January 14, 2000
To the Holders of First Investors Periodic Payment Plans
for Investment in First Investors High Yield Fund, Inc. (the "Plan"):
Enclosed is a notice concerning the Special Meeting of Shareholders of the
First Investors High Yield Fund, Inc. (the "Fund"), as well as a proxy
statement/prospectus for the Fund and First Investors Fund For Income, Inc.
("Fund For Income"). The purpose of the meeting is to approve the proposed
reorganization of the High Yield Fund into the Fund For Income.
You may vote shares representing your proportionate interest in the Plan
by signing and returning the proxy card in the enclosed envelope. IF YOU SIMPLY
SIGN THE PROXY CARD WITHOUT MARKING ANY BOX, THE PROXY WILL BE DEEMED TO GRANT
AUTHORITY TO VOTE FOR THE PROPOSAL.
If you do NOt return the proxy card properly signed and dated, your shares
will be voted FOR or AGAINST the proposal in the same proportion as indicated in
the voting instructions given by the other planholders.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO THE HIGH YIELD FUND OF FURTHER
SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
Sincerely,
/s/ Glenn O. Head
Glenn O. Head
Chairman
Enclosures
<PAGE>
January 14, 2000
Dear First Investors High Yield Fund, Inc. Shareholder:
After careful consideration, the Board of Directors of the First Investors
High Yield Fund, Inc. ("High Yield Fund") approved a plan to reorganize the High
Yield Fund into the First Investors Fund For Income, Inc. ("Fund For Income").
The reorganization is subject to the approval of the High Yield Fund's
shareholders. A shareholders' meeting has been scheduled for February 25, 2000
at which High Yield Fund shareholders of record on January 7, 2000 will be
eligible to vote either in person or by proxy. Enclosed you will find a notice
of the meeting, a proxy card, a proxy statement, a Fund For Income prospectus
and a postage-paid return envelope for your use.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO APPROVE THE
REORGANIZATION. NO MATTER HOW LARGE OR SMALL YOUR INVESTMENT, YOUR VOTE IS
IMPORTANT, SO PLEASE REVIEW THE PROXY STATEMENT CAREFULLY. TO CAST YOUR VOTE,
SIMPLY MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
POSTAGE-PAID ENVELOPE TODAY. IF YOU OWN YOUR SHARES JOINTLY, BOTH OWNERS MUST
SIGN THE CARD. REMEMBER, IT CAN BE EXPENSIVE FOR THE FUND - AND ULTIMATELY FOR
YOU AS A SHAREHOLDER - TO REMAIL PROXIES IF NOT ENOUGH RESPONSES ARE RECEIVED TO
CONDUCT THE MEETING.
While we encourage you to read the enclosed materials carefully, we will
attempt to address some possible questions in this letter.
WHAT IS THE FUND FOR INCOME? The Fund For Income is a fund which is
substantially similar to the High Yield Fund. It is advised by the same
investment adviser, has the same investment objectives, and follows similar
investment policies and strategies as the High Yield Fund. However, the Fund For
Income is a larger and older fund and has had slightly better performance.
WHAT IS THE EFFECT ON FUND EXPENSES? High Yield Fund shareholders should
benefit from a reduction in fund expenses following the reorganization. The
Board determined that the reorganization would be in the best interests of the
Funds and their shareholders based upon, among other factors, the likelihood
that it would reduce expense ratios for all shareholders over the long term.
WILL THERE BE ANY TAX CONSEQUENCES? The reorganization will be done on a
tax free basis to both the Funds and the shareholders. You will receive Fund For
<PAGE>
January 14, 2000
Page 2
Income shares that have exactly the same total value as your High Yield Fund
shares without owing any taxes as the result of the reorganization.
If you have any questions about the proposal, please feel free to contact
your registered representative, or call us at 1-800-423-4026.
As always, we appreciate your confidence and look forward to serving you
for many years to come.
Sincerely,
/s/ Glenn O. Head
-----------------
Glenn O. Head
President
Enclosures
<PAGE>
FIRST INVESTORS HIGH YIELD FUND, INC.
95 Wall Street, New York, New York 10005
212-858-8000
-----------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
-----------
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of the First
Investors High Yield Fund, Inc. ("High Yield Fund") will be held on February 25,
2000, at 10:00 a.m., Eastern time, at the offices of High Yield Fund, 95 Wall
Street, New York, New York 10005 (the "Meeting"), and at any adjournment of the
Meeting, if the Meeting is adjourned for any reason. The Meeting will be held
for the purpose of considering and voting on the following matters:
(1) To approve an Agreement and Plan of Reorganization and Termination
under which the First Investors Fund For Income, Inc. ("Fund For Income") would
acquire all of the assets of High Yield Fund in exchange solely for shares of
Fund For Income and the assumption by Fund For Income of all of High Yield
Fund's liabilities, followed by the distribution of those shares to the
shareholders of High Yield Fund and the termination of High Yield Fund, all as
described in the accompanying Prospectus/Proxy Statement; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
Shareholders of record at the close of business on January 7, 2000 are
entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors,
CONCETTA DURSO
Secretary
New York, New York
January 14, 2000
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE MEETING, PLEASE MARK, DATE, SIGN AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. IN ORDER
TO AVOID THE ADDITIONAL EXPENSE TO THE HIGH YIELD FUND OF FURTHER SOLICITATION,
WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
<PAGE>
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF FURTHER SOLICITATIONS
RETURN THE PROXY TO
PROXY DEPARTMENT
ADMINISTRATIVE DATA MANAGEMENT CORP.
581 MAIN STREET
WOODBRIDGE, NEW JERSEY 07095-1198
PROXY
FIRST INVESTORS HIGH YIELD FUND, INC.
Please detach before mailing
- - - - - - - - - - - - -- - -- - - - - - - - - - - - - - - - - - - - - - - - - -
FIRST INVESTORS HIGH YIELD FUND, INC.
Special Meeting of Shareholders, February 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) as proxies Concetta Durso and Tammie Lee
each with power of substitution and hereby authorize(s) each of them to
represent and to vote all the shares shown below, held of record by the
undersigned on January 7, 2000, at the Special Meeting of Shareholders of the
First Investors High Yield Fund, Inc., to be held on February 25, 2000, or any
adjournment thereof, with discretionary power to vote upon such other business
as may properly come before the meeting.
The undersigned hereby acknowledge(s) receipt of the Proxy Statement
prepared on behalf of the Board of Directors. Please date and sign this proxy
and return it in the enclosed postage-paid envelop. Your Board of Directors
recommends that you vote FOR the proposal in the Proxy Statement. Please
indicate your vote by an "X" in the appropriate box below. IF YOU SIMPLY SIGN
THIS PROXY WITHOUT MARKING ANY BOX, THIS PROXY SHALL BE DEEMED TO GRANT
AUTHORITY TO VOTE FOR THE PROPOSAL.
1. To approve an Agreement and Plan of Reorganization and Termination between
First Investors High Yield Fund, Inc. ("High Yield Fund") and First Investors
Fund For Income, Inc. ("Fund For Income") and the transactions contemplated
thereby, including (a) the transfer of substantially all of the assets of
High Yield Fund to Fund For Income in exchange for Class A and Class B shares
of Fund For Income, (b) the pro rata distribution of such shares to the
corresponding Class A and Class B shareholders of High Yield Fund and (c) the
dissolution of High Yield Fund.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
--------------------------------------------------------
Signature Date
--------------------------------------------------------
Additional Signature if held jointly Date
<PAGE>
FIRST INVESTORS FUND FOR INCOME, INC.
95 WALL STREET
NEW YORK, NEW YORK 10005
1-800-423-4026
PROSPECTUS/PROXY STATEMENT
JANUARY 14, 2000
This Prospectus/Proxy Statement ("Prospectus/Proxy") is being furnished
to shareholders of the First Investors High Yield Fund, Inc. ("High Yield Fund")
in connection with the solicitation of proxies by its Board of Directors
("Board") for use at a special meeting of its shareholders ("Meeting") to be
held at the office of High Yield Fund, 95 Wall Street, New York, New York on
February 25, 2000, at 10:00 a.m., Eastern time, and at any adjournment of the
Meeting, if the Meeting is adjourned for any reason.
As more fully described in this Prospectus/Proxy, the primary purpose of
the Meeting is to consider a proposed reorganization (the "Reorganization")
involving High Yield Fund and First Investors Fund For Income, Inc. ("Fund For
Income") (each a "Fund" and together the "Funds") and vote on an Agreement and
Plan of Reorganization and Termination by and between High Yield Fund and Fund
For Income (the "Agreement"). Pursuant to the Agreement, Fund For Income would
acquire all of the assets of High Yield Fund in exchange for shares of Fund For
Income and the assumption by Fund For Income of all of the liabilities of High
Yield Fund. Those shares of Fund For Income would then be distributed to the
shareholders of High Yield Fund, so that each shareholder of High Yield Fund
would receive a number of full and fractional shares of Fund For Income having
an aggregate value that, on the effective date of the Reorganization, is equal
to the aggregate net asset value of the shareholder's shares of High Yield Fund.
As soon as practicable following the distribution of shares, High Yield Fund
will be terminated.
Like High Yield Fund, Fund For Income is an open-end diversified
management investment company. Also like High Yield Fund, the investment
objective of Fund For Income is to primarily seek high current income and
secondarily to seek capital appreciation.
This Prospectus/Proxy sets forth concisely information about the
Reorganization, the Agreement and the Funds, and it should be retained for
future reference. A Statement of Additional Information ("SAI"), dated January
14, 2000, relating to Fund For Income and High Yield Fund has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated herein by
reference. Additional information about the Funds' investments is available in
<PAGE>
the Funds' annual and semi-annual reports to shareholders. The Shareholder
Manual relating to the Funds provides more detailed information about the
purchase, redemption and sale of Fund shares.
You can get free copies of reports, the SAI and the Shareholder Manual,
request other information and discuss your questions about the Funds by
contacting the Funds at:
Administrative Data Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198
Telephone: 1-800-423-4026
You can review and copy Fund documents (including proxy materials,
reports, Shareholder Manuals and SAIs) at the Public Reference Room of the SEC
in Washington, D.C. You can also obtain copies of Fund documents after paying a
duplicating fee (i) by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-0102 or (ii) by electronic request at [email protected].
You can obtain information on the operation of the Public Reference Room,
including information about duplicating fee charges, by calling (202) 942-8090.
Text-only versions of Fund documents can be viewed online or downloaded from the
EDGAR database on the SEC's Internet website at http://www.sec.gov.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THE FUND FOR INCOME SHARES OR DETERMINED WHETHER THIS PROSPECTUS/PROXY STATEMENT
IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
2
<PAGE>
TABLE OF CONTENTS
PAGE
I. Synopsis...............................................................4
II. Principal Risks........................................................4
III. Plan of Reorganization.................................................5
IV. Voting Information.....................................................9
V. Information About the Funds...........................................11
VI. Other Information.....................................................24
VII. Financial Highlights..................................................26
Appendix A: Agreement and Plan of Reorganization and Termination.............A-1
Appendix B: Narrative review of Fund For Income's performance
(as of September 30, 1999).........................................B-1
3
<PAGE>
I. SYNOPSIS
Pursuant to the Agreement, Fund For Income will acquire the assets of High
Yield Fund in exchange for shares in Fund For Income and the assumption by Fund
For Income of High Yield Fund's liabilities. High Yield Fund will distribute the
shares of Fund For Income to its shareholders, and High Yield Fund will be
liquidated. Shareholders of High Yield Fund Class A and Class B shares will
receive corresponding Class A and Class B shares of Fund For Income.
The Reorganization is designed to be a tax-free reorganization under the
Internal Revenue Code of 1986, as amended ("Code"). This means that (1) neither
High Yield Fund nor its shareholders will recognize gain or loss with respect to
the Reorganization, and (2) Fund For Income and shareholders of High Yield Fund,
respectively, will have carryover basis and holding periods with respect to the
assets and shares, respectively, that each will receive pursuant to the
Reorganization.
High Yield Fund and Fund For Income are substantially similar. They share a
common Board of Directors, have the same investment adviser, same underwriter,
same transfer agent, same classes of shares, same sales charge structures, and
same investment objectives. Each Fund invests primarily in high yield,
below-investment grade corporate bonds (commonly referred to as "high yield
bonds" or "junk bonds"). At the present time, the two Funds generally follow
similar investment management styles. The Funds also have identical procedures
with respect to distribution, purchase and redemption of shares, and exchange
rights.
Each Fund's investment objective is to seek primarily high current income
and secondarily capital appreciation. Each Fund diversifies its investments
among bonds of many different companies and industries. While each Fund invests
primarily in domestic companies, each Fund may invest in securities of issuers
domiciled in foreign countries. Although both Funds may invest in common stocks
and emerging market debt, only High Yield Fund currently pursues a strategy of
investing in common stocks and emerging market debt.
II. PRINCIPAL RISKS
The principal risks of investing in the Fund For Income and High Yield Fund
are substantially the same. First, the value of each Fund's shares could decline
as a result of a deterioration of the financial condition of an issuer of bonds
owned by the Fund or as a result of a default by the issuer. This is known as
credit risk. High yield bonds carry higher credit risks than investment grade
bonds because the companies that issue them are not as strong financially as
companies with investment grade credit ratings. High yield bonds issued by
foreign companies are subject to additional risks including political
instability, government regulation and differences in financial reporting
standards. Second, the value of each Fund's shares could decline if the entire
high yield bond market were to decline, even if none of the Fund's bond holdings
were at risk of a default. The high yield market can experience sharp declines
at times as the result of a deterioration in the overall economy, declines in
the stock market, a change of investor tolerance for risk, or other factors.
Third, high yield bonds tend to be less liquid than other bonds, which means
4
<PAGE>
that they are more difficult to sell. Fourth, while high yield bonds are
generally less interest rate sensitive than higher quality bonds, their values
generally will decline when interest rates rise. Fluctuations in the prices of
high yield bonds can be substantial. Accordingly, the value of your investment
in a Fund will go up and down, which means that you could lose money.
Because the High Yield Fund pursues a strategy of investing a small
percentage of its assets in common stocks and emerging market debt, its shares
may be more volatile and its yield may be less than that of other high yield
bond funds, such as Fund For Income, which do not invest in common stocks and
emerging market debt. While Fund For Income has the ability to invest in common
stocks and emerging market debt, it currently does not invest significantly in
these types of securities and does not currently intend to make significant
investments in such securities following the Reorganization.
III. PLAN OF REORGANIZATION
Pursuant to the Agreement, Fund For Income will acquire the assets of High
Yield Fund in exchange for shares of beneficial interest in Fund For Income and
the assumption by Fund For Income of High Yield Fund's liabilities. High Yield
Fund will distribute the shares of Fund For Income to its shareholders, and High
Yield Fund will be liquidated. The exchange of High Yield Fund assets for Fund
For Income shares will be at their respective net asset values, determined in
the manner used by each Fund to value its assets and its share price. Thus, each
High Yield Fund shareholder will receive PRO RATA the number of full and
fractional Fund For Income shares having an aggregate value equal to the value
of his or her High Yield Fund shares.
As a condition of the Reorganization, the Funds will receive an opinion of
its counsel, Kirkpatrick & Lockhart LLP, to the effect that the Reorganization
will constitute a tax-free reorganization within the meaning of section
368(a)(1)(C) of the Code. This means that (1) no gain or loss will be recognized
to either Fund on the transfer of High Yield Fund's assets to the Fund For
Income, (2) Fund For Income's basis and holding period for those assets will be
the same as High Yield Fund's basis and holding period immediately prior to the
reorganization, (3) no gain or loss will be recognized to High Yield Fund
shareholders on their receipt of Fund For Income shares, and (4) High Yield Fund
shareholders' basis and holding periods for Fund For Income shares will be the
same as the basis for their High Yield Fund shares immediately prior to the
reorganization.
Shareholders of the Funds should consult their tax advisers regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to federal income
tax consequences of the Reorganization, those shareholders also should consult
their tax advisers about state and local tax consequences, if any, of the
Reorganization.
The Reorganization will occur as of the close of business on March 14,
2000, or at a later date when the conditions to the closing are satisfied
("Closing Date").
5
<PAGE>
The assets of High Yield Fund to be acquired by Fund For Income include all
cash, cash equivalents, securities, receivables, claims and rights of action,
rights to register shares under applicable securities laws, books and records,
deferred and prepaid expenses shown as assets on High Yield Fund's books and all
other property owned by High Yield Fund. Fund For Income will assume from High
Yield Fund all liabilities, debts, obligations and duties of High Yield Fund of
whatever kind or nature; provided, however, that High Yield Fund will use its
best efforts to discharge all of its known debts, liabilities, obligations and
duties before the Closing Date. Fund For Income will deliver its shares to High
Yield Fund, which will distribute the shares to High Yield Fund's shareholders.
The shares will be distributed by opening accounts on the books of Fund For
Income in the names of High Yield Fund shareholders and by transferring to those
accounts the shares previously credited to the account of High Yield Fund on
those books. Fractional shares in Fund For Income will be rounded to the third
decimal place.
The value of High Yield Fund's net assets to be acquired by Fund For Income
and the net asset value ("NAV") per share of the shares of Fund For Income to be
exchanged for those assets will be determined as of the close of regular trading
on the New York Stock Exchange on the Closing Date ("Valuation Time"), using the
valuation procedures described in each Fund's then-current Prospectus and
Statement of Additional Information. High Yield Fund's net value shall be the
value of its assets to be acquired by Fund For Income, less the amount of High
Yield Fund's liabilities, as of the Valuation Time.
Each Fund offers two classes of shares, designated Class A and Class B
shares. Class A shares are sold at the public offering price, which includes a
front-end sales load. Class B shares are sold at NAV, without any initial sales
load, but are subject to a contingent deferred sales charge ("CDSC") if they are
redeemed within certain designated time periods. Each class of shares of Fund
For Income is identical to the corresponding class of shares of High Yield Fund.
This means that Class A shareholders of each Fund have identical rights and
Class B shareholders of each Fund have identical rights. Shareholders of High
Yield Fund Class A and Class B shares will receive corresponding Class A and
Class B shares of Fund For Income.
As indicated above, the investment objectives and policies of the two Funds
are substantially similar. Based on its review of the investment portfolios of
each Fund, the Funds' investment adviser believes that all of the assets held by
High Yield Fund will be consistent with the investment policies of Fund For
Income and thus can be transferred to and held by Fund For Income if the
proposed Reorganization is approved. However, it is the current intention of the
portfolio manager of the High Yield Fund to sell a substantial portion of the
common stock and emerging market debt securities held by the High Yield Fund
prior to the Reorganization. The intention of the High Yield Fund to dispose of
assets prior to the Reorganization could result in selling securities at a
disadvantageous time and could result in High Yield Fund's realizing losses that
would not otherwise have been realized. It could also result in the recognition
of gains that would not otherwise have been realized by the High Yield Fund, the
net proceeds of which would be included in a distribution to High Yield Fund
shareholders prior to the Reorganization.
6
<PAGE>
On or before the Closing Date, High Yield Fund will declare as a
distribution substantially all of its net investment income and realized net
capital gain, if any, and distribute that amount plus any previously declared
but unpaid dividends, in order to continue to maintain its tax status as a
regulated investment company.
High Yield Fund and Fund For Income have each agreed to share
Reorganization expenses, in proportion to the total net assets of each Fund
because, in the opinion of their Board of Directors, the reasonable expectation
of the cost savings and added efficiency to a unified fund will in the long term
accrue as a benefit to the shareholders of both Funds. All such expenses to be
assumed by the Funds are customary and appropriate to the transaction in
question, and it is anticipated that these fees shall be reasonable in amount
and not out of the ordinary. Such expenses include the fees and disbursements of
attorneys, printing, proxy solicitation, registration fees, any state stock
transfer stamps and taxes required in connection with the transfer of portfolio
securities from High Yield Fund to Fund For Income, and the transfer of shares
of Fund For Income to High Yield Fund, and the expenses of liquidation.
At a meeting of the Board of the Funds held on October 21, 1999, the Board,
including its directors who are not "interested persons" as that term is defined
in the Investment Company Act of 1940, as amended ("1940 Act") ("Independent
Directors"), considered the merits of the proposed Reorganization and voted to
approve the Agreement (which is substantially summarized herein), and the
distribution to High Yield Fund shareholders of this Prospectus/Proxy seeking
approval of the Reorganization. (This summary of the Agreement, and any other
discussion of the Agreement contained herein, is subject to the terms and
conditions of the actual Agreement, attached hereto as Appendix A.) The Board,
including the Independent Directors, found the proposed Reorganization to be in
the best interests of each respective Fund's shareholders and determined that
the combination of the assets of High Yield Fund and Fund For Income would best
serve the shareholders of both Funds. The combination should result in a
reduction of certain expenses, lower overall expense ratios and, thus, a
reduction in the per share expenses applicable to shareholders, including those
of High Yield Fund.
The Board of Directors of High Yield Fund has scheduled a Special Meeting
of its shareholders which will be held at the office of High Yield Fund, 95 Wall
Street, New York, New York on February 25, 2000 at 10:00 a.m., Eastern time, or
any adjournment thereof, to consider and approve or disapprove the Agreement.
In approving the Agreement, the Board of Directors of the Funds considered,
among other factors, the objectives and policies of each Fund, the assets and
liabilities of each Fund, the operations of the business and management of the
two Funds, the prospects of each Fund individually and combined, and the
fairness to the respective shareholders of each Fund as a result of the exchange
of shares being done on a net asset value basis. The Board of Directors has
determined that participation in the transaction is in the best interests of the
Funds and the interests of existing shareholders of the Funds will not be
diluted as a result of the transaction. In connection with their approval of the
proposed Reorganization, and in making the necessary determination prior to such
approval, the Board of Directors of the Funds reviewed all pertinent information
and discussed all relevant issues. In approving the proposed Reorganization, the
Board of Directors of the Funds specifically considered the following factors:
7
<PAGE>
A. Commonality of Investment Objectives and Policies
-------------------------------------------------
The Funds have identical investment objectives and substantially similar
management styles. Both Funds seek high current income and secondarily capital
appreciation. Both Funds seek to achieve their respective investment objectives
by primarily investing in a diversified portfolio of high yield, below
investment grade corporate bonds. In selecting investments, both Funds attempt
to invest in bonds that have stable to improving credit quality and potential
for capital appreciation because of a credit rating upgrade or an improvement in
the outlook for a particular company, industry or the economy as a whole.
B. Greater Portfolio Diversification
---------------------------------
The Reorganization should result in a combined Fund holding a slightly
larger number of individual portfolio investments. This should result in
somewhat greater diversification and potentially better investment performance
over a broader range of market conditions.
C. Reduced Expense Ratio
---------------------
The Reorganization should result in a lower expense ratio not only for the
current shareholders of the High Yield Fund, but for all shareholders of the
combined Fund, for three reasons. First, the combined Fund will have the
opportunity to achieve a breakpoint in management fees which High Yield Fund and
Fund For Income would not achieve as separate funds. Currently, the High Yield
Fund does not have enough assets to reach its first breakpoint. Fund For Income
has already achieved its first breakpoint. Assuming no significant loss of
assets, the Reorganization should result in Fund For Income having assets of
approximately $600 million, which will allow it to reach the second breakpoint.
Second, wholly apart from the potential of achieving breakpoints, the combined
Fund will have a larger asset base over which to spread other fees and expenses
than the Funds standing alone. Third, the combination of the Funds will
eliminate duplicative legal and auditor's fees, printing costs and certain
registration fees.
D. Tax Considerations
------------------
The consummation of the proposed Reorganization is contingent upon receipt
of an opinion of counsel that no gain or loss for federal income tax purposes
will be recognized as a result of the proposed transaction. In contrast, if the
High Yield Fund were to liquidate and shareholders were to receive the net asset
value of their shares in liquidating distributions, gain or loss would be
recognized for Federal income tax purposes.
E. Performance
-----------
Fund For Income is older and has a longer track record than High Yield
Fund. Moreover, Fund For Income has slightly better long-term performance than
High Yield Fund.
8
<PAGE>
F. Continuity of Sales Representative Services
-------------------------------------------
The Reorganization should not result in any change which would prevent
existing sales representatives for High Yield Fund shareholders from continuing
to service the shareholders following the Reorganization.
G. Shareholder Services
--------------------
As a member of the First Investors group of mutual funds, Fund For Income
has available the same range of services currently provided to High Yield Fund
shareholders. In addition, with the consolidation of the operations of the
Funds, the Board of Directors anticipates that the services provided to
shareholders may be done more efficiently.
The consummation of the Reorganization is subject to a number of conditions
set forth in the Agreement, some of which may be waived by either Fund. In
addition, the Agreement may be amended in any mutually agreeable manner, except
that no amendment may be made subsequent to the Meeting that has a material
adverse effect on the interests of the shareholders of the Funds.
IV. VOTING INFORMATION
------------------
Proxy materials will be mailed to shareholders of High Yield Fund beginning
on or about January14, 2000. Holders of record of shares of beneficial interest
("Shares") of High Yield Fund at the close of business on January 7, 2000 (the
"Record Date") will be entitled to one vote per Share on all business of the
Meeting on which they are entitled to vote and any adjournment or adjournments
thereof. On the Record Date, there were outstanding and entitled to vote
36,850,831.112 Shares of High Yield Fund. This solicitation of proxies is made
by the Board of High Yield Fund on behalf of the Fund.
The holders of one-third of the High Yield Fund's Shares outstanding on the
Record Date, represented in person or by proxy, must be present to form a quorum
for the transaction of business at the Meeting. In the event that a quorum is
present at the Meeting but sufficient votes to approve the proposed
Reorganization are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournments will require the affirmative vote of a majority of those Fund
Shares represented at the Meeting in person or by proxy. If a quorum is present,
the persons named as proxies will vote those proxies that they are entitled to
vote FOR any such proposal in favor of an adjournment and will vote those
proxies required to be voted AGAINST any such proposal against such adjournment.
Abstentions and broker non-votes will be counted as Shares present for
determining whether a quorum is present, but will not be counted for or against
any adjournment. Accordingly, abstentions and broker non-votes effectively will
be a vote against adjournment. Broker non-votes are Shares held by a broker or
nominee as to which instructions have not been received from the beneficial
owners or persons entitled to vote, and the broker or nominee does not have
discretionary voting power. Abstentions and broker non-votes will not be
counted, however, as votes cast for purposes of determining whether sufficient
9
<PAGE>
votes have been received to approve the proposed Reorganization.
All valid proxies received prior to the Meeting, or any adjournments
thereof, will be voted at the Meeting. All proxies will be voted in accordance
with the instructions of the shareholder. If no instruction is specified the
proxies will be voted FOR the matters set forth in the accompanying Notice of
Special Meeting of Shareholders and the persons named as proxies will use their
best judgment in connection with the transaction of such other business as may
properly come before the Meeting or any adjournments thereof. A shareholder who
executes a proxy retains the right to revoke it at any time insofar as it has
not been exercised. A proxy may be revoked by the subsequent execution and
submission of a revised proxy, by written notice of revocation to the secretary
of the Fund, or by voting in person at the Meeting.
As of December 27, 1999, 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 7.8% of the outstanding
Class A shares of HIGH YIELD FUND for beneficial owners of such Plans. The Bank
of New York would have owned of record 2.40% of the combined Fund, if the Funds
had been combined on that date.
The directors and officers of High Yield Fund and Fund For Income,
respectively, as a group, own less than 1% of either Class A or Class B shares
of either Fund.
VOTE REQUIRED
All shares of all classes shall vote together as a single class. The
favorable vote of the holders of a majority of the Shares of the High Yield Fund
present at the Meeting in person or by proxy is required to approve the proposed
Reorganization.
RECOMMENDATION OF THE DIRECTORS
The Board of Directors have concluded that the proposed Reorganization may
benefit the Funds and their shareholders. Thus, the Directors recommend voting
FOR the proposed Reorganization.
OTHER MATTERS
The Board is not aware of any matters to be presented for action at the
Meeting other than those set forth in this Prospectus/Proxy. If any other
business should come before the Meeting, the persons named in the accompanying
proxy will vote thereon in accordance with their best judgment.
METHOD AND EXPENSE OF SOLICITATION
The cost of preparing, assembling and mailing the proxy materials will be
borne by the Funds in proportion to the total net assets of each Fund determined
as of the Closing Date. In addition to the solicitation of proxies by the use of
10
<PAGE>
the mails, the High Yield Fund may, if necessary to obtain the requisite
representation of shareholders, solicit proxies by telephone, telegraph and
personal interview by employees of First Investors Corporation and any of its
affiliates, or through securities dealers. While there is no current intent to
do so, the Directors have authorized the officers of the High Yield Fund to
retain the services of a proxy soliciting firm if the officers determine that it
is appropriate to do so. The cost of soliciting proxies, including reimbursement
to dealers and others who forward proxy material to their clients, will be borne
by the Funds in proportion to the total net assets of each Fund.
V. INFORMATION ABOUT THE FUNDS
---------------------------
OVERVIEW OF THE FUNDS
WHAT ARE THE INVESTMENT OBJECTIVES, PRIMARY INVESTMENT STRATEGIES AND RISKS
OF THE FUND FOR INCOME?
The Fund For Income primarily seeks high current income and secondarily
seeks capital appreciation.
The Fund For Income primarily invests in a diversified portfolio of
high-yield, below-investment grade corporate bonds (commonly known as "junk
bonds"). These bonds provide a higher level of income than investment grade
bonds because they have a higher risk of default. The Fund seeks to reduce the
risk of a default by selecting bonds through careful credit research and
analysis. The Fund seeks to reduce the impact of a default by diversifying its
investments among bonds of many different companies and industries. While the
Fund invests primarily in domestic companies, it also can invest in securities
of issuers domiciled in foreign countries. These securities will generally be
dollar-denominated and traded in the U.S. The Fund seeks to achieve capital
appreciation by investing in high yield bonds with stable to improving credit
conditions.
There are four primary risks of investing in the Fund For Income. First,
the value of the Fund's shares could decline as a result of a deterioration of
the financial condition of an issuer of bonds owned by the Fund or as a result
of a default by the issuer. This is known as credit risk. High yield bonds carry
higher credit risks than investment grade bonds because the companies that issue
them are not as strong financially as companies with investment grade credit
ratings. High yield bonds issued by foreign companies are subject to additional
risks including political instability, government regulation and differences in
financial reporting standards. Second, the value of the Fund's shares could
decline if the entire high yield bond market were to decline, even if none of
the Fund's bond holdings were at risk of a default. The high yield market can
experience sharp declines at times as the result of a deterioration in the
overall economy, declines in the stock market, a change of investor tolerance
for risk, or other factors. Third, high yield bonds tend to be less liquid than
other bonds, which means that they are more difficult to sell. Fourth, while
high yield bonds are generally less interest rate sensitive than higher quality
bonds, their values generally will decline when interest rates rise.
Fluctuations in the prices of high yield bonds can be substantial. Accordingly,
the value of your investment in the Fund will go up and down, which means that
you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
11
<PAGE>
WHAT ARE THE INVESTMENT OBJECTIVES, PRIMARY INVESTMENT STRATEGIES AND RISKS
OF THE HIGH YIELD FUND?
The High Yield Fund has the same investment objectives, primary investment
strategies, and primary risks as the Fund For Income with the following
exception. The High Yield Fund currently invests a relatively small part of its
assets in emerging market debt securities and common stocks. While the Fund For
Income has the ability to invest in such securities, it does not currently do
so, and does not currently intend to do so in the future, to any material
degree. As a result, the High Yield Fund's shares may be slightly more volatile
and its yield slightly lower than those of the Fund For Income. Thus, except as
to its strategy of investing in emerging market debt and common stocks, the
objectives, strategies and risks of the High Yield Fund are the same as
summarized above for the Fund For Income.
HOW HAVE THE FUNDS PERFORMED?
FUND FOR INCOME
The bar chart and table below show you how the Fund For Income's
performance has varied from year to year and in comparison with a broad-based
index. This information gives you some indication of the risks of investing in
the Fund.
The Fund For Income has two classes of shares, Class A shares and Class B
shares. The bar chart shows changes in the performance of the Fund's Class A
shares for each of the last ten calendar years. The performance of Class B
shares differs from the performance of Class A shares shown in the bar chart
only to the extent that it does not have the same expenses. The bar chart does
not reflect sales charges that you may pay upon purchase or redemption of Fund
shares. If they were included, the returns would be less than those shown.
12
<PAGE>
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 14.74% (for the
quarter ended March 31, 1991) and the lowest quarterly return was -8.75% (for
the quarter ended September 30, 1990). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for Class A
shares and Class B shares compare to those of the Credit Suisse First Boston
High Yield Index ("High Yield Index") as of December 31, 1999. This table
assumes that the maximum sales charge or CDSC was paid. The High Yield Index is
designed to measure the performance of the high yield bond market. The High
Yield Index does not take into account fees and expenses that an investor would
incur in holding the securities in the Index. If it did so, the returns would be
lower than those shown.
Inception
Class B Shares
1 Year* 5 Years* 10 Years* (1/12/95)
------- -------- --------- ---------
Class A Shares -3.16% 8.69% 9.52% N/A
Class B Shares -1.54% N/A N/A 9.03%
High Yield Index 2.26% 8.86% 10.95% 8.86%**
*The annual returns are based upon calendar years.
**The average annual total return shown is for the period 1/1/95 to 12/31/99.
13
<PAGE>
HIGH YIELD FUND
The bar chart and table below show you how the High Yield Fund's
performance has varied from year to year and in comparison with a broad-based
index. This information gives you some indication of the risks of investing in
the Fund.
The High Yield Fund has two classes of shares, Class A shares and Class B
shares. The bar chart shows changes in the performance of the Fund's Class A
shares for each of the last ten calendar years. The performance of Class B
shares differs from the performance of Class A shares shown in the bar chart
only to the extent that it does not have the same expenses. The bar chart does
not reflect sales charges that you may pay upon purchase or redemption of Fund
shares. If they were included, the returns would be less than those shown.
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 11.65% (for the
quarter ended March 31, 1991) and the lowest quarterly return was -8.30% (for
the quarter ended September 30, 1990). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for Class A
shares and Class B shares compare to those of the High Yield Index as of
December 31, 1999. This table assumes that the maximum sales charge or CDSC was
paid. The High Yield Index is designed to measure the performance of the high
yield bond market. The High Yield Index does not take into account fees and
expenses that an investor would incur in holding the securities in the Index. If
it did so, the returns would be lower than those shown.
Inception
Class B Shares
1 Year* 5 Years* 10 Years* (1/12/95)
------- -------- --------- ---------
Class A Shares -4.01% 9.10% 9.26% N/A
Class B Shares -2.22% N/A N/A 8.53%
High Yield Index 2.26% 8.86% 10.95% 8.86%**
*The annual returns are based upon calendar years.
**The average annual total return shown is for the period 1/1/95 to 12/31/99.
14
<PAGE>
WHAT ARE THE FEES, EXPENSES AND CAPITALIZATION OF THE FUNDS?
The following table describes the fees and expenses that you may pay if you
buy and hold shares of the Funds. The shareholder fees are the same for the Fund
For Income, High Yield and the surviving fund after the Reorganization
("Combined Fund"). THERE WILL BE NO SHAREHOLDER FEES CHARGED IN CONNECTION WITH
THE REORGANIZATION.
Class A Class B
Shares Shares
------ ------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price).............. 6.25% None
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)....................... None* 4%**
*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.
**4% in the first year; declining to 0% after the sixth year. Class B shares
convert to Class A shares after 8 years. The holding period for Class B
shareholders of High Yield Fund will be tacked on following the Reorganization
for purposes of measuring the 8 year conversion period of Class B shares to
Class A shares of the Combined Fund.
The following table shows the current fees and expenses a shareholder may
pay with respect to Fund For Income and High Yield Fund, and PRO FORMA fees and
expenses for the Fund For Income after giving effect to the Reorganization.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL
AND SERVICE ANNUAL FUND FEE NET
MANAGEMENT (12B-1) OTHER OPERATING WAIVER (1), EXPENSES
FEES (1) FEES (2) EXPENSES(3) EXPENSES(3) (3) (1), (3)
-------- -------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
FUND FOR INCOME
Class A Shares 0.74% 0.30% 0.25% 1.29% 0.00% 1.29%
Class B Shares 0.74% 1.00% 0.25% 1.99% 0.00% 1.99%
HIGH YIELD FUND
Class A Shares 1.00% 0.30% 0.32% 1.62% 0.25% 1.37%
Class B Shares 1.00% 1.00% 0.32% 2.32% 0.25% 2.07%
FUND FOR INCOME
PRO FORMA
Class A Shares 0.73% 0.30% 0.26% 1.29% 0.00% 1.29%
Class B Shares 0.73% 1.00% 0.26% 1.99% 0.00% 1.99%
</TABLE>
(1) For the fiscal year ended September 30, 1999, the Adviser waived Management
Fees in excess of 0.75% for the High Yield Fund. The Adviser has contractually
15
<PAGE>
agreed with the High Yield Fund to waive Management Fees in excess of 0.75% for
the fiscal year ending September 30, 2000.
(2) Because each Fund pays Rule 12b-1 fees, long-term shareholders could pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
(3) 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 Annual Fund
Operating Expenses or Net Expenses.
EXAMPLE
This example is intended to help you to compare the costs of investing in
High Yield Fund with the cost of investing in Fund For Income and the cost of
investing in the Combined Fund assuming the Reorganization has been completed.
The example assumes that (1) you invest $10,000 in the specified Fund for the
time periods indicated; (2) your investment has a 5% return each year; and (3)
the Fund's operating expenses remain the same, except for year one which is net
of any fees waived and/or expenses assumed. Although your actual costs may be
higher or lower, under these assumptions your costs would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
If you redeem your shares:
<S> <C> <C> <C> <C>
FUND FOR INCOME
Class A shares $748 $1,008 $1,288 $2,084
Class B shares $602 $924 $1,273 $2,136*
HIGH YIELD FUND
Class A shares $756 $1,081 $1,429 $2,407
Class B shares $610 $1,001 $1,418 $2,461*
FUND FOR INCOME PRO FORMA
Class A shares $748 $1,008 $1,288 $2,084
Class B shares $602 $924 $1,273 $2,136*
If you do not redeem your shares:
FUND FOR INCOME
Class A shares $748 $1,008 $1,288 $2,084
Class B shares $202 $624 $1,073 $2,136*
HIGH YIELD FUND
Class A shares $756 $1,081 $1,429 $2,407
Class B shares $210 $701 $1,218 $2,461*
FUND FOR INCOME PRO FORMA
Class A shares $748 $1,008 $1,288 $2,084
Class B shares $202 $624 $1,073 $2,136*
</TABLE>
*Assumes conversion to Class A shares eight years after purchase.
16
<PAGE>
CAPITALIZATION
The following table shows the capitalization of each Fund as of December
27, 1999, and on a pro forma combined basis (unaudited) as of December 27, 1999,
giving effect to the Reorganization:
<TABLE>
<CAPTION>
CLASS A CLASS A FUND FOR CLASS B CLASS B FUND FOR
FUND FOR HIGH YIELD INCOME FUND FOR HIGH YIELD INCOME
INCOME FUND (PRO FORMA) INCOME FUND (PRO FORMA)
------ ---- ----------- ------ ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets................... $388,252,696 $172,037,736 $560,290,432 $14,754,325 $8,369,661 $23,123,986
Net Asset Value Per Share.... $3.93 $4.88 $3.93 $3.92 $4.87 $3.92
Shares Outstanding............ 98,725,095 35,233,884 142,470,939 3,765,777 1,717,929 5,901,983
</TABLE>
THE FUNDS IN DETAIL
WHAT ARE THE FUNDS' OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RISKS?
OBJECTIVES: Each Fund primarily seeks high current income and secondarily
seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES: Each Fund primarily invests in a diversified
portfolio of high-yield, below-investment grade corporate bonds commonly known
as "junk bonds" (those rated below Baa by Moody's Investors Service, Inc. or
below BBB by Standard & Poor's Ratings Group). High yield bonds generally
provide higher income than investment grade bonds to compensate investors for
their higher risk of default (i.e., failure to make required interest or
principal payments). High-yield bond issuers include small or relatively new
companies lacking the history or capital to merit investment grade status,
former Blue Chip companies downgraded because of financial problems, companies
using debt rather than equity to fund capital investment or spending programs,
companies electing to borrow heavily to finance or avoid a takeover or buyout,
and firms with heavy debt loads. Each Fund's portfolio may include zero coupon
bonds and pay in kind bonds. While each Fund invests primarily in domestic
companies, each Fund also invests in securities of issuers domiciled in foreign
countries. These securities will generally be dollar-denominated and traded in
the U.S. Each Fund seeks to reduce the risk of a default by selecting bonds
through careful credit research and analysis. Each Fund seeks to reduce the
impact of a potential default by diversifying its investments among bonds of
many different companies and industries. Each Fund attempts to invest in bonds
that have stable to improving credit quality and potential for capital
appreciation because of a credit rating upgrade or an improvement in the outlook
for a particular company, industry or the economy as a whole.
High Yield Fund will also invest, opportunistically, in common stocks of
domestic and foreign companies that are deemed to offer attractive potential for
appreciation as well as bonds of issuers in emerging or developing countries.
High Yield Fund's investments in common stocks will not exceed 10% of its total
17
<PAGE>
assets. (Income-producing preferred stocks, convertible securities, or equity
securities that are acquired as part of a unit with a fixed-income security are
not considered common stocks for purposes of this limitation.)
Although each Fund will consider ratings assigned by ratings agencies in
selecting high yield bonds, they rely principally on their own research and
investment analysis. Each Fund considers a variety of factors, including the
issuer's managerial strength, anticipated cash flow, debt maturity schedules,
borrowing requirements, interest or dividend coverage, asset coverage and
earnings prospects. The Funds will usually sell a bond when it shows
deteriorating fundamentals or falls short of the portfolio manager's
expectations.
PRINCIPAL RISKS: Any investment carries with it some level of risk. An
investment offering greater potential rewards generally carries greater risks.
Here are the principal risks of owning the Funds:
CREDIT RISK: This is the risk that an issuer of bonds will be unable to pay
interest or principal when due. The prices of bonds are affected by the credit
quality of the issuer. High yield bonds are subject to greater credit risk than
higher quality bonds because the companies that issue them are not as
financially strong as companies with investment grade ratings. Changes in the
financial condition of an issuer, changes in general economic conditions, and
changes in specific economic conditions that affect a particular type of issuer
can impact the credit quality of an issuer. Such changes may weaken an issuer's
ability to make payments of principal or interest, or cause an issuer of bonds
to fail to make timely payments of interest or principal. Lower quality bonds
generally tend to be more sensitive to these changes than higher quality bonds.
While credit ratings may be available to assist in evaluating an issuer's credit
quality, they may not accurately predict an issuer's ability to make timely
payments of principal and interest.
MARKET RISK: The entire junk bond market can experience sharp price swings due
to a variety of factors, including changes in economic forecasts, stock market
volatility, large sustained sales of junk bonds by major investors, high-profile
defaults, or changes in the market's psychology. This degree of volatility in
the high yield market is usually associated more with stocks than bonds. The
prices of high yield bonds held by the Fund could therefore decline, regardless
of the financial condition of the issuers of such bonds. Markets tend to run in
cycles with periods when prices generally go up, known as "bull" markets, and
periods when prices generally go down, referred to as "bear" markets. Because
High Yield Fund may decide to invest a portion of its assets in common stocks,
its shares may be more volatile than those of other high yield bond funds which
do not invest in common stocks and its yield may be less than other high yield
funds.
LIQUIDITY RISK: High yield bonds tend to be less liquid than higher quality
bonds, meaning that it may be difficult to sell high yield bonds at a reasonable
price, particularly if there is a deterioration in the economy or in the
financial prospects of their issuers. As a result, the prices of high yield
bonds may be subject to wide price fluctuations due to liquidity concerns.
18
<PAGE>
INTEREST RATE RISK: The market value of a bond is affected by changes in
interest rates. When interest rates rise, the market value of a bond declines,
and when interest rates decline, the market value of a bond increases. The price
volatility of a bond also depends on its maturity and duration. Generally, the
longer the maturity and duration of a bond, the greater its sensitivity to
interest rates. To compensate investors for this higher risk, bonds with longer
maturities and durations generally offer higher yields than bonds with shorter
maturities and durations.
FOREIGN ISSUERS RISK: Foreign investments involve additional risks, including
currency fluctuations, political instability, government regulation, unfavorable
political or legal developments and differences in financial reporting standards
and less stringent regulations of foreign securities markets.
FUND MANAGEMENT
First Investors Management Company, Inc. ("FIMCO") is the investment
adviser to the Funds. Its address is 95 Wall Street, New York, NY 10005. It
currently serves as investment adviser to 52 mutual funds or series of funds
with total net assets of over $5 billion. FIMCO supervises all aspects of the
Fund's operations and determines the Fund's portfolio transactions. For the
fiscal year ended September 30, 1999, FIMCO received advisory fees of 0.74% of
the Fund For Income's average daily net assets and 0.75% of the High Yield
Fund's daily net assets, net of waiver. Following the Reorganization, the
management fee for the Combined Fund is expected to be 0.73% of the Fund's
average daily net assets. FIMCO will maintain the responsibility of managing the
Fund's combined assets following the Reorganization. In addition, the directors
and officers of Fund For Income, its distributor, administrator and other
service providers will continue to serve the Fund in their current capacities.
Nancy Jones serves as Portfolio Manager of the Fund For Income and since
January 1, 2000 has served as Portfolio Manager of the High Yield Fund. Ms.
Jones also serves as Portfolio Manager of certain other First Investors Funds.
Ms. Jones joined FIMCO in 1983 as a Director of Research in the High Yield
Department. Prior to January 1, 2000, George V. Ganter served as Portfolio
Manager of the High Yield Fund. Mr. Ganter also serves as Portfolio Manager of
another First Investors Fund. Mr. Ganter joined FIMCO in 1985 as a Senior
Investment Analyst. It is anticipated that Ms. Jones will serve as Portfolio
Manager of the Combined Fund following the Reorganization.
BUYING AND SELLING SHARES
HOW AND WHEN DO THE FUNDS PRICE THEIR SHARES?
The share price (which is called "net asset value" or "NAV" per share) for
the Funds is calculated once each day as of 4:00 p.m., Eastern time, on each day
the New York Stock Exchange ("NYSE") is open for regular trading. The NYSE is
closed on most national holidays and Good Friday. In the event that the NYSE
closes early, the share price will be determined as of the time of the closing.
19
<PAGE>
To calculate the NAV, each Fund's assets are valued and totaled,
liabilities are subtracted, and the balance, called net assets, is divided by
the number of shares outstanding. The prices or NAVs of Class A shares and Class
B shares will generally differ because they have different expenses.
In valuing its assets, the Funds use the market value of securities for
which market quotations or last sale prices are readily available. If there are
no readily available quotations or last sale prices for an investment or the
available quotations are considered to be unreliable, the securities will be
valued at their fair value as determined in good faith pursuant to procedures
adopted by the Board of Directors of the Funds.
HOW DO I BUY SHARES?
In connection with the Reorganization, High Yield Fund shareholders will
receive corresponding shares of the Fund For Income. With respect to purchases
of Fund shares separate and apart from the Reorganization, you may buy shares of
the Fund For Income and High Yield Fund through a First Investors registered
representative or through a registered representative of an authorized
broker-dealer ("Representative"). Investments in the Funds may be made in any
amount.
If we receive your order in our Woodbridge, N.J. offices prior to the close
of regular trading on the NYSE, your transaction will be priced at that day's
NAV. If you place your order with your Representative prior to the close of
regular trading on the NYSE, your transaction will also be priced at that day's
NAV provided that your Representative transmits the order to our Woodbridge,
N.J. offices by 5:00 p.m., Eastern time. Orders placed after the close of
regular trading on the NYSE will be priced at the next business day's NAV. The
procedures for processing transactions are explained in more detail in our
Shareholder Manual which is available upon request.
You can arrange to make systematic investments electronically from your
bank account or through payroll deduction. All the various ways you can buy
shares are explained in the Shareholder Manual. For further information on the
procedures for buying shares, please contact your Representative or call
Shareholder Services at 1-800-423-4026.
The Funds reserve the right to refuse any order to buy shares if a Fund
determines that doing so would be in the best interests of the Fund and its
shareholders.
WHAT ARE THE SALES CHARGES AND EXPENSES FOR SHARES?
Each Fund has two classes of shares, Class A and Class B. While each class
invests in the same portfolio of securities, the classes have separate sales
charge and expense structures. Because of the different expense structures, each
class of shares generally will have different NAVs and dividends.
The principal advantages of Class A shares are the lower overall expenses,
the availability of quantity discounts on volume purchases and certain account
20
<PAGE>
privileges that are available only on Class A shares. The principal advantage of
Class B shares is that all of your money is put to work from the outset.
Class A shares of each Fund are sold at the public offering price which
includes a front-end sales load. The sales charge declines with the size of your
purchase, as illustrated below. There will be no shareholder fees charged in
connection with the Reorganization.
Class A Shares
Your investment Sales Charge as a percentage of
offering price net amount invested
Less than $25,000 6.25% 6.67%
$25,000-$49,999 5.75 6.10
$50,000-$99,999 5.50 5.82
$100,000-$249,999 4.50 4.71
$250,000-$499,999 3.50 3.63
$500,000-$999,999 2.50 2.56
$1,000,000 or more 0* 0*
*If you invest $1,000,000 or more in Class A shares, you will not pay a
front-end sales charge. However, if you make such an investment and then sell
your shares within 24 months of purchase, you will pay a CDSC of 1.00%.
Class B shares are sold at net asset value, without any initial sales
charge. However, you may pay a CDSC when you sell your shares. The CDSC declines
the longer you hold your shares, as illustrated below. Class B shares convert to
Class A shares after eight years.
Class B Shares
Year of Redemption CDSC as a Percentage
of Purchase Price or
NAV at Redemption
Within the 1st or 2nd year............ 4%
Within the 3rd or 4th year............ 3
In the 5th year....................... 2
In the 6th year....................... 1
Within the 7th year and 8th year...... 0
There is no CDSC on Class B shares which are acquired through reinvestment
of dividends or distributions. The CDSC is imposed on the lower of the original
purchase price or the net asset value of the shares being sold. For purposes of
determining the CDSC, all purchases made during a calendar month are counted as
having been made on the first day of that month at the average cost of all
purchases made during that month.
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<PAGE>
To keep your CDSC as low as possible, each time you place a request to sell
shares, we will first sell any shares in your account that carry no CDSC. If
there is an insufficient number of these shares to meet your request in full, we
will then sell those shares that have the lowest CDSC.
Sales charges and CDSCs may be reduced or waived under certain
circumstances and for certain groups. Consult your Representative or call us
directly at 1-800-423-4026 for details.
Each Fund has adopted a plan pursuant to Rule 12b-1 that allows the Fund to
pay distribution fees for the sale and distribution of its shares. Each class of
shares pays Rule 12b-1 fees for the marketing of fund shares and for services
provided to shareholders. The plans provide for payments at annual rates (based
on average daily net assets) of up to 0.30% on Class A shares and 1.00% on Class
B shares. No more than 0.25% of these payments may be for service fees. These
fees are paid monthly in arrears. Because these fees are paid out of each Fund's
assets on an on-going basis, the higher fees for Class B shares will increase
the cost of your investment and over time may cost you more than paying the
initial sales charge for Class A shares.
FOR ACTUAL PAST EXPENSES OF CLASS A AND CLASS B SHARES, SEE THE SECTION ENTITLED
"WHAT ARE THE FEES, EXPENSES AND CAPITALIZATION OF THE FUNDS?" IN THIS
PROSPECTUS/PROXY.
Because of the lower overall expenses on Class A shares, we recommend Class
A shares for purchases in excess of $250,000. If you are investing in excess of
$1,000,000, we will only sell Class A shares to you. For purchases below
$250,000, the class that is best for you generally depends upon the amount you
invest, your time horizon, and your preference for paying the sales charge
initially or later. If you fail to tell us what Class of shares you want, we
will purchase Class A shares for you.
HOW DO I SELL SHARES?
You may redeem your Fund shares on any day a Fund is open for business by:
o Contacting your Representative who will place a redemption order for you;
o Sending a written redemption request to Administrative Data Management
Corp., ("ADM") at 581 Main Street, Woodbridge, N.J. 07095-1198;
o Telephoning the Special Services Department of ADM at 1-800-342-6221 (if
you have elected to have telephone privileges); or
o Instructing us to make an electronic transfer to a predesignated bank (if
you have completed an application authorizing such transfers).
Your redemption request will be processed at the price next computed
after we receive the request. For all requests, have your account number
22
<PAGE>
available.
Payment of redemption proceeds generally will be made within 7 days. If you
are redeeming shares which you recently purchased by check, payment may be
delayed to verify that your check has cleared. This may take up to 15 days from
the date of your purchase. You may not redeem shares by telephone or Electronic
Fund Transfer unless you have owned the shares for at least 15 days.
If your account falls below the minimum account balance for any reason
other than market fluctuation, each Fund reserves the right to redeem your
account without your consent or to impose a low balance account fee of $15
annually on 60 days prior notice. Each Fund may also redeem your account or
impose a low balance account fee if you have established your account under a
systematic investment program and discontinue the program before you meet the
minimum account balance. You may avoid redemption or imposition of a fee by
purchasing additional Fund shares during this 60-day period to bring your
account balance to the required minimum. If you own Class B shares, you will not
be charged a CDSC on a low balance redemption.
Each Fund reserves the right to make in-kind redemptions. This means that
it could respond to a redemption request by distributing shares of the Fund's
underlying investments rather than distributing cash.
CAN I EXCHANGE MY SHARES FOR THE SHARES OF OTHER FIRST INVESTORS FUNDS?
You may exchange shares of the Funds for shares of other First Investors
Funds without paying any additional sales charge. You can only exchange within
the same class of shares (i.e., Class A to Class A). Consult your Representative
or call ADM at 1-800-423-4026 for details.
Each Fund reserves the right to reject any exchange request that appears to
be part of a market timing strategy based upon the holding period of the initial
investment, the amount of the investment being exchanged, the funds involved,
and the background of the shareholder or dealer involved. Each Fund is designed
for long-term investment purposes. It is not intended to provide a vehicle for
short-term market timing.
ACCOUNT POLICIES
WHAT ABOUT DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS?
Each Fund will declare daily and pay on a monthly basis dividends from net
investment income. Any net realized capital gains will be declared and
distributed on an annual basis, usually after the end of each Fund's fiscal
year. Each Fund may make an additional distribution in any year if necessary to
avoid a federal excise tax on certain undistributed income and capital gain.
23
<PAGE>
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 each 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. 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 choose to reinvest all dividends and other distributions at NAV in
additional shares of the same class of a Fund or certain other First Investors
Funds, or receive all dividends and other distributions in cash. If you do not
select an option when you open your account, all dividends and other
distributions will be reinvested in additional shares of that Fund. If you do
not cash a distribution check and do not notify ADM to issue a new check within
12 months, the distribution may be reinvested in that Fund. If any
correspondence sent by a Fund is returned as "undeliverable," dividends and
other distributions automatically will be reinvested in that Fund. No interest
will be paid to you while a distribution remains uninvested.
A dividend or other distribution paid on a class of shares will only be
paid in additional shares of the distributing class if the total amount of the
distribution is under $5 or the Fund has received notice of your death (until
written alternate payment instructions and other necessary documents are
provided by your legal representative).
WHAT ABOUT TAXES?
Any dividends or capital gain distributions paid by a Fund are taxable to
you unless you hold your shares in an individual retirement account, 403(b)
account, 401(k) account, or other tax-deferred account. Dividends (including
distributions of net short-term capital gains) are taxable to you as ordinary
income. Capital gain distributions (essentially, distributions of net long-term
capital gains) by a Fund are taxed to you as long-term capital gains, regardless
of how long you owned your Fund shares. You are taxed in the same manner whether
you receive your dividends and capital gain distributions in cash or reinvest
them in additional Fund shares. Your sale or exchange of Fund shares will be
considered a taxable event for you. Depending on the purchase price and the
sales price of the shares you sell or exchange, you may have a gain or a loss on
the transaction. You are responsible for any tax liabilities generated by your
transactions.
HOW DO I OBTAIN A COMPLETE EXPLANATION OF ALL ACCOUNT PRIVILEGES AND POLICIES?
Each Fund offers a full range of special privileges, including special
investment programs for group retirement plans, systematic investment programs,
automatic payroll investment programs, telephone privileges, check writing
privileges, and expedited redemptions by wire order or Automated Clearing House
transfer. The full range of privileges, and related policies, are described in a
special Shareholder Manual, which you may obtain on request. For more
information on the full range of services available, please contact us directly
at 1-800-423-4026.
24
<PAGE>
VI. OTHER INFORMATION
-----------------
Each Fund is subject to the information requirements of the Securities and
Exchange Act of 1934 and the Investment Company Act of 1940, and in accordance
with those requirements, files reports and other information with the SEC. These
reports, proxy material and other information can be inspected and copied at the
Public Reference Room maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Northeast Regional Office of the SEC, Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
materials can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates.
A narrative review of the Fund For Income's performance, as well as a
graphical and tabular summary of performance, for the period ended September 30,
1999 are attached hereto as Appendix B. Similar information for the High Yield
Fund for the period ended September 30, 1999 is incorporated by reference from
the Fund's Annual Report to shareholders, electronically filed with the SEC on
December 6, 1999, and is available upon request from the Funds without charge.
25
<PAGE>
VII. FINANCIAL HIGHLIGHTS
--------------------
The financial highlights table is intended to help you understand the
Funds' financial performance for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in the
tables represent the rate that an investor would have earned (or lost) on an
investment in each Fund (assuming reinvestment of all dividends and
distributions). The information has been audited by Tait, Weller & Baker, whose
report, along with the Funds' financial statements, are included in the SAI,
which is available upon request.
<TABLE>
<CAPTION>
FUND FOR INCOME
------------------------------------------------------------------------
PER SHARE DATA
------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM
NET
NET REALIZED
ASSET NET AND TOTAL NET
VALUE INVEST- UNREALIZED FROM INVEST- NET TOTAL
BEGINNING MENT GAIN (LOSS) INVESTMENT MENT REALIZED DISTRI-
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME GAINS BUTIONS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1994(d) $4.17 $.37 $(.35) $.02 $.38 $-- $.38
1995(d) 3.81 .38 .30 .68 .36 -- .36
1996(d) 4.13 .39 .14 .53 .37 -- .37
1997(d) 4.29 .38 .14 .52 .38 -- .38
1998(a) 4.43 .29 (.26) .03 .29 -- .29
1999(e) 4.17 .40 (.27) .13 .38 -- .38
CLASS B
1995(b) $3.81 $.31 $.33 $.64 $.32 $-- $.32
1996(d) 4.13 .38 .12 .50 .35 -- .35
1997(d) 4.28 .34 .15 .49 .35 -- .35
1998(a) 4.42 .26 (.26) -- .26 -- .26
1999(e) 4.16 .37 (.27) .10 .36 -- .36
* Calculated without sales charges
+ Annualized
++ Net of expenses waived or assumed
(a) For the period January 1, 1998 to September 30, 1998
(b) For the period January 12, 1995 (date class B shares first offered) to December 31, 1995
(d) For the calendar year ended December 31
(e) For the fiscal year ended September 30
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
RATIO TO AVERAGE NET
RATIO TO AVERAGE ASSETS BEFORE EXPENSES
NET ASSETS ++ WAIVED OR ASSUMED
---------------- ----------------------
NET NET
NET ASSET INVEST- INVEST-
VALUE TOTAL NET ASSETS MENT MENT PORTFOLIO
END OF RETURN* END OF PERIOD EXPENSES INCOME EXPENSES INCOME TURNOVER RATE
PERIOD (%) (IN MILLIONS) (%) (%) (%) (%) (%)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$3.81 .58 $401 1.22 9.34 N/A N/A 39
4.13 18.54 425 1.18 9.53 N/A N/A 33
4.29 13.40 432 1.16 9.27 N/A N/A 30
4.43 12.62 439 1.15 8.63 N/A N/A 45
4.17 .49 410 1.27+ 8.68+ N/A N/A 28
3.92 3.13 389 1.29 9.71 N/A N/A 28
$4.13 17.46 $ 2 1.92+ 8.78+ N/A N/A 33
4.28 12.51 3 1.86 8.57 N/A N/A 30
4.42 11.95 6 1.85 7.93 N/A N/A 45
4.16 (.06) 9 1.97+ 7.98+ N/A N/A 28
3.90 2.29 14 1.99 9.01 N/A N/A 28
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
HIGH YIELD FUND
---------------------------------------------------------------------------------------------------------------
PER SHARE DATA
---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM
--------------------------------- -----------------------
NET ASSET NET NET REALIZED NET
VALUE INVEST- AND UNREALIZED TOTAL FROM INVEST- NET TOTAL
BEGINNING MENT GAIN (LOSS) INVESTMENT MENT REALIZED DISTRI-
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS BUTIONS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
- -------
1994(d)..................... $5.30 $.48 $(.46) $ .02 $.48 $ -- $.48
1995(d)..................... 4.84 .47 .39 .86 .48 -- .48
1996(d)..................... 5.22 .47 .20 .67 .49 -- .49
1997(d)..................... 5.40 .46 .15 .61 .48 -- .48
1998(a)..................... 5.53 .35 (.34) .01 .34 -- .34
1999(e)..................... 5.20 .48 (.34) .14 .46 -- .46
CLASS B
- -------
1995(b)..................... $4.84 $.42 $ .40 $ .82 $.43 $ -- $.43
1996(d)..................... 5.23 .44 .18 .62 .45 -- .45
1997(d)..................... 5.40 .43 .14 .57 .44 -- .44
1998(a)..................... 5.53 .32 (.34) (.02) .32 -- .32
1999(e)..................... 5.19 .44 (.34) .10 .42 -- .42
* Calculated without sales charges
+ Annualized
++ Net of expenses waived or assumed
(a) For the period January 1, 1998 to September 30, 1998
(b) For the period January 12, 1995 (date class B shares first offered) to December 31, 1995
(d) For the calendar year ended December 31
(e) For the fiscal year ended September 30
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET
RATIO TO AVERAGE ASSETS BEFORE EXPENSES
NET ASSETS ++ WAIVED OR ASSUMED
----------------------------------------------------------------
NET ASSET NET NET
VALUE TOTAL NET ASSETS INVESTMENT INVESTMENT PORTFOLIO
END OF RETURN* END OF PERIOD EXPENSES INCOME EXPENSES INCOME TURNOVER
PERIOD (%) (IN MILLIONS) (%) (%) (%) (%) RATE (%)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$4.84 .39 $170 1.56 9.48 1.59 9.44 32
5.22 18.43 187 1.45 9.22 1.55 9.12 42
5.40 13.35 202 1.37 8.99 1.52 8.84 29
5.53 11.84 209 1.29 8.17 1.48 7.98 46
5.20 .08 194 1.36+ 8.36+ 1.59+ 8.13+ 20
4.88 2.54 176 1.37 9.31 1.62 9.06 30
$5.23 17.40 $ 1 2.22+ 8.45+ 2.32+ 8.35+ 42
5.40 12.41 4 2.07 8.28 2.22 8.13 29
5.53 11.11 7 1.99 7.47 2.18 7.28 46
5.19 (.59) 9 2.06+ 7.66+ 2.29+ 7.43+ 20
4.87 1.90 9 2.07 8.61 2.32 8.36 30
</TABLE>
29
<PAGE>
APPENDIX A
----------
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of January 7, 2000, between FIRST INVESTORS HIGH YIELD FUND, INC., a
Maryland corporation ("Target"), and FIRST INVESTORS FUND FOR INCOME, INC., a
Maryland corporation ("Acquiring Fund"). (Acquiring Fund and Target are
sometimes referred to herein individually as a "Fund" and collectively as the
"Funds.")
The Funds desire to effect a reorganization described in section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code"), and
intend this Agreement to be, and adopt it as, a "plan of reorganization" within
the meaning of the regulations under the Code ("Regulations"). The
reorganization will involve the transfer to Acquiring Fund of Target's assets in
exchange solely for shares of beneficial interest ("shares") in Acquiring Fund
and the assumption by Acquiring Fund of Target's liabilities, followed by the
constructive distribution of those shares PRO RATA to the holders of shares of
beneficial interest in Target ("Target Shares") in exchange therefor, all on the
terms and conditions set forth herein. The foregoing transactions are referred
to herein collectively as the "Reorganization."
The Target Shares are divided into two classes, designated Class A and
Class B shares ("Class A Target Shares" and "Class B Target Shares,"
respectively). Acquiring Fund's shares are also divided into two classes
("Acquiring Fund Shares"), designated Class A and Class B shares ("Class A
Acquiring Fund Shares" and "Class B Acquiring Fund Shares," respectively). Each
class of Acquiring Fund Shares is similar to the corresponding class of Target
Shares (I.E., the Funds' Class A Shares correspond to each other and the Funds'
Class B Shares correspond to each other).
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
--------------------------------------
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and fractional
(rounded to the third decimal place) (i) Class A Acquiring Fund
Shares, determined by dividing the net value of Target (computed
as set forth in paragraph 2.1) ("Target Value") attributable to
the Class A Target Shares by the net asset value ("NAV") of a
Class A Acquiring Fund Share (computed as set forth in paragraph
2.2), and (ii) Class B Acquiring Fund Shares, determined by
dividing the Target Value attributable to the Class B Target
<PAGE>
Shares by the NAV of a Class B Acquiring Fund Share (as so
computed), and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in
paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement.
Notwithstanding the foregoing, Target agrees to use its best efforts to
discharge all its known Liabilities before the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and substantially all of its realized net
capital gain, if any, for its current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to its shareholders of record, determined as of the
Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by Acquiring Fund's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with
the respective PRO RATA number of full and fractional (rounded to the third
decimal place) Acquiring Fund Shares due that Shareholder by class (I.E., the
account for a Shareholder of Class A Target Shares shall be credited with the
respective PRO RATA number of Class A Acquiring Fund Shares due that
Shareholder, and the account for a Shareholder of Class B Target Shares shall be
credited with the respective PRO RATA number of Class B Acquiring Fund Shares
due that Shareholder). All outstanding Target Shares, including any represented
by certificates, shall simultaneously be canceled on Target's share transfer
books. Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares issued in connection with the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within twelve months
after the Effective Time, Target shall be terminated and any further actions
shall be taken in connection therewith as required by applicable law.
2
<PAGE>
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable on issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
---------
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"), using the
valuation procedures set forth in Target's then-current prospectus and statement
of additional information (collectively "P/SAI") less (b) the amount of the
Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time, using the valuation procedures set
forth in Acquiring Fund's then-current P/SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of First Investors Management Company, Inc. ("FIMCO").
3. CLOSING AND EFFECTIVE TIME
--------------------------
3.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at the Funds' principal office on
or about March 14, 2000, or at such other place and/or on such other date as to
which the parties may agree. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the date
thereof or at such other time as to which the parties may agree ("Effective
Time"). If, immediately before the Valuation Time, (a) the NYSE is closed to
trading or trading thereon is restricted or (b) trading or the reporting of
trading on the NYSE or elsewhere is disrupted, so that accurate appraisal of the
net value of Target and the NAV of an Acquiring Fund Share is impracticable, the
Effective Time shall be postponed until the first business day after the day
when such trading shall have been fully resumed and such reporting shall have
been restored.
3.2. Target's fund accounting and pricing agent shall deliver at the
Closing a certificate of an authorized officer verifying that the information
(including adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, transferred by Target to Acquiring Fund, as
reflected on Acquiring Fund's books immediately following the Closing, does or
will conform to such information on Target's books immediately before the
Closing. Target's custodian shall deliver at the Closing a certificate of an
authorized officer stating that (a) the Assets held by the custodian will be
transferred to Acquiring Fund at the Effective Time and (b) all necessary taxes
in conjunction with the delivery of the Assets, including all applicable federal
and state stock transfer stamps, if any, have been paid or provision for payment
has been made.
3
<PAGE>
3.3. Target shall deliver to Acquiring Fund at the Closing a list of the
names and addresses of the Shareholders and the number of outstanding Target
Shares owned by each Shareholder, all as of the Effective Time, certified by the
Secretary or Assistant Secretary of Target. Acquiring Fund's transfer agent
shall deliver at the Closing a certificate as to the opening on Acquiring Fund's
share transfer books of accounts in the Shareholders' names. Acquiring Fund
shall issue and deliver a confirmation to Target evidencing the Acquiring Fund
Shares to be credited to Target at the Effective Time or provide evidence
satisfactory to Target that such Acquiring Fund Shares have been credited to
Target's account on Acquiring Fund's books. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, stock
certificates, receipts, or other documents as the other party or its counsel may
reasonably request.
3.4. Each Fund shall deliver to the other at the Closing a certificate
executed in its name by its President or a Vice President in form and substance
satisfactory to the recipient and dated the Effective Time, to the effect that
the representations and warranties it made in this Agreement are true and
correct at the Effective Time except as they may be affected by the transactions
contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
4.1. Target represents and warrants as follows:
4.1.1. Target is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland; and a copy of
its Articles of Incorporation ("Target Articles") is on file with the
Secretary of the State of Maryland;
4.1.2. Target is duly registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"),
and such registration will be in full force and effect at the Effective
Time;
4.1.3. At the Closing, Target will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer,
and deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.4. Target's current P/SAI conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended ("1933
Act"), and the 1940 Act and the rules and regulations thereunder and do
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
4.1.5. Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby
will not conflict with or violate, Maryland law or any provision of the
Target Articles or By-Laws or of any agreement, instrument, lease, or
other undertaking to which Target is a party or by which it is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Target is a
4
<PAGE>
party or by which it is bound, except as previously disclosed in writing
to and accepted by Acquiring Fund;
4.1.6. Except as otherwise disclosed in writing to and accepted by
Acquiring Fund, all material contracts and other commitments of or
applicable to Target (other than this Agreement and investment contracts,
including options, futures, and forward contracts) will be terminated, or
provision for discharge of any liabilities of Target thereunder will be
made, at or prior to the Effective Time, without either Fund's incurring
any liability or penalty with respect thereto and without diminishing or
releasing any rights Target may have had with respect to actions taken or
omitted or to be taken by any other party thereto prior to the Closing;
4.1.7. Except as otherwise disclosed in writing to and accepted by
Acquiring Fund, no litigation, administrative proceeding, or investigation
of or before any court or governmental body is presently pending or (to
Target's knowledge) threatened against Target that, if adversely
determined, would materially and adversely affect its financial condition
or the conduct of its business; Target knows of no facts that might form
the basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially or adversely affects its business or its ability to consummate
the transactions contemplated hereby;
4.1.8. The execution, delivery, and performance of this Agreement
have been duly authorized as of the date hereof by all necessary action on
the part of Target's board of directors, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders, this Agreement constitutes a valid and legally
binding obligation of Target, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
4.1.9. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's
shareholders;
4.1.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934, as amended ("1934 Act"), or the 1940 Act for the execution or
performance of this Agreement by Target, except for (a) the filing with
the Securities and Exchange Commission ("SEC") of a registration statement
by Acquiring Fund on Form N-14 relating to the Acquiring Fund Shares
issuable hereunder, and any supplement or amendment thereto ("Registration
Statement"), including therein a prospectus/proxy statement ("Proxy
Statement"), and (b) such consents, approvals, authorizations, and filings
as have been made or received or as may be required subsequent to the
Effective Time;
4.1.11. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
5
<PAGE>
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Acquiring Fund for use therein;
4.1.12. The Liabilities were incurred by Target in the ordinary
course of its business and are associated with the Assets; and there are
no Liabilities other than liabilities disclosed or provided for in
Target's financial statements referred to in paragraph 4.1.17 and
liabilities incurred by Target in the ordinary course of its business
subsequent to September 30, 1999, or otherwise previously disclosed to
Acquiring Fund, none of which has been materially adverse to the business,
assets, or results of Target's operations;
4.1.13. Target qualified for treatment as a regulated investment
company under Subchapter M of the Code ("RIC") for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; and it
has no earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it. The Assets shall be
invested at all times through the Effective Time in a manner that ensures
compliance with the foregoing;
4.1.14. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of section 368(a)(3)(A) of the Code;
4.1.15. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested
in the stock and securities of any one issuer, and not more than 50% of
the value of such assets is invested in the stock and securities of five
or fewer issuers;
4.1.16. Target's federal income tax returns, and all applicable state
and local tax returns, for all taxable years to and including the taxable
year ended September 30, 1998, have been timely filed and all taxes
payable pursuant to such returns have been timely paid; and
4.1.17. The financial statements of Target for the year ended
September 30, 1999, to be delivered to Acquiring Fund, fairly represent
the financial position of Target as of that date and the results of its
operations and changes in its net assets for the year then ended.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. Acquiring Fund is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland;
and a copy of its Articles of Incorporation ("Acquiring Articles") is on
file with the Secretary of the State of Maryland;
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4.2.2. Acquiring Fund is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.4. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued
and outstanding shares of Acquiring Fund, fully paid and non-assessable;
4.2.5. Acquiring Fund's current P/SAI conform in all material
respects to the applicable requirements of the 1933 Act and the 1940 Act
and the rules and regulations thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
4.2.6. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Maryland law or any
provision of the Acquiring Articles or Acquiring Fund's By-Laws or of any
provision of any agreement, instrument, lease, or other undertaking to
which Acquiring Fund is a party or by which it is bound or result in the
acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which Acquiring Fund is a party or
by which it is bound, except as previously disclosed in writing to and
accepted by Target;
4.2.7. Except as otherwise disclosed in writing to and accepted by
Target, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to
Acquiring Fund's knowledge) threatened against Acquiring Fund that, if
adversely determined, would materially and adversely affect Acquiring
Fund's financial condition or the conduct of its business; Acquiring Fund
knows of no facts that might form the basis for the institution of any
such litigation, proceeding, or investigation and is not a party to or
subject to the provisions of any order, decree, or judgment of any court
or governmental body that materially or adversely affects its business or
its ability to consummate the transactions contemplated hereby;
4.2.8. The execution, delivery, and performance of this Agreement
have been duly authorized as of the date hereof by all necessary action on
the part of Acquiring Fund's board of directors (together with Target's
board of directors, the "Boards"), which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and this Agreement
constitutes a valid and legally binding obligation of Acquiring Fund,
enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
and by general principles of equity;
7
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4.2.9. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by Acquiring Fund, except
for (a) the filing with the SEC of the Registration Statement and a
post-effective amendment to Acquiring Fund's registration statement on
Form N1-A and (b) such consents, approvals, authorizations, and filings as
have been made or received or as may be required subsequent to the
Effective Time;
4.2.10. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Target for use therein;
4.2.11. Acquiring Fund qualified for treatment as a RIC for each past
taxable year since it commenced operations and will continue to meet all
the requirements for such qualification for its current taxable year;
Acquiring Fund intends to continue to meet all such requirements for the
next taxable year; and it has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M of the Code did not
apply to it;
4.2.12. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares
issued in the ordinary course of its business as an open-end investment
company; nor does Acquiring Fund have any plan or intention to redeem or
otherwise reacquire any Acquiring Fund Shares issued to the Shareholders
pursuant to the Reorganization, except to the extent it is required by the
1940 Act to redeem any of its shares presented for redemption at net asset
value in the ordinary course of that business;
4.2.13. Following the Reorganization, Acquiring Fund (a) will
continue Target's "historic business" (within the meaning of section
1.368-1(d)(2) of the Regulations), (b) use a significant portion of
Target's "historic business assets" (within the meaning of section
1.368-1(d)(3) of the Regulations) in a business, (c) has no plan or
intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of that business and dispositions
necessary to maintain its status as a RIC, and (d) expects to retain
substantially all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4.2.14. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or a business trust or any
"fund" thereof (within the meaning of section 851(g)(2) of the Code)
following the Reorganization;
8
<PAGE>
4.2.15. Immediately after the Reorganization, (a) not more than 25%
of the value of Acquiring Fund's total assets (excluding cash, cash items,
and U.S. government securities) will be invested in the stock and
securities of any one issuer and (b) not more than 50% of the value of
such assets will be invested in the stock and securities of five or fewer
issuers;
4.2.16. Acquiring Fund does not directly or indirectly own, nor at
the Effective Time will it directly or indirectly own, nor has it directly
or indirectly owned, at any time during the past five years, any shares of
Target;
4.2.17. Acquiring Fund's federal income tax returns, and all
applicable state and local tax returns, for all taxable years to and
including the taxable year ended September 30, 1998, have been timely
filed and all taxes payable pursuant to such returns have been timely
paid;
4.2.18. The financial statements of Acquiring Fund for the year ended
September 30, 1999, to be delivered to Target, fairly represent the
financial position of Acquiring Fund as of that date and the results of
its operations and changes in its net assets for the year then ended; and
4.3. Each Fund represents and warrants as follows:
4.3.1. The aggregate fair market value of the Acquiring Fund Shares,
when received by the Shareholders, will be approximately equal to the
aggregate fair market value of their Target Shares constructively
surrendered in exchange therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person related
(within the meaning of section 1.368-1(e)(3) of the Regulations) to either
Fund or (ii) any portion of the Acquiring Fund Shares to be received by
them in the Reorganization to any person related (as so defined) to
Acquiring Fund, (b) does not anticipate dispositions of those Acquiring
Fund Shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of dispositions of shares of Target as an
open-end investment company, (c) expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or
at the time of the Reorganization will be DE MINIMIS, and (d) does not
anticipate that there will be extraordinary redemptions of Acquiring Fund
Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto (in addition to the assets and liabilities
Acquiring Fund then held or was subject to), plus any liabilities and
expenses of the parties incurred in connection with the Reorganization;
9
<PAGE>
4.3.5. The fair market value of the Assets on a going concern basis
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to pay
its Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions not made as
part of the Reorganization and (b) distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code) will be included as assets held thereby
immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration
for, or allocable to, any of the Target Shares held by such Shareholder;
none of the Acquiring Fund Shares received by any such Shareholder will be
separate consideration for, or allocable to, any employment agreement,
investment advisory agreement, or other service agreement; and the
consideration paid to any such Shareholder will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services;
4.3.9. Immediately after the Reorganization, the Shareholders will
not own shares constituting "control" within the meaning of section 304(c)
of the Code of Acquiring Fund; and
4.3.10. Neither Fund will be reimbursed for any expenses incurred by
it or on its behalf in connection with the Reorganization unless those
expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1
C.B. 187) ("Reorganization Expenses").
5. COVENANTS
---------
5.1. Each Fund covenants to operate its respective business in the
ordinary course between the date hereof and the Closing, it being understood
that
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and such changes in operations
as are contemplated by each Fund's normal business activities and
10
<PAGE>
(b) each Fund will retain exclusive control of the composition of its
portfolio until the Closing; provided that (1) Target shall not
dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior
consent and (2) if Target's shareholders' approve this Agreement
(and the transactions contemplated hereby), then between the date
of such approval and the Closing, the Funds shall coordinate
their respective portfolios so that the transfer of the Assets to
Acquiring Fund will not cause it to fail to be in compliance with
all of its investment policies and restrictions immediately after
the Closing.
5.2. Target covenants to call a shareholders' meeting to consider and act
on this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist Acquiring Fund in obtaining such
information as Acquiring Fund reasonably requests concerning the beneficial
ownership of Target Shares.
5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to Acquiring Fund at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
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6. CONDITIONS PRECEDENT
--------------------
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all its obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Boards and shall have been approved by
Target's shareholders in accordance with the Target Articles and applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Investment Company
may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. The Reorganization shall be contingent upon, among other things,
issuance by the SEC of an Order pursuant to Section 26(b) of the 1940 Act
approving the substitution of shares of Acquiring Fund for shares of Target for
investments under the First Investors Periodic Payment Plans for Investment in
First Investors High Yield Fund, Inc. This contingency, however, may be waived
by the Funds' Boards.
6.5. Target shall have received an opinion of Kirkpatrick & Lockhart LLP
("Counsel") substantially to the effect that:
6.5.1.Acquiring Fund is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland
with power under the Acquiring Articles to own all its properties and
assets and, to the knowledge of Counsel, to carry on its business as
presently conducted;
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<PAGE>
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Acquiring Fund and (b) assuming due authorization, execution,
and delivery of this Agreement by Target, is a valid and legally binding
obligation of Acquiring Fund, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
6.5.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable;
6.5.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate the Acquiring Articles or By-Laws or any provision of any
agreement (known to Counsel, without any independent inquiry or
investigation) to which Acquiring Fund is a party or by which it is bound
or (to the knowledge of Counsel, without any independent inquiry or
investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Acquiring Fund is a party or by which it is bound, except as set
forth in such opinion or as previously disclosed in writing to and
accepted by Target;
6.5.5. To the knowledge of Counsel (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by
Acquiring Fund of the transactions contemplated herein, except such as
have been obtained under the 1933 Act, the 1934 Act, and the 1940 Act and
such as may be required under state securities laws;
6.5.6. Acquiring Fund is registered with the SEC as an investment
company, and to the knowledge of Counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.5.7. To the knowledge of Counsel (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Acquiring Fund or any of its properties or assets and (b)
Acquiring Fund is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially and adversely affects its business, except as set forth in such
opinion or as otherwise disclosed in writing to and accepted by Target.
In rendering such opinion, Counsel may (1) rely, as to matters governed by the
laws of the State of Maryland, on an opinion of competent Maryland counsel, (2)
make assumptions regarding the authenticity, genuineness, and/or conformity of
documents and copies thereof without independent verification thereof, (3) limit
such opinion to applicable federal and state law, and (4) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
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6.6. Acquiring Fund shall have received an opinion of Counsel
substantially to the effect that:
6.6.1. Target is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland with power under
the Target Articles to own all its properties and assets and, to the
knowledge of Counsel, to carry on its business as presently conducted;
6.6.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target and (b) assuming due authorization, execution, and
delivery of this Agreement by Acquiring Fund, is a valid and legally
binding obligation of Target, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
6.6.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate the Target Articles or By-Laws or any provision of any agreement
(known to Counsel, without any independent inquiry or investigation) to
which Target is a party or by which it is bound or (to the knowledge of
Counsel, without any independent inquiry or investigation) result in the
acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which Target is a party or by which
it is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by Acquiring Fund;
6.6.4. To the knowledge of Counsel (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by Target
of the transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act, and the 1940 Act and such as may be
required under state securities laws;
6.6.5. Target is registered with the SEC as an investment company,
and to the knowledge of Counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.6.6. To the knowledge of Counsel (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Target or any of its properties or assets and (b) Target
is not a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially and adversely
affects Target's business, except as set forth in such opinion or as
otherwise disclosed in writing to and accepted by Acquiring Fund.
In rendering such opinion, Counsel may (1) rely, as to matters governed by the
laws of the State of Maryland, on an opinion of competent Maryland counsel, (2)
make assumptions regarding the authenticity, genuineness, and/or conformity of
documents and copies thereof without independent verification thereof, (3) limit
such opinion to applicable federal and state law, and (4) define the word
14
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"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.7. Each Fund shall have received an opinion of Counsel, addressed to and
in form and substance satisfactory to it, as to the federal income tax
consequences mentioned below ("Tax Opinion"). In rendering the Tax Opinion,
Counsel may rely as to factual matters, exclusively and without independent
verification, on the representations made in this Agreement which Counsel may
treat as representations made to it, or in separate letters addressed to
Counsel, and the certificates delivered pursuant to paragraph 3.4. The Tax
Opinion shall be substantially to the effect that, based on the facts and
assumptions stated therein, for federal income tax purposes:
6.7.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares PRO RATA to
the Shareholders constructively in exchange for the Shareholders' Target
Shares, will constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
6.7.2. Target will recognize no gain or loss on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.7.3. Acquiring Fund will recognize no gain or loss on its receipt
of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.7.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.7.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.7.6. A Shareholder's aggregate basis for the Acquiring Fund Shares
to be received by it in the Reorganization will be the same as the
aggregate basis for its Target Shares to be constructively surrendered in
exchange for those Acquiring Fund Shares, and its holding period for those
Acquiring Fund Shares will include its holding period for those Target
Shares, provided they are held as capital assets by the Shareholder at the
Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
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taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting.
At any time before the Closing, either Investment Company may waive any of the
foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.
7. FINDERS FEES AND EXPENSES
-------------------------
7.1. Each Fund represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
7.2. Except as otherwise provided herein, all the Reorganization Expenses
will be borne by the Funds in proportion to their respective total net assets as
of the close of business on the last business day prior to the Closing.
8. ENTIRE AGREEMENT; NO SURVIVAL
-----------------------------
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.
9. TERMINATION OF AGREEMENT
------------------------
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach
of any representation, warranty, or covenant contained herein to be performed at
or prior to the Effective Time, (b) if a condition to its obligations has not
been met and it reasonably appears that such condition will not or cannot be
met, or (c) if the Closing has not occurred on or before December 31, 2000; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or its directors or officers,
to the other Fund.
10. AMENDMENT
---------
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
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11. MISCELLANEOUS
-------------
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Maryland; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2. Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
11.3. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Fund and delivered to
the other. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
ATTEST: FIRST INVESTORS HIGH YIELD FUND, INC.
/s/ C. Durso By: /s/ Glenn O. Head
- --------------------------- -----------------------------
Concetta Durso, Secretary Glenn O. Head, President
ATTEST: FIRST INVESTORS FUND FOR INCOME, INC.
/s/ C. Durso By: /s/ Glenn O. Head
- --------------------------- -----------------------------
Concetta Durso, Secretary Glenn O. Head, President
17
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APPENDIX B
PORTFOLIO MANAGER'S LETTER
FIRST INVESTORS FUND FOR INCOME, INC.
Dear Investor:
We are pleased to present the annual report for the First Investors Fund For
Income for the fiscal year ending September 30, 1999. During the period, the
Fund's return on a net asset value basis was 3.1% on Class A shares and 2.3% on
Class B shares, compared to a return of 4.8% for the Lipper high yield bond fund
group. During the period, the Fund declared dividends from net investment income
of 38.4 cents per share on Class A shares and 36 cents per share on Class B
shares.
The primary factors that drove the Fund's performance during the fiscal
year were the rising interest rate environment and the credit quality of the
bonds in the portfolio. The reporting period began with the resolution of
several system-wide financial difficulties. Financial markets struggled to put
the difficulties of the summer -- the Asian economic crisis, Russian
devaluation, and the near-collapse of the giant hedge fund Long-Term Capital
Management -- behind them. Investors around the world shunned risk and sought
safety. Corporate bonds in general became "cheap," and lower-rated, high yield
bonds suffered the most. The Federal Reserve, looking to prevent a credit
crunch, provided liquidity to the monetary system by lowering interest rates
three times in an eight-week period. Investors became more comfortable -- though
still selective -- with risk, and the high yield market rebounded sharply in
November, posting one of its best months ever.
In the early part of 1999, investors continued to shun riskier bonds. Investor
confidence returned in March, and the high yield market surged. Risk was
rewarded, not only for lower-quality issues, but also for bonds with longer
durations and those issued in emerging markets. For the quarter, lower-rated
issues tended to outperform higher-rated issues and overall, the high-yield
market outperformed other domestic fixed income markets.
By the middle of 1999,the domestic economy continued to be strong and the market
began to brace for possible tightening by the Fed to stave off inflation. Yields
rose in May as interest rate concerns were priced into the market. New issuance
- -- which had been building slowly through the year -- declined somewhat in June.
On June 25, 1999, the Fed, as expected, raised interest rates 25 basis points.
Demand for high yield bonds abated, as evidenced by heavy mutual fund outflows
in May, and smaller outflows in June.
The latter part of the reporting period was difficult for the high-yield market,
and it was the weakest performing sector in the bond market. The Fed raised
rates a second time in August, and economic uncertainty prompted concerns
regarding the need for further rate increases. Demand within the high-yield
market fell, liquidity decreased and new issuance slowed. In this guarded
environment, higher-rated issues tended to outperform lower-rated issues.
A number of factors aided the Fund's performance during the reporting period. In
general, the Fund's holdings of higher-rated bonds helped to enhance returns.
<PAGE>
Also, a number of positions in the telecommunications sector performed well, in
large part because of merger and acquisition activity. The Fund's performance
was negatively impacted by poor performance in several sectors, including health
care, which was hurt due to the enactment of various reimbursement-related
legislation. Two of the Fund's holdings, Genesis Health Ventures, Inc. and
Integrated Health Services, were particularly hard hit. In addition, holdings in
the textile/apparel industry negatively impacted performance.
Going forward, we will likely see a continuation of current market conditions.
We look forward to stabilization in the high yield market early in 2000, as Y2K
concerns pass and the economic picture becomes clearer. The Fund will continue
to focus on credit quality and seek value in the high yield market.
Thank you for placing your trust in First Investors. As always, we appreciate
the opportunity to serve your investment needs.
Sincerely,
/s/ Nancy W. Jones
- ------------------
Nancy W. Jones
Vice President and Portfolio Manager
October 29, 1999
<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 CS First Boston High Yield Index.
$1,000
[GRAPH OMITTED]
THE GRAPH COMPARES A $10,000 INVESTMENT IN THE FIRST INVESTORS FUND FOR INCOME,
INC. (CLASS A SHARES) BEGINNING 1/1/90 WITH A THEORETICAL INVESTMENT IN THE CS
FIRST BOSTON HIGH YIELD INDEX. THE CS FIRST BOSTON HIGH YIELD INDEX IS DESIGNED
TO MEASURE THE PERFORMANCE OF THE HIGH YIELD BOND MARKET. THE INDEX CONSISTS OF
1,631 DIFFERENT ISSUES, 1,403 OF WHICH ARE CASH PAY, 176 ARE ZERO-COUPON, 11 ARE
STEP BONDS, 18 ARE PAY-IN-KIND BONDS AND THE REMAINING 23 ARE IN DEFAULT. THE
BONDS INCLUDED IN THE INDEX HAVE AN AVERAGE LIFE OF 7.9 YEARS, AN AVERAGE
MATURITY OF 7.9 YEARS, AN AVERAGE DURATION OF 4.8 YEARS AND AN AVERAGE COUPON OF
10.1%. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN THIS INDEX. IN ADDITION, THE
INDEX DOES NOT TAKE INTO ACCOUNT FEES AND EXPENSES. FOR PURPOSES OF THE GRAPH
AND THE ACCOMPANYING TABLE, UNLESS OTHERWISE INDICATED, IT HAS BEEN ASSUMED THAT
THE MAXIMUM SALES CHARGE WAS DEDUCTED FROM THE INITIAL $10,000 INVESTMENT IN THE
FUND AND ALL DIVIDENDS AND DISTRIBUTIONS WERE REINVESTED. CLASS B SHARES
PERFORMANCE MAY BE GREATER THAN OR LESS THAN THAT SHOWN IN THE LINE GRAPH ABOVE
FOR CLASS A SHARES BASED ON DIFFERENCES IN SALES LOADS AND FEES PAID BY
SHAREHOLDERS INVESTING IN THE DIFFERENT CLASSES.
* AVERAGE ANNUAL TOTAL RETURN FIGURES (FOR THE YEAR ENDED 9/30/99) INCLUDE THE
REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS. "N.A.V. ONLY" RETURNS ARE
CALCULATED WITHOUT SALES CHARGES. THE CLASS A "S.E.C. STANDARDIZED" RETURNS
SHOWN ARE BASED ON THE MAXIMUM SALES CHARGE OF 6.25% (PRIOR TO 7/1/93, THE
MAXIMUM SALES CHARGE WAS 6.9%). THE CLASS B "S.E.C. STANDARDIZED" RETURNS ARE
ADJUSTED FOR THE APPLICABLE DEFERRED SALES CHARGE (MAXIMUM OF 4% IN THE FIRST
YEAR). 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. CS
FIRST BOSTON HIGH YIELD INDEX FIGURES FROM CS FIRST BOSTON CORPORATION AND ALL
OTHER FIGURES FROM FIRST INVESTORS MANAGEMENT COMPANY, INC.
