Portfolio Manager's Letter
FIRST INVESTORS HIGH YIELD FUND, INC.
Dear Investor:
1995 was a very good year for investors in the U.S. financial markets. The broad
stock market averages repeatedly closed at record highs, and bond prices surged
as long-term interest rates fell almost two percent. Several general factors
contributed to this strong performance. First, the U.S. economy grew at a
moderate pace throughout the year. Second, the rate of inflation declined,
reaching its lowest level since the 1960s. Third, the Federal Reserve began
lowering short-term interest rates during the second half of the year. Finally,
during the fourth quarter, Congress and the President appeared close to reaching
an agreement to eliminate the Federal budget deficit over the next seven years.
First Investors High Yield Fund performed well during 1995 returning 18.4% on a
net asset value basis on Class A shares and 17.4% on Class B shares (first
offered for sale on January 12, 1995). These returns compare favorably with a
16.4% average return for high yield funds according to Lipper Analytical
Services, Inc. During this period, dividends paid from net investment income
amounted to 48 cents per share on Class A shares and 42.6 cents per share for
Class B shares.
Inflows to high yield mutual funds were fairly consistent throughout 1995. AMG
Data measured a net $8.4 billion inflow to the funds, fueling a rally that began
early in the year. Led at first by lower-rated and deferred coupon bonds,
several industry sectors that had underperformed in 1994 rebounded in 1995. The
communications sector posted among the highest returns of any industry. Gaming,
one of the worst performers of 1994, showed a strong turnaround driven
particularly by improvement in the Atlantic City market. Other industries that
generally outperformed the overall market were finance, media, energy,
healthcare services, and home building. These industries benefited from lower
interest rates, regulatory developments, and/or consolidation. The retail and
restaurant groups showed continued weakness for the second year in a row.
The improving interest rate environment caused the net new supply of high yield
bonds to increase significantly in 1995 compared to 1994. Approximately 60% of
the new issuance occurred in the second half of 1995 amid signs of a slowing
economy. Accordingly, market leadership began to rotate away from economically
sensitive industries such as metals, chemicals, and forest products as the
volume growth and pricing power these industries recently enjoyed reached a
cyclical peak. The overall credit quality of the high yield market continued to
improve. Growth in issuance of credits rated split BB or better resulted in a
greater participation from better quality and crossover investors, thus bidding
up the prices in that tier of the market.
The High Yield Fund's performance benefited from its holdings of more liquid and
higher-rated bonds in industries where cash flows are perceived to be stable or
growing or where significant consolidation is occurring. Examples of sector
choices which aided performance include a heavy weighting in the media,
telecommunications (notably Echostar deferred coupon bonds), and forest products
industries. Also, the Fund gained from an underweighting in the retail industry,
where we avoided several bankruptcies such as Caldor, Bradlee's and Grand Union.
Additionally, the Fund's deferred-pay holdings helped performance, both by
virtue of their increased interest-rate sensitivity and by solid credit
improvements by many of them.
We believe that high yield bonds are positioned to perform well versus fixed
income alternatives in 1996. While we expect some modest short-term interest
rate reduction to stimulate the economy in this election year, we are unlikely
to see the magnitude of interest rate decline that occurred in 1995. In a stable
to moderately declining interest rate environment, high yield bonds tend to
outperform fixed income alternatives by virtue of their higher income. We expect
that our credit-oriented strategy of concentrating on stable to improving bonds
will continue to reward Fund shareholders. As always we appreciate the
opportunity to serve your investment needs.
Sincerely,
/S/ George V. Ganter
George V. Ganter
Portfolio Manager
January 31, 1996
<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. (Class A shares) and the First Boston High Yield Index.
[The following was represented by a line graph in the printed document]
- --------------------------------------------------------------------------------
As of December 31, 1995
$100,000
Average Annual Total Return*
N.A.V. Only SEC Standardized
Class A shares
One Year 18.4% 11.1%
Five Years 17.6% 16.1%
Since Inception 7.4% 6.6%
$10,000 S.E.C. 30-Day Yield 7.1%
Class B shares
Since Inception 17.4% 12.7%
S.E.C. 30-Day Yield 6.8%
$1,000
Aug-86 Dec-87 Dec-89 Dec-91 Dec-93 Dec-95
- --------------------------------------------------------------------------------
High Yield Fund First Boston High Yield Index
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The graph compares a $10,000 investment made in the First Investors High Yield
Fund, Inc. (Class A shares) on 8/12/86 (inception date) with a theoretical
investment in the First Boston High Yield Index. It is not possible to invest
directly in this Index. In addition, the Index does not take into account fees
and expenses. For purposes of the graph and the accompanying table, unless
otherwise indicated, it has been assumed that the maximum sales charge was
deducted from the initial $10,000 investment in the Fund and all dividends and
distributions were reinvested. Class B shares performance may be greater than or
less than that shown above based on differences in sales loads and fees paid by
shareholders investing in the different classes.
The First Boston High Yield Index is designed to measure the performance of the
high yield bond market. The Index consists of 687 different issues, 574 of which
are cash pay, 84 are zero-coupon, 20 are step bonds, 5 are payment-in-kind bonds
and the remaining 4 are in default. The bonds included in the Index have an
average life of 7.8 years, an average maturity of 7.9 years, an average duration
of 4.4 years and an average coupon of 10.6%.
*Average Annual Total Return figures (for the period ended 12/31/95) include the
reinvestment of all dividends and distributions. "N.A.V. Only" returns are
calculated without sales charges. The Class A "S.E.C. Standardized" returns
shown are based on the maximum sales charge of 6.25% (prior to 7/1/93 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 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 Class A shares "S.E.C.
Standardized" Average Annual Total Return for One Year, Five Years and Since
Inception would have been 11.0%, 15.9% and 6.6%, respectively and the Class A
shares S.E.C. 30-Day Yield for December 1995 would have been 7.0%. The returns
for Class B shares (first offered for sale on 1/12/95) are for the period
1/12/95 through 12/31/95. The Class B "S.E.C. Standardized" return is adjusted
for the applicable deferred sales charge (maximum of 4% in the first year).
Results represent past performance and do not indicate future results.
Investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost. The unusually high current yields offered reflect the substantial risks
associated with investments in high yield bonds. The issuers of the bonds pay
higher interest rates because they have a greater likelihood of financial
difficulty which could result in their inability to repay the bonds fully when
due. Prices of high yield bonds are also subject to greater fluctuations. 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.
2
<PAGE>
Portfolio Composition
FIRST INVESTORS HIGH YIELD FUND, INC.
The Dollar weighted average of credit ratings of all bonds held by the Fund
during the 1995 fiscal year, and the dollar weighted average of the total of the
Fund's investments in zero coupon bonds and pay-in-kind bonds during the 1995
fiscal year, computed on a monthly basis, is set forth below. This information
reflects the average composition of the Fund's assets during the 1995 fiscal
year and is not necessarily representative of the Fund as of the end of its 1995
fiscal year, the current fiscal year or at any other time in the future.
- --------------------------------------------------------------------------------
Comparable Quality
Rated by of Unrated Securities
Moody's to Bonds Rated by Moody's
- --------------------------------------------------------------------------------
Baa1 0.12% 0.00%
Baa2 0.15 0.00
Baa3 0.34 0.00
Ba1 1.58 0.00
Ba2 3.07 0.81
Ba3 14.39 0.00
B1 17.91 0.37
B2 18.01 0.87
B3 16.57 0.68
Caa 4.12 0.96
Ca 0.40 0.00
- --------------------------------------------------------------------------------
Zero Coupon Bonds 12.75%
Pay-in-kind Bonds 1.51%
3
<PAGE>
Portfolio of Investments
FIRST INVESTORS HIGH YIELD FUND, INC.
December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS -- 89.6%
Aerospace/Defense -- 1.0%
$ 1,750M Fairchild Industries, Inc., 121/4%, 1999 $ 1,863,750 $ 99
- --------------------------------------------------------------------------------------------------------------
Apparel/Textiles--1.6%
3,900M +Linter Textiles Corp., Ltd., 133/4%, 2000 29,250 2
3,000M Westpoint Stevens, Inc., 93/8%, 2005 2,955,000 157
- --------------------------------------------------------------------------------------------------------------
2,984,250 159
- --------------------------------------------------------------------------------------------------------------
Automotive--3.9%
1,500M Aftermarket Technology Corp., 12%, 2004 1,590,000 85
1,100M Lear Seating, Inc., 111/4%, 2000 1,159,125 62
2,450M SPX Corp., 113/4%, 2002 2,597,000 138
2,000M Walbro Corp., 97/8%, 2005 (Note 5) 2,000,000 107
- --------------------------------------------------------------------------------------------------------------
7,346,125 392
- --------------------------------------------------------------------------------------------------------------
Building Materials--2.5%
3,000M G-I Holdings, Inc., 0%, 1998 2,302,500 123
1,600M Waxman Industries, Inc., 133/4%, 1999 1,232,000 66
3,155M Waxman Industries, Inc., 0%-123/4%, 2004 1,230,450 66
- --------------------------------------------------------------------------------------------------------------
4,764,950 255
- --------------------------------------------------------------------------------------------------------------
Chemicals--5.6%
2,500M Harris Chemical North America, Inc., 0%-101/4%, 2001 2,425,000 129
2,175M Harris Chemical North America, Inc., 103/4%, 2003 1,995,563 106
1,000M Huntsman Corp., 11%, 2004 1,146,250 61
2,800M Rexene Corp., 113/4%, 2004 2,968,000 159
2,000M Synthetic Industries, Inc., 123/4%, 2002 1,960,000 104
- --------------------------------------------------------------------------------------------------------------
10,494,813 559
- --------------------------------------------------------------------------------------------------------------
Conglomerates--2.1%
1,255M Lexington Precision Co., Inc., 123/4%, 2000 978,900 52
5,500M Semi-Tech Corp., 0%-111/2%, 2003 2,970,000 158
- --------------------------------------------------------------------------------------------------------------
3,948,900 210
- --------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--.7%
1,300M Hines Horticulture, Inc., 113/4%, 2005 (Note 5) 1,358,500 72
- --------------------------------------------------------------------------------------------------------------
Consumer Products--.8%
1,500M Herff Jones, Inc., 11%, 2005 1,605,000 85
- --------------------------------------------------------------------------------------------------------------
Containers--3.2%
5,400M Owens Illinois, Inc., 11%, 2003 6,108,750 325
- --------------------------------------------------------------------------------------------------------------
Durable Goods Manufacturing--2.4%
2,445M Fairfield Manufacturing, Inc., 113/8%, 2001 2,383,875 127
2,500M RACI Acquisition Corp., 10%, 2003 (Note 5) 2,125,000 113
- --------------------------------------------------------------------------------------------------------------
4,508,875 240
- --------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Electrical Equipment--1.2%
$ 2,200M IMO Industries, Inc., 12%, 2001 $ 2,233,000 $ 119
- --------------------------------------------------------------------------------------------------------------
Energy--1.9%
1,500M Giant Industries, Inc., 93/4%, 2003 1,518,750 81
2,000M Maxus Energy Corp., 111/2%, 2015 2,100,000 112
- --------------------------------------------------------------------------------------------------------------
3,618,750 193
- --------------------------------------------------------------------------------------------------------------
Energy Exploration/Production--1.7%
3,000M Gulf Canada Resources, Ltd., 95/8%, 2005 3,127,500 167
- --------------------------------------------------------------------------------------------------------------
Financial Services--1.9%
1,500M +Lomas Mortgage, USA, 101/4%, 2002 750,000 40
1,200M Olympic Financial, Ltd., 13%, 2000 1,308,000 70
1,300M Terra Nova Holdings, PLC, 103/4%, 2005 1,417,000 75
- --------------------------------------------------------------------------------------------------------------
3,475,000 185
- --------------------------------------------------------------------------------------------------------------
Food Services--1.1%
2,200M Flagstar Corp., 103/4%, 2001 2,029,500 108
- --------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--4.1%
3,000M Fleming Co., Inc., 105/8%, 2001 2,910,000 155
2,500M TLC Beatrice International Holdings, Inc., 111/2%, 2005 2,431,250 129
2,350M Van de Kamps, Inc., 12%, 2005 (Note 5) 2,444,000 130
- --------------------------------------------------------------------------------------------------------------
7,785,250 414
- --------------------------------------------------------------------------------------------------------------
Gaming/Lodging--2.8%
2,450M Casino America, Inc., 111/2%, 2001 2,303,000 123
1,000M GB Property Funding, Inc., 107/8%, 2004 872,500 46
750M Grand Casinos, Inc., 101/8%, 2003 781,875 42
800M Players International, Inc., 107/8%, 2005 750,000 40
1,925M +SHRP Capital Corp., 113/4%, 1999 442,750 24
- --------------------------------------------------------------------------------------------------------------
5,150,125 275
- --------------------------------------------------------------------------------------------------------------
Healthcare--4.4%
1,300M Genesis Healthcare, Inc., 93/4%, 2005 1,371,500 73
1,600M Integrated Health Services, Inc., 103/4%, 2004 1,712,000 91
2,700M Ornda Healthcorp., 121/4%, 2002 2,956,500 157
2,000M Tenet Healthcare Corp., 101/8%, 2005 2,212,500 118
- --------------------------------------------------------------------------------------------------------------
8,252,500 439
- --------------------------------------------------------------------------------------------------------------
Information Technology/Office Equipment--.6%
1,000M Bell & Howell Co., 103/4%, 2002 1,062,500 57
- --------------------------------------------------------------------------------------------------------------
Media/Cable Television--17.2%
1,400M Adelphia Communications, Inc., 97/8%, 2005 1,267,000 67
4,000M Bell Cablemedia, PLC, 0%-11.95%, 2004 2,820,000 150
2,000M Century Communications Corp., 91/2%, 2005 2,065,000 110
- --------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Portfolio of Investments
FIRST INVESTORS HIGH YIELD FUND, INC.
December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Media/Cable Television (continued)
$ 3,725M Echostar Communications Corp., 0%-127/8%, 2004 $ 2,495,750 $ 133
3,200M Garden State Newspapers, Inc., 12%, 2004 3,224,000 172
3,000M Lamar Advertising, Inc., 11%, 2003 3,105,000 165
1,000M Le Groupe Videotron, Ltee., 105/8%, 2005 1,072,500 57
3,625M Outdoor Systems, Inc., 103/4%, 2003 3,498,125 187
1,800M PanAmSat Capital Corp., 93/4%, 2000 1,890,000 101
3,700M PanAmSat Capital Corp., 0%-113/8%, 2003 2,997,000 160
2,000M Rogers Cablesystems, Inc., 10%, 2005 2,147,500 114
2,000M Rogers Communication, Inc., 107/8%, 2004 2,087,500 111
5,100M Videotron Holdings, PLC, 0%-111/8%, 2004 3,570,000 190
- --------------------------------------------------------------------------------------------------------------
32,239,375 1,717
- --------------------------------------------------------------------------------------------------------------
Mining/Metals--7.9%
2,755M Carbide/Graphite Group, Inc., 111/2%, 2003 2,975,400 159
2,475M Geneva Steel Co., Inc., 111/8%, 2001 2,054,250 109
2,590M Magma Copper Co., Inc., 12%, 2001 2,871,663 153
4,050M WCI Steel, Inc., 101/2%, 2002 3,928,500 209
3,200M Wheeling-Pittsburgh Steel Corp., 93/8%, 2003 3,008,000 160
- --------------------------------------------------------------------------------------------------------------
14,837,813 790
- --------------------------------------------------------------------------------------------------------------
Miscellaneous--1.1%
2,025M Monarch Marking Systems, Inc., 121/2%, 2003 2,116,125 113
- --------------------------------------------------------------------------------------------------------------
Paper/Forest Products--9.3%
2,000M Doman Industries, Inc., 83/4%, 2004 1,920,000 102
3,600M Gaylord Container Corp., 111/2%, 2001 3,708,000 197
2,000M Riverwood International Corp., 111/4%, 2002 2,160,000 115
2,600M S.D. Warren Co., Inc., 12%, 2004 2,860,000 152
2,750M Stone Container Corp., 117/8%, 1998 2,880,625 153
4,000M Stone Container Corp., 97/8%, 2001 3,890,000 208
- --------------------------------------------------------------------------------------------------------------
17,418,625 927
- --------------------------------------------------------------------------------------------------------------
Retail-Food/Drug--1.2%
2,400M Penn Traffic Co., 101/4%, 2002 2,292,000 122
- --------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.9%
11M Barry's Jewelers, Inc., 125/8%, 1996 5,750 --
1,750M General Host Co., Inc., 111/2%, 2002 1,645,000 88
- --------------------------------------------------------------------------------------------------------------
1,650,750 88
- --------------------------------------------------------------------------------------------------------------
Telecommunications--5.0%
3,750M American Communication Services, Inc., 0%-13%, 2005 (Note 5) 2,053,125 109
2,000M Metrocall, Inc., 103/8%, 2007 2,120,000 113
6,525M MFS Communications, Inc., 0%-93/8%, 2004 5,203,687 277
- --------------------------------------------------------------------------------------------------------------
9,376,812 499
- --------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Amount
Principal Invested
Amount, For Each
Shares or $10,000 of
Warrants Security Value Net Assets
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Transportation--3.5%
$ 3,550M Eletson Holdings, Inc., 91/4%, 2003 $ 3,479,000 $ 185
1,100M Moran Transportation Co., 113/4%, 2004 1,034,000 55
2,050M Trism, Inc., 103/4%, 2000 1,988,500 106
- --------------------------------------------------------------------------------------------------------------
6,501,500 346
- --------------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $173,454,644) 168,151,038 8,955
- --------------------------------------------------------------------------------------------------------------
COMMON STOCKS--.9%
Electrical Equipment--.1%
6,481 *Thermadyne Holdings Corp. 117,468 6
- --------------------------------------------------------------------------------------------------------------
Financial Services--.1%
9,600 *Olympic Financial, Ltd. 156,000 9
- --------------------------------------------------------------------------------------------------------------
Gaming/Lodging--.0%
120,498 *Divi Hotels, Inc. (Note 4) 6,025 --
- --------------------------------------------------------------------------------------------------------------
Media/Cable Television--.3%
22,350 *Echostar Communications Corp., Class "A" 541,988 29
- --------------------------------------------------------------------------------------------------------------
Paper/Forest Products--.2%
53,061 *Gaylord Container Corp., Class "A" 427,804 23
- --------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.2%
89,806 *Barry's Jewelers, Inc. 359,225 19
- --------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $4,950,927) 1,608,510 86
- --------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--2.3%
Financial Services--1.8%
20,000 California Federal Bank, 105/8%, Series "B" 2,160,000 115
40,800 Greater New York Savings Bank, 12%, Series "B" 1,162,800 62
- --------------------------------------------------------------------------------------------------------------
3,322,800 177
- --------------------------------------------------------------------------------------------------------------
Paper/Forest Products--.5%
30,200 *S.D. Warren Co., Inc., 14% 951,300 51
- --------------------------------------------------------------------------------------------------------------
Total Value of Preferred Stocks (cost $3,998,050) 4,274,100 228
- --------------------------------------------------------------------------------------------------------------
WARRANTS--.3%
Building Materials--.0%
100,300 *Waxman Industries, Inc. (expiring 6/1/04) (Note 5) 25,075 1
- --------------------------------------------------------------------------------------------------------------
Electrical Equipment--.0%
67 *Digicon, Inc. (expiring 7/1/96) 2 --
- --------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Portfolio of Investments
FIRST INVESTORS HIGH YIELD FUND, INC.
December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Amount
Warrants Invested
or For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Gaming/Lodging--.1%
7,987 *Casino America, Inc. (expiring 11/15/96) $ 1,997 $--
12,000 *President Riverboat Casinos, Inc. (expiring 9/23/96) (Note 5) 36,000 2
17,660 *President Riverboat Casinos, Inc. (expiring 9/30/99) (Note 4) 70,640 4
7,200 *SHRP Capital Corp. (expiring 7/15/99) (Note 5) -- --
- --------------------------------------------------------------------------------------------------------------
108,637 6
- --------------------------------------------------------------------------------------------------------------
Paper/Forest Products--.2%
47,697 *Gaylord Container Corp. (expiring 7/31/96) 357,727 19
30,200 *S.D. Warren Co., Inc. (expiring 12/15/06) (Note 5) 151,000 8
- --------------------------------------------------------------------------------------------------------------
508,727 27
- --------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.0%
3,800 *Payless Cashways, Inc. (expiring 11/1/96) 950 --
- --------------------------------------------------------------------------------------------------------------
Total Value of Warrants (cost $884,483) 643,391 34
- --------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--2.1%
$ 4,000M Federal Home Loan Bank Board, 6.02%, 1998 (cost $4,000,000) 4,006,716 213
- --------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.2%
1,000M Appalachian Power, 6%, 1/2/96 999,833 53
5,000M Gannett Co., 5.85%, 1/8/96 4,994,313 266
- --------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $5,994,146) 5,994,146 319
- --------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $193,282,250) 98.4% 184,677,901 9,835
Other Assets, Less Liabilities 1.6 3,102,608 165
- --------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $187,780,509 $10,000
==============================================================================================================
</TABLE>
* Non-income producing
+ In default as to principal and/or interest (Note 7)
8
<PAGE>
Statement of Assets and Liabilities
FIRST INVESTORS HIGH YIELD FUND, INC.
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Investments in securities, at value
(identified cost $193,282,250) (Note 1A)................................ $ 184,677,901
Cash...................................................................... 201,922
Receivables:
Interest................................................................ $ 3,625,748
Capital shares sold..................................................... 193,176
Investment securities sold.............................................. 28,000 3,846,924
-----------
Other assets.............................................................. 59,061
-------------
Total Assets.............................................................. 188,785,808
Liabilities
Payables:
Capital shares redeemed................................................. 385,394
Dividend payable January 15, 1996....................................... 369,939
Accrued advisory fee...................................................... 140,504
Accrued expenses.......................................................... 109,462
-----------
Total Liabilities......................................................... 1,005,299
-------------
Net Assets (Note 8):
Class A (35,771,215 shares outstanding)................................. 186,892,517
Class B (169,897 shares outstanding).................................... 887,992 $ 187,780,509
----------- =============
Net Assets Consist of:
Capital paid in........................................................... $ 631,641,245
Undistributed net investment income....................................... 1,991,248
Accumulated net realized loss on investment transactions.................. (437,247,635)
Net unrealized depreciation in value of investments....................... (8,604,349)
-------------
Total..................................................................... $ 187,780,509
=============
Net asset value and redemption price per share-- Class A ................ $5.22
=====
Maximum offering price per share-- Class A ($5.22/.9375)*................. $5.57
=====
Net asset value and offering price per share-- Class B ................... $5.23
=====
*On purchases of $25,000 or more, the sales charge is reduced.
</TABLE>
See notes to financial statements
9
<PAGE>
Statement of Operations
FIRST INVESTORS HIGH YIELD FUND, INC.
Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income
Income:
Interest ................................................................. $18,855,778
Dividends ................................................................ 311,109
Consent fees ............................................................. 187,465
-----------
Total income ............................................................... $19,354,352
Expenses (Note 3):
Advisory fee ............................................................. 1,815,792
Shareholder servicing costs .............................................. 540,510
Distribution plan expenses-- Class A ..................................... 271,715
Distribution plan expenses-- Class B ..................................... 3,697
Reports and notices to shareholders ...................................... 75,600
Professional Fees ........................................................ 43,512
Custodian Fees ........................................................... 24,771
Other expenses ........................................................... 44,997
-----------
Total expenses ............................................................. 2,820,594
Less: Portion of advisory fee waived........................................ (181,579)
Custodian fees paid indirectly ........................................ (21,288)
-----------
Net expenses ............................................................... 2,617,727
-----------
Net investment income ...................................................... 16,736,625
Realized and Unrealized Gain (Loss) on Investments (Notes 2 and 6):
Net realized gain (loss) on investments:
Unaffiliated companies ................................................... 1,690,981
Affiliated companies ..................................................... (2,411,012)
-----------
Net realized loss on investments ........................................... (720,031)
Net unrealized appreciation of investments ................................. 14,815,104
-----------
Net gain on investments .................................................... 14,095,073
-----------
Net Increase in Net Assets Resulting from Operations ...................... $30,831,698
===========
</TABLE>
See notes to financial statements
10
<PAGE>
FIRST INVESTORS HIGH YIELD FUND, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Year Ended December 31 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income .................................................... $ 16,736,625 $ 17,082,492
Net realized gain (loss) on investments .................................. (720,031) 846,883
Net unrealized appreciation (depreciation) on investments ................ 14,815,104 (17,368,735)
------------ ------------
Net increase in net assets resulting from operations ................... 30,831,698 560,640
------------ ------------
Dividends to Shareholders from:
Net investment income-- Class A .......................................... (17,039,142) (17,023,090)
Net investment income-- Class B .......................................... (37,544) --
------------ ------------
Total dividends ........................................................ (17,076,686) (17,023,090)
------------ ------------
Capital Share Transactions (a)
Class A:
Proceeds from shares sold .............................................. 12,606,146 7,240,104
Value of dividends reinvested .......................................... 12,721,081 12,643,358
Cost of shares redeemed ................................................ (22,568,327) (24,351,080)
------------ ------------
2,758,900 (4,467,618)
------------ ------------
Class B:
Proceeds from shares sold .............................................. 856,809 --
Value of dividends reinvested .......................................... 16,473 --
Cost of shares redeemed ................................................ (5,776) --
------------ ------------
867,506 --
------------ ------------
Net increase (decrease) from capital share transactions ................ 3,626,406 (4,467,618)
------------ ------------
Net increase (decrease) in net assets ................................ 17,381,418 (20,930,068)
Net Assets
Beginning of year ...................................................... 170,399,091 191,329,159
------------ ------------
End of year (including undistributed net investment income of
$1,991,248 and $2,331,309, respectively).............................. $187,780,509 $170,399,091
============ ============
(a)Capital shares issued and redeemed
Class A:
Sold ................................................................... 2,473,148 1,431,548
Issued for dividends reinvested ........................................ 2,489,075 2,504,396
Redeemed ............................................................... (4,415,539) (4,798,027)
------------ ------------
Net increase (decrease) in Class A shares outstanding ................ 546,684 (862,083)
============ ============
Class B:
Sold ................................................................... 167,832 --
Issued for dividends reinvested ........................................ 3,176 --
Redeemed ............................................................... (1,111) --
------------ ------------
Net increase in Class B shares outstanding ........................... 169,897 --
============ ============
</TABLE>
See notes to financial statements
11
<PAGE>
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. The primary investment
objective of the Fund is to seek high current income and secondarily to seek
capital appreciation.
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 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, 1995, the Fund had
capital loss carryovers of $437,011,075 of which $51,200,545 expires in 1996,
$107,418,334 in 1997, $166,492,834 in 1998, $109,407,948 in 1999, $1,762,042 in
2001, $135,416 in 2002 and $593,956 in 2003.
C. Distributions to Shareholders--Dividends to shareholders from net investment
income are declared daily and paid monthly. Income dividends and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for capital loss carryforwards and post
October losses.
D. Other--Security transactions are accounted for on the date the securities are
purchased or sold. Cost is determined, and gains and losses are based, on the
identified cost basis for both financial statement and federal income tax
purposes. Dividend income is recorded on the ex-dividend date. Interest income
and estimated expenses are accrued daily. The Fund's Custodian has provided
credits in the amount of $21,288 against custodian charges based on the
uninvested cash balances of the Fund.
2. Security Transactions--For the year ended December 31, 1995, purchases and
sales of investment securities, other than United States Government obligations
and short-term corporate notes, aggregated $71,482,943 and $67,704,878,
respectively.
At December 31, 1995, the cost of investments for federal income tax purposes
was $193,282,250. Accumulated net unrealized depreciation on investments was
$8,604,349, consisting of $6,811,627 gross unrealized appreciation and
$15,415,976, gross unrealized depreciation.
12
<PAGE>
3. Advisory Fee and Other Transactions With Affiliates--Certain officers and
directors of the Fund are officers and directors of its investment adviser,
First Investors Management Company, Inc. ("FIMCO"), 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. For the year ended December 31, 1995, FIMCO has voluntarily waived 10%
of the fee.
Pursuant to certain state regulations, FIMCO has agreed to reimburse the Fund if
and to the extent that the Fund's aggregate operating expenses, including the
advisory fee but generally excluding interest, taxes, brokerage commissions and
extraordinary expenses, exceed any limitation on expenses applicable to the Fund
in those states (unless waivers of such limitations have been obtained). The
amount of any such reimbursement is limited to the yearly advisory fee. For the
year ended December 31, 1995, no reimbursement was required pursuant to these
provisions.
For the year ended December 31, 1995, FIC, as underwriter, received $310,680 in
commissions after allowing $80,463 to other dealers. Shareholder servicing costs
included $321,117 in transfer agent fees paid to ADM and $126,079 in custodian
fees paid to FFS.
Pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940 Act, the
Fund is authorized to pay FIC a fee in an amount up to .30% of the Fund's
average net assets of the Class A shares and up to 1% of the average net assets
of the Class B shares on an annualized basis each 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% for Class A and .85% for Class B until February 1, 1998. For the
year ended December 31, 1995, this fee reduction amounted to $271,715. for Class
A and $652 for Class B.
4. Restricted Securities--The Fund held the following restricted securities at
December 31, 1995:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Date Number
Issuer Acquired of Units Type of Security Cost
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Divi Hotels, Inc. 4/23/92 120,498shs Common Stock $2,540,750
President Riverboat
Casinos, Inc. 11/10/94 17,660wts Warrants, Expiring 9/30/99 84,316
- ----------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Notes to Financial Statements
FIRST INVESTORS HIGH YIELD FUND, INC.
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, 1995, the
aggregate value of the above restricted securities was $76,665 representing less
than 1/2 of 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, 1995, the
Fund held nine 144A securities with an aggregate value of $10,192,700
representing 51/2% of the Fund's net assets. These securities are valued as set
forth in Note 1A.
6. Affiliated Person--Investments in companies 5% or more of whose outstanding
voting securities are held by the Fund are defined as "affiliated person" in
Section 2(a)(3) of the 1940 Act.
7. 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, 1995, the Fund
held three defaulted securities with a value aggregating $1,222,000 representing
less than 1% of the Fund's net assets.
8. Capital--The Fund sells two classes of shares, Class A and Class B, each with
a public offering price that reflects different sales charges and expense
levels. Class A shares are sold with an initial sales charge of up to 6.25% of
the amount invested and together with the Class B shares are subject to 12b-1
fees as described in Note 3. Class B shares are sold without an initial sales
charge, but are generally subject to a contingent deferred sales charge which
declines in steps from 4% to 0% over a six-year period. Class B shares
automatically convert into Class A shares after eight years. Realized and
unrealized gains or losses, investment income and expenses (other than 12b-1
fees and certain other class expenses) are allocated daily to each class of
shares based upon the relative proportion of net assets of each class. Of the
500,000,000 shares originally authorized, the Fund has designated 250,000,000
shares as Class A and 250,000,000 shares as Class B.
9. Pending Litigation--The Fund and FIC are defendants in two cases involving
investors who invested in the Fund. The suits primarily allege that FIC sales
representatives had made misrepresentations concerning the risks of investing in
the Fund. FIC's parent company, First Investors Consolidated Corporation has
agreed to assume the liability, if any.
14
<PAGE>
Financial Highlights
FIRST INVESTORS HIGH YIELD FUND, INC.
The following table sets 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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------------------------------------------- -------
Year Ended December 31 8/12/86* 1/12/95*
---------------------------------------------------------------------------- to to
1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86 12/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data
- -------------
Net Asset Value,
Beginning of Year ....... $4.84 $5.30 $4.97 $4.59 $3.83 $5.26 $6.52 $6.51 $7.40 $7.42 $4.84
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from
Investment Operations
Net investment income . .47 .48 .47 .53 .53 .61 .78 .81 .81 .21 .42
Net realized and
unrealized gain (loss)
on investments ........ .39 (.46) .34 .31 .75 (1.44) (1.26) -- (.87) (.03) .40
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment
Operations ............ .86 .02 .81 .84 1.28 (.83) (.48) .81 (.06) .18 .82
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions from:
Net Investment Income ... .48 .48 .48 .46 .52 .60 .78 .80 .82 .20 .43
Capital surplus ......... -- -- -- -- -- -- -- -- .01 -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions .... .48 .48 .48 .46 .52 .60 .78 .80 .83 .20 .43
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value,
End of Year ............. $5.22 $4.84 $5.30 $4.97 $4.59 $3.83 $5.26 $6.52 $6.51 $7.40 $5.23
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return(%)+ ......... 18.43 .39 16.95 18.94 35.87 (17.25) (8.07) 12.86 (1.38) 6.29(a) 17.40(a)
Ratios/Supplemental Data
Net Assets, End of Year
(in millions) ........... $187 $170 $191 $192 $211 $297 $754 $637 $228 $92 $1
Ratio to Average Net
Assets:(%)
Expenses ............... 1.45 1.56 1.69 1.39 1.58 1.48 1.23 1.30 1.28 1.39(a) 2.22(a)
Net investment income .. 9.21 9.48 8.96 10.65 12.36 13.18 12.85 12.08 11.42 10.82(a) 8.36(a)
Ratio to Average Net
Assets Before Expenses
Waived:(%)
Expenses ............... 1.55 1.59 N/A N/A N/A N/A N/A N/A 1.30 1.57(a) 2.32(a)
Net investment income .. 9.11 9.44 N/A N/A N/A N/A N/A N/A 11.40 10.65(a) 8.26(a)
Portfolio Turnover Rate(%) 42 32 87 43 45 26 45 82 80 11 42
</TABLE>
+ Calculated without sales charges
* Commencement of operations of Class A shares or date Class B shares were
first offered
(a) Annualized
See notes to financial statements
15
<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, 1995, 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 years 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, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of First
Investors High Yield Fund, Inc. at December 31, 1995, and the results of its
operations, changes in its net assets and financial highlights for each of the
respective years presented, in conformity with generally accepted accounting
principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1996
16
<PAGE>
This page left blank intentionally.
17
<PAGE>
FIRST INVESTORS HIGH YIELD FUND, INC.
Directors
- --------------------------------------------------------------------------------
James J. Coy
Roger L. Grayson
Glenn O. Head
Kathryn S. Head
Rex R. Reed
Herbert Rubinstein
James M. Srygley
John T. Sullivan
Robert F. Wentworth
Officers
- --------------------------------------------------------------------------------
Glenn O. Head
President
George V. Ganter
Vice President
Concetta Durso
Vice President and Secretary
Joseph I. Benedek
Treasurer
Carol Lerner Brown
Assistant Secretary
18
<PAGE>
FIRST INVESTORS HIGH YIELD FUND, INC.
Shareholder Information
- --------------------------------------------------------------------------------
Investment Adviser
First Investors
Management Company, Inc.
95 Wall Street
New York, NY 10005
Underwriter
First Investors Corporation
95 Wall Street
New York, NY 10005
Custodian
The Bank of New York
48 Wall Street
New York, NY 10286
Transfer Agent
Administrative Data
Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036
Auditors
Tait, Weller & Baker
Two Penn Center Plaza
Philadelphia, PA 19102
It is the Fund's practice to mail only one copy of its annual and semi-annual
reports to any address at which more than one shareholder with the same last
name has indicated that mail is to be delivered. Additional copies of the
reports will be mailed if requested by any shareholder in writing or by calling
800-423-4026. The Fund will ensure that separate reports are sent to any
shareholder who subsequently changes his or her mailing address.
This report is authorized for distribution only to existing shareholders, and,
if given to prospective shareholders, must be accompanied or preceded by the
Fund's prospectus.
19
<PAGE>
FIRST
INVESTORS
HIGH YIELD
FUND, INC.
ANNUAL
REPORT
DECEMBER 31,1995
Vertically reading from bottom to top in the center of the page the words "FIRST
INVESTORS" appear.
The following language appears to the left of the above language:
The words "BULK RATE U.S. POSTAGE PAID PERMIT NO. 7379" in a box to the right of
a circle containing the words "MAILED FROM ZIP CODE 11201" appears on the
righthand side.
The following language appears on the lefthand side:
FIRST INVESTORS HIGH YIELD FUND, INC.
95 WALL STREET
NEW YORK, NY 10005
The following language appears on the bottom lefthand side:
First Investors logo
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK
FIHY150
<PAGE>
