As filed with the Securities and Exchange Commission on January 28, 2000
1933 Act File No. 2-71911
1940 Act File No. 811-3169
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. 28 [ X ]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 28
---
(Check appropriate box or boxes.)
FIRST INVESTORS GLOBAL FUND, INC.
(Exact name of Registrant as Specified in Charter)
95 Wall Street
New York, New York 10005
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 858-8000
Ms. Concetta Durso
Secretary and Vice President
First Investors Fund For Income, Inc.
95 Wall Street
New York, New York 10005
(Name and Address of Agent for Service)
Copy to:
Robert J. Zutz, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, D.C. 20036
Approximate Date of Proposed Public Offering____________________
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on January 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.
<PAGE>
FIRST INVESTORS GLOBAL 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 Global Fund, Inc.
Combined Prospectus for the First Investors Global Fund, Inc., the
First Investors Series Fund and the First Investors Series Fund II,
Inc.
Combined Statement of Additional Information for the First Investors
Global Fund, Inc., the First Investors Series Fund and the First
Investors Series Fund II, Inc.
Part C of Form N-1A
Signature Page
Exhibits
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[FIRST INVESTORS LOGO]
GLOBAL 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 January 28, 2000
<PAGE>
CONTENTS
OVERVIEW OF THE GLOBAL FUND
O What is the Global Fund?
O O Objectives
O O Primary Investment Strategies
O O Primary Risks
O Who should consider buying the Global Fund?
O How has the Global Fund performed?
O What are the fees and expenses of the Global Fund?
THE GLOBAL FUND IN DETAIL
O What are the Global Fund's objectives, principal investment strategies and
principal risks?
O Who manages the Global Fund?
BUYING AND SELLING SHARES
O How and when does the Fund price its shares?
O How do I buy shares?
O Which class of shares is best for me?
O How do I sell shares?
O Can I exchange my shares for the shares of other First Investors Funds?
ACCOUNT POLICIES
O What about dividends and capital gain distributions?
O What about taxes?
O How do I obtain a complete explanation of all account privileges and
policies?
FINANCIAL HIGHLIGHTS
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OVERVIEW OF THE GLOBAL FUND
What is the Global Fund?
OBJECTIVES: The Fund primarily seeks long-term capital growth and
secondarily a reasonable level of current income.
PRIMARY
INVESTMENT
STRATEGIES: The Fund invests in a diversified portfolio of common stocks
of companies which are located throughout the world. While the
Fund attempts to maintain broad country diversification, under
normal market conditions it must allocate assets to at least
three countries, including the United States. The Fund
primarily invests in large or medium capitalization stocks
which are traded in larger or more established markets
throughout the world. The Fund also invests opportunistically
in smaller capitalization stocks and stocks of smaller,
less-developed or emerging markets. The Fund generally does
not attempt to hedge its foreign securities investments
against currency rate fluctuations.
PRIMARY
RISKS: All stocks fluctuate in price in response to movements in the
overall securities markets, general economic conditions, and
changes in interest rates or investor sentiment. The risks of
investing in a stock fund that invests in foreign stocks are
accentuated because investments in foreign stocks,
particularly emerging markets, can decline in value because of
declines in the values of local currencies, irrespective of
how well the companies that issue such stocks are doing; there
is generally less supervision and regulation of foreign
securities markets; foreign securities markets are generally
less liquid than U.S. markets; there may be less financial
information available on certain foreign companies; and there
may be political instability in some countries in which the
Fund may invest. Fluctuations in the prices of foreign stocks
can be especially sudden and substantial. Stocks with smaller
market capitalizations tend to experience sharper price
fluctuations. Accordingly, the value of your investment in the
Fund will go up and down, which means that you could lose
money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Who should consider buying the Global Fund?
The Global Fund is most appropriately used to add
diversification to an investment portfolio. It may be
appropriate for you if you:
o Are seeking significant growth of capital,
o Want exposure not only to U.S. but also foreign
securities,
o Are willing to accept a high degree of market volatility
and the additional risks of foreign investments, and
o Have a long-term investment horizon and are able to ride
out market cycles.
You should keep in mind that the Global Fund is not a complete
investment program. For most investors, a complete program
should include not only stock funds but also bond and money
market funds. While stocks have historically outperformed
other categories of investments over long periods of time,
they generally carry higher risks. There have also been
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extended periods during which bonds and money market
instruments have outperformed stocks. By allocating your
assets among different types of funds, you can reduce the
overall risk of your portfolio. Of course, even a diversified
investment program can result in a loss.
How has the Global 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.
The Fund has two classes of shares, Class A shares and Class B shares. The bar
chart shows changes in the performance of the Fund's Class A shares for each of
the last ten calendar years. The performance of Class B shares differs from the
performance of Class A shares shown in the bar chart only to the extent that
they do not have the same expenses. The bar chart does not reflect sales charges
that you may pay upon purchase or redemption of Fund shares. If they were
included, the returns would be less than those shown.
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 20.13% (for the
quarter ended December 31, 1999) and the lowest quarterly return was -21.79%
(for the quarter ended September 30, 1990). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for Class A
shares and Class B shares compare to those of the Morgan Stanley All Country
World Free Index ("All Country Index"). This table assumes that the maximum
sales charge or contingent deferred sales charge ("CDSC") was paid. The All
Country Index is designed to measure the performance of stock markets in the
United States, Europe, Canada, Australia, New Zealand and the developed and
emerging markets of Eastern Europe, Latin America, Asia and the Far East. The
index consists of approximately 60% of the aggregate market value of the covered
stock exchanges and is calculated to exclude companies and share classes which
cannot be freely purchased by foreigners. The All Country 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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Inception
Class B Shares
1 Year* 5 Years* 10 Years* 1/12/95)
Class A Shares 23.48% 15.98% 9.25% N/A
Class B Shares 26.92% N/A N/A 16.89%
All Country Index 26.82% 19.18% 11.70% 19.18%**
*The annual returns are based upon calendar years.
**The average annual total return shown is for the period 1/1/95 to 12/31/99.
What are the fees and expenses of the Global Fund?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Class A Class B
Shares Shares
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price).................... 6.25% None
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)............................. None* 4%**
(ANNUAL FUND OPERATING EXPENSES
expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL
AND SERVICE ANNUAL FUND
MANAGEMENT (12B-1) OTHER OPERATING
FEES FEES (1) EXPENSES EXPENSES
Class A 0.99% 0.30% 0.43% 1.72%
Shares......................
Class B 0.99% 1.00% 0.43% 2.42%
Shares......................
*A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge.
**4% in the first year; declining to 0% after the sixth year. Class B shares
convert to Class A shares after 8 years.
(1) Because the Fund pays Rule 12b-1 fees, long-term shareholders could pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
EXAMPLE
This example helps you to compare the costs of investing in the Fund with the
cost of investing in other mutual funds. The example assumes that (1) you invest
$10,000 in the Fund for the time periods indicated; (2) your investment has a 5%
return each year; and (3) the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
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<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
If you redeem your shares:
Class A shares $789 $1,133 $1,500 $2,528
Class B shares $645 $1,055 $1,491 $2,583*
If you do not redeem your shares:
Class A shares $789 $1,133 $1,500 $2,528
Class B shares $245 $ 755 $1,291 $2,583*
</TABLE>
*Assumes conversion to Class A shares eight years after purchase.
THE GLOBAL FUND IN DETAIL
What are the Global Fund's objectives, principal investment
strategies, and risks?
OBJECTIVES: The Global Fund primarily seeks long-term capital growth and
secondarily a reasonable level of current income.
PRINCIPAL INVESTMENT STRATEGIES: The Fund invests in a diversified portfolio of
common stocks of companies which are located throughout the world. While the
Fund attempts to maintain broad country diversification, under normal market
conditions it must allocate assets to at least three countries, including the
United States.
The Fund primarily invests in stocks of companies which are considered large to
medium in size (measured by market capitalization). The Fund may also invest in
smaller companies when management views them as attractive alternatives to the
stocks of larger or more established companies.
The Fund primarily invests in stocks which trade in larger or more established
markets, but also may invest (to a lesser degree) in smaller, less-developed or
emerging markets where management believes there is significant opportunity for
growth of capital. The definition of "emerging markets" may change over time as
a result of developments in national or regional economies and capital markets.
The foreign stocks that the Fund purchases are typically denominated in foreign
currencies. The Fund generally does not hedge against fluctuations in the value
of foreign currencies.
The Fund uses fundamental research and analysis to identify prospective
investments. Security selection is based on any one or more of the following
characteristics: accelerating earnings growth or the possibility of positive
earnings surprises; strong possibility of price to earnings multiple expansion
(or increases in other similar valuation measures); hidden or unappreciated
value; or improving local market and/or industry outlook.
Once the purchase candidates for the Fund are identified, the portfolio
construction process begins. In this phase, many factors are considered in
creating a total portfolio of securities for the Fund, including: (1) regional
and country allocation, (2) currency exposure, (3) industry and sector
allocation, and (4) exposure to a number of other factors such as interest rates
or company size. The total risk of the Fund is monitored at this point in the
portfolio construction process.
Every company in the portfolio is monitored to ensure its fundamental
attractiveness. A stock may be sold if in the portfolio manager's opinion its
downside risk equals or exceeds its upside potential; it suffers from a
decreasing trend of earnings growth or suffers an earnings disappointment; it
experiences excessive valuations; or there is a deteriorating local market
and/or industry outlook.
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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 owning the Global Fund:
MARKET RISK: Because the Fund primarily invests in common stocks, it is subject
to market risk. Stock prices in general may decline over short or even extended
periods not only because of company-specific developments but also due to an
economic downturn, a change in interest rates, or a change in investor
sentiment, regardless of the success or failure of an individual company's
operations. Stock markets tend to run in cycles with periods when prices
generally go up, known as "bull" markets, and periods when stock prices
generally go down, referred to as "bear" markets.
While the Fund's strategy of being globally diversified may help to reduce the
volatility or variability of the Fund's returns relative to another fund which
invests in fewer stocks or whose investments are focused in fewer countries or
industry sectors, this strategy may not prevent a loss if stock markets
worldwide were to decline at the same time. Fluctuations of prices of stocks can
be sudden and substantial. Accordingly, the value of your investment in the Fund
will go up and down, which means that you could lose money.
FOREIGN SECURITIES RISK: There are special risk factors associated with
investing in foreign securities. Some of these factors are also present when
investing in the United States but are heightened issues when investing in
non-U.S. markets, especially emerging markets. For example, such risks and
considerations may include political and economic instability, differing
accounting and financial reporting standards or inability to obtain reliable
financial information regarding a company's balance sheet and operations. Risks
such as these are common to all investments but are exacerbated when investing
in international markets. In addition, international investors may experience
higher commission rates on foreign portfolio transactions, potentially adverse
changes in tax and exchange control regulations, the potential for restrictions
on the flow of international capital and the transition to the euro for European
Monetary Union countries. Many foreign countries impose withholding taxes on
income from investments in such countries, which the Fund may not recover. Also,
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies may have a negative impact on investments denominated in foreign
currencies, for example, by eroding or reversing gains or widening losses from
those investments.
LIQUIDITY RISK: The Fund is also susceptible to the risk that certain securities
may be difficult or impossible to sell at the time and the price that the Fund
would like. As a result, the Fund may have to lower the price on certain
securities that it is trying to sell, sell other securities instead, or forego
an investment opportunity, any of which could have a negative effect on fund
management or performance. This risk is common to most stock mutual funds, but
is particularly acute in the case of foreign investments.
SMALL-CAP AND MID-CAP RISK: The market risk associated with small-to mid-cap
stocks is greater than that associated with larger-cap stocks because small-to
mid-cap stocks tend to experience sharper price fluctuations than larger-cap
stocks, particularly during bear markets. Small-to mid-cap companies are
generally dependent on a smaller number of products or services, their earnings
are less predictable, and their share prices more volatile. These companies are
also more likely to have limited markets or financial resources, or to depend on
a small, inexperienced management group.
Who manages the Global Fund?
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 serves
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as investment adviser to 52 mutual funds or series of funds with total net
assets of over $5 billion. FIMCO supervises all aspects of the Fund's operations
except that the investment subadviser determines the Fund's portfolio
transactions. For the fiscal year ended September 30, 1999, FIMCO received
advisory fees of 0.99% of the Fund's average daily net assets.
FIMCO and the Fund have retained Wellington Management Company, LLP ("WMC") as
the Fund's investment subadviser. WMC has discretionary trading authority over
all of the Global Fund's assets, subject to continuing oversight and supervision
by FIMCO and the Board of Directors. WMC is located at 75 State Street, Boston,
MA 02109. WMC is a professional investment counseling firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. As of December 31,
1999, WMC held investment management authority with respect to $235.5 billion of
assets. Of that amount, WMC acted as investment adviser or subadviser to
approximately 60 registered investment companies or series of such companies,
with net assets of approximately $170 billion.
The Fund is managed by Trond Skramstad, Senior Vice President of WMC and
Chairman of the firm's Global Equity Strategy Group. Mr. Skramstad joined WMC in
1993.
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. The prices or NAVs of Class A shares and Class B shares will
generally differ because they have different expenses.
In valuing its assets, the 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
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 shares?
You may buy shares of the Fund through a First Investors registered
representative or through a registered representative of an authorized
broker-dealer ("Representative"). Your Representative will help you complete and
submit an application. Your initial investment must be at least $1,000. However,
we have lower initial investment requirements and offer automatic investment
plans that allow you to open a Fund account with as little as $50. Subsequent
investments may be made in any amount. You can also arrange to make systematic
investments electronically from your bank account or through payroll deduction.
All the various ways you can buy shares are explained in the Shareholder Manual.
For further information on the procedures for buying shares, please contact your
Representative or call Shareholder Services at 1-800-423-4026.
If we receive your application or order in our Woodbridge, N.J. offices in
correct form, as described in the Shareholder Manual, prior to the close of
regular trading on the NYSE, your transaction will be priced at that day's NAV.
If you place your order with your Representative prior to the close of regular
trading on the NYSE, your transaction will also be priced at that day's NAV
provided that your Representative transmits the order to our Woodbridge, N.J.
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offices by 5 p.m., E.T. Orders placed after the close of regular trading on the
NYSE will be priced at the next business day's NAV. The procedures for
processing transactions are explained in more detail in our Shareholder Manual
which is available upon request.
The Fund reserves the right to refuse any order to buy shares if the Fund
determines that doing so would be in the best interests of the Fund and its
shareholders.
Which class of shares is best for me?
The Fund has two classes of shares, Class A and Class B. While each class
invests in the same portfolio of securities, the classes have separate sales
charge and expense structures. Because of the different expense structures, each
class of shares generally will have different NAVs and dividends.
The principal advantages of Class A shares are the lower overall expenses, the
availability of quantity discounts on volume purchases and certain account
privileges that are available only on Class A shares. The principal advantage of
Class B shares is that all of your money is invested from the outset.
Class A shares of the Fund are sold at the public offering price which includes
a front-end sales load. The sales charge declines with the size of your
purchase, as illustrated below.
Class A Shares
Your investment Sales Charge as a percentage of
-------------------------------
offering price net amount invested
Less than $25,000 6.25% 6.67%
$25,000-$49,999 5.75 6.10
$50,000-$99,999 5.50 5.82
$100,000-$249,999 4.50 4.71
$250,000-$499,999 3.50 3.63
$500,000-$999,999 2.50 2.56
$1,000,000 or more 0* 0*
*If you invest $1,000,000 or more in Class A shares, you will not pay a
front-end sales charge. However, if you make such an investment and then sell
your shares within 24 months of purchase, you will pay a CDSC of 1.00%.
Class B shares are sold at net asset value, without any initial sales charge.
However, you may pay a CDSC when you sell your shares. The CDSC declines the
longer you hold your shares, as illustrated below. Class B shares convert to
Class A shares after eight years.
Class B Shares
<TABLE>
<CAPTION>
Year of Redemption CDSC as a Percentage of Purchase Price
------------------ or NAV at Redemption
--------------------
<S> <C> <C>
Within the 1st or 2nd year............ 4%
Within the 3rd or 4th year............ 3
In the 5th year....................... 2
In the 6th year....................... 1
Within the 7th year and 8th year...... 0
</TABLE>
There is no CDSC on Class B shares which are acquired through reinvestment of
dividends or distributions. The CDSC is imposed on the lower of the original
purchase price or the net asset value of the shares being sold. For purposes of
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<PAGE>
determining the CDSC, all purchases made during a calendar month are counted as
having been made on the first day of that month at the average cost of all
purchases made during that month.
To keep your CDSC as low as possible, each time you place a request to sell
shares, we will first sell any shares in your account that carry no CDSC. If
there is an insufficient number of these shares to meet your request in full, we
will then sell those shares that have the lowest CDSC.
Sales charges and CDSCs may be reduced or waived under certain circumstances and
for certain groups. Consult your Representative or call us directly at
1-800-423-4026 for details.
The Fund has adopted a plan pursuant to Rule 12b-1 that allows the Fund to pay
distribution fees for the sale and distribution of its shares. Each class of
shares pays Rule 12b-1 fees for the marketing of fund shares and for services
provided to shareholders. The plans provide for payments at annual rates (based
on average daily net assets) of up to 0.30% on Class A shares and 1.00% on Class
B shares. No more than 0.25% of these payments may be for service fees. These
fees are paid monthly in arrears. Because these fees are paid out of the Fund's
assets on an ongoing basis, the higher fees for Class B shares will increase the
cost of your investment and over time may cost you more than paying the initial
sales charge for Class A shares.
FOR ACTUAL PAST EXPENSES OF CLASS A AND CLASS B SHARES, SEE THE SECTION ENTITLED
"WHAT ARE THE FEES AND EXPENSES OF THE FUND?" IN THIS PROSPECTUS.
Because of the lower overall expenses on Class A shares, we recommend Class A
shares for purchases in excess of $250,000. If you are investing in excess of
$1,000,000, we will only sell Class A shares to you. For purchases below
$250,000, the class that is best for you generally depends upon the amount you
invest, your time horizon, and your preference for paying the sales charge
initially or over time. If you fail to tell us what Class of shares you want, we
will purchase Class A shares for you.
How do I sell shares?
You may redeem your Fund shares on any day the Fund is open for business by:
o Contacting your Representative who will place a redemption order for
you;
o Sending a written redemption request to Administrative Data Management
Corp., ("ADM") at 581 Main Street, Woodbridge, NJ 07095-1198;
o Telephoning the Special Services Department of ADM at 1-800-342-6221
(telephone redemptions are not available on retirement and certain
other types of accounts); or
o Instructing us to make an electronic transfer to a predesignated bank
(if you have completed an application authorizing such transfers).
Your redemption request will be processed at the price next computed after we
receive the request, in good order, as described in the Shareholder Manual. For
all requests, have your account number available.
Payment of redemption proceeds generally will be made within 7 days. If you are
redeeming shares which you recently purchased by check, payment may be delayed
to verify that your check has cleared. This may take up to 15 days from the date
of your purchase. You may not redeem shares by telephone or Electronic Fund
Transfer unless you have owned the shares for at least 15 days.
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If your account fails to meet the minimum account balance as a result of a
redemption, or for any reason other than market fluctuation, the Fund reserves
the right to redeem your account without your consent or to impose a low balance
account fee of $15 annually on 60 days prior notice. The Fund may also redeem
your account or impose a low balance account fee if you have established your
account under a systematic investment program and discontinue the program before
you meet the minimum account balance. You may avoid redemption or imposition of
a fee by purchasing additional Fund shares during this 60-day period to bring
your account balance to the required minimum. If you own Class B shares, you
will not be charged a CDSC on a low balance redemption.
The Fund reserves the right to make in-kind redemptions. This means that it
could respond to a redemption request by distributing shares of the Fund's
underlying investments rather than distributing cash.
Can I exchange my shares for the shares of other First Investors Funds?
You may exchange shares of the Fund for shares of the same class of any other
First Investors Fund without paying any additional sales charge. Consult your
Representative or call ADM at 1-800-423-4026 for details.
The Fund reserves the right to reject any exchange request that appears to be
part of a market timing strategy based upon the holding period of the initial
investment, the amount of the investment being exchanged, the funds involved,
and the background of the shareholder or dealer involved. The Fund is designed
for long-term investment purposes. It is not intended to provide a vehicle for
short-term market timing.
ACCOUNT POLICIES
What about dividends and capital gain distributions?
To the extent that it has net investment income and net realized capital gain,
the Fund will declare and pay dividends from net investment income and will
distribute any net realized capital gain on an annual basis, usually at 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.
Dividends and other distributions paid on both classes of the Fund's shares are
calculated at the same time and in the same manner. Dividends on Class B shares
of the Fund are expected to be lower than those for its Class A shares because
of the higher distribution fees borne by the Class B shares. Dividends on each
class also might be affected differently by the allocation of other
class-specific expenses. In order to be eligible to receive a dividend or other
distribution, you must own Fund shares as of the close of business on the record
date of the distribution.
You may choose to reinvest all dividends and other distributions at NAV in
additional shares of the same class of the Fund or certain other First Investors
Funds, or receive all dividends and other distributions in cash. If you do not
select an option when you open your account, all dividends and other
distributions will be reinvested in additional shares of the Fund. If you do not
cash a distribution check and do not notify ADM to issue a new check within 12
months, the distribution may be reinvested in the Fund. If any correspondence
sent by the Fund is returned as "undeliverable," dividends and other
distributions automatically will be reinvested in the Fund. No interest will be
paid to you while a distribution remains uninvested.
A dividend or other distribution paid on a class of shares will be paid in
additional shares of the distributing class if the total amount of the
distribution is under $5 or the Fund has received notice of your death (until
written alternate payment instructions and other necessary documents are
provided by your legal representative).
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What about taxes?
Any dividends or capital gain distributions paid by the Fund are taxable to you
unless you hold your shares in an individual retirement account ("IRA"), 403(b)
account, 401(k) account, or other tax-deferred account. Dividends (including
distributions of net short-term capital gains) are taxable to you as ordinary
income. Capital gain distributions (essentially, distributions of net long-term
capital gains) by the Fund are taxed to you as long-term capital gain,
regardless of how long you owned your Fund shares. You are taxed in the same
manner whether you receive your dividends and capital gain distributions in cash
or reinvest them in additional Fund shares. Your sale or exchange of Fund shares
will be a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
How do I obtain a complete explanation of all account privileges and policies?
The Fund offers a full range of special privileges, including special investment
programs for group retirement plans, systematic investment programs, automatic
payroll investment programs, telephone privileges, check writing privileges, and
expedited redemptions by wire order or Automated Clearing House transfer. The
full range of privileges, and related policies, are described in a special
Shareholder Manual, which you may obtain on request. For more information on the
full range of services available, please contact us directly at 1-800-423-4026.
12
<PAGE>
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 tables
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>
---------------------------------------------------------------------------------------
PER SHARE DATA
---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- ------------------
FROM
----
NET
REALIZED
NET ASSET AND TOTAL FROM NET NET
VALUE NET UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
--------- INVESTMENT GAIN (LOSS) OPERATIONS INCOME GAIN DISTRIBU
BEGINNING INCOME ON TIONS
OF PERIOD (LOSS) INVESTMENTS
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
CLASS A
- -------
1994(h)............ $6.27 $ .03 $ (.27) $ (.24) $ .03 $.16 $.19
1995(h)............ 5.84 .03 1.01 1.04 .04 . 27 .31
1996(h)............ 6.57 .04 .91 .95 .04 .89 .93
1997(h)............ 6.59 .03 .50 .53 .03 .68 .71
1998(a)............ 6.41 .01 (.09) (.08) -- -- --
1999(f)............ 6.33 1.86 1.86 -- .08 .08
CLASS B
- -------
1995(b)............ $5.76 $ .03 $1.05 $1.08 $ .03 $.27 $.30
1996(h)............ 6.54 (.01) .88 .87 .02 .88 .90
1997(h............. 6.51 (.01) .49 .48 -- .68 .68
1998(a)............ 6.31 (.03) (.09) (.12) -- -- --
1999(f)............ 6.19 (.04) 1.81 1.77 -- .08 .08
+ Annualized
++ Net of expenses waived or assumed by the investment adviser
* Calculated without sales charge.
(a) For the period January 1, 1998 to September 30, 1998.
(b) For the period January 12, 1995 (date Class B shares first offered to December 31, 1995.
(f) For the period October 1, 1998 to September 30, 1999
(j) For the calendar year ended December 31.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET
RATIO TO AVERAGE NET ASSET BEFORE EXPENSES
ASSETS++ WAIVED OR ASSUMED
-------------------- ---------------------
NET ASSET
VALUE NET NET PORTFOLIO
--------- NET ASSETS INVESTMENT INVESTMENT TURNOVER
END TOTAL END OF PERIOD EXPENSES INCOME EXPENSES INCOME RATE
OF PERIOD RETURN* (IN MILLIONS) (%) (%) (%) (%) (%)
(%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
$5.84 (3.78) 214 1.84 .45 N/A N/A 56
6.57 17.83 228 1.83 .55 N/A N/A 47
6.59 14.43 263 1.83 .50 N/A N/A 73
6.41 7.98 277 1.82 .41 N/A N/A 70
6.33 (1.25) 261 1.82+ .12+ N/A N/A 82
8.11 29.63 316 1.72 (.03) N/A N/A 92
6.54 18.80 1 2.56+ (.19) + N/A N/A 47
6.51 13.33 5 2.54 (.21) N/A N/A 73
6.31 7.36 10 2.52 (.29) N/A N/A 70
6.19 (1.90) 12 2.52+ (.58) N/A N/A 82
7.88 28.78 18 2.42 (.73) N/A N/A 92
</TABLE>
14
<PAGE>
[FIRST INVESTORS LOGO]
GLOBAL 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.
SHAREHOLDER MANUAL: The Shareholder Manual provides more detailed information
about the purchase, redemption and sale of Fund shares.
You can get free copies of reports, the SAI and the Shareholder Manual, request
other information and discuss your questions about the 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, Shareholder Manuals
and SAIs) at the Public Reference Room of the SEC in Washington, D.C. You can
also obtain copies of Fund documents after paying a duplicating fee (i) by
writing to the Public Reference Section of the SEC, Washington, D.C. 20549-0102
or (ii) by electronic request at [email protected]. You can obtain information
on the operation of the Public Reference Room, including information about
duplicating fee charges, by calling (202) 942-8090. Text-only versions of Fund
documents can be viewed online or downloaded from the EDGAR database on the
SEC's Internet website at http://www.sec.gov.
(Investment Company Act File No: First
Investors Global Fund 811-3169)
<PAGE>
[FIRST INVESTORS LOGO]
EQUITY FUNDS
TOTAL RETURN
GROWTH & INCOME
BLUE CHIP
UTILITIES INCOME
MID-CAP OPPORTUNITY
SPECIAL SITUATIONS
GLOBAL
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 January 28, 2000
<PAGE>
CONTENTS
INTRODUCTION
FUND DESCRIPTIONS
Total Return Fund
Growth & Income Fund
Blue Chip Fund
Utilities Income Fund
Mid-Cap Opportunity Fund
Special Situations Fund
Focused Equity Fund
Global Fund
FUND MANAGEMENT
BUYING AND SELLING SHARES
How and when do the Funds price their shares? How do I buy shares? Which
class of shares is best for me?
How do I sell shares?
Can I exchange my shares for the shares of other First Investors Funds?
ACCOUNT POLICIES
What about dividends and capital gain distributions?
What about taxes?
How do I obtain a complete explanation of all account privileges and
policies?
APPENDIX
FINANCIAL HIGHLIGHTS
Total Return Fund
Growth & Income Fund
Blue Chip Fund
Utilities Income Fund
Mid-Cap Opportunity Fund
Special Situations Fund
Focused Equity Fund
Global Fund
2
<PAGE>
INTRODUCTION
This prospectus describes the First Investors Funds that invest primarily in
common stocks and other equity securities. Each individual Fund description in
this prospectus has an "Overview" which provides a brief explanation of the
Fund's objectives, its primary strategies and primary risks, how it has
performed, and its fees and expenses. To help you decide which Funds may be
right for you, we have included in each Overview a section offering examples of
who should consider buying the Fund. Each Fund description also contains a "Fund
in Detail" section with more information on strategies and risks of the Fund.
None of the Funds in this prospectus, other than the Total Return Fund, pursues
a strategy of allocating its assets among stocks, bonds, and money market
instruments. For most investors, a complete investment program should include
each of these asset classes. While stocks have historically outperformed other
categories of investments over long periods of time, they generally carry higher
risks. There have also been extended periods during which bonds and money market
instruments have outperformed stocks. By allocating your assets among different
types of funds, you can reduce the overall risk of your portfolio. Of course,
even a diversified investment program can result in a loss.
3
<PAGE>
FUND DESCRIPTIONS
TOTAL RETURN FUND
OVERVIEW
OBJECTIVE: The Fund seeks high, long-term total investment return consistent
with moderate investment risk.
PRIMARY
INVESTMENT
STRATEGIES: The Fund allocates its assets among stocks, bonds and money
market instruments based upon its views on market conditions, the
relative values of these asset classes, and economic trends.
While the percentage of assets allocated to each asset class is
flexible rather than fixed, the Fund normally invests at least
50% of its assets in stocks and at least 25% in bonds, cash and
cash equivalents. On a regular basis, the Fund reviews and
determines whether to adjust the asset allocations. Once the
target allocation for stocks has been set, the Fund uses
fundamental research and analysis to determine which particular
stocks to purchase or sell. The Fund decides how to invest the
assets allocated to bonds by first considering the outlook for
the economy and interest rates and thereafter the financial
strength of particular issuers. The Fund may invest in investment
grade or below investment grade bonds ("high yield" or "junk
bonds") depending on its view of the economy.
PRIMARY
RISKS: While a diversified portfolio of stocks, bonds and money market
instruments is generally regarded as having less risk than a
portfolio invested exclusively in stocks, it is nevertheless
subject to market risk. Both stocks and bonds fluctuate not only
as a result of company-specific developments but also with market
conditions, economic cycles, and interest rates. High yield bonds
provide a higher yield but fluctuate more than investment grade
bonds because of their speculative nature and their potential
lack of liquidity. There are times when the value of bonds and
stocks may decline simultaneously, such as when interest rates
rise. The Fund may, at times, engage in short-term trading, which
could produce higher brokerage costs and taxable distributions
and may result in a lower total return for the Fund. Accordingly,
the value of your investment in the Fund will go up and down,
which means that you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Who should consider buying the Total Return Fund?
The Total Return Fund may be used as a core holding of an
investment portfolio. While every investor should consider an
asset allocation strategy that meets his or her own needs, the
Fund can be used as a stand-alone investment by an investor who
does not want to make his or her own asset allocation decisions.
It may be appropriate for you if you:
o Are seeking total return,
o Are willing to accept a moderate degree of market volatility,
and
o Have a long-term investment horizon and are able to ride out
market cycles.
4
<PAGE>
How has the Total Return 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.
The Fund has two classes of shares, Class A shares and Class B shares. The bar
chart shows changes in the performance of the Fund's Class A shares from year to
year over the life of the Fund. The performance of Class B shares differs from
the performance of Class A shares shown in the bar chart only to the extent that
they do not have the same expenses. The bar chart does not reflect sales charges
that you may pay upon purchase or redemption of Fund shares. If they were
included, the returns would be less than those shown.
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 13.00% (for the
quarter ended December 31, 1999) and the lowest quarterly return was -4.95% (for
the quarter ended March 31, 1994). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for Class A
shares and Class B shares compare to those of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index") and the Lehman Brothers
Government/Corporate Bond Index ("Government/Corporate Bond Index"). This table
assumes that the maximum sales charge or contingent deferred sales charge
("CDSC") was paid. The S&P 500 Index is an unmanaged index consisting of the
stocks of large-sized U.S. and foreign companies. The Government/Corporate Bond
Index is an index which includes Treasury obligations, obligations of U.S.
agencies, and investment grade corporate bonds. The indexes do not take into
account fees and expenses that an investor would incur in holding the securities
in the indexes. If they did so, the returns would be lower than those shown.
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception Inception
Class A Shares Class B Shares
1 Year* 5 Years* (4/24/90) (1/12/95)
Class A Shares 6.48% 15.43% 10.35% N/A
Class B Shares 8.82% N/A N/A 15.97%
S&P 500 Index 21.04% 28.51% 19.53% 28.56%
Government/Corporate
Bond Index -2.15% 7.60% 7.91%** 7.60%
</TABLE>
* The annual returns are based upon calendar years.
** The average annual total return shown is for the period 4/30/90 to 12/31/99.
*** The average annual total return shown is for the period 1/1/95 to 12/31/99.
What are the fees and expenses of the Total Return Fund?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Class A Class B
SHARES SHARES
------ ------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price).......... 6.25% None
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)................... None* 4%**
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<S> <C> <C> <C> <C> <C> <C>
DISTRIBUTION TOTAL
AND SERVICE ANNUAL FUND
MANAGEMENT (12B-1) OTHER OPERATING FEE NET
FEES(1) FEES (2) EXPENSES EXPENSES(3) WAIVER(1) EXPENSES
----- -------- --------- --------- ------- --------
(3)
Class A Shares....... 1.00% 0.30% 0.35% 1.65% 0.25% 1.40%
Class B Shares....... 1.00% 1.00% 0.35% 2.35% 0.25% 2.10%
</TABLE>
*A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge.
**4% in the first year; declining to 0% after the sixth year. Class B shares
convert to Class A shares after 8 years.
(1) For the fiscal year ended September 30, 1999, First Investors
Management Company, Inc. ("the Adviser") waived Management Fees in excess of
0.75% for the Fund. The Adviser has contractually agreed with the Fund to
waive Management Fees in excess of 0.75% for the fiscal year ending September
30, 2000.
(2)Because the Fund pays Rule 12b-1 fees, long-term shareholders could pay more
than the economic equivalent of the maximum front-end sales charge permitted
by the National Association of Securities Dealers, Inc.
(3)The Fund has an expense offset arrangement that may reduce the Fund's
custodian fee based on the amount of cash maintained by the Fund with its
custodian. Any such fee reductions are not reflected under Total Annual Fund
Operating Expenses or Net Expenses.
6
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE
This example helps you to compare the costs of investing in the Fund with the
cost of investing in other mutual funds. The example assumes that (1) you invest
$10,000 in the Fund for the time periods indicated; (2) your investment has a 5%
return each year; and (3) the Fund's operating expenses remain the same, except
for year one, which is net of fees waived. Although your actual costs may be
higher or lower, under these assumptions your costs would be:
<S> <C> <C> <C> <C>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
If you redeem your shares:
Class A shares $759 $1,090 $1,444 $2,438
Class B shares $613 $1,010 $1,433 $2,492*
If you do not redeem your shares:
Class A shares $759 $1,090 $1,444 $2,438
Class B shares $213 $710 $1,233 $2,492*
</TABLE>
*Assumes conversion to Class A shares eight years after purchase.
THE FUND IN DETAIL
What are the Total Return Fund's objective, principal investment strategies,
and risks?
OBJECTIVE: The Fund seeks high, long-term total investment return consistent
with moderate investment risk.
PRINCIPAL INVESTMENT STRATEGIES: The Fund allocates its assets among stocks,
bonds, and money market instruments. While the percentage of assets allocated to
each asset class is flexible rather than fixed, the Fund normally invests at
least 50% of its assets in stocks and at least 25% in bonds, cash and cash
equivalents. On a regular basis, the Fund reviews and determines whether to
adjust its asset allocations based upon its views on market conditions, the
relative values of the asset classes and economic trends. The Fund may allocate
up to 25% of its net assets to high yield bonds. These are bonds that are below
investment grade. Investment grade bonds are those that are rated among the four
highest ratings categories by Moody's Investors Service, Inc. or Standard &
Poor's Ratings Group.
Once the asset allocation for stocks has been set, the Fund uses fundamental
research and analysis to determine which particular stocks to purchase or sell.
In selecting stocks, the Fund looks for companies that have a mix of strong
management, solid financial condition, and above-average earnings growth
potential.
Once the target allocation for bonds has been set, the Fund determines how this
percentage should be allocated among different types of bonds based upon the
outlook for the economy and interest rates. If the outlook for the economy is
positive, the Fund would normally allocate more to high yield, below-investment
grade bonds to secure additional income and potential capital appreciation. If
the outlook for the economy is negative, the Fund would normally allocate more
to investment grade or Treasury bonds. The duration of the bond portion of the
portfolio would be determined by the interest rate outlook. Duration is a
measurement of a bond's sensitivity to changes in interest rates that takes into
consideration not only the maturity of the bond but also the time value of money
that will be received from the bond over its life. In selecting bonds, the Fund
considers a variety of factors, including the issuer's earnings and cash flow
generating capabilities, asset quality, debt levels, and management strength.
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.
7
<PAGE>
The Fund sells a security if its fundamentals have deteriorated or if it is
necessary to rebalance the portfolio. 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 owning the Total Return Fund:
MARKET RISK: The Fund's portfolio is subject to market risk. Stock prices in
general may decline over short or even extended periods not only because of
company-specific developments but also due to an economic downturn, a change in
interest rates, or a change in investor sentiment, regardless of the success or
failure of an individual company's operations. Stock markets tend to run in
cycles with periods when prices generally go up, known as "bull" markets, and
periods when stock prices generally go down, referred to as "bear" markets.
Similarly, bond prices fluctuate in value with changes in interest rates, the
economy and in the case of corporate bonds, the financial conditions of
companies that issue them. In general, bonds decline in value when interest
rates rise. High yield bonds behave like bonds at times and like stocks at
times. Like other bonds, high yield bonds tend to decline in value when interest
rates rise. Like stocks, however, high yield bonds generally decline in value
when the economy deteriorates.
While stocks and bonds may react differently to economic events, and thereby
provide a more balanced return, there are times when stocks and bonds both may
decline in value simultaneously. Accordingly, the value of your investment in
the Fund will go up and down, which means that you could lose money.
ASSET ALLOCATION RISK: The Fund may allocate assets to investment classes which
underperform other classes. For example, the Fund may be overweighted in stocks
when the stock market is falling and the bond market is rising.
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.
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,
but BBB-rated bonds may have speculative characteristics as well. 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.
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.
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.
8
<PAGE>
FREQUENT TRADING RISK: The Fund may, at times, engage in short-term trading,
which could produce higher brokerage costs and taxable distributions and may
result in a lower total return for the Fund.
9
<PAGE>
GROWTH & INCOME FUND
OVERVIEW
OBJECTIVES: The Fund seeks long-term growth of capital and current
income.
PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in dividend-paying common stocks
and securities that are convertible into common stocks of
established domestic and foreign companies. The strategy of
focusing on securities which offer income as well as the
potential for capital appreciation is intended to reduce the
Fund's volatility relative to the general stock market while
affording potential for long-term total return. The Fund also
may invest in corporate bonds to increase the income component
of its total return.
PRIMARY
RISKS: While dividend-paying common stocks and convertible securities
are expected to hold up better in a declining market than
stocks which do not pay dividends, like all stocks they
fluctuate in price in response to movements in the overall
securities markets, general economic conditions, changes in
interest rates, company-specific developments and other
factors. Moreover, under certain conditions, the dividends
paid on stocks held by the Fund may not be sufficient to
provide a significant cushion against price declines.
Fluctuations in the prices of the stocks held by the Fund at
times can be substantial. Accordingly, the value of your
investment in the Fund will go up and down, which means that
you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Who should consider buying the Growth & Income Fund?
The Growth & Income Fund may be used as a core holding for an
investment portfolio or as a base on which to build a portfolio.
It may be appropriate for you if you:
o Are primarily seeking growth of capital,
o Are willing to accept a moderate degree of market volatility,
and
o Have a long-term investment horizon and are able to ride out
market cycles.
Since the Fund's income level will likely be small and will
fluctuate, there can be no assurance that the Fund will be able
to pay regular dividends. The Fund is therefore not designed for
investors who need an assured level of current income.
How has the Growth & Income 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.
The Fund has two classes of shares, Class A shares and Class B shares. The bar
chart shows changes in the performance of the Fund's Class A shares from year to
year over the life of the Fund. The performance of Class B shares differs from
the performance of Class A shares shown in the bar chart only to the extent that
they do not have the same expenses. The bar chart does not reflect sales charges
that you may pay upon purchase or redemption of Fund shares. If they were
included, the returns would be less than those shown.
10
<PAGE>
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 18.90% (for the
quarter ended December 31, 1999) and the lowest quarterly return was -10.80%
(for the quarter ended September 30, 1998 ). THE FUND'S PAST PERFORMANCE DOES
NOT NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the Fund's average annual total returns for Class
A shares and Class B shares compare to those of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index"). This table assumes that the
maximum sales charge or CDSC was paid. The S&P 500 Index is an unmanaged index
consisting of the stocks of large-sized U.S. and foreign companies. The S&P 500
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception Inception
Class A Shares Class B Shares
1 Year* 5 Years* (10/4/93) (1/12/95)
Class A Shares 15.49% 23.22% 18.33% N/A
Class B Shares 18.39% N/A N/A 24.01%
S&P 500 Index 21.04% 28.51% 22.85% 28.56%
*The annual returns are based upon calendar years.
</TABLE>
11
<PAGE>
What are the fees and expenses of the Growth & Income Fund?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Class A Class B
SHARES SHARES
------ ------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price).......... 6.25% None
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)................... None* 4%**
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL
AND SERVICE ANNUAL FUND
MANAGEMENT (12B-1) OTHER OPERATING
FEES FEES (1) EXPENSES EXPENSES(2)
----- -------- -------- -----------
Class A Shares....... 0.74% 0.30% 0.32% 1.36%
Class B Shares....... 0.74% 1.00% 0.32% 2.06%
*A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge. **4% in
the first year; declining to 0% after the sixth year. Class B shares convert to
Class A shares after 8 years.
(1) Because the Fund pays Rule 12b-1 fees, long-term shareholders could pay more
than the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers, Inc.
(2) The Fund has an expense offset arrangement that may reduce the Fund's
custodian fee based on the amount of cash maintained by the Fund with its
custodian. Any such fee reductions are not reflected under Total Annual Fund
Operating Expenses.
EXAMPLE
This example helps you to compare the costs of investing in the Fund with the
cost of investing in other mutual funds. The example assumes that (1) you invest
$10,000 in the Fund for the time periods indicated; (2) your investment has a 5%
return each year; and (3) the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
If you redeem your shares:
Class A shares $755 $1,029 $1,323 $2,158
Class B shares $609 $ 946 $1,308 $2,210*
If you do not redeem your shares:
Class A shares $755 $1,029 $1,323 $2,158
Class B shares $209 $ 646 $1,108 $2,210*
*Assumes conversion to Class A shares eight years after purchase.
12
<PAGE>
THE FUND IN DETAIL
What are the Growth & Income Fund's objectives, principal investment strategies,
and principal risks?
OBJECTIVES: The Fund seeks long-term growth of capital and current income.
PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in dividend-paying common stocks and convertible securities of
established domestic and foreign companies. The Fund also invests in corporate
bonds to increase the income component of its total return. The strategy of
focusing on securities which offer income as well as the potential for capital
appreciation is intended to reduce the Fund's volatility relative to the overall
stock market while affording potential for long-term total return.
The Fund uses a "bottom-up" approach to selecting investments. This means that
the Fund identifies potential investments through fundamental research and
analysis and thereafter focuses on broader issues, such as economic trends,
interest rates, and industry diversification. The Fund focuses on companies
which have solid balance sheets, strong management, relatively consistent
earnings growth or potential earnings growth greater than that of the average
company in the S&P 500 Index. The Fund typically sells a security when the
reason for holding it is no longer valid, it shows deteriorating fundamentals,
or falls short of the 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 owning the Growth & Income Fund:
MARKET RISK: Because the Fund primarily invests in common stocks and convertible
securities, it is subject to market risk. Stock prices in general may decline
over short or even extended periods not only because of company-specific
developments but also due to an economic downturn, a change in interest rates,
or a change in investor sentiment, regardless of the success or failure of an
individual company's operations. Stock markets tend to run in cycles with
periods when prices generally go up, known as "bull" markets, and periods when
stock prices generally go down, referred to as "bear" markets.
While dividend-paying common stocks and convertible securities are expected to
hold up better in a declining market than stocks which do not pay dividends,
like all stocks they fluctuate in price in response to movements in the overall
securities markets, general economic conditions, company-specific developments,
and other factors. Moreover, under certain conditions, the dividends paid on
these stocks may not be sufficient to provide a significant cushion against
price declines. Fluctuations in the prices of these stocks can therefore be
substantial. The dividend income received by the Fund will also fluctuate with
market conditions. Depending upon market conditions, the Fund may not have
sufficient income to pay its shareholders regular dividends. Accordingly, the
value of your investment in the Fund will go up and down, which means that you
could lose money.
The Fund's focus on growth stocks increases the potential volatility of its
share price. Growth stocks are stocks of companies which are expected to
increase their earnings faster than the overall market. If expectations are not
met, the prices of these stocks may decline drastically even if earnings do
increase. Investments in growth companies may lack the dividend yield that can
cushion stock prices in market downturns.
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. 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
13
<PAGE>
interest or principal. Lower quality bonds generally tend to be more sensitive
to these changes than higher quality bonds, but BBB-rated bonds may have
speculative characteristics as well. 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 payment of principal and interest.
14
<PAGE>
BLUE CHIP FUND
OVERVIEW
OBJECTIVE: The Fund seeks high total investment return consistent with
the preservation of capital.
PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in the common stocks of large,
well-established companies that are in the Standard and Poor's
500 Composite Stock Price Index ("S&P 500 Index"). These are
defined by the Fund as "Blue Chip" stocks. The Fund selects
stocks that it believes will have earnings growth in excess of
the average company in the S&P 500 Index. While the Fund
attempts to diversify its investments so that its weightings
in different industries are similar to those of the S&P 500
Index, it is not an index fund and therefore will not
necessarily mirror the S&P 500 Index. The Fund generally
stays fully invested in stocks under all market conditions.
PRIMARY
RISKS: While Blue Chip stocks are regarded as among the most
conservative stocks, like all stocks they fluctuate in price
in response to movements in the overall securities markets,
general economic conditions, and changes in interest rates or
investor sentiment. Fluctuations in the prices of Blue Chip
stocks at times can be substantial. Accordingly, the value of
your investment in the Fund will go up and down, which means
that you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Who should consider buying the Blue Chip Fund?
The Blue Chip Fund may be used as a core holding for an
investment portfolio or as a base on which to build a portfolio.
It may be appropriate for you if you:
o Are seeking growth of capital,
o Are willing to accept a moderate degree of market volatility,
and
o Have a long-term investment horizon and are able to ride
out market cycles.
How has the Blue Chip 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.
The Fund has two classes of shares, Class A shares and Class B shares. The bar
chart shows changes in the performance of the Fund's Class A shares for each of
the last 10 calendar years. The performance of Class B shares differs from the
performance of Class A shares shown in the bar chart only to the extent that
they do not have the same expenses. The bar chart does not reflect sales charges
that you may pay upon purchase or redemption of Fund shares. If they were
included, the returns would be less than those shown.
15
<PAGE>
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 19.96% (for the
quarter ended December 31, 1998) and the lowest quarterly return was -14.96%
(for the quarter ended September 30, 1990). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for Class A
shares and Class B shares compare to those of the S&P 500 Index. This table
assumes that the maximum sales charge or CDSC was paid. The S&P 500 Index is an
unmanaged index consisting of the stocks of large-sized U.S. and foreign
companies. The S&P 500 Index does not take into account fees and expenses that
an investor would incur in holding the securities in the S&P 500 Index. If it
did so, the returns would be lower than those shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception
Class B Shares
1 Year* 5 Years* 10 Years* (1/12/95)
Class A Shares 16.92% 22.97% 14.44% N/A
Class B Shares 19.84% N/A N/A 23.65%
S&P 500 Index 21.04% 28.51% 18.19% 28.56%
* The annual returns are based upon calendar years.
</TABLE>
What are the fees and expenses of the Blue Chip Fund?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Class A Class B
SHARES SHARES
------ ------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price).......... 6.25% None
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)................... None* 4%**
16
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DISTRIBUTION TOTAL
AND SERVICE ANNUAL FUND
MANAGEMENT (12B-1) OTHER OPERATING FEE NET
FEES(1) FEES(2) EXPENSES EXPENSES(3) WAIVER(1) EXPENSES(3)
----------- ----------- -------- ------------ --------- -----------
Class A Shares 0.85% 0.30% 0.27% 1.42% 0.10% 1.32%
Class B Shares 0.85% 1.00% 0.27% 2.12% 0.10% 2.02%
</TABLE>
*A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge.
**4% in the first year; declining to 0% after the sixth year. Class B shares
convert to Class A shares after 8 years.
(1)For the fiscal year ended September 30, 1999, the Adviser waived
Management Fees in excess of 0.75% for the Blue Chip Fund. The Adviser has
contractually agreed with the Fund to waive Management Fees in excess of
0.75% for the fiscal year ending September 30, 2000.
(2)Because the Fund pays Rule 12b-1 fees, long-term shareholders could pay more
than the economic equivalent of the maximum front-end sales charge permitted
by the National Association of Securities Dealers, Inc.
(3)The Fund has an expense offset arrangement that may reduce the Fund's
custodian fee based on the amount of cash maintained by the Fund with its
custodian. Any such fee reductions are not reflected under Total Annual Fund
Operating Expenses or Net Expenses.
EXAMPLE
<TABLE>
<CAPTION>
This example helps you to compare the costs of investing in the Fund with the
cost of investing in other mutual funds. The example assumes that (1) you invest
$10,000 in the Fund for the time periods indicated; (2) your investment has a 5%
return each year; and (3) the Fund's operating expenses remain the same, except
for year one, which is net of fees waived. Although your actual costs may be
higher or lower, under these assumptions your costs would be:
<S> <C> <C> <C> <C>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
If you redeem your shares:
Class A shares $751 $1,037 $1,344 $2,213
Class B shares $605 $ 954 $1,330 $2,265*
If you do not redeem your shares:
Class A shares $751 $1,037 $1,344 $2,213
Class B shares $205 $ 654 $1,130 $2,265*
</TABLE>
*Assumes conversion to Class A shares eight years after purchase.
THE FUND IN DETAIL
What are the Blue Chip Fund's objective, principal investment strategies, and
risks?
OBJECTIVE: The Fund seeks high total investment return consistent with the
preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in common stocks of large, well-established companies that are in the
S&P 500 Index. These are defined by the Fund as "Blue Chip" stocks. The S&P
500 Index consists of both U.S. and foreign corporations.
17
<PAGE>
The Fund uses fundamental research to select stocks of companies with strong
balance sheets, relatively consistent records of achievement, and potential
earnings growth that is greater than that of the average company in the S&P 500
Index. The Fund attempts to stay broadly diversified and sector neutral relative
to the S&P 500 Index, but it may emphasize certain industry sectors based on
economic and market conditions. The Fund intends to remain relatively fully
invested in stocks under all market conditions rather than attempt to time the
market by maintaining large cash or fixed income securities positions when
market declines are anticipated. The Fund usually will sell a stock when the
reason for holding it is no longer valid, it shows deteriorating fundamentals,
or it falls short of the Fund'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 owning the Blue Chip Fund:
MARKET RISK: Because the Fund primarily invests in common stocks, it is subject
to market risk. Stock prices in general may decline over short or even extended
periods not only because of company-specific developments but also due to an
economic downturn, a change in interest rates or a change in investor sentiment,
regardless of the success or failure of an individual company's operations.
Stock markets tend to run in cycles with periods when prices generally go up,
known as "bull" markets, and periods when stock prices generally go down,
referred to as "bear" markets. While Blue Chip stocks have historically been the
least risky and most liquid of stocks, like all stocks they fluctuate in value.
Fluctuations of Blue Chip stocks can be sudden and substantial. Accordingly, the
value of your investment in the Fund will go up and down, which means that you
could lose money.
OTHER RISKS: While the Fund generally attempts to remain sector-neutral relative
to the S&P 500 Index, it is not an index fund. The Fund may hold securities
other than those in the S&P 500 Index, may hold fewer securities than the index,
and may have sector or industry allocations different from the index, each of
which could cause the Fund to underperform the index.
18
<PAGE>
UTILITIES INCOME FUND
OVERVIEW
OBJECTIVES: The Fund primarily seeks high current income and secondarily
long-term capital appreciation.
PRIMARY
INVESTMENT
STRATEGIES: The Fund concentrates its investments in stocks of public
utilities companies ("utilities stocks"). The Fund attempts to
diversify across all sectors of the utilities industry (i.e.,
electric, gas, telecommunications and water), but from time to
time it will emphasize one or more sectors based on the
outlook for the various sectors. While the Fund primarily
invests in U.S. companies, it may invest in stocks of foreign
utilities companies.
PRIMARY
RISKS: While utilities stocks tend to be regarded as less volatile
than other stocks, like all stocks they fluctuate in value in
response to movements in the overall securities markets,
general economic conditions, and changes in interest rates or
investor sentiment. Because the Fund concentrates its
investments in public utilities stocks, the value of its
shares will be particularly affected by events that impact on
the utilities industry, such as changes in public utilities
regulation, changes in weather, and changes in interest
rates. Stocks of foreign utilities companies carry 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.
An investment in the Fund could decline in value even if the
market as a whole does well. Accordingly, the value of your
investment in the Fund will go up and down, which means that
you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Who should consider buying the Utilities Income Fund?
The Utilities Income Fund is most appropriately used to add
diversification to an investment portfolio. It may be appropriate
for you if you:
o Are seeking income and growth of capital,
o Are willing to accept a moderate degree of market volatility,
and
o Have a long-term investment horizon and are able to ride out
market cycles.
How has the Utilities Income 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.
The Fund has two classes of shares, Class A shares and Class B shares. The bar
chart shows changes in the performance of the Fund's Class A shares from year to
year over the life of the Fund. The performance of Class B shares differs from
the performance of Class A shares shown in the bar chart only to the extent that
they do not have the same expenses. The bar chart does not reflect sales charges
that you may pay upon purchase or redemption of Fund shares. If they were
included, the returns would be less than those shown.
19
<PAGE>
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 12.13% (for the
quarter ended December 31, 1997) and the lowest quarterly return was -7.56% (for
the quarter ended March 31, 1994). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for Class A
shares and Class B shares compare to those of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index") and the Standard and Poor's
Utilities Index ("S&P Utilities Index"). This table assumes that the maximum
sales charge or CDSC was paid. The S&P 500 Index is an unmanaged index
consisting of the stocks of large-sized U.S. and foreign companies. The S&P
Utilities Index is a capitalization-weighted index of 41 stocks designed to
measure the performance of the utilities sector of the S&P 500 Index. The
indexes do not take into account fees and expenses that an investor would incur
in holding the securities in the indexes. If they did so, the returns would be
lower than those shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception Inception
Class A Shares Class B Shares
1 Year* 5 Years* (2/22/93) (1/12/95)
Class A Shares 8.47% 16.35% 10.95% N/A
Class B Shares 10.99% N/A N/A 16.90%
S&P 500 Index 21.04% 28.51% 21.96% 28.56%
S&P Utilities Index -8.89% 13.84% 8.67% 13.93%
</TABLE>
* The annual returns are based upon calendar years.
20
<PAGE>
What are the fees and expenses of the Utilities Income Fund?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Class A Class B
SHARES SHARES
------ ------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price).......... 6.25% None
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)................... None* 4%**
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL
AND SERVICE ANNUAL FUND
MANAGEMENT (12B-1) OTHER OPERATING
FEES FEES (1) EXPENSES EXPENSES
(2)
Class A Shares 0.75% 0.30% 0.32% 1.37%
Class B Shares 0.75% 1.00% 0.32% 2.07%
*A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge. **4% in
the first year; declining to 0% after the sixth year. Class B shares convert to
Class A shares after 8 years.
(1)Because the Fund pays Rule 12b-1 fees, long-term shareholders could pay more
than the economic equivalent of the maximum front-end sales charge permitted
by the National Association of Securities Dealers, Inc.
(2)The Fund has an expense offset arrangement that may reduce the Fund's
custodian fee based on the amount of cash maintained by the Fund with its
custodian. Any such fee reductions are not reflected under Total Annual Fund
Operating Expenses.
EXAMPLE
This example helps you to compare the costs of investing in the Fund with the
cost of investing in other mutual funds. The example assumes that (1) you invest
$10,000 in the Fund for the time periods indicated; (2) your investment has a 5%
return each year; and (3) the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
If you redeem your shares:
Class A shares $756 $1,032 $1,328 $2,168
Class B shares $610 $ 949 $1,314 $2,221*
If you do not redeem your shares:
Class A shares $756 $1,032 $1,328 $2,168
Class B shares $210 $ 649 $1,114 $2,221*
*Assumes conversion to Class A shares eight years after purchase.
21
<PAGE>
THE FUND IN DETAIL
What are the Utilities Income Fund's objectives, principal investment
strategies, and risks?
OBJECTIVES: The Fund primarily seeks high current income and secondarily
long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in stocks (including not only common stocks, but also preferred stocks)
and securities convertible into stocks of companies in the utilities industry.
These are securities of companies which are primarily engaged in owning or
operating facilities used to provide electricity, gas, water or
telecommunications (including telephone, telegraph and satellite, but not public
broadcasting or cable television). While the Fund primarily invests in U.S.
companies, it may invest in stocks of foreign utilities companies. The Fund's
investments in foreign utilities companies are generally limited to stocks that
are dollar-denominated and traded in the U.S.
While the Fund attempts to diversify across all utilities sectors, it may
emphasize a particular sector based on that sector's yield, price to earnings
ratio, economic trends, and the regulatory environment. The Fund uses a
"top-down" approach to selecting investments. This means that it first decides
on how much of its assets to allocate to each sector of the utilities market and
then identifies potential investments for each sector through fundamental
research and analysis.
In selecting securities, the Fund will consider a stock's dividend potential,
its price to earnings ratio, the company's management, the company's ratio of
international to domestic earnings, the company's future strategies, and
external factors such as demographics and mergers and acquisitions prospects.
The Fund typically sells a security when its issuer shows deteriorating
fundamentals, it falls short of the manager's expectations or there is a change
in economic trends. 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 owning the Utilities Income Fund:
MARKET RISK: Because this Fund invests in stocks, it is subject to stock market
risk. Stock prices in general may decline over short or even extended periods
not only because of company-specific developments, but also due to an economic
downturn, a change in interest rates, or a change in investor sentiment,
regardless of the success or failure of an individual company's operations.
Stock markets tend to run in cycles with periods when prices generally go up,
known as "bull" markets, and periods when stock prices generally go down,
referred to as "bear" markets. While utilities stocks have long been thought of
as being less volatile than other stocks, like all stocks they fluctuate in
value. As the utilities industry has begun to deregulate and earnings have
become less predictable, utilities stocks have begun to have price fluctuations
which are more like other stocks.
INDUSTRY CONCENTRATION RISK: Because the Fund concentrates its investments in
public utilities companies, the value of its shares will be especially affected
by events that are peculiar to or have a greater impact on the utilities
industry. Utilities companies, especially electric and gas and other
energy-related utilities companies, have historically been subject to the risk
of increases in fuel and other operating costs, changes in national or regional
weather patterns, changes in interest rates, changes in applicable laws and
regulations, and costs and operating constraints associated with compliance with
environmental regulations. Utilities stocks therefore may decline in value even
if the overall market is doing well.
SECTOR CONCENTRATION RISK: Because the Fund may concentrate its portfolio in one
sector of the utilities industry, its share value could decline if one sector of
the utilities industry does poorly even if the industry does well as a whole.
22
<PAGE>
DEREGULATION/COMPETITION RISK: Regulatory changes in the United States have
increasingly allowed utilities companies to provide services and products
outside their traditional geographical areas and lines of business, creating
competitors and new areas of competition. As a result, certain utilities
companies earn more than their traditional, regulated rates of return, while
others are forced to defend their core business from competition and are less
profitable. Some utilities companies may not be able to recover the costs of
facilities built or acquired prior to the date of deregulation. This is known as
the "stranded assets" problem.
INTEREST RATE RISK: Utilities stocks tend to be more interest rate sensitive
than other stocks. As interest rates increase, utilities stocks tend to decline
in value.
FOREIGN ISSUERS RISK: Stock of foreign utilities companies carry 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.
23
<PAGE>
MID-CAP OPPORTUNITY FUND
OVERVIEW
OBJECTIVE: The Fund seeks long-term capital growth.
PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in common stocks of companies with
medium market capitalizations ("mid-cap stocks") which offer
the potential for substantial long-term growth. These
companies are generally more established than smaller
companies, yet are early enough in their development to be
still capable of increasing their revenues and earnings at a
strong rate. In selecting stocks, the Fund will look for
companies that have one or more of the following: a strong
balance sheet, experienced management; above-average earnings
growth potential; and stocks that are attractively priced.
Based upon the Fund's economic outlook for stocks, the Fund
may decide to invest a portion of its assets in stocks of
companies with small or large market capitalizations
("small-cap" and "large-cap"). While the Fund primarily
invests in U.S. companies, it may invest in stocks of foreign
companies.
PRIMARY
RISKS: While the potential long-term rewards of investing in mid-cap
stocks are substantial, there are also substantial risks.
Mid-cap companies carry more risk because they generally rely
on a smaller number of products or services, their earnings
tend to be less predictable, and their stocks tend to be less
liquid than those of large-cap companies. Mid-cap stocks tend
to experience sharper price fluctuations than stocks of
large-cap companies. These fluctuations can be substantial.
To the extent that the Fund decides to invest in small-cap
companies, the risk of price fluctuations is greater. Stocks
of foreign companies carry 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. Accordingly, the value of your
investment in the Fund will go up and down, which means that
you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Who should consider buying the Mid-Cap Opportunity Fund?
The Mid-Cap Opportunity Fund is most appropriately used to add
diversification to an investment portfolio. It may be appropriate
for you if you:
o Are seeking significant growth of capital,
o Are willing to accept higher than average market volatility,
and
o Have a long-term investment horizon and are able to ride
out market cycles.
How has the Mid-Cap Opportunity 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.
The Fund has two classes of shares, Class A shares and Class B shares. The bar
chart shows changes in the performance of the Fund's Class A shares from year to
year over the life of the Fund. The performance of Class B shares differs from
24
<PAGE>
the performance of Class A shares shown in the bar chart only to the extent that
they do not have the same expenses. The bar chart does not reflect sales charges
that you may pay upon purchase or redemption of Fund shares. If they were
included, the returns would be less than those shown.
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 30.70% (for the
quarter ended December 31, 1998) and the lowest quarterly return was -20.16%
(for the quarter ended September 30, 1998). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for Class A
shares and Class B shares compare to those of the Standard & Poor's 400 Mid-Cap
Index ("S&P 400 Mid-Cap Index"). This table assumes that the maximum sales
charge or CDSC was paid. The S&P 400 Mid-Cap Index is an unmanaged index
generally representative of the U.S. market for medium cap stocks. The S&P 400
Mid-Cap Index does not take into account fees and expenses that an investor
would incur in holding the securities in the S&P 400 Mid-Cap Index. If it did
so, the returns would be lower than those shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception Inception
Class A Shares Class B Shares
1 Year* 5 Years* (8/24/92) (1/12/95)
Class A Shares 31.47% 20.15% 13.93% N/A
Class B Shares 35.36% N/A N/A 20.51%
S&P 400 Mid-Cap Index 14.70% 23.04% 18.68% 23.06%
*The annual returns are based upon calendar years.
</TABLE>
What are the fees and expenses of the Mid-Cap Opportunity Fund?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Class A Class B
SHARES SHARES
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price).......... 6.25% None
25
<PAGE>
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)................... None* 4%**
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DISTRIBUTION TOTAL FEE
AND SERVICE ANNUAL FUND WAIVER
MANAGEMENT (12B-1) OTHER OPERATING AND/OR NET
FEES FEES EXPENSES EXPENSES(4) EXPENSE EXPENSES(4)
(1) (2) (3) ASSUMPTION(1),
(3),(4)
Class A Shares 1.00% 0.30% 0.47% 1.77% 0.27% 1.50%
Class B Shares 1.00% 1.00% 0.47% 2.47% 0.27% 2.20%
</TABLE>
*A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge.
**4% in the first year; declining to 0% after the sixth year. Class B shares
convert to Class A shares after 8 years.
(1)For the fiscal year ended September 30, 1999, the adviser waived Management
Fees in excess of 0.75% for the Fund. The Adviser has contractually agreed
with the Fund to waive Management Fees in excess of 0.75% for the fiscal year
ending September 30, 2000.
(2)Because the Fund pays Rule 12b-1 fees, long-term shareholders could pay more
than the economic equivalent of the maximum front-end sales charge permitted
by the National Association of Securities Dealers, Inc.
(3)For the fiscal year ended September 30, 1999, the Adviser assumed for each
class of shares of the Fund certain Other Expenses that were in excess of
0.45%. The Adviser has contractually agreed with the Fund to assume Other
Expenses in excess of 0.45% for the fiscal year ending September 30, 2000.
(4)The Fund has an expense offset arrangement that may reduce the Fund's
custodian fee based on the amount of cash maintained by the Fund with its
custodian. The Fund's custodial credits equaled 0.02%. Any such fee
reductions are not reflected under Total Annual Fund Operating Expenses, but
are reflected under Fee Waiver and Net Expenses.
EXAMPLE
This example helps you to compare the costs of investing in the Fund with the
cost of investing in other mutual funds. The example assumes that (1) you invest
$10,000 in the Fund for the time periods indicated; (2) your investment has a 5%
return each year; and (3) the Fund's operating expenses remain the same, except
for year one, which is net of fees waived and/or expenses assumed. Although your
actual costs may be higher or lower, under these assumptions your costs would
be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
If you redeem your shares:
Class A shares $768 $1,123 $1,501 $2,558
Class B shares $623 $1,044 $1,491 $2,613*
If you do not redeem your shares:
Class A shares $768 $1,123 $1,501 $2,558
Class B shares $223 $ 744 $1,291 $2,613*
*Assumes conversion to Class A shares eight years after purchase.
26
<PAGE>
THE FUND IN DETAIL
What are the Mid-Cap Opportunity Fund's objective, principal investment
strategies, and risks?
OBJECTIVE: The Fund seeks long-term capital growth.
PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in common stocks of mid-cap companies. The Fund defines mid-cap stocks as
those with market capitalizations which fall within the range of those of
companies in the S&P 400 Mid-Cap Index. (As of December 31, 1999, the market
capitalizations of companies in the S&P 400 Mid-Cap Index was between $165
million and $37.1 billion. The market capitalizations of companies in the S&P
400 Mid-Cap Index will change with market conditions.) Mid-cap companies are
generally more established than smaller capitalization companies, yet are early
enough in their development to be still capable of increasing their revenues and
earnings at a strong rate. The Fund also may invest a portion of its assets in
stocks of small-cap or large-cap companies. While the Fund primarily invests in
U.S. companies, it may invest in stocks of foreign companies. The Fund's
investments in foreign companies will generally be dollar-denominated and traded
in the U.S.
The Fund uses a "bottom-up" approach to selecting investments. The Fund uses
fundamental research to search for stocks of companies that have one of more of
the following: a strong balance sheet; experienced management; above-average
earnings growth potential; and stocks that are attractively priced. The Fund
attempts to stay broadly diversified, but it may emphasize certain industry
sectors based upon economic and market conditions. The Fund will usually sell a
stock when the reason for holding it is no longer valid, it shows deteriorating
fundamentals, or it 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 owning the Mid-Cap Opportunity Fund:
MARKET RISK: Because the Fund invests in equity securities, it is subject to
stock market risk. Stock prices in general may decline over short or even
extended periods not only because of company-specific developments but also due
to an economic downturn, a change in interest rates, or a change in investor
sentiment, regardless of the success or failure of an individual company's
operations. Stock markets tend to run in cycles with periods when prices
generally go up, known as "bull" markets, and periods when stock prices
generally go down, referred to as "bear" markets.
The market risk associated with mid-cap and small-cap stocks is generally
greater than that associated with large-cap stocks because mid-cap and small-cap
stocks tend to experience sharper price fluctuations than large-cap stocks,
particularly during bear markets. Their earnings tend to be less predictable
than those of larger, more established companies. The prices of these stocks can
also be influenced by the anticipation of future products and services which, if
delayed, could cause the prices to drop.
LIQUIDITY RISK: The stocks in which the Fund primarily invests are less liquid
than those of larger, more well-established companies. Securities of companies
with small-to-medium market capitalization often are not as broadly traded as
those of companies with larger market capitalization and are often subject to
wider price fluctuations. As a result, at times it may be difficult for the Fund
to sell these securities at a reasonable price.
FOREIGN SECURITIES 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.
27
<PAGE>
OTHER RISKS: While the Fund generally attempts to invest in mid-cap stocks with
market capitalizations which fall within the range of those of companies in the
S&P 400 Mid-Cap Index, it is not an index fund. The Fund may hold securities
other than those in the S&P 400 Mid-Cap Index, may hold fewer securities than
the index, and may have sector or industry allocations different from the index,
each of which could cause the Fund to underperform the index.
28
<PAGE>
SPECIAL SITUATIONS FUND
OVERVIEW
OBJECTIVE: The Fund seeks long-term growth of capital.
PRIMARY
INVESTMENT
STRATEGIES: The Fund primarily invests in common stocks of companies with
small market capitalizations ("small-cap stocks") which have the
potential for substantial long-term growth. The Fund looks for
companies that are in the early stages of their development, have
a new product or service, are in a position to benefit from some
change in the economy, have new management, or are experiencing
some other "special situation" which makes their stocks
undervalued. Because these companies tend to be smaller, their
growth potential is often greater. While the Fund primarily
invests in U.S. companies, it may invest in stocks of foreign
companies.
PRIMARY
RISKS: While the potential long-term rewards of investing in small-cap
stocks are substantial, there are also substantial risks.
Small-cap stocks carry more risk because they are often in the
early stages of development, dependent on a small number of
products or services, lack substantial financial resources, and
have less predictable earnings. Small-cap stocks also tend to be
less liquid, and experience sharper price fluctuations than
stocks of companies with large capitalizations. These
fluctuations can be substantial. Stocks of foreign companies
carry 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.
Accordingly, the value of your investment in the Fund will go up
and down, which means that you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Who should consider buying the Special Situations Fund?
The Special Situations Fund is most appropriately used to add
diversification to an investment portfolio. It may be appropriate
for you if you:
o Are seeking significant growth of capital,
o Are willing to accept a high degree of market volatility, and
o Have a long-term investment horizon and are able to ride out
market cycles.
How has the Special Situations 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.
The Fund has two classes of shares, Class A shares and Class B shares. The bar
chart shows changes in the performance of the Fund's Class A shares from year to
year over the life of the Fund. The performance of Class B shares differs from
the performance of Class A shares shown in the bar chart only to the extent that
they do not have the same expenses. The bar chart does not reflect sales charges
that you may pay upon purchase or redemption of Fund shares. If they were
included, the returns would be less than those shown.
29
<PAGE>
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 26.30% (for the
quarter ended December 31, 1998) and the lowest quarterly return was -23.05%
(for the quarter ended September 30, 1998). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for Class A
shares and Class B shares compare to those of the Russell 2000 Index. This table
assumes that the maximum sales charge or CDSC was paid. The Russell 2000 Index
is an unmanaged index generally representative of the U.S. market for small-cap
stocks. The Russell 2000 Index does not take into account fees and expenses that
an investor would incur in holding the securities in the Russell 2000 Index. If
it did so, the returns would be lower than those shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception Inception
Class A Shares Class B Shares
1 Year* 5 Years* (9/18/90) (1/12/95)
------ ------- --------- ---------
Class A Shares 19.49% 14.26% 16.54% N/A
Class B Shares 22.52% N/A N/A 14.89%
Russell 2000 Index 21.35% 16.36% 15.85% 16.66%
</TABLE>
*The annual returns are based upon calendar years.
30
<PAGE>
What are the fees and expenses of the Special Situations Fund?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Class A Class B
SHARES SHARES
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price).......... 6.25% None
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)................... None* 4%**
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DISTRIBUTION TOTAL
AND SERVICE ANNUAL FUND
MANAGEMENT (12B-1) OTHER OPERATING FEE NET
FEES(1) FEES (2) EXPENSES EXPENSES(3) WAIVER(1) EXPENSES(3)
---------- ------------ -------- ------------ --------- -----------
Class A Shares...... 0.99% 0.30% 0.48% 1.77% 0.24% 1.53%
Class B Shares...... 0.99% 1.00% 0.48% 2.47% 0.24% 2.23%
</TABLE>
*A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge. **4% in
the first year; declining to 0% after the sixth year. Class B shares convert to
Class A shares after 8 years.
(1)For the fiscal year ended September 30, 1999, the Adviser waived Management
Fees in excess of 0.75% for the Fund. The Adviser has contractually agreed
with the Fund to waive Management Fees in excess of 0.75% for the fiscal year
ending September 30, 2000.
(2)Because the Fund pays Rule 12b-1 fees, long-term shareholders could pay more
than the economic equivalent of the maximum front-end sales charge permitted
by the National Association of Securities Dealers, Inc.
(3)The Fund has an expense offset arrangement that may reduce the Fund's
custodian fee based on the amount of cash maintained by the Fund with its
custodian. Any such fee reductions are not reflected under Total Annual Fund
Operating Expenses or Net Expenses.
EXAMPLE
This example helps you to compare the costs of investing in the Fund with the
cost of investing in other mutual funds. The example assumes that (1) you invest
$10,000 in the Fund for the time periods indicated; (2) your investment has a 5%
return each year; and (3) the Fund's operating expenses remain the same, except
for year one, which is net of fees waived. Although your actual costs may be
higher or lower, under these assumptions your costs would be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
If you redeem your shares:
Class A shares $771 $1,125 $1,503 $2,560
Class B shares $626 $1,047 $1,494 $2,615*
If you do not redeem your shares:
Class A shares $771 $1,125 $1,503 $2,560
Class B shares $226 $ 747 $1,294 $2,615*
31
<PAGE>
*Assumes conversion to Class A shares eight years after purchase.
THE FUND IN DETAIL
What are the Special Situations Fund's objective, principal investment
strategies, and risks?
OBJECTIVE: The Fund seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in common stocks of small-cap companies. The Fund defines small-cap
stocks as those with market capitalizations which fall within the range of those
of companies in the Standard and Poor's 600 Small-Cap Index ("S&P 600 Small-Cap
Index"). (As of December 31, 1999, the market capitalizations of companies in
the S&P 600 Small-Cap Index was between $28 million and $4.1 billion. The market
capitalizations of companies in the S&P 600 Small-Cap Index will change with
market conditions.) The Fund looks for companies that are in the early stages of
their development, have a new product or service, are in a position to benefit
from some change in the economy, have new management, or are experiencing some
other "special situation" which makes their stocks undervalued. Because these
companies tend to be smaller, their growth potential is often greater. While the
Fund primarily invests in U.S. companies, it may invest in stocks of foreign
companies. The Fund's investments in foreign companies are generally limited to
stocks that are dollar-denominated and traded in the U.S.
In selecting stocks, the Fund relies on fundamental research. It considers,
among other things, earnings growth potential, revenue growth potential, cash
flow and tangible book value. The Fund attempts to stay broadly diversified but
it may emphasize certain industry sectors based on economic and market
conditions. The Fund usually will sell a stock 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 owning the Special Situations Fund:
MARKET RISK: Because this Fund invests in stocks, an investment in the Fund is
subject to stock market risk. Stock prices in general may decline over short or
even extended periods not only because of company-specific developments but also
due to an economic downturn, a change in interest rates, or a change in investor
sentiment, regardless of the success or failure of an individual company's
operations. Stock markets tend to run in cycles with periods when prices
generally go up, known as "bull" markets and periods when stock prices generally
go down, referred to as "bear" markets. The market risk associated with
small-cap stocks is greater than that associated with larger-cap stocks because
small-cap stocks tend to experience sharper price fluctuations than larger-cap
stocks, particularly during bear markets.
Small-cap companies are generally dependent on a small number of products or
services, their earnings are less predictable, and their share prices more
volatile. These companies are also more likely to have limited markets or
financial resources, and may depend on a small, inexperienced management group.
LIQUIDITY RISK: Stocks of small-cap companies often are not as broadly traded as
those of larger-cap companies and are often subject to wider price fluctuations.
As a result, at times it may be difficult for the Fund to sell these securities
at a reasonable price.
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.
OTHER RISKS: While the Fund generally attempts to invest in small-cap stocks
with market capitalizations which fall within the range of those of companies in
32
<PAGE>
the S&P 600 Small-Cap Index, it is not an index fund. The Fund may hold
securities other than those in the S&P 600 Small-Cap Index, may hold fewer
securities than the index, and may have sector or industry allocations different
from the index, each of which could cause the Fund to underperform the index.
33
<PAGE>
FOCUSED EQUITY FUND
OVERVIEW
OBJECTIVE: The Fund seeks capital appreciation.
PRIMARY
INVESTMENT
STRATEGIES: The Fund seeks to achieve its objective by focusing its investments
in the common stocks of approximately 20 to 30 U.S. companies.
Generally, not more than 12% of the Fund's total assets will be
invested in the securities of a single issuer. The Fund uses an
event-driven approach in selecting investments. In making investment
decisions, the Fund looks for companies that appear to be
undervalued because they are undergoing corporate or other events
that appear likely to result in significant growth in the companies'
valuations. The Fund seeks to identify companies with proven
management, superior cash flow and outstanding franchise values. The
Fund usually will sell a stock when it shows deteriorating
fundamentals, reaches its target value, constitutes 12% or more of
the total portfolio, or when the Fund identifies better investment
opportunities.
PRIMARY While there are substantial potential long-term rewards of investing
RISKS: in a concentrated portfolio of securities that are considered
undervalued, there are also substantial risks. First, the value of
the portfolio will fluctuate with movements in the overall
securities markets, general economic conditions, and changes in
interest rates or investor sentiment. Second, because the Fund is
non-diversified and concentrates its investments in the stocks of a
small number of issuers, the Fund's performance may be substantially
impacted by the change in value of a single holding. Third, there is
a risk that the event that led the Fund to make an investment may
occur later than anticipated or not at all. This may disappoint the
market and cause a decline in the value of the investment.
Accordingly, the value of your investment in the Fund will go up and
down, which means that you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
Who should consider buying the Focused Equity Fund?
The Focused Equity Fund is most appropriately used to add
diversification to an investment portfolio. It may be appropriate
for you if you:
o Are seeking significant growth of capital,
o Understand and are willing to accept significant stock market
volatility,
o Are willing to take high risk on the money you invest in the
Fund, and
o Have a long-term investment horizon and are able to ride out
market cycles.
What about performance?
Because the Fund commenced operations on March 22, 1999, as of the date of this
prospectus it did not have a full year of performance information available. For
the performance of the Fund from March 22, 1999 to December 31, 1999, see the
Appendix on page 49 of this prospectus.
34
<PAGE>
What are the fees and expenses of the Focused Equity Fund?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
CLASS A CLASS B
SHARES SHARES
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)....... 6.25% None
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)................ None* 4%**
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund
assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DISTRIBUTION
AND SERVICE TOTAL
(12B-1) ANNUAL
FEES(1) FUND EXPENSE
MANAGEMENT AND SERVICE OTHER OPERATING ASSUMPTION NET
FEES FEES(1) EXPENSES(2) EXPENSES (2) EXPENSES
---- ------- ----------- -------- --- --------
Class A
Shares...... 0.75% 0.30% 0.85% 1.90% 0.15% 1.75%
Class B
Shares...... 0.75% 1.00% 0.85% 2.60% 0.15% 2.45%
</TABLE>
* A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge.
** 4% in the first year; declining to 0% after the sixth year. Class B shares
convert To Class A shares after 8 years.
(1)Because the Fund pays Rule 12b-1 fees, long-term shareholders could pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
(2)The Adviser has contractually agreed with the Fund to assume Other Expenses
in excess of .70% during the Fund's first fiscal year (ending September 30,
1999), provided that the Adviser may recover such assumed expenses within the
following three years as long as the total expenses of the Fund do not exceed
1.75% of the average daily net assets on Class A shares and 2.45% of the
average daily net assets on Class B shares or any lower expense limitation to
which the Adviser agrees. Other Expenses include organizational expenses.
EXAMPLE
This example helps you to compare the costs of investing in the Fund with the
cost of investing in other mutual funds. The example assumes that (1) you invest
$10,000 in the Fund for the time periods indicated; (2) your investment has a 5%
return each year; and (3) the Fund's operating expenses remain the same, except
for year one, which is net of expenses assumed. Although your actual costs may
be higher or lower, under these assumptions your costs would be:
35
<PAGE>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
If you redeem your shares:
Class A shares $792 $1,171 $1,574 $2,697
Class B Shares $648 $1,094 $1,567 $2,753*
If you do not redeem your
shares:
Class A shares $792 $1,171 $1,574 $2,697
Class B Shares $248 $ 794 $1,367 $2,753*
* Assumes conversion to Class A shares eight years after purchase.
THE FUND IN DETAIL
What are the Focused Equity Fund's objective, principal investment
strategies, and principal risks?
OBJECTIVE: The Fund seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES: The Fund seeks to achieve its objective by
focusing its investments in the common stocks of approximately 20 to 30 U.S.
companies. The Fund is a non-diversified investment company. The Fund will
usually concentrate 80% of its portfolio in its top 15 holdings. It will
frequently have more than 10% of its assets in the securities of a single
issuer. Although the Fund is not required to limit the amount of any investment
in the securities of any one issuer, it generally will not invest more than 12%
of its total assets in the securities of a single issuer. The Fund's strategy is
to remain relatively fully invested, but at times the Fund may have cash
positions of 10% or more if the Fund cannot identify qualified investment
opportunities or it has a negative or "bearish" view of the stock market.
However, under normal market conditions, at least 65% of the Fund's total assets
will be invested in equity securities (including not only common stocks, but
preferred stocks and securities convertible into common and preferred stocks).
The Fund uses an event-driven approach in selecting investments. The Fund looks
for companies that appear to be undervalued because they are undergoing some
corporate or other event that the Fund believes can result in significant growth
in the companies' valuations. Examples of these events include: announced
mergers, acquisitions and divestitures; financial restructurings; management
reorganizations; stock buy-back programs; or industry transformations that can
affect competitiveness. The Fund then identifies companies with proven
management teams which maintain significant financial interest in the companies,
superior cash flows in excess of internal growth requirements and outstanding
franchise values. The Fund generally invests with a time horizon of two-to-five
years and seeks investments which offer the potential of appreciating at least
50% within the first two years of the investment.
The Fund actively monitors the companies in its portfolio through regular
meetings and teleconference calls with senior management and personal visits.
The Fund also actively monitors the industries and competitors of the companies
within its portfolio and checks whether the original investment thesis still
holds true. The Fund usually will sell a stock when it shows deteriorating
fundamentals, reaches its target value, constitutes 12% or more of the total
portfolio, or when the Fund identifies better investment opportunities.
The Fund may purchase and sell futures contracts and options on futures
contracts for hedging purposes. The Fund anticipates engaging in such
transactions relatively infrequently and over relatively short periods of time.
Any hedging strategy that the Fund may decide to employ will generally be
effected by buying puts on the overall market or an index, such as puts on the
Standard & Poor's 500 Composite Stock Price Index.
PRINCIPAL RISKS: Any investment carries with it some level of risk. An
investment offering greater potential rewards generally carries greater risks.
Here are the principal risks of owning the Focused Equity Fund:
36
<PAGE>
MARKET RISK: Because the Fund primarily invests in stocks, it is subject to
market risk. Stock prices in general may decline over short or even extended
periods not only due to company specific developments but also due to an
economic downturn, a change in interest rates, or a change in investor
sentiment, regardless of the success or failure of an individual company's
operations. Stock markets tend to run in cycles with periods when prices
generally go up, known as "bull" markets, and periods when stock prices
generally go down, referred to as "bear" markets. Fluctuations in the prices of
stocks can be sudden and substantial. Accordingly, the value of your investment
in the Fund will go up and down, which means that you could lose money.
NON-DIVERSIFICATION RISK: The Fund is a non-diversified investment company and,
as such, its assets may be invested in a limited number of issuers. This means
that the Fund's performance may be substantially impacted by the change in value
of even a single holding. The price of a share of the Fund can therefore be
expected to fluctuate more than a comparable diversified fund. Moreover, the
Fund's share price may decline even when the overall market is increasing.
Accordingly, an investment in the Fund therefore may entail greater risks than
an investment in a diversified investment company.
EVENT-DRIVEN STYLE RISK: The event-driven investment approach used by the Fund
carries the additional risk that the event anticipated may occur later than
expected or not at all or may not have the desired effect on the market price of
the security.
FUTURES AND OPTIONS RISK: The Fund could suffer a loss if it fails to hedge its
portfolio prior to a market decline. Moreover, if the Fund engages in hedging
transactions using futures or options, the Fund could nevertheless suffer a loss
if the hedging is based upon an inaccurate prediction of movements in the
direction of the securities and interest rate markets or the hedging instrument
does not accurately reflect the Fund's portfolio. The Fund may experience
adverse consequences that leave it in a worse position than if such strategies
were not used. As a result, the Fund may not achieve its investment objective.
37
<PAGE>
GLOBAL FUND
OVERVIEW
OBJECTIVES: The Fund primarily seeks long-term capital growth and
secondarily a reasonable level of current income.
PRIMARY
INVESTMENT
STRATEGIES: The Fund invests in a diversified portfolio of common stocks
of companies which are located throughout the world. While the
Fund attempts to maintain broad country diversification, under
normal market conditions it must allocate assets to at least
three countries, including the United States. The Fund primarily
invests in large or medium capitalization stocks which are traded
in larger or more established markets throughout the world. The
Fund also invests opportunistically in smaller capitalization
stocks and stocks of smaller, less-developed or emerging markets.
The Fund generally does not attempt to hedge its foreign
securities investments against currency rate fluctuations.
PRIMARY
RISKS: All stocks fluctuate in price in response to movements in
the overall securities markets, general economic conditions, and
changes in interest rates or investor sentiment. The risks of
investing in a stock fund that invests in foreign stocks are
accentuated because investments in foreign stocks, particularly
emerging markets, can decline in value because of declines in the
values of local currencies, irrespective of how well the
companies that issue such stocks are doing; there is generally
less supervision and regulation of foreign securities markets;
foreign securities markets are generally less liquid than U.S.
markets; there may be less financial information available on
certain foreign companies; and there may be political instability
in some countries in which the Fund may invest. Fluctuations in
the prices of foreign stocks can be especially sudden and
substantial. Stocks with smaller market capitalizations tend to
experience sharper price fluctuations. Accordingly, the value of
your investment in the Fund will go up and down, which means that
you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Who should consider buying the Global Fund?
The Global Fund is most appropriately used to add diversification
to an investment portfolio. It may be appropriate for you if you:
o Are seeking significant growth of capital,
o Want exposure not only to U.S. but also foreign securities,
o Are willing to accept a high degree of market volatility
and the additional risks of foreign investments, and
o Have a long-term investment horizon and are able to ride out
market cycles.
How has the Global 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.
38
<PAGE>
The Fund has two classes of shares, Class A shares and Class B shares. The bar
chart shows changes in the performance of the Fund's Class A shares for each of
the last 10 calendar years. The performance of Class B shares differs from the
performance of Class A shares shown in the bar chart only to the extent that
they do not have the same expenses. The bar chart does not reflect sales charges
that you may pay upon purchase or redemption of Fund shares. If they were
included, the returns would be less than those shown.
[OBJECT OMITTED]
During the periods shown, the highest quarterly return was 20.13% (for the
quarter ended December 31, 1999) and the lowest quarterly return was -21.79%
(for the quarter ended September 30, 1990). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for Class A
shares and Class B shares compare to those of the Morgan Stanley All Country
World Free Index ("All Country Index"). This table assumes that the maximum
sales charge or CDSC was paid. The All Country Index is designed to measure the
performance of stock markets in the United States, Europe, Canada, Australia,
New Zealand and the developed and emerging markets of Eastern Europe, Latin
America, Asia and the Far East. The index consists of approximately 60% of the
aggregate market value of the covered stock exchanges and is calculated to
exclude companies and share classes which cannot be freely purchased by
foreigners. The All Country 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception
Class B Shares
1 Year* 5 Years* 10 Years* (1/12/95)
Class A Shares 23.48% 15.98% 9.25% N/A
Class B Shares 26.92% N/A N/A 16.89%
All Country Index 26.82% 19.18% 11.70% 19.18%**
</TABLE>
*The annual returns are based upon calendar years.
**The average annual total return shown is for the period 1/1/95 to 12/31/99.
39
<PAGE>
What are the fees and expenses of the Global Fund?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Class A Class B
SHARES SHARES
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price).......... 6.25% None
Maximum deferred sales charge (load)
(as a percentage of the lower of purchase
price or redemption price)................... None* 4%**
(ANNUAL FUND OPERATING EXPENSES
expenses that are deducted from Fund assets)
DISTRIBUTION TOTAL
AND SERVICE ANNUAL FUND
MANAGEMENT (12B-1) OTHER OPERATING
FEES FEES (1) EXPENSES EXPENSES
Class A Shares....... 0.99% 0.30% 0.43% 1.72%
Class B Shares....... 0.99% 1.00% 0.43% 2.42%
*A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge.
**4% in the first year; declining to 0% after the sixth year. Class B shares
convert to Class A shares after 8 years.
(1) Because the Fund pays Rule 12b-1 fees, long-term shareholders could
pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc.
EXAMPLE
This example helps you to compare the costs of investing in the Fund with the
cost of investing in other mutual funds. The example assumes that (1) you invest
$10,000 in the Fund for the time periods indicated; (2) your investment has a 5%
return each year; and (3) the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
If you redeem your shares:
Class A shares $789 $1,133 $1,500 $2,528
Class B shares $645 $1,055 $1,491 $2,583*
If you do not redeem your shares:
Class A shares $789 $1,133 $1,500 $2,528
Class B shares $245 $ 755 $1,291 $2,583*
*Assumes conversion to Class A shares eight years after purchase.
THE FUND IN DETAIL
What are the Global Fund's objectives, principal investment strategies, and
risks?
OBJECTIVES: The Global Fund primarily seeks long-term capital growth
and secondarily a reasonable level of current income.
40
<PAGE>
PRINCIPAL INVESTMENT STRATEGIES: The Fund invests in a diversified portfolio of
common stocks of companies which are located throughout the world. While the
Fund attempts to maintain broad country diversification, under normal market
conditions it must allocate assets to at least three countries, including the
United States.
The Fund primarily invests in stocks of companies which are considered large to
medium in size (measured by market capitalization). The Fund may also invest in
smaller companies when management views them as attractive alternatives to the
stocks of larger or more established companies.
The Fund primarily invests in stocks which trade in larger or more established
markets, but also may invest (to a lesser degree) in smaller, less-developed or
emerging markets where management believes there is significant opportunity for
growth of capital. The definition of "emerging markets" may change over time as
a result of developments in national or regional economies and capital markets.
The foreign stocks that the Fund purchases are typically denominated in foreign
currencies. The Fund generally does not hedge against fluctuations in the value
of foreign currencies.
The Fund uses fundamental research and analysis to identify prospective
investments. Security selection is based on any one or more of the following
characteristics: accelerating earnings growth or the possibility of positive
earnings surprises; strong possibility of price to earnings multiple expansion
(or increases in other similar valuation measures); hidden or unappreciated
value; or improving local market and/or industry outlook.
Once the purchase candidates for the Fund are identified, the portfolio
construction process begins. In this phase, many factors are considered in
creating a total portfolio of securities for the Fund, including: (1) regional
and country allocation, (2) currency exposure, (3) industry and sector
allocation, and (4) exposure to a number of other factors such as interest rates
or company size. The total risk of the Fund is monitored at this point in the
portfolio construction process.
Every company in the portfolio is monitored to ensure its fundamental
attractiveness. A stock may be sold if in the portfolio manager's opinion its
downside risk equals or exceeds its upside potential; it suffers from a
decreasing trend of earnings growth or suffers an earnings disappointment; it
experiences excessive valuations; or there is a deteriorating local market
and/or industry outlook.
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 owning the Global Fund:
MARKET RISK: Because the Fund primarily invests in common stocks, it is subject
to market risk. Stock prices in general may decline over short or even extended
periods not only because of company-specific developments but also due to an
economic downturn, a change in interest rates, or a change in investor
sentiment, regardless of the success or failure of an individual company's
operations. Stock markets tend to run in cycles with periods when prices
generally go up, known as "bull" markets, and periods when stock prices
generally go down, referred to as "bear" markets.
While the Fund's strategy of being globally diversified may help to reduce the
volatility or variability of the Fund's returns relative to another fund which
invests in fewer stocks or whose investments are focused in fewer countries or
industry sectors, this strategy may not prevent a loss if stock markets
worldwide were to decline at the same time. Fluctuations of prices of stocks can
be sudden and substantial. Accordingly, the value of your investment in the Fund
will go up and down, which means that you could lose money.
41
<PAGE>
FOREIGN SECURITIES RISK: There are special risk factors associated with
investing in foreign securities. Some of these factors are also present when
investing in the United States but are heightened issues when investing in
non-U.S. markets, especially emerging markets. For example, such risks and
considerations may include political and economic instability, differing
accounting and financial reporting standards or inability to obtain reliable
financial information regarding a company's balance sheet and operations. Risks
such as these are common to all investments but are exacerbated when investing
in international markets. In addition, international investors may experience
higher commission rates on foreign portfolio transactions, potentially adverse
changes in tax and exchange control regulations, the potential for restrictions
on the flow of international capital and the transition to the euro for European
Monetary Union countries. Many foreign countries impose withholding taxes on
income from investments in such countries, which the Fund may not recover. Also,
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies may have a negative impact on investments denominated in foreign
currencies, for example, by eroding or reversing gains or widening losses from
those investments.
LIQUIDITY RISK: The Fund is also susceptible to the risk that certain securities
may be difficult or impossible to sell at the time and the price that the Fund
would like. As a result, the Fund may have to lower the price on certain
securities that it is trying to sell, sell other securities instead, or forego
an investment opportunity, any of which could have a negative effect on fund
management or performance. This risk is common to most stock mutual funds, but
is particularly acute in the case of foreign investments.
SMALL-CAP AND MID-CAP RISK: The market risk associated with small-to mid-cap
stocks is greater than that associated with larger-cap stocks because small-to
mid-cap stocks tend to experience sharper price fluctuations than larger-cap
stocks, particularly during bear markets. Small-to mid-cap companies are
generally dependent on a smaller number of products or services, their earnings
are less predictable, and their share prices more volatile. These companies are
also more likely to have limited markets or financial resources, or to depend on
a small, inexperienced management group.
42
<PAGE>
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 serves
as investment adviser to 52 mutual funds or series of funds with total net
assets of over $5 billion. FIMCO supervises all aspects of each Fund's
operations and determines each Fund's portfolio transactions, except for the
Focused Equity Fund and the Global Fund. For the fiscal year ended September 30,
1999, FIMCO received advisory fees as follows: 0.75% of average daily net
assets, net of waiver, for Total Return Fund, Blue Chip Fund, Mid-Cap
Opportunity Fund, and Special Situations Fund; 0.75% of average daily net assets
for Utilities Income Fund and Focused Equity Fund; 0.74% of average daily net
assets for Growth & Income Fund; and 0.99% of average daily net assets for
Global Fund.
The Total Return Fund is managed by a team of portfolio managers.
Dennis T. Fitzpatrick serves as Co-Portfolio Manager of the Growth & Income Fund
and the Blue Chip Fund. Mr. Fitzpatrick has been a member of FIMCO's investment
management team since October 1995. During 1995, Mr. Fitzpatrick was a Regional
Surety Manager at United States Fidelity & Guaranty Co. From 1988 to 1995, he
was Northeast Surety Manager at American International Group.
Andrew Wedeck serves as Co-Portfolio Manager of the Growth & Income Fund and the
Blue Chip Fund. From April 1999 to November 1999, Mr. Wedeck was a Research
Analyst at Cramer Rosenthal McGlynn. From April 1998 to March 1999, Mr. Wedeck
was a personal money management consultant for family members. From 1995 to
March 1998, Mr. Wedeck was an Equity Analyst at Stechler & Company.
Matthew S. Wright serves as Portfolio Manager of the Utilities Income Fund. Mr.
Wright is also the Portfolio Manager for the Utilities Income Fund of First
Investors Life Series Fund. Mr. Wright joined FIMCO in February 1996 as an
Equity Analyst. From May 1995 to January 1996, Mr. Wright was an Analyst at Fuji
Bank. From June 1994 to April 1995, he was Market Editor of BLOOMBERG MAGAZINE
and from September 1991 to June 1994, he was Editor/Reporter for BLOOMBERG
BUSINESS NEWS.
Patricia D. Poitra serves as Portfolio Manager of the Mid-Cap Opportunity Fund
and Co-Portfolio Manager of the Special Situations Fund. Ms. Poitra has been
Director of Equities at FIMCO since October 1994.
David A. Hanover is Co-Portfolio Manager of the Special Situations Fund. From
1997 to August 1998, Mr. Hanover was a Portfolio Manager and Analyst at Heritage
Investors Management Corporation. From 1994 to 1996, Mr. Hanover was
Co-Portfolio Manager and Analyst at Psagot Mutual Funds and in 1993 he was an
International Equity Investments Summer Associate at Howard Hughes Medical
Institute.
FIMCO and the Global Fund have retained Wellington Management Company, LLP
("WMC") as the Global Fund's investment subadviser. WMC has discretionary
trading authority over all of the Global Fund's assets, subject to continuing
oversight and supervision by FIMCO and the Board of Directors. WMC is located at
75 State Street, Boston, MA 02109. WMC is a professional investment counseling
firm which provides investment services to investment companies, employee
benefit plans, endowment funds, foundations and other institutions and
individuals. As of December 31, 1999, WMC held investment management authority
with respect to $241 billion of assets. Of that amount, WMC acted as investment
adviser or subadviser to approximately 60 registered investment companies or
series of such companies, with net assets of approximately $170 billion. The
Global Fund is managed by Trond Skramstad, Senior Vice President of WMC and
Chairman of the firm's Global Equity Strategy Group. Mr. Skramstad joined WMC in
1993.
FIMCO and the Focused Equity Fund have retained Arnhold and S. Bleichroeder,
Inc. ("ASB") as the Fund's investment subadviser. ASB has discretionary trading
authority over all of the Focused Equity Fund's assets, subject to continuing
43
<PAGE>
oversight and supervision by FIMCO and the Board of Directors. ASB is located at
1345 Avenue of the Americas, New York, NY 10105. ASB and its affiliates
currently provide investment advisory services to investment companies,
institutions and private clients. As of December 31, 1999, ASB and its
affiliates held investment management authority with respect to approximately $7
billion of domestic and international assets. The Focused Equity Fund is managed
by Colin G. Morris, Senior Vice President of ASB, who has been responsible for
the management of various ASB clients since January 1993. Prior to joining ASB
in 1992, Mr. Morris was a partner at Mabon Securities, with responsibility over
arbitrage investments from 1988 to 1992.
BUYING AND SELLING SHARES
How and when do the Funds price their shares?
The share price (which is called "net asset value" or "NAV" per share) for each
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, each Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding. The prices or NAVs of Class A shares and Class B shares will
generally differ because they have different expenses.
In valuing its assets, each 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
available quotations are considered to be unreliable, the securities will be
valued at their fair value as determined in good faith pursuant to procedures
adopted by the Board of Directors of the Funds.
How do I buy shares?
You may buy shares of each Fund through a First Investors registered
representative or through a registered representative of an authorized
broker-dealer ("Representative"). Your Representative will help you complete and
submit an application. Your initial investment must be at least $1,000. However,
we have lower initial investment requirements and offer automatic investment
plans that allow you to open a Fund account with as little as $50. Subsequent
investments may be made in any amount. You can also arrange to make systematic
investments electronically from your bank account or through payroll deduction.
All the various ways you can buy shares are explained in the Shareholder Manual.
For further information on the procedures for buying shares, please contact your
Representative or call Shareholder Services at 1-800-423-4026.
If we receive your application or order in our Woodbridge, N.J. offices in
correct form, as described in the Shareholder Manual, prior to the close of
regular trading on the NYSE, your transaction will be priced at that day's NAV.
If you place your order with your Representative prior to the close of regular
trading on the NYSE, your transaction will also be priced at that day's NAV
provided that your Representative transmits the order to our Woodbridge, N.J.
offices by 5 p.m., E.T. Orders placed after the close of regular trading on the
NYSE will be priced at the next business day's NAV. The procedures for
processing transactions are explained in more detail in our Shareholder Manual
which is available upon request.
Each Fund reserves the right to refuse any order to buy shares if the Fund
determines that doing so would be in the best interests of the Fund and its
shareholders.
Which class of shares is best for me?
Each Fund has two classes of shares, Class A and Class B. While each class
invests in the same portfolio of securities, the classes have separate sales
44
<PAGE>
charge and expense structures. Because of the different expense structures, each
class of shares generally will have different NAVs and dividends.
The principal advantages of Class A shares are the lower overall expenses, the
availability of quantity discounts on volume purchases and certain account
privileges that are available only on Class A shares. The principal advantage of
Class B shares is that all of your money is invested from the outset.
Class A shares of a Fund are sold at the public offering price which includes a
front-end sales load. The sales charge declines with the size of your purchase,
as illustrated below.
Class A Shares
Your investment SALES CHARGE AS A PERCENTAGE OF
offering price net amount invested
Less than $25,000 6.25% 6.67%
$25,000-$49,999 5.75 6.10
$50,000-$99,999 5.50 5.82
$100,000-$249,999 4.50 4.71
$250,000-$499,999 3.50 3.63
$500,000-$999,999 2.50 2.56
$1,000,000 or more 0* 0*
*If you invest $1,000,000 or more in Class A shares, you will not pay a
front-end sales charge. However, if you make such an investment and then sell
your shares within 24 months of purchase, you will pay a CDSC of 1.00%.
Class B shares are sold at net asset value, without any initial sales charge.
However, you may pay a CDSC when you sell your shares. The CDSC declines the
longer you hold your shares, as illustrated below. Class B shares convert to
Class A shares after eight years.
Class B Shares
<TABLE>
<CAPTION>
<S> <C> <C>
CDSC as a Percentage of Purchase Price
YEAR OF REDEMPTION OR NAV AT REDEMPTION
------------------ --------------------
Within the 1st or 2nd year...... 4%
Within the 3rd or 4th year...... 3
In the 5th year................. 2
In the 6th year................. 1
Within the 7th year and 8th year 0
</TABLE>
There is no CDSC on Class B shares which are acquired through reinvestment of
dividends or distributions. The CDSC is imposed on the lower of the original
purchase price or the net asset value of the shares being sold. For purposes of
determining the CDSC, all purchases made during a calendar month are counted as
having been made on the first day of that month at the average cost of all
purchases made during that month.
To keep your CDSC as low as possible, each time you place a request to sell
shares, we will first sell any shares in your account that carry no CDSC. If
there is an insufficient number of these shares to meet your request in full, we
will then sell those shares that have the lowest CDSC.
Sales charges and CDSCs may be reduced or waived under certain circumstances and
for certain groups. Consult your Representative or call us directly at
1-800-423-4026 for details.
Each Fund has adopted a plan pursuant to Rule 12b-1 that allows the Fund to pay
distribution fees for the sale and distribution of its shares. Each class of
45
<PAGE>
shares pays Rule 12b-1 fees for the marketing of fund shares and for services
provided to shareholders. The plans provide for payments at annual rates (based
on average daily net assets) of up to 0.30% on Class A shares and 1.00% on Class
B shares. No more than 0.25% of these payments may be for service fees. These
fees are paid monthly in arrears. Because these fees are paid out of a Fund's
assets on an ongoing basis, the higher fees for Class B shares will increase the
cost of your investment and over time may cost you more than paying the initial
sales charge for Class A shares.
FOR ACTUAL PAST EXPENSES OF CLASS A AND CLASS B SHARES OF A FUND, SEE THE
APPROPRIATE SECTION IN THIS PROSPECTUS ENTITLED "WHAT ARE THE FEES AND EXPENSES
OF THE FUND?"
Because of the lower overall expenses on Class A shares, we recommend Class A
shares for purchases in excess of $250,000. If you are investing in excess of
$1,000,000, we will only sell Class A shares to you. For purchases below
$250,000, the class that is best for you generally depends upon the amount you
invest, your time horizon, and your preference for paying the sales charge
initially or over time. If you fail to tell us what Class of shares you want, we
will purchase Class A shares for you.
How do I sell shares?
You may redeem your Fund shares on any day the Fund is open for business by:
o Contacting your Representative who will place a redemption order for you;
o Sending a written redemption request to Administrative Data Management
Corp., ("ADM") at 581 Main Street, Woodbridge, N.J. 07095-1198;
o Telephoning the Special Services Department of ADM at 1-800-342-6221
(telephone redemptions are not available on retirement and certain other
types of accounts); or
o Instructing us to make an electronic transfer to a predesignated bank (if
you have completed an application authorizing such transfers).
Your redemption request will be processed at the price next computed after we
receive the request, in good order, as described in the Shareholder Manual. For
all requests, have your account number available.
Payment of redemption proceeds generally will be made within 7 days. If you are
redeeming shares which you recently purchased by check, payment may be delayed
to verify that your check has cleared. This may take up to 15 days from the date
of your purchase. You may not redeem shares by telephone or Electronic Fund
Transfer unless you have owned the shares for at least 15 days.
If your account fails to meet the minimum account balance as a result of a
redemption, or for any reason other than market fluctuation, each Fund reserves
the right to redeem your account without your consent or to impose a low balance
account fee of $15 annually on 60 days prior notice. Each Fund may also redeem
your account or impose a low balance account fee if you have established your
account under a systematic investment program and discontinue the program before
you meet the minimum account balance. You may avoid redemption or imposition of
a fee by purchasing additional Fund shares during this 60-day period to bring
your account balance to the required minimum. If you own Class B shares, you
will not be charged a CDSC on a low balance redemption.
Each Fund reserves the right to make in-kind redemptions. This means that it
could respond to a redemption request by distributing shares of the Fund's
underlying investments rather than distributing cash.
Can I exchange my shares for the shares of other First Investors Funds?
You may exchange shares of a Fund for shares of the same class of any other
46
<PAGE>
First Investors Fund without paying any additional sales charge. Consult your
Representative or call ADM at 1-800-423-4026 for details.
Each Fund reserves the right to reject any exchange request that appears to be
part of a market timing strategy based upon the holding period of the initial
investment, the amount of the investment being exchanged, the funds involved,
and the background of the shareholder or dealer involved. Each Fund is designed
for long-term investment purposes. It is not intended to provide a vehicle for
short-term market timing.
ACCOUNT POLICIES
What about dividends and capital gain distributions?
To the extent that it has net investment income, Total Return Fund, Growth &
Income Fund, Blue Chip Fund and Utilities Income Fund will declare and pay a
dividend from net investment income on a quarterly basis. To the extent that it
has net investment income, Mid-Cap Opportunity Fund, Special Situations Fund,
Focused Equity Fund and Global Fund will declare and pay a dividend from net
investment income on an annual basis. Any net realized capital gains will be
declared and distributed on an annual basis, usually after the end of each
Fund's fiscal year. Each Fund may make an additional distribution in any year if
necessary to avoid a Federal excise tax on certain undistributed income and
capital gain.
Dividends and other distributions paid on both classes of a Fund's shares are
calculated at the same time and in the same manner. Dividends on Class B shares
of a Fund are expected to be lower than those for its Class A shares because of
the higher distribution fees borne by the Class B shares. Dividends on each
class also might be affected differently by the allocation of other
class-specific expenses. In order to be eligible to receive a dividend or other
distribution, you must own Fund shares as of the close of business on the record
date of the distribution.
You may choose to reinvest all dividends and other distributions at NAV in
additional shares of the same class of a Fund or certain other First Investors
Funds, or receive all dividends and other distributions in cash. If you do not
select an option when you open your account, all dividends and other
distributions will be reinvested in additional shares of a Fund. If you do not
cash a distribution check and do not notify ADM to issue a new check within 12
months, the distribution may be reinvested in a Fund. If any correspondence sent
by a Fund is returned as "undeliverable," dividends and other distributions
automatically will be reinvested in a Fund. No interest will be paid to you
while a distribution remains uninvested.
A dividend or other distribution paid on a class of shares will be paid in
additional shares of the distributing class if the total amount of the
distribution is under $5 or a Fund has received notice of your death (until
written alternate payment instructions and other necessary documents are
provided by your legal representative).
What about taxes?
Any dividends or capital gain distributions paid by a Fund are taxable to you
unless you hold your shares in an individual retirement account ("IRA"), 403(b)
account, 401(k) account, or other tax-deferred account. Dividends (including
distributions of net short-term capital gains) are taxable to you as ordinary
income. Capital gain distributions (essentially, distributions of net long-term
capital gains) by a Fund are taxed to you as long-term capital gains, regardless
of how long you owned your Fund shares. You are taxed in the same manner whether
you receive your dividends and capital gain distributions in cash or reinvest
47
<PAGE>
them in additional Fund shares. Your sale or exchange of Fund shares will be
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
How do I obtain a complete explanation of all account privileges and
policies?
The Funds offer a full range of special privileges, including special investment
programs for group retirement plans, systematic investment programs, automatic
payroll investment programs, telephone privileges, check writing privileges, and
expedited redemptions by wire order or Automated Clearing House transfer. The
full range of privileges, and related policies, are described in a special
Shareholder Manual, which you may obtain on request. For more information on the
full range of services available, please contact us directly at 1-800-423-4026.
48
<PAGE>
APPENDIX
--------
For the period March 22, 1999 to December 31, 1999, the Focused Equity Fund's
Class A and Class B shares returned 19.00% and 18.30%, respectively. The
performance of Class B shares differs from the performance of Class A shares
only to the extent that they do not have the same expenses. These figures do not
reflect sales charges that you may pay upon purchase or redemption of Fund
shares. If they were included, the returns would be less than those stated.
49
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
financial performance of each Fund for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in the
tables represent the rates that an investor would have earned (or lost) on an
investment in each Fund (assuming reinvestment of all dividends and
distributions). The information has been audited by Tait, Weller & Baker, whose
report, along with the Funds' financial statements, are included in the SAI,
which is available upon request.
<TABLE>
<CAPTION>
TOTAL RETURN FUND
--------------------------------------------------------------------------------
PER SHARE DATA
--------------------------------------------------------------------------------
LESS DISTRIBUTIONS
INCOME FROM INVESTMENT OPERATIONS FROM
--------------------------------- ------------------
NET
REALIZED
NET AND
NET ASSET INVEST- UNREALIZED TOTAL FROM NET
VALUE MENT GAIN(LOSS) INVEST- INVEST- NET TOTAL
---------
BEGINNING INCOME ON MENT MENT REALIZED DISTRI-
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAINS BUTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
CLASS A
1994(h).............. $11.88 $.21 $(.62) $(.41) $.19 $.39 $.58
1995(h).............. 10.89 .39 2.50 2.89 .37 .44 .81
1996(h).............. 12.97 .39 .97 1.36 .41 1.12 1.53
1997(h).............. 12.80 .26 2.04 2.30 .28 1.08 1.36
1998(a).............. 13.74 .23 .43 .66 .13 -- .13
1999(f).............. 14.27 .29 1.26 1.55 .30 1.18 1.48
CLASS B
1995(b).............. $10.90 $ .25 $2.54 $2.79 $ .33 $ .44 $ .77
1996(h).............. 12.92 .32 .94 1.26 .34 1.12 1.46
1997(h).............. 12.72 .21 1.97 2.18 .19 1.08 1.27
1998(a).............. 13.63 .17 .41 .58 .08 -- .08
1999(f).............. 14.13 .21 1.22 1.43 .21 1.18 1.39
</TABLE>
+ Annualized
++ Net of expenses waived or assumed by the investment advisor.
* Calculated without sales charges.
** Prior to February 15, 1996, known as Made In The U.S.A. Fund, and prior to
December 31, 1997, known as U.S.A.Mid-Cap Opportunity Fund.
(a) For the period January 1, 1998 to September 30, 1998.
(b) For the period January 12, 1995 (date Class B shares first offered) to
December 31, 1995.
(c) For the period November 1, 1997 to September 30, 1998.
(d) For the fiscal year ended October 31.
(e) For the period January 12, 1995 (class B shares first offered) to October
31, 1995.
(f) For the period October 1, 1998 to September 30, 1999.
(g) For the period March 22, 1999 (commencement of operations) to September 30,
1999.
(h) For the calendar year ended December 31.
50
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET
ASSETS BEFORE
RATIO TO AVERAGE EXPENSES WAIVED OR
NET ASSETS ++ ASSUMED
------------------- --------------------
NET ASSETS NET NET
NET ASSET END OF INVEST- INVEST-
VALUE TOTAL PERIOD MENT MENT PORTFOLIO
- ---------
END OF RETURN* (IN EXPENSES INCOME EXPENSES INCOME TURNOVER
PERIOD (%) MILLIONS) (%) (%) (%) (%) RATE (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
$10.89 (3.45) $51 1.63 1.91 1.88 1.66 124
12.97 26.71 55 1.58 3.08 1.83 2.83 135
12.80 10.62 57 1.53 2.93 1.78 2.68 146
13.74 18.08 67 1.49 1.94 1.74 1.69 149
14.27 4.76 73 1.42+ 2.15+ 1.65+ 1.92+ 111
14.34 11.50 92 1.40 2.08 1.63 1.85 127
$12.92 25.74 $ .3 2.41+ 2.24+ 2.67+ 1.98+ 135
12.72 9.86 1 2.32 2.14 2.49 1.97 146
13.63 17.24 3 2.19 1.24 2.44 .99 149
14.13 4.25 4 2.12+ 1.45+ 2.35+ 1.22+ 111
14.17 10.72 9 2.10 1.38 2.33 1.15 127
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
GROWTH & INCOME FUND
----------------------------------------------------------------------------------------------------
PER SHARE DATA
----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------------- --------------------
FROM
----
NET
REALIZED
AND TOTAL FROM NET NET TOTAL
NET ASSET NET UNREALIZED INVESTMENT INVESTMENT REALIZED DISTRIBU-
VALUE INVESTMENT GAIN (LOSS) OPERATIONS INCOME GAINS TIONS
BEGINNING INCOME ON
OF PERIOD (LOSS) INVESTMENTS
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
CLASS A
1994(d)....... $6.56 $.13 $.11 $.24 $.11 $-- $.11
1995(d)....... 6.69 .16 1.13 1.29 .17 -- .17
1996(d)....... 7.81 .10 1.60 1.70 .12 -- .12
1997(d)....... 9.39 .06 2.36 2.42 .06 .16 .22
1998(c)....... 11.59 .05 .97 1.02 .03 .27 .30
1999(f)....... 12.31 .04 2.88 2.92 .05 -- .05
CLASS B
1995(e)....... $6.43 $.08 $1.38 $1.46 $ .11 $-- $.11
1996(d)....... 7.78 .07 1.55 1.62 .07 -- .07
1997(d)....... 9.33 2.32 2.32 .01 .16 .17
1998(c)....... 11.48 (.01) .94 .93 -- .27 .27
1999(f)....... 12.14 (.04) 2.80 2.76 -- -- --
</TABLE>
+Annualized
++Net of expenses waived or assumed by the investment advisor.
*Calculated without sales charges.
**Prior to February 15, 1996, known as Made In The U.S.A. Fund, and prior to
December 31, 1997, known as U.S.A.Mid-Cap Opportunity Fund.
(a) For the period January 1, 1998 to September 30, 1998.
(b) For the period January 12, 1995 (date Class B shares first offered) to
December 31, 1995.
(c) For the period November 1, 1997 to September 30, 1998.
(d) For the fiscal year ended October 31.
(e) For the period January 12, 1995 (class B shares first offered) to October
31, 1995.
(f) For the period October 1, 1998 to September 30, 1999.
(g) For the period March 22, 1999 (commencement of operations) to September 30,
1999.
(h) For the calendar year ended December 31.
52
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
------------------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET
RATIO TO AVERAGE NET ASSET BEFORE EXPENSES
NET ASSETS++ WAIVED OR ASSUMED
-------------------- --------------------
NET ASSET
VALUE NET ASSETS
-------- END OF PERIOD NET NET PORTFOLIO
END TOTAL (IN INVESTMENT INVESTMENT TURNOVER
OF PERIOD RETURN* MILLIONS) EXPENSES INCOME EXPENSES INCOME RATE
(%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
$ 6.69 3.67 $ 34 .67 2.26 1.83 1.11 6
7.81 19.51 63 .98 2.34 1.59 1.74 19
9.39 21.82 112 1.31 1.20 1.49 1.02 25
11.59 26.20 194 1.39 .55 1.43 .51 28
12.31 8.84 258 1.39+ .47+ N/A N/A 36
15.18 23.75 378 1.36 .29 N/A N/A 112
$ 7.78 22.73 $ 4 1.90+ 2.23+ 2.61+ 1.52+ 19
9.33 20.92 12 2.03 .48 2.19 .31 25
11.48 25.23 27 2.09 (.15) 2.13 (.19) 28
12.14 8.19 43 2.09+ (.23)+ N/A N/A 36
14.90 22.77 77 2.06 (.41) N/A N/A 112
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
BLUE CHIP FUND
----------------------------------------------------------------------------------------------------
PER SHARE DATA
----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- ------------------
NET REALIZED
NET AND
NET ASSET INVEST- UNREALIZED NET
VALUE MENT GAIN (LOSS) TOTAL FROM INVEST- NET TOTAL
BEGINNING INCOME ON INVESTMENT MENT REALIZED DISTRI-
OF PERIOD (LOSS) INVESTMENT OPERATIONS INCOME GAINS BUTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
CLASS A
1994(h)............... $15.58 $.11 $(.58) $(.47) $.09 $1.56 $1.65
1995(h)............... 13.46 .19 4.37 4.56 .20 .60 .80
1996(h)............... 17.22 .14 3.39 3.53 .17 1.11 1.28
1997(h)............... 19.47 .09 4.98 5.07 .08 1.62 1.70
1998(a)............... 22.84 .04 (.39) (.35) .03 -- .03
1999(f)............... 22.46 -- 5.46 5.46 .02 .75 .77
CLASS B
1995(b)............... $13.51 $ .10 $4.31 $4.41 $.16 $ .60 $ .76
1996(h)............... 17.16 .06 3.32 3.38 .06 1.11 1.17
1997(h)............... 19.37 (.03) 4.91 4.88 - 1.62 1.62
1998(a)............... 22.63 (.06) (.42) (.48) - -- --
1999(f)............... 22.15 (.14) 5.35 5.21 - .75 .75
</TABLE>
+Annualized
++Net of expenses waived or assumed by the investment advisor.
*Calculated without sales charges.
**Prior to February 15, 1996, known as Made In The U.S.A. Fund, and prior to
December 31, 1997, known as U.S.A.Mid-Cap Opportunity Fund.
(a) For the period January 1, 1998 to September 30, 1998.
(b) For the periodJanuary 12, 1995 (date Class B shares first offered) to
December 31, 1995.
(c) For the period November 1, 1997 to September 30, 1998.
(d) For the fiscal year ended October 31.
(e) For the period January 12, 1995 (class B shares first offered) to October
31, 1995.
(f) For the period October 1, 1998 to September 30, 1999.
(g) For the period March 22, 1999 (commencement of operations) to September 30,
1999.
(h) For the calendar year ended December 31.
54
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
RATIO TO AVERAGE
NET ASSETS
RATIO TO AVERAGE BEFORE EXPENSES
NET ASSETS++ WAIVED OR ASSUMED
---------------- ---------------------
NET
ASSETS NET NET
NET ASSET END OF INVEST- INVEST-
VALUE TOTAL PERIOD INCOME MENT PORTFOLIO
END OF RETURN* (IN EXPENSES MENT EXPENSES INCOME TURNOVER
PERIOD (%) MILLIONS) (%) (%) (%) (%) RATE (%
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
$13.46 (3.02) $124 1.54 .80 1.79 .55 82
17.22 34.01 170 1.49 1.23 1.74 .98 25
19.47 20.55 240 1.44 .78 1.67 .55 45
22.84 26.05 351 1.39 .40 1.64 .15 63
22.46 (1.55) 368 1.37+ .23+ 1.47+ .13+ 71
27.15 24.88 471 1.32 .01 1.41 (.08) 97
$17.16 32.76 $ 5 2.20+ .52+ 2.46+ .26+ 25
19.37 19.71 17 2.22 -- 2.37 (.16) 45
22.63 25.19 37 2.09 (.30) 2.34 (.55) 63
22.15 (2.12) 47 2.07+ (.47)+ 2.17+ (.57)+ 71
26.61 24.07 70 2.02 (.69) 2.11 (.78) 97
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
UTILITIES INCOME FUND
------------------------------------------------------------------------
PER SHARE DATA
------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM
--------------------------------- -----------------------
NET
NET ASSET REALIZED AND
VALUE NET UNREALIZED TOTAL
--------- INVESTMENT GAIN (LOSS) FROM NET NET
BEGINNING INCOME ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAIN. DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
- -------
1994(d).............. $5.92 $.24 $(.84) $(.60) $.23 $.01 $.24
1995(d).............. 5.08 .23 .83 1.06 .24 -- .24
1996(d).............. 5.90 .21 .52 .73 .22 -- .22
1997(d).............. 6.41 .20 .61 .81 .19 -- .19
1998(c).............. 7.03 .14 .96 1.10 .14 .37 .51
1999(f).............. 7.62 .13 .74 .87 .13 .37 .50
CLASS B
- -------
1995(e).............. $4.95 $.14 $.93 $1.07 $.16 $-- .16
1996(d).............. 5.86 .18 .49 .67 .18 -- .18
1997(d).............. 6.35 .15 .61 .76 .15 -- .15
1998(c).............. 6.96 .10 .94 1.04 .10 .37 .47
1999(f).............. 7.53 .08 .72 .80 .08 .37 .45
+ Annualized
++ Net of expenses waived or assumed by the investment advisor.
* Calculated without sales charges.
** Prior to February 15, 1996, known as Made In The U.S.A. Fund, and prior to
December 31, 1997, known as U.S.A.Mid-Cap Opportunity Fund.
(a) For the period January 1, 1998 to September 30, 1998.
(b) For the period January 12, 1995 (date Class B shares first offered) to
December 31, 1995.
(c) For the period November 1, 1997 to September 30, 1998. (d) For the fiscal
year ended October 31.
(e) For the period January 12, 1995 (class B shares first offered) to October
31, 1995.
(f) For the period October 1, 1998 to September 30, 1999.
(g) For the period March 22, 1999 (commencement of operations) to September 30,
1999.
(h) For the calendar year ended December 31.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
- --------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET
RATIO TO AVERAGE NET ASSET BEFORE EXPENSES
ASSETS++ WAIVED OR ASSUMED
-------------------- ---------------------
NET ASSET
VALUE NET NET PORTFOLIO
- -------- TOTAL NET ASSETS INVESTMENT INVESTMENT TURNOVER
END RETURN* END OF PERIOD EXPENSES INCOME EXPENSES INCOME RATE
OF PERIOD (%) (IN MILLIONS) (%) (%) (%) (%) (%)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$5.08 (10.15) $ 63 .80 4.59 1.59 3.80 58
5.90 21.35 84 1.04 4.37 1.57 3.84 16
6.41 12.45 104 1.20 3.49 1.49 3.19 38
7.03 12.86 102 1.40 2.98 1.48 2.90 60
7.62 16.05 123 1.43+ 2.10+ N/A N/A 83
7.99 11.99 145 1.37 1.69 N/A N/A 65
$5.86 21.99 $ 3 1.82+ 4.93+ 2.53+ 4.21+ 16
6.35 11.61 8 1.91 2.77 2.28 2.40 38
6.96 12.08 9 2.10 2.28 2.18 2.20 60
7.53 15.38 14 2.13+ 1.40+ N/A N/A 83
7.88 11.13 21 2.07 .99 N/A N/A 65
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
MID-CAP OPPORTUNITY FUND**
-----------------------------------------------------------------------------------------------------
PER SHARE DATA
-----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM
--------------------------------- -----------------------
NET
NET ASSET REALIZED AND
VALUE NET UNREALIZED TOTAL
--------- INVESTMENT GAIN (LOSS) FROM NET NET
BEGINNING INCOME ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAIN. DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
- -------
1994(d)................ $12.15 $.08 $(.33) $(.25) $.12 $-- $.12
1995(d)................ 11.78 .08 2.80 2.88 .08 -- .08
1996(d)................ 14.58 .04 1.57 1.61 .06 .84 .90
1997(d)................ 15.29 (.03) 4.02 3.99 .04 .68 .72
1998(c)................ 18.56 (.03) (2.82) (2.85) -- 1.18 1.18
1999(f)................ 14.53 (.13) 6.62 6.49 -- -- --
CLASS B
- -------
1995(e)................ $12.03 $(.01) $2.49 $2.48 $-- $-- $
1996(d)................ 14.51 .01 1.47 1.48 .05 .84 .89
1997(d)................ 15.10 (.08) 3.89 3.81 -- .68 .68
1998(c)................ 18.23 (.12) (2.76) (2.88) -- 1.18 1.18
1999(f)................. 14.17 (.23) 6.41 6.18 -- --
</TABLE>
+ Annualized
++ Net of expenses waived or assumed by the investment advisor.
* Calculated without sales charges.
** Prior to February 15, 1996, known as Made In The U.S.A. Fund, and prior to
December 31, 1997, known as U.S.A.Mid-Cap Opportunity Fund.
(a) For the period January 1, 1998 to September 30, 1998.
(b) For the period January 12, 1995 (date Class B shares first offered) to
December 31, 1995.
(c) For the period November 1, 1997 to September 30, 1998. (d) For the fiscal
year ended October 31.
(e) For the period January 12, 1995 (class B shares first offered) to October
31, 1995.
(f) For the period October 1, 1998 to September 30, 1999.
(g) For the period March 22, 1999 (commencement of operations) to September 30,
1999.
(h) For the calendar year ended December 31.
58
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
- ---------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET
RATIO TO AVERAGE NET ASSET BEFORE EXPENSES
ASSETS++ WAIVED OR ASSUMED
-------------------- ---------------------
NET ASSET
VALUE NET NET PORTFOLIO
- -------- TOTAL NET ASSETS INVESTMENT INVESTMENT TURNOVER
END RETURN* END OF PERIOD EXPENSES INCOME EXPENSES INCOME RATE
OF PERIOD (%) (IN MILLIONS) (%) (%) (%) (%) (%)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$11.78 (2.05) $ 8 .90 .45 2.32 (.97) 29
14.58 24.59 9 1.34 .48 2.36 (.55) 106
15.29 11.64 14 1.57 .36 2.15 (.21) 118
18.56 27.09 26 1.50 (.21) 1.94 (.65) 90
14.53 (16.42) 30 1.50+ (.25)+ 1.89+ (.64)+ 102
21.02 44.67 50 1.50 (.69) 1.77 (.96) 171
$14.51 20.62 $ .3 2.29+ (.03)+ 3.79+ (1.53)+ 106
15.10 10.80 1 2.30 (.37) 3.03 (1.10) 118
18.23 26.17 3 2.20 (.91) 2.64 (1.35) 90
14.17 (16.91) 4 2.20+ (.95)+ 2.59+ (1.34)+ 102
20.35 43.61 7 2.20 (1.39) 2.47 (1.66) 171
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
SPECIAL SITUATIONS FUND
- -------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
--------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
INCOME FROM INVESTMENT OPERATIONS FROM
--------------------------------- -------------------
NET
REALIZED
NET ASSET NET AND
VALUE INVEST- UNREALIZED TOTAL FROM NET
--------- MENT GAIN (LOSS) INVEST- INVEST- NET TOTAL
BEGINNING INCOME ON MENT MENT REALIZED DISTRI-
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAINS BUTIONS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
- -------
1994(h)................... $18.00 $(.04) $(.62) $(.66) $ -- $.91 $.91
1995(h)................... 16.43 (.01) 3.94 3.93 -- .73 .73
1996(h)................... 19.63 (.01) 2.28 2.27 -- 1.17 1.17
1997(h)................... 20.73 (.09) 3.44 3.35 -- 1.90 1.90
1998(a)................... 22.18 (.05) (4.30) (4.35) -- -- --
1999(f)................... 17.83 (.22) 5.79 5.57 -- -- --
CLASS B
- -------
1995(b)................... $16.40 $(.01) $3.85 $3.84 $-- $ .73 $ .73
1996(h)................... 19.51 (.14) 2.25 2.11 -- 1.17 1.17
1997(h)................... 20.45 (.15) 3.29 3.14 -- 1.90 1.90
1998(a)................... 21.69 (.13) (4.22) (4.35) -- -- --
1999(f)................... 17.34 (.36) 5.64 5.28 -- -- --
</TABLE>
+ Annualized
++ Net of expenses waived or assumed by the investment advisor.
* Calculated without sales charges.
** Prior to February 15, 1996, known as Made In The U.S.A. Fund, and prior to
December 31, 1997, known as U.S.A.Mid-Cap Opportunity Fund.
(a) For the period January 1, 1998 to September 30, 1998.
(b) For the period January 12, 1995 (date Class B shares first offered) to
December 31, 1995.
(c) For the period November 1, 1997 to September 30, 1998.
(d) For the fiscal year ended October 31.
(e) For the period January 12, 1995 (class B shares first offered) to October
31, 1995.
(f) For the period October 1, 1998 to September 30, 1999.
(g) For the period March 22, 1999 (commencement of operations) to September 30,
1999.
(h) For the calendar year ended December 31.
60
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET
ASSET BEFORE
RATIO TO AVERAGE EXPENSES WAIVED OR
NET ASSETS++ ASSUMED
-------------------- ---------------------
NET ASSET NET NET
VALUE NET ASSETS INVEST- INVEST-
- -------- TOTAL END OF MENT MENT PORTFOLIO
END RETURN* PERIOD (IN EXPENSES INCOME EXPENSES INCOME TURNOVER
OF PERIOD (%) MILLIONS) (%) (%) (%) (%) RATE (%)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$16.43 (3.66) $ 90 1.65 (.26) 1.90 (.51) 53
19.63 23.92 125 1.60 (.08) 1.85 (.33) 80
20.73 11.56 158 1.59 (.13) 1.84 (.38) 99
22.18 16.15 194 1.53 (.45) 1.78 (.70) 84
17.83 (19.61) 160 1.53+ (.32)+ 1.75+ (.54)+ 70
23.40 31.24 186 1.53 (.97) 1.76 (1.20) 132
$19.51 23.42 $ 5 2.33+ (.81)+ 2.59+ (1.07)+ 80
20.45 10.81 10 2.38 (.92) 2.55 (1.09) 99
21.69 15.34 17 2.23 (1.15) 2.48 (1.40) 84
17.34 (20.06) 15 2.23+ (1.02)+ 2.45+ (1.24) 70
22.62 30.45 20 2.23 (1.67) 2.46 (1.90) 132
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
FOCUSED EQUITY FUND
---------------------------------------------------------------------------------
PER SHARE DATA
---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- FROM
----
NET
REALIZED
NET ASSET AND
VALUE UNREALIZED
--------- NET GAIN (LOSS) TOTAL FROM NET NET TOTAL
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED DISTRIBU
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS TIONS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
- -------
1999(g) $10.00 $(.04) $.92 $.88 $-- $-- $--
CLASS B
- -------
1999(g) $10.00 $(.06) $.90 $.84 $-- $-- $--
</TABLE>
+ Annualized
++ Net of expenses waived or assumed by the investment advisor.
* Calculated without sales charges.
** Prior to February 15, 1996, known as Made In The U.S.A. Fund, and prior to
December 31, 1997, known as U.S.A.Mid-Cap Opportunity Fund.
(a) For the period January 1, 1998 to September 30, 1998.
(b) For the period January 12, 1995 (date Class B shares first offered) to
December 31, 1995.
(c) For the period November 1, 1997 to September 30, 1998. (d) For the fiscal
year ended October 31.
(e) For the period January 12, 1995 (class B shares first offered) to October
31, 1995.
(f) For the period October 1, 1998 to September 30, 1999.
(g) For the period March 22, 1999 (commencement of operations) to September 30,
1999.
(h) For the calendar year ended December 31.
62
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
-----------------------------------------------------------------------------------------------
RATIO TO AVERAGE NET
RATIO TO AVERAGE NET ASSET BEFORE EXPENSES
ASSETS++ WAIVED OR ASSUMED
--------------------- ---------------------
NET ASSET NET NET
VALUE NET ASSETS INVEST- INVEST-
- -------- TOTAL END OF MENT MENT PORTFOLIO
END RETURN* PERIOD (IN EXPENSES INCOME EXPENSES INCOME TURNOVER
OF PERIOD (%) MILLIONS) (%) (%) (%) (%) RATE (%)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.88 8.80 $ 59 1.75+ (.93)+ 1.90+ (1.08)+ 57
$ 10.84 8.40 $ 14 2.45+ (1.63)+ 2.60+ (1.78)+ 57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL FUND
-----------------------------------------------------------------------------------
PER SHARE DATA
-----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- FROM
----
NET
VALUE REALIZED
--------- NET AND TOTAL FROM NET NET
BEGINNING INVESTMENT UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAINS DISTRIBU
(LOSS) ON TIONS
INVESTMENTS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
- -------
1994(h)...... $6.27 $ .03 $ (.27) $ (.24) $ .03 $.16 $.19
1995(h)...... 5.84 .03 1.01 1.04 .04 .27 .31
1996(h)...... 6.57 .04 .91 .95 .04 .89 .93
1997(h)...... 6.59 .03 .50 .53 .03 .68 .71
1998(a)...... 6.41 .01 (.09) (.08) -- -- --
1999(f)...... 6.33 1.86 1.86 .08 .08 .08
CLASS B
- -------
1995(b)...... $5.76 $ .03 $ 1.05 $1.08 $ .03 $.27 $.30
1996(h)...... 6.54 (.01) .88 .87 .02 .88 .90
1997(h....... 6.51 (.01) .49 .48 -- .68 .68
1998(a)...... 6.31 (.03) (.09) (.12) -- -- --
1999(f)...... 6.19 (.04) 1.81 1.77 -- .08 .08
</TABLE>
+ Annualized
++ Net of expenses waived or assumed by the investment advisor.
* Calculated without sales charges.
** Prior to February 15, 1996, known as Made In The U.S.A. Fund, and prior to
December 31, 1997, known as U.S.A.Mid-Cap Opportunity Fund.
(a) For the period January 1, 1998 to September 30, 1998.
(b) For the period January 12, 1995 (date Class B shares first offered) to
December 31, 1995.
(c) For the period November 1, 1997 to September 30, 1998.
(d) For the fiscal year ended October 31.
(e) For the period January 12, 1995 (class B shares first offered) to October
31, 1995.
(f) For the period October 1, 1998 to September 30, 1999.
(g) For the period March 22, 1999 (commencement of operations) to September 30,
1999.
(h) For the calendar year ended December 31.
64
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
R A T I O S / S U P P L E M E N T A L D A T A
- -----------------------------------------------------------------------------------------
RATIO TO AVERAGE NET
RATIO TO AVERAGE NET ASSET BEFORE EXPENSES
ASSETS++ WAIVED OR ASSUMED
--------------------- ---------------------
NET ASSET NET NET
VALUE NET ASSETS INVEST- INVEST-
- -------- TOTAL END OF MENT MENT PORTFOLIO
END RETURN* PERIOD (IN EXPENSES INCOME EXPENSES INCOME TURNOVER
OF PERIOD (%) MILLIONS) (%) (%) (%) (%) RATE (%)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$5.84 (3.78) 214 1.84 .45 N/A N/A 56
6.57 17.83 228 1.83 .55 N/A N/A 47
6.59 14.43 263 1.83 .50 N/A N/A 73
6.41 7.98 277 1.82 .41 N/A N/A 70
6.33 (1.25) 261 1.82+ .12+ N/A N/A 82
8.11 29.63 316 1.72 (.03) N/A N/A 92
6.54 18.80 1 2.56+ (.19)+ N/A N/A 47
6.51 13.33 5 2.54 (.21) N/A N/A 73
6.31 7.36 10 2.52 (.29) N/A N/A 70
6.19 (1.90) 12 2.52+ (.58) N/A N/A 82
7.88 28.78 18 2.42 (.73) N/A N/A 92
</TABLE>
<PAGE>
[FIRST INVESTORS LOGO]
TOTAL RETURN
GROWTH & INCOME
BLUE CHIP
UTILITIES INCOME
MID-CAP OPPORTUNITY
SPECIAL SITUATIONS
FOCUSED EQUITY
GLOBAL
For investors who want more information about the Funds, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about each Fund's investments
is available in the Funds' annual and semi-annual reports to shareholders. In
the Funds' annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected each Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds and is incorporated by reference into this
prospectus.
SHAREHOLDER MANUAL: The Shareholder Manual provides more detailed information
about the purchase, redemption and sale of the Funds' shares.
You can get free copies of reports, the SAI and the Shareholder Manual, request
other information and discuss your questions about the Funds by contacting the
Funds at:
Administrative Data Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198
Telephone: 1-800-423-4026
You can review and copy Fund documents (including reports, Shareholder Manuals
and SAIs) at the Public Reference Room of the SEC in Washington, D.C. You can
also send your request and a duplicating fee to the Public Reference Room of the
SEC, Washington, D.C. 20549-6009. You can obtain information on the operation of
the Public Reference Room, by calling 1-800-SEC-0330. Text-only versions of Fund
documents can be viewed online or downloaded from the SEC's Internet website at
http://www.sec.gov.
(Investment Company Act File No:
First Investors Total Return Fund
811-5690, First Investors Growth &
Income Fund 811-6618, First
Investors Blue Chip Fund 811-5690,
First Investors Utilities Income
Fund 811-6618, First Investors
Mid-Cap Opportunity Fund 811-6618,
First Investors Special Situations
Fund 811-5690, First Investors
Global Fund 811-3169)
<PAGE>
Supplement to Equity Funds Prospectus dated January 28, 2000
In addition to the Funds listed on the front and back cover pages of the
prospectus, this is also a prospectus for the Focused Equity Fund (Investment
Company Act File No.: 811-6618).
The following paragraph replaces the last paragraph on the back cover page: You
can review and copy Fund documents (including reports, Shareholder Manuals and
SAIs) at the Public Reference Room of the SEC in Washington, D.C. You can also
obtain copies of Fund documents after paying a duplicating fee (i) by writing to
the Public Reference Section of the SEC, Washington, D.C. 20549-0102 or (ii) by
electronic request at [email protected]. You can obtain information on the
operation of the Public Reference Room, including information about duplicating
fee charges, by calling (202) 942-8090. Text-only versions of Fund documents can
be viewed online or downloaded from the EDGAR database on the SEC's Internet
website at http://www.sec.gov.
Dated: January 28, 2000
<PAGE>
FIRST INVESTORS SERIES FUND II, INC.
FOCUSED EQUITY FUND
GROWTH & INCOME FUND
MID-CAP OPPORTUNITY FUND
UTILITIES INCOME FUND
FIRST INVESTORS SERIES FUND
BLUE CHIP FUND
SPECIAL SITUATIONS FUND
TOTAL RETURN FUND
FIRST INVESTORS GLOBAL FUND, INC.
95 Wall Street
New York, New York 10005
1-800-423-4026
STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 28, 2000
This is a Statement of Additional Information ("SAI") for FIRST INVESTORS
SERIES FUND II, INC. ("SERIES FUND II"), FIRST INVESTORS SERIES FUND ("SERIES
FUND") and FIRST INVESTORS GLOBAL FUND, INC. ("GLOBAL FUND"), each an open-end
management investment company. SERIES FUND II offers four separate series, each
of which has different investment objectives and policies: FIRST INVESTORS
FOCUSED EQUITY FUND, FIRST INVESTORS GROWTH & INCOME FUND, FIRST INVESTORS
MID-CAP OPPORTUNITY FUND and FIRST INVESTORS UTILITIES INCOME FUND. SERIES FUND
offers five separate series, three of which are described in this SAI and each
of which has different investment objectives and policies: FIRST INVESTORS BLUE
CHIP FUND, FIRST INVESTORS SPECIAL SITUATIONS FUND and FIRST INVESTORS TOTAL
RETURN FUND. GLOBAL FUND offers one series. (Each series is referred to as a
"Fund").
This SAI is not a prospectus. It should be read in conjunction with the
Funds' Prospectuses dated January 28, 2000, which may be obtained free of cost
from the Funds at the address or telephone number noted above. Information
regarding the purchase, redemption and exchange of your Fund shares is contained
in the Shareholder Manual, a separate section of the SAI that is a distinct
document and may also be obtained free of charge by contacting a Fund at the
address or telephone number noted above.
TABLE OF CONTENTS
PAGE
Investment Strategies and Risks................................. 2
Investment Policies............................................. 11
Futures and Options Strategies.................................. 21
Portfolio Turnover.............................................. 27
Investment Restrictions......................................... 28
Directors/Trustees and Officers................................. 38
Management...................................................... 40
Underwriter..................................................... 44
Distribution Plans.............................................. 45
Determination of Net Asset Value................................ 46
Allocation of Portfolio Brokerage............................... 48
Purchase, Redemption and Exchange of Shares..................... 50
Taxes........................................................... 50
Performance Information......................................... 54
General Information............................................. 59
Appendix A...................................................... 62
Appendix B...................................................... 65
Appendix C...................................................... 66
Financial Statements............................................ 72
Shareholder Manual: A Guide to your First Investors Mutual
Fund Account.................................................. 134
<PAGE>
INVESTMENT STRATEGIES AND RISKS
FOCUSED EQUITY FUND
The Fund seeks its objective of capital appreciation by investing
primarily in the equity securities of approximately 20 to 30 U.S. companies.
Under normal market conditions, at least 65% of the Fund's total assets will be
invested in equity securities, including common stocks, preferred stocks,
convertible securities and warrants.
The Fund invests in the stocks of companies it believes to be undervalued
in the current market. The Fund generally seeks to buy stocks of companies that
are involved in corporate or other events such as mergers, acquisitions,
divestitures, financial restructurings, management reorganizations, stock
buy-back programs and industry changes. In addition, the Fund looks for
companies with proven management with a financial interest in the company under
consideration, strong cash flows in excess of internal growth requirements,
established franchises and the potential for at least 50% appreciation within
two years. An investment in a company based on the occurrence of a corporate
event is subject to the risk that the corporate event will not develop as
favorably as expected or that the situation may deteriorate. For example, a
merger with favorable implications may be blocked or an industrial development
may not enjoy anticipated market acceptance. The Fund invests with a two-to-five
year time horizon. It will generally sell a security even before this horizon
expires if it reaches its target valuation, if the company's franchise value
deteriorates to a point where it no longer generates superior cash flows, if an
investment position reaches more than 12% of the Fund's total portfolio value
through appreciation or if better investment opportunities are identified.
The majority of the Fund's investments are expected to be securities
listed on the New York Stock Exchange ("NYSE") or other national securities
exchanges, or securities that have an established over-the-counter ("OTC")
market, although the depth and liquidity of the OTC market may vary from time to
time and from security to security.
The Fund may invest in the securities of foreign companies when they are
linked to the U.S. companies it has identified as having investment potential;
for example, it may invest in securities of foreign issuers that are involved in
mergers with U.S. companies that are held in the Fund's portfolio. Such foreign
investments usually will be in the form of American Depository Receipts ("ADRs")
or Global Depository Receipts ("GDRs"). See "Foreign Securities" and "American
Depository Receipts and Global Depository Receipts," below.
When market conditions warrant, or when the Fund's Subadviser, Arnhold and
S. Bleichroeder, Inc. ("ASB" or "Subadviser") believes it is necessary to
achieve the Fund's objective, the Fund may invest in fixed-income securities.
The fixed-income securities in which the Fund may invest include money market
instruments (including prime commercial paper, certificates of deposit of
domestic branches of U.S. banks and bankers' acceptances), U.S. Government
Obligations (including mortgage-backed securities) and corporate debt
securities. In addition, the Fund may invest in debt securities rated below Baa
by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group ("S&P") (including debt securities that have been downgraded), or
in unrated debt securities that are of comparable quality as determined by the
Subadviser. Securities rated lower than BBB by S&P or Baa by Moody's, commonly
referred to as "junk bonds" or "high yield securities," are speculative and
2
<PAGE>
generally involve a higher risk of loss of principal and income than
higher-rated securities. See "Debt Securities," "High Yield Securities," and
Appendix A for a description of debt security ratings.
Although the Fund may borrow money, it has no present intention of
borrowing other than for temporary or emergency purposes in amounts not
exceeding 5% of its total assets. The Fund may make loans of portfolio
securities, enter into repurchase agreements and invest in zero coupon
securities and securities issued on a "when-issued" or delayed delivery basis.
In any period of market weakness or of uncertain market or economic conditions,
the Fund may establish a temporary defensive position to preserve capital by
having all or part of its assets invested in short-term fixed-income securities
or retained in cash or cash equivalents.
Additional restrictions are set forth in the "Investment Restrictions"
section of this SAI.
GROWTH & INCOME FUND
The Fund seeks its objective by investing, under normal market conditions,
at least 65% of its total assets in securities that provide the potential for
growth and offer income, such as dividend-paying stocks and securities
convertible into common stock. The portion of the Fund's assets invested in
equity securities and in debt securities may vary from time to time due to
changes in interest rates and economic and other factors. The Fund is not
designed for investors seeking a steady flow of income distributions. Rather,
the Fund's policy of investing in income producing securities is intended to
provide investors with a more consistent total return than may be achieved by
investing solely in growth stocks.
The convertible debt securities in which the Fund may invest are not
subject to any limitations as to ratings and may include high, medium, lower and
unrated securities. Although the Fund may invest up to 20% of its total assets
in convertible debt securities rated below Baa by Moody's or BBB by S&P
(so-called "junk bonds") (including convertible debt securities that have been
downgraded), or in unrated convertible debt securities that are of comparable
quality as determined by First Investors Management Company, Inc. ("FIMCO" or
"Adviser"), it does not anticipate investing more than 5% of its total net
assets in such securities in the coming year. Convertible debt securities rated
lower than BBB by S&P or Baa by Moody's, commonly referred to as "junk bonds,"
are speculative and generally involve a higher risk of loss of principal and
income than higher-rated securities. See "Debt Securities," below, and Appendix
A for a description of convertible debt security ratings.
The Fund may invest up to 35% of its total assets in the following
instruments: money market instruments, including U.S. bank certificates of
deposit, bankers' acceptances, commercial paper issued by domestic corporations
and repurchase agreements; fixed income securities, including obligations issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities ("U.S. Government Obligations"), including mortgage-backed
securities, and corporate debt securities rated at least Baa by Moody's or BBB
by S&P, commonly known as "investment grade securities" or unrated securities
that are of comparable quality as determined by the Adviser; and common stock
and securities convertible into common stock of companies that are not paying a
dividend if there exists the potential for growth of capital or future income.
It is the Fund's policy to attempt to sell, within a reasonable time period, a
debt security which has been downgraded below investment grade (other than
convertible debt securities, as previously discussed), provided that such
3
<PAGE>
disposition is in the best interests of the Fund and its shareholders. See "Debt
Securities," below, and Appendix A for a description of corporate and
convertible debt security ratings.
Because the Fund invests in bonds and convertible debt securities, it is
subject to interest rate risk. The market value of a bond or convertible debt
security is affected by changes in interest rates. When interest rates rise, the
market value of a bond declines. When interest rates decline, the market value
of a bond increases. Generally, the longer a bond's maturity, the greater its
sensitivity to interest rates. A bond's value can also be affected by changes in
the credit rating of the financial condition of its issuer.
The Fund's investments in bonds are also subject to the risk of default.
This risk is greater in the case of its investments in high yield bonds. These
bonds generally provide higher income in an effort to compensate investors for
their higher risk of default (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, and companies which
have elected to borrow heavily.
Generally, the prices of equity securities could be affected by such
factors as a change in a company's earnings, fluctuations in interest rates or
changes in the rate of economic growth. To the extent the Fund invests in
issuers with small capitalizations, the Fund would be subject to greater risk
than may be involved in investing in companies with larger capitalizations.
These securities generally include newer and less seasoned companies which are
more speculative than securities issued by well-established issuers. Other risks
may include less available information about the issuer, the absence of a
business history or historical pattern of performance, as well as normal risks
which accompany the development of new products, markets or services.
The Fund may invest in securities of foreign companies directly or through
ADRs or GDRs. The Fund may invest without limitation in sponsored ADRs. It may
not invest more than 10% of its total assets in direct foreign securities,
unsponsored ADRs and GDRs. Foreign securities, ADRs and GDRs 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. See "Foreign Securities" and "American Depository Receipts
and Global Depository Receipts," below. While the Fund may enter into forward
currency contracts to protect against uncertainty in the level of future
exchange rates, it does not currently intend to use this authority. In any
event, the Adviser will not attempt to time actively either short-term market
trends or short-term currency trends in any market. See "Futures and Options
Strategies."
The Fund may also borrow money for temporary or emergency purposes in
amounts not exceeding 5% of its net assets, make loans of portfolio securities
and invest in securities issued on a "when-issued" or delayed delivery basis. In
addition, in any period of market weakness or of uncertain market or economic
conditions, the Fund may establish a temporary defensive position to preserve
capital by having up to 100% of its assets invested in short-term fixed income
securities or retained in cash or cash equivalents.
Additional restrictions are set forth in the "Investment Restrictions"
section of this SAI.
4
<PAGE>
MID-CAP OPPORTUNITY FUND
The Fund seeks its objective of long-term capital growth by investing,
under normal market conditions, at least 65% of its total assets in common
stocks of companies that have a medium market capitalization. The Fund seeks to
invest in equity securities that the Adviser believes demonstrate outstanding
growth records and potential based on the Adviser's fundamental analysis of the
company. The companies in which the Fund invests will be primarily those with
medium market capitalization (often known as "mid-cap"). The Fund defines
mid-cap stocks as those with market capitalizations which fall within the range
of those companies in the S&P 400 Mid-Cap Index. The market capitalizations of
companies in the S&P 400 Mid-Cap Index will change with market conditions.
Market capitalization is the total market value of a company's outstanding
common stock. Growth equity securities tend to have above-average price to
earnings ratios and less-than-average current yields compared to non-growth
equity securities. The payment of dividend income will not be a primary
consideration in the selection of equity investments.
The Fund's focus on growth stocks increases the potential volatility of
its share price. Growth stocks are stocks of companies which are expected to
increase their earnings faster than the overall market. If expectations are not
met, the prices of these stocks may decline drastically even if earnings do
increase. Investments in growth companies may lack the dividend yield that can
cushion stock prices in market downturns.
The Fund may invest up to 35% of its total assets in small capitalization
stocks, large capitalization stocks, U.S. Government Obligations, including
mortgage-backed securities, and investment grade debt securities or unrated
securities that are of comparable quality as determined by the Adviser,
repurchase agreements, investment grade securities convertible into common
stock, warrants to purchase common stock and zero coupon and pay-in-kind
securities. The Fund may borrow money for temporary or emergency purposes in an
amount not exceeding 5% of its net assets and invest in securities issued on a
"when-issued" or delayed delivery basis. The Adviser continually monitors the
investments in the Fund's portfolio and carefully evaluates on a case-by-case
basis whether to dispose of or retain a debt security that has been downgraded
below investment grade. No more than 5% of the Fund's net assets will remain
invested in such downgraded securities. See "Debt Securities," below, and
Appendix A for a description of corporate bond ratings.
In any period of market weakness or of uncertain market or economic
conditions, the Fund may establish a temporary defensive position to preserve
capital by having all or part of its assets invested in short-term fixed income
securities or retained in cash or cash equivalents, including U.S. Government
Obligations, mortgage-backed securities, bank certificates of deposit, bankers'
acceptances and commercial paper issued by domestic corporations.
The Fund may invest in securities of foreign companies directly or through
ADRs or GDRs. The Fund may invest without limitation in sponsored ADRs. It may
not invest more than 10% of its total assets in direct foreign securities,
unsponsored ADRs and GDRs. Foreign securities, ADRs and GDRs 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. See "Foreign Securities" and "American Depository Receipts
and Global Depository Receipts," below.
5
<PAGE>
Additional restrictions are set forth in the "Investment Restrictions"
section of this SAI.
UTILITIES INCOME FUND
The Fund seeks its objective by investing, under normal market conditions,
at least 65% of its total assets in equity and debt securities issued by
companies primarily engaged in the public utilities industry. Equity securities
in which the Fund may invest include common stocks, preferred stocks, securities
convertible into common stocks or preferred stocks and warrants to purchase
common or preferred stocks. The portion of the Fund's assets invested in equity
securities and in debt securities will vary from time to time due to changes in
interest rates and economic and other factors.
The Fund defines utilities companies as those that are primarily engaged
in the ownership or operation of facilities used to provide electricity, gas,
water or telecommunications (including telephone, telegraph and satellite, but
not public broadcasting or cable television). For these purposes, "primarily
engaged" means that (1) more than 50% of the company's assets are devoted to the
ownership or operation of one or more facilities as described above, or (2) more
than 50% of the company's operating revenues are derived from the business or
combination of any of the businesses described above. It should be noted that
based on this definition, the Fund may invest in companies which are also
involved to a significant degree in non-public utilities activities.
Utilities stocks generally offer dividend yields that exceed those of
industrial companies and their prices tend to be less volatile than stocks of
industrial companies. However, utilities stocks can still be affected by the
risks of the stock of industrial companies. The Fund has a policy to concentrate
its investments in the securities of companies in the public utilities industry.
Because the Fund concentrates its investments in public utilities companies, the
value of its shares will be especially affected by factors peculiar to the
utilities industry, and may fluctuate more widely than the value of shares of a
fund that invests in a broader range of industries. See "Utilities Industries."
The Fund may invest up to 35% of its total assets in the following
instruments: debt securities and common and preferred stocks of non-utilities
companies; U.S. Government Obligations; mortgage-backed securities; cash; and
money market instruments consisting of prime commercial paper, bankers'
acceptances, certificates of deposit and repurchase agreements. The Fund may
invest in securities on a "when-issued" or delayed delivery basis and make loans
of portfolio securities.
The Fund may borrow money for temporary or emergency purposes in amounts
not exceeding 5% of its net assets. The Fund also may invest in zero coupon and
pay-in-kind securities. In addition, in any period of market weakness or of
uncertain market or economic conditions, the Fund may establish a temporary
defensive position to preserve capital by having up to 100% of its assets
invested in short-term fixed income securities or retained in cash or cash
equivalents.
The Fund may not invest more than 5% of its total assets in debt
securities rated below Baa by Moody's or BBB by S&P (so called "junk bonds").
See "Debt Securities," below, and Appendix A for a description of corporate bond
ratings. See "High Yield Securities."
6
<PAGE>
The Fund may invest in securities of foreign companies directly or through
ADRs or GDRs. The Fund may invest without limitation in sponsored ADRs. It may
not invest more than 10% of its total assets in direct foreign securities,
unsponsored ADRs and GDRs. Foreign securities, ADRs and GDRs 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. See "Foreign Securities" and "American Depository Receipts
and Global Depository Receipts," below.
Additional restrictions are set forth in the "Investment Restrictions"
section of this SAI.
BLUE CHIP FUND
The Fund seeks its objective by investing, under normal market conditions,
at least 65% of its total assets in common stocks of "Blue Chip" companies that
the Adviser believes have potential earnings growth that is greater than the
average company in the Standard & Poor's 500 Composite Stock Price Index ("S&P
500"). The Fund also may invest up to 35% of its total assets in the equity
securities of non-Blue Chip companies that the Adviser believes have significant
potential for growth of capital or future income consistent with the
preservation of capital. When market conditions warrant, or when the Adviser
believes it is necessary to achieve the Fund's objective, the Fund may invest up
to 25% of its total assets in fixed-income securities. It is the Fund's policy
to remain relatively fully invested in equity securities under all market
conditions rather than to attempt to time the market by maintaining large cash
or fixed-income securities positions when market declines are anticipated. The
Fund is appropriate for investors who are comfortable with a fully invested
stock portfolio.
The Fund defines Blue Chip companies as those companies that are in the
S&P 500. Blue Chip companies are considered to be of relatively high quality and
generally exhibit superior fundamental characteristics, which may include:
potential for consistent earnings growth, a history of profitability and payment
of dividends, leadership position in their industries and markets, proprietary
products or services, experienced management, high return on equity and a strong
balance sheet. Blue Chip companies usually exhibit less investment risk and
share price volatility than smaller, less established companies.
The Fund primarily invests in stocks of growth companies. These are
companies which are expected to increase their earnings faster than the overall
market. If earnings expectations are not met, the prices of these stocks may
decline substantially even if earnings do increase. Investments in growth
companies may lack the dividend yield that can cushion stock prices in market
downturns.
The fixed-income securities in which the Fund may invest include money
market instruments (including prime commercial paper, certificates of deposit of
domestic branches of U.S. banks and bankers' acceptances), U.S. Government
Obligations (including mortgage-backed securities) and corporate debt
securities. However, no more than 5% of the Fund's net assets may be invested in
corporate debt securities rated below Baa by Moody's or BBB by S&P. The Fund may
borrow money for temporary or emergency purposes in amounts not exceeding 5% of
its total assets. The Fund may enter into repurchase agreements and make loans
of portfolio securities.
7
<PAGE>
The Fund may invest in securities of foreign companies directly or through
ADRs or GDRs. The Fund may invest without limitation in sponsored ADRs. It may
not invest more than 10% of its total assets in direct foreign securities,
unsponsored ADRs and GDRs. Foreign securities, ADRs and GDRs 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. See "Foreign Securities" and "American Depository Receipts
and Global Depository Receipts," below.
Additional restrictions are set forth in the "Investment Restrictions"
section of this SAI.
SPECIAL SITUATIONS FUND
The Fund seeks its objective by investing, under normal market conditions,
at least 65% of its total assets in the common stock of companies with small
market capitalization that the Adviser considers to be undervalued or less well
known in the current marketplace and to have potential for capital growth. The
Fund may invest up to 35% of its total assets in other common stocks and in
preferred stock that is convertible into common stock issued by U.S.
corporations, and in the common stock of companies located outside the United
States, including companies with larger market capitalization if the Fund
determines that they present good opportunities for growth.
The Fund seeks to invest in the common stock of companies that the Adviser
believes are undervalued in the current market in relation to fundamental
economic values such as earnings, sales, cash flow and tangible book value; that
are early in their corporate development (I.E., before they become widely
recognized and well known and while their reputations and track records are
still emerging); or that offer the possibility of greater earnings because of
revitalized management, new products or structural changes in the economy. Such
companies primarily are those with small market capitalizations (often knows as
"small-cap." The Fund defines small-cap stocks as those with market
capitalizations which fall within the range of those companies in the S&P 600
Small-Cap Index. The market capitalizations of companies in the S&P 600
Small-Cap Index will change with market conditions. The Adviser believes that,
over time, these securities are more likely to appreciate in price than
securities whose market prices have already reached their perceived economic
value. In addition, the Fund intends to diversify its holdings among as many
companies and industries as the Adviser deems appropriate.
Companies that are early in their corporate development may be dependent
on relatively few products or services, may lack adequate capital reserves, may
be dependent on one or two management individuals and may have less of a track
record or historical pattern of performance. In addition, there may be less
information available as to the issuers and their securities may not be well
known to the general public and may not yet have wide institutional ownership.
Securities of these companies may have more potential for growth but also
greater risk than that normally associated with larger, older or better-known
companies.
Investments in securities of companies with small market capitalizations
are generally considered to offer greater opportunity for appreciation and to
involve greater risk of depreciation than securities of companies with larger
market capitalization. These include the equity securities of companies which
represent new or changing industries and those which, in the opinion of the
8
<PAGE>
Adviser, represent special situations, the potential future value of which has
not been fully recognized. Growth securities of companies with small market
capitalizations which represent a special situation bear the risk that the
special situation will not develop as favorably as expected, or the situation
may deteriorate. For example, a merger with favorable implications may be
blocked, an industrial development may not enjoy anticipated market acceptance
or a bankruptcy may not be as profitably resolved as had been expected. Because
the securities of most companies with small market capitalizations are not as
broadly traded as those of companies with larger market capitalizations, these
securities are often subject to wider and more abrupt fluctuations in market
price. In the past, there have been prolonged periods when these securities have
substantially underperformed or outperformed the securities of larger
capitalization companies. In addition, smaller capitalization companies
generally have fewer assets available to cushion an unforeseen adverse
occurrence and thus such an occurrence may have a disproportionately negative
impact on these companies.
The majority of the Fund's investments are expected to be securities of
U.S. issuers that are traded on a U.S. securities exchange, or in the OTC
market. The depth and liquidity of the market for small-cap stocks may vary from
time to time and from security to security.
The Fund may invest in securities of foreign companies directly or through
ADRs or GDRs. The Fund may invest without limitation in sponsored ADRs. It may
not invest more than 10% of its total assets in direct foreign securities,
unsponsored ADRs and GDRs. Foreign securities, ADRs and GDRs 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. See "Foreign Securities" and "American Depository Receipts
and Global Depository Receipts," below.
The Fund may invest up to 5% of its total assets in the securities of
other registered investment companies. Such investments will probably involve
additional advisory or distribution fees. The Fund may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets
and enter into repurchase agreements.
Additional restrictions are set forth in the "Investment Restrictions"
section of this SAI.
TOTAL RETURN FUND
The Fund seeks its objective by employing a flexible investment strategy
which emphasizes investments in stocks, bonds and money market instruments.
Under normal market conditions, the Fund will have at 25% of total assets
invested in bonds, cash and cash equivalents, and at least 50% in equities. On a
regular basis, the Fund reviews and determines whether to adjust its asset
allocations based upon its views on market conditions, the relative values of
the asset classes and economic trends. The Fund may invest in domestic and
foreign common stocks and other equity securities, such as preferred stocks,
securities convertible into common stocks and warrants to purchase common stock.
The Fund also may invest in debt securities, including money market instruments
(consisting of prime commercial paper, certificates of deposit of domestic
branches of U.S. banks and bankers' acceptances), U.S. Government Obligations
(including mortgage-backed securities), municipal bonds rated Baa or better by
Moody's or BBB or better by S&P and corporate and foreign debt securities. The
Fund also may borrow money for temporary or emergency purposes in amounts not
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exceeding 5% of its total assets, enter into repurchase agreements and make
loans of portfolio securities. The Fund may invest up to 5% of its net assets in
zero coupon and pay-in-kind securities and may invest up to 10% of its net
assets in securities issued on a when-issued or delayed delivery basis. No more
than 25% of the Fund's net assets may be invested in corporate debt securities
and municipal bonds rated below Baa by Moody's or BBB by S&P. See "High Yield
Securities" and Appendix A for a description of corporate and municipal bond
ratings.
The equity securities in which the Fund generally invests include both
growth and value equity securities. Growth equity securities include securities
of seasoned companies, I.E., companies with above-average earnings growth as
compared to the average of the stocks in the S&P 500, other companies which the
Adviser believes demonstrate changing or accelerating growth profiles and
smaller companies with outstanding growth records and potential based on the
Adviser's fundamental analysis of the company. Growth equity securities tend to
have above-average price to earnings ratios and less-than-average current yields
as compared to other equity securities. Value equity securities tend to have
below average price to earnings ratios, low price to book value and potentially
high current yields.
The majority of the Fund's equity investments are expected to be
securities listed on the NYSE other national securities exchanges or securities
that have an established OTC market, although the depth and liquidity of the OTC
market may vary from time to time and from security to security. The Fund may
invest in newer and less seasoned companies with small to medium market
capitalizations. The Fund's ability to invest in unseasoned companies with
above-average earnings growth, other companies with changing or accelerating
growth profiles and smaller companies with outstanding growth records and
potential subjects the Fund to greater risk than may be involved in investing in
securities which are not selected for such growth characteristics.
The Fund may invest in securities of foreign companies directly or through
ADRs or GDRs. The Fund may invest without limitation in sponsored ADRs. It may
not invest more than 10% of its total assets in direct foreign securities,
unsponsored ADRs and GDRs. Foreign securities, ADRs and GDRs 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. See "Foreign Securities" and "American Depository Receipts
and Global Depository Receipts," below. While the Fund may enter into forward
currency contracts to protect against uncertainty in the level of future
exchange rates, it does not currently intend to use this authority. In any
event, the Adviser will not attempt to time actively either short-term market
trends or short-term currency trends in any market. See "Futures and Options
Strategies."
Additional restrictions are set forth in the "Investment Restrictions"
section of this SAI.
GLOBAL FUND
The Fund, under normal market conditions, invests in common stocks,
preferred stocks and bonds and other debt obligations issued by companies or
governments of at least three countries, including the United States. Currently,
the Fund primarily is invested in common stocks. The emphasis is on
high-quality, medium to large capitalization companies with an established
market throughout the world and the United States, with opportunistic investment
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in smaller companies and/or emerging markets. Investments in foreign markets
involve special risks and considerations which are in addition to the usual
risks inherent in domestic investments. See "Foreign Securities," below.
The Fund may purchase securities traded on any foreign stock exchange. The
Fund may also purchase ADRs and GDRs. See "American Depository Receipts and
Global Depository Receipts," below. The Fund also may invest up to 25% of its
total assets in unlisted securities of foreign issuers; provided, however, that
no more than 10% of the value of its net assets may be invested in such
securities with a limited trading market. The investment standards for the
selection of unlisted securities are the same as those used in the purchase of
securities traded on a stock exchange. The Fund will invest in debt securities
rated in the three highest rating categories by either Moody's or S&P or, if
unrated, determined to be of comparable quality by Wellington Management
Company, LLP ("WMC" or the "Subadviser"). See Appendix A for a description of
such bond ratings.
The Fund may invest in securities convertible into common stocks,
preferred stocks, warrants and repurchase agreements and may purchase securities
on a when-issued or delayed delivery basis. The Fund also may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets
and make loans of portfolio securities. For temporary defensive purposes, the
Fund may invest up to 100% of its total assets in U.S. Government obligations
and cash equivalents denominated in U.S. dollars.
Additional restrictions are set forth in the "Investment Restrictions"
section of this SAI.
INVESTMENT POLICIES
AMERICAN DEPOSITORY RECEIPTS AND GLOBAL DEPOSITORY RECEIPTS. Each Fund may
invest in ADRs and GDRs. ADRs typically are issued by a U.S. bank or trust
company and evidence ownership of the underlying securities of foreign issuers.
Generally, ADRs are denominated in U.S. dollars and are designed for use in the
U.S. securities markets. Thus, these securities are not denominated in the same
currency as the underlying securities into which they may be converted. While
ADRs are not considered by the Fund to be foreign securities, ADRs are subject
to many of the risks inherent in investing in foreign securities, including but
not limited to currency fluctuations, political instability, government
regulation, unfavorable political or legal developments, and differences in
financial reporting standards. ADRs may be purchased through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the underlying security and a depository, whereas a depository may
establish an unsponsored facility without participation by the issuer of the
depository security. Holders of unsponsored depository receipts generally bear
all the costs of such facilities and the depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts of the deposited securities.
GDRs are issued globally and evidence a similar ownership arrangement to
ADRs. Generally, GDRs are not denominated in U.S. dollars and are designed for
trading in non-U.S. securities markets. Like ADRs, GDRs may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. As with ADRs, the issuers of the securities underlying
unsponsored GDRs are not obligated to disclose material information in the U.S.
and, therefore, there may be less information available regarding such issuers
and there may not be a correlation between such information and the market value
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of the GDRs. GDRs also involve the risks of other investments in foreign
securities. For purposes of certain investment limitations, GDRs are considered
to be foreign securities by the Funds.
BANKERS' ACCEPTANCES. Each Fund may invest in bankers' acceptances.
Bankers' acceptances are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an asset
or it may be sold in the secondary market at the going rate of interest for a
specific maturity. Although maturities for acceptances can be as long as 270
days, most acceptances have maturities of six months or less.
CERTIFICATES OF DEPOSIT. Each Fund may invest in bank certificates of
deposit ("CDs"). 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.
COMMERCIAL PAPER. Each Fund may invest in commercial paper. Commercial
paper is a promissory issued by a corporation to finance short-term needs, which
may either be unsecured or backed by a letter of credit. 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 commercial paper are limited to
obligations rated Prime-1 by Moody's or A-1 by S&P. Investments in certificates
of deposit are made only with domestic institutions with assets in excess of
$500 million.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities.
While no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock, although
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed income
security. The Adviser or, in the case of Focused Equity Fund and Global Fund,
their respective Subadviser will decide to invest based upon a fundamental
analysis of the long-term attractiveness of the issuer and the underlying common
stock, the evaluation of the relative attractiveness of the current price of the
underlying common stock, and the judgment of the value of the convertible
security relative to the common stock at current prices.
DEBT SECURITIES. Each Fund may invest in debt securities. The market value
of debt securities is influenced significantly by changes in the level of
interest rates. Generally, as interest rates rise, the market value of debt
securities decreases. Conversely, as interest rates fall, the market value of
debt securities increases. Factors which could result in a rise in interest
rates, and a decrease in market value of debt securities, include an increase in
inflation or inflation expectations, an increase in the rate of U.S. economic
growth, an expansion in the Federal budget deficit, or an increase in the price
of commodities such as oil. In addition, the market value of debt securities is
influenced by perceptions of the credit risks associated with such securities.
Credit risk is the risk that adverse changes in economic conditions can affect
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an issuer's ability to pay principal and interest. GLOBAL FUND may invest in
debt securities that, at the time of purchase, are rated in the three highest
rating categories by at least one nationally recognized statistical rating
organization rating that security, such as S&P and Moody's, or, if unrated,
deemed to be of comparable quality by its Subadviser. The Adviser or, for
Focused Equity Fund and GLOBAL FUND, their respective Subadviser, continually
monitor the investments in each Fund's portfolio and carefully evaluates on a
case-by-case basis whether to dispose of or retain a debt security that has been
downgraded.
FOREIGN GOVERNMENT OBLIGATIONS. GLOBAL FUND and TOTAL RETURN 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. Each Fund may sell a security denominated in a foreign
currency and retain the proceeds in that foreign currency to use at a future
date (to purchase other securities denominated in that currency) or the Fund may
buy foreign currency outright to purchase securities denominated in that foreign
currency at a future date. Investing in foreign securities involves more risk
than investing in securities of U.S. companies. The Funds currently do not
intend to hedge their foreign investments against the risk of foreign currency
fluctuations. Accordingly, changes in the value of foreign currencies can
significantly affect the Fund's share price, irrespective of developments
relating to the issuers of securities held by the Fund. 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 Funds held in foreign
countries.
GLOBAL FUND and FOCUSED EQUITY FUND may also invest in the securities of
issuers in less developed foreign countries. Each Fund's investments in emerging
markets include investments in countries whose economies or securities markets
are not yet highly developed. Special considerations associated with these
investments (in addition to the considerations regarding foreign investments
generally) may include, among others, greater political uncertainties, an
economy's dependence on revenues from particular commodities or on international
aid or development assistance, currency transfer restrictions, a limited number
of potential buyers for such securities and delays and disruptions in securities
settlement procedures.
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HIGH YIELD SECURITIES-RISK FACTORS. BLUE CHIP FUND, FOCUSED EQUITY FUND,
TOTAL RETURN FUND, UTILITIES INCOME FUND and GROWTH & INCOME FUND may invest in
high yield, high risk securities (commonly referred to as "junk bonds") ("High
Yield Securities"). High Yield Securities are subject to greater risks than
those that are present with investments of higher grade securities, as discussed
below. These risks also apply to lower-rated and certain unrated convertible
securities.
EFFECT OF INTEREST RATE AND ECONOMIC CHANGES. Debt obligations,
including convertible debt securities, rated lower than Baa by Moody's or BBB by
S&P, commonly referred to as "junk bonds" are speculative and generally involve
a higher risk or loss of principal and income than higher-rated securities. The
prices of High Yield Securities tend to be less sensitive to interest rate
changes than higher-rated investments, but may be more sensitive to adverse
economic changes or individual corporate developments. Periods of economic
uncertainty and changes generally result in increased volatility in the market
prices and yields of High Yield Securities and thus in a Fund's net asset value.
A 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 a 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,
the Fund might incur additional expenses to seek recovery.
Generally, when interest rates rise, the value of fixed rate debt
obligations, including High Yield Securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a High Yield Security containing a redemption or call provision
exercises either provision in a declining interest rate market, the Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if the Fund experiences unexpected net redemptions in
a rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to
which Fund expenses could be allocated and in a reduced rate of return for the
Fund. While it is impossible to protect entirely against this risk,
diversification of the Fund's portfolio and the Adviser's careful analysis of
prospective portfolio securities helps to minimize the impact of a decrease in
value of a particular security or group of securities in the Fund's portfolio.
THE HIGH YIELD SECURITIES MARKET. The market for below investment
grade bonds expanded rapidly in recent years and its growth paralleled a long
economic expansion. At times in the past, the prices of many lower-rated debt
securities have declined substantially, reflecting an expectation that many
issuers of such securities might experience financial difficulties. As a result,
the yields on lower-rated debt securities rose dramatically. However, such
higher yields did not reflect the value of the income streams that holders of
such securities expected, but rather the risk that holders of such securities
could lose a substantial portion of their value as a result of the issuers'
financial restructuring or default. There can be no assurance that such declines
in the below investment grade market will not reoccur. The market for below
investment grade bonds generally is thinner and less active than that for higher
quality bonds, which may limit the Fund's ability to sell such securities at
reasonable prices 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.
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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.
LIQUIDITY AND VALUATION. Lower-rated bonds are typically traded
among a smaller number of broker-dealers than in a broad secondary market.
Purchasers of High Yield Securities tend to be institutions, rather than
individuals, which is a factor that further limits the secondary market. To the
extent that no established retail secondary market exists, many High Yield
Securities may not be as liquid as higher-grade bonds. A less active and thinner
market for High Yield Securities than that available for higher quality
securities may result in more volatile valuations of the Fund's holdings and
more difficulty in executing trades at favorable prices during unsettled market
conditions.
The ability of a Fund to value or sell High Yield Securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. During such periods, there may be less reliable objective information
available and thus the responsibility of the Board of Directors or Trustees, as
applicable (hereinafter referred to as the "Board" or "Directors") to value High
Yield Securities becomes more difficult, with judgment playing a greater role.
Further, adverse publicity about the economy or a particular issuer may
adversely affect the public's perception of the value, and thus liquidity, of a
High Yield Security, whether or not such perceptions are based on a fundamental
analysis.
LOANS OF PORTFOLIO SECURITIES. While they have no present intention of
doing so, GROWTH & INCOME FUND, UTILITIES INCOME FUND, GLOBAL FUND, BLUE CHIP
FUND, FOCUSED EQUITY FUND and TOTAL RETURN FUND may loan securities to qualified
broker-dealers or other institutional investors provided: the borrower pledges
to a 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 a 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. A 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.
MORTGAGE-BACKED SECURITIES. BLUE CHIP FUND, FOCUSED EQUITY FUND, TOTAL
RETURN FUND, GROWTH & INCOME FUND, UTILITIES INCOME FUND and MID-CAP OPPORTUNITY
FUND may invest in mortgage-backed securities, including those representing an
undivided ownership interest in a pool of mortgage loans. Each of the
certificates described below is characterized by monthly payments to the
security holder, reflecting the monthly payments made by the mortgagees of the
underlying mortgage loans. The payments to the security holders (such as a
Fund), like the payments on the underlying loans, generally represent both
principal and interest. Although the underlying mortgage loans are for specified
periods of time, such as twenty to thirty years, the borrowers can, and
typically do, repay them sooner. Thus, the security holders frequently receive
prepayments of principal, in addition to the principal which is part of the
regular monthly payments. A borrower is more likely to prepay a mortgage which
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bears a relatively high rate of interest. Thus, in times of declining interest
rates, some higher yielding mortgages might be repaid resulting in larger cash
payments to a Fund, and the Fund will be forced to accept lower interest rates
when that cash is used to purchase additional securities.
Interest rate fluctuations may significantly alter the average maturity of
mortgage-backed securities by changing the rates at which homeowners refinance
mortgages. When interest rates rise, prepayments often drop, which should
increase the average maturity of the mortgage-backed security. Conversely, when
interest rates fall, prepayments often rise, which should decrease the average
maturity of the mortgage-backed security.
GNMA CERTIFICATES. Government National Mortgage Association ("GNMA")
certificates ("GNMA Certificates") are mortgage-backed securities, which
evidence an undivided interest in a pool of mortgage loans. In the case of GNMA
Certificates, principal is paid back monthly by the borrower over the term of
the loan rather than returned in a lump sum at maturity. GNMA Certificates that
the Fund purchase are the "modified pass-through" type. "Modified pass-through"
GNMA Certificates entitle the holder to receive a share of all interest and
principal payments paid and owed on the mortgage pool net of fees paid to the
"issuer" and GNMA, regardless of whether or not the mortgagor actually makes the
payment.
GNMA GUARANTEE. The National Housing Act authorizes GNMA to
guarantee the timely payment of principal and interest on securities backed by a
pool of mortgages insured by the Federal Housing Administration ("FHA") or the
Farmers' Home Administration ("FMHA"), or guaranteed by the Department of
Veteran Affairs ("VA"). The GNMA guarantee is backed by the full faith and
credit of the U.S. Government. GNMA also is empowered to borrow without
limitation from the U.S. Treasury if necessary to make any payments required
under its guarantee.
LIFE OF GNMA CERTIFICATES. The average life of a GNMA Certificate is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of principal
investment long before maturity of the mortgages in the pool. A Fund normally
will not distribute principal payments (whether regular or prepaid) to its
shareholders. Rather, it will invest such payments in additional mortgage-backed
securities of the types described above. Interest received by the Fund will,
however, be distributed to shareholders. Foreclosures impose no risk to
principal investment because of the GNMA guarantee. As prepayment rates of the
individual mortgage pools vary widely, it is not possible to predict accurately
the average life of a particular issue of GNMA Certificates.
YIELD CHARACTERISTICS OF GNMA CERTIFICATES. The coupon rate of
interest on GNMA Certificates is lower than the interest rate paid on the
VA-guaranteed or FHA-insured mortgages underlying the Certificates by the amount
of the fees paid to GNMA and the issuer. The coupon rate by itself, however,
does not indicate the yield which will be earned on GNMA Certificates. First,
Certificates may trade in the secondary market at a premium or discount. Second,
interest is earned monthly, rather than semi-annually as with traditional bonds;
monthly compounding raises the effective yield earned. Finally, the actual yield
of a GNMA Certificate is influenced by the prepayment experience of the mortgage
pool underlying it. For example, if the higher-yielding mortgages from the pool
are prepaid, the yield on the remaining pool will be reduced.
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FHLMC SECURITIES. The Federal Home Loan Mortgage Corporation
("FHLMC") issues two types of mortgage pass-through securities, mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro rata
share of all interest and principal payments made and owed on the underlying
pool.
FNMA SECURITIES. The Federal National Mortgage Association ("FNMA")
issues guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble GNMA Certificates in that each FNMA Certificate represents
a pro rata share of all interest and principal payments made and owed on the
underlying pool. FNMA guarantees timely payment of interest on FNMA Certificates
and the full return of principal.
Risk of foreclosure of the underlying mortgages is greater with
FHLMC and FNMA securities because, unlike GNMA Certificates, FHLMC and FNMA
securities are not guaranteed by the full faith and credit of the U.S.
Government.
MUNICIPAL BONDS. TOTAL RETURN FUND may invest in municipal bonds.
Municipal bonds are debt obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, generally to
obtain funds for various public purposes and have a time to maturity, at
issuance, of more than one year. The two principal classifications of municipal
bonds are "general obligation" and "revenue" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith and credit for the payment of
principal and interest. Revenue bonds generally are payable only from revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special tax or other specific revenue source. There are
variations in the security of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors. The
yields on municipal bonds depend on, among other things, general money market
conditions, conditions of the municipal bond market, the size of a particular
offering, the maturity of the obligation and the rating of the issuer.
Generally, the value of municipal bonds varies inversely to changes in interest
rates. Distributions of interest income from municipal bonds in the Fund's
portfolio will be taxable to shareholders the same as distributions of interest
income from other securities held by the Fund. See "Taxes."
PREFERRED STOCK. Each Fund may invest in preferred stock. A preferred
stock is a security which has a blend of the characteristics of a bond and
common stock. It can offer the higher yield of a bond and has priority over
common stock in equity ownership, but does not have the seniority of a bond and,
unlike common stock, its participation in the issuer's growth may be limited.
Preferred stock has preference over common stock in the receipt of dividends and
in any residual assets after payment to creditors should the issuer be
dissolved. Although the dividend is set at a fixed annual rate, in some
circumstances it can be changed or omitted by the issuer.
REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements. The
GLOBAL FUND currently is the only Fund that intends to use this authority. A
repurchase agreement essentially is a short-term collateralized loan. The lender
(a Fund) agrees to purchase a security from a borrower (typically a
broker-dealer) at a specified price. The borrower simultaneously agrees to
repurchase that same security at a higher price on a future date (which
typically is the next business day). The difference between the purchase price
and the repurchase price effectively constitutes the payment of interest. In a
standard repurchase agreement, the securities which serve as collateral are
transferred to a Fund's custodian bank. In a "tri-party" repurchase agreement,
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these securities would be held by a different bank for the benefit of the Fund
as buyer and the broker-dealer as seller. In a "quad-party" repurchase
agreement, the Fund's custodian bank also is made a party to the agreement. Each
Fund may enter into repurchase agreements with banks which are members of the
Federal Reserve System or securities dealers who are members of a national
securities exchange or are market makers in government securities. The period of
these repurchase agreements will usually be short, from overnight to one week,
and at no time will a Fund invest in repurchase agreements with more than one
year in time to maturity. The securities which are subject to repurchase
agreements, however, may have maturity dates in excess of one year from the
effective date of the repurchase agreement. Each Fund will always receive, as
collateral, securities whose market value, including accrued interest, which
will at all times be at least equal to 100% of the dollar amount invested by the
Fund in each agreement, and the Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian. If the seller defaults, a Fund might incur a loss if the value of the
collateral securing the repurchase agreement declines, and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy or similar proceedings are commenced with respect to the seller of
the security, realization upon the collateral by a Fund may be delayed or
limited. No Fund may enter into a repurchase agreement with more than seven days
to maturity if, as a result, more than 15% of such Fund's net assets would be
invested in such repurchase agreements and other illiquid investments.
RESTRICTED SECURITIES AND ILLIQUID INVESTMENTS. None of the Funds may
purchase or otherwise acquire any security if, as a result, more than 15% of its
net assets (taken at current value) would be invested in securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale. This policy includes foreign issuers'
unlisted securities with a limited trading market and repurchase agreements
maturing in more than seven days. This policy does not include restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended ("1933 Act"), which the Fund's Board 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, a Fund
may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, a Fund might obtain a less favorable price than prevailed when it
decided to sell.
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are either themselves exempt from registration or sold in
transactions not requiring registration. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
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Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by a Fund, however, could affect adversely the marketability of
such portfolio securities and a Fund might be unable to dispose of such
securities promptly or at reasonable prices.
OTC options and their underlying collateral are also considered illiquid
investments. UTILITIES INCOME FUND, BLUE CHIP FUND, FOCUSED EQUITY FUND and
TOTAL RETURN FUND may invest in OTC options. The FOCUSED EQUITY FUND currently
is the only Fund that intends to use this authority. The assets used as cover
for OTC options written by a Fund would not be considered illiquid unless the
OTC options are sold to qualified dealers who agree that a Fund may repurchase
any OTC option it writes at a maximum price to be calculated by a formula set
forth in the option agreement. The cover for an OTC option written subject to
this procedure would be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option
U.S. GOVERNMENT OBLIGATIONS. BLUE CHIP FUND, TOTAL RETURN FUND, GROWTH &
INCOME FUND, FOCUSED EQUITY FUND and UTILITIES INCOME FUND may invest in U.S.
Government Obligations. U.S. Government Obligations include: (1) U.S. Treasury
obligations (which differ only in their interest rates, maturities and times of
issuance), 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 FHA, GNMA, 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 FMHA and the Small Business Administration). The range of maturities of U.S.
Government Obligations is usually three months to thirty years.
UTILITIES INDUSTRIES. The UTILITIES INCOME FUND invests primarily in
utilities companies. Many utilities companies, especially electric and gas and
other energy-related utilities companies, have historically been subject to the
risk of increases in fuel and other operating costs, changes in interest rates
on borrowings for capital improvement programs, changes in applicable laws and
regulations, and costs and operating constraints associated with compliance with
environmental regulations.
In recent years, regulatory changes in the United States have increasingly
allowed utilities companies to provide services and products outside their
traditional geographical areas and lines of business, creating new areas of
competition with the utilities industries. This trend toward deregulation and
the emergence of new entrants have caused non-regulated providers of utilities
services to become a significant part of the utilities industries. The Adviser
believes that the emergence of competition and deregulation will result in
certain utilities companies being able to earn more than their traditional
regulated rates of return, while others may be forced to defend their core
business from increased competition and may be less profitable.
Certain utilities, especially gas and telephone utilities, have in recent
years been affected by increased competition, which could adversely affect the
profitability of such utilities companies. In addition, expansion by companies
engaged in telephone communication services of their non-regulated activities
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into other businesses (such as cellular telephone services, data processing,
equipment retailing, computer services and financial services) has provided the
opportunity for increases in earnings and dividends at faster rates than have
been allowed in traditional regulated businesses. However, technological
innovations and other structural changes also could adversely affect the
profitability of such companies. Although the Adviser seeks to take advantage of
favorable investment opportunities that may arise from these structural changes,
there can be no assurance that the Fund will benefit from any such changes.
Foreign utilities companies may be more heavily regulated than U.S.
utilities companies, which may result in increased costs or otherwise adversely
affect the operations of such companies. The securities of foreign utilities
companies also have lower dividend yields than U.S. utilities companies. The
Fund's investments in foreign issuers may include recently privatized
enterprises, in which the Fund's participation may be limited or otherwise
affected by local law. There can e no assurance that governments with
privatization programs will continue such programs or that privatization will
succeed in such countries.
Because securities issued by utilities companies are particularly
sensitive to movement in interest rates, the equity securities of such companies
are more affected by movements in interest rates than are the equity securities
of other companies.
Each of these risks could adversely affect the ability and inclination of
public utilities companies to declare or pay dividends and the ability of
holders of common stock, such as UTILITIES INCOME FUND, to realize any value
from the assets of the company upon liquidation or bankruptcy.
WARRANTS. Each Fund except BLUE CHIP FUND may purchase warrants, which are
instruments that permit a Fund to acquire, by subscription, the capital stock of
a corporation at a set price, regardless of the market price for such stock.
Warrants may be either perpetual or of limited duration. There is a greater risk
that warrants might drop in value at a faster rate than the underlying stock.
WHEN-ISSUED SECURITIES. GROWTH & INCOME FUND, UTILITIES INCOME FUND and
TOTAL RETURN FUND may each invest up to 10%, and MID-CAP OPPORTUNITY FUND,
FOCUSED EQUITY FUND and GLOBAL FUND may each invest up to 5%, of its net assets
in securities issued on a when-issued or delayed delivery basis at the time the
purchase is made. A Fund generally would not pay for such securities or start
earning interest on them until they are issued or received. However, when a Fund
purchases debt obligations on a when-issued basis, it assumes the risks of
ownership, including the risk of price fluctuation, at the time of purchase, not
at the time of receipt. Failure of the issuer to deliver a security purchased by
the Fund on a when-issued basis may result in the Fund's incurring a loss or
missing an opportunity to make an alternative investment. When a Fund enters
into a commitment to purchase securities on a when-issued basis, it establishes
a separate account with its custodian consisting of cash or liquid high-grade
debt securities equal to the amount of the Fund's commitment, which are valued
at their fair market value. If on any day the market value of this segregated
account falls below the value of the Fund's commitment, the Fund will be
required to deposit additional cash or qualified securities into the account
until the value of the account is equal to the value of the Fund's commitment.
When the securities to be purchased are issued, a 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 the sale of the
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when-issued securities themselves although this is not ordinarily expected.
Securities purchased on a when-issued basis are subject to the risk that yields
available in the market, when delivery takes place, may be higher than the rate
to be received on the securities a Fund is committed to purchase. Sale of
securities in the segregated account or sale of the when-issued securities may
cause the realization of a capital gain or loss.
ZERO COUPON AND PAY-IN-KIND SECURITIES. MID-CAP OPPORTUNITY FUND, FOCUSED
EQUITY FUND, UTILITIES INCOME FUND and TOTAL RETURN FUND may each invest in 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 accounted for by the Fund that holds the securities for
purposes of determining the amount it must distribute that year to continue to
qualify for tax treatment as a regulated investment company. See "Taxes." Thus,
a Fund may be required to distribute as a dividend an amount that is greater
than the total amount of cash it actually receives. These distributions must be
made from a Fund's cash assets or, if necessary, from the proceeds of sales of
portfolio securities. Each Fund will not be able to purchase additional
income-producing securities with cash used to make such distributions, and its
current income ultimately could be reduced as a result.
FUTURES AND OPTIONS STRATEGIES
GLOBAL FUND and FOCUSED EQUITY FUND are the only Funds that currently
anticipate using financial futures or options as part of its investment
strategy. Focused Equity Fund engages in such strategies relatively infrequently
and over relatively short periods of time. Moreover, it is anticipated that any
strategy that Focused Equity Fund may decide to employ will most likely be
effected by buying puts on the overall market or an index, such as puts on the
Standard & Poor's 500 Composite Stock Price Index. Other Funds that are
authorized to purchase and sell futures and option contracts but at this time
have no intention of doing so for the coming year include: UTILITIES INCOME FUND
and TOTAL RETURN FUND which may purchase and sell futures contracts and options
on futures contracts to hedge their portfolios, and UTILITIES INCOME FUND, BLUE
CHIP FUND, and TOTAL RETURN FUND which may purchase and sell options on
securities and indices to enhance income.
Certain special characteristics of and risks associated with using these
instruments are discussed below. Use of these instruments is subject to the
applicable regulations of the Securities and Exchange Commission ("SEC"), the
several options and futures exchanges upon which options and futures contracts
are traded and the Commodities Futures Trading Commission ("CFTC"). In addition,
a Fund's ability to use these instruments will be limited by tax considerations.
See "Taxes."
To the extent that they participate in the options or futures markets, the
Funds will incur investment risks and transaction costs to which the Funds would
not be subject absent the use of these strategies. If the Adviser's or a
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Subadviser's, as applicable, prediction of movements in the direction of the
securities and interest rate markets are inaccurate, the adverse consequences to
the Funds may leave the Funds in a worse position than if such strategies were
not used. The Funds might not employ any of the strategies described below, and
there can be no assurance that any strategy will succeed. The use of these
strategies involve certain special risks, including (1) dependence on the
Adviser's or Subadviser's, as applicable, ability to predict correctly movements
in the direction of interest rates and securities prices; (2) imperfect
correlation between the price of options, futures contracts and options thereon
and movements in the prices of the securities being hedged; (3) the fact that
skills needed to use these strategies are different from those needed to select
portfolio securities; and (4) the possible absence of a liquid secondary market
for any particular instrument at any time.
FUTURES AND OPTIONS ON FUTURES STRATEGIES. Each Fund may use stock index
futures contracts and options thereon in anticipation of a significant market or
market sector advance. The purchase of a stock index futures contract affords a
hedge against not participating in such advance at a time when the Fund is not
fully invested. Such purchase of a futures contract would serve as a temporary
substitute for the purchase of individual stocks which may then be purchased in
a orderly fashion. Further, stock index futures contracts and options thereon
may be purchased to maintain a desired percentage of the Fund invested in stocks
in the event of a large cash flow into the Fund, or to generate additional
income from cash held by the Fund. Stock index futures and options thereon may
also be used to adjust country exposure. When the Fund purchases a stock index
futures contract on foreign stocks, an accompanying foreign currency forward or
foreign currency futures contract is executed to provide the same currency
exposure that would result from directly owning the underlying foreign stocks.
Failure to obtain such currency exposure would constitute a hedge back into U.S.
dollars with respect to such index futures positions. The value of the Fund's
futures positions shall not exceed 5% of the total assets in the Fund's
portfolio.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES TRADING. No price is paid
upon entering into futures contracts. Instead, upon entering into a futures
contract, the Funds are required to deposit with their custodian in a segregated
account in the name of the futures broker through which the transaction is
effected and amount of cash, U.S. Government securities or other liquid,
high-grade debt instruments generally equal to 3%-5% or less of the contract
value. This amount is known as "initial margin." When writing a call or put
option on a futures contract, margin also must be deposited in accordance with
applicable exchange rules. Initial margin on futures contracts is in the nature
of a performance bond or good-faith deposit that is returned to a Fund upon
termination of the transaction, assuming all obligations have been satisfied.
Under certain circumstances, such as periods of high volatility, a Fund may be
required by an exchange to increase the level of its initial margin payment.
Additionally, initial margin requirements may be increased generally in the
future by regulatory action. Subsequent payments, called "variation margin," to
and from the broker, are made on a daily basis as the value of the futures
position varies, a process known as "marking to market." Variation margin does
not involve borrowing to finance the futures transactions, but rather represents
a daily settlement of a Fund's obligation to or from a clearing organization. A
Fund is also obligated to make initial and variation margin payments when it
writes options on futures contracts.
Holders and writers of futures positions and options thereon can enter
into offsetting closing transactions, by selling or purchasing, respectively, a
futures position or options position with the same terms as the position or
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option held or written. Positions in futures contracts and options thereon may
be closed only on an exchange or board of trade providing a secondary market for
such futures or options.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures contract or related option may vary
either up or down from the previous day's settlement price. Once the daily limit
has been reached in a particular contract, no trades may be made that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because
prices could move to the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation of unfavorable
positions. In such event, it may not be possible for a Fund to close a position
and, in the event of adverse price movements a Fund would have to make daily
cash payments of variation margin (except in the case of purchased options).
However, in the event futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the contracts can be
terminated. In such circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the futures contract.
However, there is no guarantee that the price of the securities will, in fact,
correlate with the price movements in the contracts and thus provide an offset
to losses on the contracts.
Successful use by a Fund of futures contracts and related options will
depend upon the Adviser's ability to predict movements in the direction of the
overall securities, currency and interest rate markets, which requires different
skills and techniques than predicting changes in the prices of individual
securities. There is, in addition, the risk that the movements in the price of
the futures contract or related option will not correlate with the movements in
prices of the underlying instruments or currencies. In addition, if a Fund has
insufficient cash, it may have to sell assets from its portfolio to meet daily
variation margin requirements. Any such sale of assets may or may not be made at
prices that reflect the rising market. Consequently, a Fund may need to sell
assets at a time when such sales are disadvantageous to a Fund. If the price of
the futures contract or related option moves more than the price of the
underlying instruments or currencies, a Fund will experience either a loss or a
gain on the futures contract or related option that may or may not be completely
offset by movement in the price of the instruments or currencies that are the
subject of the hedge.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between price movements in the futures or related
option position and the securities or currencies being hedged, movements in the
prices of futures contracts and related options may not correlate perfectly with
movements in the prices of the hedged securities or currencies because of price
distortions in the futures market. As a result, a correct forecast of general
market trends may not result in successful hedging through the use of futures
contracts and related options over the short term.
Positions in futures contracts and related options may be closed out only
on the exchange or board of trade that provides a secondary market for such
futures contracts or related options. Although a Fund intends to purchase or
sell futures contracts and related options only on the exchanges or boards of
trade where there appears to be a liquid secondary market for such futures and
related options, there is no assurance that such a market will exist for any
particular contract or option at any particular time. In such event, it may not
be possible to close a futures or option position and, in the event of adverse
price movements, a Fund would continue to be required to make variation margin
payments.
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Options on futures contracts have a limited life. The ability to establish
and close out options on futures will be subject to the development and
maintenance of liquid secondary markets on the relevant exchanges or boards of
trade. There can be no certainty that liquid secondary markets for all options
on futures contracts will develop.
Purchasers of options on futures contracts pay a premium in cash at the
time of purchase. This amount and the transaction costs are all that is at risk.
Sellers of options on a futures contract, however, must post initial margin and
are subject to additional margin calls that could be substantial in the event of
adverse price movements, In addition, although the maximum amount at risk when s
Fund purchases an option is the premium paid for the option and the transaction
costs, there may be circumstances when the purchase of an option on a futures
contract would result in a loss to s Fund when the use of a futures contract
would not, such as when there is no movement in the level of the underlying
stock index or the value of securities or currencies being hedged.
A Fund's activities in the futures and related options markets may result
in a higher portfolio turnover rate and additional transaction costs in the form
of added brokerage commissions; however, a Fund also may save on commissions by
using futures and related options as a hedge rather than buying or selling
individual securities or currencies in anticipation or as a result of market
movements.
SPECIAL RISKS RELATED TO FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED
OPTIONS. Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. Further, settlement
of a foreign currency futures contract may occur within the country issuing the
underlying currency. In that case, a Fund must accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign restrictions
or regulations regarding the maintenance of foreign banking arrangements by U.S.
residents, and may be required to pay any fees, taxes or charges associated with
such delivery that are assessed in the issuing country.
Options on foreign currency futures contracts may involve certain
additional risks. Trading of such options is relatively new. The ability to
establish and close out positions on such options is subject to the maintenance
of a liquid secondary market. To reduce this risk, a Fund will not purchase or
write options on foreign currency futures contracts unless and until, in the
Adviser's opinion, the market for such options has developed sufficiently that
the risks in connection with such options are not greater than the risks in
connection with transactions in the underlying futures contracts. Compared to
the purchase or sale of foreign currency futures contracts, the purchase of call
or put options thereon involves less potential risk to a Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of a call or put
option on a foreign currency futures contract would result in a loss, such as
when there is no movement in the price of the underlying currency or futures
contract.
FUTURES GUIDELINES. To the extent that a Fund enters into futures
contracts or options thereon other than for bona fide hedging purposes (as
defined by the CFTC), the aggregate initial margin and premiums required to
establish these positions (excluding the in-the-money amount for options that
are in-the-money at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and
losses on any contracts into which the Fund has entered. This policy does not
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limit a Fund's assets at risk to 5%. The value of all futures sold will not
exceed the total market value of a Fund's portfolio.
COVER FOR FUTURES AND OPTIONS STRATEGIES. No Fund will use leverage in its
futures and options strategies. No Fund will write options or purchase or sell
futures contracts unless it owns either (1) an offsetting ("covered") position
in securities, or other options or futures contracts or (2) cash and liquid
securities with a value sufficient at all times to cover its potential
obligations. A Fund will comply with guidelines established by the SEC with
respect to coverage of such instruments by mutual funds and, if required, will
set aside cash and liquid securities in a segregated account with its custodian
in the prescribed amount. Securities or other options or futures positions used
for cover and securities held in a segregated account cannot be sold or closed
out while the hedging or option income strategy is outstanding unless they are
replaced with similar assets. As a result, there is a possibility that the use
of cover or segregation involving a large percentage of a Fund's assets could
impede portfolio management and decrease a Fund's liquidity.
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING. A Fund may
effectively terminate its right or obligation under an option by entering into a
closing transaction. If a Fund wishes to terminate its obligation to sell
securities under a call option it has written, a Fund may purchase a call option
of the same series (that is, a call option identical in its terms to the call
option previously written); this is known as a closing purchase transaction.
Conversely, in order to terminate its right to purchase or sell specified
securities under a call or put option it has purchased, a Fund may write an
option of the same series, as the option held; this is known as a closing sale
transaction. Closing transactions essentially permit a Fund to realize profits
or limit losses on its options positions prior to the exercise or expiration of
the option.
The value of an option position will reflect, among other things, the
current market price of the underlying security or index, the time remaining
until expiration, the relationship of the exercise price to the market price,
the historical price volatility of the underlying security or index and general
market conditions. For this reason, the successful use of options depends upon
the Adviser's ability to forecast the direction of price fluctuations in the
underlying securities or, in the case of index options, fluctuations in the
market sector represented by the index selected.
Options normally have expiration dates of up to nine months. Unless an
option purchased by a Fund is exercised or unless a closing transaction is
effected with respect to that position, a loss will be realized in the amount of
the premium paid and any transaction costs.
A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. The ability to
establish and close out positions on the exchanges is subject to the maintenance
of a liquid secondary market. Although a Fund intends to purchase or write only
those exchange-traded options for which there appears to be a liquid secondary
market, there is no assurance that a liquid secondary market will exist for any
particular option at any particular time. Closing transactions may be effected
with respect to options traded in the OTC markets (currently the primary markets
for options on debt securities) only by negotiating directly with the other
party to the option contract or in a secondary market for the option if such
market exists. Although a Fund will enter into OTC options only with dealers
that agree to enter into, and that are expected to be capable of entering into,
closing transactions with a Fund, there is no assurance that a Fund will be able
to liquidate an OTC option at a favorable price at any time prior to expiration.
In the event of insolvency of the opposite party, a Fund may be unable to
liquidate an OTC option. Accordingly, it may not be possible to effect closing
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transactions with respect to certain options, with the result that a Fund would
have to exercise those options that it has purchased in order to realize any
profit. With respect to options written by a Fund, the inability to enter into a
closing transaction may result in material losses to a Fund. For example,
because a Fund must maintain a covered position or segregate assets with respect
to any call option it writes, a Fund may not sell the underlying assets used to
cover an option during the period it is obligated under the option. This
requirement may impair a Fund's ability to sell a portfolio security or make an
investment at a time when such a sale or investment might be advantageous.
Index options are settled exclusively in cash. If a Fund purchases an
option on an index, the option is settled based on the closing value of the
index on the exercise date. Thus, a holder of an index option who exercises it
before the closing index value for that day is available runs the risk that the
level of the underlying index may subsequently change. For example, in the case
of a call option, if such a change causes the closing index value to fall below
the exercise price of the option on the index, the exercising holder will be
required to pay the difference between the closing index value and the exercise
price of the option.
A Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs; however, a Fund also may
save on commissions by using options as a hedge rather than buying or selling
individual securities in anticipation or as a result of market movements.
FORWARD CURRENCY CONTRACTS STRATEGIES. Each Fund may use forward currency
contracts to protect against uncertainty in the level of future foreign currency
exchange rates. The GLOBAL FUND currently is the only Fund that intends to use
this authority in the coming year. The Funds will not speculate with forward
currency contracts or foreign currency exchange rates.
While the Funds generally do not attempt to hedge its foreign security
holdings against the risk of changes in foreign currency exchange rates, it will
use forward currency contracts to hedge cash positions during the settlement of
transactions and in between transactions. For example, when a Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, or when a Fund anticipates the receipt in a foreign currency of
dividend or interest payments on a security that it holds, a Fund may desire to
"lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent of
such payment, as the case may be, by entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars or foreign currency, of the
amount of foreign currency involved in the underlying transaction. A Fund will
thereby be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the currency exchange rates during
the period between the date on which the security is purchased or sold, or on
which the dividend or interest payment is declared, and the date on which such
payments are made or received. When the Fund uses foreign currency contracts in
connection with stock index futures contracts, as noted previously it is doing
so to replicate the experience of owning the foreign securities and not to hedge
against foreign currency fluctuations.
The precise matching of the forward currency contract amounts and the
value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. Accordingly,
it may be necessary for the Fund to purchase additional foreign currency on the
spot (i.e., cash) market and bear the expense of such purchase if the market
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value of the security is less than the amount of foreign currency the Fund is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency a Fund is
obligated to deliver. The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Forward currency contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing a Fund
to sustain losses on these contracts and transactions costs. Unless a Fund's
obligations under a forward contract are covered with positions in securities,
currencies or other forward contracts, a Fund will enter into a forward contract
only if the Fund maintains cash or liquid assets in a segregated account in an
amount not less than the value of a Fund's total assets committed to the
consummation of the contract, as marked to market daily.
At or before the maturity date of a forward contract requiring a Fund to
sell a currency, a Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which a Fund will obtain, on the same maturity date, the same amount
of the currency that it is obligated to deliver. Similarly, a Fund may close out
a forward contract requiring it to purchase a specified currency by entering
into a second contract entitling it to sell the same amount of the same currency
on the maturity date of the first contract. A Fund would realize a gain or loss
as a result of entering into an offsetting forward currency contract under
either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
the offsetting contract. There can be no assurance that the Fund will be able to
enter into new or offsetting forward currency contracts. Forward currency
contracts also involve a risk that the other party to the contract may fail to
deliver currency or pay for currency when due, which could result in substantial
losses to a Fund. The cost to a Fund of engaging in forward currency contracts
varies with factors such as the currencies involved, the length of the contract
period and the market conditions then prevailing. Because forward currency
contracts are usually entered into on a principal basis, no fees or commissions
are involved.
PORTFOLIO TURNOVER
Although each Fund generally will not invest for short-term trading
purposes, portfolio securities may be sold from time to time without regard to
the length of time they have been held when, in the opinion of the Adviser,
investment considerations warrant such action. Portfolio turnover rate is
calculated by dividing (1) the lesser of purchases or sales of portfolio
securities for the fiscal year by (2) the monthly average of the value of
portfolio securities owned during the fiscal year. A 100% turnover rate would
occur if all the securities in a Fund's portfolio, with the exception of
securities whose maturities at the time of acquisition were one year or less,
were sold and either repurchased or replaced within one year. A high rate of
portfolio turnover (100% or more) generally leads to higher transaction costs
and may result in a greater number of taxable transactions. See "Allocation of
Portfolio Brokerage."
For the fiscal year ended September 30, 1998, the portfolio turnover rate
for GROWTH & INCOME FUND, MID-CAP OPPORTUNITY FUND, UTILITIES INCOME FUND, BLUE
CHIP FUND, SPECIAL SITUATIONS FUND, TOTAL RETURN FUND and GLOBAL FUND was 36%,
102%, 83%, 71%, 70%, 111% and 82%, respectively. For the fiscal year ended
September 30, 1999, the portfolio turnover rate for GROWTH & INCOME FUND,
MID-CAP OPPORTUNITY FUND, UTILITIES INCOME FUND, BLUE CHIP FUND, SPECIAL
27
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SITUATIONS FUND, TOTAL RETURN FUND, GLOBAL FUND and FOCUSED EQUITY FUND was
112%, 171%, 65%, 97%, 132%, 127%, 92% and 57%, respectively.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below have been adopted by the
respective Fund and, unless identified as non-fundamental policies, may not be
changed without the affirmative vote of a majority of the outstanding voting
securities of that Fund, voting separately from any other Fund. As provided in
the Investment Company Act of 1940, as amended ("1940 Act"), a "vote of a
majority of the outstanding voting securities of the Fund" means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or
(2) 67% or more of the shares of the Fund present at a meeting, if more than 50%
of the outstanding shares are represented at the meeting in person or by proxy.
Except with respect to borrowing, changes in values of a particular Fund's
assets as a whole will not cause a violation of the following investment
restrictions so long as percentage restrictions are observed by each Fund at the
time it purchases any security.
FOCUSED EQUITY FUND will not:
(1) Borrow money, except that the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets including the amount borrowed
less liabilities (other than borrowings).
(2) Issue senior securities, except as permitted under the 1940 Act.
(3) Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws.
(4) Buy or sell real estate or interests in real estate, except that the
Fund may purchase and sell securities that are secured by real
estate, securities of companies that invest or deal in real estate
and publicly traded securities or real estate investment trusts.
(5) Make loans, except as permitted under the 1940 Act.
(6) Concentrate its investments in any particular industry.
(7) Buy or sell physical commodities; however, this policy shall not
prevent the Fund from purchasing and selling foreign currency,
futures contracts, options, forward contracts, swaps, caps, collars,
floors and other financial instruments.
The following investment restriction is not fundamental and may be changed
without shareholder approval. The Fund will not:
(1) Purchase any security if, as a result, more than 15% of its net assets
would be invested in illiquid securities, including repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
any securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market. The Directors, or the
Fund's Subadviser acting pursuant to authority delegated by the Directors, may
determine that a readily available market exists for securities eligible for
28
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resale pursuant to Rule 144A under the 1933 Act or any other applicable rule,
and therefore that such securities are not subject to the foregoing limitation.
The Fund's Subadviser will monitor the liquidity of such restricted securities
under the supervision of the Board.
GROWTH & INCOME FUND will not:
(1) Issue senior securities or borrow money, except that the Fund may
borrow money from a bank for temporary or emergency purposes in amounts not
exceeding 5% (taken at the lower of cost or current value) of its net assets
(not including the amount borrowed).
(2) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result, with respect to 75% of the
Fund's total assets, more than 5% of such assets would then be invested in
securities of a single issuer.
(3) With respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of any one issuer or more than 10% of any class of
securities of one issuer (all debt and all preferred stock of an issuer are each
considered a single class for this purpose).
(4) Concentrate its investments in any particular industry.
(5) Pledge, mortgage or hypothecate any of its assets, except that the
Fund may pledge its assets to secure borrowings made in accordance with
paragraph (1) above, provided the Fund maintains asset coverage of at least 300%
for all such borrowings.
(6) Buy or sell commodities or commodity contracts, or real estate or
interests in real estate, except that the Fund may purchase and sell securities
that are secured by real estate, securities of companies which invest or deal in
real estate, and interests in real estate investment trusts.
(7) Act as an underwriter, except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.
(8) Make loans, except loans of portfolio securities and repurchase
agreements.
The following investment restrictions are not fundamental and may be
changed without shareholder approval. The Fund will not:
(1) Invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days or in other illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions as to resale. Securities that have
legal or contractual restrictions as to resale but have a readily available
market and securities eligible for resale under Rule 144A under the 1933 Act,
are not deemed illiquid for purposes of this limitation; the Adviser will
monitor the liquidity of such restricted securities under the supervision of the
Board of Directors.
(2) Make investments for the purpose of exercising control or management.
(3) Purchase any securities on margin.
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<PAGE>
(4) Purchase or sell portfolio securities from or to the Adviser or any
director or officer thereof or of SERIES FUND II, as principals.
MID-CAP OPPORTUNITY FUND will not:
(1) Issue senior securities or borrow money, except that the Fund may
borrow money from a bank for temporary or emergency purposes in amounts not
exceeding 5% (taken at the lower of cost or current value) of its net assets
(not including the amount borrowed).
(2) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result: (a) as to 75% of the Fund's
total assets more than 5% of such assets would then be invested in securities of
a single issuer, or (b) 25% or more of the Fund's total assets would be invested
in a single industry.
(3) Purchase more than 10% of the outstanding voting securities of any one
issuer or more than 10% of any class of securities of one issuer (all debt and
all preferred stock of an issuer are each considered a single class for this
purpose).
(4) Pledge, mortgage or hypothecate any of its assets, except that the
Fund may pledge its assets to secure borrowings made in accordance with
paragraph (1) above, provided the Fund maintains asset coverage of at least 300%
for all such borrowings.
(5) Buy or sell commodities or commodity contracts, including futures
contracts, or real estate or interests in real estate, although it may purchase
and sell securities which are secured by real estate, securities of companies
which invest or deal in real estate, and interests in real estate investment
trusts.
(6) Act as an underwriter, except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under certain Federal securities laws.
(7) Make investments for the purpose of exercising control or management.
(8) Purchase any securities on margin.
(9) Make loans, except through repurchase agreements.
(10) Purchase or sell portfolio securities from or to the Adviser or any
director or officer thereof or of SERIES FUND II, as principals.
(11) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer or director of SERIES FUND II or of the Adviser owns more than
1/2 of 1% of the outstanding securities of such issuer, and such officers or
directors who own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.
The following investment restrictions are not fundamental and may be
changed without shareholder approval. The Fund will not:
(1) Invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days or in other illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions as to resale. Securities that have
30
<PAGE>
legal or contractual restrictions as to resale but have a readily available
market and securities eligible for resale under Rule 144A under the Securities
Act of 1933, as amended, are not deemed illiquid for purposes of this
limitation; the Adviser will monitor the liquidity of such restricted securities
under the supervision of the Board of Directors.
(2) Write, purchase or sell options (puts, calls or combinations thereof).
UTILITIES INCOME FUND will not:
(1) Issue senior securities or borrow money, except that the Fund may
borrow money from a bank for temporary or emergency purposes in amounts not
exceeding 5% (taken at the lower of cost or current value) of its net assets
(not including the amount borrowed).
(2) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result as to 75% of the Fund's total
assets more than 5% of such assets would then be invested in securities of a
single issuer.
(3) Purchase more than 10% of the outstanding voting securities of any one
issuer or more than 10% of any class of securities of one issuer (all debt and
all preferred stock of an issuer are each considered a single class for this
purpose).
(4) Concentrate its investments in any particular industry, except that
the Fund may concentrate its investments in securities of companies in the
public utilities industry.
(5) Pledge, mortgage or hypothecate any of its assets, except that the
Fund may pledge its assets to secure borrowings made in accordance with
paragraph (1) above, provided the Fund maintains asset coverage of at least 300%
for all such borrowings.
(6) Buy or sell commodities or commodity contracts, or real estate or
interests in real estate, except that the Fund may purchase and sell futures
contracts, options on futures contracts, securities that are secured by real
estate, securities of companies which invest or deal in real estate, and
interests in real estate investment trusts.
(7) Act as an underwriter, except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.
(8) Make investments for the purpose of exercising control or management.
(9) Purchase any securities on margin, except the Fund may make deposits
of margin in connection with futures contracts and options.
(10) Make loans, except loans of portfolio securities and repurchase
agreements.
(11) Purchase or sell portfolio securities from or to the Adviser or any
director or officer thereof or of SERIES FUND II, as principals.
(12) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer or director of SERIES FUND II or of the Adviser owns more than
1/2 of 1% of the outstanding securities of such issuer, and such officers or
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directors who own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.
The following investment restrictions are not fundamental and may be
changed without shareholder approval. The Fund will not:
(1) Invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days or in other illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions as to resale. Securities that have
legal or contractual restrictions as to resale but have a readily available
market and securities eligible for resale under Rule 144A under the 1933 Act,
are not deemed illiquid for purposes of this limitation; the Adviser will
monitor the liquidity of such restricted securities under the supervision of the
Board of Directors.
(2) Make short sales of securities, except short sales "against the box."
BLUE CHIP FUND will not:
(1) Make short sales of securities to maintain a short position.
(2) Issue senior securities, borrow money or pledge its assets except that
the Fund may borrow from a bank for temporary or emergency purposes in amounts
not exceeding 5% (taken at the lower of cost or current value) of its total
assets (not including the amount borrowed) and pledge its assets to secure such
borrowings.
(3) Make loans, except loans of portfolio securities (limited to 10% of
the Fund's total assets).
(4) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result: (1) as to 75% of the Fund's
total assets (taken at current value), more than 5% of such assets would then be
invested in securities of a single issuer, or (2) 25% or more of the Fund's
total assets (taken at current value) would be invested in a single industry.
(5) Purchase more than 10% of the outstanding voting securities of any one
issuer or more than 10% of any class of securities of one issuer (all debt and
all preferred stock of an issuer are each considered a single class for this
purpose).
(6) Pledge, mortgage or hypothecate any of its assets except that the Fund
may pledge its assets to secure borrowings made in accordance with paragraph (2)
above, provided the Fund maintains asset coverage of at least 300% for pledged
assets.
(7) Buy or sell commodities or commodity contracts or real estate or
interests in real estate, although it may purchase and sell securities which are
secured by real estate and securities of companies which invest or deal in real
estate.
(8) Act as an underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.
(9) Make investments for the purpose of exercising control or management.
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<PAGE>
(10) Purchase any securities on margin.
(11) Purchase or sell portfolio securities from or to the Adviser or any
director, officer or Trustee thereof or of Series Fund, as principals.
(12) Invest in any securities of any issuer if, to the knowledge of Series
Fund, any officer, director or Trustee of Series Fund or of the Adviser owns
more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers, directors or Trustees who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.
The following investment restriction is not fundamental and may be changed
without shareholder approval. The investment restriction provides that the Fund
will not:
Purchase any security if, as a result, more than 15% of its net assets
would be invested in illiquid securities, including repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
any securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market. The Trustees, or the
Fund's investment adviser acting pursuant to authority delegated by the
Trustees, 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; the Adviser will monitor the liquidity
of such restricted securities under the supervision of the Board of Trustees.
SPECIAL SITUATIONS FUND will not:
(1) Make short sales of securities "against the box" in excess of 10% of
the Fund's total assets.
(2) Issue senior securities or borrow money, except that the Fund may
borrow money from a bank for temporary or emergency purposes in amounts not
exceeding 5% (taken at the lower of cost or current value) of its total assets
(not including the amount borrowed).
(3) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result: (i) as to 75% of the Fund's
total assets (taken at current value), more than 5% of such assets would then be
invested in securities of a single issuer, or (ii) 25% or more of the Fund's
total assets (taken at current value) would be invested in a single industry.
(4) Purchase more than 10% of the outstanding voting securities of any one
issuer or more than 10% of any class of securities of one issuer (all debt and
all preferred stock of an issuer are each considered a single class for this
purpose).
(5) Pledge, mortgage or hypothecate any of its assets, except that the
Fund may pledge its assets to secure borrowings made in accordance with
paragraph (2) above, provided the Fund maintains asset coverage of at least 300%
for all such borrowings.
(6) Buy or sell commodities or commodity contracts including futures
contracts, or real estate or interests in real estate, although it may purchase
and sell securities which are secured by real estate, securities of companies
33
<PAGE>
which invest or deal in real estate and interests in real estate investment
trusts.
(7) Act as an underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.
(8) Make investments for the purpose of exercising control or management.
(9) Purchase any securities on margin.
(10) Make loans, except through repurchase agreements.
(11) Purchase or sell portfolio securities from or to the Adviser or any
director, officer or Trustee thereof or of Series Fund, as principals.
(12) Invest in any securities of any issuer if, to the knowledge of Series
Fund, any officer, director or Trustee of Series Fund or of the Adviser owns
more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers, directors or Trustees who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.
The following investment restrictions are not fundamental and may be
changed without shareholder approval. These investment restrictions provide that
the Fund will not:
(1) Invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days or in other illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions as to resale. Securities that have
legal or contractual restrictions as to resale but have a readily available
market are not deemed illiquid for purposes of this limitation; the Adviser will
monitor the liquidity of such restricted securities under the supervision of the
Board of Trustees.
(2) Write, purchase or sell options (puts, calls or combinations thereof).
TOTAL RETURN FUND will not:
(1) Borrow money except for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 5% of the value of its
total assets (including the amount borrowed) less liabilities (other than
borrowings). Any borrowings that exceed 5% of the value of the Fund's total
assets by reason of a decline in net assets will be reduced within three
business days to the extent necessary to comply with the 5% limitation. This
policy shall not prohibit deposits of assets to provide margin or guarantee
positions in connection with transactions in options, futures contracts, swaps,
forward contracts, and other derivative instruments or the segregation of assets
in connection with such transactions.
(2) Issue senior securities.
(3) Make loans, except loans of portfolio securities (limited to 10% of
the Fund's total assets).
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<PAGE>
(4) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result: (i) as to 75% of the Fund's
total assets (taken at current value), more than 5% of such assets would then be
invested in securities of a single issuer, or (ii) 25% or more of the Fund's
total assets (taken at current value) would be invested in a single industry.
(5) Purchase more than 10% of the outstanding voting securities of any one
issuer or more than 10% of any class of securities of one issuer (all debt and
all preferred stock of an issuer are each considered a single class for this
purpose).
(6) Buy or sell real estate or interests in real estate, although it may
purchase and sell securities which are secured by real estate and securities of
companies which invest or deal in real estate, including limited partnership
interests.
(7) Act as an underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.
(8) Make investments for the purpose of exercising control or management.
(9) Purchase or sell portfolio securities from or to the Adviser or any
director, officer or Trustee thereof or of Series Fund, as principals.
(10) Invest in any securities of any issuer if, to the knowledge of Series
Fund, any officer, director or Trustee of Series Fund or of the Adviser owns
more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers, directors or Trustees who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.
The following investment restrictions are not fundamental and may be
changed without shareholder approval. These investment restrictions provide that
the Fund will not:
(1) Purchase any security if, as a result, more than 15% of its net assets
would be invested in illiquid securities, including repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
any securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market. The Trustees, or the
Fund's investment adviser acting pursuant to authority delegated by the
Trustees, 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; the Adviser will monitor the liquidity
of such restricted securities under the supervision of the Board of Trustees.
(2) Purchase or sell physical commodities unless acquired as a result of
ownership of securities (but this restriction shall not prevent the Fund from
purchasing or selling options, futures contracts, caps, floors and other
derivative instruments, engaging in swap transactions or investing in securities
or other instruments backed by physical commodities).
(3) Enter into futures contracts or options on futures contracts for
non-bona fide hedging purposes if immediately thereafter the aggregate margin
deposits on all outstanding futures contracts positions held by the Fund and
premiums paid on outstanding options on futures contracts, after taking into
account unrealized profits and losses, would exceed 5% of the market value of
35
<PAGE>
the total assets of the Fund, or enter into any futures contracts or options on
futures contracts if the aggregate amount of the Fund's commitments under
outstanding futures contracts positions and options on future contracts written
by the Fund would exceed the market value of the total assets of the Fund.
(4) Pledge 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 pledged assets;
provided, however, this limitation will not prohibit escrow, collateral or
margin arrangements in connection with the Fund's use of options, futures
contracts or options on futures contracts.
(5) Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions, and
provided that margin payments and other deposits made in connection with
transactions in options, futures contracts, swaps, forward contracts, and other
derivative instruments shall not be deemed to constitute purchasing securities
on margin.
GLOBAL 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 that it
deems qualified, authorize the Fund to lend securities for the purpose of
covering short positions of the borrower, but only when the borrower pledges
cash collateral to the Fund and agrees to maintain such collateral so that it
amounts at all times to at least 100% of the value of the securities. Such
security loans will not be made if as a result the aggregate of such loans
exceed 10% of the value of the Fund's total assets. The purchase of a portion of
an issue of publicly distributed debt securities is not considered the making of
a loan. This restriction is not intended to prohibit the Fund from investing in
repurchase agreements.
(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 15% of the value of its total assets in warrants.
(5) Invest more than 25% of the value of its total assets in securities of
foreign issuers, other than American Depository Receipts, that are not listed on
a recognized U.S. or foreign securities exchange, including no more than 10% of
the value of its assets in securities with a limited trading market.
(6) Invest 25% or more of the value of its total assets in a particular
industry at one time. The Fund, however, is not limited in the amount of its
total assets that may be invested in any particular country.
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<PAGE>
(7) Underwrite securities of other issuers, except to the extent that the
purchase and sale of restricted securities may be deemed to be underwriting.
(8) Purchase or sell real estate, commodities or commodity contracts.
However, the Fund may purchase interests in real estate investment trusts whose
securities are registered under the 1933 Act and are readily marketable, and may
purchase or sell options on securities, securities indices and foreign
currencies, stock index futures, interest rate futures and foreign currency
futures, as well as options on such futures contracts.
(9) Invest in companies for the purpose of exercising control or
management.
(10) Purchase any securities on margin or sell any securities short,
except to make margin deposits in connection with the use of options, futures
contracts and options on futures contracts.
(11) Purchase or retain securities of any issuer if any officer or
Director of the Fund or the Adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and, together such officers and Directors own more
than 5% of the securities of such issuer.
(12) Purchase or sell portfolio securities from or to the Adviser or any
Director or officer thereof or of the Fund, as principals.
(13) Buy or sell puts, calls, straddles or spreads, except with respect to
options on securities, securities indices and foreign currencies or on futures
contracts.
(14) Issue senior securities.
(15) 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.
(16) Invest in securities of other domestic investment companies, except
in connection with a merger of another investment company, although the Fund may
purchase the securities of foreign investment companies or investment trusts in
the open market where no commissions or profits accrue to a sponsor or dealer
other than customary broker's commission, provided such securities do not have
an aggregate value (at cost) of more than 10% of the value of the Fund's total
net assets. Investment in securities of other investment companies may cause a
duplication of management and/or advisory fees.
The following investment restrictions are not fundamental and may be
changed without prior shareholder approval. These restrictions provide that the
Fund may not.
(1) Purchase any security if, as a result, more than 15% of its net assets
would be invested in illiquid securities, including repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
any securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market. The Directors, or the
Fund's investment adviser acting pursuant to authority delegated by the
Directors, may determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, or any other applicable rule, and therefore that such securities are
not subject to the foregoing limitation.
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<PAGE>
(2) Pledge, mortgage or hypothecate any of its assets, except that the
Fund may pledge its assets to secure borrowings made in accordance with
fundamental investment restriction (1) above, provided the Fund maintains asset
coverage of at least 300% for all such borrowings.
DIRECTORS/TRUSTEES AND OFFICERS
The following table lists the Directors/Trustees and executive officers of
SERIES FUND II, SERIES FUND and GLOBAL FUND, their business address and
principal occupations during the past five years. Unless otherwise noted, an
individual's business address is 95 Wall Street, New York, New York 10005.
GLENN O. HEAD*+ (74), President and Director/Trustee. 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/Trustee, 581 Main Street, Woodbridge, NJ 07095.
President and Director, FICC, ADM and FIMCO; Vice President and Director, FIC
and EIC; President, EIMCO; Chairman, President and Director, First Financial
Savings Bank, S.L.A.
LARRY R. LAVOIE* (52), Director/Trustee. Assistant Secretary, ADM, EIC, EIMCO,
FIAMCO, FICC and FIMCO; President, FIAMCO; Secretary and General Counsel, FIC.
REX R. REED** (77), Director/Trustee, 259 Governors Drive, Kiawah Island, SC
29455. Retired; formerly Senior Vice President, American Telephone & Telegraph
Company.
HERBERT RUBINSTEIN** (78), Director/Trustee, 695 Charolais Circle, Edwards, CO
81632-1136. Retired; formerly President, Belvac International Industries, Ltd.
and President, Central Dental Supply.
NANCY SCHAENEN** (68), Director/Trustee, 56 Midwood Terrace, Madison, NJ 07940.
Trustee, Drew University and DePauw University.
JAMES M. SRYGLEY** (67), Director/Trustee, 39 Hampton Road, Chatham, NJ 07928.
Principal, Hampton Properties, Inc. (property investment company).
JOHN T. SULLIVAN* (67), Director/Trustee and Chairman of the Board; Director,
FIMCO, FIC, FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.
ROBERT F. WENTWORTH** (70), Director/Trustee, 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.
38
<PAGE>
PATRICIA D. POITRA (44), Vice President, SERIES FUND and SERIES FUND II. Vice
President, First Investors U.S. Government Plus Fund; Director of Equities,
FIMCO.
CLARK D. WAGNER (40), Vice President, SERIES FUND. Vice President, First
Investors Multi-State Insured Tax Free Fund, First Investors New York Insured
Tax Free Fund, Inc., First Investors Insured Tax Exempt Fund, Inc., Executive
Investors Trust, First Investors Series Fund, and First Investors Government
Fund, Inc.; Chief Investment Officer, FIMCO.
DENNIS FITZPATRICK (41), Vice President, SERIES FUND and SERIES FUND II. Vice
President, First Investors Series Fund II, Inc. and First Investors Series
Fund.; Portfolio Manager, FIMCO.
NANCY W. JONES (55), Vice President, SERIES FUND. Vice President, First
Investors Asset Management Company, Inc., First Investors High Yield Fund, Inc.,
First Investors Special Bond Fund, Inc., and Executive Investors Trust;
Portfolio Manager, FIMCO.
GEORGE V. GANTER (47), Vice President, SERIES FUND. Vice President, First
Investors Asset Management Company, Inc.; Portfolio Manager, FIMCO.
- ------------------------------
*These Directors/Trustees may be deemed to be "interested persons," as defined
in the 1940 Act.
** These Directors/Trustees are members of the Board's Audit Committee.
+ Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.
The Directors/Trustees and officers, as a group, owned less than 1% of
either Class A or Class B shares of each Fund.
All of the officers and Directors/Trustees, except for Ms. Poitra and Mr.
Wagner, hold identical or similar positions with the other registered investment
companies in the First Investors Family of Funds. Mr. Head is also an officer
and/or Director of First Investors Asset Management Company, Inc., First
Investors Credit Funding Corporation, First Investors Leverage Corporation,
First Investors Realty Company, Inc., First Investors Resources, Inc., N.A.K.
Realty Corporation, Real Property Development Corporation, Route 33 Realty
Corporation, First Investors Life Insurance Company, First Financial Savings
Bank, S.L.A., First Investors Credit Corporation and School Financial Management
Services, Inc. Ms. Head is also an officer and/or Director of First Investors
Life Insurance Company, First Investors Credit Corporation, School Financial
Management Services, Inc., First Investors Credit Funding Corporation, N.A.K.
Realty Corporation, Real Property Development Corporation, First Investors
Leverage Corporation and Route 33 Realty Corporation.
The following table lists compensation paid to the Directors/Trustees of
each Fund for the fiscal year ended September 30, 1999.
39
<PAGE>
TOTAL
COMPENSATION
FROM FIRST
AGGREGATE AGGREGATE AGGREGATE INVESTORS
COMPENSATION COMPENSATION COMPENSATION FAMILY OF
FROM FROM FROM FUNDS PAID
SERIES FUND SERIES GLOBAL TO
DIRECTOR II** FUND**+ FUND** DIRECTOR++
James J. Coy* $0 $0 $0 $0
Glenn O. Head $0 $0 $0 $0
Kathryn S. Head $0 $0 $0 $0
Larry R. Lavoie $0 $0 $0 $0
Rex R. Reed $5,455 $7,100 $2,400 $41, 695
Herbert Rubinstein $5,455 $7,100 $2,400 $41, 695
Nancy Schaenen $5,455 $7,100 $2,400 $41, 695
James M. Srygley $5,455 $7,100 $2,400 $41, 695
John T. Sullivan $0 $0 $0 $0
Robert F. Wentworth $5,455 $7,100 $2,400 $41, 695
- -------------------
* On March 27, 1997, Mr. Coy resigned as a Director of the Funds. Mr. Coy
currently serves as an emeritus Director.
** Compensation to officers, interested Directors of the Funds and the emeritus
Director is paid by the Adviser.
+ Does not include compensation with respect to the Insured Intermediate Tax
Exempt Fund.
++ 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 September 30, 1999.
MANAGEMENT
ADVISER. Investment advisory services to each 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 each Fund's Board, including a majority of the Directors who are not parties
to the Funds' Advisory Agreement or "interested persons" (as defined in the 1940
Act) of any such party ("Independent Directors"), in person at a meeting called
for such purpose and by a majority of the public shareholders of each Fund.
Pursuant to each Advisory Agreement, FIMCO shall supervise and manage each
Fund's investments, determine each Fund's portfolio transactions and supervise
all aspects of each Fund's operations, subject to review by the Directors. The
Advisory Agreement also provides that FIMCO shall provide the Funds with certain
executive, administrative and clerical personnel, office facilities and
supplies, conduct the business and details of the operation of each Fund and
assume certain expenses thereof, other than obligations or liabilities of the
Funds. An Advisory Agreement may be terminated at any time, with respect to a
Fund, without penalty by the Directors or by a majority of the outstanding
voting securities of such Fund, or by FIMCO, in each instance on not less than
60 days' written notice, and shall automatically terminate in the event of its
assignment (as defined in the 1940 Act). Each Advisory Agreement also provides
that it will continue in effect, with respect to a Fund, 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 such Fund, and, in
40
<PAGE>
either case, by a vote of a majority of the Independent Directors voting in
person at a meeting called for the purpose of voting on such approval.
Under the Advisory Agreements, each Fund is obligated to pay the Adviser
an annual fee, paid monthly, according to the following schedules:
MID-CAP OPPORTUNITY FUND
Annual
Average Daily Net Assets Rate
- ------------------------ ------
Up to $200 million.......................................... 1.00%
In excess of $200 million up to $500 million................ 0.75
In excess of $500 million up to $750 million................ 0.72
In excess of $750 million up to $1.0 billion................ 0.69
Over $1.0 billion........................................... 0.66
FOCUSED EQUITY FUND, GROWTH & INCOME FUND, UTILITIES INCOME FUND
Annual
Average Daily Net Assets Rate
- ------------------------ ------
Up to $300 million.......................................... 0.75%
In excess of $300 million up to $500 million................ 0.72
In excess of $500 million up to $750 million................ 0.69
Over $750 million........................................... 0.66
GLOBAL FUND
Annual
Average Daily Net Assets Rate
- ------------------------ ------
Up to $250 million.......................................... 1.00%
In excess of $250 million up to $500 million................ 0.97
In excess of $500 million up to $750 million................ 0.94
Over $750 million........................................... 0.91
BLUE CHIP FUND, TOTAL RETURN FUND, SPECIAL SITUATIONS FUND
Annual
Average Daily Net Assets Rate
- ------------------------ ------
Up to $200 million.......................................... 1.00%
In excess of $200 million up to $500 million................ 0.75
In excess of $500 million up to $750 million................ 0.72
In excess of $750 million up to $1.0 billion................ 0.69
Over $1.0 billion........................................... 0.66
The following tables reflect the advisory fees paid, advisory fees waived
and expenses reimbursed with respect to each Fund for the fiscal years ended
October 31, 1997, December 31, 1997, September 30, 1998 and September 30, 1999.
FISCAL YEAR ENDED 10/31/97
ADVISORY ADVISORY EXPENSES
FEES PAID FEES WAIVED REIMBURSED
--------- ----------- ----------
MID-CAP OPPORTUNITY FUND $86,930 $28,977 $38,900
GROWTH & INCOME FUND 561,048 125,042 17,942
UTILITIES INCOME FUND 601,030 169,147 137,128
41
<PAGE>
FISCAL YEAR ENDED 12/31/97
ADVISORY ADVISORY EXPENSES
FEES PAID FEES WAIVED REIMBURSED
--------- ----------- ----------
BLUE CHIP FUND $2,451,280 $817,093 $0
SPECIAL SITUATIONS FUND 1,411,573 470,525 $0
TOTAL RETURN FUND 474,344 158,115 $0
GLOBAL FUND 2,883,822 $0 $0
FISCAL YEAR ENDED 9/30/98
ADVISORY ADVISORY EXPENSES
FEES PAID FEES WAIVED REIMBURSED
--------- ----------- ----------
MID-CAP OPPORTUNITY FUND $243,554 $81,184 $35,000
GROWTH & INCOME FUND $1,931,302 $0 $0
UTILITIES INCOME FUND $886,819 $0 $0
BLUE CHIP FUND $2,447,114 $375,000 $0
SPECIAL SITUATIONS FUND $1,215,398 $375,000 $0
TOTAL RETURN FUND $422,293 $140,764 $0
GLOBAL FUND $2,298,343 $0 $0
FISCAL YEAR ENDED 9/30/99
ADVISORY ADVISORY EXPENSES
FEES PAID FEES WAIVED REIMBURSED
--------- ----------- ----------
FOCUSED EQUITY FUND $208,003 $0 $41,267
MID-CAP OPPORTUNITY FUND $364,319 $121,439 $0
GROWTH & INCOME FUND $3,035,400 $0 $0
UTILITIES INCOME FUND $1,181,599 $0 $0
BLUE CHIP FUND $3,881,685 $501,256 $0
SPECIAL SITUATIONS FUND $1,534,162 $494,988 $0
TOTAL RETURN FUND $702,691 $234,230 $0
GLOBAL FUND $3,222,946 $0 $0
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 stock of First Investors
Corporation and the Funds' transfer agent. Mr. Glenn O. Head controls FICC and,
therefore, controls the Adviser.
Prior to January 1, 1998, Wellington Management Company, LLP was the
subadviser to GROWTH & INCOME FUND. For the fiscal year ended October 31, 1997,
the Adviser paid Wellington Management Company, LLP fees of $489,484.
SUBADVISERS. Wellington Management Company, LLP has been retained by the
Adviser and GLOBAL FUND as the investment subadviser to GLOBAL FUND under a
subadvisory agreement dated June 13, 1994 ("Global Subadvisory Agreement"). The
Global Subadvisory Agreement was approved by the Board of Directors of the Fund,
including a majority of Independent Directors in person at a meeting called for
such purpose and by a majority of the shareholders of the GLOBAL FUND.
42
<PAGE>
The Global Subadvisory Agreement provides that it will continue for a
period of more than two years from the date of execution only so long as such
continuance is approved annually by either GLOBAL FUND's Board of Directors or a
majority of the outstanding voting securities of the Fund and, in either case,
by a vote of a majority of the Independent Directors voting in person at a
meeting called for the purpose of voting on such approval. The Global
Subadvisory Agreement provides that it will terminate automatically if assigned
or upon the termination of the Advisory Agreement, and that it may be terminated
at any time without penalty by GLOBAL FUND's Board of Directors or a vote of a
majority of the outstanding voting securities of the Fund or by the Subadvisor
upon not more than 60 days' nor less than 30 days' written notice. The Global
Subadvisory Agreement provides that WMC will not be liable for any error of
judgment or for any loss suffered by the Fund in connection with the matters to
which the Global Subadvisory Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation or from
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
Under the Global Subadvisory Agreement, the Adviser will pay to the
Subadviser a fee at an annual rate of 0.400% of the average daily net assets of
GLOBAL FUND up to and including $50 million; 0.275% of the average daily net
assets in excess of $50 million up to and including $150 million, 0.225% of the
average daily net assets in excess of $150 million up to and including $500
million; and 0.200% of the average daily net assets in excess of $500 million.
This fee will be computed daily and paid monthly. For the fiscal years ended
December 31, 1997, September 30, 1998 and September 30, 1999, the Adviser paid
the Subadviser fees of $786,373, $623,514 and $865,453, respectively.
ASB has been retained by the Adviser and the Focused Equity Fund as the
Subadviser to the Fund under a subadvisory agreement dated March 8, 1999
("Focused Subadvisory Agreement"). The Focused Subadvisory Agreement provides
that it will continue for a period of more than two years from the date of
execution only so long as such continuance is approved annually by either the
Board or a majority of the outstanding voting securities of the Fund and, in
either case, by a vote of a majority of the Independent Directors voting in
person at a meeting called for the purpose of voting on such approval. The
Focused Subadvisory Agreement provides that it will terminate automatically if
assigned or upon the termination of the Advisory Agreement, and that it may be
terminated at any time without penalty by the Board or a vote of a majority of
the outstanding voting securities of the Fund or by ASB upon not more than 60
days' nor less than 30 days' written notice. The Focused Subadvisory Agreement
provides that ASB will not be liable for any error of judgment or for any loss
suffered by the Fund in connection with the matters to which the Focused
Subadvisory Agreement relates, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation or from willful
misfeasance, bad faith, negligence or reckless disregard of its obligations and
duties.
Under the Focused Subadvisory Agreement, the Adviser will pay to ASB a fee
at an annual rate of 0.40% of the average daily net assets of the Fund up to and
including $100 million; 0.275% of the average daily net assets in excess of $100
million up to and including $500 million, and 0.20% of the average daily net
assets in excess of $500 million. This fee will be computed daily and paid
monthly. For the fiscal year ended September 30, 1999, the Adviser paid ASB fees
of $110,689.
Each Fund bears all expenses of its operations other than those assumed by
the Adviser or Underwriter under the terms of its advisory or underwriting
agreements. Fund expenses include, but are not limited to: the advisory fee;
shareholder servicing fees and expenses; custodian fees and expenses; legal and
43
<PAGE>
auditing fees; expenses of communicating to existing shareholders, including
preparing, printing and mailing prospectuses and shareholder reports to such
shareholders; and proxy and shareholder meeting expenses.
UNDERWRITER
SERIES FUND II, SERIES FUND and GLOBAL FUND have entered into an
Underwriting Agreement ("Underwriting Agreement") with First Investors
Corporation ("Underwriter" or "FIC") which requires the Underwriter to use its
best efforts to sell shares of the Funds. The Underwriting Agreement was
approved by each Fund's Board, including a majority of the Independent
Directors. The Underwriting Agreement provides that it will continue in effect
from year to year, with respect to a Fund, only so long as such continuance is
specifically approved at least annually by the Board or by a vote of a majority
of the outstanding voting securities of such Fund, and in either case by the
vote of a majority of the Independent Directors, voting in person at a meeting
called for the purpose of voting on such approval. The Underwriting Agreement
will terminate automatically in the event of its assignment.
For the fiscal year ended October 31, 1997, FIC received underwriting
commissions with respect to GROWTH & INCOME FUND, MID-CAP OPPORTUNITY FUND and
UTILITIES INCOME FUND of $2,689,581, $365,416 and $586,037, respectively. For
the same period, FIC allowed to unaffiliated dealers an additional $8,575 with
respect to GROWTH & INCOME FUND, $1,353 with respect to MID-CAP OPPORTUNITY FUND
and $770 with respect to UTILITIES INCOME FUND.
For the fiscal year ended December 31, 1997, FIC received underwriting
commissions with respect to BLUE CHIP FUND, SPECIAL SITUATIONS FUND, TOTAL
RETURN FUND and GLOBAL FUND of $3,445,078, $1,787,009, $372,980 and $1,410,014,
respectively. or the same period, FIC allowed to unaffiliated dealers an
additional $22,793 with respect to BLUE CHIP FUND, $19,149 with respect to
SPECIAL SITUATIONS FUND, $0 with respect to TOTAL RETURN FUND and $5,856 with
respect to GLOBAL FUND.
For the fiscal year ended September 30, 1998, FIC received underwriting
commissions with respect to GROWTH & INCOME FUND, MID-CAP OPPORTUNITY FUND,
UTILITIES INCOME FUND, BLUE CHIP FUND, SPECIAL SITUATIONS FUND, TOTAL RETURN
FUND and GLOBAL FUND of $3,063,270, $583,003, $766,650, $2,563,743, $1,334,822,
$398,189, and $814,076, respectively. For the same period, FIC allowed to
unaffiliated dealers an additional $12,781 with respect to GROWTH & INCOME FUND,
$3,970 with respect to MID-CAP OPPORTUNITY FUND, $1,729 with respect to
UTILITIES INCOME FUND, $10,859 with respect to BLUE CHIP FUND, $8,944 with
respect to SPECIAL SITUATIONS FUND, $472 with respect to TOTAL RETURN FUND and
$2,883 with respect to GLOBAL FUND.
For the fiscal year ended September 30, 1999, FIC received underwriting
commissions with respect to FOCUSED EQUITY FUND, GROWTH & INCOME FUND, MID-CAP
OPPORTUNITY FUND, UTILITIES INCOME FUND, BLUE CHIP FUND, SPECIAL SITUATIONS
FUND, TOTAL RETURN FUND AND GLOBAL FUND of $1,836,071, $3,968,945, $464,848,
$1,022,719, $2,836,749, $1,087,759, $893,930, and $850,537, respectively. For
the same period, FIC allowed to unaffiliated dealers an additional $1,570 with
respect to FOCUSED EQUITY FUND, $19,863 with respect to GROWTH & INCOME FUND,
$2,626 with respect to MID-CAP OPPORTUNITY FUND, $2,782 with respect to
UTILITIES INCOME FUND, $18,643 with respect to BLUE CHIP FUND, $1,254 with
44
<PAGE>
respect to SPECIAL SITUATIONS FUND, $0 with respect to TOTAL RETURN FUND and
$1,296 with respect to GLOBAL FUND.
DISTRIBUTION PLANS
As stated in the Funds' Prospectus, pursuant to a separate plan of
distribution for each class of shares adopted by SERIES FUND II, SERIES FUND and
GLOBAL FUND pursuant to Rule 12b-1 under the 1940 Act ("Class A Plan" and "Class
B Plan" and, collectively, "Plans"), each Fund is authorized to compensate the
Underwriter for certain expenses incurred in the distribution of that Fund's
shares and the servicing or maintenance of existing Fund shareholder accounts.
Each Class A Plan is a compensation plan except for the Global Fund Class A Plan
which is a reimbursement plan. Each Class B Plan is a compensation plan.
Each Plan was approved by each Fund's Board, including a majority of the
Independent Directors, and by a majority of the outstanding voting securities of
the relevant class of each Fund. Each Plan will continue in effect from year to
year, with respect to a Fund, as long as its continuance is approved annually by
either the Board or by a vote of a majority of the outstanding voting securities
of the relevant class of shares of such Fund. In either case, to continue, each
Plan must be approved by the vote of a majority of the Independent Directors.
The Board reviews quarterly and annually a written report provided by the
Treasurer of the amounts expended under the applicable Plan and the purposes for
which such expenditures were made. While each Plan is in effect, the selection
and nomination of the Independent Directors will be committed to the discretion
of such Independent Directors then in office.
Each Plan can be terminated at any time by a vote of a majority of the
applicable Fund's Independent Directors or by a vote of a majority of the
outstanding voting securities of the relevant class of shares of such Fund. Any
change to any Plan that would materially increase the costs to that class of
shares of such Fund may not be instituted without the approval of the
outstanding voting securities of the class of shares of such Fund as well as any
class of shares that converts into that class. Such changes also require
approval by a majority of the applicable Fund's Independent Directors.
In adopting each Plan, the Board considered all relevant information and
determined that there is a reasonable likelihood that each Plan will benefit
each Fund and their class of shareholders. The Board believes that the amounts
spent pursuant to each Plan have assisted each Fund in providing ongoing
servicing to shareholders, in competing with other providers of financial
services and in promoting sales, thereby increasing the net assets of each Fund.
In reporting amounts expended under the Plans to the Directors, in the
event tht the expenses are not related solely to one class, FIMCO will allocate
expenses attributable to the sale of each class of a Fund's shares to such class
based on the ratio of sales of such class to the sales of both classes of
shares. The fees paid by one class of a Fund's shares will not be used to
subsidize the sale of any other class of that Fund's shares.
For the fiscal year ended September 30, 1999, FOCUSED EQUITY FUND, GROWTH
& INCOME FUND, MID-CAP OPPORTUNITY FUND, UTILITIES INCOME FUND, BLUE CHIP FUND,
SPECIAL SITUATIONS FUND, TOTAL RETURN FUND AND GLOBAL FUND paid $67,591,
$1,032,302, $127,413, $418,222, $1,367,207, $556,888, $260,211 and $926,324,
respectively, in fees pursuant to the Class A Plan. For the same period, the
Underwriter incurred the following Class A Plan-related
expenses with respect to each Fund:
45
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TO COMPENSATION TO COMPENSATION TO
FUND UNDERWRITER DEALERS SALES PERSONNEL
<S> <C> <C> <C>
FOCUSED EQUITY FUND $67,591 $0 $0
GROWTH & INCOME FUND $658,224 $1,475 $372,603
MID-CAP OPPORTUNITY FUND $80,923 $389 $46,101
UTILITIES INCOME FUND $264,461 $263 $153,498
BLUE CHIP FUND $884,874 $1065 $481,268
SPECIAL SITUATIONS FUND $357,450 $11,656 $187,782
TOTAL RETURN FUND $163,339 $28 $96,844
GLOBAL FUND $538,398 $436 $387,490
</TABLE>
For the fiscal year ended September 30, 1999, FOCUSED EQUITY FUND, GROWTH
& INCOME FUND, MID-CAP OPPORTUNITY FUND, UTILITIES INCOME FUND, BLUE CHIP FUND,
SPECIAL SITUATIONS FUND, TOTAL RETURN FUND AND GLOBAL FUND paid $50,019,
$645,751, $60,731, $183,929, $628,753, $189,233, $69,269 and $156,867,
respectively, in fees pursuant to the Class B Plan. For the same period, the
Underwriter incurred the following Class B Plan-related expenses with respect to
each Fund:
<TABLE>
<CAPTION>
COMPENSATION TO COMPENSATION TO COMPENSATION TO
FUND UNDERWRITER DEALERS SALES PERSONNEL
<S> <C> <C> <C>
FOCUSED EQUITY FUND $49,202 $817 $0
GROWTH & INCOME FUND $598,016 $5,665 $42,070
MID-CAP OPPORTUNITY FUND $55,458 $179 $5,094
UTILITIES INCOME FUND $167,200 $982 $15,747
BLUE CHIP FUND $555,151 $4,573 $69,029
SPECIAL SITUATIONS FUND $161,012 $3,129 $25,092
TOTAL RETURN FUND $67,262 $29 $1,978
GLOBAL FUND $134,416 $1,927 $20,524
</TABLE>
DEALER CONCESSIONS. With respect to Class A shares of each Fund, the Fund will
reallow a portion of the sales load to the dealers selling the shares as shown
in the following table:
SALES CHARGES AS % OF CONCESSION TO
OFFERING NET AMOUNT DEALERS AS % OF
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------- ----- -------- --------------
Less than $25,000................... 6.25% 6.67% 5.13%
$25,000 but under $50,000........... 5.75 6.10 4.72
$50,000 but under $100,000.......... 5.50 5.82 4.51
$100,000 but under $250,000......... 4.50 4.71 3.69
$250,000 but under $500,000......... 3.50 3.63 2.87
$500,000 but under $1,000,000....... 2.50 2.56 2.05
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 over-the-counter market ("OTC")
(including securities listed on exchanges whose primary market is believed to be
46
<PAGE>
OTC) are valued at the mean between the last bid and asked prices based upon
quotes furnished by market makers for such securities. Securities may also be
priced by pricing services. Pricing services use quotations obtained from
investment dealers or brokers for the particular securities being evaluated,
information with respect to market transactions in comparable securities and
other available information in determining value. Short-term debt securities
that mature in 60 days or less are valued at amortized cost. Securities for
which market quotations are not readily available and other assets are valued on
a consistent basis at fair value as determined in good faith by or under the
supervision of the particular Fund's officers in a manner specifically
authorized by the Board.
With respect to each Fund, "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 most recent bid and asked prices
obtained from recognized dealers in such securities or by the pricing service.
For valuation purposes, where applicable, quotations of foreign securities in
foreign currencies are converted into U.S. dollar equivalents using the foreign
exchange equivalents in effect.
Each Fund's Board may suspend the determination of a Fund's net asset
value per share separately for each class of shares for the whole or any part of
any period (1) during which trading on the New York Stock Exchange ("NYSE") is
restricted as determined by the SEC or the NYSE is closed for other than weekend
and holiday closings, (2) during which an emergency, as defined by rules of the
SEC in respect to the U.S. market, exists as a result of which disposal by a
Fund of securities owned by it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or (3) for such other period as the
SEC has by order permitted.
EMERGENCY PRICING PROCEDURES. In the event that the Funds must halt
operations during any day that they would normally be required to price under
Rule 22c-1 under the 1940 Act due to an emergency ("Emergency Closed Day"), the
Funds will apply the following procedures:
1. The Funds will make every reasonable effort to segregate orders
received on the Emergency Closed Day and give them the price that they would
have received but for the closing. The Emergency Closed Day price will be
calculated as soon as practicable after operations have resumed and will be
applied equally to sales, redemptions and repurchases that were in fact received
in the mail or otherwise on the Emergency Closed Day.
2. For purposes of paragraph 1, an order will be deemed to have been
received by the Funds on an Emergency Closed Day, even if neither the Funds nor
the Transfer Agent is able to perform the mechanical processing of pricing on
that day, under the following circumstances:
(a) In the case of a mail order the order will be considered
received by a Fund when the postal service has delivered it to FIC's offices in
Woodbridge, New Jersey prior to the close of regular trading on the NYSE, or at
such other time as may be prescribed in its 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 its prospectus.
47
<PAGE>
3. If the Funds are unable to segregate orders received on the Emergency
Closed Day from those received on the next day the Funds are open for business,
the Funds may give all orders the next price calculated after operations resume.
4. Notwithstanding the foregoing, on business days in which the NYSE is
not open for regular trading, the Funds may determine not to price their
portfolio securities if such prices would lead to a distortion of the NAV for
the Funds and their shareholders.
ALLOCATION OF PORTFOLIO BROKERAGE
The Adviser, WMC or ASB, as applicable, may purchase or sell portfolio
securities on behalf of a Fund in agency or principal transactions. In agency
transactions, a Fund generally pays brokerage commissions. In principal
transactions, a 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. The Adviser, WMC or ASB normally purchases fixed-income
securities on a net basis from primary market makers acting as principals for
the securities. The Adviser, WMC or ASB may purchase certain money market
instruments directly from an issuer without paying commissions or discounts. The
Adviser, WMC or ASB 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, WMC or ASB will seek to obtain best execution. A Fund may pay more than
the lowest available commission in return for brokerage and research 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, WMC or ASB 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 Investors Fund
Family. The Lipper's Directors' Analytical Data is used by the Adviser or
Subadvisers and the Fund Board to analyze a fund's performance relative to other
comparable funds. The Subadvisers may use research obtained with commissions to
service their other clients.
In selecting the broker-dealers to execute a Fund's portfolio
transactions, the Adviser, WMC or ASB 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 and WMC do
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 or WMC participates in commissions
generated by portfolio orders placed on behalf of the Fund. ASB or an affiliate
of ASB may execute brokerage transactions on behalf of FOCUSED EQUITY FUND. The
48
<PAGE>
Board of SERIES FUND II has adopted procedures in conformity with Rule 17e-1
under the 1940 Act to ensure that all brokerage commissions paid to ASB or any
affiliate of ASB are reasonable and fair in the context of the market in which
they are operating. Any such transactions will be effected and related
compensation paid only in accordance with applicable SEC regulations.
The Adviser and Subadvisers may combine transaction orders placed on
behalf of a Fund with orders placed on behalf of any other fund or private
account managed by the Adviser or Subadvisers 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
procedures approved by the Board of Directors/Trustees.
The following tables reflect the total commissions paid, commissions paid
to brokers who furnished research services and the amount of portfolio
transactions for which commissions were paid to brokers for research services,
with respect to each Fund for the fiscal years ended October 31, 1997, December
31, 1997, September 30, 1998 and September 30, 1999.
Fiscal Year Ended 10/31/97
--------------------------
TRANSACTIONS
FOR WHICH
COMMISSIONS COMMISSIONS
TOTAL PAID FOR PAID FOR
COMMISSIONS RESEARCH RESEARCH
PAID SERVICES SERVICES
---- -------- --------
MID-CAP OPPORTUNITY FUND $111,995 $17,242 $6,861,292
GROWTH & INCOME FUND $146,190 $46,196 $50,452,086
UTILITIES INCOME FUND $277,318 $13,624 $6,820,235
FISCAL YEAR ENDED 12/31/97
TRANSACTIONS
FOR WHICH
COMMISSIONS COMMISSIONS
TOTAL PAID FOR PAID FOR
COMMISSIONS RESEARCH RESEARCH
PAID SERVICES SERVICES
---- -------- --------
BLUE CHIP FUND $497,747 $270,364 $198,146,829
SPECIAL SITUATIONS FUND $285,203 $126,202 $51,723,575
TOTAL RETURN FUND $101,918 $41,817 $24,738,675
GLOBAL FUND $940,540 $44,537 $45,620,259
FISCAL YEAR ENDED 9/30/98
TRANSACTIONS
FOR WHICH
COMMISSIONS COMMISSIONS
TOTAL PAID FOR PAID FOR
COMMISSIONS RESEARCH RESEARCH
PAID SERVICES SERVICES
---- -------- --------
MID-CAP OPPORTUNITY FUND $89,618 $12,996 $5,787,100
GROWTH & INCOME FUND $257,106 $30,162 $23,988,319
UTILITIES INCOME FUND $245,565 $31,740 $23,906,565
BLUE CHIP FUND $699,323 $55,969 $52,726,903
SPECIAL SITUATIONS FUND $249,971 $26,598 $11,528,675
TOTAL RETURN FUND $108,028 $23,685 $20,827,238
GLOBAL FUND $1,169,770 $25,798 $24,747,557
49
<PAGE>
FISCAL YEAR ENDED 9/30/99
TRANSACTIONS
FOR WHICH
COMMISSIONS COMMISSIONS
TOTAL PAID FOR PAID FOR
COMMISSIONS RESEARCH RESEARCH
PAID SERVICES SERVICES
---- -------- --------
FOCUSED EQUITY FUND $100,084 $0 $0
MID-CAP OPPORTUNITY FUND $161,295 $14,340 $5,854,119
GROWTH & INCOME FUND $1,045,261 $41,310 $40,109,981
UTILITIES INCOME FUND $341,574 $15,306 $11,116,431
BLUE CHIP FUND $986,337 $22,062 $21,271,567
SPECIAL SITUATIONS FUND $420,540 $16,625 $6,105,437
TOTAL RETURN FUND $167,714 $8,592 $7,161,041
GLOBAL FUND $1,598,921 $129,299 $67,959,392
PURCHASE, REDEMPTION AND EXCHANGE OF SHARES
Information regarding the purchase, redemption and exchange of Fund shares
is contained in the Shareholder Manual, a separate section of the SAI that is a
distinct document and may be obtained free of charge by contacting your Fund.
REDEMPTIONS-IN-KIND. If each Fund's Board should determine that it would
be detrimental to the best interests of the remaining shareholders of a Fund to
make payment wholly or partly in cash, the Fund may pay redemption proceeds in
whole or in part by a distribution in kind of securities from the portfolio of
the Fund. In this connection, Series Fund II has elected to be governed by Rule
18f-1 under the 1940 Act. Pursuant to Rule 18f-1 Series Fund II is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Fund during any 90-day period for any one shareholder. With respect
to all Funds, if shares are redeemed in kind, the redeeming shareholder will
likely incur brokerage costs in converting the assets into cash. The method of
valuing portfolio securities for this purpose is described under "Determination
of Net Asset Value."
TAXES
In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended, a Fund --
each Fund being treated as a separate corporation for these purposes -- must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. For each Fund these requirements include the following: (1) the
Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in securities or those currencies ("Income
Requirement"); (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,
50
<PAGE>
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. If a Fund failed to qualify as a RIC for any taxable year, it would
be taxed on the full amount of its taxable income for that year without being
able to deduct the distributions it makes to its shareholders and the
shareholders would treat all those distributions, including distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), as dividends (that is, ordinary income) to the extent of the
Fund's earnings and profits.
Dividends and other distributions declared by a Fund in October, November
or December of any year and payable to shareholders of record on a date in any
of those months are deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
A portion of the dividends from a Fund's investment company taxable income
may be eligible for the dividends-received deduction allowed to corporations.
The eligible portion may not exceed the aggregate dividends received by the Fund
from U.S. corporations. However, dividends received by a corporate shareholder
and deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
If shares of a Fund are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
Dividends and interest received by each Fund, and gains realized by each
Fund, may be subject to income, withholding or other taxes imposed by foreign
countries and U.S. possessions ("foreign taxes") 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 foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors. If more than 50% of the value of a Fund's total assets at
the close of any taxable year consists of securities of foreign corporations, it
will be eligible to, and may, file an election with the Internal Revenue Service
that would enable its shareholders, in effect, to benefit from any foreign tax
credit or deduction available with respect to any foreign taxes paid by it.
Pursuant to any such election, a Fund would treat those taxes as dividends paid
to its shareholders and each shareholder (1) would be required to include in
gross income, and treat as paid by the shareholder, the shareholder's
proportionate share of those taxes, (2) would be required to treat that share of
those taxes and of any dividend paid by the Fund that represents income from
foreign or U.S. possessions sources as the shareholder's own income from those
sources, and (3) could either deduct the taxes deemed paid by the shareholder in
computing taxable income or, alternatively, use the foregoing information in
calculating the tax credit against the shareholder's Federal income tax. Each
Fund that makes this election will report to its shareholders shortly after each
taxable year their respective shares of its income from sources within, and
taxes paid to, foreign countries and U.S. possessions. Individuals who have no
51
<PAGE>
more than $300 ($600 for married persons filing jointly) of creditable foreign
taxes included on Form 1099 and all of whose foreign source income is "qualified
passive income" may elect each year to be exempt from the extremely complicated
foreign tax credit limitation and will be able to claim a foreign tax credit
without having to file the detailed Form 1116 that otherwise is required.
Each Fund may each invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation - other than a "controlled
foreign corporation" (i.e., a foreign corporation in which, on any day during
its taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly,
or constructively, by "U.S. shareholders," defined as U.S. persons that
individually own, directly, indirectly, or constructively, at least 10% of that
voting power) as to which a Fund is a U.S. shareholder - that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, if a Fund holds
stock of a PFIC, it will be subject to Federal income tax on a portion of any
"excess distribution" received on the stock or of any gain on disposition of the
stock (collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent it
distributes that income to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain - which
probably would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax - even if those earnings and
gain were not distributed to the Fund by the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Each Fund may elect to "mark-to-market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of the PFIC's stock
over a Fund's adjusted basis in that stock as of the end of that year. Pursuant
to the election, a Fund also may deduct (as an ordinary, not capital, loss) the
excess, if any, of its adjusted basis in PFIC stock over the fair market value
thereof as of the taxable year-end, but only to the extent of any net
mark-to-market gains with respect to that stock included by the Fund for prior
taxable years. A Fund's adjusted basis in each PFIC's stock subject to the
election would be adjusted to reflect the amounts of income included and
deductions taken thereunder (and under regulations proposed in 1992 that
provided a similar election with respect to the stock of certain PFICs).
MID-CAP OPPORTUNITY FUND, FOCUSED EQUITY FUND, TOTAL RETURN FUND and
UTILITIES INCOME FUND may acquire zero coupon or other securities issued with
original issue discount. As a holder of those securities, each such Fund must
include in its income the portion of the original issue discount that accrues on
the securities during the taxable year, even if the Fund receives no
corresponding payment on them during the year. Similarly, each such Fund must
include in its gross income securities it receives as "interest" on pay-in-kind
securities. Because each Fund annually must distribute substantially all of its
investment company taxable income, including any original issue discount and
other non-cash income, to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax, a Fund may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of cash
52
<PAGE>
it actually receives. Those distributions will be made from a Fund's cash assets
or from the proceeds of sales of portfolio securities, if necessary. A Fund may
realize capital gains or losses from those sales, which would increase or
decrease its investment company taxable income and/or net capital gain.
GLOBAL FUND'S and FOCUSED EQUITY FUND'S use of hedging strategies, such as
selling (writing) and purchasing options and futures contracts and entering into
forward currency contracts, involve complex rules that will determine for income
tax purposes the character and timing of recognition of the gains and losses a
Fund realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
futures and options thereon, and forward currency contracts derived by a Fund
with respect to its business of investing in securities or foreign currencies,
will qualify as permissible income under the Income Requirement.
If GLOBAL FUND or FOCUSED EQUITY FUND has an "appreciated financial
position" generally, an interest (including an interest through an option,
futures or forward contract or short sale) with respect to any stock, debt
instrument (other than "straight debt") or partnership interest the fair market
value of which exceeds its adjusted basis and enters into a "constructive sale"
of the same or substantially similar property, the Fund will be treated as
having made an actual sale thereof, with the result that gain will be recognized
at that time. A constructive sale generally consists of a short sale, an
offsetting notional principal contract or futures or forward contract entered
into by a Fund or a related person with respect to the same or substantially
similar property. In addition, if the appreciated financial position is itself a
short sale or such a contract, acquisition of the underlying property or
substantially similar property will be deemed a constructive sale.
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<PAGE>
PERFORMANCE INFORMATION
A Fund may advertise its top holdings from time to time. A Fund may also
advertise its performance in various ways.
Each Fund's "average annual total return" ("T") is an average annual
compounded rate of return. The calculation produces an average annual total
return for the number of years measured. It is the rate of return based on
factors which include a hypothetical initial investment of $1,000 ("P") over a
number of years ("n") with an Ending Redeemable Value ("ERV") of that
investment, according to the following formula:
T=[(ERV/P)(1/n)]-1
The "total return" uses the same factors, but does not average the rate of
return on an annual basis. Total return is determined as follows:
(ERV-P)/P = TOTAL RETURN
Total return is calculated by finding the average annual change in the
value of an initial $1,000 investment over the period. In calculating the ending
redeemable value for Class A shares, each Fund will deduct the maximum sales
charge of 6.25% (as a percentage of the offering price) from the initial $1,000
payment and, for Class B shares, the applicable CDSC imposed on a redemption of
Class B shares held for the period is deducted. All dividends and other
distributions are assumed to have been reinvested at net asset value on the
initial investment ("P").
Return information may be useful to investors in reviewing a Fund's
performance. However, certain factors should be taken into account before using
this information as a basis for comparison with alternative investments. No
adjustment is made for taxes payable on distributions. Return information will
fluctuate over time and return information for any given past period will not be
an indication or representation of future rates of return. At times, the Adviser
may reduce its compensation or assume expenses of a Fund in order to reduce the
Fund's expenses. Any such waiver or reimbursement would increase the Fund's
return during the period of the waiver or reimbursement.
Average annual return and total return computed at the public offering
price (maximum sales charge for Class A shares and applicable CDSC for Class B
shares) for the period ended September 30, 1999 are set forth in the tables
below:
54
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN: 1, 2
One Year Five Years Ten Years Life of Fund
-------- ---------- --------- ------------
Class A Class B Class A Class B Class A Class B Class A Class B
Shares Shares3 Shares Shares3 Shares Shares3 Shares Shares3
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOCUSED EQUITY FUND N/A N/A N/A N/A N/A N/A N/A N/A
MID-CAP OPPORTUNITY FUND 35.61% 39.61% 15.37% N/A N/A N/A 10.71% 15.74%
UTILITIES INCOME FUND 4.96% 7.13% 13.71% N/A N/A N/A 9.47% 15.05%
GROWTH & INCOME FUND 16.02% 18.77% 18.57% N/A N/A N/A 15.78% 20.92%
BLUE CHIP FUND 17.07% 20.07% 18.26% N/A 12.61% N/A N/A 20.37%
SPECIAL SITUATIONS FUND 23.03% 26.45% 9.05% N/A N/A N/A 14.43% 10.85%
TOTAL RETURN FUND 4.54% 6.72% 12.13% N/A N/A N/A 9.22% 13.93%
GLOBAL FUND 21.56% 24.78% 11.07% N/A 8.00% N/A N/A 13.36%
TOTAL RETURN: 1, 2
</TABLE>
<TABLE>
<CAPTION>
One Year Five Years Ten Years Life of Fund
-------- ---------- --------- ------------
Class A Class B Class A Class B Class A Class B Class A Class B
Shares Shares3 Shares Shares3 Shares Shares3 Shares Shares3
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOCUSED EQUITY FUND N/A N/A N/A N/A N/A N/A 1.97% 4.40%
MID-CAP OPPORTUNITY FUND 35.61% 39.61% 104.39% N/A N/A N/A 106.03% 99.21%
UTILITIES INCOME FUND 4.96% 7.13% 90.11% N/A N/A N/A 81.83% 93.67%
GROWTH & INCOME FUND 16.02% 18.77% 134.34% N/A N/A N/A 140.60% 144.84%
BLUE CHIP FUND 17.07% 20.07% 131.33% N/A 227.86% N/A N/A 139.63%
SPECIAL SITUATIONS FUND 23.03% 26.45% 54.21% N/A N/A N/A 238.05% 62.50%
TOTAL RETURN FUND 4.54% 6.72% 77.27% N/A N/A N/A 129.85% 84.92%
GLOBAL FUND 21.56% 24.78% 69.07% N/A 115.94% N/A N/A 80.61%
</TABLE>
1 All Class A total return figures assume the maximum front-end sales charge of
6.25% and dividends reinvested at net asset value. All Class B total return
figures assume the maximum applicable CDSC. Prior to July 1, 1993, the maximum
front-end sales charge was 6.90%. Prior to December 29, 1989, the maximum
front-end sales charge was 7.25% for BLUE CHIP FUND and 8.50% for GLOBAL FUND.
2 Certain expenses of the Funds have been waived from commencement of operations
through September 30, 1999. Accordingly, return figures are higher than they
would have been had such expenses not been waived.
3 The inception dates for Class A shares of the Funds are as follows: FOCUSED
EQUITY FUND - March 22, 1999; MID-CAP OPPORTUNITY FUND - August 24, 1992;
UTILITIES INCOME FUND - February 22, 1993; GROWTH & INCOME FUND - October 4,
1993 ; BLUE CHIP FUND - January 3, 1989; SPECIAL SITUATIONS FUND - September 18,
1990; TOTAL RETURN FUND - April 24, 1990; and GLOBAL FUND - November 16, 1981.
The commencement date for the offering of Class B shares, with the exception of
FOCUSED EQUITY FUND, is January 12, 1995. FOCUSED EQUITY FUND Class B shares
were first offered on March 12, 1999.
Average annual total return and total return may also be based on
investment at reduced sales charge levels or at net asset value. Any quotation
of return not reflecting the maximum sales charge will be greater than if the
maximum sales charge were used. Average annual return and total return computed
at net asset value for the period ended September 30, 1999 are set forth in the
tables below:
55
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN: 1
One Year Five Years Ten Years Life of Fund2
-------- ---------- --------- -------------
Class A Class B Class A Class B Class A Class B Class A Class B
Shares Shares2 Shares Shares2 Shares Shares2 Shares Shares
------ ------- ------ ------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOCUSED EQUITY FUND N/A N/A N/A N/A N/A N/A N/A N/A
MID-CAP OPPORTUNITY FUND 44.67% 43.61% 16.87% N/A N/A N/A 11.73% 15.99%
UTILITIES INCOME FUND 11.99% 11.13% 15.20% N/A N/A N/A 10.54% 15.30%
GROWTH & INCOME FUND 23.75% 22.77% 20.10% N/A N/A N/A 17.04% 21.13%
BLUE CHIP FUND 24.86% 24.07% 19.80% N/A 13.33% N/A N/A 20.58%
SPECIAL SITUATIONS FUND 31.24% 30.45% 10.46% N/A N/A N/A 15.25% 11.14%
TOTAL RETURN FUND 11.50% 10.72% 13.60% N/A N/A N/A 9.96% 14.19%
GLOBAL FUND 29.63% 28.78% 12.53% N/A 8.70% N/A N/A 13.62%
TOTAL RETURN: 1
</TABLE>
<TABLE>
<CAPTION>
One Year Five Years Ten Years Life of Fund2
-------- ---------- --------- -------------
Class A Class B Class A Class B Class A Class B Class A Class B
Shares Shares2 Shares Shares2 Shares Shares2 Shares Shares
------ ------- ------ ------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOCUSED EQUITY FUND N/A N/A N/A N/A N/A N/A 8.80% 8.40%
MID-CAP OPPORTUNITY FUND 44.67% 43.61% 118.01% N/A N/A N/A 119.84% 101.21%
UTILITIES INCOME FUND 11.99% 11.13% 102.86% N/A N/A N/A 93.87% 95.67%
GROWTH & INCOME FUND 23.75% 22.77% 149.82% N/A N/A N/A 156.73% 146.84%
BLUE CHIP FUND 24.86% 24.07% 146.75% N/A 249.63% N/A N/A 141.63%
SPECIAL SITUATIONS FUND 31.24% 30.45% 64.48% N/A N/A N/A 260.56% 64.50%
TOTAL RETURN FUND 11.50% 10.72% 89.16% N/A N/A N/A 145.08% 86.92%
GLOBAL FUND 29.63% 28.78% 80.47% N/A 130.21% N/A N/A 82.61%
</TABLE>
1 Certain expenses of the Funds have been waived from commencement of operations
through September 30, 1999. Accordingly, return figures are higher than they
would have been had such expenses not been waived.
2 The inception dates for Class A shares of the Funds are as follows: FOCUSED
EQUITY FUND - March 22, 1999; MID-CAP OPPORTUNITY FUND - August 24, 1992;
UTILITIES INCOME FUND - February 22, 1993; GROWTH & INCOME FUND - October 4,
1993 ; BLUE CHIP FUND - January 3, 1989; SPECIAL SITUATIONS FUND - September 18,
1990; TOTAL RETURN FUND - April 24, 1990; and GLOBAL FUND - November 16, 1981.
The commencement date for the offering of Class B shares, with the exception of
FOCUSED EQUITY FUND, is January 12, 1995. FOCUSED EQUITY FUND Class B shares
were first offered on March 12, 1999.
Each Fund may include in advertisements and sales literature, information,
examples and statistics to illustrate the effect of compounding income at a
fixed rate of return to demonstrate the growth of an investment over a stated
period of time resulting from the payment of dividends and capital gain
distributions in additional shares. These examples may also include hypothetical
returns comparing taxable versus tax-deferred growth which would pertain to an
IRA, section 403(b)(7) Custodial Account or other qualified retirement program.
The examples used will be for illustrative purposes only and are not
representations by the Funds of past or future yield or return. Examples of
typical graphs and charts depicting such historical performance, compounding and
hypothetical returns are included in Appendix C.
From time to time, in reports and promotional literature, the Funds may
compare their performance to, or cite the historical performance of, Overnight
Government repurchase agreements, U.S. Treasury bills, notes and bonds,
certificates of deposit, and six-month money market certificates or indices of
56
<PAGE>
broad groups of unmanaged securities considered to be representative of, or
similar to, the Funds' portfolio holdings, such as:
Lipper Analytical Services, Inc. ("Lipper") is a widely-recognized
independent service that monitors and ranks the performance of regulated
investment companies. The Lipper performance analysis includes the
reinvestment of capital gain distributions and income dividends but does
not take sales charges into consideration. The method of calculating total
return data on indices utilizes actual dividends on ex-dividend dates
accumulated for the quarter and reinvested at quarter end.
Morningstar Mutual Funds ("Morningstar"), a semi-monthly publication
of Morningstar, Inc. Morningstar proprietary ratings reflect historical
risk-adjusted performance and are subject to change every month. Funds
with at least three years of performance history are assigned ratings from
one star (lowest) to five stars (highest). Morningstar ratings are
calculated from the funds' three-, five-, and ten-year average annual
returns (when available) and a risk factor that reflects fund performance
relative to three-month Treasury bill monthly returns. Fund's returns are
adjusted for fees and sales loads. Ten percent of the funds in an
investment category receive five stars, 22.5% receive four stars, 35%
receive three stars, 22.5% receive two stars, and the bottom 10% receive
one star.
Salomon Brothers Inc., "Market Performance," a monthly publication
which tracks principal return, total return and yield on the Salomon
Brothers Broad Investment-Grade Bond Index and the components of the
Index.
Telerate Systems, Inc., a computer system to which the Adviser
subscribes which daily tracks the rates on money market instruments,
public corporate debt obligations and public obligations of the U.S.
Treasury and agencies of the U.S. Government.
THE WALL STREET JOURNAL, a daily newspaper publication which lists
the yields and current market values on money market instruments, public
corporate debt obligations, public obligations of the U.S. Treasury and
agencies of the U.S. Government as well as common stocks, preferred
stocks, convertible preferred stocks, options and commodities; in addition
to indices prepared by the research departments of such financial
organizations as Lehman Bros., Merrill Lynch, Pierce, Fenner and Smith,
Inc., Credit Suisse First Boston, Salomon Smith Barney, Morgan Stanley
Dean Witter & Co., Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette,
Value Line, Datastream International, HBSC James Capel, Warburg Dillion
Read, County Natwest and UBS UK Limited, including information provided by
the Federal Reserve Board, Moody's, and the Federal Reserve Bank.
Merrill Lynch, Pierce, Fenner & Smith, Inc. "Taxable Bond Indices,"
a monthly corporate government index publication which lists principal,
coupon and total return on over 100 different taxable bond indices which
Merrill Lynch tracks. They also list the par weighted characteristics of
each Index.
57
<PAGE>
Lehman Brothers, Inc., "The Bond Market Report," a monthly
publication which tracks principal, coupon and total return on the Lehman
Govt./Corp. Index and Lehman Aggregate Bond Index, as well as all the
components of these Indices.
Reuters, a wire service that frequently reports on global business.
The Consumer Price Index, prepared by the U.S. Bureau of Labor
Statistics, is a commonly used measure of inflation. The Index shows
changes in the cost of selected consumer goods and does not represent a
return on an investment vehicle.
The Credit Suisse First Boston High Yield Index is designed to
measure the performance of the high yield bond market.
The Lehman Brothers Aggregate Index is an unmanaged index which
generally covers the U.S. investment grade fixed rate bond market,
including government and corporate securities, agency mortgage
pass-through securities, and asset-backed securities.
The Lehman Brothers Corporate Bond Index includes all publicly
issued, fixed rate, nonconvertible investment grade dollar-denominated,
corporate debt which have at least one year to maturity and an outstanding
par value of at least $100 million.
Moody's Stock Index, an unmanaged index of utility stock
performance.
The Morgan Stanley All Country World Free Index is designed to
measure the performance of stock markets in the United States, Europe,
Canada, Australia, New Zealand and the developed and emerging markets of
Eastern Europe, Latin America, Asia and the Far East. The index consists
of approximately 60% of the aggregate market value of the covered stock
exchanges and is calculated to exclude companies and share classes which
cannot be freely purchased by foreigners.
The Morgan Stanley World Index is designed to measure the
performance of stock markets in the United States, Europe, Canada,
Australia, New Zealand and the Far East. The index consists of
approximately 60% of the aggregate market value of the covered stock
exchanges.
The NYSE composite of component indices--unmanaged indices of all
industrial, utilities, transportation, and finance stocks listed on the
NYSE.
The Russell 2000 Index, prepared by the Frank Russell Company,
consists of U.S. publicly traded stocks of domestic companies that rank
from 1000 to 3000 by market capitalization.
The Russell 2500 Index, prepared by the Frank Russell Company,
consists of U.S. publicly traded stocks of domestic companies that rank
from 500 to 3000 by market capitalization.
The Salomon Brothers Government Index is a market
capitalization-weighted index that consists of debt issued by the U.S.
Treasury and U.S. Government sponsored agencies.
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<PAGE>
The Salomon Brothers Mortgage Index is a market
capitalization-weighted index that consists of all agency pass-throughs
and FHA and GNMA project notes.
The Standard & Poor's 400 Mid-Cap Index is an unmanaged
capitalization-weighted index that is generally representative of the U.S.
market for medium cap stocks.
The Standard & Poor's 500 Composite Stock Price Index and the Dow
Jones Industrial Average of 30 stocks are unmanaged lists of common stocks
frequently used as general measures of stock market performance. Their
performance figures reflect changes of market prices and quarterly
reinvestment of all distributions but are not adjusted for commissions or
other costs.
The Standard & Poor's Small-Cap 600 Index is a
capitalization-weighted index that measures the performance of selected
U.S. stocks with a small market capitalization.
The Standard & Poor's Utilities Index is a capitalization-weighted
index of 41 stocks designed to measure the performance of the utilities
sector of the S&P 500 Index. The Index assumes the reinvestment of
dividends.
From time to time, in reports and promotional literature,
performance rankings and ratings reported periodically in national
financial publications such as MONEY, FORBES, BUSINESS WEEK, BARRON'S,
FINANCIAL TIMES and FORTUNE may also be used. In addition, quotations from
articles and performance ratings and ratings appearing in daily newspaper
publications such as THE WALL STREET JOURNAL, THE NEW YORK TIMES and NEW
YORK DAILY NEWS may be cited.
GENERAL INFORMATION
SERIES FUND is a Massachusetts business trust organized on September 23,
1988. SERIES FUND is authorized to issue an unlimited number of shares of
beneficial interest, no par value, in such separate and distinct series and
classes of shares as the Board of Trustees shall from time to time establish.
The shares of beneficial interest of Series Fund are presently divided into five
separate and distinct series, each having two classes, designated Class A shares
and Class B shares. Series Fund does not hold annual shareholder meetings. If
requested to do so by the holders of at lest 10% of Series Fund's outstanding
shares, Series Fund's Board of Trustees will call a special meeting of
shareholders for any purpose, including the removal of Trustees. Each share of
each Fund has equal voting rights except as noted above.
59
<PAGE>
GLOBAL FUND was incorporated in the state of Maryland on March 9, 1981.
GLOBAL Fund's authorized capital stock consists of 100 million shares of common
stock, all of one series, with a par value per share of $1.00. The Fund is
authorized to issue shares of common stock in such separate and distinct series
and classes of shares as the Fund's Board of Directors shall from time to time
establish. The shares of common stock of the Fund are presently divided into two
classes, designated Class A shares and Class B shares. Each class of the Fund
represents interests in the same assets of the Fund. 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 Fund's Board of Directors will call a
special meeting of shareholders for any purpose, including the removal of
Directors. Each share of the Fund has equal voting rights except as noted above.
SERIES FUND II is a Maryland corporation organized on April 1, 1992.
SERIES FUND II is authorized to issue 400 million shares of common stock, $0.001
par value, in such separate and distinct series and classes of shares as SERIES
FUND II'S Board of Directors shall from time to time establish. The shares of
common stock of SERIES FUND II are presently divided into four separate and
distinct series, each having two classes, designated Class A shares and Class B
shares. Each class of a Fund represents interests in the same assets of that
Fund. SERIES FUND II does not hold annual shareholder meetings. If requested to
do so by the holders of at least 10% of a Fund's outstanding shares, the Board
of Directors will call a special meeting of shareholders for any purpose,
including the removal of Directors. Each share of each Fund has equal voting
rights except as noted above. Prior to December 31, 1997, the MID-CAP
OPPORTUNITY FUND was known as U.S.A. Mid-Cap Opportunity Fund and prior to
February 15, 1996 it was known as Made in the U.S.A.
Fund.
CUSTODIAN. The Bank of New York, 48 Wall Street, New York, NY 10286, is
custodian of the securities and cash of each Fund, except for the GLOBAL FUND,
and employs foreign sub-custodians to provide custody of foreign assets for
SPECIAL SITUATIONS FUND and TOTAL RETURN FUND. Brown Brothers Harriman & Co., 40
Water Street, Boston, MA 02109, is custodian of the securities and cash of the
GLOBAL FUND and employs foreign subcustodians to provide custody of the GLOBAL
FUND'S foreign assets.
AUDITS AND REPORTS. The accounts of the Funds are audited twice a year by
Tait, Weller & Baker, independent certified public accountants, 8 Penn Center
Plaza, Philadelphia, PA, 19103-2108. Shareholders of each Fund receive
semi-annual and annual reports, including audited financial statements, and a
list of securities owned.
LEGAL COUNSEL. Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036 serves as counsel to the Funds.
TRANSFER AGENT. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as transfer agent
for the Funds and as redemption agent for regular redemptions. The fees charged
to each Fund by the Transfer Agent are $5.00 to open an account; $3.00 for each
certificate issued; $.75 per account per month; $10.00 for each legal transfer
of shares; $.45 per account per dividend declared; $5.00 for each exchange of
shares into a Fund; $5.00 for each partial withdrawal or complete liquidation;
$1.00 for each Systematic Withdrawal Plan check; $4.00 for each shareholder
services call; $20.00 for each item of correspondence; and $1.00 per account per
report required by any governmental authority. Additional fees charged to the
Funds by the Transfer Agent are assumed by the Underwriter. The Transfer Agent
reserves the right to change the fees on prior notice to the Funds. Upon request
from shareholders, the Transfer Agent will provide an account history. For
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<PAGE>
account histories covering the most recent three year period, there is no
charge. The Transfer Agent charges a $5.00 administrative fee for each account
history covering the period 1983 through 1994 and $10.00 per year for each
account history covering the period 1974 through 1982. Account histories prior
to 1974 will not be provided. If any communication from the Transfer Agent to a
shareholder is returned from the U.S. Postal Service marked as "Undeliverable"
two consecutive times, the Transfer Agent will cease sending any further
materials to the shareholder until the Transfer Agent is provided with a correct
address. Efforts to locate a shareholder will be conducted in accordance with
SEC rules and regulations prior to forfeiture of funds to the appropriate state
treasury. The Transfer Agent may deduct the costs of its efforts to locate a
shareholder from the shareholder's account. These costs may include a percentage
of the account if a search company charges such a fee in exchange for its
location services. The Transfer Agent is not responsible for any fees that
states and/or their representatives may charge for processing the return of
funds to investors whose funds have been escheated. The Transfer Agent's
telephone number is 1-800-423-4026.
5% SHAREHOLDERS. As of December 31, 1999, The Bank of New York, 48 Wall
Street, New York, NY 10286, Custodian of First Investors Single Payment and
Periodic Payment Plans for the Accumulation of Shares of First Investors Global
Fund, Inc., owned of record 13.7% of the outstanding Class A shares of GLOBAL
FUND for beneficial owners of such Plans.
SHAREHOLDER LIABILITY. SERIES FUND is organized as an entity known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable for the
obligations of SERIES FUND. The Declaration of Trust however, contains an
express disclaimer of shareholder liability for acts or obligations of SERIES
FUND and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Fund or the Trustees.
The Fund's Declaration of Trust provides for indemnification out of the property
of the Fund of any shareholder held personally liable for the obligations of
SERIES FUND. The Declaration of Trust also provides that the Fund shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Fund and satisfy any judgment thereon. Thus, the risk
of a shareholder's incurring financial loss on account of shareholder liability
is limited to circumstances in which the Fund itself would be unable to meet its
obligations. The Adviser believes that, in view of the above, the risk of
personal liability to shareholders is immaterial and extremely remote. The
Declaration of Trust further provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office. SERIES
FUND may have an obligation to indemnify Trustees and officers with respect to
litigation.
TRADING BY PORTFOLIO MANAGERS AND OTHER ACCESS PERSONS. Pursuant to
Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, the Funds and the
Adviser have adopted Codes of Ethics restricting personal securities trading by
portfolio managers and other access persons of the Funds. Among other things,
such persons, except the Director or Trustees of the Funds, as applicable: (a)
must have all non-exempt trades pre-cleared; (b) are restricted from short-term
trading; (c) must provide duplicate statements and transactions confirmations to
a compliance officer; and (d) are prohibited from purchasing securities of
initial public offerings.
61
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APPENDIX A
DESCRIPTION OF CORPORATE BOND AND
CONVERTIBLE SECURITY 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"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
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<PAGE>
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.
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.
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<PAGE>
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.
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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.
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APPENDIX C
[The following tables are represented as graphs in the printed document.]
The following graphs and chart illustrate hypothetical returns:
INCREASE RETURNS
This graph shows over a period of time even a small increase in returns can make
a significant difference. This assumes a hypothetical investment of $10,000.
Years 10% 8% 6% 4%
----- ------- ------ ------ ------
5 16,453 14,898 13,489 12,210
10 27,070 22,196 18,194 14,908
15 44,539 33,069 24,541 18,203
20 73,281 49,268 33,102 22,226
25 120,569 73,402 44,650 27,138
INCREASE INVESTMENT
This graph shows the more you invest on a regular basis over time, the more you
can accumulate. this assumes monthly installment with a constant hypothetical
return rate of 8%.
Years $100 $250 $500 $1,000
----- ------ ------- ------- -------
5 7,348 18,369 36,738 73,476
10 18,295 43,736 91,473 182,946
15 34,604 86,509 173,019 346,038
20 58,902 147,255 294,510 589,020
25 95,103 237,757 475,513 951,026
C-1
<PAGE>
[The following table is represented as a graph in the printed document.]
This chart illustrates the time value of money based upon the following
assumptions:
If you invested $2,000 each year for 20 years, starting at 25, assuming a 9%
investment return, you would accumulate $573,443 by the time you reach age 65.
However, had you invested the same $2,000 each year for 20 years, at that rate,
but waited until age 35, you would accumulate only $242,228 - a difference of
$331,215.
25 years old .............. 573,443
35 years old .............. 242,228
45 years old .............. 103,320
For each of the above graphs and chart it should be noted that systematic
investment plans do not assume a profit or protect against loss in declining
markets. Investors should consider their financial ability to continue purchases
through periods of both high and low price levels. Figures are hypothetical and
for illustrative purposes only and do not represent any actual investment or
performance. The value of a shareholder's investment and return may vary.
C-2
<PAGE>
[The following table is represented as a chart in the printed document.]
The following chart illustrates the historical performance of the Dow Jones
Industrial Average from 1928 through 1996.
1928 .................. 300.00
1929 .................. 248.48
1930 .................. 164.58
1931 .................. 77.90
1932 .................. 59.93
1933 .................. 99.90
1934 .................. 104.04
1935 .................. 144.13
1936 .................. 179.90
1937 .................. 120.85
1938 .................. 154.76
1939 .................. 150.24
1940 .................. 131.13
1941 .................. 110.96
1942 .................. 119.40
1943 .................. 136.20
1944 .................. 152.32
1945 .................. 192.91
1946 .................. 177.20
1947 .................. 181.16
1948 .................. 177.30
1949 .................. 200.10
1950 .................. 235.40
1951 .................. 269.22
1952 .................. 291.89
1953 .................. 280.89
1954 .................. 404.38
1955 .................. 488.39
1956 .................. 499.46
1957 .................. 435.68
1958 .................. 583.64
1959 .................. 679.35
1960 .................. 615.88
1961 .................. 731.13
1962 .................. 652.10
1963 .................. 762.94
1964 .................. 874.12
1965 .................. 969.25
1966 .................. 785.68
1967 .................. 905.10
1968 .................. 943.75
1969 .................. 800.35
1970 .................. 838.91
1971 .................. 890.19
1972 .................. 1,020.01
1973 .................. 850.85
1974 .................. 616.24
1975 .................. 858.71
1976 .................. 1,004.65
1977 .................. 831.17
1978 .................. 805.01
1979 .................. 838.74
1980 .................. 963.98
1981 .................. 875.00
1982 .................. 1,046.55
1983 .................. 1,258.64
1984 .................. 1,211.56
1985 .................. 1,546.67
1986 .................. 1,895.95
1987 .................. 1,938.80
1988 .................. 2,168.60
1989 .................. 2,753.20
1990 .................. 2,633.66
1991 .................. 3,168.83
1992 .................. 3,301.11
1993 .................. 3,754.09
1994 .................. 3,834.44
1995 .................. 5,000.00
1996 .................. 6,000.00
The performance of the Dow Jones Industrial Average is not indicative of
the performance of any particular investment. It does not take into account fees
and expenses associated with purchasing mutual fund shares. Individuals cannot
invest directly in any index. Please note that past performance does not
guarantee future results.
C-3
<PAGE>
[The following table is represented as a chart in the printed document.]
The following chart shows that inflation is constantly eroding the value of your
money.
THE EFFECTS OF INFLATION OVER TIME
1966 ....................... 96.61836
1967 ....................... 93.80423
1968 ....................... 89.59334
1969 ....................... 84.36285
1970 ....................... 79.88906
1971 ....................... 77.33694
1972 ....................... 74.79395
1973 ....................... 68.80768
1974 ....................... 61.27131
1975 ....................... 57.31647
1976 ....................... 54.63915
1977 ....................... 51.20820
1978 ....................... 46.98000
1979 ....................... 41.46514
1980 ....................... 36.85790
1981 ....................... 33.84564
1982 ....................... 32.60659
1983 ....................... 31.41290
1984 ....................... 30.23378
1985 ....................... 29.12696
1986 ....................... 28.81005
1987 ....................... 27.59583
1988 ....................... 26.43279
1989 ....................... 25.27035
1990 ....................... 23.81748
1991 ....................... 23.10134
1992 ....................... 22.45028
1993 ....................... 21.86006
1994 ....................... 21.28536
1995 ....................... 20.76620
1996 ....................... 20.16135
1996 ....................... 100.00
1997 ....................... 103.00
1998 ....................... 106.00
1999 ....................... 109.00
2000 ....................... 113.00
2001 ....................... 116.00
2002 ....................... 119.00
2003 ....................... 123.00
2004 ....................... 127.00
2005 ....................... 130.00
2006 ....................... 134.00
2007 ....................... 138.00
2008 ....................... 143.00
2009 ....................... 147.00
2010 ....................... 151.00
2011 ....................... 156.00
2012 ....................... 160.00
2013 ....................... 165.00
2014 ....................... 170.00
2015 ....................... 175.00
2016 ....................... 181.00
2017 ....................... 186.00
2018 ....................... 192.00
2019 ....................... 197.00
2020 ....................... 203.00
2021 ....................... 209.00
2022 ....................... 216.00
2023 ....................... 222.00
2024 ....................... 229.00
2025 ....................... 236.00
2026 ....................... 243.00
Inflation erodes your buying power. $100 in 1966, could purchase five times the
goods and service as in 1996 ($100 vs. $20).* Projecting inflation at 3%, goods
and services costing $100 today will cost $243 in the year 2026.
* Source: Consumer Price Index, U.S. Bureau of Labor Statistics.
C-4
<PAGE>
[The following tables are represented as graphs in the printed document.]
This chart illustrates that historically, the longer you hold onto stocks, the
greater chance that you will have a positive return.
1926 through 1996*
Total Number of Percentage of
Number of Positive Positive
Rolling Period Periods Periods Periods
-------------- ------- ------- -------
1-Year 71 51 72%
5-Year 67 60 90%
10-Year 62 60 97%
15-Year 57 57 100%
20-Year 52 52 100%
The following chart shows the compounded annual return of large company stocks
compared to U.S. Treasury Bills and inflation over the most recent 15 year
period. **
Compound Annual Return from 1982 -- 1996*
Inflation ..................... 3.55
U.S. Treasury Bills ........... 6.50
Large Company Stocks .......... 16.79
The following chart illustrates for the period shown that long-term corporate
bonds have outpaced U.S. Treasury Bills and inflation.
Compound Annual Return from 1982 -- 1996*
Inflation ..................... 3.55
U.S. Treasury Bills ........... 6.50
Long-Term Corp. bonds ......... 13.66
* Source: Used with permission. (c)1997 Ibbotson Associates, Inc. All rights
reserved. [Certain provisions of this work were derived from copyrighted
works of Roger G. Ibbotson and Rex Sinquefield.]
** Please note that U.S. Treasury bills are guaranteed as to principal and
interest payments (although the funds that invest in them are not), while
stocks will fluctuate in share price. Although past performance cannot
guarantee future results, returns of U.S. Treasury bills historically have
not outpaced inflation by as great a margin as stocks.
C-5
<PAGE>
The accompanying table illustrates that if you are in the 36% tax bracket, a
tax-free yield of 3% is actually equivalent to a taxable investment earning
4.69%.
Your Taxable Equivalent Yield
Your Federal Tax Bracket
---------------------------------------------
28.0% 31.0% 36.0% 39.6%
your tax-free yield
3.00% 4.17% 4.35% 4.69% 4.97%
3.50% 4.86% 5.07% 5.47% 5.79%
4.00% 5.56% 5.80% 6.25% 6.62%
4.50% 6.25% 6.52% 7.03% 7.45%
5.00% 6.94% 7.25% 7.81% 8.25%
5.50% 7.64% 7.97% 8.59% 9.11%
This information is general in nature and should not be construed as tax advice.
Please consult a tax or financial adviser as to how this information affects
your particular circumstances.
C-6
<PAGE>
[The following table is represented as a graph in the printed document.]
The following graph illustrates how income has affected the gains from stock
investments since 1965.
S&P 500 Dividends Reinvested S&P 500 Principal Only
12/31/64 10,000 10,000
12/31/65 11,269 10,906
12/31/66 10,115 9,478
12/31/67 12,550 11,383
12/31/68 13,948 12,255
12/31/69 12,795 10,863
12/31/70 13,299 10,873
12/31/71 15,200 12,046
12/31/72 18,088 13,929
12/31/73 15,431 11,510
12/31/74 11,346 8,090
12/31/75 15,570 10,642
12/31/76 19,296 12,680
12/31/77 17,915 11,221
12/31/78 19,092 11,340
12/31/79 22,645 12,736
12/31/80 30,004 16,019
12/31/81 28,528 14,460
12/31/82 34,674 16,595
12/31/83 42,496 19,461
12/31/84 45,161 19,733
12/31/85 59,489 24,930
12/31/86 70,594 28,575
12/31/87 74,301 29,154
12/31/88 86,641 32,769
12/31/89 114,093 41,699
12/31/90 110,549 38,964
12/31/91 144,230 49,214
12/31/92 155,218 51,411
12/31/93 170,863 55,039
12/31/94 173,120 54,191
12/31/95 238,175 72,676
12/31/96 292,863 87,403
11/30/97 383,977 112,732
Source: First Investors Management Company, Inc. Standard & Poor's is a
registered trademark. The S&P 500 is an unmanaged index comprising 500 common
stocks spread across a variety of industries. The total returns represented
above compare the impact of reinvestment of dividends and illustrates past
performance of the index. The performance of any index is not indicative of the
performance of a particular investment and does not take into account the
effects of inflation or the fees and expenses associated with purchasing mutual
fund shares. Individuals cannot invest directly in any index. Mutual fund shares
will fluctuate in value, therefore, the value of your original investment and
your return may vary. Moreover, past performance is no guarantee of future
results.
C-7
<PAGE>
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999
Registrants incorporate by reference the financial statements and Report of
Independent Accountants contained in the Annual Report to Shareholders for the
fiscal year ended September 30, 1999 electronically filed with the Commission on
December 7, 1999 (Accession Number: 0000912057-99-008506).
66
<PAGE>
SHAREHOLDER MANUAL
xxxA Guide to Your
First Investors
Mutual Fund Account
as of January 11, 2000
INTRODUCTION
Investing in mutual funds doesn't have to be complicated. Your registered
representative is available to answer your questions and help you process your
transactions. First Investors offers personalized service and a wide variety of
mutual funds. In the event you wish to process a transaction directly, the
material provided in this easy-to-follow guide tells you how to contact us and
explains our policies and procedures. Please note that there are special rules
for money market funds.
Please read this manual completely to gain a better understanding of how shares
are bought, sold, exchanged, and transferred. In addition, the manual provides
you with a description of the services we offer to simplify investing. The
services, privileges and fees referenced in this manual are subject to change.
You should call our Shareholder Services Department at 1 (800) 423-4026 before
initiating any transaction.
This manual must be preceded or accompanied by a First Investors mutual fund
prospectus. For more complete information on any First Investors Fund, including
charges and expenses, refer to the prospectus. Read the prospectus carefully
before you invest or send money.
Principal Underwriter
First Investors Corporation
95 Wall Street
New York, NY 10005
1-212-858-8000
Transfer Agent
Administrative Data Management Corp.
581 Main Street
Woodbridge, NJ 07095
1-800-423-4026
TABLE OF CONTENTS
HOW TO BUY SHARES
To Open an Account................1
To Open a Retirement Account........2
Minimum Initial Investment..........2
Additional Investments..............2
Acceptable Forms of Payment.........2
Share Classes.......................2
Share Class Specification...........3
Class A Shares......................3
Class B Shares......................5
How to Pay..........................6
HOW TO SELL SHARES
Written Redemptions.................9
<PAGE>
Telephone Redemptions...............9
Electronic Funds Transfer...........9
Systematic Withdrawal Plans.........10
Expedited Wire Redemptions..........10
HOW TO EXCHANGE SHARES
Exchange Methods....................11
Exchange Conditions.................12
Exchanging Funds with
Automatic Investments or
Systematic Withdrawals..............12
WHEN AND HOW
FUND SHARES ARE PRICED..............13
HOW PURCHASE,
REDEMPTION AND
EXCHANGE ORDERS ARE
PROCESSED AND PRICED.................13
SPECIAL RULES FOR MONEY
MARKET FUNDS ........................14
RIGHT TO REJECT PURCHASE
OR EXCHANGE ORDERS...................15
SIGNATURE GUARANTEE
POLICY .............................15
TELEPHONE SERVICES
Telephone Exchanges
and Redemptions......................16
Shareholder Services.................17
OTHER SERVICES.......................18
ACCOUNT STATEMENTS
Transaction Confirmation Statements..20
Master Account Statements 20
Annual and Semi-Annual Reports.......20
DIVIDENDS AND DISTRIBUTIONS
Dividends and Distributions..........21
Buying a Dividend....................21
TAX FORMS ..........................22
THE OUTLOOK..........................22
<PAGE>
HOW TO BUY SHARES
First Investors offers a wide variety of mutual funds to meet your financial
needs ("FI Funds"). Your registered representative will review your financial
objectives and risk tolerance, explain our product line and services, and help
you select the right investments. Call our Shareholder Services Department at 1
(800) 423-4026 or visit us on-line at www.firstinvestors.com for more
information.
TO OPEN AN ACCOUNT
Before investing, you must establish an account with your broker-dealer. At
First Investors Corporation ("FI") you do this by completing and signing a
Master Account Agreement ("MAA"). Some types of accounts require additional
paperwork.* After you determine the fund(s) you want to purchase, deliver your
completed MAA and your check, made payable to First Investors Corporation, to
your registered representative. New client accounts must be established through
your registered representative.
NON-RETIREMENT
ACCOUNTS
We offer a variety of different "non-retirement" accounts, which is the term we
use to describe all accounts other than retirement accounts.
INDIVIDUAL ACCOUNTS. These accounts may be opened by any adult individual.
Telephone privileges are automatically available, unless they are declined.
JOINT ACCOUNTS. For any account with two or more owners, all owners must
sign requests to process transactions. Telephone privileges allow any one of
the owners to process transactions independently.
GIFTS AND TRANSFERS TO MINORS. Custodial accounts for a minor may be established
under your state's Uniform Gifts/Transfers to Minors Act. Custodial accounts are
registered under the minor's social security number.
TRUSTS. A trust account may be opened only if you have a valid written trust
document.
TRANSFER ON DEATH (TOD). TOD registrations, available on all FI Funds in all
states, allow individual and joint account owners to name one or more
beneficiaries. The ownership of the account passes to the named beneficiaries in
the event of the death of all account owners.
* ADDITIONAL PAPERWORK REQUIRED FOR CERTAIN ACCOUNTS.
TYPE OF ACCOUNT ADDITIONAL DOCUMENTS REQUIRED
Corporations First Investors Certificate of Authority
Partnership
& Trusts
Transfer On Death First Investors TOD Registration Request Form
(TOD)
Estates Original or Certified Copy of Death Certificate
Certified Copy of Letters Testamentary/Administration
First Investors Executor's Certification & Indemnification Form
Conservatorships Certified copy of court document appointing Conservator/
& Guardianships Guardian
<PAGE>
RETIREMENT ACCOUNTS
We offer the following types of retirement plans for individuals and employers:
INDIVIDUAL RETIREMENT ACCOUNTS including Roth, Traditional, and Rollover IRAs.
SIMPLE IRAS for employers.
SEP-IRAS (SIMPLIFIED EMPLOYEE PENSION PLANS) for small business owners or people
with income from self-employment. SARSEP-IRAs are available as trustee to
trustee transfers.
403(B)(7) accounts for employees of eligible tax-exempt organizations such as
schools, hospitals and charitable organizations.
401(K) plans for employers.
MONEY PURCHASE PENSION
& PROFIT SHARING plans for sole proprietors and partnerships.
Currently, there are no annual service fees chargeable to a participant in
connection with an IRA, SEP-IRA, SARSEP-IRA or SIMPLE-IRA. Each Fund currently
pays the annual $10.00 custodian fee for each IRA account maintained with such
Fund. This policy may be changed at any time by a Fund on 45 days' written
notice to the holder of any IRA, SEP-IRA, SARSEP-IRA or SIMPLE-IRA. First
Financial Savings has reserved the right to waive its fees at any time or to
change the fees on 45 days' prior written notice to the holder of any IRA.
(First Financial Savings Bank will change its name to First Investors Federal
Savings Bank.)
For more information about these plans call your registered representative or
our Shareholder Services Department at
1 (800) 423-4026.
MINIMUM INITIAL
INVESTMENT
Your initial investment in a non-retirement fund account may be as little as
$1,000. The minimum is waived if you use one of our Automatic Investment
Programs (see How to Pay) or if you open a Fund account through a full exchange
from another FI Fund. You can open a First Investors Traditional IRA or Roth IRA
with as little as $500. Other retirement accounts may have lower initial
investment requirements at the Fund's discretion.
ADDITIONAL INVESTMENTS
Once you have established an account, you can add to it through your
registered representative or by sending us a check directly. There is no
minimum requirement on additional purchases into existing fund accounts.
Remember to include your FI Fund account number on your check made payable to
First Investors Corporation.
Mail checks to:
FIRST INVESTORS CORPORATION
ATTN: DEPT. CP
581 MAIN STREET
WOODBRIDGE, NJ 07095-1198
ACCEPTABLE FORMS OF PAYMENT The following forms of payment are acceptable:
- -checks made payable to First Investors Corporation.
- -Money Line and Automatic Payroll Investment electronic funds transfers.
- -Federal Funds wire transfers.
<PAGE>
For your protection, never give your registered representative cash or a check
made payable to your registered representative.
We DO NOT accept:
- -Third party checks.
- -Traveler's checks.
- -Checks drawn on non-US banks.
- -Money orders.
- -Cash.
SHARE CLASSES
All FI Funds are available in Class A and Class B shares. Direct purchases into
Class B share money market accounts are not accepted. Class B money market fund
shares may only be acquired through an exchange from another Class B share
account or through Class B share dividend cross-reinvestment.
Each class of shares has its own cost structure. As a result, different classes
of shares in the same fund generally have different prices. Class A shares have
a front-end sales charge. Class B shares may have a contingent deferred sales
charge ("CDSC"). While both classes have a Rule 12b-1 fee, the fee on Class B
shares is generally higher. The principal advantages of Class A shares are that
they have lower overall expenses, the availability of quantity discounts on
sales charges, and certain account privileges that are not offered on Class B
shares. The principal advantage of Class B shares is that all your money is put
to work from the outset. Your registered representative can help you decide
which class of shares is best for you.
SHARE CLASS SPECIFICATION
It's very important to specify which class of shares you wish to purchase when
you open a new account. All First Investors account applications have a place to
designate your selection. If you do not specify which class of shares you want
to purchase, Class A shares will automatically be purchased.
CLASS A SHARES
When you buy Class A shares, you pay the offering price - the net asset value of
the fund plus a front-end sales charge. The front-end sales charge declines with
larger investments.
CLASS A SALES CHARGES
AS A % OF AS A % OF YOUR
YOUR INVESTMENT OFFERING PRICE INVESTMENT
up to $24,999 6.25% 6.67%
$25,000 - $49,999 5.75% 6.10%
$50,000 - $99,999 5.50% 5.82%
$100,000 - $249,999 4.50% 4.71%
$250,000 - $499,999 3.50% 3.63%
$500,000 - $999,999 2.50% 2.56%
$1,000,000 or more 0%* 0%*
* If you invest $1,000,000 or more in Class A shares, you will not pay a
front-end sales charge. However, if you make such an investment and then sell
your shares within 24 months of purchase, you will pay a contingent deferred
sales charge ("CDSC") of 1.00%.
Generally, you should consider purchasing Class A shares if you plan to
invest $250,000 or more either initially or over time.
SALES CHARGE WAIVERS
& REDUCTIONS ON CLASS A SHARES:
<PAGE>
If you qualify for one of the sales charge reductions or waivers, it is very
important to let us know at the time you place your order. Include a written
statement with your check explaining which privilege applies. If you do not
include this statement we cannot guarantee that you will receive the reduction
or waiver.
CLASS A SHARES MAY BE PURCHASED WITHOUT A SALES CHARGE: 1: By an officer,
trustee, director, or employee of the Fund, the Fund's adviser or subadviser,
First Investors Corporation, or any affiliates of First Investors Corporation,
or by his/her spouse, child (under age 21) or grandchild (under age 21).
2: By a former officer, trustee, director, or employee of the Fund, First
Investors Corporation, or their affiliates or by his/her spouse, child (under
age 21) or child under UTMA/UGMA provided the person worked for the company for
at least 5 years and retired or terminated employment in good standing.
3: By a FI registered representative or an authorized dealer, or by his/her
spouse, child (under age 21) or grandchild (under age 21).
4: When Class A share fund distributions are reinvested in Class A shares.
5: When Class A share Systematic Withdrawal Plan payments are reinvested in
Class A shares (except for certain payments from money market accounts which may
be subject to a sales charge).
6: When qualified retirement plan loan repayments are reinvested in Class A
shares.
7: With the liquidation proceeds from a First Investors Life Variable Annuity
Fund A, C, or D contracts or First Investors Single Premium Retirement Annuity
contract within one year of the contract's maturity date.
8: When dividends (at least $50 a year) from a First Investors Life Insurance
Company policy are invested into an EXISTING account.
9: When a group qualified plan (401(k) plans, money purchase pension plans,
profit sharing plans and 403(b) plans that are subject to Title I of ERISA) is
reinvesting redemption proceeds from another fund on which a sales charge or
CDSC was paid.
10: With distribution proceeds from a First Investors group qualified plan
account into an IRA.
11: By participant directed group qualified plans with 100 or more eligible
employees or $1,000,000 or more in assets.
12: In amounts of $1 million or more.
13: By individuals under a Letter of Intent or Cumulative Purchase Privilege of
$1 million or more.
FOR ITEMS 9 THROUGH 13 ABOVE: A CDSC OF 1.00% WILL BE DEDUCTED IF SHARES ARE
REDEEMED WITHIN 2 YEARS OF PURCHASE.
SALES CHARGES ON CLASS A SHARES MAY BE REDUCED FOR:
1: Participant directed group qualified retirement plans with 99 or fewer
eligible employees. The initial sales charge is reduced to 3.00% of the offering
price.
2: Certain unit trust holders ("unitholders") who elect to invest the entire
amount of principal, interest, and/or capital gains distributions from their
unit investment trusts in Class A shares. Unitholders of various series of New
York Insured Municipals-Income Trust sponsored by Van Kampen Merrit, Inc.,
unitholders of various series of the Multistate Tax Exempt Trust sponsored by
Advest Inc., and unitholders of various series of the Insured Municipal Insured
National Trust, J.C. Bradford & Co. as agent, may buy Class A shares of a FI
Fund with unit trust distributions at the net asset value plus a sales charge of
1.5%. Unitholders of various tax-exempt trusts, other than the New York Trust,
sponsored by Van Kampen Merritt Inc. may buy Class A shares of a FI Fund at the
net asset value plus a sales charge of 1.0%.
<PAGE>
Unitholders may make additional purchases, other than those made by unit trust
distributions, at the Fund's regular offering price.
+ CUMULATIVE PURCHASE PRIVILEGE
The Cumulative Purchase Privilege lets you add the value of all your existing FI
Fund accounts (Class A and Class B shares) to the amount of your next Class A
share investment to reach sales charge discount breakpoints. The Cumulative
Purchase Privilege lets you add the values of all of your existing FI Fund
accounts (except for amounts that have been invested directly in Cash Management
or Tax Exempt Money Market accounts on which no sales charge was previously
imposed) to the amount of your next Class A share investment in determining
whether you are entitled to a sales charge discount. While sales charge
discounts are available only on Class A shares, we will also include any Class B
shares you may own in determining whether you have achieved a discount level.
For example, if the combined current value of your existing FI Fund accounts is
$25,000 (measured by offering price), your next purchase will be eligible for a
sales charge discount at the $25,000 level. Cumulative Purchase discounts are
applied to purchases as indicated in the first column of the Class A Sales
Charge table.
All your accounts registered with the same social security number will be linked
together under the Cumulative Purchase Privilege. Your spouse's accounts and
custodial accounts held for minor children residing at your home
can also be linked to your accounts upon request.
- -Conservator accounts are linked to the social security number of the ward,
not the conservator.
- -Sole proprietorship accounts are linked to personal/family accounts only if the
account is registered with a social security number, not an employer
identification number ("EIN").
- -Testamentary trusts and living trusts may be linked to other accounts
registered under the same trust EIN, but not to the personal accounts of the
trustee(s).
-Estate accounts may only be linked to other accounts registered under the same
EIN of the estate or social security number of the decedent.
-Church and religious organizations may link accounts to others registered with
the same EIN but not to the personal accounts of any member.
+ LETTER OF INTENT
A Letter of Intent ("LOI") lets you purchase Class A shares at a discounted
sales charge level even though you do not yet have sufficient investments to
qualify for that discount level. An LOI is a commitment by you to invest a
specified dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay. Under an LOI, you can reduce the initial
sales charge on Class A share purchases based on the total amount you agree to
invest in both Class A and Class B shares during the 13 month period. Purchases
made 90 days before the date of the LOI may be included, in which case the 13
month period begins on the date of the first purchase. Your LOI can be amended
in two ways. First, you may file an amended LOI to raise or lower the LOI amount
during the 13 month period. Second, your LOI will be automatically amended if
you invest more than your LOI amount during the 13 month period and qualify for
an additional sales charge reduction. Amounts invested in the Cash Management or
Tax Exempt Money Market Funds are not counted toward an LOI.
By purchasing under an LOI, you acknowledge and agree to the following:
- -You authorize First Investors to reserve 5% of your total intended investment
in shares held in escrow in your name until the LOI is completed.
- -First Investors is authorized to sell any or all of the escrow shares to
satisfy any additional sales charges owed in the event you do not fulfill the
LOI.
- -Although you may exchange all your shares, you may not sell the reserve shares
held in escrow until you fulfill the LOI or pay the higher sales charge.
<PAGE>
CLASS B SHARES
Class B shares are sold without an initial sales charge, putting all your money
to work for you immediately. If you redeem Class B shares within 6 years of
purchase, a CDSC will be imposed. The CDSC declines from 4% to 0% over a 6-year
period, as shown in the chart below. Class B share money market fund shares are
not sold directly. They can only be acquired through an exchange from another
Class B fund account or through cross reinvestment of dividends from another
Class B share account. Class B shares, and the dividend and distribution shares
they earn, automatically convert to Class A shares after 8 years, reducing
future annual expenses.
Generally, you should consider purchasing Class B shares if you intend to invest
less than $250,000 and you would rather pay higher ongoing expenses than an
initial sales charge.
CLASS B SALES CHARGES
THE CDSC DECLINES OVER TIME AS SHOWN IN THE TABLE BELOW:
YEAR 1 2 3 4 5 6 7+
CDSC 4% 4% 3% 3% 2% 1% 0%
If shares redeemed are subject to a CDSC, the CDSC will be based on the lesser
of the original purchase price or redemption price. There is no CDSC on shares
acquired through dividend and capital gains reinvestment. We call these "free
shares."
Anytime you sell shares, your shares will be redeemed in the following manner to
ensure that you pay the lowest possible CDSC:
First-Class B shares representing dividends and capital gains that are not
subject to a CDSC.
Second-Class B shares held more than six years which are not subject to a CDSC.
Third-Class B shares held longest which will result in the lowest CDSC.
For purposes of calculating the CDSC, all purchases made during the calendar
month are deemed to have been made on the first business day of the month at the
average cost of the shares purchased during that period.
SALES CHARGE WAIVERS ON
CLASS B SHARES:
The CDSC on Class B shares does not apply to:
1: Appreciation on redeemed shares above their original purchase price and
shares acquired through dividend or capital gains distributions.
2: Redemptions due to the death or disability (as defined in Section 72(m)(7) of
the Internal Revenue Code) of an account owner. Redemptions following the death
or disability of one joint owner of a joint account are not deemed to be as the
result of death or disability.
3: Distributions from employee benefit plans due to plan termination.
4: Redemptions to remove an excess contribution from an IRA or qualified
retirement plan.
5: Distributions upon reaching required minimum age 70 1/2 provided you have
held the shares for at least three years.
6: Annual redemptions of up to 8% of your account's value redeemed by a
Systematic Withdrawal Plan. Free shares not subject to a CDSC will be redeemed
first and will count towards the 8% limit.
<PAGE>
7: Shares redeemed from advisory accounts managed by or held by the Fund's
investment advisor or any of its affiliates.
8: Tax-free returns of excess contributions from employee benefit plans.
9: Redemptions of non-retirement shares purchased with proceeds from the sale of
shares of another fund group between April 29, 1996 and June 30, 1996 that did
not pay a sales charge (other than money market fund accounts or retirement plan
accounts).
10: Redemptions by the Fund when the account falls below the minimum.
11: Redemptions to pay account fees.
Include a written statement with your redemption request explaining which
exemption applies. If you do not include this statement we cannot guarantee that
you will receive the waiver.
HOW TO PAY
You can invest using one or more of the following options:
+ CHECK:
You can buy shares by writing a check payable to First Investors Corporation. If
you are opening a new fund account, your check must meet the fund minimum. When
making purchases to an existing account, remember to include your fund account
number on your check.
AUTOMATIC INVESTMENTS:
We offer several automatic investment
programs to simplify investing.
+ MONEY LINE:
With our Money Line program, you can invest in a FI fund account with as little
as $50 a month or $600 each year by transferring funds electronically from your
bank account. You can invest up to $50,000 a month through Money Line.
Money Line allows you to select the payment amount and frequency that is best
for you. You can make automatic investments bi-weekly, semi-monthly, monthly,
quarterly, semi-annually, or annually.
The date you select as your Money Line investment date is the date on which
shares will be purchased. THE PROCEEDS MUST BE AVAILABLE IN YOUR BANK ACCOUNT
TWO BUSINESS DAYS PRIOR TO THE INVESTMENT DATE.
HOW TO APPLY:
1: Complete the Electronic Funds Transfer ("EFT") section of the application to
provide complete bank information and authorize EFT fund share purchases. Attach
a voided check or account statement. A signature guarantee of all shareholders
and bank account owners is required. PLEASE ALLOW AT LEAST 10 BUSINESS DAYS FOR
INITIAL PROCESSING.
2: Complete the Money Line section of the application to specify the amount,
frequency and date of the investment.
3: Submit the paperwork to your registered representative or send it to:
ADMINISTRATIVE DATA MANAGEMENT CORP.
581 MAIN STREET
WOODBRIDGE, NJ 07095-1198.
HOW TO CHANGE:
Provided you have telephone privileges, you may call Shareholder Services at 1
(800) 423-4026 to:
- -Increase the payment up to $999.99 provided bank and fund account
registrations are the same.
- -Decrease the payment.
- -Discontinue the service.
<PAGE>
To change investment amounts, reallocate or cancel Money Line, you must notify
us at least 3 business days prior to the investment date.
You must send a signature guaranteed written request to Administrative Data
Management Corp. to:
- -Increase the payment to $1,000 or more.
- -Change bank information (a new Money Line Application and voided check or
account statement is required).
A medallion signature guarantee (see Signature Guarantee Policy) is required to
increase a Money Line payment to $25,000 or more. Changing banks or bank account
numbers requires 10 days notice. Money Line service will be suspended upon
notification that all account owners are deceased.
+ AUTOMATIC PAYROLL
INVESTMENT:
With our Automatic Payroll Investment service ("API") you can systematically
purchase shares by salary reduction. To participate, your employer must offer
direct deposit and permit you to electronically transfer a portion of your
salary. Contact your company payroll department to authorize the salary
reductions. If not available, you may consider our Money Line program.
Shares purchased through API are purchased on the day the electronic transfer is
received by the Fund.
HOW TO APPLY:
1: Complete an API Application. If you are receiving a government payment and
wish to participate in the API Program you must also complete the government's
Direct Deposit Sign-up Form. Call Shareholder Services at 1 (800) 423-4026 for
more information.
2: Complete an API Authorization Form.
3: Submit the paperwork to your registered representative or send it to:
ADMINISTRATIVE DATA MANAGEMENT CORP.
581 MAIN STREET
WOODBRIDGE, NJ 07095-1198.
+ WIRE TRANSFERS:
You may purchase shares via a Federal Funds wire transfer from your bank account
into your EXISTING First Investors account. Federal Fund wire transfer proceeds
are not subject to a holding period and are available to you immediately upon
receipt, as long as we have been notified properly.
Shares will be purchased on the day we receive your wire transfer provided that
we have received adequate instructions and you have previously notified us that
the wire is on the way (by calling 1 (800) 423-4026). Your notification must
include the Federal Funds wire transfer confirmation number, the amount of the
wire, and the fund account number to receive same day credit. There are special
rules for money market fund accounts.
To wire Federal Funds to an existing First Investors account (other than money
markets), instruct your bank to wire your investment to:
FIRST FINANCIAL SAVINGS BANK, S.L.A.
ABA # 221272604
ACCOUNT # 0306142
YOUR NAME
YOUR FIRST INVESTORS FUND ACCOUNT #
(First Financial Savings Bank will change its name to First Investors Federal
Savings Bank.)
+ DISTRIBUTION
CROSS-INVESTMENT:
<PAGE>
You can invest the dividends and capital gains from one fund account, excluding
the money market funds, into another fund account in the same class of shares.
The shares will be purchased at the net asset value on the day after the record
date of the distribution.
- -You must invest at least $50 a month or $600 a year into a NEW fund account.
- -A signature guarantee is required if the ownership on both accounts is not
identical.
You may establish a Distribution Cross-Investment service by contacting your
registered representative or calling Shareholder Services at 1 (800) 423-4026.
+ SYSTEMATIC WITHDRAWAL PLAN PAYMENT INVESTMENTS: You can invest Systematic
Withdrawal Plan payments (see How to Sell Shares) from one fund account in
shares of another fund account in the same class of shares. -Payments are
invested without a sales charge. -A signature guarantee is required if the
ownership on both accounts is not
identical.
- -Both accounts must be in the same class of shares. -You must invest at least
$600 a year if into a new fund account. -You can invest on a monthly, quarterly,
semi-annual, or annual basis. Redemptions are suspended upon notification that
all account owners are deceased. Service will recommence upon receipt of written
alternative payment instructions and other required documents from the
decedent's legal representative.
HOW TO SELL SHARES
You can sell your shares on any day the New York Stock Exchange ("NYSE") is open
for regular trading. In the mutual fund industry, a sale is referred to as a
"redemption." Payment of redemption proceeds generally will be made within seven
days. If the shares being redeemed were recently purchased by check or
electronic funds transfer, payment may be delayed to verify that the check or
electronic funds transfer has been honored, which may take up to 15 days from
the date of purchase. Shareholders may not redeem shares by telephone or
electronic funds transfer unless the shares have been owned for at least 15
days.
Redemptions of shares are not subject to the 15 day verification period if the
shares were purchased via:
- -Automatic Payroll Investment.
- -FIC registered representative payroll checks.
- -First Investors Life Insurance Company checks.
- -Federal funds wire payments.
For trusts, estates, attorneys-in-fact, corporations, partnerships, and other
entities, additional documents are required to redeem shares. Call
Shareholder Services at
1 (800) 423-4026 for more information.
WRITTEN REDEMPTIONS
You can write a letter of instruction or contact your registered
representative for a liquidation request form. A written liquidation request
in
good order must include:
<PAGE>
1: The name of the fund;
2: Your account number;
3: The dollar amount, number of shares or percentage of the account you want to
redeem;
4: Share certificates (if they were issued to you);
5: Original signatures of all owners exactly as your account is registered; and
6: Signature guarantees, if required (see Signature Guarantee Policy).
If we are being asked to redeem a retirement account and transfer the proceeds
to another financial institution, we will also require a Letter of Acceptance
from the successor custodian before we effect the redemption.
For your protection, the Fund reserves the right to require additional
supporting legal documentation.
Written redemption requests should be mailed to:
ADMINISTRATIVE DATA MANAGEMENT CORP.
581 MAIN STREET
WOODBRIDGE, NJ 07095-1198.
If your redemption request is not in good order or information is missing, the
Transfer Agent will seek additional information and process the redemption on
the day it receives such information.
TELEPHONE REDEMPTIONS
You, or any person we believe is authorized to act on your behalf, may redeem
non-retirement shares which have been owned for at least 15 days by calling our
Special Services Department at 1 (800) 342-6221 from 9:00 a.m. to 4:00 p.m., ET,
provided:
- -Telephone privileges are available for your account registration and you
have not declined telephone privileges (see Telephone Privileges);
- -You do not hold share certificates (issued shares);
- -The redemption check is made payable to the registered owner(s) or
pre-designated bank;
- -The redemption check is mailed to your address of record or predesignated
bank account;
- -Your address of record has not changed within the past 60 days;
- -The redemption amount is $50,000 or less; AND
- -The redemption amount, combined with the amount of all telephone redemptions
made within the previous 30 days does not exceed
$100,000. Telephone redemption orders received between 4:00-5:00p.m. will be
processed on the following business day.
ELECTRONIC FUNDS TRANSFER
The Electronic Funds Transfer ("EFT") service allows you to redeem shares and
electronically transfer proceeds to your bank account.
YOU MUST ENROLL IN THE ELECTRONIC FUNDS TRANSFER SERVICE AND PROVIDE COMPLETE
BANK ACCOUNT INFORMATION BEFORE USING THE PRIVILEGE. Signature guarantees of all
shareholders and all bank account owners are required. Please allow at least 10
business days for initial processing. We will send any proceeds during the
processing period to your address of record. Call your registered representative
or Shareholder Services at 1 (800) 423-4026 for an application. You may call
Shareholder Services or send written instructions to Administrative Data
Management Corp. to request an EFT redemption of shares which have been held at
least 15 days. Each EFT redemption:
1: Must be electronically transferred to your pre-designated bank account;
2: Must be at least $500;
3: Cannot exceed $50,000; and
4: Cannot exceed $100,000 when added to the total amount of all EFT redemptions
made within the previous 30 days.
If your redemption does not qualify for an EFT redemption, your redemption
proceeds will be mailed to your address of record.
<PAGE>
The Electronic Funds Transfer service may also be used to purchase shares (see
Money Line) and transfer systematic withdrawal payments (see Systematic
Withdrawal Plans) and dividend distributions (see Other Services) to your bank
account.
SYSTEMATIC WITHDRAWAL PLANS
Our Systematic Withdrawal Plan allows you to redeem a specific dollar amount,
number of shares, or percentage from your account on a regular basis. Your
payments can be mailed to you or a pre-authorized payee by check, transferred to
your bank account electronically (if you have enrolled in the EFT service) or
invested in shares of another FI fund in the same class of shares through our
Systematic Withdrawal Plan Payment investment service (see How to Buy Shares).
You can receive payments on a monthly, quarterly, semi-annual, or annual basis.
Your account must have a value of at least $5,000 in non-certificated shares
("unissued shares"). The $5,000 minimum account balance is waived for required
minimum distributions from retirement plan accounts, payments to First Investors
Life Insurance Company, and systematic investments into another eligible fund
account. The minimum Systematic Withdrawal Plan payment is $25 (waived for
Required Minimum Distributions on retirement accounts or FIL premium payments).
Once you establish the Systematic Withdrawal Plan, you should not make
additional investments into this account (except money market funds). Buying
shares during the same period as you are selling shares is not advantageous to
you because of sales charges.
If you own Class B shares, you may establish a Systematic Withdrawal Plan and
redeem up to 8% of the value of your account annually without a CDSC.
If you own Class B shares of a retirement account and you are receiving your
Required Minimum Distribution through a Systematic Withdrawal Plan, up to 8% of
the value of your account may be redeemed annually without a CDSC. However, if
your Required Minimum Distribution exceeds the 8% limit, the applicable CDSC
will be charged if the additional shares were held less than 3 years and you
have not reached age 701/2.
To establish a Systematic Withdrawal Plan, complete the appropriate section of
the account application or contact your registered representative or call
Shareholder Services at
1 (800) 423-4026.
EXPEDITED WIRE
REDEMPTIONS
(MONEY MARKET FUNDS ONLY)
Enroll in our Expedited Redemption service to wire proceeds from your FI money
market account to your bank account. Call Shareholder Services at 1 (800)
423-4026 for an application or to discuss specific requirements.
Requests for redemptions by wire out of money market funds must be received in
writing or by phone prior to 12:00 p.m., ET on a day the NYSE is open for
trading. These days are referred to as "Trading Days" in this manual. Wire
Redemption orders received after 12:00 p.m., ET but before the close of regular
trading on the NYSE, or received on a day that the Federal Reserve system is
closed will be processed on the following business day.
- -Each wire under $5,000 is subject to a $15 fee.
- -Two wires of $5,000 or more are permitted without charge each month. Each
additional wire is $15.00.
- -Wires must be directed to your pre-designated bank account.
HOW TO EXCHANGE SHARES
<PAGE>
The exchange privilege gives you the flexibility to change investments as your
goals change without incurring a sales charge. Since an exchange of
non-retirement fund shares is a redemption and a purchase, it creates a gain or
loss which is reportable for tax purposes. You should consult your tax advisor
before requesting an exchange. Read the prospectus of the FI Fund you are
purchasing carefully. Review the differences in objectives, policies, risk,
privileges and restrictions.
EXCHANGE METHODS
METHOD STEPS TO FOLLOW
Through Your
Registered Representative Call your registered representative.
By Phone Call Special Services from 9:00 a.m. to 5:00 p.m., ET
1(800) 342-6221 Orders received after the close of the NYSE, usually
4:00 p.m., ET, are processed the following business day.
1. You must have telephone privileges.
(see Telephone Transactions.)
2. Certificate shares cannot be exchanged by phone.
3. For trusts, estates, attorneys-in-fact, corporations,
partnerships, and other entities, additional documents
are required and must be on file.
By Mail to:
ADM
581 MAIN STREET
WOODBRIDGE, NJ 07095-1198 1. Send us written instructions signed by all
account owners exactly as the account is registered.
2. Include the name and account number of your fund.
3. Indicate either the dollar amount, number of shares or
percent of the source account you want to exchange.
4. Specify the existing account number or the name of the
new Fund you want to exchange into.
5. Include any outstanding share certificates for shares you
want to exchange. A signature guarantee is required.
6. For trusts, estates, attorneys-in-fact, corporations,
partnerships, and other entities, additional
documents are required. Call Shareholder
Services at 1(800) 423-4026.
EXCHANGE CONDITIONS
1: You may only exchange shares within the same class.
2: Exchanges can only be made into identically owned accounts.
3: Partial exchanges into a new fund account must meet the new fund's minimum
initial investment.
4: The fund you are exchanging into must be eligible for sale in your state.
5: If your request does not clearly indicate the amount to be exchanged or the
accounts involved, no shares will be exchanged.
<PAGE>
6: Amounts exchanged from a non-money market fund to a money market fund may be
exchanged back along with the dividends earned on that amount at net asset
value. Dividends earned from money market fund shares will be subject to a sales
charge.
7: If you are exchanging from a money market fund to a fund with a sales charge,
there will be a sales charge on any shares that were not previously subject to a
sales charge. Dividends earned on money market shares that were purchased by an
exchange from a fund with a sales charge, may be exchanged back at net asset
value. Your request must be in writing and include a statement acknowledging
that a sales charge will be paid.
8: If you exchange Class B shares of a fund for shares of a Class B money market
fund, the CDSC will not be imposed but the CDSC and the holding period used to
calculate the CDSC will carry over to the acquired shares.
9: FI Funds reserve the right to reject any exchange order which in the opinion
of the Fund is part of a market timing strategy. In the event that an exchange
is rejected, neither the redemption nor the purchase side of the exchange will
be processed.
10: If your exchange request is not in good order or information is missing, the
Transfer Agent will seek additional information and process the exchange on the
day it receives such information.
EXCHANGING FUNDS WITH AUTOMATIC INVESTMENTS OR SYSTEMATIC WITHDRAWALS
Let us know if you want to continue automatic investments into the original fund
or the fund you are exchanging into ("receiving fund") or if you want to change
the amount or allocation. Also inform us if you wish to continue, terminate, or
change a preauthorized systematic withdrawal. Without specific instructions, we
will amend account privileges as outlined below:
EXCHANGE EXCHANGE EXCHANGE A
ALL SHARES TO ALL SHARES TO PORTION OF
ONE FUND MULTIPLE SHARES TO ONE OR
FUNDS MULTIPLE
FUNDS
MONEY LINE ML moves to ML stays with ML stays with
(ML) Receiving Fund Original Fund Original Fund
AUTOMATIC PAYROLL API moves to API Stays with API stays with
INVESTMENT (API) Receiving Fund Original Fund Original Fund
SYSTEMATIC SWP moves to SWP SWP stays
WITHDRAWALS Receiving Fund Canceled with Original Fund
(SWP)
WHEN AND HOW FUND SHARES ARE PRICED
Each FI Fund prices its shares each day that the NYSE is open for trading. The
share price is calculated as of the close of trading on the NYSE (generally 4:00
p.m., ET).
Each Fund calculates the net asset value of each class of its shares separately
by taking the total value of class assets, subtracting class expenses, and
dividing the difference by the total number of shares in the class. The price
that you will pay for a share is the NAV plus any applicable front-end sales
charge. You receive the NAV price if you redeem or exchange your shares, less
any applicable CDSC.
Fund prices are on our website (www.firstinvestors.com) the next day. The prices
for our larger funds are also reported in many newspapers, including The Wall
Street Journal and The New York Times. Special pricing procedures are employed
during emergencies. For a description of these procedures you can request, free
of charge, a copy of a Statement of Additional Information.
<PAGE>
HOW PURCHASE,
REDEMPTION AND
EXCHANGE ORDERS
ARE PROCESSED AND PRICED
The processing and price for a purchase, redemption or exchange depends upon how
your order is placed. As indicated below, in certain instances, special rules
apply to money market transactions. Special rules also apply for emergency
conditions. These are described in the Statement of Additional Information.
+ PURCHASES:
Purchases that are made by written application or order are processed when they
are received in "good order" by our Woodbridge, NJ office. To be in good order,
all required paperwork must be completed and payment received. If your order is
received prior to the close of trading on the NYSE, it will receive that day's
price (except in the case of money market funds which are discussed in the
section below called Special Rules for Money Market Funds). This procedure
applies whether your purchase order is given to your registered representative
or mailed directly by you to our Woodbridge, NJ office.
As described previously in "How to Buy Shares," certain types of purchases can
only be placed by written application. For example, purchases in connection with
the opening of retirement accounts may only be made by written application.
Furthermore, rollovers of retirement accounts will be processed only when we
have received both written application and the proceeds of the rollover. Thus,
for example, if it takes 30 days for another fund group to send us the proceeds
of a retirement account, your purchase of First Investors funds will not occur
until we receive the proceeds.
Some types of purchases may be phoned or electronically transmitted to us via
Fund/SERV by your broker-dealer. If you give your order to a registered
representative before the close
of trading on the NYSE and the order is phoned to our Woodbridge, NJ office
prior to 5:00 p.m., ET, your shares will be purchased at that day's price
(except in the case of money market funds which are discussed in the section
below called Special Rules for Money Market Funds). If you are buying a First
Investors Fund through a broker-dealer other than First Investors, other
requirements may apply. Consult with your broker-dealer about its requirements.
Payment is due within three business days of placing an order by phone or
electronic means or the trade may be cancelled. (In such event, you will be
liable for any loss resulting from the cancellation.) To avoid cancellation of
your orders, you may arrange to open a money market account and use it to pay
for subsequent purchases.
Purchases made pursuant to our Automatic Investment Programs are processed as
follows:
- -Money Line purchases are processed on the date you select on your
application.
- -Automatic Payroll Investment Service purchases are processed on the date that
we receive funds from your employer.
+ REDEMPTIONS:
As described previously in "How To Sell Shares," certain redemption orders may
only be made by written instructions or application. Unless you have declined
Telephone Privileges, most non-retirement account redemptions can be made by
phone by you or your registered representative.
Written redemption orders will be processed when received in good order in our
Woodbridge, NJ office. Phone redemption orders will be processed when received
in good order in our Woodbridge, NJ office prior to 4:00 p.m., ET.
<PAGE>
If your redemption order is received prior to the close of trading on the NYSE,
you will receive that day's price. If you redeem through a broker-dealer other
than First Investors, other requirements may apply. Consult with your
broker-dealer about its requirements.
+ EXCHANGES:
Unless you have declined telephone privileges, you or your representative may
exchange shares by phone. Exchanges can also be made by written instructions.
Exchange orders are processed when we receive them in good order in our
Woodbridge, NJ office.
Exchange orders received in good order prior to the close of trading on the NYSE
will be processed at that day's prices.
+ ORDERS PLACED VIA FIRST INVESTORS REGISTERED REPRESENTATIVES: All orders
placed through a First Investors registered representative must be reviewed and
approved by a principal officer of the branch office before being mailed or
transmitted to the Woodbridge, NJ office.
+ ORDERS PLACED VIA DEALERS:
It is the responsibility of the Dealer to forward or transmit orders to the Fund
promptly and accurately. A fund will not be liable for any change in the price
per share due to the failure of the Dealer to place or pay for the order in a
timely fashion. Any such disputes must be settled between you and the Dealer.
SPECIAL RULES FOR MONEY MARKET FUNDS
Money market fund shares will not be purchased until the Fund receives Federal
Funds for the purchase. Federal Funds for a purchase will generally not be
received until the morning of the next Trading Day following the Trading Day on
which your purchase check or other form of payment is received in our
Woodbridge, NJ office. If a check is received in our Woodbridge, NJ office after
the close of regular trading on the NYSE, the Federal Funds for the purchase
will generally not be received until the morning of the second following Trading
Day.
If we receive a wire transfer for a purchase prior to 12:00 p.m., ET and you
have previously notified us that the wire is on the way (by calling 1 (800)
423-4026) the funds for the purchase will be deemed to have been received on
that same day. Your notification must include the Federal Funds wire transfer
confirmation number, the amount of the wire, and the money market fund account
number to receive same day credit. If we fail to receive such advance
notification, the funds for your purchase will not be deemed to have been
received until the morning of the next Trading Day following receipt of the
Federal Wire and your account information.
To wire funds to an existing First Investors money market account, instruct your
bank to wire your investment, as applicable, to:
CASH MANAGEMENT FUND
BANK OF NEW YORK
ABA #021000018
FI CASH MGMT. ACCOUNT 8900005696
FOR FURTHER CREDIT TO: YOUR NAME
YOUR FIRST INVESTORS ACCOUNT #
TAX-EXEMPT MONEY MARKET FUND
BANK OF NEW YORK
ABA #021000018
FI TAX EXEMPT ACCOUNT 8900023198
FOR FURTHER CREDIT TO: YOUR NAME
YOUR FIRST INVESTORS ACCOUNT #
<PAGE>
Requests for redemptions by wire out of the money market funds must be received
in writing or by phone prior to 12:00 p.m., ET, on a Trading Day, to be
processed the same day. Wire redemption requests received after 12:00 p.m., ET,
but before the close of regular trading on the NYSE, will be processed the
following Trading Day.
There is no sales charge on Class A share money market fund purchases. However,
anytime you make a redemption from a Class A share money market account and
subsequently invest the proceeds in another eligible Class A share fund, the
purchase will incur a sales charge unless one has already been paid.
RIGHT TO REJECT
PURCHASE OR
EXCHANGE ORDERS
A fund reserves the right to reject or restrict any specific purchase or
exchange request if the fund determines that doing so is in the best interest of
the fund and its shareholders. Investments in a fund are designed for long-term
purposes and are not intended to provide a vehicle for short-term market timing.
The funds also reserve the right to reject any exchange that in the funds'
opinion is part of a market timing strategy. In the event that a fund rejects an
exchange request, neither the redemption nor the purchase side of the exchange
will be processed.
SIGNATURE
GUARANTEE POLICY
A signature guarantee protects you from the risk of a fraudulent signature and
is generally required for non-standard and large dollar transactions. A
signature guarantee may be obtained from eligible guarantor institutions
including banks, savings associations, credit unions and brokerage firms which
are members of the Securities Transfer Agents Medallion Program ("STAMP"), the
New York Stock Exchange Medallion Signature Program ("MSP"), or the Stock
Exchanges Medallion Program ("SEMP"). Please note that a notary public stamp or
seal is not acceptable.
+ SIGNATURE GUARANTEES
ARE REQUIRED:
1: For redemptions over $50,000.
2: For redemption checks made payable to any person(s) other than the registered
shareholder(s) or any entity other than a major financial institution for the
benefit of the registered shareholder(s).
3: For redemption checks mailed to an address other than the address of record,
pre-authorized bank account, or a major financial institution on your behalf.
4: For redemptions when the address of record has changed within 60 days of the
request.
5: When a stock certificate is mailed to an address other than the address of
record or the dealer on the account.
6: When shares are transferred to a new registration.
7: When certificated (issued) shares are redeemed or exchanged.
8: To establish any EFT service.
9: For requests to change the address of record to a P.O. box or a "c/o" street
address.
10: If multiple account owners of one account give inconsistent instructions.
11: When a transaction requires additional legal documentation.
<PAGE>
12: When the authority of a representative of a corporation, partnership, trust,
or other entity has not been satisfactorily established.
13: When an address is updated on an account which has been coded "Do Not Mail"
because mail has been returned as undeliverable.
14: Any other instance whereby a fund or its transfer agent deems it
necessary as a matter of prudence.
TELEPHONE
SERVICES
TELEPHONE EXCHANGES AND REDEMPTIONS
1 (800) 342-6221
You automatically receive telephone privileges when you open a First Investors
individual, joint, or custodial account unless you decline the option on your
account application or send the Fund written instructions. For trusts, estates,
attorneys-in-fact, corporations, partnerships, and other entities, telephone
privileges are not automatically granted. You must complete additional
documentation. Call Shareholder Services at 1 (800) 423-4026 for assistance.
Telephone privileges allow you to exchange or redeem eligible shares and
authorize other transactions with a simple phone call. Your registered
representative may also use telephone privileges to execute your transactions.
+ SECURITY MEASURES:
For your protection, the following security measures are taken:
1: Telephone requests are recorded to verify accuracy.
2: Some or all of the following information is obtained:
- -Account number.
- -Address.
- -Social security number.
- -Other information as deemed necessary.
3: A written confirmation of each transaction is mailed to you.
We will not be liable for following instructions if we reasonably believe the
instructions are genuine based on our verification procedures.
+ ELIGIBILITY:
NON-RETIREMENT ACCOUNTS:
You can exchange or redeem shares of any non-retirement account by phone. Shares
must be uncertificated and owned for 15 days for telephone redemption. See "How
To Sell Shares" for additional information.
Telephone exchanges and redemptions are not available on guardianship and
conservatorship accounts.
RETIREMENT ACCOUNTS:
You can exchange shares of any eligible FI fund of any participant directed FI
prototype IRA, 403(b) or 401(k) Simplifier Plan. You may also exchange shares
from an individually registered non-retirement account to an IRA account
registered to the same owner (provided an IRA application is on file). Telephone
exchanges are permitted on 401(k) Flexible plans, money purchase pension plans
and profit sharing plans if a First Investors Qualified Retirement Plan
<PAGE>
Application is on file with the fund. Contact your registered representative or
call Shareholder Services at 1 (800) 423-4026 to obtain a Qualified Retirement
Plan Application. Telephone redemptions are not permitted on First Investors
retirement accounts.
During times of drastic economic or market changes, telephone redemptions or
exchanges may be difficult to implement. If you experience difficulty in making
a telephone exchange or redemption, you may send us a written request by regular
or express mail. The written request will be processed at the next determined
net asset value, less any applicable CDSC, when received in good order in our
Woodbridge, N.J. office.
SHAREHOLDER SERVICES
1 (800) 423-4026
PROVIDED YOU HAVE NOT DECLINED TELEPHONE PRIVILEGES, CALL US TO UPDATE OR
CORRECT:
- -Your address or phone number. For security purposes, the Fund will not
honor telephone requests to change an address to a P.O. Box or "c/o" street
address.
- -Your birth date (important for retirement distributions).
- -Your distribution option to reinvest or pay in cash or initiate cross
reinvestment of dividends (non-retirement accounts only).
- -The amount of your Money Line up to $999.99 per payment provided bank and fund
account registrations are the same.
- -The allocation of your Money Line or Automatic Payroll Investment payment.
- -The amount of your Systematic Withdrawal payment on non-retirement accounts.
TO REQUEST:
- -A history of your account (the fee can be debited from your non-retirement
account).
- -A share certificate to be mailed to your address of record (non-retirement
accounts only).
- -Cancellation of your Systematic Withdrawal Plan (non-retirement accounts
only).
- -Money market fund draft checks (non-retirement accounts only). Additional
written documentation may be required for certain registrations.
- -A stop payment on a dividend, redemption or money market draft check.
- -Reactivation of your Money Line (provided an application and voided check is
on file).
- -Suspension (up to six months) or cancellation of Money Line.
- -A duplicate copy of a statement or tax form.
- -Cancellation of cross-reinvestment of dividends.
OTHER SERVICES
+ REINSTATEMENT PRIVILEGE:
<PAGE>
If you sell some or all of your Class A or Class B shares, you may be entitled
to invest all or a portion of the proceeds in the same class of shares of a FI
fund within six months of the redemption without a sales charge.
If you invest proceeds into a new fund account, you must meet the fund's minimum
initial investment requirement.
If you invest all the proceeds from a Class B share redemption, you will be
credited, in additional shares, for the full amount of the CDSC. If you invest a
portion of a Class B share redemption, you will be credited with a pro-rated
percentage of the CDSC.
The reinstatement privilege does not apply to automated purchases, automated
redemptions, or reinstatements in Class B shares of less than $1,000.
Please notify us if you qualify for this privilege. For more information, call
Shareholder Services at 1 (800) 423-4026.
+ CERTIFICATE SHARES:
Every time you make a purchase of Class A shares, we will credit shares to your
fund account. We do not issue share certificates unless you specifically request
them. Certificates are not issued on any Class B shares, Class A money market
shares, or any shares in retirement accounts.
Having us credit shares on your behalf eliminates the expense of replacing lost,
stolen, or destroyed certificates. If a certificate is lost, stolen, or damaged,
you may be charged a replacement fee of the greater of 2% of the current value
of the certificated shares or $25.
In addition, certificated shares cannot be redeemed, exchanged, or transferred
until they are returned with your transaction request. The share certificate
must be properly endorsed and signature guaranteed.
+ MONEY MARKET FUND DRAFT CHECKS:
Free draft check writing privileges are available when you open a First
Investors Cash Management Fund or a First Investors Tax Exempt Money Market Fund
account. Checks may be written for a minimum of $500. Draft checks are not
available for Class B share accounts, retirement accounts, guardianships and
conservatorships. Complete the Money Market Fund Check Redemption section of the
account application to apply for draft checks. To order additional checks, call
Shareholder Services at 1 (800) 423-4026.
Additional documentation is required to establish check writing privileges
for trusts, corporations, partnerships and other entities. Call Shareholder
Services at 1 (800) 423-4026 for further information.
FEE TABLE:
Call Shareholder Services at 1 (800) 423-4026 or send your request to FIC,
Attn: Correspondence Dept., 581 Main Street, Woodbridge, NJ 07095-1198 to
request a copy of the following records:
.
ACCOUNT HISTORY STATEMENTS:
1974 - 1982* $10 per year fee
1983 - present $5 total fee for all years
Current & Two Prior Years Free
*ACCOUNT HISTORIES ARE NOT AVAILABLE PRIOR TO 1974
CANCELLED CHECKS:
There is a $10 fee for a copy of a cancelled dividend, liquidation, or
investment check requested. There is a $15 fee for a copy of a cancelled money
market draft check.
<PAGE>
DUPLICATE TAX FORMS:
Current Year Free
Prior Year(s) $7.50 per tax form per year
+ RETURN MAIL:
If mail is returned to the fund marked undeliverable by the U.S. Postal Service
after two consecutive mailings, and the fund is unable to obtain a current
shareholder address, the account status will be changed to "Do Not Mail" to
discontinue future mailings and prevent unauthorized persons from obtaining
account information.
You can remove the "Do Not Mail" status on your account by submitting written
instructions including your current address signed by all shareholders with a
signature guarantee (see Signature Guarantee Policy). Additional requirements
may apply for certain accounts. Call Shareholder Services at 1 (800) 423-4026
for more information.
Returned dividend checks and other distributions will be reinvested in the fund
when an account's status has been changed to "Do Not Mail." No interest will be
paid on outstanding checks prior to reinvestment. All future dividends and other
distributions will be reinvested in additional shares until new instructions are
provided. If you cannot be located within a period of time mandated by your
state of residence your fund shares may be escheated to your state (in other
words turned over) in accordance with state laws governing abandoned property.
Prior to turning over assets to your state, the fund will seek to obtain a
current shareholder address in accordance with Securities and Exchange
Commission rules. A search company may be employed to locate a current address.
The fund may deduct the costs associated with the search from your account.
+ TRANSFERRING SHARES:
A transfer is a change of share ownership from one customer to another. Unlike
an exchange, transfers occur within the same fund. You can transfer your shares
at any time. Partial transfers must meet the minimum initial investment
requirement of the fund.
To transfer shares, submit a letter of instruction including:
- -Your account number.
- -Dollar amount, percentage, or number of shares to be transferred.
- -Existing account number receiving the shares (if any).
- -The name(S), registration, and taxpayer identification number of the
customer receiving the shares.
- -The signature of each account owner requesting the transfer with signature
guarantee(S).
If First Investors is your broker-dealer, we will request that the transferee
complete a Master Account Agreement to establish a brokerage account with First
Investors Corporation and validate his or her social security number to avoid
back-up withholding. If the transferee declines to complete a MAA, all
transactions in the account must be on an unsolicited basis and the account will
be so coded.
Depending upon your account registration, additional documentation may be
required to transfer shares. Transfers due to the death of a shareholder require
additional documentation. Please call our Shareholder Services Department at 1
(800) 423-4026 for specific transfer requirements before initiating a request.
A transfer is a change of ownership and may trigger a taxable event. You should
consult your tax advisor before initiating a transfer.
ACCOUNT STATEMENTS
<PAGE>
TRANSACTION
CONFIRMATION STATEMENTS
You will receive a confirmation statement immediately after most transactions.
These include:
- -dealer purchases.
- -check investments.
- -Federal Funds wire purchases.
- -redemptions.
- -exchanges.
- -transfers.
- -systematic withdrawals.
Money Line and Automatic Payroll Investment purchases are not confirmed for each
transaction. They will appear on your next regularly scheduled monthly or
quarterly statement (see Dividend Payment Schedule under "Dividends and
Distributions").
A separate confirmation statement is generated for each fund account you own. It
provides:
- -Your fund account number.
- -The date of the transaction.
- -A description of the transaction (PURCHASE, REDEMPTION, ETC.).
- -The number of shares bought or sold for the transaction.
- -The dollar amount of the transaction.
- -The dollar amount of the dividend payment (IF APPLICABLE).
- -The total share balance in the account.
- -The dollar amount of any dividends or capital gains paid.
- -The number of shares held by you, held for you (INCLUDING ESCROW SHARES), and
the total number of shares you own.
The confirmation statement also may provide a perforated Investment Stub with
your preprinted name, registration, and fund account number for future
investments.
MASTER ACCOUNT
STATEMENTS
If First Investors Corporation is your broker, you will receive a Master Account
Statement for all your identically owned First Investors fund accounts on at
least a quarterly basis. The Master Account Statement will also include a recap
of any First Investors Life Insurance accounts you may own. Joint accounts
registered under your taxpayer identification number will appear on a separate
Master Account Statement but may be mailed in the same envelope upon request.
The Master Account Statement provides the following information for each First
Investors fund you own:
- -fund name.
- -fund's current market value.
- -total distributions paid year-to-date.
- -total number of shares owned.
<PAGE>
ANNUAL AND
SEMI-ANNUAL REPORTS
You will also receive an Annual and a Semi-Annual Report. These financial
reports show the assets, liabilities, revenues, expenses, and earnings of the
fund as well as a detailed accounting of all portfolio holdings. You will
receive one report per household.
DIVIDENDS AND
DISTRIBUTIONS
DIVIDENDS AND
DISTRIBUTIONS
For funds that declare daily dividends, except money market funds, you start
earning dividends on the day your purchase is made. For FI money market fund
purchases, including Money Line and API purchases, you start earning dividends
on the day Federal Funds are credited to your fund account. For exchanges into
the money market funds, you start earning dividends on the day following the
Trading Day on which an exchange is processed. No dividends are earned on
exchanges out of the money market funds on the Trading Day on which an exchange
is processed. The funds declare dividends from net investment income and
distribute the accrued earnings to shareholders as noted below:
<TABLE>
<CAPTION>
DIVIDEND PAYMENT SCHEDULE
<S> <C> <C>
MONTHLY: QUARTERLY: ANNUALLY (IF ANY):
Cash Management Fund Blue Chip Fund Focused Equity Fund
Fund for Income Growth & Income Fund Global Fund
Government Fund Total Return Fund Mid-Cap Opportunity Fund
Insured Intermediate Tax-Exempt Utilities Income Fund Special Situations Fund
Insured Tax Exempt Fund
Investment Grade Fund
Multi-State Insured Tax Free Fund
New York Insured Tax Free Fund
Tax-Exempt Money Market Fund
</TABLE>
Capital gains distributions, if any, are paid annually, usually near the end of
the fund's fiscal year. On occasion, more than one capital gains distribution
may be paid during one year.
Dividend and capital gains distributions are automatically reinvested to
purchase additional fund shares unless otherwise instructed. Dividend payments
of less than $5.00 are automatically reinvested to purchase additional fund
shares.
BUYING A DIVIDEND
If you buy shares shortly before the record date of the dividend, the entire
dividend you receive may be taxable even though a part of the distribution is
actually a return of your purchase price. This is called "buying a dividend."
There is no advantage to buying a dividend because a fund's net asset value per
share is reduced by the amount of the dividend.
<PAGE>
<TABLE>
<CAPTION>
TAX FORMS
<S> <C> <C>
TAX FORM DESCRIPTION MAILED BY
1099-DIV Consolidated report lists all taxable dividend and capital gains January 31
distributions for all of the shareholder's accounts. Also includes
foreign taxes paid and any federal income tax withheld due to
backup withholding.
1099-B Lists proceeds from all redemptions including systematic January 31
withdrawals and exchanges. A separate form is issued for each fund
account. Includes amount of federal income tax withheld due to backup
withholding.
1099-R Lists taxable distributions from a retirement account. A separate January 31
form is issued for each fund account. Includes federal income
tax withheld due to IRS withholding requirements.
5498 Provided to shareholders who made an annual IRA May 31
contribution or rollover purchase. Also provides the account's
fair market value as of the last business day of the previous year.
A separate form is issued for each fund account.
1042-S Provided to non-resident alien shareholders to report the amount March 15
of fund dividends paid and the amount of federal taxes withheld.
A separate form is issued for each fund account.
Cost Basis Uses the "average cost-single category" method to show the cost January 31
Statement basis of any shares sold or exchanged. Information is provided to
assist shareholders in calculating capital gains or losses.
A separate statement, included with Form 1099-B, is issued for each
fund account. This statement is not reported to the IRS and does
not include money market funds or retirement accounts.
Tax Savings Consolidated report lists all amounts not subject to federal, January 31
Report for state and local income tax for all the shareholder's accounts.
Non-Taxable Also includes any amounts subject to alternative minimum tax.
Income
Tax Savings Provides the percentage of income paid by each fund that may January 31
Summary be exempt from state income tax.
</TABLE>
THE OUTLOOK
Today's strategies for tomorrow's goals are brought into focus in the Outlook,
the quarterly newsletter for clients of First Investors Corporation. This
informative tool discusses the products and services we offer to help you take
advantage of current market conditions and tax law changes. The OUTLOOK'S
straight forward approach and timely articles make it a valuable resource. As
always, your registered representative is available to provide you with
additional information and assistance. Material contained in this publication
should not be considered legal, financial, or other professional advice.
(This page Intentionally Left Blank)
<PAGE>
Principal Underwriter
First Investors Corporation
95 Wall Street
New York, NY 10005
1-212-858-8000
Transfer Agent
Administrative Data Management Corp.
581 Main Street
Woodbridge, NJ 07095
1-800-423-4026
<PAGE>
PART C. OTHER INFORMATION
Item 23. EXHIBITS
(a)(i) Articles of Restatement(1)
(ii) Articles Supplementary(1)
(b) Amended and Restated By-Laws(2)
(c) Shareholders' rights are contained in (a) Articles FIFTH and EIGHTH
of Registrant's Articles of Restatement dated September 14, 1994,
previously filed as Exhibit 99.B1.1 to Registrant's Registration
Statement; (b) Article FOURTH of Registrant's Articles Supplementary
to Articles of Incorporation dated October 20, 1994, previously
filed as Exhibit 99.B1.2 to Registrant's Registration Statement and
(c) Article II of Registrant's Amended and Restated By-laws,
previously filed as Exhibit 99.B2 to Registrant's Registration
Statement.
(d)(i) Investment Advisory Agreement between Registrant and First Investors
Management Company, Inc.(1)
(ii) Subadvisory Agreement(1)
(e) Underwriting Agreement between Registrant and First Investors
Corporation(1)
(f) Bonus, profit sharing or pension plans - none
(g) Custodian Agreement between Registrant and Brown Brothers Harriman &
Co.(1)
(h)(i) Administration Agreement between Registrant, First Investors
Management Company, Inc., First Investors Corporation and
Administrative Data Management Corp.(1)
(ii) Schedule A to Administration Agreement(2)
(iii) Transfer Agency Agreement - filed herewith
(i) Consent of counsel - filed herewith
(j)(i) Consent of independent accountants - filed herewith
(ii) Powers of Attorney(1)
(k) Financial statements omitted from prospectus - none
(l) Initial capital agreements - none
(m)(i) Amended and Restated Class A Distribution Plan(1)
2
<PAGE>
(ii) Class B Distribution Plan(1)
(n) Financial Data Schedules - filed herewith
(o) 18f-3 Plan(1)
- ---------------
(1) Incorporated by reference from Post-Effective Amendment No. 21 to
Registrant's Registration Statement (File No. 2-71911) filed on April 24,
1996.
(2) Incorporated by reference from Post-Effective Amendment No. 23 to
Registrant's Registration Statement (File No. 2-71911) filed on May 15,
1997.
(3) Incorporated by reference from Post-Effective Amendment No. 24 to
Registrant's Registration Statement (File No. 2-71911) filed on April 28,
1998.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
There are no persons controlled by or under common control with the
Fund.
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.
3
<PAGE>
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.
The Registrant's Underwriting Agreement provides as follows:
The Underwriter agrees to use its best efforts in effecting the sale
and public distribution of the shares of the Fund through dealers and to perform
its duties in redeeming and repurchasing the shares of the Fund, but nothing
contained in this Agreement shall make the Underwriter or any of its officers
and directors or shareholders liable for any loss sustained by the Fund or any
of its officers, directors, or shareholders, or by any other person on account
of any act done or omitted to be done by the Underwriter under this Agreement
provided that nothing herein contained shall protect the Underwriter against any
liability to the Fund or to any of its shareholders to which the Underwriter
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties as Underwriter or by reason of its
reckless disregard of its obligations or duties as Underwriter under this
Agreement. Nothing in this Agreement shall protect the Underwriter from any
liabilities which they may have under the Securities Act of 1933 or the
Investment Company Act of 1940.
Reference is hereby made to the Maryland Corporations and Associations
Annotated Code, Sections 2-417, 2-418 (1986).
The general effect of this Indemnification will be to indemnify the
officers and directors of the Registrant from costs and expenses arising from
any action, suit or proceeding to which they may be made a party by reason of
their being or having been a director or officer of the Registrant, except where
such action is determined to have arisen out of the willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the director's or officer's office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable. See Item 30 herein.
Item 26. I. 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 and Officers."
4
<PAGE>
II. BUSINESS AND OTHER CONNECTIONS OF SUBADVISER
Wellington Management Company, LLP ("Wellington Management") is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"). The list required by this Item 26 of officers and
partners of Wellington Management, together with any information as to any
business profession, vocation or employment of a substantial nature engaged in
by such officers and partners during the past two years, is incorporated herein
by reference to Schedules A and D of Form ADV filed by Wellington Management
pursuant to the Advisers Act (SEC File No. 801-159089).
Item 27. PRINCIPAL UNDERWRITERS
(a) First Investors Corporation, Underwriter of the Registrant, is also
underwriter for:
First Investors Cash Management Fund, Inc.
First Investors Series Fund
First Investors Fund For Income, Inc.
First Investors Government Fund, Inc.
First Investors High Yield Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Multi-State Insured Tax Free Fund
First Investors New York Insured Tax Free Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
First Investors Series Fund II, Inc.
First Investors Life Variable Annuity Fund A
First Investors Life Variable Annuity Fund C
First Investors Life Variable Annuity Fund D
First Investors Life Level Premium Variable Life Insurance (Separate
Account B)
(b) The following persons are the officers and directors of the Underwriter:
Position and Position and
Name and Principal Office with First Office with
BUSINESS ADDRESS INVESTORS CORPORATION REGISTRANT
Glenn O. Head Chairman President
95 Wall Street and Director and Director
New York, NY 10005
Marvin M. Hecker President None
95 Wall Street
New York, NY 10005
John T. Sullivan Director Chairman of the
95 Wall Street Board of Directors
5
<PAGE>
New York, NY 10005
Joseph I. Benedek Treasurer Treasurer
581 Main Street
Woodbridge, NJ 07095
Lawrence A. Fauci Senior Vice President None
95 Wall Street and Director
New York, NY 10005
Kathryn S. Head Vice President Director
581 Main Street and Director
Woodbridge, NJ 07095
Louis Rinaldi Senior Vice None
581 Main Street President
Woodbridge, NJ 07095
Frederick Miller Senior Vice President None
581 Main Street
Woodbridge, NJ 07095
Larry R. Lavoie Secretary and Director
95 Wall Street General Counsel
New York, NY 10005
Matthew Smith Vice President None
581 Main Street
Woodbridge, NJ 07095
Jeremiah J. Lyons Director None
56 Weston Avenue
Chatham, NJ 07928
Anne Condon Vice President None
581 Main Street
Woodbridge, NJ 07095
Jane W. Kruzan Director None
232 Adair Street
Decatur, GA 30030
Elizabeth Reilly Vice President None
581 Main Street
Woodbridge, NJ 07095
Robert Flanagan Vice President- None
6
<PAGE>
95 Wall Street Sales Administration
New York, NY 10005
William M. Lipkus Chief Financial Officer None
581 Main Street
Woodbridge, NJ 07095
(c) 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, Brown Brothers Harriman &
Co., 40 Water Street, Boston, MA 02109.
Item 29. MANAGEMENT SERVICES
Not applicable.
Item 30. UNDERTAKINGS
The Registrant undertakes to carry out all indemnification provisions
of its Articles of Incorporation, Advisory Agreement, Subadvisory Agreement and
Underwriting Agreement in accordance with Investment Company Act Release No.
11330 (September 4, 1980) and successor releases.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions under Item 27 herein, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes to furnish a copy of its latest annual
report to shareholders, upon request and without charge, to each person to whom
a prospectus is delivered.
7
<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 has duly
caused this Post-Effective Amendment No. 28 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 13th day of January, 2000.
FIRST INVESTORS GLOBAL
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. 28 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 January 13, 2000
- ----------------------------- Officer and Director
Glenn O. Head
/s/ Joseph I. Benedek Principal Financial January 13, 2000
- ----------------------------- and Accounting Officer
Joseph I. Benedek
Kathyrn S. Head* Director January 13, 2000
- -----------------------------
Kathryn S. Head
/s/ Larry R. Lavoie Director January 13, 2000
- -----------------------------
Larry R. Lavoie
Herbert Rubinstein* Director January 13, 2000
- -----------------------------
Herbert Rubinstein
Nancy Schaenen* Director January 13, 2000
- -----------------------------
Nancy Schaenen
James M. Srygley* Director January 13, 2000
- -----------------------------
James M. Srygley
8
<PAGE>
John T. Sullivan* Director January 13, 2000
- -----------------------------
John T. Sullivan
Rex R. Reed* Director January 13, 2000
- -----------------------------
Rex R. Reed
Robert F. Wentworth* Director January 13, 2000
- -----------------------------
Robert F. Wentworth
*By: /s/ Larry R. Lavoie
-------------------
Larry R. Lavoie
Attorney-in-fact
<PAGE>
INDEX TO EXHIBITS
Exhibit
NUMBER DESCRIPTION
PAGE
(a)(i) Articles of Restatement(1)
(ii) Articles Supplementary(1)
(b) Amended and Restated By-Laws(2)
(c) Shareholders' rights are contained in (a) Articles FIFTH and EIGHTH
of Registrant's Articles of Restatement dated September 14, 1994,
previously filed as Exhibit 99.B1.1 to Registrant's Registration
Statement; (b) Article FOURTH of Registrant's Articles Supplementary
to Articles of Incorporation dated October 20, 1994, previously
filed as Exhibit 99.B1.2 to Registrant's Registration Statement and
(c) Article II of Registrant's Amended and Restated By-laws,
previously filed as Exhibit 99.B2 to Registrant's Registration
Statement.
(d)(i) Investment Advisory Agreement between Registrant and First Investors
Management Company, Inc.(1)
(ii) Subadvisory Agreement(1)
(e) Underwriting Agreement between Registrant and First Investors
Corporation(1)
(f) Bonus, profit sharing or pension plans - none
(g) Custodian Agreement between Registrant and Brown Brothers Harriman &
Co.(1)
(h)(i) Administration Agreement between Registrant, First Investors
Management Company, Inc., First Investors Corporation and
Administrative Data Management Corp.(1)
(ii) Schedule A to Administration Agreement(2)
(iii) Transfer Agency Agreement - filed herewith
(i) Consent of counsel - filed herewith
(j)(i) Consent of independent accountants - filed herewith
(ii) Powers of Attorney(1)
(k) Financial statements omitted from prospectus - none
(l) Initial capital agreements - none
9
<PAGE>
(m)(i) Amended and Restated Class A Distribution Plan(1)
(ii) Class B Distribution Plan(1)
(n) Financial Data Schedules - filed herewith
(o) 18f-3 Plan(1)
(1) Incorporated by reference from Post-Effective Amendment No. 21 to
Registrant's Registration Statement (File No. 2-71911) filed on April 24,
1996.
(2) Incorporated by reference from Post-Effective Amendment No. 23 to
Registrant's Registration Statement (File No. 2-71911) filed on May 15,
1997.
(3) Incorporated by reference from Post-Effective Amendment No. 24 to
Registrant's Registration Statement (File No. 2-71911) filed on April 28,
1998.
10
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352564
<NAME> FIRST INVESTORS GLOBAL FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 266189
<INVESTMENTS-AT-VALUE> 338415
<RECEIVABLES> 1939
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 340388
<PAYABLE-FOR-SECURITIES> 5308
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 773
<TOTAL-LIABILITIES> 6081
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 212778
<SHARES-COMMON-STOCK> 39024
<SHARES-COMMON-PRIOR> 41297
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (186)
<ACCUMULATED-NET-GAINS> 32698
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 71165
<NET-ASSETS> 316455
<DIVIDEND-INCOME> 4541
<INTEREST-INCOME> 664
<OTHER-INCOME> 0
<EXPENSES-NET> (5310)
<NET-INVESTMENT-INCOME> (105)
<REALIZED-GAINS-CURRENT> 32756
<APPREC-INCREASE-CURRENT> 43344
<NET-CHANGE-FROM-OPS> 75995
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (123)
<DISTRIBUTIONS-OF-GAINS> (3199)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3142
<NUMBER-OF-SHARES-REDEEMED> 5877
<SHARES-REINVESTED> 463
<NET-CHANGE-IN-ASSETS> 55137
<ACCUMULATED-NII-PRIOR> 41
<ACCUMULATED-GAINS-PRIOR> 3142
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (3067)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (5309)
<AVERAGE-NET-ASSETS> 307995
<PER-SHARE-NAV-BEGIN> 6.33
<PER-SHARE-NII> (.003)
<PER-SHARE-GAIN-APPREC> 1.864
<PER-SHARE-DIVIDEND> (.003)
<PER-SHARE-DISTRIBUTIONS> (.078)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.11
<EXPENSE-RATIO> 1.72
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000352564
<NAME> FIRST INVESTORS GLOBAL FUND, INC.
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 266189
<INVESTMENTS-AT-VALUE> 338415
<RECEIVABLES> 1939
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 340388
<PAYABLE-FOR-SECURITIES> 5308
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 773
<TOTAL-LIABILITIES> 6081
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15227
<SHARES-COMMON-STOCK> 2266
<SHARES-COMMON-PRIOR> 1920
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (175)
<ACCUMULATED-NET-GAINS> 1721
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1079
<NET-ASSETS> 17852
<DIVIDEND-INCOME> 233
<INTEREST-INCOME> 34
<OTHER-INCOME> 0
<EXPENSES-NET> (378)
<NET-INVESTMENT-INCOME> (111)
<REALIZED-GAINS-CURRENT> 1711
<APPREC-INCREASE-CURRENT> 1922
<NET-CHANGE-FROM-OPS> 3522
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (150)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 650
<NUMBER-OF-SHARES-REDEEMED> 327
<SHARES-REINVESTED> 22
<NET-CHANGE-IN-ASSETS> 5966
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 161
<OVERDISTRIB-NII-PRIOR> (64)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (156)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (379)
<AVERAGE-NET-ASSETS> 15643
<PER-SHARE-NAV-BEGIN> 6.19
<PER-SHARE-NII> (.044)
<PER-SHARE-GAIN-APPREC> 1.812
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.078)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.88
<EXPENSE-RATIO> 2.42
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</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-
January 28, 2000
First Investors Global Fund, Inc.
95 Wall Street
New York, New York 10005
Ladies and Gentlemen:
You have requested our opinion, as counsel to First Investors Global
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 Class
A and Class B shares of beneficial interest of the Company, during the time this
Post-Effective Amendment No. 28 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 Global Fund, Inc.
95 Wall Street
New York, New York 10005
We consent to the use in Post-Effective Amendment No. 28 to the
Registration Statement on Form N-1A (File No. 2-71911) of our report dated
October 30, 1999 relating to the September 30, 1999 financial statements of
First Investors Global Fund, Inc., which are included in said Registration
Statement.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 20, 2000