ADDENDUM TO
INVESTORS RESEARCH FUND PROSPECTUS
DATED JANUARY 30, 1998
JUNE 15, 1998
1. New Adviser Effective June 22, 1998.
On June 22, 1998, the Fund's relationship with its new adviser and portfolio
manager, Fox Asset Management, Inc., of Little Silver, New Jersey, becomes
effective and Fox assumes the management of the Fund's portfolio on that date.
As of June 21, 1998, former adviser Lakeview Securities Corporation and former
sub-adviser Merrimac Advisors Company will no longer be affiliated with the
Fund.
Fox Asset Management, Inc. has been acting as an institutional investment
manager for the last twelve years.
FOX ASSET MANAGEMENT, INC.
Fox Asset Management, Inc. ("Fox") is a New Jersey Corporation which was
organized in December, 1985. It is an investment adviser registered as such with
the Securities and Exchange Commission under the Investment Advisers Act of
1940. Its shares are 100% employee owned. The address of Fox is 44 Sycamore
Avenue, Little Silver, New Jersey 07739-1242. The telephone number is (732)
747-9143.
Mr. J. Peter Skirkanich (age 54) is the President of Fox, is a managing director
of the company, and was the founder of the firm. He serves as the chairman of
both the Investment Committee for Equity Investment and the Committee for Fixed
Income Investments. Previously he was a managing director of Dreman Value
Management, also a highly regarded investment counseling firm. His work there
centered on portfolio management. He is a graduate of the Wharton School of
Business at the University of Pennsylvania.
Other directors of Fox are John W. Liang, Paul A. Stach, and Russell S.
Tompkins. All of them are employees of Fox and serve as Senior Portfolio
Managers in the firm's investment management operations. Mr. Liang holds degrees
in Economics and Business Management from Columbia University, Mr. Stach has a
B.A. in Economics from Williams College and the M.B.A. from Stanford, and Mr.
Tompkins has a B.A. in Economics from Utah State University and a Masters degree
in International Economics from the National University of Mexico. (U.N.A.M.)
In the past, Fox has served primarily large institutional clients and large
private clients. It currently has approximately $6 billion under management. Fox
is interested in managing the investment functions of a mutual fund and has
agreed to serve Investors Research Fund, Inc. in that capacity. Prior to June
22, 1998, Fox had not advised an equity mutual fund.
Fox has had an exemplary performance record since it began operations on January
1, 1986. In making comparisons with the Standard & Poor's 500 Index, it must be
recognized that the S & P 500 has no brokerage charges and no operational costs
subtracted from its performance results. With that recognition, the investment
returns on Fox's equity accounts have equaled or exceeded the returns of the S &
P 500 in ten of the last 12 years. A table of net returns of Fox's equity
accounts (Fox returns presented below are net of management fees and all
transaction costs in accordance with S.E.C. guidelines) versus the S & P 500
through 12/31/97 follows:
Total Return Total Return
Fox Equity S & P 500
1 year 31.3 33.4
3 years 130.1 125.6
5 years 175.7 151.7
10 years 456.2 423.7
Since 1/86 604.7 554.1
Annualized Annualized
Returns Returns
Fox Equity S & P 500
1 year 31.3 33.4
3 years 32.0 31.2
5 years 22.5 20.3
10 years 18.7 18.0
Since 1/86 17.7 17.3
According to information supplied by Fox, its equity portfolio has outperformed
the S & P 500 in seven out of twelve years even with expenses deducted and
performed within one percent of the S & P 500 without consideration of Fox
expenses in three of the other five years. In only two out of the last twelve
years has Fox's portfolio underperformed the S & P 500 index.
In compiling its performance records, Fox follows the standards established by
the Association for Investment Management and Research. In accordance with AIMR
standards, the equity composites have been dollar-weighted since 7/1/92. From
1/1/86 to 12/31/87, all accounts were included; from 1/1/88 to 7/1/92, all fully
discretionary tax exempt accounts managed for one quarter with a value of at
least $500,000 or more are included (the number of accounts excluded by that
criterion is negligible); from 7/1/92 to date, all fully discretionary equity
accounts are included.
Fox has informed the Fund that, except as noted in the preceding paragraph, the
foregoing performance includes all of Fox's private accounts which were managed
with investment objectives, policies and strategies substantially similar to
those used in managing the Fund and that the relative sizes of the Fund and the
private accounts were sufficiently comparable to ensure that the private account
performance would be relevant to a potential investor in the Fund. Of course,
that information relates to past performance of private accounts, does not
represent historical performance of Investors Research Fund, and does not
necessarily indicate that future performance of the Fund will be the same. Also,
it is to be noted that private accounts are not subject to certain investment
limitations, diversification requirements, and other restrictions imposed by the
Investment Company Act of 1940 and the Internal Revenue Code which, if they had
been applicable, may have adversely affected the performance result of the
private account composite.
In evaluating the foregoing statistics, it is to be recognized that past
performance is not a guarantee that the Fund's future performance will be the
same.
Fox's investment style is of the Value Philosophy. Fox defines "Value
Philosophy" of equity investing as the disciplined evaluation of companies and
the discipline of acquiring them only when their price is at a material discount
to fair market value or intrinsic value. They state the following with respect
to their particular application of value investing based upon cash flow:
"Fox Asset Management's `Value Philosophy' is distinguished by its initial focus
on a company's cash flow, or earnings plus non-cash expenses. Both the amount of
cash flow per share and the uses of a company's cash flow are critical. Cash
flow from operations defines a company's ability to maintain and increase its
current capacity and efficiency, to invest in its future (acquisitions or R &
D), to pay interest and principal on debt, and perhaps most importantly to
increase dividends to investors. The companies included in the Fund's portfolios
have a history of increasing cash flow at a solid growth rate. Their current
cash flow is also high relative to current price (a low price to cash flow
ratio). This discipline concurrently generates a portfolio of companies with
materially lower P/E ratios and significantly higher yields from dividends than
the market average."
FOX'S INVESTMENT APPROACH
Fox reports that it continuously monitors a universe of about 2,000 companies to
identify 75 to 100 qualifying candidates for use in construction of its clients'
portfolios. They invest only in those companies meeting the majority of Fox's
criteria for undervaluation. Their stock selection criteria are listed as
follows:
1. High cash flow per share.
2. Consistent cash flow growth.
3. Dividend yield materially above the market average.
4. Consistent dividend growth.
5. Sustainable dividend payout rate.
6. Low price relative to earnings (low P/E ratio).
7. High per share working capital.
8. Low debt to equity ratio.
9. Favorable price relative to asset value.
Fox personnel are continuously making trips to personally visit companies in
which they have existing investments and companies which constitute potential
investments. They do their utmost to verify information on a current basis
regarding their stock selection criteria and to assess the future prospects of
those companies.
The equity portfolios are concentrated in 35 to 45 issues representing 15 to 20
industries. Fox's experience in both rising and falling markets (including the
1987 market drop) has indicated that that diversity is sufficient
diversification with properly selected investments. Generally, 80% to 90% of a
portfolio is invested in large or medium sized companies. Fox considers a
capitalization of $1 billion to $5 billion to be medium size and above $5
billion to be large capitalization. Portfolio purchases and sales are approved
by the Fox investment committee and purchases and sales are made simultaneously
from all accounts. That assures consistent investment performance and
maintenance of a sound sell discipline. Fox attempts to maintain low turnover
while carefully maintaining sound portfolios.
2. The Discussion in the Current Prospectus on Page 13 Under the Heading
"Waiver of Sales Load for Certain Investors" is Supplemented as Follows:
(a) Shares will be sold at net asset value and without sales commission to
persons who are affiliated with clients of Fox Asset Management, Inc.
and to persons sponsored to the Fund by Fox.
(b) The above-described privilege will also be available to the immediate
family members of persons meeting the above stated employee status
requirements and to any trust, pension, profit sharing or other
benefit plan for such persons.
3. Minimum Investment Amount With Certain Exceptions:
Effective with the publication of this Addendum to the January 30, 1998
Prospectus, the Fund will require a minimum investment of $500 unless an
exception applies. At present, the Board of Directors has authorized two
exceptions. (1) The $500 minimum will not apply to custodial accounts
established for the benefit of minors, and (2) The $500 minimum will not apply
to accounts established under a periodic investment accumulation plan as
described on page 14 of the prospectus when the investor agrees to invest at
least $500 under the plan. These requirements replace and supersede any
statements in the prospectus indicating that no minimum investment amount is
required.
