<PAGE>
As filed with the Securities and Exchange Commission on April 25, 1995
Registration No. 33-4935
811-4674
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 22 X
-
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
-----------
Amendment No. 22 X
-
----------
FIRST INVESTORS HIGH YIELD FUND, INC.
(Exact name of Registrant as specified in charter)
Mr. Larry R. Lavoie
Secretary and General Counsel
First Investors Corporation
95 Wall Street
New York, New York 10005
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement
It is proposed that this filing will become effective on May 1, 1995 pursuant to
paragraph (b) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously elected to register an indefinite number of shares of common stock,
par value $.01 per share, under the Securities Act of 1933. Registrant filed a
Rule 24f-2 Notice for its fiscal year ending December 31, 1994 on February 21,
1995.
<PAGE>
FIRST INVESTORS HIGH YIELD FUND, INC.
CROSS-REFERENCE SHEET
N-1A Item No. Location
- ------------- --------
PART A: PROSPECTUS
1. Cover Page .............................. Cover Page
2. Synopsis ................................ Fee Table
3. Condensed Financial Information ......... Financial Highlights
4. General Description of Registrant ....... Investment Objectives and
Policies; General Information
5. Management of the Fund .................. Management
5A. Management's Discussion of
Fund Performance ....................... Performance Information
6. Capital Stock and Other Securities ...... Description of Shares;
Dividends and Other
Distributions; Taxes;
Determination of Net Asset
Value
7. Purchase of Securities Being Offered .... Alternative Purchase Plan; How
to Buy Shares
8. Redemption or Repurchase ................ How to Exchange Shares; How to
Redeem Shares; Telephone
Transactions
9. Pending Legal Proceedings ............... Management
PART B: STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page .............................. Cover Page
11. Table of Contents ....................... Table of Contents
12. General Information and History ......... General Information
13. Investment Objectives and Policies ...... Investment Policies; Investment
Restrictions
14. Management of the Fund .................. Directors and Officers
15. Control Persons and Principal
Holders of Securities .................. Not Applicable
16. Investment Advisory and Other Services .. Management
17. Brokerage Allocation .................... Allocation of Portfolio
Brokerage
18. Capital Stock and Other Securities ...... Determination of Net Asset
Value
19. Purchase, Redemption and Pricing
of Securities Being Offered ............ Reduced Sales Charges,
Additional Exchange and
Redemption Information and
Other Services; Determination
of Net Asset Value
<PAGE>
N-1A Item No. Location
- ------------- --------
20. Tax Status .............................. Taxes
21. Underwriters ............................ Underwriter
22. Performance Data ........................ Performance Information
23. Financial Statements .................... Financial Statements; Report of
Independent Accountants
PART C: OTHER INFORMATION
Information required to be included in Part C is set forth under
the appropriate item so numbered, in Part C hereof.
<PAGE>
FIRST INVESTORS HIGH YIELD FUND, INC.
FIRST INVESTORS FUND FOR INCOME, INC.
95 Wall Street, New York, New York 10005/1-800-423-4026
This is a Prospectus for FIRST INVESTORS HIGH YIELD FUND, INC. ("HIGH YIELD
FUND") and FIRST INVESTORS FUND FOR INCOME, INC. ("INCOME FUND"), each of which
is an open-end diversified management investment company. HIGH YIELD FUND and
INCOME FUND are referred to herein collectively as "Funds." Each Fund sells two
classes of shares. Investors may select Class A or Class B shares, each with a
public offering price that reflects different sales charges and expense levels.
See "Alternative Purchase Plans."
HIGH YIELD FUND primarily seeks high current income and secondarily seeks
capital appreciation. The Fund seeks its objectives by investing, under normal
market conditions, at least 65% of its total assets in high risk, high yield
securities, commonly referred to as "junk bonds" ("High Yield Securities").
INCOME FUND primarily seeks to earn a high level of current income and, to the
extent possible, in view of that objective, secondarily seeks growth of capital.
The Fund seeks its objective by emphasizing investment in High Yield Securities.
Because the price of lower-grade debt securities tends to fluctuate more than
the price of investment grade debt securities, the net asset value of each
Fund's shares has fluctuated significantly in recent years. Because of the
emphasis placed upon High Yield Securities by the Funds, investors in either
Fund should differentiate between it and investment companies emphasizing high-
grade debt securities and commit only that portion of their resources that they
wish to invest in a portfolio which is accompanied by higher risk. There is no
assurance that either Fund will achieve its investment objectives. INVESTMENTS
IN HIGH YIELD, HIGH RISK SECURITIES, COMMONLY REFERRED TO AS "JUNK BONDS,"
ENTAIL RISKS THAT ARE DIFFERENT AND MORE PRONOUNCED THAN THOSE INVOLVED IN
HIGHER-RATED SECURITIES. SEE "HIGH YIELD SECURITIES-RISK FACTORS."
This Prospectus sets forth concisely the information about each Fund that a
prospective investor should know before investing and should be retained for
future reference. First Investors Management Company, Inc. ("FIMCO" or
"Adviser") serves as investment adviser to the Funds and First Investors
Corporation ("FIC" or "Underwriter") serves as distributor of the Funds' shares.
A Statement of Additional Information ("SAI"), dated May 1, 1995 (which is
incorporated by reference herein), has been filed with the Securities and
Exchange Commission. The SAI is available at no charge upon request to the
Funds at the address or telephone number indicated above.
The Funds, FIC, FIMCO and/or certain affiliated entities and persons have
entered into settlements with the Securities and Exchange Commission and various
state regulators to resolve allegations regarding certain sales of shares of the
Funds that occurred prior to December of 1990. For a further discussion of these
settlements and related regulatory matters, investors should see "Management-
Regulatory Matters" on page 23.
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured or protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other government agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1995
<PAGE>
FEE TABLE
The following table is intended to assist investors in understanding the
expenses associated with investing in each class of shares of a Fund. Shares of
either Fund issued prior to January 12, 1995 have been designated as Class A
shares.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
------- -------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................. 6.25% None
Deferred Sales Load
(as a percentage of the lower of original purchase
price or redemption proceeds)....................... None* 4% in the first year;
declining to 0% after
the sixth year
Exchange Fee** None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
High Yield Fund Income Fund
--------------- -----------
Class A Class B/(1)/ Class A Class B/(1)/
Shares Shares Shares Shares
-------- ------------ ------- ------------
<S> <C> <C> <C> <C>
Management Fees/(2)/ 0.90%+ 0.90%+ 0.74% 0.74%
12b-1 Fees/(3)/ 0.15 0.85 0.15 0.85
Other Expenses 0.43 0.43 0.32 0.32
Total Fund Operating Expenses/(4)/ 1.48+ 2.18+ 1.21 1.91
</TABLE>
- --------------------------
* A contingent deferred sales charge ("CDSC") of 1.00% will be assessed on
certain redemptions of Class A shares that are purchased without a sales
charge. See "How to Buy Shares."
** Although there is a $5.00 exchange fee for exchanges into a Fund, this fee
is being assumed by that Fund for a minimum period ending December 31, 1995.
Each Fund reserves the right to change or suspend this privilege after
December 31, 1995. See "How to Exchange Shares."
+ Net of waiver
(1) Since Class B shares were not issued during each Fund's prior fiscal year,
Other Expenses and Total Fund Operating Expenses are based on estimated
amounts for the fiscal year ended December 31, 1995.
(2) Management Fees have been restated for HIGH YIELD FUND. The Adviser will
waive Management Fees for HIGH YIELD FUND in excess of 0.90% for a minimum
period ending December 31, 1995. Otherwise, such fee would have been
0.96%.
(3) 12b-1 Fees have been restated to reflect the maximum 12b-1 Fees that may be
incurred by each class of shares of each Fund through December 31, 1995
(see "Distribution Plans"). Otherwise such fee for each Fund would have
been 0.30% for Class A shares and 1.00% for Class B shares.
(4) If Management Fees and 12b-1 Fees had not been restated, Total Fund
Operating Expenses for Class A shares would have been 1.69% for HIGH YIELD
FUND and 1.36% for INCOME FUND and for Class B shares are estimated to be
2.39% for HIGH YIELD FUND and 2.06% for INCOME FUND.
For a more complete description of the various costs and expenses, see
"Alternative Purchase Plans," "How to Buy Shares," "How to Redeem Shares,"
"Management" and "Distribution Plans." Due to the imposition of 12b-1 fees, it
is possible that long-term shareholders of a Fund may pay more in total sales
charges than the economic equivalent of the maximum front-end sales charge
permitted by the rules of the National Association of Securities Dealers, Inc.
The Fee Table does not
2
<PAGE>
reflect the costs incurred by shareholders who purchase shares of the Funds
through First Investors Contractual Plans.
The Example below is based on Class A expense data for each Fund's fiscal year
ended December 31, 1994, except that certain Operating Expenses have been
restated, as noted above. Expense data for Class B shares has been estimated
because the shares were not issued during this period.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
HIGH YIELD FUND
Class A.......... $77 $106 $138 $228
Class B.......... 62 98 137 234
INCOME FUND
Class A.......... 74 99 125 200
Class B.......... 59 90 123 205
</TABLE>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) no redemption at the end of each time period:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
HIGH YIELD FUND
Class A.......... $77 $106 $138 $228
Class B.......... 22 68 117 234
INCOME FUND
Class A.......... 74 99 125 200
Class B.......... 19 60 163 205
</TABLE>
THE EXPENSES IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION BY THE
FUNDS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES IN FUTURE YEARS MAY BE
GREATER OR LESS THAN THOSE SHOWN.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables set forth the per share operating performance data for a
share of capital stock outstanding, total return, ratios to average net assets
and other supplemental data for each year indicated. Financial highlights are
not presented for Class B shares since no shares of that class were outstanding
during these years. The tables have been derived from financial statements
which have been examined by Tait, Weller & Baker, independent certified public
accountants, whose reports thereon appear in the SAI. This information should
be read in conjunction with the Financial Statements and Notes thereto, which
also appear in the SAI, available at no charge upon request to the Funds.
HIGH YIELD FUND*
<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED DECEMBER 31
----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986**
---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
- --------------
Net Asset Value, Beginning of Year....... $5.30 $4.97 $4.59 $3.83 $5.26 $6.52 $6.51 $7.40 $7.42
----- ----- ----- ----- ----- ----- ----- ----- -----
Income from Investment Operations
Net investment income................... .48 .47 .53 .53 .61 .78 .81 .81 .21
Net realized and unrealized
gain (loss) on investments............. (.46) .34 .31 .75 (1.44) (1.26) -- (.87) (.03)
----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations .02 .81 .84 1.28 (.83) (.48) .81 (.06) .18
----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions from:
Net investment income................... .48 .48 .46 .52 .60 .78 .80 .82 .20
Capital surplus......................... -- -- -- -- -- -- -- .01 --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions .48 .48 .46 .52 .60 .78 .80 .83 .20
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year............. $4.84 $5.30 $4.97 $4.59 $3.83 $5.26 $6.52 $6.51 $7.40
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN(%)+......................... .39 16.95 18.94 35.87 (17.25) (8.07) 12.86 (1.38) 6.29(a)
- ---------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year (in millions).... $170 $191 $192 $211 $297 $754 $637 $228 $92
Ratio to Average Net Assets:(%)
Expenses............................... 1.56 1.69 1.39 1.58 1.48 1.23 1.30 1.28 1.39(a)
Net investment income.................. 9.48 8.96 10.65 12.36 13.18 12.85 12.08 11.42 10.82(a)
Ratio to Average Net Assets Before Expenses
Waived:(%)
Expenses............................... 1.59 N/A N/A N/A N/A N/A N/A 1.30 1.57(a)
Net investment income.................. 9.44 N/A N/A N/A N/A N/A N/A 11.40 10.65(a)
Portfolio Turnover Rate(%)................. 32 87 43 45 26 45 82 80 11
- ----------
</TABLE>
+ Calculated without sales charge
(a) Annualized
* Adjusted for two-for-one stock split on March 31, 1989
** From August 12, 1986 (commencement of operations) to December 31, 1986
4
<PAGE>
INCOME FUND
<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED DECEMBER 31
----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
- ---------------
Net Asset Value,
Beginning of Year.............. $4.17 $ 3.89 $ 3.69 $ 2.98 $ 4.16 $ 5.19 $ 5.15 $ 5.87 $ 5.96 $ 5.70
----- ------ ------ ------ ------- ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment income.......... .37 .39 .41 .42 .53 .64 .69 .66 .77 .77
Net realized and
unrealized gain (loss)
on investments (.35) .29 .19 .78 (1.19) (1.01) .01 (.71) (.11) .28
----- ------ ------ ------ ------- ------ ------ ------ ------ ------
Total from Investment
Operations................... .02 .68 .60 1.20 (.66) (.37) .70 (.05) .66 1.05
----- ------ ------ ------ ------- ------ ------ ------ ------ ------
Less Distributions from:
Net investment income.......... .38 .40 .40 .41 .52 .66 .66 .67 .75 .79
Capital surplus................ -- -- -- .08 -- -- -- -- -- --
----- ------ ------ ------ ------- ------ ------ ------ ------ ------
Total Distributions.......... .38 .40 .40 .49 .52 .66 .66 .67 .75 .79
----- ------ ------ ------ ------- ------ ------ ------ ------ ------
Net Asset Value, End of Year..... $3.81 $4 .17 $ 3.89 $ 3.69 $ 2.98 $ 4.16 $ 5.19 $ 5.15 $ 5.87 $ 5.96
===== ====== ====== ====== ======= ====== ====== ====== ====== ======
TOTAL RETURN(%)+................. .58 18.06 16.70 42.84 (17.23) (8.05) 14.22 (1.25) 11.58 19.56
- ---------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------
Net Assets, End of Year
(in millions)................... $ 401 $ 431 $ 414 $ 429 $ 527 $1,321 $1,739 $1,620 $1,693 $1,364
Ratio to Average Net Assets:(%)
Expenses....................... 1.22 1.32 1.03 1.18 1.27 1.02 .99 1.08 .98 .90
Net Investment Income.......... 9.34 9.54 10.63 12.49 14.39 13.19 13.03 11.56 12.81 13.10
Portfolio Turnover Rate(%)....... 39 76 51 50 21 44 74 74 168 96
- ----------
</TABLE>
+ Calculated without sales charge
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
HIGH YIELD FUND primarily seeks high current income and secondarily seeks
capital appreciation by investing, under normal market conditions, at least 65%
of its total assets in high risk, high yield securities, commonly referred to as
"junk bonds" ("High Yield Securities"). INCOME FUND primarily seeks to earn a
high level of current income and, to the extent possible, in view of that
objective, secondarily seeks growth of capital by emphasizing, under normal
market conditions, investments in High Yield Securities. High Yield Securities
include the following instruments: fixed, variable or floating rate debt
obligations (including bonds, debentures and notes) which are rated below Baa by
Moody's Investors Service, Inc. ("Moody's") or below BBB by Standard & Poor's
Ratings Group ("S&P"), or are unrated and deemed to be of comparable quality by
the Adviser; preferred stocks and dividend-paying common stocks that have yields
comparable to those of high yielding debt securities; any of the foregoing
securities of companies that are financially troubled, in default or undergoing
bankruptcy or reorganization ("Deep Discount Securities"); and any securities
convertible into any of the foregoing. See "High Yield Securities--Risk
Factors" and "Deep Discount Securities."
GENERAL POLICIES
Each Fund may invest up to 5% of its total assets in debt securities issued by
foreign governments and companies located outside the United States and
denominated in foreign currency. Each Fund also may borrow money for temporary
or emergency purposes in amounts not exceeding 5% of its total assets, invest in
restricted securities (which may not be publicly marketable) and invest in zero
coupon and pay-in-kind securities. In addition, HIGH YIELD FUND may make loans
of portfolio securities. In order to attempt to hedge against changes in
interest rates, HIGH YIELD FUND may engage in short sales "against the box" and
transactions involving interest rate futures contracts. See the SAI for more
information concerning these securities.
HIGH YIELD FUND may invest up to 35% of its total assets, and INCOME FUND may
invest without limitation, in the following instruments: common and preferred
stocks, other than those considered to be High Yield Securities; debt
obligations of all types (including bonds, debentures and notes) rated A or
better by Moody's or S&P; securities issued by the U.S. Government or its
agencies or instrumentalities ("U.S. Government Obligations"); warrants and
money market instruments consisting of prime commercial paper, certificates of
deposit of domestic branches of U.S. banks, bankers' acceptances and repurchase
agreements.
In any period of market weakness or of uncertain market or economic
conditions, each Fund may establish a temporary defensive position to preserve
capital by having all or part of its assets invested in short-term fixed income
securities or retained in cash or cash equivalents, including bank certificates
of deposit, bankers' acceptances, U.S. Government Obligations and commercial
paper issued by domestic corporations. See the SAI for more information
concerning these securities.
The medium- to lower-rated, and certain of the unrated securities in which
each Fund invests tend to offer higher yields than higher-rated securities with
the same maturities because the historical financial condition of the issuers of
such securities may not be as strong as that of other issuers. Debt obligations
rated lower than A by Moody's or S&P tend to have speculative characteristics or
are speculative, and generally involve more risk of loss of principal and income
than higher-rated securities. Also, their yields and market value, tend to
fluctuate more than higher quality securities. The greater risks and
fluctuations in yield and value occur because investors
6
<PAGE>
generally perceive issuers of lower-rated and unrated securities to be less
creditworthy. These risks cannot be eliminated, but may be reduced by
diversifying holdings to minimize the portfolio impact of any single investment.
In addition, fluctuations in market value do not affect the cash income from the
securities, but are reflected in the computation of a Fund's net asset value.
When interest rates rise, the net asset value of the Funds tends to decrease.
When interest rates decline, the net asset value of the Funds tends to increase.
Variable or floating rate debt obligations in which the Funds may invest
periodically adjust their interest rates to reflect changing economic
conditions. Thus, changing economic conditions specified by the terms of the
security would serve to change the interest rate and the return offered to the
investor. This reduces the effect of changing market conditions on the
security's underlying market value.
A High Yield Security may itself be convertible into or exchangeable for
equity securities, or may carry with it the right to acquire equity securities
evidenced by warrants attached to the security or acquired as part of a unit
with the security. Although each Fund invests primarily in High Yield
Securities, securities received upon conversion or exercise of warrants and
securities remaining upon the break-up of units or detachment of warrants may be
retained to permit orderly disposition, to establish a long-term holding basis
for Federal income tax purposes, or to seek capital appreciation.
Because of the greater number of investment considerations involved in
investing in High Yield Securities, the achievement of either Fund's investment
objectives depends more on the Adviser's research abilities than would be the
case if a Fund were investing primarily in securities in the higher rated
categories. Because medium- to lower-rated securities generally involve greater
risks of loss of income and principal than higher-rated securities, investors
should consider carefully the relative risks associated with investments in
securities that carry medium to lower ratings or are unrated. See "High Yield
Securities--Risk Factors" and Appendix A for a description of corporate bond
ratings.
Each Fund actively seeks to achieve its secondary objective to the extent
consistent with its primary objective. There can be no assurance that either
Fund will be able to achieve its investment objectives. Each Fund's net asset
value fluctuates based mainly upon changes in the value of its portfolio
securities. Each Fund's investment objectives and certain investment policies
set forth in the SAI that are designated fundamental policies may not be changed
without shareholder approval.
The dollar weighted average of credit ratings of all bonds held by each Fund
during the 1994 fiscal year, and the dollar weighted average of the total of
each Fund's investment in zero coupon and pay-in-kind bonds during the 1994
fiscal year, computed on a monthly basis, are set forth below. This information
reflects the average composition of each Fund's assets during the 1994 fiscal
year and is not necessarily representative of either Fund as of the end of its
1994 fiscal year, the current fiscal year or at any other time in the
future.
7
<PAGE>
HIGH YIELD FUND
---------------
<TABLE>
<CAPTION>
COMPARABLE QUALITY
OF UNRATED SECURITIES
RATED BY MOODY'S TO BONDS RATED BY MOODY'S
---------------- -------------------------
<S> <C> <C>
Baa.............. 1.67% 0.00%
Ba............... 17.51 0.79
B................ 57.99 3.98
Caa.............. 5.85 0.29
Ca............... 0.07 0.29
Total...... 83.09% 5.35%
Zero Coupon Bonds 9.02%
Pay-In-Kind Bonds 2.01%
INCOME FUND
-----------
<CAPTION>
COMPARABLE QUALITY
OF UNRATED SECURITIES
RATED BY MOODY'S TO BONDS RATED BY MOODY'S
---------------- -------------------------
<S> <C> <C>
Baa.............. 0.56% 0.00%
Ba............... 15.36 0.00
B................ 65.30 2.67
Caa.............. 5.48 0.13
Ca............... 0.78 0.13
Total....... 87.48% 2.93%
Zero Coupon Bonds 6.28%
Pay-In-Kind Bonds 1.44%
</TABLE>
DESCRIPTION OF CERTAIN SECURITIES, OTHER INVESTMENT POLICIES AND RISK FACTORS
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or
dividends paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying stock because they have
fixed income characteristics, and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. See
the SAI for more information on convertible securities.
DEBT SECURITIES--RISK FACTORS. The market value of debt securities is
influenced primarily by changes in the level of interest rates. Generally, as
interest rates rise, the market value of debt securities decreases. Conversely,
as interest rates fall, the market value of debt securities increases. Factors
which could result in a rise in interest rates, and a decrease in the market
value of debt securities, include an increase in inflation or inflation
expectations, an increase in the rate of U.S. economic growth, an expansion in
the Federal budget deficit or an increase in the price of commodities such as
oil. In addition, the market value of debt securities is influenced by
perceptions
8
<PAGE>
of the credit risks associated with such securities. See Appendix A for a
description of corporate bond ratings.
DEEP DISCOUNT SECURITIES. Each Fund may invest up to 15% of its total assets
in securities of companies that are financially troubled, in default or
undergoing bankruptcy or reorganization. Such securities are usually available
at a deep discount from the face value of the instrument. A Fund will invest in
Deep Discount Securities when the Adviser believes that there exist factors that
are likely to restore the company to a healthy financial condition. Such
factors include a restructuring of debt, management changes, existence of
adequate assets or other unusual circumstances. Debt instruments purchased at
deep discounts may pay very high effective yields. In addition, if the financial
condition of the issuer improves, the underlying value of the security may
increase, resulting in a capital gain. If the company defaults on its
obligations or remains in default, or if the plan of reorganization is
insufficient for debtholders, the Deep Discount Securities may stop paying
interest and lose value or become worthless. The Adviser will balance the
benefits of investing in Deep Discount Securities with their risks. While a
diversified portfolio may reduce the overall impact of a Deep Discount Security
that is in default or loses its value, the risk cannot be eliminated. See "High
Yield Securities--Risk Factors."
HIGH YIELD SECURITIES--RISK FACTORS. High Yield Securities are subject to
certain risks that may not be present with investments in higher grade
securities.
EFFECT OF INTEREST RATE AND ECONOMIC CHANGES. Debt obligations rated lower
than Baa by Moody's or BBB by S&P, commonly referred to as "junk bonds" are
speculative and generally involve a higher risk or loss of principal and income
than higher-rated securities ("High Yield Securities"). The prices of High Yield
Securities tend to be less sensitive to interest rate changes than higher-rated
investments, but may be more sensitive to adverse economic changes or individual
corporate developments. Periods of economic uncertainty and changes generally
result in increased volatility in the market prices and yields of High Yield
Securities and thus in a Fund's net asset value. A strong economic downturn or
a substantial period of rising interest rates could severely affect the market
for High Yield Securities. In these circumstances, highly leveraged companies
might have greater difficulty in making principal and interest payments, meeting
projected business goals, and obtaining additional financing. Thus, there could
be a higher incidence of default. This would affect the value of such
securities and thus a Fund's net asset value. Further, if the issuer of a
security owned by a Fund defaults, that Fund might incur additional expenses to
seek recovery.
Generally, when interest rates rise, the value of fixed rate debt
obligations, including High Yield Securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a High Yield Security containing a redemption or call provision
exercises either provision in a declining interest rate market, a Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if a Fund experiences unexpected net redemptions in a
rising interest rate market, it might be forced to sell certain securities,
regardless of investment merit. This could result in decreasing the assets to
which Fund expenses could be allocated and in a reduced rate of return for that
Fund. While it is impossible to protect entirely against this risk,
diversification of a Fund's portfolio and the Adviser's careful analysis of
prospective portfolio securities should minimize the impact of a decrease in
value of a particular security or group of securities in a Fund's portfolio.
9
<PAGE>
THE HIGH YIELD SECURITIES MARKET. The market for below investment grade
bonds expanded rapidly in the 1980's, and its growth paralleled a long economic
expansion. During that period, the yields on below investment grade bonds rose
dramatically. Such higher yields did not reflect the value of the income stream
that holders of such bonds expected, but rather the risk that holders of such
bonds could lose a substantial portion of their value as a result of the
issuers' financial restructuring or default. In fact, from 1989 to 1991 during
a period of economic recession, the percentage of lower quality securities that
defaulted rose significantly, although the default rate decreased in subsequent
years. There can be no assurance that such declines in the below investment
grade market will not reoccur. The market for below investment grade bonds
generally is thinner and less active than that for higher quality bonds, which
may limit a Fund's ability to sell such securities at fair value in response to
changes in the economy or the financial markets. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower rated securities, especially in a thinly traded
market.
CREDIT RATINGS. The credit ratings issued by credit rating services may not
fully reflect the true risks of an investment. For example, credit ratings
typically evaluate the safety of principal and interest payments, not market
value risk, of High Yield Securities. Also, credit rating agencies may fail to
change on a timely basis a credit rating to reflect changes in economic or
company conditions that affect a security's market value. Although the Adviser
considers ratings of recognized rating services such as Moody's and S&P, the
Adviser primarily relies on its own credit analysis, which includes a study of
existing debt, capital structure, ability to service debt and to pay dividends,
the issuer's sensitivity to economic conditions, its operating history and the
current trend of earnings. Each Fund may invest in securities rated D by S&P or
C by Moody's or, if unrated, deemed to be of comparable quality by the Adviser.
Debt obligations with these ratings either have defaulted or in great danger of
defaulting and are considered to be highly speculative. See "Deep Discount
Securities." The Adviser continually monitors the investments in a Fund's
portfolio and carefully evaluates whether to dispose of or retain High Yield
Securities whose credit ratings have changed. See Appendix A for a description
of corporate bond ratings.
LIQUIDITY AND VALUATION. Lower-rated bonds are typically traded among a
smaller number of broker-dealers than in a broad secondary market. Purchasers
of High Yield Securities tend to be institutions, rather than individuals, which
is a factor that further limits the secondary market. To the extent that no
established retail secondary market exists, many High Yield Securities may not
be as liquid as higher-grade bonds. A less active and thinner market for High
Yield Securities than that available for higher quality securities may result in
more volatile valuations of a Fund's holdings and more difficulty in executing
trades at favorable prices during unsettled market conditions.
The ability of a Fund to value or sell High Yield Securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. During such periods, there may be less reliable objective information
available and thus the responsibility of each Fund's Board of Directors to value
High Yield Securities becomes more difficult, with judgment playing a greater
role. Further, adverse publicity about the economy or a particular issuer may
adversely affect the public's perception of the value, and thus liquidity, of a
High Yield Security, whether or not such perceptions are based on a fundamental
analysis.
LEGISLATION. Provisions of the Revenue Reconciliation Act of 1989 limit a
corporate issuer's deduction for a portion of the original issue discount on
"high yield discount" obligations (including
10
<PAGE>
certain pay-in-kind securities). This limitation could have a materially
adverse impact on the market for certain High Yield Securities. From time to
time, legislators and regulators have proposed other legislation that would
limit the use of high yield debt securities in leveraged buyouts, mergers and
acquisitions. It is not certain whether such proposals, which also could
adversely affect High Yield Securities, will be enacted into law.
MONEY MARKET INSTRUMENTS. Investments in commercial paper are limited to
obligations rated Prime-1 by Moody's or A-1 by S&P. Commercial paper includes
notes, drafts, or similar instruments payable on demand or having a maturity at
the time of issuance not exceeding nine months, exclusive of days of grace or
any renewal thereof. Investments in certificates of deposit will be made only
with domestic institutions with assets in excess of $500 million. See the SAI
for more information regarding money market instruments and Appendix A to the
SAI for a description of commercial paper ratings.
PREFERRED STOCK. A preferred stock is a blend of the characteristics of a
bond and common stock. It can offer the higher yield of a bond and has priority
over common stock in equity ownership, but does not have the seniority of a bond
and, unlike common stock, its participation in the issuer's growth may be
limited. Preferred stock has preference over common stock in the receipt of
dividends and in any residual assets after payment to creditors should the
issuer be dissolved. Although the dividend is set at a fixed annual rate, in
some circumstances it can be changed or omitted by the issuer.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a Fund
purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Each Fund's risk is
limited to the ability of the seller to repurchase the securities at the agreed-
upon price upon the delivery date. See the SAI for more information regarding
repurchase agreements.
RESTRICTED AND ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net
assets in illiquid securities, including (1) securities that are illiquid due to
the absence of a readily available market or due to legal or contractual
restrictions on resale and (2) repurchase agreements maturing in more than seven
days. However, illiquid securities for purposes of this limitation do not
include securities eligible for resale under Rule 144A under the Securities Act
of 1933, as amended (the "1933 Act"), which the applicable Fund's Board of
Directors or the Adviser has determined are liquid under Board-approved
guidelines. See the SAI for more information regarding restricted and illiquid
securities.
ZERO COUPON AND PAY-IN-KIND SECURITIES. Zero coupon securities are debt
obligations that do not entitle the holder to any periodic payment of interest
prior to maturity or a specified date when the securities begin paying current
interest. They are issued and traded at a discount from their face amount or
par value, which discount varies depending on the time remaining until cash
payments begin, prevailing interest rates, liquidity of the security and the
perceived credit quality of the issuer. Pay-in-kind securities are those that
pay interest through the issuance of additional securities. The market prices
of zero coupon and pay-in-kind securities generally are more volatile than the
prices of securities that pay interest periodically and in cash and are likely
to respond to changes in interest rates to a greater degree than do other types
of debt securities having similar maturities and credit quality. Original issue
discount earned on zero coupon securities and the
11
<PAGE>
"interest" on pay-in-kind securities must be included in a Fund's income. Thus,
to continue to qualify for tax treatment as a regulated investment company and
to avoid a certain excise tax on undistributed income, a Fund may be required to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. See "Taxes" in the SAI. These distributions must be made
from a Fund's cash assets or, if necessary, from the proceeds of sales of
portfolio securities. Each Fund will not be able to purchase additional income-
producing securities with cash used to make such distributions, and its current
income ultimately could be reduced as a result.
ALTERNATIVE PURCHASE PLANS
Each Fund has two classes of shares, Class A and Class B, which represent
interests in the same portfolio of securities and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that each class (i) is subject to a different sales charge and bears its
separate distribution and certain other class expenses; (ii) has exclusive
voting rights with respect to matters affecting only that class; and (iii) has
different exchange privileges.
CLASS A SHARES. Class A shares are sold with an initial sales charge of up to
6.25% of the amount invested with discounts available for volume purchases.
Class A shares are subject to a maximum 12b-1 fee at the annual rate of 0.15% of
each Fund's average daily net assets attributable to Class A shares. The
initial sales charge is waived for certain purchases and a CDSC may be imposed
on such purchases. See "How to Buy Shares."
CLASS B SHARES. Class B shares are sold without an initial sales charge, but
are generally subject to a CDSC which declines in steps from 4% to 0% during a
six-year period and bear a higher 12b-1 fee than Class A shares. Class B shares
pay a 12b-1 fee at the annual rate of 0.85% of each Fund's average daily net
assets attributable to Class B shares, of which no more than 0.25% may be paid
as a service fee and the balance thereof paid as an asset-based sales charge.
Class B shares automatically convert into Class A shares after eight years. See
"How to Buy Shares."
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES. In deciding which
alternative is most suitable, an investor should consider several factors, as
discussed below. Regardless of whether an investor purchases Class A or Class B
shares, your Representative, as defined under "How to Buy Shares," receives
compensation for selling shares of a Fund, which may differ for each class.
The principal advantages of purchasing Class A shares are the lower overall
expenses, the availability of quantity discounts on volume purchases and certain
account privileges which are not offered to Class B shareholders. If an
investor plans to make a substantial investment, the sales charge on Class A
shares may either be lower due to the reduced sales charges available on volume
purchases of Class A shares or waived for certain eligible purchasers. Because
of the reduced sales charge available on quantity purchases of Class A shares,
it is recommended that investments of $250,000 or more be made in Class A
shares. Investments in excess of $1,000,000 must be made in Class A shares.
Distributions paid by each Fund with respect to Class A shares will also
generally be greater than those paid with respect to Class B shares because
expenses attributable to Class A shares will generally be lower.
The principal advantage of purchasing Class B shares is that, since no initial
sales charge is paid, all of an investor's money is put to work from the outset.
Furthermore, although any investment in a Fund should only be viewed as a long-
term investment, if a redemption must be
12
<PAGE>
made soon after purchase, an investor will pay a lower sales charge than if
Class A shares had been purchased. Conversely, because Class B shares are
subject to a higher asset-based sales charge, long-term Class B shareholders may
pay more in an asset-based sales charge than the economic equivalent of the
maximum sales charge on Class A shares. The automatic conversion of Class B
shares into Class A shares is designed to reduce the probability of this
occurring.
HOW TO BUY SHARES
You may buy shares of a Fund through a First Investors registered
representative ("FIC Representative") or through a registered representative
("Dealer Representative") of an unaffiliated broker-dealer ("Dealer") which is
authorized to sell shares of the Fund. Your FIC Representative or Dealer
Representative (collectively, "Representative") may help you complete and submit
an application to open an account with a Fund. Applications accompanied by
checks drawn on U.S. banks made payable to "FIC" received in FIC's Woodbridge
offices by the close of regular trading on the New York Stock Exchange ("NYSE"),
generally 4:00 P.M. (New York City time), will be processed and shares will be
purchased at the public offering price determined at the close of regular
trading on the NYSE on that day. The "public offering price" is defined in this
Prospectus as net asset value plus the applicable sales charge for Class A
shares and net asset value for Class B shares. Checks received after the close
of regular trading on the NYSE will be processed at the public offering price
determined at the close of regular trading on the NYSE on the next trading day.
Orders given to Representatives before the close of regular trading on the NYSE
and received by FIC at their Woodbridge offices before the close of its business
day, generally 5:00 P.M. (New York City time), will be executed at the public
offering price determined at the close of regular trading on the NYSE on that
day. Orders received by Representatives after the close of regular trading on
the NYSE or received by FIC after the close of its business day will be executed
at the public offering price determined after the close of regular trading on
the NYSE on the next trading day. It is the responsibility of Representatives
to promptly transmit orders they receive to FIC. Each Fund reserves the right
to reject any application or order for its shares for any reason and to suspend
the offering of its shares.
WHEN YOU OPEN A FUND ACCOUNT, YOU MUST SPECIFY WHICH CLASS OF SHARES YOU WISH
TO PURCHASE. If not, your order will be processed as follows: (1) if you are
opening an account with a new registration with First Investors your order will
not be processed until the Fund receives notification of which class of shares
to purchase; (2) if you have existing First Investors accounts solely in either
Class A shares or Class B shares with the identical registration, your
investment in the Fund will be made in the same class of shares as your existing
fund account(s); (3) if you are an existing First Investors shareholder and own
a combination of Class A and Class B shares with an identical registration, your
investment in the Fund will be made in Class B shares; and (4) if you own in the
aggregate at least $250,000 in any combination of classes, your investment will
be made in Class A shares.
INITIAL INVESTMENT IN A FUND. You may open a Fund account with as little as
$1,000. This account minimum is waived if you open an account for a particular
class of shares through a full exchange of shares of the same class of another
"Eligible Fund," as defined below. Class A share accounts opened through an
exchange of shares from First Investors Cash Management Fund, Inc. or First
Investors Tax-Exempt Money Market Fund, Inc. (collectively, "Money Market
Funds") may be subject to an initial sales charge. You may open a Fund account
with $250 for individual retirement accounts ("IRAs") or, at the Fund's
discretion, a lesser amount for Simplified Employee
13
<PAGE>
Pension Plans ("SEPs"), salary reduction SEPs ("SARSEPs") and qualified or other
retirement plans. Automatic investment plans allow you to open an account with
as little as $50, provided you invest at least $600 a year. See "Systematic
Investing."
ADDITIONAL PURCHASES. After you make your first investment in a Fund, you may
purchase additional shares of the Fund by mailing a check made payable to FIC,
directly to First Investors Corporation, 10 Woodbridge Center Drive, Woodbridge,
NJ 07095-1198, Attn: Dept. CP. Include your account number on the face of the
check. There is no minimum on additional purchases of Fund shares.
ELIGIBLE FUNDS. Shares of all the funds and/or series in the First Investors
family of funds, except as noted below, are eligible to participate in certain
shareholder privileges noted in this Prospectus and the SAI (singularly,
"Eligible Fund" and, collectively, "Eligible Funds"). Shares of First Investors
Special Bond Fund, Inc., First Investors Life Series Fund and First Investors
U.S. Government Plus Fund are not deemed to be Eligible Funds. Class A Shares
of the Money Market Funds, unless otherwise noted, are not deemed to be Eligible
Funds. Class A shares of each series of Executive Investors Trust ("Executive
Investors") are deemed to be Eligible Funds if such shares have either (a) been
acquired through an exchange from an Eligible Fund which imposes a maximum sales
charge of 6.25%, or (b) been held for at least one year from their date of
purchase.
SYSTEMATIC INVESTING
FIRST INVESTORS MONEY LINE. This service allows you to invest in a Fund
through automatic deductions from your bank checking account. Scheduled
investments may be made on a bi-weekly, semi-monthly, monthly, quarterly, semi-
annual or annual basis provided a minimum total of $600 is invested per year.
Shares of the Fund are purchased at the public offering price determined at the
close of business on the day your designated bank account is debited and a
confirmation will be sent to you after every transaction. You may decrease the
amount or discontinue this service at any time by calling Shareholder Services
or writing to Administrative Data Management Corp. (the "Transfer Agent"), 10
Woodbridge Center Drive, Woodbridge, NJ 07095-1198, Attn: Control Dept. To
increase the amount, send a written request to the Transfer Agent at the address
noted above, which may take up to five days to process. Money Line application
forms are available from your Representative or by calling Shareholder Services
at 1-800-423-4026.
AUTOMATIC PAYROLL INVESTMENT. You also may arrange for automatic
investments into a Fund on a systematic basis through salary deductions,
provided your employer has direct deposit capabilities. Shares of the Fund are
purchased at the public offering price determined as of the close of business on
the day the electronic fund transfer is received by the Fund, and a confirmation
will be sent to you after every transaction. You may change the amount or
discontinue the service by contacting your employer. An application is
available from your Representative or by calling Shareholder Services at 1-800-
423-4026. Arrangements must also be made with your employer's payroll
department.
CROSS-INVESTMENT OF CASH DISTRIBUTIONS. You may elect to invest in Class A
shares of a Fund at net asset value all the cash distributions from the same
class of shares of another Eligible Fund. You may also elect to invest cash
distributions of a Fund's Class A shares into the same class of another Eligible
Fund, including the Money Market Funds. See "Dividends and Other
Distributions." To arrange for cross-investing, call Shareholder Services at 1-
800-423-4026.
14
<PAGE>
INVESTMENT OF SYSTEMATIC WITHDRAWAL PLAN PAYMENTS. You may elect to invest
in Class A shares of a Fund at net asset value through payments from a
Systematic Withdrawal Plan you maintain with any other Eligible Fund. Scheduled
investments may be made on a monthly, quarterly, semi-annual or annual basis.
You may also elect to invest Systematic Withdrawal Plan payments of Class A
shares from a Fund into the same class of another Eligible Fund, including the
Money Market Funds. See "How to Redeem Shares." To arrange for Systematic
Withdrawal Plan investments, call Shareholder Services at 1-800-423-4026.
CLASS A SHARES. Class A shares of each Fund are sold at the public offering
price, which will vary with the size of the purchase, as shown in the following
table:
<TABLE>
<CAPTION>
SALES CHARGE AS % OF
--------------------- CONCESSION TO
OFFERING NET AMOUNT DEALERS AS % OF
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------- -------- ---------- ---------------
<S> <C> <C> <C>
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
</TABLE>
There is no sales charge on transactions of $1 million or more, including
transactions subject to the Cumulative Purchase Privilege or a Letter of Intent.
The Underwriter will pay from its own resources a sales commission to FIC
Representatives and a concession equal to 0.90% of the amount invested to
Dealers on such purchases. If shares are purchased on or after the date of this
Prospectus and are redeemed within 24 months of purchase (this holding period is
18 months for shares purchased prior to the date of this Prospectus), a CDSC of
1.00% will be deducted from the redemption proceeds. The CDSC will be
calculated in the same manner as the CDSC on the Class B shares. See "Class B
Shares."
WAIVERS OF CLASS A SALES CHARGES. Sales charges on Class A shares do not
apply to: (1) any purchase by an officer, director or full-time employee (who
has completed the introductory period) of the Funds, the Underwriter, the
Adviser, or their affiliates, by a Representative, or by the spouse, or by the
children and grandchildren under the age of 21 of any such person; and (2) any
purchase by a former officer, director or full-time employee of the Funds, the
Underwriter, the Adviser, or their affiliates, or by a former FIC
Representative; provided they had acted as such for at least five years and had
retired or otherwise terminated the relationship in good standing.
The sales charge will be waived on any purchase of Class A shares by a
participant in a Qualified Plan account, as defined under "Retirement Plans," if
the purchase is made with the proceeds from a redemption of shares of a fund in
another fund group on which either an initial sales charge or a CDSC has been
paid.
Additionally, policyholders of participating life insurance policies issued by
First Investors Life Insurance Company, an affiliate of the Adviser and
Underwriter, may elect to invest dividends earned on such policies in Class A
shares of a Fund at net asset value, provided the annual dividend is at least
$50 and the policyholder has an existing account with the Fund.
15
<PAGE>
CUMULATIVE PURCHASE PRIVILEGE AND LETTERS OF INTENT. You may purchase Class A
shares of a Fund at a reduced sales charge through the Cumulative Purchase
Privilege or by executing a Letter of Intent. You may combine your Class A and
Class B shares of any Eligible Fund (including Class B shares of the Money
Market Funds) to qualify for this reduced sales charge. Under the Cumulative
Purchase Privilege, Class A shares of a Fund are available at quantity
discounts. By completing a Letter of Intent, you state your intention to invest
a specific amount in Class A shares over the next 13 months which, if made in
one lump sum, would qualify you for a reduced sales charge. For more
information, see the SAI, call your Representative or call Shareholder Services
at 1-800-423-4026.
UNITHOLDERS. Holders of certain unit trusts ("Unitholders") who have elected
to invest the entire amount of cash distributions from either principal,
interest income or capital gains or any combination thereof ("Unit
Distributions") from the following trusts may invest such Unit Distributions in
Class A shares of a Fund at a reduced sales charge.
Unitholders of various series of New York Insured Municipals-Income Trust
sponsored by Van Kampen Merritt Inc. (the "New York Trust"); Unitholders of
various series of the Multistate Tax Exempt Trust sponsored by Advest Inc.; and
Unitholders of various series of the Municipal Insured National Trust, J.C.
Bradford & Co. as agent, may purchase Class A shares of a Fund with Unit
Distributions at an offering price which is the net asset value per share plus a
sales charge of 1.5%. Unitholders of various series of tax-exempt trusts, other
than the New York Trust, sponsored by Van Kampen Merritt Inc. may purchase Class
A shares of a Fund with Unit Distributions at an offering price which is the net
asset value per share plus a sales charge of 1.0%. Each Fund's initial minimum
investment requirement is waived for purchases of Class A shares with Unit
Distributions. Shares of a Fund purchased by Unitholders may be exchanged for
Class A shares of any Eligible Fund subject to the terms and conditions set
forth under "How to Exchange Shares."
RETIREMENT PLANS. You may invest in shares of a Fund through an IRA, SEP,
SARSEP or any retirement plan. Participant directed plans, such as 401(k)
plans, profit sharing and money purchase plans and 403(b) plans, that are
subject to Title I of ERISA (each, a "Qualified Plan") are entitled to a special
reduced sales charge based upon the number of employees who are eligible to
participate, as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS % OF
-------------------- CONCESSION TO
NUMBER OF OFFERING NET AMOUNT DEALERS AS % OF
ELIGIBLE EMPLOYEES PRICE INVESTED OFFERING PRICE
- ------------------ -------- ---------- ---------------
<S> <C> <C> <C>
99 or less.......... 3.00% 3.09% 2.55%
100 or more......... 1.00% 1.01% 0.85%
</TABLE>
The reduced sales charge will be available regardless of whether the account
is registered with the Transfer Agent in the name of the individual participant
or the sponsoring employer or plan trustee. A Qualified Plan account will be
subject to the lower of the sales charge for Qualified Plans or the sales charge
for the purchase of Fund shares (see page 15).
CLASS B SHARES. The public offering price of Class B shares of each Fund is
the next determined net asset value, with no initial sales charge imposed. A
CDSC, however, is imposed upon most redemptions of Class B shares at the rates
set forth below:
16
<PAGE>
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
YEAR SINCE PURCHASE AS A PERCENTAGE OF DOLLARS INVESTED
PAYMENT MADE OR REDEMPTION PROCEEDS
-------------------- -----------------------------------
<S> <C>
First................... 4%
Second.................. 4
Third................... 3
Fourth.................. 3
Fifth................... 2
Sixth................... 1
Seventh and thereafter.. 0
</TABLE>
The CDSC will not be imposed on (1) the redemption of Class B shares acquired
as dividends or other distributions, or (2) any increase in the net asset value
of redeemed shares above their initial purchase price (in other words, the CDSC
will be imposed on the lower of net asset value or purchase price). In
determining whether a CDSC is payable on any redemption, it will be assumed that
the redemption is made first of any Class B shares acquired as dividends or
distributions, second of Class B shares that have been held for a sufficient
period of time such that the CDSC no longer is applicable to such shares and
finally of Class B shares held longest during the period of time that a CDSC is
applicable to such shares. This will result in your paying the lowest possible
CDSC.
As an example, assume an investor purchased 100 shares of Class B shares at
$10 per share for a total cost of $1,000 and in the second year after purchase,
the net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares as dividends. If at such time the
investor makes his or her first redemption of 50 shares (proceeds of $600), 10
shares will not be subject to a CDSC charge because redemptions are first made
of shares acquired through dividend reinvestment. With respect to the remaining
40 shares, the charge is applied only to the original cost of $10 per share and
not to the increase in net asset value of $2 per share. Therefore, $400 of the
$600 redemption proceeds will be charged at a rate of 4.00% (the applicable rate
in the second year after purchase).
For purposes of determining the CDSC on Class B shares, all purchases made
during a calendar month will be deemed to have been made on the first business
day of that month at the average cost of all purchases made during that month.
The holding period of Class B shares acquired through an exchange with another
Eligible Fund will be calculated from the first business day of the month that
the Class B shares were initially acquired in the other Eligible Fund. The
amount of any CDSC will be paid to FIC. The CDSC imposed on the purchase of
Class B shares will be waived under certain circumstances. See "Waivers of CDSC
on Class B Shares" in the SAI.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares approximately eight years after the date
of purchase, together with a pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class B shares. The Class
B shares so converted will no longer be subject to the higher expenses borne by
Class B shares. The conversion will be effected at the relative net asset
values per share of the two classes on the first business day of the month
following that in which the eighth anniversary of the purchase of the Class B
shares occurs. If a shareholder effects one or more exchanges between Class B
shares of the Eligible Funds during the eight-year period, the holding period
for the shares so exchanged will commence upon the date of the purchase of the
original shares. Because the per
17
<PAGE>
share net asset value of the Class A shares may be higher than that of the Class
B shares at the time of conversion, a shareholder may receive fewer Class A
shares than the number of Class B shares converted. See "Determination of Net
Asset Value."
GENERAL. The Underwriter may at times agree to reallow to Dealers up to an
additional 0.25% of the dollar amount of shares of the Funds and/or certain
other First Investors or Executive Investors funds sold by such Dealers during a
specific period of time. From time to time, the Underwriter also will pay,
through additional reallowances or other sources, a bonus or other compensation
to Dealers which employ a Dealer Representative who sells a minimum dollar
amount of the shares of the Funds and/or certain other First Investors or
Executive Investors funds during a specific period of time. Such bonus or other
compensation may take the form of reimbursement of certain seminar expenses, co-
operative advertising, or payment for travel expenses, including lodging
incurred in connection with trips taken by qualifying Dealer Representatives to
the Underwriter's principal office in New York City.
HOW TO EXCHANGE SHARES
Should your investment needs change, you may exchange, at net asset value,
shares of a Fund for shares of any Eligible Fund (including the Money Market
Funds). In addition, Class A shares of a Fund may be exchanged at net asset
value for units of any single payment plan ("plan") sponsored by the
Underwriter. SHARES OF A PARTICULAR CLASS MAY BE EXCHANGED ONLY FOR SHARES OF
THE SAME CLASS OF ANOTHER FUND. For example, you can exchange Class A shares of
a Fund only for Class A shares of another Eligible Fund. Exchanges can only be
made into accounts registered to identical owners. If your exchange is into a
new account, it must meet the minimum investment and other requirements of the
fund or plan into which the exchange is being made. Additionally, the fund or
plan must be available for sale in the state where you reside. A $5.00 exchange
fee is charged for each exchange. However, currently this fee is being
voluntarily borne by the fund into which you are making the exchange and, thus,
that fund's shareholders are bearing the fee ratably. Before exchanging Fund
shares for shares of another fund or plan, you should read the Prospectus of the
fund or plan into which the exchange is to be made. You may obtain Prospectuses
and information with respect to which funds or plans qualify for the exchange
privilege free of charge by calling Shareholder Services at 1-800-423-4026.
Exchange requests may be made in writing or by telephone (for shares held on
deposit only) if telephone privileges were elected on your application. Exchange
requests received in "good order" by the Transfer Agent before the close of
regular trading on the NYSE, generally 4:00 P.M. (New York City time), will be
processed at the net asset value determined as of the close of regular trading
on the NYSE on that day; exchange requests received after that time will be
processed on the following trading day.
EXCHANGES BY MAIL. To exchange shares by mail, you should mail requests to
Administrative Data Management Corp., 10 Woodbridge Center Drive, Woodbridge, NJ
07095-1198. Shares will be exchanged after the request is received in "good
order" by the Transfer Agent. "Good order" means that exchange requests must
state: (1) the names of the funds; (2) account numbers (if existing accounts);
(3) the dollar amount, number of shares or percentage of the account you wish to
exchange; and (4) the exchange request must be signed by all registered owners
exactly as the account is registered. If information is missing, your request
is ambiguous or the value of your account is less than the amount indicated on
your request, the exchange will not be processed. The Transfer Agent will seek
additional information from you and process the exchange on the day it
18
<PAGE>
receives such information. Signature guarantees may be required to process
certain exchange requests. See "How to Redeem Shares--Signature Guarantees."
EXCHANGES BY TELEPHONE. See "Telephone Transactions" for instructions on
making exchanges by telephone.
ADDITIONAL EXCHANGE INFORMATION. Exchanges should be made for investment
purposes only. A pattern of frequent exchanges may be contrary to the best
interests of a Fund's other shareholders. Accordingly, each Fund has the right,
at its sole discretion, to limit the amount of an exchange, reject any exchange,
or, upon 60 days' notice, materially modify or discontinue the exchange
privilege. Each Fund will consider all relevant factors in determining whether a
particular frequency of exchanges is contrary to the best interests of the Fund
and/or a class of the Fund and its other shareholders. Any such restriction
will be made by a Fund on a prospective basis only, upon notice to the
shareholder not later than ten days following such shareholder's most recent
exchange.
HOW TO REDEEM SHARES
You may redeem your Fund shares at the next determined net asset value, less
any applicable CDSC, on any day the NYSE is open, directly through the Transfer
Agent. Your Representative may help you with this transaction. Shares may be
redeemed by mail or telephone (provided written authorization for telephone
transactions is on file). Redemption requests received in "good order" by the
Transfer Agent before the close of regular trading on the NYSE, generally 4:00
P.M. (New York City time), will be processed at the net asset value, less any
applicable CDSC, determined as of the close of regular trading on the NYSE on
that day; redemption requests received after that time will be processed on the
following trading day. Payment of redemption proceeds will be made within seven
days. If the shares being redeemed were recently purchased by check, payment
may be delayed to verify that the check has been honored, normally not more than
fifteen days.
REDEMPTIONS BY MAIL. Written redemption requests should be mailed to
Administrative Data Management Corp., 10 Woodbridge Center Drive, Woodbridge, NJ
07095-1198. For your redemption request to be in good order, you must include:
(1) the name of the Fund; (2) your account number; (3) the dollar amount, number
of shares or percentage of the account you want redeemed; (4) share
certificates, if issued; (5) the original signatures of all registered owners
exactly as the account is registered; (6) signature guarantees as described
below; and (7) additional documents required for redemptions by corporations,
trusts, partnerships, organizations, retirement, pension or profit sharing plans
and for requests from anyone other than the shareholder(s) of record. If
information is missing, your request is ambiguous or the value of your account
is less than the amount indicated on your request, the redemption will not be
processed. The Transfer Agent will seek additional information and process the
redemption on the day it receives such information.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect you, the
Funds and their agents. Members of STAMP (Securities Transfer Agents Medallion
Program), MSP (New York Stock Exchange Medallion Signature Program), SEMP (Stock
Exchanges Medallion Program) or any underwriter of any issue for which the
Transfer Agent acts as transfer agent are eligible signature guarantors. A
notary public is not an acceptable guarantor. The guarantee must be manually
signed by an authorized signatory of the guarantor and the words "Signature
Guaranteed" must appear in direct association with such signature. Although
each Fund reserves the right to require signature guarantees at any other time,
signature guarantees are required whenever: (1) the amount
19
<PAGE>
of the redemption is $50,000 or more, (2) an exchange in the amount of $50,000
or more is made into the Money Market Funds, (3) a redemption check is to be
made payable to someone other than the registered accountholder, other than
institutions on behalf of the shareholder, (4) a redemption check is to be
mailed to an address other than the address of record, (5) an account
registration is being transferred to another owner, (6) an account, other than
an individual, joint, UGMA or UTMA nonretirement account, is being exchanged or
redeemed, (7) the redemption request is for certificated shares, or (8) your
address of record has changed within 60 days prior to a redemption request or an
exchange to a Money Market Fund of $50,000 or more.
REDEMPTIONS BY TELEPHONE. See "Telephone Transactions" for instructions on
making redemptions by telephone.
SYSTEMATIC WITHDRAWAL PLAN. If you own noncertificated Class A shares with a
net asset value of $5,000 or more in a single Fund account, you may set up a
plan for redemptions to be made automatically at regular intervals. You may
elect to have the payments (a) sent directly to you or persons you designate; or
(b) automatically invested at net asset value in shares of the same class of any
other Eligible Fund, including the Money Market Funds. If you own Class B
shares in a retirement account and qualify to receive distributions under the
Internal Revenue Code of 1986, as amended (the "Code"), you may elect to receive
redemptions at regular intervals. The redemption proceeds, less any applicable
CDSC, will be automatically sent directly to you. See the SAI for more
information on the Systematic Withdrawal Plan. To establish a Systematic
Withdrawal Plan, call Shareholder Services at 1-800-423-4026.
REINVESTMENT AFTER REDEMPTION. If you redeem Class A or Class B shares in
your Fund account, you can reinvest within ninety days from the date of
redemption all or any part of the proceeds in shares of the same class of the
same Fund or any other Eligible Fund (including the Money Market Funds), at net
asset value, on the date the Transfer Agent receives your purchase request. If
you reinvest the entire proceeds of a redemption of Class B shares for which a
CDSC has been paid, you will be credited for the amount of the CDSC. If you
reinvest less than the entire proceeds, you will be credited with a pro rata
portion of the CDSC. All credits will be paid in Class B shares of the fund
into which the reinvestment is being made. The period you owned the original
Class B shares prior to redemption will be added to the period of time you own
Class B shares acquired through reinvestment for purposes of determining (a) the
applicable CDSC upon a subsequent redemption and (b) the date on which Class B
shares automatically convert to class A shares. If your reinvestment is into a
new account, it must meet the minimum investment and other requirements of the
fund into which the reinvestment is being made. To take advantage of this
option, send your reinvestment check along with a written request to the
Transfer Agent within 90 days from the date of your redemption. Include your
account number and a statement that you are taking advantage of the
"Reinvestment Privilege."
REPURCHASE THROUGH UNDERWRITER. You may redeem Class A shares for which a
certificate has been issued through a Dealer. In this event, the Underwriter,
acting as agent for each Fund, will offer to repurchase or accept an offer to
sell such shares at a price equal to the net asset value next determined after
the making of such offer. The Dealer may charge you an added commission for
handling any redemption transaction.
REDEMPTION OF LOW BALANCE ACCOUNTS. Because each Fund incurs certain fixed
costs in maintaining shareholder accounts, each Fund may redeem without your
consent, on at least 60 days'
20
<PAGE>
prior written notice (which may appear on your account statement), any Fund
account of Class A or Class B shares which has a net asset value of less than
$500. To avoid such redemption, you may, during such 60-day period, purchase
additional Fund shares of the same class so as to increase your account balance
to the required minimum. There will be no CDSC imposed on such redemptions of
Class B shares. The Funds will not redeem accounts that fall below $500 solely
as a result of a reduction in net asset value. Accounts established under a
Systematic Investment Plan which have been discontinued prior to meeting the
$1,000 minimum are subject to this policy.
Additional information concerning how to redeem shares of the Funds is
available upon request to your Representative or Shareholder Services at 1-800-
423-4026.
TELEPHONE TRANSACTIONS
Provided you have selected telephone privileges on your account application,
you may redeem or exchange noncertificated shares of a Fund by calling the
Special Services Department at 1-800-342-6221 weekdays (except holidays) between
9:00 A.M. and 5:00 P.M. (New York City time). Exchange or redemption requests
received after the close of regular trading on the NYSE, generally 4:00 P.M.
(New York City time), will be processed at the net asset value, less any
applicable CDSC, determined as of the close of business on the following
business day. For your convenience, you may authorize your FIC Representative
(or your Dealer Representative, provided certain minimum sales requirements are
met) to exchange or redeem shares for you.
TELEPHONE EXCHANGES. Telephone exchanges are available between nonretirement
accounts and between IRA accounts of the same class of shares registered in the
same name. A telephone exchange also is available from an individually
registered nonretirement account to an IRA account of the same class of shares
in the same name (provided an IRA application is on file). Telephone exchanges
are not available for exchanges of Fund shares for plan units. For joint
accounts, telephone exchange instructions will be accepted from any one owner.
You are limited to one telephone exchange within any 30-day period for each
account authorized. Telephone exchanges to Money Market Funds are not available
if your address of record has changed within 60 days prior to the exchange
request.
TELEPHONE REDEMPTIONS. The telephone redemption privilege may be used
provided: (1) the redemption proceeds are being mailed to the address of record;
(2) your address of record has not changed within the past 60 days; (3) the
shares to be redeemed have not been issued in certificate form; (4) the proceeds
of the redemption do not exceed $50,000; and (5) shares have not been redeemed
by telephone from the account in the past 30 days. Retirement plan accounts are
not eligible for the telephone redemption option. For joint accounts, telephone
redemption instructions will be accepted from any one owner.
ADDITIONAL INFORMATION. The Funds, the Underwriter and their affiliates will
not be liable for any loss, damage, cost or expense arising out of any
instruction (or any interpretation of such instruction) received by telephone
which they reasonably believe to be authentic. In acting upon telephone
instructions, these parties use procedures which are reasonably designed to
ensure that such instructions are genuine. If the Funds, the Underwriter or
their affiliates do not follow reasonable procedures, some or all of them may be
liable for any such losses. For more information on telephone transactions see
the SAI. Each Fund has the right, at its sole discretion, upon 60 days' notice,
to materially modify or discontinue the telephone exchange and redemption
privilege. During
21
<PAGE>
times of drastic economic or market changes, telephone exchanges or
redemptions may be difficult to implement. If you experience difficulty in
making a telephone exchange or redemption, your exchange or redemption request
may be made by regular or express mail, and it will be implemented at the next
determined net asset value, less any applicable CDSC, following receipt by the
Transfer Agent.
MANAGEMENT
BOARD OF DIRECTORS. Each Fund's Board of Directors, as part of its overall
management responsibility, oversees various organizations responsible for that
Fund's day-to-day management.
ADVISER. First Investors Management Company, Inc. supervises and manages each
Fund's investments, supervises all aspects of each Fund's operations and
determines the Fund's portfolio transactions. The Adviser is a New York
corporation located at 95 Wall Street, New York, NY 10005. The Adviser
presently acts as investment adviser to 14 mutual funds. First Investors
Consolidated Corporation ("FICC") owns all of the voting common stock of the
Adviser and all of the outstanding stock of FIC and the Transfer Agent. Mr.
Glenn O. Head (and members of his family) and Mrs. Julie W. Grayson (as
executrix of the estate of her deceased husband, David D. Grayson) are
controlling persons of FICC and, therefore, jointly control the Adviser.
As compensation for its services, the Adviser receives an annual fee from each
of the Funds, which is payable monthly. For the fiscal year ended December 31,
1994, HIGH YIELD FUND's advisory fees were 0.96%, net of waiver, of its average
daily net assets and INCOME FUND's advisory fees were 0.74% of its average daily
net assets.
Each Fund bears all expenses of its operations other than those incurred by
the Adviser or Underwriter under the terms of its advisory or underwriting
agreements. Fund expenses include, but are not limited to: the advisory fee;
shareholder servicing fees and expenses; custodian fees and expenses; legal and
auditing fees; expenses of communicating to existing shareholders, including
preparing, printing and mailing prospectuses and shareholder reports to such
shareholders; and proxy and shareholder meeting expenses.
PORTFOLIO MANAGERS. George V. Ganter has been Portfolio Manager for the HIGH
YIELD FUND since 1989. Mr. Ganter joined FIMCO in 1985 as an Analyst. In 1986,
he was made Portfolio Manager for First Investors Special Bond Fund, Inc. and in
1989, he was made Portfolio Manager for the High Yield Series of First Investors
Life Series Fund and Executive Investors High Yield Fund.
Nancy Jones has been Portfolio Manager for INCOME FUND since 1989. Ms. Jones
joined FIMCO in 1983 as Director of Research in the High Yield Department. Ms.
Jones is also Portfolio Manager for First Investors Cash Management Fund, Inc.,
First Investors Tax-Exempt Money Market Fund, Inc., Investment Grade Series of
First Investors Series Fund, the Investment Grade Series of First Investors Life
Series Fund, Cash Management Series of First Investors Life Series Fund and has
managed the fixed income corporate securities portion of the Total Return Series
of First Investors Series Fund.
BROKERAGE. Each Fund may allocate brokerage commissions, if any, to broker-
dealers in consideration of Fund share distribution, but only when execution and
price are comparable to that
22
<PAGE>
offered by other broker-dealers. Brokerage may be directed to brokers who
provide research. See the SAI for more information on allocation of portfolio
brokerage.
UNDERWRITER. Each Fund has entered into an Underwriting Agreement with First
Investors Corporation, 95 Wall Street, New York, NY 10005, as Underwriter. The
Underwriter receives all sales charges in connection with the sale of each
Fund's Class A shares and all contingent deferred sales charges in connection
with each Fund's Class B shares and may receive payments under a plan of
distribution. See "How to Buy Shares" and "Distribution Plans."
REGULATORY MATTERS. In June 1992, the Funds' underwriter FIC, entered into a
settlement with the Securities and Exchange Commission ("SEC") to resolve
allegations by the agency that certain of FIC's sales representatives had made
misrepresentations concerning the risks of investing in the Funds, and had sold
the Funds to investors for whom they were not suitable. Without admitting or
denying the SEC's allegations, FIC: (a) consented to the entry of a final
judgment enjoining it from violating Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the 1933 Act; (b)
agreed to the entry of an administrative order censuring it and requiring it to
comply with undertakings to improve its policies and procedures with regard to
sales, training, supervision and compliance; and (c) agreed to pay $24.7 million
to certain investors who purchased shares of the High Yield Funds from in or
about November 1984 to in or about November 1990.
FIC, FIMCO and/or certain affiliated entities and persons have entered into
settlements with regulators in 29 states to resolve allegations, similar to
those made by the SEC, concerning sales of the Funds. In October 1993, as part
of settlements with Maine, Massachusetts, New York, Virginia and Washington
("State Settlements"), FIC, FIMCO and certain affiliated entities and persons
agreed, without admitting or denying any of the allegations, (a) to be enjoined
from violating certain provisions of the state securities laws, (b) to engage in
remedial measures designed to ensure that proper sales practices are observed in
the future, and (c) to pay $7.5 million, in addition to the $24.7 million
previously paid by FIC in connection with the SEC settlement, to investors in
the Funds. In addition, as part of those settlements, several FIC executives,
including Glenn O. Head, who is an officer and director of the Funds, agreed to
be suspended and enjoined temporarily from associating with any broker-dealer in
a supervisory capacity in certain of the states. On December 8, 1993, several
present and former FIC executives, including Mr. Head, also agreed, without
admitting or denying the allegations, to temporary SEC suspensions from
associating with broker-dealers and in some cases other regulated entities in a
supervisory capacity.
DISTRIBUTION PLANS
Pursuant to separate distribution plans pertaining to each Fund's Class A and
Class B shares ("Class A Plan" or "Class B Plan," and collectively, "Plans"),
each Fund may reimburse or compensate, as applicable, the Underwriter for
certain expenses incurred in the distribution of that Fund's shares
("distribution fees") and the servicing or maintenance of existing Fund
shareholder accounts ("service fees"). Pursuant to the Plans, distribution fees
are paid for activities relating to the distribution of Fund shares, including
costs of printing and dissemination of sales material or literature,
prospectuses and reports used in connection with the sale of Fund shares.
Service fees are paid for the ongoing maintenance and servicing of existing
shareholder accounts, including
23
<PAGE>
payments to Representatives who provide shareholder liaison services to their
customers who are holders of that Fund, provided they meet certain criteria.
Pursuant to each Class A Plan, each Fund's Board of Directors, in its sole
discretion, may periodically allocate the portion of distribution fees and
services fees that Fund may spend, provided the aggregate of such fees paid by
the Fund may not exceed an annual rate of 0.30% of the Fund's average daily net
assets attributable to Class A shares in any one fiscal year. Of that amount,
no more than 0.25% of a Fund's average daily net assets attributable to Class A
shares may be paid as service fees. Payments made to the Underwriter under each
Class A Plan may only be made for reimbursement of specific expenses incurred in
connection with distribution and service activities.
Pursuant to each Class B Plan, each Fund is authorized to pay the Underwriter
a distribution fee at the annual rate of 0.75% of that Fund's average daily net
assets attributable to Class B shares and a service fee of 0.25% of the Fund's
average daily net assets attributable to Class B shares. Payments made to the
Underwriter under each Class B Plan will represent compensation for distribution
and service activities, not reimbursement for specific expenses incurred.
Although Class B shares are sold without an initial sales charge, the
Underwriter pays from its own resources a sales commission to FIC
Representatives and a concession equal to 3.5% of the amount invested to Dealers
who sell Class B shares. In addition, the Underwriter will make quarterly
payments of service fees to Representatives commencing after the thirteenth
month following the initial sale of Class B shares. The Underwriter will make
such payments at an annual rate of up to 0.25% of the average net asset value of
Class B shares which are attributable to shareholders for whom the
Representatives are designated as dealer of record.
Pursuant to settlements entered into with various state regulators, for a
period ending on or about February 1, 1998, each Fund is permitted to pay up to
a maximum of 0.15% of that Fund's average daily net assets attributable to its
Class A shares and up to a maximum of 0.85% of its average daily net assets
attributable to its Class B shares for service and distribution fees.
The Funds may suspend or modify payments under the Plans at any time, and
payments are subject to the continuation of each Plan, the terms of any dealer
agreements between Dealers and the Underwriter and any applicable limits imposed
by the National Association of Securities Dealers, Inc. Each Fund will not
carry over any fees under the Plans to the next fiscal year. See "Distribution
Plans" in the SAI for a full discussion of the various Plans.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund's shares fluctuates and is determined
separately for each class of shares. The per share net asset value of the Class
B shares will generally be lower than that of the Class A shares because of the
higher expenses borne by the Class B shares. The net asset value of shares of a
given class of each Fund is determined as of the close of regular trading on the
NYSE (generally 4:00 P.M., New York City time) on each day the NYSE is open for
trading, and at such other times as such Fund's Board of Directors deems
necessary, by dividing the market value of the securities held by such Fund,
plus any cash and other assets, less all liabilities attributable to that class,
by the number of shares of the applicable class outstanding. If there is no
available market value, securities will be valued at their fair value as
determined in good faith pursuant to procedures
24
<PAGE>
adopted by each Fund's Board of Directors. The NYSE currently observes the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividends from net investment income are generally declared daily and paid
monthly by each Fund. Unless you direct the Transfer Agent otherwise, dividends
declared on a class of shares of a Fund are paid in additional shares of the
same class of the distributing Fund at the net asset value generally determined
as of the close of business on the first business day of the following month. If
you redeem all of your shares of a Fund at any time during a month, you are paid
all dividends declared through the day prior to the date of the redemption,
together with the proceeds of your redemption, less any applicable CDSC. Net
investment income includes interest and dividends, earned discount and other
income earned on portfolio securities less expenses.
Each Fund also distributes with its regular dividend at the end of the year
substantially all of its net capital gain (the excess of net long-term capital
gain over net short-term capital loss) and net short-term capital gain, if any,
after deducting any available capital loss carryovers, and any net realized
gains from foreign currency transactions. Unless you direct the Transfer Agent
otherwise, these distributions are paid in additional shares of the same class
of the distributing Fund at the net asset value generally determined as of the
close of business on the business day immediately following the record date of
the distribution. A Fund may make an additional distribution in any year if
necessary to avoid a Federal excise tax on certain undistributed income and
capital gain.
Dividends and other distributions paid on both classes of a Fund's shares are
calculated at the same time and in the same manner. Dividends on Class B shares
of a Fund are expected to be lower than those for its Class A shares because of
the higher distribution fees borne by the Class B shares. Dividends on each
class also might be affected differently by the allocation of other class-
specific expenses.
In order to be eligible to receive a dividend or other distribution, you must
own Fund shares as of the close of business on the record date of the
distribution. You may elect to receive dividends and/or other distributions in
cash by notifying the Transfer Agent by telephone or in writing prior to the
record date of any such distribution. If you elect this form of payment, the
payment date generally is two weeks following the record date of any such
distribution. Your election remains in effect until you revoke it by notifying
the Transfer Agent.
You may elect to invest the entire amount of any cash distribution on Class A
shares in shares of the same class of any Eligible Fund, including the Money
Market Funds, by notifying the Transfer Agent. See "How to Buy Shares--Cross-
Investment of Cash Distributions." The investment will be made at the net asset
value per share of the other fund, generally determined as of the close of
business, on the business day immediately following the record date of any such
distribution.
A dividend or other distribution paid on a class of shares of a Fund will be
paid in additional shares of that class and not in cash if any of the following
events occurs: (1) the total amount of the distribution is under $5, (2) the
Fund has received notice of your death on an individual account (until written
alternate payment instructions and other necessary documents are provided by
your
25
<PAGE>
legal representative), or (3) a distribution check is returned to the Transfer
Agent, marked as being undeliverable, by the U.S. Postal Service after two
consecutive mailings.
TAXES
Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of Federal income
tax on that part of its investment company taxable income (consisting generally
of net investment income, net short-term capital gain and net gains from certain
foreign currency transactions) and net capital gain that is distributed to its
shareholders.
Dividends from a Fund's investment company taxable income are taxable to you
as ordinary income, to the extent of the Fund's earnings and profits, whether
paid in cash or in additional Fund shares. Distributions of a Fund's net
capital gain, when designated as such, are taxable to you as long-term capital
gain, whether paid in cash or in additional Fund shares, regardless of the
length of time you have owned your shares. If you purchase shares shortly
before the record date for a dividend or other distribution, you will pay full
price for the shares and receive some portion of the price back as a taxable
distribution. You will receive an annual statement following the end of each
calendar year describing the tax status of distributions paid by the Fund during
that year.
Each Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to you after any applicable CDSC
is deducted (if you are an individual or certain other non-corporate
shareholder) if the Fund is not furnished with your correct taxpayer
identification number, and that percentage of dividends and such distributions
in certain other circumstances.
Your redemption of Fund shares will result in a taxable gain or loss to you,
depending on whether the redemption proceeds are more or less than your adjusted
basis for the redeemed shares (which normally includes any initial sales charge
paid on Class A shares). An exchange of Fund shares for shares of any other
Eligible Fund generally will have similar tax consequences. However, special
tax rules apply when a shareholder (1) disposes of Class A shares through a
redemption or exchange within 90 days of purchase and (2) subsequently acquires
Class A shares of an Eligible Fund without paying a sales charge due to the 90-
day reinvestment privilege or exchange privilege. In these cases, any gain on
the disposition of the original Class A shares will be increased, or loss
decreased, by the amount of the sales charge paid when the shares were acquired,
and that amount will increase the basis of the Eligible Fund's shares
subsequently acquired. In addition, if you purchase Fund shares within 30 days
before or after redeeming other shares of that Fund (regardless of class) at a
loss, all or a portion of the loss will not be deductible and will increase the
basis of the newly purchased shares.
No gain or loss will be recognized to a shareholder as a result of a
conversion of Class B shares into Class A shares.
The foregoing is only a summary of some of the important Federal tax
considerations generally affecting each Fund and its shareholders; see the SAI
for a further discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You therefore are urged to
consult your own tax adviser.
26
<PAGE>
PERFORMANCE INFORMATION
For purposes of advertising, each Fund's performance may be calculated for
each class of its shares based on average annual total return and total return.
Each of these figures reflects past performance and does not necessarily
indicate future results. Average annual total return shows the average annual
percentage change in an assumed $1,000 investment. It reflects the hypothetical
annually compounded return that would have produced the same total return if a
Fund's performance had been constant over the entire period. Because average
annual total return tends to smooth out variations in a Fund's return, you
should recognize that it is not the same as actual year-by-year results.
Average annual total return includes the effect of paying the maximum sales
charge (in the case of Class A shares) or the deduction of any applicable CDSC
(in the case of Class B shares) and payment of dividends and other distributions
in additional shares. One, five and ten year periods will be shown unless the
class has been in existence for a shorter period. Total return is computed
using the same calculations as average annual total return. However, the rate
expressed is the percentage change from the initial $1,000 invested to the value
of the investment at the end of the stated period. Total return calculations
assume reinvestment of dividends and other distributions.
Each Fund also may advertise its yield for each class of shares. Yield
reflects investment income net of expenses over a 30-day (or one-month) period
on a Fund share, expressed as an annualized percentage of the maximum offering
price per share for Class A shares and the net asset value per share for Class B
shares at the end of the period. Yield computations differ from other
accounting methods and therefore may differ from dividends actually paid or
reported net income. Each Fund may also advertise its "actual distribution rate"
for each class of shares. This is computed in the same manner as yield except
that actual income dividends declared per share during the period in questions
are substituted for net investment income per share. In addition, each Series
calculates its "actual distribution rate" based upon net asset value for
dissemination to existing shareholders.
Each of the above performance calculations may be based on investment at
reduced sales charge levels or at net asset value. Any quotation of performance
figures not reflecting the maximum sales charge or CDSC will be greater than if
the maximum sales charge or CDSC were used. Additional performance information
is contained in the Funds' Annual Reports which may be obtained without charge
by contacting the Funds at 1-800-423-4026.
27
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS HIGH YIELD FUND, INC.
Comparison of change in value of $10,000 investment in the First Investors High
Yield Fund, Inc. and the First Boston High Yield Index.
The following table is the source data for the line chart which
appears at this point in the printed document. This table is
not part of the original printed document and is shown for
reference only. The same is also true for this descriptive
paragraph.
<TABLE>
<CAPTION>
High Yield Fund First Boston High Yield Index
<S> <C> <C>
Aug-86 $ 9,375 $10,000
Dec-86 9,612 10,438
Dec-87 9,480 11,119
Dec-88 10,699 12,637
Dec-89 9,835 12,686
Dec-90 8,139 11,877
Dec-91 11,058 17,073
Dec-92 13,153 19,909
Dec-93 15,383 23,675
Dec-94 15,444 23,445
</TABLE>
<TABLE>
<CAPTION>
Class A shares Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
<S> <C> <C> <C>
One Year .39% (5.83%)
Five Years 9.44% 8.04%
Since Inception 6.12% 5.32%
S.E.C. 30-Day Yield 9.27%
</TABLE>
The graph compares a $10,000 investment made in the First Investors
High Yield Fund, Inc. on 8/12/86 (inception date) with a similar
investment in the First Boston High Yield Index. For purposes of the
graph and the accompanying table, unless otherwise indicated, it has
been assumed that the maximum sales charge was deducted from the
initial $10,000 investment in the Fund and all dividends and
distributions were reinvested. Investors investing in periodic payment
plans bear additional expenses.
The First Boston High Yield Index is designed to measure the
performance of the High Yield Bond Market. The Index consists of 661
different issues, 576 of which are cash pay, 70 are zero-coupon, 6 are
step bonds, 4 are payment-in-kind bonds and the remaining 5 are in
default. The bonds included in the Index have an average life of 8.1
years, an average maturity of 8.2 years, an average duration of 4.7
years and an average coupon of 10.65%. The Index does not take into
account fees and expenses. It is not possible to invest in the First
Boston High Yield Index.
* Average Annual Total Return figures (for the period ended 12/31/94)
include the reinvestment of all dividends and distributions. "N.A.V.
Only" returns are calculated without sales charges. The "S.E.C.
Standardized" returns shown are based on the maximum sales charge of
6.25% (prior to 7/1/93 and 12/29/89, the maximum sales charges were
6.9% and 7.25%, respectively). In addition, the Fund began reinvesting
dividends at N.A.V. on 11/30/90; previously dividends were reinvested
at offering price. Therefore, total returns and yield are higher than
they would have been had these charges not been reduced or eliminated.
Some or all of the expenses of the Fund were waived or assumed. If such
expenses had been paid by the Fund, the S.E.C. Standardized Average
Annual Total Return for One Year, Five Years and Since Inception would
have been (5.86%), 7.91%, and 5.24%, respectively and the S.E.C. Yield
for December 1994 would have been 9.22%. Results represent past
performance and do not indicate future results. Investment return and
principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original
cost. The unusually high current yields offered reflect the substantial
risks associated with investments in high yield bonds. The issuers of
the bonds pay higher interest rates because they have a greater
likelihood of financial difficulty which could result in their
inability to repay the bonds fully when due. Prices of high yield
bonds are also subject to greater fluctuations. The Fund was closed to
new investments from 11/9/90 to 7/27/92. First Boston High Yield Index
figures from CS First Boston and all other figures from First Investors
Management Company Inc. Class A shares were the only shares offered by
the Fund during the period.
28
<PAGE>
CUMULATIVE PERFORMANCE INFORMATION
FIRST INVESTORS FUND FOR INCOME, INC.
Comparison of change in value of $10,000 investment in the First Investors Fund
For Income, Inc. and the First Boston High Yield Index.
The following table is the source data for the line chart which
appears at this point in the printed document. This table is
not part of the original printed document and is shown for
reference only. The same is also true for this descriptive
paragraph.
<TABLE>
<CAPTION>
First Boston High
Fund For Income Yield Index
<S> <C> <C>
Jan-85 $ 9,375 $10,000
Dec-85 11,208 12,493
Dec-86 12,506 14,446
Dec-87 12,350 15,390
Dec-88 14,106 17,491
Dec-89 12,970 17,558
Dec-90 10,735 16,438
Dec-91 15,334 23,629
Dec-92 17,896 27,565
Dec-93 21,128 32,778
Dec-94 21,251 32,460
</TABLE>
<TABLE>
<CAPTION>
Class A shares Average Annual Total Return*
N.A.V. Only S.E.C. Standardized
<S> <C> <C> <C>
One Year .58% (5.75%)
Five Years 10.38% 8.95%
Ten Years 8.53% 7.83%
S.E.C. 30-Day Yield 9.27%
</TABLE>
The graph compares a $10,000 investment made in the First
Investors Fund For Income, Inc. on 1/1/85 with a similar
investment in the First Boston High Yield Index. For
purposes of the graph and the accompanying table, unless
otherwise indicated, it has been assumed that the maximum
sales charge was deducted from the initial $10,000
investment in the Fund and all dividends and distributions
were reinvested. Investors investing in periodic payment
plans bear additional expenses.
The First Boston High Yield Index is designed to measure
the performance of the High Yield Bond Market. The Index
consists of 661 different issues, 576 of which are cash
pay, 70 are zero-coupon, 6 are step bonds, 4 are payment-in-
kind bonds and the remaining 5 are in default. The bonds
included in the Index have an average life of 8.1 years, an
average maturity of 8.2 years, an average duration of 4.7
years and an average coupon of 10.65%. The Index does not
take into account fees and expenses. It is not possible to
invest in the First Boston High Yield Index.
* Average Annual Total Return figures (for the period ended
12/31/94) include the reinvestment of all dividends and
distributions. "N.A.V. Only" returns are calculated
without sales charges. The "S.E.C. Standardized" returns
shown are based on the maximum sales charge of 6.25% (prior
to 7/1/93 and 12/29/89, the maximum sales charges were 6.9%
and 8.5%, respectively) and are higher than they would have
been had these sales charges not been reduced. Results
represent past performance and do not indicate future
results. Investment return and principal value of an
investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than the original
cost. The unusually high current yields offered reflect the
substantial risks associated with investments in high yield
bonds. The issuers of the bonds pay higher interest rates
because they have a greater likelihood of financial
difficulty which could result in their inability to repay
the bonds fully when due. Prices of high yield bonds are
also subject to greater fluctuations. The Fund was closed
to new investments from 11/9/90 to 7/27/92. First Boston
High Yield Index figures from CS First Boston and all other
figures from First Investors Management Company Inc. Class
A shares were the only shares offered by the Fund during
the period.
29
<PAGE>
GENERAL INFORMATION
ORGANIZATION. HIGH YIELD FUND and INCOME FUND were incorporated in the state
of Maryland on November 14, 1984 and August 20, 1970, respectively. HIGH YIELD
FUND'S authorized capital stock consists of 500 million shares of common stock,
all of one series, with a par value per share of $0.01. INCOME FUND's
authorized capital stock consists of 1 billion shares of common stock, all of
one series, with a par value per share of $1.00. Each Fund is authorized to
issue shares of common stock in such separate and distinct series and classes of
series as the particular Fund's Board of Directors shall from time to time
establish. The shares of common stock of each Fund are presently divided into
two classes, designated Class A shares and Class B shares. Each class of a Fund
represents interests in the same assets of that Fund. The classes differ in
that (1) each class has exclusive voting rights on matters affecting only that
class, (2) Class A shares are subject to an initial sales charge and relatively
lower ongoing distribution fees, (3) Class B shares bear higher ongoing
distribution fees, are subject to a CDSC upon certain redemptions and will
automatically convert to Class A shares approximately eight years after
purchase, (4) each class may bear differing amounts of certain other class-
specific expenses, and (5) each class has different exchange privileges. Neither
Fund's Board of Directors anticipates that there will be any conflicts among the
interests of the holders of the different classes of each Fund's shares. On an
ongoing basis, each Fund's Board of Directors will consider whether any such
conflict exists and, if so, take appropriate action. The Funds do not hold
annual shareholder meetings. If requested to do so by the holders of at least
10% of a Fund's outstanding shares, such Fund's Board of Directors will call a
special meeting of shareholders for any purpose, including the removal of
Directors. Each share of each Fund has equal voting rights except as noted
above. Each share of a Fund is entitled to participate equally in dividends and
other distributions and the proceeds of any liquidation except that, due to the
higher expenses borne by the Class B shares, such dividends and proceeds are
likely to be lower for the Class B shares than for the Class A shares.
CUSTODIAN. The Bank of New York, 48 Wall Street, New York, NY 10286, is
custodian of the securities and cash of each Fund.
TRANSFER AGENT. Administrative Data Management Corp., 10 Woodbridge Center
Drive, Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as
transfer and dividend disbursing agent for each Fund and as redemption agent for
regular redemptions. The Transfer Agent's telephone number is 1-800-423-4026.
SHARE CERTIFICATES. The Funds do not issue share certificates unless
requested in writing to do so. The Funds do not issue certificates for Class B
shares or for Class A shares purchased under any retirement account. Ownership
of shares of each Fund is recorded on a stock register by the Transfer Agent and
shareholders have the same rights of ownership with respect to such shares as if
certificates had been issued.
CONFIRMATIONS AND STATEMENTS. You will receive confirmations of purchases
and redemptions of shares of a Fund. Statements of shares owned will be sent to
you following a transaction in the account, including payment of a dividend or
capital gain distribution in additional shares or cash.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. Ann McHugh, 402 Marine
Ave., Brooklyn, NY 11209 owns 29.4% of the Class B shares of INCOME FUND and
may, therefore, be deemed to control this class of that Fund under the 1940 Act.
William H. Ellison, P.O. Box 585705,
30
<PAGE>
Orlando, FL 32858 owns 26.6% of the Class B shares of HIGH YIELD FUND and may,
therefore, be deemeed to control this class of that Fund under the 1940 Act.
SHAREHOLDER INQUIRIES. Shareholder inquiries can be made by calling
Shareholder Services at 1-800-423-4026.
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. It is each Fund's practice
to mail only one copy of its annual and semi-annual reports to any address at
which more than one shareholder with the same last name has indicated that mail
is to be delivered. Additional copies of the reports will be mailed if
requested in writing or by telephone by any shareholder. Each Fund will ensure
that an additional copy of such reports are sent to any shareholder who
subsequently changes his or her mailing address.
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S RATINGS GROUP
- -------------------------------
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, 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.
31
<PAGE>
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C Debt rated "BB," "B," "CCC," "CC" and "C" is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal. "BB" indicates the least degree of speculation and "C" the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
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.
32
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
- -------------------------------
Aaa Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat greater than the Aaa
securities.
A Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically 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.
33
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Fee Table........................... 2
Financial Highlights................ 4
Investment Objectives and Policies.. 6
Alternative Purchase Plans.......... 12
How to Buy Shares................... 13
How to Exchange Shares.............. 18
How to Redeem Shares................ 19
Telephone Transactions.............. 21
Management.......................... 22
Distribution Plans.................. 23
Determination of Net Asset Value.... 24
Dividends and Other Distributions... 25
Taxes............................... 26
Performance Information............. 27
General Information................. 30
Appendix A.......................... 31
</TABLE>
INVESTMENT ADVISER CUSTODIAN
First Investors Management The Bank of New York
Company, Inc. 48 Wall Street
95 Wall Street New York, NY 10286
New York, NY 10005
TRANSFER AGENT
UNDERWRITER Administrative Data
First Investors Corporation Management Corp.
95 Wall Street 10 Woodbridge Center Drive
New York, NY 10005 Woodbridge, NJ 07095-1198
LEGAL COUNSEL AUDITORS
Kirkpatrick & Lockhart Tait, Weller & Baker
1800 M Street, N.W. Two Penn Center Plaza
Washington, D.C. 20036 Philadelphia, PA 19102-1707
This Prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this Prospectus. No Fund intends to make any representation as to
the accuracy or completeness of the disclosure in this Prospectus relating to
any other Fund. No dealer, salesman or any other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus or the Statement of Additional Information, and if given or
made, such information and representation must not be relied upon as having been
authorized by either Fund, First Investors Corporation, or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the shares offered hereby in any state to any person
to whom it is unlawful to make such offer in such state.
<PAGE>
First Investors
High Yield Fund, Inc.
- ---------------------
First Investors Fund
For Income, Inc.
- ---------------------
Prospectus
- ----------
May 1, 1995
- -----------
First Investors Logo
Logo is described as follows: the arabic numeral one separated into seven
vertical segments followed by the words "First Investors."
Vertical line from top to bottom in center of page about 1/2 inch in thickness.
The following language appears to the left of the above language in the printed
piece:
The words "BULK RATE U.S. POSTAGE PAID PERMIT NO. 1796" in a box to the right of
a circle containing the words "MAILED FROM ZIP CODE 17604" appears on the
righthand side.
The following language appears on the lefthand side:
FIRST INVESTORS HIGH YIELD FUND, INC.
FIRST INVESTORS FUND FOR INCOME, INC.
95 WALL STREET
NEW YORK, NY 10005
First Investors Logo (as described above)
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK
HYFI001
<PAGE>
FIRST INVESTORS HIGH YIELD FUND, INC.
FIRST INVESTORS FUND FOR INCOME, INC.
95 Wall Street 1-800-423-4026
New York, New York 10005
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1995
This is a Statement of Additional Information ("SAI") for FIRST INVESTORS
HIGH YIELD FUND, INC. ("HIGH YIELD FUND") and FIRST INVESTORS FUND FOR INCOME,
INC. ("INCOME FUND"), each of which is an open-end diversified management
investment company. HIGH YIELD FUND and INCOME FUND are referred to herein
collectively as "Funds."
HIGH YIELD FUND primarily seeks high current income and secondarily seeks
capital appreciation.
INCOME FUND primarily seeks to earn a high level of current income and, to
the extent possible, in view of that objective, secondarily seeks growth of
capital.
This SAI is not a prospectus. It should be read in conjunction with the
Funds' Prospectus dated May 1, 1995, which may be obtained free of cost from the
Funds at the address or telephone number noted above.
TABLE OF CONTENTS
-----------------
Page
----
Investment Policies............................. 2
Hedging Strategies.............................. 5
Investment Restrictions......................... 8
Directors and Officers.......................... 12
Management...................................... 14
Underwriter..................................... 15
Distribution Plans.............................. 16
Determination of Net Asset Value................ 17
Allocation of Portfolio Brokerage............... 18
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services..... 19
Taxes........................................... 23
Performance Information......................... 25
General Information............................. 29
Appendix A...................................... 32
Financial Statements............................ 33
<PAGE>
INVESTMENT POLICIES
BANKERS' ACCEPTANCES. Each Fund may invest in bankers' acceptances.
--------------------
Bankers' acceptances are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
asset or it may be sold in the secondary market at the going rate of interest
for a specific maturity. Although maturities for acceptances can be as long as
270 days, most acceptances have maturities of six months or less.
CERTIFICATES OF DEPOSIT. Each Fund may invest in bank certificates of
-----------------------
deposit ("CDs") subject to the restrictions set forth in the Prospectus. The
Federal Deposit Insurance Corporation is an agency of the U.S. Government which
insures the deposits of certain banks and savings and loan associations up to
$100,000 per deposit. The interest on such deposits may not be insured if this
limit is exceeded. Current Federal regulations also permit such institutions to
issue insured negotiable Cds in amounts of $100,000 or more, without regard to
the interest rate ceilings on other deposits. To remain fully insured, these
investments currently must be limited to $100,000 per insured bank or savings
and loan association.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities.
----------------------
While no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer's common stock, although
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed income
security. The Funds' investment adviser, First Investors Management Company,
Inc. ("Adviser" or "FIMCO"), will decide to invest based upon a fundamental
analysis of the long-term attractiveness of the issuer and the underlying common
stock, the evaluation of the relative attractiveness of the current price of the
underlying common stock and the judgment of the value of the convertible
security relative to the common stock at current prices.
FOREIGN SECURITIES--RISK FACTORS. HIGH YIELD 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. Because HIGH
YIELD FUND does not intend to hedge its foreign investments against the risk of
foreign currency fluctuations, changes in the value of these currencies can
significantly affect the Fund's share price. 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 HIGH YIELD FUND held in
foreign countries.
2
<PAGE>
LOANS OF PORTFOLIO SECURITIES. HIGH YIELD FUND may loan securities to
------------------------------
qualified broker-dealers or other institutional investors provided: the borrower
pledges to the Fund and agrees to maintain at all times with the Fund collateral
equal to not less than 100% of the value of the securities loaned (plus accrued
interest or dividend, if any); the loan is terminable at will by the Fund; the
Fund pays only reasonable custodian fees in connection with the loan; and the
Adviser monitors the creditworthiness of the borrower throughout the life of the
loan. Such loans may be terminated by the Fund at any time and the Fund may
vote the proxies if a material event affecting the investment is to occur. The
market risk applicable to any security loaned remains a risk of the Fund. The
borrower must add to the collateral whenever the market value of the securities
rises above the level of such collateral. The Fund could incur a loss if the
borrower should fail financially at a time when the value of the loaned
securities is greater than the collateral. HIGH YIELD FUND may make loans of
portfolio securities, together with illiquid securities, not in excess of 15% of
its net assets.
PORTFOLIO TURNOVER. Although each Fund generally will not invest for
------------------
short-term trading purposes, portfolio securities may be sold from time to time
without regard to the length of time they have been held when, in the opinion of
the Adviser, investment considerations warrant such action. Portfolio turnover
rate is calculated by dividing (1) the lesser of purchases or sales of portfolio
securities for the fiscal year by (2) the monthly average of the value of
portfolio securities owned during the fiscal year. A 100% turnover rate would
occur if all the securities in a Fund's portfolio, with the exception of
securities whose maturities at the time of acquisition were one year or less,
were sold and either repurchased or replaced within one year. A high rate of
portfolio turnover generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Allocation of Portfolio
Brokerage." For the fiscal years ended December 31, 1993 and 1994, HIGH YIELD
FUND'S portfolio turnover rate was 87% and 32%, respectively and INCOME FUND'S
portfolio turnover rate was 76% and 39%, respectively.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements with
---------------------
banks which are members of the Federal Reserve System or securities dealers who
are members of a national securities exchange or are market makers in government
securities. The period of these repurchase agreements will usually be short,
from overnight to one week, and at no time will a Fund invest in repurchase
agreements with more than one year in time to maturity. The securities which
are subject to repurchase agreements, however, may have maturity dates in excess
of one year from the effective date of the repurchase agreement. Each Fund will
always receive, as collateral, securities whose market value, including accrued
interest, which will at all times be at least equal to 100% of the dollar amount
invested by the Fund in each agreement, and the Fund will make payment for such
securities only upon physical delivery or evidence of book entry transfer to the
account of the custodian. If the seller defaults, a Fund might incur a loss if
the value of the collateral securing the repurchase agreement declines, and
might incur disposition costs in connection with liquidating the collateral. In
addition, if bankruptcy or similar proceedings are commenced with respect to the
seller of the security, realization upon the collateral by a Fund may be delayed
or limited. Neither Fund will enter into a repurchase agreement with more than
seven days to maturity if, as a result more than 15% of its net assets would be
invested in such repurchase agreements, together with any other illiquid
investments.
RESTRICTED AND ILLIQUID SECURITIES. No Fund will purchase or otherwise
----------------------------------
acquire any security if, as a result, more than 15% of its net assets (taken at
current value) would be invested in securities that are illiquid by virtue of
the absence of a readily available market or legal or contractual restrictions
on resale. This policy includes foreign issuers' unlisted securities with a
limited trading market and repurchase agreements maturing in more than seven
days. This policy does not include restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, as amended ("1933 Act"),
which each Fund's Board of Directors or the Adviser has determined under Board-
approved
3
<PAGE>
guidelines are liquid. As a result of an undertaking to a certain state
securities commission, INCOME FUND will not invest more than 15% of its total
assets in restricted securities, including Rule 144A securities and unseasoned
issuers.
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% limitation, as noted above. Where registration
is required, a Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, a Fund might obtain a less favorable price than
prevailed when it decided to sell.
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are either themselves exempt from registration or sold in
transactions not requiring registration. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by a Fund, however, could affect adversely the marketability of
such portfolio securities and a Fund might be unable to dispose of such
securities promptly or at reasonable prices.
SHORT SALES. Although HIGH YIELD FUND does not presently intend to do so,
-----------
it may borrow securities for cash sale to others for hedging purposes only. In
this type of transaction, known as a "short sale," the Fund borrows a security
from a lender and is obligated to replace the security (not its cash value) at a
date in the future. The Fund may make short sales "against the box." A short
sale against the box occurs when the Fund enters into a short sale with a
security identical to the one it already owns or has the immediate or
unconditional right, at no cost, to obtain the identical security.
U.S. GOVERNMENT OBLIGATIONS. Securities issued or guaranteed as to
---------------------------
principal and interest by the U.S. Government include (1) U.S. Treasury
obligations which differ only in their interest rates, maturities and times of
issuance as follows: U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years) and U.S. Treasury bonds
(generally maturities of greater than ten years), and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are backed by
the full faith and credit of the United States, such as securities issued by the
Federal Housing Administration, Government National Mortgage Association, the
Department of Housing and Urban Development, the Export-Import Bank, the General
Services Administration and the Maritime
4
<PAGE>
Administration and certain securities issued by the Farmers Home Administration
and the Small Business Administration. The range of maturities of U.S.
Government Obligations is usually three months to thirty years.
WARRANTS. Each Fund may purchase warrants, which are instruments that
--------
permit a Fund to acquire, by subscription, the capital stock of a corporation at
a set price, regardless of the market price for such stock. Warrants may be
either perpetual or of limited duration. There is greater risk that warrants
might drop in value at a faster rate than the underlying stock. HIGH YIELD
FUND's investment in warrants is limited to 5% of its net assets, with no more
than 2% in warrants not listed on either the New York or American Stock
Exchange. INCOME FUND's investment in warrants is limited to 2% of its net
assets.
WHEN-ISSUED SECURITIES. Although they have no intention of doing so in the
----------------------
coming year, each Fund many invest up to 10% of its net assets in securities
issued on a when-issued or delayed delivery basis at the time the purchase is
made. A Fund generally would not pay for such securities or start earning
interest on them until they are issued or received. However, when a Fund
purchases debt obligations on a when-issued basis, it assumes the risks of
ownership, including the risk of price fluctuation, at the time of purchase, not
at the time of receipt. Failure of the issuer to deliver a security purchased
by a Fund on a when-issued basis may result in such Fund incurring a loss or
missing an opportunity to make an alternative investment. When a Fund enters
into a commitment to purchase securities on a when-issued basis, it establishes
a separate account with its custodian consisting of cash or liquid high-grade
debt securities equal to the amount of the Fund's commitment, which are valued
at their fair market value. If on any day the market value of this segregated
account falls below the value of the Fund's commitment, the Fund will be
required to deposit additional cash or qualified securities into the account
until equal to the value of the Fund's commitment. When the securities to be
purchased are issued, the Fund will pay for the securities from available cash,
the sale of securities in the segregated account, sales of other securities and,
if necessary, from sale of the when-issued securities themselves although this
is not ordinarily expected. Securities purchased on a when-issued basis are
subject to the risk that yields available in the market, when delivery takes
place, may be higher than the rate to be received on the securities a Fund is
committed to purchase. Sale of securities in the segregated account or other
securities owned by a Fund and when-issued securities may cause the realization
of a capital gain or loss.
HEDGING STRATEGIES
Although it presently does not intend to engage in these strategies in the
coming year, HIGH YIELD FUND may engage in certain futures strategies to hedge
its investment portfolio and in other circumstances permitted by the Commodities
Futures Trading Commission ("CFTC"). Certain special characteristics of and
risks associated with using Hedging Instruments are discussed below. In
addition to the investment guidelines (described below) adopted by the Fund's
Board of Directors to govern its investments in Hedging Instruments, use of
these instruments is subject to the applicable regulations of the Securities and
Exchange Commission ("SEC"), the several futures exchanges upon which futures
contracts are traded, the CFTC and various state regulatory authorities. In
addition, the Fund's ability to use Hedging Instruments will be limited by tax
considerations. See "Taxes."
Participation in the futures markets involves investment risks and
transaction costs to which the Fund would not be subject absent the use of these
strategies. If the Adviser's prediction of movements in the direction of the
securities and interest rate markets are inaccurate, the adverse consequences to
the
5
<PAGE>
Fund may leave the Fund in a worse position than if such strategies were not
used. The Fund might not employ any of the strategies described below, and
there can be no assurance that any strategy will succeed. The use of these
strategies involve certain special risks, including (1) dependence on the
Adviser's ability to predict correctly movements in the direction of interest
rates and securities prices; (2) imperfect correlation between the price of
futures contracts and movements in the prices of the securities being hedged;
(3) the fact that skills needed to use these strategies are different from those
needed to select portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument at any time; and (5) the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences.
COVER FOR HEDGING STRATEGIES. The Fund will not use leverage in its
----------------------------
hedging strategies. In the case of each transaction entered into as a hedge,
the Fund will hold securities or futures positions whose values are expected to
offset ("cover") its obligations thereunder. The Fund will not enter into a
hedging strategy that exposes the Fund to an obligation to another party unless
it owns either (1) an offsetting ("covered") position in securities or futures
contracts, or (2) cash, receivables and short-term debt securities with a value
sufficient at all times to cover its potential obligations. The Fund will
comply with guidelines established by the SEC with respect to coverage of
hedging strategies by mutual funds and, if required, will set aside cash and/or
liquid, high-grade debt securities in a segregated account with its custodian in
the prescribed amount. Securities or futures positions used for cover and
securities held in a segregated account cannot be sold or closed out while the
hedging strategy is outstanding unless they are replaced with similar assets.
As a result, there is a possibility that the use of cover or segregation
involving a large percentage of the Fund's assets could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
INTEREST RATE FUTURES CONTRACTS. Interest rate futures contracts are
-------------------------------
bilateral agreements pursuant to which one party agrees to make, and the other
party agrees to accept, delivery of a specified type of debt security at a
specified future time and at a specified price. Although such futures contracts
by their terms call for actual delivery or acceptance of debt securities, in
most cases the contracts are closed out before the settlement date without the
making or taking of delivery. The Fund may buy and sell interest rate futures
contracts which are traded on a board of trade as a hedge against adverse
changes in interest rates.
FUTURES STRATEGIES. The Fund may engage in futures strategies to attempt
------------------
to reduce the overall investment risk that would normally be expected to be
associated with ownership of the securities in which it invests. The Fund may
use interest rate futures contracts to hedge its portfolio against changes in
the general level of interest rates. The Fund may purchase an interest rate
futures contract when it intends to purchase debt securities but has not yet
done so. This strategy may minimize the effect of all or part of an increase in
the market price of those securities because a rise in the price of the
securities prior to their purchase may either be offset by an increase in the
value of the futures contract purchased by the Fund or avoided by taking
delivery of the debt securities under the futures contract. Conversely, a fall
in the market price of the underlying debt securities may result in a
corresponding decrease in the value of the futures position. The Fund may sell
an interest rate futures contract in order to continue to receive the income
from a debt security, while endeavoring to avoid part or all of the decline in
the market value of that security that would accompany an increase in interest
rates.
FUTURES GUIDELINES. In view of the risks involved in using futures
------------------
strategies described below, the Fund's Board of Directors has adopted non-
fundamental investment guidelines to govern the Fund's use of such investments
that may be modified by the Board without shareholder vote. The Fund will not
purchase or sell futures contracts if, immediately thereafter, the sum of the
amount of initial margin
6
<PAGE>
deposits on the Fund's existing futures positions would exceed 5% of the market
value of the Fund's total assets. The Fund may not purchase futures contracts
if immediately thereafter more than 30% of the Fund's total assets would be so
invested.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES TRADING. No price is paid
----------------------------------------------------
upon entering into futures contracts. Instead, upon entering into a futures
contract, the Fund is required to deposit with its custodian in a segregated
account in the name of the futures broker through which the transaction is
effected an amount of cash, U.S. Government securities or other liquid, high-
grade debt instruments generally equal to 10% or less of the contract value.
This amount is known as "initial margin." Initial margin on futures contracts
is in the nature of a performance bond or good-faith deposit that is returned to
the Fund upon termination of the transaction, assuming all obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
Fund may be required by an exchange to increase the level of its initial margin
payment. Additionally, initial margin requirements may be increased generally
in the future by regulatory action. Subsequent payments, called "variation
margin," to and from the broker, are made on a daily basis as the value of the
futures position varies, a process known as "marking to market." Variation
margin does not involve borrowing to finance the futures transactions, but
rather represents a daily settlement of the Fund's obligation to or from a
clearing organization.
Holders and writers of futures positions can enter into offsetting closing
transactions, similar to closing transactions on options on securities, by
selling or purchasing, respectively, a futures position with the same terms as
the position held or written. Positions in futures contracts thereon may be
closed only on an exchange or board of trade providing a secondary market for
such futures or options.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures contract may vary either up or down
from the previous day's settlement price. Once the daily limit has been reached
in a particular contract, no trades may be made that day at a price beyond that
limit. The daily limit governs only price movements during a particular trading
day and therefore does not limit potential losses because prices could move to
the daily limit for several consecutive trading days with little or no trading
and thereby prevent prompt liquidation of unfavorable positions. In such event,
it may not be possible for the Fund to close a position and, in the event of
adverse price movements the Fund would have to make daily cash payments of
variation margin. However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the contracts
can be terminated. In such circumstances, an increase in the price of the
securities, if any, may partially or completely offset losses on the futures
contract. However, there is no guarantee that the price of the securities will,
in fact, correlate with the price movements in the contracts and thus provide an
offset to losses on the contracts.
Successful use by the Fund of futures contracts will depend upon the
Adviser's ability to predict movements in the direction of the overall interest
rate markets, which requires different skills and techniques than predicting
changes in the prices of individual securities. Moreover, futures contracts
relate not to the current price level of the underlying instrument but to the
anticipated levels at some point in the future. There is, in addition, the risk
that the movements in the price of the futures contract will not correlate with
the movements in prices of the securities being hedged. In addition, if the
Fund has insufficient cash, it may have to sell assets from its portfolio to
meet daily variation margin requirements. Any such sale of assets may or may not
be made at prices that reflect the rising market. Consequently, the Fund may
need to sell assets at a time when such sales are disadvantageous to the Fund.
If the price of the futures contract moves more than the price of the underlying
securities, the Fund will experience
7
<PAGE>
either a loss or a gain on the futures contract that may or may not be
completely offset by movements in the price of the securities that are the
subject of the hedge.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between price movements in the futures position and
the securities being hedged, movements in the prices of futures contracts may
not correlate perfectly with movements in the prices of the hedged securities
because of price distortions in the futures market. As a result, a correct
forecast of general market trends may not result in successful hedging through
the use of futures contracts over the short term.
Positions in futures contracts may be closed out only on an exchange or
board of trade that provides a secondary market for such futures contracts.
Although the Fund intends to purchase or sell futures only on exchanges or
boards of trade where there appears to be a liquid secondary market, there is no
assurance that such a market will exist for any particular contract at any
particular time. In such event, it may not be possible to close a futures
position and, in the event of adverse price movements, the Fund would continue
to be required to make variation margin payments.
The Fund's activities in the futures markets may result in a higher
portfolio turnover rate and additional transaction costs in the form of added
brokerage commissions; however, the Fund also may save on commissions by using
futures as a hedge rather than buying or selling individual securities in
anticipation or as a result of market movements.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below have been adopted by the
respective Fund and, unless identified as non-fundamental policies, may not be
changed without the affirmative vote of a majority of the outstanding voting
securities of that Fund. As provided in the Investment Company Act of 1940, as
amended ("1940 Act"), a "vote of a majority of the outstanding voting securities
of the Fund" means the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares of the Fund or (2) 67% or more of the shares present at a
meeting, if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy. Changes in values of a particular Fund's assets
will not cause a violation of the following investment restrictions so long as
percentage restrictions are observed by such Fund at the time it purchases any
security.
HIGH YIELD FUND. HIGH YIELD FUND will not:
- ----------------
(1) Borrow money, except from banks and only for temporary or emergency
purposes and then in amounts not in excess of 5% of its total assets.
(2) Engage in "short sales" in excess of 10% of the Fund's total assets.
As a matter of non-fundamental policy, the Fund has undertaken to a certain
state securities commission that the Fund will not engage in short sales other
than (a) short sales against the box and (b) the sale of financial futures
contracts and options thereon.
(3) Pledge, mortgage or hypothecate any of its assets, except that the Fund
may pledge its assets to secure borrowings made in accordance with paragraphs
(1) and (2) above and for margin to secure its obligations under interest rate
futures contracts, provided the Fund maintains asset coverage of at least 300%
for pledged assets.
8
<PAGE>
(4) Make loans, except by purchase of debt obligations and through
repurchase agreements. However, the Board of Directors may, on the request of
broker-dealers or other institutional investors which they deem qualified,
authorize the Fund to loan securities to cover the borrower's short position;
provided, however, the borrower pledges to the Fund and agrees to maintain at
all times with the Fund cash collateral equal to not less than 100% of the value
of the securities loaned, the loan is terminable at will by the Fund, the Fund
receives interest on the loan as well as any distributions upon the securities
loaned, the Fund retains voting rights associated with the securities, the Fund
pays only reasonable custodian fees in connection with the loan, and the Adviser
monitors the creditworthiness of the borrower throughout the life of the loan;
provided further, that such loans will not be made if the value of all
repurchase agreements with more than seven days to maturity, and other illiquid
assets is greater than an amount equal to 15% of the Fund's net assets.
(5) With respect to 75% of the Fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.
(6) Purchase the securities of an issuer if such purchase, at the time
thereof, would cause more than 5% value of the Fund's total assets to be
invested in securities of issuers which, including predecessors, have a record
of less than three years' continuous operation.
(7) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under Federal securities laws.
(8) Purchase or sell real estate or commodities or commodity contracts.
However, the Fund may purchase interests in real estate investment trusts whose
securities are registered under the Act and are readily marketable and may
invest in interest rate futures contracts and options thereon (provided the
margin required does not violate the investment restrictions pertaining to
pledging assets).
(9) Invest in companies for the purpose of exercising control or
management.
(10) Invest in securities of other investment companies, except in
connection with a merger of another investment company.
(11) Purchase any securities on margin (however, the Fund's engaging in
"hedging transactions" and the margins required thereon shall not be considered
a violation of this provision).
(12) Purchase or retain securities of any issuer if any officer or Director
of the Fund or the Adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer or if all such officers and Directors together own
more than 5% of the securities of such issuer.
(13) Invest 25% or more of the value of its total assets in a particular
industry at any one time.
(14) Invest more than 5% of the value of its net assets in warrants, with
no more than 2% in warrants not listed on either the New York or American Stock
Exchange.
(15) Purchase or sell portfolio securities from or to the Adviser or any
Director or officer thereof or of the Fund, as principals.
9
<PAGE>
(16) Invest more than 15% of the value of its total assets, at the time of
purchase, in deep discount securities of companies that are financially
troubled, in default or in bankruptcy or reorganization.
(17) Issue senior securities.
(18) Invest any of its assets in interests in oil, gas or other mineral
exploration or development programs, or in puts, calls, straddles or any
combination thereof.
(19) Invest more than 10% of its net assets in when-issued securities at
the time such purchase is made.
The Fund has also filed the following undertakings to comply with
requirements of certain states in which shares of the Fund are sold, which may
be changed without shareholder approval:
(1) In the event the original custodian or any successor custodian resigns
or for any reason cannot or will not continue to serve as custodian and no
successor custodian can be found, the Fund will submit to shareholders for their
approval or disapproval, the matter of possible liquidation of the Fund.
(2) Not withstanding investment restriction (8) above, the Fund will not
invest in real estate limited partnership interests or interests in real estate
investment trusts that are not readily marketable.
The Fund has adopted the following non-fundamental investment restriction
which may be changed without shareholder approval. This investment restriction
provides that the Fund will not:
Purchase any security if, as a result, more than 15% of its net assets
would be invested in illiquid securities, including repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
any securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market. The Directors, or the
Fund's investment adviser acting pursuant to authority delegated by the
Directors, may determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, or any other applicable rule, and therefore that such securities are
not subject to the foregoing limitation.
INCOME FUND. INCOME FUND will not:
- ------------
(1) Borrow money except from banks and only for temporary or emergency
purposes and then in amounts not in excess of 5% of its total assets taken at
cost or value, whichever is the lesser.
(2) Make loans to other persons except that the Board of Directors may, on
the request of broker-dealers or other institutional investors that it deems
qualified, authorize the Fund to lend securities for the purpose of covering
short positions of the borrower, but only when the borrower pledges cash
collateral to the Fund and agrees to maintain such collateral so that it amounts
at all times to at least 100% of the value of the securities. Such security
loans will not be made if as a result the aggregate of such loans exceeds 10% of
the value of the Fund's total assets. The Fund may terminate such loans at any
time and vote the proxies if a material event affecting the investment is about
to occur. The market risk applicable to any security loaned remains a risk of
the Fund. The borrower must add to collateral whenever the market value of the
securities rises above the level of such collateral. The primary objective of
such loaning function is to supplement the Fund's income through investment of
the cash collateral in
10
<PAGE>
short-term interest-bearing obligations. The purchase of a portion of an issue
of publicly distributed debt securities is not considered the making of a loan.
(3) With respect to 75% of the Fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.
(4) Invest more than 5% of the value of its total assets in securities of
issuers, including the operations of predecessors, that have been in business
for less than three years.
(5) Invest 25% or more of the value of its total assets in a particular
industry at one time.
(6) Underwrite securities of other issuers, except to the extent that, in
connection with the disposition of its portfolio investments, it may be deemed
to be an underwriter under Federal securities laws.
(7) Purchase or sell real estate or commodities or commodity contracts.
However, the Fund may purchase interests in real estate investment trusts whose
securities are registered under the 1933 Act and are readily marketable.
(8) Invest in companies for the purpose of exercising control or
management.
(9) Invest in securities of other investment companies, except in
connection with a merger of another investment company.
(10) Purchase any securities on margin or sell any securities short.
(11) Purchase or retain securities of any issuer if any officer or Director
of the Fund or the Adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the securities of
such issuer.
(12) Purchase or sell portfolio securities from or to the Adviser or any
Director or officer thereof or of the Fund, as principals.
(13) Issue senior securities.
The following undertakings, which may be changed without shareholder
approval, have been filed to comply with requirements of certain states in which
shares of the Fund are sold:
(1) Notwithstanding fundamental investment restriction (7) above, the Fund
will not invest in real estate limited partnership interests or in interests in
real estate investment trusts that are not readily marketable.
(2) The Fund will not write, purchase or sell puts, calls, straddles or any
combinations thereof.
(3) In reference to the investment power of the Fund to invest in warrants
and rights in connection with the purchase of securities, the investment in
warrants taken at the lower of cost or market will not exceed 2% of the Fund's
net assets. Warrants initially attached to securities and acquired by the
11
<PAGE>
Fund upon the original issuance thereof shall be deemed for the above 2%
determination to be without value.
(4) In the event the original custodian or any successor custodian resigns
or for any reason cannot or will not continue to serve as custodian and no
successor can be found, the Fund will submit to shareholders for their approval
or disapproval the matter of possible liquidation of the Fund.
(5) Notwithstanding non-fundamental investment restriction (1) below, the
Fund will not invest more than 15% of its total assets in restricted securities,
including Rule 144A securities and unseasoned issuers.
The Fund has adopted the following non-fundamental investment restrictions,
which may be changed without shareholder approval. These investment
restrictions provide that the Fund will not:
(1) Purchase any security if, as a result, more than 15% of its net assets
would be invested in illiquid securities, including repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
any securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market. The Directors, or the
Fund's investment adviser acting pursuant to authority delegated by the
Directors, may determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, or any other applicable rule, and therefore that such securities are
not subject to the foregoing limitation.
(2) Pledge, mortgage or hypothecate any of its assets, except that the Fund
may pledge its assets to secure borrowings made in accordance with fundamental
investment restriction (1) above, provided the Fund maintains asset coverage of
at least 300% for all such borrowings.
DIRECTORS AND OFFICERS
The following table lists the Directors and executive officers of the
Funds, their 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*+, President and Director. Chairman of the Board, Director and
Treasurer, Administrative Data Management Corp. ("ADM"); Chairman of the Board
and Director, FIMCO, Executive Investors Management Company, Inc. ("EIMCO"),
First Investors Corporation ("FIC"), Executive Investors Corporation ("EIC") and
First Investors Consolidated Corporation ("FICC").
JAMES J. COY, Director, 90 Buell Lane, East Hampton, NY 11937. Retired;
formerly Senior Vice President, James Talcott, Inc. (financial institution).
ROGER L. GRAYSON*, Director. Director, FIC and FICC; President and Director,
First Investors Resources, Inc.; Commodities Portfolio Manager.
KATHRYN S. HEAD*+, Director, 10 Woodbridge Center Drive, Woodbridge, NJ 07095.
President, FICC and FIMCO; Vice President, Chief Financial Officer and Director,
FIC and EIC; President and Director, First Financial Savings Bank, S.L.A.;
Chief Financial Officer, ADM.
12
<PAGE>
F. WILLIAM ORTMAN, JR., Director, 50 B Cambridge Circle, Lakehurst, NJ 08723.
Retired; formerly Management Consultant.
REX R. REED, Director, 76 Keats Way, Morristown, NJ 07960. Retired; formerly
Senior Vice President, American Telephone & Telegraph Company.
HERBERT RUBINSTEIN, Director, 145 Elm Drive, Roslyn, NY 11576. Retired;
formerly President, Belvac International Industries, Ltd. and President,
Central Dental Supply.
JOHN T. SULLIVAN*, Director and Chairman of the Board; Director, FIMCO, FIC,
FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.
ROBERT F. WENTWORTH, Director, RR1, Box 2554, Upland Downs Road, Manchester
Center, VT 05255. Retired; formerly, financial and planning executive with
American Telephone & Telegraph Company.
JOSEPH I. BENEDEK, Treasurer, 10 Woodbridge Center Drive, Woodbridge, NJ 07095.
Treasurer, FIC FIMCO, EIMCO and EIC.
GEORGE V. GANTER, Vice President, HIGH YIELD FUND. Vice President, First
Investors Asset Management Company, Inc., First Investors Special Bond Fund,
Inc. and Executive Investors Trust; Portfolio Manager, FIMCO.
NANCY W. JONES, Vice President, INCOME FUND. Vice President, First Investors
Asset Management Company, Inc., First Investors Cash Management Fund, Inc.,
First Investors Tax-Exempt Money Market Fund, Inc. and First Investors Series
Fund; Portfolio Manager, FIMCO.
CONCETTA DURSO, Vice President and Secretary. Vice President, FIMCO, EIMCO and
ADM; Assistant Vice President and Assistant Secretary, FIC.
CAROL LERNER BROWN, Assistant Secretary. Secretary, FIMCO, EIMCO, FIC, EIC and
ADM.
- ----------
* These Directors may be deemed to be "interested persons," as defined in the
1940 Act.
+ Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.
All of the officers and Directors, except for Ms. Jones and Mr. Ganter,
hold identical or similar positions with Executive Investors Trust, First
Investors Cash Management Fund, Inc., First Investors Global Fund, Inc., First
Investors Government Fund, Inc., First Investors Insured Tax Exempt Fund, Inc.,
First Investors Series Fund, First Investors Life Fund Series, First Investors
Multi-State Insured Tax Free Fund, First Investors New York Insured Tax Free
Fund, Inc., First Investors Series Fund II, Inc., First Investors Special Bond
Fund, Inc., First Investors Tax-Exempt Money Market Fund, Inc. and First
Investors U.S. Government Plus Fund. 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 and School Financial
Management Services, Inc.
13
<PAGE>
Compensation to officers and interested Directors of the Funds is paid by
the Adviser and not by the Funds. In addition, compensation to non-interested
Directors of the Funds is currently voluntarily paid by the Adviser.
MANAGEMENT
Investment advisory services to each Fund are provided by First Investors
Management Company, Inc. pursuant to separate Investment Advisory Agreements
(each, an "Advisory Agreement") dated June 13, 1994. Each Advisory Agreement
was approved by the Board of Directors of the applicable Fund, including a
majority of the Directors who are not parties to such Fund's Advisory Agreement
or "interested persons" (as defined in the 1940 Act) of any such party
("Independent Directors"), in person at a meeting called for such purpose and by
a majority of the public shareholders of the applicable Fund.
Pursuant to each Advisory Agreement, FIMCO shall supervise and manage each
Fund's investments, determine each Fund's portfolio transactions and supervise
all aspects of each Fund's operations, subject to review by the applicable
Fund's Directors. Each Advisory Agreement also provides that FIMCO shall
provide the applicable Fund with certain executive, administrative and clerical
personnel, office facilities and supplies, conduct the business and details of
the operation of such Fund and assume certain expenses thereof, other than
obligations or liabilities of such Fund. Each Advisory Agreement may be
terminated at any time without penalty by the applicable Fund's Directors or by
a majority of the outstanding voting securities of such Fund, or by FIMCO, in
each instance on not less than 60 days' written notice, and shall automatically
terminate in the event of its assignment (as defined in the 1940 Act). Each
Advisory Agreement also provides that it will continue in effect, with respect
to the applicable Fund, for a period of over two years only if such continuance
is approved annually either by such Fund's Directors or by a majority of the
outstanding voting securities of such Fund, and, in either case, by a vote of a
majority of such Fund's Independent Directors voting in person at a meeting
called for the purpose of voting on such approval.
Under each Advisory Agreement, the applicable Fund pays the Adviser an
annual fee, paid monthly, according to the following schedules:
HIGH YIELD FUND
Annual
Average Daily Net Assets Rate
- ------------------------ ------
Up to $200 million ..................................... 1.00%
In excess of $200 million up to $500 million ........... 0.75
In excess of $500 million up to $750 million ........... 0.72
In excess of $750 million up to $1.0 billion ........... 0.69
Over $1.0 billion ...................................... 0.66
14
<PAGE>
INCOME FUND
Annual
Average Daily Net Assets Rate
- ------------------------ ------
Up to $250 million ..................................... 0.75%
In excess of $250 million up to $500 million ........... 0.72
In excess of $500 million up to $750 million ........... 0.69
Over $750 million ...................................... 0.66
The SEC staff takes the position that fees of 0.75% or greater are higher than
those paid by most investment companies.
For the fiscal years ended December 31, 1992, 1993 and 1994, HIGH YIELD
FUND paid the Adviser $2,036,540, $1,911,571 and$1,735,499 (net of waiver of
$66,131), respectively, in advisory fees. For the fiscal years ended December
31, 1992, 1993 and 1994, INCOME FUND paid the Adviser $3,167,427, $3,130,066 and
$3,060,320, respectively, in advisory fees.
Pursuant to certain state regulations, the Adviser has agreed to reimburse
a Fund if and to the extent that Fund's aggregate operating and management
expenses, including advisory fees but generally excluding interest, taxes,
brokerage commissions and extraordinary expenses, exceed any limitation on
expenses applicable to that Fund for any full fiscal year (unless a waiver of
such expense limitation is obtained). The amount of any such reimbursement is
limited to the amount of the advisory fees paid or accrued to the Adviser for
the fiscal year. For the fiscal year ended December 31, 1994, no reimbursement
to either Fund was required pursuant to these regulations.
The Adviser has an Investment Committee composed of Denise M. Burns, George
V. Ganter, Margaret Haggerty, Glenn O. Head, Nancy W. Jones, Patricia D. Poitra,
Christopher Brigati, Clark D. Wagner and John Tomasulo. The Committee usually
meets weekly to discuss the composition of the portfolio of each Fund and to
review additions to and deletions from the portfolios.
UNDERWRITER
Each Fund has entered into an Underwriting Agreement ("Underwriting
Agreement") with First Investors Corporation ("Underwriter" or "FIC") which
requires the Underwriter to use its best efforts to sell shares of the Funds.
Pursuant to each Underwriting Agreement, the Underwriter shall bear all fees and
expenses incident to the registration and qualification of the applicable Fund's
shares. In addition, the Underwriter shall bear all expenses of sales material
or literature, including prospectuses and proxy materials, to the extent such
materials are used in connection with the sale of the Fund's shares, unless the
Fund has agreed to bear such costs pursuant to a plan of distribution. See
"Distribution Plans." Each Underwriting Agreement was approved by the
applicable Fund's Board of Directors, including a majority of the Independent
Directors. Each Underwriting Agreement provides that it will continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by the applicable Fund's Board of Directors or by a vote of a
majority of the outstanding voting securities of such Fund, and in either case
by the vote of a majority of such Fund's Independent Directors, voting in person
at a meeting called for the purpose of voting on such approval. Each
Underwriting Agreement will terminate automatically in the event of its
assignment.
15
<PAGE>
For the fiscal years ended December 31, 1992, 1993 and 1994, FIC received
or accrued underwriting commissions with respect to HIGH YIELD FUND of $19,296,
$64,157 and $171,682, respectively. For the same periods, FIC reallowed an
additional $592, $1,382 and $3,102, respectively, to unaffiliated dealers. For
the fiscal years ended December 31, 1992, 1993 and 1994, FIC received
underwriting commissions with respect to INCOME FUND of $28,455, $236,878 and
$413,039, respectively. For the same periods, FIC reallowed an additional
$4,757, $100,618 and $28,996, respectively, to unaffiliated dealers.
DISTRIBUTION PLANS
As stated in the Funds' Prospectus, pursuant to a separate plan of
distribution for each class of shares adopted by each Fund pursuant to Rule 12b-
1 under the 1940 Act ("Class A Plan" and "Class B Plan" and, collectively,
"Plans"), each Fund may reimburse or compensate, as applicable, the Underwriter
for certain expenses incurred in the distribution of that Fund's shares and the
servicing or maintenance of existing Fund shareholder accounts.
Each Plan was approved by the applicable Fund's Board of Directors,
including a majority of the Independent Directors, and by a majority of the
outstanding voting securities of the relevant class of such Fund. Each Plan
will continue in effect from year to year as long as its continuance is approved
annually be either the applicable Fund's Board of Directors or by a vote of a
majority of the outstanding voting securities of the relevant class of shares of
such Fund. In either case, to continue, each Plan must be approved by the vote
of a majority of the Independent Directors of the applicable Fund. Each Fund's
Board reviews quarterly and annually a written report provided by the Treasurer
of the amounts expended under the applicable Plan and the purposes for which
such expenditures were made. While each Plan is in effect, the selection and
nomination of the applicable Fund's Independent Directors will be committed to
the discretion of such Independent Directors then in office.
Each Plan can be terminated at any time by a vote of a majority of the
applicable Fund's Independent Directors or by a vote of a majority of the
outstanding voting securities of the relevant class of shares of such Fund. Any
change to the Class B Plan that would materially increase the costs to that
class of shares of a Fund or any material change to the Class A Plan may not be
instituted without the approval of the outstanding voting securities of the
relevant class of shares of such Fund. Such changes also require approval by a
majority of the applicable Fund's Independent Directors.
In reporting amounts expended under the Plans to the Directors, FIMCO will
allocate expenses attributable to the sale of each class of a Fund's shares to
such class based on the ratio of sales of such class to the sales of both
classes of shares. The fees paid by one class of a Fund's shares will not be
used to subsidize the sale of any other class of the Fund's shares.
In approving each Fund's overall system of distribution, that Fund's Board
of Directors considered several factors, including that implementation of the
system would (1) enable investors to choose the purchasing option better suited
to their individual situation, thereby encouraging current shareholders to make
additional investments in a Fund and attracting new investors and assets to that
Fund to the benefit of the Fund and its shareholders; (2) facilitate
distribution of each Fund's shares; and (3) maintain the competitive position of
each Fund in relation to other funds that have implemented or are seeking to
implement similar distribution arrangements.
16
<PAGE>
In adopting the Class B Plan for each Fund, the applicable Fund's Board of
Directors considered all the features of the distribution system, including (1)
the conditions under which a contingent deferred sales charge ("CDSC") would be
imposed and the amount of such charge, (2) the advantage to investors in having
no initial sales charges deducted from a Fund's purchase payments and instead
having the entire amount of their purchase payments immediately invested in Fund
shares, (3) the Underwriter's belief that the ability to receive sales
commissions and service fees under the Class B Plan would prove attractive to
Representatives, resulting in greater growth of each Fund than might otherwise
be the case, (4) the advantages to the shareholders of a Fund of economies of
scale resulting from growth in such Fund's assets, and (5) the Underwriter's
shareholder service and distribution-related expenses and costs.
In adopting the Class A Plan for each Fund, the applicable Fund's Board of
Directors considered all relevant information and determined that there is a
reasonable likelihood that the Class A Plan will benefit such Fund and its
shareholders. The Board of each Fund believes that the amounts spent pursuant
to that Fund's Class A Plan have assisted the relevant 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 that Fund.
For the fiscal year ended December 31, 1994, HIGH YIELD FUND and INCOME
FUND paid $294,283 and $676,231, respectively, pursuant to their respective
Class A Plan. For the same period, the Underwriter incurred the following Class
A Plan-related expenses with respect to each Fund:
<TABLE>
<CAPTION>
HIGH YIELD INCOME
FUND FUND
---------- --------
<S> <C> <C>
Advertising $ 0 $ 0
Payments to Sales $ 82,113 $181,641
Personnel*
Expenses of the $212,150 $494,590
Underwriter**
</TABLE>
* Represents service fees
**Represents distribution fees
DETERMINATION OF NET ASSET VALUE
Except as provided herein, a security listed or traded on an exchange or the
Nasdaq national market system is valued at its last sale price on the exchange
or market system where the security is primarily traded, and lacking any sales
on a particular day, the security is valued at the mean between the closing bid
and asked prices on that day. Each security traded in the market (including
securities listed on exchanges whose primary market is believed to be OTC) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by a market maker for such securities. The U.S. Government securities
in which the Funds invest are traded primarily in the OTC markets. In the
absence of market quotations, a Fund will determine the value of bonds based
upon quotes furnished by market makers, if available, or in accordance with the
procedures described herein. In that connection, the Boards of Directors have
determined that a Fund may use an outside pricing service. The pricing service
uses quotations obtained from investment dealers or brokers for the particular
securities being evaluated, information with respect to market transactions in
comparable securities and other available information
17
<PAGE>
in determining value. This service is furnished by Interactive Data
Corporation. Short-term debt securities that mature in 60 days or less are
valued at amortized cost if their original term to maturity from the date of
purchase was 60 days or less, or by amortizing their value on the 61st day prior
to maturity if their term to maturity from the date of purchase exceeded 60
days, unless the Board of Directors determines that such valuation does not
represent fair value. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of a Fund's officers in a manner specifically authorized by the Board
of Directors of that Fund.
"When-issued securities" are reflected in the assets of the Fund as of the
date the securities are purchased. Such investments are valued thereafter at
the mean between the most recent bid and asked prices obtained from recognized
dealers in such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are converted into U.S. dollar equivalents
using the foreign exchange equivalents in effect.
Each Fund's Board of Directors may suspend the determination of a Fund's net
asset value per share separately for each class of shares for the whole or any
part of any period (1) during which trading on the New York Stock Exchange
("NYSE") is restricted as determined by the SEC or the NYSE is closed for other
than weekend and holiday closings, (2) during which an emergency, as defined by
rules of the SEC in respect to the U.S. market, exists as a result of which
disposal by a Fund of securities owned by it is not reasonably practicable for
the Fund fairly to determine the value of its net assets, or (3) for such other
period as the SEC has by order permitted.
ALLOCATION OF PORTFOLIO BROKERAGE
Purchases and sales of portfolio securities by a Fund may be principal
transactions. In principal transactions, portfolio securities are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. There will usually be no brokerage commissions paid by a Fund
for such purchases. Purchases from underwriters will include the underwriter's
commission or concession and purchases from dealers serving as market makers
will include the spread between the bid and asked price.
Each Fund may deal in securities which are not listed on a national
securities exchange or the Nasdaq national market system but are traded in the
OTC market. Each Fund also may purchase listed securities through the "third
market." When transactions are executed in the OTC market, each Fund seeks to
deal with the primary market makers, but when advantageous it utilizes the
services of brokers.
In effecting portfolio transactions, the Adviser seeks best execution of
trades either (1) at the most favorable and competitive rate of commission
charged by any broker or member of an exchange, or (2) with respect to agency
transactions, at a higher rate of commission if reasonable in relation to
brokerage and research services provided to a Fund or the Adviser by such member
or broker. Such services may include, but are not limited to, any one or more
of the following: information as to the availability of securities for purchase
or sale and statistical or factual information or opinions pertaining to
investments. The Adviser may use research and services provided to it by
brokers in servicing all the funds in the First Investors Group of Funds;
however, not all such services may be used by the Adviser in connection with a
Fund. No portfolio orders are placed with an affiliated broker, nor does any
affiliated broker-dealer participate in these commissions.
The Adviser may combine transaction orders placed on behalf of a Fund and any
other Fund in the First Investors Group of Funds, any series of Executive
Investors Trust and First Investors Life
18
<PAGE>
Insurance Company, affiliates of the Funds, for the purpose of negotiating
brokerage commissions or obtaining a more favorable transaction price; and where
appropriate, securities purchased or sold may be allocated, in terms of price
and amount, to a Fund according to the proportion that the size of the
transaction order actually placed by a Fund bears to the aggregate size of the
transaction orders simultaneously made by other participants in the transaction.
For the fiscal year ended December 31, 1992, HIGH YIELD FUND paid $9,112 in
brokerage commissions. Of that amount, $8,562 was paid in brokerage commissions
to brokers who furnished research services on portfolio transactions in the
amount of $2,146,182. For the fiscal year ended December 31, 1993, HIGH YIELD
FUND paid $30,860 in brokerage commissions. Of that amount, $22,306 was paid in
brokerage commissions to brokers who furnished research services on portfolio
transactions in the amount of $5,651,721. For the fiscal year ended December
31, 1992, INCOME FUND paid $54,979 in brokerage commissions. Of that amount,
$47,789 was paid in brokerage commissions to brokers who furnished research
services on portfolio transactions in the amount of $1,856,812. For the fiscal
year ended December 31, 1993, INCOME FUND paid $29,024 in brokerage commissions.
Of that amount $15,520 was paid in brokerage commissions to brokers who
furnished research services on portfolio transactions in the amount of
$1,957,960. For the fiscal year ended December 31, 1994, HIGH YIELD FUND paid
$2,312 in brokerage commissions. Of that amount $2,187 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $264,375. For the fiscal year ended December 31, 1994, INCOME
FUND did not pay brokerage commissions.
REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND
REDEMPTION INFORMATION AND OTHER SERVICES
ELIGIBLE FUNDS. Shares of all the funds and/or series in the First Investors
--------------
family of funds, except as noted below, are eligible to participate in certain
shareholder privileges noted in this SAI and the Prospectus (singularly,
"Eligible Fund" and, collectively, "Eligible Funds"). Shares of First Investors
Special Bond Fund, Inc., First Investors Life Series Fund and First Investors
U.S. Government Plus Fund are not deemed to be Eligible Funds. Shares of the
Money Market Funds, unless otherwise noted, are not deemed to be Eligible Funds.
Class A shares of each series of Executive Investors Trust are deemed to be
Eligible Funds if such shares have either (a) been acquired through an exchange
from an Eligible Fund which imposes a maximum sales charge of 6.25%, or (b) been
held for at least one year from their date of purchase.
REDUCED SALES CHARGES--CLASS A SHARES
Reduced sales charges are applicable to purchases made at one time of Class A
shares of any one or more of the Funds or of any one or more of the Eligible
Funds by "any person," which term shall include an individual, or an individual,
his or her spouse and children under the age of 21, or a trustee or other
fiduciary of a single trust, estate or fiduciary account (including a pension,
profit-sharing or other employee benefit trust created pursuant to a plan
qualified under section 401 of the Internal Revenue Code of 1986, as amended
(the "Code")), although more than one beneficiary is involved; provided,
however, that the term "any person" shall not include a group of individuals
whose funds are combined, directly or indirectly, for the purchase of redeemable
securities of a registered investment company, nor shall it include a trustee,
agent, custodian or other representative of such a group of individuals.
Ownership of Class A and Class B shares of any Eligible Fund, except as noted
below, qualify for a reduced sales charge on the purchase of Class A shares.
Class A shares purchased at net asset value,
19
<PAGE>
Class A shares of the Money Market Funds, or shares owned under a Contractual
Plan are not eligible for the purchase of Class A shares of a Fund at a reduced
sales charge through a Letter of Intent or the Cumulative Purchase Privilege.
LETTER OF INTENT. Any of the eligible persons described above may, within 90
----------------
days of their investment, sign a statement of intent ("Letter of Intent") in the
form provided by the Underwriter, covering purchases of Class A shares of any
one or more of the Funds and of the other Eligible Funds to be made within a
period of thirteen months, provided said shares are currently being offered to
the general public and only in those states where such shares may be legally
sold, and thereby become eligible for the reduced sales charge applicable to the
total amount purchased. A Letter of Intent filed after the date of investment
is considered retroactive to the date of investment for determination of the
thirteen-month period. The Letter of Intent is not a binding obligation on
either the investor or the Funds. During the term of a Letter of Intent,
Administrative Data Management Corp. ("Transfer Agent") will hold Class A shares
representing 5% of each purchase in escrow, which shares will be released upon
completion of the intended investment.
Purchases of Class A Shares made under a Letter of Intent are made at the
sales charge applicable to the purchase of the aggregate amount of shares
covered by the Letter of Intent as if they were purchased in a single
transaction. The applicable quantity discount will be based on the sum of the
then current value at public offering price (i.e., net asset value plus
----
applicable sales charge) of all Class A shares and the net asset value of all
Class B shares of a Fund and of the other Eligible Funds, including Class B
shares of the Money Market Funds, currently owned, together with the aggregate
offering price of purchases to be made under the Letter of Intent. If all such
shares are not so purchased, a price adjustment is made, depending upon the
actual amount invested within such period, by the redemption of sufficient Class
A shares held in escrow in the name of the investor (or by the investor paying
the commission differential). A Letter of Intent can be amended (1) during the
thirteen-month period if the purchaser files an amended Letter of Intent with
the same expiration date as the original Letter of Intent, or (2) automatically
after the end of the period, if total purchases credited to the Letter of Intent
qualify for an additional reduction in the sales charge. The Letter of Intent
privilege may be modified or terminated at any time by the Underwriter.
CUMULATIVE PURCHASE PRIVILEGE. Upon written notice to FIC, Class A shares of
-----------------------------
a Fund are also available at a quantity discount on new purchases if the then
current value at the current public offering price (i.e., net asset value plus
----
applicable sales charge) of all Class A shares and the net asset value of all
Class B shares of a Fund and of the other Eligible Funds, including Class B
shares of the Money Market Funds, previously purchased and then owned, plus the
value of Class A shares being purchased at the current public offering price,
amount to $25,000 or more. Such quantity discounts may be modified or
terminated at any time by the Underwriter.
SYSTEMATIC WITHDRAWAL PLAN--CLASS A SHARES. Shareholders who own Class A
------------------------------------------
shares of a Fund with a net asset value of at least $5,000 may establish a
Systematic Withdrawal Plan ("Withdrawal Plan") and either (a) receive monthly,
quarterly, semi-annual or annual checks for any designated amount (minimum $25);
or (b) automatically reinvest the proceeds at net asset value in the same class
of shares in any other Eligible Fund, including the Money Market Funds.
Dividends and other distributions, if any, are reinvested in additional Class A
shares of the Fund. Shareholders may add shares to the Withdrawal Plan or
terminate the Withdrawal Plan at any time. Withdrawal Plan payments will be
suspended when a distributing Fund has received notice of a shareholder's death
on an individual account. Payments may recommence upon receipt of written
alternate payment instructions and other necessary documents from the deceased's
legal representative. Withdrawal payments will also be suspended when a payment
check
20
<PAGE>
is returned to the Transfer Agent marked as undeliverable by the U.S. Postal
Service after two consecutive mailings.
The withdrawal payments derived from the redemption of sufficient shares in
the account to meet designated payments in excess of dividends and other
distributions may deplete or possibly extinguish the initial investment,
particularly in the event of a market decline, and may result in a capital gain
or loss depending on the shareholder's cost. Purchases of additional shares of
a Fund concurrent with withdrawals are ordinarily disadvantageous to
shareholders because of tax liabilities and sales charges.
CONVERSION OF CLASS B SHARES. Class B Shares of a Fund will automatically
----------------------------
convert to Class A shares of that Fund, based on the relative net asset values
per share of the two classes, as of the close of business on the first business
day of the month in which the eighth anniversary of the initial purchase of such
Class B shares occurs. For these purposes, the date of initial purchase shall
mean (1) the first business day of the month in which such Class B shares were
issued, or (2) for Class B shares obtained through an exchange or a series of
exchanges, the first business day of the month in which the original Class B
shares were issued. For conversion purposes, Class B shares purchased through
the reinvestment of dividends and other distributions paid in respect of Class B
shares will be held in a separate sub-account. Each time any Class B shares in
the shareholder's regular account (other than those in the sub-account) convert
to Class A shares, a pro rata portion of the Class B shares in the sub-account
also will convert to Class A shares. The portion will be determined by the
ratio that the shareholder's Class B shares converting to Class A shares bears
to the shareholder's total Class B shares not acquired through dividends and
other distributions.
The availability of the conversion feature is subject to the continuing
applicability of a ruling of the Internal Revenue Service ("IRS"), or an opinion
of counsel, that: (1) the dividends and other distributions paid on Class A and
Class B shares will not result in "preferential dividends" under the Code; and
(2) the conversion of shares does not constitute a taxable event. If the
conversion feature ceased to be available, the Class B shares of the Funds would
not be converted and would continue to be subject to the higher ongoing expenses
of the Class B shares beyond eight years from the date of purchase. FIMCO has no
reason to believe that these conditions for the availability of the conversion
feature will not continue to be met.
If a Fund implements any amendments to its Class A Plan that would increase
materially the costs that may be borne under such Plan by Class A shareholders,
Class B shares will stop converting into Class A shares unless a majority of
Class B shareholders, voting separately as a class, approve the proposal.
WAIVERS OF CDSC ON CLASS B SHARES. The CDSC imposed on Class B shares does
---------------------------------
not apply to: (a) any redemption pursuant to the tax-free return of an excess
contribution to an IRA or other qualified retirement plan if the Fund is
notified at the time of such request; (b) any redemption of a lump-sum or other
distribution from qualified retirement plans or accounts provided the
shareholder has attained the minimum age of 70 1/2 years and has held the Class
B shares for a minimum period of three years; (c) any redemption by advisory
accounts managed by the Adviser or any of its affiliates or for shares held by
the Adviser or any of its affiliates; (d) any redemption by a tax-exempt
employee benefit plan if continuance of the investment would be improper under
applicable laws or regulations; and (e) any redemption or transfer of ownership
of Class B shares following the death or disability, as defined in Section
72(m)(7) of the Code, of a shareholder if the Fund is provided with proof of
death or disability and with all documents required by the Transfer Agent within
one year after the death or disability. For more information on what specific
documents are required, call Shareholder Services at 1-800-423-4026.
21
<PAGE>
TELEPHONE TRANSACTIONS. As stated in the Funds' Prospectus, the Funds, the
----------------------
Underwriter and their affiliates will not be liable for any loss, damage, cost
or expense arising out of any instruction (or any interpretation of such
instruction) received by telephone which they reasonably believe to be
authentic. In acting upon telephone instructions, these parties use procedures
which are reasonably designed to ensure that such instructions are genuine, such
as (1) obtaining some or all of the following information: account number;
name(s) and social security number registered to the account; and personal
identification; (2) recording all telephone transactions; and (3) sending
written confirmation of each transaction to the registered owner.
RETIREMENT PLANS
PROFIT-SHARING/MONEY PURCHASE PENSION PLANS. FIC offers prototype Profit-
-------------------------------------------
Sharing, Money Purchase Pension and 401(k) Retirement Plans ("Retirement Plans")
approved by the IRS for corporations, sole proprietorships and partnerships.
The Custodial Agreement for the above captioned Money Purchase Pension and
Profit Sharing Plan provides that First Financial Savings Bank, S.L.A. ("First
Financial Savings"), an affiliate of FIC, will furnish all required custodial
services.
FIC offers additional versions of prototype qualified retirement plans for
eligible employers, including 401(k), money purchase, profit sharing and target
benefit plans.
Currently, there are no annual service fees chargeable to participants in
connection with a Retirement Plan account. Participants are, however, charged
$5.00 for opening a Retirement Plan account, other than a 401(k) Retirement Plan
account. Each Fund currently pays the annual $10.00 custodian fee for each
Retirement Plan account, if applicable, maintained with such Fund. This policy
may be changed at any time by a Fund on 45 days' written notice. First
Financial Savings has reserved the right to waive its fees at any time or to
change the fees on 45 days' prior written notice.
The Retirement Plan documents contain further specific information about the
Retirement Plans and may be obtained from your First Investors Representative.
Prior to establishing a Retirement Plan, you are advised to consult with your
legal and tax advisers.
INDIVIDUAL RETIREMENT ACCOUNTS. A qualified individual may purchase shares
------------------------------
of a Fund through an individual retirement account ("IRA") or, as an employee of
a qualified employer, through a Simplified Employee Pension-IRA ("SEP-IRA") or a
Salary Reduction Simplified Employee Pension-IRA ("SARSEP-IRA") furnished by
FIC. Under the related Custodial Agreements, First Financial Savings acts as
custodian of each of these retirement plans.
A taxpayer generally may make an annual IRA contribution no greater than the
lesser of: (a) 100% of his or her compensation, or (b) $2,000 (or $2,250 when
also contributing to a spousal IRA). However, contributions are deductible only
under certain conditions. The requirements as to SEP-IRAs and SARSEP-IRAs are
described in IRS Form 5305-SEP and 5305A-SEP, respectively, which is provided to
employers. Employers are required to provide copies of Forms 5305-SEP and
5305A-SEP to their eligible employees. A disclosure statement setting forth
complete details of the IRA is given to each participant before the contribution
is invested.
Currently, there are no annual service fees chargeable to a participant in
connection with an IRA, SEP-IRA or SARSEP-IRA. Each Fund currently pays the
annual $10.00 custodian fee for each IRA account maintained with such Fund.
This policy may be changed at any time by a Fund on 45 days' written notice to
the holder of any IRA, SEP-IRA or SARSEP-IRA. First Financial Savings has
reserved
22
<PAGE>
the right to waive its fees at any time or to change the fees on 45 days' prior
written notice to the holder of any IRA.
An application and other documents necessary to establish an IRA, SEP-IRA or
SARSEP-IRA, are available from your Representative. Prior to establishing an
IRA, SEP-IRA or SARSEP-IRA, you are advised to consult with your legal and tax
advisers.
RETIREMENT BENEFIT PLANS FOR EMPLOYEES OF ELIGIBLE ORGANIZATIONS. FIC makes
----------------------------------------------------------------
available model custodial accounts under Section 403(b)(7) of the Code
("Custodial Accounts") to provide retirement benefits for employees of certain
eligible public educational institutions and other eligible non-profit
charitable, religious and humane organizations. The Custodial Accounts are
designed to permit contributions (up to a "maximum exclusion allowance") by
employees through salary reduction. First Financial Savings acts as custodian
of these accounts.
Contributions may be made to a Custodial Account under the Optional
Retirement Program for Employees of Texas Institutions of Higher Education
("ORP"), either by salary reduction agreement or otherwise, in accordance with
the terms and conditions of the ORP, and under the Texas Deferred Compensation
Plan Program for eligible state employees by salary reduction agreement.
Currently, there are no annual service fees chargeable to participants in
connection with a Custodial Account. Each Fund currently pays the annual $10.00
custodian fee for each Custodial Account maintained with such Fund. This policy
may be changed at any time by a Fund on 45 days' written notice to a Custodial
Account participant. First Financial Savings has reserved the right to waive
its fees at any time or to change the fees on 45 days' prior written notice to a
Custodial Account participant.
An application and other documents necessary to establish a Custodial Account
are available from your First Investors Representative. Persons desiring to
create a Custodial Account are advised to confer with their legal and tax
advisers concerning the specifics of this type of retirement benefit plan.
Mandatory income tax withholding, at the rate of 20%, may be required for
Federal income tax purposes on "eligible rollover" distributions made from any
of the foregoing retirement plans (other than IRAs, including SEP-IRAs and
SARSEP-IRAs). If the recipient elects to directly transfer an eligible rollover
distribution to an "eligible retirement plan" that permits acceptance of such
distributions, no withholding will apply. For distributions that are not
"eligible rollover" distributions, the recipient can elect, in writing, not to
require any withholding. This election must be submitted immediately before, or
must accompany, the distribution request. The amount, if any, of any such
optional withholding depends on the amount and type of the distribution.
Appropriate election forms are available from the Custodian or Shareholder
Services. Other types of withholding nonetheless may apply.
DISTRIBUTION FEES. A participant/shareholder's account under any of the
-----------------
foregoing retirement plans (including IRAs) may be charged a distribution fee
(at the time of withdrawal) of $7.00 for a single distribution of the entire
account and $1.00 for each periodic distribution therefrom.
TAXES
In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Code, each Fund must distribute to its shareholders
for each taxable year at least 90% of its investment company taxable income
(consisting generally of net investment income, net short-term capital gain and
23
<PAGE>
net gains from certain foreign currency transactions) ("Distribution
Requirement") and must meet several additional requirements. For each Fund
these requirements include the following: (1) the Fund must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from futures
contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, or any of the following, that were held for less than three months -
- - futures contracts or foreign currencies that are not directly related to the
Fund's principal business of investing in securities (or futures with respect
thereto) ("Short-Short Limitation"); (3) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs and other securities, with those other securities limited, in respect
of any one issuer, to an amount that does not exceed 5% of the value of the
Fund's total assets and that does not represent more than 10% of the issuer's
outstanding voting securities; and (4) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities (other than U.S. Government securities or the securities
of other RICs) of any one issuer.
Dividends and other distributions declared by a Fund in October, November or
December of any year and payable to shareholders of record on a date in any of
those months are deemed to have 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. Although each Fund is authorized to
hold equity securities, it is expected that any dividend income received by
either Fund will be minimal; accordingly, very little, if any, of the
distributions made by the Funds will be eligible for the dividends-received
deduction.
If shares of a Fund are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
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 a Fund may be subject to income,
withholding or other taxes imposed by foreign countries that would reduce the
yield on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.
Each Fund may acquire zero coupon securities issued with original issue
discount. As a holder of those securities, each Fund must include in its income
the original issue discount that accrues on the securities for the taxable year,
even if it receives no corresponding payment on the securities during the year.
Similarly, each Fund must include in its gross income securities it receives as
"interest" on pay-in-
24
<PAGE>
kind securities. Because each Fund annually must distribute substantially all of
its investment company taxable income, including any original issue discount, in
order to satisfy the Distribution Requirement and avoid imposition of the Excise
Tax, either Fund may be required in a particular year to distribute as a
dividend an amount that is greater than the total amount of cash it actually
receives. Those distributions will be made from a Fund's cash assets or from the
proceeds of sales of portfolio securities, if necessary. Each Fund may realize
capital gains or losses from those sales, which would increase or decrease its
investment company taxable income and/or net capital gain. In addition, any such
gains may be realized on the disposition of securities held for less than three
months. Because of the Short-Short Limitation, any such gains would reduce a
Fund's ability to sell other securities or futures contracts held for less than
three months that it might wish to sell in the ordinary course of its portfolio
management.
The use of hedging strategies, such as selling and purchasing futures
contracts, involves complex rules that will determine for income tax purposes
the character and timing of recognition of the gains and losses HIGH YIELD FUND
realizes in connection therewith. Income from foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and income
from transactions in futures contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
Fund's disposition of futures contracts will be subject to the Short-Short
Limitation if they are held for less than three months. Income from a Fund's
disposition of foreign currencies that are not directly related to its principal
business of investing in securities (or futures with respect thereto) also will
be subject to the Short-Short Limitation if they are held for less than three
months.
If HIGH YIELD FUND satisfies certain requirements, then any increase in value
of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging position
during the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that
limitation. The Fund intends that, when it engages in hedging strategies, it
will qualify for this treatment, but at the present time it is not clear whether
this treatment will be available for all of the Fund's hedging transactions. To
the extent this treatment is not available, the Fund may be forced to defer the
closing out of certain futures contracts beyond the time when it otherwise would
be advantageous to do so, in order for the Fund to continue to qualify as a RIC.
PERFORMANCE INFORMATION
A Fund may advertise its performance in various ways.
Each Fund's "average annual total return" ("T") is an average annual
compounded rate of return. The calculation produces an average annual total
return for the number of years measured. It is the rate of return based on
factors which include a hypothetical initial investment of $1,000 ("P" in the
formula below) over a number of years ("n") with an Ending Redeemable Value
("ERV") of that investment, according to the following formula:
T=[(ERV/P) to the 1/nth power]-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
25
<PAGE>
Total return is calculated by finding the average annual change in the value
of an initial $1,000 investment over the period. In calculating the ending
redeemable value for Class A shares, each Fund will deduct the maximum sales
charge of 6.25% (as a percentage of the offering price) from the initial $1,000
payment and, for Class B shares, the applicable CDSC imposed on a redemption of
Class B shares held for the period is deducted. All dividends and other
distributions are assumed to have been reinvested at net asset value on the
initial investment ("P").
Return information may be useful to investors in reviewing a Fund's
performance. However, certain factors should be taken into account before using
this information as a basis for comparison with alternative investments. No
adjustment is made for taxes payable on distributions. Return will fluctuate
over time and return for any given past period is not an indication or
representation by a Fund of future rates of return on its shares. At times, the
Adviser may reduce its compensation or assume expenses of a Fund in order to
reduce the Fund's expenses. Any such waiver or reimbursement would increase the
Fund's return during the period of the waiver or reimbursement. The average
annual total return for the Funds' Class A shares/*/ for periods ended December
31, 1994 are as follows:/**/
<TABLE>
<CAPTION>
HIGH YIELD FUND/***/ INCOME FUND
-------------------- -----------
<S> <C> <C>
One Year (5.83)% 0.57%
Five Years 8.04 8.95
Ten Years N/A 7.83
Life of Fund/****/ 5.32 N/A
</TABLE>
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 computed at net asset
value for the periods ended December 31, 1994 for each Series' Class A shares/*/
is set forth in the table below:
<TABLE>
<CAPTION>
HIGH YIELD FUND/***/ INCOME FUND
-------------------- -----------
<S> <C> <C>
One Year 0.39% 0.58%
Five Years 9.44 10.38
Ten Years N/A 8.53
Life of Fund/****/ 6.12 N/A
</TABLE>
- -----------
/*/ Performance for Class B shares is not quoted because Class B shares were
not offered for sale during these periods.
/**/ The total return figures assume the maximum sales charge of 6.25% and
dividends reinvested at net asset value. Prior to July 1, 1993, each
Fund's maximum sales charge was 6.90% and prior to December 29, 1989, the
maximum sales charge was 7.25% for HIGH YIELD FUND and 8.50% for INCOME
FUND. Prior to December 18, 1990, HIGH YIELD FUND's dividends were paid
in additional shares at the public offering price. The total return
figures do not reflect the prior sales charges or the payment of
dividends in additional shares at the public offering price.
/***/ Certain fees and expenses of the HIGH YIELD FUND were waived or
reimbursed from commencement of operations through December 31, 1994.
Accordingly, the Fund's total return figures are higher than they would
have been had such expenses not been waived or reimbursed.
/****/ HIGH YIELD FUND commenced operations August 12, 1986.
26
<PAGE>
Yield is presented for a specified thirty-day period ("base period").
Yield is based on the amount determined by (i) calculating the aggregate amount
of dividends and interest earned by a Fund during the base period less expenses
accrued for that period (net of reimbursement), and (ii) dividing that amount by
the product of (A) the average daily number of shares of the Fund outstanding
during the base period and entitled to receive dividends and (B) the per share
maximum public offering price for Class A shares or the net asset value for
Class B shares of the Fund on the last day of the base period. The result is
annualized by compounding on a semi-annual basis to determine the Fund's yield.
For this calculation, interest earned on debt obligations held by the Fund is
generally calculated using the yield to maturity (or first expected call date)
of such obligations based on their market values (or, in the case of
receivables-backed securities such as GNMA Certificates, based on cost).
Dividends on equity securities are accrued daily at their estimated stated
dividend rates.
For the thirty days ended December 31, 1994, the yield for Class A
shares of each of HIGH YIELD FUND and INCOME FUND was 9.27%. The yield for
Class B shares is not quoted because Class B shares were not offered for sale
during this period. Certain fees of HIGH YIELD FUND were waived during this
period. Accordingly, the yield quoted is higher than it would have been had
such expenses not been waived.
The distribution rate for each Fund is presented for a twelve-month
period. It is calculated by adding the dividends for the last twelve months and
dividing the sum by that Fund's offering price per share at the end of that
period. The distribution rate is also calculated by using the Funds' net asset
value. Distribution rate calculations do not include capital gain distributions,
if any, paid. The distribution rate for the twelve-month period ended December
31, 1994 for Class A shares of INCOME FUND and HIGH YIELD FUND calculated using
the offering price was 9.38% and 9.30%, respectively. The distribution rate
for the same period for Class A shares of INCOME FUND and HIGH YIELD FUND
calculated using the net asset value was 10.00% and 9.92%, respectively. During
this period certain expenses of HIGH YIELD FUND were waived or reimbursed.
Accordingly, the distribution rates are higher than they would have been had
such expenses not been waived or reimbursed. The distribution rate for Class B
shares is not quoted because Class B shares were not offered for sale during
this period.
Each Fund may include in advertisements and sales literature,
information, examples and statistics to illustrate the effect of compounding
income at a fixed rate of return to demonstrate the growth of an investment over
a stated period of time resulting from the payment of dividends and capital gain
distributions in additional shares. These examples may also include
hypothetical returns comparing taxable versus tax-deferred growth which would
pertain to an IRA, section 403(b)(7) Custodial Account or other qualified
retirement program. The examples used will be for illustrative purposes only
and are not representations by the Fund of past or future yield or return.
From time to time, in reports and promotional literature, each Fund
may compare its performance to, or cite the historical performance of, Overnight
Government repurchase agreements, U.S. Treasury bills, notes and bonds,
certificates of deposit, and six-month money market certificates or indices of
broad groups of unmanaged securities considered to be representative of, or
similar to, that Fund's portfolio holdings, such as:
Lipper Analytical Services, Inc. ("Lipper") is a widely-recognized
independent service that monitors and ranks the performance of
regulated investment companies. The Lipper performance analysis
includes the reinvestment of capital gain distributions and income
dividends but does not take sales charges into consideration. The
method of calculating total return data on indices utilizes actual
dividends on ex-dividend dates accumulated for the quarter and
reinvested at quarter
27
<PAGE>
end. This calculation is at variance with SEC release 327 of August 8, 1972,
which utilizes latest 12 month dividends. The latter method is the one used by
S&P.
Morningstar Mutual Funds ("Morningstar"), a semi-monthly publication of
Morningstar, Inc. Morningstar proprietary ratings reflect historical risk-
adjusted performance and are subject to change every month. Funds with at least
three years of performance history are assigned ratings from one star (lowest)
to five stars (highest). Morningstar ratings are calculated from the funds'
three-, five-, and ten-year average annual returns (when available) and a risk
factor that reflects fund performance relative to three-month Treasury bill
monthly returns. Fund's returns are adjusted for fees and sales loads. Ten
percent of the funds in an investment category receive five stars, 22.5% receive
four stars, 35% receive three stars, 22.5% receive two stars, and the bottom 10%
receive one star.
Salomon Brothers Inc., "Market Performance," a monthly publication which tracks
principal return, total return and yield on the Salomon Brothers Broad
Investment-Grade Bond Index and the components of the Index.
Telerate Systems, Inc., a computer system to which the Adviser subscribes which
daily tracks the rates on money market instruments, public corporate debt
obligations and public obligations of the U.S. Treasury and agencies of the U.S.
Government.
The Wall Street Journal, a daily newspaper publication which lists the yields
and current market values on money market instruments, public corporate debt
obligations, public obligations of the U.S. Treasury and agencies of the U.S.
Government as well as common stocks, preferred stocks, convertible preferred
stocks, options and commodities; in addition to indices prepared by the research
departments of such financial organizations as Lehman Bros., Merrill Lynch,
Pierce, Fenner and Smith, Inc., First Boston, Salomon Brothers, Morgan Stanley,
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette, Value Line, Datastream
International, James Capel, S.G. Warburg Securities, County Natwest and UBS UK
Limited, including information provided by the Federal Reserve Board, Moody's,
and the Federal Reserve Bank.
Merrill Lynch, Pierce, Fenner & Smith, Inc., "Taxable Bond Indices," a monthly
corporate government index publication which lists principal, coupon and total
return on over 100 different taxable bond indices which Merrill Lynch tracks.
They also list the par weighted characteristics of each Index.
Lehman Brothers, Inc., "The Bond Market Report," a monthly publication which
tracks principal, coupon and total return on the Lehman Govt./Corp. Index and
Lehman Aggregate Bond Index, as well as all the components of these Indices.
Standard & Poor's 500 Composite Stock Price Index and the Dow Jones Industrial
Average of 30 stocks are unmanaged lists of common stocks frequently used as
general measures of stock market performance. Their performance figures reflect
changes of market prices and quarterly reinvestment of all distributions but are
not adjusted for commissions or other costs.
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a
commonly used measure of inflation. The Index shows changes in the cost of
selected consumer goods and does not represent a return on an investment
vehicle.
28
<PAGE>
The NYSE composite of component indices--unmanaged indices of all
industrial, utilities, transportation, and finance stocks listed on
the NYSE.
The Russell 2500 Index, prepared by the Frank Russell Company,
consists of U.S. publicly traded stocks of domestic companies that
rank from 500 to 3000 by market capitalization. The Russell 2500
tracks the return on these stocks based on price appreciation or
depreciation and does not include dividends and income or changes in
market values caused by other kinds of corporate changes.
The Russell 2000 Index, prepared by the Frank Russell Company,
consists of U.S. publicly traded stocks of domestic companies that
rank from 1000 to 3000 by market capitalization. The Russell 2000
tracks the return on these stocks based on price appreciation or
depreciation and does not include dividends and income or changes in
market values caused by other kinds of corporate changes.
Reuters, a wire service that frequently reports on global business.
Standard & Poor's Utilities Index is an unmanaged capitalization
weighted index comprising common stock in approximately 40 electric,
natural gas distributors and pipelines, and telephone companies. The
Index assumes the reinvestment of dividends.
Moody's Stock Index, an unmanaged index of utility stock performance.
From time to time, in reports and promotional literature, performance
rankings and ratings reported periodically in national financial publications
such as MONEY, FORBES, BUSINESS WEEK, BARRON'S, FINANCIAL TIMES and FORTUNE may
also be used. In addition, quotations from articles and performance ratings and
ratings appearing in daily newspaper publications such as THE WALL STREET
JOURNAL, THE NEW YORK TIMES and NEW YORK DAILY NEWS may be cited.
GENERAL INFORMATION
AUDITS AND REPORTS. The accounts of each Fund are audited twice a
------------------
year by Tait, Weller & Baker, independent certified public accountants, Two Penn
Center Plaza, Philadelphia, PA, 19102-1707. Shareholders of each Fund receive
semi-annual and annual reports, including audited financial statements, and a
list of securities owned.
TRANSFER AGENT. Administrative Data Management Corp., 10 Woodbridge
--------------
Center Drive, Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as
transfer agent for each Fund and as redemption agent for regular redemptions.
The fees charged to a Fund by the Transfer Agent are $5.00 to open an account;
$3.00 for each certificate issued; $.65 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; and $1.00 per account per report required by any governmental
authority. Additional fees charged to a Fund by the Transfer Agent are assumed
by the Underwriter. The Transfer Agent reserves the right to change the fees on
prior notice to a Fund. The $5 administrative fee for exchange transactions
into a Fund, which is generally to be charged to the shareholder, is being borne
on a voluntary basis by that Fund for an indefinite period. Upon request from
shareholders, the Transfer Agent will provide an account history. For account
histories covering the most recent three year period, there is no charge. The
Transfer Agent charges a $5.00 administrative fee for
29
<PAGE>
each account history covering the period 1983 through 1990 and $10.00 per year
for each account history covering the period 1974 through 1982. Account
histories prior to 1974 will not be provided. If any communication from the
Transfer Agent to a shareholder is returned from the U.S. Postal Service marked
as "Undeliverable" two consecutive times, the Transfer Agent will cease sending
any further materials to the shareholder until the Transfer Agent is provided
with a correct address. Furthermore, if there is no known address for a
shareholder for at least one year, the Transfer Agent will charge such
shareholder's account $40 to cover the Transfer Agent's expenses in trying to
locate the shareholder's correct address. For the fiscal year ended December 31,
1994, HIGH YIELD FUND and INCOME FUND paid $444,839 and $649,200, respectively,
in transfer agency fees. The Transfer Agent's telephone number is 1-800-423-
4026.
5% SHAREHOLDERS. As of April 17, 1995, The Bank of New York, 48 Wall
---------------
Street, New York, NY 10286, Custodian of First Investors Periodic Payment Plans
for Investment in First Investors High Yield Fund, Inc., owned of record 8.9% of
the outstanding Class A shares of HIGH YIELD FUND for beneficial owners of such
Plans and as Custodian of First Investors Single Payment and Periodic Payment
Plans for Investment in First Investors Fund For Income, Inc., owned of record
28.0% of the outstanding Class A shares of INCOME FUND for beneficial owners of
such Plans.
As of April 17, 1995, the following beneficially owned more than 5% of
the outstanding Class B shares of the Fund listed below:
Fund % of Shares Shareholder
- ---- ----------- -----------
High Yield 6.0% Dennis Moniz and
Barbara Moniz
52 Harris Dr.
Tiverton, RI 02878
6.9% Peter W. Buchanan
18 Middlebrook Rd.
Stratford, CT 06497
6.5% Richard G. Nelson and
Hazel M. Nelson
106 CO Highway 393 N
Lot #11
Santa Rosa Beach, FL 32459
7.9% Florence Dorsky
51 Deepdale Drive
Great Neck Estates, N.Y. 11021
5.1% Diego Canzoneri
8965 Linville
Livonia, MI 48150
30
<PAGE>
Fund % of Shares Shareholder
- ---- ----------- -----------
20.7% Estate of Ralph Holt
Mary Holt Executrix
23 Meadow Hill Rd.
Newburgh, N.Y. 12550
Fund For Income 7.2% Roy B. Chamberlin and
Cynthia R. Chamberlin
RD 3, Box 222
New Berlin, N.Y. 13411
5.7% Melvin F. Beam
209 Green Lawn Rd.
Vestal, N.Y. 13850
6.1% Sheila Palsma
19 Woodlawn Ave.
Middletown, N.Y. 10940
5.1% Thomas G. Gill, as Trustee
15 Secor St.
Sidney, N.Y. 13838
5.4% Zenon F. Zadworski
2147 Santa Cruz Ave.
Santa Clara, CA 95051
TRADING BY PORTFOLIO MANAGERS AND OTHER ACCESS PERSONS. Pursuant to
------------------------------------------------------
Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, each Fund and the
Adviser have adopted Codes of Ethics restricting personal securities trading by
portfolio managers and other access persons of the Fund. Among other things,
such persons: (a) must have all trades pre-cleared by the Adviser; (b) are
restricted from short-term trading; (c) must have duplicate statements and
transactions confirmations reviewed by a compliance officer; and (d) are
prohibited from purchasing securities of initial public offerings.
31
<PAGE>
APPENDIX A
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S RATINGS GROUP
- -------------------------------
S&P's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest.
A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus (+) designation.
MOODY'S INVESTORS SERVICE, INC.
- -------------------------------
Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of indemnity are excluded unless explicitly rated.
PRIME-1 Issuers (or supporting institutions) rated Prime-1 (P-1) have
a superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:
-Leading market positions in well-established industries.
-High rates of return on funds employed.
-Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
-Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
-Well-established access to a range of financial markets and assured
sources of alternate liquidity.
32
<PAGE>
Financial Statements
as of December 31, 1994
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS HIGH YIELD FUND, INC.
December 31, 1994
- --------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS-- 86.2%
Aerospace/Defense--3.5%
$ 1,200M Allison Engine Company, Inc., 10%, 2003 $ 1,230,000 $ 72
3,805M Dyncorp, PIK, 16%, 2003 3,576,822 210
1,250M Fairchild Industries, Inc., 12 1/4%, 1999 1,228,125 72
- --------------------------------------------------------------------------------
6,034,947 354
- --------------------------------------------------------------------------------
Apparel/Textiles--1.9%
3,900M +Linter Textiles Corp., Ltd., 13 3/4%, 2000 29,250 2
3,600M Westpoint Stevens, Inc., 9 3/8%, 2005 3,231,000 190
- --------------------------------------------------------------------------------
3,260,250 192
- --------------------------------------------------------------------------------
Automotive--1.7%
1,100M Lear Seating, Inc., 11 1/4%, 2000 1,115,125 65
1,800M SPX Corp., 11 3/4%, 2002 1,791,000 105
- --------------------------------------------------------------------------------
2,906,125 170
- --------------------------------------------------------------------------------
Building Materials--2.8%
3,000M G-I Holdings, Inc., 0%, 1998 1,837,500 108
3,155M Waxman Industries, Inc., 0%-12 3/4%, 2004 1,388,200 81
1,700M Waxman Industries, Inc., 13 3/4%, 1999 1,598,000 94
- --------------------------------------------------------------------------------
4,823,700 283
- --------------------------------------------------------------------------------
Chemicals--7.4%
2,240M Buckeye Cellulose, Inc., 10 1/4%, 2001 2,094,400 123
2,500M Harris Chemical North America, Inc.,
0%-10 1/4%, 2001 2,062,500 121
3,175M Harris Chemical North America, Inc.,
10 3/4%, 2003 2,928,938 172
1,350M OSI Specialties, Inc., 9 1/4%, 2003 1,228,500 72
1,800M Rexene Corp., 11 3/4%, 2004 1,840,500 108
2,000M Synthetic Industries, Inc., 12 3/4%, 2002 1,760,000 103
600M UCC Investors Holdings, Inc., 11%, 2003 591,000 35
- --------------------------------------------------------------------------------
12,505,838 734
- --------------------------------------------------------------------------------
Conglomerates--2.0%
5,500M International Semi-Tech Microelectronics,
Inc., 0%-11 1/2%, 2003 2,310,000 135
1,255M Lexington Precision Co., Inc.,
12 3/4%, 2000 1,116,717 66
- --------------------------------------------------------------------------------
3,426,717 201
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Consumer Non-Durables--.9%
1,500M Calmar, Inc., 12%, 1997 1,500,000 88
- --------------------------------------------------------------------------------
Containers--4.6%
5,600M Owens Illinois, Inc., 11%, 2003 5,810,000 341
2,000M Riverwood International Corp.,
11 1/4%, 2002 2,040,000 120
- --------------------------------------------------------------------------------
7,850,000 461
- --------------------------------------------------------------------------------
Durable Goods Manufacturing--2.6%
2,460M Fairfield Manufacturing, Inc.,
11 3/8%, 2001 2,300,100 135
2,500M Remington Arms Company, Inc.,
9 1/2%, 2003 (Note 5) 2,100,000 123
- --------------------------------------------------------------------------------
4,400,100 258
- --------------------------------------------------------------------------------
Electrical Equipment--2.5%
1,850M Amphenol Corp., 12 3/4%, 2002 2,072,000 122
2,200M IMO Industries, Inc., 12%, 2001 2,200,000 129
- --------------------------------------------------------------------------------
4,272,000 251
- --------------------------------------------------------------------------------
Energy Services--3.5%
2,918M Synergy Group, Inc., 9 1/2%, 2000 2,334,400 137
3,400M Transco Energy Co., 11 1/4%, 1999 3,612,500 212
- --------------------------------------------------------------------------------
5,946,900 349
- --------------------------------------------------------------------------------
Entertainment/Leisure--.2%
1,925M +SHRP Capital Corp., 11 3/4%, 1999 288,750 17
- --------------------------------------------------------------------------------
Financial Services--3.5%
1,750M American Reinsurance Co., Inc.,
10 7/8%, 2004 1,884,865 111
2,800M Lomas Mortgage, USA, 10 1/4%, 2002 2,352,000 138
1,900M Olympic Financial, Ltd., 11 3/4%, 2000 1,738,500 102
- --------------------------------------------------------------------------------
5,975,365 351
- --------------------------------------------------------------------------------
Food/Beverage/Tobacco--1.7%
2,900M Fleming Co., Inc., 10 5/8%, 2001 2,900,000 170
- --------------------------------------------------------------------------------
Food Services--1.1%
1,100M Americold Corp., 11 1/2%, 2005 990,000 58
1,100M Flagstar Cos., Inc., 11 1/4%, 2004 913,000 54
- --------------------------------------------------------------------------------
1,903,000 112
- --------------------------------------------------------------------------------
Gaming/Lodging--2.7%
2,450M Casino America, Inc., 11 1/2%, 2001 2,058,000 121
1,000M GB Property Funding, Inc., 10 7/8%, 2004 810,000 47
2,000M President Riverboat Casinos, Inc., 13%,
2001 (Note 5) 1,750,000 103
- --------------------------------------------------------------------------------
4,618,000 271
- --------------------------------------------------------------------------------
Healthcare--5.8%
900M American Medical International, Inc.,
11%, 2000 936,000 55
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
2,800M American Medical International, Inc.,
13 1/2%, 2001 3,059,000 180
2,215M Continental Medical Systems, Inc.,
10 7/8%, 2002 1,827,375 107
1,000M Healthtrust, Inc., 10 3/4%, 2002 1,057,500 62
1,700M Healthtrust, Inc., 8 3/4%, 2005 1,632,000 96
1,300M Hillhaven Corp., 10 1/8%, 2001 1,300,000 76
- --------------------------------------------------------------------------------
9,811,875 576
- --------------------------------------------------------------------------------
Information Technology/Office
Equipment--2.4%
1,000M Bell & Howell Co., 10 3/4%, 2002 952,500 56
3,000M CES Card Establishment Services, Inc.,
10%, 2003 3,120,000 183
- --------------------------------------------------------------------------------
4,072,500 239
- --------------------------------------------------------------------------------
Media/Cable Television--10.0%
1,000M Cablevision Industries, Inc.,
10 3/4%, 2002 985,000 58
2,300M Continental Broadcasting, Ltd.,
10 5/8%, 2003 2,323,000 136
3,700M Garden State Newspapers, Inc., 12%, 2004 3,663,000 215
3,000M Lamar Advertising, Inc., 11%, 2003 2,857,500 168
3,625M Outdoor Systems, Inc., 10 3/4%, 2003 3,262,500 191
1,300M Summit Communications Group, 10 1/2%, 2005 1,322,750 78
5,100M Videotron Holdings, PLC., 0%-11 1/8%, 2004 2,677,500 157
- --------------------------------------------------------------------------------
17,091,250 1,003
- --------------------------------------------------------------------------------
Mining/Metals--9.7%
3,000M Carbide/Graphite Group, Inc.,
11 1/2%, 2003 3,015,000 177
2,475M Geneva Steel Co., Inc., 11 1/8%, 2001 2,326,500 136
4,000M Magma Copper Co., Inc., 12%, 2001 4,315,000 253
4,050M WCI Steel, Inc., 10 1/2%, 2002 3,877,875 228
3,600M Wheeling-Pittsburgh Steel Corp.,
9 3/8%, 2003 3,060,000 180
- --------------------------------------------------------------------------------
16,594,375 974
- --------------------------------------------------------------------------------
Miscellaneous--.5%
2,300M +Acme Holdings, Inc., 11 3/4%, 2000 920,000 54
- --------------------------------------------------------------------------------
Paper/Forest Products--6.3%
3,600M Gaylord Container Corp., 11 1/2%, 2001 3,654,000 214
590M Seminole Kraft Corp., 13 1/2%, 1996 590,000 34
2,750M Stone Container Corp., 11 7/8%, 1998 2,842,813 167
3,800M Stone Container Corp., 9 7/8%, 2001 3,591,000 211
- --------------------------------------------------------------------------------
10,677,813 626
- --------------------------------------------------------------------------------
Retail-General Merchandise--.9%
33M Barry's Jewelers, Inc., 12 5/8%, 1996 16,785 1
1,750M General Host Co., Inc., 11 1/2%, 2002 1,531,250 90
- --------------------------------------------------------------------------------
1,548,035 91
- --------------------------------------------------------------------------------
Telecommunications--4.5%
6,525M MFS Communications, Inc., 0%-9 3/8%, 2004 3,784,500 222
1,800M PanAmSat Capital Corp., 9 3/4%, 2000 1,710,000 100
3,400M PanAmSat Capital Corp., 0%-11 3/8%, 2003 2,108,000 124
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
7,602,500 446
- --------------------------------------------------------------------------------
Transportation--3.5%
3,550M Eletson Holdings, Inc., 9 1/4%, 2003 3,163,937 185
1,100M Moran Transportation Co., 11 3/4%, 2004 1,034,000 61
1,900M Trism, Inc., 10 3/4%, 2000 1,786,000 105
- --------------------------------------------------------------------------------
5,983,937 351
- --------------------------------------------------------------------------------
Total Value of Corporate Bonds
(cost $161,067,896) 146,913,977 8,622
- --------------------------------------------------------------------------------
UNITS--1.1%
Telecommunications
3,725 Echostar Communications Corp., 0%-12 7/8%,
2004(a)(cost $2,153,714) 1,927,688 113
- --------------------------------------------------------------------------------
COMMON STOCKS--2.7%
Building Materials--.5%
65,119 *American Buildings, Inc. 920,213 54
- --------------------------------------------------------------------------------
Electrical Equipment--.0%
6,481 *Thermadyne Holdings Corp. 73,721 4
- --------------------------------------------------------------------------------
Gaming/Lodging--.0%
120,498 *Divi Hotels, Inc. (Note 4) 6,025 --
- --------------------------------------------------------------------------------
Miscellaneous--.4%
8,832 #*CIC I Acquisition Corp. (Note 4) 635,904 37
- --------------------------------------------------------------------------------
Paper/Forest Products--.1%
15,964 *Gaylord Container Corp., Class "A" 145,671 9
- --------------------------------------------------------------------------------
Retail-General Merchandise--1.5%
115,806 *Barry's Jewelers, Inc. 810,645 48
115,965 *Peebles, Inc. (Note 4) 1,739,475 102
- --------------------------------------------------------------------------------
2,550,120 150
- --------------------------------------------------------------------------------
Transportation--.2%
13,964 *Chicago & North Western Holdings Corp. 272,298 16
- --------------------------------------------------------------------------------
Total Value of Common Stocks
(cost $12,704,755) 4,603,952 270
- --------------------------------------------------------------------------------
PREFERRED STOCKS--1.7%
20,000 California Federal Bank, 10 5/8%,
Series "B" 1,990,000 116
40,800 Greater New York Savings Bank, 12%,
Series "B" 897,600 53
- --------------------------------------------------------------------------------
Total Value of Preferred Stocks
(cost $3,160,000) 2,887,600 169
- --------------------------------------------------------------------------------
WARRANTS--.5%
Building Materials--.0%
100,300 *Waxman Industries, Inc.
(expiring 6/1/04)(Note 5) 25,075 2
- --------------------------------------------------------------------------------
Electrical Equipment--.0%
202 *Digicon, Inc. (expiring 7/1/96) 13 --
- --------------------------------------------------------------------------------
Entertainment/Leisure--.0%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
7,200 *SHRP Capital Corp. (expiring 7/15/99) -- --
- --------------------------------------------------------------------------------
Financial Services--.0%
9,600 *Olympic Financial, Ltd. (expiring 9/1/99) 16,800 1
- --------------------------------------------------------------------------------
Gaming/Lodging--.1%
7,987 *Casino America, Inc. (expiring 11/15/96) 1,997 --
12,000 *Presidential Riverboat Casinos, Inc.
(expiring 9/15/96)(Note 5) 48,000 3
17,660 *Presidential Riverboat Casinos, Inc.
(expiring 9/30/99)(Note 4) 70,640 4
- --------------------------------------------------------------------------------
120,637 7
- --------------------------------------------------------------------------------
Paper/Forest Products--.4%
84,794 *Gaylord Container Corp. (expiring 7/31/96) 625,356 37
- --------------------------------------------------------------------------------
Retail-Food/Drug--.0%
3,466 *Purity Supreme, Inc. (expiring 8/6/97)
(Note 4) 69 --
- --------------------------------------------------------------------------------
Retail-General Merchandise--.0%
3,800 *Payless Cashways, Inc. (expiring 11/1/96) 5,700 --
- --------------------------------------------------------------------------------
Total Value of Warrants (cost $1,003,705) 793,650 47
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--2.3%
4,000M United States Treasury Notes, 7%, 1999
(cost $4,331,875) 3,875,625 227
- --------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--4.4%
2,500M Cigna Corp., 6.1%, 1/3/95 2,499,153 147
4,000M Coca Cola Co., 5.75%, 1/9/95 3,994,889 234
1,000M Raytheon Co., 5.95%, 1/9/95 998,677 59
- --------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $7,492,719) 7,492,719 440
- --------------------------------------------------------------------------------
Total Value of Investments (cost
$191,914,664) 98.9% 168,495,211 9,888
Other Assets, Less Liabilities 1.1 1,903,880 112
- --------------------------------------------------------------------------------
Net Assets 100.0% $170,399,091 $10,000
================================================================================
* Non-income producing
+ In default as to principal and/or interest (Note 8)
# Affiliated company (Note 6)
(a) Each unit consists of $1,000 principal amount 12 7/8% senior secured
discount note due 6/1/04 and warrants to purchase six shares of Class "A"
common stock.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS HIGH YIELD FUND, INC.
December 31, 1994
<S> <C> <C>
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Assets
Investments in securities, at value (Note 1A):
Unaffiliated companies (identified cost
$188,684,484) $167,859,307
Affiliated companies (identified cost $3,230,180) 635,904 $168,495,211
------------
Cash 467,366
Receivables:
Interest and dividends 3,486,402
Capital stock sold 134,387
Investment securities sold 28,000 3,648,789
------------
Other assets 59,061
------------
Total Assets 172,670,427
Liabilities
Payables:
Investment securities purchased 1,000,327
Capital stock redeemed 648,752
Cash portion of dividend payable
January 15, 1995 363,261
Accrued advisory fee 134,059
Accrued expenses 124,937
------------
Total Liabilities 2,271,336
------------
Net Assets $170,399,091
============
Net Assets Consist of:
Capital paid in $629,648,249
Undistributed net investment income 2,331,309
Accumulated net realized loss on investment
transactions (438,161,014)
Net unrealized depreciation in value of
investments (23,419,453)
------------
Total $170,399,091
============
Net Asset Value and Redemption Price Per Share--
Class A (Note 9) ($170,399,091 divided by
35,224,531 shares outstanding), 250,000,000 shares
authorized, $0.01 par value $4.84
=====
Maximum Offering Price Per Share--Class A
($4.84/.9375)* $5.16
=====
* On purchases of $25,000 or more, the sales charge is reduced.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
FIRST INVESTORS HIGH YIELD FUND, INC.
Year Ended December 31, 1994
<S> <C> <C>
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
Investment Income
Income:
Interest (Note 6) $ 19,405,929
Dividends 235,670
Other income 245,472
------------
Total income $ 19,887,071
Expenses:
Advisory fee (Note 3) 1,801,630
Shareholder servicing costs (Note 3) 584,336
Distribution plan expenses (Note 7) 294,283
Reports and notices to shareholders 99,863
Other expenses 90,598
------------
Total expenses 2,870,710
Less: Expenses waived (Note 3) 66,131
------------
Net expenses 2,804,579
------------
Net investment income 17,082,492
Realized and Unrealized Gain (Loss) on Investments
(Notes 2 and 6):
Net realized gain (loss) on investments:
Unaffiliated companies 1,028,559
Affiliated companies (181,676)
------------
Net realized gain on investments 846,883
Net unrealized depreciation of investments (17,368,735)
------------
Net loss on investments (16,521,852)
------------
Net Increase in Net Assets Resulting from Operations $ 560,640
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS HIGH YIELD FUND, INC.
- --------------------------------------------------------------------------------
Year Ended December 31 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 17,082,492 $ 17,131,714
Net realized gain (loss) on investments 846,883 (2,829,513)
Net unrealized appreciation (depreciation) of
investments (17,368,735) 15,996,568
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
------------ ------------
Net increase in net assets resulting from
operations 560,640 30,298,769
------------ ------------
Dividends to Shareholders from:
Net investment income (17,023,090) (17,765,856)
------------ ------------
Capital Share Transactions--Class A(a)
Issued 7,240,104 2,163,475
Issued on reinvestments 12,643,358 13,081,889
Redeemed (24,351,080) (28,138,192)
------------ ------------
Net decrease from capital share transactions (4,467,618) (12,892,828)
------------ ------------
Total decrease in net assets (20,930,068) (359,915)
Net Assets
Beginning of year 191,329,159 191,689,074
------------ ------------
End of year (including undistributed net investment
income of $2,331,309 and $2,271,907, respectively) $170,399,091 $191,329,159
============ ============
(a) Capital shares issued and redeemed--Class A
(Note 9)
Issued 1,431,548 417,046
Issued on reinvestments 2,504,396 2,526,676
Redeemed (4,798,027) (5,461,251)
------------ ------------
Net decrease in shares (862,083) (2,517,529)
============ ============
See notes to financial statements
</TABLE>
Notes to Financial Statements
FIRST INVESTORS HIGH YIELD FUND, INC.
1. Significant Accounting Policies--The Fund is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end
management investment company.
A. Security Valuation--Except as provided below, a security listed or
traded on an exchange or the NASDAQ National Market System is valued at
its last sale price on the exchange or system where the security is
principally traded, and lacking any sales, the security is valued at
the last bid price. Each security traded in the over-the-counter market
(including securities listed on exchanges whose primary market is
believed to be over-the-counter) is valued at the most recent bid price
based upon quotes furnished by a market maker for such securities.
Securities may also be priced by a pricing service. The pricing service
uses quotations obtained from investment dealers or brokers,
<PAGE>
information with respect to market transactions in comparable
securities and other available information in determining value. Short-term
corporate notes which are purchased at a discount are valued at
amortized cost. Securities for which market quotations are not readily
available, "restricted securities," and any other assets are valued on
a consistent basis at fair value as determined in good faith by or
under the supervision of the Fund's officers in a manner specifically
authorized by the Board of Directors.
B. Federal Income Taxes--No provision has been made for federal income
taxes on net income or capital gains since it is the policy of the Fund
to continue to comply with the special provisions of the Internal
Revenue Code applicable to investment companies and to make sufficient
distributions of income and capital gains (in excess of any available
capital loss carryovers) to relieve it from all, or substantially all,
such taxes. At December 31, 1994, the Fund had capital loss carryovers
of $438,050,529 of which $1,633,410 expires in 1995, $51,200,545 in
1996, $107,418,334 in 1997, $166,492,834 in 1998, $109,407,948 in 1999
$1,762,042 in 2001 and $135,416 in 2002.
C. Other--Security transactions are accounted for on the date the
securities are purchased or sold. Cost is determined, and gains and
losses are based, on the identified cost basis for both financial
statement and federal income tax purposes. Dividend income is recorded
on the ex-dividend date. Interest income and estimated expenses are
accrued daily. Dividends to shareholders from net investment income are
accrued daily and paid monthly.
2. Security Transactions--For the year ended December 31, 1994,
purchases and sales of investment securities, other than United States
Government obligations and short-term corporate notes, aggregated
$54,443,906 and $58,263,513, respectively.
At December 31, 1994, the cost of investments for federal income tax
purposes was $191,914,664. Accumulated net unrealized depreciation on
investments was $23,419,453, consisting of $2,638,408 gross unrealized
appreciation and $26,057,861 gross unrealized depreciation.
3. Advisory Fee and Other Transactions With Affiliates (Also see Note
7)--Certain officers and directors of the Fund are officers and
directors of its investment adviser, First Investors Management
Company, Inc. ("FIMCO"), its underwriter, First Investors Corporation
("FIC"), its transfer agent, Administrative Data Management Corp.
("ADM") and/or First Financial Savings Bank, S.L.A. ("FFS"), custodian
of the Fund's Individual Retirement Accounts. Officers and directors of
the Fund received no remuneration from the Fund for serving in such
capacities. Their remuneration (together with certain other expenses of
the Fund) is paid by FIMCO or FIC.
The Investment Advisory Agreement provides as compensation to FIMCO an
annual fee, payable monthly, at the rate of 1% on the first $200
million of the Fund's average daily net assets, .75% on the next $300
million, declining by .03% on each $250 million thereafter, down to
.66% on average daily net assets over $1 billion. Since April 1, 1994,
FIMCO has voluntary waived .05% of the fee. For the year ended December
31, 1994, this reduction amounted to $66,131.
<PAGE>
Pursuant to certain state regulations, FIMCO has agreed to reimburse
the Fund if and to the extent that the Fund's aggregate operating
expenses, including the advisory fee but generally excluding interest,
taxes, brokerage commissions and extraordinary expenses, exceed any
limitation on expenses applicable to the Fund in those states (unless
waivers of such limitations have been obtained). The amount of any such
reimbursement is limited to the yearly advisory fee. For the year ended
December 31, 1994, no reimbursement was required pursuant to these
provisions.
For the year ended December 31, 1994, FIC, as underwriter, received
$171,682 in commissions after allowing $3,102 to other dealers.
Shareholder servicing costs included $350,193 in transfer agent fees
paid to ADM and $139,498 in custodian fees paid to FFS
4. Restricted Securities--The Fund held the following restricted
securities at December 31, 1994:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Date Number
Issuer Acquired of units Type of Security Cost
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CIC I Acquisition Corp. 10/20/89 8,832shs Common Stock $3,230,180
Peebles, Inc. 2/07/92 115,965shs Common Stock 3,181,125
Divi Hotels, Inc. 4/23/92 120,498shs Common Stock 2,540,750
Purity Supreme, Inc. 7/29/92 3,466wts Warrants, Expiring
8/6/97 --
Presidential Riverboat 11/10/94 17,660wts Warrants, Expiring
Casinos, Inc. 9/30/99 84,316
- --------------------------------------------------------------------------------
</TABLE>
These securities, which have been acquired through private placements,
may not be sold or transferred without prior registration under the
Securities Act of 1933 or pursuant to an exemption therefrom. If and
when the Fund sells such portfolio securities, additional costs for
registration may be required. The restricted securities are valued
pursuant to procedures established by the Fund's Board of Directors
which include using data provided by certain dealers that participate
in any secondary market that may exist for these securities, pricing
services and other relevant criteria. At December 31, 1994, the
aggregate value of the above restricted securities was $2,452,113
representing 1.4% of the Fund's net assets.
5. Rule 144A Securities--Under Rule 144A, certain restricted securities
are exempt from the registration requirements of the Securities Act of
1933 and may only be resold to qualified institutional investors. At
December 31, 1994, the Fund held four 144A securities with an aggregate
value of $3,923,075 representing 2.3% of the Fund's net assets. These
securities are valued as set forth in Note 1A.
6. Affiliated Companies--Investments in companies 5% or more of whose
outstanding voting securities are held by the Fund are defined as
"Affiliated Companies" in Section 2(a)(3) of the 1940 Act. For the year
<PAGE>
ended December 31, 1994, the Fund received interest income of $10,866
from such affiliated companies.
7. Distribution Plan--Pursuant to a Distribution Plan adopted under
Rule 12b-1 of the 1940 Act, the Fund may pay a fee to FIC in an amount
up to .30% of the Fund's average net assets on an annualized basis each
fiscal year, payable monthly. The fee consists of a distribution fee
and a service fee. The service fee is paid for the ongoing servicing of
clients who are shareholders of the Fund. However, pursuant to
settlements entered into with various state regulators, the fee is
limited to .15% until February 1, 1998. For the year ended December 31,
1994, this fee reduction amounted to $246,206.
8. Concentration of Credit Risk--The Fund's investment in high yield
securities whether rated or unrated may be considered speculative and
subject to greater market fluctuations and risks of loss of income and
principal than lower yielding, higher rated, fixed income securities.
The risk of loss due to default by the issuer may be significantly
greater for the holders of high yielding securities, because such
securities are generally unsecured and are often subordinated to other
creditors of the issuer. At December 31, 1994, the Fund held three
defaulted securities with a value aggregating $1,238,000 representing
.7% of the Fund's net assets.
9. Capital Stock--By action of the Board of Directors, the Fund amended
its Articles of Incorporation on October 21, 1994 so that of the
500,000,000 shares originally authorized, 250,000,000 shares were
allocated as Class A capital stock and 250,000,000 shares were
allocated as Class B capital stock. As of December 31, 1994, only Class
A shares have been issued.
10. Pending Litigation--The Fund is a defendant in a number of cases
involving investors who invested in the Fund and First Investors Fund
For Income, Inc. (collectively, the "Funds"). First Investors Fund For
Income, Inc. and FIC are defendants in some or all of these cases. The
suits allege that FIC sales representatives had made misrepresentations
concerning the risks of investing in the Funds. FIC has made tentative
settlements in connection with several of these cases. In connection
with these settlements, FIC's parent company, First Investors
Consolidated Corporation ("FICC"), has agreed to assume the liability.
Additionally, FICC has agreed to assume the liability, if any, in the
remaining suits.
<PAGE>
Independent Auditor's Report
To the Shareholders and Board of Directors of
First Investors High Yield Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
First Investors High Yield Fund, Inc., including the portfolio of
investments, as of December 31, 1994, and the related statement of
operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and financial
highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of First Investors High Yield Fund, Inc. at December
31, 1994, and the results of its operations, changes in its net assets
and financial highlights for each of the respective periods presented,
in conformity with generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1995
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS FUND FOR INCOME, INC.
December 31, 1994
- --------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--88.5%
Aerospace/Defense--2.8%
$4,800M Allison Engine Co., Inc., 10%, 2003 $ 4,920,000 $ 122
4,308M Dyncorp, PIK, 16%, 2003 4,049,623 101
3,000M Sequa Corp., 9 3/8%, 2003 2,505,000 62
- --------------------------------------------------------------------------------
11,474,623 285
- --------------------------------------------------------------------------------
Apparel/Textiles--2.5%
2,000M Consoltex Group, Inc., 11%, 2003 1,840,000 46
2,000M Dan River, Inc., 10 1/8%, 2003 1,800,000 45
7,000M +Linter Textiles Corp., Ltd., 13 3/4%, 2000 52,500 1
7,000M Westpoint Stevens, Inc., 9 3/8%, 2005 6,282,500 157
- --------------------------------------------------------------------------------
9,975,000 249
- --------------------------------------------------------------------------------
Automotive--4.4%
5,600M JPS Automotive Products Corp., 11 1/8%, 2001 5,446,000 136
4,000M Lear Seating, Inc., 11 1/4%, 2000 4,055,000 101
4,400M SPX Corp., 11 3/4%, 2002 4,378,000 109
3,500M Truck Components, Inc., 12 1/4%, 2001 3,640,000 91
- --------------------------------------------------------------------------------
17,519,000 437
- --------------------------------------------------------------------------------
Building Materials--2.6%
4,500M American Standard Corp., 11 3/8%, 2004 4,590,000 114
4,500M American Standard Corp., 0%-10 1/2%, 2005 2,868,750 72
1,750M Waxman Industries, Inc., 13 3/4%, 1999 1,645,000 41
3,248M Waxman Industries, Inc., 0%-12 3/4%, 2004 1,429,120 36
- --------------------------------------------------------------------------------
10,532,870 263
- --------------------------------------------------------------------------------
Chemicals--8.6%
6,200M Harris Chemical North America, Inc.,
0%-10 1/4%, 2001 5,115,000 128
4,125M Harris Chemical North America, Inc.,
10 3/4%, 2003 3,805,313 95
5,000M Huntsman Corp., 11%, 2004 5,187,500 129
1,700M Methanex Corp., 8 7/8%, 2001 1,657,500 41
1,500M NL Industries, Inc., 11 3/4%, 2003 1,500,000 37
2,500M OSI Specialties, Inc., 9 1/4%, 2003 2,275,000 57
5,100M Rexene Corp., 11 3/4%, 2004 5,214,750 130
6,000M Synthetic Industries, Inc., 12 3/4%, 2002 5,280,000 132
4,700M UCC Investors Holdings, Inc., 11%, 2003 4,629,500 115
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
34,664,563 864
- --------------------------------------------------------------------------------
Conglomerates--.7%
4,400M Eagle Industries, Inc., 0%-10 1/2%, 2003 2,816,000 70
- --------------------------------------------------------------------------------
Consumer Non-Durables--.4%
1,600M Calmar, Inc., 12%, 1997 1,600,000 40
- --------------------------------------------------------------------------------
Containers--5.9%
13,000M Owens Illinois, Inc., 11%, 2003 13,487,500 336
5,000M Riverwood International Corp.,
11 1/4%, 2002 5,100,000 127
5,250M Sweetheart Cup Co., Inc., 10 1/2%, 2003 4,908,750 123
- --------------------------------------------------------------------------------
23,496,250 586
- --------------------------------------------------------------------------------
Durable Goods Manufacturing--1.0%
4,275M Fairfield Manufacturing, Inc.,
11 3/8%, 2001 3,997,125 100
- --------------------------------------------------------------------------------
Electrical Equipment--1.8%
3,650M Essex Group, Inc., 10%, 2003 3,394,500 85
3,850M IMO Industries, Inc., 12%, 2001 3,850,000 96
- --------------------------------------------------------------------------------
7,244,500 181
- --------------------------------------------------------------------------------
Energy Exploration/Production--1.0%
3,900M Maxus Energy Corp., 11 1/2%, 2015 3,919,500 98
- --------------------------------------------------------------------------------
Energy Services--3.8%
3,500M Deeptech International, Inc., 12%, 2000 3,193,750 80
3,500M Falcon Drilling Co., Inc., 9 3/4%, 2001 3,333,750 83
2,851M Synergy Group, Inc., 9 1/2%, 2000 2,280,800 57
6,000M Transco Energy Co., 11 1/4%, 1999 6,375,000 159
- --------------------------------------------------------------------------------
15,183,300 379
- --------------------------------------------------------------------------------
Food/Beverage/Tobacco--1.1%
4,500M Fleming Co., Inc., 10 5/8%, 2001 4,500,000 112
- --------------------------------------------------------------------------------
Food Services--1.9%
4,000M Americold Corp., 11 1/2%, 2005 3,600,000 90
5,062M Flagstar Cos., Inc., 11 1/4%, 2004 4,201,460 105
- --------------------------------------------------------------------------------
7,801,460 195
- --------------------------------------------------------------------------------
Gaming/Lodging--2.2%
5,000M Casino America, Inc., 11 1/2%, 2001 4,200,000 105
5,500M Showboat, Inc., 9 1/4%, 2008 4,606,250 115
- --------------------------------------------------------------------------------
8,806,250 220
- --------------------------------------------------------------------------------
Healthcare--8.4%
3,650M American Medical International, Inc.,
11%, 2000 3,796,000 94
4,950M Continental Medical Systems, Inc.,
10 7/8%, 2002 4,083,750 102
4,400M Healthsouth Rehabilitation Corp.,
9 1/2%, 2001 4,246,000 106
5,300M Healthtrust, Inc., 10 3/4%, 2002 5,604,750 140
4,500M Integrated Health Service Inc.,
10 3/4%, 2004 4,522,500 113
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
3,000M Mediq/PRN Life Support Services, Inc.,
11 1/8%, 1999 2,700,000 67
6,000M Ornda Healthcorp., 12 1/4%, 2002 6,300,000 157
2,550M Ornda Healthcorp., 11 3/8%, 2004 2,594,625 65
- --------------------------------------------------------------------------------
33,847,625 844
- --------------------------------------------------------------------------------
Information Technology/Office
Equipment--1.3%
5,000M Unisys Corp., 10 5/8%, 1999 5,050,000 126
- --------------------------------------------------------------------------------
Media/Cable Television--8.6%
5,500M Jones Intercable, Inc., 11 1/2%, 2004 5,720,000 142
2,000M Lamar Advertising, Inc., 11%, 2003 1,905,000 48
5,000M Marcus Cable Operating Co.,
0%-13 1/2%, 2004 2,612,500 65
3,625M Outdoor Systems, Inc., 10 3/4%, 2003 3,262,500 81
6,150M Rogers Communication Corp., 10 7/8%, 2004 6,211,500 155
5,000M SCI Television Corp., 11%, 2005 5,037,500 126
1,500M Sullivan Graphics, Inc., 15%, 2000 1,582,500 39
4,000M Videotron, Ltd., 10 1/4%, 2002 3,960,000 99
8,000M Videotron Holdings, Plc.,
0%-11 1/8%, 2004 4,200,000 105
- --------------------------------------------------------------------------------
34,491,500 860
- --------------------------------------------------------------------------------
Mining/Metals--8.0%
5,500M Carbide/Graphite Group, Inc.,
11 1/2%, 2003 5,527,500 138
2,750M Earle M. Jorgensen Co., 10 3/4%, 2000 2,667,500 66
4,000M Federal Industries, Ltd., 10 1/4%, 2000 3,730,000 93
5,000M Geneva Steel Co., Inc., 11 1/8%, 2001 4,700,000 117
5,500M Magma Copper Co., Inc., 12%, 2001 5,933,125 148
5,400M WCI Steel, Inc., 10 1/2%, 2002 5,170,500 129
5,000M Wheeling-Pittsburgh Steel Corp.,
9 3/8%, 2003 4,250,000 106
- --------------------------------------------------------------------------------
31,978,625 797
- --------------------------------------------------------------------------------
Miscellaneous--.4%
4,000M +Acme Holdings, Inc., 11 3/4%, 2000 1,600,000 40
- --------------------------------------------------------------------------------
Paper/Forest Products--7.7%
1,000M Container Corp., 11 1/4%, 2004 1,020,000 26
3,000M Fort Howard Corp., 14 1/8%, 2004 3,026,250 75
4,000M Gaylord Container Corp., 11 1/2%, 2001 4,060,000 101
2,000M Rainy River Forest Products Co., Inc.,
10 3/4%, 2001 1,985,000 50
1,815M Seminole Kraft Corp., 13 1/2%, 1996 1,815,000 45
5,500M Stone Container Corp., 11 7/8%, 1998 5,685,625 142
7,000M Stone Container Corp., 9 7/8%, 2001 6,615,000 165
2,600M Stone Container Corp., 10 3/4%, 2002 2,580,500 64
3,870M S. D. Warren Co., Inc. 12%, 2004 (Note 5) 3,947,400 98
- --------------------------------------------------------------------------------
30,734,775 766
- --------------------------------------------------------------------------------
Retail-General Merchandise--5.5%
4,500M Barnes & Noble, Inc., 11 7/8%, 2003 4,792,500 120
31M Barry's Jewelers, Inc., 12 5/8%, 1996 15,490 --
4,760M General Host Co., Inc., 11 1/2%, 2002 4,165,000 104
1,500M Hook-SupeRx, Inc., 10 1/8%, 2002 1,526,250 38
3,500M Levitz Furniture Corp., 12 3/8%, 1997 3,618,125 90
4,000M Payless Cashways, Inc., 9 1/8%, 2003 3,560,000 89
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
4,500M Waban, Inc., 11%, 2004 4,365,000 109
- --------------------------------------------------------------------------------
22,042,365 550
- --------------------------------------------------------------------------------
Telecommunications--3.6%
5,000M Horizon Cellular Telephone, Inc.,
0%-11 3/8%, 2000 3,612,500 90
2,800M Paging Network, Inc., 11 3/4%, 2002 2,779,000 69
3,250M PanAmSat Capital Corp., 9 3/4%, 2000 3,087,500 77
8,000M PanAmSat Capital Corp., 0%-11 3/8%, 2003 4,960,000 124
- --------------------------------------------------------------------------------
14,439,000 360
- --------------------------------------------------------------------------------
Transportation--4.3%
5,700M Eletson Holdings, Inc., 9 1/4%, 2003 5,080,125 127
3,100M Moran Transportation Co., 11 3/4%, 2004 2,914,000 73
5,500M OMI Corp., 10 1/4%, 2003 4,757,500 118
4,600M Trism, Inc., 10 3/4%, 2000 4,324,000 108
- --------------------------------------------------------------------------------
17,075,625 426
- --------------------------------------------------------------------------------
Total Value of Corporate Bonds
(cost $376,715,528) 354,789,956 8,848
- --------------------------------------------------------------------------------
COMMON STOCKS--1.3%
Chemicals--.5%
173,769 *UCC Investors Holding, Inc. (Note 4) 2,085,228 52
- --------------------------------------------------------------------------------
Gaming/Lodging--.0%
141,762 *Divi Hotels, Inc. (Note 4) 7,088 --
35,000 *Goldriver Hotel & Casino Corp., Series "B" 35,000 1
- --------------------------------------------------------------------------------
42,088 1
- --------------------------------------------------------------------------------
Paper/Forest Products--.0%
18,538 *Gaylord Container Corp., Class "A" 169,159 4
- --------------------------------------------------------------------------------
Retail-General Merchandise--.6%
116,129 *Barry's Jewelers, Inc. 812,903 20
10,800 *Finlay Enterprises, Inc. 162,000 4
77,310 *Peebles, Inc. (Note 4) 1,159,650 29
- --------------------------------------------------------------------------------
2,134,553 53
- --------------------------------------------------------------------------------
Transportation--.2%
32,605 *Chicago & North Western Holdings Corp. 635,798 16
- --------------------------------------------------------------------------------
Total Value of Common Stocks
(cost $8,818,980) 5,066,826 126
- --------------------------------------------------------------------------------
PREFERRED STOCKS--.2%
Media/Cable Television
9,133 K-III Communications Corp., 11 5/8%,
Series B (cost $912,471) 876,833 22
- --------------------------------------------------------------------------------
WARRANTS--.3%
Building Materials--.0%
103,250 *Waxman Industries, Inc. (expiring 6/1/04)
(Note 5) 25,812 1
- --------------------------------------------------------------------------------
Financial Services--.0%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
89,950 *Reliance Group Holdings, Inc.
(expiring 1/28/97) 116,935 3
- --------------------------------------------------------------------------------
Gaming/Lodging--.1%
16,300 *Casino America, Inc. (expiring 11/15/96) 4,075 --
7,000 *Goldriver Finance Corp., Liquidating Trust 105,000 3
21,000 *Presidential Riverboat Casinos, Inc.
(expiring 9/15/96) (Note 5) 84,000 2
- --------------------------------------------------------------------------------
193,075 5
- --------------------------------------------------------------------------------
Paper/Forest Products--.2%
98,471 *Gaylord Container Corp. (expiring 7/31/96) 726,224 18
- --------------------------------------------------------------------------------
Retail-Food/Drug--.0%
12,129 *Purity Supreme, Inc. (expiring 8/6/97)
(Note 4) 242 --
- --------------------------------------------------------------------------------
Retail-General Merchandise--.0%
66,000 *New Cort Holdings Corp. (expiring 9/1/98) 66,000 1
4,000 *Payless Cashways, Inc. (expiring 11/1/96) 6,000 --
- --------------------------------------------------------------------------------
72,000 1
- --------------------------------------------------------------------------------
Total Value of Warrants (cost $745,601) 1,134,288 28
- --------------------------------------------------------------------------------
UNITS--2.0%
Paper/Forest Products--.6%
100,000 S. D. Warren Co., Inc., (a) (Note 5) 2,600,000 65
- --------------------------------------------------------------------------------
Telecommunications--1.4%
10,550 Echostar Communications Corp.,
0%-12 7/8, 2004 (b) 5,459,625 136
- --------------------------------------------------------------------------------
Total Value of Units (cost $8,436,964) 8,059,625 201
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--2.4%
10,000M United States Treasury Notes,
7 1/2%, 2002 (cost $10,667,187) 9,814,063 245
- --------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.7%
7,500M Appalachian Power, 6.35%, 1/3/95 7,497,354 187
1,500M Coca Cola Co., 5.75%, 1/9/95 1,498,084 38
6,000M General Electric Capital Corp.,
5.80%, 1/11/95 5,990,334 149
- --------------------------------------------------------------------------------
Total Value of Short-Term Corporate
Notes (cost $14,985,772) 14,985,772 374
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Value of Investments (cost
$421,282,503) 98.4% 394,727,363 9,844
Other Assets, Less Liabilities 1.6 6,259,345 156
- --------------------------------------------------------------------------------
Net Assets 100.0% $400,986,708 $10,000
================================================================================
* Non-income producing
+ In default as to principal and/or interest (Note 8).
(a) Each unit consists of one share of senior preferred stock of the S.D.
Warren Company and one warrant to purchase 0.29948 shares of common stock
of SDW Holdings Corporation and its successors.
(b) Each unit consists of a $1,000 principal amount 12 7/8% senior
</TABLE>
<PAGE>
<TABLE>
<S> <C>
secured discount note due 6/1/04 and warrants to purchase six shares of
Class "A" common stock.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS FUND FOR INCOME, INC.
December 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities, at value
(identified cost $421,282,503) (Note 1A) $394,727,363
Cash 90,555
Receivables:
Interest $7,958,218
Investment securities sold 5,043,750
Capital stock sold 514,259 13,516,227
----------
Other assets 168,816
------------
Total Assets 408,502,961
Liabilities
Payables:
Investment securities purchased 5,034,125
Dividend payable January 15, 1995 1,086,258
Capital stock redeemed 931,054
Accrued advisory fee 244,508
Accrued expenses 220,308
----------
Total Liabilities 7,516,253
------------
Net Assets $400,986,708
============
Net Assets Consist of:
Capital paid in $1,160,927,008
Undistributed net investment income 926,838
Accumulated net realized loss on investment
transactions (734,311,998)
Net unrealized depreciation in value of
investments (26,555,140)
--------------
Total $ 400,986,708
==============
Net Asset Value and Redemption Price Per
Share--Class A (Note 9) ($400,986,708 divided
by 105,260,290 shares outstanding), 500,000,000
shares authorized, $1.00 par value $3.81
=====
Maximum Offering Price Per Share--Class A
($3.81/.9375)* $4.06
=====
* On purchases of $25,000 or more, the sales charge is reduced.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
FIRST INVESTORS FUND FOR INCOME, INC.
Year Ended December 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Income (Notes 1C and 6):
Interest $43,264,173
Consent fees 391,938
Dividends 117,550
-----------
Total income $43,773,661
Expenses:
Advisory fee (Note 3) 3,060,320
Shareholder servicing costs (Note 3) 880,226
Distribution plan expenses (Note 7) 676,231
Reports and notices to shareholders 245,356
Professional fees 84,724
Other expenses 96,002
-----------
Total expenses 5,042,859
-----------
Net investment income 38,730,802
Realized and Unrealized Gain (Loss) on
Investments (Note 2):
Net realized gain on investments 653,361
Net unrealized depreciation of investments (37,481,745)
-----------
Net loss on investments (36,828,384)
-----------
Net Increase in Net Assets Resulting from
Operations $ 1,902,418
===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS FUND FOR INCOME, INC.
- --------------------------------------------------------------------------------
Year Ended December 31 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 38,730,802 $ 40,467,236
Net realized gain on investments 653,361 12,200,587
Net unrealized appreciation (depreciation) of
investments (37,481,745) 18,206,744
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Net increase in net assets resulting from
operations 1,902,418 70,874,567
------------ ------------
Dividends to Shareholders from:
Net investment income (39,768,324) (41,216,569)
------------ ------------
Capital Share Transactions--Class A(a)
Issued 20,228,141 10,712,359
Issued on reinvestments 26,318,610 26,744,743
Redeemed (38,780,019) (50,022,071)
------------ ------------
Net increase (decrease) in net assets resulting
from capital share transactions 7,766,732 (12,564,969)
------------ ------------
Total increase (decrease) in net assets (30,099,174) 17,093,029
Net Assets
Beginning of year 431,085,882 413,992,853
------------ ------------
End of year (including undistributed net
investment income of $926,838 and $1,964,360,
respectively) $400,986,708 $431,085,882
============ ============
(a) Capital Shares Issued and Redeemed--Class A
(Note 9)
Issued 5,062,541 2,608,233
Issued on reinvestments 6,666,913 6,546,010
Redeemed (9,787,987) (12,279,291)
------------ ------------
Net increase (decrease) in capital shares 1,941,467 (3,125,048)
============ ============
See notes to financial statements
</TABLE>
Notes to Financial Statements
FIRST INVESTORS FUND FOR INCOME, INC.
1. Significant Accounting Policies--The Fund is registered
under the Investment Company Act of 1940 (the "1940 Act")
as a diversified, open-end management investment company.
A. Security Valuation--Except as provided below, a security
listed or traded on an exchange or the NASDAQ National
Market System is valued at its last sale price on the
exchange or system where the security is principally
traded, and lacking any sales, the security is valued at
the last bid price. Each security traded in the over-the-counter
market (including securities listed on exchanges
whose primary market is believed to be over-the-counter) is
valued at the most recent bid price based upon quotes
furnished by a market maker for such securities. Securities
may also be priced by a pricing service. The pricing
service uses quotations obtained from investment dealers or
brokers, information with respect to market transactions in
<PAGE>
comparable securities and other available information in
determining value. Short-term corporate notes which are
purchased at a discount are valued at amortized cost.
Securities for which market quotations are not readily
available, "restricted securities," and any other assets
are valued on a consistent basis at fair value as
determined in good faith by or under the supervision of the
Fund's officers in a manner specifically authorized by the
Board of Directors.
B. Federal Income Taxes--No provision has been made for
federal income taxes on net income or capital gains since
it is the policy of the Fund to continue to comply with the
special provisions of the Internal Revenue Code applicable
to investment companies and to make sufficient
distributions of income and capital gains (in excess of any
available capital loss carryovers) to relieve it from all,
or substantially all, such taxes. At December 31, 1994, the
Fund had capital loss carryovers of $734,311,998 of which
$24,933,230 expires in 1995, $40,084,935 in 1996,
$111,360,941 in 1997, $350,158,165 in 1998, $207,520,038 in
1999 and $254,689 in 2002.
C. Other--Security transactions are accounted for on the
date the securities are purchased or sold. Cost is
determined, and gains and losses are based, on the
identified cost basis for both financial statement and
federal income tax purposes. Dividend income is recorded on
the ex-dividend date. Shares of stock received in lieu of
cash dividends on certain preferred stock holdings are
recognized as dividend income and recorded at the market
value of the shares received. During the year ended
December 31, 1994, the Fund recognized $97,485 of dividend
income from these taxable "pay in kind" distributions.
Interest income and estimated expenses are accrued daily.
Dividends to shareholders from net investment income are
accrued daily and paid monthly.
2. Security Transactions--For the year ended December 31,
1994, purchases and sales of investment securities, other
than United States Government obligations and short-term
corporate notes, aggregated $157,529,700 and $154,513,942,
respectively.
At December 31, 1994, the cost of investments for federal
income tax purposes was $421,282,503. Accumulated net
unrealized depreciation on investments was $26,555,140,
consisting of $7,517,479 gross unrealized appreciation and
$34,072,619 gross unrealized depreciation.
3. Advisory Fee and Other Transactions With Affiliates
(Also see Note 7)--Certain officers and directors of the
Fund are officers and directors of its investment adviser,
First Investors Management Company, Inc. ("FIMCO"), its
underwriter, First Investors Corporation ("FIC"), its
transfer agent, Administrative Data Management Corp.
<PAGE>
("ADM") and/or First Financial Savings Bank, S.L.A.
("FFS"), custodian of the Fund's Individual Retirement
Accounts. Officers and directors of the Fund received no
remuneration from the Fund for serving in such capacities.
Their remuneration (together with certain other expenses of
the Fund) is paid by FIMCO or FIC.
The Investment Advisory Agreement provides as compensation
to FIMCO an annual fee, payable monthly, at the rate of
.75% on the first $250 million of the Fund's average daily
net assets, declining by .03% on each $250 million
thereafter, down to .66% on average daily net assets over
$750 million.
Pursuant to certain state regulations, FIMCO has agreed to
reimburse the Fund if and to the extent that the Fund's
aggregate operating expenses, including the advisory fee
but generally excluding interest, taxes, brokerage
commissions and extraordinary expenses, exceed any
limitation on expenses applicable to the Fund in those
states (unless waivers of such limitations have been
obtained). The amount of any such reimbursement is limited
to the yearly advisory fee. For the year ended December 31,
1994, no reimbursement was required pursuant to these
provisions.
For the year ended December 31, 1994, FIC, as underwriter,
received $413,039 in commissions after allowing $28,996 to
other dealers. Shareholder servicing costs included
$516,083 in transfer agent fees paid to ADM and $231,027 in
custodian fees paid to FFS.
4. Restricted Securities--The Fund held the following
restricted securities at December 31, 1994:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Date
Issuer Acquired Quantity Type of Security Cost
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UCC Investors Holding, Inc. 10/30/89 173,769shs Common Stock Class "A" $ 173,769
Peebles, Inc. 2/07/92 77,310shs Common Stock 2,120,750
Divi Hotels, Inc. 4/27/92 141,762shs Common Stock 3,387,500
Purity Supreme, Inc. 7/29/92 12,129wts Warrants, Expiring 8/6/97 --
- --------------------------------------------------------------------------------------
</TABLE>
These securities, which have been acquired through private
placements, may not be sold or transferred without prior
registration under the Securities Act of 1933 or pursuant
to an exemption therefrom. If and when the Fund sells such
portfolio securities, additional costs for registration may
be required. The restricted securities are valued pursuant
to procedures established by the Fund's Board of Directors
<PAGE>
which include using data provided by certain dealers that
participate in any secondary market that may exist for
these securities, pricing services and other relevant
criteria. At December 31, 1994, the aggregate value of the
above restricted securities was $3,252,208 representing
less than 1% of the Fund's net assets.
5. Rule 144A Securities--Under Rule 144A, certain
restricted securities are exempt from the registration
requirements of the Securities Act of 1933 and may only be
resold to qualified institutional investors. At December
31, 1994, the Fund held four 144A securities with an
aggregate value of $6,657,212 representing 1.7% of the
Fund's net assets. These securities are valued as set forth
in Note 1A.
6. Affiliated Companies--Investments in companies 5% or
more of whose outstanding voting securities are held by the
Fund are defined as "Affiliated Companies" in Section
2(a)(3) of the 1940 Act. For the year ended December 31,
1994, the Fund received interest income of $9,601 from such
affiliated companies.
7. Distribution Plan--Pursuant to a Distribution Plan
adopted under Rule 12b-1 of the 1940 Act, the Fund may pay
a fee to FIC in an amount up to .30% of the Fund's average
net assets on an annualized basis each fiscal year, payable
monthly. The fee consists of a distribution fee and a
service fee. The service fee is paid for the ongoing
servicing of clients who are shareholders of the Fund.
However, pursuant to settlements entered into with various
state regulators, the fee is limited to .15% until February
1, 1998. For the year ended December 31, 1994, this fee
reduction amounted to $567,652.
8. Concentration of Credit Risk--The Fund's investment in
high yield securities whether rated or unrated may be
considered speculative and subject to greater market
fluctuations and risks of loss of income and principal than
lower yielding, higher rated, fixed income securities. The
risk of loss due to default by the issuer may be
significantly greater for the holders of high yielding
securities, because such securities are generally unsecured
and are often subordinated to other creditors of the
issuer. At December 31, 1994, the Fund held two defaulted
securities with a value aggregating $1,652,500 representing
less than 1/2 of 1% of the Fund's net assets.
9. Capital Stock--By action of the Board of Directors, the
Fund amended its Articles of Incorporation on October 21,
1994 so that of the 1,000,000,000 shares originally
authorized, 500,000,000 shares were reclassified as Class A
capital stock and 500,000,000 shares as Class B capital
stock. As of December 31, 1994, only Class A shares have
been issued.
<PAGE>
10. Pending Litigation--The Fund is a defendant in a number
of cases involving investors who invested in the Fund and
First Investors High Yield Fund, Inc. (collectively, the
"Funds"). First Investors High Yield Fund, Inc. and FIC are
defendants in these cases. The suits allege that FIC sales
representatives had made misrepresentations concerning the
risks of investing in the Funds. FIC has made tentative
settlements in connection with several of these cases. In
connection with these settlements, FIC's parent company,
First Investors Consolidated Corporation ("FICC"), has
agreed to assume the liability. Additionally, FICC has
agreed to assume the liability, if any, in the remaining
suits.
<PAGE>
Independent Auditor's Report
To the Shareholders and Board of Directors of
First Investors Fund For Income, Inc.
We have audited the accompanying statement of assets and
liabilities of First Investors Fund For Income, Inc.,
including the portfolio of investments, as of December 31,
1994, and the related statement of operations for the year
then ended, the statement of changes in net assets for each
of the two years in the period then ended and financial
highlights for each of the ten years in the period then
ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1994, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of First
Investors Fund For Income, Inc. at December 31, 1994, and
the results of its operations, changes in its net assets
and financial highlights for each of the respective periods
presented, in conformity with generally accepted accounting
principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1995
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements are set forth in Part B, Statement of Additional
Information.
(b) Exhibits:
(1)/7/ Articles of Restatement
(2)/7/ Amended and Restated By-laws
(3) Not Applicable
(4)/1/ Specimen Certificate
(5)/7/ Investment Advisory Agreement between Registrant
and First Investors Management Company, Inc.
(6)/6/ Underwriting Agreement between Registrant and
First Investors Corporation
(7) Not Applicable
(8)a./1/ Custodian Agreement between Registrant and Irving Trust
Company
b./4/ Supplement to Custodian Agreement
(9)/1/ Administration Agreement between Registrant, First
Investors Management Company, Inc., First Investors
Corporation and Administrative Data Management Corp.
(10)/5/ Opinion of counsel
(11)a. Consent of independent accountants
b./4/ Powers of Attorney
(12) Not Applicable
(13)/1/ Undertaking of the Co-Underwriters
C-1
<PAGE>
(14)a./3/ First Investors Profit Sharing/Money Purchase Pension
Retirement Plan for Sole Proprietorships, Partnerships
and Corporations
b./4/ First Investors Individual Retirement Account
c./2/ First Investors 403(b) Custodial Account
d./4/ First Investors SEP-IRA and SARSEP-IRA
(15)a./7/ Amended and Restated Class A Distribution Plan
b./7/ Class B Distribution Plan
(16) Performance Calculations
- -----------------
/1/ Incorporated by reference from Registrant's Registration Statement (File
No. 33-4935) filed on April 17, 1986
/2/ Incorporated by reference from Post-Effective Amendment No. 7 to
Registrant's Registration Statement (File No. 33-4935) filed on January 22,
1991.
/3/ Incorporated by reference from Post-Effective Amendment No. 12 to
Registrant's Registration Statement (File No. 33-4935) filed on July 23,
1991.
/4/ Incorporated by reference from Post-Effective Amendment No. 18 to
Registrant's Registration Statement (File No. 33-4935) filed on April 29,
1993.
/5/ Incorporated by reference from Registrant's Rule 24f-2 Notice for its
fiscal year ending December 31, 1994 filed on February 21, 1995.
/6/ Incorporated by reference from Post-Effective Amendment No. 19 to
Registrant's Registration Statement (File No. 33-4935) filed on April 29,
1994.
/7/ Incorporated by reference from Post-Effective Amendment No. 20 to
Registrant's Registration Statement (File No. 33-4935) filed on October 18,
1994.
Item 25. Persons Controlled by or under common control with Registrant
There are no persons controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities
C-2
<PAGE>
Number of Record
Holders as of
Title of Class February 28, 1995
-------------- ------------------
Class A shares 22,663
Class B Shares 8
Item 27. Indemnification
Article X, Section 1 of the By-Laws of Registrant provides as follows:
Section 1. Every person who is or was an officer or director of the
Corporation (and his heirs, executors and administrators) shall be indemnified
by the Corporation against reasonable costs and expenses incurred by him in
connection with any action, suit or proceeding to which he may be made a party
by reason of his being or having been a director or officer of the Corporation,
except in relation to any action, suit or proceeding in which he has been
adjudged liable because of negligence or misconduct, which shall be deemed to
include willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. In the absence of an
adjudication which expressly absolves the director or officer of liability to
the Corporation or its stockholders for negligence or misconduct, within the
meaning thereof as used herein, or in the event of a settlement, each director
or officer (and his heirs, executors and administrators) shall be indemnified by
the Corporation against payments made, including reasonable costs and expenses,
provided that such indemnity shall be conditioned upon the prior determination
by a resolution of two-thirds of the Board of Directors, who are not involved in
the action, suit or proceeding that the director or officer has no liability by
reason of negligence or misconduct within the meaning thereof as used herein,
and provided further that if a majority of the members of the Board of Directors
of the Corporation are involved in the action, suit or proceeding, such
determination shall have been made by a written opinion of independent counsel.
Amounts paid in settlement shall not exceed costs, fees and expenses which would
have been reasonably incurred if the action, suit or proceeding had been
litigated to a conclusion. Such a determination by the Board of Directors or by
independent counsel, and the payment of amounts by the Corporation on the basis
thereof, shall not prevent a stockholder from challenging such indemnification
by appropriate legal proceedings on the grounds that the person indemnified was
liable to the Corporation or its security holders by reason of negligence or
misconduct within the meaning thereof as used herein. The foregoing rights and
indemnification shall not be exclusive of any other rights to which any officer
or director (or his heirs, executors and administrators) may be entitled to
according to law.
C-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.
C-4
<PAGE>
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 32 herein.
Item 28. Business and Other Connections of Investment Adviser
First Investors Management Company, Inc., the Registrant's Investment Adviser,
also serves as Investment Adviser to:
First Investors Cash Management Fund, Inc.
First Investors Series Fund
First Investors Fund For Income, Inc.
First Investors Government Fund, Inc.
First Investors Global Fund, Inc.
First Investors Life Series Fund
First Investors Multi-State Insured Tax Free Fund
First Investors New York Insured Tax Free Fund, Inc.
First Investors Special Bond Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
First Investors Series Fund II, Inc.
Affiliations of the officers and directors of the Investment Adviser are set
forth in Part B, Statement of Additional Information, under "Directors and
Officers."
Item 29. Principal Underwriters
(a) First Investors Corporation, Underwriter of the Registrant, is also
underwriter for:
First Investors Cash Management Fund, Inc.
First Investors Series Fund
First Investors Fund For Income, Inc.
First Investors Government Fund, Inc.
First Investors Global Fund, Inc.
First Investors Multi-State Insured Tax Free Fund
First Investors New York Insured Tax Free Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
C-5
<PAGE>
First Investors U.S. Government Plus Fund
First Investors Series Fund II, Inc.
(b) The following persons are the officers and directors of the Underwriter:
<TABLE>
<CAPTION>
Position and Position and
Name and Principal Office with First Office with
Business Address Investors Corporation Registrant
- ------------------ --------------------- ------------
<S> <C> <C>
Glenn O. Head Chairman and Director President
95 Wall Street and Director
New York, NY 10005
John T. Sullivan Director Chairman of the
95 Wall Street Board of
New York, NY 10005 Directors
Roger L. Grayson Director Director
95 Wall Street
New York, NY 10005
Joseph I. Benedek Treasurer Treasurer
10 Woodbridge Center
Drive
Woodbridge, NJ 07095
Concetta Durso Assistant Vice Vice President
95 Wall Street President and and Secretary
New York, NY 10005 Assistant Secretary
Lawrence A. Fauci Senior Vice President None
95 Wall Street and Director
New York, NY 10005
Kathryn S. Head Vice President, Director
10 Woodbridge Center Chief Financial
Drive Officer and Director
Woodbridge, NJ 07095
Louis Rinaldi Senior Vice None
10 Woodbridge Center President
Drive
Woodbridge, NJ 07095
Frederick Miller Vice President None
10 Woodbridge Center
Drive
Woodbridge, NJ 07095
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
Position and Position and
Name and Principal Office with First Office with
Business Address Investors Corporation Registrant
- ------------------ --------------------- ------------
<S> <C> <C>
Larry R. Lavoie Secretary and None
95 Wall Street General Counsel
New York, NY 10005
Carol Lerner Brown Assistant Secretary Assistant
95 Wall Street Secretary
New York, NY 10005
Marvin M. Hecker President None
95 Wall Street
New York, NY 10005
Matthew Smith Vice President None
10 Woodbridge Center
Drive
Woodbridge, NJ 07095
Howard M. Factor Vice President None
95 Wall Street
New York, NY 10005
Jeremiah J. Lyons Director None
56 Weston Avenue
Chatham, NJ 07928
Jane W. Kruzan Director None
15 Norwood Avenue
Summit, NJ 07901-0493
Kellen M. Carson Vice President None
95 Wall Street
New York, NY 10005
Anne Condon Vice President None
10 Woodbridge Center
Drive
Woodbridge, NJ 07095
</TABLE>
(c) Not applicable
C-7
<PAGE>
Item 30. Location of Accounts and Records
Physical possession of the books, accounts and records of the Registrant
are held by First Investors Management Company, Inc. and its affiliated
companies, First Investors Corporation and Administrative Data Management Corp.,
at their corporate headquarters, 95 Wall Street, New York, NY 10005 and
administrative offices, 10 Woodbridge Center Drive, Woodbridge, NJ 07095,
except for those maintained by the Registrant's Custodian, The Bank of New York,
48 Wall Street, New York, NY 10286.
Item 31. Management Services
Inapplicable
Item 32. Undertakings
The Registrant undertakes to carry out all indemnification provisions
of its Articles of Incorporation, Advisory Agreement and Underwriting Agreement
in accordance with Investment Company Act Release No. 11330 (September 4, 1980)
and successor releases.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions under Item 27 herein, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes to furnish a copy of its latest
annual report to shareholders, upon request and without charge, to each person
to whom a prospectus is delivered.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant represents that this Amendment
meets all the requirements for effectiveness pursuant to Rule 485(b) under the
Securities Act of 1933, and has duly caused this Post-Effective Amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
17th day of April, 1995.
FIRST INVESTORS HIGH YIELD FUND,
INC.
(Registrant)
By: /s/ Glenn O. Head
---------------------------
Glenn O. Head
President and Director
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/ Glenn O. Head Principal Executive April 17, 1995
- --------------------- Officer and Director
Glenn O. Head
/s/ Joseph I. Benedek Principal Financial April 17, 1995
- --------------------- and Accounting Officer
Joseph I. Benedek
/s/ Kathryn S. Head Director April 17, 1995
- ---------------------
Kathryn S. Head
/s/ James J. Coy Director April 17, 1995
- ---------------------
James J. Coy
/s/ F. William Ortman Director April 17, 1995
- ---------------------
F. William Ortman, Jr.
/s/ Roger L. Grayson Director April 17, 1995
- ---------------------
Roger L. Grayson
/s/ Herbert Rubinstein Director April 17, 1995
- ----------------------
Herbert Rubinstein
/s/ James M. Srygley Director April 17, 1995
- ---------------------
James M. Srygley
/s/ John T. Sullivan Director April 17, 1995
- ---------------------
John T. Sullivan
/s/ Rex R. Reed Director April 17, 1995
- ---------------------
Rex R. Reed
/s/ Robert F. Wentworth Director April 17, 1995
- -----------------------
Robert F. Wentworth
*By: /s/ Larry R. Lavoie
-------------------------
Larry R. Lavoie
Attorney-in-fact
C-9
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
23 Consent of accountants
24 Power of Attorney
27 Financial Data Schedule
99 Performance Calculations
<PAGE>
EXHIBIT 23
Consent of Independent Certified Public Accountants
First Investors High Yield Fund, Inc.
95 Wall Street
New York, New York 10005
We consent to the use in Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A (File No. 33-4935) of our report dated
January 31, 1995 relating to the December 31, 1994 financial statements of First
Investors High Yield Fund, Inc., which are included in said Registration
Statement.
/s/ Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 11, 1995
<PAGE>
EXHIBIT 24
First Investors High Yield Fund, Inc.
Power of Attorney
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or director
of First Investors High Yield Fund, Inc. hereby appoints Larry R. Lavoie or
Glenn O. Head, and each of them, his true and lawful attorney to execute in his
name, place and stead and on his behalf a Registration Statement on Form N-1A
for the registration pursuant to the Securities Act of 1933 and the Investment
Company Act of 1940 of shares of common stock of said Maryland corporation and
any and all amendments to said Registration Statement (including post-effective
amendments), and all instruments necessary or incidental in connection therewith
and to file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on behalf
of the undersigned every act whatsoever requisite or desirable to be done in the
premises, as fully and to all intents and purposes as the undersigned might or
could do, the undersigned hereby ratifying and approving all such acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this this
19th day of January, 1995.
/s/James M. Srygley
---------------------------------
James M. Srygley
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 191,915
<INVESTMENTS-AT-VALUE> 168,495
<RECEIVABLES> 3,649
<ASSETS-OTHER> 526
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 172,670
<PAYABLE-FOR-SECURITIES> 1,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,271
<TOTAL-LIABILITIES> 2,271
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 629,648
<SHARES-COMMON-STOCK> 35,225
<SHARES-COMMON-PRIOR> 36,087
<ACCUMULATED-NII-CURRENT> 2,331
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (438,161)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (23,419)
<NET-ASSETS> 170,399
<DIVIDEND-INCOME> 236
<INTEREST-INCOME> 19,406
<OTHER-INCOME> 245
<EXPENSES-NET> (2,805)
<NET-INVESTMENT-INCOME> 17,082
<REALIZED-GAINS-CURRENT> 847
<APPREC-INCREASE-CURRENT> (17,369)
<NET-CHANGE-FROM-OPS> 561
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17,023)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,432
<NUMBER-OF-SHARES-REDEEMED> 4,798
<SHARES-REINVESTED> 2,504
<NET-CHANGE-IN-ASSETS> (20,930)
<ACCUMULATED-NII-PRIOR> 2,272
<ACCUMULATED-GAINS-PRIOR> (439,008)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,802
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,871
<AVERAGE-NET-ASSETS> 180,163
<PER-SHARE-NAV-BEGIN> 5.3
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> (.46)
<PER-SHARE-DIVIDEND> .48
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.84
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99
Distribution yields for First Investor's Funds are calculated using the
following formula:
Yield = (a/b)
Where:
a = dividends declared during the last 12 months.
b = Net asset value per share on the last day of the period.
The following is a list of the information used to calculate the distribution
yield for First Investors High Yield Fund, Inc. as of December 31, 1994.
<TABLE>
<CAPTION>
Distribution
a b Yield
- - -----
<S> <C> <C>
$.480 $4.84 9.92%
</TABLE>
<PAGE>
Distribution yields for First Investor's Funds are calculated using the
following formula:
Yield = (a/b)
Where:
a = dividends declared during the last 12 months.
b = Maximum offering price per share on the last day of the period.
The following is a list of the information used to calculate the distribution
yield for First Investors High Yield Fund, Inc. as of December 31, 1994.
<TABLE>
<CAPTION>
Distribution
a b Yield
- - -----
<S> <C> <C>
$.480 $5.16 9.30%
</TABLE>
<PAGE>
Yields for First Investor's Funds are calculated using the following formula:
2(((((a - b) + ((cd) - e)) + 1) - 1) - 1)
Where:
a = dividends and interest earned during the 30 day period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
e = undeclared earned income.
The following is a list of the information used to calculate the for
First Investors High Yield Fund, Inc. as of december 31, 1994.
<TABLE>
<CAPTION>
a b c d e Yield
- - - - - -----
<S> <C> <C> <C> <C> <C>
$1,621,545 $201,820 35,164,099 $5.16 $.00 9.27%
</TABLE>
<PAGE>
NAV Only Total Returns
Average Annual Total Return and Total Return for First Investors
Funds are calculated using the following standardized formula:
Average Annual
Total Return = ((ERV divided by P) ) - 1
Total Return = ((ERV - P) divided by P)
WHERE: ERV = Ending redeemable value of a hypothetical
$1,000 investment made at the beginning of
1, 5, or 10 year periods (or fractional
period thereof.)
P = a hypothetical initial investment of $1,000
N = number of years
The following table lists the information used to calculate the average annual
total return and total return for First Investors High Yield Fund, Inc. as of
December 31, 1994.
<TABLE>
<CAPTION>
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
<S> <C> <C> <C> <C> <C>
1 year: $1,003.90 $1,000.00 1.00 (.39%) (.39%)
5 years: $1,570.20 $1,000.00 5.00 9.44% 57.02%
Life of Fund: $1,646.30 $1,000.00 8.39 6.12% 64.63%
</TABLE>
<PAGE>
SEC Standardized Total Returns
Average Annual Total Return and Total Return for First Investors
Funds are calculated using the following standardized formula:
Average Annual
Total Return = ((ERV divided by P) ) - 1
Total Return = ((ERV - P) divided by P)
WHERE: ERV = Ending redeemable value of a hypothetical
$1,000 investment made at the beginning of
1, 5, or 10 year periods (or fractional
period thereof.)
P = a hypothetical initial investment of $1,000
N = number of years
The following table lists the information used to calculate the standardized
average annual total return and total return for First Investors High Yield
Fund, Inc. as of December 31, 1994.
<TABLE>
<CAPTION>
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
<S> <C> <C> <C> <C> <C>
1 year: $ 941.70 $1,000.00 1.00 (5.83%) (5.83%)
5 years: $1,472.10 $1,000.00 5.00 8.04% 47.21%
10 years: $1,544.30 $1,000.00 8.39 5.32% 54.43%
</TABLE>
