SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ......... ( )
Post-Effective Amendment No. 67 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 67
INVESTORS RESEARCH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
3916 State Street, Suite 3C, Santa Barbara, California 93105
(Address of Principal Executive Offices)
Registrant's Telephone Number: (805) 569-3253
Hugh J. Haferkamp, Esq.
11800 Baccarat Lane, N.E., Albuquerque, New Mexico 87111-7600
(Name and Address of Agent for Service)
Copies to:
Dr. Francis S. Johnson
President
Investors Research Fund, Inc.
3916 State Street, Suite 3C
Santa Barbara, CA 93105
Approximate Date of Proposed Public Offering: January 30, 1997
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on January 30, 1997 pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1) 485A-POS
[ ] on January 30, 1997 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on January 30, 1997 pursuant to paragraph (a)(2) of rule 485
If appropriate check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- --------------------------------------------------------------------------------
PART A - PROSPECTUS
PART B - STATEMENT OF ADDITIONAL INFORMATION
PART C - OTHER INFORMATION
END OF FISCAL YEAR: September 30, 1996
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<PAGE>
INVESTORS RESEARCH FUND, INC.
Cross Reference Sheet showing
Location in Registration Statement of Information
Required by the Items of Form N-lA
Item on Form N-lA Page in
Required by Registration
17 C.F.R. 23.404(a) Caption or Subcaption Statement
PART A
1 Cover Page 6, 48
2 Synopsis 10 -13
3 Condensed Financial Information 9
4 General Description of Registrant 10
5 Management of the Fund 14 - 15
A. Responsibilities of the Board 14 - 15
B. Investment Adviser 16
C. Transfer Agent 30
D. Registrant's Expenses 17, 18
5A Management's Discussion of Fund Performance 19
6 Capital Stock and Other Securities 10
7 Purchase of Securities Being Offered 20
A. Principal Underwriter 21, 48
B. Determination of Public Offering Price 19
C. Special Purchase Arrangements 20 - 24
8 Redemption or Repurchase 24
A. Redemption Procedures 24, 25
9 Legal Proceedings N/A
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<PAGE>
Item on Form N-lA Page in
Required by Registration
17 C.F.R. 23.404(a) Caption or Subcaption Statement
PART B
10 Cover Page 6, 48
11 Table of Contents 7
12 General Information and History 10 - 13
13 Investment Objectives and Policies
A. Investment Policies 11 -12
B. Short Sales, etc. 12
C. Borrowing of Money N/A
D. Concentration of Investments 11
E. Making of Loans N/A
F. Portfolio Turnover Variation 13
14 Management of the Registrant 14
A. Table of Directors and Officers 15
15 Control Persons and Principal Holders of Securities 14
A. Securities of Registrant Owned by Directors
and Officers 15
16 Investment Advisory and Other Services 16, 17
A. Controlling Persons of the Investment Adviser 16, 48
B. Affiliated Persons 16, 48
C. Method of Computing the Advisory Fee 17
1. Total Dollar Amounts 17
2. Expense Limitations 17
D. Management Related Service Contract 53
E. Custodian 30, 44, 48
F. Independent Public Accountant 30, 48
17 Brokerage Allocation and Other Practices 18
A. Effecting Transactions in Portfolio Securities 18
B. Brokerage Commissions 18
C. Selection of Brokers 18
18 Capital Stock and other Securities 10
A. Capital Stock 10
19 Purchase, Redemption and Pricing of Securities
Being Offered 20 - 26
A. Methods of Purchasing Registrants Securities 20 - 22
B. Method of Determining Offering Price 20, 21
20 Tax Status 26
21 Underwriters 21, 45
A. Principal Underwriter Arrangements 21, 45
B. Principal Underwriter's Commissions 18, 21
22 Calculation of Performance Data 30,55
23 Financial Statements 35 - 47, 56
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<PAGE>
Item on Form N-lA Page in
Required by Registration
17 C.F.R. 23.404(a) Caption or Subcaption Statement
PART C
24 Financial Statements and Exhibits
A. Financial Statements - Index 50
B. Exhibit - Indexed 50
(Certain exhibits have been incorporated
by reference)
25 Persons Controlled By or Under Common Control
with Registrant 51
26 Number of Holders of Securities 51
27 Indemnification 51
28 Business and Other Connections of Investment Adviser 51
29 Principal Underwriters 51, 52
A. Personnel 52
B. Commissions and Other Compensation 52
30 Location of Accounts and Records 52, 53
31 Management Services 53
32 Undertakings N/A
Report and Consent of Independent Accountants 57
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<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART A
PROSPECTUS
AND
PART B
STATEMENT OF ADDITIONAL INFORMATION
INVESTORS RESEARCH FUND, INC.
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<PAGE>
This Prospectus Sets Forth Information That
A Prospective Investor Should Know Before Investing.
In this single document appears the
information that some mutual funds place
in two separate documents.
PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION
January 30, 1997
Please Read And Retain This Prospectus for Future Reference
LIKE ALL OTHER MUTUAL FUND SHARES, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
WHAT IS INVESTORS RESEARCH FUND, INC.?
Investors Research Fund, Inc. is a diversified management investment company of
the open-end type, commonly known as a mutual fund. The Fund's principal
investment objective is to provide continuous management of money over the long
term and under all market conditions with primary emphasis on investments in
common stocks or short term cash equivalents. It is called an open-end
investment company because it continuously offers and sells shares of its stock
to the public and it has a legal duty, upon demand of the shareholder, to take
back the shares held by the shareholder and pay the shareholder the net asset
value of the shares. (See discussion of computation of net asset value and
redemption, pages 19 and 24). This "open endedness" characterizes a type of
investment company commonly called a mutual fund, and this prospectus describes
INVESTORS RESEARCH FUND, INC. The Fund's investment adviser is Lakeview
Securities Corporation (See page 16).
HOW IS THE RETAIL OFFERING PRICE DETERMINED?
The retail offering price is determined once daily as of the close of the New
York Stock Exchange on each day the Exchange is open for trading, and is the net
asset value plus a selling commission equal to 5 3/4% of the maximum retail
offering price, with lower sales charges on purchases of $25,000 or more. There
is no minimum or subsequent investment required. (See How to Buy Shares on page
20). The advisory fee is a maximum of 0.5% of average annual net assets
depending on total operating expense. (See page 17.)
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<PAGE>
Table of Contents
What Is Investors Research Fund, Inc? .................................... 6
Fund Expenses ............................................................. 8
Financial Highlights ...................................................... 9
General Description of the Fund ........................................... 10
Capital Stock and Shareholder's Rights .................................... 10
Investment Objectives, Policies and Techniques
(How the Fund operates) ................................................. 11
Restrictions (What the Fund may not do) ................................... 12
Portfolio Activity ........................................................ 13
Portfolio Turnover......................................................... 13
The Management of The Fund (Officers and Directors of The Fund) ........... 14
The Investment Adviser .................................................... 16
Personal Investing By Fund Personnel ...................................... 17
The Fund Does Not Utilize Derivatives ..................................... 18
Portfolio Brokerage (Who receives it?) .................................... 18
Management's Discussion and Analysis of Investment Performance ............ 19
The Risk in Fund Investments............................................... 19
Computation of Net Asset Value and Maximum Offering Price
of the Company's Shares ................................................. 19
Net Asset Value ........................................................... 20
How to Buy Shares ......................................................... 20
Restriction on Purchase of New Shares by Check............................. 20
Waiver of Sales Load for Investors Who Employee Fee Based Advisers......... 20
Sales Charges ............................................................. 21
Intended Quantity Investment Statement of Intention ....................... 22
Investment Accumulation Plan .............................................. 22
Pre-Authorized Check Plan ................................................. 22
Check-a-Month Payment Plan ................................................ 22
Certificate Shareholders Reinvestment Privileges .......................... 22
Handling Investing and Redemption Transactions Through Your
Bank or Savings Institution ............................................. 23
Retirement Plan for the Self-Employed (Keogh Plan) ........................ 23
Individual Retirement Account ............................................. 24
403 (b) Retirement Account ................................................ 24
Retirement Plans: General ................................................ 24
Redemption of Shares ...................................................... 24
Safeguards Against Fraudulent Redemption Requests.......................... 25
Reinvestment of Redemption Proceeds ....................................... 26
Income Dividends, Capital Gain Distribution and Taxes ..................... 26
Plan of Distribution Under Rule 12b-1 ..................................... 26
Terms and Conditions of Statement of Intention ............................ 27
Terms of Escrow ........................................................... 27
Requirement that Purchase Comply with Rule 22d-1 .......................... 27
Investment Plans - Application Form ....................................... 28
Performance Information ................................................... 30
Shareholder's Inquiries ................................................... 30
Illustration of an Assumed Investment of $10,000 in
Investors Research Fund ................................................. 31
Regular Investing Over the Past 36 1/2 Years in
Investors Research Fund ................................................. 32
Assuming $100 per Month ................................................... 32
Comparison to Standard Indicators ......................................... 33
Report of Independent Accountants ......................................... 34
Statement of Assets and Liabilities ....................................... 35
Securities in the Fund (the Fund's Portfolio) ............................. 36
Statement of Operations - including realized and unrealized capital
gains or (losses) on investments ........................................ 40
Statements of Changes in Net Assets (two years) ........................... 41
Notes to Financial Statements ............................................. 42
Selected Per Share Data and Ratios ........................................ 47
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<PAGE>
FUND EXPENSES:
The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are for the 1996
fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases .................................. 5.75%
For lower Sales Load applicable to larger investments see page 21.
Sales Load imposed on reinvested dividends ....................... None
Redemption Fees .................................................. None*
ANNUAL FUND OPERATING EXPENSES
(as a percent of average net assets)
Investment Advisory Fees .......................................... 0.47%
12b-1 Fee ......................................................... 0.16%
Custody, shareholder records keeping, accounting and legal ....... 0.59%
Salaries, insurance, printing and postage ........................ 0.33%
Regulatory fees and misc ......................................... 0.21%
-----
Total other expenses .............................................. 1.13%
-----
TOTAL FUND OPERATING EXPENSES ..................................... 1.76%
=====
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. Sales load is a direct cost and is paid only once. Annual operating
expenses recur every year. For further information concerning Fund operating
expenses please see Statement of Operations on page 40. There is a maximum 12b-1
service charge of 0.25%.There is no redemption fee*.
The following example illustrates the cumulative expenses that you would pay on
a $1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the table
preceding, this Fund charges no redemption fees of any kind.
1 3 5 10
year years years years
----- ----- ----- -----
$ 74 $ 110 $ 147 $ 253
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown.
* (but see exception for fee based advisers - page 20)
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<PAGE>
Investors Research Fund, Inc.
Financial Highlights
The following information for the fiscal year ended September 30, 1996 has been
audited by Timpson Garcia, independent auditors, whose opinion was unqualified
and is incorporated on page 34 and should be read in conjunction with the
financial statements and notes thereto included elsewhere herein.
* The information for all other years, 1987 through 1992, reclassified for
comparative purposes with the addition of "total return" and "net assets, end of
year" were audited by other auditors whose reports expressed unqualified
opinions on all years.
<TABLE>
<CAPTION>
Year Ended September 30
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data 1996 1995 1994 1993 1992* 1991* 1990* 1989* 1988* 1987*
(for one share outstanding ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
throughout each year) (1) (2)
Net asset value, beginning of $4.10 $4.62 $5.18 $5.74 $5.65 $5.31 $6.38 $4.77 $6.93 $6.29
year ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Income from investment
operations
Net investment income $0.26 $0.07 $0.06 $0.05 $0.05 $0.11 $0.18 $0.13 $0.13 $0.06
Net realized and unrealized
gains (losses) on securities 0.33 0.25 (0.15) 0.43 0.17 1.10 (1.16) 1.65 (1.58) 1.88
Total from investment $0.59 $ 0.32 $(0.09) $0.48 $0.22 $1.21 ($0.98) $1.78 ($1.45) $1.94
operations ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Less distributions to
shareholders:
Dividends from net
investment income $(0.07) $(0.50) $(0.05) $(0.07) $(0.07) $(0.23) $(0.09) $(0.17) $(0.06) $(0.03)
Distribution from capital $(0.29) (0.34) (0.42) (0.97) (0.06) (0.64) -- -- (0.65) (1.27)
gains ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total distributions $(0.36) $(0.84) $(0.47) $(1.04) $(0.13) $(0.87) $(0.09) $(0.17) $(0.71) $(1.30)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value, end of year $4.33 $4.10 $4.62 $5.18 $5.74 $5.65 $5.31 $6.38 $4.77 $6.93
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Total return (3) 14.7% 7.7% (1.8)% 9.6% 3.5% 26.2% (15.5)% 38.6% 21.2% 37.8%
==== ==== ==== ==== ===== ==== ===== ===== ===== =====
Ratios and Supplemental Data
Net assets, end of year (in $30 $32 $36 $48 $61 $65 $58 $82 $71 $95
millions)
Ratios to average net assets:
Expenses 1.76% 1.60% 1.47% 1.05% 0.91% 0.90% 0.85% 0.84% 0.76% 0.79%
Net investment income 6.67% 1.52% 1.39% 1.12% 0.99% 2.00% 3.12% 2.49% 2.28% 0.96%
Portfolio turnover rate (4) 669.79% 248.44% 234.77% 109.92% 67.31% 46.86% 72.10% 48.11% 76.84% 100.55%
Average commission paid $0.0339 (5) (5) (5) (5) (5) (5) (5) (5) (5)
per share for portfolio
transactions
<FN>
(1) Fund changed investment adviser on January 1, 1994.
(2) The information for the year 1992, reclassified for comparative purposes
the addition of "Total Return" and "Net Assets End of Year" was audited by
other auditors whose report expressed unqualified opinions.
(3) Sales loads are not reflected in total return.
(4) Portfolio turnover rates for the years 1986 through 1993 have been restated
to exclude U.S. Treasury Bills.
(5) Information not available.
</FN>
</TABLE>
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<PAGE>
GENERAL DESCRIPTION of the FUND:
(What is the Fund and what does it do?)
The Fund (Investors Research Fund, Inc.) is an investment company, an
arrangement by which a number of persons invest in a corporation that itself
invests in securities. Each shareholder's proportional share of all securities
owned by the Fund is a direct ratio of the number of shares of the Fund which he
owns compared to the total number of shares (called shares outstanding) that all
shareholders together own. Simply stated, therefore, the Fund is really a
diversified portfolio of securities in many different companies, and the shares
of the Fund do not represent a single security as would be the case if someone
purchased shares in XYZ manufacturing company.
The Fund is called an open-end investment company because it continuously offers
and sells shares of its stock to the public and, upon demand of the shareholder,
it has a legal duty to take back the shares held by the shareholder and pay the
shareholder the net asset value of the shares. (See discussion of computation of
net asset value and redemption, pages 19 and 24). This "open-endedness"
characterizes a type of investment company commonly called a mutual fund, and
this prospectus describes INVESTORS RESEARCH FUND, INC.
The Fund is a corporation incorporated in the State of Delaware. It commenced
operations on March 3, 1959 and thus has been in business continuously for 38
years.
Mutual funds operate within their objectives and policies, and this mutual
fund's investment objectives and policies are described on pages 11 and 12.
With respect to the management of its portfolio, the Fund has employed and
receives investment advice and portfolio management from Lakeview Securities
Corporation, an independent corporation which is neither owned nor controlled by
the Fund. By contract the Fund pays an advisory fee for these services. The fee
is 1/2 of 1% of the Company's average net assets on an annual basis. (See page
16 for a discussion of the investment adviser and the advisory contract.)
In addition to the advisory fee, the Fund pays other expenses including legal
and accounting fees, costs of qualifying the shares of the Fund for sale under
applicable federal and state laws, wire and telephone services, custodian and
transfer agent's fees, costs of shareholder meetings, costs of independent audit
and preparation of reports to shareholders, reports, taxes and fees to many
government regulatory agencies, interest expense and taxes on security trades.
The Fund also pays brokerage commissions on all security trades, but these are a
part of the capital cost of securities purchased and sold rather than an item of
expense.
Should the total of these expenses (excluding interest, taxes, and certain other
expenses) exceed 2 1/2% of the Fund's average annual net assets, the adviser
must reimburse the difference. The adviser exercises no responsibility or
control over any of these expenses (see page 16).
The value of shares in the Fund fluctuates because the value of the securities
in which the Fund invests fluctuates. When the Fund sells any part of its
portfolio securities it may realize a profit or a loss, depending on whether it
sells them for more or less than their cost. The Fund usually receives dividend
or interest income from its investments. (For an explanation of the significance
of these transactions for federal tax purposes see Dividends, Distributions, and
Taxes on page 26.)
CAPITAL STOCK and SHAREHOLDER'S RIGHTS:
The Fund is authorized to issue twenty million shares of Capital Stock, $1 par
value. Each share is fully paid and nonassessable, and each has equal voting,
dividend and redemption* rights. There are no preemptive or conversion rights or
sinking fund provisions. Shareholders enjoy cumulative voting in the election of
directors. Cumulative voting entitles each shareholder to as many votes as shall
equal the number of his shares multiplied by the number of directors to be
elected, and all of such votes may be cast for a single director or distributed
among the number to be voted for.
The Fund's shares are sold to the public at net asset value plus a sales
commission. The sales commission is divided between the Fund's principal
underwriter and dealers who sell the Fund's shares. (See discussion of How to
Buy Shares on page 20). The net asset value all goes to the Fund for its
investment operations.
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<PAGE>
INVESTMENT OBJECTIVES POLICIES AND TECHNIQUES:
(How the Fund operates)
Every reader-investor enjoys the privilege of buying and selling individual
securities of manufacturing companies and thereby managing his own portfolio
without having to pay the fees and expenses that a mutual fund charges.
Therefore, the key question for the reader-investor is to decide for himself
whether he believes the Fund can manage a diversified portfolio better than he
can do it for himself. In considering this question, the reader will be
interested in the objectives, policies and results of the Fund's management
operations, and these now follow.
Objectives: The Fund's investment objective is to provide continuous management
of money over the long term and under all market conditions, With the dual
purpose of making the shareholder's money grow during rising stock markets, and
defending the shareholder's capital during falling stock markets.
Policies and Techniques To implement its objectives, the Fund utilizes the
investment approach formulated primarily by Richard W. Arms, Jr., known as
Equivolume Charting, with some modifications. The primary modification factors
dividends into the selection process, a technique that examines a stock's
dividend level and evaluates it in the light of the dividend's relation to the
market dividend level, to the relevant sector dividend level, and to the stock's
own dividend history. Stocks which are identified for purchase by that technique
are then evaluated and confirmed for purchase on the basis of the fundamentals
of the stock issues being investigated. The dividend screening modification is
based upon the recognition that, over a period of time, dividends have created
almost 50% of the total return on common stocks.
During rising markets it is the Fund's policy to limit purchases substantially
to common stocks. Conversely, during declining markets it is the Fund's policy
to defend capital through the technique of purchasing cash equivalents up to 60%
of total net assets; the balance of assets may be invested in common stocks,
preferred stocks, bonds, or debentures.
The Fund cannot, of course, guarantee that its perceptions of market trends will
be accurate. When trends exist, the Fund believes that they can be recognized
and will try to recognize them as early as possible, but it should be borne in
mind that a change in trend may be recognized only after it has occurred.
The use of Equivolume Charting and Dividend Screening does not reduce the normal
risks of market fluctuations, and the Fund's practice of attempting to recognize
and act upon market trends often has entailed more frequent portfolio changes
(with attendant costs) than some other Funds (see Portfolio Activity on page 13
).
Concentration of Investments. Types of Securities and Standards: As a part of
its portfolio policy the Fund may invest up to 25% of its net assets in any one
industry group. Emphasis is to be placed on the common stocks of seasoned
companies with established records of successful enterprise, rather than on
stocks of newer enterprises. In the selection of common stocks for purchase, the
possibilities of price appreciation are foremost. However, current income
through receipt of interest or dividends is an important factor in our adviser's
selection process.
In trying to achieve its investment objectives, the Fund attempts to choose
stocks for purchase that represent major industries which in themselves reflect
rising price trends. The Fund also recognizes the logic of fundamental analysis
of such factors as per-share earnings, and these factors are to be considered in
choosing its portfolio stocks. How ever, the Fund accepts market action as the
most significant standard in the selection and retention of securities, and
reserves freedom of action in portfolio turnover consistent with protection of
each share's net asset value.
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<PAGE>
Policies Deemed Fundamental: The Fund's portfolio policies with respect to
concentration of investments in any one industry, is eemed to be fundamental
policies, and cannot be changed without shareholder action. While aimed at
safeguarding the shareholder's interests in both rising and declining stock
markets, the reader should realize that there can be no assurance that the Fund
will in fact achieve its objectives.
The Fund is also subject to the following restrictions which cannot be changed
without the approval of a majority (any number over 50%) of the Fund's
outstanding voting securities.
RESTRICTIONS:
(What the Fund may not do)
1. May not purchase any securities on margin. May not lend money or securities.
It may, however, purchase notes, bonds, certificates of deposit or evidences of
indebtedness of a type commonly distributed by financial institutions.
2. May not issue any senior securities other than notes to evidence bank
borrowing.
3. May not sell any securities short, or distribute or underwrite securities
of others.
4. May not purchase the securities of any company which has not been in
continuous operation for three years or more.
5. May not invest more than 5 percent of the value of its gross assets in
securities of any one issuer, other than those of the U.S. Government.
6. May not own more than 10 percent of the outstanding voting, or any other
class of, securities of a single issuer.
7. May not purchase and sell commodities and commodity contracts, or real
estate.
8. May not purchase the securities of any other mutual fund.
9. May not invest in any companies for the purpose of exercising control or
management.
10. May not own the securities of any company in which any officer or director
of this Fund has a substantial financial interest.
11. May not trade in securities with Directors and Officers.
12.May not invest in restricted equity securities, commonly known as "letter
stock," warrants, oil, gas and other mineral leases, and illiquid securities and
also may not invest or engage in arbitrage transactions or in puts, calls,
straddles or spreads.
13. The Fund may not issue any shares for any consideration other than cash.
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<PAGE>
PORTFOLIO ACTIVITY
In implementing its policy of continuous money management, the Fund's practice
of attempting to recognize and act upon market trends and to preserve
sharehodlers' capital may entail more frequent portfolio changes than some other
fund's management styles.
Excluding U.S. Government and other short term maturity direct obligations, for
the last three fiscal years the portfolio turnover of the Fund as a ratio to
total assets amounted to 234.77%, 248.44% and 669.79%. See table on page 18. A
100% turnover rate would occur if all the securities in the Fund's portfolio
were replaced in a period of one year. The Fund commits funds to purchase common
stocks when market uptrends can be recognized, and, converselyh, sells common
stocks when market downtrends can be recognized. These policies are applied to
changes in market trends regardless of whether they may be long-term (more than
six months) or short-term (less than six months) as the Fund accepts market
performance as the controlling standard in the purchase, retention or sale of
securities.
The effect of these policies may involve heavier brokerage commission costs
which must be borne by the Fund's shareholders. Brokerage commissions are not,
however, paid as a separate expense of the Fund, and have no effect on dividends
which may be paid by the Fund from ordinary investment income. Instead, they are
a part of the capital cost of securities purchased and a reduction in proceeds
from securities sold, and thus reduce net realized profits or increase net
realized losses of the Fund. Portfolio turnover may also be affected by the
amount and timing of purchases and redemptions of shares of the Fund, but the
Fund has no control over this factor.
During the last three fiscal years, the turnover rate for the Fund's portfolio
has been considerably higher than in the periods preceding the last three years.
There were several factors driving that turnover rate. One was that the markets
during those recent periods were such that changes in sector leadership occurred
more often than usual, dictating more rapid changes in portfolio holdings.
Another reason was that the adviser has been attempting to increase
representation of very high quality companies in the portfolio. Although the
earlier portfolios were of good quality, the adviser wants to hold "household
name" stocks with good dividend returns and low risk ratings. An additional
factor is that the Arms Equivolume Charting system has an inherent tendency to
increase turnover somewhat because of its utilization of support and resistance
levels appearing in the charting analysis of market action.
The Fund's portfolio turnover rate may continue to fluctuate from year to year
as it has in the past. The management believes that the turnover rate may be
greater than that of many other mutual funds, and expects that it will continue
to be comparatively greater. However, in its entire operating history (nearly 38
years) the Fund has never realized excessive short term profits that eliminated
the Fund's relief from income tax liability under sub-Chapter M of the Internal
Revenue Code. The management believes it is improbable that this will ever
occur.
PORTFOLIO TURNOVER
During the latest fiscal year, the turnover rate increased slightly less than
threefold as a result of highly unusual conditions. One of those conditions was
the extremely volatile nature of the securities markets during fiscal 1996.
Maintaining our portfolio at its low market risk level required significant
changes during the year and periodic accumulations of cash. Another factor was
the change in the portfolio stocks dictated by the development of the dividend
screening process by portfolio manager, Fred French. In turn, that turnover
generated a need to protect the non-tax status of the Fund by acquiring stocks
that would enable us to meet the requirements of the Internal Revenue Code for
such non-tax status. Management does not believe that, except for possible
market volatility, such conditions will recur and expects that turnover will
return to rates previously experienced under our present adviser.
- 13 -
<PAGE>
THE MANAGEMENT of the FUND; OFFICERS AND DIRECTORS OF THE FUND:
The officers and directors of the Fund, their principal occupations for the past
five years, mailing address and number of shares owned on September 30, 1996 are
as follows:
Francis S. Johnson,* President, is a retired dental surgeon in Santa Barbara,
California, and past president of the Santa Barbara-Ventura County Research and
Education Group. (A non-profit association.) Dr. Johnson has served as an
officer of the Fund for 26 years and had been a member of the Fund's executive
Committee for 27 years. 4439 Shadow Hills Boulevard, Santa Barbara, CA 93105
(159,177 shares)
Mark L. Sills,* Vice-President, Director, and Member of the Executive
Committee**, is Director of Consumer Services, and Director, Informations
Services, Aleene's - Division of ARTIS, Inc. 85 Industrial Way, Buellton, CA
93427 (15,340 shares)
Michael A. Marshall, Secretary-Treasurer, Director and Member of the Executive
Commitee**, is a former Senior Vice-President of Prudential California Realty
and is engaged in real estate investment and property management, M-P Marshall &
Co., 23 Princeton Trail, Coto De Caza, CA 92679 (2,948 shares)
Gertrude B. Calden, Director and Member of the Executive Committee,** is
Emeritus Director, Foundation for Santa Barbara City College and has served
under three Presidents on the National Advisory Council on Adult Education. 819
East Pedregosa Street, Santa Barbara, CA 93103 (15,155 shares)
Richard Chernick, Director elected January 22, 1997), is a Retired Partner of
the Los Angeles Law Firm of Gibson, Dunn & Crutcher. He is currently active in
arbitration and mediation of disputes in the Los Angeles area. 3055 Wilshire
Boulevard, Seventh Floor, Los Angeles, CA 90010-1108
James A. Corradi, Director, Retired business executive, former General Manager
of Hope Ranch Park Homes Association, and former Board President of Cook College
at Rutgers University. 17 Via Alicia, Santa Barbara, CA 93108 (501 shares)
Fredric J. French, * Director, is President of the Arms Companies, the
Investment Portfolio Management Division of Lakeview Securities Corporation,
investment adviser to the Fund; formerly Vice-President and Senior Portfolio
Strategist of The Arms Companies since November, 1992. Please see page 16 for a
more extensive biography. 6201 Uptown Blvd., NE, Albuquerque, NM 87110 (532
shares)
Harry P. Gelles, Director (elected January 22, 1997), is Senior Vice-President
of Chelsea Management Company, an investment management company in Los Angeles,
California. Previously, was Senior Adviser to the Trust Company of the West,
which is also an investment management firm in Los Angeles. 444 South Flower
Street, Suite 2340, Los Angeles, CA 90071
Hugh J. Haferkamp,*** Director, (elected January 22, 1997), is an
attorney-at-law in private practice in the Santa Barbara area. Has been legal
counsel to Investors Research Fund, Inc. for approximately 17 years. 11800
Baccarat Lane, N.E., Albuquerque, NM 87111
Leonard S. Jarrott, Director, is a Real Estate Investment Advisor and
independent Real Estate Broker in Santa Barbara, CA. 2725 Vernon Road, Santa
Barbara, CA 93105
Robert P. Moseson,* Director, is President and Director of Lakeview Securities
Corporation, investment adviser to the Fund. He is also President and Director
of Performance Analytics, Inc., an investment consulting firm which is
affiliated with Lakeview Securities. 333 West Wacker Drive, Chicago, IL 60606
(9,187 shares)
Willaim J. Nasif, Director, is a Certified Public Accountant and Partner of
Nasif, Hicks, Harris & Co., Certified Public Accountants of Santa Barbara, CA.
1111 Garden Street, Santa Barbara, CA 93101
Mark Schniepp, Director, is Director of the Economics Forecast Project at the
University of California, Santa Barbara. 944 Randolph, Santa Barbara, CA 93111
Dan B. Secord, Director, is in private practice of obstetrics and gynecology
since 1969. Staff Santa Barbara Cottage Hospital and currently on the Creditials
Committee of the medical staff. Vice Chairman, Santa Barbara City Planning
Commission. 2329 Oak Park Lane, Santa Barbara, CA 93105
All directors are paid by the Fund; however, no compensation is paid to
directors affiliated with the adviser.
- 14 -
<PAGE>
*Are "interested persons" as defined in Section 2(a) (19) of the Investment
Company Act of 1940 as amended.
**The Board of Directors has established an Executive Committee whose function
is to take action between the regular meetings of the Board. The Committee has
all of the powers and authority of the full Board in the management of the
business of the Fund except the power to declare dividends and to adopt, amend
or rescind By-Laws.
*** An interested person on the basis of serving as counsel to the Fund
On September 30, 1996, the officers and directors and their families
collectively owned 202,448 shares of the Fund with a value of approximately $1
million.
The Board of Directors oversees and controls all operations of the Fund,
including: Recommending and monitoring the Investment Adviser; determining that
the investment policies of the Fund are carried out; the employment and
termination of all employees, consultants, agents and service providers; and
declaration of dividends.
The Board of Directors also monitors and controls custodial and shareholder
record keeping expenses, audit, accounting and legal fees. Directors fees are
set directly by the Board of Directors. Taxes, postage and regulatory fees of
the Securities and Exchange Commission and state regulatory bodies are
determined unilaterally by government agencies.
The Board of Directors has also established an Audit Committee. That committee's
function are to supervise and oversee audits by the Fund's independent
accountants, review the auditor's audit plans and procedures, and to review the
auditor's recommendations concerning the Fund's accounting records, procedures
and internal controls Messrs. Corradi, Nasif and Schniepp currently comprise the
Audit Committee
COMPENSATION TABLE
Pension or Estimated
Retirment Annual Total
Benefits Benefits Compensation
Aggregate Accrued as Upon Paid to
Name, Position Compensation Expenses Retirement Directors
Francis S. Johnson $16,650 $ 0 $ 0 $ 2,250
President
Mark L. Sills $ 1,250 $ 0 $ 0 $ 1,250
Vice-President
Michael A. Marshall $ 2,250 $ 0 $ 0 $ 2,250
Secretary-Treasurer
Gertrude B. Calden $ 2,250 $ 0 $ 0 $ 2,250
Director
Richard Chernick $ 0 $ 0 $ 0 $ 0
Director
James A. Corradi $ 1,250 $ 0 $ 0 $ 1.250
Director
Fredric J. French $ 0 $ 0 $ 0 $ 0
Director
Harry P. Gelles $ 0 $ 0 $ 0 $ 0
Director
Hugh J. Haferkamp $ 0 $ 0 $ 0 $ 0
Director
Leonard S. Jarrott $ 750 $ 0 $ 0 $ 750
Director
Robert P. Moseson $ 0 $ 0 $ 0 $ 0
Director
Willaim J. Nasif $ 1,000 $ 0 $ 0 $ 1,000
Director
Mark Schniepp $ 1,500 $ 0 $ 0 $ 1,500
Director
Dan B. Secord $ 1,250 $ 0 $ 0 $ 1,250
Director
- 15 -
<PAGE>
INVESTMENT ADVISER:
Lakeview Securities Corporation, 333 West Wacker Drive, Chicago, Illinois 60610,
is an investment advisory firm which is neither owned nor controlled by the
Fund. Messrs. Robert Moseson and Leslie Golembo, by virtue of stock ownership,
qualify as controlling persons of Lakeview Securities. Respectively, they serve
as president and chief executive officer of Lakeview Securities. Mr. Moseson and
Mr. Golembo also own and control Performance Analytics, Inc., an investment
consulting firm which is also based in Chicago. Since 1986, Performance
Analytics has specialized in providing investment advice, investment management
evaluation services, and management consulting services to a broad range of
institutional investors. The Fund, however, is not a customer or client of
Performance Analytics, Inc.
Lakeview Securities has been employed by the Fund and is its investment adviser.
The existing investment advisory contract was solicited by the adviser,
recommended by the Board of Directors, and approved on November 29, 1993 by vote
of the holders of a majority of the outstanding shares of the Fund. The contract
may be terminated by either party without penalty on sixty (60) days written
notice, is automatically terminated if assigned, and must be submitted annually
for approval (a) by the Board of Directors of the Fund, or (b) by a vote of a
majority of the outstanding voting securities of the Fund, provided that in
either event the continuance of the contract is also approved by the vote of a
majority of the Directors who are not interested persons of the Fund. That vote
must be cast in person at a meeting called for the purpose of voting on such
approval.
Primary responsibility for the day-to-day management of the Fund's investment
portfolio is that of The Arms Companies Division of Lakeview Securities.
Fredric J. French is President of that division, which is headquartered in
Albuquerque, New Mexico, and is the portfolio manager for the Fund. In addition
to serving as portfolio manger for Investors Research Fund, Inc., The Arms
Companies division serve as an investment adviser to large equity investment
funds and to securities investment programs that specialize in investing in the
S & P 500 futures market.
Lakeview Securities Corporation ("Lakeview") has served as investment adviser to
Investors Research Fund since January 1, 1994. From that date to December 31
,1995, Richard W. Arms, Jr., as President of the Arms Companies Division of
Lakeview, was primarily responsible for Investors Research Fund portfolio
management, subject to oversight supervision by Robert P. Moseson, President of
Lakeview. In managing the Investors Research Fund portfolio Lakeview has applied
the Arms Equivolume investment strategy, a stock selection strategy that uses
technical indicators. Since November 1992, Mr. Arms was assisted in applying
this strategy on behalf of Lakeview clients, including Investors Research Fund,
by Fredric J. French. On December 31, 1995, Richard W. Arms, Jr., resigned as
President of the Arms Companies Division of, and as an employee of Lakeview, and
on January 1, 1996, Fredric J. French was promoted from Vice President and
Senior Portfolio Strategist for the Arms Companies to the position of President
of that division. Thus, beginning January 1, 1996, Fredric J. French and Robert
P. Moseson jointly assume responsibility for Investors Research Fund's portfolio
management.
Fredric J. French has more than six years of experience in applying the Arms
Equivolume investment strategy, primarily as an immediate assistant to Richard
W. Arms, Jr., the developer of the strategy. Mr. French has served in positions
of increasing responsibility of the Arms Companies Division of Lakeview since
November, 1992. Since that time, he has been part of the management team setting
investment guidelines and objectives for Lakeview's investment management
accounts and for the day-to-day application of the Arms Equivolume investment
strategy. In this regard, he has also been responsible for stock selection and
trading for investment management accounts. In October, 1995, Mr. French
conceived and developed the dividend screening addition to the Arms Equivolume
charting method of stock selection. Lakeview believes that the dividend
screening addition was an improvement that significantly enhanced the Fund's
performance since its implementation. Prior to joining Lakeview, Mr. French
served as a sales agent and field sales manager for Encyclopedia Britannica
(March 1991 to November 1992) and as an insurance agent with The Prudential
Insurance Company of America (January 1990 to March 1991). For approximately
four years prior to 1996, Mr. French was employed, in part, by the Arms
Equivolume Corporation where he served as sales manager and assisted Richard
Arms in stock selection for investments based on Arms Equivolume and in the
application of Arms Equivolume investment strategies. Mr. French was also
instrumental in the design and marketing of Equivolume software. Mr. French
holds a Bachelor of Arts in business administration degree from Chadron State
University (Nebraska).
- 16 -
<PAGE>
Robert P. Moseson, President of Lakeview, is also the founder and President of
Performance Analytics, Inc., a national retirement plan consulting firm and
Spectrum Adviser Corporation, an investment advisory firm. Lakeview is an
NASD-licensed broker/dealer firm and an SEC registered investment adviser. Prior
to co-founding Performance Analytics, Inc., Mr. Moseson served in positions of
increasing responsibility with Merrill Lynch, Pierce, Fenner & Smith, initially
as an account executive (1969-1972) and later as Vice President and head of
Merrill Lynch Midwest region for performance evaluation (1972-1985). Performance
Analytics, Inc., is an investment consulting firm specializing in tracking and
evaluating the investment performance of fund managers. Mr. Moseson has
developed and implemented computer-based programs for style tilting and asset
allocation that are operated and licensed through Spectrum Advisory Corporation.
Mr. Moseson is considered to be a leading national authority on style tilting
and asset allocation, which are strategies to enhance fund returns and control
risk. Accordingly, Mr. Moseson had extensive experience in formulating
investment objectives and policies, developing investment action plans for
institutional funds, measuring investment performance and selecting courses of
action to maximize investment return. Mr. Moseson holds a Bachelor of Science
degree in business from Roosevelt University (Chicago, Illinois).
The advisory contract provides in substance that the adviser will continuously
provide an investment program for the Fund's assets; will, subject to the
general control of the Board of Directors, develop and implement portfolio
investment decisions, including placement of portfolio brokerage orders on a
discretionary basis; and will furnish to the Fund the services of its directors,
officers, and employees in the supervision, control and conduct of the
investment activities of the Fund.
The Fund bears the operating expenses as set forth on page 2. The Fund pays the
adviser a quarterly fee equal to 0.125% of the value of the Fund's average net
assets. On an annual basis, this will amount to one-half (1/2) of one percent
(1%) of the value of the Fund's average net assets. The ratio of operating
expenses to average net assets was 1.76% in 1996.
The contract also provides that, in the event operating expenses of the Fund (as
audited and including the adviser's fee, but not including taxes, brokerage,
12b-1 fees, capitalized expenditures and extraordinary expenses) exceed the
limits applicable to the Fund under the laws or regulations of any state in
which Fund shares are qualified for sale, the adviser will immediately
compensate the Fund for such excess. At the present time, the effective limits
of expenses allowable are 2.5% of the first $30,000,000 of average net assets;
2.0% of the next $70,000,000 of net assets; and 1.5% of the remaining net assets
for any fiscal year.
The management fees paid by the Fund to Lakeview Securities Corporations in
fiscal years 1996, 1995 and 1994 were $145,654, $171,087 and $141,952
respectively. The management fees paid by the Fund to its previous adviser,
Investors Research Company, in 1994 was $56,691 (for the first quarter of fiscal
1994). The investment adviser receives no brokerage commissions or any other
compensation from the Fund.
PERSONAL INVESTING BY FUND PERSONNEL:
Investors Research Fund has a strict Code of Ethics which prohibits all of its
affiliated personnel from engaging in personal investment activities which
compete with or attempt to take advantage of the Fund's planned portfolio
transactions. Lakeview Securities also has a Code of Ethics which is intended to
achieve that same goal. The objective of the Code of Ethics of both the Fund and
its adviser is that their operations be carried out for the exclusive benefit of
the Fund's shareholders. Both organizations maintain careful monitoring of
compliance with their Code of Ethics.
- 17 -
<PAGE>
THE FUND DOES NOT UTILIZE DERIVATIVES:
Investors Research Fund may not either purchase or sell those instruments
commonly known as derivatives. Broadly defined, derivatives are contracts that
derive their value from the value of some underlying asset (such as currencies,
equities or commodities), some indicator (such as interest rates), or some index
(such as the Standard & Poor's 500 Stock Index). It is the Fund's belief that
the risks of such contracts are not consistent with the capital appreciation
objectives of Investors Research Fund.
PORTFOLIO BROKERAGE:
Neither the Fund nor any of its officers is affiliated with any broker-dealer.
None of the directors is affiliated with a broker-dealer except for Robert P.
Moseson and Fredric J. French, who are affiliated with Lakeview Securities
Corporation, a licensed broker-dealer. However, the Fund's investment advisory
agreement specifically prohibits the placement of the Fund's portfolio brokerage
through Lakeview Securities Corporation, which eliminates such a source of
potential conflicts of interest. The principal underwriter is not affiliated
with either the Fund or the investment adviser.
The authority for placing the Fund's portfolio brokerage has been delegated to
the Fund's investment adviser, Lakeview Securities Corporation. Mr. French, as
portfolio manager, is principally responsible for selecting the broker-dealer to
execute portfolio orders. The Fund is informed that neither Mr. French nor
Lakeview Securities has any agreement or commitment of any kind to place
portfolio transactions through any particular broker-dealer.
Orders for portfolio transactions may be placed by the adviser with
broker-dealers who have sold shares of the Fund, but the fact that a
broker-dealer has sold shares of the Fund is not the sole factor in the
selection of such broker-dealer. The adviser will not, however, give weight to
this factor if this would result in the Fund not obtaining the most favorable
prices and executions reasonably obtainable. Further, there will be no
particular ratio of brokerage business to Fund sales.
The Fund itself checks executions of portfolio orders with the spread quoted in
the financial press to ascertain that executions are within the range quoted for
the day of execution.
The Fund has authorized the adviser to give consideration to the receipt of
research services from broker-dealers in its placing of portfolio brokerage
transactions. However, the adviser has informed the Fund that it does not expect
to exercise that authority on more than a nominal basis. No persons acting on
behalf of Lakeview Securities or the Fund are authorized to pay a broker a
brokerage commission in excess of that which another broker might have charged
for effecting the same transaction in recognition of the value of brokerage or
research services provided by the broker. The primary basis for selecting
brokers is to seek brokers to effect transactions where prompt execution of
orders at the most favorable prices can be secured.
Figures pertaining to the Fund's brokerage for the last three fiscal years are
presented in the following table:
<TABLE>
<CAPTION>
Annual Portfolio
Turnover Brokerage Commissions Paid Brokerage Paid to
Ratio to Total Brokerage by the Fund to Broker-Dealers not Affiliated
Total Assets Commissions Paid the Underwriters* with Adviser or Underwriter for
Sales Services Other
<S> <C> <C> <C> <C> <C> <C>
1994 234.77% $210,457 $82,392 $128,065 -nil- -nil-
1995 248.44% $284,333 $80,465 $203,868 -nil- -nil-
1996 669.79% $424,531 $46,392 $378,139 -nil- -nil-
<FN>
* The Underwriter is also a registered broker-dealer with a securities retail
brokerage operation and its offices have in the past been the largest source of
Fund sales.
</FN>
</TABLE>
- 18 -
<PAGE>
MANAGEMENT'S DISCUSSION and ANALYSIS of INVESTMENT PERFORMANCE
Investors Research Fund had a total return of 14.7% during the last fiscal year
(excluding any commissions). That was accomplished in spite of the extreme
volatility of the markets in which the Fund operates and the unusually high
turnover for the period caused to a great extent by that volatility. The Fund's
policy of preserving its shareholders' capital dictated a move to Treasury bills
on a number of occasions during the year, which created a minor reduction in
portfolio return while some of the portfolio was comprised of Treasury bills.
The high market valuations as measured by historical yield, price earnings
ratios, and price to book ratios coupled with high volatility caused concern for
the advisers of the Fund during calendar 1996. Particularly in July, but to a
lesser extent at several other times during the year, the markets became
obviously overbought and forced the Fund to take profits and raise the
percentage of cash in the portfolio in order to protect gains. There was during
1996, and there continues to be, a rotation of stocks and sectors that appear
attractive from both the technical and from the dividend screening methods
employed by the advisers. Additionally, it appeared late in the year that the
portfolio emphasis should be moving toward the smaller end of the capitalization
spectrum considered appropriate by the advisers.
The Fund's adviser remains concerned that the valuations of the market are too
high to be sustained long term, but feels that the risk/reward of undervalued
stocks requires that the Fund be fully invested until the direction of the
markets is clearly defined downward.
As always it is to be noted that past performance is not necessarily predictive
of future performance.
THE RISK IN FUND INVESTMENTS:
Every investment carries some market risk. The Fund's investments in stocks are
subject to changes in their value from a number of factors, such as changes in
general stock and bond market movements and the change in value of particular
stocks or bonds because of an event affecting the issuer. Changes in interest
rates also can affect stock and bond prices. These changes can affect the value
of the Fund's investments and the price per share of the shares of the Fund. The
Fund's net asset value per share will usually fluctuate with the changes in the
market prices of its portfolio shares, which fluctuation can occur almost daily
when the markets are open.
However, a primary objective of Investors Research Fund, in addition to
shareholder return, is the preservation of each shareholder's capital.
Therefore, we maintain a portfolio which usually consists of stocks which
present a substantially lower level of risk than that of the stock market in
general.
Part of the Fund's investment approach is to move some of the portfolio into
Treasury bills ("cash") when it appears that there may be a significant downward
movement in the type of stocks in which the Fund investments. Although this
entails a higher turnover, over time the value of that approach in preserving
capital has been proven.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any financial institution, and are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency. Shares of
the Fund involve investment risk, including possible loss of principal, and they
may be worth more or less than their original cost when redeemed.
Computation of Net Asset Value and Maximum
Offering Price of the Company's Shares
On the Basis of the Financial Condition of the Company at September 30, 1996
Value of net assets............................................$ 30,442,128
Number of shares outstanding................................... 7,032,451
Net asset value and repurchase price per share.................$ 4.33
Underwriting commission per share included in offering price*..$ .26
Offering Price per share (100/94.25 of $4.33)..................$ 4.59
*(5 3/4% of offering price, reduced on sale of $25,000 or more. See sales
charges page 21).
- 19 -
<PAGE>
NET ASSET VALUE:
The net asset value per share is determined by dividing (1) the total value of
the assets of the Fund (securities, cash and assets of every kind, but not
including any amount for good-will or going-concern value) less the amount of
all debts, obligations and liabilities of the Fund, by (2) the total number of
shares of the Fund outstanding.
In determining the total value of the assets of the Fund, securities are valued
once daily as of the close of the exchange on which they are primarily traded,
as set forth on page 24 under Redemption of Shares. In the event there is no
sale on this date, the value of the security is fixed by the Board of Directors,
on the basis of the last known transaction for such security.
The value of securities which are not listed or traded on any recognized stock
exchange, but for which market quotations are readily available, is determined
by the Board of Directors on the basis of the latest bid price quotations
available. The value of securities which are not listed or traded on any
recognized stock exchange, and for which market quotations are not readily
available, and the value of any other assets of the Fund, are fair value as
determined in good faith by the Board of Directors.
HOW TO BUY SHARES:
The Fund's shares may be purchased at the public offering price through
broker-dealers who are members of the National Association of Securities
Dealers, Inc. and have sales agreements with Diversified Securities Inc., the
Underwriter.
Purchases are made at the net asset value to be determined plus applicable sales
charge. The public offering price (net asset value plus sales charge) is
computed once daily on each day that the New York Stock Exchange is open, as of
the close of trading on the Exchange New York City time. At the date of this
prospectus, the close of trading is 4:00 p.m., but this time may be changed. The
offering price so determined becomes effective at the New York Stock Exchange
closing time. Orders for shares of the Fund received by dealers prior to the New
York Stock Exchange closing time are confirmed at the offering price next to be
determined on that day, provided the order is received by the Underwriter prior
to the NYSE's close of business. (It is the responsibility of the dealers to
transmit such orders so that they will be received by the underwriter prior to
such close of business.) Orders received by dealers subsequent to the New York
Stock Exchange closing time will be confirmed at the closing time on the next
day the New York Stock Exchange is open. The New York Stock Exchange is closed
on New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
RESTRICTIONS ON PURCHASE OF NEW SHARES BY CHECK:
Our transfer agent, DST Systems, Inc., has informed the Fund that all transfer
agents are experiencing increased efforts by criminals to tap into the resources
of mutual fund investors. Therefore, the Fund canno longer accept "third party
checks" for the purchase of new shares of Investors Research Fund, Inc. "Third
party checks" are defined as checks made payable to a payee other than Investors
Research Fund, Inc., DST Systems, Inc., or the custodianof an account (such as
Investors Fiduciary Trust Company.) The Fund recommends that checks for new
shares be made payable to Investors Research Fund, Inc.
WAIVER OF SALES LOAD FOR INVESTORS
WHO EMPLOY FEE BASED INVESTMENT ADVISERS:
The Fund has agreed to waive the sales load on shares purchased by investors who
have employed fee based investment advisers to assist them. This waiver applies
to persons who are clients of financial institution trust departments, fee based
financial advisers, and holders of "wrap accounts" established for the benefit
of clients of broker-dealers who have sales agreements or similar arrangements
with the Fund's principal underwriter with respect to sales of Fund shares.
Shares will also be sold at net asset value to registered management investment
companies or separate accounts of insurance companies.
In connection with such shares, the Fund may impose a redemption fee of 1% on
the shares redeemed within one year of original purchase. However, no such fee
will be imposed on shares acquired by reinvestment of distributions or on shares
which would have originally been exempt from a sales charge. In determining
whether a redemption fee is payable, the Fund will first redeem shares acquired
by reinvestment of distributions, secondly, shares held for over 12 months, and
thirdly, shares held the longest during the 12-month period.
No commissions will be paid to dealers in connection with the sales of shares at
net asset value under this program.
- 20 -
<PAGE>
SALES CHARGES:
Sales charges on purchases of less than $25,000 amount to 5.75% of the amount
the buyer invests; 6.10% of the amount received by the Fund.
Lower sales charges are applicable to larger transactions as indicated in the
following table:
Sales
Sales Charge as
Charges as Percentage
Percentage of the
of the Net Offering
Amount Price (The
Received Amount
Amount of by the the Buyer
Purchase Fund Invests)
Less than $25,000................... 6.10% 5.75%
$25,000 to less than $50,000........ 5.82% 5.50%
$50,000 to less than $100,000....... 4.99% 4.75%
$100,000 to less than $250,000...... 3.90% 3.75%
$250,000 to less than $500,000...... 2.56% 2.50%
$500,000 to less than $1,000,000.... 2.04% 2.00%
$1,000,000 and more................. 0.00% 0.00%
(A selling dealer is ordinarily allowed approximately 85% of the sales charge on
sales of less than $1,000,000.)
The above scale is applicable to a purchase made at one time by an individual,
or an individual, his spouse and children under the age of 21, or a trustee or
other fiduciary of a single trust estate or single fiduciary account (including
a pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code).
The above reduced sales commissions scale is also applicable to the cumulative
amount of purchases made by any one of the persons enumerated above on an
"accumulated purchases" basis. For example, if a shareholder has purchased and
still owns shares with a value at cost or current offering price (whichever is
higher) of $25,000 and subsequently purchases $5,000 additional, the charge
applicable to the $5,000 purchase would be 5.50%.
TO TAKE ADVANTAGE OF THIS PRIVILEGE, THE DEALER MUST NOTIFY THE PRINCIPAL
UNDERWRITER WHEN THE ORDER IS PLACED.
Shares are sold at net asset value and without sales commission to the directors
(including retired directors with long service), officers of the Fund, its
Investment Adviser and Principal Underwriter and broker-dealers who maintain
selling agreements with the Underwriter, or the bona fide employees or sales
representatives of any of the foregoing who have acted as such for not less than
90 days, and to their family members or to any trust, pension, profit sharing or
other benefit plan for such persons, upon written assurance that the shares are
being purchased for investment purposes and will not be resold except through
redemption or repurchase by or on behalf of the Fund.
The Board of Directors has recently approved a new program under which members
of qualified organizations are able to invest at net asset value on the basis of
broker cooperation. The arrangement applies when the following requirements are
met: (1) the individual is a member of an organization which has at least 200
members, (2) that organization has sponsored Investors Research Fund, Inc. as an
investment vehicle for its members, and (3) the selling broker has agreed to
waive any commission on the transactions of members of that organization
investing in the Fund through that broker. Diversified Securities, Inc., the
Fund's underwriter, has agreed to waive its usual underwriting retention for
investors meeting the above requirements.
The aggregate dollar amount of underwriting commissions derived by all retailers
from sales of the Fund's securities during 1994, 1995, and 1996 were $40,075,
$19,603, and $ 5,791 respectively. The underwriter receives a portion of the
sales charges. The underwriter, Diversified Securities, Inc., retained $5,124,
$5,222 and $2,945 in the past three fiscal years. These latter figures represent
the underwriter's share of sales charges on all sales of Fund shares.
- 21 -
<PAGE>
INTENDED QUANTITY INVESTMENT STATEMENT OF INTENTION:
If it is anticipated that $25,000 or more of Fund shares will be purchases
within a 13 month period it is advantageous to sign a Statement of Intention so
that shares first purchased may be obtained at the same reduced sales charge as
though the quantity were invested in one lump sum. For this purpose, such a
Statement may be signed at any time within 90 days of a purchase, and a 90 day
back dating period will be used in order to include the earlier purchase also at
the reduced sales charge. The Statement authorizes the Transfer Agent to hold in
escrow sufficient shares which can be redeemed to make up any difference in
sales charge on the amount actually invested within the 13 month period.
Execution of a Statement is not binding and does not obligate the shareholder to
purchase, or the Fund to sell, the full amount indicated in the Statement, and
should the total amount actually purchased during the 13 month period be more or
less than that indicated on the Statement of Intention, any required price
adjustment will be made. The Statement of Intention Procedure applies to
purchases of $25,000 or more. Required application forms are available from the
Principal Underwriter or your investment dealer, or on page 28 of this
Prospectus, and should be read carefully.
INVESTMENT ACCUMULATION PLAN:
Open Accounts for Accumulating Shares
When an investor makes his initial investment (no minimum) in shares of the Fund
through his investment dealer, an account will be opened for him on the books of
the Fund by DST Systems, Inc. the Fund's Transfer and Shareholder Record Keeping
Agent. A shareowner may make additional investments (no minimum) in shares of
the Fund at any time through his investment dealer or by sending a check to DST
Systems, Inc. for investment in full and fractional shares at the public
offering price next determined. There is no charge for stock certificates, but
they will not be issued unless DST Systems receives a written request from the
shareowner or the dealer.
Income dividends and capital gains distributions, if any, will be automatically
credited by DST Systems to the shareowner's account in full and fractional
shares of the Fund at net asset value on the date of payment without sales
charge, except to the extent the shareowner elects in writing to the contrary. A
shareowner may at any time give a written direction to DST Systems that all
income dividends and/or capital gains distributions are to be paid to him in
cash. A shareowner may terminate his account at will. An application form for
such an account appears on page 28 of this prospectus.
PRE-AUTHORIZED CHECK PLAN:
Investment Plan
Investors desiring to make monthly investments are given the option to utilize a
pre-authorized check plan whereby DST Systems, Inc., as agent for the
Distributor, is empowered to draft the investor's bank account monthly in the
amount of $25.00 or more as specified by the investor. The proceeds of the draft
will be invested in shares of the Fund at the offering price on the 5th or 20th
day of the month as specified by the investor, or the next succeeding business
day should the date of the draft fall on a day when the New York Exchange is not
open. Forms for this purpose are available from your Dealer or by writing the
Fund Underwriter.
CHECK-A-MONTH PAYMENT PLAN:
Withdrawal Plan
Under this Plan, you can advise DST Systems how many dollars you wish to receive
each month or each quarter, provided your shares are worth at least $5,000 at
the time the plan is initiated. However, there can be no withdrawal in excess of
current account balance.
At the net asset value effective on the 15th day of each month (or effective on
the closest business day) Fund shares will be sold to make up the amount of each
month's payment (since all dividends and distributions are automatically
reinvested at net asset value). These sales may deplete the shareholder's
investment, especially in declining markets, and may create an income tax
liability or credit, depending on whether the sale price is higher or lower than
the shareholder's cost basis. This arrangement does not, of course, provide a
guaranteed annuity.
Ordinarily, it will be disadvantageous to be making withdrawals under a Plan
like this while buying shares in this or any other investment company, because
you will be paying unnecessary sales charges. Accordingly, if you start a
Withdrawal Plan, your Accumulation Plan open account, if one is in effect, will
be terminated.
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<PAGE>
HANDLING INVESTING AND REDEMPTION TRANSACTIONS THROUGH YOUR BANK OR
SAVINGS INSTITUTION;
A. Shareholders may arrange for automatic investing whereby the Transfer Agent
will be authorized to initiate a debit to your bank account in a specific amount
(minimum $50) to be used to purchase shares of the Fund. Scheduled automatic
investments may be made any day of the month. After each automatic investment,
you will receive a transaction confirmation and the debit should be reflected on
the shareholder's next bank statement. The plan may be terminated by the
shareholder at any time, and the Fund also may modify or terminate the plan at
any time. If, however, the shareholder terminates an automatic investment plan
leaving an account balance of less than $1,000, the Fund may close that account.
If the applicant desires to utilize this investment option, that election should
be made on the application included in this prospectus.
B. If a shareholder who has elected the check-a-month payment plan or who
requests a redemption or purchase of part or all of his or her shares so
requests, payment of the redemption amount may be made through the Automated
Clearing House ("ACH") direct to the shareholder's bank or savings institution
if the shareholder has selected that option in the application and has named a
commercial bank or savings institution with a routing number to which the
Transfer Agent can send the redemption proceeds. Once the ACH redemption
privilege has been initiated, the shareholder or someone acting on his or her
behalf may make such redemption request by calling 1-800-616-4414. He or she may
also use the ACH by mailing a signed request that includes the name of the Fund,
the account number and the amount to be transferred to:
Investors Research Fund, inc.
P.O. Box 419958
Kansas City, MO 64141
Changes in banking information, bank, account or special instructions will
require a signature guarantee on the instructions.
CERTIFICATE SHAREHOLDERS REINVESTMENT PRIVILEGES:
Shareholders who may not wish to participate in the Investment Accumulation Plan
or Check-a-Month Payment Plan, and who have elected to receive dividends and
distributions in cash regularly, may still enjoy the privilege of electing to
reinvest dividends and distributions at net asset value without sales commission
by so electing within 15 days of the date of payment, and returning their
dividend to the Transfer Agent for reinvestment. Such reinvestments will be made
at the closing net asset value on the day the dividend or distribution is
received by DST Systems.
RETIREMENT PLAN FOR THE SELF-EMPLOYED:
For those self-employed individuals who wish to purchase shares of the Fund in
conjunction with the Self-Employed Individuals Tax Retirement Act of 1962,
(Keogh Act), there is available through the Principal Underwriter an Agreement
and Plan. The Plan has been accepted by the Federal Internal Revenue Service for
adoption as a master plan by a self-employed individual. Investors Fiduciary
Trust Company of Kansas City, Missouri acts as custodian of the assets
represented by the shares in each Keogh Account. The Custodian will charge $12
per year to the Keogh participants for this service, and will file such
information as may be required by the Internal Revenue Service or other
agencies.
DST Systems,Inc., a data processing company which provides services to all
shareholders of the Fund, will act as accounting and reporting agent for the
Keogh Plan sponsored by the Fund. It will provide the participants with regular
accountings of their investments, and with a cumulative statement at least
annually of their plan assets.
The Agreement provides that normal fees as Accounting and Reporting Agent or
out-of-pocket expenses (as Accounting and Reporting Agent) are not included in
the above charges.
For further details, including the right to appoint a successor custodian, see
the Agreement and Plan Application available through your investment dealer.
- 23 -
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNT:
An employed person may establish an I.R.A. plan regardless of his participation
in any other retirement program, and there is available through the Principal
Underwriter an individual retirement account (I.R.A.) established under the
Employee Retirement Income Security Act of 1974.
The IRA sponsored by Investors Research Fund, Inc. (the Fund) is substantially
identical to the model IRA approved by the Internal Revenue Service. Investors
Fiduciary Trust Company of Kansas City, Missouri acts as Custodian of the assets
represented by the shares in each IRA custodial account. The Custodian will
charge $12 per year to IRA participants for this service, and will file such
information as may be required by the Internal Revenue Service or other
agencies.
DST Systems, Inc., a data processing company which provides services to all
shareholders of the Fund, will act as accounting and reporting agent for the IRA
plan sponsored by the Fund. It will provide the participants with regular
accountings of their investments, and with a cumulative statement at least
annually of their plan assets.
On the initial investment in an Individual Retirement Account, the funds are
invested on the date of receipt by DST Systems. However, in compliance with
Internal Revenue Service rules each individual has the right to revoke the
investment in seven days by notifying DST Systems by mail or telegram, and all
funds will be returned to the investor.
403 (b) RETIREMENT ACCOUNT:
The Fund offers a Plan and Custody Agreement for those employees who qualify
under section 403 (b) of the Internal Revenue Code and who wish to purchase
shares of the Fund in conjunction with a tax-deferred compensation arrangement.
Consult your dealer or the Principal Underwriter of the Fund.
RETIREMENT PLANS: General
All payments for Keogh Plans and IRAs must be mailed directly to DST Systems,
and should not be placed through your investment dealer's normal order entering
process. Make checks payable to Investors Research Fund, Inc.
As soon as practicable following each purchase for a Participant's account, DST
Systems will furnish the Participant with a statement indicating (a) dollars
invested and price per share, (b) the number of full and fractional shares just
purchased, (c) total full and fractional shares held under the Plan, and (d) a
history for the year-to-date of all transactions for the Participant's account.
The Internal Revenue Code has several important restrictions concerning
contributions to and withdrawals from Keogh Plans and IRAs. Therefore,
consultation with a competent legal or financial adviser with respect to plan
requirements and tax aspects is recommended.
REDEMPTION OF SHARES:
The net asset value is determined once daily as of the close of the New York
Stock Exchange on each day on which said Exchange is open for trading.
Redemptions are confirmed at the net asset value next to be determined, unless
redemption at a specified future date is requested. The Board of Directors
reserves the right to make interim determinations, of net asset value.
On behalf of the Fund, the transfer agent, DST Systems, Inc., will redeem shares
from stockholders of record at the per share net asset value next to be
determined after receipt of a properly executed request from a shareholder *,
unless, as noted above, redemption at a future date is requested. The Fund's
transfer agent is willing to accept notices of redemption to be effected on a
specified business day in the future, not to exceed fifteen (15) calendar days
from the date of the notice. For example, notice can be given to redeem a
particular number of shares on a specified business day or a sufficient number
of shares to provide a stipulated dollar amount on the last business day of a
specified period (e.g., a specified year, month, week, or quarter) or any other
business day. The share value at which redemption will be made will be the net
asset value determined for the day specified for redemption.
- 24 -
<PAGE>
Please take note, however, that market conditions can change during the period
specified and neither the Fund nor DST Systems, Inc. assumes any responsibility
for taking action itself to deal with any such interim market action.
Nevertheless, in view of such possibility, DST Systems, Inc. will accept written
instructions canceling a specific redemption request transmitted by FAX
transmission and received a sufficient time prior to execution to allow
cancellation. The DST Systems, Inc. FAX number for such notices is (816)
435-7123.
For a properly executed request all parties (or trustees) in whose name the
shares are held should sign, and any redemption of either book shares or
certificates exceeding $50,000 in value should be accompanied by a stock power
or letter with the signatures guaranteed. Shareholders' signatures may be
guaranteed by municipal and government securities dealers and brokers, national
and registered securities exchanges and associations, savings associations, and
most credit unions as well as banks, trust companies and securities brokers. The
Fund's transfer agent, DST Systems, Inc., determines the acceptability of
specific guarantor institutions and the form of signature guarantee presented.
Be sure to identify your account number.
Requests for redemption should be sent to the transfer agent's office at the
address listed on the face of this prospectus. It is suggested that all
redemption requests by mail be sent Certified with return receipt. Normally
payment for shares redeemed will be made by check by the Fund, mailed within
seven days after receipt of the certificates or the written redemption request.
The Fund may delay forwarding a redemption check for recently purchased shares
while it determines whether the purchase payment will be honored. Such delay may
take up to 15 days or more. Redemption of shares or payment may be suspended at
times (a) when the New York Stock Exchange is closed other than customary
week-end and holiday closings, (b) when trading on said Exchange is restricted,
(c) when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by order,
so permits, provided that applicable rules and regulations of the Securities and
Exchange Commission shall govern as to whether the conditions prescribed in (b)
or (c) exist. The redemption price will be 100% of the net asset value, but the
Fund reserves the right to fix an across the board redemption fee in an amount
not to exceed 1% of the net asset value. The Fund does not presently intend to
charge a redemption fee.
Shares will normally be redeemed for cash, although the Corporation retains the
right to redeem its shares in kind under unusual circumstances, such as an
unusually large redemption, in order to protect the interests of the remaining
shareholders, by the delivery of securities selected from its assets, at its
discretion. The Corporation has, however, elected to be governed by Rule 18f-1
under the Investment Company Act of 1940 pursuant to which the corporation is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Corporation during any 90 day period for any one
shareholder. Should redemptions by any shareholder exceed such limitations, the
Corporation will have the option of redeeming the excess in cash or in kind. If
shares are redeemed in kind the redeeming shareholder might incur brokerage
costs in converting the assets to cash. The method of valuing securities used to
make redemptions in kind will be the same as the method of valuing portfolio
securities described under Net Asset Value, page 10, and such valuation will be
made as of the same time the redemption price is determined.
A shareholder may also submit his endorsed certificate through a dealer, but any
dealer through whom the redemption is made may impose a service charge. It is
the dealer's responsibility to transmit orders promptly.
SAFEGUARDS AGAINST FRAUDULENT REDEMPTION REQUESTS:
Our transfer agent is concerned about fraudulent redemptions requests,
particularly the practice of requesting change of a shareholder's mailing
address without the knowledge of the shareholder. The criminal then requests
redemption of some or all of the shareholder's shares, with check to be sent to
the new address. All of that without the knowledge of the shareholder.
Accordingly the Fund will no longer honor a redemption request which is received
less than (60) sixty days after the requesting shareholder's record address hass
been changed unless the request is accompanied by a guarantee of the
shareholder's signature. Please refer to the above section for a discussion of
signature guarantees. Additionally, any changes in a shareholder's banking
information to be effective after the initial information has been received by
the Fund or the transfer agent will require that the request be accompanied by a
signature guarantee.
- 25 -
<PAGE>
REINVESTMENT of REDEMPTION PROCEEDS:
A shareholder who has had shares redeemed and has not previously exercised this
reinstatement privilege may, within 9 months after the date of the redemption,
reinstate any portion or all of the proceeds of such redemption in shares of the
Fund at net asset value next determined after a reinstatement request. This
reinvestment request must be accompanied by the full amount of the proceeds to
be reinvested, and sent to the Transfer Agent.
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTION and TAXES:
Ordinary Investment Income. The Fund has complied with Sub-Chapter M of the
Internal Revenue Code in every year and intends to comply with provisions of the
Federal Internal Revenue Code, and to distribute annually on or about the last
business day of December substantially all of its net ordinary investment
income, if any. This policy will relieve the Fund of income tax liability on
such income under said Code. The Fund also intends to meet the distribution
requirements imposed by the Code to avoid the imposition of the 4% excise tax.
The distribution will be made in additional shares of the Fund unless the
shareholder has notified the transfer agent, DST Systems, that he prefers to
receive cash.
Capital Gains. If net gains are realized from the sale of assets during any
year, the Directors will decide whether or not to distribute them. If a
distribution is made, it will be made in additional shares of the Fund unless
the shareholder has notified the transfer agent, DST Systems, that he prefers
cash, and will be made but once annually on or about the last business day of
December. If these gains are not distributed, the Fund will pay the Federal
Income Tax assessed thereon, if any, and advise each shareholder of the amount
of the tax credit to which he will then be personally entitled.
Approximately 3% of the net asset value of the shares at September 30, 1996
represents net unrealized appreciation. Net gain on sale of securities when
realized and distributed, whether paid in cash or additional shares, is taxable.
If the net asset value of shares were reduced below a shareholder's cost by
distribution of gain realized on sale of securities, such distribution would be
a return of investment though taxable as stated above.
To the extent that a regulated investment company distributes the excess of its
net gain over its net loss, such gain is not taxable to the company but is
taxable to the shareholder, irrespective of how long the shareholder may have
held his shares.
Special Note. When declared, all ordinary income and capital gain distributions
immediately reduce the net asset value of the shares by a like amount. Therefore
when shares are purchased just before the declaration date, the distribution
received by that shareholder constitutes a direct return of his capital even
though subject to taxation.
PLAN of DISTRIBUTION UNDER RULE 12b-1:
On March 30, 1993, the Fund adopted a plan of distribution pursuant to the
S.E.C.'s Rule 12b-1. The plan became effective April 1, 1993. During Fiscal
1996, the Fund expended $50,356 pursuant to this plan. The plan authorizes the
Fund to make certain payments to broker-dealers who have engaged in the
marketing and distribution of the Fund's shares and who are available to provide
services to the Fund's shareholders. The payments are made quarterly and are
based on the value of shares held by Fund shareholders for whom the registered
representative is broker of record. Currently, all of the payments represent
compensation to underwriters, dealers and sales personnel for services to
shareholders of the Fund. No director or other interested person of the Fund has
any direct or indirect financial interest in the operation of the plan or its
related agreements.
The Fund believes that the existence of the Plan has enhanced the service level
to Fund shareholders.
Illustration of an Assumed Investment of $10,000
in the Investors Research Fund
[GRAPHIC OMITTED]
The graph compares the results of a $10,000 original investment in the Investors
Research Fund in two different investment scenarios over the life of the fund.
The first being with capital gains income distribution and dividends reinvested
and the second being with capital gains income distributions and dividends
received in cash
- 26 -
<PAGE>
TERMS AND CONDITIONS OF STATEMENT OF INTENTION
Subject to conditions specified below each purchase will be made at the public
offering price applicable to a single transaction of the dollar amount indicated
on the application as described in the then effective Prospectus. I understand
that this reduction in the distribution charge and offering price does not apply
to investments directly into an Investment Accumulation Plan nor will such
investments apply toward the completion of the "Statement."
I understand that after having purchased the amount indicated above, I may
continue purchases for the balance of the period at the public offering price
applicable to such amount. I also understand that I may, at any time during the
period, revise upward my stated intention and that such a revision shall, for
all subsequent purchases, be treated as a new Statement of Intention (including
escrow of additional shares) except as to the period of this statement, which
shall remain unchanged. There will be no retroactive reduction of the
distribution charge already paid on purchases made prior to such revision.
I make no commitment to purchase shares, but I agree that if purchases are made
within thirteen (13) months from this date do not aggregate the amount specified
on the application I will pay the increased amount of distribution charge
prescribed in the terms of escrow set forth below. It is understood that 5% of
the dollar amount checked on the reverse side will be held in escrow in the form
of shares (computed to the nearest full share) registered in my name. These
shares will be held by the Escrow Agent and will be subject to the terms of
escrow referred to above.
I further understand that the privilege of purchasing shares at a reduced
distribution charge over a thirteen month period may be withdrawn as to future
purchases upon information that the shares are being resold or transferred by me
within the thirteen month period.
To assure that I will benefit from the reduced public offering price on future
purchases, my dealer must refer to this statement of intention in placing each
future order by me for shares of the Fund specified above while this statement
is in effect.
TERMS OF ESCROW
1. Out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified in the Statement of Intention shall be held in escrow by
the Escrow Agent, DST Systems, Inc. in the form of shares (computed to the
nearest full share at the public offering price applicable to the initial
purchase hereunder) registered in the name of the purchaser. For instance, if
the minimum amount specified under this Statement is $25,000 and the public
offering price applicable to transactions of $25,000 is $10 a share, 125 shares
($1,250 worth) would be held in escrow. All dividends and any capital gains
distributions on the escrowed shares will be paid directly to the purchaser or
to his order.
2. If the purchaser completes the total minimum investment specified under this
Statement within the thirteen month period, the escrowed shares will be
delivered to the purchaser or to his order promptly upon completion.
3. If the intended investment is not completed, the purchaser will remit to DST
Systems, Inc. an amount equal to the excess of the distribution charge
applicable to a single purchase in the aggregate amount actually paid by him
over the distribution charge actually included in such aggregate amount. If the
purchaser does not within 20 days after written request by Diversified
Securities Inc. or his dealer pay such difference in distribution charge, the
Escrow Agent, upon instructions from Diversified Securities, Inc. will cause to
be redeemed an appropriate number of the escrowed shares in order to realize
such difference. If the proceeds from such a redemption are inadequate for such
purpose, the purchaser shall be liable to DST Systems, Inc. for the difference.
4. The purchaser hereby irrevocably constitutes and appoints the Escrow Agent
his attorney with full power of substitution in the premises to surrender for
redemption any or all escrowed shares on the books of the Fund.
5. Full shares remaining after the redemption referred to in Item 3, together
with any excess cash proceeds of the shares so redeemed, will be delivered to
the purchaser or to his order by the Escrow Agent.
REQUIREMENT THAT PURCHASE COMPLY WITH RULE 22d-1
Rule 22d-1 under the Investment Company Act of 1940, supervised by the
Securities and Exchange Commission, provides that reduced rates on large
transactions are limited to purchases made by the following: An individual, or
an individual, his spouse, and their children under 21 purchasing securities for
his (their) own account; and a trustee or other fiduciary purchasing securities
for a single trust estate or single fiduciary account (including a pension,
profit sharing, or other employee benefit trust created pursuant to a Plan
qualified under Section 401 of the Internal Revenue Code). Such rates are not
allowable to a group of individuals whose funds are combined, directly or
indirectly, for the purchase of securities or to a trustee, agent, custodian or
their representative of such a group.
- 27 -
<PAGE>
Sponsor: DIVERSIFIED SECURITIES, INC. Transfer Agent: DST Systems, Inc.
P.O. Box 357 P.O. Box 419958
3701 Long Beach Blvd. Kansas City, Missouri 64141
Long Beach, California 90801
INVESTORS RESEARCH FUND, INC.
================================================================================
TYPE OF ACCOUNT (Check one only): BASIS FOR OPENING MY
I. [] INVESTMENT ACCUMULATION PLAN ACCOUNT (Check as
Appropriate):
Income Dividends are to be [] Reinvested [] Paid in [] I enclose a check
Capital Gains Distributions cash in the amount of
are to be [] Reinvested [] Paid in $______________
[] Hold shares on deposit OR cash [] I attach
[] Issue certificate and Certificates
deliver to [] Dealer OR [] Investor for__________shares
[] Wire Order
(see attached)
II. []CHECK-A-MONTH PAYMENT PLAN (All payments are processed at the net asset
value effective on the 21st day of the month (Minimum investment is $5,000).
Type of Plan: [] Monthly or [] Quarterly Send check in amount of $ (not less
than $50) Make check payable to: [] Registered Owner(s) as shown below Or []
Other Payee (see attached)
- --------------------------------------------------------------------------------
III.REGISTRATION INFORMATION: REGISTRATION ADDRESS:
Owner(s)____________________________ Street or
____________________________________ P.O. Box________________________
In the case of two or more owners, City ___________________________
the account will be registered State __________ Zip ___________
"Join Tenants" unless otherwise specified.
Soc. Sec. Number ___________________ Citizenship: [] U.S. [] Other________
If you fail to supply the Fund with your correct Social Security Number or Tax
Identification Number you will be subject to a $50 penalty. If you falsify
information on this form or make any other false statement resulting in no
backup withholding on an account which is subject to backup withholding, you may
be subject to a $500 penalty and to certain criminal penalties, including fines
and imprisonment.
(See IRS Certification Information on reverse)
- --------------------------------------------------------------------------------
IV. Authorization for Automated Clearing House Transfer
Investments and/or Redemptions
[]A. Investments - I (we) hereby authorize the Fund's Transfer Agent to have the
amount shown below transferred automatically from my (our) account as
indicated and invested in my (our) Investors Research Fund account. I can
indicate any day between the 3rd and 28th of the month.
[] Monthly, transfer $______________ on the ______ day of the month.
[] Quarterly, transfer $______________ on the _______ day of January,
April, July and October.
[]B. Redemption - I (we) hereby elect to use the Automated Clearing House
transfer facilities in the event I (we) should redeem any of my (our)
shares.
___________________________________ ______________________________
Name of Bank or Savings Institution Account Number at that Bank or
Savings Institution
Type of account: [] Checking [] Savings
YOU MUST ATTACH A VOIDED CHECK OR ENCODED DEPOSIT SLIP. YOUR REQUEST CANNOT BE
PROCESSED WITHOUT IT.
- --------------------------------------------------------------------------------
V. STATEMENT OF INTENTION. Although I am not obligated to do so, it is my
intention to purchase shares of INVESTORS RESEARCH FUND, INC. over a period of
thirteen months in accordance with the provisions provided on page 13 of the
Fund's prospectus. The aggregate amount of such purchase(s) to be at least equal
to the amount indicated below:
[] $25,000 [] $50,000 [] $100,000 [] $250,000 [] $500,000 [] $1,000,000
Accepted by Diversified Securities, Inc.
By ______________________Escrow Shares ____________ Expiration Date ____________
- --------------------------------------------------------------------------------
VI. TO BE EXECUTED BY DEALER: The undersigned desires to act as a dealer for
this account and hereby enters into the dealer
agreement on the reverse side of this application.
Unregistered shares are being held by the Distributor for this plan:
___________ _____________ __________ Dealer's Name and Address
Invoice No. No. of Shares Trade Date (Main Office Only)
_________________________
______________________________________ | |
Representative's Last Name and Number | |
______________________________________ | |
Dealer Branch in Which Plan Originated _________________________
______________________________________
Authorized Signature of Dealer (see over)
- --------------------------------------------------------------------------------
- 28 -
<PAGE>
DEALER AGREEMENT
Under these plans, the dealer signing the application acts as principal in all
purchases of Fund shares and appoints the Transfer Agent as its agent to execute
the purchases, confirm each purchase for the investor, and transmit to the
investor each new prospectus of the Fund. The Transfer Agent remits monthly to
the dealer the amount of its commissions. The dealer hereby guarantees the
genuineness of the signature(s) on the application and represents that he is a
duly licensed dealer and may lawfully sell Fund shares in the state designated
as the Investor's mailing address, and that he has entered into a Selling Group
Agreement with Diversified Securities Inc. with respect to the sale of Fund
shares. The dealer signature on the reverse side of this application signifies
acceptance of the concession terms, a signature guarantee, and acceptance of
responsibility for obtaining additional sales charges if specified purchases are
not completed.
IRS CERTIFICATION INFORMATION
As required by law, the Fund is to withhold Federal Income tax equal to 20% from
income dividends, capital gains distributions and redemption payments if you do
not provide the Fund with your correct social security or other taxpayer
identification number. In addition, the Fund is required to withhold from income
dividends and capital gains distributions, but not redemption payments, if you
do not certify to the Fund that you are not subject to backup withholding due to
notification by the Internal Revenue Service of under reported interest or
income from dividends, including those which would otherwise be reinvested in
additional shares of the Fund.
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION
- --------------------------------------------------------------------------------
[] New Account Part II:
A. [] I have [] I have NOT
Name been notified by the IRS that
_________________________ I am subject to Backup
Please Print Withholding as a result of a
failure to report dividend or
Address interest income.
_____________________________
_____________________________________ B. [] The IRS has notified me that
_____________________________________ I am no longer subject to
_____________________________________ Backup Withholding.
- --------------------------------------------------------------------------------
Part I: Part III:
A. Social Security Number or Tax I.D.
Number
NON-RESIDENT ALIEN
__ __ __ __ __ __ __ __ __ Under penalties of perjury, I certify
that I am neither a citizen nor a
resident of the United States.
B. I do not have a TIN, but I have
applied for or intend to apply for
one. I understand that if I do not _____________________________________
provide this number within 60 days, Signature (Non-Resident Alien)
the required 20% withholding will
apply.
- --------------------------------------------------------------------------------
Under Penalties of perjury, I certify If Further information is needed.
that the information on this form is consult your tax adviser.
true, correct and complete
_____________________________________ _____________________________________
Signature Date Signature Date
_____________________________________ _____________________________________
Signature Date Signature Date
- 29 -
<PAGE>
PERFORMANCE INFORMATION:
From time to time, Investors Research Fund may state its total return in
advertisements and investor communications. Total return is the change in value
of an investment in the Fund over a given period, assuming reinvestment of any
dividends and capital gains, thus reflecting actual performance over the stated
period. Total return may be stated for any relevant period as specified in the
advertisement or communication. Any statements of total return, or other
performance data on the Fund, will normally be accompanied by information on the
Fund's average annual compounded rate of return over the most recent four
calendar quarters and the period from the Fund's inception of operations. The
Fund may also advertise aggregate and average total return information over
different periods of time.
The Fund's average annual compounded rate of return is determined by reference
to a hypothetical $1,000 investment in the Fund. The value of the $1,000
investment is then ascertained at the end of the stated period (one year, five
years, ten years, and the life of the fund) as if the shareholder had redeemed
his or her investment at that time. Thus, the calculation takes into
consideration the maximum sales charge, all distributions, and whatever capital
appreciation and depreciation occurred during the particular period. Taxes are
not deducted. Finally, by use of a mathematical formula, the final increase or
decrease is given on the basis of an average annual return which, compounded
annually, would have produced an amount equaling the redemtion value at the end
of the period stated. Aggregate total return is calculated in a similar manner
except that the results are not stated on an annualized basis.
The result is that each such calculation assumes that the maximum sales charge
was deducted from the initial $1,000 investment at the time it was made and that
all dividends and distributions were reinvested at net asset value on the
reinvestment dates during the particular period stated. It is to be noted that
averaging the total return over a period creates a hypothetical rate of return
that, if achieved annually, would have produced the same total return with
performance constant over the entire period. Averaging has the affect of
smoothing out year to year variations; actual year by year results almost always
differ from each other to some extent, but the ending total return is the same
in both presentations.
The performance of the Fund may be compared to that of various indexes of
investment performance published by third parties (including, for example, and
not limited to, The Dow Jones Industrial Average. The S&P 500, and the NASDAQ
Composite Index). Also, the Fund's standard performance may be compared to the
Fund's performance calculated as if no sales charges were deducted.
From time to time, evaluations of the Fund's performance by independent sources
may also be used in advertisements and in information furnished to present or
prospective investors in the Fund.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current or average total return
for any period should not be considered as a representation of what an
investment may earn or what an investor's total return may be in any future
period.
OTHER SERVICES:
United Missouri Bank, 928 Grand Avenue, Kansas City, Missouri 94141, is the
Fund's custodian, and as such is responsible for safekeeping of securities in
the Fund.
Timpson Garcia, 1610 Harrison Street, Oakland, CA 94612, is the Fund's
independent accountant and annually audits the financial statements of the Fund.
For a more complete description of the duties performed by the independent
accountant, see page 34 of this document.
SHAREHOLDER'S INQUIRIES:
In the event a shareholder should have any question concerning his or her
individual records or matters of shareholder accounting, he or she should direct
the inquiry in writing to DST Systems, Inc., P.O. Box 419958, Kansas City, MO
64141, (800) 616-4414 or (816) 435-1089. In the event a shareholder should
desire information relating to general operations of the Fund, he or she should
write to Investors Research Fund, Inc., 3916 State Street, Suite 3C, Santa
Barbara, CA 93105, or (800) IRFUND1 or (805) 569-3253.
- 30 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
with Dividends and Capital Gains Distributions Reinvested in
Additional Shares and Calculated on the Basis of the Current Sales Commission
The table below covers a period from March 3, 1959 to Sept. 30, 1996 the life of
the Fund. While this period, on the whole, was one of generally rising common
stock prices, it also included some interim periods of substantial market
decline. The results shown should not be considered as a representation of the
dividend income or capital gains or loss which may be realized from an
investment made in the Fund today.
<TABLE>
<CAPTION>
Cost Net Asset Value of Shares Accumulated
Total Cost
Year Annual Cumulative Including Initially Capital Subtotal Investment Total
Ended Dividends Dividends Invested Gains Of Value
12/31 Invested Invested Dividends Distribution Dividends
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1959-65 $ 810 $ 810 $ 10,810 $ 13,873 $ 5,125 $ 18,998 $ 1,058 $ 20,056
1966-70 $ 1,424 $ 2,234 $ 12,234 $ 11,628 $ 12,344 $ 23,972 $ 2,196 $ 26,168
1971-75 $ 2,699 $ 4,933 $ 14,933 $ 12,268 $ 18,436 $ 30,704 $ 5,225 $ 35,929
1976-80 $ 4,670 $ 9,603 $ 19,603 $ 23,614 $ 59,198 $ 82,812 $ 17,036 $ 99,848
1981 $ 1,624 $ 11,227 $ 21,227 $ 13,254 $ 58,111 $ 71,365 $ 11,196 $ 82,561
1982 $ 5,265 $ 16,492 $ 26,492 $ 18,671 $ 81,860 $100,531 $ 21,334 $121,865
1983 $ 0 $ 16,492 $ 26,492 $ 20,092 $111,063 $131,155 $ 22,958 $154,113
1984 $ 6,188 $ 22,680 $ 32,680 $ 17,633 $106,658 $124,291 $ 26,496 $150,787
1985 $ 3,614 $ 26,294 $ 36,294 $ 19,324 $127,301 $146,625 $ 32,621 $179,246
1986 $ 1,069 $ 27,363 $ 37,363 $ 19,862 $174,676 $194,538 $ 34,561 $229,098
1987 $ 2,659 $ 30,022 $ 40,022 $ 18,978 $198,019 $216,997 $ 35,901 $252,898
1988 $ 8,601 $ 38,623 $ 48,623 $ 18,094 $188,799 $206,893 $ 42,949 $249,842
1989 $ 4,827 $ 43,450 $ 53,450 $ 21,667 $226,078 $247,745 $ 56,189 $303,934
1990 $ 13,634 $ 57,084 $ 67,084 $ 18,018 $220,011 $238,029 $ 60,453 $298,482
1991 $ 4,137 $ 61,221 $ 71,221 $ 25,125 $310,784 $335,909 $ 88,768 $424,677
1992 $ 4,805 $ 66,026 $ 76,026 $ 18,479 $294,064 $312,543 $ 70,066 $382,609
1993 $ 4,375 $ 70,401 $ 80,401 $ 17,902 $317,716 $335,618 $ 72,295 $407,913
1994 $ 41,929 $112,330 $122,330 $ 14,368 $279,267 $293,635 $100,154 $393,789
1995 $ 40,017 $114,021 $162,347 $ 15,290 $297,188 $312,478 $146,615 $459,093
9-30-96 $ 0 $161,640 $162,347 $ 16,636 $323,323 $339,959 $159,508 $499,467
<FN>
The total cost figure represents the initial cost of $10,000 plus the cumulative
amount of income dividends reinvested, but a sales commission of 5.75% is
included only on the initial $10,000 investment as all shareholders enjoy the
privilege of reinvesting dividends and distributions without sales charge. The
dollar amounts of capital gains distributions accepted in shares were: 1959 nil;
1960 $208; 1961 nil; 1962 $85; 1963 nil; 1964 $1,126; 1965 $2,358; 1966 $697;
1967 $2,566; 1968 $2,291; 1969 $4,582; 1970 nil; 1971 nil; 1972 $6,359; 1973
nil; 1974 nil; 1975 nil; 1976 nil; 1977 nil; 1978 $4,417; 1979 $7,020; 1980
$4,699; 1981 $25,175; 1982 nil; 1983 $23,281; 1984 $9,113; 1985 $10,687; 1986
$46,198; 1987 $29,252; 1988 nil; 1989 nil; 1990 $32,354; 1991 $3,756; 1992
$65,668; 1993 $32,447; 1994 $24,095; 1995 nil. Total $338,434.
No adjustment has been made for any income taxes payable by shareholders on
capital gains distributions and dividends reinvested in shares.
In this illustration the dollars invested over the life of the Fund yielded a
total return of +4,895%, or an average annual compound total return of +10.76%
per year.
</FN>
</TABLE>
- 31 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
SUMMARY OF REGULAR INVESTING OVER THE PAST 37 1/2 YEARS $100 PER MONTH
(The Life of the Fund)
[GRAPHIC OMITTED]
Illustration of An Assumed Continuous Investment Program in terms of investments
of $100 per month with Dividends and Capital Gains Distributions accepted in
shares. Covers the period from March 3, 1959 to Sept. 30, 1996 - the life of the
Fund. While this period, on the whole, was one of generally rising common stock
prices, it also included some interim periods of substantial market decline.
The results shown should not be considered as a representation of the dividend
income or profit or loss which may be realized from an investment made in the
Fund today. Such systematic investment plans cannot assure a profit or protect
against depreciation in declining markets. No adjustment has been made for any
income taxes payable by shareholders on capital gains income distributions
accepted in shares.
Investors Research Fund, Inc.
Summary of Regular Investing Over the Past 37 1/2 Years (The Life of the Fund)
Monthly Investments of $100
Total Investment since March 3, 1959............................... $ 45,100
Income Dividends for Period Invested............................. 192,054
Total Investment Cost Including Invested Dividends............... $ 237,154
Value of Investment on September 30, 1995*......................... $ 645,113
* Includes value of shares accepted as capital gains distributions. The total
dollar amounts of the distributions (at the time shares were acquired) were
$414,039.
<TABLE>
<CAPTION>
COST CUMULATIVE NET ASSET VALUE OF SHARES
Total Cost As From
Year Cumulative Annual Cumulative Including Through Capital Sub Investment Total
Ended Monthly Dividends Dividends Invested Monthly + Gain = Total + of = Value
12/31 Investments Invested Invested Dividends Investments Distributions Dividends
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1959-65 $ 8,200 $ 363 $ 363 $ 8,563 $ 10,181 $ 2,968 $ 13,149 $ 466 $ 13,615
1966-70 $ 14,200 $ 1,204 $ 1,567 $ 15,767 $ 13,222 $ 9,171 $ 22,393 $ 1,503 $ 23,896
1971-75 $ 20,200 $ 2,805 $ 4,372 $ 24,572 $ 19,365 $ 14,978 $ 34,343 $ 4,615 $ 38,958
1976-80 $ 26,200 $ 5,486 $ 9,858 $ 36,058 $ 46,346 $ 56,913 $103,259 $ 17,049 $120,308
1981 $ 27,400 $ 1,978 $ 11,836 $ 39,236 $ 26,746 $ 62,252 $ 88,998 $ 11,559 $100,557
1982 $ 28,600 $ 6,482 $ 18,318 $ 46,918 $ 39,217 $ 87,694 $126,911 $ 23,131 $150,042
1983 $ 29,800 $ 0 $ 18,318 $ 48,118 $ 43,213 $122,829 $166,042 $ 24,892 $190,934
1984 $ 31,000 $ 7,716 $ 26,034 $ 57,034 $ 38,998 $119,251 $158,249 $ 29,760 $188,009
1985 $ 32,200 $ 4,531 $ 30,565 $ 62,765 $ 43,886 $143,746 $187,632 $ 37,108 $224,740
1986 $ 33,400 $ 1,346 $ 31,911 $ 65,311 $ 46,060 $202,929 $248,989 $ 39,440 $288,429
1987 $ 34,600 $ 3,359 $ 35,270 $ 69,870 $ 44,948 $233,206 $278,154 $ 41,321 $319,475
1988 $ 35,800 $ 10,905 $ 46,175 $ 81,975 $ 43,982 $222,348 $266,330 $ 50,452 $316,782
1989 $ 37,000 $ 6,140 $ 52,315 $ 89,315 $ 53,892 $266,251 $320,143 $ 66,470 $386,613
1990 $ 38,200 $ 17,396 $ 69,711 $107,911 $ 45,803 $262,250 $308,053 $ 72,789 $380,842
1991 $ 39,400 $ 5,292 $ 75,003 $114,403 $ 65,294 $370,799 $436,093 $107,219 $543,312
1992 $ 40,600 $ 6,162 $ 81,165 $121,765 $ 48,984 $356,700 $405,684 $ 84,986 $490,670
1993 $ 41,800 $ 5,624 $ 86,789 $128,589 $ 48,563 $387,766 $436,329 $ 88,009 $524,338
1994 $ 43,000 $ 54,019 $140,808 $183,808 $ 39,934 $342,488 $382,422 $124,914 $507,336
1995 $ 44,200 $ 51,246 $192,054 $236,254 $ 43,458 $364,466 $407,924 $184,197 $592,121
9-30-95 $ 45,100 $ 0 $192,054 $237,154 $ 48,200 $396,517 $444,717 $200,396 $645,113
<FN>
* The total cost figure represents the cumulative total of monthly investments
of $100 plus the cumulative amount of income dividends invested, but includes a
sales charge of 5.75% (subject to discount under right of accumulation) only on
shares purchased through monthly investments. No adjustment has been made for
any income taxes payable by shareholders. The dollar amounts of capital gain
distributions accepted in shares were: 1959 nil; 1960 $43; 1961 nil; 1962 $27;
1963 nil; 1964 $642; 1965 $1,461; 1966 $486; 1967 $1,915; 1968 $1,805; 1969
$3,770; 1970 nil; 1971 nil; 1972 $6,122; 1973 nil; 1974 nil; 1975 nil; 1976 nil;
1977 nil; 1978 $5,053; 1979 $8,196; 1980 $5,564; 1981 $30,132; 1982 nil; 1983
$28,344; 1984 $11,166; 1985 $13,168; 1986 $57,156; 1987 $36,313; 1988 nil; 1989
nil; 1990 $40,568; 1991 $4,722; 1992 $84,441; 1993 $41,819;1994 $31,126; 1995
nil. Total $414,039.
</FN>
</TABLE>
- 32 -
<PAGE>
Comparison of the Investors Research Fund to Standard & Poor's 500 Stock Index
[GRAPHIC OMITTED]
The average annual compound rate of Total Return for the 1, 5, and 10 year
periods ended September 30, 1996 was +8.08%, +5.54%, and +7.70% respectively.
Total Return quotations reflect the deduction of the maximum initial sales
charge, deduction of proportional shares of Fund expenses, and assume that all
dividends and distributions are reinvested when paid.
Past performance is not predictive of future performance.
- 33 -
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Directors
Investors Research Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Investors Research Fund, Inc., including the securities in the Fund, as of
September 30, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the selected per share data and ratios for each of the
four years in the period then ended. These financial statements and per share
data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
selected per share data and ratios based on our audits. The selected per share
data and ratios for the year ended September 30, 1992, were audited by other
auditors whose report dated October 13, 1992, expressed an unqualified opinion
on the per share data and ratios.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of Investors Research Fund, Inc. as of September 30, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the selected per share data
and ratios for each of the four years in the period then ended, in conformity
with generally accepted accounting principles.
TIMPSON GARCIA
Oakland, California
October 18, 1996
- 34 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996
A S S E T S
Investments in securities, at market
(cost $29,584,352) (Note 1) $ 30,491,151
Cash 96,332
Receivables - dividends from common stocks 70,661
Other assets 31,407
---------------------
$ $30,689,551
L I A B I L I T I E S
Investment securities purchased $ 146,730
Investment advisory fees (Note 2) 35,115
Other expenses 65,578 $247,423
--------------- ---------------------
Net assets at September 30, 1996 $ $30,442,128
=====================
Net assets value per share on 7,032,451
shares outstanding (Note 3) $4.329
=====================
Maximum offering price per share
(100/94.25 of $4.329) $4.593
=====================
See Notes to Financial Statements.
- 35 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
SECURITIES IN THE FUND
September 30, 1996
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
AUTO & AUTO PARTS ( 4.8%)
16,200 Chrysler Corp $ 463,725
5,900 Dana Corp 178,475
13,600 Ford Motor 425,000
9,150 Genuine Parts 400,312
BANKS (5.7%)
2,400 Barnett Banks Inc 81,000
1,400 CoreStates Financial 60,550
6,700 Mellon Bank Corp 396,975
12,300 Morgan (J.P.) 1,093,163
3,900 Signet Banking 104,325
CHEMICAL (10.7%)
8,500 Betz Laboratories 446,250
1,600 Dow Chemical 128,400
10,600 duPont (El) deNemours 934,125
14,100 Lubrizol Corp 405,375
16,000 Minnesota Mining & Mfg 1,116,000
6,100 Nalco Chemical 221,125
COPPER (1.2%)
5,800 Phelps Dodge 371,925
DIVERSIFIED COMPANIES (1.3%)
15,300 Ogden Corp 307,913
900 TRW Inc. 83,700
DRUGS (1.3%)
5,700 Merck & Co 401,137
ELECTRICAL EQUIPMENT (5.8%)
10,400 Cooper Industries 449,800
9,800 General Electric 891,800
11,600 Phillips Electronics NV 416,150
- 36 -
<PAGE>
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
ELECTRICAL UTILITIES (3.8%)
12,300 New England El Sys $ 382,838
14,500 Public Service Enterprises 387,875
13,700 Western Resources 399,013
ELECTRONICS (1.4%)
10,600 AMP Inc 410,750
ENVIRONMENTAL (0.8%)
15,000 Safety-Kleen 247,500
FOOD PROCESSING (5.3%)
7,000 General Mills 422,625
9,800 Heinz (H.J.) 330,750
11,500 Quaker Oats 418,312
12,100 Sara Lee Corp 432,575
FOOD WHOLESALE (1.3%)
14,100 Supervalu Inc 387,750
INSURANCE (1.8%)
3,800 Lincoln Natl Corp 166,725
1,150 Marsh & McLennan 111,694
5,600 Torchmark Corp 256,900
MACHINERY (2.7%)
8,700 GATX Corp 406,725
12,600 TRINOVA Corp 398,475
MARITIME (1.0%)
12,000 Alexander & Baldwin 294,000
MEDICAL SUPPLIES (2.1%)
8,100 Abbott Laboratories 398,925
6,900 Bausch & Lomb 253,575
METAL FABRICATING (1.3%)
10,200 Timken Co 400,350
- 37 -
<PAGE>
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
NATURAL GAS (1.1%)
1,500 Tenneco Inc $ 75,188
11,500 Valero Energy 253,000
OFFICE EQUIPMENT (1.2%)
20,300 Moore Corp Ltd 373,013
PAPER & FOREST PRODUCTS (8.1%)
7,600 Consolidated Papers 395,200
26,500 International Paper 1,126,250
9,800 Rayonier Inc 389,550
12,700 Stone Container 196,850
7,500 Union Camp 366,562
PETROLEUM (11.4%)
18,600 Chevron Corp 1,164,825
13,000 Exxon Corp 1,082,250
600 Mobil Corp 69,450
12,700 Texaco Inc 1,168,400
PRECISION INSTRUMENTS (4.6%)
13,100 Eastman Kodak 1,028,350
21,200 EG & G Inc 378,950
PUBLISHING (1.2%)
18,100 Jostens Inc 377,838
RAILROAD (0.5%)
1,500 Norfolk Southern 137,063
RETAIL (1.3%)
13,300 Limited Inc 254,362
2,800 Penney (J.C.) 151,900
SECURITIES BROKERAGE (0.1%)
1,100 Edwards (AG) Inc 32,037
STEEL (1.3%)
14,300 USX-US Steel Group 407,550
- 38 -
<PAGE>
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
TELECOMMUNICATIONS (3.0%)
3,500 AT & T Corp $ 182,875
1,500 Sprint Corp 58,312
13,400 Telefonica de Argentina ADS 333,325
5,900 Telefonica de Espana ADS 328,187
TOBACCO (4.3%)
7,600 American Brands 321,100
10,900 Philip Morris Cos 978,275
-------------------
Total common stock (90.4%)
(cost $26,608,445) $ 27,515,244
$3,000,000 U.S. TREASURY BILLS -
due November 29,1996 (9.8%) 2,975,907
-------------------
Total assets (100.2%) $ 30,491,151
Less: excess of payables over cash
and other assets (0.2%) 49,023
-------------------
Net assets (100.0%) $ 30,442,128
===================
See Notes to Financial Statements.
- 39 -
<PAGE>
INVESTORS RESEARCH, FUND, INC.
STATEMENT OF OPERATIONS
Year Ended September 30, 1996
Investment income:
Dividends $ 2,508,365
Interest 87,061
Other (Note 4) 5,195
-------------
Total investment income $ 2,600,621
Expenses:
Investment advisory fee (Note 2) $ 145,654
Legal, accounting and auditing 101,834
Transfer agent fee 55,938
12b-1 distribution fees 50,356
Custodian fee $ 24,062
Less credits earned (Note 5) 6,120 17,942
---------
Salaries - officer 14,400
Salaries - other 30,073
Insurance 26,358
Taxes 30,603
Notices to investors 29,515
Directors' fees 17,750
Registration fees 15,394
Miscellaneous 1,690
-------------
Total expenses 537,507
------------
Net investment income $ 2,063,114
Realized and unrealized gain (loss) on investments:
Net realized gain $ 2,576,382
Net decrease in unrealized appreciation of
investments during the year (382,533)
-------------
Net gain on investments 2,193,849
Net increase in net assets resulting from operations $ 4,256,963
============
See Notes to Financial Statements.
- 40 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended September 30, 1996 and 1995
1996 1995
(DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 2,063,114 $ 522,843
Net realized gain (loss) on investments 2,576,382 (136,509)
Net change in unrealized appreciation
of investments (382,533) 2,123,911
------------ -----------
Net increase in net assets
resulting from operations $ 4,256,963 $ 2,510,245
------------ -----------
Distributions paid to shareholders:
From net investment income $ (515,788) $(3,952,096)
From net realized gain on investments (2,063,154) (2,099,817)
------------ -----------
Total distributions to shareholders $ (2,578,942) $(6,051,913)
------------ -----------
Fund share transactions:
Proceeds from sale of Fund shares $ 288,486 $ 922,757
Proceeds from reinvestment of distributions
from net
investment income and net realized gain
on investments 2,239,506 5,418,536
Cost of shares redeemed from shareholders (5,777,015) (7,256,192)
------------ -----------
Net (decrease) in net assets due to
fund share transactions $ (3,249,023) $ (914,899)
------------ -----------
Total (decrease) in net assets $ (1,571,002) $(4,456,567)
NET ASSETS:
Beginning of year 32,013,130 36,469,697
------------ -----------
End of year $ 30,442,128 $32,013,130
============ ===========
NET ASSETS CONSIST OF:
Fund shares at par $ 7,032,451 $ 7,806,337
Paid in capital 19,973,211 22,532,049
Undistributed net investment income 2,153,869 522,843
Undistributed net realized gain (loss)
on sale of investment securities 375,798 (137,430)
Unrealized appreciation of investment
securities 906,799 1,289,331
------------ -----------
$ 30,442,128 $32,013,130
============ ===========
See Notes to Financial Statements.
- 41 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Investors Research Fund is registered under the Investment Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund
is incorporated in the State of Delaware.
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets,
liabilities, revenues and expenses.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles
for investment companies.
Security valuations:
A security listed or traded on an exchange is valued at its last sales
price on the exchange where the security is principally traded. Each
security reported on the NASDAQ National Market System is valued at
the last sales price on the valuation date. Short-term obligations
(U.S. Treasury Bills) are valued at amortized cost which approximates
market value.
Security transactions and related investment income:
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Realized gains or losses on security
transactions are computed on the basis of specific identification of
the securities sold. Interest income is recorded as earned from
settlement date and is recorded on the accrual basis. Dividend income
is recorded on the ex-dividend date.
Distributions to shareholders:
Dividends to shareholders are recorded on the ex-divided date. Net
investment income and net realized gains from security transactions
are generally distributed at December 31 of each calendar year. See
Note 9.
Income taxes:
The Fund's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income to its shareholders. Therefore,
no provision for federal income taxes is recorded in the financial
statements.
- 42 -
<PAGE>
Note 2. Affiliated Party Transactions - Investment Advisory Fee
The Fund has entered into an investment advisory agreement with Lakeview
Securities Corporation (Advisor). Under the terms of the investment
advisory agreement, the Fund pays an advisory fee to the Advisor at the
annual rate of one-half of one percent (0.5%) of the Fund's average daily
net assets, payable quarterly. This agreement requires the Advisor to
reduce its fees or, if necessary, make payments to the Fund to the extent
required to satisfy any expense limitations imposed by the securities laws
or regulations thereunder of any state in which the Fund's shares are
qualified for sale. There were no excess expenses absorbed by the Advisor
during the year.
Messrs. Robert P. Moseson and Fredric J. French, directors of the Fund, are
President and a Director of Lakeview Securities Corporation and President
of the Arms Companies Division of Lakeview Securities Corporation,
respectively.
The Fund does not directly compensate directors affiliated with the
Advisor.
Note 3. Capital Stock (Fund Shares)
At September 30, 1996, there were 20,000,000 shares of $1.00 par value
capital stock authorized. Transactions in Fund shares for the years ended
September 30, 1996 and 1995 were as follows:
1996 1995
Shares sold 70,381 229,192
Shares issued to shareholders
in reinvestment of net investment
income and net realized gains 564,961 1,448,735
Shares redeemed (1,409,228) (1,765,100)
Net (decrease) (773,886) ( 87,173)
Balance:
Beginning of year 7,806,337 7,893,510
End of year 7,032,451 7,806,337
- 43 -
<PAGE>
Note 4. Other Income
Other income represents income from a settlement of a class action lawsuit
against a company whose security was previously held by the Fund.
Note 5. Custodian Fees
The Fund's custodian is UMB Bank, N.A. (UMB). From October 1, 1995 to
December 31, 1995, under the fee schedule with UMB, the Fund earned credits
based on custody cash balances to be applied to custodian fees. Any
earnings credits that are not applied in full to the UMB charges expired at
the end of each calendar year.
Total custodian fees for year ending
September 30, 1996 $ 24,062
Credits applied 6,120
Net fees $ 17,942
Effective January 1, 1996, the fee schedule was modified to create a sweep
account to be invested in UMB's money market account, ending the
arrangement whereby the Fund obtained credits to be applied to custodian
fees.
Note 6. Appreciation (Depreciation) of Investments
At September 30, 1996, the net unrealized appreciation for stocks was as
follows:
Aggregate gross unrealized appreciation
for all investments in which there is an
excess of value over tax cost $ 1,217,522
Aggregate gross unrealized (depreciation)
for all investments in which there is an
excess of tax cost over value ( 310,723)
Net unrealized appreciation - stocks $ 906,799
The cost basis used above is the same as that used for financial statement
purposes.
- 44 -
<PAGE>
Note 7. Underwriting Agreement
The Fund has entered into a distribution agreement with Diversified
Securities, Inc. (DSI), wherein DSI serves as the principal underwriter of
the Fund. A sales charge of 1.0% to 5.75% based on the amounts purchased is
withheld by the transfer agent. No sales charge is assessed on purchases of
$1,000,000 or more and on purchases by employees and directors of the Fund,
investment advisor, and underwriter. The transfer agent disburses the sales
charges withheld in the following manner: (1) to the sales broker and (2)
to DSI as the Fund's underwriter. Sales charges withheld by the transfer
agent amounted to $5,791. Of the total amount withheld a net of $2,945 of
brokerage fees was paid to DSI and a net of $352 of underwriting fees was
refunded by DSI due to a cancellation of a sale made in a prior year. The
sales charges are not an expense of the Fund and hence are not reflected in
the accompanying statement of operations.
Note 8. Distribution of Income
Net investment income and realized gains from investment transactions
distributed during the year to the shareholders' accounts for each
outstanding share were:
Net investment income $ 0.068
Net realized gain on investments $ 0.272
The distributions were paid on December 29, 1995 to shareholders of record
on December 27, 1995. These distributions represent net investment income
and net realized gains for the year ended December 31, 1995.
Note 9. Primary Difference Between Net Investment Income and Realized Gains
per Financial Statements and Actual Distributions to Shareholders
The primary difference between net investment income and realized gains per
financial statements and actual distributions to shareholders is due to the
fact that the financial statements are reported on the October 1 through
September 30 fiscal year and the distributions are based on the calendar
year for net investment income and short term capital gain income (ordinary
income) and on the November 1 through October 31 fiscal year for net
long-term capital gain. The distribution periods follow income tax laws and
regulations.
- 45 -
<PAGE>
Note 10. Purchases and Sales of Securities
Purchases and sales of securities (other than United States Government
Obligations) from unaffiliated issuers aggregated $194,873,069 and
$200,846,824, respectively. Purchases and sales, including redemptions, of
U.S. Treasury Bills totaled $16,369,805 and $14,141,026, respectively
- 46 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Year Ended September 30
<S> <C> <C> <C> <C> <C>
Per Share Data 1996 1995 1994 1993 1992*
(for one share outstanding ---- ---- ---- ---- -----
throughout each year) (1) (2)
Net asset value, beginning of $4.10 $4.62 $5.18 $5.74 $5.65
year ---- ---- ---- ---- ----
Income from investment
operations
Net investment income $0.26 $0.07 $0.06 $0.05 $0.05
Net realized and unrealized
gains (losses) on securities 0.33 0.25 (0.15) 0.43 0.17
Total from investment $0.59 $ 0.32 $(0.09) $0.48 $0.22
operations ---- ---- ---- ---- ----
Less distributions to
shareholders:
Dividends from net
investment income $(0.07) $(0.50) $(0.05) $(0.07) $(0.07)
Distribution from capital $(0.29) (0.34) (0.42) (0.97) (0.06)
gains ---- ---- ---- ---- ----
Total distributions $(0.36) $(0.84) $(0.47) $(1.04) $(0.13)
---- ---- ---- ---- ----
Net asset value, end of year $4.33 $4.10 $4.62 $5.18 $5.74
==== ==== ==== ==== ====
Total return (3) 14.7% 7.7% (1.8)% 9.6% 3.5%
==== ==== ==== ==== =====
Ratios and Supplemental Data
Net assets, end of year (in $30 $32 $36 $48 $61
millions)
Ratios to average net assets:
Expenses 1.76% 1.60% 1.47% 1.05% 0.91%
Net investment income 6.67% 1.52% 1.39% 1.12% 0.99%
Portfolio turnover rate (4) 669.79% 248.44% 234.77% 109.92% 67.31%
Average commission paid $0.0339 (5) (5) (5) (5)
per share for portfolio
transactions
<FN>
(1) Fund changed investment adviser on January 1, 1994.
(2) The information for the year 1992, reclassified for comparative purposes
the addition of "Total Return" and "Net Assets End of Year" was audited by
other auditors whose report expressed unqualified opinions.
(3) Sales loads are not reflected in total return.
(4) Portfolio turnover rates for the years 1992 and1993 have been restated
to exclude U.S. Treasury Bills.
(5) Information not available.
</FN>
</TABLE>
- 47 -
<PAGE>
Distributor / Underwriter
DIVERSIFIED SECURITIES, INC. PROSPECTUS 1997
P.O. Box 357 (3701 Long Beach Blvd.) Application & Statement of Additional
Long Beach, CA 90801 - 90807 Information
Shareholder/Dealer Services
(800) 732-1733 or (562) 595-7711
INVESTORS RESEARCH FUND, INC.
3916 State Street, Suite 3C
Santa Barbara, California 93105
(800) IRFUND1
(805) 569-3253
INVESTMENT ADVISER
LAKEVIEW SECURITIES CORP. January 30, 1997
333 W. Wacker Drive, Suite 1010
Chicago, Illinois 60606
CUSTODIAN
United Missouri Bank
928 Grand Avenue
Kansas City, MO 64141
AUDITORS
TIMPSON GARCIA
Certified Public Accountants
21610 Harrison Street
Oakland, California 94612
COUNSEL
HUGH J. HAFERKAMP, ESQ. INVESTORS
3916 State Street RESEARCH
Santa Barbara, California 93105 FUND
INCORPORATED
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 419958
Kansas City, Missouri 64141
(800) 616-4414
(816) 435-1089
Please Read and Retain This Prospectus
For Future Reference
- 48 -
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART C
OTHER INFORMATION
- 49 -
<PAGE>
PART C
Item 24 Financial Statements and Exhibits (See Appendix)
A. Index to Financial Statements
(1) Statements and Schedules Included in Prospectus and
Statement of Additional Information - Parts A and B
1. Statement of Assets and Liabilities as of
September 30, 1996 (page 35).
2. Statement of Operations - including Realized and
Unrealized Capital Gains or (Losses)on Investments
for the Fiscal Year Ended September 30, 1996 (page 40).
3. Statement of Changes in Net Assets for the Two Fiscal
Years Ended September 30, 1995 and 1996 (page 41).
4. Notes to Financial Statements (pages 42 - 46).
5. Securities in the Fund - Schedule of Investments
in Securities of Unaffiliated Issuers (pages 36 - 39).
6. Selected Per Share Data and Ratios (page 47).
(2) Statements Included in the Registration Statement -
Part C - but Omitted From the Prospectus
1. Statement of Operations for the Fiscal Years
Ended September 30, 1995 and 1996 (page 56).
2. Realized and Unrealized Gains on Investments (page 56).
B. Exhibits:
(1) The charter presently in effect is the same as that originally filed
except that Article IV has been amended to authorize up to 20,000,000
shares and a new Article XVI has been added to modify director's
liability pursuant to Section 102(b)(7) of the Delaware General
Corporation Law. The charter and the referenced amendments were
previously filed as EX-99.B1.
(2) The bylaws presently in effect are the same as those originally filed
except that Article III, Section 1 was amended in February, 1988 to
authorize the Board of Directors to fix the location of the annual
meeting and Article III, Section 2 was amended concurrently to change
the date of the annual meeting to the last Tuesday in March. See also
Item 27 below re an Amendment to Article IV of the bylaws. The bylaws
and the referenced amendments were previously filed as EX-99.B2.
(3) Not applicable.
(4) The forms of securities presently used are the same as those
previously filed.
(5) An investment advisory contract has been made with Lakeview Securities
Corporation. The investment advisory contract was previously filed as
EX-99.B5.
(6) The underwriting contract between the Fund and Diversified Securities,
Inc. is the same as that previously filed. The Fund is not a party to
any other underwriting agreements. That underwriting contract was
previously filed as EX-99.B6.
(7) Not applicable.
(8) The Fund's custodial agreement is with the United Missouri Bank,
Kansas City, Missouri. A copy of the new custodial agreement was filed
as EX-99.B8.
(9) Not applicable.
(10) Counsel's opinion and consent were previously filed as EX-99.B10.
(11) Not applicable.
- 50 -
<PAGE>
(12) For the Statement of Operations for the last two fiscal years, see
page 56.
(13) Not applicable.
(14) The model plans currently in use are plans which have been restated,
and amended in connection therewith, to comply with the various legal
requirements imposed by federal legislation in the past several years.
Current copies of the Fund's Master Self-Employed Retirement Plan, its
Section 403(b) Plan, and its Retirement Plan Custodial Services
Agreement were previously filed in EX-99.B14. Custodial fees are
presently $12 per annum per account.
(15) The Fund adopted a plan pursuant to rule 12b-1 during 1993. Copies of
the effective documents were previously filed as EX-99.B15.
(16) See Part C Appendix at page 55.
(17) Submitted herewith as EX-27 at page 59.
(18) Not Applicable.
Item 25 Persons Controlled By or Under Common Control With Registrant
A. Persons controlled by Investors Research Fund, Inc.: None
B. Persons under common control with the Fund: None
Item 26 Number of Holders of Securities
On September 30, 1996, the Fund had 2,120 holders of its securities.
Item 27 Indemnification
A. The Fund was incorporated under the laws of the State of Delaware.
Therefore, Section 145 of the Delaware Corporation law would be
applicable with respect to indemnification of the officers, directors,
employees and agents of the Fund.
B. On July 13, 1982, the Fund amended its bylaws to provide for
indemnification of certain officers, directors and other parties with
respect to certain types of liabilities, claims and expenses. The
amendment to Article IV was set forth as part of EX-99.B2. This bylaw
will be implemented in accordance with the requirements of the
Securities and Exchange Commission release Number IC-11330, September
2, 1980.
C. The Fund has purchased a policy of directors and officers liability
insurance in accordance with the authorization set forth in
subparagraph (e) of Article IV, Section 16 of the bylaws.
Item 28 Business and Other Connections of Investment Adviser
A. Lakeview Securities Corporation has been engaged in essentially the
same activities during the last two fiscal years. In addition to
serving as a registered investment adviser, Lakeview Securities acts
as a licensed broker-dealer. In that capacity, it acts primarily as an
introducing broker for clients of its affiliated corporation,
Performance Analytics, Inc., as well as other companies.
Robert P. Moseson and Leslie I. Golembo, President and Chief Executive
Officer, respectively, and the two directors, of Lakeview Securities,
also hold the same positions in Performance Analytics, Inc., which is
an investment consulting firm which specializes in providing
investment advice, investment manager evaluation services, and
management consulting services to a broad range of institutional
investors. The principal business address of Performance Analytics,
Inc. is: 333 West Wacker Drive, Suite 1010 Chicago, Illinois 60610.
Item 29 Principal Underwriters
A. The Fund's principal underwriter, Diversified Securities, Inc., does
not act as principal underwriter, depositor or investment adviser to
any other investment company.
- 51 -
<PAGE>
Positions
and
B. Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
Robert J. Conway President None
3701 Long Beach Blvd.
Long Beach, CA 90801
Joseph W. Conway Executive None
3701 Long Beach Blvd. Vice President
Long Beach, CA 90801
Joseph W. Stok Vice President and None
3701 Long Beach Blvd. Secretary
Long Beach, CA 90801
C. During 1996, Diversified Securities, Inc. received $2,945 in net
underwriting commissions in connection with the sale of the Fund's
shares and $46,392 in brokerage commissions in connection with the
Fund's portfolio transactions.
Item 30 Location of Accounts and Records
Records required by 17 C.F.R. Chap. 230.31a-1(b)
A. Current Operating Accounts and Records of the Fund.
(1) At Investors Research Fund Headquarters, 3916 State Street, Suite
C, Santa Barbara, CA 93105
(a) Records required by subparagraphs (4), (5),(6),(9),(10) and
(11)
(2) At Bartlett, Pringle & Wolf, Certified Public Accountants, 1123
Chapala Street, Santa Barbara, CA 93101
(a) Records required by subparagraphs (1) and (2) except those
maintained by the Bank of America and DST Systems, Inc. (see
infra)
(3) (A) From October 1, 1995 through the present: At United Missouri
Bank, 928 Grand Avenue, Kansas City, MO 64141.
(a) Records required by subparagraph (1) relating to
receipts and deliveries of portfolio securities.
(b) Records required by subparagraph (2) relating to
portfolio securities in transfer and in physical
possession.
(c) Records required by subparagraph (2) relating to each
broker-dealer, bank or other person effecting portfolio
transactions.
(4) At DST Systems, Inc., 1004 Baltimore Avenue, Kansas City, MO
64105
(a) Records required by subparagraph (1) relating to
receipts and deliveries of Fund shares.
(b) Records required by subparagraph (2) relating to Fund
shares in transfer and in physical possession.
(c) Records required by subparagraph (2) relating to
accounts for each shareholder of the Fund.
- 52 -
<PAGE>
B. Records of the Fund retained on a Temporary basis.
(1) All records are retained at their current records location for
two years.
C. Records of the Fund retained on a Permanent basis.
(1) At Investors Research Fund Headquarters, 3916 State Street, Suite
3C, Santa Barbara, CA 93105
(a) All records requiring permanent retention except those
listed below.
(2) At Data Retrieval Services, 7201 East 64th Court, Kansas City, MO
64133.
(a) All records which are maintained on a current basis by DST
Systems, Inc. are stored at this location permanently.
(3) At Bank of America, Records Storage Center-South, Orange 4049,
5200 East La Palma, Anaheim, CA 92807
(a) Records required by subparagraph (12) relating to receipts
and deliveries of portfolio securities.
(b) Records required by subparagraph (2) relating to portfolio
securities in transfer and in physical possession.
(c) Records required by subparagraph (2) relating to each
broker-dealer, bank or other person effecting portfolio
transactions.
Item 31 Management Services
A. The only pertinent management-related service contract not discussed
in Parts A or B issued by the Fund is that with the accounting firm of
Bartlett, Pringle & Wolf, 1123 Chapala Street, Santa Barbara,
California 93101. The Fund has a written agreement terminable upon
reasonable notice engaging that firm to provide operational accounting
services to the Fund. The Fund paid Bartlett, Pringle & Wolf $45,305
during 1996 and $27,035 during 1995.
Item 32 Undertakings
Not applicable.
- 53 -
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART C
APPENDIX
FINANCIAL STATEMENTS AND EXHIBITS
INVESTORS RESEARCH FUND, INC.
- 54 -
<PAGE>
Average Annual Total Return
Current Year Ending
30-Sep-96
I (Investment) $1,000.00
L (Load) 5.75%
P (Gross investment including maximum sales load) $942.50
<TABLE>
<CAPTION>
Prior Year 5 Years Prior 10 Years Prior Life of the Fund
Ending Ending Ending
30-Sep-95 30-Sep-91 30-Sep-86 31-Mar-59
<S> <C> <C> <C> <C>
ERV (Ending redeemable value of investment (P) $1,080.75 $1,309.16 $2,100.17 $44,976.29
after "N" years, all dividends
and distributions reinvested)
N (Number of years) 1 5 10 37.3
T (Average annual Total Return) 8.0747 5.5365 7.7024 10.7581%
</TABLE>
- 55 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENT OF OPERATIONS
Years Ended September 30, 1996 and 1995
1996 1995
Investment income:
Dividends $ 2,508,365 $ 932,082
Interest 87,061 138,111
Other 5,195 1,234
Total investment income $ 2,600,621 $ 1,071,427
Expenses:
Investment advisory fee $ 145,654 $ 171,087
Legal, accounting and auditing 101,834 92,159
Transfer agent's fee 55,938 54,606
12b-1 distribution fees 50,356 56,614
Custodian's fee 24,062 30,155
Less: credits earned ( 6,120) ( 1,436)
Salaries officer 14,400 18,000
Salaries other 30,073 29,850
Insurance 26,358 27,958
Taxes 30,603 8,896
Notices to investors 29,515 18,199
Directors' fees 17,750 10,250
Registration fees 15,394 21,330
Miscellaneous 1,690 1,689
Line of credit commitment fee 0 9,227
Total expenses $ 537,507 $ 548,584
Net investment income $ 2,063,114 $ 522,843
Realized and unrealized gain (loss) on investments:
Net realized gain $ 2,576,382 $( 136,509)
Net increase (decrease) in unrealized
appreciation of investments during
the year ( 382,533) 2,123,911
Net gain on investments $ 2,193,849 $ 1,987,402
Net increase in net assets
resulting from operations $ 4,256,963 $ 2,510,245
- 56 -
<PAGE>
REPORT AND CONSENT OF
INDEPENDENT AUDITORS
To the Board of Directors
and Shareholders of
Investors Research Fund, Inc.
With reference to the Registration Statement (Form N-1A) of Investors Research
Fund, Inc., filed under the Securities Act of 1933 as amended, we hereby consent
to the use of our report dated October 18, 1996, appearing in the prospectus
which is a part of such Registration Statement. We further consent to the use of
the opinion in the following paragraph.
The audit referred to in the aforementioned report include an audit of the
financial statements of Investors Research Fund, Inc., for the year ended
September 30, 1996, as listed in the accompanying index of this Registration
Statement. The statements of operations for the year ended September 30, 1995
were audited by us and we expressed an unqualified opinion on them in our report
dated October 17, 1995.
TIMPSON GARCIA
Oakland, California
January 22, 1997
- 57 -
<PAGE>
Undertaking to File Reports
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
Signature
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to rule 485(a) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 65 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Barbara and State of California on the 23 rd
day of January, 1997.
INVESTORS RESEARCH FUND, INC.
By: /S/
Dr. Francis S. Johnson
President
- 58 -
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> US Dollars $
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 29,584,352
<INVESTMENTS-AT-VALUE> 30,491,151
<RECEIVABLES> 70,661
<ASSETS-OTHER> 127,739
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,689,551
<PAYABLE-FOR-SECURITIES> 146,730
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,693
<TOTAL-LIABILITIES> 247,423
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,005,662
<SHARES-COMMON-STOCK> 7,032,451
<SHARES-COMMON-PRIOR> 7,806,337
<ACCUMULATED-NII-CURRENT> 2,153,869
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 375,798
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 906,799
<NET-ASSETS> 30,442,128
<DIVIDEND-INCOME> 2,508,365
<INTEREST-INCOME> 87,061
<OTHER-INCOME> 5,195
<EXPENSES-NET> 537,507
<NET-INVESTMENT-INCOME> 2,063,114
<REALIZED-GAINS-CURRENT> 2,576,382
<APPREC-INCREASE-CURRENT> (382,533)
<NET-CHANGE-FROM-OPS> 4,256,963
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 515,788
<DISTRIBUTIONS-OF-GAINS> 2,063,154
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 70,381
<NUMBER-OF-SHARES-REDEEMED> 1,409,228
<SHARES-REINVESTED> 564,961
<NET-CHANGE-IN-ASSETS> (1,571,002)
<ACCUMULATED-NII-PRIOR> 522,843
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (136,509)
<GROSS-ADVISORY-FEES> 145,654
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 543,627
<AVERAGE-NET-ASSETS> 30,943,159
<PER-SHARE-NAV-BEGIN> 4.10
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> 0.07
<PER-SHARE-DISTRIBUTIONS> 0.29
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.33
<EXPENSE-RATIO> 1.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
