performance analysis
includes the reinvestment of capital gain distributions and income
dividends but does not take sales charges into consideration. The
method of calculating total return data on indices utilizes actual
dividends on ex-dividend dates accumulated for the quarter and
reinvested at quarter end.
Morningstar Mutual Funds ("Morningstar"), a semi-monthly publication of
Morningstar, Inc. Morningstar proprietary ratings reflect historical
risk-adjusted performance and are subject to change every month. Funds
with at least three years of performance history are assigned ratings
from one star (lowest) to five stars (highest). Morningstar ratings are
calculated from the funds' three-, five-, and ten-year average annual
returns (when available) and a risk factor that reflects fund
performance relative to three-month Treasury bill monthly returns.
Fund's returns are adjusted for fees and sales loads. Ten percent of
the funds in an investment category receive five stars, 22.5% receive
four stars, 35% receive three stars, 22.5% receive two stars, and the
bottom 10% receive one star.
Salomon Brothers Inc., "Market Performance," a monthly publication
which tracks principal return, total return and yield on the Salomon
Brothers Broad Investment-Grade Bond Index and the components of the
Index.
Telerate Systems, Inc., a computer system to which the Adviser
subscribes which daily tracks the rates on money market instruments,
public corporate debt obligations and public obligations of the U.S.
Treasury and agencies of the U.S. Government.
THE WALL STREET JOURNAL, a daily newspaper publication which lists the
yields and current market values on money market instruments, public
corporate debt obligations, public obligations of the U.S. Treasury and
agencies of the U.S. Government as well as common stocks, preferred
stocks, convertible preferred stocks, options and commodities; in
addition to indices prepared by the research departments of such
financial organizations as Lehman Bros., Merrill Lynch, Pierce, Fenner
and Smith, Inc., First Boston, Salomon Brothers, Morgan Stanley,
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette, Value Line,
Datastream International, James Capel, S.G. Warburg Securities, County
Natwest and UBS UK Limited, including information provided by the
Federal Reserve Board, Moody's, and the Federal Reserve Bank.
Merrill Lynch, Pierce, Fenner & Smith, Inc., "Taxable Bond Indices," a
monthly corporate government index publication which lists principal,
coupon and total return on over 100
30
<PAGE>
different taxable bond indices which Merrill Lynch tracks. They
also list the par weighted characteristics of each Index.
Lehman Brothers, Inc., "The Bond Market Report," a monthly publication
which tracks principal, coupon and total return on the Lehman
Govt./Corp. Index and Lehman Aggregate Bond Index, as well as all the
components of these Indices.
Standard & Poor's 500 Composite Stock Price Index and the Dow Jones
Industrial Average of 30 stocks are unmanaged lists of common stocks
frequently used as general measures of stock market performance. Their
performance figures reflect changes of market prices and quarterly
reinvestment of all distributions but are not adjusted for commissions
or other costs.
The Consumer Price Index, prepared by the U.S. Bureau of Labor
Statistics, is a commonly used measure of inflation. The Index shows
changes in the cost of selected consumer goods and does not represent a
return on an investment vehicle.
The NYSE composite of component indices--unmanaged indices of all
industrial, utilities, transportation, and finance stocks listed on the
NYSE.
The Russell 2500 Index, prepared by the Frank Russell Company, consists
of U.S. publicly traded stocks of domestic companies that rank from 500
to 3000 by market capitalization. The Russell 2500 tracks the return on
these stocks based on price appreciation or depreciation and does not
include dividends and income or changes in market values caused by
other kinds of corporate changes.
The Russell 2000 Index, prepared by the Frank Russell Company, consists
of U.S. publicly traded stocks of domestic companies that rank from
1000 to 3000 by market capitalization. The Russell 2000 tracks the
return on these stocks based on price appreciation or depreciation and
does not include dividends and income or changes in market values
caused by other kinds of corporate changes.
Reuters, a wire service that frequently reports on global business.
Standard & Poor's Utilities Index is an unmanaged capitalization
weighted index comprising common stock in approximately 40 electric,
natural gas distributors and pipelines, and telephone companies. The
Index assumes the reinvestment of dividends.
Moody's Stock Index, an unmanaged index of utility stock performance.
From time to time, in reports and promotional literature, performance
rankings and ratings reported periodically in national financial publications
such as MONEY, FORBES, BUSINESS WEEK, BARRON'S, FINANCIAL TIMES and FORTUNE may
also be used. In addition, quotations from articles and performance ratings and
ratings appearing in daily newspaper publications such as THE WALL STREET
JOURNAL, THE NEW YORK TIMES and NEW YORK DAILY NEWS may be cited.
GENERAL INFORMATION
AUDITS AND REPORTS. The accounts of each Fund are audited twice a year
by Tait, Weller & Baker, independent certified public accountants, Two Penn
Center Plaza, Philadelphia, PA, 19102-1707. Shareholders of each Fund receive
semi-annual and annual reports, including audited financial statements, and a
list of securities owned.
31
<PAGE>
TRANSFER AGENT. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as transfer agent
for the Funds and as redemption agent for regular redemptions. The fees charged
to each Fund by the Transfer Agent are $5.00 to open an account; $3.00 for each
certificate issued; $.75 per account per month; $10.00 for each legal transfer
of shares; $.45 per account per dividend declared; $5.00 for each exchange of
shares into a Fund; $5.00 for each partial withdrawal or complete liquidation;
$1.00 for each Systematic Withdrawal Plan check; $4.00 for each shareholder
services call; $20.00 for each item of correspondence; and $1.00 per account per
report required by any governmental authority. Additional fees charged to the
Funds by the Transfer Agent are assumed by the Underwriter. The Transfer Agent
reserves the right to change the fees on prior notice to the Funds. Upon request
from shareholders, the Transfer Agent will provide an account history. For
account histories covering the most recent three year period, there is no
charge. The Transfer Agent charges a $5.00 administrative fee for each account
history covering the period 1983 through 1994 and $10.00 per year for each
account history covering the period 1974 through 1982. Account histories prior
to 1974 will not be provided. If any communication from the Transfer Agent to a
shareholder is returned from the U.S. Postal Service marked as "Undeliverable"
two consecutive times, the Transfer Agent will cease sending any further
materials to the shareholder until the Transfer Agent is provided with a correct
address. Furthermore, if there is no known address for a shareholder for at
least one year, the Transfer Agent will charge such shareholder's account $40 to
cover the Transfer Agent's expenses in trying to locate the shareholder's
correct address. For the fiscal year ended December 31, 1996, HIGH YIELD FUND
and INCOME FUND paid $429,713 and $656,612, respectively, in transfer agency
fees and expenses. The Transfer Agent's telephone number is 1-800-423-4026.
5% SHAREHOLDERS. As of March 31, 1997, The Bank of New York, 48 Wall
Street, New York, NY 10286, Custodian of First Investors Periodic Payment Plans
for Investment In First Investors High Yield Fund, Inc., owned of record 8.5% of
the outstanding Class A shares of HIGH YIELD FUND for beneficial owners of such
Plans and as Custodian of First Investors Single Payment and Periodic Payment
Plans for Investment in First Investors Fund For Income, Inc. owned 26.2% of the
outstanding Class A shares of INCOME FUND for beneficial owners of such Plans.
As of March 31, 1997, Adelaide B. Krnak, 235 E Main Street, Somerville, NJ
08876-3023 beneficially owned 9.0% of the outstanding Class B shares of the HIGH
YIELD FUND.
TRADING BY PORTFOLIO MANAGERS AND OTHER ACCESS PERSONS. Pursuant to
Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, each Fund and the
Adviser have adopted Codes of Ethics restricting personal securities trading by
portfolio managers and other access persons of the Fund. Among other things,
such persons, except the Directors: (a) must have all non-exempt trades
pre-cleared; (b) are restricted from short-term trading; (c) must have duplicate
statements and transactions confirmations reviewed by a compliance officer; and
(d) are prohibited from purchasing securities of initial public offerings.
32
<PAGE>
APPENDIX A
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S RATINGS GROUP
S&P's commercial paper rating is a current assessment of the likelihood
of timely payment of debt considered short-term in the relevant market. Ratings
are graded into several categories, ranging from "A-1" for the highest quality
obligations to "D" for the lowest.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) designation.
MOODY'S INVESTORS SERVICE, INC.
Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of indemnity are excluded unless explicitly rated.
PRIME-1 Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
33
<PAGE>
APPENDIX B
[The following tables are represented as graphs in the printed document.]
The following graphs and chart illustrate hypothetical returns:
INCREASE RETURNS
This graph shows over a period of time even a small increase in returns can make
a significant difference.
Years 10% 8% 6% 4%
----- ------- ------ ------ ------
5 16,453 14,898 13,489 12,210
10 27,070 22,196 18,194 14,908
15 44,539 33,069 24,541 18,203
20 73,281 49,268 33,102 22,226
25 120,569 73,402 44,650 27,138
INCREASE INVESTMENT
This graph shows the more you invest on a regular basis over time, the more you
can accumulate.
Years $100 $250 $500 $1,000
----- ------ ------- ------- -------
5 7,348 18,369 36,738 73,476
10 18,295 43,736 91,473 182,946
15 34,604 86,509 173,019 346,038
20 58,902 147,255 294,510 589,020
25 95,103 237,757 475,513 951,026
<PAGE>
[The following table is represented as graph in the printed document.]
This chart illustrates the time value of money based upon the following
assumptions:
If you invested $2,000 each year for 20 years, starting at 25, assuming a 9%
investment return, you would accumulate $573,443 by the time you reach age 65.
However, had you invested the same $2,000 each year for 20 years, at that rate,
but waited until age 35, you would accumulate only $242,228 - a diference of
$331,215.
25 years old .............. 533,443
35 years old .............. 202,228
45 years old .............. 62,320
For each of the above graphs and chart it should be noted that systematic
investment plans do not assume a profit or protect against loss in declining
markets. Investors should consider their financial ability to continue purchases
through periods of both high and low price levels. Figures are hypothetical and
for illustrative purposes only and do not represent any actual investment or
performance. The value of a shareholder's investment and return may vary.
<PAGE>
[The following table is represented as chart in the printed document.]
The following chart illustrates the historical performance of the Dow Jones
Industrial Average from 1928 through 1995.
1928 .................. 300.00
1929 .................. 248.48
1930 .................. 164.58
1931 .................. 77.90
1932 .................. 59.93
1933 .................. 99.90
1934 .................. 104.04
1935 .................. 144.13
1936 .................. 179.90
1937 .................. 120.85
1938 .................. 154.76
1939 .................. 150.24
1940 .................. 131.13
1941 .................. 110.96
1942 .................. 119.40
1943 .................. 136.20
1944 .................. 152.32
1945 .................. 192.91
1946 .................. 177.20
1947 .................. 181.16
1948 .................. 177.30
1949 .................. 200.10
1950 .................. 235.40
1951 .................. 269.22
1952 .................. 291.89
1953 .................. 280.89
1954 .................. 404.38
1955 .................. 488.39
1956 .................. 499.46
1957 .................. 435.68
1958 .................. 583.64
1959 .................. 679.35
1960 .................. 615.88
1961 .................. 731.13
1962 .................. 652.10
1963 .................. 762.94
1964 .................. 874.12
1965 .................. 969.25
1966 .................. 785.68
1967 .................. 905.10
1968 .................. 943.75
1969 .................. 800.35
1970 .................. 838.91
1971 .................. 890.19
1972 .................. 1,020.01
1973 .................. 850.85
1974 .................. 616.24
1975 .................. 858.71
1976 .................. 1,004.65
1977 .................. 831.17
1978 .................. 805.01
1979 .................. 838.74
1980 .................. 963.98
1981 .................. 875.00
1982 .................. 1,046.55
1983 .................. 1,258.64
1984 .................. 1,211.56
1985 .................. 1,546.67
1986 .................. 1,895.95
1987 .................. 1,938.80
1988 .................. 2,168.60
1989 .................. 2,753.20
1990 .................. 2,633.66
1991 .................. 3,168.83
1992 .................. 3,301.11
1993 .................. 3,754.09
1994 .................. 3,834.44
1995 .................. 5,000.00
<PAGE>
[The following table is represented as a chart in the printed document.]
The following chart shows that inflation is constantly eroding the value of your
money.
THE EFFECTS OF INFLATION OVER TIME
1966 ....................... 96.61836
1967 ....................... 93.80423
1968 ....................... 89.59334
1969 ....................... 84.36285
1970 ....................... 79.88906
1971 ....................... 77.33694
1972 ....................... 74.79395
1973 ....................... 68.80768
1974 ....................... 61.27131
1975 ....................... 57.31647
1976 ....................... 54.63915
1977 ....................... 51.20820
1978 ....................... 46.98000
1979 ....................... 41.46514
1980 ....................... 36.85790
1981 ....................... 33.84564
1982 ....................... 32.60659
1983 ....................... 31.41290
1984 ....................... 30.23378
1985 ....................... 29.12696
1986 ....................... 28.81005
1987 ....................... 27.59583
1988 ....................... 26.43279
1989 ....................... 25.27035
1990 ....................... 23.81748
1991 ....................... 23.10134
1992 ....................... 22.45028
1993 ....................... 21.86006
1994 ....................... 21.28536
1995 ....................... 20.76620
1995........................ 1.00
1996........................ 1.03
1997........................ 1.06
1998 ....................... 1.09
1999 ....................... 1.13
2000 ....................... 1.16
2001 ....................... 1.19
2002 ....................... 1.23
2003 ....................... 1.27
2004 ....................... 1.30
2005 ....................... 1.34
2006 ....................... 1.38
2007 ....................... 1.43
2008 ....................... 1.47
2009 ....................... 1.51
2010 ....................... 1.56
2011 ....................... 1.60
2012 ....................... 1.65
2013 ....................... 1.70
2014 ....................... 1.75
2015 ....................... 1.81
2016 ....................... 1.86
2017 ....................... 1.92
2018 ....................... 1.97
2019 ....................... 2.03
2020 ....................... 2.09
2021 ....................... 2.16
2022 ....................... 2.22
2023 ....................... 2.29
2024 ....................... 2.36
2025 ....................... 2.43
Inflation erodes your buying power. $100 in 1966, could purchase the same amount
of goods and service as $21 in 1995.* Projecting inflation at 3%, goods and
services costing $100 today will cost $243 in the year 2025.
* Source: Consumer Price Index, U.S. Bureau of Labor Statistics.
<PAGE>
[The following tables are represented as graphs in the printed document.]
This chart illustrates that historically, the longer you hold onto stocks, the
greater chance that you will have a positive return.
1926 through 1995(1)
Total Number of Percentage of
Number of Positive Positive
Periods Periods Periods
------- ------- -------
1-Year Periods 70 50 71%
5-Year Periods 66 59 89%
10-Year Periods 61 59 97%
15-Year Periods 56 56 100%
20-Year Periods 51 51 100%
The following chart shows the compounded annual return of large company stocks
compared to U.S. Treasury Bills and inflation over the most recent 15 year
period. (2)
Compound Annual Return from 1981 -- 1995(1)
Inflation ..................... 3.93
U.S. Treasury Bills ........... 7.11
Large Company Stocks .......... 14.80
The following chart illustrates for the period shown that long-term corpoate
bonds have outpaced U.S. Treasury Bills and inflation.
Compound Annual Return from 1981 -- 1995(1)
Inflation ..................... 3.93
U.S. Treasury Bills ........... 7.11
Long-Term Corp. bonds ......... 13.46
(1) Sources: Stocks, Bonds, Bill and Inflation 1996 Yearbook, Ibbotson
Associates, Chicago.
(2) Please note that U.S. Treasury bills are guaranteed as to principal and
interest payments (although the funds that invest in them are not), while
stocks will fluctuate in share price. Although past performance cannot
guarantee future results, reeturns of U.S. Treasury bills historically have
not outpaced inflation by as great a margin as stocks.
The accompanying table illustrates that if you are in the 36% tax bracket, a
tax-free yield of 3% is actually equivalent to a taxable investment earning
4.69%.
Your Taxable Equivalent Yield
Your Federal TAx Bracket
---------------------------------------------
28.0% 31.0% 36.0% 39.6%
your tax-free yield
3.00% 4.17% 4.35% 4.69% 4.97%
3.50% 4.86% 5.07% 5.47% 5.79%
4.00% 5.56% 5.80% 6.25% 6.62%
4.50% 6.25% 6.52% 7.03% 7.45%
5.00% 6.94% 7.25% 7.81% 8.25%
5.50% 7.64% 7.97% 8.59% 9.11%
This information is general in nature and should not be construed as tax advice.
Please consult a tax or financial adviser as to how this information affects
your particular circumstances.
<PAGE>
Financial Statements
as of December 31, 1996
First Investors Fund For Income, Inc. (2-38309) incorporates by reference the
financial statements and report of independent auditors contained in the Annual
Report to shareholders for the fiscal year ended December 31, 1996
electronically filed with the Commission on March 4, 1997 (Accession Number:
0000912057-97-007732).
First Investors High Yield Fund, Inc. (33-4935) incorporates by reference the
financial statements and report of independent auditors contained in the Annual
Report to shareholders for the fiscal year ended December 31, 1996
electronically filed with the Commission on February 24, 1997 (Accession Number:
0000912057-97-006561).
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements are set forth in Part B, Statement of Additional
Information.
(b) Exhibits:
(1)a./2/ Articles of Restatement
b./2/ Articles Supplementary
(2)/2/ Amended and Restated By-laws
(3) Not Applicable
(4) Shareholders' rights are contained in (a)
Articles FIFTH and EIGHTH of Registrant's
Articles of Restatement dated September 14,
1994, previously filed as Exhibit 99.B1.1 to
Registrant's Registration Statement; (b)
Article FOURTH of Registrant's Articles
Supplementary to Articles of Incorporation
dated October 20, 1994, previously filed as
Exhibit 99.B1.2 to Registrant's Registration
Statement and (c) Article II of Registrant's
Amended and Restated By-laws, previously filed
as Exhibit 99.B2 to Registrant's Registration
Statement.
(5)/2/ Investment Advisory Agreement between Registrant and
First Investors Management Company, Inc.
(6)/2/ Underwriting Agreement between Registrant and First
Investors Corporation.
(7) Not Applicable
(8)a./2/ Custodian Agreement between Registrant and Irving
Trust Company
b./2/ Supplement to Custodian Agreement between Registrant
and The Bank of New York
(9)/2/ Administration Agreement between Registrant, First
Investors Management Company, Inc., First
Investors Corporation and Administrative Data
Management Corp.
<PAGE>
(10)/1/ Opinion of Counsel
(11)a. Consent of independent accountants
b./2/ Powers of Attorney
(12) Not Applicable
(13) No undertaking in effect
(14)a./3/ First Investors Profit Sharing/Money Purchase
Pension Retirement Plan for Sole Proprietorships,
Partnerships and Corporations
b./4/ First Investors Individual Retirement Account
c./5/ First Investors 403(b) Custodial Account
d./4/ First Investors SEP-IRA and SARSEP-IRA
(15)a./2/ Amended and Restated Class A Distribution Plan
b./2/ Class B Distribution Plan
(16) Performance Calculations
(17) Financial Data Schedule (filed as Exhibit 27 for
electronic filing purposes)
(18)/2/ 18f-3 Plan
- ----------
/1/ Incorporated by reference from Registrant's Rule 24f-2 Notice for its
fiscal year ending December 31, 1996 filed on February 27, 1997.
/2/ Incorporated by reference from Post-Effective Amendment No. 62 to
Registrant's Registration Statement (File No. 2-38309) filed on April 24,
1996.
/3/ Incorporated by reference from Post-Effective Amendment No. 51 to
Registrant's Registration Statement (File No. 2-38309) filed on July 23,
1991.
/4/ Incorporated by reference from Post-Effective Amendment No. 57 to
Registrant's Registration Statement (File No. 2-38309) filed on April 29,
1993.
/5/ Incorporated by reference from Post-Effective Amendment No. 46 to
Registrant's Registration Statement (File No. 2-38309) filed on January
22, 1991.
Item 25. Persons Controlled by or under common control with Registrant
There are no persons controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities
<PAGE>
Number of Record
Holders as of
Title of Class February 3, 1997
-------------- ----------------
Class A Shares 29,037
Class B Shares 239
Item 27. Indemnification
Article X, Section 1 of the By-Laws of Registrant provides as follows:
Section 1. Every person who is or was an officer or director of the
Corporation (and his heirs, executors and administrators) shall be indemnified
by the Corporation against reasonable costs and expenses incurred by him in
connection with any action, suit or proceeding to which he may be made a party
by reason of his being or having been a director or officer of the Corporation,
except in relation to any action, suit or proceeding in which he has been
adjudged liable because of negligence or misconduct, which shall be deemed to
include willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. In the absence of an
adjudication which expressly absolves the director or officer of liability to
the Corporation or its stockholders for negligence or misconduct, within the
meaning thereof as used herein, or in the event of a settlement, each director
or officer (and his heirs, executors and administrators) shall be indemnified by
the Corporation against payments made, including reasonable costs and expenses,
provided that such indemnity shall be conditioned upon the prior determination
by a resolution of two-thirds of the Board of Directors who are not involved in
the action, suit or proceeding that the director or officer has no liability by
reason of negligence or misconduct within the meaning thereof as used herein,
and provided further that if a majority of the members of the Board of Directors
of the Corporation are involved in the action, suit or proceeding, such
determination shall have been made by a written opinion of independent counsel.
Amounts paid in settlement shall not exceed costs, fees and expenses which would
have been reasonably incurred if the action, suit or proceeding had been
litigated to a conclusion. Such a determination by the Board of Directors or by
independent counsel, and the payment of amounts by the Corporation on the basis
thereof, shall not prevent a stockholder from challenging such indemnification
by appropriate legal proceedings on the grounds that the person indemnified was
liable to the Corporation or its security holders by reason of negligence or
misconduct within the meaning thereof as used herein. The foregoing rights and
indemnification shall not be exclusive of any other rights to which any officer
or director (or his heirs, executors and administrators) may be entitled to
according to law.
The Registrant's Investment Advisory Agreement provides as follows:
<PAGE>
The Manager shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Company or any Series in connection with the
matters to which this Agreement relate except a loss resulting from the willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement. Any person, even though also an officer, partner, employee, or agent
of the Manager, who may be or become an officer, Board member, employee or agent
of the Company shall be deemed, when rendering services to the Company or acting
in any business of the Company, to be rendering such services to or acting
solely for the Company and not as an officer, partner, employee, or agent or one
under the control or direction of the Manager even though paid by it.
The Registrant's Underwriting Agreement provides as follows:
The Underwriter agrees to use its best efforts in effecting the sale and
public distribution of the shares of the Fund through dealers and to perform its
duties in redeeming and repurchasing the shares of the Fund, but nothing
contained in this Agreement shall make the Underwriter or any of its officers
and directors or shareholders liable for any loss sustained by the Fund or any
of its officers, directors, or shareholders, or by any other person on account
of any act done or omitted to be done by the Underwriter under this Agreement
provided that nothing herein contained shall protect the Underwriter against any
liability to the Fund or to any of its shareholders to which the Underwriter
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties as Underwriter or by reason of its
reckless disregard of its obligations or duties as Underwriter under this
Agreement. Nothing in this Agreement shall protect the Underwriter from any
liabilities which they may have under the Securities Act of 1933 or the
Investment Company Act of 1940.
Reference is hereby made to the Maryland Corporations and Associations
Annotated Code, Sections 2-417, 2-418 (1986).
The general effect of this Indemnification will be to indemnify the
officers and directors of the Registrant from costs and expenses arising from
any action, suit or proceeding to which they may be made a party by reason of
their being or having been a director or officer of the Registrant, except where
such action is determined to have arisen out of the willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the director's or officer's office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as
<PAGE>
expressed in the Act and is therefore unenforceable. See Item 32 herein.
Item 28. Business and Other Connections of Investment Adviser
First Investors Management Company, Inc., the Registrant's Investment
Adviser, also serves as Investment Adviser to:
First Investors Cash Management Fund, Inc.
First Investors Series Fund
First Investors Government Fund, Inc.
First Investors High Yield Fund, Inc.
First Investors Global Fund, Inc.
First Investors Life Series Fund
First Investors Multi-State Insured Tax Free Fund
First Investors New York Insured Tax Free Fund, Inc.
First Investors Special Bond Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
First Investors Series Fund II, Inc.
Affiliations of the officers and directors of the Investment Adviser are
set forth in Part B, Statement of Additional Information, under "Directors and
Officers."
Item 29. Principal Underwriters
(a) First Investors Corporation, Underwriter of the Registrant, is also
underwriter for:
First Investors Cash Management Fund, Inc.
First Investors Series Fund
First Investors Government Fund, Inc.
First Investors High Yield Fund, Inc.
First Investors Global Fund, Inc.
First Investors Multi-State Insured Tax Free Fund
First Investors New York Insured Tax Free Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
First Investors Series Fund II, Inc.
(b) The following persons are the officers and directors of the
Underwriter:
Position and Position and
Name and Principal Office with First Office with
Business Address Investors Corporation Registrant
- ------------------ --------------------- ------------
Glenn O. Head Chairman President
95 Wall Street and Director and Director
New York, NY 10005
Marvin M. Hecker President None
95 Wall Street
New York, NY 10005
John T. Sullivan Director Chairman of the
95 Wall Street Board of Directors
New York, NY 10005
Roger L. Grayson Director Director
95 Wall Street
New York, NY 10005
Joseph I. Benedek Treasurer Treasurer
581 Main Street
Woodbridge, NJ 07095
Robert Murphy Comptroller None
581 Main Street
Woodbridge, NJ 07095
Lawrence A. Fauci Senior Vice President None
95 Wall Street and Director
New York, NY 10005
Kathryn S. Head Vice President, Director
581 Main Street Chief Financial
Woodbridge, NJ 07095 Officer and Director
Louis Rinaldi Senior Vice None
581 Main Street President
Woodbridge, NJ 07095
Frederick Miller Vice President None
581 Main Street
Woodbridge, NJ 07095
Howard M. Factor Vice President None
95 Wall Street
New York, NY 10005
Larry R. Lavoie Secretary and None
95 Wall Street General Counsel
New York, NY 10005
Matthew Smith Vice President None
581 Main Street
Woodbridge, NJ 07095
<PAGE>
Jeremiah J. Lyons Director None
56 Weston Avenue
Chatham, NJ 07928
Anne Condon Vice President None
581 Main Street
Woodbridge, NJ 07095
Jane W. Kruzan Director None
232 Adair Street
Decatur, GA 30030
(c) Not applicable
Item 30. Location of Accounts and Records
Physical possession of the books, accounts and records of the Registrant
are held by First Investors Management Company, Inc. and its affiliated
companies, First Investors Corporation and Administrative Data Management Corp.,
at their corporate headquarters, 95 Wall Street, New York, NY 10005 and
administrative offices, 581 Main Street, Woodbridge, NJ 07095, except for those
maintained by the Registrant's Custodian, The Bank of New York, 48 Wall Street,
New York, NY 10286.
Item 31. Management Services
Inapplicable
Item 32. Undertakings
<PAGE>
Registrant undertakes to carry out all indemnification provisions of its
Articles of Incorporation, Advisory Agreement and Underwriting Agreement in
accordance with Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions under Item 27 herein, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Registrant hereby undertakes to furnish a copy of its latest annual
report to shareholders, upon request and without charge, to each person to whom
a prospectus is delivered.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant represents that this Amendment
meets all the requirements for effectiveness pursuant to Rule 485(b) under the
Securities Act of 1933, and has duly caused this Post-Effective Amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
16th day of April, 1997.
FIRST INVESTORS FUND FOR
INCOME, INC.
(Registrant)
By: /s/ Glenn O. Head
----------------
Glenn O. Head
President and Director
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/Glenn O. Head Principal Executive April 16, 1997
- ------------------------- Officer and Director
Glenn O. Head
/s/Joseph I. Benedek Principal Financial April 16, 1997
- ------------------------- and Accounting Officer
Joseph I. Benedek
* Director April 16, 1997
- -------------------------
Kathryn S. Head
* Director April 16, 1997
- -------------------------
Roger L. Grayson
* Director April 16, 1997
- -------------------------
Herbert Rubinstein
* Director April 16, 1997
- -------------------------
Nancy Schaenen
* Director April 16, 1997
- -------------------------
James M. Srygley
* Director April 16, 1997
- -------------------------
John T. Sullivan
* Director April 16, 1997
- -------------------------
Rex R. Reed
* Director April 16, 1997
- -------------------------
Robert F. Wentworth
*By: /s/Larry R. Lavoie
------------------
Larry R. Lavoie
Attorney-in-fact
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
99.B11.1 Consent of Accountants
99.B11.2 Power of Attorney
99.B16 Performance Calculations
27.001 FDS-Class A Shares
27.002 FDS-Class B Shares
Consent of Independent Certified Public Accountants
First Investors Fund For Income, Inc.
95 Wall Street
New York, New York 10005
We consent to the use in Post-Effective Amendment No. 63 to the
Registration Statement on Form N-1A (File No. 2-38309) of our report dated
January 31, 1997 relating to the December 31, 1996 financial statements of First
Investors Fund For Income, Inc., which are included in said Registration
Statement.
/s/ Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 16, 1997
First Investors Fund For Income, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or
director of First Investors Fund For Income, Inc. hereby appoints Larry R.
Lavoie or Glenn O. Head, and each of them, his true and lawful attorney to
execute in his name, place and stead and on his behalf a Registration Statement
on Form N-1A for the registration pursuant to the Securities Act of 1933 and the
Investment Company Act of 1940 of shares of common stock of said Maryland
corporation and any and all amendments to said Registration Statement (including
post-effective amendments), and all instruments necessary or incidental in
connection therewith and to file the same with the Securities and Exchange
Commission. Said attorney shall have full power and authority to do and perform
in the name and on behalf of the undersigned every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do, the undersigned hereby ratifying and
approving all such acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
3rd day of April, 1997.
/s/ Nancy Schaenen
Nancy Schaenen
<PAGE>
Distribution yields for First Investor's Funds are calculated using the
following formula:
Yield = (a/b)
Where:
a = dividends declared during the last 12 months.
b = Net asset value per share on the last day of the period.
The following is a list of the information used to calculate the distribution
yield for First Investors Fund For Income, Inc. (Class A shares) as of
December 31, 1996.
Distribution
a b Yield
- - -----
$.370 $4.29 8.62%
<PAGE>
Distribution yields for First Investor's Funds are calculated using the
following formula:
Yield = (a/b)
Where:
a = dividends declared during the last 12 months.
b = Net asset value per share on the last day of the period.
The following is a list of the information used to calculate the distribution
yield for First Investors Fund For Income, Inc. (Class B shares) as of December
31, 1996.
Distribution
a b Yield
- - -----
$.346 $4.28 8.08%
<PAGE>
Yields for First Investor's Funds are calculated using the following formula:
2(((((a-b) + ((cd)-e))+1)-)-1)
Where:
a = dividends and interest earned during the 30 day period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
e = undeclared earned income.
The following is a list of the information used to calculate the for First
Investors Fund For Income, Inc. (Class A shares) as of December 31, 1996.
A b c d e Yield
- - - - - -----
$3,011,570 $431,983 100,353,609 $4.58 $.00 6.84%
<PAGE>
Yields for First Investor's Funds are calculated using the following formula:
2(((((a-b) + ((cd)-e))+1)-)-1)
Where:
a = dividends and interest earned during the 30 day period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
e = undeclared earned income.
The following is a list of the information used to calculate the for First
Investors Fund For Income, Inc. (Class B shares) as of December 31, 1996.
A b c d e Yield
- - - - - -----
$23,076 $5,170 770,136 $4.28 $.00 6.61%
<PAGE>
SEC Standardized Total Returns - Class A shares
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV / P) ) - 1
Total Return = ((ERV - P) / P)
Where: ERV = Ending redeemable value of a hypothetical $1,000
investment made at the beginning of 1, 5, or 10
year periods (or fractional period there of.)
P = a hypothetical initial investment of $1,000
N = number of years
The following table lists the information used to calculate the standardized
average annual total return and total return for First Investors Fund For
Income, Inc. (Class A shares) as of December 31, 1996.
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
1 year: $ 1,062.00 $ 1,000.00 1.00 6.20% 6.20%
5 years: $ 1,744.80 $ 1,000.00 5.00 11.78% 74.48%
10 years: $ 2,135.60 $ 1,000.00 10.00 7.88% 113.56%
<PAGE>
NAV Only Total Returns - Class A shares
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV / P) ) - 1
Total Return = ((ERV - P) / P)
Where: ERV = Ending redeemable value of a hypothetical $1,000
investment made at the beginning of 1, 5, or 10
year periods (or fractional period there of.)
P = a hypothetical initial investment of $1,000
N = number of years
The following table lists the information used to calculate the average annual
total return and total return for First Investors Fund For Income, Inc. (Class A
shares) as of December 31, 1996.
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
1 year: $ 1,134.00 $ 1,000.00 1.00 13.40% 13.40%
5 years: $ 1,863.00 $ 1,000.00 5.00 13.25% 86.30%
10 years: $ 2,279.30 $ 1,000.00 10.00 8.59% 127.93%
<PAGE>
SEC Standardized Total Returns - Class B shares
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV / P) ) - 1
Total Return = ((ERV - P) / P)
Where: ERV = Ending redeemable value of a hypothetical $1,000
investment made at the beginning of 1, 5, or 10
year periods (or fractional period there of.)
P = a hypothetical initial investment of $1,000
N = number of years
The following table lists the information used to calculate the standardized
average annual total return and total return for First Investors Fund For
Income, Inc. (Class B shares) as of December 31, 1996.
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
1 year: $ 1,080.60 $ 1,000.00 1.00 8.06% 8.06%
Life of Fund: $ 1,268.30 $ 1,000.00 1.97 12.83% 26.83%
<PAGE>
NAV Only Total Returns - Class B shares
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV / P) ) - 1
Total Return = ((ERV - P) / P)
Where: ERV = Ending redeemable value of a hypothetical $1,000
investment made at the beginning of 1, 5, or 10
year periods (or fractional period there of.)
P = a hypothetical initial investment of $1,000
N = number of years
The following table lists the information used to calculate the average annual
total return and total return for First Investors Fund For Income, Inc. (Class B
shares) as of December 31, 1996.
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------- ------
1 year: $ 1,125.10 $ 1,000.00 1.00 12.51% 12.51%
Life of Fund: $ 1,321.60 $ 1,000.00 1.97 15.22% 32.16%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000312370
<NAME> FIRST INVESTORS FUND FOR INCOME, INC.
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 408107
<INVESTMENTS-AT-VALUE> 428792
<RECEIVABLES> 8025
<ASSETS-OTHER> 523
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 437340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2322
<TOTAL-LIABILITIES> 2322
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1121354
<SHARES-COMMON-STOCK> 100684
<SHARES-COMMON-PRIOR> 103018
<ACCUMULATED-NII-CURRENT> 5056
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (715225)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20493
<NET-ASSETS> 431678
<DIVIDEND-INCOME> 2047
<INTEREST-INCOME> 41815
<OTHER-INCOME> 468
<EXPENSES-NET> (4909)
<NET-INVESTMENT-INCOME> 39421
<REALIZED-GAINS-CURRENT> (5839)
<APPREC-INCREASE-CURRENT> 19452
<NET-CHANGE-FROM-OPS> 53034
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (37526)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3565
<NUMBER-OF-SHARES-REDEEMED> 12071
<SHARES-REINVESTED> 6172
<NET-CHANGE-IN-ASSETS> 5840
<ACCUMULATED-NII-PRIOR> 3161
<ACCUMULATED-GAINS-PRIOR> (709386)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (3135)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (5547)
<AVERAGE-NET-ASSETS> 425085
<PER-SHARE-NAV-BEGIN> 4.13
<PER-SHARE-NII> .390
<PER-SHARE-GAIN-APPREC> .140
<PER-SHARE-DIVIDEND> (.370)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.29
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000312370
<NAME> FIRST INVESTORS FUND FOR INCOME, INC.
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 408107
<INVESTMENTS-AT-VALUE> 428792
<RECEIVABLES> 8025
<ASSETS-OTHER> 523
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 437340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2322
<TOTAL-LIABILITIES> 2322
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3178
<SHARES-COMMON-STOCK> 780
<SHARES-COMMON-PRIOR> 426
<ACCUMULATED-NII-CURRENT> 12
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (41)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 192
<NET-ASSETS> 3340
<DIVIDEND-INCOME> 13
<INTEREST-INCOME> 248
<OTHER-INCOME> 2
<EXPENSES-NET> (47)
<NET-INVESTMENT-INCOME> 216
<REALIZED-GAINS-CURRENT> (48)
<APPREC-INCREASE-CURRENT> 140
<NET-CHANGE-FROM-OPS> 308
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (211)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 384
<NUMBER-OF-SHARES-REDEEMED> 60
<SHARES-REINVESTED> 30
<NET-CHANGE-IN-ASSETS> 1580
<ACCUMULATED-NII-PRIOR> 6
<ACCUMULATED-GAINS-PRIOR> 7
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (19)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (51)
<AVERAGE-NET-ASSETS> 2529
<PER-SHARE-NAV-BEGIN> 4.13
<PER-SHARE-NII> .380
<PER-SHARE-GAIN-APPREC> .120
<PER-SHARE-DIVIDEND> (.346)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.28
<EXPENSE-RATIO> 1.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
