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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-12
FIRST INVESTORS TAX-EXEMPT MONEY MARKET FUND, INC.
FIRST INVESTORS SERIES FUND
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
EXECUTIVE INVESTORS TRUST
FIRST INVESTORS NEW YORK INSURED TAX FREE FUND, INC.
FIRST INVESTORS SERIES FUND II, INC.
FIRST INVESTORS GLOBAL FUND, INC.
FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND
FIRST INVESTORS CASH MANAGEMENT FUND, INC.
FIRST INVESTORS GOVERNMENT FUND, INC.
FIRST INVESTORS FUND FOR INCOME FUND, INC.
FIRST INVESTORS SPECIAL BOND FUND, INC.
FIRST INVESTORS LIFE SERIES FUND
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY PROXY MATERIALS--FOR SEC USE ONLY
FIRST INVESTORS MANAGEMENT COMPANY, INC.
95 WALL STREET
NEW YORK, NEW YORK 10005
A Message from the President of the First Investors Funds to all Shareholders
September [ ], 2005
Dear Shareholder:
I am writing to ask for your vote, as a shareholder of the First Investors
Funds (the "Funds"), at the October 28, 2005 special meeting of shareholders, to
(1) elect eight Trustees to serve on the Boards of all of the First Investors
Funds and (2) approve the reorganization of each Fund into a corresponding
series of one of four newly-established Delaware statutory trusts (collectively,
the "New Trusts").
The Board of Directors/Trustees of each First Investors Fund recommends
approval of both proposals. The Boards believes that the reorganizations will
offer a number of benefits to the Funds. Among other things, they will:
o Allow the Funds to operate under uniform, modern and flexible
governing documents that would increase operating efficiency by
streamlining the governance process.
o Update, standardize and streamline certain of the Funds' outdated
investment restrictions.
o Lower the contractual advisory fee rates on over half of the Funds,
making permanent a portion of the temporary fee waivers that have been
approved by the Boards and reducing the actual effective rates paid by
three of the Funds.
o Add more advisory fee breakpoints on most of the Funds.
THE REORGANIZATIONS WILL NOT RESULT IN ANY INCREASE IN THE ADVISORY FEES
PAID BY ANY OF THE FUNDS. NOR WILL THEY RESULT IN ANY MATERIAL CHANGE IN THE
INVESTMENT OBJECTIVE(S) OR PRINCIPAL INVESTMENT STRATEGIES OF ANY FUND. THE
INVESTMENT ADVISER, SUBADVISERS, PORTFOLIO MANAGERS AND OTHER SERVICE PROVIDERS
WILL REMAIN THE SAME. THE SERVICES PROVIDED BY THOSE SERVICE PROVIDERS WILL BE
THE SAME AS THOSE CURRENTLY BEING PROVIDED TO EACH FUND. EACH REORGANIZED FUND
WILL OFFER THE SAME SERVICES TO SHAREHOLDERS AS ARE CURRENTLY PROVIDED BY ITS
CORRESPONDING FUND.
If the reorganizations are approved, the reorganizations will take effect
during the first half of 2006. At that time, the shares you currently own in a
Fund would, in effect, be exchanged on a tax-free basis for the same number of
shares of the same value of the corresponding series (and class) of one of the
four New Trusts. No sales load, commission or other transactional fee will be
imposed on shareholders in connection with the tax-free exchange of their
shares.
Detailed information about the proposals is contained in the enclosed
materials. Whether or not you plan to attend the Meeting in person, we need your
vote. Once you have decided how you will vote, please promptly complete, sign,
date and return the enclosed proxy card or vote by telephone or internet. You
may receive more than one set of proxy materials if you hold shares in more than
one account or in more than one Fund. Please be sure to vote each proxy card you
receive.
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Voting is quick and easy. Everything you will require is enclosed. IT IS
IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN THE TIME OF THE SPECIAL
SHAREHOLDERS' MEETING ON FRIDAY, OCTOBER 28, 2005. To assist with the
solicitation of proxies we have engaged InvestorCONNECT, a division of The
Altman Group, a professional proxy solicitation firm. As the meeting date
approaches if you have not voted your shares you may receive a phone call from
InvestorCONNECT urging you to vote your shares.
If you have any questions about the proposals or the voting instructions please
call InvestorCONNECT, the Funds' proxy solicitor, toll-free at 1-800-591-6313.
Sincerely,
[/s/ Kathryn S. Head]
President of the First Investors Funds
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Q&A
While we encourage you to read the full text of the enclosed Proxy
Statement, here is a brief overview of some matters affecting your Fund(s) that
will be the subject of a shareholder vote.
Q. WHAT IS HAPPENING? WHY DID I GET THIS BIG PACKAGE?
A. Your Fund(s) is conducting a Special Meeting of Shareholders scheduled
to be held on Friday, October 28, 2005 to vote on two important
matters.
Q. WHAT ISSUES AM I BEING ASKED TO VOTE ON AT THE UPCOMING MEETING ON OCTOBER
28TH, 2005?
A. As outlined in the attached Proxy Statement you are being asked to
approve:
1. The election of 8 Trustees and
2. The reorganization of your Fund (each a "Reorganization" and
together, the "Reorganizations").
Q. HOW DOES THE BOARD RECOMMEND THAT I VOTE?
A. The Board unanimously recommends that you vote "FOR" both proposals.
Q. WHAT IS THE REORGANIZATION? WHY IS THE BOARD RECOMMENDING APPROVAL OF
THE REORGANIZATION AGREEMENTS?
A. The primary purposes of the proposed Reorganizations are to seek future
economies of scale and to eliminate certain costs associated with operating
thirteen different business entities organized in two different states,
each of which has different fundamental investment policies. After the
Reorganizations there will be 4 different business entities (First
Investors Equity Funds, First Investors Income Funds, First Investors Tax
Exempt Funds and First Investors Life Series Funds) in one state operating
under one set of fundamental policies.
Q. WHAT EFFECT WILL THE REORGANIZATIONS HAVE ON THE FUNDS AND THEIR
SHAREHOLDERS?
A. The Reorganizations will not result in any material change in the
investment objective(s) or principal investment strategies of any of the
Funds. The Reorganizations will allow the Funds to operate under uniform,
modern and flexible governing documents that would streamline the
governance process, and is expected to reduce future proxy solicitation
costs and reduce costs associated with Fund governance and compliance
monitoring.
Q. WILL THE INVESTMENT ADVISORY FEE RATE CHANGE UPON APPROVAL OF THE
REORGANIZATIONS?
A. The Reorganizations will standardize contractual advisory fees and add
additional breakpoints to all but three of the Funds. The contractual rate
of advisory fees will be the same or lower than those currently in effect
for each Fund. Many of the rate reductions make permanent a portion of the
temporary fee waivers that have been approved by the Boards. In three cases
the actual effective rates paid by the Funds will be reduced.
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Q. WILL THERE BE ANY SALES LOAD, COMMISSION OR OTHER TRANSACTIONAL FEE IN
CONNECTION WITH THE REORGANIZATIONS?
A. No. The full value of your shares of a Fund will be exchanged for shares
of the same class of the corresponding New Fund without any sales load,
commission or other transactional fee being imposed.
Q. WHAT WILL BE THE FEDERAL INCOME TAX CONSEQUENCE OF THE REORGANIZATIONS?
A. Each Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a) of the Internal
Revenue Code of 1986.
Q. WHO IS BEARING THE EXPENSES RELATED TO THE PROXY SOLICITATION?
A. The Funds will bear the expenses associated with the proxy solicitation
including printing, mailing, tabulation and solicitation expenses.
Q. WILL THE FUNDS' INVESTMENT OBJECTIVES OR STRATEGIES CHANGE?
A. The Reorganizations will not result in any material change in the
investment objective(s) or principal investment strategies of any Fund.
Q. HOW DO I VOTE MY SHARES?
A. You can vote your shares at the meeting or you can authorize proxies to
vote your shares by mail, internet or telephone utilizing the enclosed
proxy card.
Q. WHOM SHOULD I CALL FOR ADDITIONAL INFORMATION ABOUT THE ACCOMPANYING PROXY
STATEMENT?
A. Please call InvestorCONNECT, a division of The Altman Group, your Funds'
proxy solicitor, toll-free at 1-800-591-6313.
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FIRST INVESTORS SPECIAL BOND FUND, INC.
FIRST INVESTORS TAX-EXEMPT MONEY MARKET FUND, INC.
EXECUTIVE INVESTORS TRUST
First Investors Insured Tax Exempt Fund II
FIRST INVESTORS LIFE SERIES FUND
Blue Chip Fund International Securities Fund
Cash Management Fund Investment Grade Fund
Discovery Fund Target Maturity 2007 Fund
Focused Equity Fund Target Maturity 2010 Fund
Government Fund Target Maturity 2015 Fund
Growth Fund Value Fund
High Yield Fund
FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND
Arizona Fund Minnesota Fund
California Fund Missouri Fund
Colorado Fund New Jersey Fund
Connecticut Fund North Carolina Fund
Florida Fund Ohio Fund
Georgia Fund Oregon Fund
Maryland Fund Pennsylvania Fund
Massachusetts Fund Virginia Fund
Michigan Fund
FIRST INVESTORS CASH MANAGEMENT FUND, INC.
FIRST INVESTORS FUND FOR INCOME, INC.
FIRST INVESTORS GLOBAL FUND, INC.
FIRST INVESTORS GOVERNMENT FUND, INC.
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
FIRST INVESTORS NEW YORK INSURED
TAX FREE FUND, INC.
FIRST INVESTORS SERIES FUND
First Investors Insured Intermediate Tax Exempt Fund
First Investors Blue Chip Fund
First Investors Total Return Fund
First Investors Special Situations Fund
First Investors Investment Grade Fund
FIRST INVESTORS SERIES FUND II, INC.
First Investors Value Fund
First Investors Mid-Cap Opportunity Fund
First Investors All-Cap Growth Fund
First Investors Growth & Income Fund
First Investors Focused Equity Fund
FIRST INVESTORS MANAGEMENT COMPANY, INC.
95 WALL STREET
NEW YORK, NEW YORK 10005
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 28, 2005
To Shareholders:
NOTICE IS HEREBY GIVEN that each First Investors Fund and, if applicable, on
behalf of each of its investment series named above (each an "Old Fund" and,
collectively, the "Old Funds"), will hold a special meeting of its shareholders
at 95 Wall Street, New York, New York 10005, on October 28, 2005 at 10:00 a.m.,
Eastern Time (the "Meeting") for the following purposes:
(1) To elect eight (8) Trustees* for the Old Funds, who will assume office
on or about January 1, 2006;
(2) To approve the proposed Agreements and Plan of Conversion and
Terminations, pursuant to which each Old Fund named in this Notice of
Special Meeting of Shareholders would be reorganized into a
corresponding series of one of four newly-established Delaware
statutory trusts, each a Reorganization and together the
Reorganizations; and
(3) To transact such other business as may properly come before the
Meeting and any adjournments or postponements thereof.
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* Some of the First Investors funds are Maryland corporations and others are
Massachusetts business trusts. For ease and clarity of presentation, shares of
common stock or shares of beneficial interest of a First Investors fund are
referred to herein as "shares," holders of shares are referred to as
"shareholders," and the Directors or Trustees of each First Investors Fund are
referred to as "Trustees."
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The Proxy Statement and the accompanying Proxy Card are also being
furnished to persons who have invested in First Investors Special Bond Fund,
Inc. ("Special Bond"), or any of the series of First Investors Life Series Fund
("Life Series"), through variable annuity contracts and variable life policies
issued by First Investors Life Insurance Company ("FIL"). Although FIL is the
sole shareholder of Special Bond and each series of Life Series, it will vote
shares that are attributable to variable annuity contracts or variable life
policies in accordance with the votes received from the contract owners and
policy holders. FIL will vote shares attributable to contract owners or policy
holders who do not vote in the same proportion that it votes shares attributable
to those who do vote. Since contract owners and policy holders essentially are
entitled to vote through FIL, we will refer to them hereinafter simply as
"shareholders."
You are entitled to vote at the Meeting and any adjournment(s) or
postponement(s) thereof if you owned shares of any Old Fund listed above at the
close of business on August 31, 2005.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE VOTE YOUR
SHARES. WE ASK THAT YOU VOTE PROMPTLY IN ORDER TO AVOID THE ADDITIONAL EXPENSE
OF FURTHER SOLICITATION.
InvestorCONNECT, the Old Funds' proxy solicitor, is available to assist you
if you have any questions about the proposals or the voting instructions. Please
contact InvestorCONNECT at 1-800-591-6313.
IN ADDITION TO VOTING BY MAIL YOU MAY ALSO CONTACT INVESTORCONNECT TO VOTE
BY EITHER TELEPHONE OR VIA THE INTERNET, AS FOLLOWS:
TO VOTE BY TELEPHONE: TO VOTE BY INTERNET:
(1) Read the Proxy Statement and have your Proxy (1) Read the Proxy Statement and have your Proxy
Card at hand. Card at hand.
(2) Call the toll-free number that appears on your (2) Go to the website that appears on your Proxy
Proxy Card. Card.
(3) Enter the control number set forth on the (3) Enter the control number set forth on the
Proxy Card and follow the simple instructions. Proxy Card and follow the simple instructions.
We encourage you to vote by telephone or via the Internet using the control
number that appears on your enclosed Proxy Card. Use of telephone or Internet
voting will reduce the time and costs associated with this proxy solicitation.
WHICHEVER METHOD YOU CHOOSE, PLEASE READ THE ENCLOSED PROXY STATEMENT
CAREFULLY BEFORE YOU VOTE.
YOUR VOTE IS IMPORTANT. PLEASE VOTE YOUR SHARES.
By Order of the Boards of Trustees of the First Investors Funds,
[/s/ Carol Lerner Brown]
Assistant Secretary
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FIRST INVESTORS SPECIAL BOND FUND, INC.
FIRST INVESTORS TAX-EXEMPT MONEY MARKET FUND, INC.
EXECUTIVE INVESTORS TRUST
First Investors Insured Tax Exempt Fund II
FIRST INVESTORS LIFE SERIES FUND
Blue Chip Fund International Securities Fund
Cash Management Fund Investment Grade Fund
Discovery Fund Target Maturity 2007 Fund
Focused Equity Fund Target Maturity 2010 Fund
Government Fund Target Maturity 2015 Fund
Growth Fund Value Fund
High Yield Fund
FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND
Arizona Fund Minnesota Fund
California Fund Missouri Fund
Colorado Fund New Jersey Fund
Connecticut Fund North Carolina Fund
Florida Fund Ohio Fund
Georgia Fund Oregon Fund
Maryland Fund Pennsylvania Fund
Massachusetts Fund Virginia Fund
Michigan Fund
FIRST INVESTORS CASH MANAGEMENT FUND, INC.
FIRST INVESTORS FUND FOR INCOME, INC.
FIRST INVESTORS GLOBAL FUND, INC.
FIRST INVESTORS GOVERNMENT FUND, INC.
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
FIRST INVESTORS NEW YORK INSURED
TAX FREE FUND, INC.
FIRST INVESTORS SERIES FUND
First Investors Insured Intermediate Tax Exempt Fund
First Investors Blue Chip Fund
First Investors Total Return Fund
First Investors Special Situations Fund
First Investors Investment Grade Fund
FIRST INVESTORS SERIES FUND II, INC.
First Investors Value Fund
First Investors Mid-Cap Opportunity Fund
First Investors All-Cap Growth Fund
First Investors Growth & Income Fund
First Investors Focused Equity Fund
FIRST INVESTORS MANAGEMENT COMPANY, INC.
95 WALL STREET
NEW YORK, NEW YORK 10005
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 28, 2005
September [ ], 2005
THIS PROXY STATEMENT IS BEING FURNISHED TO YOU IN CONNECTION WITH THE
SOLICITATION OF PROXIES BY THE BOARD OF TRUSTEES* of Executive Investors Trust
("Executive Investors"), First Investors Cash Management Fund, Inc. ("Cash
Management"), First Investors Fund for Income, Inc. ("Fund For Income"), First
Investors Global Fund, Inc. ("Global Fund"), First Investors Government Fund,
Inc. ("Government Fund"), First Investors Insured Tax Exempt Fund, Inc.
("Insured Tax-Exempt"), First Investors Life Series Fund ("Life Series"), First
Investors Multi-State Insured Tax Free Fund ("Multi-State"), First Investors New
York Insured Tax Free Fund, Inc. ("New York Insured"), First Investors Series
Fund ("Series Fund"), First Investors Series Fund II, Inc. ("Series Fund II),
First Investors Special Bond Fund, Inc. ("Special Bond") and First Investors
Tax-Exempt Money Market Fund, Inc. ("Tax-Exempt Money"), on behalf of each of
its investment series, if any, named above (each an "Old Fund" and collectively,
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* Some of the First Investors funds are "series funds," meaning that they are
comprised of one or more investment series while others are "stand-alone"
funds," meaning they do not offer investment series. Secondly, some of the First
Investors funds are Maryland corporations and others are Massachusetts business
trusts. For ease and clarity of presentation, each series fund and stand-alone
fund are referred to herein as an "Old Fund," shares of common stock or shares
of beneficial interest of a First Investors fund are referred to as "shares,"
holders of shares are referred to as "shareholders," and the Directors or
Trustees of each First Investors fund are referred to as "Trustees."
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the "Old Funds"), to be voted at a special meeting of shareholders to be held on
Friday, October 28, 2005, at 95 Wall Street, New York, New York, at 10:00 a.m.,
Eastern Time, for the purposes set forth below and described in greater detail
in this Proxy Statement. (The Meeting and any adjournment(s) or postponement(s)
of the Meeting is referred to in the Proxy Statement as the "Meeting"). This
Proxy Statement, along with a Notice of a Meeting and a Proxy Card, is first
being mailed to shareholders of the Old Funds on or about September [ ], 2005.
The following Proposals affecting all of the Old Funds will be considered
and acted upon at the Meeting:
PROPOSAL PAGE
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(1) To elect eight (8) Trustees for the Old Funds, who will 5
assume office on or about January 1, 2006.
(2) To approve proposed Agreements and Plans of Conversion and 11
Termination pursuant to which each Old Fund would be
reorganized into a corresponding series of one of four
newly-established Delaware statutory trusts (each, a
"Reorganization" and collectively, the "Reorganizations").
(3) To transact such other business as may properly come before
the Meeting and any adjournments or postponements thereof.
This Proxy Statement and the accompanying Proxy Card are also being
furnished to persons who have invested in Special Bond or any of the series of
Life Series through variable annuity contracts and variable life policies issued
by First Investors Life Insurance Company ("FIL"). Although FIL is the sole
shareholder of Special Bond and each series of Life Series, it will vote shares
that are attributable to variable annuity contracts or variable life policies in
accordance with the votes received from the contract owners and policy holders.
FIL will vote shares attributable to contract owners or policy holders who do
not vote in the same proportion that it votes shares attributable to those who
do vote. Since contract owners and policy holders essentially are entitled to
vote through FIL, we will refer to them hereinafter simply as "shareholders".
VOTING INFORMATION
Shareholders of all Old Funds are entitled to one vote for each Old Fund
share and a fractional vote for each fractional share held directly or held
indirectly through an insurance policy or a variable annuity contract.
Shareholders of record of all Old Funds listed above as of the close of business
on August 31, 2005 ("Record Date"), are entitled to vote at the Meeting. On the
Record Date, each Old Fund had the number of shares issued and outstanding,
consisting of Class A shares and Class B shares, if applicable, as set forth in
Exhibit H. To the best of the Old Funds' knowledge, Exhibit I sets forth, as of
the July 31, 2005, certain information regarding persons who own beneficially or
of record more than 5% of any class of shares of the Old Funds.
All properly executed and unrevoked proxies received in time for the
Meeting will be voted as instructed by shareholders. If you execute your proxy
but give no voting instructions, your shares that are represented by proxies
will be voted "FOR" each proposal and "FOR" or "AGAINST" any other business
which may properly arise at the Meeting, in the proxies' discretion. Any person
giving a proxy has the power to revoke it at any time prior to its exercise by
executing a superseding proxy or by submitting a written notice of revocation to
the Assistant Secretary of the Old Funds ("Assistant Secretary"). To be
effective, such revocation must be received by the Assistant Secretary prior to
the Meeting and must indicate the shareholder's name and account number. In
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addition, although mere attendance at the Meeting will not revoke a proxy, a
shareholder present at the Meeting may withdraw his or her proxy by voting in
person.
QUORUM AND ADJOURNMENT
With respect to Executive Investors, Multi-State, Series Fund and Special
Bond, the presence in person or by proxy of the holders of record of (1) a
majority of the total outstanding shares of such Old Fund (with all series, if
any, of such Old Fund counted together) shall constitute a quorum at the Meeting
for purposes of Proposal 1 and (2) a majority of the total outstanding shares of
each series, if applicable, of such Old Fund (with each series counted
separately) shall constitute a quorum at the Meeting for purposes of Proposal 2.
With respect to Life Series, the presence in person or by proxy of the holders
of record of a majority of the total outstanding shares of Life Series (with all
series counted together) shall constitute a quorum at the Meeting for purposes
of both Proposals 1 and 2. With respect to Cash Management, Fund for Income,
Global Fund, Government Fund, Insured Tax-Exempt, New York Insured, Tax-Exempt
Money and Series Fund II, the presence in person or by proxy of the holders of
record of (1) one-third of the total outstanding shares of such Old Fund (with
all series, if any, of such Old Fund counted together) shall constitute a quorum
at the Meeting for purposes of Proposal 1 and (2) one-third of the total
outstanding shares of each series, if applicable, of such Old Fund (with each
series counted separately) shall constitute a quorum at the Meeting for purposes
of Proposal 2.
In the absence of a quorum or in the event that a quorum is present at the
Meeting but votes sufficient to approve one or both of the proposals are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment may
be an adjournment with respect to one or both proposals and will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote in favor of any such
adjournment if they believe that the adjournment and additional proxy
solicitation are reasonable and in the interests of the Old Funds' shareholders.
In the event of an adjournment, no further notice is needed other than an
announcement at the Meeting to be adjourned. A shareholder vote may be taken on
one or more of the proposals in this Proxy Statement prior to any such
adjournment if sufficient votes have been received and it is otherwise
appropriate.
REQUIRED VOTE
Approval of Proposal 1 will be determined separately for each Old Fund that
is a stand-alone fund and each Old Fund that is a series fund. Assuming the
presence of a quorum, approval of Proposal 1 by:
o each Old Fund, except Executive Investors, Life Series, Multi-State
and Series Fund, requires the affirmative vote of a majority of the
votes cast in person or by proxy at the Meeting; and
o Executive Investors, Life Series, Multi-State and Series Fund require
the affirmative vote of a plurality of the votes cast in person or by
proxy at the Meeting.
Approval of Proposal 2 will be determined separately for each Old Fund on a
series-by-series basis if the Old Fund is a series fund and each Old Fund that
is a stand-alone fund. Assuming the presence of a quorum, approval of Proposal 2
by:
o Cash Management, Government Fund, New York Insured and Tax-Exempt
Money, and by each series comprising Series Fund II requires the
affirmative vote of a majority of the outstanding shares of such Old
Fund entitled to vote at the Meeting;
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o Fund for Income, Global Fund, Insured Tax-Exempt and Special Bond
requires the affirmative vote of two-thirds of the outstanding shares
of such Old Fund entitled to vote at the Meeting; and
o Executive Investors and each series comprising Life Series,
Multi-State and Series Fund requires the affirmative vote of the
lesser of (1) 67% or more of the shares of such Old Fund present at
the Meeting, if more than 50% of the outstanding shares of such Old
Fund are represented at the Meeting in person or by proxy, or (2) more
than 50% of the outstanding shares of such Old Fund.
Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present at the Meeting for quorum purposes but will not be voted for
or against any adjournment or proposal. Accordingly, abstentions and broker
non-votes will have no effect on Proposal 1, for which the required vote is a
plurality or a majority of the votes cast but will effectively be a vote against
Proposal 2 for which the required vote is a percentage of the shares present at
the Meeting or outstanding.
SOLICITATION OF PROXIES
The solicitation of proxies will be made by mail. Additional solicitations
may be made by telephone, e-mail, or other personal contact by the Old Fund's
officers or employees or representatives of First Investors Management Company,
Inc. ("FIMCO" or "Adviser"), the investment adviser to the Old Funds, or one of
its affiliates or by proxy soliciting firms retained by the Old Funds. The Old
Funds have retained InvestorCONNECT, a division of The Altman Group, Inc., as
proxy solicitor, to assist in the solicitation of proxy votes primarily by
contacting shareholders by telephone and facsimile. By contract with the Old
Funds, InvestorConnect, among other things, will provide proxy consulting,
mailing, tabulation and solicitation services. The cost of retaining such proxy
solicitor is estimated to be between $600,000 and $800,000, excluding printing
and mailing costs. Costs will vary depending on the number of solicitations
made. The Old Funds' officers, and those employees and representatives of FIMCO
who assist in the proxy solicitation, will not receive any additional or special
compensation for any such efforts. The cost of the solicitation, including
retaining InvestorConnect, will be borne by the Old Funds. In addition, the Old
Funds will request broker-dealer firms, custodians, nominees and fiduciaries to
forward proxy materials to the beneficial owners of the shares held of record by
such persons. The Old Funds may reimburse such broker-dealer firms, custodians,
nominees and fiduciaries for their reasonable expenses incurred in connection
with such proxy solicitation.
SHAREHOLDER REPORTS
The most recent annual reports of the Old Funds, including financial
statements, for the fiscal years ended September 30, 2004 and December 31, 2004
and the most recent semi-annual reports succeeding the annual reports, if any,
have been mailed previously to shareholders. (A complete list of the Old Funds
and their applicable fiscal year ends can be found at Exhibit F.) If you would
like to receive additional copies of these shareholder reports free of charge,
or copies of any previous or subsequent shareholder reports, please contact
Administrative Data Management Corp., Raritan Plaza 1, Edison, NJ 08837 or by
calling 1-800-423-4026.
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PROPOSAL 1
AFFECTED: ALL OLD FUNDS
ELECTION OF TRUSTEES
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WHAT ARE SHAREHOLDERS BEING ASKED TO APPROVE IN PROPOSAL 1?
The purpose of this proposal is to elect a common Board of Trustees for
each of the Old Funds (except as otherwise specified, the Boards of Trustees of
the Old Funds will be referred to collectively as the "Board"). If elected, the
new Board will assume office on or about January 1, 2006. It is intended that
the enclosed Proxy Card will be voted "FOR" the election as Trustees of the Old
Funds of the eight nominees listed below (each, a "Nominee" and collectively,
the "Nominees"). Each of the eight Nominees is standing for election. All
Nominees whose names are preceded by an asterisk (*) are currently Trustees of
the Old Funds, and each such incumbent Trustee has served in that capacity since
originally elected or appointed. On May 19, 2005 Messrs. Charles R. Barton III,
Stefan L. Geiringer and Arthur M. Scutro, Jr. were each nominated by the current
Independent Trustees to replace Mr. Glenn O. Head who retired at the end of 2004
and Messrs. Rex R. Reed and Herbert Rubinstein who will retire at the end of
2005. None of these new nominees have previously served on the Board. If
elected, each Nominee, except Ms. Kathryn S. Head and Mr. John T. Sullivan would
serve as a Trustee who is not an "interested person" (an "Independent Trustee"),
as that term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act") (each Nominee who is not or would not be an Independent Trustee will
be referred to as an "Interested Trustee"), of the Old Funds.
Charles R. Barton, III
Stefan L. Geiringer
*Robert M. Grohol
*Kathryn S. Head
Arthur M. Scutro, Jr.
*James M. Srygley
*John T. Sullivan
*Robert F. Wentworth
The Nominating and Compensation Committee of the Board met to discuss Board
candidates and, after due consideration, recommended to the Board the Nominees
listed above for election by shareholders. The Nominating and Compensation
Committee took into consideration the general knowledge, background, and
experience of each Nominee. In particular, the Nominating and Compensation
Committee considered each Nominee's ability to bring integrity, insight, energy
and analytical skills to the deliberations of the Board; and ability and
willingness to make the considerable time commitment necessary to function as an
effective Board member. In the case of incumbent Nominees, the Nominating and
Compensation Committee also considered their prior years of service as Trustees
of the Old Funds and their familiarity with the Old Funds. The Board discussed
with the Nominating and Compensation Committee its recommendations and, after
due consideration, determined to recommend to shareholders the election of each
of the Nominees listed above.
As will be explained in greater detail in Proposal 2, the Board has
approved a series of initiatives that are designed to streamline and modernize
the operations of the Old Funds by, among other things, redomiciling each of the
Old Funds into corresponding series of First Investors Equity Funds, First
Investors Income Funds, First Investors Tax Exempt Funds and First Investors
- 5 -
Life Series Funds (each a "New Trust" and collectively the "New Trusts"), which
are four newly-established Delaware statutory trusts. If elected by shareholders
of the Old Funds, the same individuals will serve as Trustees of the New Funds.
It is the intention of the persons named in the enclosed form of proxy to
vote in favor of the election of each Nominee. The Nominees each have consented
to be named in this Proxy Statement and to serve as Trustees if elected. The
Board has no reason to believe that any of the Nominees will become unavailable
for election as Trustees, but if that should occur before the Meeting, the
proxies will be voted for such other nominees as the Board may recommend. None
of the Nominees is related to one another.
No Nominee is a party adverse to any Old Fund or any of its affiliates in
any material pending legal proceeding, nor does any Nominee have any interest
materially adverse to any Old Fund or any of its affiliates.
WHO ARE THE NOMINEES TO THE BOARD?
Information about the Nominees, including their addresses, year of birth,
principal occupations during the past five years, and other current
directorships, is set forth in the table below. For purposes of this Proxy
Statement, "Fund Complex" and "Family of Investment Companies" are used
interchangeably to mean the Old Funds and each series thereof.
INFORMATION REGARDING NOMINEES
FOR ELECTION AT THE MEETING
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS IN FUND
COMPLEX OVERSEEN
POSITION(S) HELD BY TRUSTEE OR
WITH THE OLD FUNDS PRINCIPAL OCCUPATION DURING NOMINEE FOR
NAME, YEAR OF BIRTH, AND LENGTH OF PAST FIVE YEARS AND OTHER DIRECTORSHIPS TRUSTEE, IF
ADDRESS(1) TIME SERVED(2) HELD BY TRUSTEE(3) ELECTED(4)
- -----------------------------------------------------------------------------------------------------------------------
NOMINEES FOR
INDEPENDENT TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------
Charles R. Barton, III n/a President, Noe Pierson Corporation 49
(1965) (management service provider); Trustee of
the Barton Group, LLC (garnet mining and
industrial abrasives).
- -----------------------------------------------------------------------------------------------------------------------
Stefan L. Geiringer n/a Senior Vice President of Pepco Energy 49
(1934) Services since 2003; founder of North
Atlantic Utilities, Inc. from 1987-2003.
- -----------------------------------------------------------------------------------------------------------------------
Robert M. Grohol Trustee since 2000 Retired; formerly Senior Vice President of 49
(1932) Operations of Beneficial Corporation
(consumer financial services).
- -----------------------------------------------------------------------------------------------------------------------
Arthur M. Scutro, Jr. n/a Retired; formerly Vice President of UBS 49
(1941) PaineWebber.
- -----------------------------------------------------------------------------------------------------------------------
- ----------
(1) The addresses for each Nominee and Trustee is c/o the First Investors
Funds, 95 Wall Street, New York, New York 10005.
(2) Each Trustee serves for an indefinite term and until his or her successor
is elected and qualified, or until his or her death, resignation or removal as
provided in the applicable Old Fund's organizational documents or by statute.
Length of time served is measured from the date of first service as a Trustee of
any of the Old Funds.
(3) Positions that do not specify a date range have been held for five or more
years.
(4) If the new Board is elected, it will oversee all Old Funds in the Fund
Complex.
- 6 -
- -----------------------------------------------------------------------------------------------------------------------
James M. Srygley Trustee since 1995 Retired; formerly Vice President, 49
(1932) Marketing and Refinement Division, Mobil
Oil Corporation; owner of Hampton
Properties, Inc. (real property management
and investments).
- -----------------------------------------------------------------------------------------------------------------------
Robert F. Wentworth Trustee since 1992 Retired; formerly financial and planning 49
(1929) executive with American Telephone &
Telegraph Company.
- -----------------------------------------------------------------------------------------------------------------------
NOMINEES FOR INTERESTED
TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------
Kathryn S. Head* Trustee since 1994 Chairman, President and Director of First 49
(1955) Investors Consolidated Corporation, First
President since 2001 Investors Management Company, Inc.,
Administrative Data Management Corp.,
First Investors Resources, Inc., First
Investors Leverage Corporation, N.A.K.
Realty Corporation, Real Property
Development Corporation, Route 33 Realty
Corporation, and First Investors Credit
Funding Corporation; Chairman and Director
of First Investors Federal Savings Bank,
First Investors Corporation, School
Financial Management Services, Inc., First
Investors Life Insurance Company, First
Investors Credit Corporation, and First
Investors Realty Company, Inc.
- -----------------------------------------------------------------------------------------------------------------------
John T. Sullivan* Trustee since 1979 Director of First Investors Corporation, 49
(1932) First Investors Consolidated Corporation,
First Investors Management Company, Inc.,
Administrative Data Management Corp.,
First Investors Life Insurance Company,
First Investors Resources, Inc., First
Investors Leverage Corporation, First
Investors Realty Company, Inc., N.A.K.
Realty Corporation, Real Property
Development Corporation, Route 33 Realty
Corporation, First Investors Credit
Corporation and First Investors Credit
Funding Corporation; formerly, Of Counsel
of Hawkins, Delafield & Wood.
- -----------------------------------------------------------------------------------------------------------------------
- -------------
* Ms. Head is considered an Interested Trustee because (a) she is an indirect
owner of more than 5% of the voting stock of FIMCO and First Investors
Corporation ("Underwriter" or "FIC"), the principal underwriter for certain Old
Funds and (b) she is an officer, director and employee of FIMCO and FIC. Mr.
Sullivan is considered an Interested Trustee because he is a director of FIMCO,
FIC and certain other affiliates and he indirectly owns securities issued by
FIMCO and FIC.
WHO ARE THE OTHER EXECUTIVE OFFICERS OF THE OLD FUNDS?
Executive officers of the Old Funds are appointed by the Board to oversee
the day-to-day activities of each Old Fund. Information about the executive
officers of the Old Funds not listed above, including their principal
occupations during the past five years, is set forth below.
- 7 -
- --------------------------------------------------------------------------------
POSITION(S) HELD WITH THE
NAME, YEAR OF BIRTH, OLD FUNDS AND LENGTH OF PRINCIPAL OCCUPATION DURING
ADDRESS(1) TIME SERVED(2) PAST FIVE YEARS
- --------------------------------------------------------------------------------
Joseph I. Benedek Treasurer Treasurer and Principal
(1957) since 1988 Accounting Officer of
First Investors
Management Company, Inc.
- --------------------------------------------------------------------------------
Larry R. Lavoie Chief Compliance Officer Director/Trustee and
(1947) since 2004 General Counsel of First
Investors Corporation and
various affiliates.
- --------------------------------------------------------------------------------
- ---------------
(1) The address of each officer is c/o the First Investors Funds, 95 Wall
Street, New York, New York 10005.
(2) Officers are generally elected and appointed by the Board for one-year
terms.
WHAT IS THE SHARE OWNERSHIP IN THE OLD FUNDS BY THE NOMINEES AND THE EXECUTIVE
OFFICERS?
As of the Record Date, each of the Nominees and executive officers of the
Old Funds beneficially owned individually and collectively as a group [less than
1%] of the outstanding shares of any class of shares of the Old Funds.
The following table sets forth the aggregate dollar range of equity
securities owned by each Nominee of the Old Funds and of all Old Funds in the
Family of Investment Companies as of June 30, 2005. The information as to
beneficial ownership is based on statements furnished by each Nominee.
NAME OF TRUSTEE AGGREGATE DOLLAR AGGREGATE DOLLAR RANGE OF SECURITIES IN
RANGE OF SECURITIES INVESTMENT COMPANIES OVERSEEN BY TRUSTEE
IN THE OLD FUNDS LISTED BELOW IN FAMILY OF INVESTMENT COMPANIES(1)
- --------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES/NOMINEES
Charles R. Barton, III
Stefan L. Geiringer
Robert M. Grohol
Arthur M. Scutro, Jr.
James M. Srygley
Robert F. Wentworth
INTERESTED TRUSTEES/NOMINEES
Kathryn S. Head
John T. Sullivan
- -------------------
(1) Securities valued as of Record Date.
It is expected that the Board will meet each year at four regularly
scheduled formal meetings and at a minimum of two informal meetings. During each
of the most recent fiscal years ended September 30, 2004 and December 31, 2004,
the Board met seven times at formal and informal meetings. Each incumbent
Trustee attended at least 75% of all meetings of the Board held during those
fiscal years, including the meetings of the Board's standing committees on which
such Trustee was a member. The Old Funds do not hold annual shareholders
meetings and, therefore, the Board does not have a policy with regard to Trustee
attendance at such meetings.
If elected, each Nominee will serve for an indefinite term and until his or
her successor is elected and qualified, or until his or her death, resignation
or removal as provided in the Old Funds' organizational documents or by statute.
If Proposal 2 is approved by shareholders, the Old Funds will operate under the
by-laws of the New Trusts which provide that the Board will review the Trustee's
- 8 -
service after 15 years and determine, by a majority vote, whether such Trustee
may continue serving on the Board. The Board may approve such Trustee's
continued service, subject to a mandatory retirement age of 80.
WHAT IS THE COMPENSATION FOR TRUSTEES ON THE BOARD?
Interested Trustees and officers of the Old Funds are paid by FIMCO, the
investment adviser to the Old Funds, and such persons receive no compensation
from the Old Funds. Each Old Fund pays its Independent Trustees annual
compensation in addition to certain out-of-pocket expenses. The amount of
compensation paid to each Independent Trustee may change as a result of the
introduction of additional funds to the Fund Complex, which would be subject to
oversight by the Board.
The following table lists compensation paid to the Independent Trustees of
the Old Funds for the twelve-month period ended December 31, 2004, as well as
information regarding compensation from the Fund Complex for the twelve-month
period ended December 31, 2004.
No pension or retirement benefits are proposed to be paid under any
existing plan to any Trustee by any Old Fund, its subsidiaries or any investment
company in the Fund Complex.
COMPENSATION TABLE
------------------
AGGREGATE PENSION OR RETIREMENT
COMPENSATION FROM BENEFITS ACCRUED AS ESTIMATED ANNUAL TOTAL COMPENSATION FROM
THE PART OF THE BENEFITS UPON THE
NAME OF TRUSTEE OLD FUNDS OLD FUNDS' EXPENSES RETIREMENT FUND COMPLEX(1)
--------------- --------- ------------------- ---------- ------------
Robert M. Grohol
Rex R. Reed
Herbert Rubinstein
James M. Srygley
Robert F. Wentworth
- ------------------------
(1) Indicates number of Old Funds in the Fund Complex at December 31, 2004 to
which aggregate compensation relates.
WHAT ARE THE OLD FUNDS' STANDING COMMITTEES?
There is one common Board for all of the Old Funds. The Board plays an
important supervisory role with respect to oversight of the management of the
Old Funds. Among other things, the Board is responsible for the annual approval
of investment advisory contracts, oversight of portfolio performance, and the
oversight of decisions that have been made by the Adviser and subadvisers, as
applicable, pursuant to delegated authority. There are two standing committees
of the Board, the "Audit Committee" and the "Nominating and Compensation
Committee," both of which are comprised solely of the Independent Trustees. The
Audit Committee may designate one member to serve as the Chairperson of the
Committee and the Chairperson is currently serving a three-year term. The
Nominating and Compensation Committee elects from its members a Chairperson who
serves for a three-year term and until a successor is elected.
The members of the Audit Committee are Messrs. Grohol, Reed, Rubinstein,
Srygley and Wentworth (Chairperson). The Audit Committee is responsible for,
among other things, overseeing the Old Funds' accounting, financial reporting,
and internal controls, approving the selection, retention, or termination of the
Old Funds' independent registered public accounting firm, evaluating the
independence of the Old Fund's independent registered public accountants,
pre-approving any non-audit services provided to the Old Funds and certain
non-audit services provided to the Old Funds' investment adviser or any of its
- 9 -
affiliates, meeting with the auditors to discuss the audit plan, audit results,
and any matters of concern that may be raised by the auditors, receiving reports
from Old Fund management regarding the design or operation of the Old Funds'
internal controls, investigating improprieties or suspected improprieties in the
Old Funds' accounting or financial reporting, and reporting its activities to
the full Board on a regular basis. During each of the fiscal years ended
September 30, 2004 and December 31, 2004, the Audit Committee met three times.
The members of the Nominating and Compensation Committee are Messrs. Grohol
(Chairperson), Reed, Rubinstein, Srygley and Wentworth. The Nominating and
Compensation Committee is responsible for, among other things, selecting and
nominating persons to serve as Independent Trustees on the Board, evaluating
candidates' qualifications, reviewing the composition of the Board to determine
whether it may be appropriate to add other Independent Trustees, and reviewing
director compensation. The Nominating and Compensation Committee was established
in November 2004. The functions of the Nominating and Compensation Committee
previously had been integrated into the Independent Directors Committee, which
met seven times, at both formal and informal meetings, during each of the fiscal
years ended September 30, 2004 and December 31, 2004. The Nominating and
Compensation Committee has adopted a charter, a current copy of which is
available on the First Investors Funds' website at WWW.FIRSTINVESTORS.COM.
In considering candidates for election to the Board, the Nominating and
Compensation Committee considers, among other things, the prospective nominee's
educational background, business or professional experience, and reputation.
Prospective nominees should demonstrate an ability to bring integrity, insight,
energy and analytical skills to Board deliberations. In addition, all
prospective nominees must demonstrate an ability and willingness to make the
considerable time commitment believed necessary to his or her function as an
effective Board member. When the Board has, or expects to have, a vacancy, the
Nominating and Compensation Committee receives and reviews information on
candidates qualified to be recommended to the full Board as nominees for
election as Trustees, including any recommendations by shareholders. All
candidates will be evaluated based upon the criteria described above and such
other additional qualifications as the Nominating and Compensation Committee may
adopt from time to time. The Nominating and Compensation Committee will review
shareholder recommendations for nominations to fill vacancies on the Board if
such recommendations are submitted in writing and addressed to the Nominating
and Compensation Committee at the First Investors Fund's offices.
WHAT VOTE IS REQUIRED BY SHAREHOLDERS TO APPROVE PROPOSAL 1?
Election of the Nominees for Trustees must be approved separately for each
Old Fund that is a stand-alone fund and each Old Fund that is a series fund.
Approval of this Proposal 1 by:
o each Old Fund, except Executive Investors, Life Series, Multi-State
and Series Fund, requires the affirmative vote of a majority of the
votes cast in person or by proxy at the Meeting; and
o Executive Investors, Life Series, Multi-State and Series Fund require
the affirmative vote of a plurality of the votes cast in person or by
proxy at the Meeting.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES TO THE BOARD OF TRUSTEES OF THE OLD FUNDS.
- 10 -
--------------------------------------------------
PROPOSAL 2
AFFECTED: ALL OLD FUNDS
APPROVAL OF AGREEMENTS AND PLANS OF
CONVERSION AND TERMINATION
--------------------------------------------------
OVERVIEW
HOW WILL THE OLD FUNDS BE REORGANIZED?
At a meeting of the Board of the Old Funds held on August 18, 2005, the
respective Boards of each Old Fund approved, on behalf of such Old Funds, an
Agreement and Plan of Conversion and Termination (each a "Reorganization
Agreement" and collectively, the "Reorganization Agreements") substantially in
the forms attached to this Proxy Statement as Exhibits A-1 (for Old Funds
organized as Maryland corporations) and A-2 (for Old Funds organized as
Massachusetts business trusts), pursuant to which each Old Fund would be
reorganized into a corresponding series of the First Investors Equity Funds,
First Investors Income Funds, First Investors Tax Exempt Funds, or First
Investors Life Series Funds, which are newly-established Delaware statutory
trusts, as set forth below. The name of each Old Fund after the Reorganizations
is indicated in the right-hand column.
- ---------------------------------------------------------------------------------------------------------------------------------
EXISTING OLD FUNDS NEW FUNDS AFTER REORGANIZATION
- ---------------------------------------------------------------------------------------------------------------------------------
FIRST INVESTORS EQUITY FUNDS,
WITH THE FOLLOWING SERIES
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Global Fund, Inc. Global Fund
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Series Fund (only those series at right)* Blue Chip Fund
Special Situations Fund
Total Return Fund
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Series Fund II, Inc. All-Cap Growth Fund Mid-Cap Opportunity Fund
(all series) Focused Equity Fund Value Fund
Growth and Income Fund
- ---------------------------------------------------------------------------------------------------------------------------------
FIRST INVESTORS INCOME FUNDS,
WITH THE FOLLOWING SERIES
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Cash Management Fund, Inc. Cash Management Fund
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Fund For Income, Inc. Fund For Income
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Government Fund, Inc. Government Fund
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Series Fund (only the series at right)* Investment Grade Fund
- ---------------------------------------------------------------------------------------------------------------------------------
FIRST INVESTORS TAX EXEMPT FUNDS,
WITH THE FOLLOWING SERIES
- ---------------------------------------------------------------------------------------------------------------------------------
Executive Investors Trust (all series) Insured Tax Exempt Fund II
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Insured Tax-Exempt Fund, Inc. Insured Tax Exempt Fund
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Multi-State Insured Tax Free Fund Arizona Tax Free Fund Minnesota Tax Free Fund
(all series) California Tax Free Fund Missouri Tax Free Fund
Colorado Tax Free Fund New Jersey Tax Free Fund
Connecticut Tax Free Fund North Carolina Tax Free Fund
Florida Tax Free Fund Ohio Tax Free Fund
Georgia Tax Free Fund Oregon Tax Free Fund
Maryland Tax Free Fund Pennsylvania Tax Free Fund
Massachusetts Tax Free Fund Virginia Tax Free Fund
Michigan Tax Free Fund
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Series Fund (only the series at right)* Insured Intermediate Tax Exempt Fund
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Tax-Exempt Money Market Fund Tax-Exempt Money Market Fund
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors New York Insured Tax Free Fund, Inc. New York Tax Free Fund
- ---------------------------------------------------------------------------------------------------------------------------------
- 11 -
- ---------------------------------------------------------------------------------------------------------------------------------
EXISTING OLD FUNDS NEW FUNDS AFTER REORGANIZATION
- ---------------------------------------------------------------------------------------------------------------------------------
FIRST INVESTORS LIFE SERIES FUNDS,
WITH THE FOLLOWING SERIES
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Life Series Fund Blue Chip Fund International Securities Fund
(all series) Cash Management Fund Investment Grade Fund
Discovery Fund Target Maturity 2007 Fund
Focused Equity Fund Target Maturity 2010 Fund
Government Fund Target Maturity 2015 Fund
Growth Fund Value Fund
High Yield Fund
- ---------------------------------------------------------------------------------------------------------------------------------
First Investors Special Bond Fund, Inc. Special Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------------
* First Investors Series Fund which consists of five series will be restructured
in the Reorganizations so that Blue Chip Fund, Special Situations Fund and Total
Return Fund, which principally invest in equity securities will become series of
First Investors Equity Funds; Investment Grade Fund, which principally invests
in investment grade debt securities, will become a series of First Investors
Income Funds; and Insured Intermediate Tax-Exempt Fund, which principally
invests in municipal bonds and other municipal securities, will become a series
of First Investors Tax Exempt Fund.
WHAT ARE SHAREHOLDERS BEING ASKED TO APPROVE IN PROPOSAL 2?
Shareholders of each Old Fund are now being asked to approve the applicable
Reorganization Agreement. If shareholders of each Old Fund approve the
applicable Reorganization Agreement, the Trustees and officers of the respective
Old Fund will implement the Reorganization Agreement on behalf of such Old Fund.
If approved, it is expected that the Reorganization for each Old Fund with a
fiscal year ending September 30, 2005, will take effect after the close of
business on or about January 27, 2006 and the Reorganization for each Old Fund
with a fiscal year ending December 31, 2005, will take effect after the close of
business on or about April 28, 2006 (each "Closing Date"), although these dates
may be adjusted in accordance with each Reorganization Agreement.
Each Reorganization Agreement contemplates:
o the transfer of all of the assets of each Old Fund to a corresponding
series of one of the New Trusts designated in the table above (each a
"New Fund") in exchange for shares of beneficial interest (referred to
simply as "shares") of the corresponding New Fund;
o the assumption by the corresponding New Fund of all of the liabilities
of the Old Fund;
o the distribution to shareholders of each class of the Old Fund, in
exchange for his or her shares of the Old Fund, the same number of
full and fractional shares of the corresponding class of the
respective New Fund having an aggregate net asset value equal to the
aggregate net asset value of the full and fractional shares of that
class of the Old Fund held by that shareholder at the close of
business on the applicable Closing Date; and
o the subsequent complete termination of the Old Fund.
The consummation of any Reorganization is not contingent on the
consummation of any other Reorganization. For a more detailed discussion of the
terms of the Reorganization Agreements, please see "SUMMARY OF THE
REORGANIZATION AGREEMENTS" below.
If approved, the Reorganizations will have the following effects with
respect to the New Funds:
(1) If elected, the same Trustees nominated for election in Proposal 1
will serve as Trustees for the New Funds (except as otherwise
specified, the Boards of Trustees of the New Funds will also be
referred to collectively as the "Board").
- 12 -
(2) The New Funds will enter into investment advisory agreements with
FIMCO that are the same as the agreements currently in place with
respect to the Old Funds, except that there will be new fee schedules
under which the contractual rates for over half of the New Funds (25
of 49) will be lower than those currently in effect for the Old Funds,
while the contractual advisory rates for the remaining New Funds will
be the same as those currently in effect for the Old Funds. The
contractual fee rate reductions will make permanent a portion of the
fee waivers that have been previously approved by the Boards of the
Old Funds on a temporary basis and will lower the actual effective
rates paid by three of the New Funds. In addition, all but three of
the New Funds will benefit, to the extent assets reach certain levels,
from the addition of breakpoints that are proposed to be added to the
advisory rates for the New Funds.
(3) First Investors Equity Funds and First Investors Life Series Funds
will enter into subadvisory agreements with FIMCO and Wellington
Management Company, LLP for the New Funds corresponding to (a) the
Global Fund, (b) the Focused Equity Fund, the Growth Fund, and the
International Securities Fund of Life Series and (c) the Focused
Equity Fund and the All-Cap Growth Fund of Series Fund II that are the
same as the agreements currently in place with respect to these Old
Funds.
(4) First Investors Equity Funds and First Investors Life Series Funds
will enter into subadvisory agreements with FIMCO and Paradigm Capital
Management, Inc. for the New Funds corresponding to (a) Special
Situations Fund of Series Fund and (b) Discovery Fund of Life Series
Fund that are the same as the agreements currently in place with
respect to these Old Funds.
(5) The New Funds will apply for an exemptive order from the Securities
and Exchange Commission ("SEC"), which would permit FIMCO and the
Board of the New Funds to appoint and replace subadvisers, to enter
into subadvisory agreements and to amend subadvisory agreements on
behalf of the New Funds without shareholder approval. Such changes
could be effected for any New Fund so long as the overall investment
advisory fees paid by such fund remain the same or decrease.
(6) Distribution plans will be adopted in accordance with Rule 12b-1 under
the 1940 Act with respect to each applicable New Fund and its classes
which are substantially similar to the existing plans, except that to
standardize the distribution plans for the New Funds all
"reimbursement" plans will be converted into "compensation" plans and
the lone "defensive" plan will be eliminated.
(7) The investment objective(s) of each New Fund will be non-fundamental,
meaning that the Board of the New Funds may change the investment
objective(s) of the New Funds when the Board believes that changes are
necessary or appropriate in light of market circumstances or other
events, without shareholders' approval.
(8) The investment objective of the New Funds corresponding to the Blue
Chip Fund of Life Series Fund, the First Investors Blue Chip Fund of
Series Fund and First Investors Insured Tax Exempt Fund II of
Executive Investors will be revised in minor respects as described
under "COMPARISON OF THE NEW FUNDS AND THE OLD FUNDS--HOW WILL THE OLD
FUNDS' INVESTMENT OBJECTIVES CHANGE?" below.
- 13 -
(9) The New Funds will adopt certain investment restrictions which update,
standardize and streamline the investment restrictions currently in
effect for the Old Funds.
(10) Shareholders will be deemed to have approved, to the extent necessary,
any actions required to terminate each Old Fund.
SHAREHOLDERS OF THE OLD FUNDS ARE NOT BEING ASKED TO VOTE SEPARATELY ON THESE
MATTERS. BY VOTING "FOR" PROPOSAL 2 SHAREHOLDERS WILL EFFECT THE ACTIONS
DESCRIBED ABOVE. MORE INFORMATION ON EACH OF THESE MATTERS IS DISCUSSED UNDER
"COMPARISON OF THE NEW FUNDS AND THE OLD FUNDS" BELOW.
WHY IS THE BOARD RECOMMENDING APPROVAL OF THE REORGANIZATION AGREEMENTS?
As noted earlier, at meetings held on August 18, 2005, the Boards of the
Old Funds and the New Funds each approved a series of initiatives that are
designed to streamline and modernize the operations of the Old Funds by
redomiciling each of the Old Funds to a single jurisdiction under a single form
of declaration of trust and operating under a uniform set of
statutorily-mandated investment restrictions. These initiatives are being
implemented in a series of steps, the majority of which are expected to be
completed for each Old Fund with a fiscal year ending September 30, 2005, on or
about January 27, 2006, and for each Old Fund with a fiscal year ending December
31, 2005, on or about April 28, 2006.
The primary purpose of the proposed Reorganizations is to seek future
economies of scale and to eliminate certain costs associated with operating
thirteen different business entities that are organized in two different states.
In unanimously approving the Reorganization Agreements and recommending that
shareholders of the Old Funds also approve the Reorganization Agreements, the
Board of the Old Funds was provided and evaluated such information as it
reasonably believed necessary to consider the proposed Reorganizations. The
Board of the Old Funds determined that (1) the interests of each Old Fund's
shareholders would not be diluted as a result of the Reorganizations and (2) the
Reorganizations would be in the best interests of each Old Fund and its
shareholders. Summarized below are the key factors considered by the Board:
o In recent years, many mutual funds have reorganized as Delaware
statutory trusts. FIMCO informed the Board that the Delaware statutory
trust form of organization provides more flexibility with respect to
the administration of the New Funds, which potentially could lead to
greater operating efficiencies and lower expenses for shareholders of
the New Funds.
o FIMCO informed the Board that the New Funds may be able to realize
greater operating efficiencies because the Reorganizations would
permit the New Funds to (1) eliminate the many differences in voting,
record date, quorum and other corporate requirements under the
governing documents of the Old Funds and (2) operate under uniform,
modern and flexible governing documents that would streamline the
governance process, reduce future reporting, filing and proxy costs
and reduce costs associated with Fund governance and compliance
monitoring.
o The Board considered that the contractual advisory rates for over half
of the New Funds (25 of 49) will be lower than those currently in
effect for the Old Funds, the contractual advisory rates for the
remaining New Funds will be the same as those currently in effect for
the Old Funds, and that the actual effective rates paid by three of
the New Funds would be lower than those paid by the corresponding Old
Funds. In addition, the Board noted that all but three of the New
Funds will benefit, to the extent assets reach certain levels, from
the addition of breakpoints that are proposed to be added to the
advisory rates for the New Funds.
- 14 -
o FIMCO informed the Board that the Reorganizations will not result in
any material change in the investment objective(s) or principal
investment strategies of any of the Old Funds even though (1) the New
Funds will adopt investment objectives that may be changed with
approval of the Board only, and (2) the investment objective of the
New Funds corresponding to the Blue Chip Fund of Life Series Fund, the
First Investors Blue Chip Fund of Series Fund and First Investors
Insured Tax Exempt Fund II of Executive Investors will be revised in
minor respects.
o The New Funds will adopt certain investment restrictions which update,
standardize and streamline the investment restrictions currently in
effect for the Old Funds which would simplify portfolio management and
compliance monitoring for the New Funds.
o The Board considered the estimated cost of the Reorganizations,
including the costs of holding shareholder meetings and of obtaining
shareholder approval of the Reorganizations, the fact that a
significant portion of these costs would have been incurred even if
the Reorganizations had not been proposed since shareholder approval
of a new Board was necessary in light of the retirement plans of two
Independent Trustees, and the anticipated long-term benefits of the
Reorganizations, including anticipated cost savings. The Board also
considered the fact that FIMCO represented to it that there would be
no effect on shareholder fees and services as a result of the
Reorganizations.
o FIMCO informed the Board that there were no anticipated direct or
indirect federal income tax consequences of the Reorganizations to Old
Fund shareholders.
WHAT EFFECT WILL THE REORGANIZATION HAVE ON THE OLD FUNDS AND THEIR
SHAREHOLDERS?
The Reorganizations will not result in any material change in the
investment objective(s) or principal investment strategies of any of the Old
Funds. The investment adviser, subadvisers, portfolio managers and other service
providers will remain the same. The services provided by those service providers
will be the same as those currently being provided to each Old Fund. The
Reorganizations will result in name changes for certain Old Funds (which do not
require shareholder approval). Approval of the Reorganizations will result in
changes to certain of the Old Funds' investment objectives and investment
restrictions as discussed under "COMPARISON OF THE NEW FUNDS AND THE OLD
FUNDS--HOW WILL THE OLD FUNDS' INVESTMENT OBJECTIVES CHANGE? and --HOW WILL THE
INVESTMENT RESTRICTIONS OF THE NEW FUNDS DIFFER FROM THE INVESTMENT RESTRICTIONS
IN EFFECT FOR THE OLD FUNDS?" below.
Immediately after the Reorganizations, shareholders of the Old Funds will
own shares of the corresponding class of each corresponding New Fund that are
equal in number and in value to the shares of each Old Fund that were held by
those shareholders immediately prior to the closing of the Reorganization. For
example, if you currently own 100 Class A shares of an Old Fund, immediately
after the closing of the Reorganization, you would own 100 Class A shares of the
corresponding New Fund having the same net asset value as your original 100
shares of the Old Fund.
As a result of the Reorganizations, shareholders of the Old Funds, which
are organized as either Maryland corporations or Massachusetts business trusts
will become shareholders of the corresponding New Funds, each of which is a
series of one of the four New Trusts, each a Delaware statutory trust. For a
comparison of certain attributes of these entities that may affect shareholders
of the Old Funds, please see "COMPARISON OF THE NEW FUNDS AND THE OLD FUNDS--HOW
WILL THE NEW FUNDS BE ORGANIZED?" below.
WILL THERE BE ANY SALES LOAD, COMMISSION OR OTHER TRANSACTIONAL FEE IN
CONNECTION WITH THE REORGANIZATION?
No. The full value of your shares of an Old Fund will be exchanged for
shares of the same class of the corresponding New Fund without any sales load,
commission or other transactional fee being imposed.
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WHAT WILL BE THE FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION?
As a condition to consummation of each Reorganization, the Old Funds will
receive an opinion from Kirkpatrick & Lockhart Nicholson Graham LLP to the
effect that neither the participating Old Funds nor its shareholders will
recognize any gain or loss as a result of the Reorganization. The holding period
for, and the aggregate tax basis in, the New Fund's shares a shareholder
receives pursuant to a Reorganization will include the holding period for, and
will be the same as the aggregate tax basis in, the Old Fund's shares the
shareholder holds immediately prior to the Reorganization (provided the
shareholder holds the shares as capital assets on the applicable Closing Date).
Also, a New Fund's holding period for, and tax basis in, each asset a Old Fund
transfers to it will include the Old Fund's holding period for, and be the same
as the New Fund's tax basis in, that asset immediately prior to the
Reorganization. Please see "SUMMARY OF THE REORGANIZATION AGREEMENTS--WHAT ARE
THE FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED REORGANIZATION" below for
further information.
WHO IS BEARING THE EXPENSES RELATED TO THE REORGANIZATION?
The Old Funds will bear the expenses associated with the Reorganization.
The pro rata share to be paid by each Old Fund is based on the Old Fund's
average net assets as a percentage of the average net assets of the Old Funds in
the Fund Complex.
SUMMARY OF THE REORGANIZATION AGREEMENTS
WHAT ARE THE MATERIAL TERMS AND CONDITIONS OF THE REORGANIZATION AGREEMENTS?
The terms and conditions under which each Reorganization would be completed
are contained in each Reorganization Agreement. The following summary of the
Reorganization Agreements is qualified in its entirety by reference to each
Reorganization Agreement itself, the forms of which are attached to this Proxy
Statement as Exhibits A-1 and A-2.
The Reorganization Agreements provide that each New Fund will acquire all
of the assets of the corresponding Old Fund in exchange solely for shares of the
New Fund and the New Fund's assumption of such Old Fund's liabilities. The
Reorganization Agreements further provide that, as promptly as practicable after
the applicable Closing Date, each Old Fund will distribute the shares of the New
Fund it receives in the Reorganization to its shareholders, by class.
The number of full and fractional shares of the New Fund you will receive
in the Reorganization will be equal in value, as calculated at the close of
business (generally 4:00 p.m. Eastern Time) on the applicable Closing Date, to
the number of full and fractional shares of the Old Fund you own on that Closing
Date and will be of the same class as the shares you own on that Closing Date.
The New Funds will not issue certificates representing the New Fund shares
issued in connection with such exchange. Outstanding certificates for shares of
the Old Funds will continue to be recognized.
After such distribution, each Old Fund will take all necessary steps under
applicable state law, its governing documents, and any other applicable law to
effect a complete termination or dissolution of the Old Fund, to the extent that
the Old Fund has no outstanding shares following the closing of the
Reorganization.
Any Reorganization Agreement may be terminated, and any Reorganization may
be abandoned at any time prior to its consummation, before or after approval by
- 16 -
Old Fund shareholders, if circumstances should develop that, in the Board's
opinion, make proceeding with the Reorganization inadvisable with respect to
such Old Fund(s). The completion of each Reorganization also is subject to
various conditions, including (1) completion of all necessary filings with the
SEC, state securities authorities and, in the case of Life Series and Special
Bond, state insurance regulators; the receipt of all material consents, order
and permits of federal, state, and local regulatory authorities necessary to
consummate the Reorganizations; (2) delivery of a legal opinion regarding the
federal tax consequences of the Reorganization; (3) the issuance by the New
Funds of initial shares to FIMCO or its affiliate, to permit FIMCO or its
affiliate to take all necessary actions as such New Fund's sole shareholder,
required to be taken by the New Funds; (4) each New Trusts (on behalf of the New
Funds) shall have entered into or adopted an investment advisory contract, a
distribution and service plan pursuant to Rule 12b-1 under the 1940 Act, and
such other agreements and plans necessary for each New Fund's operations; and
(5) other customary corporate and securities matters. Subject to the
satisfaction of those conditions, each Reorganization will take place
immediately after the close of business on the applicable Closing Date. The
Reorganization Agreements provide that either of the Old Funds or the New Funds
may waive compliance with any of the covenants or conditions made therein for
the benefit of any Old Fund or New Fund, as applicable, if such waiver will not
have a material adverse effect on the Old Funds' shareholders other than the
requirements specifically listed in clauses (1)-(4) above.
The Reorganization Agreement for each Old Fund must be approved by
shareholders of that Old Fund. The consummation of one Reorganization is not
contingent on the consummation of any other Reorganization. In the event that
shareholders of a particular Old Fund do not approve the Reorganization
Agreement of that Old Fund or the Reorganization is not consummated with respect
to that Old Fund for any other reasons, the Board will consider other courses of
action.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATIONS?
Each Reorganization is intended to qualify for federal income tax purposes
as a tax-free reorganization under section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
As a condition to consummation of each Reorganization, each Old Fund and
New Fund will receive an opinion from Kirkpatrick & Lockhart Nicholson Graham
LLP to the effect that, based on the facts and assumptions stated therein as
well as certain representations of each Old Fund and conditioned on each
Reorganization's being completed in accordance with the Reorganization
Agreement, for federal income tax purposes, with respect to each Reorganization
and the Old Funds participating therein:
(1) the Reorganization will qualify as a "reorganization" (as defined in
section 368(a)(1)(F) of the Code), and each Old Fund will be a "party
to a reorganization" (within the meaning of section 368(b) of the
Code);
(2) no Old Fund will recognize gain or loss on the Reorganization;
(3) the shareholders will not recognize any gain or loss on the exchange
of shares of the Old Fund for shares of the New Fund;
(4) the holding period for, and tax basis in, the shares of a New Fund a
shareholder receives pursuant to the Reorganization will include the
holding period for, and will be the same as the aggregate tax basis
in, the shares of an Old Fund the shareholder holds immediately prior
to the Reorganization (provided the shareholder holds the shares as
capital assets on the applicable Closing Date); and
- 17 -
(5) the New Fund's holding period for, and tax basis in, each asset the
Old Fund transfers to it will include the Old Fund's holding period
for, and will be the same as the New Fund's tax basis in, that asset
immediately prior to the Reorganization.
Notwithstanding clauses (2) and (5), such opinion may state that no opinion
is expressed as to the effect of a Reorganization on the Old Funds or the
shareholders with respect to any transferred asset as to which any unrealized
gain or loss is required to be recognized for federal income tax purposes at the
end of a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting.
The foregoing description of the federal income tax consequences of each
Reorganization does not take into account the particular circumstances of any
shareholder. If a Reorganization fails to meet the requirements of section
368(a)(1)(F), a shareholder could realize a gain or loss on the transaction.
Shareholders are therefore urged to consult their tax advisers as to the
specific consequences to them of the Reorganizations, including the
applicability and effect of state, local, foreign and other taxes.
COMPARISON OF THE NEW FUNDS AND THE OLD FUNDS
HOW WILL THE NEW FUNDS BE ORGANIZED?
Each of the Old Funds is currently organized as either a Maryland
corporation or a Massachusetts business trust as indicated below.
MARYLAND FUNDS MASSACHUSETTS FUNDS
Global Fund Government Fund Executive Investors
Series Fund II Insured Tax-Exempt Life Series
Cash Management New York Insured Multi-State
Fund for Income Special Bond Series Fund
Tax-Exempt Money
If the Reorganizations are approved, each Old Fund will redomicile into
corresponding series of the New Trusts which are Delaware statutory trusts
governed by their own Declarations of Trust and By-Laws. The Board of Trustees
of the New Funds is expected to be the same eight (8) Nominees identified in
Proposal 1. The operations of each Old Fund and New Fund are also governed by
applicable state and federal law.
Under the Declaration of Trust and By-Laws of each New Trust, the Trustees
will have more flexibility than Trustees of the Old Funds and, subject to
applicable requirements of the 1940 Act and Delaware law, broader authority to
act, as further described below. The increased flexibility may allow the
Trustees of the New Funds to react more quickly to changes in competitive and
regulatory conditions and, as a consequence, may allow the New Funds to operate
in a more efficient and economical manner and will reduce the circumstances in
which shareholder approval will be required. Delaware law also promotes ease of
administration by permitting the Board of Trustees of the New Funds to take
certain actions, for example, establishing new investment series, without filing
additional documentation with the state, which would otherwise require
additional time and costs.
Importantly, the Trustees of the New Funds will have the same fiduciary
obligations to act with due care and in the interest of the New Funds and their
shareholders as do the Trustees of the Old Funds with respect to the Old Funds
and their shareholders.
Certain other similarities and differences between these entities are
summarized at Exhibit D, although this is not a complete comparison.
Shareholders should refer to the provisions of these governing documents and the
relevant state law directly for a more thorough comparison. Copies of these
- 18 -
governing documents are available to shareholders without charge upon written
request to the Legal Department, First Investors Management Company, Inc, 95
Wall Street, New York, New York 10005.
WHAT ARE THE MATERIAL TERMS OF THE INVESTMENT ADVISORY AGREEMENTS WITH FIMCO?
The Reorganization Agreements require the New Trusts to enter into
investment advisory agreements for the New Funds. Together, the current
Investment Advisory Agreements for each of the Old Funds are referred to herein
as the "Current Advisory Agreements," the Investment Advisory Agreements for
each of the New Funds are referred to herein as the "New Advisory Agreements,"
and the Current Advisory Agreements and the New Advisory Agreements are referred
to together as the "Advisory Agreements."
The Current Advisory Agreements were approved by Old Fund shareholders. The
Board of the Old Funds, including the Trustees who are not "interested persons"
(as defined in the 1940 Act) of any party to the Current Advisory Agreements or
its affiliates, last approved the continuation of the Current Advisory
Agreements on May 19, 2005. The Board of the New Funds separately approved the
New Advisory Agreements on August 18, 2005. Information concerning the Board's
approval of these agreements is set forth below under "--WHY DID THE BOARD
APPROVE THE NEW ADVISORY AGREEMENTS, THE NEW WELLINGTON AGREEMENTS AND THE NEW
PARADIGM AGREEMENTS?"
The New Advisory Agreements are the same as the Current Advisory
Agreements, except for the new fee schedules described below under "--WILL THE
ADVISORY RATES FOR THE NEW FUNDS BE DIFFERENT?" Pursuant to each Advisory
Agreement, FIMCO is responsible for supervising and managing each funds'
investments, effecting each funds' portfolio transactions and supervising all
aspects of each fund's operations, subject to review by the Board. The Advisory
Agreements also each provide that FIMCO shall provide the funds with certain
executive, administrative and clerical personnel, office facilities and
supplies, conduct the business and details of the operation of each fund and
assume certain expenses thereof, other than obligations or liabilities of the
funds.
The Advisory Agreements provide that they will continue in effect for two
years from their respective dates of execution. Thereafter, if not terminated,
they will continue for successive 12-month periods only if such continuance is
approved at least annually in conformity with the requirements of the 1940 Act.
Each New Advisory Agreement further provides that with respect to any new series
of a New Trust, the agreement will continue in effect for two years from the
date the series is added to such agreement. Each Advisory Agreement may be
terminated at any time, with respect to a fund, without penalty by the Trustees
or by a majority of the outstanding voting securities of such fund, or by FIMCO,
in each instance on not less than 60 days' written notice, and shall
automatically terminate in the event of its assignment (as defined in the 1940
Act). The Advisory Agreements each provide that FIMCO shall not be liable for
any error of judgment or mistake of law or for any loss suffered by a fund in
connection with the performance of the agreement, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith, or gross
negligence on the part of FIMCO in the performance of its duties, or from
reckless disregard by FIMCO of its duties and obligations thereunder.
Under the Advisory Agreements, each fund is obligated to pay the Adviser an
annual fee, paid monthly. Each fund also bears all fees and expenses of its
operations other than those assumed by the Adviser or its Underwriter under the
terms of its Advisory or underwriting agreements.
WILL THE ADVISORY RATES FOR THE NEW FUNDS BE DIFFERENT?
The contractual advisory rates for over half of the New Funds (25 of 49)
will be lower than those currently in effect for the Old Funds, while the
- 19 -
contractual advisory rates for the remaining New Funds will be the same as those
currently in effect for the Old Funds. The contractual fee rate reductions will
make permanent a portion of the fee waivers that have been previously negotiated
with and approved by the Boards of the Old Funds on a temporary basis and will
lower the actual effective rates paid by Global Fund, Blue Chip Fund of Series
Fund and First Investors Mid-Cap Opportunity Fund of Series Fund II. The new
advisory rates are designed to eliminate some of the historical inconsistencies
that have arisen over the years and to better align contractual rates with
current industry standards. All but three of the New Funds (Cash Management, Tax
Exempt Money and First Investors Insured Intermediate Tax Exempt Fund, a series
of Series Fund, which already have lower advisory rates) will benefit, to the
extent assets reach certain levels, from the addition of breakpoints that are
proposed to be added to the advisory rates for the New Funds.
Exhibit C sets forth the individual fees paid on behalf of each Old Fund
for the calendar year ended December 31, 2004 (before and after taking into
account any fee waivers) and indicates the reduction, if any, to the contractual
and actual effective advisory rates of the New Funds. Exhibit C assumes that the
proposed fee reductions would have been reflected in corresponding reductions of
the fee waivers that were in effect in 2004. Any waivers to the contractual
advisory fees for the New Funds are subject to change under year-to-year
negotiations of the waiver rates with the Board, just as they are for the Old
Funds. Any change to the fee waivers could result in a decrease or an increase
of the actual effective advisory rates for the New Funds. Exhibit C also sets
out the advisory fee schedules for each of the Old and New Funds. FIMCO
compensates each subadviser from the fees it receives.
WHAT ARE THE MATERIAL TERMS OF THE SUBADVISORY AGREEMENTS WITH WELLINGTON
MANAGEMENT?
The Reorganization Agreements require that (i) FIMCO, Wellington Management
Company LLP ("Wellington Management") and First Investors Equity Funds and (ii)
FIMCO, Wellington Management and First Investors Life Series Funds enter into
subadvisory agreements for the New Funds that are corresponding series of (i)
the Global Fund, (ii) the Focused Equity Fund, the Growth Fund, and the
International Securities Fund of Life Series and (iii) the Focused Equity Fund
and the All-Cap Growth Fund of Series Fund II (together, the "Wellington
Subadvised Funds"). Together, the current Subadvisory Agreements with Wellington
Management are referred to herein as the "Current Wellington Agreements," the
proposed Subadvisory Agreements with Wellington Management are referred to
herein as the "New Wellington Agreements," and the Current Wellington Agreements
and the New Wellington Agreements are referred to together as the "Wellington
Agreements."
The Current Wellington Agreements were approved by affected shareholders of
the Old Funds. The Board of the applicable Old Funds, including the Trustees who
are not "interested persons" (as defined in the 1940 Act) of any party to the
Current Wellington Agreements or its affiliates, last approved the continuation
of the Current Wellington Agreements on May 19, 2005. The Board of the
applicable New Funds separately approved the New Wellington Agreements on August
18, 2005. Information concerning the Board's approval of these agreements is set
forth under "--WHY DID THE BOARD APPROVE THE NEW ADVISORY AGREEMENTS, THE NEW
WELLINGTON AGREEMENTS AND THE NEW PARADIGM AGREEMENTS?" below.
The New Wellington Agreements are the same as the Current Wellington
Agreements. Under the Wellington Agreements, Wellington Management is
responsible for managing each Wellington Subadvised Fund's investments allocated
to it, subject to the oversight of FIMCO and the Board. FIMCO is responsible for
paying Wellington Management a subadvisory fee with respect to each Wellington
Subadvised Fund. The subadvisory rates to be paid to Wellington Management under
the New Wellington Agreements and the Current Wellington Agreements are the
same. Each Wellington Agreement provides that it will continue in effect for two
years from their respective dates of execution. Thereafter, if not terminated,
they will continue for successive 12-month periods only if such continuance is
- 20 -
approved at least annually in conformity with the requirements of the 1940 Act.
Each Wellington Agreement also provides that it will terminate automatically if
assigned or upon their termination of the Advisory Agreement, and that it may be
terminated at any time without penalty by the Board or a vote of a majority of
the outstanding voting securities of the Wellington Subadvised Fund or by
Wellington Management upon not more than 60 days' nor less than 30 days' written
notice. Each Wellington Agreement provides that Wellington Management will not
be liable for any error of judgment or for any loss suffered by the fund party
to such agreement in connection with the matters to which the Wellington
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation or from willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties.
WHAT ARE THE MATERIAL TERMS OF THE SUBADVISORY AGREEMENTS WITH PARADIGM?
The Reorganization Agreements require that (i) FIMCO, Paradigm Capital
Management, Inc. ("Paradigm") and First Investors Equity Funds and (ii) FIMCO,
Paradigm and First Investors Life Series Funds for the New Funds corresponding
to (i) Special Situations Fund of First Investors Series Fund and (ii) Discovery
Fund of First Investors Life Series Fund (together, the "Paradigm Subadvised
Funds") enter into new subadvisory agreements. Together, the current Subadvisory
Agreements with Paradigm are referred to herein as the "Current Paradigm
Agreements." Together, the proposed Subadvisory Agreements with Paradigm are
referred to herein as the "New Paradigm Agreements."
The Current Paradigm Agreements were approved by affected shareholders of
the Old Fund on March 8, 2005. The Board of the applicable New Funds, including
the Trustees who are not "interested persons" (as defined in the 1940 Act) of
any party to the Current Paradigm Agreements or its affiliates, separately
approved the New Paradigm Agreements on August 18, 2005. Information concerning
the Board's approval of these agreements is set forth under "--WHY DID THE BOARD
APPROVE THE NEW ADVISORY AGREEMENTS, THE NEW WELLINGTON AGREEMENTS AND THE NEW
PARADIGM AGREEMENTS?" below.
The New Paradigm Agreements are the same as the Current Paradigm
Agreements. Under the Paradigm Agreements, Paradigm is responsible, subject to
the supervision of the Board and FIMCO, for the investment management of the
assets of each Paradigm Subadvised Fund. FIMCO is responsible for paying
Paradigm a subadvisory fee with respect to each Paradigm Subadvised Fund. The
subadvisory rates to be paid to Paradigm under the New Paradigm Agreements and
the Current Paradigm Agreements are the same. Each Paradigm Agreement provides
that it will continue in effect for two years from their respective dates of
execution. Thereafter, if not terminated, they will continue for successive
12-month periods only if such continuance is approved at annually by either the
Board or a majority of the outstanding voting securities of the fund and, in
either case, by a vote of a majority of the Independent Trustees voting in
person at a meeting called for the purpose of voting on such approval. Each
Paradigm Agreement also provides that the fund party to such agreement, by the
vote of a majority of the Board or a majority of the outstanding voting
securities of the Paradigm Subadvised Fund, may terminate its agreement, without
penalty, on not more than 60 days' nor less than 30 days' written notice to
Paradigm and Paradigm may terminate each Paradigm Agreement, without penalty, on
not more than 60 days' nor less than 30 days' written notice to FIMCO. In
addition, each Paradigm Agreement is automatically terminable upon assignment.
The Paradigm Agreements provide that Paradigm will not be liable for any error
of judgment or mistake of law or for any loss suffered by the fund party to such
agreement, their shareholders, or FIMCO in connection with the matters to which
a Paradigm Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of Paradigm in the performance of its
duties or from reckless disregard by it of its obligations and duties under such
agreement.
- 21 -
WHY DID THE BOARD APPROVE THE NEW ADVISORY AGREEMENTS, THE NEW WELLINGTON
AGREEMENTS AND THE NEW PARADIGM AGREEMENTS?
In determining whether to approve the New Advisory Agreements, the New
Wellington Agreements and the New Paradigm Agreements, the Board of the New
Funds reviewed and considered: (i) the information provided to it in advance of
the meeting; (ii) the presentations made by FIMCO at the meeting; and (iii) a
variety of other factors. The material factors considered by the Board in
approving these agreements included, but were not limited to, the following:
o that the investment objective(s) and principal investment strategies
of the Old Funds will not materially change;
o that the terms of the New Advisory Agreements are the same as those of
the Current Advisory Agreements; that the terms of the New Wellington
Agreements and New Paradigm Agreements are the same as the Current
Wellington Agreements and Current Paradigm Agreements, respectively;
and that there would be no changes in the nature, extent and quality
of the services provided to the New Funds under each such agreement;
o That, as indicated in Exhibit C, the contractual advisory rates for
over half of the New Funds (25 of 49) will be lower than those
currently in effect for the Old Funds, while the contractual advisory
rates for the remaining New Funds will be the same as those currently
in effect for the Old Funds, and that all but three of the New Funds
will benefit, to the extent assets reach certain levels, from the
addition of breakpoints that are proposed to be added to the advisory
rates for the New Funds; and
o that FIMCO and the Board have had a history of negotiating additional
contractual advisory rate waivers for some of the Old Funds where
appropriate to bring fees in line with industry standards, to address
competitive issues, and to address other circumstances.
Based upon the foregoing and other factors, the Board, including the
Independent Trustees, concluded that each of the New Advisory Agreements and the
New Wellington and New Paradigm Agreements is in the best interests of the
applicable Old Fund and its respective shareholders and unanimously approved the
adoption of each New Advisory Agreement, New Wellington Agreement and New
Paradigm Agreement.
WILL THERE BE ANY ADDITIONAL CHANGES WITH RESPECT TO THE SUBADVISORY AGREEMENTS?
The New Funds will apply for an exemptive order from the SEC that permits
FIMCO, subject to the approval of the Board of the affected New Fund, including
a majority of the Independent Trustees, to (1) enter into new subadvisory
agreements with either a current or a new subadviser that is not an affiliate of
FIMCO or the Old Funds or (2) continue to employ an existing subadviser or amend
an existing subadvisory agreement after certain events that would otherwise
require a shareholder vote, in each case, without shareholder approval. Under
this policy FIMCO, subject to Board approval, could change subadvisers or
subadvisory arrangements for a variety of reasons, including, but not limited
to: (1) the existing subadviser has a record of substandard performance; (2) the
individual employees responsible for portfolio management of the New Fund leave
the investment advisory firm; (3) there is a change of control of the
subadviser; (4) FIMCO decides to diversify the New Fund's management by adding
another subadviser; or (5) there is a change in investment style of the New
Fund. The New Fund will notify shareholders of any subadviser changes and any
other changes for which notification is required under the exemptive order, if
granted, and any other conditions therein.
- 22 -
There is no assurance that the SEC will grant such exemptive relief.
However, there is a pending rule proposal that would permit a board to appoint
and replace subadvisers or to amend subadvisory agreements without obtaining
shareholder approval subject to certain conditions. The rule would eliminate the
need for the New Funds to obtain exemptive relief from the SEC.
WHAT ARE THE MATERIAL TERMS OF THE DISTRIBUTION PLANS?
Each Old Fund, except Special Bond and the series of Life Series, has
adopted one or more distribution plans in accordance with Rule 12b-1 under the
1940 Act. The Old Funds that have adopted distribution plans currently have
separate plans for their Class A and Class B shares (except for Cash Management,
which only has an Old Class B Plan) ("Old Class A Plans" and "Old Class B Plans"
together, the "Old 12b-1 Plans"). With respect to the Old Funds that will be
reorganized as series of First Investors Equity Funds, each Old Class A Plan is
a compensation plan. With respect to the Old Funds that will be reorganized as
series of First Investors Income Funds and First Investors Tax Exempt Funds,
each Old Class A Plan is a reimbursement plan, except for Investment Grade
Fund's Old Class A Plan which is a compensation plan and Tax-Exempt Money's Old
Class A Plan which is a defensive plan. The Old Class B Plans are all
compensation plans.
If the Reorganizations are approved, each New Fund, except the New Funds
corresponding to Cash Management Fund and Tax-Exempt Money Market Fund, will
adopt new distribution plans in accordance with Rule 12b-1 for its Class A
shares and Class B shares ("New Class A Plans" and "New Class B Plans" together,
the "New 12b-1 Plans"). The fee rates paid under the New Class A Plans and the
New Class B Plans will be the same as the current fee rates under the Old Class
A Plans and the Old Class B Plans. The Old Class A defensive plan for Tax Exempt
Money will be eliminated.
The principal difference between the Old Class A Plans and the New Class A
Plans is that all of the New Class A Plans will be compensation plans. The form
of the New Class A Plan is included as Exhibit B. Under a "compensation" plan
the fees paid by a fund are intended as compensation for services rendered. The
fee is paid regardless of whether the amount exceeds or is less than the actual
expenses incurred by the underwriter in distributing shares or servicing
shareholder accounts in a particular year. By contrast, under a "reimbursement"
plan the fees paid by a fund are intended as reimbursement for services rendered
up to the maximum allowable fee. The terms of the New Class B Plans are
substantially similar to those of the Old Class B Plans, except for minor
changes to the approval provisions.
The Board of the Old Funds, including the Trustees who are not "interested
persons" (as defined in the 1940 Act) of any party to the Old 12b-1 Plans or its
affiliates, last approved the continuation of the Old 12b-1 Plans on May 19,
2005. The Board of the New Funds, including the Trustees who are not "interested
persons" (as defined in the 1940 Act) of any party to the New 12b-1 Plans
separately approved the New 12b-1 Plans on August 18, 2005.
Each Old 12b-1 Plan and New 12b-1 Plan can be terminated at any time by a
vote of a majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the relevant class of shares of such fund. Any
change to any 12b-1 Plan that would materially increase the costs to that class
of shares of a fund may not be instituted without the approval of the
outstanding voting securities of that class of shares of such fund, any class of
shares that converts into that class and a majority of the Independent Trustees.
HOW WILL THE OLD FUNDS' INVESTMENT OBJECTIVES CHANGE?
If the Reorganizations are approved, minor changes will be made to the
investment objectives of two of the New Funds so that they more accurately
- 23 -
reflect the investment strategies and risks that are described in the
corresponding Old Funds' prospectuses. The investment objectives of the New
Funds corresponding to the Blue Chip Fund of Life Series Fund and the First
Investors Blue Chip Fund of Series Fund will be revised from that of seeking a
"high total investment return consistent with the preservation of capital" to
that of simply seeking "high total investment return." FIMCO believes the phrase
"consistent with the preservation of capital" has become inconsistent with
investing in Blue Chip stocks in today's marketplace where even Blue Chip stocks
exhibit substantial volatility.
The investment objective of the New Fund corresponding to First Investors
Insured Tax Exempt Fund II of Executive Investors will also be amended so that
the New Fund may seek not only tax-exempt income but also "capital
appreciation." The new investment objective would state that the New Fund "seeks
a high level of investment income that is exempt from federal income tax and is
not a tax preference item for purposes of the federal alternative minimum tax
and seek capital appreciation." The change to such New Fund's investment
objective would more closely reflect how the corresponding Old Fund is currently
being managed.
Other than as described above, the Old Funds' investment objectives will
remain the same. However, the investment objectives of each New Fund will be
classified non-fundamental. This would allow the Board of the New Funds to
change the investment objective(s) of the New Funds whenever the Board believes
that changes are necessary or appropriate in light of market circumstances or
other events, without causing the New Funds to incur the costs of shareholder
meetings.
HOW WILL THE INVESTMENT RESTRICTIONS OF THE NEW FUNDS DIFFER FROM THE INVESTMENT
RESTRICTIONS IN EFFECT FOR THE OLD FUNDS?
The 1940 Act requires each registered investment company to adopt
fundamental investment restrictions with respect to several specific types of
activities, including the fund's ability to:
o concentrate its investments in any particular industry or group of
industries;
o borrow money;
o issue senior securities;
o make loans to other persons;
o purchase or sell real estate;
o purchase or sell commodities; and
o underwrite securities issued by other persons.
In order to amend or eliminate a fund's fundamental investment
restrictions, the 1940 Act requires that any such change be approved by
shareholders of a majority of the fund's outstanding voting securities. Pursuant
to the requirements of the 1940 Act, each Old Fund has adopted certain
fundamental investment restrictions with respect to the activities listed above.
Each Old Fund also has a fundamental investment restriction related to
diversification and certain other policies, although not required by the 1940
Act.
In connection with the Reorganizations, the New Funds intend to adopt
uniform fundamental investment restrictions that standardize, update and
streamline the Old Funds' fundamental investment restrictions to make them
consistent with current industry standards. In addition, the New Funds intend to
eliminate certain fundamental investment restrictions of the Old Funds because
such restrictions are duplicative or unnecessary under existing federal
regulations. The Board of the New Funds has reviewed and approved the
modifications to the fundamental investment restrictions of the Old Funds that
will be applicable to the New Funds.
- 24 -
In general, the purpose of the modifications is to permit the New Funds
greater flexibility in portfolio management, consolidate minor differences,
simplify compliance monitoring and/or make the restrictions uniform among all
New Funds. The New Funds do not intend to have different investment objectives
or strategies as a result of the modifications to, or in some cases elimination
of, the Old Funds' fundamental investment restrictions.
Exhibit E lists and describes each fundamental investment restriction for
each Old Fund and the corresponding fundamental investment restriction, if any,
for each New Fund. In addition, Exhibit E includes a brief summary of the
material differences, if any, between a fundamental investment restriction among
the Old Funds and New Funds.
SHAREHOLDER APPROVAL
Approval of Proposal 2 will be determined separately for each Old Fund on a
series-by-series basis if the Old Fund is a series fund and each Old Fund that
is a stand-alone fund. The consummation of one Reorganization is not contingent
on the consummation of any other Reorganization. Approval of Proposal 2 by:
o Cash Management, Government Fund, New York Insured and Tax-Exempt
Money, and by each series comprising Series Fund II requires the
affirmative vote of a majority of the outstanding shares of such Old
Fund entitled to vote at the Meeting;
o Fund for Income, Global Fund, Insured Tax-Exempt and Special Bond
requires the affirmative vote of two-thirds of the outstanding shares
of such Old Fund entitled to vote at the Meeting; and
o Executive Investors and each series comprising Life Series,
Multi-State and Series Fund requires the affirmative vote of the
lesser of (1) 67% or more of the shares of such Old Fund present at
the Meeting, if more than 50% of the outstanding shares of such Old
Fund are represented at the Meeting in person or by proxy, or (2) more
than 50% of the outstanding shares of such Old Fund.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS OF EACH OLD FUND VOTE "FOR"
APPROVAL OF THE APPLICABLE REORGANIZATION AGREEMENT.
---------------------------
GENERAL INFORMATION ABOUT THE FIRST INVESTORS FUNDS
MANAGEMENT AND OTHER SERVICE PROVIDERS
Set forth below is a description of the current service providers of the
Old Funds.
INVESTMENT ADVISER AND ADMINISTRATION AND FUND ACCOUNTING SERVICES
First Investors Management Company, Inc. is the investment adviser and
makes the day-to-day investment decisions for the Old Funds. FIMCO has been an
investment adviser to the First Investors Funds since 1965. FIMCO also provides
certain administrative and fund accounting services to the Old Funds. FIMCO is
located at 95 Wall Street, New York, New York 10005. As of December 31, 2004,
FIMCO served as investment adviser to 50 mutual funds or series of funds
constituting the First Investors Funds with total net assets of approximately
$6.6 billion. FIMCO supervises all aspects of each Old Fund's operations and
- 25 -
provides certain fund accounting and administrative services to the Old Funds.
FIMCO is a wholly owned subsidiary of First Investors Consolidated Corporations.
Set forth in Exhibit G is certain information with respect to the executive
officers and directors of FIMCO. Following the Reorganization, FIMCO will
continue to serve the New Funds as investment adviser.
SUBADVISERS
Wellington Management Company, LLP serves as the investment subadviser of
(a) the Global Fund, (b) the Focused Equity Fund, the Growth Fund, and the
International Securities Fund of Life Series and (c) the Focused Equity Fund and
the All-Cap Growth Fund of Series Fund. Wellington Management is a professional
investment counseling firm which provides investment services to investment
companies, employee benefit plans, endowment funds, foundations and other
institutions. As of June 30, 2005, Wellington Management held investment
management authority with respect to approximately $484 billion of assets. Of
that amount, Wellington Management acted as investment adviser or subadviser to
approximately 175 registered investment companies or series of such companies,
with net assets of approximately $235.1 billion. Wellington Management is
located at 75 State Street, Boston, MA 02109.
Set forth in Exhibit G is certain information with respect to the principal
executive officers and general partners of Wellington Management. Following the
Reorganizations, Wellington Management will continue to serve the New Funds
corresponding to Old Funds it currently serves.
Paradigm Capital Management, Inc. serves as the investment subadviser of
(a) Special Situations Fund of Series Fund and (b) Discovery Fund of Life Series
Fund. Paradigm is an investment management firm that provides investment
services to high net worth individuals, pension and profit sharing plans,
investment companies, and other institutions. As of June 30, 2005, Paradigm held
investment management authority with respect to approximately $1.9 billion in
assets. Of that amount, Paradigm acted as investment adviser or subadviser to 6
registered investment companies or series of such companies with net assets of
approximately $506.5 million. Paradigm is located at Nine Elk Street, Albany,
New York 12207.
Set forth in Exhibit G is certain information with respect to the principal
executive officers and directors of Paradigm. Following the Reorganizations,
Paradigm will continue to serve the New Funds corresponding to Old Funds it
currently serves.
UNDERWRITER
First Investors Corporation, 95 Wall Street, New York, New York 10005
serves as the underwriter to all of the Old Funds except Special Bond and those
series comprising Life Series.
CUSTODIAN
The Bank of New York, 48 Wall Street, New York, NY 10286, is custodian of
the securities and cash of each Old Fund, except for the Global Fund and the
International Securities Fund of Life Series, and employs foreign sub-custodians
to provide custody of foreign assets. Brown Brothers Harriman & Co., 40 Water
Street, Boston, MA 02109, is custodian of the securities and cash of the Global
Fund and the International Securities Fund of Life Series and employs foreign
subcustodians to provide custody of their foreign assets.
- 26 -
TRANSFER AGENT
Administrative Data Management Corp. ("ADM"), Raritan Plaza 1, Edison, NJ
08837, an affiliate of FIMCO and FIC, acts as transfer agent for the Old Funds
and as redemption agent for regular redemptions except Special Bond and those
series comprising Life Series. ADM provides services to accounts that includes,
but is not limited to, opening and closing non-retirement and retirement
accounts, transacting purchases, redemptions and exchanges, issuing checks,
issuing tax statements, and issuing account statements.
First Investors Federal Savings Bank ("FIFSB") acts as custodian on
individual retirement accounts, including IRAs. FIFSB charges an annual
custodial fee for each individual retirement account it services. These
custodial fees are currently being paid by the Old Funds but the Old Funds
reserve the right to discontinue this practice.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The accounts of the Old Funds are audited once each fiscal year by Tait,
Weller & Baker ("TWB"), an independent registered public accounting firm, 1818
Market Street, Suite 2400, Philadelphia, PA 19103-2108. Upon the recommendation
of the Audit Committee, a majority of the Independent Trustees selected TWB to
act as the independent registered public accounting firm for the Old Funds for
the current fiscal years. The selection of TWB was approved by the entire Board.
TWB has advised the Old Funds that, to the best of its knowledge and belief, as
of the [ ], no TWB professional had any direct or material indirect ownership
interest in the Old Funds inconsistent with independent professional standards
pertaining to accountants. Certain information concerning the fees and services
provided by TWB to the Old Funds and to FIMCO and its affiliates for the most
recent fiscal years of the Old Funds is provided below. For purposes of the
following information, FIMCO, and any entity controlling, controlled by or under
common control with FIMCO that provides ongoing services to the Old Funds, are
referred to as "Affiliated Service Providers."
The tables below set forth the fees billed by TWB for each of the last two
fiscal years of the Old Funds for (i) all audit and non-audit services provided
directly to the Old Funds and (ii) those non-audit services provided to the Old
Funds' Affiliated Service Provider that relate directly to the Old Fund's
operations and financial reporting, and, therefore, require Audit Committee
pre-approval. Services under the caption:
o AUDIT FEES are for the audit of the Old Funds' annual financial
statements included in each Old Fund's reports to stockholders and in
connection with statutory and regulatory filings or engagements;
o AUDIT-RELATED FEES include assurance and related services reasonably
related to the performance of the audit of the Old Funds' annual
financial statements not included in AUDIT FEES;
o TAX FEES include tax compliance, tax advice and tax planning; and
o ALL OTHER FEES include any other products and services provided by
TWB.
For a list of the Old Funds that are classified as September 30 Funds and
December 31 Funds see Exhibit F.
- 27 -
FEES FOR AUDIT AND NON-AUDIT SERVICES PROVIDED DIRECTLY TO THE OLD FUNDS:
FOR THE FISCAL YEAR ENDED 2004.
AUDIT AUDIT-RELATED TAX ALL OTHER
FEES FEES FEES FEES
------- ------------- ------- ---------
September 30 Funds $[ ] $[ ] $[ ] $[ ]
December 31 Funds $[ ] $[ ] $[ ] $[ ]
FOR THE FISCAL YEAR ENDED 2003.
AUDIT AUDIT-RELATED TAX ALL OTHER
FEES FEES FEES FEES
------- ------------- ------- ---------
September 30 Funds $[ ] $[ ] $[ ] $[ ]
December 31 Funds $[ ] $[ ] $[ ] $[ ]
FEES FOR NON-AUDIT SERVICES PROVIDED TO THE OLD FUNDS' AFFILIATED SERVICE
PROVIDERS FOR WHICH PRE-APPROVAL BY THE AUDIT COMMITTEE WAS REQUIRED:
FOR THE FISCAL YEAR ENDED 2004.
AUDIT-RELATED TAX ALL OTHER
FEES FEES FEES
------------- ------- ---------
September 30 Funds $[ ] $[ ] $[ ]
December 31 Funds $[ ] $[ ] $[ ]
FOR THE FISCAL YEAR ENDED 2003.
AUDIT-RELATED TAX ALL OTHER
FEES FEES FEES
------------- ------- ---------
September 30 Funds $[ ] $[ ] $[ ]
December 31 Funds $[ ] $[ ] $[ ]
AGGREGATE NON-AUDIT FEES FOR SERVICES PROVIDED TO THE OLD FUNDS AND THEIR
AFFILIATED SERVICE PROVIDERS, REGARDLESS OF WHETHER PRE-APPROVAL WAS REQUIRED.
FOR THE FISCAL YEAR ENDED 2004.
AGGREGATE NON-AUDIT FEES
------------------------
September 30 Funds $[ ]
December 31 Funds $[ ]
FOR THE FISCAL YEAR ENDED 2003.
AGGREGATE NON-AUDIT FEES
------------------------
September 30 Funds $[ ]
December 31 Funds $[ ]
Audit and non-audit services provided to the Old Funds by TWB require
pre-approval by the Audit Committee. [All of the audit and non-audit services
described above for which TWB billed the Old Funds fees for the fiscal years
ended September 30, 2004 and December 31, 2004 and September 30, 2003 and
- 28 -
December 31, 2003 were pre-approved by the Audit Committee.] The aggregate
non-audit fees billed by TWB for services rendered to the Old Funds, FIMCO and
any entity controlling, controlled by, or under common control with the Old
Funds and FIMCO that provides ongoing services to the Old Funds for the fiscal
years ended September 30, 2004 and December 31, 2004 and September 30, 2003 and
December 31, 2003 were $[ ], $[ ], $[ ] and $[ ], respectively. The Audit
Committee has determined that the provision of these non-audit services is
compatible with maintaining the independence of TWB.
None of the services described above, provided in the fiscal years ended
September 30, 2004 and December 31, 2004 and September 30, 2003 and December 31,
2003, were approved pursuant to the de minimis exception provided in Rule
2-01(c)(7)(i)(C) of Regulation S-X promulgated by the SEC.
OTHER BUSINESS
The Board does not intend to present any other business at the Meeting. If,
however, any other matters are properly brought before the Meeting, the persons
named in the accompanying form of proxy will vote thereon in accordance with
their judgment.
The Old Funds do not hold annual shareholder meetings. Any shareholder who
wishes to submit proposals to be considered at a special meeting of the Old
Funds' shareholders should send such proposals to the Assistant Secretary of the
First Investors Funds at 95 Wall Street, New York, New York 10005. Any
shareholder proposal intended to be presented at any future meeting of
shareholders must be received by the Old Funds at their principal office a
reasonable time before the solicitation of proxies for such meeting in order for
such proposal to be considered for inclusion in that Proxy Statement relating to
such meeting. Moreover, inclusion of such proposals is subject to limitations
under the federal securities laws. Persons named as proxies for any subsequent
shareholders' meeting will vote in their discretion with respect to proposals
submitted on an untimely basis.
Shareholders of the First Investors Funds that wish to send communications
to the Board of Trustees or the specific members of the Board should submit the
communication in writing to the attention of the Assistant Secretary of the
First Investors Funds, at the address in the preceding paragraph, identifying
the correspondence as intended for the Board of Trustees of the First Investors
Funds or a specified member of the Board. The Assistant Secretary will maintain
a copy of any such communication and will promptly forward it to the Board or
the specified member of the Board, as appropriate.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the New Trusts
will be passed upon by Kirkpatrick & Lockhart Nicholson Graham, as special
counsel to the New Trusts.
- 29 -
EXHIBITS INDEX
- --------------------------------------------------------------------------------
Exhibit A-1 Form of Agreement and Plan of Conversion and Termination
(Maryland corporation)
- --------------------------------------------------------------------------------
Exhibit A-2 Form of Agreement and Plan of Conversion and Termination
(Massachusetts business trust)
- --------------------------------------------------------------------------------
Exhibit B Form of Class A Distribution Plan
- --------------------------------------------------------------------------------
Exhibit C Advisory Fees
- --------------------------------------------------------------------------------
Exhibit D Comparison of the New Funds and the Old Funds
- --------------------------------------------------------------------------------
Exhibit E Proposed Modifications to each Old Fund's Fundamental Investment
Restrictions
- --------------------------------------------------------------------------------
Exhibit F The Old Funds and Their Respective Fiscal Year Ends
- --------------------------------------------------------------------------------
Exhibit G Executive Officers and Directors or Partners of FIMCO, Wellington
Management and Paradigm
- --------------------------------------------------------------------------------
Exhibit H Outstanding Shares
- --------------------------------------------------------------------------------
Exhibit I Principal Shareholders of the Old Funds
- --------------------------------------------------------------------------------
EXHIBIT A-1
FORM OF AGREEMENT AND PLAN OF CONVERSION AND TERMINATION
THIS AGREEMENT AND PLAN OF CONVERSION AND TERMINATION ("AGREEMENT") is made
as of ________ __, 2005, between FIRST INVESTORS _______ FUNDS, a Delaware
statutory trust ("TRUST"), on behalf of each of its segregated portfolios of
assets ("SERIES") listed under the heading "New Funds" on Schedule A to this
Agreement ("SCHEDULE A") (each, a "NEW FUND"), and __________, a Maryland
corporation ("CORPORATION"), on behalf of its series listed under the heading
"Old Funds" on Schedule A (each, an "OLD FUND"). (Each New Fund and Old Fund is
sometimes referred to herein as a "FUND," and each of the Trust and the
Corporation is sometimes referred to herein as an "INVESTMENT COMPANY.") All
agreements, covenants, representations, actions, and obligations described
herein made or to be taken or undertaken by a Fund are made and shall be taken
or undertaken by the Trust on each New Fund's behalf and by the Corporation on
each Old Fund's behalf, and all rights and benefits created hereunder in favor
of a Fund shall inure to, and shall be enforceable by, the Investment Company of
which it is a series acting on its behalf.
Each Investment Company wishes to effect five separate reorganizations,
each described in section 368(a)(1)(F) of the Internal Revenue Code of 1986, as
amended ("CODE"), and intends this Agreement to be, and adopts it as, a "plan of
reorganization" within the meaning of the regulations under the Code
("REGULATIONS"). Each reorganization will involve an Old Fund's changing its
identity, form, and place of organization -- by converting from a series of the
Corporation to a series of the Trust -- by (1) transferring all its assets to
the New Fund listed on Schedule A opposite its name (which is being established
solely for the purpose of acquiring such assets and continuing that Old Fund's
business) in exchange solely for voting shares of beneficial interest in that
New Fund and that New Fund's assumption of all that Old Fund's liabilities, (2)
distributing those shares PRO RATA to that Old Fund's shareholders in exchange
for their shares of common stock therein and in complete liquidation thereof,
and (3) terminating that Old Fund (all the foregoing transactions involving each
Old Fund and its corresponding New Fund being referred to herein collectively as
a "REORGANIZATION"), all on the terms and conditions set forth herein. The
consummation of one Reorganization shall not be contingent on the consummation
of any other Reorganization. (For convenience, the balance of this Agreement,
except paragraph 8, refers only to a single Reorganization, one Old Fund, and
one New Fund, but the terms and conditions hereof shall apply separately to each
Reorganization and the Funds participating therein.)
Each Investment Company's Board of Trustees/Directors (each, a "BOARD"),
including a majority of its members who are not "interested persons" (as that
term is defined in the Investment Company Act of 1940, as amended ("1940 ACT"))
thereof, (1) has duly adopted and approved this Agreement and the transactions
contemplated hereby and (2) has determined that participation in the
Reorganization is in the best interests of its Fund and that the interests of
the existing shareholders of its Fund will not be diluted as a result of the
Reorganization.
Old Fund offers two classes of voting shares of common stock, designated
Class A and Class B shares ("CLASS A OLD FUND SHARES" and "CLASS B OLD FUND
SHARES," respectively, and collectively, "OLD FUND SHARES"). New Fund will offer
two classes of voting shares of beneficial interest, also designated Class A and
Class B shares ("CLASS A NEW FUND SHARES" and "CLASS B NEW FUND SHARES,"
respectively, and collectively, "NEW FUND SHARES"). The rights, powers,
privileges, and obligations of each class of New Fund Shares will be identical
to those of the similarly designated class of Old Fund Shares.
In consideration of the mutual promises contained herein, the Investment
Companies agree as follows:
1. PLAN OF CONVERSION AND TERMINATION
----------------------------------
1.1. Subject to the requisite approval of Old Fund's shareholders and the
terms and conditions set forth herein, Old Fund shall assign, sell, convey,
transfer, and deliver all of its assets described in paragraph 1.2 ("ASSETS") to
New Fund. In exchange therefor, New Fund shall --
(a) issue and deliver to Old Fund the number of full and fractional (1)
Class A New Fund Shares equal to the number of full and fractional
Class A Old Fund Shares then outstanding and (2) Class B New Fund
Shares equal to the number of full and fractional Class B Old Fund
Shares then outstanding (all references herein to "fractional" shares
meaning fractions rounded to the third decimal place), and
(b) assume all of Old Fund's liabilities described in paragraph 1.3
("LIABILITIES").
Such transactions shall take place at the CLOSING (as defined in paragraph 2.1).
1.2 The Assets shall consist of all assets and property -- including all
cash, cash equivalents, securities, commodities, futures interests, receivables
(including interest and dividends receivable), claims and rights of action,
rights to register shares under applicable securities laws, books and records,
and deferred and prepaid expenses shown as assets on Old Fund's books -- Old
Fund owns at the EFFECTIVE TIME (as defined in paragraph 2.1).
1.3 The Liabilities shall consist of all of Old Fund's liabilities, debts,
obligations, and duties of whatever kind or nature existing at the Effective
Time, whether absolute, accrued, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable at that time, and
whether or not specifically referred to in this Agreement. Notwithstanding the
foregoing, Old Fund shall endeavor to discharge all its known liabilities,
debts, obligations, and duties before the Effective Time.
1.4 At or immediately before the Closing, New Fund shall redeem the INITIAL
SHARES (as defined in paragraph 5.5) for $10.00 each. At the Effective Time (or
as soon thereafter as is reasonably practicable), Old Fund shall distribute the
New Fund Shares it receives pursuant to paragraph 1.1(a) to its shareholders of
record determined as of the Effective Time (each, a "SHAREHOLDER"), in
proportion to their Old Fund Shares then held of record and in exchange for
their Old Fund Shares, and will completely liquidate. That distribution shall be
accomplished by the Trust's transfer agent's opening accounts on New Fund's
share transfer books in the Shareholders' names and transferring those New Fund
Shares thereto. Pursuant to such transfer, each Shareholder's account shall be
credited with the respective PRO RATA number of full and fractional New Fund
Shares due that Shareholder, by class (i.e., the account for each Shareholder
that holds Class A Old Fund Shares shall be credited with the number of full and
fractional Class A New Fund Shares equal to the number of full and fractional
Class A Old Fund Shares that Shareholder holds at the Effective Time, and the
account for each Shareholder that holds Class B Old Fund Shares shall be
credited with the number of full and fractional Class B New Fund Shares equal to
the number of full and fractional Class B Old Fund Shares that Shareholder holds
at the Effective Time). All issued and outstanding Old Fund Shares, including
any represented by certificates, shall simultaneously be canceled on Old Fund's
share transfer books. New Fund shall not issue certificates representing the New
Fund Shares issued in connection with the Reorganization.
1.5 As soon as reasonably practicable after distribution of the New Fund
Shares pursuant to paragraph 1.4, but in all events within six months after the
Effective Time, Old Fund shall be terminated as a series of the Corporation and
any further actions shall be taken in connection therewith as required by
applicable law.
- 2 -
1.6 Any reporting responsibility of Old Fund to a public authority,
including the responsibility for filing regulatory reports, tax returns, and
other documents with the Securities and Exchange Commission ("COMMISSION"), any
state securities commission, any federal, state, and local tax authorities, and
any other relevant regulatory authority, is and shall remain its responsibility
up to and including the date on which it is terminated.
1.7 Any transfer taxes payable on issuance of New Fund Shares in a name
other than that of the registered holder on Old Fund's share transfer books of
the Old Fund Shares actually or constructively exchanged therefor shall be paid
by the person to whom those New Fund Shares are to be issued, as a condition of
that transfer.
2. CLOSING AND EFFECTIVE TIME
--------------------------
2.1 The Reorganization, together with related acts necessary to consummate
the same ("CLOSING"), shall occur at the Investment Companies' offices on
[January 27, 2006][April 28, 2006], or at such other place and/or on such other
date as to which the Investment Companies may agree. All acts taking place at
the Closing shall be deemed to take place simultaneously immediately after the
close of business (i.e., 4:00 p.m., Eastern time) on the date thereof
("EFFECTIVE TIME").
2.2 The Corporation shall direct the custodian for its assets ("CUSTODIAN")
to deliver at the Closing a certificate of an authorized officer stating that
(a) the Assets have been delivered in proper form to New Fund within two
business days before or at the Effective Time and (b) all necessary taxes in
connection with the delivery of the Assets, including all applicable federal and
state stock transfer stamps, if any, have been paid or provision for payment has
been made. Each of Old Fund's portfolio securities represented by a certificate
or other written instrument shall be transferred and delivered by Old Fund as of
the Effective Time for New Fund's account duly endorsed in proper form for
transfer in such condition as to constitute good delivery thereof. The Custodian
shall deliver as of the Effective Time by book entry, in accordance with the
customary practices of the Custodian and any securities depository (as defined
in Rule 17f-4 under the 1940 Act) in which any Assets are deposited, the Assets
that are deposited with such depositories. The cash to be transferred by Old
Fund shall be delivered by wire transfer of federal funds at the Effective Time.
2.3 The Corporation shall direct its transfer agent to deliver at the
Closing a certificate of an authorized officer stating that its records contain
the number of full and fractional outstanding Old Fund Shares each Shareholder
owned immediately before the Closing.
2.4 The Corporation shall deliver to the Trust at the Closing a certificate
of an authorized officer of the Corporation setting forth information (including
adjusted basis and holding period, by lot) concerning the Assets, including all
portfolio securities, on Old Fund's books immediately before the Effective Time.
2.5 Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance reasonably satisfactory to the recipient and dated the date of the
Closing, to the effect that the representations and warranties it made in this
Agreement are true and correct at the Effective Time except as they may be
affected by the transactions contemplated by this Agreement.
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 The Corporation, on Old Fund's behalf, represents and warrants to the
Trust, on New Fund's behalf, as follows:
- 3 -
(a) The Corporation is a corporation that is duly incorporated, validly
existing, and in good standing under the laws of the State of
Maryland; and its Articles of Incorporation ("ARTICLES") are on file
with that state's Department of Assessments and Taxation;
(b) The Corporation is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be
in full force and effect at the Effective Time;
(c) Old Fund is a duly established and designated series of the
Corporation;
(d) At the Effective Time, the Corporation, on Old Fund's behalf, will
have good and marketable title to the Assets and full right, power,
and authority to sell, assign, transfer, and deliver the Assets
hereunder free of any liens or other encumbrances (except securities
that are subject to "securities loans" as referred to in section
851(b)(2) of the Code or that are restricted to resale by their
terms); and on delivery and payment for the Assets, the Trust, on New
Fund's behalf, will acquire good and marketable title thereto;
(e) Old Fund is not engaged currently, and the Corporation's execution,
delivery, and performance of this Agreement will not result, in (1) a
material violation of the Articles or the Corporation's By-Laws
(collectively, "CORPORATION GOVERNING DOCUMENTS") or of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
the Corporation, on Old Fund's behalf, is a party or by which it is
bound or (2) the acceleration of any obligation, or the imposition of
any penalty, under any agreement, indenture, instrument, contract,
lease, judgment, or decree to which the Corporation, on Old Fund's
behalf, is a party or by which it is bound;
(f) All material contracts and other commitments of Old Fund (other than
this Agreement and certain investment contracts, including options,
futures, and forward contracts) will terminate, or provision for
discharge of any liabilities of Old Fund thereunder will be made, at
or before the Effective Time, without either Fund's incurring any
liability or penalty with respect thereto and without diminishing or
releasing any rights the Corporation, on Old Fund's behalf, may have
had with respect to actions taken or omitted or to be taken by any
other party thereto before the Closing;
(g) No litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against the Corporation with respect to Old Fund
or any of its properties or assets that, if adversely determined,
would materially and adversely affect its financial condition or the
conduct of its business; and the Corporation, on Old Fund's behalf,
knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of
any order, decree, or judgment of any court or governmental body that
materially and adversely affects its business or its ability to
consummate the transactions herein contemplated, except as otherwise
disclosed to the Trust;
(h) Old Fund's Statement of Assets and Liabilities, Statements of
Operations and Changes in Net Assets, and Portfolio of Investments at
and for the year ended on September 30, 2005, have been audited by
Tait Weller & Baker, an independent registered public accounting firm,
and present fairly, in all material respects, Old Fund's financial
condition as of such date in accordance with generally accepted
accounting principles consistently applied ("GAAP"); and to the
Corporation's management's best knowledge and belief, there are no
known contingent liabilities, debts, obligations, or duties of Old
- 4 -
Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date that are not
disclosed therein;
(i) Since September 30, 2005, there has not been any material adverse
change in Old Fund's financial condition, assets, liabilities, or
business, other than changes occurring in the ordinary course of
business, or any incurrence by Old Fund of indebtedness maturing more
than one year from the date such indebtedness was incurred; for
purposes of this subparagraph, a decline in net asset value per Old
Fund Share due to declines in market values of securities Old Fund
holds, the discharge of Old Fund liabilities, or the redemption of Old
Fund Shares by its shareholders shall not constitute a material
adverse change;
(j) At the Effective Time, all federal and other tax returns, dividend
reporting forms, and other tax-related reports of Old Fund required by
law to have been filed by such date (including any extensions) shall
have been filed and are or will be correct in all material respects,
and all federal and other taxes shown as due or required to be shown
as due on such returns and reports shall have been paid or provision
shall have been made for the payment thereof, and to the best of the
Corporation's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns;
(k) Old Fund is a "fund" as defined in section 851(g)(2) of the Code; for
each taxable year of its operation, Old Fund has met (or, for its
current taxable year, will meet) the requirements of Subchapter M of
Chapter 1 of the Code for qualification as a regulated investment
company ("RIC") and has been (or will be) eligible to and has computed
(or will compute) its federal income tax under section 852 of the
Code; from the time the Corporation's Board approved the transactions
contemplated by this Agreement ("APPROVAL TIME") through the Effective
Time, Old Fund has invested and will invest its assets in a manner
that ensures its compliance with the foregoing; from the time it
commenced operations through the Effective Time, Old Fund has
conducted and will conduct its "historic business" (within the meaning
of section 1.368-1(d)(2) of the Regulations) in a substantially
unchanged manner; from the Approval Time through the Effective Time,
Old Fund (1) has not disposed of and/or acquired, and will not dispose
of and/or acquire, any assets (i) for the purpose of satisfying New
Fund's investment objective or policies or (ii) for any other reason
except in the ordinary course of its business as a RIC and (2) has not
otherwise changed, and will not otherwise change, its historic
investment policies; and Old Fund has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter
M did not apply to it;
(l) All issued and outstanding Old Fund Shares are, and at the Effective
Time will be, duly and validly issued and outstanding, fully paid, and
non-assessable by the Corporation and have been offered and sold in
every state and the District of Columbia in compliance in all material
respects with applicable registration requirements of the Securities
Act of 1933, as amended ("1933 ACT"), and state securities laws; all
issued and outstanding Old Fund Shares will, at the Effective Time, be
held by the persons and in the amounts set forth in the Corporation's
transfer agent's records, as provided in paragraph 2.3; and Old Fund
does not have outstanding any options, warrants, or other rights to
subscribe for or purchase any Old Fund Shares, nor is there
outstanding any security convertible into any Old Fund Shares;
(m) Old Fund incurred the Liabilities, which are associated with the
Assets, in the ordinary course of its business;
(n) Old Fund is not under the jurisdiction of a court in a "title 11 or
similar case" (as defined in section 368(a)(3)(A) of the Code);
- 5 -
(o) During the five-year period ending at the Effective Time, (1) neither
Old Fund nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to it will have acquired Old Fund
Shares, either directly or through any transaction, agreement, or
arrangement with any other person, with consideration other than New
Fund Shares or Old Fund Shares, except for shares redeemed in the
ordinary course of Old Fund's business as a series of an open-end
investment company as required by section 22(e) of the 1940 Act, and
(2) no distributions will have been made with respect to Old Fund
Shares, other than normal, regular dividend distributions made
pursuant to Old Fund's historic dividend-paying practice and other
distributions that qualify for the deduction for dividends paid
(within the meaning of section 561 of the Code) referred to in
sections 852(a)(1) and 4982(c)(1)(A) of the Code;
(p) Not more than 25% of the value of Old Fund's total assets (excluding
cash, cash items, and U.S. government securities) is invested in the
stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five
or fewer issuers;
(q) The Corporation's current prospectus and statement of additional
information including Old Fund, and each prospectus and statement of
additional information including Old Fund used at all times prior to
the date hereof, (1) conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and (2) as of the date on
which they were issued did not contain, and as supplemented by any
supplement thereto dated before or at the Effective Time do not
contain, any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
(r) Each of the PROXY STATEMENT (as defined in paragraph 4.5) (other than
written information the Trust provided for inclusion therein) and the
REGISTRATION STATEMENT (as defined in paragraph 3.3(a)) will, on its
effective date, at the Effective Time, and at the time of the
SHAREHOLDERS MEETING (as defined in paragraph 4.1), not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements
were made, not misleading; and
(s) The New Fund Shares are not being acquired for the purpose of any
distribution thereof, other than in accordance with the terms hereof.
3.2 The Trust, on New Fund's behalf, represents and warrants to the
Corporation, on Old Fund's behalf, as follows:
(a) The Trust is a statutory trust that is duly organized, validly
existing, and in good standing under the laws of the State of
Delaware; and its Certificate of Trust has been duly filed in the
office of the Secretary of State thereof;
(b) At the Effective Time, the Trust will be duly registered as an
open-end management investment company under the 1940 Act;
(c) Before the Effective Time, New Fund will be a duly established and
designated series of the Trust;
- 6 -
(d) New Fund has not commenced operations and will not do so until after
the Closing;
(e) Before the Closing, there will be no (1) issued and outstanding New
Fund Shares, (2) options, warrants, or other rights to subscribe for
or purchase any New Fund Shares, (3) securities convertible into any
New Fund Shares, or (4) any other securities issued by New Fund,
except the Initial Shares;
(f) No consideration other than New Fund Shares (and New Fund's assumption
of the Liabilities) will be issued in exchange for the Assets in the
Reorganization;
(g) New Fund is not engaged currently, and the Trust's execution,
delivery, and performance of this Agreement will not result, in (1) a
material violation of the Trust's Trust Instrument or By-Laws
(collectively, "TRUST GOVERNING DOCUMENTS") or of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
the Trust, on New Fund's behalf, is a party or by which it is bound or
(2) the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease,
judgment, or decree to which the Trust, on New Fund's behalf, is a
party or by which it is bound;
(h) No litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against the Trust with respect to New Fund or
any of its properties or assets that, if adversely determined, would
materially and adversely affect its financial condition or the conduct
of its business; and the Trust, on New Fund's behalf, knows of no
facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(i) New Fund will be a "fund" as defined in section 851(g)(2) of the Code;
it will meet the requirements of Subchapter M of Chapter 1 of the Code
for qualification as a RIC for its taxable year in which the
Reorganization occurs; and it intends to continue to meet all such
requirements for the next taxable year;
(j) New Fund has no plan or intention to issue additional New Fund Shares
following the Reorganization except for shares issued in the ordinary
course of its business as a series of an open-end investment company;
nor does New Fund, or any person "related" (within the meaning of
section 1.368-1(e)(3) of the Regulations) to it, have any plan or
intention to acquire -- during the five-year period beginning at the
Effective Time, either directly or through any transaction, agreement,
or arrangement with any other person -- with consideration other than
New Fund Shares, any New Fund Shares issued to the Shareholders
pursuant to the Reorganization, except for redemptions in the ordinary
course of such business as required by section 22(e) of the 1940 Act;
(k) Following the Reorganization, New Fund (1) will continue Old Fund's
"historic business" (within the meaning of section 1.368-1(d)(2) of
the Regulations) and (2) will use a significant portion of Old Fund's
"historic business assets" (within the meaning of section
1.368-1(d)(3) of the Regulations) in a business; moreover, New Fund
(3) has no plan or intention to sell or otherwise dispose of any of
the Assets, except for dispositions made in the ordinary course of
that business and dispositions necessary to maintain its status as a
RIC, and (4) expects to retain substantially all the Assets in the
same form as it receives them in the Reorganization, unless and until
subsequent investment circumstances suggest the desirability of change
or it becomes necessary to make dispositions thereof to maintain such
status;
- 7 -
(l) There is no plan or intention for New Fund to be dissolved or merged
into another statutory or business trust or a corporation or any
"fund" thereof (as defined in section 851(g)(2) of the Code) following
the Reorganization;
(m) During the five-year period ending at the Effective Time, neither New
Fund nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to it will have acquired Old Fund
Shares with consideration other than New Fund Shares;
(n) Assuming the truthfulness and correctness of the Corporation's
representation and warranty in paragraph 3.1(p), immediately after the
Reorganization, (1) not more than 25% of the value of New Fund's total
assets (excluding cash, cash items, and U.S. government securities)
will be invested in the stock and securities of any one issuer and (2)
not more than 50% of the value of such assets will be invested in the
stock and securities of five or fewer issuers;
(o) The New Fund Shares to be issued and delivered to Old Fund, for the
Shareholders' account, pursuant to the terms hereof, (1) will at the
Effective Time have been duly authorized and duly registered under the
federal securities laws (and appropriate notices respecting them will
have been duly filed under applicable state securities laws) and (2)
when so issued and delivered, will be duly and validly issued and
outstanding New Fund Shares and will be fully paid and non-assessable
by the Trust;
(p) The Proxy Statement (only with respect to written information the
Trust provided for inclusion therein) will, on its effective date, at
the Effective Time, and at the time of the Shareholders Meeting, not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading; and
(q) The Trust's Trust Instrument permits the Trust to vary its
shareholders' investment; and the Trust will not have a fixed pool of
assets -- each series thereof (including New Fund after it commences
operations) will be a managed portfolio of securities, and its
investment adviser, First Investors Management Company, Inc.
("ADVISER"), will have the authority to buy and sell securities for
it.
3.3 Each Investment Company, on its respective Fund's behalf, represents and
warrants to the other Investment Company, on its respective Fund's behalf, as
follows:
(a) No governmental consents, approvals, authorizations, or filings are
required under the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 ACT"), the 1940 Act, or state securities laws for its
execution or performance of this Agreement, except for (1) the
Corporation's amendment of its registration statement under the 1933
Act and the 1940 Act and the amendment of its notification of
registration filed on Form N-8A under the 1940 Act to reflect the
Reorganization and any additional information necessary to comply with
Rule 414(d) under the 1933 Act ("REGISTRATION STATEMENT")(1), and (2)
such consents, approvals, authorizations, and filings as have been
made or received or as may be required subsequent to the Effective
Time;
(b) The fair market value of the New Fund Shares each Shareholder receives
will be approximately equal to the fair market value of its Old Fund
Shares it actually or constructively surrenders in exchange therefor;
- ----------
(1) Clause (1) will only be included in an agreement that involves a Corporation
the registration statement of which is adopted by the corresponding Trust.
- 8 -
(c) Its management (1) is unaware of any plan or intention of the
Shareholders to redeem, sell, or otherwise dispose of (i) any portion
of their Old Fund Shares before the Reorganization to any person
"related" (within the meaning of section 1.368-1(e)(3) of the
Regulations) to either Fund or (ii) any portion of the New Fund Shares
they receive in the Reorganization to any person "related" (within
such meaning) to New Fund, (2) does not anticipate dispositions of
those New Fund Shares at the time of or soon after the Reorganization
to exceed the usual rate and frequency of dispositions of shares of
Old Fund as a series of an open-end investment company, (3) expects
that the percentage of interests, if any, that will be disposed of as
a result of or at the time of the Reorganization will be DE MINIMIS,
and (4) does not anticipate that there will be extraordinary
redemptions of New Fund Shares immediately following the
Reorganization;
(d) The Shareholders will pay their own expenses (such as fees of personal
investment or tax advisers for advice regarding the Reorganization),
if any, incurred in connection with the Reorganization;
(e) The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by New Fund and those to
which the Assets are subject;
(f) None of the compensation received by any Shareholder who is an
employee of or service provider to Old Fund will be separate
consideration for, or allocable to, any of the Old Fund Shares that
Shareholder held; none of the New Fund Shares any such Shareholder
receives will be separate consideration for, or allocable to, any
employment agreement, investment advisory agreement, or other service
agreement; and the compensation paid to any such Shareholder will be
for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's-length for similar services;
(g) Neither Fund will be reimbursed for any expenses incurred by it or on
its behalf in connection with the Reorganization unless those expenses
are solely and directly related to the Reorganization (determined in
accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1
C.B. 187) ("REORGANIZATION EXPENSES");
(h) The aggregate value of the acquisitions, redemptions, and
distributions limited by paragraphs 3.1(o), 3.2(j), and 3.2(m) will
not exceed 50% of the value (without giving effect to such
acquisitions, redemptions, and distributions) of the proprietary
interest in Old Fund at the Effective Time;
(i) Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares and will own such shares
solely by reason of their ownership of the Old Fund Shares immediately
before the Reorganization; and
(j) Immediately following consummation of the Reorganization, New Fund
will hold the same assets -- except for assets used to pay the Funds'
expenses incurred in connection with the Reorganization -- and be
subject to the same liabilities that Old Fund held or was subject to
immediately before the Reorganization, plus any liabilities for such
expenses; and such excepted assets, together with the amount of all
redemptions and distributions (other than regular, normal dividends)
Old Fund makes immediately preceding the Reorganization, will, in the
aggregate, constitute less than 1% of its net assets.
- 9 -
4. COVENANTS
---------
4.1 The Corporation covenants to call a meeting of Old Fund's
shareholders to consider and act on this Agreement and to take all other action
necessary to obtain approval of the transactions contemplated herein
("SHAREHOLDERS MEETING").
4.2 The Corporation covenants that the New Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
4.3 The Corporation covenants that it will assist the Trust in
obtaining information the Trust reasonably requests concerning the beneficial
ownership of Old Fund Shares.
4.4 The Corporation covenants that it will turn over its books and
records (including all books and records required to be maintained under the
1940 Act and the rules and regulations thereunder) to the Trust at the Closing.
4.5 Each Investment Company covenants to cooperate in preparing, in
compliance with applicable federal securities laws, a proxy statement on
Schedule 14A relating to the Reorganization to be furnished in connection with
the Corporation's Board's solicitation of proxies for use at the Shareholders
Meeting ("PROXY STATEMENT").
4.6 Each Investment Company covenants that it will, from time to time,
as and when requested by the other Investment Company, execute and deliver or
cause to be executed and delivered all assignments and other instruments, and
will take or cause to be taken further action, the other Investment Company
deems necessary or desirable in order to vest in, and confirm to, (a) New Fund,
title to and possession of all the Assets, and (b) Old Fund, title to and
possession of the New Fund Shares to be delivered hereunder, and otherwise to
carry out the intent and purpose hereof.
4.7 The Trust covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and state
securities laws it deems appropriate to continue its operations after the
Effective Time.
4.8 Subject to this Agreement, each Investment Company covenants to
take or cause to be taken all actions, and to do or cause to be done all things,
reasonably necessary, proper, or advisable to consummate and effectuate the
transactions contemplated hereby.
5. CONDITIONS PRECEDENT
--------------------
Each Investment Company's obligations hereunder shall be subject to (a)
performance by the other Investment Company of all its obligations to be
performed hereunder at or before the Closing, (b) all representations and
warranties of the other Investment Company contained herein being true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated hereby, as of the Effective Time,
with the same force and effect as if made at and as of such time, and (c) the
following further conditions that, at or before such time:
5.1 All necessary filings shall have been made with the Commission and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Trust shall have expressly adopted the
Registration Statement with respect to New Fund for purposes of the 1933 Act and
the 1940 Act. The Registration Statement shall have become effective under the
1933 Act, no stop orders suspending the effectiveness thereof shall have been
- 10 -
issued, and, to each Investment Company's best knowledge, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened, or contemplated under the 1933 Act or the 1940 Act, and the
Commission shall not have issued an unfavorable report with respect to the
Reorganization under section 25(b) of the 1940 Act nor instituted any
proceedings seeking to enjoin consummation of the transactions contemplated
hereby under section 25(c) of the 1940 Act. All consents, orders, and permits of
federal, state, and local regulatory authorities (including the Commission and
state securities authorities) either Investment Company deems necessary to
permit consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain same would not
involve a risk of a material adverse effect on either Fund's assets or
properties;
5.2 At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby;
5.3 The Investment Companies shall have received an opinion of Kirkpatrick &
Lockhart Nicholson Graham LLP ("COUNSEL") substantially to the effect that:
(a) Old Fund is a duly established series of the Corporation, a
corporation that is validly existing and in good standing under the
laws of the State of Maryland, and New Fund is a duly established
series of the Trust, a trust that is validly existing as a statutory
trust under the laws of the State of Delaware;
(b) Each Investment Company has duly authorized and adopted this Agreement
on its respective Fund's behalf;
(c) The New Fund Shares to be issued and distributed to the Shareholders
under this Agreement have been duly authorized and, on their issuance
and delivery in accordance with this Agreement, will be validly
issued, fully paid, and non-assessable;
(d) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not,
materially violate any provision of the Corporation Governing
Documents or the Trust Governing Documents or, to Counsel's knowledge,
violate any obligation of either Investment Company under the express
terms of any court order that names the Investment Company and is
specifically directed to it or its property, except as set forth in
such opinion;
(e) To Counsel's knowledge (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by
either Investment Company, on its respective Fund's behalf, of the
transactions contemplated herein, except any that have been obtained
and are in effect and exclusive of any required under state securities
laws;
(f) Each Investment Company is registered with the Commission as an
investment company, and to Counsel's knowledge no order has been
issued or proceeding instituted to suspend either such registration;
and
(g) To Counsel's knowledge (without any independent inquiry or
investigation), as of the date of the opinion, there is no action or
proceeding pending before any court or governmental agency, or overtly
threatened in writing against either Investment Company (with respect
to its respective Fund) or any of its properties or assets
attributable or allocable to its respective Fund that seeks to enjoin
- 11 -
the performance or affect the enforceability of this Agreement, except
as set forth in such opinion.
In rendering such opinion, Counsel need not undertake any independent
investigation, examination, or inquiry to determine the existence or absence of
any facts, need not cause a search to be made of court records or liens in any
jurisdiction with respect to either Investment Company or Fund, and may (1)
rely, as to matters governed by the laws of the State of Maryland and/or the
State of Delaware, on an opinion of competent Maryland or Delaware counsel,
respectively, (2) make assumptions that the execution, delivery, and performance
of any agreement, instrument, or document by any person or entity other than an
Investment Company has been duly authorized, (3) make assumptions regarding the
authenticity, genuineness, and/or conformity of documents and copies thereof
without independent verification thereof and other assumptions customary for
opinions of this type, (4) limit such opinion to applicable federal and state
law, (5) define the word "knowledge" and related terms to mean the actual
knowledge of attorneys then with Counsel who have devoted substantive attention
to matters directly related to this Agreement and the Reorganization and not to
include matters as to which such attorneys could be deemed to have constructive
knowledge, and (6) rely as to matters of fact on certificates of public
officials and statements contained in officers' certificates;
5.4 The Investment Companies shall have received an opinion of Counsel as to
the federal income tax consequences mentioned below ("TAX OPINION"). In
rendering the Tax Opinion, Counsel may rely as to factual matters, exclusively
and without independent verification, on the representations and warranties made
in this Agreement, which Counsel may treat as representations and warranties
made to it, and in separate letters addressed to it. The Tax Opinion shall be
substantially to the effect that, based on the facts and assumptions stated
therein and conditioned on consummation of the Reorganization in accordance with
this Agreement, for federal income tax purposes:
(a) New Fund's acquisition of the Assets in exchange solely for New Fund
Shares and its assumption of the Liabilities, followed by Old Fund's
distribution of those shares PRO RATA to the Shareholders actually or
constructively in exchange for their Old Fund Shares, will qualify as
a "reorganization" (as defined in section 368(a)(1)(F) of the Code),
and each Fund will be "a party to a reorganization" within the meaning
of section 368(b) of the Code;
(b) Old Fund will recognize no gain or loss on the transfer of the Assets
to New Fund in exchange solely for New Fund Shares and New Fund's
assumption of the Liabilities or on the subsequent distribution of
those shares to the Shareholders in exchange for their Old Fund
Shares;
(c) New Fund will recognize no gain or loss on its receipt of the Assets
in exchange solely for New Fund Shares and its assumption of the
Liabilities;
(d) New Fund's basis in each Asset will be the same as Old Fund's basis
therein immediately before the Reorganization, and New Fund's holding
period for each Asset will include Old Fund's holding period therefor;
(e) A Shareholder will recognize no gain or loss on the exchange of all
its Old Fund Shares solely for New Fund Shares pursuant to the
Reorganization;
(f) A Shareholder's aggregate basis in the New Fund Shares it receives in
the Reorganization will be the same as the aggregate basis in its Old
Fund Shares it actually or constructively surrenders in exchange for
those New Fund Shares, and its holding period for those New Fund
Shares will include, in each instance, its holding period for those
Old Fund Shares, provided the Shareholder holds them as capital assets
at the Effective Time; and
- 12 -
(g) For purposes of section 381 of the Code, New Fund will be treated as
if there had been no Reorganization. Accordingly, the Reorganization
will not result in the termination of Old Fund's taxable year, Old
Fund's tax attributes enumerated in section 381(c) of the Code will be
taken into account by New Fund as if there had been no Reorganization,
and the part of Old Fund's taxable year before the Reorganization will
be included in New Fund's taxable year after the Reorganization.
Notwithstanding subparagraphs (b) and (d), the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting;
5.5 Before the Closing, the Trust's Board shall have authorized the issuance
of, and New Fund shall have issued, one New Fund Share in each class ("INITIAL
SHARES") to the Adviser or an affiliate thereof in consideration of the payment
of $10.00 each to take whatever action it may be required to take as New Fund's
sole shareholder pursuant to paragraph 5.6;
5.6 The Trust (on behalf of and with respect to New Fund) shall have entered
into, or adopted, as appropriate, an investment advisory contract, a
distribution and service plan pursuant to Rule 12b-1 under the 1940 Act, and
other agreements and plans necessary for New Fund's operation as a series of an
open-end investment company. Each such contract and agreement shall have been
approved by the Trust's Board and, to the extent required by law (as interpreted
by Commission staff positions), by its trustees who are not "interested persons"
(as defined in the 1940 Act) thereof and by the Adviser or its affiliate as New
Fund's sole shareholder; and
5.7 At any time before the Closing, either Investment Company may waive any
of the foregoing conditions (except those set forth in paragraphs 5.1, 5.4, 5.5
and 5.6) if, in the judgment of its Board, such waiver will not have a material
adverse effect on its Fund's shareholders' interests.
6. EXPENSES
--------
Subject to complying with the representation contained in paragraph 3.3(g), the
Reorganization Expenses shall be borne by the Funds equally or in any other
proportion or manner the Investment Companies mutually agree on. The
Reorganization Expenses include costs associated with obtaining any necessary
order of exemption from the 1940 Act, preparation of the Registration Statement,
printing and distributing New Fund's prospectus and Old Fund's proxy materials,
soliciting proxies, legal fees, accounting fees, securities registration fees,
and expenses of holding shareholders meetings. Notwithstanding the foregoing,
expenses shall be paid by the party directly incurring them if and to the extent
that the payment thereof by another person would result in such party's
disqualification as a RIC or would prevent the Reorganization from qualifying as
a tax-free reorganization.
7. ENTIRE AGREEMENT; NO SURVIVAL
-----------------------------
Neither Investment Company has made any representation, warranty, or covenant
not set forth herein, and this Agreement constitutes the entire agreement
between the Investment Companies. The representations, warranties, and covenants
contained herein or in any document delivered pursuant hereto or in connection
herewith shall not survive the Closing.
8. TERMINATION
-----------
This Agreement may be terminated, with respect to one or more Reorganizations,
at any time at or before the Closing:
- 13 -
8.1 By either Investment Company (a) in the event of the other Investment
Company's material breach of any representation, warranty, or covenant contained
herein to be performed at or before the Closing, (b) if a condition to its
obligations has not been met and it reasonably appears that such condition will
not or cannot be met, (c) if a governmental body issues an order, decree, or
ruling having the effect of permanently enjoining, restraining, or otherwise
prohibiting consummation of the Reorganization, or (d) if the Closing has not
occurred on or before [January 27, 2006][April 28, 2006], or such other date as
to which the Investment Companies agree; or
8.2 By the Investment Companies' mutual agreement.
In the event of termination under paragraphs 8.1(c) or 8.2, neither Investment
Company (nor its trustees/directors, officers, or shareholders) shall have any
liability to the other Investment Company.
9. AMENDMENTS
----------
The Investment Companies may amend, modify, or supplement this Agreement at any
time in any manner they mutually agree on in writing, notwithstanding Old Fund's
shareholders' approval thereof; provided that, following such approval no such
amendment, modification, or supplement shall have a material adverse effect on
the Shareholders' interests.
10. SEVERABILITY
------------
Any term or provision of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms and provisions of this Agreement in any
other jurisdiction.
11. MISCELLANEOUS
-------------
11.1 This Agreement shall be construed and interpreted in accordance with the
internal laws of the State of Delaware; provided that, in the case of any
conflict between those laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be construed to
confer on or give any person, firm, trust, or corporation other than each
Investment Company (on its respective Fund's behalf) and its respective
successors and assigns any rights or remedies under or by reason of this
Agreement.
11.3 Notice is hereby given that this instrument is executed and
delivered on behalf of the Trust's trustees solely in their capacities as
trustees and not individually. Each Investment Company's obligations under this
instrument are not binding on or enforceable against any of its
trustees/directors, officers, or shareholders or any series of the Investment
Company other than its Fund but are only binding on and enforceable against its
Fund's property. Each Investment Company, in asserting any rights or claims
under this Agreement on its Fund's behalf, shall look only to the other Fund's
property in settlement of such rights or claims and not to the property of any
other series of the other Investment Company or to such trustees/directors,
officers, or shareholders.
11.4 THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE COUNTERPARTS, ALL OF WHICH
SHALL BE CONSIDERED ONE AND THE SAME AGREEMENT, AND SHALL BECOME EFFECTIVE WHEN
ONE OR MORE COUNTERPARTS HAVE BEEN EXECUTED BY EACH INVESTMENT COMPANY AND
DELIVERED TO THE OTHER INVESTMENT COMPANY. THE HEADINGS CONTAINED IN THIS
- 14 -
AGREEMENT ARE FOR REFERENCE PURPOSES ONLY AND SHALL NOT AFFECT IN ANY WAY THE
MEANING OR INTERPRETATION OF THIS AGREEMENT.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officer as of the day and year first
written above.
FIRST INVESTORS _______ FUNDS, on
behalf of each of its series listed
on Schedule A
By:
-----------------------
Kathryn S. Head
President
_________________, on behalf of each of its series
listed on Schedule A
By:
-----------------------
Kathryn S. Head
President
- 15 -
SCHEDULE A
OLD FUNDS NEW FUNDS
(EACH A SERIES OF THE CORPORATION) (EACH A SERIES OF THE TRUST)
- -------------------------------------------- --------------------------------
-16-
EXHIBIT A-2
FORM OF AGREEMENT AND PLAN OF CONVERSION AND TERMINATION
THIS AGREEMENT AND PLAN OF CONVERSION AND TERMINATION ("AGREEMENT") is made
as of ________ __, 2005, between FIRST INVESTORS ______ FUNDS, a Delaware
statutory trust ("NEW TRUST"), on behalf of each of its segregated portfolios of
assets ("SERIES") listed under the heading "New Funds" on Schedule A to this
Agreement ("SCHEDULE A") (each, a "NEW FUND"), and _________, a Massachusetts
business trust ("OLD TRUST"), on behalf of its series listed under the heading
"Old Funds" on Schedule A (each, an "OLD FUND"). (Each New Fund and Old Fund is
sometimes referred to herein as a "FUND," and each of New Trust and Old Trust is
sometimes referred to herein as an "INVESTMENT COMPANY.") All agreements,
covenants, representations, actions, and obligations described herein made or to
be taken or undertaken by a Fund are made and shall be taken or undertaken by
New Trust on each New Fund's behalf and by Old Trust on each Old Fund's behalf,
and all rights and benefits created hereunder in favor of a Fund shall inure to,
and shall be enforceable by, the Investment Company of which it is a series
acting on its behalf.
Each Investment Company wishes to effect 18 separate reorganizations, each
described in section 368(a)(1)(F) of the Internal Revenue Code of 1986, as
amended ("CODE"), and intends this Agreement to be, and adopts it as, a "plan of
reorganization" within the meaning of the regulations under the Code
("REGULATIONS"). Each reorganization will involve an Old Fund's changing its
identity, form, and place of organization -- by converting from a series of Old
Trust to a series of New Trust -- by (1) transferring all its assets to the New
Fund listed on Schedule A opposite its name (which is being established solely
for the purpose of acquiring such assets and continuing that Old Fund's
business) in exchange solely for voting shares of beneficial interest ("SHARES")
in that New Fund and that New Fund's assumption of all that Old Fund's
liabilities, (2) distributing those shares PRO RATA to that Old Fund's
shareholders in exchange for their shares therein and in complete liquidation
thereof, and (3) terminating that Old Fund (all the foregoing transactions
involving each Old Fund and its corresponding New Fund being referred to herein
collectively as a "REORGANIZATION"), all on the terms and conditions set forth
herein. The consummation of one Reorganization shall not be contingent on the
consummation of any other Reorganization. (For convenience, the balance of this
Agreement, except paragraph 8, refers only to a single Reorganization, one Old
Fund, and one New Fund, but the terms and conditions hereof shall apply
separately to each Reorganization and the Funds participating therein.)
Each Investment Company's Board of Trustees (each, a "BOARD"), including a
majority of its members who are not "interested persons" (as that term is
defined in the Investment Company Act of 1940, as amended ("1940 ACT")) thereof,
(1) has duly adopted and approved this Agreement and the transactions
contemplated hereby and (2) has determined that participation in the
Reorganization is in the best interests of its Fund and that the interests of
the existing shareholders of its Fund will not be diluted as a result of the
Reorganization.
Old Fund offers two classes of shares, designated Class A and Class B
shares ("CLASS A OLD FUND Shares" and "CLASS B OLD FUND SHARES," respectively,
and collectively, "OLD FUND SHARES"). New Fund will offer two classes of shares,
also designated Class A and Class B shares ("CLASS A NEW FUND SHARES" and "CLASS
B NEW FUND SHARES," respectively, and collectively, "NEW FUND SHARES"). The
rights, powers, privileges, and obligations of each class of New Fund Shares
will be identical to those of the similarly designated class of Old Fund Shares.
In consideration of the mutual promises contained herein, the Investment
Companies agree as follows:
1. PLAN OF CONVERSION AND TERMINATION
----------------------------------
1.1. Subject to the requisite approval of Old Fund's shareholders and the
terms and conditions set forth herein, Old Fund shall assign, sell, convey,
transfer, and deliver all of its assets described in paragraph 1.2 ("ASSETS") to
New Fund. In exchange therefor, New Fund shall --
(a) issue and deliver to Old Fund the number of full and fractional (1)
Class A New Fund Shares equal to the number of full and fractional
Class A Old Fund Shares then outstanding and (2) Class B New Fund
Shares equal to the number of full and fractional Class B Old Fund
Shares then outstanding (all references herein to "fractional" shares
meaning fractions rounded to the third decimal place), and
(b) assume all of Old Fund's liabilities described in paragraph 1.3
("LIABILITIES").
Such transactions shall take place at the CLOSING (as defined in paragraph 2.1).
1.2 The Assets shall consist of all assets and property -- including all
cash, cash equivalents, securities, commodities, futures interests, receivables
(including interest and dividends receivable), claims and rights of action,
rights to register shares under applicable securities laws, books and records,
and deferred and prepaid expenses shown as assets on Old Fund's books -- Old
Fund owns at the EFFECTIVE TIME (as defined in paragraph 2.1).
1.3 The Liabilities shall consist of all of Old Fund's liabilities, debts,
obligations, and duties of whatever kind or nature existing at the Effective
Time, whether absolute, accrued, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable at that time, and
whether or not specifically referred to in this Agreement. Notwithstanding the
foregoing, Old Fund shall endeavor to discharge all its known liabilities,
debts, obligations, and duties before the Effective Time.
1.4 At or immediately before the Closing, New Fund shall redeem the INITIAL
SHARES (as defined in paragraph 5.5) for $10.00 each. At the Effective Time (or
as soon thereafter as is reasonably practicable), Old Fund shall distribute the
New Fund Shares it receives pursuant to paragraph 1.1(a) to its shareholders of
record determined as of the Effective Time (each, a "SHAREHOLDER"), in
proportion to their Old Fund Shares then held of record and in exchange for
their Old Fund Shares, and will completely liquidate. That distribution shall be
accomplished by New Trust's transfer agent's opening accounts on New Fund's
share transfer books in the Shareholders' names and transferring those New Fund
Shares thereto. Pursuant to such transfer, each Shareholder's account shall be
credited with the respective PRO RATA number of full and fractional New Fund
Shares due that Shareholder, by class (i.e., the account for each Shareholder
that holds Class A Old Fund Shares shall be credited with the number of full and
fractional Class A New Fund Shares equal to the number of full and fractional
Class A Old Fund Shares that Shareholder holds at the Effective Time, and the
account for each Shareholder that holds Class B Old Fund Shares shall be
credited with the number of full and fractional Class B New Fund Shares equal to
the number of full and fractional Class B Old Fund Shares that Shareholder holds
at the Effective Time). All issued and outstanding Old Fund Shares, including
any represented by certificates, shall simultaneously be canceled on Old Fund's
share transfer books. New Fund shall not issue certificates representing the New
Fund Shares issued in connection with the Reorganization.
1.5 As soon as reasonably practicable after distribution of the New Fund
Shares pursuant to paragraph 1.4, but in all events within six months after the
Effective Time, Old Fund shall be terminated as a series of Old Trust and any
- 2 -
further actions shall be taken in connection therewith as required by applicable
law.
1.6 Any reporting responsibility of Old Fund to a public authority,
including the responsibility for filing regulatory reports, tax returns, and
other documents with the Securities and Exchange Commission ("COMMISSION"), any
state securities commission, any federal, state, and local tax authorities, and
any other relevant regulatory authority, is and shall remain its responsibility
up to and including the date on which it is terminated.
1.7 Any transfer taxes payable on issuance of New Fund Shares in a name
other than that of the registered holder on Old Fund's share transfer books of
the Old Fund Shares actually or constructively exchanged therefor shall be paid
by the person to whom those New Fund Shares are to be issued, as a condition of
that transfer.
2. CLOSING AND EFFECTIVE TIME
--------------------------
2.1 The Reorganization, together with related acts necessary to consummate
the same ("CLOSING"), shall occur at the Investment Companies' offices on
[January 27, 2006][April 28, 2006], or at such other place and/or on such other
date as to which the Investment Companies may agree. All acts taking place at
the Closing shall be deemed to take place simultaneously immediately after the
close of business (i.e., 4:00 p.m., Eastern time) on the date thereof
("EFFECTIVE TIME").
2.2 Old Trust shall direct the custodian for its assets ("CUSTODIAN") to
deliver at the Closing a certificate of an authorized officer stating that (a)
the Assets have been delivered in proper form to New Fund within two business
days before or at the Effective Time and (b) all necessary taxes in connection
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made. Each of Old Fund's portfolio securities represented by a certificate or
other written instrument shall be transferred and delivered by Old Fund as of
the Effective Time for New Fund's account duly endorsed in proper form for
transfer in such condition as to constitute good delivery thereof. The Custodian
shall deliver as of the Effective Time by book entry, in accordance with the
customary practices of the Custodian and any securities depository (as defined
in Rule 17f-4 under the 1940 Act) in which any Assets are deposited, the Assets
that are deposited with such depositories. The cash to be transferred by Old
Fund shall be delivered by wire transfer of federal funds at the Effective Time.
2.3 Old Trust shall direct its transfer agent to deliver at the Closing a
certificate of an authorized officer stating that its records contain the number
of full and fractional outstanding Old Fund Shares each Shareholder owned
immediately before the Closing.
2.4 Old Trust shall deliver to New Trust at the Closing a certificate of an
authorized officer of Old Trust setting forth information (including adjusted
basis and holding period, by lot) concerning the Assets, including all portfolio
securities, on Old Fund's books immediately before the Effective Time.
2.5 Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance reasonably satisfactory to the recipient and dated the date of the
Closing, to the effect that the representations and warranties it made in this
Agreement are true and correct at the Effective Time except as they may be
affected by the transactions contemplated by this Agreement.
- 3 -
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Old Trust, on Old Fund's behalf, represents and warrants to New Trust,
on New Fund's behalf, as follows:
(a) Old Trust is a trust operating under a written instrument or
declaration of trust, the beneficial interest under which is divided
into transferable shares, organized under the laws of the Commonwealth
of Massachusetts (a "MASSACHUSETTS BUSINESS TRUST") that is duly
organized and validly existing under such laws; and its Amended and
Restated Declaration of Trust ("DECLARATION") is on file with that
commonwealth's Secretary of State; and before January 1, 1997, Old
Trust claimed classification for federal tax purposes as an
association taxable as a corporation and has not elected otherwise
since;
(b) Old Trust is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full
force and effect at the Effective Time;
(c) Old Fund is a duly established and designated series of Old Trust;
(d) At the Effective Time, Old Trust, on Old Fund's behalf, will have good
and marketable title to the Assets and full right, power, and
authority to sell, assign, transfer, and deliver the Assets hereunder
free of any liens or other encumbrances (except securities that are
subject to "securities loans" as referred to in section 851(b)(2) of
the Code or that are restricted to resale by their terms); and on
delivery and payment for the Assets, New Trust, on New Fund's behalf,
will acquire good and marketable title thereto;
(e) Old Fund is not engaged currently, and Old Trust's execution,
delivery, and performance of this Agreement will not result, in (1) a
material violation of the Declaration or Old Trust's By-Laws
(collectively, "OLD TRUST GOVERNING DOCUMENTS") or of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
Old Trust, on Old Fund's behalf, is a party or by which it is bound or
(2) the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease,
judgment, or decree to which Old Trust, on Old Fund's behalf, is a
party or by which it is bound;
(f) All material contracts and other commitments of Old Fund (other than
this Agreement and certain investment contracts, including options,
futures, and forward contracts) will terminate, or provision for
discharge of any liabilities of Old Fund thereunder will be made, at
or before the Effective Time, without either Fund's incurring any
liability or penalty with respect thereto and without diminishing or
releasing any rights Old Trust, on Old Fund's behalf, may have had
with respect to actions taken or omitted or to be taken by any other
party thereto before the Closing;
(g) No litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against Old Trust with respect to Old Fund or
any of its properties or assets that, if adversely determined, would
materially and adversely affect its financial condition or the conduct
of its business; and Old Trust, on Old Fund's behalf, knows of no
facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially and adversely affects its business or its ability to
consummate the transactions herein contemplated, except as otherwise
disclosed to New Trust;
- 4 -
(h) Old Fund's Statement of Assets and Liabilities, Statements of
Operations and Changes in Net Assets, and Portfolio of Investments
(collectively, "STATEMENTS") at and for the year ended on December 31,
2004, have been audited by Tait Weller & Baker, an independent
registered public accounting firm; such Statements and Old Fund's
unaudited Statements at and for the six-month period ended on June 30,
2005, present fairly, in all material respects, Old Fund's financial
condition as of the respective dates thereof in accordance with
generally accepted accounting principles consistently applied
("GAAP"); and to Old Trust's management's best knowledge and belief,
there are no known contingent liabilities, debts, obligations, or
duties of Old Fund required to be reflected on a balance sheet
(including the notes thereto) in accordance with GAAP as of such
respective dates that are not disclosed therein;
(i) Since December 31, 2004, there has not been any material adverse
change in Old Fund's financial condition, assets, liabilities, or
business, other than changes occurring in the ordinary course of
business, or any incurrence by Old Fund of indebtedness maturing more
than one year from the date such indebtedness was incurred; for
purposes of this subparagraph, a decline in net asset value per Old
Fund Share due to declines in market values of securities Old Fund
holds, the discharge of Old Fund liabilities, or the redemption of Old
Fund Shares by its shareholders shall not constitute a material
adverse change;
(j) At the Effective Time, all federal and other tax returns, dividend
reporting forms, and other tax-related reports of Old Fund required by
law to have been filed by such date (including any extensions) shall
have been filed and are or will be correct in all material respects,
and all federal and other taxes shown as due or required to be shown
as due on such returns and reports shall have been paid or provision
shall have been made for the payment thereof, and to the best of Old
Trust's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(k) Old Fund is a "fund" as defined in section 851(g)(2) of the Code; for
each taxable year of its operation, Old Fund has met (or, for its
current taxable year, will meet) the requirements of Subchapter M of
Chapter 1 of the Code for qualification as a regulated investment
company ("RIC") and has been (or will be) eligible to and has computed
(or will compute) its federal income tax under section 852 of the
Code; from the time Old Trust's Board approved the transactions
contemplated by this Agreement ("APPROVAL TIME") through the Effective
Time, Old Fund has invested and will invest its assets in a manner
that ensures its compliance with the foregoing; from the time it
commenced operations through the Effective Time, Old Fund has
conducted and will conduct its "historic business" (within the meaning
of section 1.368-1(d)(2) of the Regulations) in a substantially
unchanged manner; from the Approval Time through the Effective Time,
Old Fund (1) has not disposed of and/or acquired, and will not dispose
of and/or acquire, any assets (i) for the purpose of satisfying New
Fund's investment objective or policies or (ii) for any other reason
except in the ordinary course of its business as a RIC and (2) has not
otherwise changed, and will not otherwise change, its historic
investment policies; and Old Fund has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter
M did not apply to it;
(l) All issued and outstanding Old Fund Shares are, and at the Effective
Time will be, duly and validly issued and outstanding, fully paid, and
non-assessable by Old Trust and have been offered and sold in every
state and the District of Columbia in compliance in all material
respects with applicable registration requirements of the Securities
Act of 1933, as amended ("1933 ACT"), and state securities laws; all
issued and outstanding Old Fund Shares will, at the Effective Time, be
held by the persons and in the amounts set forth in Old Trust's
transfer agent's records, as provided in paragraph 2.3; and Old Fund
does not have outstanding any options, warrants, or other rights to
- 5 -
subscribe for or purchase any Old Fund Shares, nor is there
outstanding any security convertible into any Old Fund Shares;
(m) Old Fund incurred the Liabilities, which are associated with the
Assets, in the ordinary course of its business;
(n) Old Fund is not under the jurisdiction of a court in a "title 11 or
similar case" (as defined in section 368(a)(3)(A) of the Code);
(o) During the five-year period ending at the Effective Time, (1) neither
Old Fund nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to it will have acquired Old Fund
Shares, either directly or through any transaction, agreement, or
arrangement with any other person, with consideration other than New
Fund Shares or Old Fund Shares, except for shares redeemed in the
ordinary course of Old Fund's business as a series of an open-end
investment company as required by section 22(e) of the 1940 Act, and
(2) no distributions will have been made with respect to Old Fund
Shares, other than normal, regular dividend distributions made
pursuant to Old Fund's historic dividend-paying practice and other
distributions that qualify for the deduction for dividends paid
(within the meaning of section 561 of the Code) referred to in
sections 852(a)(1) and 4982(c)(1)(A) of the Code;
(p) Not more than 25% of the value of Old Fund's total assets (excluding
cash, cash items, and U.S. government securities) is invested in the
stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five
or fewer issuers;
(q) Old Trust's current prospectus and statement of additional information
including Old Fund, and each prospectus and statement of additional
information including Old Fund used at all times prior to the date
hereof, (1) conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and (2) as of the date on
which they were issued did not contain, and as supplemented by any
supplement thereto dated before or at the Effective Time do not
contain, any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
(r) Each of the PROXY STATEMENT (as defined in paragraph 4.5) (other than
written information New Trust provided for inclusion therein) and the
REGISTRATION STATEMENT (as defined in paragraph 3.3(a)) will, on its
effective date, at the Effective Time, and at the time of the
SHAREHOLDERS MEETING (as defined in paragraph 4.1), not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements
were made, not misleading;
(s) The New Fund Shares are not being acquired for the purpose of any
distribution thereof, other than in accordance with the terms hereof;
and
(t) The Declaration permits Old Trust to vary its shareholders'
investment; and Old Trust does not have a fixed pool of assets -- each
series thereof (including Old Fund) is a managed portfolio of
securities, and its investment adviser, First Investors Management
Company, Inc. ("ADVISER"), has the authority to buy and sell
securities for it.
- 6 -
3.2 New Trust, on New Fund's behalf, represents and warrants to Old Trust,
on Old Fund's behalf, as follows:
(a) New Trust is a statutory trust that is duly organized, validly
existing, and in good standing under the laws of the State of
Delaware; and its Certificate of Trust has been duly filed in the
office of the Secretary of State thereof;
(b) At the Effective Time, New Trust will be duly registered as an
open-end management investment company under the 1940 Act;
(c) Before the Effective Time, New Fund will be a duly established and
designated series of New Trust;
(d) New Fund has not commenced operations and will not do so until after
the Closing;
(e) Before the Closing, there will be no (1) issued and outstanding New
Fund Shares, (2) options, warrants, or other rights to subscribe for
or purchase any New Fund Shares, (3) securities convertible into any
New Fund Shares, or (4) any other securities issued by New Fund,
except the Initial Shares;
(f) No consideration other than New Fund Shares (and New Fund's assumption
of the Liabilities) will be issued in exchange for the Assets in the
Reorganization;
(g) New Fund is not engaged currently, and New Trust's execution,
delivery, and performance of this Agreement will not result, in (1) a
material violation of New Trust's Trust Instrument or By-Laws
(collectively, "NEW TRUST GOVERNING DOCUMENTS") or of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
New Trust, on New Fund's behalf, is a party or by which it is bound or
(2) the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease,
judgment, or decree to which New Trust, on New Fund's behalf, is a
party or by which it is bound;
(h) No litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against New Trust with respect to New Fund or
any of its properties or assets that, if adversely determined, would
materially and adversely affect its financial condition or the conduct
of its business; and New Trust, on New Fund's behalf, knows of no
facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(i) New Fund will be a "fund" as defined in section 851(g)(2) of the Code;
it will meet the requirements of Subchapter M of Chapter 1 of the Code
for qualification as a RIC for its taxable year in which the
Reorganization occurs; and it intends to continue to meet all such
requirements for the next taxable year;
(j) New Fund has no plan or intention to issue additional New Fund Shares
following the Reorganization except for shares issued in the ordinary
course of its business as a series of an open-end investment company;
nor does New Fund, or any person "related" (within the meaning of
section 1.368-1(e)(3) of the Regulations) to it, have any plan or
intention to acquire -- during the five-year period beginning at the
Effective Time, either directly or through any transaction, agreement,
or arrangement with any other person -- with consideration other than
- 7 -
New Fund Shares, any New Fund Shares issued to the Shareholders
pursuant to the Reorganization, except for redemptions in the ordinary
course of such business as required by section 22(e) of the 1940 Act;
(k) Following the Reorganization, New Fund (1) will continue Old Fund's
"historic business" (within the meaning of section 1.368-1(d)(2) of
the Regulations) and (2) will use a significant portion of Old Fund's
"historic business assets" (within the meaning of section
1.368-1(d)(3) of the Regulations) in a business; moreover, New Fund
(3) has no plan or intention to sell or otherwise dispose of any of
the Assets, except for dispositions made in the ordinary course of
that business and dispositions necessary to maintain its status as a
RIC, and (4) expects to retain substantially all the Assets in the
same form as it receives them in the Reorganization, unless and until
subsequent investment circumstances suggest the desirability of change
or it becomes necessary to make dispositions thereof to maintain such
status;
(l) There is no plan or intention for New Fund to be dissolved or merged
into another statutory or business trust or a corporation or any
"fund" thereof (as defined in section 851(g)(2) of the Code) following
the Reorganization;
(m) During the five-year period ending at the Effective Time, neither New
Fund nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to it will have acquired Old Fund
Shares with consideration other than New Fund Shares;
(n) Assuming the truthfulness and correctness of Old Trust's
representation and warranty in paragraph 3.1(p), immediately after the
Reorganization, (1) not more than 25% of the value of New Fund's total
assets (excluding cash, cash items, and U.S. government securities)
will be invested in the stock and securities of any one issuer and (2)
not more than 50% of the value of such assets will be invested in the
stock and securities of five or fewer issuers;
(o) The New Fund Shares to be issued and delivered to Old Fund, for the
Shareholders' account, pursuant to the terms hereof, (1) will at the
Effective Time have been duly authorized and duly registered under the
federal securities laws (and appropriate notices respecting them will
have been duly filed under applicable state securities laws) and (2)
when so issued and delivered, will be duly and validly issued and
outstanding New Fund Shares and will be fully paid and non-assessable
by New Trust;
(p) The Proxy Statement (only with respect to written information New
Trust provided for inclusion therein) will, on its effective date, at
the Effective Time, and at the time of the Shareholders Meeting, not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading; and
(q) New Trust's Trust Instrument permits New Trust to vary its
shareholders' investment; and New Trust will not have a fixed pool of
assets -- each series thereof (including New Fund after it commences
operations) will be a managed portfolio of securities, and the Adviser
will have the authority to buy and sell securities for it.
3.3 Each Investment Company, on its respective Fund's behalf, represents and
warrants to the other Investment Company, on its respective Fund's behalf, as
follows:
(a) No governmental consents, approvals, authorizations, or filings are
required under the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 ACT"), the 1940 Act, or state securities laws for its
- 8 -
execution or performance of this Agreement, except for (1) Old Trust's
amendment of its registration statement under the 1933 Act and the
1940 Act and the amendment of its notification of registration filed
on Form N-8A under the 1940 Act to reflect the Reorganization and any
additional information necessary to comply with Rule 414(d) under the
1933 Act ("REGISTRATION STATEMENT")(2), and (2) such consents,
approvals, authorizations, and filings as have been made or received
or as may be required subsequent to the Effective Time;
(b) The fair market value of the New Fund Shares each Shareholder receives
will be approximately equal to the fair market value of its Old Fund
Shares it actually or constructively surrenders in exchange therefor;
(c) Its management (1) is unaware of any plan or intention of the
Shareholders to redeem, sell, or otherwise dispose of (i) any portion
of their Old Fund Shares before the Reorganization to any person
"related" (within the meaning of section 1.368-1(e)(3) of the
Regulations) to either Fund or (ii) any portion of the New Fund Shares
they receive in the Reorganization to any person "related" (within
such meaning) to New Fund, (2) does not anticipate dispositions of
those New Fund Shares at the time of or soon after the Reorganization
to exceed the usual rate and frequency of dispositions of shares of
Old Fund as a series of an open-end investment company, (3) expects
that the percentage of interests, if any, that will be disposed of as
a result of or at the time of the Reorganization will be DE MINIMIS,
and (4) does not anticipate that there will be extraordinary
redemptions of New Fund Shares immediately following the
Reorganization;
(d) The Shareholders will pay their own expenses (such as fees of personal
investment or tax advisers for advice regarding the Reorganization),
if any, incurred in connection with the Reorganization;
(e) The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by New Fund and those to
which the Assets are subject;
(f) None of the compensation received by any Shareholder who is an
employee of or service provider to Old Fund will be separate
consideration for, or allocable to, any of the Old Fund Shares that
Shareholder held; none of the New Fund Shares any such Shareholder
receives will be separate consideration for, or allocable to, any
employment agreement, investment advisory agreement, or other service
agreement; and the compensation paid to any such Shareholder will be
for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's-length for similar services;
(g) Neither Fund will be reimbursed for any expenses incurred by it or on
its behalf in connection with the Reorganization unless those expenses
are solely and directly related to the Reorganization (determined in
accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1
C.B. 187) ("REORGANIZATION EXPENSES");
(h) The aggregate value of the acquisitions, redemptions, and
distributions limited by paragraphs 3.1(o), 3.2(j), and 3.2(m) will
not exceed 50% of the value (without giving effect to such
acquisitions, redemptions, and distributions) of the proprietary
interest in Old Fund at the Effective Time;
- ----------
(2) Clause (1) will only be included in an agreement that involves an Old Trust
the registration statement of which is adopted by the corresponding New Trust.
- 9 -
(i) Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares and will own such shares
solely by reason of their ownership of the Old Fund Shares immediately
before the Reorganization; and
(j) Immediately following consummation of the Reorganization, New Fund
will hold the same assets -- except for assets used to pay the Funds'
expenses incurred in connection with the Reorganization -- and be
subject to the same liabilities that Old Fund held or was subject to
immediately before the Reorganization, plus any liabilities for such
expenses; and such excepted assets, together with the amount of all
redemptions and distributions (other than regular, normal dividends)
Old Fund makes immediately preceding the Reorganization, will, in the
aggregate, constitute less than 1% of its net assets.
4. COVENANTS
---------
4.1 Old Trust covenants to call a meeting of Old Fund's shareholders to
consider and act on this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein ("SHAREHOLDERS
MEETING").
4.2 Old Trust covenants that the New Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
4.3 Old Trust covenants that it will assist New Trust in obtaining
information New Trust reasonably requests concerning the beneficial ownership of
Old Fund Shares.
4.4 Old Trust covenants that it will turn over its books and records
(including all books and records required to be maintained under the 1940 Act
and the rules and regulations thereunder) to New Trust at the Closing.
4.5 Each Investment Company covenants to cooperate in preparing, in
compliance with applicable federal securities laws, a proxy statement on
Schedule 14A relating to the Reorganization to be furnished in connection with
Old Trust's Board's solicitation of proxies for use at the Shareholders Meeting
("PROXY STATEMENT").
4.6 Each Investment Company covenants that it will, from time to time,
as and when requested by the other Investment Company, execute and deliver or
cause to be executed and delivered all assignments and other instruments, and
will take or cause to be taken further action, the other Investment Company
deems necessary or desirable in order to vest in, and confirm to, (a) New Fund,
title to and possession of all the Assets, and (b) Old Fund, title to and
possession of the New Fund Shares to be delivered hereunder, and otherwise to
carry out the intent and purpose hereof.
4.7 New Trust covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and state
securities laws it deems appropriate to continue its operations after the
Effective Time.
4.8 Subject to this Agreement, each Investment Company covenants to
take or cause to be taken all actions, and to do or cause to be done all things,
reasonably necessary, proper, or advisable to consummate and effectuate the
transactions contemplated hereby.
- 10 -
5. CONDITIONS PRECEDENT
--------------------
Each Investment Company's obligations hereunder shall be subject to (a)
performance by the other Investment Company of all its obligations to be
performed hereunder at or before the Closing, (b) all representations and
warranties of the other Investment Company contained herein being true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated hereby, as of the Effective Time,
with the same force and effect as if made at and as of such time, and (c) the
following further conditions that, at or before such time:
5.1 All necessary filings shall have been made with the Commission and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. New Trust shall have expressly adopted the
Registration Statement with respect to New Fund for purposes of the 1933 Act and
the 1940 Act. The Registration Statement shall have become effective under the
1933 Act, no stop orders suspending the effectiveness thereof shall have been
issued, and, to each Investment Company's best knowledge, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened, or contemplated under the 1933 Act or the 1940 Act, and the
Commission shall not have issued an unfavorable report with respect to the
Reorganization under section 25(b) of the 1940 Act nor instituted any
proceedings seeking to enjoin consummation of the transactions contemplated
hereby under section 25(c) of the 1940 Act. All consents, orders, and permits of
federal, state, and local regulatory authorities (including the Commission and
state securities authorities) either Investment Company deems necessary to
permit consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain same would not
involve a risk of a material adverse effect on either Fund's assets or
properties;
5.2 At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby;
5.3 The Investment Companies shall have received an opinion of Kirkpatrick &
Lockhart Nicholson Graham LLP ("COUNSEL") substantially to the effect that:
(a) Old Fund is a duly established series of Old Trust, a Massachusetts
business trust that is validly existing under the laws of the
Commonwealth of Massachusetts, and New Fund is a duly established
series of New Trust, a trust that is validly existing as a statutory
trust under the laws of the State of Delaware;
(b) Each Investment Company has duly authorized and adopted this Agreement
on its respective Fund's behalf;
(c) The New Fund Shares to be issued and distributed to the Shareholders
under this Agreement have been duly authorized and, on their issuance
and delivery in accordance with this Agreement, will be validly
issued, fully paid, and non-assessable;
(d) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not,
materially violate any provision of the Old Trust Governing Documents
or the New Trust Governing Documents or, to Counsel's knowledge,
violate any obligation of either Investment Company under the express
terms of any court order that names the Investment Company and is
specifically directed to it or its property, except as set forth in
such opinion;
- 11 -
(e) To Counsel's knowledge (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by
either Investment Company, on its respective Fund's behalf, of the
transactions contemplated herein, except any that have been obtained
and are in effect and exclusive of any required under state securities
laws;
(f) Each Investment Company is registered with the Commission as an
investment company, and to Counsel's knowledge no order has been
issued or proceeding instituted to suspend either such registration;
and
(g) To Counsel's knowledge (without any independent inquiry or
investigation), as of the date of the opinion, there is no action or
proceeding pending before any court or governmental agency, or overtly
threatened in writing against either Investment Company (with respect
to its respective Fund) or any of its properties or assets
attributable or allocable to its respective Fund that seeks to enjoin
the performance or affect the enforceability of this Agreement, except
as set forth in such opinion.
In rendering such opinion, Counsel need not undertake any independent
investigation, examination, or inquiry to determine the existence or absence of
any facts, need not cause a search to be made of court records or liens in any
jurisdiction with respect to either Investment Company or Fund, and may (1)
rely, as to matters governed by the laws of the State of Delaware, on an opinion
of competent Delaware counsel, respectively, (2) make assumptions that the
execution, delivery, and performance of any agreement, instrument, or document
by any person or entity other than an Investment Company has been duly
authorized, (3) make assumptions regarding the authenticity, genuineness, and/or
conformity of documents and copies thereof without independent verification
thereof and other assumptions customary for opinions of this type, (4) limit
such opinion to applicable federal and state law, (5) define the word
"knowledge" and related terms to mean the actual knowledge of attorneys then
with Counsel who have devoted substantive attention to matters directly related
to this Agreement and the Reorganization and not to include matters as to which
such attorneys could be deemed to have constructive knowledge, and (6) rely as
to matters of fact on certificates of public officials and statements contained
in officers' certificates;
5.4 The Investment Companies shall have received an opinion of Counsel as to
the federal income tax consequences mentioned below ("TAX OPINION"). In
rendering the Tax Opinion, Counsel may rely as to factual matters, exclusively
and without independent verification, on the representations and warranties made
in this Agreement, which Counsel may treat as representations and warranties
made to it, and in separate letters addressed to it. The Tax Opinion shall be
substantially to the effect that, based on the facts and assumptions stated
therein and conditioned on consummation of the Reorganization in accordance with
this Agreement, for federal income tax purposes:
(a) New Fund's acquisition of the Assets in exchange solely for New Fund
Shares and its assumption of the Liabilities, followed by Old Fund's
distribution of those shares PRO RATA to the Shareholders actually or
constructively in exchange for their Old Fund Shares, will qualify as
a "reorganization" (as defined in section 368(a)(1)(F) of the Code),
and each Fund will be "a party to a reorganization" within the meaning
of section 368(b) of the Code;
(b) Old Fund will recognize no gain or loss on the transfer of the Assets
to New Fund in exchange solely for New Fund Shares and New Fund's
assumption of the Liabilities or on the subsequent distribution of
those shares to the Shareholders in exchange for their Old Fund
Shares;
(c) New Fund will recognize no gain or loss on its receipt of the Assets
in exchange solely for New Fund Shares and its assumption of the
Liabilities;
- 12 -
(d) New Fund's basis in each Asset will be the same as Old Fund's basis
therein immediately before the Reorganization, and New Fund's holding
period for each Asset will include Old Fund's holding period therefor;
(e) A Shareholder will recognize no gain or loss on the exchange of all
its Old Fund Shares solely for New Fund Shares pursuant to the
Reorganization;
(f) A Shareholder's aggregate basis in the New Fund Shares it receives in
the Reorganization will be the same as the aggregate basis in its Old
Fund Shares it actually or constructively surrenders in exchange for
those New Fund Shares, and its holding period for those New Fund
Shares will include, in each instance, its holding period for those
Old Fund Shares, provided the Shareholder holds them as capital assets
at the Effective Time; and
(g) For purposes of section 381 of the Code, New Fund will be treated as
if there had been no Reorganization. Accordingly, the Reorganization
will not result in the termination of Old Fund's taxable year, Old
Fund's tax attributes enumerated in section 381(c) of the Code will be
taken into account by New Fund as if there had been no Reorganization,
and the part of Old Fund's taxable year before the Reorganization will
be included in New Fund's taxable year after the Reorganization.
Notwithstanding subparagraphs (b) and (d), the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting;
5.5 Before the Closing, New Trust's Board shall have authorized the issuance
of, and New Fund shall have issued, one New Fund Share in each class ("INITIAL
SHARES") to the Adviser or an affiliate thereof in consideration of the payment
of $10.00 each to take whatever action it may be required to take as New Fund's
sole shareholder pursuant to paragraph 5.6;
5.6 New Trust (on behalf of and with respect to New Fund) shall have entered
into, or adopted, as appropriate, an investment advisory contract, a
distribution and service plan pursuant to Rule 12b-1 under the 1940 Act, and
other agreements and plans necessary for New Fund's operation as a series of an
open-end investment company. Each such contract and agreement shall have been
approved by New Trust's Board and, to the extent required by law (as interpreted
by Commission staff positions), by its trustees who are not "interested persons"
(as defined in the 1940 Act) thereof and by the Adviser or its affiliate as New
Fund's sole shareholder; and
5.7 At any time before the Closing, either Investment Company may waive any
of the foregoing conditions (except those set forth in paragraphs 5.1, 5.4, 5.5
and 5.6) if, in the judgment of its Board, such waiver will not have a material
adverse effect on its Fund's shareholders' interests.
6. EXPENSES
--------
Subject to complying with the representation contained in paragraph 3.3(g), the
Reorganization Expenses shall be borne by the Funds equally or in any other
proportion or manner the Investment Companies mutually agree on. The
Reorganization Expenses include costs associated with obtaining any necessary
order of exemption from the 1940 Act, preparation of the Registration Statement,
printing and distributing New Fund's prospectus and Old Fund's proxy materials,
soliciting proxies, legal fees, accounting fees, securities registration fees,
- 13 -
and expenses of holding shareholders meetings. Notwithstanding the foregoing,
expenses shall be paid by the party directly incurring them if and to the extent
that the payment thereof by another person would result in such party's
disqualification as a RIC or would prevent the Reorganization from qualifying as
a tax-free reorganization.
7. ENTIRE AGREEMENT; NO SURVIVAL
-----------------------------
Neither Investment Company has made any representation, warranty, or covenant
not set forth herein, and this Agreement constitutes the entire agreement
between the Investment Companies. The representations, warranties, and covenants
contained herein or in any document delivered pursuant hereto or in connection
herewith shall not survive the Closing.
8. TERMINATION
-----------
This Agreement may be terminated, with respect to one or more Reorganizations,
at any time at or before the Closing:
8.1 By either Investment Company (a) in the event of the other Investment
Company's material breach of any representation, warranty, or covenant contained
herein to be performed at or before the Closing, (b) if a condition to its
obligations has not been met and it reasonably appears that such condition will
not or cannot be met, (c) if a governmental body issues an order, decree, or
ruling having the effect of permanently enjoining, restraining, or otherwise
prohibiting consummation of the Reorganization, or (d) if the Closing has not
occurred on or before [January 27, 2006][April 28, 2006], or such other date as
to which the Investment Companies agree; or
8.2 By the Investment Companies' mutual agreement.
In the event of termination under paragraphs 8.1(c) or 8.2, neither Investment
Company (nor its trustees, officers, or shareholders) shall have any liability
to the other Investment Company.
9. AMENDMENTS
----------
The Investment Companies may amend, modify, or supplement this Agreement at any
time in any manner they mutually agree on in writing, notwithstanding Old Fund's
shareholders' approval thereof; provided that, following such approval no such
amendment, modification, or supplement shall have a material adverse effect on
the Shareholders' interests.
10. SEVERABILITY
------------
Any term or provision of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms and provisions of this Agreement in any
other jurisdiction.
11. MISCELLANEOUS
-------------
11.1 This Agreement shall be construed and interpreted in accordance with the
internal laws of the State of Delaware; provided that, in the case of any
conflict between those laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be construed to
confer on or give any person, firm, trust, or corporation other than each
- 14 -
Investment Company (on its respective Fund's behalf) and its respective
successors and assigns any rights or remedies under or by reason of this
Agreement.
11.3 Notice is hereby given that this instrument is executed and
delivered on behalf of each Investment Company's trustees solely in their
capacities as trustees and not individually. Each Investment Company's
obligations under this instrument are not binding on or enforceable against any
of its trustees, officers, or shareholders or any series of the Investment
Company other than its Fund but are only binding on and enforceable against its
Fund's property. Each Investment Company, in asserting any rights or claims
under this Agreement on its Fund's behalf, shall look only to the other Fund's
property in settlement of such rights or claims and not to the property of any
other series of the other Investment Company or to such trustees, officers, or
shareholders.
11.4 THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE COUNTERPARTS, ALL OF WHICH
SHALL BE CONSIDERED ONE AND THE SAME AGREEMENT, AND SHALL BECOME EFFECTIVE WHEN
ONE OR MORE COUNTERPARTS HAVE BEEN EXECUTED BY EACH INVESTMENT COMPANY AND
DELIVERED TO THE OTHER INVESTMENT COMPANY. THE HEADINGS CONTAINED IN THIS
AGREEMENT ARE FOR REFERENCE PURPOSES ONLY AND SHALL NOT AFFECT IN ANY WAY THE
MEANING OR INTERPRETATION OF THIS AGREEMENT.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officer as of the day and year first
written above.
FIRST INVESTORS _______ FUNDS, on
behalf of each of its series listed
on Schedule A
By:
-----------------------
Kathryn S. Head
President
_________________, on behalf of each of its series
listed on Schedule A
By:
-----------------------
Kathryn S. Head
President
- 15 -
SCHEDULE A
OLD FUNDS NEW FUNDS
(EACH A SERIES OF THE CORPORATION) (EACH A SERIES OF THE TRUST)
- -------------------------------------------- --------------------------------
- 16 -
EXHIBIT B
FORM OF CLASS A DISTRIBUTION PLAN
OF
FIRST INVESTORS _________ FUNDS
WHEREAS, FIRST INVESTORS ______ FUNDS (the "Fund") is an open-end
management investment company duly registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Fund employs one or more broker-dealers as distributors of
its shares ("Underwriter") pursuant to a written agreement ("Underwriting
Agreement");
WHEREAS, Rule 12b-1 under the 1940 Act permits registered investment
companies to bear certain expenses associated with the distribution of their
shares;
WHEREAS, the Fund offers multiple series and multiple classes of shares
for purchase by shareholders;
WHEREAS, the Board of Trustees believes that payment of certain expenses
associated with the distribution of the Class A shares of the separate
investment series of the Fund listed in Schedule A hereto, as may be amended
from time to time (individually and collectively, the "Series") (the Class A
shares of each Series, the "Class A Shares") and the servicing or maintenance of
shareholder accounts for such Class A Shares would be beneficial to the Fund and
its shareholders; and
WHEREAS, the Fund, on behalf of its Series, wishes to adopt a plan under
Rule 12b-1 to permit each Series to pay some of the expenses involved in
distributing its Class A Shares and the servicing or maintenance of its
shareholder accounts for such Class A Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund hereby
adopts the following distribution plan in accordance with Rule 12b-1 (the "Class
A Plan"):
1. PAYMENT OF THE FEE. Pursuant to one or more Underwriting
Agreements which the Fund can enter into from time to time and this Class A
Plan, each Series shall pay as compensation for the Underwriter's services an
annualized Rule 12b-1 fee of an aggregate of 0.30% of each Series' average daily
net assets attributable to its Class A Shares (referred to herein as the "Class
A 12b-1 Fee"). The Class A 12b-1 Fee is payable by each Series monthly, or at
such other intervals as shall be determined by the Board of Trustees in the
manner provided for approval of the Class A Plan in paragraph 5(a). The Class A
12b-1 Fee shall consist of a distribution fee and a service fee, in the
following proportions: (a) the distribution fee shall be at the rate of 0.25% of
the average daily net assets attributable to Class A Shares of such Series, and
(b) the service fee shall be at the rate of 0.05% of the average daily net
assets attributable to Class A Shares of such Series. The Class A 12b-1 Fee
shall be payable regardless of whether that amount exceeds or is less than the
actual expenses incurred by the Underwriter in distributing Class A Shares of
such Series in a particular year.
2. EXPENSES DIFFERENT FROM ANNUAL RATE. To the extent that the
Class A 12b-l Fees paid by the Series in a particular year exceeds actual
expenses attributable to Class A Shares of the Series incurred by an Underwriter
in that year, the Underwriter may realize a profit in that year. If the expenses
attributable to Class A Shares incurred by an Underwriter in a particular year
are greater than the Class A 12b-1 Fee, the Underwriter may incur a loss in that
year and may not recover from the Series such excess of expenses attributable to
Class A Shares of the Series over the Class A 12b-1 Fees unless actual expenses
attributable to Class A Shares of the Series incurred in a subsequent year in
which the Class A Plan remained in effect were less than the Class A 12b-1 Fees
paid under the Class A Plan in that year.
3. DISTRIBUTION AND SERVICE FEES. "Distribution" fees are fees paid
for the distribution of the Series' Class A Shares, including continuing
payments to registered representatives and dealers for sales of such shares, the
costs of printing and dissemination of sales material or literature,
prospectuses used as sales material and reports or proxy material prepared for
the Series' shareholders of the Class A Shares to the extent that such material
is used in connection with the sales of the Class A Shares, and general overhead
of an Underwriter. "Service" fees are fees paid for services related to the
maintenance and servicing of existing shareholder accounts for the Series' Class
A Shares, including shareholder liaison services, whether provided by individual
representatives, dealers, an Underwriter or others entitled to receive such
fees.
4. REPORTS TO TRUSTEES. Quarterly and annually in each year that
the Class A Plan remains in effect, the Treasurer of the Fund shall prepare and
furnish to the Board of Trustees of the Fund a written report of the amounts so
expended and the purposes for which such expenditures were made under the Class
A Plan. The Board of Trustees will promptly review the Treasurer's report.
5. APPROVAL OF PLAN. The Class A Plan shall become effective with
respect to any Series of the Fund immediately upon the approval by the majority
vote of (a) the Fund's Board of Trustees and the Trustees who are not
"interested persons" of the Fund, within the meaning of the 1940 Act, and who
have no direct or indirect financial interest in the operation of the Class A
Plan or in any agreements related to the Class A Plan (the "Independent
Trustees") cast in person at a meeting called for the purpose of voting on such
Class A Plan and (b) the outstanding Class A voting securities of such Series,
voting separately from any other class or Series of the Fund, which for this
purpose is defined in Section 2(a)(42) of the 1940 Act and means the lesser of
(1) more than 50% of the outstanding shares, or (2) 67% or more of the shares
present or represented at a shareholders meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy,
whichever is less.
6. TERMINATION OF PLAN. The Class A Plan can be terminated by any
Series at any time by vote of a majority of the Independent Trustees or by vote
of a majority of the outstanding Class A voting securities of such Series,
voting separately from any other class or Series of the Fund (as defined in
Section 2(a)(42) of the 1940 Act).
7. AMENDMENTS. Any amendment to increase materially the cost to any
Series of the Fund under the Class A Plan may not be instituted without the
approval of the outstanding Class A voting securities of such Series, voting
separately from any other class or Series of the Fund (as defined in Section
2(a)(42) of the 1940 Act). If Class B Shares of any Series of the Fund are
convertible into Class A shares of such Series, and if the Fund implements any
- 2 -
amendment to the Class A Plan that would increase materially the cost to any
Series of the Fund under the Class A Plan, then Class B shares of such Series
will stop converting into Class A shares of such Series unless the holders of a
majority of Class B shares, voting separately from any other class or Series of
the Fund (as defined in the 1940 Act), also approve the amendment. Any material
amendment of the Class A Plan must also be approved by the Board of Trustees in
the manner described in paragraph 5(a).
8. NOMINATION OF TRUSTEES. While the Class A Plan shall be in
effect, the selection and nomination of the Independent Trustees shall be
committed to the discretion of the Independent Trustees then in office.
9. TERM. The Class A Plan shall remain in effect with respect to
any Series for one year from the date of its approval by the shareholders of the
Class A Shares of such Series and may continue thereafter only if the Class A
Plan is approved at least annually in the manner described in paragraph 5(a).
Dated: [ ], 2006
- 3 -
EXHIBIT C
ADVISORY FEES
Set forth below are current advisory fee schedules for each of the Old Funds and the proposed advisory fee schedules for the
New Funds.
CURRENT ADVISORY FEE SCHEDULE SCHEDULE 1 SCHEDULE 2 SCHEDULE 3 SCHEDULE 4
- ----------------------------------------------------------------------------------------------------------------------------
0.75% first $250M 1.00% first $200M 0.75% first $300M 1.00% first $250M
0.72% $250M to $500M 0.75% $200M to $500M 0.72% $300M to $500M 0.97% $250M to $500M
0.69% $500M to $750M 0.72% $500M to $750M 0.69% $500M to $750M 0.94% $500M to $750M
0.66% over $750M 0.69% $750M to $1B 0.66% over $750M 0.91% over $750M
0.66% over $1B
Old Funds
- ----------------------------------------------------------------------------------------------------------------------------
Fund For Income XXX
- ----------------------------------------------------------------------------------------------------------------------------
Insured Tax Exempt XXX
- ----------------------------------------------------------------------------------------------------------------------------
Global Fund XXX
- ----------------------------------------------------------------------------------------------------------------------------
Special Bond XXX
- ----------------------------------------------------------------------------------------------------------------------------
New York Insured XXX
- ----------------------------------------------------------------------------------------------------------------------------
Government Fund XXX
- ----------------------------------------------------------------------------------------------------------------------------
Multi-State (all series) XXX
- ----------------------------------------------------------------------------------------------------------------------------
Life Series (all series) XXX
- ----------------------------------------------------------------------------------------------------------------------------
Blue Chip Fund of Series Fund XXX
- ----------------------------------------------------------------------------------------------------------------------------
Total Return Fund of Series Fund XXX
- ----------------------------------------------------------------------------------------------------------------------------
Insured Tax Exempt Fund II of Executive Investors XXX
- ----------------------------------------------------------------------------------------------------------------------------
Special Situations Fund of Series Fund XXX
- ----------------------------------------------------------------------------------------------------------------------------
Investment Grade Fund of Series Fund XXX
- ----------------------------------------------------------------------------------------------------------------------------
Mid-Cap Opportunity Fund of Series Fund II XXX
- ----------------------------------------------------------------------------------------------------------------------------
Value Fund of Series Fund II XXX
- ----------------------------------------------------------------------------------------------------------------------------
Growth & Income Fund of Series Fund II XXX
- ----------------------------------------------------------------------------------------------------------------------------
Focused Equity Fund of Series Fund II XXX
- ----------------------------------------------------------------------------------------------------------------------------
All-Cap Growth Fund of Series Fund II XXX
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Cash Management 0.50% of average daily net assets
- ----------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money 0.50% of average daily net assets
- ----------------------------------------------------------------------------------------------------------------------------
Insured Intermediate Tax 0.60% of average daily net assets
Exempt Fund of Series Fund
- ----------------------------------------------------------------------------------------------------------------------------
PROPOSED ADVISORY
FEE SCHEDULE SCHEDULE 1 SCHEDULE 2 SCHEDULE 3 SCHEDULE 4 SCHEDULE 5
- -----------------------------------------------------------------------------------------------------------------------------------
New Funds 0.75% first $250M 1.00% first $200M 0.75% first $300M 0.98% first $300M 0.66% first $500M
Corresponding 0.72% $250M to $500M 0.75% $200M to $500M 0.72% $300M to $500M 0.95% $300M to $600M 0.64% $500M to $1B
to the Following 0.69% $500M to $750M 0.72% $500M to $750M 0.69% $500M to $750M 0.92% $600M to $1B 0.62% $1B to $1.5B
Series of 0.66% $750M to $1.25B 0.69% $750M to $1B 0.66% $750M to $1.25B 0.90% $1B to $1.5B 0.60% over $1.5B
Old Funds 0.64% $1.25B to $1.75B 0.66% $1B to $1.5B 0.64% $1.25B to $1.75B 0.88% over $1.5B
0.62% $1.75B to $2.25B 0.64% over $1.5B 0.62% $1.75B to $2.25B
0.60% over $2.25B 0.60% over $2.25B
- -----------------------------------------------------------------------------------------------------------------------------------
Fund For Income XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Insured Tax Exempt XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Global Fund XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Special Bond XXX
- -----------------------------------------------------------------------------------------------------------------------------------
New York Insured XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Government Fund XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Multi-State (all series) XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Life Series (all series) XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Blue Chip Fund of Series
Fund XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return Fund of
Series Fund XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Insured Tax Exempt
Fund II of Executive
Investors XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Special Situations
Fund of Series Fund XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Grade
Fund of Series Fund XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Opportunity
Fund of Series Fund II XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Value Fund of Series
Fund II XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Growth & Income
Fund of Series Fund II XXX
- -----------------------------------------------------------------------------------------------------------------------------------
Focused Equity
Fund of Series Fund II XXX
- -----------------------------------------------------------------------------------------------------------------------------------
All-Cap Growth
Fund of Series Fund II XXX
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Management 0.50% of average daily net assets
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money 0.50% of average daily net assets
- -----------------------------------------------------------------------------------------------------------------------------------
Insured Intermediate 0.60% of average daily net assets
Tax Exempt Fund of
Series Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Set forth below in the first column are the gross and net advisory fees
(i.e., before and after any fee waivers) paid on behalf of each Old Fund for the
calendar year ended December 31, 2004. The middle column sets forth the gross
and net fees that would have been paid on behalf of the Old Funds had the
proposed contractual advisory fee rates and waivers been in place for the same
period. It is assumed that fee waivers were reduced by the fee reductions that
are reflected in the new rates to the extent applicable. The last column sets
forth the difference, if any, in the net dollar amount of fees that would have
been payable in that period taking into account the reductions in the
contractual advisory fee rates and corresponding reductions in waiver rates
under the proposed fee schedules for the New Funds. Fee waivers reflect
agreements approved by the Boards of the Old Funds under which FIMCO commits
temporarily to waive a certain amount of its advisory fees. These agreements are
generally for periods of one year. Any waivers to the contractual advisory fees
for the New Funds will therefore be subject to change under year-to-year
negotiations of waiver agreements, just as they are for the Old Funds. Any
change to the fee waivers could result in a decrease or an increase of the
actual effective advisory rates for the New Funds.
2004 ACTUAL 2004 PRO FORMA REDUCTION IN GROSS, WAIVED & NET
INVESTMENT ADVISORY FEES PAID INVESTMENT ADVISORY FEES AMOUNTS
UNDER PROPOSED FEE SCHEDULES
-------------------------------- --------------------------------- --------------------------------
Gross Waiver Net Gross Waiver Net Gross Waived Net
--------------------------------- --------------------------------- --------------------------------
Amount Amount Amount
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
GLOBAL FUND $2,321,355 - $2,321,355 $2,274,399 - $2,274,399 $46,956 - $46,956
SERIES FUND
Blue Chip 4,197,480 $500,344 3,697,136 3,638,557 - 3,638,557 558,923 $500,344 58,579
Special Situations 2,143,964 499,606 1,644,358 2,143,964 $499,606 1,644,358 - - -
Total Return 2,442,946 500,344 1,942,602 1,942,602 - 1,942,602 500,344 500,344 -
SERIES FUND II
All-Cap Growth 1,061,162 - 1,061,162 1,061,162 - 1,061,162 - - -
Focused Equity 473,935 - 473,935 473,935 - 473,935 - - -
Growth & Income 4,241,013 - 4,241,013 4,241,013 - 4,241,013 - - -
Mid-Cap Opportunity 2,848,522 500,344 2,348,178 2,343,451 - 2,343,451 505,071 500,344 4,727
Value 1,482,116 - 1,482,116 1,482,116 - 1,482,116 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
TAXABLE BOND AND MONEY MARKET FUNDS
- -----------------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT 887,813 603,169 284,644 887,813 603,169 284,644 - - -
FUND FOR INCOME 4,310,556 - 4,310,556 4,310,556 - 4,310,556 - - -
GOVERNMENT FUND 1,966,603 928,435 1,038,168 1,296,949 258,781 1,038,168 669,654 669,654 -
SERIES FUND
Investment Grade 1,449,723 425,841 1,023,882 1,449,723 425,841 1,023,882 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
TAX EXEMPT FUNDS
- -----------------------------------------------------------------------------------------------------------------------------------
EXECUTIVE INVESTORS
Insured Tax Exempt II 960,216 437,172 523,044 633,652 110,608 523,044 326,564 326,564 -
INSURED TAX EXEMPT 6,064,339 875,249 5,189,090 5,543,139 354,049 5,180,090 521,200 521,200 -
MULTI-STATE
Arizona Fund 168,614 94,984 73,630 148,354 74,724 73,630 20,260 20,260 -
California Fund 222,236 91,649 130,587 195,541 64,954 130,587 26,695 26,695 -
Colorado Fund 88,282 75,664 12,618 77,674 65,056 12,618 10,608 10,608 -
Connecticut Fund 279,246 119,981 159,265 245,702 86,437 159,265 33,544 33,544 -
Florida Fund 305,651 103,445 202,206 268,933 66,727 202,206 36,718 36,718 -
Georgia Fund 84,999 70,389 14,610 74,787 60,177 14,610 10,212 10,212 -
Maryland Fund 244,506 104,342 140,164 215,128 74,964 140,164 29,378 29,378 -
Massachusetts Fund 222,561 99,468 123,093 195,817 72,724 123,093 26,744 26,744 -
Michigan Fund 301,246 112,701 188,545 265,043 76,498 188,545 36,203 36,203 -
Minnesota Fund 114,376 95,559 18,817 100,634 81,817 18,817 13,742 13,742 -
Missouri Fund 82,915 73,668 9,247 72,954 63,707 9,247 9,961 9,961 -
New Jersey Fund 521,753 138,271 383,482 459,058 75,576 383,482 62,695 62,695 -
North Carolina Fund 187,801 110,951 76,850 165,241 88,391 76,850 22,560 22,560 -
Ohio Fund 196,506 114,013 82,493 172,890 90,397 82,493 23,616 23,616 -
Oregon Fund 217,899 130,417 87,482 191,717 104,235 87,482 26,182 26,182 -
Pennsylvania Fund 363,256 122,241 241,015 319,607 78,592 241,015 43,649 43,649 -
Virginia Fund 315,087 110,679 204,408 277,206 72,798 204,408 37,881 37,881 -
NEW YORK INSURED 1,409,116 281,823 1,127,293 1,239,783 112,490 1,127,293 169,333 169,333 -
SERIES FUND
Insured Intermediate 427,932 71,337 356,595 427,932 71,337 356,595 - - -
Tax Exempt Fund
TAX-EXEMPT MONEY MARKET 77,912 83,085 (5,173) 77,912 83,085 (5,173) - -
LIFE SERIES FUNDS
LIFE SERIES
Blue Chip Fund 1,316,245 - 1,316,245 1,316,245 - 1,316,245 - - -
Cash Management Fund 60,903 27,209 33,694 60,903 27,209 33,694 - - -
Discovery Fund 916,337 - 916,337 916,337 - 916,337 - - -
Focused Equity Fund 77,857 - 77,857 77,857 - 77,857 - - -
Government Fund 167,511 33,502 134,009 167,511 33,502 134,009 - - -
Growth Fund 1,678,268 - 1,678,268 1,678,268 - 1,678,268 - - -
High Yield Fund 497,973 - 497,973 497,973 - 497,973 - - -
International Securities 679,613 - 679,613 679,613 - 679,613 - - -
Fund
Investment Grade Fund 279,506 55,901 223,605 279,506 55,901 223,605 - - -
Target Maturity 2007 Fund 190,815 38,163 152,652 190,815 38,163 152,652 - - -
Target Maturity 2010 Fund 125,173 25,035 100,138 125,173 25,035 100,138 - - -
Target Maturity 2015 Fund 106,156 21,231 84,925 106,156 21,231 84,925 - - -
Value Fund 463,664 - 463,664 463,664 - 463,664 - - -
SPECIAL BOND 160,540 - 160,540 160,540 - 160,540 - - -
--------------------------------- ---------------------------------- --------------------------------
TOTAL $49,404,198 $7,676,212 $41,727,986 $45,635,505 $4,017,782 $41,617,723 $3,768,693 $3,658,430 $110,262
--------------------------------- ---------------------------------- --------------------------------
EXHIBIT D
COMPARISON OF THE NEW FUNDS AND
THE OLD FUNDS
SHAREHOLDER LIABILITY
- ---------------------
Generally, liability is limited for shareholders of the New Trusts to the same
extent as for shareholders of the Maryland and Massachusetts Funds.
THE NEW TRUSTS:
The Trust Instrument provides that shareholders are not personally liable for
the liabilities incurred by, contracted for, or otherwise existing with respect
to the New Trusts or the New Funds. Shareholders of the New Trusts have the same
limitation of personal liability as is extended to shareholders of a private
corporation for profit incorporated in the State of Delaware.
MARYLAND FUNDS:
The Articles of Incorporation do not include a specific provision. However,
under Maryland law, shareholders are generally not liable for the corporation's
obligations, except that a shareholder may be liable to the extent that he
receives any distribution which exceeds the amount which he could properly
receive under Maryland law or where such liability is necessary to prevent
fraud.
MASSACHUSETTS FUNDS:
The Declarations of Trust state that the shareholders will not be subject to any
personal liability other than the amount the shareholders have personally agreed
to pay by way of subscription for any shares.
LIQUIDATION OR DISSOLUTION
- --------------------------
The primary difference in this provision among the entities is that the New
Trusts do not need shareholder approval for liquidations or mergers, unlike the
Maryland and Massachusetts Funds.
THE NEW TRUSTS:
The Trust Instrument permits a majority of the Board of Trustees ("Trustees") to
liquidate or merge the New Trusts, or any series or class of the New Trusts,
upon written notice to the shareholders, without submitting the matter for
shareholder approval. There is no required shareholder vote.
MARYLAND FUNDS:
The Articles of Incorporation provide that the Board of Directors ("Directors")
may sell, lease or exchange all of the property and assets of the Fund when and
as authorized by the affirmative vote of the holders of a majority of the stock
issued and outstanding. Maryland law requires shareholder approval (two-thirds
of the shares entitled to vote) to liquidate or dissolve a Maryland Fund.
MASSACHUSETTS FUNDS:
The Declarations of Trust permit the Trustees to liquidate or merge a Fund,
subject to majority shareholder approval.
LIABILITY OF TRUSTEES AND INDEMNIFICATION
- -----------------------------------------
The Trustees or the Directors, as applicable, of the New Trusts, Maryland Funds
and Massachusetts Funds are generally not personally liable to the respective
entity or obligation of the entity unless there are certain "bad acts" involved
in their conduct. Furthermore, the organizational documents or applicable state
law permit Trustees and Directors to be indemnified against liability to the
maximum extent permitted by applicable law, including state law and the
Investment Company Act of 1940 (the "1940 Act").
THE NEW TRUSTS:
The Trust Instrument provides that absent willful misfeasance, bad faith, gross
negligence or reckless disregard of the Trustee's duties, a Trustee shall not be
personally liable to any person contracting with or having any claim against the
Trusts or a particular series. Further, a Trustee is not liable to the Trust or
its shareholders for the Trustee's, or other party's, acts, omissions, provided
that the Trustee has exercised reasonable care and acted under the reasonable
belief that his actions are in the best interest of the Trust.
The Trust Instrument also provides that a Trustee shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with the defense of
any proceeding in which he becomes involved by virtue of his being or having
been a Trustee.
MARYLAND FUNDS:
The Articles of Incorporation provide that the Directors are not liable to the
Funds or their shareholders for money damages to the maximum extent permitted by
applicable law (including Maryland law and the 1940 Act). The Articles of
Incorporation or Maryland law also permit for indemnification of Directors to
the maximum extent permitted by the 1940 Act or Maryland law, as applicable.
However, indemnification is not permitted when the Director acted in bad faith
or received an improper benefit.
MASSACHUSETTS FUNDS:
The Declarations of Trust provide that a current or former Trustee will be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
and against amounts paid or incurred by him in the settlement thereof. However,
no indemnification to the Trustee is permitted for any liability by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
Trustee's duties.
RIGHTS OF INSPECTION
- --------------------
The primary difference is that shareholders of the New Trusts and the
Massachusetts Funds do not have any right to inspect trust documents, unlike
shareholders of the Maryland Funds.
- 2 -
THE NEW TRUSTS:
The By-Laws provide that shareholders do not have the right to inspect any
account, book or document of the New Trusts except as conferred by law or
otherwise by the Trustees. No such rights have been conferred.
MARYLAND FUNDS:
The Articles of Incorporation do not include a specific provision. However,
Maryland law permits shareholders of the Maryland Funds to inspect certain
documents (e.g., by-laws, shareholder meeting minutes) of the corporation upon
request, subject to certain limitations and conditions.
MASSACHUSETTS FUNDS:
The By-laws provide that no shareholder shall have any right to inspect any
account or book or document of the Trust except as conferred by law, by the
Trustees or by resolution of the shareholders. No such rights have been
conferred.
SHAREHOLDER VOTING RIGHTS AND SHAREHOLDER MEETINGS
- --------------------------------------------------
The New Trusts differ from the Old Funds in certain respects, such as the
percentage of outstanding shares necessary for shareholders to call a special
meeting and the ability of shareholders to take action by written consent. In
addition, the New Trusts entitle shareholders to vote based on the amount
invested, unlike the Massachusetts Funds and Maryland Funds that base voting on
the number of shares owned.
THE NEW TRUSTS:
The Trust Instrument does not require annual shareholder meetings unless
required by law. Shareholders may hold special meetings to vote on certain
matter whenever ordered by the Trustees or the President and upon, the written
request of the shareholders owning at least 10% of the outstanding shares of
such series or class entitled to vote. Shareholders may take action by written
consent.
Shareholders are entitled to one vote for each dollar of net asset value of such
Funds (or Classes thereof) and each fractional dollar amount shall be entitled
to a proportionate fractional vote.
MARYLAND FUNDS:
The By-Laws do not require annual shareholder meetings unless required by the
1940 Act. Further, a special meeting of the shareholders can be called upon the
written request of shareholders owning at least 25% of the outstanding shares
entitled to vote. Special meetings of shareholders for the purpose of voting on
the removal of one more directors require the written request of shareholders
owning at least 10% of the outstanding shares entitled to vote. Shareholders may
take action by written consent.
Shareholders are entitled to one vote per share held by the shareholder.
MASSACHUSETTS FUNDS:
The Declarations of Trust do not require an annual meeting. Further, a special
meeting of the shareholders can be called upon the written request of
shareholders owning at least 10% of the outstanding shares entitled to vote.
Shareholders may not take action by written consent.
Shareholders are entitled to one vote per share and a proportionate fractional
vote for each fractional share.
- 3 -
REORGANIZATION/COMBINATION TRANSACTIONS
- ---------------------------------------
The primary difference in this provision among the entities is that the New
Trusts are not required to obtain shareholder approval for reorganization or
combination transactions unlike the Maryland and Massachusetts Funds.
THE NEW TRUSTS:
Under the Trust Instrument, the Trustees may, without any shareholder approval,
authorize mergers, consolidations, and reorganizations of the New Trusts with
another trust, series or other business organizations, if the resulting entity
is an open-end management investment company, within the meaning of the 1940
Act, or sell all or substantially all of the assets of the Trust or assets
belonging to a series.
MARYLAND FUNDS:
Under the Articles of Incorporation, shareholders must approve mergers,
consolidations or sales of a Fund's assets.
MASSACHUSETTS FUNDS:
The Declarations of Trust provide that the Trustees, with the approval of a
majority of the Trust's shareholders, may sell and convey the assets of the
Trust to another Trust, partnership, association or corporation organized under
U.S. law.
AMENDMENT OF CHARTER DOCUMENT
- -----------------------------
The primary difference in this provision among the entities is that the New
Trusts may amend their Trust Instruments without shareholder approval, unlike
the Maryland and Massachusetts Funds. The By-Laws, or certain sections thereof,
for each entity may be amended without shareholder approval.
THE NEW TRUSTS:
The Declaration of Trust provides that the Trustees may, without shareholder
vote, amend or otherwise supplement the Declaration of Trust provided that the
shareholders will have the right to vote on certain amendments, such as changes
to their voting rights. The By-Laws may generally be amended by action of the
Trustees without shareholder approval.
MARYLAND FUNDS:
The Articles of Incorporation provide that amendments to the Articles of
Incorporation require shareholder approval. The By-Laws may be amended at any
meeting of the shareholders or by a majority vote of the Directors except with
respect to certain matters, including matters relating to investment
restrictions and amendments to the By-Laws. These matters may only be amended
with shareholder approval.
MASSACHUSETTS FUNDS:
The Declarations of Trust require a majority shareholder vote to amend or
otherwise supplement the Declarations of Trust. The By-Laws may be amended
without the shareholder vote, except for certain provisions.
- 4 -
DERIVATIVE ACTIONS
- ------------------
In each case, shareholder must first make a demand to bring such action on
behalf of the entity. Shareholders of the New Trusts must be shareholders at the
time of commencing the action and at the time of the disputed transactions.
THE NEW TRUSTS:
Under Delaware law, shareholders may not bring a derivative action unless they
have first made a demand upon the Trustees to bring the action on behalf of the
New Trusts. Shareholders may bring derivative actions to enforce the right of
the New Trusts if certain conditions are met. The conditions include, among
others, that (1) the complaining shareholder submit a written demand to the
Board of Trustees and that demand must be refused, and (2) the complaining
shareholder be a shareholder of the Fund at the time of commencing the action
and at the time of the disputed transaction or that his stock thereafter
devolved upon him by operation of law.
MARYLAND FUNDS:
Under Maryland law, shareholders may not bring a derivative action unless they
have first made a demand upon the corporation to sue in its own name and the
demand was refused. If the Directors improperly refuse to bring a derivative
suit or if the demand upon the Directors is excused, then a plaintiff generally
must then make the demand upon the corporation's other shareholders before
commencing suit.
MASSACHUSETTS FUNDS:
While not directly applicable, Massachusetts corporation law may be considered
persuasive authority for matters concerning derivative actions by a
Massachusetts Fund's shareholders. Under Massachusetts corporation law, any
shareholder that was a shareholder of the corporation at the time of the act or
omission complained of may commence a derivative proceeding after written demand
has been made upon the corporation to take suitable action and at least 90 days
has elapsed (assuming no shareholder vote is taken with respect to the demand)
or if irreparable injury to the corporation would result by waiting for the
expiration of such period.
*****
The foregoing is only a summary of certain characteristics of the operations of
the New Trusts and the Old Funds, their relevant corporate governance documents
and relevant state law. The foregoing is not a complete description of the
documents cited. Shareholders should refer to the provisions of such documents
and state laws governing the New Trusts for a more thorough description.
- 5 -
EXHIBIT E
PROPOSED MODIFICATIONS TO EACH OLD FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
LISTED BELOW ARE THE FUNDAMENTAL INVESTMENT RESTRICTIONS FOR EACH OLD FUND WHICH IS PROPOSED TO BE
REORGANIZED AS A SERIES OF FIRST INVESTORS EQUITY FUNDS (EACH AN "OLD EQUITY FUND" AND TOGETHER, THE "OLD
EQUITY FUNDS") AND THE CHANGES PROPOSED FOR THE CORRESPONDING NEW FUNDS (EACH A "NEW EQUITY FUND" AND
TOGETHER, THE "NEW EQUITY FUNDS").
- -------------------------------------------------------------------------------------------------------------------------
BORROWING
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restriction on borrowing for each Old Equity Fund
to the fundamental investment restriction for each New Equity Fund. The main differences between the
existing and new restrictions include the ability of a New Equity Fund to borrow only as permitted under
applicable law, as opposed to borrowing only a certain amount (5%) for some of the Old Equity Funds. One
of the purposes of the new restriction is to provide greater flexibility for the portfolio manager in
managing the New Equity Funds. Further, the new restriction would simplify compliance monitoring and make
the restriction uniform among all New Equity Funds. There is no current intention for the New Equity Funds
to have different investment strategies from the Old Equity Funds as a result of a change to this
restriction.
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT
RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND VALUE FUND BLUE CHIP FUND ALL-CAP GROWTH FUND FOR ALL NEW EQUITY
GROWTH & FOCUSED EQUITY FUND FUNDS
INCOME FUND
MID-CAP
OPPORTUNITY
FUND
SPECIAL
SITUATIONS FUND
GLOBAL FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may The Fund may not The Fund may not The Fund may not
borrow money except not borrow borrow money, or borrow money, borrow money,
for temporary or money, except pledge its assets except that that except to the
emergency purposes that the Fund except that the Fund may borrow extent permitted
(not for leveraging or may borrow Fund may borrow money in an amount by the 1940 Act,
investment) in an money from a from a bank for not exceeding 33 the rules and
amount not exceeding bank for temporary or 1/3% of its total regulations
5% of the value of its temporary or emergency purposes assets including thereunder and any
total assets emergency in amounts not the amount borrowed applicable
(including the amount purposes in exceeding 5% less liabilities exemptive relief.
borrowed) less amounts not (taken at the (other than
liabilities (other exceeding 5% lower of cost or borrowings).
than borrowings). Any (taken at the current value) of
borrowings that exceed lower of cost its net assets
5% of value of the or current (not including the
Fund's total assets by value) of its amount borrowed)
reason of a decline in net assets and pledge its
net assets will be (not including assets to secure
reduced in three the amount such borrowings.
business days to the borrowed).
extent necessary to
comply with the 5%
limitation. This
policy shall not
prohibit deposits of
assets to provide
margin or guarantee
positions in
connection with
transactions in
options, futures
contracts, swaps,
forward contracts,
and other
derivative
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND VALUE FUND BLUE CHIP FUND ALL-CAP GROWTH FUND FOR ALL NEW EQUITY
GROWTH & FOCUSED EQUITY FUND FUNDS
INCOME FUND
MID-CAP
OPPORTUNITY
FUND
SPECIAL
SITUATIONS FUND
GLOBAL FUND
- -------------------------------------------------------------------------------------------------------------------------
instruments or the
segregation of assets
in connection with
such transactions.
- -------------------------------------------------------------------------------------------------------------------------
-2-
- -------------------------------------------------------------------------------------------------------------------
LOANS
- -------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restriction on loans for each Old Equity Fund to the
fundamental investment restriction for each New Equity Fund. The existing restrictions provide that an Old Equity
Fund may not make loans except through loans of portfolio securities, repurchase agreements or as permitted under
the Investment Company Act of 1940, as amended. Further, Old Total Return Fund and Old Global Fund each has a 10%
limitation on their loans. Global Fund also may lend its securities for the purposes of covering short positions of
the borrower under certain circumstances. The new restriction permits loans only as allowed under applicable law.
The primary purpose of the change in this restriction is to consolidate the differences among the restrictions,
which would simplify compliance monitoring and portfolio management. There is no current intention for the New
Equity Funds to have different investment strategies from the Old Equity Funds as a result of a change to this
restriction.
- -------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED
FOR THE OLD EQUITY FUNDS REVISED
FUNDAMENTAL
INVESTMENT
RESTRICTION
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN VALUE FUND ALL-CAP GROWTH GLOBAL FUND SPECIAL MID-CAP FOR ALL NEW
FUND GROWTH & FUND SITUATIONS OPPORTUNITY EQUITY
BLUE CHIP INCOME FUND FOCUSED EQUITY FUND FUND FUNDS
FUND FUND
- -------------------------------------------------------------------------------------------------------------------
The Fund may The Fund may The Fund may The Fund may not The Fund may None The Fund may
not make not make not make make loans to not make loans, make loans
loans, loans, except loans, except other persons, except through only as
except loans loans of as permitted except that the repurchase permitted
of portfolio portfolio under the Fund's Board of agreements. under the
securities securities Investment Directors may, 1940 Act,
(limited to and Company Act of on the request the rules
10% of the repurchase 1940. of broker- and
Fund's total agreements. dealers or regulations
assets). other thereunder
institutional and any
investors that applicable
it deems exemptive
qualified, relief.
authorize the
Fund to lend
securities for
the purpose of
covering short
positions of the
borrower, but
only when the
borrower pledges
cash collateral
to the Fund and
agrees to
maintain such
collateral so
that it amounts
at all times to
- -------------------------------------------------------------------------------------------------------------------
-3-
- -------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED
FOR THE OLD EQUITY FUNDS REVISED
FUNDAMENTAL
INVESTMENT
RESTRICTION
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN VALUE FUND ALL-CAP GROWTH GLOBAL FUND SPECIAL MID-CAP FOR ALL NEW
FUND GROWTH & FUND SITUATIONS OPPORTUNITY EQUITY
BLUE CHIP INCOME FUND FOCUSED EQUITY FUND FUND FUNDS
FUND FUND
- -------------------------------------------------------------------------------------------------------------------
at least 100% of
the value of the
securities.
Such security
loans will not
be made if as a
result the
aggregate of
such loans
exceed 10% of
the value of the
Fund's total
assets. The
purchase of a
portion of an
issue of
publicly
distributed debt
securities is
not considered
the making of a
loan. This
restriction is
not intended to
prohibit the
Fund from
investing in
repurchase
agreements.
- -------------------------------------------------------------------------------------------------------------------
-4-
- -------------------------------------------------------------------------------------------------------------------
DIVERSIFICATION
- -------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on diversification for each Old Equity Fund to
the fundamental investment restriction for each New Equity Fund. There are no significant differences among the old
restrictions except that the Old Total Return Fund has a 25% limitation on investments in a single industry. The Old
Growth & Income Fund also has a 10% limitation (as opposed to 5% for the other Funds) related to investments in a
single issuer. The new restriction (like the old restriction) includes the 5% and 10% limitations related to
investments in any securities, or voting securities, of a single issuer. Thus, the purpose of the new restriction is
to provide uniformity in the diversification restriction among all New Equity Funds. There is no current intention
for the New Equity Funds to have different investment strategies than the Old Equity Funds as a result of a change
to this restriction.
- -------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT
RESTRICTION
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND VALUE FUND GROWTH & INCOME ALL-CAP FOR ALL NEW EQUITY
BLUE CHIP FUND GLOBAL FUND FUND GROWTH FUND FUNDS
MID-CAP FOCUSED
OPPORTUNITY FUND EQUITY FUND
SPECIAL
SITUATIONS FUND
- -------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may The Fund may not None. Except to the
purchase any not purchase purchase any extent permitted by
security (other any security security (other the 1940 Act, the
than obligations (other than than obligations rules and
of the U.S. obligations of of the U.S. regulations
Government, its the U.S. Government, its thereunder and any
agencies or Government, its agencies or applicable
instrumentalities) agencies or instrumentalities) exemptive relieft,
if as a result: instrumentalities) if, as a result, the Fund may not
(i) as to 75% of if, as a as to 75% of the with respect to 75%
the Fund's total result, as to Fund's total of the Fund's total
assets (taken at 75% of the assets, more than assets, purchase
current value), Fund's total 5% of such assets the securities of
more than 5% of assets, more would then be any issuer (other
such assets than 5% of such invested in than securities
would then be assets would securities of a issued or
invested in then be single issuer. guaranteed by the
securities of a invested in U.S. Government or
single issuer, securities of a any of its agencies
or (ii) 25% or single issuer. With respect to or
more of the 75% of the total instrumentalities,
Fund's total assets of the and securities of
assets (taken at With respect to Fund, purchase other investment
current value) 75% of the more than 10% of companies) if, as a
would be total assets of the voting result, (a) more
invested in a the Fund, securities of any than 5% of the
single industry. purchase more one issuer. Fund's total assets
than 10% of the would be invested
voting in the securities
securities of With respect to of that issuer, or
any one issuer. 75% of the total (b) the Fund would
assets of the hold more than 10%
Fund, purchase of the outstanding
more than 10% of voting securities
the outstanding of that issuer.
voting securities
of any one issuer
or more than 10%
of any class of
securities of one
issuer (all debt
and all preferred
- -------------------------------------------------------------------------------------------------------------------
-5-
- -------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT
RESTRICTION
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND VALUE FUND GROWTH & INCOME ALL-CAP FOR ALL NEW EQUITY
BLUE CHIP FUND GLOBAL FUND FUND GROWTH FUND FUNDS
MID-CAP FOCUSED
OPPORTUNITY FUND EQUITY FUND
SPECIAL
SITUATIONS FUND
- -------------------------------------------------------------------------------------------------------------------
stock of an
issuer are each
considered a
single class for
this purpose).
- -------------------------------------------------------------------------------------------------------------------
-6-
- -------------------------------------------------------------------------------------------------------------------
CONCENTRATION
- -------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on concentration for each Old Equity Fund to
fundamental investment restrictions for each New Equity Fund. The existing restrictions for each Old Equity Fund
restrict investments in securities of issuers in the same industry to 25%, or in single issuers to 10%, of a Fund's
total assets. In addition, the Old Mid-Cap Opportunity Fund and Old Special Situations Fund are not permitted to
purchase more than 10% of the outstanding voting securities of any issuer. The new restriction permits each New
Equity Fund (unless "concentrated") to invest up to 25% of its total assets in issuers in the same industry and does
not limit investments in securities of the U.S. Government or its agencies. The main purpose of the new restriction
is to simplify the restriction and make it uniform among all New Equity Funds. There is no current intention for the
New Equity Funds to have different investment strategies than the Old Equity Funds as a result of a change to this
restriction.
- -------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED
FOR THE OLD EQUITY FUNDS REVISED
FUNDAMENTAL
INVESTMENT
RESTRICTION
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND VALUE FUND MID-CAP GLOBAL FUND FOR ALL NEW
BLUE CHIP FUND GROWTH & INCOME OPPORTUNITY FUND EQUITY FUNDS
FUND SPECIAL
ALL-CAP GROWTH SITUATIONS FUND
FUND
FOCUSED EQUITY
FUND
- -------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may The Fund may Except for any
purchase more purchase the not purchase not invest Fund that is
than 10% of any securities of any more than 10% 25% or more "concentrated"
class of issuer (other of the of the value in an
securities of than securities outstanding of its total industry or
one issuer (all issued or voting assets in a group of
debt and all guaranteed by the securities of particular industries
preferred stock U.S. Government any one issuer industry at within the
of an issuer are or any of its or more than one time. meaning of
each considered agencies or 10% of any The Fund, the 1940 Act,
a single class instrumentalities) class of however, is the Fund may
for this if, as a result, securities of not limited not purchase
purpose). more than 25% of one issuer (all in the amount the securities
the Fund's total debt and all of its total of any issuer
assets would be preferred stock assets that (other than
invested in the of an issuer may be securities
securities of are each invested in issued or
companies whose considered a any guaranteed by
principle single class particular the U.S.
business for this country. Government or
activities are in purpose). any of its
the same industry. agencies or
instrumentalities)
if, as a
result, more
than 25% of
the fund's
total assets
would be
invested in
the securities
of companies
whose principal
business
activities
are in the same
industry.
- -------------------------------------------------------------------------------------------------------------------
-7-
- ------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE
- ------------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on real estate for each Old Equity Fund to the
fundamental investment restriction for each New Equity Fund. There are no significant differences among the existing and new
restrictions. In each case, the restrictions do not permit any Old or New Equity Fund to purchase or sell real estate except
under certain circumstances. The Funds may invest in real estate investment trusts, securities backed by real estate or
publicly-traded real estate securities. The new restriction consolidates and makes the restriction uniform for each New Equity
Fund. There is no current intention for the New Equity Funds to have different investment strategies from the Old Equity Funds
as a result of a change to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT
RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN VALUE FUND BLUE CHIP FUND ALL-CAP GROWTH GLOBAL FUND FOR ALL NEW
FUND GROWTH & FUND EQUITY FUNDS
INCOME FOCUSED EQUITY
FUND FUND
MID-CAP
OPPORTUNITY
FUND
SPECIAL
SITUATIONS
FUND
- ------------------------------------------------------------------------------------------------------------------------------
The Fund may The Fund may The Fund may The Fund may The Fund may not The Fund may not
not buy or not buy or not buy or sell not buy or sell purchase or sell purchase or sell
sell real sell real real estate or real estate or real estate. real estate,
estate or estate or interests in interests in However, the except that, to
interests in interests in real estate, real estate, Fund may the extent
real estate, real estate, except that the except that the purchase permitted by
although it except that Fund may Fund may interests in applicable law,
may purchase the Fund may purchase or purchase and real estate the Fund may (a)
and sell purchase or sell securities sell securities investment invest in
securities sell that are that are trusts whose securities or
which are securities secured by real secured by real securities are other instruments
secured by that are estate, estate, registered under directly or
real estate secured by securities or securities of the 1933 Act and indirectly
and securities real estate, companies which companies that are readily secured by real
of companies securities invest or deal invest or deal marketable. estate, and (b)
which invest or companies in real estate, in real estate invest in
or deal in which invest and interests and publicly securities or
real estate, or deal in in real estate traded other instruments
including real estate, investment securities or issued by issuers
limited and trusts. real estate that invest in
partnership interests in investment real estate.
interests. real estate trusts.
investment
trusts.
- ------------------------------------------------------------------------------------------------------------------------------
-8-
- ------------------------------------------------------------------------------------------------------------------------------
COMMODITIES
- ------------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on commodities for each Old Equity Fund to the
fundamental investment restrictions for each New Equity Fund. Under the existing restrictions, no Old Equity Fund may buy or
sell commodities or commodity contracts. However, some Old Equity Funds may purchase certain futures, forward contracts or
other instruments. The new restriction notes that each New Equity Fund may not invest in commodities except under certain
circumstances and may invest in financial futures contracts, options on financial futures, warrants, swaps, forward contracts
and other derivative instruments. The main purposes of the change are to make the restriction uniform among the New Equity
Funds and to clarify the exceptions. There is no current intention for the New Equity Funds to have different investment
strategies from the Old Equity Funds as a result of a change to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT
RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------
VALUE FUND BLUE CHIP ALL-CAP MID-CAP GLOBAL FUND TOTAL FOR ALL NEW EQUITY
FUND GROWTH OPPORTUNITY RETURN FUNDS
GROWTH & FUND FUND FUND
INCOME FUND FOCUSED SPECIAL
EQUITY FUND SITUATIONS
FUND
- ------------------------------------------------------------------------------------------------------------------------------
The Fund may The Fund may The Fund The Fund The Fund may None. The Fund may not
not buy or not buy or may not buy may not buy not purchase purchase or sell
sell sell or sell or sell or sell commodities or
commodities or commodities physical commodities commodities or commodity contracts
commodity or commodity commodities; or commodity unless acquired as
contracts, contracts. however, commodity contracts. a result of
except that this policy contracts, However, the ownership of
the Fund may shall not including Fund may securities or other
purchase or prevent the futures purchase or instruments issued
sell futures Fund from contracts. sell options by persons that
contracts, purchasing on securities, purchase or sell
options on and selling securities commodities or
futures foreign indices and commodities
contracts. currency, foreign contracts; but this
futures currencies, shall not prevent
contracts, stock index the Fund from
options, futures, purchasing, selling
forward interest rate and entering into
contracts, futures and financial futures
swaps, foreign contracts
caps, currency (including futures
collars, futures, as contracts on
floors and well as indices of
other options on securities,
financial such futures interest rates and
instruments. contracts. currencies),
options on
financial futures
contracts
(including futures
contracts on
indices of
securities,
- ------------------------------------------------------------------------------------------------------------------------------
-9-
- ------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT
RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------
VALUE FUND BLUE CHIP ALL-CAP MID-CAP GLOBAL FUND TOTAL FOR ALL NEW EQUITY
FUND GROWTH OPPORTUNITY RETURN FUNDS
GROWTH & FUND FUND FUND
INCOME FUND FOCUSED SPECIAL
EQUITY FUND SITUATIONS
FUND
- ------------------------------------------------------------------------------------------------------------------------------
interest rates and
currencies),
warrants, swaps,
forward contracts,
foreign currency
spot and forward
contracts or other
derivative
instruments that
are not related to
physical
commodities.
- ------------------------------------------------------------------------------------------------------------------------------
-10-
- ------------------------------------------------------------------------------------------------
UNDERWRITING
- ------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on underwriting for each
Old Equity Fund to the fundamental investment restrictions for each New Equity Fund. The
existing restrictions provide that an Old Equity Fund may not underwrite securities issued by
other persons to the extent that it may be deemed an underwriter under applicable federal
securities laws with respect to the disposition of its portfolio or restricted securities. The
new restriction maintains this limitation as applicable to the disposition of restricted
securities or investments in other investment companies. The purpose of the proposed change is
to clarify the application of underwriter pursuant to the Securities Act of 1933 and to make
uniform the restrictions among the New Equity Funds. There is no current intention of the New
Equity Funds to have different investment strategies than the Old Equity Funds as a result of a
change to this restriction.
- ------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD EQUITY FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------
GLOBAL FUND ALL OLD EQUITY FUNDS FOR ALL NEW EQUITY FUNDS
(EXCEPT GLOBAL FUND)
- ------------------------------------------------------------------------------------------------
The Fund may not underwrite The Fund may not act as an The Fund may not underwrite
securities of other issuers, underwriter except to the securities issued by others,
except to the extent that the extent that, in connection except to the extent that the
purchase and sale of with the disposition of Fund may be considered an
restricted securities may be portfolio securities, it underwriter within the
deemed to be underwriting. may be deemed to be an meaning of the Securities Act
underwriter under certain of 1933 in the disposition of
Federal securities laws. restricted securities or in
connection with investments
in other investment
companies.
- ------------------------------------------------------------------------------------------------
-11-
- -----------------------------------------------------------------------------------------------------------------------
AFFILIATED TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on affiliated transactions for each Old Equity
Fund and each New Equity Fund. The New Funds do not have a fundamental restriction because there is no current intention
for the New Equity Funds to have different investment strategies as a result of the elimination of this restriction.
- -----------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT RESTRICTION
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN MID-CAP OPPORTUNITY GLOBAL FUND VALUE FUND FOR ALL NEW
FUND FUND GROWTH & INCOME FUND EQUITY FUNDS
BLUE CHIP FUND ALL-CAP GROWTH FUND
SPECIAL FOCUSED EQUITY FUND
SITUATIONS FUND
- -----------------------------------------------------------------------------------------------------------------------
The Fund may The Fund may not The Fund may not None. None.
not purchase purchase or sell purchase or
or sell portfolio securities retain securities
portfolio from or to the of any issuer if
securities Adviser or any any officer or
from or to the director or officer Director of the
Adviser or any thereof or of Series Fund or the
director, Fund II, as Adviser owns
officer or principals. beneficially more
Trustee than 1/2 of 1% of
thereof or of the securities of
Series Fund, The Fund may not such issuer and,
as principals. invest in any together such
securities of any officers and
issuer if, to the Directors own
The Fund may knowledge of the more than 5% of
not invest in Fund, any officer, the securities of
any securities director of Series such issuer.
of any issuer Fund II or of the
if, to the Adviser owns more
knowledge of than 1/2 of 1% of the Purchase or sell
Series Fund, outstanding portfolio
any officer, securities of such securities from
director or issuer, and such or to the Adviser
Trustee of officers, directors or any Director
Series Fund or who own more than 1/2 or officer
of the Adviser of 1% own in the thereof or of the
owns more than aggregate more than Fund, as
1/2 of 1% of the 5% of the outstanding principals.
outstanding securities of such
securities of issuer.
such issuer,
and such
officers,
directors or
Trustees who
own more than
1/2 of 1% own in
the aggregate
more than 5%
of the
outstanding
securities of
such issuer.
- -----------------------------------------------------------------------------------------------------------------------
-12-
- ----------------------------------------------------------------------------------------------
CONTROL
- ----------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on control for each Old
Equity Fund. The New Equity Funds do not have a fundamental investment restriction because the
restrictions for the Old Equity Funds originally were included to meet certain state law
requirements that no longer apply. There is no current intention for the New Equity Funds to
have different investment strategies from the Old Equity Funds as a result of the elimination
of this restriction.
- ----------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT RESTRICTION
- ----------------------------------------------------------------------------------------------
TOTAL RETURN FUND VALUE FUND FOR ALL NEW EQUITY FUNDS
BLUE CHIP FUND GROWTH &
MID-CAP OPPORTUNITY FUND INCOME FUND
SPECIAL SITUATIONS FUND ALL-CAP
GLOBAL FUND GROWTH FUND
FOCUSED
EQUITY FUND
- ----------------------------------------------------------------------------------------------
The Fund may not invest in None. None.
companies for the purpose
of exercising control or
management.
- ----------------------------------------------------------------------------------------------
-13-
- ----------------------------------------------------------------------------------------------------------
MARGIN PURCHASES
- ----------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on margin purchases for each old
Equity Fund. The New Funds do not have a fundamental investment restriction because these restrictions for
the Old Equity Funds originally were included to meet certain state law requirements that no longer apply.
There is no current intention for the New Equity Funds to have different investment strategies from the
Old Equity Funds as a result of the elimination of this restriction.
- ---------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT RESTRICTION
- ---------------------------------------------------------------------------------------------------------------
VALUE FUND BLUE CHIP FUND GLOBAL FUND TOTAL RETURN FUND FOR ALL NEW EQUITY FUNDS
MID-CAP OPPORTUNITY GROWTH & INCOME
FUND FUND
SPECIAL SITUATIONS ALL-CAP GROWTH
FUND FUND
FOCUSED EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not None. None.
purchase any purchase any purchase any
securities on securities on securities on
margin, except margin. margin, except to
that the Fund may make margin
make deposits or deposits in
margin in connection with the
connection with use of options,
futures contracts futures contracts
and options. and options on
futures contracts.
- ---------------------------------------------------------------------------------------------------------------
-14-
- ----------------------------------------------------------------------------------------------
PLEDGING
- ----------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on pledging for each Old
Equity Fund and each new Equity Fund. The New Funds do not have a fundamental investment
restriction because the restrictions for the Old Funds originally were included to meet certain
state law requirements that no longer apply and because they duplicate current requirements
under the Investment Company Act of 1940. There is no current intention for the New Equity Fund
to have different investment strategies from the Old Equity funds as a result of the
elimination of this restriction.
- ----------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD EQUITY FUNDS INVESTMENT RESTRICTION
- ----------------------------------------------------------------------------------------------
VALUE FUND TOTAL RETURN FUND FOR ALL NEW EQUITY FUNDS
BLUE CHIP FUND ALL-CAP GROWTH FUND
GROWTH & INCOME FUND FOCUSED EQUITY FUND
MID-CAP OPPORTUNITY GLOBAL FUND
FUND
SPECIAL SITUATIONS
FUND
- ----------------------------------------------------------------------------------------------
The Fund may not None. None.
pledge, mortgage or
hypothecate any of
its assets, except
that the Fund may
pledge its assets to
secure borrowings
made in accordance
with the Borrowing
limitation (above),
provided the Fund
maintains asset
coverage of at least
300% for all such
borrowings.
- ----------------------------------------------------------------------------------------------
-15-
- ---------------------------------------------------------------------------------------------------------
SHORT SALES
- ---------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on short sales for each Old Equity
Fund. The New Funds do not have a fundamental investment restriction because the restrictions for the Old
Equity Funds originally were included to meet certain state law requirements that no longer apply. There
is no current intention for the New Equity Funds to have different investment strategies from the Old
Equity Funds as a result of the elimination of this restriction.
- ---------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD EQUITY FUNDS INVESTMENT RESTRICTION
- ---------------------------------------------------------------------------------------------------------
BLUE CHIP FUND SPECIAL SITUATIONS TOTAL RETURN FUND FOR ALL NEW EQUITY FUNDS
FUND VALUE FUND
GROWTH & INCOME
FUND
ALL-CAP GROWTH FUND
MID-CAP
OPPORTUNITY FUND
FOCUSED EQUITY FUND
GLOBAL FUND
- ---------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not None. None.
make short sales make short sales
of securities to of securities,
maintain a short "against the box"
position. in excess of 10%
of the Fund's
total assets.
- ---------------------------------------------------------------------------------------------------------
-16-
- ---------------------------------------------------------------------------------------------------------
FUTURES / OPTIONS (OTHER THAN AS LISTED UNDER COMMODITIES)
- ---------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on investments in futures
and options for each Old Equity Fund and each new Equity Fund. The New Equity Funds do not have
a fundamental investment limitation to provide greater flexibility in portfolio management.
There is no current intention for the New Equity Funds to have different investment strategies
from the Old Equity Funds as a result of the elimination of this restriction.
- ----------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD EQUITY FUNDS INVESTMENT RESTRICTION
- ----------------------------------------------------------------------------------------------
GLOBAL FUND ALL OLD EQUITY FUNDS FOR ALL NEW EQUITY FUNDS
(EXCEPT GLOBAL FUND)
- ----------------------------------------------------------------------------------------------
The Fund may not buy or None. None.
sell puts, calls,
straddles or spreads,
except with respect to
options on securities,
securities indices and
foreign currencies or
on futures contracts.
- ----------------------------------------------------------------------------------------------
-17-
- ---------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES
- ---------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on investments in investment
companies for each Old Equity Fund. The New Equity Funds do not have a fundamental investment restriction
because investments in investment companies are subject to specific provisions under the Investment
Company Act of 1940 Act. There is no current intention for the Old Equity Funds to have different
investment strategies from the Old Equity Funds as a result of the elimination of to this restriction.
- ---------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD EQUITY FUNDS INVESTMENT RESTRICTION
- ---------------------------------------------------------------------------------------------------------
GLOBAL FUND SPECIAL SITUATIONS ALL OLD EQUITY FUNDS FOR ALL NEW EQUITY FUNDS
FUND (EXCEPT GLOBAL FUND
AND SPECIAL
SITUATIONS FUND)
- ---------------------------------------------------------------------------------------------------------
The Fund may invest in The Fund may None. None.
securities of other invest up to 5% of
domestic investment its total assets
companies, except in in the securiteis
connection with a merger of other
of another investment registered
company, although the investment
Fund may purchase the companies.
securities of foreign
investment companies or
investment trusts in the
open market where no
commissions or profits
accrue to a sponsor or
dealer other than
customary broker's
commission, provided such
securities do not have an
aggregate value (at cost)
of more than 10% of the
value of the Fund's total
net assets. Investment
in securities of other
investment companies may
cause a duplication of
management and/or
advisory fees.
- ---------------------------------------------------------------------------------------------------------
-18-
- ------------------------------------------------------------------------------------------------
UNSEASONED ISSUERS
- ------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on unseasoned issuers for
each Old Equity Fund and each new Equity Fund. The New Equity Funds do not have a fundamental
investment restriction because the restrictions for the Old Equity Funds were originally
included to meet certain state law requirements that no longer apply. There is no current
intention for the New Equity Funds to have different investment strategies from the Old Equity
Funds as a result of the elimination of this restriction.
- ------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD EQUITY FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------
GLOBAL FUND ALL OLD EQUITY FUNDS FOR ALL NEW EQUITY FUNDS
(EXCEPT GLOBAL FUND)
- ------------------------------------------------------------------------------------------------
The Fund may not invest None. None.
more than 5% of the
value of its total
assets in securities of
issuers that have been
in business for less
than three years.
- ------------------------------------------------------------------------------------------------
-19-
- ------------------------------------------------------------------------------------------------
WARRANTS
- ------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions in warrants for each
Equity Fund. The New Equity Funds do not have a fundamental investment restriction because the
restrictions for the Old Equity Funds were originally included to meet certain state law
requirements that no longer apply. There is no current intention for the New Equity Funds to
have different investment strategies from the Old Equity Funds as a result of the elimination
of this restriction.
- ------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------
GLOBAL FUND ALL OLD EQUITY FUNDS FOR ALL NEW EQUITY FUNDS
(EXCEPT GLOBAL FUND)
- ------------------------------------------------------------------------------------------------
The Fund may not invest None. None.
more than 15% of the
value of its total
assets in warrants.
- ------------------------------------------------------------------------------------------------
-20-
- ------------------------------------------------------------------------------------------------
FOREIGN ISSUERS
- ------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions in foreign issuers for
each Old Equity Fund to the New Equity Funds. The New Equity Funds do not have a fundamental
investment restriction because the restrictions for the Old Equity Funds were originally
included to meet certain state law requirements that no longer apply. There is no current
intention for the New Equity Funds to have different investment strategies from the Old Equity
Funds as a result of the elimination of this restriction.
- ------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED
FOR THE OLD EQUITY FUNDS FUNDAMENTAL
INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------
GLOBAL FUND ALL OLD EQUITY FUNDS FOR ALL NEW EQUITY FUNDS
(EXCEPT GLOBAL FUND)
- ------------------------------------------------------------------------------------------------
The Fund may not invest None. None.
more than 25% of the
value of its total
assets in securities of
foreign issuers, other
than American
Depository Receipts,
that are not listed on
a recognized U.S. or
foreign securities
exchange, including no
more than 10% of the
value of its assets in
securities with a
limited trading market.
- ------------------------------------------------------------------------------------------------
-21-
LISTED BELOW ARE THE FUNDAMENTAL INVESTMENT RESTRICTIONS FOR EACH OLD FUND WHICH IS PROPOSED TO BE REORGANIZED AS A
SERIES OF FIRST INVESTORS INCOME FUNDS (EACH AN "OLD TAXABLE BOND FUND" AND TOGETHER, THE "OLD TAXABLE BOND FUNDS") AND
THE CHANGES PROPOSED FOR THE CORRESPONDING NEW FUNDS (EACH A "NEW TAXABLE BOND FUND" AND TOGETHER, THE "NEW TAXABLE BOND
FUNDS").
- -------------------------------------------------------------------------------------------------------------------------
BORROWING
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restriction on borrowing for each Old Taxable Bond Fund to the
fundamental investment restriction for each New Taxable Bond Fund. The main difference between the existing and new
restrictions include the ability of a New Taxable Bond Fund to borrow only as permitted under applicable law, as opposed
to borrowing only a certain amount (5%) for an Old Taxable Bond Fund. One of the purposes of the new restriction is to
provide greater flexibility for the portfolio manager in managing the New Taxable Bond Funds. Further, the new restriction
would simplify compliance monitoring among all New Taxable Bond Funds. There is no current intention for the New Taxable
Bond Funds to have different investment strategies from the Old Taxable Bond Funds as a result of a change to this
restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT GOVERNMENT FUND INVESTMENT GRADE FUND FUND FOR INCOME, INC. FOR ALL NEW TAXABLE BOND
FUND SPECIAL BOND FUND FUNDS
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may The Fund may not borrow The Fund may not borrow The Fund may not borrow
borrow money, not borrow money, except that it money except from banks money, except to the
except as a money, except may borrow money from a and only for temporary extent permitted by the
temporary or as a temporary bank for temporary or or emergency purposes 1940 Act, the rules and
emergency measure or emergency emergency purposes in and then in amounts not regulations thereunder and
(not for measure in an amounts not exceeding 5% in excess of 5% of its any applicable exemptive
leveraging or amount not to (taken at the lower of total assets taken at relief.
investment) in an exceed 5% of cost or current value) cost or value, whichever
amount not to the value of of its total assets (not is less.
exceed 5% of the its assets. including the amount
value of its borrowed).
assets.
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
SENIOR SECURITIES
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on senior securities for each Old Taxable Bond Fund
to the fundamental investment restriction for each New Taxable Bond Fund. The only difference among the existing and new
restrictions is that the new restriction permits investments in senior securities to the extent permitted under applicable
law. There is no current intention for the New Taxable Bond Funds to have different investment strategies from the Old
Taxable Bond Funds as a result of a change to this restriction.
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAXABLE BOND FUNDS INVESTMENT RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND SPECIAL BOND FUND FOR ALL NEWTAXABLE BOND FUNDS
GOVERNMENT FUND
INVESTMENT GRADE FUND
FUND FOR INCOME, INC.
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not issue senior securities. None. The Fund may not issue senior securities,
except to the extent permitted by the 1940
Act, the rules and regulations thereunder
and any applicable exemptive relief.
- -------------------------------------------------------------------------------------------------------------------------
-2-
- -------------------------------------------------------------------------------------------------------------------------
LOANS
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restriction on loans for each Old Taxable Bond Fund to the
fundamental investment restriction for each New Taxable Bond Fund. The existing restriction provides that each Old Taxable
Bond Fund may not make loans except by investing in debt securities, short-term interest bearing obligations and/or
repurchase agreements. Further, each existing restriction limits an Old Taxable Bond Fund's investments in such securities
to 10% or 15% of that fund's assets, except for the Old Investment Grade Fund, which has no percent limitation. Government
Fund, Fund for Income, Inc. and Special Bond Fund also may lend its securities for the purposes of covering short
positions under certain circumstances. The new restriction permits loans to the extent allowed by applicable law. The
primary purpose of the change in this restriction is to consolidate the minor differences among the restrictions, which
would simplify compliance monitoring and portfolio management. There is no current intention for the New Taxable Bond
Funds to have different investment strategies from the Old Taxable Bond Funds as a result of a change to this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD TAXABLE BOND FUNDS INVESTMENT
RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH GOVERNMENT FUND INVESTMENT GRADE FUND FUND FOR SPECIAL BOND FUND FOR ALL NEW
MANAGEMENT INCOME, INC. TAXABLE BOND FUNDS
FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may The Fund may The Fund may not The Fund may The Fund may not make The Fund may make
not make not make loans, make loans to not make loans loans to other loans only as
loans, except except by others, except (a) to other persons except that permitted under
by purchase purchase of through the purchase persons except the Fund's Board of the 1940 Act, the
of debt debt of debt securities that the Board Directors may, on the rules and
obligations obligations and in accordance with of Directors request of regulations
and through through its investment may, on the broker-dealers or thereunder and any
repurchase repurchase objective and request of other institutional applicable
agreement, agreements. policies, (b) broker-dealers investors which it exemptive relief.
provided, However, the through the lending or other deems qualified,
however, that Fund's Board of of its portfolio institutional authorize the Fund to
repurchase Directors may, securities, or (c) investors that lend securities for
agreements on the request to the extent a it deems the purpose of
maturing in of repurchase agreement qualified, covering short
more than broker-dealers is deemed a loan. authorize the positions of the
seven days or other Fund to lend borrower, but only
will not institutional securities for when the borrower
exceed 10% of investors which the purpose of pledges cash
the Fund's they deem covering short collateral to the
net assets qualified, positions of Fund and agrees to
(taken at authorize the the borrower, maintain such
current value). Fund to loan but only when collateral so that it
securities to the borrower amounts at all times
cover the pledges cash to at least 100% of
borrower's collateral to the value of the
short position; the Fund and securities. Such
provided, agrees to security loans will
however, the maintain such not be made if as a
- -------------------------------------------------------------------------------------------------------------------------
-3-
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD TAXABLE BOND FUNDS INVESTMENT
RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH GOVERNMENT FUND INVESTMENT GRADE FUND FUND FOR SPECIAL BOND FUND FOR ALL NEW
MANAGEMENT INCOME, INC. TAXABLE BOND FUNDS
FUND
- -------------------------------------------------------------------------------------------------------------------------
borrower collateral so result the aggregate
pledges to the that it amounts of such loans exceeds
Fund and agrees at all times to 10% of the value of
to maintain at at least 100% the Fund's total
all times with of the value of assets. The Fund may
the Fund cash the terminate such loans
collateral securities. at any time and vote
equal to not Such security the proxies if a
less than 100% loans will not material event
of the value of be made if as a affecting the
the securities result the investment is about
loaned, the aggregate of to occur. The
loan is such loans primary objective of
terminable at exceeds 10% of such loaning function
will by the the value of is to supplement the
Fund, the Fund the Fund's Fund's income through
receives total assets. investment of the
interest on the The Fund may cash collateral in
loan as well as terminate loans short-term interest
any of securities bearing obligations.
distributions at any time and The purchase of a
upon the vote the portion of an issue
securities proxies if a of publicly
loaned, the material event distributed debt
Fund retains affecting the securities is not
voting rights investment is considered the making
associated with about to of a loan.
the securities, occur. The
the Fund pays primary
only reasonable objective of
custodian fees loaning
in connection securities is
with the loan, to supplement
and the Adviser the Fund's
monitors the income through
creditworthiness investment of
of the borrower the cash
throughout the collateral in
life of the short-term
loan; provided interest-bearing
further, that obligations.
such loans will This policy
not be made if against making
the value of loans does not
all loans, prohibit the
repurchase Fund from
agreements with investing in
more then seven debt securities
days to or syndicated
maturity, and bank loans.
other illiquid
assets is
greater than an
amount equal to
15% of the
Fund's net
assets.
- -------------------------------------------------------------------------------------------------------------------------
-4-
- -------------------------------------------------------------------------------------------------------------------------
DIVERSIFICATION
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on diversification for each Old Taxable Bond Fund to
the fundamental investment restriction for each New Taxable Bond Fund. There are no significant differences among the old
restrictions except that the Old Investment Grade Fund may not invest more than 25% of its securities (with respect to 75%
of its total assets) in a single industry and that there is no 10% limitation as to holding voting securities of an
issuer. The new restriction includes the 5% and 10% limitations that appear in the existing restrictions for most Old
Funds. Thus, the purpose of the new restriction is to provide uniformity in the diversification restriction among all New
Taxable Bond Funds. There is no current intention for the New Taxable Bond Funds to have different investment strategies
than the Old Taxable Bond Funds as a result of a change to this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND GOVERNMENT FUND INVESTMENT GRADE FUND FOR ALL NEW TAXABLE
FUND FOR INCOME, INC. BOND FUNDS
SPECIAL BOND FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not Except to the extent
with respect to 75% purchase, with respect purchase any security permitted by the 1940
of the Fund's total to 75% of the Fund's (other than Act, the rules and
assets purchase the assets, the securities obligations of the regulations thereunder
securities of any of any issuer (other U.S. Government, its and any applicable
issuer (other than than U.S. Government agencies or exemptive relieft, the
securities issued or Obligations (as defined instrumentalities) if Fund may not with
guaranteed by the in the Prospectus)) if, as a result, as to 75% respect to 75% of the
U.S. Government, its as a result thereof, of the Fund's total Fund's total assets,
agencies or (a) more than 5% of the assets (taken at purchase the
instrumentalities) Fund's total assets current value), more securities of any
if, as a result, (a) (taken at current than 5% of such assets issuer (other than
more than 5% of the value) would be would then be invested securities issued or
Fund's total assets invested in the in securities of a guaranteed by the U.S.
would be invested in securities of such single issuer. Government or any of
the securities of issuer, or (b) the Fund its agencies or
that issuer, or (b) would hold more than instrumentalities, and
the Fund would hold 10% of any class of The Fund may not securities of other
more than 10% of the securities (including purchase more than 10% investment companies)
outstanding voting any class of voting of the outstanding if, as a result, (a)
securities of that securities) of such voting securities of more than 5% of the
issuer. issuer (for the any one issuer or more Fund's total assets
purpose, all debt than 10% of any class would be invested in
obligations of an of securities of one the securities of that
issuer maturing in less issuer (all debt and issuer, or (b) the
than one year are all preferred stock of Fund would hold more
treated as a single an issuer are each than 10% of the
class of securities). considered a single outstanding voting
class for this securities of that
purpose). issuer.
For the Cash
Management Fund, the
Fund may not purchase
the securities of any
issuer, if as a
result, the Fund would
not comply with any
applicable
diversification
requirements for a
money market fund
under the Investment
Company Act of 1940
and the rules
- -------------------------------------------------------------------------------------------------------------------------
-5-
- -------------------------------------------------------------------------------------------------------------------------
thereunder, as such
may be amended from
time to time.
- -------------------------------------------------------------------------------------------------------------------------
-6-
- -------------------------------------------------------------------------------------------------------------------------
CONCENTRATION
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on concentration for each Old Taxable Bond Fund to
the fundamental investment restrictions for each New Taxable Bond Fund. The existing restrictions for each Old Taxable
Bond Fund restrict investments in securities of issuers in the same industry. However, the percent limitation in each of
these restrictions is different and range from none to 25% for each Old Fund. Further, the Old Cash Management Fund may
invest more than 25% in bank securities and obligations issued or guaranteed by the U.S. Government or its agencies ("U.S.
Government Securities"). The Old Investment Grade Fund also is restricted to investments in single issuers. The new
restriction permits each New Taxable Bond Fund (unless "concentrated") to invest up to 25% of its total assets in issuers
in the same industry and does not limit investment in U.S. Government Securities. The main purpose of the new restriction
is to simplify the restriction and make it uniform among all New Taxable Bond Funds. There is no current intention for the
New Taxable Bond Funds to have different investment strategies than the Old Taxable Bond Funds as a result of a change to
this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND GOVERNMENT FUND INVESTMENT GRADE FUND FOR ALL NEW TAXABLE BOND
FUND FOR INCOME, INC. FUNDS
SPECIAL BOND FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not purchase The Fund may not concentrate The Fund may not invest Except for any Fund that
the securities of any its investments in any 25% or more of the is "concentrated" in an
issuer (other than particular industry. value of its total industry or group of
obligations issued or assets in a particular industries within the
guaranteed as to industry at one time. meaning of the 1940 Act,
principal and interest by the Fund may not
the Government of the purchase the securities
United States or any of any issuer (other
agency or instrumentality than securities issued
thereof) if, as a result or guaranteed by the
thereof more than 25% of U.S. Government or any
the Fund's total assets of its agencies or
(taken at current value) instrumentalities) if,
would be invested in the as a result, more than
obligations of one or 25% of the fund's total
more issuers having their assets would be invested
principal business in the securities of
activities in the same companies whose
industry; provided, principal business
however, that the Fund activities are in the
may invest more than 25% same industry.
of its total assets in
the obligations of banks.
- -------------------------------------------------------------------------------------------------------------------------
-7-
- -------------------------------------------------------------------------------------------------------------------------
REAL ESTATE
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on real estate for each Old Taxable Bond Fund to the
fundamental investment restrictions for each New Taxable Bond Fund. There are no significant differences among the
existing and new restrictions. In each case, the restrictions do not permit any Old or New Taxable Bond Fund to purchase
or sell real estate except under certain circumstances. The existing restrictions permit investments in securities secured
by real estate, real estate investment trusts, and securities of companies dealing in real estate and/or as a result of
ownership in securities. While all of these restrictions appear in the existing restrictions, they are not uniform among
the Old Taxable Bond Funds. Thus, the new restriction consolidates and makes the restriction uniform for each New Taxable
Bond Fund. There is no current intention for the New Taxable Bond Funds to have different investment strategies from the
Old Taxable Bond Funds as a result of a change to this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT GOVERNMENT FUND INVESTMENT GRADE FUND FUND FOR INCOME, INC. FOR ALL NEW TAXABLE
FUND SPECIAL BOND FUND BOND FUNDS
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not The Fund may not The Fund may not
buy or sell real buy or sell real purchase or sell purchase or sell real purchase or sell real
estate (unless estate (unless real estate or estate. However, the estate, except that,
acquired as a acquired as a interests in real Fund may purchase to the extent
result of result of ownership estate, although it interests in real permitted by
ownership of of securities); may purchase and estate investment applicable law, the
securities). provided, however, sell securities trusts whose securities Fund may (a) invest in
the Fund may invest which are secured by are registered under securities or other
in securities real estate, the 1933 Act and are instruments directly
secured by real securities of readily marketable. or indirectly secured
estate or interests companies which by real estate, and
in real estate. invest or deal in (b) invest in
real estate and securities or other
interests in real instruments issued by
estate investment issuers that invest in
trusts. However, real estate.
this restriction
will not preclude
bona fide hedging
transactions,
including the
purchase and sale of
futures contracts
and related options.
- -------------------------------------------------------------------------------------------------------------------------
-8-
- -------------------------------------------------------------------------------------------------------------------------
COMMODITIES
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on commodities for each Old Taxable Bond Fund to the
fundamental investment restrictions for each New Taxable Bond Fund. The existing restrictions do not permit investments in
commodities or commodity contracts except under certain circumstances for three of the Old Taxable Bond Funds. As noted
below, the Old Cash Management Fund, Government Fund and Investment Grade Fund each have different exceptions related to
commodities. For example, the Old Government Fund and Investment Grade Fund may purchase or sell futures and options
contracts, while the Old Cash Management Fund may invest in commodities acquired as a result of ownership of such
securities. The new restriction notes that each New Taxable Bond Fund may not invest in commodities except under certain
circumstances and may invest in financial futures contracts, options on financial futures, warrants, swaps, forward
contracts and other derivative instruments. The main purposes of the change are to make the restriction uniform among the
New Taxable Bond Funds and to clarify the exceptions. There is no current intention for the New Taxable Bond Funds to have
different investment strategies from the Old Taxable Bond Funds as a result of a change to this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND GOVERNMENT FUND INVESTMENT GRADE FUND FUND FOR INCOME, INC. FOR ALL NEW TAXABLE BOND
SPECIAL BOND FUND FUNDS
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not The Fund may not The Fund may not purchase
buy or sell purchase or sell purchase or sell purchase or sell or sell commodities or
commodities or commodities or commodities or commodities or commodity contracts unless
commodity contracts commodity commodity contracts. commodity contracts. acquired as a result of
(unless acquired as contracts except However, this ownership of securities or
a result of that the Fund may restriction will not other instruments issued
ownership of purchase and sell preclude bona fide by persons that purchase
securities). interest rate hedging transactions, or sell commodities or
futures contracts including the commodities contracts; but
and related purchase and sale of this shall not prevent the
options. futures contracts and Fund from purchasing,
related options. selling and entering into
financial futures
contracts (including
futures contracts on
indices of securities,
interest rates and
currencies), options on
financial futures
contracts (including
futures contracts on
indices of securities,
interest rates and
currencies), warrants,
- -------------------------------------------------------------------------------------------------------------------------
-9-
- -------------------------------------------------------------------------------------------------------------------------
swaps, forward contracts,
foreign currency spot and
forward contracts or other
derivative instruments
that are not related to
physical commodities.
- -------------------------------------------------------------------------------------------------------------------------
-10-
- -------------------------------------------------------------------------------------------------------------------------
OIL, GAS AND MINERAL EXPLORATION
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on oil, gas and mineral exploration for each Old
Taxable Bond Fund and each New Taxable Bond Fund. The New Taxable Bond Funds do not have a fundamental investment
restriction because the restrictions for the Old Taxable Bond Funds originally were included to meet certain state law
requirements that no longer apply. There is no current intention for the New Taxable Bond Funds to have different
investment strategies from the Old Taxable Bond Funds as a result of the elimination of this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED FUNDAMENTAL
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS INVESTMENT RESTRICTION
FOR THE OLD TAXABLE BOND FUNDS
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND INVESTMENT GRADE FUND FOR ALL NEW TAXABLE BOND FUNDS
GOVERNMENT FUND FUND FOR INCOME, INC.
SPECIAL BOND FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not buy or sell interests in None. None.
oil, gas or mineral exploration.
- -------------------------------------------------------------------------------------------------------------------------
-11-
- -------------------------------------------------------------------------------------------------------------------------
UNDERWRITING
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on underwriting for each Old Taxable Bond Fund to
the fundamental investment restrictions for each New Taxable Bond Fund. The existing restrictions provide that an Old
Taxable Bond Fund may not underwrite securities issued by other persons to the extent that it may be deemed an underwriter
under applicable federal securities laws with respect to the disposition of its securities, or in the case of the Old
Special Bond Fund, underwrite securities of other issuers. The new restriction maintains this limitation as applicable to
the disposition of restricted securities or investments in other investment companies. The purpose of the new restriction
is to clarify the application of underwriter pursuant to the Securities Act of 1933 and to consolidate the restrictions
among the New Funds. There is no current intention for the New Taxable Bond Funds to have different investment strategies
from the Old Taxable Bond Funds as a result of a change to this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND INVESTMENT GRADE FUND FOR INCOME, INC. SPECIAL BOND FUND FOR ALL NEW TAXABLE BOND
GOVERNMENT FUND FUND FUNDS
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not The Fund may not The Fund may not underwrite
underwrite act as an underwrite underwrite securities securities issued by
securities issued by underwriter except securities of other of other issuers. others, except to the
other persons except to the extent that, issuers, except to extent that the Fund may be
to the extent that, in connection with the extent that, in considered an underwriter
in connection with the disposition of connection with the within the meaning of the
the disposition of portfolio disposition of its Securities Act of 1933 in
its portfolio securities; it may portfolio the disposition of
investments, it may be deemed to be an investments, it may restricted securities or in
be deemed to be an underwriter under be deemed to be an connection with investments
underwriter under certain federal underwriter under in other investment
federal securities securities laws. federal securities companies.
laws. laws.
- -------------------------------------------------------------------------------------------------------------------------
-12-
- -------------------------------------------------------------------------------------------------------------------------
AFFILIATED TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on affiliated transaction for each Old Taxable Bond
Fund and each New Taxable Bond Fund. The New Funds do not have a fundamental investment restriction because the
restrictions for the Old Funds merely restate a statutory prohibition under the Investment Company Act of 1940 Act. There
is no current intention for the New Taxable Bond Funds to have different investment strategies from the Old Taxable Bond
Funds as a result of the elimination of this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND INVESTMENT GRADE FUND FUND FOR INCOME, INC. GOVERNMENT FUND FOR ALL NEW TAXABLE
SPECIAL BOND FUND BOND FUNDS
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not None. None.
purchase or retain invest in any purchase or sell
any securities of securities of any portfolio securities
another issuer if issuer if, to the from or to the
persons affiliated knowledge of Series Adviser or any
with the Fund or its Fund, any officer, Director thereof or
Adviser owning director or Trustee of the Fund, as
individually more of Series Fund or of Principals.
than one-half of one the Adviser owns more
percent of said than 1/2 of 1% of the Purchase or retain
issuer's outstanding outstanding securities of any
stock own, in the securities of such issuer if any
aggregate more than issuer, and such officer or Director
five percent of said officers, directors of the Fund or the
issuer's outstanding or Trustees who own Adviser owns
stock. more than 1/2 of 1% own beneficially more
in the aggregate more than 1/2 of 1% of the
than 5% of the securities of such
outstanding issuer and together
securities of such own more than 5% of
issuer. the securities of
such issuer.
Purchase or sell
portfolio securities
from or to the
Adviser or any
director, officer or
Trustee thereof or of
Series Fund, as
principals.
- -------------------------------------------------------------------------------------------------------------------------
-13-
- -------------------------------------------------------------------------------------------------------------------------
CONTROL
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on exercising control over issuers for each Old
Taxable Bond Fund and each New Taxable Bond Fund. The New Funds do not have a fundamental investment restriction because
the restrictions for the Old Funds originally were included to meet certain state law requirements that no longer apply.
There is no current intention for the New Taxable Bond Funds to have different investment strategies from the Old Taxable
Bond Funds as a result of the elimination of this restriction.
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND GOVERNMENT FUND FOR ALL NEW TAXABLE BOND FUNDS
INVESTMENT GRADE FUND
FUND FOR INCOME, INC.
SPECIAL BOND FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not invest in companies for the None. None.
purpose of exercising control or management.
- -------------------------------------------------------------------------------------------------------------------------
-14-
- -------------------------------------------------------------------------------------------------------------------------
MARGIN PURCHASES
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on margin purchases for each Old Taxable Bond Fund
and each New Taxable Bond Fund. The New Funds do not have a fundamental investment restriction because the restrictions
for the Old Funds originally were included to meet certain state law requirements that no longer apply. There is no
current intention for the New Taxable Bond Funds to have different investment strategies from the Old Taxable Bond Funds
as a result of the elimination of this restriction.
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAXABLE BOND FUNDS INVESTMENT RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND GOVERNMENT FUND FUND FOR INCOME, INC. FOR ALL NEW TAXABLE BOND FUNDS
INVESTMENT GRADE FUND SPECIAL BOND FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not purchase The Fund may not purchase The Fund may not None.
securities on margin (but securities on margin; purchase any
the Fund may obtain such except that the Fund may securities on margin.
credits as may be obtain such credits as may
necessary for the be necessary for the
clearance of purchases and clearance of purchases and
sales of securities). sales of securities. (The
deposit or payment by the
Fund of initial or
variation margin in
connection with interest
rate futures contracts or
related options
transactions is not
considered the purchase of
a security on margin.)
- -------------------------------------------------------------------------------------------------------------------------
-15-
- -------------------------------------------------------------------------------------------------------------------------
PLEDGING
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on pledging for each Old Taxable Bond Fund and each
New Taxable Bond Fund. The New Funds do not have a fundamental investment restriction because the restrictions for the Old
Funds originally were included to meet certain state law requirements that no longer apply and as they duplicate current
requirements under the Investment Company Act of 1940. There is no current intention for the New Taxable Bond Funds to
have different investment strategies from the Old Taxable Bond Funds as a result of the elimination of this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND GOVERNMENT FUND INVESTMENT GRADE FUND FOR INCOME, INC. FOR ALL NEW TAXABLE BOND
FUND SPECIAL BOND FUND FUNDS
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not None. None.
pledge assets, except pledge assets, except pledge, mortgage or
that the Fund may that the Fund may hypothecate any of
pledge not more than pledge its assets to its assets, except
one-third of its total secure borrowings that the Fund may
assets (taken at made in accordance pledge its assets to
current value) to with paragraph (1) secure borrowing
secure borrowings. above, provided the made in accordance
Fund maintains asset with paragraph (2)
coverage of at least above, provided the
300% for pledged Fund maintains asset
assets. coverage of at least
300% for all such
borrowings.
- -------------------------------------------------------------------------------------------------------------------------
-16-
- -------------------------------------------------------------------------------------------------------------------------
SHORT SALES
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on short sales for each Old Taxable Bond Fund and
each New Taxable Bond Fund. The New Funds do not have a fundamental investment restriction because the restrictions for
the Old Funds originally were included to meet certain state law requirements that no longer apply. There is no current
intention for the New Taxable Bond Funds to have different investment strategies from the Old Taxable Bond Funds as a
result of the elimination of this restriction.
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAXABLE BOND FUNDS INVESTMENT RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND GOVERNMENT FUND INVESTMENT GRADE FUND FOR ALL NEW TAXABLE BOND FUNDS
FUND FOR INCOME, INC.
SPECIAL BOND FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not make The Fund may not make short The Fund may not make None.
short sales of securities sales of securities. short sales of
unless at all times while securities "against the
a short position is open box" in excess of 10% of
the Fund maintains a long the Fund's total assets.
position in the same
security in an amount at
least equal thereto.
- -------------------------------------------------------------------------------------------------------------------------
-17-
- -------------------------------------------------------------------------------------------------------------------------
FUTURES / OPTIONS
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on futures and options for each Old Taxable Bond
Fund and each New Taxable Bond Fund. The New Taxable Bond Funds do not have this restriction to permit greater flexibility
in managing the Funds' assets. There is no current intention for the New Taxable Bond Funds to have different investment
strategies from the Old Taxable Bond Funds as a result of the elimination of this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND GOVERNMENT FUND INVESTMENT GRADE FUND FOR ALL NEW TAXABLE BOND FUNDS
FUND FOR INCOME, INC.
SPECIAL BOND FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not write or The Fund may not write put None. None.
purchase any put or call or call options; except
options. that the Fund may write
options with respect to
U.S. Government Obligations
(as defined in the
Prospectus) and interest
rate futures contracts.
Notwithstanding the
foregoing, a non-
fundamental investment
restriction, adopted by the
Fund's Board of Directors,
prohibits the Fund from
engaging in any option
transactions.
- -------------------------------------------------------------------------------------------------------------------------
-18-
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on investments in investment companies for each Old
Taxable Bond Fund and each New Taxable Bond Fund. The New Funds do not have a fundamental investment restriction because
investments in investment companies are subject to specific provisions under the Investment Company Act of 1940 Act. There
is no current intention for the New Taxable Bond Funds to have different investment strategies from the Old Taxable Bond
Funds as a result of the elimination of this restriction.
- -------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND GOVERNMENT FUND FUND FOR INCOME, INC. INVESTMENT GRADE FOR ALL NEW TAXABLE BOND
SPECIAL BOND FUND FUND FUNDS
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not None. None.
purchase the securities purchase the invest in securities
of other investment securities of other of other investment
companies or investment investment trusts, companies, except in
trusts. except as they may connection with a
be acquired as part merger of another
of a merger, investment company.
consolidation or
acquisition of
assets.
- -------------------------------------------------------------------------------------------------------------------------
-19-
- -------------------------------------------------------------------------------------------------------------------------
UNSEASONED ISSUERS
- -------------------------------------------------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on unseasoned issuers for each Old Taxable Bond Fund
and each New Taxable Bond Fund. The New Funds do not have a fundamental investment restriction because the restrictions
for the Old Funds originally were included to meet certain state law requirements that no longer apply. There is no
current intention for the New Taxable Bond Funds to have different investment strategies from the Old Taxable Bond Funds
as a result of the elimination of this restriction.
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL INVESTMENT
FOR THE OLD TAXABLE BOND FUNDS RESTRICTION
- -------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND INVESTMENT GRADE FUND FOR ALL NEW TAXABLE BOND FUNDS
GOVERNMENT FUND
FUND FOR INCOME, INC.
SPECIAL BOND FUND
- -------------------------------------------------------------------------------------------------------------------------
The Fund may not purchase the securities of None. None.
a company if such purchases, at the time
thereof, would cause more than 5% of the
value of the Fund's total assets to be
invested in securities of companies,
which, including predecessors have a record
of less than three years' continuous
operation.
- -------------------------------------------------------------------------------------------------------------------------
-20-
LISTED BELOW ARE THE FUNDAMENTAL INVESTMENT RESTRICTIONS FOR EACH OLD FUND
WHICH IS PROPOSED TO BE REORGANIZED AS A SERIES OF FIRST INVESTORS TAX EXEMPT
FUNDS (EACH AN "OLD TAX EXEMPT FUND" AND TOGETHER, THE "OLD TAX EXEMPT FUNDS")
AND THE CHANGES PROPOSED FOR THE CORRESPONDING NEW FUNDS (EACH A "NEW TAX EXEMPT
FUND" AND TOGETHER, THE "NEW TAX EXEMPT FUNDS").
- --------------------------------------------------------------------------------
BORROWING
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
borrowing for each Old Tax Exempt Fund to the fundamental investment restriction
for each New Tax Exempt Fund. The main differences between the restrictions
include the ability of a New Tax Exempt Fund to borrow only as permitted under
applicable law, as opposed to borrowing only a certain amount (5%) for an Old
Tax Exempt Fund. One of the purposes of the New Tax Exempt Funds' restriction is
to provide greater flexibility for the portfolio manager in managing the New Tax
Exempt Funds. Further, the changes in the restriction would simplify compliance
monitoring among all New Tax Exempt Funds. There is no current intention for the
New Tax Exempt Funds to have different investment strategies from the Old Tax
Exempt Funds as a result of the changes to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
ALL OLD TAX EXEMPT FUNDS TAX-EXEMPT MONEY MARKET FUND FOR ALL NEW TAX EXEMPT FUNDS
(EXCEPT TAX-EXEMPT MONEY
MARKET FUND)
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not borrow money except for The Fund may not borrow money, except as The Fund may not borrow money, except to
temporary or emergency purposes (not for a temporary or emergency measure (not the extent permitted by the 1940 Act,
leveraging or investment) in an amount for leveraging or investment) in an the rules and regulations thereunder and
not exceeding 5% of the value of its amount not to exceed 5% of the value of any applicable exemptive relief.
total assets (including the amount its assets.
borrowed) less liabilities (other than
borrowings). Any borrowings that exceed
5% of the value of the Fund's total
assets by reason of a decline in net
assets will be reduced within three
business days to the extent necessary to
comply with the 5% limitation. This
policy shall not prohibit deposits of
assets to provide margin or guarantee
positions in connection with
transactions in options, futures,
contracts, swaps, forward contracts, and
other derivative instruments or the
segregation of assets in connection with
such transactions.
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SENIOR SECURITIES
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on senior
securities for each Old Tax Exempt Fund to the fundamental investment
restriction for each New Tax Exempt Fund. The only difference among the
restrictions is that the New Tax Exempt Funds' restriction permits investments
in senior securities to the extent permitted under applicable law. There is no
current intention for the New Tax Exempt Funds to have different investment
strategies from the Old Tax Exempt Funds as a result of the changes to this
restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND NEW YORK INSURED TAX FREE FUND FOR ALL NEW TAX EXEMPT FUNDS
SERIES FUND INSURED INTERMEDIATE TAX EXEMPT MULTI-STATE INSURED TAX FREE FUND
FUND
INSURED TAX EXEMPT FUND
EXECUTIVE INVESTORS TRUST INSURED TAX
EXEMPT FUND II
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not issue senior securities. None. The Fund may not issue senior securities,
except to the extent permitted by the 1940
Act, the rules and regulations thereunder
and any applicable exemptive relief.
- ------------------------------------------------------------------------------------------------------------------------------------
- 2 -
- --------------------------------------------------------------------------------
LOANS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restriction on loans
for each Old Tax Exempt Fund to the fundamental investment restriction for each
New Tax Exempt Fund. The existing restrictions provide that each Old Tax Exempt
Fund may not make loans except by investing in debt securities, loans of
portfolio securities and/or repurchase agreements. Further, each Old Tax Exempt
Fund's investments in such securities may be limited to 10% or 15% of that
Fund's assets, except for Series Fund Insured Intermediate Tax Exempt Fund and
Multi-State Insured Tax Free Fund, which have no percent limitation. Insured Tax
Exempt Fund and New York Insured Tax Free Fund also may lend its securities for
the purposes of covering short positions of the borrower under certain
circumstances. The New Tax Exempt Funds' restriction permits loans only to the
extent allowed by applicable law. The primary purpose of the change in this
restriction is to consolidate the differences among the restrictions, which
would simplify compliance monitoring and portfolio management among the New Tax
Exempt Funds. There is no current intention for the New Tax Exempt Funds to have
different investment strategies from the Old Tax Exempt Funds as a result of the
changes to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT
RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY SERIES FUND INSURED TAX EXECUTIVE NEW YORK INSURED MULTI-STATE FOR ALL NEW TAX
MARKET FUND INSURED EXEMPT FUND INVESTORS TRUST TAX FREE FUND INSURED TAX FREE EXEMPT FUNDS
INTERMEDIATE TAX INSURED TAX FUND
EXEMPT FUND EXEMPT FUND II
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not The Fund may not The Fund may not The Fund may not The Fund may
make loans, except make loans, Make loans (the make loans, make loans, make loans, make loans only
by purchase of except loans of purchase of a except loans of except by except by as permitted
debt obligations portfolio portion of an portfolio purchase of debt purchase of debt under the 1940
and through securities and issue of securities obligations and obligations, Act, the rules
repurchase repurchase publicly (limited to 10% through publicly and regulations
agreements; agreements. distributed debt of the Fund's repurchase distributed thereunder and
provided, however, securities is total assets), agreements. bonds or any applicable
that repurchase not considered provided such However, the debentures exemptive relief.
agreements the making of a loans are at all Fund's Board of (which are not
maturing in more loan). In times secured by Directors may, considered
than seven days, addition, the cash or on the request loans), and
along with all Insured Tax equivalent of through
illiquid assets, Exempt Fund's collateral of no broker-dealers repurchase
will not exceed Board of less than 100% or other agreements.
10% of the Fund's Directors may on by marking to institutional
total assets the request of market daily. investors which
(taken at current broker-dealers they deem
value). or other qualified,
institutional authorize the
investors, which Fund to loan
- 3 -
it deems securities to
qualified, cover the
authorize the borrower's short
Fund to lend position;
securities for provided,
the purpose of however, the
covering short borrower pledges
positions of the to the Fund and
borrower, but agrees to
only when the maintain at all
borrower pledges times with the
cash collateral Fund cash
to the Fund and collateral equal
agrees to to not less than
maintain such 100% of the
collateral so value of the
that it amounts securities
at all times to loaned; and,
at least 100% of further
the value of the provided, that
securities. such loans will
Such security not be made if
loans will not the value of all
be made if as a such loans,
result the repurchase
aggregate of agreements
such loans maturing in more
exceed 10% of than seven days
the value of the and other
Fund's gross illiquid assets
assets. is greater than
an amount equal
to 15% of the
Fund's net
assets.
- ------------------------------------------------------------------------------------------------------------------------------------
- 4 -
- --------------------------------------------------------------------------------
DIVERSIFICATION
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
diversification for each Old Tax Exempt Fund to the fundamental investment
restriction for each New Tax Exempt Fund. There are no significant differences
among the Old Tax Exempt Funds' restrictions except that the Tax-Exempt Money
Market Fund has additional limitations on investments in a single bank's letters
of credit and the limitation on pre-refunded bonds with respect to the Executive
Investors Trust Insured Tax Exempt Fund II. The New Tax Exempt Funds'
restriction includes the 5% and 10% limitations that appear in the restrictions
for some of the Old Tax Exempt Funds. Thus, the purpose of the changes to the
Old Tax Exempt Funds' restrictions is to provide uniformity in the
diversification restriction among all New Tax Exempt Funds. There is no current
intention for the New Tax Exempt Funds to have different investment strategies
from the Old Tax Exempt Funds as a result of the changes to this restriction.
- -----------------------------------------------------------------------------------------------------------------------------------
SUGGESTED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS REVISED
FOR THE OLD TAX EXEMPT FUNDS FUNDAMENTAL
INVESTMENT
RESTRICTION
- -----------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY SERIES FUND EXECUTIVE INSURED TAX MULTI-STATE NEW YORK FOR ALL NEW TAX
MARKET FUND INSURED INVESTORS TRUST EXEMPT FUND INSURED TAX FREE INSURED TAX EXEMPT FUNDS
INTERMEDIATE TAX INSURED TAX FUND FREE FUND
EXEMPT FUND EXEMPT FUND II
- -----------------------------------------------------------------------------------------------------------------------------------
The Fund may not, The Fund may not The Fund may The Fund may not The Fund may not None. Except to the
with respect to purchase any not, with invest more than purchase the extent permitted
75% of the Fund's security (other respect to 75% 5% of the value securities of by the 1940 Act,
total assets, than obligations of the Fund's of its gross any issuer the rules and
purchase the of the U.S. total assets, assets, at the (other than the regulations
securities of any Government, its purchase the time of U.S. Government) thereunder and
issuers (other agencies or securities of purchase, in if, as a result any applicable
than obligations instrumentalities) any issuer securities of thereof, any exemptive
issued or if as a result, (other than any one issuer Fund would hold relieft, the Fund
guaranteed as to with respect to securities (except more than 10% of may not with
principal and 75% of the issued or obligations of any class of respect to 75% of
interest by the Fund's total guaranteed by the U.S. securities the Fund's total
Government of the assets more than the U.S. government). (including any assets, purchase
United States or 5% of such Government, its class of voting the securities of
any agency or assets would agencies or securities) of any issuer (other
instrumentality then be invested instrumentalities) such issuer. than securities
thereof) if, as a in securities of if, as a result, issued or
result thereof (a) a single issuer. (a) more than 5% guaranteed by the
more than 5% of of the Fund's U.S. Government
the Fund's total total assets or any of its
assets would be would be agencies or
invested in the With respect to invested in the instrumentalities,
- 5 -
securities of that 75% of its total securities of and securities of
issuer, or (b) the assets, purchase that issuer, or other investment
Fund would hold more than 10% of (b) the Fund companies) if, as
more than 10% of the outstanding would hold more a result, (a)
the voting voting than 10% of the more than 5% of
securities of that securities of outstanding the Fund's total
issuer. The Fund any one issuer voting assets would be
will not invest in or more than 10% securities of invested in the
securities such of any class of that issuer. securities of
that any one securities of With respect to that issuer, or
bank's letters of one issuer (all pre-refunded (b) the Fund
credit support debt and all bonds, the would hold more
more than 10% of preferred stock Adviser than 10% of the
the Fund's total of an issuer are considers an outstanding
assets. each considered escrow account voting securities
a single class to be the issuer of that issuer.
for this of such bonds
purpose). when the escrow
account consists
solely of U.S.
Government
obligations
fully
substituted for
the obligation
of the issuing
municipality.
- ------------------------------------------------------------------------------------------------------------------------------------
- 6 -
- --------------------------------------------------------------------------------
CONCENTRATION
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
concentration for each Old Tax Exempt Fund to the fundamental investment
restriction for each New Tax Exempt Fund. The restrictions for each Old Tax
Exempt Fund limit investments in securities of issuers in the same industry.
Each New Tax Exempt Fund (unless "concentrated") may invest up to 25% of its
total assets in issuers in the same industry and does not have limits in
investment in securities of the U.S. Government or its agencies. There is no
current intention for the Old Tax Exempt Funds to have different investment
strategies from the New Tax Exempt Funds as a result of the changes to this
restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
ALL OLD TAX EXEMPT FUNDS FOR ALL NEW TAX EXEMPT FUNDS
- --------------------------------------------------------------------------------
The Fund may not invest more than Except for any Fund that is
25% of the Fund's total assets "concentrated" in an industry or
(taken at current value) in the group of industries within the
obligations of one or more issuers meaning of the 1940 Act, the Fund
having their principal business may not purchase the securities of
activities in the same industry. any issuer (other than securities
issued or guaranteed by the U.S.
Government or any of its agencies
or instrumentalities) if, as a
result, more than 25% of the fund's
total assets would be invested in
the securities of companies whose
principal business activities are
in the same industry.
- --------------------------------------------------------------------------------
- 7 -
- --------------------------------------------------------------------------------
REAL ESTATE
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on real
estate for each Old Tax Exempt Fund to the fundamental investment restriction
for each New Tax Exempt Fund. There are no significant differences among the
restrictions. In each case, the restrictions do not permit any Old or New Tax
Exempt Fund to purchase or sell real estate except under certain circumstances.
The Old Tax Exempt Funds may invest in municipal securities secured by real
estate or interests in real estate. The New Tax Exempt Funds' restriction
consolidates and makes the restrictions uniform for among the New Tax Exempt
Fund. There is no current intention for the New Tax Exempt Funds to have
different investment strategies from the Old Tax Exempt Funds as a result of the
changes to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND INSURED TAX EXEMPT FUND EXECUTIVE INVESTORS TRUST FOR ALL NEW TAX EXEMPT FUNDS
SERIES FUND INSURED INTERMEDIATE INSURED TAX EXEMPT FUND II
TAX EXEMPT FUND
NEW YORK INSURED TAX FREE FUND
MULTI-STATE INSURED TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not buy or sell real The Fund may not The Fund may not buy or sell The Fund may not purchase or
estate provided however, the Fund purchase or sell real real estate or interests in sell real estate, except that,
may invest in municipal estate but this shall real estate limited to the extent permitted by
instruments secured by real not prevent the Fund partnerships, although it may applicable law, the Fund may (a)
estate or interests in real from investing in purchase and sell securities invest in securities or other
estate. municipal bonds or other which are secured by real instruments directly or
obligations secured by estate or interests therein. indirectly secured by real
real estate or interests estate, and (b) invest in
therein. securities or other instruments
issued by issuers that invest in
real estate.
- ------------------------------------------------------------------------------------------------------------------------------------
- 8 -
- --------------------------------------------------------------------------------
COMMODITIES
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
commodities for each Old Tax Exempt Fund to the fundamental investment
restrictions for each New Tax Exempt Fund. The New Tax Exempt Funds' restriction
notes that each New Tax Exempt Fund may not invest in commodities except under
certain circumstances and may invest in financial futures contracts, options on
financial futures, warrants, swaps, forward contracts and other derivative
instruments. The main purposes of the change are to make the restriction uniform
among the New Tax Exempt Funds and to clarify the exceptions. There is no
current intention for the New Tax Exempt Funds to have different investment
strategies from the Old Tax Exempt Funds as a result of a change to this
restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND ALL OLD TAX EXEMPT FUNDS FOR ALL NEW TAX EXEMPT FUNDS
(EXCEPT TAX-EXEMPT MONEY MARKET FUND)
- -----------------------------------------------------------------------------------------------------------------------------------
The Fund may not buy or sell commodities None. The Fund may not purchase or sell
(unless acquired as a result of ownership of commodities or commodity contracts unless
securities). acquired as a result of ownership of
securities or other instruments issued by
persons that purchase or sell commodities
or commodities contracts; but this shall
not prevent the Fund from purchasing,
selling and entering into financial
futures contracts (including futures
contracts on indices of securities,
interest rates and currencies), options
on financial futures contracts (including
futures contracts on indices of
securities, interest rates and
currencies), warrants, swaps, forward
contracts, foreign currency spot and
forward contracts or other derivative
instruments that are not related to
physical commodities.
- ------------------------------------------------------------------------------------------------------------------------------------
- 9 -
- --------------------------------------------------------------------------------
OIL, GAS AND MINERAL EXPLORATION
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on oil,
gas and mineral exploration for each Old Tax Exempt Fund and each New Tax Exempt
Fund. The New Tax Exempt Funds do not have a fundamental investment restriction
because the restrictions for the Old Tax Exempt Funds originally were included
to meet certain state law requirements that no longer apply. There is no current
intention for the New Tax Exempt Funds to have different investment strategies
from the Old Tax Exempt Funds as a result of the elimination of this
restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND INSURED TAX EXEMPT FUND FOR ALL NEW TAX EXEMPT FUNDS
SERIES FUND INSURED INTERMEDIATE TAX EXEMPT EXECUTIVE INVESTORS TRUST INSURED TAX
FUND EXEMPT FUND II
NEW YORK INSURED TAX FREE FUND
MULTI-STATE INSURED TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not buy or sell interests in None. None.
oil, gas or mineral exploration.
- ------------------------------------------------------------------------------------------------------------------------------------
- 10 -
- --------------------------------------------------------------------------------
UNDERWRITING
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
underwriting for each Old Tax Exempt Fund to the fundamental investment
restrictions for each New Tax Exempt Fund. The Old Tax Exempt Funds may not
underwrite securities issued by other persons to the extent that it may be
deemed an underwriter under applicable federal securities laws with respect to
the disposition of its securities. The Insured Tax Exempt Fund and Executive
Investors Trust Insured Tax Exempt Fund II also may purchase municipal bonds
directly from the issuer without being deemed an underwriter. The New Tax Exempt
Funds' restriction maintains this limitation as applicable to the disposition of
restricted securities or investments in other investment companies. The purpose
of the change to the restriction is to clarify the application of underwriter
pursuant to the Securities Act of 1933 and to make uniform the restrictions
among the New Tax Exempt Funds. There is no current intention for the New Tax
Exempt Funds to have different investment strategies from the Old Tax Exempt
Funds as a result of the changes to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND INSURED TAX EXEMPT FUND FOR ALL NEW TAX EXEMPT FUNDS
SERIES FUND INSURED INTERMEDIATE TAX EXECUTIVE INVESTORS TRUST INSURED TAX
EXEMPT FUND EXEMPT FUND II
NEW YORK INSURED TAX FREE FUND
MULTI-STATE INSURED TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not underwrite securities The Fund may not underwrite any issue The Fund may not underwrite securities
issued by other persons except to the of securities, although the Fund may issued by others, except to the extent
extent that, in connection with the purchase municipal bonds directly from that the Fund may be considered an
disposition of its portfolio investments, the issuer thereof for investment in underwriter within the meaning of the
it may be deemed to be an underwriter accordance with the Fund's investment Securities Act of 1933 in the disposition
under federal securities laws. objective, policy and limitations. of restricted securities or in connection
with investments in other investment
companies.
- ------------------------------------------------------------------------------------------------------------------------------------
- 11 -
- --------------------------------------------------------------------------------
AFFILIATED TRANSACTIONS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
affiliated transactions for each Old Tax Exempt Fund and each New Tax Exempt
Fund. The New Tax Exempt Funds do not have a fundamental investment restriction
because the restrictions for the Old Tax Exempt Funds merely restate a statutory
prohibition under the Investment Company Act of 1940. There is no current
intention for the New Tax Exempt Funds to have different investment strategies
from the Old Tax Exempt Funds as a result of the elimination of this
restriction.
- -----------------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT
RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET INSURED TAX EXEMPT FUND EXECUTIVE INVESTORS TRUST SERIES FUND INSURED FOR ALL NEW TAX
FUND INSURED TAX EXEMPT FUND II INTERMEDIATE TAX EXEMPT FUNDS
EXEMPT FUND
NEW YORK INSURED
TAX FREE FUND
MULTI-STATE INSURED
TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not The Fund may not The Fund may not purchase None. None.
purchase or retain any purchase or retain the or sell portfolio
securities of another securities of any securities from or to the
issuer if persons issuer, if, to the Adviser or any director,
affiliated with the Fund Fund's knowledge, those officer or Trustee thereof
or its Adviser or officers and directors or of the Trust, as
management owning, of the Adviser, who principals.
individually, more than individually own
one-half of one percent beneficially more than Invest in any securities of
of said issuer's 1/2 of 1% of the any issuer if, to the
outstanding stock (or outstanding securities knowledge of the Fund, any
securities convertible of such issuer together officer, director or
into stock) own, in the own beneficially more Trustee of the Trust or of
aggregate, more than 5% than 5% of such the Adviser owns more than
of said issuer's outstanding securities. 1/2 of 1% of the
outstanding stock (or outstanding securities of
securities convertible such issuer, and such
into stock). officers, directors or
Trustees who own more than
1/2 of 1% own in the
aggregate more than 5% of
the outstanding securities
of such issuer.
- ------------------------------------------------------------------------------------------------------------------------------------
- 12 -
- --------------------------------------------------------------------------------
CONTROL
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
exercising control over issuers for each Old Tax Exempt Fund and each New Tax
Exempt Fund. The New Tax Exempt Funds do not have a fundamental investment
restriction because the restrictions for the Old Tax Exempt Funds originally
were included to meet certain state law requirements that no longer apply. There
is no current intention for the New Tax Exempt Funds to have different
investment strategies from the Old Tax Exempt Funds as a result of the
elimination of this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND SERIES FUND INSURED INTERMEDIATE TAX FOR ALL NEW TAX EXEMPT FUNDS
EXECUTIVE INVESTORS TRUST INSURED TAX EXEMPT EXEMPT FUND
FUND II INSURED TAX EXEMPT FUND
NEW YORK INSURED TAX FREE FUND
MULTI-STATE INSURED TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not invest in companies for the None. None.
purpose of exercising control or management.
- ------------------------------------------------------------------------------------------------------------------------------------
- 13 -
- --------------------------------------------------------------------------------
MARGIN PURCHASES
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on margin
purchases for each Old Tax Exempt Fund and each New Tax Exempt Fund. The New Tax
Exempt Funds do not have a fundamental investment restriction because the
restrictions for the Old Tax Exempt Funds originally were included to meet
certain state law requirements that no longer apply. There is no current
intention for the New Tax Exempt Funds to have different investment strategies
from the Old Tax Exempt Funds as a result of the elimination of this
restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND ALL OLD TAX EXEMPT FUNDS FOR ALL NEW TAX EXEMPT FUNDS
(EXCEPT TAX-EXEMPT MONEY MARKET FUND)
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not purchase securities on None. None.
margin (but the Fund may obtain such credits
as may be necessary for the clearance of
purchase and sales of securities).
- ------------------------------------------------------------------------------------------------------------------------------------
- 14 -
- --------------------------------------------------------------------------------
PLEDGING
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
pledging for each Old Tax Exempt Fund and each New Tax Exempt Fund. The New Tax
Exempt Funds do not have a fundamental investment restriction because the
restrictions for the Old Tax Exempt Funds originally were included to meet
certain state law requirements that no longer apply. There is no current
intention for the New Tax Exempt Funds to have different investment strategies
from the Old Tax Exempt Funds as a result of the elimination of this
restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND ALL OLD TAX EXEMPT FUNDS FOR ALL NEW TAX EXEMPT FUNDS
(EXCEPT TAX-EXEMPT MONEY MARKET FUND)
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not pledge assets, except that None. None.
the Fund may pledge not more than one-third
of its total assets (taken at current value)
to secure borrowings made in accordance with
the limitation on borrowing.
- ------------------------------------------------------------------------------------------------------------------------------------
- 15 -
- --------------------------------------------------------------------------------
SHORT SALES
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on short
sales for each Old Tax Exempt Fund and each New Tax Exempt Fund. The New Tax
Exempt Funds do not have a fundamental investment restriction because the
restrictions for the Old Tax Exempt Funds originally were included to meet
certain state law requirements that no longer apply. There is no current
intention for the New Tax Exempt Funds to have different investment strategies
from the Old Tax Exempt Funds as a result of the elimination of this
restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
TAX-EXEMPT ALL OLD TAX EXEMPT FUNDS
MONEY MARKET (EXCEPT TAX-EXEMPT
FUND MONEY MARKET FUND) FOR ALL NEW TAX EXEMPT FUNDS
- --------------------------------------------------------------------------------
The Fund may not None. None.
make short sales
of securities.
- --------------------------------------------------------------------------------
- 16 -
- --------------------------------------------------------------------------------
FUTURES / OPTIONS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
investments in futures and options for each Tax Exempt Fund. The New Tax Exempt
Funds do not have this restriction to permit greater flexibility in managing the
Funds' assets. There is no current intention for the New Tax Exempt Funds to
have different investment strategies from the Old Tax Exempt Funds as a result
of the changes to this restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
TAX-EXEMPT ALL OLD TAX EXEMPT FUNDS
MONEY MARKET (EXCEPT TAX-EXEMPT
FUND MONEY MARKET FUND) FOR ALL NEW TAX EXEMPT FUNDS
- --------------------------------------------------------------------------------
The Fund will not None. None.
write or purchase
any put or call
options, except
stand-by commitments.
- --------------------------------------------------------------------------------
- 17 -
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
investment companies for each Old Tax Exempt Fund and each New Tax Exempt Fund.
The New Tax Exempt Funds do not have a fundamental investment restriction
because investments in investment companies are subject to specific provisions
under the Investment Company Act of 1940 Act. There is no current intention for
the New Tax Exempt Funds to have different investment strategies from the Old
Tax Exempt Funds as a result of the changes to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND INSURED TAX EXEMPT FUND SERIES FUND INSURED FOR ALL NEW TAX EXEMPT FUNDS
INTERMEDIATE TAX EXEMPT FUND
EXECUTIVE INVESTORS TRUST
INSURED TAX EXEMPT FUND II
MULTI-STATE INSURED TAX FREE
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not purchase the The Fund may not invest in None. None.
securities of other investment securities of other investment
companies or investment trusts, companies, except in the case
except as they may be acquired as of money market funds offered
part of a merger, consolidation without selling commissions,
or acquisition of assets. or in the event of merger with
another investment company.
- ------------------------------------------------------------------------------------------------------------------------------------
- 18 -
- --------------------------------------------------------------------------------
UNSEASONED ISSUERS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
unseasoned issuers for each Old Tax Exempt Fund and each New Tax Exempt Fund.
The New Tax Exempt Funds do not have a fundamental investment restriction
because the restrictions for the Old Tax Exempt Funds originally were included
to meet certain state law requirements that no longer apply. There is no current
intention for the New Tax Exempt Funds to have different investment strategies
from the Old Tax Exempt Funds as a result of the elimination of this
restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND SERIES FUND INSURED INTERMEDIATE TAX FOR ALL NEW TAX EXEMPT FUNDS
INSURED TAX EXEMPT FUND EXEMPT FUND
MULTI-STATE INSURED TAX FREE FUND EXECUTIVE INVESTORS TRUST INSURED TAX
EXEMPT FUND II
NEW YORK INSURED TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not purchase the securities of None. None.
a company if such purchase, at the time
thereof, would cause more than 5% of the
value of the Fund's total assets to be
invested in companies which, including
predecessors, have a record of less than
three years' continuous operation.
- ------------------------------------------------------------------------------------------------------------------------------------
- 19 -
- --------------------------------------------------------------------------------
RESTRICTED SECURITIES
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
restricted securities for each Old Tax Exempt Fund and each New Tax Exempt Fund.
The New Tax Exempt Funds do not have a fundamental investment restriction
because the restrictions for the Old Tax Exempt Funds originally were included
to meet certain state law requirements that no longer apply. There is no current
intention for the New Tax Exempt Funds to have different investment strategies
from the Old Tax Exempt Funds as a result of the elimination of this
restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
TAX-EXEMPT ALL OLD FOR ALL NEW
MONEY MARKET TAX EXEMPT FUNDS TAX
FUND (EXCEPT TAX-EXEMPT EXEMPT
MONEY MARKET FUND) FUNDS
- --------------------------------------------------------------------------------
The Fund may not None. None.
knowingly purchase a
security which is subject
to legal or contractual
restrictions on resale or
for which there is no
readily available market.
This policy does not
include Section 4(2)
Commercial Paper or
restricted securities
eligible for resale
pursuant to Rule 144 (A)
under the 1933 Act, which
each Fund's Board or the
Adviser has determined
under Board- approved
guidelines are liquid.
- --------------------------------------------------------------------------------
- 20 -
- --------------------------------------------------------------------------------
MUNICIPAL BONDS / INSTRUMENTS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
investments in municipal bonds and municipal instruments for each Old and New
Tax Exempt Fund. The New Tax Exempt Funds do not have a fundamental investment
restriction because the restrictions for the Old Tax Exempt Funds originally
were included to meet certain state law requirements that no longer apply or are
included under other fundamental restrictions. There is no current intention for
the New Tax Exempt Funds to have different investment strategies from the Old
Tax Exempt Funds as a result of the changes to this restriction.
- ----------------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- ----------------------------------------------------------------------------------------------------------------------------------
INSURED TAX EXEMPT FUND NEW YORK INSURED TAX FREE MULTI-STATE TAX-EXEMPT MONEY MARKET FOR ALL NEW TAX EXEMPT
EXECUTIVE INVESTORS TRUST FUND INSURED TAX FREE FUND FUNDS
INSURED TAX EXEMPT FUND II FUND SERIES FUND INSURED
INTERMEDIATE TAX EXEMPT
FUND
- ----------------------------------------------------------------------------------------------------------------------------------
The Fund may not invest in The Fund may not purchase The Fund may not None. None.
any municipal bonds unless a Municipal Instrument purchase, as to
they will be insured unless it is an Insured 75% of each Fund's
municipal bonds or unless Municipal Instrument, or total assets
they are already insured is already insured by a (taken at current
under an insurance policy policy of insurance or, as value), the
obtained by the issuer or to uninsured municipal securities of any
underwriter thereof. commercial paper or issuer (other than
municipal notes, is the U.S.
supported by a letter of Government) if, as
credit or other similar a result thereof,
guarantee obtained by the more than 5% of
issuer or underwriter the total assets
thereof. of such Fund would
be invested in the
securities of such
issuer. When the
assets and
revenues of an
agency,
instrumentality or
political
subdivision
issuing a
Municipal
Instrument or
other security are
distinct from the
assets and
revenues of the
government which
created the
issuing entity,
and the Municipal
Instrument is
supported by the
issuing entity's
assets and
revenues, the
- 21 -
issuing entity is
deemed to be the
sole issuer of the
Municipal
Instrument or
security. If an
industrial
development bond
is supported only
by the payments of
the
non-governmental
beneficiary of the
industrial
development bond,
then such
non-governmental
entity is deemed
to be the sole
issuer. With
respect to
pre-refunded
bonds, the Adviser
considers an
escrow account to
be the issuer of
such bonds when
the escrow account
consists solely of
U.S. Government
obligations fully
substituted for
the obligation of
the issuing
municipality.
- ------------------------------------------------------------------------------------------------------------------------------------
- 22 -
- --------------------------------------------------------------------------------
RIC STATUS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions related to
status as a registered investment company for each Old and New Tax Exempt Fund.
The New Tax Exempt Funds do not have this restriction since it is addressed
under applicable tax laws. There is no current intention for the New Tax Exempt
Funds to have different investment strategies from the Old Tax Exempt Funds as a
result of the changes to this restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD TAX EXEMPT FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
INSURED TAX ALL OLD TAX EXEMPT FUNDS FOR ALL NEW TAX EXEMPT FUNDS
EXEMPT FUND (EXCEPT INSURED TAX
EXEMPT FUND)
- --------------------------------------------------------------------------------
The Fund may not None. None.
purchase securities
which would not
enable the Fund to
qualify as a
regulated investment
company qualified to
pay exempt-interest
dividends under the
Internal Revenue
Code of 1986, as
amended.
- --------------------------------------------------------------------------------
- 23 -
LISTED BELOW ARE THE FUNDAMENTAL INVESTMENT RESTRICTIONS FOR EACH OLD FUND
WHICH IS PROPOSED TO BE REORGANIZED AS A SERIES OF FIRST INVESTORS LIFE SERIES
FUNDS (EACH AN "OLD LIFE SERIES FUND" AND TOGETHER, THE "OLD LIFE SERIES FUNDS")
AND THE CHANGES PROPOSED FOR THE CORRESPONDING NEW FUNDS (EACH A "NEW LIFE
SERIES FUND" AND TOGETHER, THE "NEW LIFE SERIES FUNDS").
- --------------------------------------------------------------------------------
BORROWING
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restriction on
borrowing for each Old Life Series Fund to the fundamental investment
restriction for each New Life Series Fund. The main difference between the
restrictions includes the ability of a New Life Series Fund to borrow only as
permitted under applicable law, as opposed to borrowing only a certain amount
(5%) for an Old Life Series Fund. Additionally, each New Life Series Fund
prohibits borrowing for leveraging or investment purposes. One of the purposes
of the new restriction is to provide greater flexibility for the portfolio
manager in managing the New Life Series Funds. Further, the new restriction
would simplify compliance monitoring among all New Life Series Funds. There is
no current intention for the New Life Series Funds to have different investment
strategies from the Old Life Series Funds as a result of the changes to this
restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
ALL OLD LIFE SERIES FUNDS FOR ALL NEW LIFE SERIES FUNDS
- --------------------------------------------------------------------------------
The Fund may not borrow money, except The Fund may not borrow money, except
as a temporary or emergency measure to the extent permitted by the 1940
in an amount not to exceed 5% of the Act, the rules and regulations
value of its total assets. thereunder and any applicable
exemptive relief.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOANS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restriction on loans
for each Old Life Series Fund to the fundamental investment restriction for each
New Life Series Fund. Each Old Life Series Fund may not make loans except by
investing in debt securities and repurchase agreements. Further, each Old Life
Series Fund's loans are limited to 10% of the Old Fund's total assets and also
may lend its securities for the purposes of covering the borrower's short
positions under certain circumstances. The New Life Series Funds may loan
securities to the extent allowed by applicable law. The primary purpose of the
new restriction is to simplify compliance monitoring and portfolio management by
making the restriction uniform among all New Life Series Funds. There is no
current intention for the New Life Series Funds to have different investment
strategies from the Old Life Series Funds as a result of the changes to this
restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
ALL OLD LIFE SERIES FUNDS FOR ALL NEW LIFE SERIES FUNDS
- --------------------------------------------------------------------------------
The Fund may not make loans, except The Fund may make loans only as
by purchase of debt obligations and permitted under the 1940 Act, the
through repurchase agreements. rules and regulations thereunder and
However, the Fund's Board may, on the any applicable exemptive relief.
request of broker-dealers or other
unaffiliated institutional investors
which they deem qualified, authorize
a Fund to loan securities to cover
the borrower's short position;
provided, however, the borrower
pledges to the Fund and agrees to
maintain at all times with the Fund
cash collateral equal to not less
than 100% of the value of the
securities loaned, the loan is
terminable at will by the Fund, the
Fund receives interest on the loan as
well as any distributions upon the
securities loaned, the Fund retains
voting rights associated with the
securities, the Fund pays only
reasonable custodian fees in
connection with the loan, and the
Adviser or Subadviser monitors the
creditworthiness of the borrower
throughout the life of the loan;
provided further, that such loans
will not be made if the value of all
loans is greater than an amount equal
to 10% of the Fund's total assets.
- --------------------------------------------------------------------------------
- 2 -
- --------------------------------------------------------------------------------
DIVERSIFICATION
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
diversification for each Old Life Series Fund to the fundamental investment
restriction for each New Life Series Fund. There are no significant differences
among Funds' restrictions except to clarify the exceptions to this requirement
under applicable law. Each New Life Series Fund (except Focused Equity Fund)
maintains the 5% and 10% limitations that appear in the restrictions for most
Old Life Series Funds. Thus, the purpose of the New Life Series Funds'
restriction is to provide uniformity in the diversification restriction among
all the New Life Series Funds. There is no current intention for the New Life
Series Funds to have different investment strategies from the Old Life Series
Funds as a result of the changes to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND FOCUSED EQUITY FUND FOR ALL NEW LIFE SERIES FUNDS
BLUE CHIP FUND
DISCOVERY FUND
GOVERNMENT FUND
GROWTH FUND
HIGH YIELD FUND
INTERNATIONAL SECURITIES FUND
INVESTMENT GRADE FUND
TARGET MATURITY 2007
TARGET MATURITY 2010
TARGET MATURITY 2015
VALUE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not purchase, with respect The Fund may not purchase, with respect Except to the extent permitted by the
to only 75% of a Fund's assets, the to only 75% of its assets, the 1940 Act, the rules and regulations
securities of any issuer (other than the securities of any issuer (other than the thereunder and any applicable exemptive
U.S. Government) if, as a result U.S. Government) if, as a result relieft, the Fund may not with respect
thereof, (a) more than 5% of the Fund's thereof, the Fund would hold more than to 75% of the Fund's total assets,
total assets (taken at current value) 10% of any class of securities purchase the securities of any issuer
would be invested in the securities of (including any class of voting (other than securities issued or
such issuer and (b) the Fund would hold securities) of such issuer (for this guaranteed by the U.S. Government or any
more than 10% of any class of securities purpose, all debt obligations of an of its agencies or instrumentalities,
(including any class of voting issuer maturing in less than one year and securities of other investment
securities) of such issuer (for this are treated as a single class of companies) if, as a result, (a) more
purpose, all debt obligations of an securities). than 5% of the Fund's total assets would
issuer maturing in less than one year be invested in the securities of that
are treated as a single class of issuer, or (b) the Fund would hold more
securities). than 10% of the outstanding voting
securities of that issuer.
- ------------------------------------------------------------------------------------------------------------------------------------
- 3 -
- ------------------------------------------------------------------------------------------------------------------------------------
For the Cash Management Fund, the Fund
may not purchase the securities of any
issuer, if as a result, the Fund would
not comply with any applicable
diversification requirements for a money
market fund under the Investment Company
Act of 1940 and the rules thereunder, as
such may be amended from time to time.
- ------------------------------------------------------------------------------------------------------------------------------------
- 4 -
- --------------------------------------------------------------------------------
REAL ESTATE
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on real
estate for each Old Life Series Fund to the fundamental investment restriction
for each New Life Series Fund. There are no significant differences among the
Funds' restrictions. In each case, the restrictions do not permit any Life
Series Fund to purchase or sell real estate except under certain circumstances.
The Old Life Series Funds permit investments in securities secured by real
estate, real estate investment trusts, and securities of companies dealing in
real estate and/or as a result of ownership in securities. Similarly, the New
Life Series Funds' restriction consolidates these exceptions and makes the
restriction uniform for each New Life Series Fund. There is no current intention
for the New Life Series Funds to have different investment strategies from the
Old Life Series Funds as a result of the changes to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND FOCUSED EQUITY FUND FOR ALL NEW LIFE SERIES FUNDS
BLUE CHIP FUND
DISCOVERY FUND
GOVERNMENT FUND
GROWTH FUND
HIGH YIELD FUND
INTERNATIONAL SECURITIES FUND
INVESTMENT GRADE FUND
TARGET MATURITY 2007
TARGET MATURITY 2010
TARGET MATURITY 2015
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not buy or sell real estate The Fund may not buy or sell real estate The Fund may not purchase or sell real
(unless acquired as a result of or interests in real estate (unless estate, except that, to the extent
ownership of securities) provided, acquired as a result of ownership of permitted by applicable law, the Fund
however, a Fund may invest in securities securities) except that the Fund may may (a) invest in securities or other
secured by real estate or interests in purchase and sell securities that are instruments directly or indirectly
real estate. secured by real estate, securities of secured by real estate, and (b) invest
companies which invest or deal in real in securities or other instruments
estate, and interests in real estate issued by issuers that invest in real
investment trusts. estate.
- ------------------------------------------------------------------------------------------------------------------------------------
- 5 -
- --------------------------------------------------------------------------------
OIL, GAS AND MINERAL EXPLORATION
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on oil,
gas and mineral exploration for each Old Life Series Fund and each New Life
Series Fund. The New Life Series Funds do not have a fundamental investment
restriction because the restrictions for the Old Life Series Funds originally
were included to meet certain state law requirements that no longer apply. There
is no current intention for the New Life Series Funds to have different
investment strategies from the Old Life Series Funds as a result of the
elimination of this restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
ALL OLD LIFE SERIES FUNDS FOR ALL NEW LIFE SERIES FUNDS
- --------------------------------------------------------------------------------
The Fund may not buy or sell interests None.
in oil, gas or mineral explorations.
- --------------------------------------------------------------------------------
- 6 -
- --------------------------------------------------------------------------------
UNDERWRITING
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
underwriting for each Old Life Series Fund to the fundamental investment
restriction for each New Life Series Fund. Each Old Life Series Fund may not
underwrite securities issued by other persons to the extent that it may be
deemed an underwriter under applicable federal securities laws with respect to
the disposition of its portfolio investments. The New Life Series Funds'
restriction maintains this limitation as applicable to the disposition of
restricted securities or investments in other investment companies. The purpose
of the New Life Series Funds' restriction is to clarify the application of
underwriter to a fund pursuant to the Securities Act of 1933. There is no
current intention for the New Life Series Funds to have different investment
strategies from the Old Life Series Funds as a result of the changes to this
restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
ALL OLD LIFE SERIES FUNDS FOR ALL NEW LIFE SERIES FUNDS
- --------------------------------------------------------------------------------
The Fund may not underwrite The Fund may not underwrite
securities issued by other persons securities issued by others, except
except to the extent that, in to the extent that the Fund may be
connection with the disposition of considered an underwriter within the
its portfolio investments, it may be meaning of the Securities Act of 1933
deemed to be an underwriter under in the disposition of restricted
Federal securities laws. securities or in connection with
investments in other investment
companies.
- --------------------------------------------------------------------------------
- 7 -
- --------------------------------------------------------------------------------
AFFILIATED TRANSACTIONS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
affiliated transactions for each Old Life Series Fund and each New Life Series
Fund. The New Life Series Funds do not have a fundamental investment restriction
because the restrictions for the Old Life Series Funds merely restate a
statutory prohibition under the Investment Company Act of 1940. There is no
current intention for the New Life Series Funds to have different investment
strategies from the Old Life Series Funds as a result of the elimination of this
restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
ALL OLD LIFE SERIES FUNDS FOR ALL NEW LIFE SERIES FUNDS
- --------------------------------------------------------------------------------
The Fund may not purchase or retain None.
securities issued by an issuer any of
whose officers, directors or
security-holders is an officer or
director, or Trustee of the Trust or
of its investment adviser if or so
long as the officers, directors and
Trustees of the Trust and of its
investment adviser, together, own
beneficially more than 5% of any
class of the securities of such
issuer.
- --------------------------------------------------------------------------------
- 8 -
- --------------------------------------------------------------------------------
MARGIN PURCHASES
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on margin
purchases for each Old Life Series Fund and each New Life Series Fund. The New
Life Series Funds do not have a fundamental investment restriction because the
restrictions for the Old Life Series Funds originally were included to meet
certain state law requirements that no longer apply. There is no current
intention for the New Life Series Funds to have different investment strategies
from the Old Life Series Funds as a result of the elimination of this
restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND FOCUSED EQUITY FUND FOR ALL NEW LIFE SERIES FUNDS
BLUE CHIP FUND INTERNATIONAL SECURITIES FUND
DISCOVERY FUND
GOVERNMENT FUND
GROWTH FUND
HIGH YIELD FUND
INVESTMENT GRADE FUND
TARGET MATURITY 2007
TARGET MATURITY 2010
TARGET MATURITY 2015
VALUE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not purchase securities on The Fund may not purchase securities on None.
margin (but a Fund may obtain such margin (but a Fund may obtain such
credits as may be necessary for the credits as may be necessary for the
clearance of purchases and sales of clearance of purchases and sales of
securities). securities); provided, however, that a
Fund may make margin deposits in
connection with the use of options,
futures contracts and options on futures
contracts.
- ------------------------------------------------------------------------------------------------------------------------------------
- 9 -
- --------------------------------------------------------------------------------
PLEDGING
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
pledging for each Old Life Series Fund and each New Life Series Fund. The New
Life Series Funds do not have a fundamental investment restriction because the
restrictions for the Old Life Series Funds originally were included to meet
certain state law requirements that no longer apply. There is no current
intention for the New Life Series Funds to have different investment strategies
from the Old Life Series Funds as a result of the elimination of this
restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND FOCUSED EQUITY FUND FOR ALL NEW LIFE SERIES FUNDS
BLUE CHIP FUND INTERNATIONAL SECURITIES FUND
DISCOVERY FUND
GOVERNMENT FUND
GROWTH FUND
HIGH YIELD FUND
INVESTMENT GRADE FUND
TARGET MATURITY 2007
TARGET MATURITY 2010
TARGET MATURITY 2015
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may not pledge assets, except The Fund may not pledge assets, except None.
that a Fund may pledge its assets to that a Fund may pledge its assets to
secure borrowings made in accordance secure borrowings made in accordance
with paragraph (1) above, provided the with paragraph (1) above, provided the
Fund maintains asset coverage of at Fund maintains asset coverage of at
least 300% for pledged assets. least 300% for pledged assets; provided,
however, this limitation will not
prohibit escrow, collateral or margin
arrangements in connection with a Fund's
use of options, futures contracts or
options on futures contracts.
- ------------------------------------------------------------------------------------------------------------------------------------
- 10 -
- --------------------------------------------------------------------------------
SHORT SALES
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on short
sales for each Old Life Series Fund and each New Life Series Fund. The New Funds
do not have a fundamental investment restriction because the restrictions for
the Old Funds originally were included to meet certain state law requirements
that no longer apply. There is no current intention for the New Life Series
Funds to have different investment strategies from the Old Life Series Funds as
a result of the elimination of this restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
ALL OLD LIFE SERIES FUNDS FOR ALL NEW LIFE SERIES FUNDS
- --------------------------------------------------------------------------------
The Fund may not make short sales of None.
securities.
- --------------------------------------------------------------------------------
- 11 -
- --------------------------------------------------------------------------------
FUTURES / OPTIONS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
investments in futures and options for each Old Life Series Fund to the
fundamental investment restriction for each New Life Series Fund. The New Life
Series Funds do not have this restriction to permit greater flexibility in
managing the Funds' assets. There is no current intention for the New Life
Series Funds to have different investment strategies from the Old Life Series
Fund as a result of the changes to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS SUGGESTED REVISED FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- ------------------------------------------------------------------------------------------------------------------------------------
CASH MANAGEMENT FUND FOCUSED EQUITY FUND VALUE FUND FOR ALL NEW LIFE SERIES FUNDS
BLUE CHIP FUND INTERNATIONAL SECURITIES FUND
DISCOVERY FUND
GOVERNMENT FUND
GROWTH FUND
HIGH YIELD FUND
INVESTMENT GRADE FUND
TARGET MATURITY 2007
TARGET MATURITY 2010
TARGET MATURITY 2015
- --------------------------------------------------------------------------------------------------------------------------------
The Fund may not buy or The Fund may not buy or The Fund may not buy or None.
sell puts, calls, sell puts, calls, sell puts, calls,
straddles or spreads. straddles or spreads, straddles or spreads,
except that the Fund may except that the Fund may
purchase or sell options invest in covered calls,
on securities, securities purchase and sell futures
indices and foreign
currencies, stock
contracts and options on
futures index futures,
interest rate futures
contracts. and foreign
currency futures or on
futures contracts as well
as options on such
futures contracts.
- ------------------------------------------------------------------------------------------------------------------------------------
- 12 -
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
investment companies for each Old Life Series Fund and each New Life Series
Fund. The New Life Series Funds do not have a fundamental investment restriction
because investments in investment companies are subject to specific provisions
under the Investment Company Act of 1940 Act. There is no current intention for
the New Life Series Funds to have different investment strategies from the Old
Life Series Funds as a result of the changes to this restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
ALL OLD LIFE SERIES FUNDS FOR ALL NEW LIFE SERIES FUNDS
- --------------------------------------------------------------------------------
The Fund may not purchase the None.
securities of other investment
companies or investment trusts,
except as they may be acquired as
part of a merger, consolidation or
acquisition of assets.
- --------------------------------------------------------------------------------
- 13 -
- --------------------------------------------------------------------------------
UNSEASONED ISSUERS
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
unseasoned issuers for each Old Life Series Fund and each New Life Series Fund.
The New Life Series Funds do not have a fundamental investment restriction
because the restrictions for the Old Life Series Funds originally were included
to meet certain state law requirements that no longer apply. There is no current
intention for the New Life Series Funds to have different investment strategies
from the Old Life Series Funds as a result of the elimination of this
restriction.
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL SUGGESTED REVISED
INVESTMENT RESTRICTIONS FUNDAMENTAL
FOR THE OLD LIFE SERIES FUNDS INVESTMENT RESTRICTION
- --------------------------------------------------------------------------------
ALL OLD LIFE SERIES FUNDS FOR ALL NEW LIFE SERIES FUNDS
- --------------------------------------------------------------------------------
The Fund may not purchase the None.
securities of an issuer if such
purchase, at the time thereof, would
cause more than 5% of the value of a
Fund's total assets to be invested in
securities of issuers which,
including predecessors, have a record
of less than three years' continuous
operation.
- --------------------------------------------------------------------------------
- 14 -
- --------------------------------------------------------------------------------
DOMESTIC ISSUERS (APPLICABLE TO INTERNATIONAL SECURITIES FUND)
- --------------------------------------------------------------------------------
The table below compares the fundamental investment restrictions on
investment companies for the Old and New International Securities Life Series
Fund. The New International Securities Life Series Fund has re-classified this
restriction as non-fundamental. There is no current intention for the New
International Securities Life Series Funds to have different investment
strategies from the Old International Securities Life Series Funds as a result
of the changes to this restriction.
- ------------------------------------------------------------------------------------------------------------------------------------
SUGGESTED REVISED FUNDAMENTAL
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS INVESTMENT RESTRICTION
FOR THE OLD LIFE SERIES FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL SECURITIES FUND ALL OLD LIFE SERIES FUNDS FOR ALL NEW LIFE SERIES FUNDS
(EXCEPT INTERNATIONAL SECURITIES FUND)
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund may invest no more than 35% of None. None.
its total assets in securities of U.S.
companies, obligations of the U.S.
government, its agencies and
instrumentalities, and cash or cash
equivalents denominated in U.S. dollars.
- ------------------------------------------------------------------------------------------------------------------------------------
- 15 -
EXHIBIT F
THE OLD FUNDS AND THEIR RESPECTIVE FISCAL YEAR ENDS
The table below indicates each Old Fund's fiscal year end. Those Old Funds
with a fiscal year end of September 30 are labeled the "September 30 Funds" and
those Old Funds with a fiscal year end of December 31 are labeled the "December
31 Funds".
SEPTEMBER 30 FUNDS
- ------------------------------------------------------------------------------------------------------
First Investors Global Fund, Inc. First Investors Series Fund
First Investors Total Return Fund
First Investors Cash Management Fund, Inc. First Investors Blue Chip Fund
First Investors Special Situations Fund
First Investors Government Fund, Inc. First Investors Investment Grade Fund
First Investors Fund for Income, Inc. First Investors Series Fund II, Inc.
First Investors Value Fund
First Investors Mid-Cap Opportunity Fund
First Investors All-Cap Growth Fund
First Investors Growth & Income Fund
First Investors Focused Equity Fund
- ------------------------------------------------------------------------------------------------------
DECEMBER 31 FUNDS
- ----------------------------------------------------------------------------------------------------------------------------
Executive Investors Trust
First Investors Insured Tax Exempt Fund II
First Investors Life Series Fund
Blue Chip Fund
First Investors Multi-State Insured Tax Free Fund Cash Management Fund
Arizona Fund Discovery Fund
California Fund Focused Equity Fund
Colorado Fund Government Fund
Connecticut Fund Growth Fund
Florida Fund High Yield Fund
Georgia Fund International Securities Fund
Maryland Fund Investment Grade Fund
Massachusetts Fund Target Maturity 2007 Fund
Michigan Fund Target Maturity 2010 Fund
Minnesota Fund Target Maturity 2015 Fund
Missouri Fund Value Fund
New Jersey Fund
North Carolina Fund First Investors New York Insured Tax Free Fund, Inc.
Ohio Fund
Oregon Fund First Investors Special Bond Fund, Inc.
Pennsylvania Fund
Virginia Fund First Investors Series Fund
First Investors Insured Intermediate Tax Exempt Fund
First Investors Insured Tax Exempt Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
EXHIBIT G
EXECUTIVE OFFICERS AND DIRECTORS OR PARTNERS OF
FIMCO, WELLINGTON AND PARADIGM
The following is a list of the principal executive officers and directors
or partners of FIMCO,Wellington Management and Paradigm.
FIRST INVESTORS MANAGEMENT COMPANY, INC.,
- --------------------------------------------------------------------------------
PRINCIPAL EXECUTIVE
OFFICERS AND
DIRECTORS PRINCIPAL OCCUPATION
- --------------------------------------------------------------------------------
Kathryn S. Head Chairman, President, and Director of FIMCO,
2005-present CEO of FIMCO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
John T. Sullivan Director of FIMCO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
William M. Lipkus CFO of FIMCO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Joseph I. Benedek Treasurer and Principal Accounting Officer
of FIMCO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Larry R. Lavoie General Counsel of FIMCO, 8/2004-present
CCO of FIMCO.
- --------------------------------------------------------------------------------
- ----------
* The business address for each officer and director is 95 Wall Street, New
York, New York 10005.
WELLINGTON MANAGEMENT COMPANY, LLP*
- ----------
* Wellington Management is a Massachusetts limited liability partnership of
which the following persons are managing partners: Laurie A. Gabriel, John R.
Ryan and Perry M. Traquina. The business address for each officer and director
is 75 State Street, Boston, Massachusetts 02109. Please note that the managing
partners are not necessarily those with the largest economic interests in the
firm.
PARADIGM CAPITAL MANAGEMENT, INC.
- --------------------------------------------------------------------------------
PRINCIPAL EXECUTIVE
OFFICERS AND DIRECTORS PRINCIPAL OCCUPATION
- --------------------------------------------------------------------------------
Candace King Weir Director, Chief Executive Officer, Chief
Investment Officer, and Portfolio Manager of
Paradigm
Peter E. Bulger Director of Paradigm; Director and Chief
Operating Officer of C.L. King & Associates
David J. DeLuca Director, Chief Financial Officer and Treasurer
of Paradigm
- ----------
* The business address for each officer and director is Nine Elk Street, Albany,
New York 12207-1002.
- 2 -
EXHIBIT H
OUTSTANDING SHARES
The chart below indicates the number of shares of each series of the Old
Funds that are outstanding as of the close of business on the Record Date:
FIRST INVESTORS TAX-EXEMPT MONEY MARKET FUND, INC.
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS SERIES FUND
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
First Investors Blue Chip Fund
- --------------------------------------------------------------------------------
First Investors Insured Intermediate Tax
Exempt Fund
- --------------------------------------------------------------------------------
First Investors Investment Grade Fund
- --------------------------------------------------------------------------------
First Investors Special Situations Fund
- --------------------------------------------------------------------------------
First Investors Total Return Fund
- --------------------------------------------------------------------------------
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXECUTIVE INVESTORS TRUST
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
First Investors Insured Tax Exempt Fund II
- --------------------------------------------------------------------------------
FIRST INVESTORS NEW YORK INSURED TAX FREE FUND, INC.
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
FIRST INVESTORS SERIES FUND II, INC.
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
First Investors All-Cap Growth Fund
- --------------------------------------------------------------------------------
First Investors Focused Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
First Investors Growth & Income Fund
- --------------------------------------------------------------------------------
First Investors Mid-Cap Opportunity Fund
- --------------------------------------------------------------------------------
First Investors Value Fund
- --------------------------------------------------------------------------------
FIRST INVESTORS GLOBAL FUND, INC.
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS SPECIAL BOND FUND, INC.
- --------------------------------------------------------------------------------
OUTSTANDING SHARES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
Arizona Fund
- --------------------------------------------------------------------------------
California Fund
- --------------------------------------------------------------------------------
Colorado Fund
- --------------------------------------------------------------------------------
Connecticut Fund
- --------------------------------------------------------------------------------
Florida Fund
- --------------------------------------------------------------------------------
Georgia Fund
- --------------------------------------------------------------------------------
Maryland Fund
- --------------------------------------------------------------------------------
Massachusetts Fund
- --------------------------------------------------------------------------------
Michigan Fund
- --------------------------------------------------------------------------------
Minnesota Fund
- --------------------------------------------------------------------------------
Missouri Fund
- --------------------------------------------------------------------------------
New Jersey Fund
- --------------------------------------------------------------------------------
North Carolina Fund
- --------------------------------------------------------------------------------
Ohio Fund
- --------------------------------------------------------------------------------
- 2 -
- --------------------------------------------------------------------------------
Oregon Fund
- --------------------------------------------------------------------------------
Pennsylvania Fund
- --------------------------------------------------------------------------------
Virginia Fund
- --------------------------------------------------------------------------------
FIRST INVESTORS CASH MANAGEMENT FUND, INC.
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS GOVERNMENT FUND, INC.
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS FUND FOR INCOME, INC.
- --------------------------------------------------------------------------------
CLASS A CLASS B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS LIFE SERIES FUND
- --------------------------------------------------------------------------------
OUTSTANDING SHARES
- --------------------------------------------------------------------------------
Blue Chip Fund
- --------------------------------------------------------------------------------
Cash Management Fund
- --------------------------------------------------------------------------------
Discovery Fund
- --------------------------------------------------------------------------------
Focused Equity Fund
- --------------------------------------------------------------------------------
Government Fund
- --------------------------------------------------------------------------------
Growth Fund
- --------------------------------------------------------------------------------
High Yield Fund
- --------------------------------------------------------------------------------
International Securities Fund
- --------------------------------------------------------------------------------
Investment Grade Fund
- --------------------------------------------------------------------------------
Target Maturity 2007 Fund
- --------------------------------------------------------------------------------
- 3 -
- --------------------------------------------------------------------------------
Target Maturity 2010 Fund
- --------------------------------------------------------------------------------
Target Maturity 2015 Fund
- --------------------------------------------------------------------------------
Value Fund
- --------------------------------------------------------------------------------
- 4 -
EXHIBIT I
PRINCIPAL SHAREHOLDERS OF THE OLD FUNDS
As of July 31, 2005, the following person(s) owned of record, or were known
by the Old Funds to own beneficially, more than 5% of any class of the Old
Funds' shares. Shareholders indicated with an (*) below hold greater than 25% or
more of an Old Fund and are considered "controlling persons" under the 1940 Act.
FIRST INVESTORS TAX-EXEMPT MONEY MARKET FUND, INC.
- --------------------------------------------------------------------------------
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE PERCENTAGE OF
CLASS BENEFICIAL OWNER OF BENEFICIAL CLASS
OWNERSHIP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS SERIES FUND
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
First Investors Blue
Chip Fund
- --------------------------------------------------------------------------------
First Investors
Insured Intermediate
Tax Exempt Fund
- --------------------------------------------------------------------------------
First Investors
Investment Grade Fund
- --------------------------------------------------------------------------------
First Investors
Special Situations
Fund
- --------------------------------------------------------------------------------
First Investors Total
Return Fund
- --------------------------------------------------------------------------------
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
- --------------------------------------------------------------------------------
TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OWNER OF BENEFICIAL OF
OWNERSHIP CLASS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXECUTIVE INVESTORS TRUST
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
First Investors
Insured Tax Exempt
Fund II
- --------------------------------------------------------------------------------
FIRST INVESTORS NEW YORK INSURED TAX FREE FUND, INC.
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
FIRST INVESTORS SERIES FUND II, INC.
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
First Investors
All-Cap Growth Fund
- --------------------------------------------------------------------------------
First Investors
Focused Equity Fund
- --------------------------------------------------------------------------------
First Investors
Growth & Income Fund
- --------------------------------------------------------------------------------
First Investors
Mid-Cap Opportunity
Fund
- --------------------------------------------------------------------------------
First Investors Value
Fund
- --------------------------------------------------------------------------------
FIRST INVESTORS GLOBAL FUND, INC.
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS SPECIAL BOND FUND, INC.
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
- 2 -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
Arizona Fund
- --------------------------------------------------------------------------------
California Fund
- --------------------------------------------------------------------------------
Colorado Fund
- --------------------------------------------------------------------------------
Connecticut Fund
- --------------------------------------------------------------------------------
Florida Fund
- --------------------------------------------------------------------------------
Georgia Fund
- --------------------------------------------------------------------------------
Maryland Fund
- --------------------------------------------------------------------------------
Massachusetts Fund
- --------------------------------------------------------------------------------
Michigan Fund
- --------------------------------------------------------------------------------
Minnesota Fund
- --------------------------------------------------------------------------------
Missouri Fund
- --------------------------------------------------------------------------------
New Jersey Fund
- --------------------------------------------------------------------------------
North Carolina Fund
- --------------------------------------------------------------------------------
Ohio Fund
- --------------------------------------------------------------------------------
Oregon Fund
- --------------------------------------------------------------------------------
Pennsylvania Fund
- --------------------------------------------------------------------------------
Virginia Fund
- --------------------------------------------------------------------------------
FIRST INVESTORS CASH MANAGEMENT FUND, INC.
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- 3 -
FIRST INVESTORS GOVERNMENT FUND, INC.
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS FUND FOR INCOME, INC.
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST INVESTORS LIFE SERIES FUND
- --------------------------------------------------------------------------------
FUND TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
CLASS OF BENEFICIAL OF BENEFICIAL OF
OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------
Blue Chip Fund
- --------------------------------------------------------------------------------
Cash Management Fund
- --------------------------------------------------------------------------------
Discovery Fund
- --------------------------------------------------------------------------------
Focused Equity Fund
- --------------------------------------------------------------------------------
Government Fund
- --------------------------------------------------------------------------------
Growth Fund
- --------------------------------------------------------------------------------
High Yield Fund
- --------------------------------------------------------------------------------
International
Securities Fund
- --------------------------------------------------------------------------------
Investment Grade Fund
- --------------------------------------------------------------------------------
Target Maturity 2007
Fund
- --------------------------------------------------------------------------------
- 4 -
- --------------------------------------------------------------------------------
Target Maturity 2010
Fund
- --------------------------------------------------------------------------------
Target Maturity 2015
Fund
- --------------------------------------------------------------------------------
Value Fund
- --------------------------------------------------------------------------------
- 5 -
PRELIMINARY PROXY MATERIALS--FOR SEC USE ONLY
PROXY CARD
[LOGO] FIRST INVESTORS CONTROL NUMBER
-----------------------
-----------------------
PROXY SOLICITED BY THE BOARD OF TRUSTEES
FOR THE SPECIAL MEETING OF SHAREHOLDERS - OCTOBER 28, 2005
The undersigned hereby appoints Carol Lerner Brown and Geeta Alphonso Napoli,
and each of them separately, as his or her attorney and proxy with full power of
substitution to each, and hereby authorizes them to represent and act, with
respect to all shares of each of the separate investment companies or series
listed on the reverse side ("Funds"), held by the undersigned at the Special
Meeting of Shareholders of the Funds to be held at 10:00 a.m. Eastern Time, on
October 28, 2005, at 95 Wall Street, New York, New York 10005, and at any
adjournment or postponement thereof (the "Meeting"), and instructs each of them
to vote as indicated on the matters referred to in the Proxy Statement for the
Meeting, with discretionary power to vote upon such other business as may
properly come before the Meeting.
See The Reverse Side For Proposals
Please mark, sign, date, fold and return promptly in the enclosed envelope.
You may also enter your voting instructions:
1. via the Internet at www.myproxyonline.com or
2. via touchtone phone by calling toll-free 1-866-437-4714.
If you are voting by Internet or phone, enter your control number located
in the upper right-hand corner of this proxy card and follow the instructions
provided.
If you have any questions regarding the proposals or about how to cast your
vote, please call toll-free 1-800-591-6313. Representatives are available to
assist you Monday through Friday 9:30 a.m. to 10:00 p.m. Eastern time.
- --------------------------------------------------------------------------------
Please fold here
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made on the reverse side, this
proxy will be voted FOR the proposals.
The undersigned authorizes the proxies to vote and otherwise represent the
undersigned on any other matter that may properly come before the Meeting or any
adjournment or postponement thereof in the discretion of the proxies. Receipt of
the Notice of Special Meeting and Proxy Statement is hereby acknowledged.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSALS.
NOTE: Please sign exactly as your name appears on
this proxy card.
Joint owners should each sign.
When signing as executor, administrator, attorney,
trustee, guardian or custodian for a minor, please
give full title as such. If a corporation, this
signature should be that of an authorized officer,
please sign in full corporate name and indicate
the signer's title. If a partnership, sign in the
partnership name by authorized person and indicate
the signer's title.
--------------------------------------------------
Signature (owner, trustee, custodian, etc.) Date
--------------------------------------------------
Additional Signature if held jointly Date
[LOGO] CHECK MARK` FIRST INVESTORS FUNDS
PLEASE CAST YOUR VOTE by marking the blocks below. Example: [ X ]
- --------------------------------------------------------------------------------
TO VOTE ALL PROPOSALS IN THE SAME MANNER VOTE ALL PROPOSALS AS:
FOR ALL OF YOUR INVESTMENTS, PLEASE CHECK FOR AGAINST ABSTAIN
ONE OF THESE THREE BOXES. [ ] [ ] [ ]
- --------------------------------------------------------------------------------
PLEASE NOTE: Marking "AGAINST or ABSTAIN above will count as a WITHHOLD for
proposal "1". If a ballot is marked both above this note and below it, the mark
above will override any marks made below. For questions on using this ballot, or
if you wish to vote for the trustees SEPARATELY FOR EACH OF YOUR INVESTMENTS,
PLEASE CALL THE TOLL-FREE NUMBER ON THE REVERSE SIDE.
To Vote Each Proposal Individually, Please Check The Appropriate Boxes Below
1. To Elect the following individuals as Trustees FOR WITHHOLD FOR
For First Investors Registrant ALL ALL ALL EXCEPT*
(1) Charles R. Barton, III [ ] [ ] [ ]
(2) Stefan L. Geiringer
(3) Robert M. Grohol
(4) Kathryn S. Head
(5) Arthur M. Scutro, Jr. * Instruction: To withhold
(6) James M. Srygley authority to vote for any
(7) John T. Sullivan Nominees, mark "FOR ALL
(8) Robert F. Wentworth EXCEPT" and write the
number(s) of the (1)
Nominee(s) on the line below.
--------------------------
- --------------------------------------------------------------------------------
PLEASE FOLD HERE
2. To Approve the Reorganization(s) for: PROXY ID FOR AGAINST ABSTAIN
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
Fund [ ] [ ] [ ]
THANK YOU FOR CASTING YOUR VOTE.
Please FOLD THIS BALLOT and return it in the enclosed postage paid envelope.