As filed with the Securities and Exchange Commission on April 19, 1996
Registration No. 2-66294
811-2981
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 15 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 15 X
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FIRST INVESTORS SPECIAL BOND FUND, INC.
(Exact name of Registrant as specified in charter)
Ms. Concetta Durso
Secretary and Vice President
First Investors Special Bond Fund, Inc.
95 Wall Street
New York, New York 10005
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement
It is proposed that this filing will become effective on April 29, 1996 pursuant
to paragraph (b) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously elected to register an indefinite number of shares of common stock,
par value $1.00 per share, under the Securities Act of 1933. Registrant filed a
Rule 24f-2 Notice for its fiscal year ending December 31, 1995 on February 27,
1996.
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<PAGE>
FIRST INVESTORS SPECIAL BOND FUND, INC.
CROSS-REFERENCE SHEET
N-1A Item No. Location
- ------------- --------
PART A: PROSPECTUS
1. Cover Page........................................ Cover Page
2. Synopsis.......................................... Not Applicable
3. Condensed Financial Information................... Financial Highlights
4. General Description of Registrant................. Investment Objectives
and Policies;
Investment Restrictions
5. Management of the Fund............................ Management
5A. Management's Discussion of
Fund Performance................................ Not Applicable
6. Capital Stock and Other Securities................ General Information;
Dividends and Other
Distributions;
Determination of Net
Asset Value
7. Purchase of Securities Being Offered.............. Purchase of Shares
8. Redemption or Repurchase.......................... Redemption of Shares
9. Pending Legal Proceedings......................... Not Applicable
PART B: STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page........................................ Cover Page
11. Table of Contents................................. Table of Contents
12. General Information and History................... General Information
13. Investment Objectives and Policies................ Investment Objectives
and Policies;
Investment Restrictions
14. Management of the Fund............................ Directors and Officers
15. Control Persons and Principal Holders
of Securities.................................. Not Applicable
16. Investment Advisory and Other Services............ Investment Adviser
17. Brokerage Allocation.............................. Allocation of Portfolio
Brokerage
18. Capital Stock and Other Securities................ Determination of Net
Asset Value
19. Purchase, Redemption and Pricing of
Securities Being Offered....................... Determination of Net
Asset Value
20. Tax Status........................................ Not Applicable
21. Underwriters...................................... Not Applicable
22. Performance Data.................................. Not Applicable
23. Financial Statements.............................. Financial Statements;
Report of Independent
Accountants
PART C: OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item so numbered, in Part C hereof.
<PAGE>
First Investors Special Bond Fund, Inc.
95 Wall Street, New York, N.Y. 10005/(212) 858-8200
This is a Prospectus for First Investors Special Bond Fund, Inc. ("Fund"),
an open-end diversified management investment company. Investments in the Fund
are only available through the purchase of Individual Variable Annuity Contracts
("Contracts") issued by First Investors Life Insurance Company ("First Investors
Life"). Purchase payments for the Contracts, net of certain expenses, are paid
into a unit investment trust, First Investors Life Variable Annuity Fund A
("Separate Account A"). Separate Account A uses these proceeds to purchase
shares of the Fund. Investments in the Fund are used to fund benefits under the
Contracts.
The Fund primarily seeks high current income without undue risk to
principal and secondarily seeks growth of capital by investing, under normal
market conditions, at least 65% of its total assets in high yield, high risk
securities. There can be no assurance the Fund will achieve its investment
objectives. Investments in high yield, high risk securities, commonly referred
to as "junk bonds," may entail risks that are different or more pronounced than
those involved in higher-rated securities. See "High Yield Securities--Risk
Factors."
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and should be retained for
further reference. First Investors Management Company, Inc. ("FIMCO" or
"Adviser") serves as investment adviser to the Fund. A Statement of Additional
Information ("SAI"), dated April 29, 1996 (which is incorporated by reference
herein), has been filed with the Securities and Exchange Commission. The SAI is
available at no charge upon request to the Fund at the address or telephone
number indicated above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 29, 1996
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth the per share operating performance data
for a share outstanding, total return, ratios to average net assets and other
supplemental data for each year indicated. The table has been derived from
financial statements which have been examined by Tait, Weller & Baker,
independent certified public accountants, whose report thereon appears in the
Statement of Additional Information ("SAI"). This information should be read in
conjunction with the Financial Statements and Notes thereto, which also appear
in the SAI, available at no charge upon request to the Fund.
2
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<TABLE>
<CAPTION>
-------------------------------------------------------
Year Ended December 31
-------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value, Beginning of Year $11.03 $12.18 $11.38 $11.05 $9.16
-------- -------- -------- -------- -------
Income from Investment Operations
Net investment income 1.20 1.09 1.14 1.27 1.26
Net realized and unrealized
gain (loss) on investments 1.02 (1.22) .86 .29 1.86
-------- -------- -------- -------- -------
Total from Investment Operations 2.22 (.13) 2.00 1.56 3.12
-------- -------- -------- -------- -------
Less Distributions from:
Net investment income 1.02 1.02 1.20 1.23 1.23
Net realized gain from investments - - - - -
Capital surplus - - - - -
-------- -------- -------- -------- -------
Total Distributions 1.02 1.02 1.20 1.23 1.23
-------- -------- -------- -------- -------
Net Asset Value, End of Year $12.23 $11.03 $12.18 $11.38 $11.05
-------- -------- -------- -------- -------
Total Return(%)+ 20.76 (1.00) 18.15 14.56 35.76
Ratios/Supplemental Data
Net Assets, End of Year (in thousands) $38,037 $36,725 $43,056 $44,116 $50,914
Ratio to Average Net Assets:(%)
Expenses .88 .87 .85 .88 .89
Net investment income 10.15 9.38 9.54 10.95 11.99
Portfolio Turnover Rate(%) 45 54 79 65 47
+ The effect of fees and charges incurred at the separate account level are not
reflected in these performance figures.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (CONTINUED)
FIRST INVESTORS SPECIAL BOND FUND, INC.
--------------------------------------------------------
Year Ended December 31
--------------------------------------------------------
1990 1989 1988 1987 1986
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value, Beginning of Year $11.47 $13.19 $12.99 $14.37 $13.93
-------- -------- -------- -------- --------
Income from Investment Operations
Net investment income 1.32 1.57 1.61 1.57 1.61
Net realized and unrealized
gain (loss) on investments (2.30) (1.73) .20 (1.15) .92
-------- -------- -------- -------- --------
Total from Investment Operations (.98) (.16) 1.81 .42 2.53
-------- -------- -------- -------- --------
Less Distributions from:
Net investment income 1.33 1.56 1.61 1.58 1.61
Net realized gain from investments.. - - - .19 .48
Capital surplus - - - .03 -
-------- -------- -------- -------- --------
Total Distributions 1.33 1.56 1.61 1.80 2.09
-------- -------- -------- -------- --------
Net Asset Value, End of Year $9.16 $11.47 $13.19 $12.99 $14.37
-------- -------- -------- -------- --------
Total Return(%)+ (9.18) (1.60) 14.43 2.74 19.44
Ratios/Supplemental Data
Net Assets, End of Year (in thousands) $53,328 $85,719 $69,641 $43,965 $23,078
Ratio to Average Net Assets:(%)
Expenses .86 .82 .84 .86 1.04
Net investment income 12.57 12.38 11.96 11.16 11.01
Portfolio Turnover Rate(%) 37 34 51 71 112
+ The effect of fees and charges incurred at the separate account level are not
reflected in these performance figures.
See notes to financial statements
</TABLE>
3
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INVESTMENT OBJECTIVES AND POLICIES
The Fund primarily seeks high current income without undue risk to
principal and secondarily seeks growth of capital. The Fund seeks to achieve its
objectives by investing, under normal market conditions, at least 65% of its
total assets in high yield, high risk securities, commonly referred to as "junk
bonds" ("High Yield Securities"). High Yield Securities include the following
instruments: fixed, variable or floating rate debt obligations (including bonds,
debentures and notes) which are rated below Baa by Moody's Investors Service,
Inc. ("Moody's") or below BBB by Standard & Poor's Ratings Group ("S&P"), or are
unrated and deemed to be of comparable quality by the Adviser; preferred stocks
and dividend-paying common stocks that have yields comparable to those of high
yielding debt securities; any of the foregoing securities of companies that are
financially troubled, in default or undergoing bankruptcy or reorganization
("Deep Discount Securities"); and any securities convertible into any of the
foregoing.
The Fund may invest up to 5% of its total assets in debt securities issued
by foreign governments and companies located outside the United States and
denominated in U.S. or foreign currency. The Fund also may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets,
make loans of portfolio securities and invest in zero coupon and pay-in-kind
securities. See the SAI for more information concerning these securities.
The Fund may invest up to 35% of its total assets in the following
instruments: common and preferred stocks, other than those considered to be High
Yield Securities; debt obligations of all types (including bonds, debentures and
notes) rated A or better by Moody's or S&P; securities issued by the U.S.
Government or its agencies or instrumentalities ("U.S. Government Obligations");
warrants and money market instruments consisting of prime commercial paper,
certificates of deposit of domestic branches of U.S. banks, bankers' acceptances
and repurchase agreements; purchase securities on a "when-issued" basis.
In any period of market weakness or of uncertain market or economic
conditions, the Fund may establish a temporary defensive position to preserve
capital by having all or part of its assets invested in investment grade debt
securities or retained in cash or cash equivalents, including bank certificates
of deposit, bankers' acceptances, U.S. Government Obligations and commercial
paper issued by domestic corporations. See the SAI for more information
concerning these securities.
The medium- to lower-rated, and certain of the unrated securities in which
the Fund invests tend to offer higher yields than higher-rated securities with
the same maturities because the historical financial condition of the issuers of
such securities may not be as strong as that of other issuers. Debt obligations
rated lower than A by Moody's or S&P tend to have speculative characteristics or
are speculative, and generally involve more risk of loss of principal and income
than higher-rated securities. Also, their yields and market value tend to
fluctuate more than higher quality securities. The greater risks and
fluctuations in yield and value occur because investors generally perceive
issuers of lower-rated and unrated securities to be less creditworthy. These
risks cannot be eliminated, but may be reduced by diversifying holdings to
minimize the portfolio impact of any single investment. In addition,
fluctuations in market value do not affect the cash income from the securities,
but are reflected in the computation of the Fund's net asset value. When
interest rates rise, the net asset value of the Fund tends to decrease. When
interest rates decline, the net asset value of the Fund tends to increase.
4
<PAGE>
Variable or floating rate debt obligations in which the Fund may invest
periodically adjust their interest rates to reflect changing economic
conditions. Thus, changing economic conditions specified by the terms of the
security would serve to change the interest rate and the return offered to the
investor. This reduces the effect of changing market conditions on the
security's underlying market value.
A High Yield Security may itself be convertible into or exchangeable for
equity securities, or may carry with it the right to acquire equity securities
evidenced by warrants attached to the security or acquired as part of a unit
with the security. Although the Fund invests primarily in High Yield Securities,
securities received upon conversion or exercise of warrants and securities
remaining upon the break-up of units or detachment of warrants may be retained
to permit orderly disposition, and to establish a long-term holding basis.
Because of the greater number of investment considerations involved in
investing in High Yield Securities, the achievement of the Fund's investment
objectives depends more on the Adviser's research abilities than would be the
case if the Fund were investing primarily in securities in the higher rated
categories. Because medium- to lower-rated securities generally involve greater
risks of loss of income and principal than higher-rated securities, investors
should consider carefully the relative risks associated with investments in
securities that carry medium to lower ratings or are unrated. See "High Yield
Securities--Risk Factors" and Appendix A for a description of corporate bond
ratings.
The Fund actively seeks to achieve its secondary objective to the extent
consistent with its primary objective. There can be no assurance that the Fund
will be able to achieve its investment objectives. The Fund's net asset value
fluctuates based mainly upon changes in the value of its portfolio securities.
The Fund's investment objectives and certain investment limitations set forth in
the SAI are fundamental policies that may not be changed without shareholder
approval.
The dollar weighted average of credit ratings of all bonds held by the
Fund during the 1995 fiscal year, computed on a monthly basis, are set forth
below. This information reflects the average composition of the Fund's assets
during the 1995 fiscal year and is not necessarily representative of the Fund as
of the end of its 1995 fiscal year, the current fiscal year or at any other time
in the future.
Comparable Quality
of Unrated Securities
Rated by Moody's to Bonds Rated by Moody's
---------------- -------------------------
Ba 22.49% 0%
B 60.52 0.21
Caa 4.38 2.48
Ca 0.99 0
------- -----
Total 88.38% 2.69%
Description of Certain Securities, Other Investment Policies and Risk Factors
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A
5
<PAGE>
convertible security entitles the holder to receive interest paid or accrued on
debt or dividends paid on preferred stock until the convertible security matures
or is redeemed, converted or exchanged. Convertible securities have unique
investment characteristics in that they generally (1) have higher yields than
common stocks, but lower yields than comparable non-convertible securities, (2)
are less subject to fluctuation in value than the underlying stock because they
have fixed income characteristics, and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. See
the SAI for more information on convertible securities.
Debt Securities--Risk Factors. The market value of debt securities is
influenced primarily by changes in the level of interest rates. Generally, as
interest rates rise, the market value of debt securities decreases. Conversely,
as interest rates fall, the market value of debt securities increases. Factors
which could result in a rise in interest rates, and a decrease in the market
value of debt securities, include an increase in inflation or inflationary
expectations, an increase in the rate of U.S. economic growth, an expansion in
the Federal budget deficit or an increase in the price of commodities such as
oil. In addition, the market value of debt securities is influenced by
perceptions of the credit risks associated with such securities. See Appendix A
for a description of corporate bond ratings.
Deep Discount Securities. The Fund may invest up to 15% of its total
assets in securities of companies that are financially troubled, in default or
undergoing bankruptcy or reorganization. Such securities are usually available
at a deep discount from the face value of the instrument. The Fund will invest
in Deep Discount Securities when the Adviser believes that there exist factors
that are likely to restore the company to a healthy financial condition. Such
factors include a restructuring of debt, management changes, existence of
adequate assets or other unusual circumstances. Debt instruments purchased at
deep discounts may pay very high effective yields. In addition, if the financial
condition of the issuer improves, the underlying value of the security may
increase, resulting in a capital gain. If the company defaults on its
obligations or remains in default, or if the plan of reorganization is
insufficient for debtholders, the Deep Discount Securities may stop paying
interest and lose value or become worthless. The Adviser will balance the
benefits of investing in Deep Discount Securities with these risks. While a
diversified portfolio may reduce the overall impact of a Deep Discount Security
that is in default or loses its value, the risk cannot be eliminated. See "High
Yield Securities--Risk Factors."
High Yield Securities--Risk Factors. High Yield Securities are subject to
certain risks that may not be present with investments in higher grade
securities.
Effect of Interest Rate and Economic Changes. Debt obligations rated lower
than Baa by Moody's or BBB by S&P, commonly referred to as "junk bonds" are
speculative and generally involve a higher risk or loss of principal and income
than High Yield Securities. The prices of High Yield Securities tend to be less
sensitive to interest rate changes than higher-rated investments, but may be
more sensitive to adverse economic changes or individual corporate developments.
Periods of economic uncertainty and changes generally result in increased
volatility in the market prices and yields of High Yield Securities and thus in
a Fund's net asset value. A strong economic downturn or a substantial period of
rising interest rates could severely affect the market for High Yield
Securities. In these circumstances, highly leveraged companies might have
greater difficulty in making principal and interest payments, meeting projected
business goals, and obtaining additional financing. Thus, there could be a
higher incidence of default. This would affect the value of such
6
<PAGE>
securities and thus a Fund's net asset value. Further, if the issuer of a
security owned by a Fund defaults, that Fund might incur additional expenses to
seek recovery.
Generally, when interest rates rise, the value of fixed rate debt
obligations, including High Yield Securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a High Yield Security containing a redemption or call provision
exercises either provision in a declining interest rate market, the Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if the Fund experiences unexpected net redemptions in
a rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to
which Fund expenses could be allocated and in a reduced rate of return for the
Fund. While it is impossible to protect entirely against this risk,
diversification of the Fund's portfolio and the Adviser's careful analysis of
prospective portfolio securities should minimize the impact of a decrease in
value of a particular security or group of securities in the Fund's portfolio.
The High Yield Securities Market. The market for below investment grade
bonds expanded rapidly in recent years and its growth paralleled a long economic
expansion. In the past, the prices of many lower-rated debt securities declined
substantially, reflecting an expectation that many issuers of such securities
might experience financial difficulties. As a result, the yields on lower-rated
debt securities rose dramatically. However, such higher yields did not reflect
the value of the income streams that holders of such securities expected, but
rather the risk that holders of such securities could lose a substantial portion
of their value as a result of the issuers' financial restructuring or default.
There can be no assurance that such declines in the below investment grade
market will not reoccur. The market for below investment grade bonds generally
is thinner and less active than that for higher quality bonds, which may limit
the Fund's ability to sell such securities at fair value in response to changes
in the economy or the financial markets. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower rated securities, especially in a thinly traded
market.
Credit Ratings. The credit ratings issued by credit rating services may not
fully reflect the true risks of an investment. For example, credit ratings
typically evaluate the safety of principal and interest payments, not market
value risk, of High Yield Securities. Also, credit rating agencies may fail to
change on a timely basis a credit rating to reflect changes in economic or
company conditions that affect a security's market value. Although the Adviser
considers ratings of recognized rating services such as Moody's and S&P, the
Adviser primarily relies on its own credit analysis, which includes a study of
existing debt, capital structure, ability to service debt and to pay dividends,
the issuer's sensitivity to economic conditions, its operating history and the
current trend of earnings. The Fund may invest in securities rated as low as D
by S&P or C by Moody's or, if unrated, deemed to be of comparable quality by the
Adviser. Debt obligations with these ratings either have defaulted or in great
danger of defaulting and are considered to be highly speculative. See "Deep
Discount Securities." The Adviser continually monitors the investments in the
Fund's portfolio and carefully evaluates whether to dispose of or retain High
Yield Securities whose credit ratings have changed. See Appendix A for a
description of corporate bond ratings.
Liquidity and Valuation. Lower-rated bonds are typically traded among a
smaller number of broker-dealers than in a broad secondary market. Purchasers of
High Yield Securities tend to be institutions, rather than individuals, which is
a factor that further limits the secondary market. To the extent that no
established retail secondary market exists, many High Yield Securities may not
be as liquid as higher-grade bonds. A less active and thinner market for High
7
<PAGE>
Yield Securities than that available for higher quality securities may result in
more volatile valuations of the Fund's holdings and more difficulty in executing
trades at favorable prices during unsettled market conditions.
The ability of the Fund to value or sell High Yield Securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. During such periods, there may be less reliable objective information
available and thus the responsibility of the Fund's Board of Directors to value
High Yield Securities becomes more difficult, with judgment playing a greater
role. Further, adverse publicity about the economy or a particular issuer may
adversely affect the public's perception of the value, and thus liquidity, of a
High Yield Security, whether or not such perceptions are based on a fundamental
analysis.
Legislation. Provisions of the Revenue Reconciliation Act of 1989 limit a
corporate issuer's deduction for a portion of the original issue discount on
"high yield discount" obligations (including certain pay-in-kind securities).
This limitation could have a materially adverse impact on the market for certain
High Yield Securities. From time to time, legislators and regulators have
proposed other legislation that would limit the use of high yield debt
securities in leveraged buyouts, mergers and acquisitions. It is not certain
whether such proposals, which also could adversely affect High Yield Securities,
will be enacted into law.
Market Risk. The Fund is subject to market risk because it invests in
common stocks. Market risk is the possibility that common stock prices will
decline over short or even extended periods. The U.S. stock market tends to be
cyclical, with periods when stock prices generally rise and periods when stock
prices generally decline.
Money Market Instruments. Investments in commercial paper are limited to
obligations rated Prime-1 by Moody's or A-1 by S&P. Commercial paper includes
notes, drafts, or similar instruments payable on demand or having a maturity at
the time of issuance not exceeding nine months, exclusive of days of grace or
any renewal thereof. Investments in certificates of deposit will be made only
with domestic institutions with assets in excess of $500 million. See the SAI
for more information regarding money market instruments and Appendix A to the
SAI for a description of commercial paper ratings.
Preferred Stock. A preferred stock is a blend of the characteristics of a
bond and common stock. It can offer the higher yield of a bond and has priority
over common stock in equity ownership, but does not have the seniority of a bond
and, unlike common stock, its participation in the issuer's growth may be
limited. Preferred stock has preference over common stock in the receipt of
dividends and in any residual assets after payment to creditors should the
issuer be dissolved. Although the dividend is set at a fixed annual rate, in
some circumstances it can be changed or omitted by the issuer.
Restricted and Illiquid Securities. The Fund may invest up to 15% of its
net assets in illiquid securities, including (1) securities that are illiquid
due to the absence of a readily available market or due to legal or contractual
restrictions on resale and (2) repurchase agreements maturing in more than seven
days. However, illiquid securities for purposes of this limitation do not
include securities eligible for resale to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933, as amended, which the
Fund's Board of Directors or the Adviser has
8
<PAGE>
determined are liquid under Board-approved guidelines. See the SAI for more
information regarding restricted and illiquid securities.
Zero Coupon and Pay-In-Kind Securities. Zero coupon securities are debt
obligations that do not entitle the holder to any periodic payment of interest
prior to maturity or a specified date when the securities begin paying current
interest. They are issued and traded at a discount from their face amount or par
value, which discount varies depending on the time remaining until cash payments
begin, prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind securities are those that pay interest
through the issuance of additional securities. The market prices of zero coupon
and pay-in-kind securities generally are more volatile than the prices of
securities that pay interest periodically and in cash and are likely to respond
to changes in interest rates to a greater degree than do other types of debt
securities having similar maturities and credit quality. Original issue discount
earned on zero coupon securities and the "interest" on pay-in-kind securities
must be included in the Fund's income. Thus, to continue to qualify for tax
treatment as a regulated investment company and to avoid a certain excise tax on
undistributed income, the Fund may be required to distribute as a dividend an
amount that is greater than the total amount of cash it actually receives. See
"Taxes" in the SAI. These distributions must be made from the Fund's cash assets
or, if necessary, from the proceeds of sales of portfolio securities. The Fund
will not be able to purchase additional income-producing securities with cash
used to make such distributions, and its current income ultimately could be
reduced as a result.
HOW TO BUY SHARES
Investments in the Fund are only available through purchases of the
Contracts offered by First Investors Life. Purchase payments for the Contracts,
net of certain expenses, are paid into a unit investment trust, Separate Account
A. Separate Account A purchases shares of the Fund. Orders for the purchase of
shares of the Fund received prior to the close of regular trading on the New
York Stock Exchange ("NYSE"), generally 4:00 P.M. (New York City Time), on any
business day the NYSE is open for trading, will be confirmed at the net asset
value determined as of the close of regular trading on the NYSE on that day.
Orders received after the close of regular trading on the NYSE will be confirmed
at the next determined net asset value. See "Determination of Net Asset Value."
Due to emergency conditions, such as snow storms, the Woodbridge offices of
First Investors Corporation ("FIC"), the underwriter of Separate Account A, and
Administrative Data Management Corp. (the "Transfer Agent") may not be open for
business on a day when the NYSE is open for regular trading and, therefore,
would be unable to accept purchase orders. Should this occur, purchase orders
will be executed at the net asset value determined at the close of regular
trading on the NYSE on the next business day that these offices are open for
business.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at the direction of Contractowners, in
accordance with the terms of the Contracts. Redemptions will be made at the next
determined net asset value of the Fund upon receipt of a proper request for
redemption or repurchase. Payment will be made by check as soon as possible but
within seven days after presentation. However, the Fund's Board of Directors may
suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the NYSE is restricted as determined by the
Securities and Exchange Commission
9
<PAGE>
("SEC"), or the NYSE is closed for other than weekends and holidays, (b) the SEC
has by order permitted such suspension, or (c) an emergency, as defined by rules
of the SEC, exists during which time the sale or valuation of portfolio
securities held by the Fund is not reasonably practicable.
Due to emergency conditions, such as snow storms, the Woodbridge offices of
FIC and the Transfer Agent may not be open for business on a day when the NYSE
is open for regular trading and, therefore, would be unable to accept redemption
orders. Should this occur, redemption orders will be executed at the net asset
value determined at the close of regular trading on the NYSE on the next
business day that these offices are open for business.
MANAGEMENT
Board of Directors. The Fund's Board of Directors, as part of its overall
management responsibility, oversees various organizations responsible for the
Fund's day-to-day management.
Adviser. First Investors Management Company, Inc. supervises and manages
the Fund's investments, determines the Fund's portfolio transactions and
supervises all aspects of the Fund's operations. The Adviser is a New York
corporation located at 95 Wall Street, New York, NY 10005. The Adviser presently
acts as investment adviser to 14 mutual funds. First Investors Consolidated
Corporation ("FICC") owns all of the voting common stock of the Adviser and all
of the outstanding stock of FIC and the Transfer Agent. Mr. Glenn O. Head
controls FICC and, therefore, controls the Adviser.
As compensation for its services, the Adviser receives an annual fee from
the Fund, which is payable monthly. For the fiscal year ended December 31, 1995,
the Fund's advisory fees were 0.75% of its average daily net assets. The SEC
staff takes the position that fees of 0.75% or greater are higher than those
paid by most investment companies.
The Fund bears all expenses of its operations other than those incurred by
the Adviser under the terms of its advisory agreement. Fund expenses include,
but are not limited to: the advisory fee; shareholder servicing fees and
expenses; custodian fees and expenses; legal and auditing fees; expenses of
communicating to existing shareholders, including preparing, printing and
mailing prospectuses and shareholder reports to such shareholders; and proxy and
shareholder meeting expenses.
Portfolio Manager. George V. Ganter has been Portfolio Manager for the Fund
since 1986. Mr. Ganter joined FIMCO in 1985 as an Analyst. In 1989, he was made
Portfolio Manager for First Investors High Yield Fund, Inc., the High Yield Fund
of First Investors Life Series Fund and Executive Investors High Yield Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value of a Fund share is determined as of the close of
regular trading on the NYSE (generally 4:00 P.M., New York City time) on each
day the NYSE is open for trading, and at such other times as the Fund's Board of
Directors deems necessary, by dividing the market value of the securities held
by the Fund, plus any cash and other assets, less all liabilities, by the number
of shares outstanding. If there is no available market value, securities will be
valued at their fair value as determined in good faith pursuant to procedures
adopted by the Fund's Board of Directors.
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The NYSE currently observes the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividends from net investment income are generally declared daily and paid
quarterly in additional Fund shares at net asset value (without sales charge)
generally determined as of the close of business on the first business day
immediately following the last business day of the quarter. If you redeem all of
your Fund shares at any time during the quarter, you are paid all dividends
declared through the day prior to the date of the redemption, together with the
proceeds of your redemption. Net investment income includes interest and
dividends, earned discount and other income earned on portfolio securities less
expenses. Distributions of substantially all of the Fund's net capital gain (the
excess of net long-term capital gain over net short-term capital loss) and net
short-term capital gain, if any, after deducting any available capital loss
carryovers, and any net realized gains from foreign currency transactions, are
declared annually and paid in additional Fund shares at the net asset value
(without sales charge) generally determined as of the close of business on the
business day immediately following the record date of the distribution.
TAXES
The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code of
1986, as amended ("Code"), so that it will be relieved of Federal income tax on
that part of its investment company taxable income (consisting generally of net
investment income, net short-term capital gain and net gains from certain
foreign currency transactions) and net capital gain that is distributed to its
shareholders.
Shares of the Fund are offered only to Separate Account A, which is an
insurance company separate account that funds variable annuity contracts. Under
the Code, no tax is imposed on an insurance company with respect to income of a
qualifying separate account that is properly allocable to the value of eligible
variable annuity contracts. Please refer to "Federal Income Tax Status" in the
Prospectus of Separate Account A for information as to the tax status of that
account and the holders of the Contracts.
The Fund intends to comply with the diversification requirements imposed by
section 817(h) of the Code and the regulations thereunder. These requirements,
which are in addition to the diversification requirements imposed on the Fund by
the 1940 Act and Subchapter M of the Code, place certain limitations on the
assets of Separate Account A -- and of the Fund, because section 817(h) and
those regulations treat the assets of the Fund as assets of Separate Account A
- -- that may be invested in securities of a single issuer. Specifically, the
regulations provide that, except as permitted by the "safe harbor" described
below, as of the end of each calendar quarter (or within 30 days thereafter) no
more than 55% of the Fund's total assets may be represented by one investment,
no more than 70% by any two investments, no more than 80% by any three
investments and no more than 90% by any four investments. For this purpose, all
securities of the same issuer are considered a single investment, and while each
U.S. government agency and instrumentality is considered a separate issuer, a
particular foreign government and its agencies, instrumentalities and political
subdivisions all will be considered the same issuer. Section 817(h) provides, as
a safe harbor, that a separate account will be treated as being adequately
diversified if the diversification requirements under Subchapter M are satisfied
and no more than 55% of the value of the account's total assets
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<PAGE>
are cash and cash items, government securities and securities of other RICs.
Failure of the Fund to satisfy the section 817(h) requirements would result in
taxation of First Investors Life and treatment of the Contractholders other than
as described in the Prospectus of Separate Account A.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a more detailed discussion. Shareholders
are urged to consult their tax advisers.
GENERAL INFORMATION
Organization. The Fund was incorporated in the State of Maryland on
November 14, 1979. The Fund is authorized to issue 25 million shares of common
stock, $1.00 par value per share. Shares of the Fund have equal dividend,
voting, liquidation and redemption rights. The Fund does not hold annual
shareholder meetings. If requested to do so by the holders of at least 10% of
the Fund's outstanding shares, the Board of Directors will call a special
meeting of shareholders for any purpose, including the removal of Directors.
Custodian. The Fund has retained The Bank of New York, 48 Wall Street, New
York, New York 10286, to act as custodian of the securities and cash of the
Fund.
Transfer Agent. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of the Adviser and First Investors Life,
acts as transfer agent for the Fund and as dividend disbursing agent.
Performance Information. Performance information is contained in the Fund's
Annual Report which may be obtained without charge by contacting First Investors
Life at 212-858-8200.
Shareholder Inquiries. Shareholder inquiries can be made by calling First
Investors Life at 212-858-8200.
Annual and Semi-Annual Reports to Shareholders. It is the Fund's practice
to mail only one copy of its annual and semi-annual reports to any address at
which more than one shareholder with the same last name has indicated that mail
is to be delivered. Additional copies of the reports will be mailed if requested
in writing or by telephone by any shareholder. The Fund will ensure that an
additional copy of such reports are sent to any shareholder who subsequently
changes his or her mailing address.
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S RATINGS GROUP
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed,
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suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or based on other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C Debt rated "BB," "B," "CCC," "CC" and "C" is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal. "BB" indicates the least degree of speculation and "C" the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
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CCC Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
CC The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat greater than the Aaa securities.
A Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically
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unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated "C" are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
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TABLE OF CONTENTS PAGE
Financial Highlights..................................................... 2
Investment Objectives and Policies....................................... 4
How to Buy Shares........................................................ 9
How to Redeem Shares..................................................... 9
Management............................................................... 10
Determination of Net Asset Value......................................... 10
Dividends and Other Distributions........................................ 11
Taxes.................................................................... 11
General Information...................................................... 12
Appendix A............................................................... 12
<PAGE>
FIRST INVESTORS SPECIAL BOND FUND, INC.
PROSPECTUS
INVESTMENT ADVISER
First Investors Management Company, Inc.
95 Wall Street
New York, NY 10005
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachussetts Avenue, N.W.
Washington, DC 20036
CUSTODIAN
The Bank of New York
48 Wall Street
New York, NY 10286
TRANSFER AGENT
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
AUDITORS
Tait, Weller & Baker
Two Penn Center Plaza
Philadelphia, Pennsylvania 19102
PROSPECTUS
April 29, 1996
No dealer, salesman or any other persons has been authorized to give any
information or to make any representations other than those contained in this
Prospectus or the Statement of Additional Information, and if given or made,
such information and representation must not be relied upon as having been
authorized by the Fund, or any affiliate thereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
shares offered hereby in any state to any person to whom it is unlawful to make
such offer is such state.
<PAGE>
FIRST INVESTORS SPECIAL BOND FUND, INC.
Statement of Additional Information dated April 29, 1996
95 Wall Street New York, N.Y. 10005/(212) 858-8200
This is a Statement of Additional Information for First Investors Special
Bond Fund, Inc. ("Fund"), an open-end diversified management investment company.
Shares of the Fund may be purchased only through the acquisition of a variable
annuity contract issued by First Investors Life Insurance Company ("First
Investors Life").
The Fund primarily seeks high current income without undue risk of
principal and secondarily seeks growth of capital by investing at least 65% of
its total assets in high yield, high risk securities, commonly referred to as
"junk bonds." There can be no assurance that the Fund will achieve its
investment objectives.
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Fund's Prospectus dated April 29, 1996, which may
be obtained free of cost from the Fund at the address or telephone number noted
above.
TABLE OF CONTENTS Page
- ----------------- ----
Investment Policies.................................................... 2
Investment Restrictions................................................ 5
Directors and Officers................................................. 7
Management............................................................. 8
Determination of Net Asset Value....................................... 9
Allocation of Portfolio Brokerage...................................... 10
Taxes.................................................................. 11
General Information.................................................... 12
Appendix A............................................................. 13
Financial Statements................................................... 14
<PAGE>
INVESTMENT POLICIES
Bankers' Acceptances. The Fund may invest in bankers' acceptances.
Bankers' acceptances are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an asset
or it may be sold in the secondary market at the going rate of interest for a
specific maturity. Although maturities for acceptances can be as long as 270
days, most acceptances have maturities of six months or less.
Certificates of Deposit. The Fund may invest in bank certificates of
deposit ("CDs") subject to the restrictions set forth in the Prospectus. The
Federal Deposit Insurance Corporation is an agency of the U.S. Government which
insures the deposits of certain banks and savings and loan associations up to
$100,000 per deposit. The interest on such deposits may not be insured if this
limit is exceeded. Current Federal regulations also permit such institutions to
issue insured negotiable CDs in amounts of $100,000 or more, without regard to
the interest rate ceilings on other deposits. To remain fully insured, these
investments currently must be limited to $100,000 per insured bank or savings
and loan association.
Convertible Securities. The Fund may invest in convertible securities.
While no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock, although
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed income
security. The Fund's investment adviser, First Investors Management Company,
Inc. ("Adviser" or "FIMCO"), will decide to invest based upon a fundamental
analysis of the long-term attractiveness of the issuer and the underlying common
stock, the evaluation of the relative attractiveness of the current price of the
underlying common stock and the judgment of the value of the convertible
security relative to the common stock at current prices.
Foreign Securities--Risk Factors. Investments in foreign markets involve
special risks and considerations which are in addition to the usual risks
inherent in domestic investments. These include the following: there may be less
publicly available information about foreign companies comparable to the reports
and ratings that are published about companies in the United States; foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies; some foreign stock markets have substantially less volume than
U.S. markets, and securities of some foreign companies are less liquid and more
volatile than securities of comparable U.S. companies; there may be less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies than exist in the United States; and there may be the
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments which could affect assets of the the Fund
held in foreign countries. Because the Fund does not intend to hedge its foreign
investments against the risk of foreign currency fluctuations, changes in the
value of these currencies can significantly affect the Fund's share price.
Loans of Portfolio Securities. The Fund may loan securities to qualified
broker-dealers or other institutional investors provided: the borrower pledges
to the Fund and agrees to maintain at all times with the Fund collateral equal
to not less than 100% of the value of the securities loaned (plus accrued
interest or dividend, if any); the loan is terminable at will by the Fund; the
Fund pays only reasonable custodian fees in connection with the loan; and the
Adviser monitors the creditworthiness of the borrower throughout
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the life of the loan. Such loans may be terminated by the Fund at any time and
the Fund may vote the proxies if a material event affecting the investment is to
occur. The market risk applicable to any security loaned remains a risk of the
Fund. The borrower must add to the collateral whenever the market value of the
securities rises above the level of such collateral. The Fund could incur a loss
if the borrower should fail financially at a time when the value of the loaned
securities is greater than the collateral. The Fund may make loans of portfolio
securities not in excess of 10% of its total assets.
Repurchase Agreements. The Fund may enter into repurchase agreements with
banks which are members of the Federal Reserve System or securities dealers who
are members of a national securities exchange or are market makers in government
securities. The period of these repurchase agreements will usually be short,
from overnight to one week, and at no time will the Fund invest in repurchase
agreements with more than one year in time to maturity. The securities which are
subject to repurchase agreements, however, may have maturity dates in excess of
one year from the effective date of the repurchase agreement. The Fund will
always receive, as collateral, securities whose market value, including accrued
interest, which will at all times be at least equal to 100% of the dollar amount
invested by the Fund in each agreement, and the Fund will make payment for such
securities only upon physical delivery or evidence of book entry transfer to the
account of the custodian. If the seller defaults, the Fund might incur a loss if
the value of the collateral securing the repurchase agreement declines, and
might incur disposition costs in connection with liquidating the collateral. In
addition, if bankruptcy or similar proceedings are commenced with respect to the
seller of the security, realization upon the collateral by the Fund may be
delayed or limited. The Fund may not enter into a repurchase agreement with more
than seven days to maturity if, as a result more than 15% of its net assets
would be invested in such repurchase agreements, together with any other
illiquid investments.
Restricted and Illiquid Securities. The Fund may not purchase or otherwise
acquire any security if, as a result more than 15% of its net assets (taken at
current value) would be invested in securities that are illiquid by virtue of
the absence of a readily available market or legal or contractual restrictions
on resale. This policy includes foreign issuers' unlisted securities with a
limited trading market and repurchase agreements maturing in more than seven
days. This policy does not include restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, as amended ("1933 Act"),
which the Fund's Board of Directors or the Adviser has determined under
Board-approved guidelines are liquid.
Restricted securities which are illiquid may be sold only in privately
negotiated transactions or in public offerings with respect to which a
registration statement is in effect under the 1933 Act. Such securities include
those that are subject to restrictions contained in the securities laws of other
countries. Securities that are freely marketable in the country where they are
principally traded, but would not be freely marketable in the United States,
will not be subject to the Fund's 15% limitation on illiquid securities. Where
registration is required, the Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are either themselves exempt from registration or sold in
transactions not requiring
3
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registration. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by the Fund, however, could affect adversely the marketability
of such portfolio securities and the Fund might be unable to dispose of such
securities promptly or at reasonable prices.
U.S. Government Obligations. Securities issued or guaranteed as to
principal and interest by the U.S. Government include (1) U.S. Treasury
obligations which differ only in their interest rates, maturities and times of
issuance as follows: U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years) and U.S. Treasury bonds
(generally maturities of greater than ten years), and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are backed by
the full faith and credit of the United States, such as securities issued by the
Federal Housing Administration, Government National Mortgage Association, the
Department of Housing and Urban Development, the Export-Import Bank, the General
Services Administration and the Maritime Administration and certain securities
issued by the Farmers Home Administration and the Small Business Administration.
The range of maturities of U.S. Government Obligations is usually three months
to thirty years.
Warrants. The Fund may purchase warrants, which are instruments that
permit the Fund to acquire, by subscription, the capital stock of a corporation
at a set price, regardless of the market price for such stock. Warrants may be
either perpetual or of limited duration. There is greater risk that warrants
might drop in value at a faster rate than the underlying stock. The Fund's
investment in warrants is limited to 5% of its net assets, with no more than 2%
in warrants not listed on either the New York or American Stock Exchange.
When-Issued Securities. Although it has no intention of doing so in the
coming year, the Fund many invest up to 10% of its net assets in securities
issued on a when-issued or delayed delivery basis at the time the purchase is
made. The Fund generally would not pay for such securities or start earning
interest on them until they are issued or received. However, when the Fund
purchases debt obligations on a when-issued basis, it assumes the risks of
ownership, including the risk of price fluctuation, at the time of purchase, not
at the time of receipt. Failure of the issuer to deliver a security purchased by
the Fund on a when-issued basis may result in the Fund incurring a loss or
missing an opportunity to make an alternative investment. When the Fund enters
into a commitment to purchase securities on a when-issued basis, it establishes
a separate account with its custodian consisting of cash or liquid high-grade
debt securities equal to the amount of the Fund's commitment, which are valued
at their fair market value. If on any day the market value of this segregated
account falls below the value of the Fund's commitment, the Fund will be
required to deposit additional cash or qualified securities into the account
until equal to the value of the Fund's commitment. When the securities to be
purchased are issued, the Fund will pay for the securities from available cash,
the sale of securities in the segregated account, sales
4
<PAGE>
of other securities and, if necessary, from sale of the when-issued securities
themselves although this is not ordinarily expected. Securities purchased on a
when-issued basis are subject to the risk that yields available in the market,
when delivery takes place, may be higher than the rate to be received on the
securities the Fund is committed to purchase. Sale of securities in the
segregated account or other securities owned by the Fund and when-issued
securities may cause the realization of a capital gain or loss.
Portfolio Turnover. Although the Fund generally will not invest for
short-term trading purposes, portfolio securities may be sold from time to time
without regard to the length of time they have been held when, in the opinion of
the Adviser, investment considerations warrant such action. Portfolio turnover
rate is calculated by dividing (1) the lesser of purchases or sales of portfolio
securities for the fiscal year by (2) the monthly average of the value of
portfolio securities owned during the fiscal year. A 100% turnover rate would
occur if all the securities in Fund's portfolio, with the exception of
securities whose maturities at the time of acquisition were one year or less,
were sold and either repurchased or replaced within one year. A high rate of
portfolio turnover generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Allocation of Portfolio Brokerage."
For the fiscal years ended December 31, 1994 and 1995, the Fund's portfolio
turnover rate was 54% and 45%, respectively.
INVESTMENT RESTRICTIONS
The Fund has adopted the investment restrictions set forth below, and,
unless identified as non-fundamental policies, may not be changed without the
approval of a vote of a majority of the outstanding shares of the Fund. As
provided in the Investment Company Act of 1940, as amended ("1940 Act"), a "vote
of a majority of the outstanding shares of the Fund" means the affirmative vote
of the lesser of (1) more than 50% of the outstanding shares of the Fund or (2)
67% or more of the shares present at a meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy.
The investment restrictions provide that, among other things, the Fund
will not:
(1) Borrow money except from banks and only for temporary or emergency
purposes and then in amounts not in excess of 5% of its total assets taken at
cost or value, whichever is the lesser.
(2) Make loans to other persons except that the Fund's Board of Directors
may, on the request of broker-dealers or other institutional investors, which it
deems qualified, authorize the Fund to lend securities for the purpose of
covering short positions of the borrower, but only when the borrower pledges
cash collateral to the Fund and agrees to maintain such collateral so that it
amounts at all times to at least 100% of the value of the securities. Such
security loans will not be made if as a result the aggregate of such loans
exceeds 10% of the value of the Fund's total assets. The Fund may terminate such
loans at any time and vote the proxies if a material event affecting the
investment is to occur. The market risk applicable to any security loaned
remains a risk of the Fund. The investment risk is that the borrower will fail
financially when the collateral is in its possession. The borrower must add to
collateral whenever the market value of the securities rises above the level of
such collateral. The primary objectives of such loaning function is to
supplement the Fund's income through investment of the cash collateral in
short-term interest bearing obligations. The purchase of a portion of an issue
of publicly distributed debt securities is not considered the making of a loan.
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<PAGE>
(3) With respect to 75% of the Fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.
(4) Invest more than 5% of the value of its total assets in securities of
issuers that have been in business for less than three years.
(5) Underwrite securities of other issuers.
(6) Purchase or sell real estate or commodities or commodity contracts.
However, the Fund may purchase interests in real estate investment trusts whose
securities are registered under the Securities Act of 1933, as amended, and are
readily marketable.
(7) Invest in companies for the purpose of exercising control or
management.
(8) Invest in securities of other investment companies, except in
connection with a merger of another investment company.
(9) Purchase any securities on margin or sell any securities short.
(10) Purchase or retain securities of any issuer if any officer or
director of the Fund or the Adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the securities of
such issuer.
(11) Invest more than 25% of the value of its total assets in a particular
industry at any one time.
(12) Purchase or sell portfolio securities from or to the Adviser or any
director or officer thereof or of the Fund, as principals.
The Fund has adopted the following non-fundamental investment restrictions
which may be changed without shareholder approval:
(1) The Fund will not purchase any security if, as a result, more than 15%
of its net assets would be invested in illiquid securities, including repurchase
agreements not entitling the holder to payment of principal and interest within
seven days and any securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available market.
The Directors, or the Fund's investment adviser acting pursuant to authority
delegated by the Directors, may determine that a readily available market exists
for securities eligible for resale pursuant to Rule 144A under the Securities
Act of 1933, as amended, or any other applicable rule, and therefore that such
securities are not subject to the foregoing limitation.
(2) The Fund will not pledge, mortgage or hypothecate any of its assets,
except that the Fund may pledge its assets to secure borrowings made in
accordance with fundamental investment restriction (1) above, provided the Fund
maintains asset coverage of at least 300% for all such borrowings.
6
<PAGE>
The Fund has filed the following undertaking to comply with the
requirements of a certain state in which shares of the Fund are sold, which may
be changed without shareholder approval. The Fund will not invest in oil, gas or
other mineral leases or exploration or development programs.
DIRECTORS AND OFFICERS
The following table lists the Directors and executive officers of the
Fund, their age, business address and principal occupations during the past five
years. Unless otherwise noted, an individual's business address is 95 Wall
Street, New York, New York 10005.
Glenn O. Head*+ (70), President and Director. Chairman of the Board and
Director, Administrative Data Management Corp. ("ADM"), FIMCO, Executive
Investors Management Company, Inc. ("EIMCO"), First Investors Corporation
("FIC"), Executive Investors Corporation ("EIC") and First Investors
Consolidated Corporation ("FICC").
James J. Coy (82), Director, 90 Buell Lane, East Hampton, NY 11937. Retired;
formerly Senior Vice President, James Talcott, Inc. (financial institution).
Roger L. Grayson* (39), Director. Director, FIC and FICC; President and
Director, First Investors Resources, Inc.; Commodities Portfolio Manager.
Kathryn S. Head*+ (40), Director, 581 Main Street, Woodbridge, NJ 07095.
President, FICC, EIMCO, FIMCO and ADM; Vice President, Chief Financial Officer
and Director, FIC and EIC; President and Director, First Financial Savings Bank,
S.L.A.
Rex R. Reed (74), Director, 1381 Fairway Oaks, Kiawah Island, SC 29455. Retired;
formerly Senior Vice President, American Telephone & Telegraph Company.
Herbert Rubinstein (74), Director, 145 Elm Drive, Roslyn, NY 11576. Retired;
formerly President, Belvac International Industries, Ltd. and President, Central
Dental Supply.
James M. Srygley (63), Director, 33 Hampton Road, Chatham, NJ 07982. Principal,
Hampton Properties, Inc. (property investment company).
John T. Sullivan* (64), Director and Chairman of the Board; Director, FIMCO,
FIC, FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.
Robert F. Wentworth (66), Director, RR1, Box 2554, Upland Downs Road, Manchester
Center, VT 05255. Retired; formerly financial and planning executive with
American Telephone & Telegraph Company.
Joseph I. Benedek (38), Treasurer, 581 Main Street, Woodbridge, NJ 07095.
Treasurer, FIC FIMCO, EIMCO and EIC; Comptroller and Treasurer, FICC.
Concetta Durso (61), Vice President and Secretary. Vice President, FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary, FIC and EIC.
7
<PAGE>
George V. Ganter (43), Vice President. Vice President, First Investors Asset
Management Company, Inc., First Investors High Yield Fund, Inc., and Executive
Investors Trust; Portfolio Manager, FIMCO.
- ----------
* These Directors may be deemed to be "interested persons," as defined in the
1940 Act.
+ Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.
All of the officers and Directors, except for Mr. Ganter, hold identical
or similar positions with 13 other registered investment companies in the First
Investors Family of Funds. Mr. Head is also an officer and/or Director of First
Investors Asset Management Company, Inc., First Investors Credit Funding
Corporation, First Investors Leverage Corporation, First Investors Realty
Company, Inc., First Investors Resources, Inc., N.A.K. Realty Corporation, Real
Property Development Corporation, Route 33 Realty Corporation, First Investors
Life Insurance Company, First Financial Savings Bank, S.L.A., First Investors
Credit Corporation and School Financial Management Services, Inc. Ms. Head is
also an officer and/or Director of First Investors Life Insurance Company, First
Investors Credit Corporation, School Financial Management Services, Inc., First
Investors Credit Funding Corporation, N.A.K. Realty Corporation, Real Property
Development Corporation, First Investors Leverage Corporation and Route 33
Realty Corporation.
The following table lists compensation paid to the Directors of the Fund
for the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
Total
Compensation
Pension or Estimated From First
Aggregate Retirement Benefits Annual Benefits Investors Family
Compensation Accrued as Part of Upon of Funds
Director From Fund* Fund Expenses Retirement Paid to Directors*
- -------- ------------ ------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
James J. Coy $1,200 $-0- $-0- $37,200
Roger L. Grayson -0- -0- -0- -0-
Glenn O. Head -0- -0- -0- -0-
Kathryn S. Head -0- -0- -0- -0-
F. William Ortman, Jr.** 500 -0- -0- 15,500
Rex R. Reed 1,200 -0- -0- 37,200
Herbert Rubinstein 1,200 -0- -0- 37,200
James M. Srygley*** 1,200 -0- -0- 37,200
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth 1,200 -0- -0- 37,200
</TABLE>
* Compensation to officers and interested Directors of the Fund is paid by
the Adviser. In addition, compensation to non-interested Directors of the
Fund is currently voluntarily paid by the Adviser.
** For the period January 1, 1995 through September 21, 1995.
*** For the period January 21, 1995 through December 31, 1995.
MANAGEMENT
Investment advisory services to the Fund are provided by First Investors
Management Company, Inc. pursuant to an Investment Advisory Agreement ("Advisory
Agreement") dated June 13, 1994. The
8
<PAGE>
Advisory Agreement was approved by the Board of Directors of the Fund, including
a majority of the Directors who are not parties to the Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of any such party
("Independent Directors"), in person at a meeting called for such purpose and by
a majority of the shareholders of the Fund.
Pursuant to the Advisory Agreement, FIMCO shall supervise and manage the
Fund's investments, determine the Fund's portfolio transactions and supervise
all aspects of its operations, subject to review by the Directors. The Advisory
Agreement also provides that FIMCO shall provide the Fund with certain
executive, administrative and clerical personnel, office facilities and
supplies, conduct the business and details of the operation of the Fund and
assume certain expenses thereof, other than obligations or liabilities of the
Fund. The Advisory Agreement may be terminated at any time without penalty by
the Directors or by a majority of the outstanding voting securities of the Fund,
or by FIMCO, in each instance on not less than 60 days' written notice, and
shall automatically terminate in the event of its assignment (as defined in the
1940 Act). The Advisory Agreement also provides that it will continue in effect
for a period of over two years only if such continuance is approved annually
either by the Directors or by a majority of the outstanding voting securities of
the Fund, and, in either case, by a vote of a majority of the Independent
Directors voting in person at a meeting called for the purpose of voting on such
approval.
Under the Advisory Agreement, the Fund pays the Adviser an annual fee,
paid monthly, according to the following schedule:
Annual
Average Daily Net Assets Rate
- ------------------------ ----
Up to $250 million...................................................... 0.75%
In excess of $250 million up to $500 million............................ 0.72
In excess of $500 million up to $750 million............................ 0.69
Over $750 million....................................................... 0.66
For the fiscal years ended December 31, 1993, 1994 and 1995, the Fund paid
the Adviser $322,888, $294,179 and $277,740, respectively, in advisory fees.
The Adviser has an Investment Committee composed of Denise M. Burns,
George V. Ganter, Margaret Haggerty, Glenn O. Head, Nancy W. Jones, Patricia D.
Poitra, Christopher Brigati, Clark D. Wagner and John Tomasulo. The Committee
usually meets weekly to discuss the composition of the portfolio of the Fund and
to review additions to and deletions from its portfolio.
DETERMINATION OF NET ASSET VALUE
Except as provided herein, a security listed or traded on an exchange or
the NASDAQ national market system is valued at its last sale price on the
exchange or market system where the security is primarily traded, and lacking
any sales on a particular day, the security is valued at the closing bid price
on that day. Each security traded in the over-the-counter ("OTC") market,
including securities listed on exchanges whose primary market is believed to be
OTC, is valued at the last bid price based upon quotes furnished by a market
maker for such securities. In the absence of market quotations, the Fund will
determine the value of bonds based upon quotes furnished by market makers, if
available, or in accordance with the procedures described herein. In that
connection, the Fund's Board of Directors has determined
9
<PAGE>
that the Fund may use an outside pricing service. The pricing service uses
quotations obtained from investment dealers or brokers for the particular
securities being evaluated, information with respect to market transactions in
comparable securities and other available information in determining value.
Short-term debt securities that mature in 60 days or less are valued at
amortized cost if their original term to maturity from the date of purchase was
60 days or less, or by amortizing their value on the 61st day prior to maturity
if their term to maturity from the date of purchase exceeded 60 days, unless the
Fund's Board of Directors determines that such valuation does not represent fair
value. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's officers in a manner specifically authorized by the Fund's Board of
Directors.
"When-issued securities" are reflected in the assets of the Fund as of the
date the securities are purchased. Such investments are valued thereafter at the
most recent bid price obtained from recognized dealers in such securities. For
valuation purposes, quotations of foreign securities in foreign currencies are
converted into U.S. dollar equivalents using the foreign exchange equivalents in
effect.
The Fund's Board of Directors may suspend the determination of the Fund's
net asset value for the whole or any part of any period (1) during which trading
on the New York Stock Exchange ("NYSE") is restricted as determined by the SEC
or the NYSE is closed for other than weekend and holiday closings, (2) when an
emergency exists, as defined by the SEC, that makes it not reasonably
practicable for the Fund to dispose of securities owned by it or fairly to
determine the value of its net assets, or (3) for such other period as the SEC
has by order permitted.
ALLOCATION OF PORTFOLIO BROKERAGE
Purchases and sales of portfolio securities by the Fund may be principal
transactions. In principal transactions, portfolio securities are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. There will usually be no brokerage commission paid by the Fund
for such purchases. Purchases from underwriters will include the underwriter's
commission or concession and purchases from dealers serving as market makers
will include the spread between the bid and asked price. Certain money market
instruments may be purchased by the Fund directly from an issuer, in which no
commission or discounts are paid. The Fund may purchase fixed income securities
on a "net" basis with dealers acting as principal for its own account without a
stated commission, although the price of the security usually includes a profit
to the dealer.
The Fund may deal in securities which are not listed on a national
securities exchange or the Nasdaq national market system but are traded in the
OTC market. The Fund also may purchase listed securities through the "third
market." When transactions are executed in the OTC market, the Fund seeks to
deal with the primary market makers, but when advantageous they utilize the
services of brokers.
In effecting portfolio transactions for the Fund, the Adviser seeks best
execution of trades either (1) at the most favorable and competitive rate of
commission charged by any broker or member of an exchange, or (2) with respect
to agency transactions, at a higher rate of commission if reasonable in relation
to brokerage and research services provided to the Fund or the Adviser, by such
member or broker. Such services may include, but are not limited to, any one or
more of the following: information as to the availability of securities for
purchase or sale and statistical or factual information or opinions pertaining
to investments. The Adviser may use research and services provided to it by
brokers in servicing all the funds in First Investors Group of Funds; however,
not all such services may be used by
10
<PAGE>
the Adviser in connection with the Fund. No portfolio orders are placed with an
affiliated broker, nor does any affiliated broker participate in these
commissions.
The Adviser may combine transaction orders placed on behalf of the Fund
and any other fund in the First Investors Group of Funds, any series of
Executive Investors Trust and First Investors Life for the purpose of
negotiating brokerage commissions or obtaining a more favorable transaction
price; and where appropriate, securities purchased or sold may be allocated, in
terms of price and amount, to the Fund according to the proportion that the size
of the transaction order actually placed by the Fund bears to the aggregate size
of the transaction orders simultaneously made by other participants in the
transaction.
For the fiscal year ended December 31, 1993, the Fund paid $2,790 in
brokerage commissions. Of that amount $1,843 was paid in brokerage commissions
to brokers who furnished research services on portfolio transactions in the
amount of $188,559. For the fiscal year ended December 31, 1994, the Fund paid
$781 in brokerage commissions, all of which was paid to brokers who furnished
research services on portfolio transactions in the amount of $17,968. For the
fiscal year ended December 31, 1995, the Fund did not pay brokerage commissions.
TAXES
In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Code, the Fund must distribute to its shareholders for
each taxable year at least 90% of its investment company taxable income
(consisting generally of net investment income and net short-term capital gain
and net gains from certain foreign currency transactions) and must meet several
additional requirements. These requirements include the following: (1) the Fund
must derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of securities or foreign currencies, or other income derived
with respect to its business of investing in securities or those currencies; (2)
the Fund must derive less than 30% of its gross income each taxable year from
the sale or other disposition of securities, or foreign currencies that are not
directly related to the Fund's principal business of investing in securities,
that were held for less than three months ("Short-Short Limitation"); (3) at the
close of each quarter of the Fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and other securities, with those other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of the Fund's total assets and that does not represent
more than 10% of the issuer's outstanding voting securities; and (4) at the
close of each quarter of the Fund's taxable year, not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries that would reduce the
yield on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.
The Fund may acquire zero coupon securities issued with original issue
discount. As a holder of those securities, the Fund must include in its income
the original issue discount that accrues on the securities during the taxable
year, even if it receives no corresponding payment on them during the year.
Similarly, the Fund must include in its gross income securities it receives as
"interest" on pay-in-kind securities. Because the Fund annually must distribute
substantially all of its investment company taxable
11
<PAGE>
income, including any original issue discount and other non-cash income, to
satisfy the Distribution Requirement, the Fund may be required in a particular
year to distribute as a dividend an amount that is greater than the total amount
of cash it actually receives. Those distributions will be made from the Fund's
cash assets or from the proceeds of sales of portfolio securities, if necessary.
The Fund may realize capital gains or losses from those sales, which would
increase or decrease its investment company taxable income and/or net capital
gain. In addition, any such gains may be realized on the disposition of
securities held for less than three months. Because of the Short-Short
Limitation, any such gains would reduce the Fund's ability to sell other
securities or foreign currency positions, held for less than three months that
it might wish to sell in the ordinary course of its portfolio management.
GENERAL INFORMATION
Audits And Reports. The accounts of the Fund are audited twice a year by
Tait, Weller & Baker, independent certified public accountants, Two Penn Center
Plaza, Philadelphia, PA, 19102-1707. Shareholders of the Fund receive
semi-annual and annual reports, including audited financial statements, and a
list of securities owned.
12
<PAGE>
APPENDIX A
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S RATINGS GROUP
S&P's commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market. Ratings are
graded into several categories, ranging from "A-1" for the highest quality
obligations to "D" for the lowest.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) designation.
MOODY'S INVESTORS SERVICE, INC.
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of indemnity are excluded unless explicitly rated.
Prime-1 Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
13
<PAGE>
Financial Statements as of
December 31, 1995
14
<PAGE>
<TABLE>
Portfolio of Investments
FIRST INVESTORS SPECIAL BOND FUND, INC.
December 31, 1995
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--87.4%
Apparel/Textiles--0%
$ 500M Linter Textiles Corp. Ltd., 13 3/4%, 2000 Defaulted $ 6,250 $ 2
- ----------------------------------------------------------------------------------------------------
Automotive--4.9%
500M Aftermarket Technology Corp., 12%, 2004 532,500 140
750M Exide Corp., 10%, 2005 805,312 212
500M SPX Corp., 11 3/4%,2002 532,500 140
- ----------------------------------------------------------------------------------------------------
1,870,312 492
- ----------------------------------------------------------------------------------------------------
Building Materials--2.7%
1,000M Interface, Inc., 9 1/2%, 2005 (Note 5) 1,026,250 270
- ----------------------------------------------------------------------------------------------------
Chemicals--6.6%
1,000M Huntsman Corp., 11%, 2004 1,151,250 303
800M Rexene Corp., 11 3/4%, 2004 850,000 223
500M Synthetic Industries, Inc., 12 3/4%, 2002 492,500 129
- ----------------------------------------------------------------------------------------------------
2,493,750 655
- ----------------------------------------------------------------------------------------------------
Consumer Non-Durables--1.9%
700M Hines Horticulture, Inc., 11 3/4%, 2005 (Note 5) 735,000 193
- ----------------------------------------------------------------------------------------------------
Containers--2.1%
700M Owens Illinois, Inc., 11%, 2003 793,625 209
- ----------------------------------------------------------------------------------------------------
Electrical Equipment--7.5%
725M Essex Group, Inc., 10%, 2003 717,750 189
1,000M IMO Industries, Inc., 12%, 2001 1,020,000 268
472M Thermadyne Industries, Inc., 10 1/4%, 2002 474,360 125
656M Thermadyne Industries, Inc., 10 3/4%, 2003 659,280 173
- ----------------------------------------------------------------------------------------------------
2,871,390 755
- ----------------------------------------------------------------------------------------------------
Energy--5.9%
1,000M Clark R & M Holdings, Inc., 0%,2000 667,500 175
600M Falcon Drilling Co., Inc., 9 3/4%, 2001 615,000 162
900M United Meridian Corp., 10 3/8%, 2005 956,250 251
- ----------------------------------------------------------------------------------------------------
2,238,750 588
- ----------------------------------------------------------------------------------------------------
Financial Services--1.7%
600M Olympic Financial Ltd. 13%, 2000 657,000 173
- ----------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--3.6%
700M Fleming Co., Inc., 10 5/8%, 2001 682,500 179
700M TLC Beatrice International Holdings, Inc.,11 1/2%, 2005 683,375 180
- ----------------------------------------------------------------------------------------------------
1,365,875 359
- ----------------------------------------------------------------------------------------------------
Gaming/Lodging--4.2%
900M GB Property Funding, Inc., 10 7/8%, 2004 789,750 208
800M Showboat, Inc., 9 1/4%, 2008 808,000 212
- ----------------------------------------------------------------------------------------------------
1,597,750 420
- ----------------------------------------------------------------------------------------------------
Healthcare--9.9%
870M Abbey Healthcare Group, Inc., 9 1/2%, 2002 926,550 244
900M Integrated Health Services, Inc., 9 5/8%, 2002 920,250 242
900M Mediq/PRN Life Support Services, Inc., 11 1/8%, 1999 900,000 237
900M Tenet Healthcare Corp., 10 1/8%, 2005 1,000,125 263
- ----------------------------------------------------------------------------------------------------
3,746,925 986
- ----------------------------------------------------------------------------------------------------
Media/Cable Television--16.4%
1,500M Affiliated Newspaper Investments, 0%-13 1/4%, 2006 892,500 235
1,000M Bell Cablemedia PLC., 0%-11.95%, 2004 707,500 186
1,675M Echostar Communications Corp., 0%-12 7/8%, 2004 1,130,625 297
700M PanAmSat Capital Corp., 9 3/4%, 2000 738,500 194
400M PanAmSat Capital Corp., 0%-11 3/8%, 2003 326,000 86
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS SPECIAL BOND FUND, INC.
December 31, 1995
- ----------------------------------------------------------------------------------------------------
Principal Amount
Amount, Invested
Shares For Each
or $10,000 of
Warrants Security Value Net Assets
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Media/Cable Television (continued)
$ 500M Sinclair Broadcasting Group, 10%, 2005 $ 513,125 $ 135
1,400M Videotron Holdings, PLC., 0%-11 1/8%, 2004 980,000 258
900M World Color Press, Inc., 9 1/8%, 2003 931,500 245
- ----------------------------------------------------------------------------------------------------
6,219,750 1,636
- ----------------------------------------------------------------------------------------------------
Mining/Metals--1.8%
700M WCI Steel, Inc., 10 1/2%, 2002 680,750 179
- ----------------------------------------------------------------------------------------------------
Paper/Forest Products--5.2%
500M Container Corp., 11 1/4%, 2004 517,500 136
700M Rainy River Forest Products Co., Inc., 10 3/4%, 2001 772,625 203
700M Stone Container Corp., 9 7/8%, 2001 683,375 180
- ----------------------------------------------------------------------------------------------------
1,973,500 519
- ----------------------------------------------------------------------------------------------------
Retail-Food/Drug--3.3%
800M P&C Food Markets, Inc., 11 1/2%, 2001 784,000 206
500M Penn Traffic Company, 10 1/4%, 2002 479,375 126
- ----------------------------------------------------------------------------------------------------
1,263,375 332
- ----------------------------------------------------------------------------------------------------
Retail-General Merchandise--.5%
1M Barry's Jewelers, Inc., 12 5/8%, 1996 874 -
200M General Host Co., Inc., 11 1/2%, 2002 189,000 50
- ----------------------------------------------------------------------------------------------------
189,874 50
- ----------------------------------------------------------------------------------------------------
Telecommunications--3.5%
350M Centennial Cellular, 8 7/8%, 2001 345,625 91
900M Paging Network, Inc., 11 3/4%, 2002 997,875 262
- ----------------------------------------------------------------------------------------------------
1,343,500 353
- ----------------------------------------------------------------------------------------------------
Transportation--5.7%
850M Cencall Communications Corp., 0%-10 1/8%, 2004 484,500 127
900M Eletson Holdings, Inc., 9 1/4%, 2003 886,500 233
1,000M MFS Communications, Inc., 0%-9 3/8%, 2004 802,500 211
- ----------------------------------------------------------------------------------------------------
2,173,500 571
- ----------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $32,865,964) 32,247,126 8,742
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS--1.3%
Electrical Equipment--.1%
1,036 *Thermadyne Holdings Corp. 18,778 5
- ----------------------------------------------------------------------------------------------------
Gaming/Lodging--0%
8,500 *Goldriver Hotel & Casino Corp., Series "B 1,594 -
- ----------------------------------------------------------------------------------------------------
Media/Cable Television--.7%
1,500 *Affiliated Newspaper Investments 37,500 10
10,050 *Echostar Communications Class "A" 243,713 64
- ----------------------------------------------------------------------------------------------------
281,213 74
- ----------------------------------------------------------------------------------------------------
Paper/Forest Products--.4%
20,394 *Gaylord Container Corp., Class "A" 164,426 43
- ----------------------------------------------------------------------------------------------------
Retail-General Merchandise--.1%
5,354 *Barry's Jewelers, Inc. 21,415 6
- ----------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $238,332) 487,426 128
- ----------------------------------------------------------------------------------------------------
PREFERRED STOCKS--2.8%
Financial Services
10,000 California Federal Bank, 10 5/8%, Series "B"
(cost $1,000,000) 1,085,000 285
- ----------------------------------------------------------------------------------------------------
WARRANTS--.4%
Gaming/Lodging--0%
850 *Goldriver Finance Corp., Liquidating Trust 12,750 3
- ----------------------------------------------------------------------------------------------------
Paper/Forest Products--.4%
18,332 *Gaylord Container Corp. (expiring 7/31/96) 137,490 36
- ----------------------------------------------------------------------------------------------------
Total Value of Warrants (cost $27,492) 150,240 39
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS SPECIAL BOND FUND, INC.
December 31, 1995
- ----------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM CORPORATE NOTES--6.6%
$ 500M Appalachian Power, 6%, 1/2/96 $ 499,917 $ 131
2,000M Gannett Company, 5.85%, 1/8/96 1,997,400 525
- ----------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $2,497,317) 2,497,317 656
- ----------------------------------------------------------------------------------------------------
Total Value of Investments (cost $36,629,105) 98.5% 37,467,109 9,850
Other Assets, Less Liabilities 1.5 569,895 150
- ----------------------------------------------------------------------------------------------------
Net Assets 100.0% $38,037,004 $10,000
- ----------------------------------------------------------------------------------------------------
*Non-income producing
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS SPECIAL BOND FUND, INC.
December 31, 1995
- ------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Investments in securities, at value (identified cost $36,629,105) (Note 1A) $37,467,109
Cash 133,837
Receivables:
Interest $630,889
Capital shares sold 1,889 632,778
--------
Other assets 4,373
-----------
Total Assets 38,238,097
Liabilities
Payable for capital stock redeemed 157,383
Accrued advisory fee 23,329
Accrued expenses 20,381
--------
Total Liabilities . 201,093
-----------
Net Assets $38,037,004
===========
Net Assets Consist of:
Capital paid in .$56,261,574
Undistributed net investment income . 846,562
Accumulated net realized loss on investment transactions .(19,909,136)
Net unrealized appreciation in value of investments 838,004
-----------
Total .$38,037,004
===========
Net Asset Value, Offering Price and Redemption Price Per Share
($38,037,004 divided by 3,108,898 shares outstanding),
25,000,000 shares authorized, $1.00 par value (Note 2) $12.23
===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
FIRST INVESTORS SPECIAL BOND FUND, INC.
Year Ended December 31, 1995
- ---------------------------------------------------------------------------------------------------
Investment Income
Income:
<S> <C> <C>
Interest $3,894,925
Dividends 106,754
Consent fees and other income 83,892
-----------
Total income $4,085,571
Expenses (Notes 1 and 4):
Advisory fee 277,740
Professional fees 24,590
Custodian fees 7,220
Reports and notices to shareholders 3,904
Other expenses 12,903
-----------
Total expenses 326,357
Less: Custodian fees paid indirectly (6,810)
-----------
Net expenses 319,547
----------
Net investment income 3,766,024
Realized and Unrealized Gain (Loss) on Investments (Note 3):
Net realized loss on investments (287,903)
Net unrealized appreciation of investments 3,605,865
-----------
Net gain on investments 3,317,962
----------
Net Increase in Net Assets Resulting from Operations $7,083,986
==========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS SPECIAL BOND FUND, INC.
- -----------------------------------------------------------------------------------------------
Year Ended December 31 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 3,766,024 $ 3,680,764
Net realized gain (loss) on investments (287,903) 702,669
Net unrealized appreciation (depreciation) 3,605,865 (4,824,981)
----------- -----------
Net increase (decrease) in net assets resulting from operations 7,083,986 (441,548)
----------- ------------
Dividends to Shareholders from:
Net investment income (3,226,603) (3,465,637)
----------- -----------
Capital Share Transactions (a)
Proceeds from shares sold 736,623 385,945
Value of dividends reinvested 3,226,603 3,465,637
Cost of shares redeemed (6,508,688) (6,275,104)
----------- -----------
Net decrease in net assets resulting from share transactions (2,545,462) (2,423,522)
----------- -----------
Net increase (decrease) in net assets 1,311,921 (6,330,707)
Net Assets
Beginning of year 36,725,083 43,055,790
----------- -----------
End of year (including undistributed net investment income of
$846,562 and $307,141, respectively) $38,037,004 $36,725,083
=========== ===========
(a)Capital Shares Issued and Redeemed
Sold 64,445 33,791
Issued for dividends reinvested 273,019 305,954
Redeemed (558,069) (546,626)
----------- -----------
Net decrease in capital shares . (220,605) (206,881)
=========== ===========
See notes to financial statements
</TABLE>
<PAGE>
Notes to Financial Statements
FIRST INVESTORS SPECIAL BOND FUND, INC.
1. Significant Accounting Policies - The Fund is registered under the Investment
Company Act of 1940 (the "1940 Act") as a diversified, open-end management
investment company. The investment objective of the Fund is to seek high current
income without undue risk to principal and secondarily to seek growth of
capital.
A. Security Valuation - Except as provided below, a security listed or traded on
an exchange or the NASDAQ National Market System is valued at its last sale
price on the exchange or system where the security is principally traded, and
lacking any sales, the security is valued at the mean between the closing bid
and asked prices. Each security traded in the over-the-counter market (including
securities listed on exchanges whose primary market is believed to be
over-the-counter) is valued at the mean between the last bid and asked prices
based upon quotes furnished by a market maker for such securities. Securities
may also be priced by a pricing service. The pricing service uses quotations
obtained from investment dealers or brokers, information with respect to market
transactions in comparable securities and other available information in
determining value. Short-term corporate notes which are purchased at a discount
are valued at amortized cost. Securities for which market quotations are not
readily available are valued on a consistent basis at fair value as determined
in good faith by or under the supervision of the Fund's officers in a manner
specifically authorized by the Board of Directors.
<PAGE>
B. Federal Income Taxes - No provision has been made for federal income taxes on
net income or capital gains, since it is the policy of the Fund to continue to
comply with the special provisions of the Internal Revenue Code applicable to
investment companies and to make sufficient distributions of income and capital
gains (in excess of any available capital loss carryovers) to relieve it from
all, or substantially all, such taxes. At December 31, 1995, the Fund had
capital loss carryovers of $19,909,136, of which $16,599,362 expires in 1998,
$3,021,871 expires in 1999, and $287,903 in 2003.
C. Distributions to Shareholders - Dividends to shareholders from net investment
income are declared daily and paid monthly. Distributions from net realized
capital gains are normally declared and paid annually. Income dividends and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for capital loss
carryforwards and post October losses.
D. Other - Security transactions are accounted for on the date the securities
are purchased or sold. Cost is determined, and gains and losses are based, on
the identified cost basis for both financial statement and federal income tax
purposes. Dividend income is recorded on the ex-dividend date. Interest income
and estimated expenses are accrued daily. The fund's Custodian has provided
credits in the amount of $6,810 against custodian charges based on the
uninvested cash balances of the fund.
2. Capital Stock - Shares of the Fund are sold only through the purchase of
annuity contracts issued by First Investors Life Variable Annuity Fund A.
3. Security Transactions - For the year ended December 31, 1995, purchases and
sales of investment securities, other than United States Government obligations
and short-term corporate notes, aggregated $15,869,514 and $19,255,226,
respectively.
At December 31, 1995, the cost of investments for federal income tax purposes
was $36,629,105. Accumulated net unrealized depreciation on investments was
$838,004, consisting of $1,979,924 gross unrealized appreciation and $1,141,920
gross unrealized depreciation.
<PAGE>
4. Advisory Fee and Other Transactions With Affiliates - Certain officers and
directors of the Fund are officers and directors of its investment adviser,
First Investors Management Company, Inc. ("FIMCO") and its transfer agent,
Administrative Data Management Corp. Officers and directors of the Fund received
no remuneration from the Fund for serving in such capacities. Their remuneration
(together with certain other expenses of the Fund) is paid by FIMCO or First
Investors Corporation.
The Investment Advisory Agreement provides as compensation to FIMCO an annual
fee, payable monthly, at the rate of .75% on the first $250 million of the
Fund's average daily net assets, declining by .03% on each $250 million
thereafter, down to .66% on average daily net assets over $750 million.
Pursuant to certain state regulations, FIMCO has agreed to reimburse the Fund if
and to the extent that the Fund's aggregate operating expenses, including the
advisory fee but generally excluding interest, taxes, brokerage commissions and
extraordinary expenses, exceed any limitation on expenses applicable to the Fund
in those states (unless waivers of such limitations have been obtained). The
amount of any such reimbursement is limited to the yearly advisory fee. For the
year ended December 31, 1995, no reimbursement was required pursuant to these
provisions.
5. Rule 144A Securities - Under Rule 144A, certain restricted securities are
exempt from the registration requirements of the Securities Act of 1933 and may
only be resold to qualified institutional investors. At December 31, 1995, the
Fund held two 144A securities with an aggregate value of $1,761,250 representing
4.6% of the Fund's net assets. These securities are valued as set forth in Note
1A.
6. Concentration of Credit Risk - The Fund's investment in high yield
securities, whether rated or unrated, may be considered speculative and subject
to greater market fluctuations and risk of loss of income and principal than
lower yielding, higher rated, fixed income securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At December 31, 1995, the
Fund held one defaulted security with a value of $6,250 representing less than
2/10 of 1% of the Fund's net assets.
<PAGE>
Independent Auditor's Report
To the Shareholders and Board of Directors of
First Investors Special Bond Fund, Inc.
We have audited the accompanying statement of assets and liabilities of First
Investors Special Bond Fund, Inc., including the portfolio of investments, as of
December 31, 1995, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended and financial highlights for each of the ten years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of First
Investors Special Bond Fund, Inc. as of December 31, 1995, and the results of
its operations, changes in its net assets and financial highlights for each of
the respective years presented, in conformity with generally accepted accounting
principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1996
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements are set forth in Part B, Statement of Additional
Information.
(b) Exhibits:
(1)3 Articles of Restatement
(2)3 Amended and Restated By-laws
(3) Not Applicable
(4)1 Specimen Certificate
(5)3 Investment Advisory Agreement between Registrant and
First Investors Management Company, Inc.
(6) Not Applicable
(7) Not Applicable
(8)a. Custodian Agreement between Registrant and Irving Trust
Company
b. Supplement to Custodian Agreement between Registrant
and The Bank of New York
(9) Administration Agreement between Registrant, First
Investors Management Company, Inc., First Investors
Corporation and Administrative Data Management Corp.
(10)2 Opinion of Counsel
(11)a. Consent of independent accountants
b. Powers of Attorney
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
<PAGE>
(17) Financial Data Schedule (filed as Exhibit 27 for
electronic filing purposes)
(18) Not Applicable
- ----------
1 Incorporated by reference from Registrant's Registration Statement (File
No. 2-66294)
2 Incorporated by reference from Registrant's Rule 24f-2 Notice for its
fiscal year ending December 31, 1995 filed on February 27, 1996.
3 Incorporated by reference from Post-Effective Amendment No. 14 to
Registrant's Registration Statement (File No. 2-66294) filed on April 24,
1995.
Item 25. Persons Controlled by or under common control with Registrant
There are no persons controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities
Number of Record
Holders as of
Title of Class February 9, 1996
-------------- ----------------
Common Stock 1
($1.00 par value)
Item 27. Indemnification
Article X, Section 1 of the By-Laws of Registrant provides as follows:
Section 1. Every person who is or was an officer or director of the
Corporation (and his heirs, executors and administrators) shall be indemnified
by the Corporation against reasonable costs and expenses incurred by him in
connection with any action, suit or proceeding to which he may be made a party
by reason of his being or having been a director or officer of the Corporation,
except in relation to any action, suit or proceeding in which he has been
adjudged liable because of negligence or misconduct, which shall be deemed to
include willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. In the absence of an
adjudication which expressly absolves the director or officer of liability to
the Corporation or its stockholders for negligence or misconduct, within the
meaning thereof as used herein, or in the event of a settlement, each director
or officer (and his heirs, executors and administrators) shall be indemnified by
the Corporation against payments made, including reasonable costs and expenses,
provided that such
<PAGE>
indemnity shall be conditioned upon the prior determination by a resolution of
two-thirds of the Board of Directors, who are not involved in the action, suit
or proceeding that the director or officer has no liability by reason of
negligence or misconduct within the meaning thereof as used herein, and provided
further that if a majority of the members of the Board of Directors of the
Corporation are involved in the action, suit or proceeding, such determination
shall have been made by a written opinion of independent counsel. Amounts paid
in settlement shall not exceed costs, fees and expenses which would have been
reasonably incurred if the action, suit or proceeding had been litigated to a
conclusion. Such a determination by the Board of Directors or by independent
counsel, and the payment of amounts by the Corporation on the basis thereof,
shall not prevent a stockholder from challenging such indemnification by
appropriate legal proceedings on the grounds that the person indemnified was
liable to the Corporation or its security holders by reason of negligence or
misconduct within the meaning thereof as used herein. The foregoing rights and
indemnification shall not be exclusive of any other rights to which any officer
or director (or his heirs, executors and administrators) may be entitled to
according to law.
The Registrant's Investment Advisory Agreement provides as follows:
The Manager shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company or any Series in
connection with the matters to which this Agreement relate except a loss
resulting from the willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though also an
officer, partner, employee, or agent of the Manager, who may be or become an
officer, Board member, employee or agent of the Company shall be deemed, when
rendering services to the Company or acting in any business of the Company, to
be rendering such services to or acting solely for the Company and not as an
officer, partner, employee, or agent or one under the control or direction of
the Manager even though paid by it.
Reference is hereby made to the Maryland Corporations and Associations
Annotated Code, Sections 2-417, 2-418 (1986).
The general effect of this Indemnification will be to indemnify the
officers and directors of the Registrant from costs and expenses arising from
any action, suit or proceeding to which they may be made a party by reason of
their being or having been a director or officer of the Registrant, except where
such action is determined to have arisen out of the willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the director's or officer's office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Securities and
<PAGE>
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is therefore unenforceable. See Item 32 herein.
Item 28. Business and Other Connections of Investment Adviser
First Investors Management Company, Inc., the Registrant's Investment
Adviser, also serves as Investment Adviser to:
First Investors Cash Management Fund, Inc.
First Investors Series Fund
First Investors Fund For Income, Inc.
First Investors Government Fund, Inc.
First Investors High Yield Fund, Inc.
First Investors Global Fund, Inc.
First Investors Life Series Fund
First Investors Multi-State Insured Tax Free Fund
First Investors New York Insured Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
First Investors Series Fund II, Inc.
Affiliations of the officers and directors of the Investment Adviser are
set forth in Part B, Statement of Additional Information, under "Directors and
Officers."
Item 29. Principal Underwriters
Not Applicable
Item 30. Location of Accounts and Records
Physical possession of the books, accounts and records of the Registrant
are held by First Investors Management Company, Inc. and its affiliated
companies, First Investors Corporation and Administrative Data Management Corp.,
at their corporate headquarters, 95 Wall Street, New York, NY 10005 and
administrative offices, 581 Main Street, Woodbridge, NJ 07095, except for those
maintained by the Registrant's Custodian, The Bank of New York, 48 Wall Street,
New York, NY 10286.
Item 31. Management Services
Inapplicable
Item 32. Undertakings
The Registrant undertakes to carry out all indemnification provisions of
its Articles of Incorporation and Advisory Agreement in
<PAGE>
accordance with Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions under Item 27 herein, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Registrant hereby undertakes to furnish a copy of its latest annual
report to shareholders, upon request and without charge, to each person to whom
a prospectus is delivered.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant represents that this Amendment
meets all the requirements for effectiveness pursuant to Rule 485(b) under the
Securities Act of 1933, and has duly caused this Post-Effective Amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
17th day of April, 1996.
FIRST INVESTORS SPECIAL
BOND FUND, INC.
(Registrant)
By:/s/Glenn O. Head
-----------------------------------------------
Glenn O. Head
President and Director
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<S> <C> <C>
/s/Glenn O. Head Principal Executive April 17, 1996
- --------------------- Officer and Director
Glenn O. Head
/s/Joseph I. Benedek Principal Financial April 17, 1996
- --------------------- and Accounting Officer
Joseph I. Benedek
* Director April 17, 1996
- ---------------------
Kathryn S. Head
* Director April 17, 1996
- ---------------------
James J. Coy
* Director April 17, 1996
- ---------------------
Roger L. Grayson
<PAGE>
* Director April 17, 1996
- ----------------------
Herbert Rubinstein
* Director April 17, 1996
- ---------------------
James M. Srygley
* Director April 17, 1996
- ---------------------
John T. Sullivan
* Director April 17, 1996
- ---------------------
Rex R. Reed
* Director April 17, 1996
- ---------------------
Robert F. Wentworth
*By: /s/Larry R. Lavoie
Larry R. Lavoie
Attorney-in-fact
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
99.B8.1 Custodian Agreement
99.B8.2 Supplement to Custodian Agreement
99.B9 Administration Agreement
99.B11.1 Consent of accountants
99.B11.2 Powers of Attorney
27 Financial Data Schedule
CUSTODIAN AGREEMENT
This Agreement, dated the 15th day of December, 1981, made by and between
FIRST INVESTORS SPECIAL BOND FUND, INC. (the "Fund"), a corporation duly
organized and existing under the laws of the State of Maryland; and IRVING TRUST
COMPANY ("the Custodian"), a banking corporation duly organized and existing
under the laws of the State of New York;
WITNESSETH THAT:
WHEREAS, the Fund desires to appoint the Custodian as Custodian of its
securities and principal cash, and the Custodian is willing to act in such
capacity upon the terms and conditions herein set forth; and
WHEREAS, the Custodian in its capacity as Custodian hereunder will also
collect and apply the dividends and interest on said securities in the manner
and to the extent herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
do hereby agree as follows:
Section 1. The terms as defined in this Section wherever used in this
Agreement, or in any amendment or supplement hereto, shall have the meanings
herein specified unless the context otherwise requires.
ADM: The term shall mean Administrative Data Management Corp.
Administration Agreement: The term Administration Agreement shall mean the
agreement between the Fund and ADM under which ADM performs the duties of
administrator, transfer agent and dividend disbursing agent for the Fund.
Custodian: The term Custodian shall mean Irving Trust Company in its
capacity as Custodian under this Agreement.
First Investors Group: The term First Investors Group shall mean all funds
which have First Investors Management Company, Inc. as their investment advisor.
Fund: The term Fund shall mean FIRST INVESTORS SPECIAL BOND FUND, INC.
Securities: The term Securities shall mean bonds, debentures, notes,
stocks, shares, evidence of indebtedness, and other securities and investments
from time to time owned by the Fund.
Share Certificates: The term Share Certificates shall mean
1
<PAGE>
the stock certificates for the Shares.
Shareholders: The term Shareholders shall mean the registered owners from
time to time of the Shares in accordance with the stock registry records
maintained by ADM.
Shares: The term Shares shall mean the shares of capital stock of the Fund.
Statement of ADM: The term Statement of ADM shall mean a statement of ADM
in its capacity as administrator and transfer agent under the Administration
Agreement relating to transactions processed for the Fund.
Written Instructions: The term Written Instructions shall mean
authorization, instructions, certification or approval in form acceptable to the
Custodian, signed by one or more officers of the Fund or other signatories
authorized to sign Written Instructions by a resolution of the Board of
Directors of the Fund.
Section 2. The Fund shall from time to time file with the Custodian a
certified copy of each resolution of its Board of Directors authorizing
execution of Written Instructions and the number of signatories required,
together with certified signatures of the officers and other signatories
authorized to sign, which shall constitute conclusive evidence of the authority
of the officers and signatories designated therein to act, and which shall be
considered in full force and effect with the Custodian fully protected in acting
in reliance thereon until it receives written notice to the contrary; provided,
however, that if the certifying officer is authorized to sign Written
Instructions, the certification shall also be signed by a second officer of the
Fund.
Section 3. The Fund hereby appoints the Custodian as Custodian of the
Securities and cash from time to time on deposit hereunder, to be held by the
Custodian and applied as provided in this Agreement. The Custodian hereby
accepts such appointment subject to the terms and conditions hereinafter
provided. The Securities held by the Custodian shall, unless payable to bearer,
be registered in the name of its nominee, for the benefit of the Fund and the
Shareholders. Notwithstanding the foregoing, Securities deposited in a clearing
agency or book-entry system, pursuant to Section 13 hereof, may be registered in
the name of the clearing agency or its nominee. Securities, excepting bearer
securities, delivered from time to time to the Custodian upon purchase or
otherwise shall in all cases be in due form for transfer or already registered
as above provided.
Section 4. The Fund will initially deposit or cause to be deposited with
the Custodian the Securities owned by the Fund at the time this Agreement
becomes effective. Thereafter, the Fund will cause to be deposited with the
Custodian additional Securities
2
<PAGE>
as the same are purchased or otherwise acquired from time to time.
The Fund will make an initial deposit or cause a transfer of principal cash
to be held and applied by the Custodian hereunder. Thereafter the Custodian will
retain the net proceeds of Securities sold from time to time and the Fund will
cause to be deposited with the Custodian hereunder the applicable net asset
value of Shares sold from time to time whether representing initial issue, or
reinvestments of dividends and/or distributions.
Section 5. The Custodian is hereby authorized and directed to disburse
principal cash from time to time as follows:
(a) For the purpose of completing the purchase of Securities, (i) upon
receipt of Written Instructions specifying the Securities and stating the
purchase price, and the name of the broker, investment banker or other
party to or upon whose order the purchase price is to be paid, and (ii)
upon receipt of such Securities by the Custodian;
(b) For the purpose of paying over to ADM in its capacity as transfer agent
such amounts as may be stated in Written Instructions for purposes of
effecting the redemption of shares of the Fund;
(c) For the purpose of exercising warrants and rights in connection with
Securities, upon timely receipt of Written Instructions authorizing the
exercise of such warrants and rights and stating the consideration to be
paid;
(d) For the purpose of paying over to ADM in its capacity as dividend
disbursing agent such amounts as may be stated in Written Instructions,
representing proceeds of the sale of warrants, rights, stock dividends,
profit and increases in values of the Securities, as the Fund may determine
to include in dividends and/or distributions declared on the Shares;
(e) For the purpose of paying in whole or in part any loan of the Fund upon
receipt of Written Instructions directing payment and stating the
Securities, if any, to be received against payment; or
(f) For the purpose of making, or reimbursing the Fund for, other corporate
expenditures upon receipt of Written Instructions (i) stating that such
expenditures were authorized by resolution of the Board of Directors of the
Fund and are or were for proper corporate purposes, and (ii) specifying the
amount of payment the purpose for which such payment is to be made and
(iii) naming the person or persons to whom payment is to be made.
Section 6. The Custodian is hereby authorized and directed to
3
<PAGE>
deliver Securities from time to time as follows:
(a) For the purpose of completing sales of Securities sold by the Fund,
upon receipt of (i) the net proceeds of sale and (ii) Written Instructions
specifying the Securities sold and stating the amount to be received and
the broker, investment banker or other party to or upon whose order the
Securities are to be delivered;
(b) For the purpose of exchanging Securities for other Securities and/or
cash (i) upon timely receipt of Written Instructions stating the Securities
to be delivered and the Securities and/or cash to be received in exchange
and the manner in which the exchange is to be made, and (ii) against
receipt of the other Securities and/or cash as specified in the Written
Instructions;
(c) For the purpose of exchanging or converting Securities pursuant to
their terms or pursuant to any plan of conversion, consolidation,
recapitalization, reorganization, readjustment, or otherwise, (i) upon
timely receipt of Written Instructions authorizing such exchange or
conversion and stating the manner in which such exchange or conversion is
to be made, and (ii) against receipt of the Securities, certificates of
deposit, interim receipts, and/or cash to be received as specified in the
Written Instructions;
(d) For the purpose of presenting Securities for payment which have matured
or have been called for redemption;
(e) For the purpose of delivery of Securities upon redemption of Shares in
kind, upon receipt of (i) Statement of ADM that Share Certificates in due
form for transfer, or proper processing of Shares for which no Share
Certificates are outstanding, have been received and (ii) appropriate
Written Instructions; or
(f) For the purpose of depositing with the lender Securities to be held as
collateral of a loan to the Fund upon receipt of Written Instructions
directing delivery to the lender.
Section 7. If and to the extent authorized by the Board of Directors the
Custodian is hereby authorized and directed to execute Escrow Receipts (or
Depository Receipts) pursuant to the Rules of the Options Clearing Corporation
with respect to Securities being held by the Custodian as follows:
(a) Upon receipt by the Custodian of Written Instructions and the option
contract premium; and
(b) Provided the Securities are in deliverable form or subject to an
unrestricted power to put said Securities in
4
<PAGE>
unrestricted form.
The Fund agrees that Securities subject to an Escrow Receipt or Depository
Receipt are bound by the terms and conditions thereof and that the Custodian
shall be held harmless for any liability arising out of its execution of any
such receipt.
The Fund shall immediately notify the Custodian:
(a) if it enters into a closing purchase transaction; or
(b) if the option is exercised.
Section 8. In the event that the Fund shall elect to purchase rather than
to redeem Shares tendered by Shareholders for redemption and to hold such Shares
as treasury stock pending reissuance, the Share Certificates (or the Shares in
cases where no Share Certificates were issued) shall be transferred by ADM out
of the names of the redeeming Shareholders and recorded as treasury stock in the
unissued certificates account maintained by ADM or otherwise as the Fund, with
the approval of the Custodian, shall from time to time elect. As and when
treasury Shares are from time to time sold by the Fund and reissued, the
Custodian, upon receipt of the net asset value designated in the Written
Instructions furnished by the Fund under Section 4, shall be authorized to
approve the reissuance of the Shares and transfer and registration thereof as
authorized in said Written Instructions or Statement of ADM.
Section 9. The Custodian will collect from time to time the dividends and
interest on the Securities held by it hereunder and will deposit the same in a
separate income account until disbursed as hereinafter provided.
The Custodian is authorized to advance or pay out of said income account
accrued interest on bonds purchased and dividends on stocks sold and like items.
Subject to proper reserves for dividends owing on stocks sold and like
items, the Custodian will disburse the money from time to time on deposit in the
income account to or upon the order of the Fund as it may from time to time
direct for the following purposes:
(a) to pay the proper compensation and expenses of the Custodian;
(b) to transfer funds to ADM in its capacity as dividend disbursing agent
to pay dividends and/or distributions which may be declared by the Board of
Directors of the Fund upon receipt of appropriate Written Instructions;
(c) to transfer funds to ADM in its capacity as transfer
5
<PAGE>
agent to effect redemption of Fund shares upon receipt of appropriate
Written Instructions;
(d) to pay, or provide the Fund with money to pay taxes upon receipt of
appropriate Written Instructions; or
(e) to pay interest, management or supervisory fees, administration
dividends and transfer agency fees and costs, compensation of personnel, or
operating expenses (including, without limitation thereto, fees for legal,
accounting and auditing services) and to disburse cash for other proper
corporate purposes. Before making any such payment or disbursement,
however, the Custodian shall receive (and may conclusively reply upon )
Written Instructions requesting such payment or disbursement and stating
that it is for one or more of the purposes hereinabove enumerated, provided
that if the disbursement is for other proper corporate purposes, the
Written Instructions shall state that the disbursement was authorized by
resolution of the Board of Directors of the Fund and is for a proper
corporate purpose.
The determination of the Board of Directors of the Fund as to what shall
constitute income derived from the Securities from time to time held hereunder
as distinguished from principal or capital, shall be final and conclusive upon
the Fund, the Custodian and the Shareholders.
The Fund, if it elects to do so, may direct the Custodian by Written
Instructions to make transfers from the income account in its hands, to be held
as cash principal and applied as provided in this Agreement.
Section 10. The Custodian assumes no duty, obligation or responsibility
whatsoever to exercise any voting or consent powers with respect to the
Securities held by it from time to time hereunder, it being understood that the
Fund, or such person or persons as it may designate, shall have the right to
vote, or consent or otherwise act with respect to such Securities. The Custodian
will furnish to the Fund proxies or other appropriate authorizations with
respect to securities registered in the name of the Custodian or its nominee so
that such voting power, or powers to consent or otherwise act may be exercised
by the Fund or pursuant to its direction.
Section 11. The Custodian's compensation shall be as set forth in Schedule
A hereto attached, or as shall be set forth in amendments to such Schedule as
approved by the Fund and the Custodian.
Section 12. The Custodian assumes no duty, obligation or responsibility
whatsoever to handle, forward or process in any way notices of stockholder
meetings, proxy statements, annual reports,
6
<PAGE>
conversion notices, call notices, or other notices or written materials of any
kind sent to the registered owners of securities (hereafter referred to as
"notices and material"), excluding only stock certificates and dividend and
interest payments, it being understood that responsibility for obtaining such
notices and materials, and for taking action thereon, is the sole responsibility
of the Fund and its investment advisors, and not the responsibility of the
Custodian. As an accommodation only, the Custodian will make reasonable efforts
to forward such notices and written materials as it receives them to the Fund,
but makes no warranty or representation that all notices and materials will be
forwarded, and the Fund hereby agrees that it shall make no claim whatsoever
against the Custodian for any expense, damage, or loss of any kind arising out
of or in connection with any act or omission of the Custodian, including any
intentional or negligent act or omission of the Custodian, in connection with
such notices and materials. Upon receipt by the Custodian of warrants or rights
issued in connection with the assets of the Fund, the Custodian shall enter on
its ledgers appropriate notations indicating such receipt, but shall have no
further obligation whatsoever to notify the Fund or any other person of such
receipt, or to take any action of any kind with respect to such warrants or
rights except upon receipt of Written Instructions authorizing the exercise or
sale of such warrants or rights.
Section 13. The Custodian assumes a duty to hold and administer the assets
hereunder in accordance with the terms of this Agreement. The Custodian shall
segregate all assets held in its fiduciary capacity as Custodian hereunder. To
the extent authorized by the Board of Directors of the Fund, the Custodian may
deposit Securities held by it hereunder in a clearing agency which acts as a
securities depository or book-entry system, or both under an arrangement that
complies with Rule 17f-4 under the Investment Company Act. The Custodian assumes
no responsibility for the management, investment or reinvestment of the
Securities, whether or not on deposit hereunder, it being understood that the
responsibility for the proper and timely management, investment and reinvestment
of said Securities shall be that of the Fund and its investment advisor.
The Custodian shall not be liable for any taxes, assessments or
governmental charges which may be levied or assessed upon the Securities held by
it hereunder, or upon the income therefrom or otherwise whatsoever; the Fund
hereby agrees to indemnify, defend and hold the Custodian harmless of and from
any such tax, assessment or charge. If the Fund fails to so defend and hold
harmless the Custodian, it may pay any such tax, assessment or charge and
reimburse itself out of the monies of the Fund or out of Securities held
hereunder, provided, however, that the Custodian shall consult the officers of
the Fund before making any such payment.
7
<PAGE>
The Custodian may rely upon the advice of counsel, who may be counsel for
the Fund or for the Custodian, and upon statements of accountants, brokers and
other persons believed by it in good faith to be expert in the matters upon
which they are consulted; and for any action taken or suffered in good faith
based upon such advice or statements the Custodian shall not be liable to
anyone. The Custodian shall not be liable for anything done or suffered to be
done in good faith in accordance with any requests or advice of, or based upon
information furnished by, the Fund or its officers. The Custodian is authorized
to accept a certificate of the Secretary or Assistant Secretary of the Fund to
the effect that a resolution in the form submitted has been duly adopted by its
Board of Directors or by the Shareholders, as conclusive evidence that such
resolution has been duly adopted and is in full force and effect. The Custodian
shall not be liable for any action in good faith and believed to be within the
powers conferred upon it by this Agreement.
Except for its own gross negligence, bad faith, willful misconduct, or
reckless disregard of its obligations and duties under this Agreement, no
liability of any kind shall be attached to the Custodian by reason of its
holding the Securities and funds on deposit with it from time to time under this
Agreement or otherwise by reason of its administration of its Custodianship. In
the event that any claim shall be made against the Custodian, it shall have the
right to pay the same and to reimburse and indemnify itself out of the monies of
the Fund on deposit with it or out of the Securities held; provided, however,
that no such claim shall be paid unless the Fund shall have been notified
thereof and shall have been afforded an opportunity to defend the claim if it so
elects.
Section 14. This Agreement may be amended from time to time without notice
to or approval of the Shareholders by a supplemental agreement, in form approved
by counsel, executed by the Fund and the Custodian and amending and
supplementing this Agreement in the manner mutually agreed.
Section 15. Either the Fund or the Custodian may give sixty (60) days
written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice. In case such
notice of termination is given either by the Fund, or by the Custodian, the
Board of Directors of the Fund shall, by resolution duly adopted, promptly
appoint a Successor Custodian to serve upon the terms set forth in this
Agreement as then amended and supplemented, or a custodian to serve upon the
terms set forth in an agreement similar to this one. Each successor Custodian
shall be a bank, trust company, or a bank and trust company in good standing,
with legal capacity to accept custody of the securities of a mutual fund,
incorporated and existing under the laws of the United States of America, the
laws of the State of New York, or the laws of any State and having an
8
<PAGE>
aggregate capital, surplus and undivided profits as shown by its latest report
of at least $2,000,000.00 and meeting all of the requirements of Section 26 of
the Investment Company Act of 1940. Upon receipt of written notice from the Fund
of the appointment of such Successor Custodian and upon receipt of Written
Instructions, the Custodian shall deliver such Securities and cash as it may
then be holding hereunder directly to and only to the Successor Custodian.
Unless or until a Successor Custodian has been appointed as above provided, the
Custodian then acting shall continue to act as Custodian under this Agreement.
Every Successor Custodian appointed hereunder shall execute and deliver an
appropriate written acceptance of its appointment and shall thereupon become
vested with the rights, powers, obligations and custody of the predecessor
Custodian, as the case may be. The Custodian ceasing to act shall nevertheless,
upon request of the Fund and the Successor Custodian and upon payment of its
charges and disbursements, execute an instrument in form approved by its counsel
transferring to the Successor Custodian all of the predecessor's rights, duties,
obligations and custody.
In case the Custodian shall consolidate with or merge into any other
corporation, the corporation remaining after or resulting from such
consolidation or merger shall ipso facto, with execution or filing of any papers
or other documents, succeed to and be substituted for the Custodian with like
effect as though originally named as such.
In the event the Custodian or any Successor Custodian resigns or for any
reason cannot or will not continue to serve as Custodian and no Successor
Custodian can be found, there will be submitted to the Shareholders, for their
approval or disapproval, the matter of the possible liquidation of the Fund, or
continuation to function without a Custodian.
Section 16. The Custodian will maintain, preserve for the specified periods
and make available upon request, such records required by Rule 31-a of the
General Rules and Regulations under the Investment Company Act of 1940, as may
be agreed to by the Fund and the Custodian, from time to time.
Section 17. This Agreement shall take effect on the date indicated on the
first page and shall replace, as of that date, the Custodian Agreement between
the First Pennsylvania Bank N. A. and the Fund.
Section 18. Nothing contained in this Agreement, or in agreements
referenced herein, is intended to or shall require Irving Trust Company, in any
capacity, hereunder, to perform any functions or duties on any holiday or other
day of special observance on which it is closed. Functions or duties normally
scheduled to be performed on such days shall be performed on, and as of, the
next business day on which both the New York Stock
9
<PAGE>
Exchange and Irving Trust Company are open.
Section 19. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 20. This Agreement shall extend to and be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without written consent of the
Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of its Board of Directors.
Section 21. This Agreement shall be governed by, and interpreted in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this Agreement
to be signed by their respective Presidents or Vice-Presidents and their
corporate seals hereunto duly affixed, and attested by their respective
Secretaries or Assistant Secretaries, as of the day and year first above
written.
FIRST INVESTORS SPECIAL BOND FUND, INC.
BY /s/ Joseph M. O'Brien
---------------------------------------
Joseph M. O'Brien, President
[Seal] ATTEST:
/s/ Andrew J. Donohue
---------------------------------------
Andrew J. Donohue, Secretary
IRVING TRUST COMPANY
BY /s/ Michael A. Metz
---------------------------------------
ATTEST:
BY Signature Illegible
---------------------------------------
10
<PAGE>
Irving Trust Company
One Wall Street
New York, N. Y. 10015
PROPOSED CUSTODY FEE SCHEDULE
FOR
FIRST INVESTORS SPECIAL BOND FUND
The Annual Account Maintenance Fee will be based upon the market value of
securities held by the Fund and changed quarterly.
1/25th of 1% on the first $10 million;
1/50th of 1% on the next $40 million;
1/100th of 1% on the balance.
Activity Fees
- -------------
$15.00 - receive of a security against payment or free
$15.00 - delivery of a security against payment or free
-----------------------------------
11
SUPPLEMENT
TO
CUSTODIAN AGREEMENT
This Supplement is added to and forms a part of the Custodian Agreement
between First Investors Special Bond Fund, Inc. (the "Fund") and The Bank of New
York, as successor-in-interest to Irving Trust Company (the "Custodian") dated
March 27, 1986 (the "Agreement"). All defined terms used herein shall have the
meanings ascribed to them in the Agreement.
1. If the Custodian in its sole discretion advances Funds on behalf of the
Fund or any series thereof which results in an overdraft because the moneys held
by the Custodian in the separate account for the Fund or such series shall be
insufficient to pay the total amount payable upon a purchase of securities
specifically allocated to the Fund or such series, as set forth in an officer's
certificate, oral instructions or written instructions, or which results in an
overdraft in the separate account of the Fund or such series for some other
reason, or if the Fund or such series is indebted to The Bank of New York as the
issuer of any letter of credit on behalf of the Fund or such series, such
overdraft or indebtedness shall be deemed to be a loan made by the Custodian to
the Fund (allocated to the appropriate series, if any) payable on demand and
shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to the Federal Funds
Rate in effect from time to time plus 1%, such rate to be adjusted on the
effective date of any change in the Federal Funds Rate, but in no event to be
less than 6% per annum. Promptly upon the occurrence of any overdraft, the
Custodian will notify the Fund of the amount of such overdraft and the series to
which it relates. In addition, the Fund hereby agrees that the Custodian shall
have a continuing lien and security interest in and to any property of the Fund
or specifically allocated the Fund's series (if applicable) at any time held by
it for the benefit of the Fund or such series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or control of any third party acting in the Custodian's behalf. If, one business
day after the Custodian has demanded repayment of any overdraft or indebtedness,
the Fund fails to pay the same in full, the Custodian shall be entitled, in its
sole discretion, at any time to charge any outstanding overdraft or indebtedness
together with interest due thereon against any balance of account standing to
the Fund's or the appropriate series' credit on the Custodian's books.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
for which it borrows money for investment or for temporary or emergency purposes
using securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian an officer's certificate specifying with respect to each such
borrowing:
- 1 -
<PAGE>
(a) the series to which such borrowing relates (if applicable); (b) the name of
the bank, (c) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory not, duly endorsed by the
Fund, or other loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan becomes due and
payable, (f) the total amount payable to the Fund on the borrowing date, (g) the
market value of securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in an officer's certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the officer's certificate. The Custodian may, at
the option of the lending bank, keep such collateral in its possession, but such
collateral shall be subject to all rights therein given the lending bank by
virtue of any promissory note or loan agreement. The Custodian shall deliver
such securities as additional collateral as may be specified in an officer's
certificate to collateralize further any transaction described in this
paragraph. If the Custodian keeps the collateral in its possession, it shall
release such collateral as may be specified in a notice or undertaking in the
form currently used by the lending bank, provided that the same conforms to the
total amount set forth in an officer's certificate. The Fund shall cause all
securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in an officer's certificate the series (if applicable), the name of the issuer,
the title and number of shares or the principal amount of any particular
securities to be delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any securities.
3. This Supplement shall be effective as of the date hereof upon execution
by the parties hereto, and any reference to the Agreement shall be a reference
to the Agreement as supplemented hereby.
4. In the event of any conflict between the provisions of the Agreement and
the provisions of this Supplement, the provisions of this Supplement shall
control.
5. With respect to any obligations of the Fund on behalf of a series
arising out of this agreement, including, without limitation, the obligations
arising under this Supplement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the series
to which such obligation relates as though the Fund had separately contracted
with the Custodian by separate written instrument with respect to each series.
6. Notwithstanding the provisions of any applicable law, including without
limitation the Uniform Commercial Code, the remedy set
- 2 -
<PAGE>
forth in this Section 1 shall be the only right or remedy to which the Custodian
is entitled with respect to the lien and security interest granted pursuant to
this Section 1. Without limiting the foregoing, the Custodian hereby waives and
relinquishes all contractual and common law rights of set off to which it may
now or hereafter be or become entitled with respect to any obligations of the
Fund to the Custodian arising under the Supplement.
IN WITNESS WHEREOF, the parties hereto have executed this SUPPLEMENT as of
the date first above written.
First Investors Special Bond
Fund, Inc.
By:/s/ G. Head
---------------------------------------
Title: President
ATTEST:
- ----------------------------
/s/ C. Durso
THE BANK OF NEW YORK
By: /s/ Jorge Ramos
---------------------------------------
Title: Vice President
ATTEST:
- ----------------------------
/s/ Michael Cecero
- 3 -
ADMINISTRATION AGREEMENT
This Agreement, dated as of the 28th of November, 1979 made by and between
FIRST INVESTORS SPECIAL BOND FUND, INC. (the Fund), a corporation duly organized
and existing under the laws of the State of Maryland; FIRST INVESTORS MANAGEMENT
COMPANY, INC. (FIMCO), a corporation duly organized and existing under the laws
of the State of New York; FIRST INVESTORS CORPORATION (FIC), a corporation duly
organized and existing under the laws of the State of New York; ADMINISTRATIVE
DATA MANAGEMENT CORP. (ADM), a corporation duly organized and existing under the
laws of the State of New York.
WITNESSETH THAT:
WHEREAS, FIMCO and FIC are the national distributors of the shares of the
Fund; and
WHEREAS, ADM has agreed to act as transfer agent of the Fund, as its
dividend disbursing agent, and as administrator of the Dividend Reinvestment,
Share Accumulation and Systematic Withdrawal Accounts of the Fund, and ADM also
agreed to act for the Fund in other respects as hereinafter stated; and
WHEREAS, the parties hereto desire to set forth certain terms relating to
the activities of ADM under this Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
THE TRANSFER AGENCY
Section 1. The Fund hereby appoints ADM as its transfer agent, and ADM
accepts such appointment and agrees to act in such capacity upon the terms set
forth in this Agreement.
Section 2. ADM will maintain stock registry records in the usual form in
which it will note the issuance and redemption of Shares and the issuance and
transfer of Share Certificates, and is also authorized to maintain an account
entitled Unissued Share Certificate Account in which it will record the Shares
and fractions issued and outstanding from time to time for which issuance of
Share Certificates is deferred. ADM is also authorized to keep records, which
will be part of the stock transfer records, as well as its records of the Plans,
in which it will note the names and registered addresses of Planholders, and the
number of shares and fractions from time to time owned by them for which no
Share Certificates are outstanding. Each Shareholder or Planholder whether he
holds one or more Share
-1-
<PAGE>
Certificates or owns Shares held under one or more Plans, or whether he holds or
owns Shares by both methods, will be assigned a single account number.
Section 3. Whenever Shares are purchased for Planholders, the Fund
authorizes ADM to dispense with the issuance and countersignature of Share
Certificates. In such case ADM, as transfer agent, shall merely note on its
stock registry records the issuance of the Shares and fractions, (if any), shall
credit the Unissued Share Certificate Account with the Shares and fractions to
the respective Planholders. Likewise, whenever ADM has occasion to surrender for
redemption Shares and fractions owned by Planholders, it shall be unnecessary to
issue Share Certificates for redemption purposes. The Fund authorizes ADM in
such cases to process the transactions by appropriate entries in its stock
transfer records, and debiting of the Unissued Share Certificate Account and the
record of issued Shares outstanding. Whenever Planholders are entitled to the
issuance of Share Certificates for Shares held under Plans, the Fund authorizes
ADM as transfer agent, to countersign Share Certificates for issuance and
delivery, and to debit the Unissued Certificate Account.
Section 4. ADM in its capacity as transfer agent will, in addition to the
duties and functions above-mentioned, perform the usual duties and functions of
a stock transfer agent for a corporation. It will countersign for issuance or
reissuance of Share Certificates representing original issue or reissued
treasury Shares as directed by the Written Instructions of the Fund, and will
transfer Share Certificates registered in the name of Shareholders from one
Shareholder to another in the usual manner. ADM may rely conclusively and act
without further investigation upon any list, instruction, certification,
authorization, Share Certificate or other instrument or paper believed by it in
good faith to be genuine and unaltered, and to have been signed, countersigned,
or executed by a duly authorized person or persons, or upon the instructions of
any Officer of the Fund, or upon the advice of counsel for the Fund or for ADM.
ADM may record any transfer of Share Certificates which is believed by it in
good faith to have been duly authorized or may refuse to record any transfer of
Share Certificates if in good faith ADM in its capacity as transfer agent deems
such refusal necessary in order to avoid any liability either to the Fund or
ADM. The Fund agrees to indemnify and hold harmless ADM from and against any and
all losses, costs, claims and liability which it may suffer or incur by reason
of so relying or acting or refusing to act in good faith.
-2-
<PAGE>
THE DIVIDEND DISBURSEMENT AGENCY
Section 5. Upon declaration of each dividend and each capital gains
distribution by the Board of Directors of the Fund, the Fund shall notify ADM of
the date of such declaration, the amount payable per share, the record date for
determining the Shareholders entitled to payment, the payment date, and the
reinvestment date, the price for which is to be used to purchase Shares for
reinvestment.
Section 6. On or before each payment date, the Fund will transfer, or cause
the Custodian to transfer, to ADM in its capacity as dividend disbursing agent,
the total amount of the dividend or distribution currently payable and ADM in
such capacity will on the designated payment date mail distribution checks to
the Shareholders for the proper amounts payable to them except as follows:
(a) Dividends and capital gains distributions directed to be reinvested
under Plans will be transferred to ADM in its capacity as administrator for
application as provided in Section 11.
ADMINISTRATION OF THE PLANS
Section 7. The Fund, FIMCO and FIC hereby appoint ADM as administrator of
the Plans, and ADM accepts such appointment and agrees to act in such capacity
upon the terms set forth in this Agreement. As provided Section 2, ADM will
maintain records, which will be part of the stock registry records as well as
its records of the administration of the Plans, in which it will note the
transactions effected for the respective Planholders and the number of Shares
and fractions from time to time owned by them for which no Share Certificates
are outstanding.
Section 8. FIMCO, FIC and the Fund will from time to time keep ADM fully
informed of the names of all Planholders who are entitled to purchase Shares at
reduced offering prices and of the respective prices which are applicable to
each of such Planholders. ADM may conclusively rely on such information in
placing orders for Shares on behalf of Planholders.
Section 9. It will be the practice of ADM to process payments by
planholders received by its mutual funds department in acceptable form until the
time of the closing of the New York Stock Exchange on each day on which said
exchange is open since the same time on the prior business day in which said
exchange was open, and to obtain from FIMCO, FIC or the Fund a quotation (on
which it may conclusively rely) as of the close of the said exchange. ADM will
proceed to calculate the amount available for investment in Shares at the public
offering price so quoted,
-3-
<PAGE>
(and, if applicable), the amounts to be invested as between commissions of
dealers, shares of FIMCO, or FIC and net asset value to be deposited with the
Custodian. ADM while the public offering price so quoted is still in effect,
will, as agent for sundry Planholders, place an order with FIMCO or FIC for the
proper number of Shares and fractions, will advise FIMCO or FIC of the breakdown
of the total purchase price as between discount of dealers, shares of FIMCO or
FIC and net asset value and will confirm said figures to FIMCO or FIC in
writing.
Section 10. ADM will thereupon set aside the commissions of dealers, and
share of FIMCO and FIC and will pay over the balance available (net asset value)
to the custodian and will furnish said custodian with the Statements required by
the Custodian Agreement. Said Custodian will deposit the net asset value in the
Principal Account under the Custodian Agreement. ADM will credit the Bank's
account of FIMCO or FIC for its share. The proper number of Shares and fractions
will then be issued and credited to the Unissued Certificate Account, and the
Shares and fractions purchased for each Planholder will be credited to his
separate account. ADM will thereupon mail to each Planholder a confirmation of
the purchase, with copies to the Fund and the proper dealers, if the Fund so
requests. Such confirmation will show the prior and new share balance, the
Shares held under the Plans and Shares (if any) for which Stock Certificates are
outstanding, the amount invested, the price paid and other data.
ADM will remit commissions to the proper dealers weekly or at other
convenient intervals, as agreed upon between the Fund and ADM.
Section 11. As and when the Fund declares dividends or capital gains
distributions, it will promptly quote to ADM the net asset value per share at
the close of business in the reinvestment date, whereupon as soon as it can
calculate the total of such dividend or distributions it will receive for
reinvestment, ADM will advise the Fund of the amount which will be available for
reinvestment on the payment date and the number of Shares and fractions to be
issued. Upon receipt of the amount of the dividends or distributions to be
reinvested under Plans, ADM will pay over such amount to the Custodian for
deposit in the Principal Account under the Custodian Agreement, whereupon the
Shares and fractions purchased for the Plans will be issued pursuant to a
Statement of ADM and will be credited to the Unissued Certificate Account. ADM
will credit the Shares and fractions so purchased to the separate accounts
maintained for the respective Planholders, and will promptly mail to each
Planholder a confirmation of the purchase, with a copy to the Fund, showing the
prior and new share balance.
-4-
<PAGE>
Section 12. Whenever a Shareholder shall deposit Shares represented by
Share Certificates in an investment plan or systematic withdrawal plan or other
plan permitting deposit of Shares thereunder, ADM as transfer agent is
authorized upon receipt of Share Certificates registered in the name of the
Shareholder, or if not so registered in due form for transfer, to cancel such
Share Certificates, to debit the individual stock accounts and to credit the
Shares to the Unissued Certificate Account. ADM as plan administrator will
credit the Shares to be deposited to the proper plan accounts. In the event that
a Planholder shall desire to deposit under a systematic withdrawal plan Shares
held in an investment plan or other like plan, ADM will accomplish such deposit
by proper debiting and crediting of plan accounts.
Section 13. ADM will administer the systematic withdrawal plans for the
Planholders. ADM will note in such accounts the share balances from time to
time, the additional Shares purchased with the reinvested dividends and
distributions, and the Shares redeemed to provide the withdrawal payments.
Confirmations will be mailed to the Planholders reflecting each transaction,
with copies to the Fund.
Section 14. Whenever ADM shall have received requests from Planholders to
redeem Shares and remit proceeds, or whenever ADM is required to redeem Shares
to make withdrawal payments under systematic withdrawal plans or the like, ADM
will advise the Fund that it has Shares for redemption, stating the number of
Shares and fractions to be redeemed. The Fund will then quote to ADM the
applicable net asset value of redemption price, whereupon ADM will furnish the
Fund with an appropriate confirmation of the redemption and will process the
redemption by filing with the Custodian an appropriate statement of ADM as may
be required by the Custodian Agreement. The Custodian shall be authorized to pay
over to ADM as administrator, the total redemption price stated in the Statement
of ADM for proper distribution and application. The stock registry books
recording outstanding Shares, the Unissued Certificate Account and the
individual accounts of the Shareholders shall be properly debited.
Section 15. The practices and procedures of ADM and the Fund above outlined
in Sections 7 to 14, inclusive, may be altered or modified from time to time as
may be mutually agreed by the parties to this Agreement, so long as the intent
and purposes of the Plans, as stated from time to time in the prospectus of the
Fund, are observed. For special cases, the parties hereto may adopt such
procedures as may be appropriate or practical under the circumstances and ADM
may conclusively assume that any special procedure which has been approved by
the Fund, does not conflict with or violate any requirements of its Articles of
Incorporation, By-Laws or prospectus, or any rule,
-5-
<PAGE>
regulation or requirement of any regulatory body.
Section 16. ADM in acting for Planholders, or in any other capacity set
forth in this Agreement, shall incur no liability for any actions taken or
omitted in good faith, nor shall ADM be personally liable for any taxes,
assessments or governmental charges which may be levied or assessed on any basis
whatsoever in connection with the administration of the Plans, excepting only
for taxes assessed against it in its corporate capacity out of its compensation
hereunder.
MISCELLANEOUS
Section 17. In addition to the services as transfer agent, dividend
disbursing agent and administrator as above set forth, ADM will perform other
services for the Fund as agreed from time to time, including but not limited to
preparation of Federal 1099 forms, mailing of quarterly and semi-annual reports
of the Fund, preparation of one annual list of Shareholders, and preparing
notices of Shareholders meeting, proxies and proxy statements.
Section 18. The Fund, FIMCO and FIC agree to pay ADM compensation for its
services and to reimburse it for expenses, as set forth in Schedule A attached
hereto, or as shall be set forth in amendments to such schedule approved by the
Fund, FIMCO FIC and ADM. Said payments and reimbursements shall be allocated
between the Fund, FIMCO and FIC as they may agree.
Section 19. ADM may from time to time in its sole discretion delegate some
or all of its duties hereunto to any affiliate(s) which shall perform such
functions as the agent of ADM. To the extent of such delegation, the term "ADM"
in this Agreement shall be deemed to refer to both ADM and such affiliate(s) or
either of them, as the context may indicate.
Section 20. Nothing contained in this Agreement is intended to or shall
require ADM, in any capacity hereunder to perform any functions or duties on any
holiday or other day of special observance on which ADM is closed. Functions or
duties normally scheduled to be performed on such days shall be performed on,
and as of, the next business day on which both the New York Stock Exchange and
the Bank are open.
Section 21. All terms used herein, which are defined in the Custodian
Agreement, shall have the same meanings as set forth therein. In addition, the
following terms as used in this Agreement shall have the meaning set forth below
unless the context otherwise requires:
-6-
<PAGE>
Plan: The term Plan shall include such Dividend Reinvestment Accounts,
Share Accumulation Accounts, Systematic Withdrawal Plans and other types of
plans or accounts in form acceptable to ADM, which the Fund may from time to
time adopt and make available to its Shareholders, including plans or accounts
adopted for pension and profit sharing plans established by self-employed
individuals, partnerships, individuals, corporations and not for profit
organizations.
Planholder: The term Planholder shall mean a Shareholder who at the time of
reference is participating in a Plan.
Section 22. This Agreement may be terminated by any party to this Agreement
by giving at least sixty (60) days advance written notice stating when
thereafter such termination shall be effective. Such termination shall only be
effective with respect to the rights, obligations and duties as between the non-
terminating parties. In case such notice of termination is given by either ADM
or the Fund, the Board of Directors of the Fund shall, by resolution duly
adopted, promptly appoint a successor to ADM, to serve upon the terms set forth
in this Agreement as then amended and supplemented. Unless and until a successor
to ADM has been appointed as above, provided ADM shall continue to perform
according to the terms of this Agreement and shall be entitled to receive all
the payments and reimbursement to which it is entitled under this Agreement.
Notwithstanding the foregoing, ADM agrees that it will not terminate this
Agreement prior to May 1, 1980.
Section 23. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 24. This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided however
that this Agreement shall not be assignable by the Fund without the written
consent of the Fund, authorized or approved by a resolution of its Board of
Directors.
Section 25. This Agreement shall be governed by the laws of the State of
New York.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and the year first above written.
ATTEST: FIRST INVESTORS SPECIAL BOND FUND,
INC.
/s/ Andrew J. Donohue BY: /s/Joseph M. O'Brien
- ----------------------------- -------------------------------------
Andrew J. Donohue, Secretary Joseph M. O'Brien, President
[Seal]
ATTEST: FIRST INVESTORS MANAGEMENT COMPANY,
INC.
/s/ Andrew J. Donohue BY: /s/ Joseph M. O'Brien
- ----------------------------- -------------------------------------
Andrew J. Donohue, Secretary Joseph M. O'Brien, President
[Seal]
ATTEST: FIRST INVESTORS CORPORATION
/s/ Andrew J. Donohue BY: /s/ Glenn O. Head
- ----------------------------- -------------------------------------
Andrew J. Donohue, Secretary Glenn O. Head, Chairman
[Seal]
ATTEST: ADMINISTRATIVE DATA MANAGEMENT
CORP.
/s/ Andrew J. Donohue BY: /s/ Glenn O. Head
- ----------------------------- -------------------------------------
Andrew J. Donohue, Secretary Glenn O. Head, Chairman
[Seal]
-8-
<PAGE>
ADM TRANSFER AGENT FEE SCHEDULE
Monthly Account Maintenance $0.65 per account
New Accounts $5.00 per account
Payments $0.75 per payment
Exchanges $5.00 per transaction
Liquidations $5.00 per transaction
Transfers $10.00 per transaction
Certificates Issued $3.00 per certificate
Systematic Withdrawal Checks $1.00 per check
Dividend Processing $0.45 per dividend
Reports requested by a Government $1.00 per account
Agency
Minimum Monthly Income: If the minimum monthly income from the above transaction
charges does not equal $500.00, the Fund, FIMCO or FIC will promptly pay the
deficiency to ADM.
Out-of-Pocket Expenses: In addition to the above charges, the Fund, FIMCO or FIC
shall reimburse ADM for all out-of-pocket costs including but not limited to
postage, insurance, forms relating to Shareholders or the Fund, envelopes and
other similar items, and will also reimburse ADM for counsel fees, including
fees for the preparation of the Administration Agreement and review of
prospectus and application form.
-9-
Consent of Independent Certified Public Accountants
First Investors Special Bond Fund, Inc.
95 Wall Street
New York, New York 10005
We consent to the use in Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A (File No. 2-66294) of our report dated
January 31, 1996 relating to the December 31, 1995 financial statements of First
Investors Special Bond Fund, Inc., which are included in said Registration
Statement.
/s/Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 16, 1996
First Investors Special Bond Fund, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors Special Bond Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of September, 1995.
/s/Robert F. Wentworth
--------------------------------
Robert F. Wentworth
<PAGE>
First Investors Special Bond Fund, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors Special Bond Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of September, 1995.
/s/John T. Sullivan
--------------------------------
John T. Sullivan
<PAGE>
First Investors Special Bond Fund, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors Special Bond Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of September, 1995.
/s/Herbert Rubinstein
--------------------------------
Herbert Rubinstein
<PAGE>
First Investors Special Bond Fund, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors Special Bond Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of September, 1995.
/s/James M. Srygley
--------------------------------
James M. Srygley
<PAGE>
First Investors Special Bond Fund, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors Special Bond Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of September, 1995.
/s/Kathryn S. Head
--------------------------------
Kathryn S. Head
<PAGE>
First Investors Special Bond Fund, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors Special Bond Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of September, 1995.
/s/Roger L. Grayson
--------------------------------
Roger L. Grayson
<PAGE>
First Investors Special Bond Fund, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors Special Bond Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of September, 1995.
/s/Glenn O. Head
--------------------------------
Glenn O. Head
<PAGE>
First Investors Special Bond Fund, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors Special Bond Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of September, 1995.
/s/James J. Coy
--------------------------------
James J. Coy
<PAGE>
First Investors Special Bond Fund, Inc.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors Special Bond Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of September, 1995.
/s/Rex R. Reed
--------------------------------
Rex R. Reed
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000314480
<NAME> FIRST INVESTORS SPECIAL BOND FUND, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 36629
<INVESTMENTS-AT-VALUE> 37467
<RECEIVABLES> 633
<ASSETS-OTHER> 138
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 201
<TOTAL-LIABILITIES> 201
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56262
<SHARES-COMMON-STOCK> 3109
<SHARES-COMMON-PRIOR> 3330
<ACCUMULATED-NII-CURRENT> 846
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (19909)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 838
<NET-ASSETS> 38037
<DIVIDEND-INCOME> 107
<INTEREST-INCOME> 3895
<OTHER-INCOME> 84
<EXPENSES-NET> (320)
<NET-INVESTMENT-INCOME> 3766
<REALIZED-GAINS-CURRENT> (288)
<APPREC-INCREASE-CURRENT> 3606
<NET-CHANGE-FROM-OPS> 7084
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3227)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64
<NUMBER-OF-SHARES-REDEEMED> 558
<SHARES-REINVESTED> 273
<NET-CHANGE-IN-ASSETS> 1312
<ACCUMULATED-NII-PRIOR> 307
<ACCUMULATED-GAINS-PRIOR> (19621)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (278)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (326)
<AVERAGE-NET-ASSETS> 37032
<PER-SHARE-NAV-BEGIN> 11.03
<PER-SHARE-NII> 1.20
<PER-SHARE-GAIN-APPREC> 1.02
<PER-SHARE-DIVIDEND> 1.02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.23
<EXPENSE-RATIO> .88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
