As filed with the Securities and Exchange Commission on April 27, 2000
1933 Act File No. 2-66294
1940 Act File No. 811-2981
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 20 [ X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20 [ X]
FIRST INVESTORS SPECIAL BOND FUND, INC.
(Exact name of Registrant as specified in charter)
95 Wall Street
New York, New York 10005
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code): (212) 858-8000
Ms. Concetta Durso
Secretary and Vice President
First Investors Series Fund
95 Wall Street
New York, New York 10005
(Name and Address of Agent for Service)
Copy to:
Robert J. Zutz, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on April 28, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post- effective amendment.
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FIRST INVESTORS SPECIAL BOND FUND, INC.
CONTENTS OF REGISTRATION STATEMENT
This registration document is comprised of the following:
Cover Sheet
Contents of Registration Statement
Prospectus for the First Investors Special Bond Fund, Inc.
Statement of Additional Information for the First Investors Special
Bond Fund, Inc.
Part C of Form N-1A
Signature Page
Exhibits
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[GRAPHIC OMITTED]
FIRST INVESTORS
SPECIAL BOND FUND
The Securities and Exchange Commission has not approved or disapproved
these securities or 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 28, 2000.
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Contents
INTRODUCTION...................................................................3
FUND DESCRIPTION...............................................................4
FUND MANAGEMENT................................................................7
BUYING AND SELLING SHARES......................................................7
o How and when does the Fund price its shares?................................7
o How do I buy and sell shares? ..............................................8
ACCOUNT POLICIES...............................................................8
o What about dividends and capital gain distributions? .......................8
o What about taxes? ..........................................................8
FINANCIAL HIGHLIGHTS...........................................................9
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INTRODUCTION
This prospectus describes the First Investors Fund that is used solely as the
underlying investment option for variable annuity contracts offered by First
Investors Life Insurance Company ("FIL"). This means that you cannot purchase
shares of the Fund directly, but only through such a contract as offered by FIL.
The Fund description in this prospectus has an "Overview" which provides a brief
explanation of the Fund's objectives, its primary strategies and primary risks,
and how it has performed. The Fund description also contains a "Fund in Detail"
section with more information on strategies and risks of the Fund.
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FUND DESCRIPTION
SPECIAL BOND FUND
OVERVIEW
Objectives: The Fund primarily seeks high current income without undue risk
to principal and secondarily seeks growth of capital.
Primary
Investment
Strategies: The Fund primarily invests in a diversified portfolio of
high-yield, below-investment grade corporate bonds (commonly
known as "junk bonds"). These bonds provide a higher level of
income than investment grade bonds because they have a higher
risk of default. The Fund seeks to reduce the risk of a default
by selecting bonds through careful credit research and analysis.
The Fund seeks to reduce the impact of a potential default by
diversifying its investments among bonds of many different
companies and industries. While the Fund invests primarily in
domestic companies, it also invests in securities of issuers
domiciled in foreign countries. These securities will generally
be dollar-denominated and traded in the U.S. The Fund seeks to
achieve growth of capital by investing in high-yield bonds with
stable to improving credit conditions.
Primary
Risks: There are four primary risks of investing in the Fund. First, the
value of the Fund's shares could decline as a result of a
deterioration of the financial condition of an issuer of bonds
owned by the Fund or as a result of a default by the issuer. This
is known as credit risk. High yield bonds carry higher credit
risks than investment grade bonds because the companies that
issue them are not as strong financially as companies with
investment grade credit ratings. High yield bonds issued by
foreign companies are subject to additional risks including
currency fluctuations, political instability, government
regulation, unfavorable political or legal developments,
differences in financial reporting standards and less stringent
regulation of foreign markets. Second, the value of the Fund's
shares could decline if the entire high yield bond market were to
decline, even if none of the Fund's bond holdings were at risk of
a default. The high yield market can experience sharp declines at
times as the result of a deterioration in the overall economy,
declines in the stock market, a change of investor tolerance for
risk, or other factors. Third, high yield bonds tend to be less
liquid than other bonds, which means that they are more difficult
to sell. Fourth, while high yield bonds are generally less
interest rate sensitive than higher quality bonds, their values
generally will decline when interest rates rise. Fluctuations in
the prices of high yield bonds can be substantial. Accordingly,
the value of an investment in the Fund will go up and down, which
means that you could lose money.
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
How has the Special Bond Fund performed?
The bar chart and table below show you how the Fund's performance has varied
from year to year and in comparison with a broad-based index. This information
gives you some indication of the risks of investing in the Fund.
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The bar chart shows changes in the performance of the Fund's shares for each of
the last ten calendar years. The bar chart does not reflect fees and expenses
that may be deducted by the variable annuity contract through which you invest.
If they were included, the returns would be less than those shown.
SPECIAL BOND
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 10.85% (for the
quarter ended March 31, 1991), and the lowest quarterly return was -7.24% (for
the quarter ended September 30, 1990). The Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
The following table shows how the average annual total returns for the Fund's
shares compare to those of the Credit Suisse First Boston High Yield Index
("High Yield Index") as of December 31, 1999. The Fund sells its shares solely
to the variable annuity subaccount at net asset value. The average annual total
returns shown for the Fund's shares do not reflect the fees and charges that an
individual would pay in connection with an investment in a variable annuity
contract. The High Yield Index is designed to measure the performance of the
high yield bond market. The High Yield Index does not take into account fees and
expenses that an investor would incur in holding the securities in the Index. If
it did so, the returns would be lower than those shown.
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1 Year* 5 Years* 10 Years*
Special Bond 6.24% 10.27% 10.43%
High Yield Index 2.26% 8.86% 10.95%
*The annual returns are based upon calendar years.
THE FUND IN DETAIL
What are the Special Bond Fund's objectives, principal investment strategies,
and principal risks?
Objectives: The Fund primarily seeks high current income without undue risk to
principal and secondarily seeks growth of capital.
Principal Investment Strategies: The Fund invests at least 65% of its total
assets in a diversified portfolio of high-yield, below-investment grade
corporate bonds commonly known as "junk bonds" (those rated below Baa by Moody's
Investors Service, Inc. or below BBB by Standard & Poor's Ratings Group). High
yield bonds generally provide higher income than investment grade bonds to
compensate investors for their higher risk of default (i.e., failure to make
required interest or principal payments). High-yield bond issuers include small
or relatively new companies lacking the history or capital to merit investment
grade status, former Blue Chip companies downgraded because of financial
problems, companies using debt rather than equity to fund capital investment or
spending programs, companies electing to borrow heavily to finance or avoid a
takeover or buyout, and firms with heavy debt loads. The Fund's portfolio may
include zero coupon bonds and pay in kind bonds. While the Fund invests
primarily in domestic companies, it also invests in securities of issuers
domiciled in foreign countries. These securities will generally be
dollar-denominated and traded in the U.S. The Fund seeks to reduce the risk of a
default by selecting bonds through careful credit research and analysis. The
Fund seeks to reduce the impact of a potential default by diversifying its
investments among bonds of many different companies and industries. The Fund
attempts to invest in bonds that have stable to improving credit quality that
could appreciate in value because of a credit rating upgrade or an improvement
in the outlook for a particular company, industry or the economy as a whole.
Although the Fund will consider ratings assigned by ratings agencies in
selecting high yield bonds, it relies principally on its own research and
investment analysis. The Fund considers a variety of factors, including the
issuer's managerial strength, anticipated cash flow, debt maturity schedules,
borrowing requirements, interest or dividend coverage, asset coverage and
earnings prospects. The Fund will usually sell a bond when it shows
deteriorating fundamentals or falls short of the portfolio manager's
expectations. Information on the Fund's recent strategies and holdings can be
found in the most recent annual report (see back cover).
Principal Risks: Any investment carries with it some level of risk. An
investment offering greater potential rewards generally carries greater risks.
Here are the principal risks of investing in the Special Bond Fund:
Credit Risk: This is the risk that an issuer of bonds will be unable to pay
interest or principal when due. The prices of bonds are affected by the credit
quality of the issuer. High yield bonds are subject to greater credit risk than
higher quality bonds because the companies that issue them are not as
financially strong as companies with investment grade ratings. Changes in the
financial condition of an issuer, changes in general economic conditions, and
changes in specific economic conditions that affect a particular type of issuer
can impact the credit quality of an issuer. Such changes may weaken an issuer's
ability to make payments of principal or interest, or cause an issuer of bonds
to fail to make timely payments of interest or principal. Lower quality bonds
generally tend to be more sensitive to these changes than higher quality bonds.
While credit ratings may be available to assist in evaluating an issuer's credit
quality, they may not accurately predict an issuer's ability to make timely
payments of principal and interest.
6
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Market Risk: The entire junk bond market can experience sharp price swings due
to a variety of factors, including changes in economic forecasts, stock market
volatility, large sustained sales of junk bonds by major investors, high-profile
defaults, or changes in the market's psychology. This degree of volatility in
the high yield market is usually associated more with stocks than bonds. The
prices of high yield bonds held by the Fund could therefore decline, regardless
of the financial condition of the issuers of such bonds. Markets tend to run in
cycles with periods when prices generally go up, known as "bull" markets, and
periods when prices generally go down, referred to as "bear" markets.
Liquidity Risk: High yield bonds tend to be less liquid than higher quality
bonds, meaning that it may be difficult to sell high yield bonds at a reasonable
price, particularly if there is a deterioration in the economy or in the
financial prospects of their issuers. As a result, the prices of high yield
bonds may be subject to wide price fluctuations due to liquidity concerns.
Interest Rate Risk: The market value of a bond is affected by changes in
interest rates. When interest rates rise, the market value of a bond declines,
and when interest rates decline, the market value of a bond increases. The price
volatility of a bond also depends on its maturity and duration. Generally, the
longer the maturity and duration of a bond, the greater its sensitivity to
interest rates. To compensate investors for this higher risk, bonds with longer
maturities and durations generally offer higher yields than bonds with shorter
maturities and durations.
Foreign Issuers Risk: Foreign investments involve additional risks, including
currency fluctuations, political instability, government regulation, unfavorable
political or legal developments, differences in financial reporting standards,
and less stringent regulation of foreign securities markets.
FUND MANAGEMENT
First Investors Management Company, Inc. ("FIMCO") is the investment adviser to
the Fund. Its address is 95 Wall Street, New York, NY 10005. It currently is
investment adviser to 48 mutual funds or series of funds with total net assets
of over $5 billion. FIMCO supervises all aspects of the Fund's operations and
determines the Fund's portfolio transactions. For the fiscal year ended December
31, 1999, FIMCO received advisory fees of 0.75% of the Fund's average daily net
assets.
Nancy W. Jones serves as Portfolio Manager of the Fund. Ms. Jones manages
certain other First Investors Funds. Ms. Jones joined FIMCO in 1983 as Director
of Research in the High Yield Department.
BUYING AND SELLING SHARES
How and when does the Fund price its shares?
The share price (which is called "net asset value" or "NAV" per share) for the
Fund is calculated once each day as of 4 p.m., Eastern Time ("E.T."), on each
day the New York Stock Exchange ("NYSE") is open for regular trading. The NYSE
is closed on most national holidays and Good Friday. In the event that the NYSE
closes early, the share price will be determined as of the time of the closing.
To calculate the NAV, the Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding.
In valuing its assets, the Fund uses the market value of securities for which
market quotations or last sale prices are readily available. If there are no
readily available quotations or last sale prices for an investment or the
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available quotations are considered to be unreliable, the securities will be
valued at their fair value as determined in good faith pursuant to procedures
adopted by the Board of Directors of the Fund.
How do I buy and sell shares?
Investments in the Fund may only be made through purchases of variable annuity
contracts offered by FIL. Purchase payments for variable annuity contracts, less
applicable charges or expenses, are paid into Separate Account A, a unit
investment trust. The Separate Account pools the proceeds to purchase shares of
the Fund.
For information about how to buy or sell the variable annuity contracts, see the
Separate Account prospectus which is attached to this prospectus. It will
describe not only the process for buying and selling contracts, but also the
fees and charges involved. This prospectus is not valid unless a Separate
Account prospectus is attached hereto.
ACCOUNT POLICIES
What about dividends and capital gain distributions?
The Separate Account which owns the shares of the Fund will receive all
dividends and distributions. As described in the attached Separate Account
prospectus, all dividends and distributions are then reinvested by the Separate
Account in additional shares of the Fund.
To the extent that it has net investment income, the Fund will declare daily and
pay, on a quarterly basis, dividends from net investment income. Any net
realized capital gains will be declared and distributed on an annual basis,
usually after the end of the Fund's fiscal year. The Fund may make an additional
distribution in any year if necessary to avoid a Federal excise tax on certain
undistributed income and capital gain.
What about taxes?
You will not be subject to taxes as the result of purchases or sales of Fund
shares by the Separate Account, or Fund dividends, or distributions to the
Separate Account. There are tax consequences associated with investing in the
variable annuity contracts. These are discussed in the attached Separate Account
prospectus.
8
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). The
information has been audited by Tait, Weller & Baker, whose report, along with
the Fund's financial statements, are included in the SAI, which is available
upon request.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Year Ended December 31
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net Asset Value, Beginning of Year $11.86 $12.89 $12.75 $12.23 $11.03
Income from Investment Operations
Net investment income..................... 1.10 1.12 1.11 1.17 1.20
Net realized and unrealized
gain (loss) on investments............... (.39) (.95) .23 .37 1.02
------- ------- ------ ------ ------
Total from Investment Operations .71 .17 1.34 1.54 2.22
------- ------- ------ ------ ------
Less Distributions from:
Net investment income................... 1.20 1.20 1.20 1.02 1.02
------- ------- ------ ------ ------
Net Asset Value, End of Year.............. $11.37 $11.86 $12.89 $12.75 $12.23
====== ====== ====== ====== ======
Total Return(%)+.......................... 6.24 1.29 10.94 13.10 20.76
- ----------------
Ratios/Supplemental Data
Net Assets, End of Year (in thousands) $30,194 $32,260 $36,082 $36,948 $38,037
Ratios to Average Net Assets (%)
Expenses.................................. .87 .89 .86 .86 .88
Net investment income..................... 9.38 8.93 8.60 9.31 10.17
Portfolio Turnover Rate (%)............... 32 65 53 29 45
</TABLE>
+ The effect of fees and charges incurred at the separate account level are not
reflected in these performance figures.
9
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[GRAPHIC OMITTED]
FIRST INVESTORS
SPECIAL BOND FUND
For investors who want more information about the Fund, the following documents
are available free upon request:
Annual/Semi-Annual Reports: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
prospectus.
You can get free copies of reports and the SAI, request other information and
discuss your questions about the Fund by contacting the Fund at:
Administrative Data Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198 Telephone: 1-800-423-4026
You can review and copy Fund documents (including reports, and SAIs) at the
Public Reference Room of the SEC in Washington, D.C. You can also obtain copies
of Fund documents after paying a duplicating fee (i) by writing to the Public
Reference Section of the SEC, Washington, D.C. 20549-0102 or (ii) by electronic
request at [email protected]. You can obtain information on the operation of
the Public Reference Room, including information about duplicating fee charges,
by calling (202) 942-8090. Text-only versions of Fund documents can be viewed
online or downloaded from the EDGAR database on the SEC's Internet website at
http://www.sec.gov.
(Investment Company Act File No. First
Investors Special Bond Fund, Inc.:
811-2981)
<PAGE>
FIRST INVESTORS SPECIAL BOND FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 28, 2000
95 WALL STREET NEW YORK, N.Y. 10005/(800) 342-7963
This is a Statement of Additional Information ("SAI") 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 ("Contract") issued by First Investors Life Insurance
Company ("First Investors Life").
This SAI is not a prospectus. It should be read in conjunction with the
Fund's Prospectus dated April 28, 2000, which may be obtained free of cost from
the Fund at the address or telephone number noted above.
TABLE OF CONTENTS
PAGE
----
Investment Strategies and Risks............................ 2
Investment Policies........................................ 3
Portfolio Turnover......................................... 9
Investment Restrictions.................................... 9
Directors and Officers..................................... 11
Management............................................... 13
Determination of Net Asset Value........................... 14
Allocation of Portfolio Brokerage.......................... 15
Taxes...................................................... 17
General Information........................................ 18
Appendix A................................................. 20
Appendix B................................................. 23
Financial Statements....................................... 24
<PAGE>
INVESTMENT STRATEGIES AND RISKS
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" ("High Yield Securities"). There can be no assurance that the Fund
will achieve its investment objectives.
High Yield Securities include the following instruments: fixed, variable
or floating rate debt obligations (including bonds, debentures and notes) that
are rated below Baa by Moody's Investors Service, Inc. ("Moody's") or below BBB
by Standard & Poor's ("S&P"), or are unrated and deemed to be of comparable
quality by First Investors Management Company, Inc. ("FIMCO" or "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 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 or domestic branches of U.S. banks, bankers' acceptances
and repurchase agreements.
The Fund may invest in debt securities issued by foreign governments and
companies and in foreign currencies for the purpose of purchasing such
securities. However, the Fund may not invest more than 5% of its total assets in
debt securities issued by foreign governments and companies that are denominated
in foreign currencies.
The Fund also may borrow money for temporary or emergency purposes in
amounts net exceeding 5% of its total assets, make loans of portfolio securities
and invest in zero coupon and pay-in-kind securities. The Fund may invest up to
10% of its net assets in securities issued on a when-issued or delayed delivery
basis.
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 Fund's net asset value tends to increase.
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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 conversation 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.
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. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest paid or accrued on debt or dividends paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have unique investment characteristics in that they
generally (1) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (2) are less subject to fluctuation in
value than the underlying stock because they have fixed income characteristics,
and (3) provide the potential for capital appreciation if the market price of
the underlying common stock increases. 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 Adviser 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
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<PAGE>
value of the convertible security relative to the common stock at current
prices.
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 attempt to balance
the benefits of investing in Deep Discount Securities with their risks. While a
diversified portfolio may reduce the overall impact of a Deep Discount Security
that is in default or loses its value, the risk cannot be eliminated. See "High
Yield Securities," below.
FOREIGN GOVERNMENT OBLIGATIONS. The Fund may invest in foreign government
obligations, which generally consist of obligations supported by national, state
or provincial governments or similar political subdivisions. Investments in
foreign government debt obligations involve special risks. The issuer of the
debt may be unable or unwilling to pay interest or repay principal when due in
accordance with the terms of such debt, and the Fund may have limited legal
resources in the event of default. Political conditions, especially a sovereign
entity's willingness to meet the terms of its debt obligations, are of
considerable significance.
FOREIGN SECURITIES-RISK FACTORS. The Fund may sell a debt security
denominated in a foreign currency and retain the proceeds in that foreign
currency to use at a future date (to purchase other securities denominated in
that currency), or the Fund may buy foreign currency outright to purchase
securities denominated in that foreign currency at a future date. Investing in
foreign securities involves more risk than investing in securities of U.S.
companies. Because the Fund currently 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 its share price. In addition,
the Fund will be affected by changes in exchange control regulations and
fluctuations in the relative rates of exchange between the currencies of
different nations, as well as by economic and political developments. Other
risks involved in foreign securities include the following: there may be less
publicly available information about foreign companies comparable to the reports
and ratings that are published about companies in the United States; foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies; some foreign stock markets have substantially less volume than
U.S. markets, and securities of some foreign companies are less liquid and more
volatile than securities of comparable U.S. companies; there may be less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies 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 Fund
held in foreign countries.
HIGH YIELD SECURITIES. High Yield Securities are subject to certain risks
that may not be present with investments in higher grade debt securities.
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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 involved a higher risk or loss of principal and income
than higher-rated debt 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 the Fund's net asset value. A significant 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 higher incidence of default. This would affect the value of such securities
and thus the Fund's net asset value. Further, if the issuer of a security owned
by the Fund defaults, it 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, and 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
exercised 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 experienced 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 helps to minimize the impact of a decrease in
value of a particular security or group of securities in the portfolio.
THE HIGH YIELD SECURITIES MARKET. The market for
below-investment-grade bonds has expanded rapidly in recent years, and its
growth has 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 those
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. 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 are in great danger of defaulting and are considered to
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<PAGE>
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 second market. To the
extent that no established retail secondary market exists, many High Yield
Securities may not be as liquid as higher-grade bonds. A less active and thinner
market for High Yield Securities than that available for higher quality
securities may result in more volatile valuations of a Fund's holdings and more
difficulty in executing trades at favorable prices during unsettled market
conditions.
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 become 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.
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 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 not make loans of portfolio securities
in excess of 10% of its total assets.
MONEY MARKET INSTRUMENTS. Investments in commercial paper by the Fund 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
Appendix B 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" 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.
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REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
banks which are members of the Federal Reserve System or securities dealers that
are members of a national securities exchange or are market makers in government
securities. Repurchase agreements are transactions in which the Fund purchases
securities from a bank or recognized securities dealer and simultaneously
commits to resell the securities to the bank or dealer at an agreed-upon date
and price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities. The Fund's risk is limited primarily to
the ability of the seller to repurchase the securities at the agreed-upon price
upon the deliver date. 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, 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 Fund's 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 SECURITIES AND ILLIQUID INVESTMENTS. 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 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 this 15% limit. 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
7
<PAGE>
transactions not requiring registration. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by 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.
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 on its books and records or with its custodian consisting of
cash or liquid high-grade debt securities equal to the amount of the Fund's
commitment, which are valued at their fair market value. If on any day the
market value of this segregated account falls below the value of the Fund's
commitment, the Fund will be required to deposit additional cash or qualified
securities into the account until equal to the value of the Fund's commitment.
When the securities to be purchased are issued, the Fund will pay for the
securities from available cash, the sale of securities in the segregated
account, sales of other securities and, if necessary, from sale of the
when-issued securities themselves although this is not ordinarily expected.
Securities purchased on a when-issued basis are subject to the risk that yields
available in the market, when delivery takes place, may be higher than the rate
to be received on the securities the Fund is committed to purchase. After the
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<PAGE>
Fund is committed to purchase when-issued securities, but prior to the issuance
of the securities, it is subject to adverse changes in the value of these
securities based upon changes in interest rates, as well as changes based upon
the public's perception of the issuer and its creditworthiness. When-issued
securities' market prices move inversely with respect to changes in interest
rates. Sale of securities in the segregated account or sale of the when-issued
securities may cause the realization of a capital gain or loss.
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 each year on zero coupon securities and the "interest" on
pay-in-kind securities must be included in gross income and thus must be
accounted for by the Fund for purposes of determining the amount it must
distribute that year to continue to qualify for tax treatment as a regulated
investment company. Thus, 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." 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 case used to
make such distributions, and its current income ultimately could be reduced as a
result.
PORTFOLIO TURNOVER
Although the Fund generally will not invest for short-term trading
purposes, portfolio securities may be sold 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 (100% or more) 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, 1998 and 1999, the Fund's portfolio
turnover rate was 65% and 32%, 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
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<PAGE>
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.
(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.
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(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.
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.
JAMES J. COY (85), Emeritus Director, 90 Buell Land, East Hampton, NY 11937.
Retired; formerly Senior Vice President, James Talcott, Inc. (financial
institution).
GLENN O. HEAD*+ (74), President and Director. Chairman of the Board and
Director, Administrative Data Management Corp. ("ADM"), FIMCO, Executive
Investors Management Company, Inc. ("EIMCO"), First Investors Asset Management
Company, Inc. ("FIAMCO"), First Investors Corporation ("FIC"), Executive
Investors Corporation ("EIC") and First Investors Consolidated Corporation
("FICC").
KATHRYN S. HEAD*+ (44), Director, 581 Main Street, Woodbridge, NJ 07095.
President and Director, FICC, ADM and FIMCO; Vice President and Director, FIC;
President and Chief Executive Officer, EIC; President and Director, EIMCO;
Chairman and Director, First Financial Savings Bank, S.L.A.
LARRY R. LAVOIE* (52), Director. Assistant Secretary, ADM, EIC, EIMCO, FIAMCO,
FICC and FIMCO; President, FIAMCO; Secretary and General Counsel, FIC.
REX R. REED** (78), Director, 259 Governors Drive, Kiawah Island, SC 29455.
Retired; formerly Senior Vice President, American Telephone & Telegraph Company.
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HERBERT RUBINSTEIN** (78), Director, 695 Charolais Circle, Edwards, CO
81632-1136. Retired; formerly President, Belvac International Industries, Ltd.
and President, Central Dental Supply.
NANCY SCHAENEN** (68), Director, 56 Midwood Terrace, Madison, NJ 07940. Trustee,
Drew University and DePauw University.
JAMES M. SRYGLEY** (67), Director, 33 Hampton Road, Chatham, NJ 07982.
Principal, Hampton Properties, Inc. (property investment company).
JOHN T. SULLIVAN* (67), Director and Chairman of the Board; Director, FIMCO,
FIC, FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.
ROBERT F. WENTWORTH** (70), Director, 217 Upland Downs Road, Manchester Center,
VT 05255. Retired; formerly financial and planning executive with American
Telephone & Telegraph Company.
JOSEPH I. BENEDEK (42), Treasurer and Principal Accounting Officer, 581 Main
Street, Woodbridge, NJ 07095. Treasurer, FIMCO, EIMCO and FIAMCO.
CONCETTA DURSO (64), Vice President and Secretary. Vice President, FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary, FIC and EIC.
NANCY W. JONES (55), Vice President. Vice President, First Investors Asset
Management Company, Inc., and First Investors Fund For Income, Inc.; Portfolio
Manager, FIMCO.
* These Directors may be deemed to be "interested persons," as defined in the
1940 Act.
** These Directors are members of the Board's Audit Committee.
+ Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.
The Directors and officers, as a group, owed less than 1% of either Class
A or Class B shares of the Fund.
All of the officers and Directors, except for Ms. Jones, hold identical or
similar positions with 14 other registered investment companies in the First
Investors Family of Funds. Mr. Head is also an officer and/or Director of First
Investors Asset Management Company, Inc., First Investors Credit Funding
Corporation, First Investors Leverage Corporation, First Investors Realty
Company, Inc., First Investors Resources, Inc., N.A.K. Realty Corporation, Real
Property Development Corporation, Route 33 Realty Corporation, First Investors
Life Insurance Company, First Financial Savings Bank, S.L.A., First Investors
Credit Corporation 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.
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The following table lists compensation paid to the Directors of the Fund
for the fiscal year ended December 31, 1999.
TOTAL
COMPENSATION
AGGREGATE FROM FIRST
COMPENSATION INVESTORS FAMILY
FROM OF FUNDS PAID TO
DIRECTOR FROM FUND* DIRECTOR*+
- -------- --------- ---------------
James J. Coy** $0 $0
Glenn O. Head $0 $0
Kathryn S. Head $0 $0
Larry R. Lavoie $0 $0
Rex R. Reed $600 $42,950
Herbert Rubinstein $600 $42,950
James M. Srygley $600 $42,950
John T. Sullivan $0 $0
Robert F. Wentworth $600 $42,950
Nancy Schaenen $600 $42,950
* Compensation to officers and interested Directors of the Fund is paid by the
Adviser.
** On March 27, 1997, Mr. Coy resigned as a Director of the Fund. Mr. Coy
currently serves as an emeritus Director. Mr. Coy is paid by the Adviser.
+ The First Investors Family of Funds consist of 15 separate registered
investment companies. The total compensation shown in this column is for the
twelve month period ended December 31, 1999.
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 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. The
Board of Directors is responsible for overseeing the management 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
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<PAGE>
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, 1997, 1998 and 1999, the Fund paid
the Adviser $269,748, $254,508 and $230,925, respectively, in advisory fees.
The Adviser has an Investment Committee composed of Dennis T. Fitzpatrick,
George V. Ganter, Michael Deneka, David Hanover, Glenn O. Head, Kathryn S. Head,
Nancy W. Jones, Michael O'Keefe, Patricia D. Poitra, Clark D. Wagner and Matthew
Wright. The Committee usually meets weekly to discuss the composition of the
portfolio of each Fund and to review additions to and deletions from the
portfolios.
First Investors Consolidated Corporation ("FICC") owns all of the voting
common stock of the Adviser and all of the outstanding shares of First Investors
Corporation and the Fund's transfer agent. Mr. Glenn O. Head controls FICC and,
therefore, controls the Adviser.
DETERMINATION OF NET ASSET VALUE
Except as provided herein, a security listed or traded on an exchange or
the Nasdaq Stock Market is valued at its last sale price on the exchange or
market where the security is principally traded, and lacking any sales on a
particular day, the security is valued at the mean between the closing bid and
asked prices. Securities traded in the OTC market (including securities listed
on exchanges whose primary market is believed to be OTC) are valued at the mean
between the last bid and asked prices prior to the time when assets are valued
based upon quotes furnished by market makers for such securities. However, the
Fund may determine the value of debt securities based upon prices furnished by
Interactive Data Corporation, 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 consider security type, rating, market condition,
yield data and other available information in determining value. Short-term debt
securities that mature in 60 days or less are valued at amortized cost.
Securities for which market quotations are not readily available are valued on
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 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
mean between the last bid and asked prices obtained from recognized dealers in
14
<PAGE>
such securities or the pricing service. 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.
EMERGENCY PRICING PROCEDURES. In the event that the Fund must halt
operations during any day that it would normally be required to price under Rule
22c-1 under the 1940 Act due to an emergency ("Emergency Closed Day"), the Fund
will apply the following procedures:
1. The Fund will make every reasonable effort to segregate orders received
on the Emergency Closed Day and give them the price that they would have
received but for the closing. The Emergency Closed Day price will be calculated
as soon as practicable after operations have resumed and will be applied equally
to sales, redemptions and repurchases that were in fact received in the mail or
otherwise on the Emergency Closed Day.
2. For purposes of paragraph 1, an order will be deemed to have been
received by the Fund on an Emergency Closed Day, even if neither the Fund nor
the Transfer Agent is able to perform the mechanical processing of pricing on
that day, under the following circumstances:
(a) In the case of a mail order, the order will be considered
received by the Fund when the postal service has delivered it to FIC's
Woodbridge offices prior to the close of regular trading on the NYSE; or such
other time as may be prescribed in the Fund's Prospectus; and
(b) In the case of a wire order, including a Fund/SERV order, the
order will be considered received when it is received in good form by a FIC
branch office or an authorized dealer prior to the close of regular trading on
the NYSE, or such other time as may be prescribed in the Fund's Prospectus.
3. If the Fund is unable to segregate orders received on the Emergency
Closed Day from those received on the next day the Fund is open for business,
the Fund may give all orders the next price calculated after operations resume.
4. Notwithstanding the foregoing, on business days in which the NYSE is
not open for regular trading, the Fund may determine not to price its portfolio
securities if such prices would lead to a distortion of the net asset value for
the Fund and its shareholders.
ALLOCATION OF PORTFOLIO BROKERAGE
The Adviser may purchase or sell portfolio securities on behalf of the
Fund in agency or principal transactions. In agency transactions, the Fund
generally pays brokerage commissions. In principal transactions, the Fund
generally does not pay commissions, however the price paid for the security may
include an undisclosed dealer commission or "mark-up" or selling concessions.
15
<PAGE>
The Adviser normally purchases fixed-income securities on a net basis from
primary market makers acting as principals for the securities. The Adviser may
purchase certain money market instruments directly from an issuer without paying
commissions or discounts. The Adviser may also purchase securities traded in the
OTC market. As a general practice, OTC securities are usually purchased from
market makers without paying commissions, although the price of the security
usually will include undisclosed compensation. However, when it is advantageous
to the Fund the Adviser may utilize a broker to purchase OTC securities and pay
a commission.
In purchasing and selling portfolio securities on behalf of the Fund, the
Adviser will seek to obtain best execution. The Fund may pay more than the
lowest available commission in return for brokerage and research services.
Additionally, upon instruction by the Board, the Adviser may use dealer
concessions available in fixed-priced underwritings, over-the-counter
transactions, and/or brokerage to pay for research and other services. Research
and other services may include information as to the availability of securities
for purchase or sale, statistical or factual information or opinions pertaining
to securities, reports and analysis concerning issuers and their
creditworthiness, and Lipper's Directors' Analytical Data concerning Fund
performance and fees. The Adviser generally uses the research and other services
to service all the funds in the First Investors Family of Funds, rather than the
particular Funds whose commissions may pay for research or other services. In
other words, a Fund's brokerage may be used to pay for a research service that
is used in managing another Fund within the First Investor Fund Family. The
Lipper's Directors' Analytical Data is used by the Adviser and the Fund Board to
analyze a fund's performance relative to other comparable funds.
In selecting the broker-dealers to execute the Fund's portfolio
transactions, the Adviser may consider such factors as the price of the
security, the rate of the commission, the size and difficulty of the order, the
trading characteristics of the security involved, the difficulty in executing
the order, the research and other services provided, the expertise, reputation
and reliability of the broker-dealer, access to new offerings, and other factors
bearing upon the quality of the execution. The Adviser does not place portfolio
orders with an affiliated broker, or allocate brokerage commission business to
any broker-dealer for distributing fund shares. Moreover, no broker-dealer
affiliated with the Adviser participates in commissions generated by portfolio
orders placed on behalf of the Fund.
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
accordance with written procedures approved by the Board of Directors.
For the fiscal year ended December 31, 1997, the Fund paid $1,170 in
brokerage commissions. Of that amount $1,104 was paid in brokerage commissions
to brokers who furnished research services on portfolio transactions in the
amount of $190,813. For the fiscal year ended December 31, 1998, the Fund paid
$335 in brokerage commissions. Of that amount $335 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $31,092. For the fiscal year ended December 31, 1999, the Fund
did not pay any brokerage commissions
16
<PAGE>
TAXES
Fund shares are offered only to a separate account of First Investors Life
("Separate Account") that funds individual variable annuity contracts. See the
Separate Account's prospectus for a discussion of the special taxation of First
Investors Life with respect to the account and of the Contractholders.
To continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("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, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") 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) 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 (3) 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.
By qualifying for treatment as a RIC, the Fund (but not its shareholders)
will be relieved of Federal income tax on the part of its investment company
taxable income and net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) that it distributes to its shareholders.
If the Fund failed to qualify for treatment as a RIC for any taxable year, (1)
it would be taxed at corporate rates on the full amount of its taxable income
for that year without being able to deduct the distributions it makes to its
shareholders, (2) the shareholders would treat all those distributions,
including distributions of net capital gain, as dividends (that is, ordinary
income) to the extent of the Fund's earnings and profits, and (3) most
importantly, the Separate Account would fail to satisfy the diversification
requirements of section 817(h) of the Code (see below), with the result that the
Contracts supported by that account would no longer be eligible for tax
deferral. In addition, the Fund could be required to recognize unrealized gains,
pay substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.
The Fund intends to continue 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
(described above), place certain limitations on the assets of the Separate
Account -- and of the Fund, because section 817(h) and those regulations treat
its assets as assets of the Separate Account -- 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
17
<PAGE>
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 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 Separate Account's prospectus.
Dividends and interest the Fund receives, and gains it realizes, may be
subject to income, withholding or other taxes imposed by foreign countries that
would reduce the yield and/or total return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
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 or other securities issued with original
issue discount. As a holder of those securities, the Fund must include in its
income the portion of the original issue discount that accrues on the securities
during the taxable year, even if it receives no corresponding payment on them
during the year. Similarly, 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 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.
GENERAL INFORMATION
ORGANIZATION. The Fund was incorporated in the State of Maryland on
November 14, 1979. The Fund is organized 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.
AUDITS AND REPORTS. The accounts of the Fund are audited twice a year by
Tait, Weller & Baker, independent certified public accountants, 8 Penn Center
Plaza, Philadelphia, PA, 19103. Shareholders of the Fund receive semi-annual and
annual reports, including audited financial statements, and a list of securities
owned.
18
<PAGE>
LEGAL COUNSEL. Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue.,
N.W., Washington, D.C. 20036 serves as counsel to the Fund.
TRADING BY PORTFOLIO MANAGERS AND OTHER ACCESS PERSONS. Pursuant to
Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, the Fund, the Adviser,
and the Underwriter have adopted Codes of Ethics ("Codes"). These Codes permit
portfolio managers and other access persons of the Fund to invest in securities,
including securities that may be owned by the Fund, subject to certain
restrictions.
As of March 31, 2000, First Investors Life Insurance Company owned of
record or beneficially 100% of the outstanding shares of Special Bond Fund.
19
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S
- -----------------
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in 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"
20
<PAGE>
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
CCC Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B" rating.
CC The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S INVESTORS SERVICE, INC.
AAA Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together 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.
21
<PAGE>
A Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
BAA Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA Bonds which are rated "Ca" represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated "C" are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
22
<PAGE>
APPENDIX B
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S
- -----------------
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.
23
<PAGE>
Financial Statements as of
December 31, 1999
Registrant incorporates by reference the financial statements and report of
independent auditors contained in the Annual Report to shareholders for the
fiscal year ended December 31, 1999 electronically filed with the Securities and
Exchange Commission on March 2, 2000 (Accession Number: 0000928816-00-000129).
24
<PAGE>
PART C. OTHER INFORMATION
-------------------------
Item 23. EXHIBITS
--------
(a)(i) Articles of Restatement1
(b) Amended and Restated By-laws1
(c) Shareholders' rights are contained in Article II of Registrant's
Amended and Restated By- laws, previously filed as Exhibit 99.B2 to
Registrant's Registration Statement.
(d) Investment Advisory Agreement between Registrant and First Investors
Management Company, Inc.1
(e) Underwriting Agreement - none
(f) Bonus, profit sharing or pension plans - none
(g)(i) Custodian Agreement between Registrant and Irving Trust Company2
(ii) Supplement to Custodian Agreement between Registrant and The Bank of
New York2
(h)(i) Administration Agreement between Registrant, First Investors
Management Company, Inc., First Investors Corporation and
Administrative Data Management Corp.2
(ii) Transfer Agency Agreement - filed herewith
(i) Opinion and Consent of Counsel - filed herewith
(j)(i) Consent of Independent Accountants - filed herewith
(ii) Powers of Attorney1
(k) Financial statements omitted from prospectus -none
(l) Initial capital agreements - none
(m) Distribution Plans - none
(n) Financial Data Schedules - filed herewith
(o) 18f-3 Plan - none
(p)(i) Code of Ethics for First Investors Registered Investment Companies
- filed herewith
(ii) Code of Ethics for First Investors - filed herewith
- --------
1 Incorporated by reference from Post-Effective Amendment No. 14 to
Registrant's Registration Statement (File No. 2-66294) filed on April 24,
1995.
2 Incorporated by reference from Post-Effective Amendment No. 15 to
Registrant's Registration Statement (File No. 2-66294) filed on April 19,
1996.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
--------------------------------------------------------------
There are no persons controlled by or under common control with the
Registrant.
<PAGE>
Item 25. INDEMNIFICATION
---------------
Article X, Section 1 of the By-Laws of Registrant provides as
follows:
Section 1. Every person who is or was an officer or director of the
Corporation (and his heirs, executors and administrators) shall be indemnified
by the Corporation against reasonable costs and expenses incurred by him in
connection with any action, suit or proceeding to which he may be made a party
by reason of his being or having been a director or officer of the Corporation,
except in relation to any action, suit or proceeding in which he has been
adjudged liable because of negligence or misconduct, which shall be deemed to
include willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. In the absence of an
adjudication which expressly absolves the director or officer of liability to
the Corporation or its stockholders for negligence or misconduct, within the
meaning thereof as used herein, or in the event of a settlement, each director
or officer (and his heirs, executors and administrators) shall be indemnified by
the Corporation against payments made, including reasonable costs and expenses,
provided that such indemnity shall be conditioned upon the prior determination
by a resolution of two-thirds of the Board of Directors, who are not involved in
the action, suit or proceeding that the director or officer has no liability by
reason of negligence or misconduct within the meaning thereof as used herein,
and provided further that if a majority of the members of the Board of Directors
of the Corporation are involved in the action, suit or proceeding, such
determination shall have been made by a written opinion of independent counsel.
Amounts paid in settlement shall not exceed costs, fees and expenses which would
have been reasonably incurred if the action, suit or proceeding had been
litigated to a conclusion. Such a determination by the Board of Directors or by
independent counsel, and the payment of amounts by the Corporation on the basis
thereof, shall not prevent a stockholder from challenging such indemnification
by appropriate legal proceedings on the grounds that the person indemnified was
liable to the Corporation or its security holders by reason of negligence or
misconduct within the meaning thereof as used herein. The foregoing rights and
indemnification shall not be exclusive of any other rights to which any officer
or director (or his heirs, executors and administrators) may be entitled to
according to law.
The Registrant's Investment Advisory Agreement provides as follows:
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
<PAGE>
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the director's or officer's office.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable. See Item 30 herein.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
----------------------------------------------------
First Investors Management Company, Inc. offers investment management
services and is a registered investment adviser. Affiliations of the officers
and directors of the Investment Adviser are set forth in Part B, Statement of
Additional Information, under "Directors or Trustees and Officers."
Item 27. PRINCIPAL UNDERWRITERS
----------------------
Not applicable.
Item 28. 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 29. MANAGEMENT SERVICES
-------------------
Not Applicable.
Item 30. UNDERTAKINGS
------------
The Registrant undertakes to carry out all indemnification provisions
of its Declaration of Trust, Advisory Agreement and Underwriting Agreement in
accordance with Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, 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 trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, 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.
<PAGE>
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, as amended,
and the Investment Company Act of 1940, as amended, the Registrant represents
that this Post-Effective Amendment No. 20 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 No. 20 to its 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 18th day of April, 2000.
FIRST INVESTORS SPECIAL BOND FUND,
INC.
By: /S/ GLENN O. HEAD
-----------------
Glenn O. Head
President and Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 20 to this Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
/s/ Glenn O. Head Principal Executive April 18, 2000
- -----------------------------
Glenn O. Head Officer and Director
/s/ Joseph I. Benedek Principal Financial April 18, 2000
- -----------------------------
Joseph I. Benedek and Accounting Officer
Kathryn S. Head* Director April 18, 2000
- -----------------------------
Kathryn S. Head
/s/ Larry R. Lavoie Director April 18, 2000
- -----------------------------
Larry R. Lavoie
Herbert Rubinstein* Director April 18, 2000
- -----------------------------
Herbert Rubinstein
Nancy Schaenen* Director April 18, 2000
- -----------------------------
Nancy Schaenen
James M. Srygley* Director April 18, 2000
- -----------------------------
James M. Srygley
John T. Sullivan* Director April 18, 2000
- -----------------------------
John T. Sullivan
<PAGE>
Rex R. Reed* Director April 18, 2000
- -----------------------------
Rex R. Reed
Robert F. Wentworth* Director April 18, 2000
- -----------------------------
Robert F. Wentworth
*By: /S/ LARRY R. LAVOIE
-------------------
Larry R. Lavoie
Attorney-in-fact
<PAGE>
INDEX TO EXHIBITS
Exhibit
NUMBER DESCRIPTION
- ------ -----------
23(a)(i) Articles of Restatement1
23(b) Amended and Restated By-laws1
23(c) Shareholders' rights are contained in Article II of
Registrant's Amended and Restated By-laws, previously
filed as Exhibit 99.B2 to Registrant's Registration
Statement.
23(d) Investment Advisory Agreement between Registrant and
First Investors Management Company, Inc.1
23(e) Underwriting Agreement - none
23(f) Bonus or Profit Sharing Contracts--None
23(g)(i) Custodian Agreement between Registrant and Irving Trust
Company2
23(g)(ii) Supplement to Custodian Agreement between Registrant and
The Bank of New York2
23(h)(i) Administration Agreement between Registrant, First
Investors Management Company, Inc., First Investors
Corporation and Administrative Data Management Corp.2
23(h)(ii) Transfer Agency Agreement -filed herewith
23(i) Opinion and Consent of Counsel - filed herewith
23(j)(i) Consent of independent accountants - filed herewith
23(j)(ii) Powers of Attorney1
23(k) Omitted Financial Statements -- None
23(l) Initial Capital Agreements -- None
23(m) Distribution Plan - none
23(n) Financial Data Schedules - filed herewith
23(o) Rule 18f-3 Plan - none
23(p)(i) Code of Ethics for First Investors Registered Investment
Companies - filed herewith
23(p)(ii) Code of Ethics for First Investors - filed herewith
<PAGE>
- --------
1 Incorporated by reference from Post-Effective Amendment No. 14 to
Registrant's Registration Statement (File No. 2-66294) filed on April 23,
1996.
2 Incorporated by reference from Post-Effective Amendment No. 15 to
Registrant's Registration Statement (File No. 2-66294) filed on April 19,
1996.
<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-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 29485
<INVESTMENTS-AT-VALUE> 29322
<RECEIVABLES> 636
<ASSETS-OTHER> 273
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30231
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37
<TOTAL-LIABILITIES> 37
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35827
<SHARES-COMMON-STOCK> 2655
<SHARES-COMMON-PRIOR> 2720
<ACCUMULATED-NII-CURRENT> 427
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (4200)
<ACCUM-APPREC-OR-DEPREC> (1860)
<NET-ASSETS> 30194
<DIVIDEND-INCOME> 34
<INTEREST-INCOME> 3120
<OTHER-INCOME> 0
<EXPENSES-NET> (264)
<NET-INVESTMENT-INCOME> 2890
<REALIZED-GAINS-CURRENT> (637)
<APPREC-INCREASE-CURRENT> (382)
<NET-CHANGE-FROM-OPS> 1871
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3168)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25
<NUMBER-OF-SHARES-REDEEMED> 364
<SHARES-REINVESTED> 275
<NET-CHANGE-IN-ASSETS> (2065)
<ACCUMULATED-NII-PRIOR> 705
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (3563)
<GROSS-ADVISORY-FEES> (231)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (268)
<AVERAGE-NET-ASSETS> 30755
<PER-SHARE-NAV-BEGIN> 11.86
<PER-SHARE-NII> 1.100
<PER-SHARE-GAIN-APPREC> (.390)
<PER-SHARE-DIVIDEND> (1.200)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.37
<EXPENSE-RATIO> .87
</TABLE>
TRANSFER AGENT AGREEMENT
------------------------
This Agreement, dated as of the 20th day of May 1999, made by each FIRST
INVESTORS investment company listed on Schedule A, as amended from time to time
("Fund"), and ADMINISTRATIVE DATA MANAGEMENT CORP., a corporation duly organized
and existing under the laws of the State of New York ("ADM").
WITNESSETH THAT:
WHEREAS, ADM represents that it is currently registered and licensed with
the appropriate authorities to provide services as a transfer agent of mutual
funds, and will remain so registered for the duration of the Agreement; and
WHEREAS, the Fund desires to employ ADM to provide transfer agency and
related services under the terms and conditions described in this Agreement and
ADM is willing to provide such services;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
1. APPOINTMENT. The Fund hereby appoints ADM as its registrar, transfer
agent, dividend disbursing agent, shareholder servicing agent and administrator
of its dividend reinvestment, share accumulation, systematic withdrawal and
automated payment programs (collectively its "Transfer Agent") and ADM accepts
such appointment and agrees to act in such capacity upon the terms set forth in
this Agreement.
2. DEFINITIONS. As used in this Agreement capitalized terms have the
meanings specified below:
A) "Fund" means any of the Funds set forth in Schedule A existing
now or in the future that becomes a party to this Agreement, and;
B) "Shares" means the issued and outstanding shares of beneficial
interest, and any fractions thereof, of the Fund;
C) "Shareholder" means the registered owner of Shares or the beneficial
owner of Shares if the name of the beneficial owner is recorded on
the master security holder files;
D) "Account" means a separate record established on ADM's books for
each Shareholder in the Fund which identifies the legal registration
and number of Shares owned.
<PAGE>
3. RESPONSIBILITIES OF ADM. ADM in its capacity as Transfer Agent will
perform the usual duties and functions of a stock transfer agent for the Fund.
Among other things, it will:
A) maintain stock registry and record thereon the Shares and
fractions thereof of both issued and unissued Shares for each
Shareholder's Account;
B) open, maintain, service and close Accounts of Shareholders;
C) issue, redeem, exchange and transfer Shares in Accounts
established on its books and records;
D) process initial and subsequent payments on each day the Fund is
open for trading;
E) maintain a record of sales of Shares for use by the Fund in
complying with state and federal registration requirements;
F) deliver to the underwriter all payments received by ADM;
G) calculate the amounts of Shares to be issued, the amounts of
commissions owed to dealers, and the amounts to be paid to the
underwriter;
H) answer telephone and written inquiries from Shareholders,
securities brokers and others;
I) calculate the amount of, and reinvest dividends and distributions
declared upon Shares into Shareholder Accounts or, upon
Shareholder election, pay such dividends and distributions in
cash;
J) furnish to Shareholders monthly or quarterly statements,
confirmations of transactions in Shares, prospectuses, and such
other communications as may be requested by the Fund;
K) deduct and pay the Internal Revenue Service and other payees the
required amounts of tax withholdings in accordance with
applicable laws, rules and regulations;
L) mail to Shareholders such tax forms, notices, and other information
relating to purchases, redemptions, dividends and distributions, as
required by applicable laws, rules and regulations;
M) prepare, maintain and file with the Internal Revenue Service and
other appropriate taxing authorities reports relating to purchases,
redemptions, dividends and distributions, as required by applicable
laws, rules and regulations;
-2-
<PAGE>
N) mail annual and semi-annual reports and prospectuses prepared by
or on behalf of the Fund to Shareholders;
O) mail notices of Shareholder meetings, proxies, proxy statements and
other related materials upon request by the Fund;
P) maintain a disaster recovery site for emergency use and a separate
off-site storage facility for backup computer files and data;
Q) maintain all records required to be kept by applicable laws, rules
and regulations relating to the services to be performed under this
Agreement; and,
R) comply with all other laws, rules and regulations that apply to ADM
as the result of the services that it is required to perform under
this Agreement.
4. DUTY OF CARE. ADM shall exercise due care and diligence, act in good
faith, and comply with the terms and conditions contained in the Fund's
prospectuses, statements of additional information, shareholder applications
and all applicable laws, rules and regulations in performing the services
required under this Agreement.
5. LIMITATIONS ON LIABILITY. ADM shall not be liable for any losses,
claims or damages (collectively, "Damages") arising out of or in connection with
ADM's performance or failure to perform its duties under this Agreement except
to the extent that such Damages arise out of its negligence, reckless disregard
of its duties, bad faith or willful misfeasance.
Without limiting the generality of the foregoing, ADM shall not be liable
for:
A) any Damages caused by delays, errors, or loss of data occurring by
reason of circumstances beyond ADM's control, including but not
limited to acts of civil or military authorities, national
emergencies, labor difficulties, acts of God, insurrections, wars,
riots or failures of the mails, transportation providers,
communications providers or power suppliers; or,
B) any taxes, assessments or governmental charges which may be levied
or assessed on any basis whatsoever in connection with the services
performed under this Agreement, except for taxes assessed against
ADM in its corporate capacity based upon its compensation hereunder.
6. INDEMNIFICATION.
A) The Fund shall indemnify and hold ADM harmless against any Damages
or expenses (including reasonable attorneys fees) incurred in any
action, suit or proceeding brought against it by any person other
than the Fund, including a Shareholder, based upon ADM's services
-3-
<PAGE>
for the Fund or its Shareholders, if the Damages sought did not
result from ADM's negligence, reckless disregard for its duties, bad
faith or willful misfeasance.
B) The Transfer Agent shall not pay or settle any claim, demand,
expense or liability to which it may seek indemnity pursuant to
paragraph (A) above an ("Indemnifiable Claim") without the express
written consent of the Fund. The Transfer Agent shall notify the
Fund promptly of receipt of notification of an Indemnifiable Claim.
Unless the Fund notifies the Transfer Agent within 30 days of
receipt of Written Notice of such Indemnifiable Claim that the Fund
does not intend to defend such Indemnifiable Claim, the Fund shall
defend the Transfer Agent for such Indemnifiable Claim. The Fund
shall have the right to defend any Indemnifiable Claim at its own
expense, such defense to be conducted by counsel selected by the
Fund. Further, the Transfer Agent may join the Fund in such defense
at the Transfer Agent's own expense, but to the extent that it shall
so desire the Fund shall direct such defense. If the Fund shall fail
or refuse to defend, pay or settle an Indemnifiable Claim, the
Transfer Agent, at the Fund's expense, consistent with the
limitation concerning attorney's fees expressed in (A) above, may
provide its own defense.
7. DELEGATION OF DUTIES. ADM may from time to time in its sole discretion
delegate some or all of its duties hereunder to any affiliate or entity, which
shall perform such functions as the agent of ADM; provided, however, that the
delegation of any of ADM's duties under this Agreement shall not relieve ADM of
any of its responsibilities or liabilities under this Agreement.
8. INSURANCE. ADM shall maintain insurance of the types and in the amounts
deemed by it to be appropriate for the services that it provides to the Fund. To
the extent that policies of insurance may provide for coverage of claims for
liability or indemnity by the parties set forth in this Agreement, the contracts
of insurance shall take precedence, and no provision of the Agreement shall be
construed to relieve an insurer of any obligation to pay claims to the Fund, ADM
or any other insured party which could otherwise be a covered claim in the
absence of any provision of this Agreement.
9. BOOKS AND RECORDS. The books and records pertaining to the Fund which
are in the possession of the Transfer Agent shall be the property of the Fund
and shall be returned to the Fund or its designee upon request. Such books and
records shall be prepared and maintained as required by applicable laws, rules,
and regulations. The Fund, or its authorized representatives, shall have access
to such books and records at all times during the Transfer Agent's normal
business hours. Upon request of the Fund, copies of any such books and records
shall be provided by the Transfer Agent to the Fund or the Fund's authorized
representative or designee at the Fund's expense.
-4-
<PAGE>
10. RESPONSIBILITIES OF THE FUND. The Fund is responsible for:
A) providing ADM on an ongoing basis with its current prospectuses,
statements of additional information, shareholder manuals, annual
and semi-annual reports, proxy notices and proxy statements;
B) notifying ADM upon declaration of each dividend and distribution of
the date of its declaration, the amount payable per Share, the
record date, the payment date, the reinvestment date, and the price;
C) transferring, or causing the Fund's Custodian or Custodians to
transfer, to ADM by each payment date, the total amount of the
dividend or distribution currently payable in cash; and
D) providing ADM with its net asset value on each day the Fund is open
for business and the prices which are applicable to Shareholders who
are entitled to purchase Shares at reduced offering prices.
11. COMPENSATION. The Fund agrees to pay ADM compensation for its services
and to reimburse it for expenses as set forth in Schedule B attached hereto, or
as shall be set forth in amendments to such schedule approved by the parties to
this Agreement.
12. ADDITIONAL SERVICES AND COMPENSATION. The Fund may with the consent of
ADM decide to employ ADM to perform additional services and special projects
which are not covered by this Agreement, such as proxy solicitation, proxy
tabulation or special research. In such circumstances, the terms and conditions
under which ADM will perform such services and the compensation it will receive
will be set by mutual agreement.
13. HOLIDAYS. 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 observances on which the Fund and ADM are
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 Fund
and ADM are open.
14. COOPERATION WITH ACCOUNTANTS. The Transfer Agent shall cooperate with
the Fund's independent public accountants and shall take all reasonable action
in the performance of its obligations under this Agreement to assure that the
necessary information is made available to such accountants for the expression
of their opinion as such may be required by the Fund from time to time.
15. CONFIDENTIALITY. The Transfer Agent agrees on behalf of itself and its
employees to treat confidentially all records and other information relative to
the Fund and its prior, present or potential Shareholders and relative to the
Fund's investment advisers, sub- advisers or underwriters and their present or
-5-
<PAGE>
potential customers; provided, however that the Transfer Agent may disclose
information in response to a lawful subpoena, request from a governmental
authority, or other legal process or with the consent of the Fund.
16. ENFORCEMENT OF AGREEMENT. Notwithstanding any provision of the law to
the contrary, ADM hereby waives any right to enforce this Agreement against the
individual and separate assets of any Shareholder of the Fund. With respect to
any obligations of the Fund arising out of this Agreement, ADM shall look for
payment or satisfaction of any obligation solely to the assets and property of
the Fund.
17. ASSIGNMENT. 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 any party without the
written consent of the other. In the case of the Fund, any consent to an
assignment must be approved by the Board of Directors/Trustees of the Fund.
18. TERMINATION. This Agreement may be terminated by any party to this
Agreement on at least sixty (60) days advance written notice. If ADM fails at
any time to maintain the necessary registrations or licenses required to act
lawfully as the Fund's Transfer Agent, the Fund may terminate this Agreement
upon five days written notice. In the event that ADM shall terminate this
Agreement, it shall continue to perform the services required under this
Agreement at the request of the Fund until a replacement is appointed. In such
case, ADM shall be entitled to receive all the payments and reimbursements to
which it is entitled under this Agreement.
19. AMENDMENT. This Agreement may only be amended by a written instrument
approved by both parties.
20. NON-EXCLUSIVITY. The parties understand and agree that ADM may offer
services, including the types of services covered by this Agreement, to other
parties including non-affiliated mutual funds, provided that such activities do
not adversely affect ADM's ability to perform the services to the Fund that are
required by this Agreement.
21. MISCELLANEOUS. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed to be original, but
such counterparts shall together constitute but one and the same instrument.
This Agreement shall be construed in accordance with the laws of the State of
New York.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be
signed by their duly authorized officers and their seals hereunto duly affixed
and attested as of the day and the year first above written.
ATTEST: FIRST INVESTORS FUNDS
/s/ C. Durso BY: /s/ Glenn O. Head
- ------------ -----------------
C. Durso, Secretary Glenn O. Head, President
ATTEST: ADMINISTRATIVE DATA
MANAGEMENT CORP.
/s/ Larry R. Lavoie BY: /s/ Kathryn S. Head
- ------------------- -------------------
Larry R. Lavoie, Assistant Secretary Kathryn S. Head, President
-7-
<PAGE>
TRANSFER AGENT AGREEMENT
SCHEDULE A
CURRENT LIST OF FUNDS
---------------------
Executive Investors Trust
Executive Investors Blue Chip Fund
Executive Investors High Yield Fund
Executive Investors Insured Tax Exempt Fund
First Investors Cash Management Fund, Inc.
First Investors Fund For Income, Inc.
First Investors Global Fund, Inc.
First Investors Government Fund, Inc.
First Investors High Yield Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Life Series Fund
Life Blue Chip Fund Life Cash Management Fund Life Discovery Fund Life
Government Fund Life Growth Fund Life High Yield Fund Life International
Securities Fund Life Investment Grade Fund Life Target Maturity 2007 Life
Target Maturity 2010 Life Utilities Income Fund
First Investors Multi-State Insured Tax Free Fund
Arizona Fund, California Fund, Colorado Fund, Connecticut Fund, Florida
Fund, Georgia Fund, Maryland Fund, Massachusetts Fund, Michigan Fund,
Minnesota Fund, Missouri Fund, New Jersey Fund, North Carolina Fund, Ohio
Fund, Oregon Fund, Pennsylvania Fund, Virginia Fund
First Investors New York Insured Tax Free Fund, Inc.
First Investors Series Fund
First Investors Blue Chip Fund
First Investors Insured Intermediate Tax Exempt Fund
First Investors Investment Grade Fund
First Investors Special Situations Fund
First Investors Total Return Fund
First Investors Series Fund II, Inc.
First Investors Focused Equity Fund
First Investors Growth & Income Fund
First Investors Mid-Cap Opportunity Fund
First Investors Utilities Income Fund
First Investors Special Bond Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
1st Fund
2nd Fund
5/20/99
-8-
<PAGE>
TRANSFER AGENT AGREEMENT
SCHEDULE B
COMPENSATION
------------
FEES AND CHARGES:
- ----------------
The Fund shall pay the following fees and charges of Administrative Data
Management Corp. for its services under the Transfer Agent Agreement.
For all Funds except First Investors Cash Management Fund, Inc. and
First Investors Tax-Exempt Money Market Fund, Inc.:
Monthly Account Maintenance $0.75 per account
New Accounts $5.00 for each account
Payments $0.75 for each payment
Liquidations and Withdrawals $5.00 per transaction
Exchanges $5.00 per transaction
Transfers $10.00 per transaction
Certificates Issued $3.00 per certificate issued
Systematic Withdrawal Checks $1.00 per check
Dividend Processing $0.45 per dividend
Reports Requested by Government Agency $1.00 per account
Shareholder Service Calls $4.00 per call
Correspondence $20.00 per item
First Investors Cash Management Fund, Inc. and First Investors
Tax-Exempt Money Market Fund, Inc.:
Monthly Account Maintenance $2.00 per account
Reports Requested by Government Agency $1.00 per account
EXPENSES:
- --------
In addition to the above fees and charges, the Fund shall reimburse
Administrative Data Management Corp. for all out-of-pocket costs including but
not limited to the costs of postage, insurance, forms, envelopes, telephone
lines and other similar items, counsel fees, including fees for the preparation
of the Transfer Agent Agreement and review of the Fund's registration statements
and application forms.
5/20/99
-9-
Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, NW
Second Floor
Washington, DC 20036-1800
202.778.9000
www.kl.com
Robert J. Zutz
202.778.9059
Fax: 202.778.9100
[email protected]
April 27, 2000
First Investors Special Bond Fund, Inc.
95 Wall Street
New York, New York 10005
Ladies and Gentlemen:
You have requested our opinion, as counsel to First Investors Special Bond
Fund, Inc. (the "Company"), as to certain matters regarding the issuance of
Shares of the Company. As used in this letter, the term "Shares" means the
shares of common stock of the Company, during the time this Post-Effective
Amendment No. 20 to the Company's Registration Statement on Form N-1A ("PEA") is
effective and has not been superseded by another post-effective amendment.
As such counsel, we have examined certified or other copies, believed by
us to be genuine, of the Company's Articles of Incorporation and by-laws and
such resolutions and minutes of meetings of the Company's Board of Directors as
we have deemed relevant to our opinion, as set forth herein. Our opinion is
limited to the laws and facts in existence on the date hereof, and it is further
limited to the laws (other than the conflict of law rules) in the State of
Maryland that in our experience are normally applicable to the issuance of
shares by corporations and to the Securities Act of 1933 ("1933 Act"), the
Investment Company Act of 1940 ("1940 Act") and the regulations of the
Securities and Exchange Commission ("SEC") thereunder.
Based on present laws and facts, we are of the opinion that the issuance
of the Shares has been duly authorized by the Company and that, when sold in
accordance with the terms contemplated by the PEA, including receipt by the
Company of full payment for the Shares and compliance with the 1933 Act and the
1940 Act, the Shares will have been validly issued, fully paid and
non-assessable.
We hereby consent to this opinion accompanying the PEA when it is filed
with the SEC and to the reference to our firm in the PEA.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By /s/ Robert J. Zutz
---------------------------------
Robert J. Zutz
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. 20 to the
Registration Statement on Form N-1A (File No. 2-66294) of our report dated
January 31, 2000 relating to the December 31, 1999 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 25, 2000
FIRST INVESTORS REGISTERED INVESTMENT COMPANIES
CODE OF ETHICS
I. INTRODUCTION
In accordance with Section 17(j) of the Investment Company Act of 1940
("Act") and Rule 17j-1 promulgated thereunder, the registered investment
companies advised or underwritten by First Investors (as defined in Article II)
("Funds") have adopted this Code of Ethics to establish procedures reasonably
designed to prevent any access person (as defined in Article II) ("Access
Person") from engaging in any act, practice, or course of business which would
be fraudulent, deceptive or manipulative with respect to the Funds.
Failure to comply with the provisions of this Code in any material respect
is a serious matter and can result in disciplinary action, including monetary
fines, disgorgement of profits, and suspension or termination of the person's
affiliations with the Funds. This Code supersedes any prior code of ethics
adopted by the Funds pursuant to Section 17(j) of the Act and Rule 17j-1
thereunder. The policies and procedures adopted herein are in addition to any
rules, regulations, laws or restrictions to which any person affiliated with the
Funds may be subject by operation of law or by any other agreement to which such
person may a be party. Nothing herein modifies or replaces any such other rule,
regulation, law or restriction.
It should be noted that this Code is primarily intended to deal with the
Disinterested Directors of the Funds (as defined in Article II). Most other
Access Persons who are subject to this Code are employees of investment
advisers, subadvisers, and underwriters of the Funds which must have their own
Codes and their compliance with the Codes of their employers will generally
satisfy requirements of this Code.
II. DEFINITIONS
Whenever the following terms are used in this Code, they shall have the
meanings set forth below, unless the context requires otherwise or such meanings
would be inconsistent with Rule 17j-1.
1. "Access Person" means any director, trustee, officer (or person holding
a similar position in a non-corporate entity) or Advisory Person of any of
the Funds.
2. "Advisory Person" means:
a. any employee of the Funds who, in connection with his or her
regular functions or duties, makes, participates in, or obtains information,
regarding the Purchase or Sale of a Security by the Funds, or whose functions
relate to the making of any recommendations with respect to such Purchase or
Sale; and
<PAGE>
b. any natural person in a control relationship (with "control"
being defined by Section 2(a)(9) of the Act) with the Funds who obtains
information concerning recommendations made to the Funds with regard to the
Purchase or Sale of a Security.
The Investment Compliance Manager will from time to time
create a list setting forth those persons considered to be Advisory Persons.
3. "Beneficial Ownership" has the meaning set forth in Section 16 of the
Securities Exchange Act of 1934 and the rules and regulations thereunder.
An Access Person shall be deemed to have a "Beneficial Ownership" interest
in the accounts of a spouse, minor child and relative residing in the
Access Person's home, as well as accounts of any other person if by reason
of any contract, understanding, relationship, agreement or other
arrangement, the Access Person obtains therefrom benefits substantially
equivalent to those of ownership.
4. "Code" means this Code of Ethics.
5. "Disinterested Director" means a director or trustee, as applicable, of
any of the Funds and any person holding a similar position with a
non-corporate Fund, who is not an interested person of the Funds within
the meaning of Section 2(a)(19) of the Act.
6. "First Investors" means First Investors Corporation, First Investors
Management Company, Inc., First Investors Asset Management Company, Inc.,
Executive Investors Management Company, Inc., Executive Investors
Corporation.
7. "Funds" means all registered investment companies which have First
Investors Management Company, Inc., or any affiliate, as their investment
adviser or principal underwriter unless such Funds are specifically
excluded from this Code pursuant to an addendum hereto.
8. For purposes of this Code, the "Investment Committee" means the
Investment Compliance Manager and Portfolio Managers of the Funds or such
other group of persons may be as designated from time to time by First
Investors.
9. "Investment Compliance Manager" means the person designated from time
to time as being responsible for receiving reports or other notices
pursuant to this Code and performing such other duties as are required by
this Code.
10. "Purchase or Sale" of a security means every contract for sale or
disposition of a security or interest in a security, for value, and
includes the writing of an option to Purchase or Sell a security.
11. "Rule 17j-1" means Rule 17j-1 promulgated under the Act.
2
<PAGE>
12. "Security" has the meaning set forth in Section 2(a)(36) of the Act,
except that it shall not include securities issued by the Government of
the United States, bankers' acceptances, bank certificates of deposit,
commercial paper and shares of registered open-end investment companies.
III. PROHIBITED ACTIVITIES
A. ANTI-FRAUD PROHIBITIONS. Access Persons, in connection with the Purchase
or Sale by them of a Security held or to be acquired by any of the Funds,
are prohibited from:
1. employing a device, scheme or artifice to defraud any of the Funds;
2. making any untrue statement of a material fact to any of the Funds
or omitting to state to any of the Funds a material fact necessary
in order to make the statements made, in light of the circumstances
under which they are made, not misleading;
3. engaging in any act, practice or course of business which operates
or would operate as a fraud or deceit upon any of the Funds; or
4. engaging in any manipulative practice with respect to any of the
Funds.
B. CORPORATE OPPORTUNITIES. All Access Persons are prohibited from taking
personal advantage of any opportunity properly belonging to any of the Funds.
C. CONFIDENTIALITY. Except as required in the normal course of carrying out the
Funds' business responsibilities, Access Persons are prohibited from revealing
to persons outside of First Investors information relating to the Securities
that are being considered for Purchase or Sale by any of the Funds. Access
Persons are prohibited from revealing such information to any Person inside
First Investors whose responsibilities do not require knowledge of such
information.
D. UNDUE INFLUENCE. No Access Person shall cause or attempt to cause any of the
Funds to Purchase, Sell or hold any Security in a manner calculated to create
any personal benefit to the Access Person. An Access Person who participates in
any research or in an investment decision concerning a particular Security must
disclose to the Investment Compliance Manager any personal or beneficial
interest that the Access Person has in that Security, or in the issuer thereof,
where such decision could create a material benefit to the Access Person. The
Investment Compliance Manager shall determine whether or not the Access Person
will be restricted in pursuing the research or recommendation.
3
<PAGE>
IV. EFFECTING TRANSACTIONS
A. LIMITATIONS ON CERTAIN PURCHASES OR SALES OF SECURITIES. Unless a transaction
is exempt under Subsection C below, no Access Person shall Purchase or Sell any
Security in which he or she has (or by reason of such transaction acquires) any
direct or indirect Beneficial Ownership interest if that Access Person knew or,
in the ordinary course of fulfilling his or her official duties for any of the
Funds, should have known at the time of such purchase or sale (or within the
15-day period preceding or after the date of the transaction) that the Security:
1. is being considered for Purchase or Sale by any of the Funds; or
2. is then being Purchased or Sold by any of the Funds or their
investment adviser.
B. CLEARANCE OF TRANSACTIONS. Every Access Person, other than a Disinterested
Director, is required to preclear every transaction in a Security in which he or
she has Beneficial Ownership interest as defined in this Code unless the
transaction is exempt under Subsection C below. Preclearance may be obtained by
submitting to the Investment Compliance Manager a fully executed Preclearance
Form in the form attached hereto as Exhibit B. The Investment Compliance Manager
shall provide the clearance by returning a signed copy of the Preclearance Form
to the Person requesting clearance only if, upon consultation with the
Investment Committee or such other persons as may be necessary, the Investment
Compliance Manager determines that none of the Funds is currently considering
the Purchase or Sale of the Security that is subject to the preclearance, that
none of the Funds has Purchased, Sold, or considered Purchasing or Selling such
Security during the prior 15-day period, and that the transaction is otherwise
consistent with Rule 17j-1. No member of the Investment Committee may
participate in such consultation with the Investment Compliance Manager with
respect to any transaction in which such member has any direct or indirect
personal economic interest.
Although a Disinterested Director is not required to preclear Securities
transactions, he or she may voluntarily preclear transactions. The fact that a
Disinterested Director or any other Access Person of the Funds files a voluntary
request to preclear a Securities transaction shall not be construed as an
admission or any indication that he or she knows or should know that the Funds
have considered or are considering Purchasing or Selling the Security or that
the Access Person has, or by reason of the transaction will acquire, a
Beneficial Ownership interest in the Security.
C. EXEMPTED TRANSACTIONS. The prohibitions of Section A of this Article IV shall
not apply to the following transactions:
1. Purchases or Sales effected in any account over which the Access Person
has no direct or indirect influence or control (for this purpose, an
Access Person is deemed to have direct or indirect influence or control
4
<PAGE>
over the accounts of a spouse, minor children and relatives residing in
the Access Person's home);
2. Purchases or Sales which are non-volitional on the part of the Access
Person;
3. Purchases which are part of an automatic dividend reinvestment plan;
4. Purchases effected upon the exercise of rights issued by an issuer
pro-rata to all holders of a class of Securities, to the extent such
rights were acquired from the issuer, and Sales of rights so acquired;
5. Purchases or Sales which are effected by or on behalf of any Fund or
any private account managed by First Investors;
6. Purchases or Sales involving options on broad based indices; and,
7. Stop, limit or stop limit orders at a level 20% BELOW the market price
of a Security held in a personal investment account, or 20% ABOVE the
market price to cover a short position at the time the orders are placed.
It should be noted that preclearance is not necessary for Purchases or
Sales of shares of registered open-end investment companies (including
such shares of the Funds), Securities issued by the Government of the
United States, bankers' acceptances, bank certificates of deposit, and
commercial paper, since they are excluded from the definition of a
Security in this Code.
V. REPORTING
A. REPORTS BY DISINTERESTED DIRECTORS. A Disinterested Director shall report to
the Investment Compliance Manager those Securities transactions in which the
Disinterested Director has, or by reason of the transactions acquires, any
direct or indirect Beneficial Ownership interest in the Security, if such a
Director at the time of the transaction, knew or, in the ordinary course of
fulfilling his or her official duties as a Director of any of the Funds, should
have known that, during the 15-day period immediately preceding or after the
date of the transaction, such Security was or was going to be Purchased or Sold
by any of the Funds or such Purchase or Sale was or was being considered by any
of the Funds or their investment advisers (including, but not limited to,
transactions regarding which prior clearance has been obtained). No
Disinterested Director shall be required to report Purchases and Sales effected
in any account over which the Disinterested Director has no direct or indirect
influence or control. The fact that a Disinterested Director voluntarily chooses
to report transactions to the Investment Compliance Manager shall not be
construed as an admission or any indication that he or she knows or should know
that the Funds have considered or are considering Purchasing or Selling such
5
<PAGE>
Security or that the Access Person has, or by reason of the transaction will
acquire, a Beneficial Ownership interest in the Security.
B. REPORTS BY ALL OTHER ACCESS PERSONS. Every Access Person other than those who
are reporting pursuant to Section A, above, must report all transactions in any
security in which such Access Person has, or by reason of such transaction
acquires, any direct or indirect Beneficial Ownership in the Security
(including, but not limited to, transactions regarding which prior clearance has
been obtained). No Access Person shall be required to report Purchases and Sales
effected in any account over which the Access Person has no direct or indirect
influence or control.
C. PROCEDURES FOR FILING INFORMATION. Information required to be reported under
Section A or Section B of this Article must be submitted to the Investment
Compliance Manager at 95 Wall Street, Suite 2300, New York, New York 10005, (1)
by requiring that the broker-dealer provide a duplicate confirmation of each
transaction, and (2) by filing a report within 10 days after the end of the
calendar quarter in which the transaction to which the report related was
effected. The report may be submitted by filling out completely the Form
attached as Exhibit C to this Code, or may be submitted by attaching a copy of
the account statements reflecting the transaction to the Form, provided the
following information is included on such statement:
1. The date of the transaction, the title and the number of shares or
bonds;
2. The nature of the transaction (i.e., Purchase, Sale or any other
type of acquisition or disposition);
3. The price at which the transaction was effected and the principal
amount involved; and
4. The name of the broker, dealer, or bank with or through whom the
transaction was effected.
Any such report may contain a statement that the report shall not be
construed as an admission by the Person making such report that he or she
has any direct or indirect Beneficial Ownership in the Security to which
the report relates.
VI. OBLIGATIONS OF INVESTMENT COMPLIANCE MANAGER
The Investment Compliance Manager shall:
1. Furnish a copy of this Code to each Access Person;
2. Annually obtain written confirmation on the Form attached hereto as an
Exhibit from each Access Person that he or she has received, has read and
understood this Code;
6
<PAGE>
3. Notify each Access Person of his or her obligation to comply with the
provisions of and to file reports as required by this Code;
4. Report to the Board of Directors of the Funds the information contained
in any reports filed with the Investment Compliance Manager or any other
Person pursuant to this Code when any such report indicates that an Access
Person engaged in a transaction in material violation of this Code;
5. Provide the Board of Directors with a summary of all violations of this
Code on at least an annual basis;
6. Maintain the records required by Rule 17j-1(d) of the Act; and
7. Maintain any records furnished pursuant to this Code.
VII. VIOLATIONS
Upon being apprised of facts which indicate that a material violation of
this Code may have occurred, the Investment Compliance Manager and General
Counsel shall conduct an investigation, make preliminary findings concerning
whether a violation of the Funds' Code has occurred, and, if they determine a
violation has occurred, make a recommendation with respect to sanctions for the
violation. The Disinterested Directors (who are not involved in the violation)
can then make final determinations and decisions regarding sanctions.
If the Board determines that a violation of this Code has occurred, the
Board may impose such sanctions as it deems appropriate under the circumstances
which may, among other actions, include fines, disgorgement, suspension or
termination of employment. If the Person whose conduct is being considered by
the Board is a Director of any of the Funds, he or she shall not be eligible to
participate in the decision of the Board as to whether a violation has occurred
or to what extent sanctions should be imposed.
VIII. ADDITIONAL INFORMATION
Access Persons who have questions about any of the provisions of this Code
should contact the Investment Compliance Manager or the First Investors Legal
Department.
7
<PAGE>
PRECLEARANCE FORM
-----------------
I, _________________________________ , request preclearance for the security
transaction or transactions set forth below. To my knowledge, the security or
securities listed below have not been purchased or sold by any First Investors
Fund or Private Account within the prior fifteen (15) days and are not currently
being considered for purchase or sale by any Fund or Private Account during the
next 15 days. Furthermore, the transaction and or transactions I am
contemplating do not involve a Purchase and Sale, or a Sale and Purchase, of the
same Security or a Related Security within any sixty (60) day period. I
recognize that I have five (5) days in which to effect the transaction or
transactions contemplated, measured from the time a transaction has been
approved.
Proposed Buy, Sell Quantity
Trade or Exchange, and/or
Date(s) et al. Amount Security Type Issuer Name
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------- ---------------------
Signature of Requester Date
Requester Comments (Include Disclosure of any Potential Conflict of Interest
Here):
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER (OR HIS OR HER DESIGNEE) AUTHORIZATION:*
EQUITIES FIXED INCOME
- -------- ------------
- --------------------------------- --------------------------------
D. Fitzpatrick G. Ganter
- --------------------------------- --------------------------------
P. Poitra N. Jones
- --------------------------------- --------------------------------
D. Hanover C. Wagner
- ---------------------------------
M. Wright
PORTFOLIO MANAGER COMMENTS: ____________________________________________
8
<PAGE>
* Authorization is not required by all Portfolio Managers. Only those Portfolio
Managers consulted by the Investment Compliance Manager need to sign this
Preclearance Form. A Portfolio Manager may designate an analyst to sign this
Preclearance Form in his or her absence.
APPROVED BY INVESTMENT COMPLIANCE MANAGER ________________________________
Signature Date
SEND TO: INVESTMENT COMPLIANCE MANAGER
FIMCO 95 WALL STREET - 23RD FLOOR
NEW YORK, NY 10005
9
<PAGE>
FIRST INVESTORS REGISTERED INVESTMENT COMPANIES
CODE OF ETHICS
ACKNOWLEDGEMENT FORM
I hereby (re) acknowledge receipt of a copy of the First Investors Code of
Ethics and agree that as an "Access Person" I am subject to and will abide by
its provisions and all amendments thereto. I also (re) acknowledge that I have
been informed of and will comply with the reporting provisions contained in the
Code and all amendments thereto.
DATED: __________ , 19__
Signature:_______________________________
Name:____________________________________
Please Print
Department:______________________________
Please send to: Investment Compliance Manager
FIMCO
95 Wall Street - 23rd Floor
New York, NY 10005
Rev. 5/8/97
10
FIRST INVESTORS
CODE OF ETHICS
I. INTRODUCTION AND STATEMENT OF PRINCIPLES
----------------------------------------
First Investors has adopted this code of ethics ("Code of Ethics" or
"Code") in accordance with the requirements of Section 17(j) of the Investment
Company Act of 1940 ("Investment Company Act") and Rule 17j-1 and Section 206 of
the Investment Advisers Act of 1940 ("Investment Advisers Act") to protect the
First Investors family of mutual funds (Funds") and private accounts ("Private
Accounts") from fraudulent or unethical conduct by access persons ("Access
Persons"). This Code does not apply to the disinterested directors of the Funds
or employees of unaffiliated subadvisers of the Funds. The disinterested
directors of the Funds are subject to a separate code of ethics (the "First
Investors Registered Investment Companies Code of Ethics") which takes their
unique status into account. Employees of non-affiliated subadvisers are subject
to the codes of ethics of their own employers. The policies and procedures set
forth herein are in addition to any policies and procedures which may apply to
any Access Person of First Investors by operation of law or contract, such as
the First Investors Insider Trading Policies and Procedures.
As reflected by this Code of Ethics, First Investors expects all Access
Persons of First Investors not only to comply with this Code but also to follow
the highest ethical standards in all business and personal dealings which could
in any way affect the Funds or any Private Accounts that are managed by First
Investors. The guiding principles for all Access Persons, including the
portfolio managers of the Funds or Private Accounts ("Portfolio Managers"),
traders ("Traders"), analysts ("Analysts"), and portfolio accountants
("Portfolio Accounts"), should be to place the interests of the Funds and
Private Accounts first at all times, to avoid placing themselves in any position
in which there is any actual or apparent conflict of interest with the interests
of the Funds or Private Accounts, and to refrain from taking any inappropriate
advantage of their positions of trust and responsibility.
II. DEFINITIONS
-----------
Unless the Investment Company Act, the Investment Advisers Act, or the
rules thereunder otherwise require, whenever the following terms are used in
this Code, they shall have the meanings set forth below.
A. ACCESS PERSON
-------------
1. With respect to any First Investors company which acts as an investment
adviser to any Fund or Private Account, Access Person means any director,
officer, general partner, or advisory person of such investment adviser;
and,
2. With respect to any First Investors company which acts as a principal
underwriter of a Fund, "Access Person" means any director, officer, or
<PAGE>
general partner of such principal underwriter who in the ordinary
course of his or her business makes, participates in or obtains
information regarding the Purchase or Sale of Securities by the Fund or
whose functions or duties as part of the ordinary course of his or her
business relate to the making of any recommendation to the Fund
regarding the Purchase or Sale of Securities.
B. ADVISORY PERSON
---------------
"Advisory Person" means:
1. any employee of First Investors or of any company which controls, is
controlled by, or under common control with, First Investors who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the Purchase or Sale of
a Security by the Funds or Private Accounts, or whose functions relate to
the making of any recommendations with respect to the Purchase or Sale of
a Security by the Funds or Private Accounts; and
2. any natural person in a control relationship (with the term "control"
being defined by Section 2(a)(9) of the Investment Company Act) with
First Investors who obtains information concerning Purchases, Sales, or
recommendations of Securities to the Funds or Private Accounts.
C. BENEFICIAL OWNERSHIP
--------------------
"Beneficial Ownership" means beneficial ownership as defined in Section 16
of the Securities Exchange Act of 1934 and the rules and regulations thereunder,
provided that an Access Person shall be deemed to have "Beneficial Ownership" of
Securities (1) owned by his or her spouse, minor children and relatives residing
in the Access Person's home, (2) Securities over which the Access Person has or
shares investment discretion or control and (3) any other Securities if by
reason of any contract, understanding, relationship, agreement or other
arrangement the Access Person obtains therefrom economic benefits which are
substantially equivalent to those of ownership.
D. DISINTERESTED DIRECTOR
----------------------
"Disinterested director" means a director of any of the Funds and any
person holding a similar position with a noncorporate Fund who is not an
interested person of the Funds within the meaning of Section 2(a)(19) of the
Investment Company Act.
E. FIRST INVESTORS
---------------
"First Investors" means First Investors Corporation, First Investors
Management Company, Inc., First Investors Asset Management Company, Inc.,
2
<PAGE>
Executive Investors Management Company, Inc., Executive Investors
Corporation, and Administrative Data Management Corp.
F. FUNDS
-----
"Funds" means all registered investment companies which have First
Investors as their investment adviser or principal underwriter (including
Executive Investors Trust), unless such Funds are specifically excluded from
this Code pursuant to an addendum hereto.
G. INVESTMENT COMPLIANCE MANAGER
-----------------------------
"Investment Compliance Manager" means the person designated from time to
time as being responsible for receiving reports or other notices pursuant to
this Code, and performing such other duties as are required by this Code.
H. INVESTMENT COMMITTEE
--------------------
For purposes of this Code, the "Investment Committee" means the Investment
Compliance Manager and the Portfolio Managers of the Funds or such other group
of persons as may be designated from time to time by First Investors.
I. PURCHASE OR SALE
----------------
"Purchase or Sale" means every contract for Purchase or Sale or
disposition of a Security or interest in a Security, for value, as well as every
option to Purchase or Sell a Security, whether the option permits the holder to
Purchase or Sell the Security or it must be settled in cash.
J. RELATED SECURITY
----------------
A "Related Security" means a Security which (i) is issued by the same
issuer as another Security or by an issuer that is controlled by, controls or is
under common control with such issuer or (ii) gives the holder any contractual
right with respect to another Security (e.g., options and warrants, rights or
other convertible Securities).
K. SECURITY
--------
"Security" means a Security as defined in Section 2(a)(36) of the
Investment Company Act, except that it does not include Securities issued by the
Government of the United States, bankers' acceptances, bank certificates of
deposit, commercial paper, and shares of registered open-end investment
companies, including the shares of the First Investors Funds.
3
<PAGE>
III. GENERAL PROHIBITIONS
--------------------
A. FRAUDULENT AND MANIPULATIVE CONDUCT
------------------------------------
No Access Person, shall, in connection with the Purchase or Sale, directly
or indirectly, of a Security held or to be acquired by any of the Funds or
Private Accounts managed by First Investors:
1. Employ any device, scheme or artifice to defraud any such Fund or
Private Account;
2. Make to any Fund or Private Account any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they are made,
not misleading;
3. Engage in any act, practice or course of business which operates
or would operate as fraud or deceit upon any Fund or Private Account;
or,
4. Engage in any manipulative practice with respect to any Fund or
Private Account.
B. CORPORATE OPPORTUNITIES
-----------------------
No Access Person shall take personal advantage of any opportunity that
properly belongs to any of the Funds or Private Accounts, provided that an
Access Person shall not be prevented from purchasing a Security or Related
Security which is an eligible investment for any of the Funds if the Access
Person obtains preclearance for the purchase in accordance with the provisions
of this Code after disclosing any actual or potential conflict of interest on
the Preclearance Form used to obtain preclearance.
C. CONFIDENTIALITY
---------------
Except as required in the normal course of carrying out First Investors'
business responsibilities, no Access Person shall reveal confidential
information relating to the investment intentions or activities of the Funds or
Private Accounts to any person outside of First Investors or any person inside
First Investors whose responsibilities do not require knowledge of such
information.
D. UNDUE INFLUENCE AND THE APPEARANCE THEREOF
------------------------------------------
No Access Person shall:
1. Cause or attempt to cause any of the Funds or Private Accounts to
Purchase, Sell or hold any Security in a manner calculated to create
any personal benefit to the Access Person;
4
<PAGE>
2. Accept any option, warrant, right, or other Security from any issuer,
person affiliated or associated with any issuer, underwriter, broker, or
dealer which has offered or sold any Security or Related Security to any
of the Funds or Private Accounts, unless the Access Person has obtained
preclearance from the Investment Compliance Manager after full disclosure
on the Preclearance Form of all material facts, including the nature of
the Security, the relationship of the party granting the Security to the
Funds or Private Accounts, and any other potential conflict of interest;
3. Accept any gift other than a nominal gift (which is defined herein as
having a value less than $100) from any person or entity that does
business with any Fund or Private Account; or
4. Use his or her knowledge of or ability to influence or control the
portfolio transactions of a Fund or Private Account for his or her
personal benefit or the personal benefit of his or her friends or
relatives.
E. DISCLOSURE OF POTENTIAL CONFLICTS OF INTEREST
---------------------------------------------
No Access Person shall fail to disclose to the Investment Compliance
Manager any personal or beneficial interest which he or she has in a Security
when the Access Person plays any part or role in any consideration of any
investment in the Security or any Related Security by a Fund or Private Account.
Thus, for example, an Access Person who has acquired warrants from an issuer in
a private placement would be required to disclose the warrants to the Investment
Compliance Manager before he or she plays any role in a Fund's subsequent
consideration of an investment in any Securities issued by the same issuer of
the warrants or any Related Securities. The Investment Compliance Manager, in
consultation with members of the Investment Committee who have no personal
interest in the transaction, shall determine whether or not the personal or
beneficial interest prevents the Access Person from being involved in
consideration of the Security.
F. SERVICE AS A DIRECTOR OF A PUBLIC COMPANY
-----------------------------------------
No Access Person shall serve on the board of directors of any publicly
traded company, absent prior authorization of the Investment Compliance Manager,
based upon a determination that the board service would be consistent with the
interests of the Funds and Private Accounts. In the rare case in which board
service is authorized, any Access Person serving as a director must be isolated
from those making investment decisions regarding the issuer through "Chinese
Wall" or other procedures.
IV. PERSONAL SECURITIES TRANSACTIONS
--------------------------------
A. RESTRICTIONS ON SECURITIES TRANSACTIONS
---------------------------------------
5
<PAGE>
1. TRANSACTIONS DURING BLACK-OUT PERIODS. Unless a transaction is exempt
under the terms of this Code, no Access Person shall purchase or sell,
directly or indirectly, any Security if that Access Person knew or should
have known at the time of such purchase or sale, that within fifteen (15)
days of his or her transaction, the Security:
(i) Is being considered for purchase or sale by any Fund or
Private Account; or
(ii) Is then being purchased or sold by any Fund or Private
Account.
2. PURCHASES DURING INITIAL PUBLIC OFFERINGS. In the absence of an
exemption under this Code, no Access Person shall purchase any Security
which is being offered as part of an initial public offering of
Securities. This prohibition does not apply to the exercise of rights
issued pro rata to all shareholders, policy holders or depositors of an
issuer. For example, it does not apply to Securities offered by savings
and loan institutions or insurance companies to policy holders or
depositors in connection with conversions from mutual to stock form.
3. PRIVATE PLACEMENTS. In the absence of an exemption under this Code or
preclearance by the Investment Compliance Manager, no Access Person shall
acquire any Security in a private placement. In determining whether to
grant preclearance, the Investment Compliance Manager shall take into
account, among other factors, whether the investment opportunity should be
reserved for any of the Funds or Private Accounts and whether the
opportunity is being offered to the Access Person by virtue of his or her
position with First Investors.
4. PURCHASES OF SECURITIES ISSUED BY BROKER-DEALERS. No Access Person
shall purchase Securities issued by any broker-dealer or parent company of
a broker-dealer (unless the parent derives 15% or less of its revenues
from all broker-dealer subsidiaries). This prohibition does not apply to
purchases of Securities issued by First Investors Consolidated Corporation
and its affiliates in connection with employee stock purchase or incentive
plans, compensation arrangements, or otherwise.
5. SHORT-TERM TRADING. Unless the transactions at issue are exempt under
the terms of this Code, no Access Person shall engage in short-term
trading in Securities. For purposes of this Code, "short-term" trading is
defined as the Purchase and Sale of the same Security or a Related
Security within sixty (60) days. The most recent transaction in a Security
will determine a new holding period. The Purchase or Sale of an option on
a Security shall be considered a Purchase or Sale of not only the option
but also the underlying Security. For example, the purchase of a call
option on a Security shall be considered a purchase not only of the option
but also the underlying Security.
The prohibition on short-term trading shall not prohibit an Access Person
6
<PAGE>
from placing a stop, limit or stop limit order at a level 20% BELOW the market
price of a Security within sixty (60) days of the date he or she purchases the
Security, provided that the stop, limit, or stop limit sell order is precleared
or exempt from preclearance. It should be noted that any subsequent modification
of a stop, limit or stop limit order is a new trade for purposes of the
short-term trading restriction and preclearance requirements.
B. PRECLEARANCE OF SECURITIES TRANSACTIONS
---------------------------------------
Every Access Person is required to obtain preclearance from the Investment
Compliance Manager prior to engaging in any transaction in any Security in which
he or she has, or by reason of the transaction will acquire, any direct or
indirect Beneficial Ownership interest, unless such transaction is exempt from
preclearance under this Code. It should be emphasized that, unless a transaction
is exempt from preclearance under this Code, it must be precleared by the
Investment Compliance Manager even if no Fund or Private Account would normally
purchase the Security at issue. For purposes of the preclearance requirement,
any amendment of an order to Purchase or Sell any Security (e.g., any change of
price, time, or amount) is considered a new order. Furthermore, any change of
the terms of a stop, limit or stop limit order is considered a new transaction
which must be precleared.
Preclearance may be obtained from the Investment Compliance Manager by
completing the Preclearance Form which is attached hereto and submitting it to
the Investment Compliance Manager. The Preclearance Form requires the Access
Person to certify that, among other things, to his or her knowledge, the
Securities listed on the Preclearance Form have not been purchased by any of the
Funds or Private Accounts within the prior fifteen (15) days and have not been
and will not be considered for Purchase or Sale by any of the Funds during the
prior fifteen (15) days and the following fifteen (15) days. The Preclearance
Form also has a comment section which should be used to disclose any potential
conflicts of interest.
The Investment Compliance Manager shall consult with the members of the
Investment Committee, or their designees to determine whether the proposed
transaction by the Access Person would conflict with the interests of any Fund
or Private Account. The Investment Compliance Manager need not consult with all
members of the Investment Committee before approving or disapproving a
transaction. No member of the Investment Committee may participate in such
consultation with the Investment Compliance Manager with respect to any
transaction in which such member has any direct or indirect personal economic
interest. No order shall be placed by the Access Person until the Investment
Compliance Manager (or the General Counsel in his or her absence) signifies his
or her approval by signing the Preclearance Form.
Personal securities transactions by the Investment Compliance Manager must
be approved by the General Counsel or, in his or her absence, Fund Counsel. The
same Preclearance Form and procedures should be used.
7
<PAGE>
C. EXEMPT TRANSACTIONS
-------------------
The following personal Securities transactions are exempt from the
preclearance and other restrictions on personal securities transactions set
forth above:
(a) Purchases or Sales of Securities for any account over which an
Access Person has no direct or indirect influence or control (for this purpose,
an Access Person is deemed to have direct or indirect influence or control over
the accounts of a spouse, a minor child or an adult relative residing in the
Access Person's home);
(b) Purchases or Sales of Securities which are non-volitional on the
part of the Access Person (Purchases and Sales of Securities in a discretionary
trading account owned by an Access Person are deemed to be non-volitional only
if the person having discretion is a non-Access Person and the owner of the
account is not consulted at all prior to the execution of transactions by the
person having discretion);
(c) Purchases of Securities which are part of an automatic
dividend reinvestment plan;
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(d) Purchases of Securities effected upon the exercise of rights
issued by an issuer pro-rata to all holders of a class of Securities, to the
extent such rights were acquired from the issuer, and subsequent sales of such
rights or the Securities acquired thereunder;
(e) Purchases or Sales of options on broad-based indices;
(f) Purchases and Sales of shares of stock issued by First
Investors Consolidated Corporation and its affiliates; and,
(g) Purchases and Sales by any Fund or Private Account.
It should be noted that preclearance is not necessary for Purchases or
Sales of shares of registered open-end investment companies (including such
shares of the Funds), securities issued by the Government of the United States,
bankers' acceptances, bank certificates of deposit, and commercial paper, since
they are excluded from the definition of a Security in this Code.
D. QUARTERLY REPORTS OF SECURITIES TRANSACTIONS
--------------------------------------------
On a quarterly basis, every Access Person of First Investors shall submit
a report, in the form attached hereto, to the Investment Compliance Manager
disclosing all transactions in any Securities in which he or she has or, by
reason of the transaction, acquires a direct or indirect Beneficial Ownership
interest. The report must be completed and returned to the Investment Compliance
Manager within ten (10) days of the end of each calendar quarter ("Quarterly
Report").
With respect to each transaction reported, the Quarterly Report shall
include the following trade information:
(i) the date of the transaction, the title and number of
shares or bonds;
(ii) the nature of the transaction (i.e., Purchase, Sale
or any other type of acquisition or disposition);
(iii) the price at which the transaction was effected and
the principal amount involved; and
(iv) the name of the broker-dealer, bank or other entity with
or through whom the transaction was effected.
Notwithstanding the foregoing, the Quarterly Report need not disclose
information about Securities transactions which have already been disclosed on
duplicate confirmation and account statements provided to the Investment
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Compliance Manager as long as the Access Person verifies on this report that he
or she has arranged to have duplicate confirmation and account statements sent
to the Investment Compliance Manager for all accounts in which the Access Person
has a direct or indirect Beneficial Ownership interest, he or she incorporates
by reference in the Quarterly Report the information contained in those
statements, and such person verifies that he or she has not engaged in any
Securities transactions which are not set forth in the statements. Moreover,
Quarterly Reports need not disclose information regarding transactions or
holdings of the Funds, since mutual fund shares are excluded from the definition
of a Security under this Code and, in any event, First Investors already
maintains information concerning such transactions and holdings.
No Access Person shall be required to report transactions in Securities
which have been effected for any account over which such Access Person does not
have any direct or indirect influence or control. Furthermore, an Access Person
may disclaim having a Beneficial Ownership interest in a Security disclosed in a
Quarterly Report by including in the report a statement that the report shall
not be construed as an admission that he or she has any direct or indirect
Beneficial Ownership in the Security.
E. OPENING AND MAINTAINING SECURITIES ACCOUNTS
-------------------------------------------
Every Access Person shall provide written notice to and obtain written
permission from the Investment Compliance Manager PRIOR to opening any account
with any broker-dealer or other entity through which Securities transactions may
be effected. If an Access Person has opened a Securities account prior to
becoming affiliated with First Investors, he or she must provide written notice
of and obtain written permission to continue to maintain the account at the time
he or she becomes affiliated with First Investors. An Access Person may also be
required by NASD rules to give written notice to the broker or other party at
which securities accounts are maintained that he or she is employed by or
associated with First Investors.
F. DUPLICATE CONFIRMATIONS AND STATEMENTS
--------------------------------------
All Access Persons shall arrange for duplicate confirmation and account
statements to be sent to the Investment Compliance Manager. This requirement
does not apply to investments in the Funds, since mutual funds are excluded from
the definition of a Security under the Code and, in any event, First Investors
already maintains records concerning such investments.
G. DISCLOSURE OF PERSONAL SECURITIES HOLDINGS
------------------------------------------
All Access Persons shall disclose all personal Securities holdings upon
commencement of employment and thereafter on an annual basis. The ongoing
disclosure requirement is satisfied by providing to the Investment Compliance
Manager duplicate confirmations and account statements if they reveal all
holdings. Otherwise, special disclosure of holdings is necessary. Thus, for
example, a special report would be necessary to disclose certificated Securities
held in a bank safety deposit.
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H. ANNUAL CERTIFICATIONS
---------------------
Every Access Person is required to certify on an annual basis that he or
she has read this Code of Ethics and agrees to abide by its requirements.
V. RESPONSIBILITIES OF THE INVESTMENT COMPLIANCE MANAGER
-----------------------------------------------------
The Investment Compliance Manager shall:
1. Identify and maintain a list of all Access Persons;
2. Furnish a copy of this Code of Ethics to each such Access Person;
3. Notify each new Access Person of his or her obligations to comply
with the provisions of this Code of Ethics and conduct an annual
meeting to remind Access Persons of their obligations;
4. Monitor reports, confirmations, and statements relating to
non-exempt Securities transactions for potential violations of this
Code;
5. Report to the Board of Directors of the Funds any violations of this
Code and any sanctions imposed no later than the next regular Board
Meeting; 6. Report to the Board of Directors of the Funds on a periodic
basis, but not less than annually, concerning the adequacy of existing
procedures, any changes or recommended changes since the prior report, and
the general level of compliance by Access Persons with this Code of
Ethics; and
7. Maintain the records required by Rule 17j-1(d).
VI. VIOLATIONS AND REMEDIES
-----------------------
The failure of any Access Person to comply with this Code of Ethics will
be viewed as a very serious matter and may result in a disciplinary action. Upon
discovering or being apprised of facts which indicate that a violation of this
Code of Ethics has or may have occurred, the Investment Compliance Manager shall
conduct a reasonable investigation or inquiry to determine whether such a
violation did occur. If the Investment Compliance Manager determines that a
violation of this Code of Ethics has occurred or appears to have occurred, he or
she shall notify the General Counsel who shall cause a further investigation to
be conducted if he or she determines it to be necessary.
In the event that any investigation or inquiry is commenced by First
Investors concerning any actual or potential violation of this Code of Ethics,
every Access Person shall be required to:
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(a) provide full access to First Investors, its agents and attorneys to
any and all records and documents which First Investors considers relevant
to any Securities transactions or other matters subject to this Code of
Ethics;
(b) cooperate with First Investors, or its agents and attorneys, in
investigating any Securities transactions or other matter subject to this
Code of Ethics; and
(c) provide First Investors, its agents and attorneys with an explanation
(in writing if requested) of the facts and circumstances surrounding any
Securities transaction or other matter subject to this Code of Ethics.
If a violation is determined to have occurred, the Investment Compliance
Manager in consultation with the General Counsel, shall impose such sanctions as
they deem appropriate under the circumstances which may include, among other
things, censure, fine, a directive to disgorge profits gained or losses avoided,
a suspension, or termination of employment. In the event that an Access Person
engages in short-term trading prohibited by this Code, the Access Person shall
generally be required to disgorge profits gained regardless of whether the
short-term trading is intentional or inadvertent or the reason for such trading.
ADOPTING ENTITIES
- -----------------
The following entities have adopted this Code of Ethics:
Administrative Data Management Corp.
Executive Investors Corporation
Executive Investors Management Company, Inc.
First Investors Asset Management Company, Inc.
First Investors Corporation
First Investors Management Company, Inc.
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PRECLEARANCE FORM
-----------------
I, , request preclearance for the security transaction or transactions set forth
below. To my knowledge, the security or securities listed below have not been
purchased or sold by any First Investors Fund or Private Account within the
prior fifteen (15) days and are not currently being considered for purchase or
sale by any Fund or Private Account during the next 15 days. Furthermore, the
transaction and or transactions I am contemplating do not involve a Purchase and
Sale, or a Sale and Purchase, of the same Security or a Related Security within
any sixty (60) day period. I recognize that I have five (5) days in which to
effect the transaction or transactions contemplated, measured from the time a
transaction has been approved.
Proposed Buy, Sell Quantity
Trade or Exchange, and/or
Date(s) et al. Amount Security Type Issuer Name
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
- --------------------- ---------------------
Signature of Requester Date
Requester Comments (Include Disclosure of any Potential Conflict of Interest
Here):
________________________________________________________________________________
PORTFOLIO MANAGER (OR HIS OR HER DESIGNEE) AUTHORIZATION:*
EQUITIES FIXED INCOME
- -------- ------------
- -------------------------------- --------------------------------
D. Fitzpatrick G. Ganter
- --------------------------------- --------------------------------
P. Poitra N. Jones
- --------------------------------- --------------------------------
D. Hanover C. Wagner
- ---------------------------------
M. Wright
PORTFOLIO MANAGER COMMENTS: ____________________________________________
* Authorization is not required by all Portfolio Managers. Only those Portfolio
Managers consulted by the Investment Compliance Manager need to sign this
Preclearance Form. A Portfolio Manager may designate an analyst to sign this
Preclearance Form in his or her absence.
APPROVED BY INVESTMENT COMPLIANCE MANAGER ______________________________________
Signature Date
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SEND TO: INVESTMENT COMPLIANCE MANAGER
FIMCO 95 WALL STREET - 23RD FLOOR
NEW YORK, NY 10005
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FIRST INVESTORS CODE OF ETHICS
------------------------------
ACKNOWLEDGEMENT FORM
--------------------
I hereby (re) acknowledge receipt of a copy of the First Investors Code of
Ethics and agree that as an "Access Person" I am subject to and will abide by
its provisions and all amendments thereto. I also (re) acknowledge that I have
been informed of and will comply with the reporting provisions contained in the
Code of Ethics and all amendments thereto.
DATED: , 19
------------
Signature:___________________________________
Name:________________________________________
Please Print
Department:__________________________________
Please send to: Investment Compliance Manager
FIMCO
95 Wall Street - 23rd Floor
New York, NY 10005
Rev. 5/8/97
15
