FIRST
INVESTORS
HIGH YIELD
FUND, INC.
SEMI-
ANNUAL
REPORT
June 30, 1996
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FIRST INVESTORS HIGH YIELD FUND, INC.
95 WALL STREET
NEW YORK, NY 10005
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A MEMEBER OF THE
FIRST INVESTORS
FIANCIAL NETWORK
FIHY150
Portfolio Manager's Letter
FIRST INVESTORS HIGH YIELD FUND, INC.
Dear Investor:
As 1996 began, most investors expected the U.S. economy to continue
to slow or even enter a recession. Instead the economy accelerated
throughout the first half of the year. After growing at an
annualized rate of only .5% in the fourth quarter of 1995, the
economy expanded at a 2.2% pace during the first quarter of this
year and at an estimated 3.5%-4% during the second quarter. Concern
that faster growth would lead to higher inflation contributed to a
sharp rise in interest rates, with the yield on long-term U.S.
Treasury bonds increasing from 5.95% to 6.87%. Despite higher
interest rates the stock market continued to rally, with the broad
stock market averages hitting record highs during the second
quarter.
During this period, the high yield market generally did not track
the upward move in interest rates and benefitted from some of the
factors that drove the equity markets. While stirrings of economic
strength drove interest rates higher, this same strength also raised
earnings prospects and valuations of junk bond issuers, affording
these companies greater financial flexibility. These positive
factors led the high yield market to accept a narrower yield premium
over comparable Treasuries, which is another way of saying that high
yield bonds performed better than Treasury bonds. In the first half
of 1996, the average total return for high current yield bond funds
as tracked by Lipper Analytical Services, Inc. was 4.8%, while ten
year Treasury notes returned -5%. Within the high yield category,
returns were inverse to credit quality. Issuers in the lowest rating
categories have the most to gain from economic strength and improved
financial flexibility and thus performed the best. Conversely, the
stronger companies tended to be hurt by their greater interest rate
sensitivity. These attributes caused large cash inflows into the
market from new classes of investors. This made possible a
relatively smooth funding of $40.8 billion, approximately twice the
amount financed in the first half of 1995.
For the six months ended June 30, 1996, the Fund's total return on a
net asset value basis was 4.3% on Class A shares and 3.7% on Class B
shares. Dividends from net investment income were 24 cents per Class
A share and 22.2 cents per Class B share. Our credit objective of
investing in companies with stable to improving prospects
paradoxically hurt rather than helped the Fund in the market
conditions of 1996. Helping returns were generally good security
selections in which some companies outperformed and none defaulted.
The Fund did enjoy some rebounds in which bonds held through credit
difficulties emerged from those problems as we had expected.
Holdings of bonds with interest rate sensitivity such as zero coupon
structures hampered the Fund but were at slightly less than market
weighting. The Fund had light involvement in two industries that did
very well in the marketplace; gaming and retailing, since these are
industries with extraordinary swings in investor sentiment which the
Fund seeks to avoid. Media/Cable TV, a large industry sector held by
the Fund, suffered from heavy issuance and aggressive structuring
and pricing, but we believe continues to offer good value.
We continue to emphasize finding and holding fundamental values,
companies which have achieved stability and are likely to benefit
from credit improvement despite leveraged balance sheets. Through
market cycles, we are confident that this strategy will produce
strong returns.
Investors who buy bond funds -- whether for income or total return
- -- should be aware that the value of their investment fluctuates as
interest rates change. For example, a 100 basis point (or 1%)
increase in yield on a ten year bond results in roughly a 7%
decrease in that bond's price. In each of the last four years and
the first half of 1996, ten year Treasury bond yields have moved
more than 100 basis points. In addition, the value of a fund can
fluctuate based on changes in the credit quality of the bonds which
it holds. In particular, high yield funds invest in lower-rated debt
obligations which are more sensitive than higher-rated investments
to adverse economic changes or individual corporate developments,
and thus can be subject to a higher incidence of default. Investors
should be aware of these risks and recognize that successful
investing generally requires a long-term commitment to the market.
Looking forward, inflation shows few signs of accelerating despite
the market's concern. In addition, the pace of economic growth is
likely to slow during the second half of the year. A combination of
stable inflation and moderate growth should provide a comfortable
environment for investors throughout the remainder of 1996.
As always, we appreciate the opportunity to serve your investment
needs.
Sincerely,
George V. Ganter
Vice President
and Portfolio Manager
July 8, 1996
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS HIGH YIELD FUND, INC.
June 30, 1996
- --------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS--87.6%
Aerospace/Defense--.7%
$ 1,400M Moog, Inc., 10%, 2006 (Note 4) $ 1,398,250 $ 74
- --------------------------------------------------------------------------------------------------------------------------------
Apparel/Textiles--1.5%
3,900M Linter Textiles Corp., Ltd., 13 3/4%, 2000 (Defaulted) (Note 5) 29,250 2
3,000M Westpoint Stevens, Inc., 9 3/8%, 2005 2,895,000 152
- --------------------------------------------------------------------------------------------------------------------------------
2,924,250 154
- --------------------------------------------------------------------------------------------------------------------------------
Automotive--3.8%
1,500M Aftermarket Technology Corp., 12%, 2004 1,605,000 84
1,100M Lear Seating, Inc., 11 1/4%, 2000 1,138,500 60
2,450M SPX Corp., 11 3/4%, 2002 2,590,875 136
2,000M Walbro Corp., 9 7/8%, 2005 1,970,000 104
- --------------------------------------------------------------------------------------------------------------------------------
7,304,375 384
- --------------------------------------------------------------------------------------------------------------------------------
Building Materials--2.1%
1,365M G-I Holdings, Inc., 0%, 1998 1,095,413 58
1,299M G-I Holdings, Inc., 10%, 2006 1,260,030 66
1,600M Waxman USA, Inc., 11 1/8%, 2001 (Note 4) 1,584,000 83
- --------------------------------------------------------------------------------------------------------------------------------
3,939,443 207
- --------------------------------------------------------------------------------------------------------------------------------
Chemicals--5.3%
3,000M Harris Chemical North America, Inc., 0%-10 1/4%, 2001 3,000,000 158
2,175M Harris Chemical North America, Inc., 10 3/4%, 2003 2,120,625 112
2,800M Rexene Corp., 11 3/4%, 2004 2,898,000 152
2,000M Synthetic Industries, Inc., 12 3/4%, 2002 2,115,000 111
- --------------------------------------------------------------------------------------------------------------------------------
10,133,625 533
- --------------------------------------------------------------------------------------------------------------------------------
Computers/Software/Business Equipment--.6%
1,000M Bell & Howell Co., 10 3/4%, 2002 1,060,000 56
- --------------------------------------------------------------------------------------------------------------------------------
Conglomerates--1.7%
5,500M Semi-Tech Corp., 0%-11 1/2%, 2003 3,162,500 166
- --------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--.7%
1,300M Hines Horticulture, Inc., 11 3/4%, 2005 1,345,500 71
- --------------------------------------------------------------------------------------------------------------------------------
Consumer Products--1.3%
2,500M Herff Jones, Inc., 11%, 2005 2,575,000 135
- --------------------------------------------------------------------------------------------------------------------------------
Containers--3.0%
5,400M Owens Illinois, Inc., 11%, 2003 5,805,000 304
- --------------------------------------------------------------------------------------------------------------------------------
Durable Goods Manufacturing--2.5%
2,445M Fairfield Manufacturing, Inc., 11 3/8%, 2001 2,469,450 130
2,500M RACI Acquisition Corp., 10%, 2003 (Note 4) 2,200,000 116
- --------------------------------------------------------------------------------------------------------------------------------
4,669,450 246
- --------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment--.2%
450M Thermadyne Industries, Inc., 10 1/4%, 2002 447,750 24
- --------------------------------------------------------------------------------------------------------------------------------
Energy--1.9%
1,500M Giant Industries, Inc., 9 3/4%, 2003 1,477,500 78
2,052M Maxus Energy Corp., 11 1/2%, 2015 2,134,080 112
- --------------------------------------------------------------------------------------------------------------------------------
3,611,580 190
- --------------------------------------------------------------------------------------------------------------------------------
Energy Exploration/Production--1.6%
3,000M Gulf Canada Resources, Ltd., 9 5/8%, 2005 2,988,750 157
- --------------------------------------------------------------------------------------------------------------------------------
Financial Services--1.5%
1,200M Olympic Financial, Ltd., 13%, 2000 1,299,000 68
1,300M Terra Nova Holdings, PLC, 10 3/4%, 2005 1,449,500 76
- --------------------------------------------------------------------------------------------------------------------------------
2,748,500 144
- --------------------------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--3.5%
1,800M Fleming Co., Inc., 10 5/8%, 2001 1,629,000 86
2,500M MTLC Beatrice International Holdings, Inc., 11 1/2%, 2005 2,534,375 133
2,350M Van de Kamps, Inc., 12%, 2005 2,508,625 132
- --------------------------------------------------------------------------------------------------------------------------------
6,672,000 351
- --------------------------------------------------------------------------------------------------------------------------------
Food Services--1.0%
2,200M Flagstar Corp., 10 3/4%, 2001 1,914,000 101
- --------------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging--2.4%
2,450M Casino America, Inc., 11 1/2%, 2001 2,560,250 135
750M Grand Casinos, Inc., 10 1/8%, 2003 768,750 40
800M Players International, Inc., 10 7/8%, 2005 816,000 43
1,023M SHRP Capital Corp., 11%, 2001 424,773 22
- --------------------------------------------------------------------------------------------------------------------------------
4,569,773 240
- --------------------------------------------------------------------------------------------------------------------------------
Healthcare--4.7%
1,300M Genesis Healthcare, Inc., 9 3/4%, 2005 1,322,750 701,600
1,600M Integrated Health Services, Inc., 10 3/4%, 2004 1,652,000 87
2,700M Ornda Healthcorp., 12 1/4%, 2002 2,916,000 153
1,000M Owens & Minor, Inc., 10 7/8%, 2006 1,010,000 53
2,000M Tenet Healthcare Corp., 10 1/8%, 2005 2,115,000 111
- --------------------------------------------------------------------------------------------------------------------------------
9,015,750 474
- --------------------------------------------------------------------------------------------------------------------------------
Media/Cable Television--18.4%
2,000M Adelphia Communications, Inc., 9 7/8%, 2005 1,850,000 97
4,000M Bell Cablemedia, PLC, 0%-11.95%, 2004 2,830,000 149
2,000M Century Communications Corp., 9 1/2%, 2005 1,930,000 101
3,725M Echostar Communications Corp., 0%-12 7/8%, 2004 2,728,563 143
3,200M Garden State Newspapers, Inc., 12%, 2004 3,360,000 177
1,350M Grupo Televisa, S.A., 11 7/8%, 2006 (Note 4) 1,377,000 72
3,000M Lamar Advertising, Inc., 11%, 2003 3,067,500 161
1,000M Le Groupe Videotron, Ltee., 10 5/8%, 2005 1,045,000 55
2,000M Lenfest Communications, Inc., 10 1/2%, 2006 (Note 4) 2,007,500 106
3,625M Outdoor Systems, Inc., 10 3/4%, 2003 3,751,875 197
3,700M PanAmSat Capital Corp., 0%-11 3/8%, 2003 3,209,750 169
2,000M Rogers Cablesystems, Inc., 10%, 2005 1,980,000 104
2,000M Rogers Communication, Inc., 10 7/8%, 2004 2,030,000 107
5,100M Videotron Holdings, PLC, 0%-11 1/8%, 2004 3,774,000 198
- --------------------------------------------------------------------------------------------------------------------------------
34,941,188 1,836
- --------------------------------------------------------------------------------------------------------------------------------
Mining/Metals--7.6%
2,755M Carbide/Graphite Group, Inc., 11 1/2%, 2003 2,934,075 154
1,825M Geneva Steel Co., Inc., 11 1/8%, 2001 1,569,500 83
2,590M Magma Copper Co., Inc., 12%, 2001 2,805,889 148
4,050M WCI Steel, Inc., 10 1/2%, 2002 4,110,750 216
3,200M Wheeling-Pittsburgh Steel Corp., 9 3/8%, 2003 2,960,000 156
- --------------------------------------------------------------------------------------------------------------------------------
14,380,214 757
- --------------------------------------------------------------------------------------------------------------------------------
Miscellaneous--1.7%
3,000M Monarch Marking Systems, Inc., 12 1/2%, 2003 3,165,000 166
- --------------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--6.5%
2,700M Gaylord Container Corp., 11 1/2%, 2001 2,767,500 146
2,600M S.D. Warren Co., Inc., 12%, 2004 2,756,000 145
2,750M Stone Container Corp., 11 7/8%, 1998 2,873,750 151
4,000M Stone Container Corp., 9 7/8%, 2001 3,880,000 204
- --------------------------------------------------------------------------------------------------------------------------------
12,277,250 646
- --------------------------------------------------------------------------------------------------------------------------------
Real Estate/Construction--1.2%
2,350M Continental Homes Holding Corp., 10%, 2006 2,232,500 117
- --------------------------------------------------------------------------------------------------------------------------------
Retail-Food/Drug--1.1%
2,400M Penn Traffic Company, 10 1/4%, 2002 2,172,000 114
- --------------------------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.8%
1,750M General Host Co., Inc., 11 1/2%, 2002 1,610,000 85
- --------------------------------------------------------------------------------------------------------------------------------
Telecommunications--6.8%
3,750M American Communication Services, Inc., 0%-13%, 2005 (Note 4) 2,081,250 109
1,700M Brooks Fiber Properties, Inc., 0%-10 7/8%, 2006 (Note 4) 905,250 48
4,100M Intercel, Inc., 0%-12%, 2006 2,224,250 117
1,750M Intercel, Inc., 0%-12%, 2006 949,375 50
2,000M Metrocall, Inc., 10 3/8%, 2007 1,850,000 97
6,525M MFS Communications, Inc., 0%-9 3/8%, 2004 4,910,062 258
- --------------------------------------------------------------------------------------------------------------------------------
12,920,187 679
- --------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
Principal For Each
Amount $10,000 of
or Shares Security Value Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Transportation--3.5%
3,550M Eletson Holdings, Inc., 9 1/4%, 2003 3,390,250 178
1,350M Moran Transportation Co., 11 3/4%, 2004 1,346,625 71
2,050M Trism, Inc., 10 3/4%, 2000 1,927,000 101
- --------------------------------------------------------------------------------------------------------------------------------
6,663,875 350
- --------------------------------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $172,122,960) 166,647,710 8,761
- --------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--.7%
Electrical Equipment--.1%
6,481 *Thermadyne Holdings Corp. 139,342 7
- --------------------------------------------------------------------------------------------------------------------------------
Financial Services--.1%
7,600 *Olympic Financial, Ltd. 174,800 9
- --------------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging--.0%
287 *SHRP Capital Corp. 1,435 --
- --------------------------------------------------------------------------------------------------------------------------------
Media/Cable Television--.2%
12,623 *Echostar Communications Corp., Class "A" 356,600 19
- --------------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--.2%
46,061 *Gaylord Container Corp., Class "A" 359,852 19
- --------------------------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.1%
71,006 *Barry's Jewelers, Inc. 248,521 13
- --------------------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $1,964,104) 1,280,550 67
- --------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--3.9%
Financial Services--1.8%
20,000 California Federal Bank, 10 5/8%, Series "B" 2,180,000 115
40,800 Greater New York Savings Bank, 12%, Series "B" 1,244,400 65
- --------------------------------------------------------------------------------------------------------------------------------
3,424,400 180
- --------------------------------------------------------------------------------------------------------------------------------
Media/Cable Television--1.5%
30,426 Cablevision Systems Corp., 11 1/8%, 2008 (Note 4) 2,920,896 154
- --------------------------------------------------------------------------------------------------------------------------------
Shares, Amount
Warrants Invested
or For Each
Principal $10,000 of
Amount Security Value Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--.6%
30,200 *S.D. Warren Co., Inc., 14% $ 1,057,000 $ 56
- --------------------------------------------------------------------------------------------------------------------------------
Total Value of Preferred Stocks (cost $7,041,076) 7,402,296 390
- --------------------------------------------------------------------------------------------------------------------------------
WARRANTS--.5%
Gaming/Lodging--.0%
7,987 *Casino America, Inc. (expiring 11/15/96) 998 --
12,000 *President Riverboat Casinos, Inc. (expiring 9/23/96) (Note 4) 12,000 1
17,660 *President Riverboat Casinos, Inc. (expiring 9/30/99) 17,660 1
- --------------------------------------------------------------------------------------------------------------------------------
30,658 2
- --------------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--.2%
37,697 *Gaylord Container Corp. (expiring 10/31/00) 294,508 15
30,200 *S.D. Warren Co., Inc. (expiring 12/15/06) (Note 4) 90,600 5
- --------------------------------------------------------------------------------------------------------------------------------
385,108 20
- --------------------------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.0%
3,800 *Payless Cashways, Inc. (expiring 11/1/96) 380 --
- --------------------------------------------------------------------------------------------------------------------------------
Telecommunications--.2%
3,750 *American Communication Services, Inc. (expiring 11/1/05) (Note 4) 403,126 21
5,600 *Intercel, Inc. (expiring 2/1/06) 96,250 5
- --------------------------------------------------------------------------------------------------------------------------------
499,376 26
- --------------------------------------------------------------------------------------------------------------------------------
Total Value of Warrants (cost $448,352) 915,522 48
- --------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--2.1%
4,000M Federal Home Loan Bank Board, 6.02%, 1998 (cost $4,000,000) 3,950,196 208
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.0%
5,750M Anheuser Busch, 5.30%, 7/11/96 (cost $5,740,136) 5,740,136 303
- --------------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $191,316,628) 97.8% 185,936,410 9,777
Other Assets, Less Liabilities 2.2 4,246,414 223
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $190,182,824 $10,000
================================================================================================================================
* Non-income producing
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS HIGH YIELD FUND, INC.
June 30, 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities, at value (identified cost $191,316,628) (Note 1A) $185,936,410
Cash 1,053,157
Receivables:
Interest $ 3,851,184
Investment securities sold 1,702,250
Capital shares sold 333,006 5,886,440
------------
Other assets 59,061
------------
Total Assets 192,935,068
Liabilities
Payables:
Dividend payable July 15, 1996 1,468,491
Investment securities purchased 754,844
Capital shares redeemed 312,820
Accrued advisory fee 134,767
Accrued expenses 81,322
------------
Total Liabilities 2,752,244
------------
Net Assets (Note 6):
Class A (36,236,639 shares outstanding) 188,470,725
Class B (329,036 shares outstanding) 1,712,099 $190,182,824
------------ ============
Net Assets Consist of:
Capital paid in $634,938,533
Undistributed net investment income 1,964,494
Accumulated net realized loss on investment transactions (441,339,985)
Net unrealized depreciation in value of investments (5,380,218)
------------
Total $190,182,824
============
Net asset value and redemption price per share -- Class A $5.20
=====
Maximum offering price per share -- Class A ($5.20/.9375)* $5.55
=====
Net asset value and offering price per share -- Class B $5.20
=====
*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.
Six Months Ended June 30, 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Income:
Interest $ 9,549,911
Dividends (Note 1D) 210,488
Consent fees 189,435
-----------
Total income $9,949,834
Expenses (Notes 1D and 3):
Advisory fee 951,784
Shareholder servicing costs 256,991
Distribution plan expenses -- Class A 141,813
Distribution plan expenses -- Class B 5,415
Reports and notices to shareholders 40,699
Professional fees 22,583
Custodian fees 11,604
Other expenses 14,824
-----------
Total expenses 1,445,713
Less: Portion of advisory fee waived (142,768)
Custodian fees paid indirectly (8,077)
-----------
Net expenses 1,294,868
------------
Net investment income 8,654,966
Realized and Unrealized Gain (Loss) on Investments (Note 2):
Net realized loss on investments (4,092,350)
Net unrealized appreciation of investments 3,224,131
-----------
Net loss on investments (868,219)
------------
Net Increase in Net Assets Resulting from Operations $ 7,786,747
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS HIGH YIELD FUND, INC.
- ------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 8,654,966 $ 16,736,625
Net realized loss on investments (4,092,350) (720,031)
Net unrealized appreciation on investments 3,224,131 14,815,104
------------ ------------
Net increase in net assets resulting from operations 7,786,747 30,831,698
------------ ------------
Dividends to Shareholders from:
Net investment income -- Class A (8,627,722) (17,039,142)
Net investment income -- Class B (53,998) (37,544)
------------ ------------
Total dividends (8,681,720) (17,076,686)
------------ ------------
Capital Share Transactions (a)
Class A:
Proceeds from shares sold 10,037,474 12,606,146
Value of dividends reinvested 5,337,814 12,721,081
Cost of shares redeemed (12,915,967) (22,568,327)
------------ ------------
2,459,321 2,758,900
------------ ------------
Class B:
Proceeds from shares sold 937,350 856,809
Value of dividends reinvested 21,786 16,473
Cost of shares redeemed (121,169) (5,776)
------------ ------------
837,967 867,506
------------ ------------
Net increase from capital share transactions 3,297,288 3,626,406
------------ ------------
Net increase in net assets 2,402,315 17,381,418
Net Assets
Beginning of period 187,780,509 170,399,091
------------ ------------
End of period (including undistributed net investment income of
$1,964,494 and $1,991,248, respectively) $190,182,824 $187,780,509
============ ============
(a)Capital shares issued and redeemed
Class A:
Sold 1,913,761 2,473,148
Issued for dividends reinvested 1,012,552 2,489,075
Redeemed (2,460,889) (4,415,539)
------------ ------------
Net increase in Class A shares outstanding 465,424 546,684
============ ============
Class B:
Sold 177,970 167,832
Issued for dividends reinvested 4,134 3,176
Redeemed (22,965) (1,111)
------------ ------------
Net increase in Class B shares outstanding 159,139 169,897
============ ============
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. 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 and other available information in
determining bid values. Short-term corporate notes which are
purchased at a discount are valued at amortized cost. Securities for
which market quotations are not readily available and other assets
are valued on a consistent basis at fair value as determined in good
faith by or under the supervision of the 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 June 30, 1996, 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 accrued 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. 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 six months ended June 30, 1996, the Fund
recognized $43,026 of dividend income from these taxable "pay in
kind" distributions. Interest income and estimated expenses are
accrued daily. The Fund's Custodian has provided credits in the
amount of $8,077 against custodian charges based on the uninvested
cash balances of the Fund.
2. Security Transactions -- For the six months ended June 30, 1996,
purchases and sales of investment securities, other than United
States Government obligations and short-term corporate notes,
aggregated $21,674,268 and $19,293,530, respectively.
At June 30, 1996, the cost of investments for federal income tax
purposes was $191,316,628. Accumulated net unrealized depreciation
on investments was $5,380,218, consisting of $5,000,399 gross
unrealized appreciation and $10,380,617 gross unrealized
depreciation.
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
six months ended June 30, 1996, FIMCO has voluntarily waived 15% 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 six months ended June 30, 1996, no reimbursement was
required pursuant to these provisions.
For the six months ended June 30, 1996, FIC, as underwriter,
received $254,518 in commissions after allowing $146,856 to other
dealers. Shareholder servicing costs included $155,726 in transfer
agent fees paid to ADM and $58,891 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 six months ended June 30, 1996, this fee
reduction amounted to $141,813 for Class A and $956 for Class B.
4. 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 June 30, 1996, the Fund held eleven 144A
securities with an aggregate value of $14,979,872 representing 7.9%
of the Fund's net assets. These securities are valued as set forth
in Note 1A.
5. 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 June 30,
1996, the Fund held one defaulted security with a value of $29,250.
6. 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.
7. 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.
<TABLE>
<CAPTION>
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 period indicated.
- ------------------------------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------------ --------------------
1/1/96 Year Ended December 31 1/1/96 1/12/95++
to -------------------------------------------------- to to
6/30/96 1995 1994 1993 1992 1991 6/30/96 12/31/95
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value, Beginning of Period $ 5.22 $ 4.84 $ 5.30 $ 4.97 $ 4.59 $ 3.83 $ 5.23 $ 4.84
------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations
Net investment income .24 .47 .48 .47 .53 .53 .22 .42
Net realized and unrealized
gain (loss) on investments (.02) .39 (.46) .34 .31 .75 (.03) .40
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations .22 .86 .02 .81 .84 1.28 .19 .82
------ ------ ------ ------ ------ ------ ------ ------
Less Distributions from
net investment income .24 .48 .48 .48 .46 .52 .22 .43
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $ 5.20 $ 5.22 $ 4.84 $ 5.30 $ 4.97 $ 4.59 $ 5.20 $ 5.23
====== ====== ====== ====== ====== ====== ====== ======
Total Return (%)+ 4.25 18.43 .39 16.95 18.94 35.87 3.70 17.40(a)
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $188 $187 $170 $191 $192 $211 $2 $1
Ratio to Average Net Assets:(%)
Expenses 1.36(a) 1.45 1.56 1.69 1.39 1.58 2.07(a) 2.22(a)
Net investment income 9.10(a) 9.22 9.48 8.96 10.65 12.36 8.39(a) 8.45(a)
Ratio to Average Net Assets Before
Expenses Waived:(%)
Expenses 1.51(a) 1.55 1.59 N/A N/A N/A 2.22(a) 2.32(a)
Net investment income 8.95(a) 9.12 9.44 N/A N/A N/A 8.24(a) 8.35(a)
Portfolio Turnover Rate (%) 11 42 32 87 43 45 11 42
+ Calculated without sales charges
++ Date shares first offered
(a) Annualized
See notes to financial statements
</TABLE>
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 June 30, 1996, and the related statement of
operations for the six months then ended, the statement of changes
in net assets for the six months ended June 30, 1996 and the year
ended December 31, 1995, 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 June
30, 1996, 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 June
30, 1996, 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
July 31, 1996
This page left blank intentionally.
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
Gregory R. Kingston
Assistant Treasurer
Mark S. Spencer
Assistant Treasurer
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.
