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. 68 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 68
INVESTORS RESEARCH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
3757 State Street, Suite 204, Santa Barbara, California 93105
(Address of Principal Executive Offices)
Registrant's Telephone Number: (805) 569-3253
Hugh J. Haferkamp, Esq.
3757 State Street, Suite 204, Santa Barbara, CA 93105
(Name and Address of Agent for Service)
Copies to:
Hugh J. Haferkamp
President
Investors Research Fund, Inc.
11800 Baccarat Lane, N.E.,
Albuquerque, New Mexico 87111-7600
Approximate Date of Proposed Public Offering: January 30, 1998
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on January 30, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1) 485A-POS
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) 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.
Title of Securities Being Registered: Common Stock
PART A - PROSPECTUS
PART B - STATEMENT OF ADDITIONAL INFORMATION
PART C - OTHER INFORMATION
END OF FISCAL YEAR: September 30, 1997
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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, 1998
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 3 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 38 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 1997
fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load imposed on Purchases*.................................. 3.75%
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 .......................................... 0.48%
12b-1 Fee ......................................................... 0.24%
Custody, shareholder records keeping, accounting and legal ....... 0.54%
Salaries, insurance, printing and postage ........................ 0.34%
Regulatory fees and misc ......................................... 0.17%
-----
Total other expenses .............................................. 1.05%
-----
TOTAL FUND OPERATING EXPENSES ..................................... 1.77%
=====
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 0.5%.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) payment of the
maximum load of 3.75% (2) a 5% annual rate of return and (3) 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
----- ----- ----- -----
$ 55 $ 91 $ 130 $ 238
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, 1997 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, 1988 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 1997 1996 1995 1994 1993 1992* 1991* 1990* 1989* 1988*
(for one share outstanding ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
throughout each year) (1)
Net asset value, beginning of $4.33 $4.10 $4.62 $5.18 $5.74 $5.65 $5.31 $6.38 $4.77 $6.93
year ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Income from investment
operations
Net investment income $0.09 $0.26 $0.07 $0.06 $0.05 $0.05 $0.11 $0.18 $0.13 $0.13
Net realized and unrealized
gains (losses) on securities 1.11 0.33 0.25 (0.15) 0.43 0.17 1.10 (1.16) 1.65 (1.58)
Total from investment $1.20 $0.59 $0.32 $(0.09) $0.48 $0.22 $1.21 $(0.98) $1.78 $(1.45)
operations ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Less distributions to
shareholders:
Dividends from net
investment income $(0.28) $(0.07) $(0.50) $(0.05) $(0.07) $(0.07) $(0.23) $(0.09) $(0.17) $(0.06)
Distribution from capital (0.49) (0.29) (0.34) (0.42) (0.97) (0.06) (0.64) -- -- (0.65)
gains ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total distributions $(0.77) $(0.36) $(0.84) $(0.47) $(1.04) $(0.13) $(0.87) $(0.09) $(0.17) $(0.71)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value, end of year $4.76 $4.33 $4.10 $4.62 $5.18 $5.74 $5.65 $5.31 $6.38 $4.77
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Total return (2) 30.4% 14.7% 7.7% (1.8)% 9.6% 3.5% 26.2% (15.5)% 38.6% 21.2%
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Ratios and Supplemental Data
Net assets, end of year (in $33 $30 $32 $36 $48 $61 $65 $58 $82 $71
millions)
Ratios to average net assets:
Expenses 1.77% 1.76% 1.60% 1.47% 1.05% 0.91% 0.90% 0.85% 0.84% 0.76%
Net investment income 1.94% 6.67% 1.52% 1.39% 1.12% 0.99% 2.00% 3.12% 2.49% 2.28%
Portfolio turnover rate (3) 294.81% 669.79% 248.44% 234.77% 109.92% 67.31% 46.86% 72.10% 48.11% 76.84%
Average commission paid $0.0582 $0.0339 (4) (4) (4) (4) (4) (4) (4) (4)
per share for portfolio
transactions
<FN>
(1) Fund changed investment advisers on January 1, 1994.
(2) Sales loads are not reflected in total return.
(3) Portfolio turnover rates for the years 1988 through 1993 have been restated
to exclude U.S. Treasury Bills.
(4) 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 39
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 business 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. However, 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 deemed 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
shareholders' 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 248.44%, 669.79% and 294.81%. 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, conversely, 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 39
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 returned to a percentage which
is closer to normal for our present adviser's management style. The turnover
rate for the preceding fiscal year was almost three times the usual rate because
of highly unusual conditions. The need to acquire certain stocks to protect the
non-tax status of the Fund, which affected last year's turnover rate, will not
affect portfolio management this year because of, among other things a change in
the tax law affecting mutual funds. However, under the present portfolio
management style of this Fund, we will probably have a higher turnover rate than
many other funds, especially if market volatility continues at its current
level. The Fund's value style of investing and its strong objective of
protecting the shareholders' capital in market downturns lead to more frequent
changes between the portfolio stocks and Treasury bills.
- 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, 1997 are
as follows:
Hugh J. Haferkamp,* President, and Director, *** is an attorney-at-law in
private practice in the Santa Barbara area. Has been legal counsel to Investors
Research Fund, Inc. for approximately 18 years. 11800 Baccarat Lane, N.E.,
Albuquerque, NM 87111 (475 shares)
Mark L. Sills,* Vice-President, Director, and Member of the Executive
Committee,** is Director of Consumer Services, and Director, Information
Services, Aleene's - Division of ARTIS, Inc. 85 Industrial Way, Buellton, CA
93427 (19,154 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 (3,498 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 (17,984 shares)
Richard Chernick,# Director, 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, Los Angeles, CA
90010-1108 (3,563 shares)
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. 5014 Whitney Court, Santa Barbara, CA 93111 (595 shares)
Fredric J. French, * Director, is President of Merrimac Advisors Company,
sub-adviser to Lakeview Securities Corporation, investment adviser to the Fund;
formerly 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 (632 shares)
Harry P. Gelles, Director, 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, Los
Angeles, CA 90071 (2,888 shares)
Leonard S. Jarrott, Director, and Member of the Executive Committee,** is a Real
Estate Investment Advisor and independent Real Estate Broker in Santa Barbara,
CA. 3532 Chuparosa Dr., Santa Barbara, CA 93105 (1,199 shares)
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
(10,902 shares)
William J. Nasif, Director and Member of the Executive Committee,** 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
Credentials 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.
- 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.
# Messers. Chernick and Moseson are technically deemed relatives under S.E.C.
rules because Mr. Chernick's wife and Mr. Moseson are first cousins.
On September 30, 1997, the officers and directors and their families
collectively owned 60,890 shares of the Fund with a value of $289,836.
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
Retirement Annual Total
Benefits Benefits Compensation
Aggregate Accrued as Upon Paid to
Name, Position Compensation Expenses Retirement Directors
Hugh J. Haferkamp $ 8,678 $ 0 $ 0 $ 1,250
President
Mark L. Sills $ 1,750 $ 0 $ 0 $ 1,750
Vice-President
Michael A. Marshall $ 1,750 $ 0 $ 0 $ 1,750
Secretary-Treasurer
Gertrude B. Calden $ 2,000 $ 0 $ 0 $ 2,000
Director
Richard Chernick $ 750 $ 0 $ 0 $ 750
Director
James A. Corradi $ 1,250 $ 0 $ 0 $ 1,250
Director
Fredric J. French $ 0 $ 0 $ 0 $ 0
Director
Harry P. Gelles $ 750 $ 0 $ 0 $ 750
Director
Leonard S. Jarrott $ 1,500 $ 0 $ 0 $ 1,500
Director
Robert P. Moseson $ 0 $ 0 $ 0 $ 0
Director
William J. Nasif $ 1,750 $ 0 $ 0 $ 1,750
Director
Mark Schniepp $ 1,250 $ 0 $ 0 $ 1,250
Director
Dan B. Secord $ 750 $ 0 $ 0 $ 750
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 functional responsibility for the day-to-day management of the Fund's
investment portfolio is that of Merrimac Advisors Company ("Merrimac"), 6201
Uptown Boulevard, N.E., Suite 203, Albuquerque, NM 87110. Fredric J. French,
President of Merrimac, is the basic portfolio manager for the Fund. Mr. French
operates under the general supervision of Lakeview Securities Corporation
("Lakeview"). Mr. French and Mr. Moseson jointly share responsibility for
strategic management of the Fund's investment portfolio.
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 by Fredric J. French in applying this
strategy on behalf of Lakeview clients, including Investors Research Fund. On
December 31, 1995, Richard W. Arms, Jr., resigned as President of the Arms
Companies Division, and as an employee of Lakeview. 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
assumed responsibility for Investors Research Fund's portfolio management.
In early 1997, the Arms Companies Division of Lakeview was dissolved pursuant to
an agreement between Lakeview and Mr. French. Mr. French had organized an
investment advisory corporation names Merrimac Advisors Company. Effective March
25, 1997, Merrimac became sub-advisor to Lakeview and has subsequently served
the Fund in that capacity, principally through the personal services of Mr.
French. Mr. French is no longer an employee of Lakeview.
Fredric J. French has more than seven years of experience in applying the Arms
Equivolume investment strategy, much of it as an immediate assistant to Richard
W. Arms, Jr., the developer of the strategy. Mr. French had served in positions
of increasing responsibility of the Arms Companies Division of Lakeview since
November, 1992. During that time, he was 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 those assignments, he was also 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 has significantly enhanced the Fund's
performance since its implementation. For approximately four years prior to
1996, Mr. French was also employed, part-time 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 degree
in business administration from Chadron State College (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 has 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 1.77% in 1997.
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 1997, 1996 and 1995 were $150,169, $145,654 and $171,087
respectively. 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>
1995 248.44% $284,333 $80,465 $203,868 -nil- -nil-
1996 669.79% $424,531 $46,392 $378,139 -nil- -nil-
1997 294.81% $257,905 $82,151 $175,754 -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 net return of 30.4% during the last fiscal
year (excluding any sales load). That was accomplished in spite of the extreme
volatility of the markets in which the Fund operates and the relatively 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.
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 fiscal 1997. At 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 1997, 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.
The Fund's advisers have been concerned about the valuations in the market and
about corporate profits, as well as the linkage of U.S. markets to foreign
markets. However, until those factors are more clearly defined, they believe
that the risk/reward ratios of the undervalued stocks require 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.
There is concern in all areas of American business about the Year 2000 problem
in business computers. The Fund expects to be fully operational by 1999
concerning Year 2000. Our service suppliers have informed the Fund that they are
dealing with the problem at this time and expect to have it resolved by the end
of 1998, with operational testing to be completed during 1999. Consequently, at
present, we do not anticipate any operational problems because of the turn of
the century.
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 invests. 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, 1997
Value of net assets............................................$ 33,371,688
Number of shares outstanding................................... 7,013,271
Net asset value and repurchase price per share.................$ 4.76
Underwriting commission per share included in offering price*..$ .19
Offering Price per share (100/96.25 of $4.76)..................$ 4.95
*(3 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, Martin Luther King, Jr. 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 can no 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 custodian of 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 3.75% of the amount
the buyer invests; 3.90% 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................... 3.90% 3.75%
$25,000 to less than $50,000........ 3.09% 3.00%
$50,000 to less than $100,000....... 2.56% 2.50%
$100,000 to less than $250,000...... 1.52% 2.00%
$250,000 to less than $500,000...... 1.01% 1.50%
$500,000 to less than $1,000,000.... 2.04% 1.00%
$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,
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 3.00%.
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 1995, 1996, and 1997 were $19,603,
$5,791, and $ 5,548 respectively. The underwriter receives a portion of the
sales charges. The underwriter, Diversified Securities, Inc., retained $5,222,
$2,945 and $2,298 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.
- 22 -
<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 has
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 4% of the net asset value of the shares at September 30, 1997
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
1997, the Fund expended $76,511 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. Until May 13, 19997, all of the payments
represented 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.
On May 13, 1997, the Board of Directors amended the Plan to re-allocate any
portion of the original Plan's 25 basis points not required for payments to
broker-dealers to expenditures for distribution. Also, on August 12, 1997, the
Fund's shareholders approved an amendment to the Plan increasing the maximum
expenditure under the Plan to 50 basis points (minus the amounts required for
service payments pursuant to the original Plan). Any expenditures for
distribution have to be approved in advance by the Fund's directors.
In fiscal 1997, the Fund paid service fees of $56,327 to various qualifying
brokers under the 12b-1 Plan. An additional $20,184 was paid for advertising,
public relations services, and a seminar held in Santa Barbara. The Fund does
not pay for printing and mailing of prospectuses to persons other than current
shareholders; those expenses are paid by the Fund's principal underwriter.
The Fund believes that the existence of the Plan has enhanced the service level
to Fund shareholders. There are no unreimbursed expenses carried over to future
years.
- 26 -
<PAGE>
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
- 27 -
<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.
- 28 -
<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)
- - --------------------------------------------------------------------------------
- 29 -
<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
- 30 -
<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 redemption 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, or telephone (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., 3757 State Street, Suite 204,
Santa Barbara, CA 93105, or telephone (800) IRFUND1 or (805) 569-3253.
- 31 -
<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, 1997 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>
1959-65 $827 $827 $10,827 $14,167 $5,233 $19,400 $1,080 $20,480
1966-70 $1,454 $2,281 $12,281 $11,874 $12,606 $24,480 $2,243 $26,723
1971-75 $2,756 $5,037 $15,037 $12,528 $18,828 $31,356 $5,336 $36,692
1976-80 $4,769 $9,806 $19,806 $24,115 $60,454 $84,569 $17,398 $101,967
1981 $1,659 $11,465 $21,465 $13,535 $59,344 $72,879 $11,433 $84,312
1982 $5,376 $16,841 $26,841 $19,067 $83,597 $102,664 $21,787 $124,451
1983 $0 $16,841 $26,841 $20,519 $113,420 $133,939 $23,445 $157,384
1984 $6,319 $23,160 $33,160 $18,008 $108,921 $126,929 $27,058 $153,987
1985 $3,690 $26,850 $36,850 $19,734 $130,003 $149,737 $33,313 $183,050
1986 $1,092 $27,942 $37,942 $20,283 $178,382 $198,665 $35,294 $233,959
1987 $2,715 $30,657 $40,657 $19,381 $202,221 $221,602 $36,663 $258,265
1988 $8,783 $39,440 $49,440 $18,478 $192,806 $211,284 $43,860 $255,144
1989 $4,930 $44,370 $54,370 $22,127 $230,876 $253,003 $57,382 $310,385
1990 $13,923 $58,293 $68,293 $18,400 $224,679 $243,079 $61,735 $304,814
1991 $4,225 $62,518 $72,518 $25,658 $317,378 $343,036 $90,652 $433,688
1992 $4,907 $67,425 $77,425 $18,871 $300,304 $319,175 $71,553 $390,728
1993 $4,468 $71,893 $81,893 $18,282 $324,458 $342,740 $73,829 $416,569
1994 $42,819 $114,712 $124,712 $14,673 $285,193 $299,866 $102,279 $402,144
1995 $40,866 $155,578 $165,578 $15,614 $303,494 $319,108 $149,726 $468,835
1996 $83,283 $238,861 $248,861 $15,301 $300,772 $316,073 $229,070 $545,143
9/30/97 $0 $238,861 $248,861 $19,402 $367,096 $386,498 $279,583 $666,081
<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 3.75% 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 $212; 1961 nil; 1962 $86; 1963 nil; 1964 $1,150; 1965 $2,408; 1966 $711;
1967 $2,621; 1968 $2,339; 1969 $4,679; 1970 nil; 1971 nil; 1972 $6,494; 1973
nil; 1974 nil; 1975 nil; 1976 nil; 1977 nil; 1978 $4,511; 1979 $7,169; 1980
$4,799; 1981 $25,709; 1982 nil; 1983 $23,775; 1984 $9,306; 1985 $10,914; 1986
$47,179; 1987 $29,872; 1988 nil; 1989 nil; 1990 $33,041; 1991 $3,836; 1992
$67,062; 1993 $33,135; 1994 $24,606; 1995 nil; 1996 $3,377. Total $348,991.
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 +6,561%, or an average annual compound total return of +11.52%
per year.
</FN>
</TABLE>
- 32 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
SUMMARY OF REGULAR INVESTING OVER THE PAST 38 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, 1997 - 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 38 1/2 Years (The Life of the Fund)
Monthly Investments of $100
Total Investment since March 3, 1959............................... $ 46,300
Income Dividends for Period Invested............................. 303,038
Total Investment Cost Including Invested Dividends............... $ 349,338
Value of Investment on September 30, 1997*......................... $ 854,886
* Includes value of shares accepted as capital gains distributions. The total
dollar amounts of the distributions (at the time shares were acquired) were
$427,470.
<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 $370 $370 $8,570 $10,397 $3,030 $13,427 $476 $13,903
1966-70 $14,200 $1,229 $1,599 $15,799 $13,503 $9,362 $22,865 $1,535 $24,400
1971-75 $20,200 $2,865 $4,465 $24,665 $19,802 $15,293 $35,095 $4,713 $39,808
1976-80 $26,200 $5,607 $10,072 $36,272 $47,415 $58,140 $105,555 $17,418 $122,973
1981 $27,400 $2,022 $12,094 $39,494 $27,360 $63,611 $90,971 $11,811 $102,782
1982 $28,600 $6,625 $18,719 $47,319 $40,115 $89,608 $129,723 $23,637 $153,360
1983 $29,800 $0 $18,719 $48,519 $44,198 $125,516 $169,714 $25,437 $195,151
1984 $31,000 $7,886 $26,605 $57,605 $39,883 $121,862 $161,745 $30,412 $192,157
1985 $32,200 $4,630 $31,235 $63,435 $44,875 $146,895 $191,770 $37,921 $229,691
1986 $33,400 $1,375 $32,611 $66,011 $47,089 $207,378 $254,467 $40,305 $294,772
1987 $34,600 $3,432 $36,043 $70,643 $45,941 $238,319 $284,260 $42,227 $326,487
1988 $35,800 $11,144 $47,187 $82,987 $44,941 $227,223 $272,164 $51,558 $323,722
1989 $37,000 $6,274 $53,461 $90,461 $55,052 $272,089 $327,141 $67,926 $395,067
1990 $38,200 $17,776 $71,237 $109,437 $46,778 $267,996 $314,774 $74,382 $389,156
1991 $39,400 $5,408 $76,644 $116,044 $66,668 $378,922 $445,590 $109,565 $555,155
1992 $40,600 $6,296 $82,941 $123,541 $50,005 $364,502 $414,507 $86,845 $501,352
1993 $41,800 $5,746 $88,686 $130,486 $49,565 $396,242 $445,807 $89,934 $535,741
1994 $43,000 $55,192 $143,878 $186,878 $40,748 $349,970 $390,718 $127,637 $518,355
1995 $44,200 $52,358 $196,236 $240,436 $44,435 $372,428 $416,863 $188,207 $605,070
1996 $45,400 $106,802 $303,038 $348,438 $44,639 $364,942 $409,580 $290,034 $699,615
9/30/97 $46,300 $0 $303,038 $349,338 $55,480 $445,416 $500,896 $353,990 $854,886
<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 3.75% (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 $28;
1963 nil; 1964 $655; 1965 $1,492; 1966 $497; 1967 $1,955; 1968 $1,843; 1969
$3,848; 1970 nil; 1971 nil; 1972 $6,252; 1973 nil; 1974 nil; 1975 nil; 1976 nil;
1977 nil; 1978 $5,165; 1979 $8,377; 1980 $5,687; 1981 $30,798; 1982 nil; 1983
$28,970; 1984 $11,412; 1985 $13,458; 1986 $58,412; 1987 $37,110; 1988 nil; 1989
nil; 1990 $41,453; 1991 $4,825; 1992 $86,279; 1993 $42,728; 1994 $31,802; 1995
nil; 1996 $4,381. Total $427,470.
</FN>
</TABLE>
- 33 -
<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, 1997 was +25.55%, +10.97%, and +7.40% 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 necessarily predictive of future performance.
- 34 -
<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, 1997, 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
five 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.
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, 1997, 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, 1997, 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 five years in the period then ended, in conformity
with generally accepted accounting principles.
Oakland, California
October 21, 1997
- 35 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
A S S E T S
Investments in securities, at market
(cost $31,392,159) (Note 1) $ 32,772,663
Cash 1,274,038
Receivables - dividends from common stocks 84,003
Other assets 32,051
--------------------
$ 34,162,755
L I A B I L I T I E S
Investment securities purchased $ 696,439
Other expenses (note 2) 94,628 791,067
----------------- --------------------
Net assets at September 30, 1997 $ 33,371,688
====================
Net assets value per share on 7,013,271
shares outstanding (Note 3) $4.758
======
Maximum offering price per share
(100/96.25 of $4.758) $4.943
======
See Notes to Financial Statements.
- 36 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
SECURITIES IN THE FUND
September 30, 1997
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
APPAREL (1.00%)
11,300 Russell Corp. $ 332,644
AUTO & AUTO PARTS ( 4.53%)
17,400 General Motors 1,164,712
10,500 ITT Industries 348,469
BANKING (5.62%)
7,000 Cullen Frost Bankers 331,625
10,600 Morgan (J.P.) 1,204,425
11,800 United Asset Management 338,513
CABLE TV (1.04%)
8,900 TCA Cable TV 347,100
CHEMICAL (7.67%)
17,800 duPont (El) deNemours 1,095,812
12,400 Minnesota Mining & Mfg 1,146,225
14,800 Pall Corp 319,125
COMPUTER/PERIPHERAL (0.77%)
10,700 Gerber Scientific 256,800
DIVERSIFIED COMPANIES (4.03%)
10,700 Alleghany Teledyne 306,287
9,600 Fortune Brands 323,400
13,700 Jostens Inc 371,612
14,600 Ogden Corp 344,925
DRUGS (4.82%)
12,600 Merck & Co 1,259,213
9,600 Pharmacia & Upjohn 350,400
ELECTRICAL EQUIPMENT (0.64%)
8,400 Federal Signal 213,150
(Continued)
See Notes to Financial Statements.
- 37 -
<PAGE>
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
ELECTRICAL UTILITIES (8.05%)
18,400 Delmarva Power & Light $ 347,300
13,200 Entergy Corp 344,025
10,500 Florida Progress 346,500
13,600 Long Island Lighting 350,200
5,000 Montana Power 133,125
13,600 Public Service Enterprises 350,200
14,200 Rochester Gas & Electric 351,450
4,000 UtiliCorp United 120,500
3,200 Wisconsin Energy Corp 343,200
ENERGY (10.06%)
14,400 Chevron Corp 1,196,100
11,400 Equitable Resources 359,100
18,200 Exxon Corp 1,165,938
6,000 Texaco Inc 368,625
12,900 Westcoast Energy 267,675
ENVIRONMENTAL (2.17%)
15,100 Safety-Kleen 361,456
10,400 Waste Management 363,350
FOOD (6.76%)
9,500 Alberton's Inc 331,312
45,800 Food Lion Inc CI'A' 382,144
4,900 General Mills 337,794
9,500 Hannaford Bros. 337,844
4,600 Supervalu Inc 180,550
9,100 Sysco Corp 336,131
10,000 Weis Markets 350,000
HOME FURNISHINGS (1.13%)
30,000 Shaw Industries 376,875
HOUSEHOLD PRODUCTS (2.00%)
12,800 Rubbermaid, Inc 327,200
12,100 Tupperware Corp 340,313
INSURANCE (2.12%)
5,800 Mid Ocean Ltd 367,575
9,700 TIG Holdings 339,500
(Continued)
See Notes to Financial Statements.
- 38 -
<PAGE>
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
MACHINERY (1.99%)
6,200 Caterpillar Inc $ 334,412
5,900 Tecumseh Products CI'A' 328,556
MEDICAL SUPPLIES (2.96%)
9,700 Bard (C.R.) 329,800
7,900 Bausch & Lomb 319,950
9,400 Mallinckrodt Inc 338,400
METAL/METAL FABRICATING (3.95%)
13,000 Cyprus Amax Minerals 312,000
12,300 Oregon Steel 333,637
9,400 USX - U. S. Steel 326,650
17,000 Worthington Industries 344,250
OFFICE EQUIPMENT (1.45%)
17,700 Moore Corp Ltd 336,300
4,000 Wallace Computer Svc 147,500
PACKAGING (0.87%)
6,300 Crown Cork & Seal 290,588
PAPER & FOREST PRODUCTS (2.16%)
14,900 Louisiana Pacific 372,500
7,200 Rayonier Inc 348,300
PRECISION INSTRUMENTS (5.15%)
21,200 Eastman Kodak 1,376,675
16,500 EG & G Inc 341,344
PUBLISHING (1.03%)
9,600 Donnelley (RR) & Sons 342,600
REAL ESTATE (1.07%)
12,000 Avalon Properties 357,000
RETAIL (4.18%)
22,000 Heilig-Meyers 338,250
5,300 Inimate Brands 'A' 123,888
13,400 Limited Inc 327,463
11,500 Stanhome Inc 339,969
9,300 Talbots, Inc 265,631
(Continued)
See Notes to Financial Statements.
- 39 -
<PAGE>
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
TELECOMMUNICATIONS (5.89%)
29,300 AT & T Corp $ 1,296,525
14,400 Frontier Corp 331,200
8,800 U S West Communic Grp 338,800
TOBACCO (3.45%)
27,700 Philip Morris Cos 1,151,281
TRANSPORTATION (1.64%)
8,000 Alexander & Baldwin 207,000
9,300 Illinois Central Corp 341,775
------------
Total common stock (98.20%)
(cost $31,392,159) $ 32,772,663
Add: Excess of cash and other assets
over payables (1.80%) 599,025
------------
Net assets (100.0%) $ 33,371,688
============
See Notes to Financial Statements.
- 40 -
<PAGE>
INVESTORS RESEARCH, FUND, INC.
STATEMENT OF OPERATIONS
Year Ended September 30, 1997
Investment income:
Dividends $ 837,342
Interest 323,107
Other (Note 4) 12,158
------------------
Total investment income $ 1,172,607
Expenses: Investment advisory fee (Note 2) $ 150,169
Legal, accounting and auditing 108,007
Transfer agent fee 46,123
12b-1:
Service fees $ 56,327
Distribution fees 20,184 76,511
-------------
Custodian fee 17,389
Salaries - officer 14,363
Salaries - other 29,905
Insurance 25,806
Taxes 15,887
Notices to investors 38,078
Directors' fees 16,250
Registration fees 18,873
Miscellaneous 2,535
------------------
Total expenses 559,896
------------------
Net investment income $ 612,711
------------------
Realized and unrealized gain on investments:
Net realized gain $ 7,324,197
Net increase in unrealized appreciation of
investments during the year 473,705
-------------
Net gain on investments 7,797,902
---------
Net increase in net assets resulting
from operations $ 8,410,613
==================
See Notes to Financial Statements.
- 41 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended September 30, 1997 and 1996
1997 1996
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 612,711 $ 2,063,114
Net realized gain (loss) on investments 7,324,197 2,576,382
Net change in unrealized appreciation
of investments 473,705 (382,533)
------------ -------------
Net increase in net assets
resulting from operations $ 8,410,613 $ 4,256,963
------------- -------------
Distributions paid to shareholders:
From net investment income $ (1,994,015) $ (515,788)
From net realized gain on investments (2,914,330) (2,063,154)
-------------- -------------
Total distributions to shareholders $(4,908,345) $ (2,578,942)
-------------- -------------
Fund share transactions:
Proceeds from sale of Fund shares $405,679 $ 288,486
Proceeds from reinvestment of distributions
from net investment income and net realized
gain on investments 4,383,443 2,239,506
Cost of shares redeemed from shareholders (5,361,830) (5,777,015)
-------------- ------------
Net (decrease) in net assets due to
fund share transactions $(572,708) $(3,249,023)
-------------- ------------
Total increase (decrease) in net assets $2,929,560 $(1,571,002)
NET ASSETS:
Beginning of year 30,442,128 32,013,130
-------------- ------------
End of year $33,371,688 $30,442,128
============== ============
NET ASSETS CONSIST OF:
Fund shares at par $7,013,271 $ 7,032,451
Paid in capital 19,419,681 19,973,211
Undistributed net investment income 772,567 2,153,869
Undistributed net realized gain
on sale of investment securities 4,785,665 375,798
Unrealized appreciation of investment
securities 1,380,504 906,799
--------------- ------------
$33,371,688 $30,442,128
=============== ============
See Notes to Financial Statements.
- 42 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Investors Research Fund is registered under the Investment Company 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 6.
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.
Note 2. Affiliated Party Transactions
Investment Advisory Fee
The Fund has entered into an investment advisory agreement with
Lakeview Securities Corporation (Adviser). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the
Adviser 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 Adviser 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 Adviser during the year.
- 43 -
<PAGE>
Messrs. Robert P. Moseson and Fredric J. French are directors of the
Fund. Mr. Moseson is President and a Director of Lakeview Securities
Corporation. Mr. French was President of the Arms Companies Division
of Lakeview Securities Corporation until March 25, 1997 when, due to a
reorganization, Mr. French resigned from the Arms Companies and was
employed by Merrimac Advisors Company (a New Mexico corporation) of
which he is the sole shareholder. Merrimac Advisors Company provides
investment advisory services to the Fund under a Sub-Advisory
Agreement with Lakeview Securities Corporation dated January 20, 1997,
and ratified by the Funds shareholders on March 25, 1997. The Fund
does not directly compensate Merrimac Advisors Company.
The Fund does not directly compensate directors affiliated with the
Adviser (Lakeview Securities Corporation) or the Sub-Adviser (Merrimac
Advisors Company).
Legal fees
Mr. Hugh J. Haferkamp was elected to the Board of Directors on
December 10, 1996 to fill a vacancy and was re-elected to the Board by
the shareholders on March 25, 1997. Also on March 25, 1997 the Board
of Directors elected Mr. Haferkamp to serve as the Funds President.
Mr. Haferkamp is legal counsel to the Fund and has been paid legal
fees in addition to drawing a salary as the Funds President and
receiving director's fees for attending Board meetings.
Computer consulting fees
Mr. Mark Sills was elected to the Board of Directors on December 10,
1996 to fill a vacancy and was re-elected to the Board by the
shareholders on March 25, 1997. Mr. Sills is the Fund's computer
consultant and has received compensation for computer consulting and
for director's fees for attending Board meetings.
Recap of fees Payable at
Total September 30,
Expense 1997
Lakeview Securities - investment advisory fees $ 150,169 $ 39,198
Mr. Hugh J. Haferkamp - legal fees 46,201 7,408
Mr. Mark Sills - consulting fees 2,225 -
Note 3. Capital Stock (Fund Shares)
At September 30, 1997, there were 20,000,000 shares of $1.00 par value
capital stock authorized. Transactions in Fund shares for the years ended
September 30, 1997 and 1996 were as follows:
1997 1996
Shares sold 95,506 70,381
Shares issued to shareholders in reinvestment
of net investment income and net realized gains 1,111,421 564,961
Shares redeemed (1,226,107) (1,409,228)
Net (decrease) (19,180) (773,886)
Balance:
Beginning of year 7,032,451 7,806,337
End of year 7,013,271 7,032,451
Note 4. Other Income
Other income represents income from settlements of class action lawsuits
against companies whose securities were previously held by the Fund.
Note 5. Appreciation (Depreciation) of Investments
At September 30, 1997, 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 $ 1,911,578
Aggregate gross unrealized (depreciation)
for all investments in which there is an
excess of tax cost over value ( 531,074)
Net unrealized appreciation - stocks $ 1,380,504
The cost basis used above is the same as that used for financial statement
purposes.
- 44 -
<PAGE>
Note 6. Distribution of Income
On December 10, 1996, distributions of $0.299 aggregating $1,994,015 from
net investment income, $0.408 aggregating $2,720,930 from short-term
investment transactions, and $0.029 aggregating $193,400 from long-term
investment transactions were declared.
The distributions were paid on December 31, 1996 to shareholders of record
on December27, 1996. These distributions represent net investment income
and net realized short-term gains for the calendar year ended December 31,
1996 and net realized long-term gains for the year November 1, 1995 through
October 31, 1996.
Note 7. 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 net realized gain on
investments (ordinary income) and on the November 1 through October 31
fiscal year for long-term net realized gain on investments (capital gains).
The distribution periods follow income tax laws and regulations.
Note 8. Lease Commitments
Under a lease expiring April 14, 2000, the Fund is committed to pay minimum
lease payments of $678 per month for the rent for its present office space.
The minimum monthly rent is subject to consumer price index adjustments
each April 1 for the duration of the lease. In addition to the minimum
monthly payments, the lease requires monthly payments of increases in
building operating expenses effective January 1, 1998. Building operating
expenses are adjusted annually each January 1 by the lessor.
Future minimum annual lease commitments are as follows:
Years ending September 30:
1998 $ 8,136
1999 8,136
2000 4,407
Total $ 20,679
The rent is indirectly paid by the Fund's investment adviser by decreasing
the amount due to the investment adviser. Therefore, no rental expense is
shown.
Note 9. Purchases and Sales of Securities
Purchases and sales of securities (other than United States Government
Obligations) from unaffiliated issuers aggregated $73,957,172 and
$76,497,655, respectively. Purchases and sales, including redemptions, of
U.S. Treasury Bills totaled $54,455,977 and $60,393,629, respectively.
- 45 -
<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 .............................. 1997 1996 1995 1994 1993
(for one share outstanding throughout each year) (1)
Net asset value, beginning of year .......... $ 4.33 $ 4.10 $ 4.62 $ 5.18 $ 5.74
Income from investment operations:
Net investment income ..................... $ 0.09 $ 0.26 $ 0.07 $ 0.06 $ 0.05
Net realized and unrealized gains
(losses) on securities ................... 1.11 0.33 0.25 (0.15) 0.43
Total from investment operations ........ $ 1.20 $ 0.59 $ 0.32 $ (0.09) $ 0.48
Less distribution to shareholders:
Dividends from net investment income ....... $ (0.28) $ (0.07) $ (0.50) $ (0.05) $ (0.07)
Distributions from capital gains ........... (0.49) (0.29) (0.34) (0.42) (0.97)
Total distributions ............. $ (0.77) $ (0.36) $ (0.84) $ (0.47) $ (1.04)
Net asset value, end of year ................ $ 4.76 $ 4.33 $ 4.10 $ 4.62 $ 5.18
Total return (2) ............................ 30.4% 14.7% 7.7% (1.8)% 9.6%
Ratios and Supplemental Data
Net assets, end of year (in millions) ....... $ 33 $ 30 $ 32 $ 36 $ 48
Ratios to average net assets:
Expenses .................................. 1.77% 1.76% 1.60% 1.47% 1.05%
Net investment income ..................... 1.94% 6.67% 1.52% 1.39% 1.12%
Portfolio turnover rate (3) ................. 294.81% 669.79% 248.44% 234.77% 109.92%
Average commission paid per share
for portfolio transactions ............... $ 0.0582 $ 0.0339 (4) (4) (4)
<FN>
(1) Fund changed investment advisors on January 1, 1994.
(2) Sales loads are not reflected in total return.
(3) Portfolio turnover rate for 1993 has been restated to exclude
U.S.Treasury Bills.
(4) Information not available.
</FN>
</TABLE>
- 46 -
<PAGE>
Distributor / Underwriter
DIVERSIFIED SECURITIES, INC. PROSPECTUS 1998
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.
3757 State Street, Suite 204
Santa Barbara, California 93105
(800) IRFUND1
(805) 569-3253
INVESTMENT ADVISER
LAKEVIEW SECURITIES CORP. January 30, 1998
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
1610 Harrison Street
Oakland, California 94612
COUNSEL
HUGH J. HAFERKAMP, ESQ. INVESTORS
3757 State Street, Suite 204 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
- 47 -
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART C
OTHER INFORMATION
- 48 -
<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, 1997 (page 36).
2. Statement of Operations - including Realized and
Unrealized Capital Gains or (Losses)on Investments
for the Fiscal Year Ended September 30, 1997 (page 41).
3. Statement of Changes in Net Assets for the Two Fiscal
Years Ended September 30, 1996 and 1997 (page 42).
4. Notes to Financial Statements (pages 43 - 46).
5. Securities in the Fund - Schedule of Investments
in Securities of Unaffiliated Issuers (pages 37 - 40).
6. Selected Per Share Data and Ratios (page 46).
(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, 1996 and 1997 (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. Effective March 25, 1997, the Fund approved a Sub-Advisory
Agreement between Lakeview and Merrimac Advisors Company. A copy is
filed herewith 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.
- 49 -
<PAGE>
(8) The Fund's custodial agreement is with the United Missouri Bank,
Kansas City, Missouri. A copy of that 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.
(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. The 403(b) Plan has been amended
and a copy of the amended plan is filed herewith as EX-99.B14.
(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. The plan
was amended during fiscal 1997. The amended plan is filed herewith as
EX-99.B15.
(16) See Part C Appendix.
(17) Submitted herewith as EX-27.
(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, 1997, the Fund had 1,919 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.
- 50 -
<PAGE>
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.
B. Merrimac Advisors Company, sub-advisor to Lakeview, is not, and never
has been, engaged in any business other than that of investment
advisor.
Under New Mexico law, Merrimac is required to have two officers.
Accordingly, to meet legal requirements. Mrs. Judy K. French, wife of
Fredric J. French, serves as Vice-President and Secretary of Merrimac.
Mrs. French is a bookkeeper and is owner and proprietor of Bookkeeping
on Wheels. Her company provides bookkeeping services to private
clients in the general Albuquerque area.
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.
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 1997, Diversified Securities, Inc. received $2,298 in net
underwriting commissions in connection with the sale of the Fund's
shares and $82,151 in brokerage commissions in connection with the
Fund's portfolio transactions.
- 51 -
<PAGE>
Item 30 Location of Accounts and Records
Records required by 17 C.F.R. Chap. 270.31a-1(b)
A. Current Operating Accounts and Records of the Fund.
(1) At Investors Research Fund Headquarters, 3757 State Street, Suite
204, Santa Barbara, CA 93105 and U-Haul Storage, 4101 State
Street, Santa Barbara, CA 93110.
(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.
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, 3757 State Street, Suite
204, 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, Livermore Depot, 6933 Preston Ave, Livermore,
CA 94550
(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.
- 52 -
<PAGE>
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 $38,796 during 1997, $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-97
I (Investment) $1,000.00
L (Load) 3.75%
P (Gross investment including maximum sales load) $962.50
<TABLE>
<CAPTION>
Prior Year 5 Years Prior 10 Years Prior Life of
Ending Ending Ending the Fund
30-Sep-96 30-Sep-92 30-Sep-87 31-Mar-59
<S> <C> <C> <C> <C>
ERV (Ending redeemable value of investment (P) $ 1,255.53 $ 1,682.45 $ 2,042.06 $ $ 66,535.34
after "N" years, all dividends
and distributions reinvested)
N (Number of years) .......................... 1 5 10 38.5
T (Average annual Total Return) .............. 25.553 10.965 7.400 11.5198%
</TABLE>
- 55 -
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENT OF OPERATIONS
Years Ended September 30, 1997 and 1996
1997 1996
Investment income:
Dividends $ 837,342 $ 2,508,365
Interest 323,107 87,061
Other 12,158 5,195
Total investment income $ 1,172,607 $ 2,600,621
Expenses:
Investment advisory fee $ 150,169 $ 145,654
Legal, accounting and auditing 108,007 101,834
Transfer agent's fee 46,123 55,938
12b-1: service fees 56,327 50,356
distribution fees 20,184 0
Custodian's fee 17,389 24,062
Less: credits earned 0 ( 6,120)
Salaries officer 14,363 14,400
Salaries other 29,905 30,073
Insurance 25,806 26,358
Taxes 15,887 30,603
Notices to investors 38,078 29,515
Directors' fees 16,250 17,750
Registration fees 18,873 15,394
Miscellaneous 2,535 1,690
Total expenses $ 559,896 $ 537,507
Net investment income $ 612,711 $ 2,063,114
Realized and unrealized gain on investments:
Net realized gain $ 7,324,197 $ 2,576,382
Net increase (decrease) in unrealized appreciation
of investments during the year 473,705 ( 382,533)
Net gain on investments $ 7,797,902 $ 2,193,849
Net increase in net assets
resulting from operations $ 8,410,613 $ 4,256,963
- 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 21, 1997, 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, 1997, as listed in the accompanying index of this Registration
Statement. The statements of operations for the year ended September 30, 1996
were audited by us and we expressed on unqualified opinion on them in our report
dated October 18, 1996.
TIMPSON GARCIA
Oakland, California
January 15, 1998
- 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(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 68 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 27 th
day of January, 1998.
INVESTORS RESEARCH FUND, INC.
By: /S/
Hugh J. Haferkamp
President
- 58 -
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 31,392,159
<INVESTMENTS-AT-VALUE> 32,772,663
<RECEIVABLES> 84,003
<ASSETS-OTHER> 1,306,089
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,162,755
<PAYABLE-FOR-SECURITIES> 696,439
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 94,628
<TOTAL-LIABILITIES> 791,067
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26,432,952
<SHARES-COMMON-STOCK> 7,013,271
<SHARES-COMMON-PRIOR> 7,032,451
<ACCUMULATED-NII-CURRENT> 772,567
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,785,665
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,380,504
<NET-ASSETS> 33,371,688
<DIVIDEND-INCOME> 837,342
<INTEREST-INCOME> 323,107
<OTHER-INCOME> 12,158
<EXPENSES-NET> 559,896
<NET-INVESTMENT-INCOME> 612,711
<REALIZED-GAINS-CURRENT> 7,324,197
<APPREC-INCREASE-CURRENT> 473,705
<NET-CHANGE-FROM-OPS> 8,410,613
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,994,015
<DISTRIBUTIONS-OF-GAINS> 2,914,330
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 95,506
<NUMBER-OF-SHARES-REDEEMED> 1,226,107
<SHARES-REINVESTED> 1,111,421
<NET-CHANGE-IN-ASSETS> 2,929,560
<ACCUMULATED-NII-PRIOR> 2,153,869
<ACCUMULATED-GAINS-PRIOR> 375,798
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 150,169
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 559,896
<AVERAGE-NET-ASSETS> 31,598,839
<PER-SHARE-NAV-BEGIN> 4.33
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 1.11
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.49
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 4.76
<EXPENSE-RATIO> 1.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
SUB-ADVISORY AGREEMENT
Merrimac Advisors Company
One Coronado Place
6201 Uptown Boulevard N.E.
Albuquerque, New Mexico 87100
Gentlemen:
Lakeview Securities Corporation ("LSC") is a registered investment advisor under
the Investment Advisers Act of 1940, as amended ("Advisers Act"). LSC serves as
investment adviser to Investors Research Fund, Inc. (the "Fund"), an open-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "Act") pursuant to an Investment Advisory
Agreement dated December 27, 1993 (the "Fund Agreement"). The Fund is engaged in
the business of investing and reinvesting its assets in securities of the type,
and in accordance with the limitations specified in the Prospectus, Application
and Statement of Additional Information dated January 30, 1996, which is part of
its effective Registration Statement filed with the U.S. Securities and Exchange
Commission (collectively, the "Fund Prospectus"). Merrimac Advisors Company
("Merrimac" or "you") is a registered investment advisor under the Advisers Act.
Fredric J. French, President, director and sole shareholder of Merrimac and a
director of the Fund, is familiar with the investment strategies employed by LSC
in managing the investment and reinvestment of Fund assets and may be of
assistance to LSC in carrying out its duties and responsibilities under the Fund
Agreement. LSC hereby retains Merrimac as its sub-adviser for the consideration
and upon the terms and conditions hereinafter set forth:
1. Merrimac has received copies of, and is familiar with, each of the following:
(a) The Articles of Incorporation of the Fund;
(b) The By-Laws of the Fund;
(c) The Fund Agreement;
(d) The Fund's Portfolio Compliance Checklist;
(e) The Fund Prospectus;
(f) The Fund's Code of Ethics;
(g) LSC's Code of Ethics.
LSC will furnish to Merrimac from time to time copies of all amendments of or
supplements to the foregoing, if any.
In carrying out its duties and responsibilities as sub- advisor to LSC, Merrimac
shall at all times act in a manner that is consistent with the investment
policies, objectives and restrictions as set forth in the Fund Prospectus.
Furthermore, in the performance of Merrimac's duties hereunder, it shall at all
times act in a manner consistent with the provisions contained in the documents
delivered to Merrimac pursuant to this Section 1, as each of the same may, from
time to time be amended or supplemented.
2. LSC employs Merrimac to assist LSC in managing the investment and
reinvestment of Fund assets and, without limiting the generality of the
foregoing, to review Fund investments and to recommend and, when directed by
LSC, effect investment changes whenever such changes appear to LSC to be
desirable. In addition, you are to perform all statistical, research, economic,
and analysis services necessary or convenient to the performance of your duties
as investment adviser. You will submit to LSC and the Fund such reports relating
to the valuation of the Fund's securities as LSC may reasonably request. Such
services shall be rendered directly to LSC. In addition, upon the request of LSC
or the Fund, you will provide reasonable assistance to LSC, the Fund, and to the
underwriter of the Fund shares and other persons duly authorized to market Fund
shares, in the marketing and promotion of Fund shares. You will promptly deliver
to LSC and the Fund, for their review, not less than three (3) business days
prior to any other use, any marketing and promotional materials prepared by you
for or making reference to the Fund. You agree not to use any marketing,
advertising or promotional material regarding or making reference to LSC or the
Fund that have been objected to in writing by LSC or the Fund. All advice and
recommendations provided by you to LSC will be consistent with the investment
policies, objectives and restrictions of the Fund.
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<PAGE>
3. It is understood that you will from time-to-time employ or associate with
yourself such persons as you believe to be particularly fitted to assist you in
the execution of your duties hereunder, the cost of performance of such duties
to be borne and paid by you, and you agree to employ such persons as are
reasonably necessary to carry out your obligations to all of your clients. You
will provide to LSC and the Fund in writing, promptly following request, such
information regarding itself and the Fund's investments as shall be necessary
for the preparation of periodic reports to the Fund's stockholders and such
other documents and papers as may be required to comply with applicable laws and
the rules, regulations and other requirements of the Securities and Exchange
Commission or other federal, state or local governmental agencies including,
without limitation registration statements on Form N-1A, semi-annual reports on
Form N-SAR, proxy statements, periodic statements and reports, other shareholder
communications, and "blue sky" filings. You agree to permit inspection by
officers and directors of LSC and/or the Fund, upon reasonable notice and at
reasonable times, of all records, books, correspondence, stockholder lists, and
other papers and documents maintained or prepared by you in connection with the
Fund's business and affairs. Furthermore, you agree to maintain, preserve and
make available all such records in accordance and compliance with Section 31 of
the Act, Section 204 of the Advisers Act and all governmental regulations and
requirements, as applicable to you in your capacity as sub-adviser to the Fund.
You agree that all records prepared or maintained by you in connection with the
Fund's business and affairs will be the property of the Fund.
4. You will make recommendations with respect to the purchase and sale of
securities for or on account of the Fund. To carry out such decisions, you are
hereby authorized, as LSC's sub- advisor and attorney-in-fact, to place orders
in the Fund's name for the investment and reinvestment of Fund assets when and
as directed by LSC. Notwithstanding the foregoing, all procedures for making
changes in the Fund's portfolio of securities, including procedures for the
placing and confirmation of orders with brokers and dealers, shall at all times
be and remain under the direction and control of the Fund's board of directors
and officers. You will, however, maintain such records and perform such duties
in connection with the Fund's portfolio of securities as may be reasonably
requested by LSC, and as may be required by applicable governmental laws and
regulations.
5. LSC will provide you with all information under its control which may be
reasonably required for the performance of your duties hereunder, and to advise
you promptly of any changes in the Fund's policies which may affect any of your
obligations hereunder. Except as otherwise specifically provided hereinabove,
you shall have no obligation to provide supervisory or administrative services
in connection with the general business and affairs of the Fund.
6. You will assist LSC in its reporting to the board of directors of the Fund at
each regularly scheduled meeting thereof all changes in the Fund's portfolio
since the prior report, and will furnish to LSC from time-to-time such
information as you may believe appropriate concerning the Fund's portfolio,
whether concerning the individual companies whose securities are included in the
Fund's portfolio, the industries in which they are engaged, or the conditions
prevailing in the economy generally. You will also furnish to LSC such
statistical and analytical information with respect to securities in its
portfolio as you may believe appropriate or as LSC or the board of directors of
the Fund may reasonably request. In making purchases and sales of securities,
you will bear in mind the policies set from time-to-time by LSC and the board of
directors of the Fund as well as the limitations imposed in the Fund Prospectus,
the Act, and the Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies. All powers of control over the Fund's
investments shall at all times be and remain in the Fund's directors and
officers, but this section shall not be construed to relieve LSC or Merrimac
from their various obligations to carry out the investment functions delegated
either under the Fund Agreement or this Agreement.
7. In consideration of the services to be rendered by you, LSC agrees to pay to
you a quarterly fee equal to the Applicable Percentage (as defined below) of (a)
the quarterly fee paid to it by the Fund under paragraph 7 of the Fund Agreement
less (b) any portion of the net expenses of the Fund incurred by the Fund during
each of its fiscal years or portions thereof that this Agreement is in effect
which, as to the Fund in any such year, exceeds the limits applicable to the
Fund under the laws or regulations of any state in which Fund shares are
qualified for sale (reduced pro rata for any portion of less than a year). The
Applicable Percentage shall mean (i) for the first 12 months of the term of this
Agreement, eighty percent (80%) and (ii) for each 12- month period thereafter,
fifty percent (50%) or such other percentage as the parties may mutually agree.
An estimated fee shall be paid in advance on or before the tenth day of the
first month of the applicable quarter, subject to reconciliation based on the
actual fee paid to LSC by the Fund and excess net expenses of the Fund for such
quarter. Any overpayment of the quarterly fee shall be repaid by you to LSC upon
demand. Any underpayment of the quarterly fee shall be paid to you within 30
days of the end of such quarter.
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<PAGE>
8. LSC shall expect of you, and you will give LSC the benefit of your best
judgment and effort in rendering services to LSC and the Fund, and LSC agrees as
an inducement to your undertaking these services that neither you, nor your
officers, directors, shareholders, employees or agents, or any affiliates of the
foregoing shall be liable for any mistake of judgment, or opinion relating to
portfolio and investment matters of the Fund, except for lack of good faith,
provided that nothing herein shall be deemed to protect or purport to protect,
you against any liability to the Fund or its stockholders, or LSC to which you
would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of your obligations and duties hereunder, or by
reason of your reckless disregard of your obligations and duties hereunder.
9. This Agreement shall become effective as of the date of approval of this
Agreement by the Fund, and shall continue in effect until the first anniversary
of such date, and thereafter for successive twelve-month periods (computed from
each anniversary date), provided that such continuance is specifically approved
at least annually by the board of directors of the Fund in accordance with
Section 15(c) of the Act or by vote of a majority of the outstanding voting
securities (as defined in Section 2(a)(42) of the Act) of the Fund, and, by a
majority of the board of directors who are not parties to this Agreement or
interested persons (as defined in Section 2(a)(19) of the Act) of any such
party. This Agreement shall be terminated, without the payment of any penalty,
upon the termination or expiration of the Fund Agreement. This Agreement may be
terminated, without the payment of any penalty, (a) by a vote of a majority of
the board of directors of the Fund or by a vote of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to you, (b) by you on
60 days' written notice to LSC, or (c) by LSC on 60 days' written notice to you.
If, within 90 days after the date hereof, this Agreement shall not have been
approved by the Fund, you will be entitled to terminate this Agreement upon
notice to LSC and will be entitled to any fees earned by you as provided in
Paragraph 7. Termination of this Agreement shall not be deemed to terminate or
otherwise invalidate any other agreement between Merrimac and LSC, except as
otherwise provided herein. Furthermore, termination of this Agreement shall not
be deemed to terminate or otherwise invalidate the Advisory Agreement between
the Fund and LSC.
10. This Agreement may not be transferred, assigned, sold, or in any manner
hypothecated or pledged by you, and this Agreement shall terminate automatically
in the event of any such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed to them by governing law and interpretations
thereof contained in rules or regulations promulgated by the Securities and
Exchange Commission thereunder. You may assign this Agreement in a transaction
in which you rely bona fide upon Rule 2a-6 under the Act upon notice to LSC and
the Fund.
11. In the event this Agreement is terminated for any reason and no subsequent
agreement is entered into between you and LSC, all fees due to you hereunder
shall be prorated as of the effective date of termination and paid within five
(5) business days thereafter. Upon such termination or within a reasonable time
thereafter, you shall surrender to LSC all books, records, correspondence,
stockholders' lists and other papers and documents pertaining to the Fund which
are in your possession or control.
12. No provision of this Agreement may be changed or waived orally, but only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought, and no amendment of this Agreement shall be
effective until approved by (a) the Board of Directors of the Fund, including a
majority of the directors who are not interested persons of LSC, Merrimac or the
Fund, cast in person at a meeting called for the purpose for voting on such
approval, and (b) a majority of the outstanding voting securities of the Fund,
as defined in the Act. Nothing in this Agreement shall be construed as a change
in, modification or amendment to the Fund Agreement.
13. Except to the extent necessary to enable you to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict the right of
Merrimac or of Frederic J. French to engage in any other aspects of the
investment advisory or management business or any business ancillary thereto, or
the right of Fredric J. French, upon the consent of LSC, or any of your other
officers, directors, shareholders, or employees, or any affiliates thereof, to
engage in any business, including acting as investment advisor or manager for
any other person or entity or to devote time and attention to the management or
other aspects of any other business, whether of a similar or dissimilar nature,
or to render portfolio management or advisory services of any kind to any other
corporation, firm, individual, trust or association.
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<PAGE>
14. LSC acknowledges and agrees that you may obtain from broker-dealers approved
by LSC or the board of directors of the Fund, supplemental research, market and
statistical information for use with respect to the Fund. The term "research,
market and statistical information" includes, without limitation, advice as to
the value of securities, the advisability of investing, purchasing and selling
securities, and the availability of securities or purchasers or sellers of
securities, and furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts. LSC understands that such information will be in addition to and not
in lieu of the services required to be performed by you under this Agreement and
that your expenses will not necessarily be reduced as a result of the receipt of
such information. LSC also acknowledges that such information may be useful to
you and your affiliates in providing services to clients other than the Fund,
and that not all such information will at all times be used by you in connection
with the Fund. Finally, LSC acknowledges that information provided to you and
your affiliates by brokers and dealers through whom other clients of yours
effect securities transactions may be useful to you in providing services to the
Fund. Accordingly, LSC understands that investment decisions for the Fund may
not, at all times, be made independently from those of other accounts managed by
you and your affiliates. In furtherance of the foregoing, LSC agrees that, when
the same securities are purchased for or sold by the Fund and any such other
accounts you shall allocate such purchases and sales in a manner deemed by you
to be fair and equitable to all of the accounts, including the Fund and, subject
to your obtaining the best price and execution for your clients (which shall not
necessarily mean the lowest commission available), brokers and dealers providing
research, market and statistical information may be engaged to effect
transactions on behalf of the Fund.
15. All notices and communications to be made hereunder shall be in writing
shall be delivered to LSC or to you, as the case may be, by U.S. certified mail,
return receipt requested, postage prepaid, by commercial courier or by personal
delivery, in each case to the address set forth in this Agreement or to such
other person or address as shall be identified by written notice as provided
herein. Any notice or communication sent by mail as aforesaid, shall be deemed
delivered three (3) business days after deposit in the U.S. mail; any notice
sent personally or by commercial courier shall be deemed delivered upon
confirmation of receipt at such address.
16. This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois and to the extent applicable, the Act and the
Advisor Act. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
17. In connection with the purchase or sale of portfolio securities for the
account of the Fund, neither you nor any of your directors, officers or
employees will act as principal or agent, or receive any commission. You shall,
at the time you place any order to purchase or sell portfolio securities on
behalf of the Fund, inform LSC of any financial interest you have in the issuer
of the securities being purchased or sold. Each Access Person, as defined in
Rule 17(j)-1 in the Act, of Merrimac will provide personal trading reports to a
designated representative of LSC in accordance with the Fund's Code of Ethics.
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<PAGE>
18. Nothing in this Agreement shall be construed so as to make LSC and Merrimac
partners or joint venturers. Except in the performance of its duties hereunder,
Merrimac is and shall be an independent contractor. Unless otherwise expressly
provided or authorized, Merrimac shall have no authority to act for or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund or of LSC.
19. Merrimac has delivered to LSC and the Fund its Codes of Ethics. Merrimac
agrees that any amendments that it may adopt to its Code of Ethics shall be
submitted to and reasonably satisfactory to LSC.
If the foregoing is satisfactory to you, please indicate your acceptance by
signing below.
Very truly yours,
LAKEVIEW SECURITIES CORPORATION
333 West Wacker Drive
Suite 1010
Chicago, Illinois 60601
By:
Title:
Accepted this ___ day of
______________________, 1997
MERRIMAC ADVISORS COMPANY
By:
Title:
Acknowledged this ___ day of
________________________, 1997
INVESTORS RESEARCH FUND, INC.
By:
Title:
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INVESTORS RESEARCH SECTION 403(b)(7) CUSTODIAL ACCOUNT AGREEMENT
ARTICLE I
DEFINITIONS
1.1 Account: The custodial account established and maintained under this
Agreement on behalf of the Employee pursuant to Section 403(b)(7) of the Code.
1.2 Account Holder: The Employee, or, after the death of the Employee, the
Beneficiary of the Employee, or executor or administrator of the estate of the
Employee entitled to direct investment of assets held in the Account.
1.3 Agreement: The Investors Research Section 403(b)(7) Custodial Account
Agreement as set forth herein (and as it may be amended from time to time).
1.4 Application: The Application for the Investors Research Section
403(b)(7) Custodial Account executed by the Employee and the Custodian providing
for the establishment of the Account in accordance with the terms and conditions
of this Agreement.
1.5 Beneficiary: The person or persons designated in accordance with the
provisions of Article 5.6 to receive any undistributed amounts credited to the
Account upon the death of the Employee. No person(s) will be treated as a
Beneficiary hereunder until the Custodian has been provided with such
verification of the Employee's death as the Custodian deems necessary, and the
Custodian will incur no liability (including but not limited to liability for
investment losses or loss of appreciation) for not treating the Beneficiary or,
if applicable, the Executor or Administrator of the Employee's estate, as the
Account Holder until the Employee's death has been so verified, and the
Custodian has been provided with such verification as the Custodian deems
necessary of the identity of the person claiming to be Beneficiary or of the
valid appointment of the person claiming to be Executor or Administrator.
1.6 Code: The Internal Revenue Code of 1986, as amended, and including any
regulations or rulings issued thereunder.
1.7 Company: The Investors Research Fund. Contributions to the Account
shall be invested in one or more Funds which have an investment management,
distribution and/or service contract with the Company.
1.8 Custodian: Investors Fiduciary Trust Company or any successor thereto
appointed in accordance with the provisions of Article 8, provided that such
successor is either a bank or another person who satisfies the requirements of
Section 401(f)(2) of the Code.
1.9 Disability: A determination that the Employee is unable to engage in
any substantial gainful activity by reason of a medically determinable physical
or mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration.
1.10 Employee: The individual who has executed the Application and who is
employed by the Employer on a full or part-time basis or who is a former or
retired employee of the Employer.
1.11 Employer: The employer that is:
(a) described in Section 501(c)(3) of the Code and exempt from
tax under Section 501(a) of the Code; or
(b) a State, a political subdivision of a State, or an agency or
instrumentality thereof, but only with respect to employees
who perform or have performed services for an educational
organization described in Section 170(b)(1)(A)(ii) of the
Code;
and, except with respect to an Account to which no contributions other than
rollovers or transfers are made, the Employer that has executed the Application.
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1.12 ERISA: The Employee Retirement Income Security Act of 1974, as
amended, including any regulations issued thereunder.
1.13 Financial Hardship: A determination that the Employee has an immediate
and heavy financial need requiring a distribution from the Account. Any
determination of the existence of a qualifying financial hardship on the part of
the Employee and the amount required to be distributed to meet the need created
by the hardship shall be made in accordance with the rules and regulations under
Section 403(b)(7) of the Code.
1.14 Fund(s): One or more of the regulated investment companies offered by
the Investors Research Fund, a Delaware corporation, as available investments
under this Agreement.
1.15 Salary Reduction Agreement: The Salary Reduction Agreement described
in Article 3.2.
1.16 Salary Reduction Contribution: The amount contributed by the Employer
to the Account in accordance with a Salary Reduction Agreement.
ARTICLE II
ESTABLISHMENT OF ACCOUNT
2.1 Purpose. This Agreement is intended to provide for the establishment
and administration of an Account to receive contributions by the Employer on
behalf of the Employee in accordance with Section 403(b)(7) of the Code or to
receive rollover contributions or transfers from another 403(b) annuity contract
or custodial account.
2.2 Establishment of Account. The Custodian shall establish and maintain
the Account for the benefit of the Employee according to the terms and
conditions of this Agreement. The name, address and social security number of
the Employee and Beneficiary are set forth on the Application, and it shall be
the obligation of the Account Holder to notify the Custodian of any changes
thereto. The Application and, if applicable, the Salary Reduction Agreement, are
incorporated herein by reference. The Account will become effective upon
acceptance by or on behalf of the Custodian, as evidenced by written
confirmation to the Employee.
ARTICLE III
CONTRIBUTIONS
3.1 Contributions. The Employer shall make Salary Reduction Contributions
to the Account on behalf of the Employee in accordance with the Salary Reduction
Agreement between the Employer and the Employee as described in Article 3.2,
subject to the limitations of Articles 3.4, 3.5, and 3.6.
3.2 Salary Reduction Agreement. The Salary Reduction Agreement shall be a
legally binding agreement between the Employer and the Employee whereby the
Employee agrees to take a reduction in salary or to forego an increase in salary
with respect to amounts earned after the agreement's effective date, and whereby
the Employer agrees to contribute the amount of salary reduced or foregone by
the Employee to the Account. The Salary Reduction Agreement may be terminated at
any time by the Employee with respect to amounts not yet earned by the Employee.
3.3 Limitations in General. The Employee shall compute and determine the
maximum amount that may be contributed on behalf of the Employee in accordance
with the Employee's exclusion allowance, as defined in Section 403(b)(2) of the
Code, and in accordance with the applicable limitations under Section 415(c) of
the Code and, if applicable, in accordance with Section 402(g) of the Code.
Neither the Custodian nor the Company shall have any liability or responsibility
with respect to such computations or determinations, or for any tax imposed on
any excess contributions that exceed the limitations or exclusion allowance,
which matters are solely the responsibility of the Employee.
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3.4 Contribution Limitations.
(a) No amount shall be contributed on behalf of the Employee for any
limitation year in excess of the applicable limitations of
Section 415(c) of the Code. In the absence of a special election
by the Employee under Section 415(c)(4) of the Code, the amount
contributed shall not exceed the lesser of:
(i) $30,000 (or, if greater, one-fourth the defined benefit plan
dollar limitation in effect under Section 415(b)(1) of the
Code for the limitation year); or
(ii) 25 percent of the Employee's compensation (within the
meaning of Section 415(c)(3) of the Code) for the limitation
year.
(b) The term "limitation year" shall mean the calendar year, unless
the Employee elects to change the limitation year to another
twelve-month period by attaching a statement to his or her
federal income tax return in accordance with the regulations
under Section 415 of the Code. If the Employee is in control
(within the meaning of Code Section 414(b) or (c), as modified by
Code Section 415(h)) of the Employer, the limitation year shall
be the same as the limitation year of the Employer under Section
415 of the Code.
(c) If the Employer or any affiliated employer as described in
Section 415(h) of the Code makes contributions on behalf of the
Employee to any other custodial account or annuity contract
described in Section 403(b) of the Code, then the contributions
to such annuity contract shall be combined with the contributions
to the Account for purposes of the limitations of subsection (a).
If the Employee is covered by a qualified plan sponsored by an
entity controlled by the Employee, then contributions to such a
plan shall also be included for the purposes of the limitations
of subsection (a).
3.5 Exclusion from Gross Income. For federal tax purposes, the Employee may
exclude from gross income for any taxable year the Employer contributions that
are made to the Account to the extent such contributions do not exceed the
Employee's exclusion allowance under Section 403(b)(2) of the Code for the
taxable year (and all other applicable limitations, including those set forth in
Sections 3.4 and 3.7).
3.6 Excess Contributions. Any excess contributions (as defined in Section
4973(c) of the Code) that are made to the Account shall be subject to the six
percent excise tax of Section 4973(a) of the Code. Neither the Custodian nor the
Company shall have any duty or responsibility for determining whether any
contributions to the Account are excludable from the Employee's gross income, or
for assuring that any contributions to the Account do not constitute excess
contributions for purposes of Code Section 4973. The disposition of excess
contributions will be made in accordance with instructions from the Employer, if
the Employee has not separated from service, or otherwise, from the Employee.
The Employer or Employee providing such instructions is responsible for
determining that they are consistent with applicable law.
3.7 Limitation on Salary Reduction Contributions.
(a) Employer contributions that are made to the Account pursuant
to a Salary Reduction Agreement shall not exceed the amount
of $10,000, or such greater amounts as may be permitted with
respect to the Employee for the taxable year under Section
402(g)(5) of the Code, reduced by the aggregate amounts
contributed in any calendar year at the election of the
Employee to any qualified cash and deferred arrangement
described in Section 401(k) of the Code, any simplified
employee pension described in Section 408(k)(6) of the Code,
any Simple IRA described in Section 408(p) of the Code, and
any eligible deferred compensation plan described in Section
457 of the Code.
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<PAGE>
(b) Notwithstanding any provision of this Agreement to the
contrary, if the Employee determines that an amount
contributed during a taxable year to the Account exceeds the
limitation set forth in subsection (a), and no later than
March 1 of the following taxable year notifies the Custodian
in writing of the excess amount the Employee has determined,
then the Custodian shall distribute such excess amount, plus
any income or minus any losses allocable thereto, to the
Employee no later than the following April 15. The Employee
shall have the sole responsibility for timely determining
any excess deferrals to the Account and notifying the
Custodian in accordance with these procedures.
(c) Neither the Custodian nor the Company shall have any duty or
responsibility for determining whether any contributions to
the Account constitute excess deferrals as described in
Section 402(g)(2)(A) of the Code, or for assuring that any
excess deferrals are timely distributed in accordance with
the procedures of Section 402(g)(2)(A) of the Code.
3.8 Rollover Contributions and Transfers.
(a) The Employee shall be permitted to make a rollover
contribution to the Account of an amount received by the
Employee that is attributable to participation in another
annuity contract or custodial account described in Section
403(b) of the Code, provided such rollover contribution
complies with all requirements of Section 403(b)(8) or
Section 408(d)(3)(A)(iii) of the Code, whichever is
applicable.
(b) The Custodian may accept a direct transfer of assets to the
Account on behalf of the Employee from another annuity
contract or custodial account described in Section 403(b) of
the Code to the extent permitted by the Code and the
regulations and rulings thereunder. The Employee shall not
request or initiate a transfer (or a rollover) from a
contract or account containing distribution restrictions
that are more restrictive than those provided in Article V.
The Employee shall not request or initiate a transfer from a
contract or account covered by ERISA, unless the transferee
Account is part of an employee benefit plan which provides
distribution restrictions which meet the requirements of
Section 205 of ERISA and the regulations thereunder with
respect to any amount transferred.
(c) Neither the Custodian nor the Company shall have any duty or
responsibility for determining whether any rollover
contribution or transfer of assets by or on behalf of the
Employee pursuant to this Article 3.8 is a proper rollover
contribution or transfer of assets under the Code, or for
the tax treatment to the Employee of any transfer or
rollover.
(d) To the extent permitted under applicable law, the Account
Holder reserves the right to transfer or rollover any or all
of the assets of the Account to such other form of annuity
contract or custodial account described in Section 403(b) of
the Code or to such Individual Retirement Account (IRA) or
other plan established pursuant to Section 408 of the Code
as the Employee may determine, upon written instructions to
the Custodian, in a form acceptable to the Custodian;
provided, however that the Custodian shall have no
responsibility for the tax treatment to the Account Holder
of any such transfer or rollover.
(e) The Custodian shall not be liable for losses arising from
the acts, omissions, or delays or other inaction of any
party transferring assets to the Account or receiving assets
transferred from the Account pursuant to this Article, or
for determining or inquiring into whether any account or
annuity transferring assets to or receiving assets from the
Account complies with all applicable requirements of the
Code and IRS rulings or for the tax or other consequences of
noncompliance.
3.9 Manner of Making Contributions. All contributions to the Account shall
be paid directly to the Custodian. Contributions may be made by check or bank
wire. Contributions shall be preceded or accompanied by written instructions
directing the investment of the amount contributed on behalf of the Employee in
accordance with Article 4.1.
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ARTICLE IV
INVESTMENTS
4.1 Investment of Account. All contributions to the Account and all assets
in the Account shall be invested in the Fund(s) in accordance with instructions
given to the Custodian by the Account Holder in a manner acceptable to the
Custodian. Such instructions shall remain in effect until changed by the Account
Holder in a manner acceptable to the Custodian. By giving any such instructions,
the Account Holder will be deemed to have acknowledged receipt of the then
current prospectus of any Fund in which the Account Holder instructs the
Custodian to invest such contributions or assets. If the Custodian receives any
contribution to the Account that is not accompanied by acceptable instructions
directing its investment, the Custodian may hold or return all or a part of the
contribution uninvested (or invested in a money market fund if available)
without liability for loss of income or appreciation pending receipt of
acceptable instructions.
4.2 Investment Advice. The Account Holder agrees that neither the Custodian
nor the Company undertake to provide any advice with respect to the investment
of the Account, and that the responsibility of the Custodian to invest in shares
of a particular Fund pursuant to the directions of the Account Holder does not
constitute an endorsement by the Custodian of that Fund. The Account Holder will
have sole power and responsibility for the investment of the Account in shares
of one or more Funds selected by the Account Holder. Neither the Custodian nor
the Company shall be liable for any loss that results from the exercise of
control over the Account by the Account Holder.
4.3 Account Earnings. All dividends, capital gains distributions and other
earnings received by the Custodian on any shares of a Fund held in the Account
shall be automatically reinvested in additional shares of such Fund.
4.4 Investment Exchanges. The Account Holder may direct the Custodian to
redeem any or all shares of any Fund that are held in the Account and to
reinvest the proceeds in any other Fund available under this Agreement. Any such
directions shall be given in a manner acceptable to the Custodian. If any such
directions are incomplete or ambiguous, the Custodian will not carry out such
directions until the incompleteness or ambiguity is resolved, and the Custodian
will have no liability for loss of income or appreciation pending the resolution
of such incompleteness or ambiguity. By giving any such directions, the Account
Holder will be deemed to have acknowledged receipt of the then current
prospectus of any Fund in which the Account Holder instructs the Custodian to
reinvest such proceeds. Any such exchange transaction shall conform with the
provisions of the current prospectus for the applicable Fund.
4.5 Record Ownership; Voting of Shares. All Fund shares acquired by the
Custodian pursuant to this Agreement shall be registered in the name of the
Custodian or its nominee. The Custodian shall mail or transmit to the Account
Holder's address of record all notices, prospectuses, financial statements,
proxies and proxy soliciting materials relating to the shares held in the
Account. The Custodian shall not vote any such shares except in accordance with
written instructions received from the Account Holder, provided however, that
the Custodian may, in the absence of instructions, vote "present" for the sole
purpose of allowing such shares to be counted for establishment of a quorum at a
shareholder's meeting.
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ARTICLE V
DISTRIBUTION OF ASSETS OF ACCOUNT
5.1 Request for Distribution. The Custodian shall distribute the assets of
the Account to the Employee upon receipt by the Custodian of a written request
for distribution submitted by the Employee, in a form acceptable to the
Custodian, subject to the limitations of Article 5.2.
5.2 Limitations on Distributions. Except as may otherwise be provided in
Article 3.6 or Article 3.7(b), the assets of the Account shall not be
distributed to the Employee before the Employee attains age 59-1/2 unless the
Employee has:
(a) separated from the service of the Employer,
(b) incurred a Disability, or
(c) encountered Financial Hardship.
Any distribution that is made to the Employee for reason of Financial Hardship
shall not exceed the amount of Employer contributions made to the Account
pursuant to a salary reduction agreement with the Employee, excluding earnings
thereon.
5.3 Method of Distribution. Subject to the limitations of this Article 5,
the Employee may elect to have distribution of the assets of the Account made in
one or a combination of the following ways:
(a) lump-sum payment; or
(b) monthly, quarterly or annual installment payments over a
period certain not to exceed the life expectancy of the
Employee or the joint and last survivor life expectancy of
the Employee and his or her Beneficiary in a manner that
satisfies the minimum distribution requirements of Article
5.4.
If no election of the method of distribution is made by the Employee within 30
days of receipt by the Custodian of the written request for distribution
referred to in Article 5.1, the Custodian shall make such distribution to the
Employee in a lump-sum payment of cash.
5.4 Minimum Distribution Requirements Prior to Death of Employee.
(a) Commencement of Distributions. Notwithstanding any provision
of this Agreement to the contrary, distribution of the
Account shall commence no later than the "Required Beginning
Date". For any Employee who attained age 70-1/2 after
December 31, 1996 or before January 1, 1988, the Required
Beginning Date is the April 1 following the calendar year in
which the Employee attains age 70-1/2 or terminates
employment, whichever is the later. For any Employee who
attained age 70-1/2 in 1988 and had not retired by January
1, 1989, the Required Beginning Date is April 1, 1990. For
any other Employee who attained age 70 and 1/2 after
December 31, 1987 and before January 1, 1997, the Required
Beginning Date is the April 1 following the calendar year in
which the Employee attains age 70-1/2 regardless of whether
the Employee has then retired. Notwithstanding the preceding
paragraph, effective January 1, 1997, the Required Beginning
Date for an Employee (other than an Employee who is a five
percent owner, as defined in Section 416 of the Code, of the
Employer with respect to the year in which the Employee
attains age 70-1/2) is the April 1 following the calendar
year in which the Employee attains age 70-1/2 or retires
from the Employer, whichever is later. [If an Employee is
still employed by the Employer after January 1, 1997, and he
is receiving required distributions in accordance with the
preceding paragraph but would not be required to receive
distributions under the preceding sentence, the Employee may
file an election with the Custodian to cease minimum
required distributions under the preceding paragraph; and
such Employee may resume distributions by filing a written
request with the Custodian under Section 5.1 above at the
time required by the preceding sentence. In the case of an
Account which contains Direct Contributions, the election in
the preceding sentence will apply only if the Employer
consents thereto in a written consent filed with the
Custodian.]
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(b) Minimum Amounts to be Distributed. The minimum amount
distributed to the Employee for each taxable year, beginning
no later than the Required Beginning Date under subsection
(a) above, must equal or exceed the minimum distribution
required under Sections 401(a)(9) and 403(b)(10) of the Code
and must meet the incidental death benefit requirement of
the regulations under Section 401(a)(9).
5.5 Distribution Upon Death of Employee. In the event the Employee dies
prior to the complete distribution of the assets of the Account, all assets
remaining in the Account shall be distributed to the Employee's Beneficiary in a
lump-sum payment or in monthly, quarterly or annual installment payments over a
specified period as selected in writing by the Beneficiary in accordance with
the following rules:
(a) Where Distribution Had Already Commenced. If distribution to
the Employee had already commenced and the Employee died
after the Employee's Required Beginning Date, the assets of
the Account shall be distributed to the Beneficiary at least
as rapidly as under the method of distribution in effect
prior to the Employee's death.
(b) Five-Year Rule. If the Employee died before the Employee's
Required Beginning Date, the assets of the Account shall be
distributed to the Beneficiary by December 31 of the
calendar year which contains the fifth anniversary of the
death of the Employee.
(c) Exception for Distributions Over Life Expectancy.
Notwithstanding subsection (b) above, the assets of the
Account may be distributed to the Beneficiary in installment
payments over a period certain not exceeding the
Beneficiary's life expectancy, provided such distribution
commences by December 31 of the calendar year immediately
following the year of the Employee's death or, if the
Beneficiary is the surviving spouse of the Employee, by
December 31 of the later of (1) the calendar year
immediately following the calendar year in which the
Employee died or (2) the calendar year in which the Employee
would have attained age 70- 1/2.
In determining the minimum amounts required to be distributed under Section 5.4
or this Section 5.5, life expectancies of the Employee and/or the Employee's
spouse may be recalculated annually in accordance with applicable regulations,
but only if the Employee and/or the Employee's spouse specifically so provide in
writing; life expectancies of any person other than the Employee or the
Employee's spouse will not be recalculated. Notwithstanding any provision of
this Agreement to the contrary, to the extent permitted under regulation, ruling
procedures or notice of the Internal Revenue Service, the minimum distribution
calculated in accordance with Code sections 403(b)(10) and 401(a)(9) may be
taken from any 403(b) annuity or account of the Employee. The Custodian will
have no responsibility for determining the required time or amount of any
distribution required under such Code sections, but will make distributions only
in accordance with the proper directions by the Account Holder; the Custodian
will have no liability for not making a distribution in the absence of such
directions and may assume that the Account Holder is satisfying any applicable
minimum distribution requirement from another 403(b) annuity or custodial
account. If the Beneficiary dies while receiving payments from the Account, all
remaining assets in the Account shall be distributed as soon as practicable to
the estate of the Beneficiary.
5.6 Designation of Beneficiary. The Employee may from time to time
designate any person, persons or entity as the Beneficiary who shall receive any
undistributed assets held in the Account at the time of the Employee's death.
Any Beneficiary designation by the Employee shall be made on a form prescribed
by the Custodian (or in another written designation acceptable to the
Custodian), and shall be effective only when filed with the Custodian during the
lifetime of the Employee. If the Employee fails to designate a Beneficiary in
the manner provided above, or if the Beneficiary designated by the Employee
predeceases the Employee, the assets of the Account shall be distributed upon
the death of the Employee in the following order of priority: first to the
employee's surviving spouse, if any, and second, to the estate of the Employee.
Notwithstanding the foregoing, if this Agreement constitutes part of an
"employee benefit plan" under ERISA, then the Beneficiary of a married Employee
must be the spouse of the Employee, unless the spouse of the Employee consents
in writing to designation of a different Beneficiary and such consent
acknowledges the effect of the designation, specifies the nonspouse Beneficiary
designated, and is witnessed by a notary public. Furthermore, such a designation
of a nonspouse Beneficiary may be changed to a different nonspouse Beneficiary
only if the spouse of the Employee provides a new consent that meets all
requirements of the preceding sentence.
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5.7 Distributions Pursuant to Qualified Domestic Relations Orders or Other
Court Orders. In the case of an Account that is part of an "employee pension
benefit plan" (as defined in ERISA), nothing in this Agreement shall prohibit
distribution to any person in accordance with the terms of a "qualified domestic
relations order" as defined in Section 206(d) of ERISA. The Custodian will make
payments in accordance with an apparently valid order or judgment of a court
binding on the Custodian. The Account Holder will be responsible to direct the
Custodian whether or not to contest, defend against or appeal any such order or
judgment (subject to the last sentence of Section 6.5).
5.8 Payments to Incompetent Persons. If an amount is payable to a person
believed by the Custodian to be a minor or otherwise legally incompetent, the
Custodian may make such payment to the parent, a legal guardian, committee or
other legal representative (however or wherever appointed), or any person having
control or custody of such person, and any such payment will fully discharge the
Custodian to the extent of the payment.
5.9 Direct Rollovers. This Article 5.9 applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of this Agreement to the
contrary that would otherwise limit a distributee's election under this section,
a distributee may elect, at the time and in the manner prescribed by the
Custodian and fund transfer agent, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover. For the purpose of this section, the following
definitions apply:
(a) Eligible rollover distribution: An eligible rollover is any
distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint
life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required to comply with the minimum
distribution and incidental death benefit requirements of
section 401(a)(9) and 403(b)(10) of the Code; and the
portion of any distribution that is not includible in gross
income. An eligible rollover distribution also does not
include any other amounts that may be excluded under
regulations, procedures, notices, or rulings interpreting
the term eligible rollover distribution under sections
401(a)(31), 402, or 403(b) of the Code.
(b) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in section 408(a) of
the Code, an individual retirement annuity described in
section 408(b) of the Code, or another 403(b) annuity or
403(b)(7) custodial account, that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account
or individual retirement annuity.
(c) Distributee: A distributee includes an employee or former
employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's
spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in section
414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(d) Direct rollover: A direct rollover is a payment by the plan
to the eligible retirement plan specified by the
distributee.
(e) The Custodian and fund transfer agent may prescribe
reasonable procedures for the election of direct rollovers
under this section, including, but not limited to,
requirements that the distributee provide the Custodian with
adequate information, including, but not limited to: the
name of the eligible retirement plan to which the rollover
is to be made; a representation that the recipient plan is
an individual retirement plan or a 403(b) annuity or
403(b)(7) custodial account, as appropriate; acknowledgment
from the recipient plan that it will accept the direct
rollover; and any other information necessary to make the
direct rollover.
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ARTICLE VI
RESPONSIBILITIES AND DUTIES OF CUSTODIAN
6.1 Asset Retention. The Custodian shall hold all contributions to the
Account which are received by it subject to the terms and conditions of this
Agreement and for the purposes set forth herein. The Custodian shall be
responsible only for such assets as shall actually be received by it.
6.2 Records and Reports. The Custodian shall file such reports with the
Internal Revenue Service as may be required to be filed by the Custodian (not
including such reports as may be required to be filed by the Employer or, if
applicable, the plan administrator) under Treasury Regulations. The Custodian,
the Employer, Employee and Beneficiary shall furnish to one another such
information relevant to the Account as may be required in connection with such
reports. The Custodian will also furnish the Employee (or Beneficiary if the
Employee is deceased) with annual or more frequent reports showing all
transactions in the Account during the period covered by the report and the
number of shares of each Fund held in the Account at the end of the period
covered by such report. Unless the Employee (or Beneficiary, where applicable)
sends the Custodian written objection to any such report within 60 days after
its receipt, the Employee (or Beneficiary, where applicable) shall be deemed to
have approved such report, and in such case the Custodian shall be forever
released and discharged from all liability and accountability to anyone with
respect to all matters and things included therein. The Custodian may seek a
judicial settlement of its accounts. In any such proceeding, the only necessary
party thereto in addition to the Custodian shall be the Employee.
6.3 Limitations on Responsibilities and Duties.
(a) The Custodian shall not be responsible in any way for the
timing, amount or collection of contributions provided for
under this Agreement, the selection of the investments for
the Account, the timing, amount or purpose or propriety of
any distribution made pursuant to Article 5 hereof, or the
tax consequences of any such transaction to the Employee or
Beneficiary, or any other action taken at the direction of
the Employee (or Beneficiary or Employer, where applicable).
The Custodian shall not be obliged to take any action
whatsoever with respect to the Account except upon receipt
of directions in a form acceptable to the Custodian from the
Employee (or Beneficiary or Employer, where applicable). The
Custodian shall be under no obligation to determine the
accuracy or propriety of any such directions and shall be
fully protected in acting in accordance therewith. The
Custodian will be fully protected in acting in reliance upon
any document, order or other direction believed by it to be
genuine and properly given. The Custodian will have no
responsibility if the Custodian does not act in the absence
of proper instructions, or if the Custodian believes any
document, order or other direction is not genuine or
properly given, or on the basis of any incomplete or
ambiguous document, order or other direction until such
incompleteness or ambiguity is resolved to the Custodian's
satisfaction.
(b) The Custodian is an agent appointed by the Company to
perform solely the duties assigned to it under the
Agreement, it being acknowledged that certain of such duties
may be performed by the Custodian in any event pursuant to
one or more other contractual arrangements or relationships.
The Custodian shall not be deemed to be a fiduciary under
ERISA in carrying out its duties.
(c) The Employer shall be solely responsible for assuring
compliance at all times with the nondiscrimination
requirements of Code section 403(b)(12) (whether or not the
Account holds any Direct Contributions) and the Custodian
shall not be responsible in any way for such compliance. If
the Account holds any Direct Contributions, the Employer
shall be solely responsible for compliance with all
applicable requirements of the Code (including the non-
discrimination requirements of Code Section 403(b)(12)
applicable to such Direct Contributions) and ERISA.
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(d) The Custodian will have no liability to the Account Holder
for transferring any amount to a state authority in
accordance with any law relating to escheat or abandoned or
unclaimed property.
(e) It is hereby agreed that, subject to the provisions of
applicable law, no person other than the Account Holder may
institute or maintain any action or proceeding against the
Custodian.
6.4 Indemnification of Custodian. The Account Holder and the successors of
the Account Holder, including any executor or administrator of the Account
Holder, shall, to the fullest extent permitted by law, at all times fully
indemnify and save harmless the Custodian, its successors and assigns from any
and all claims, actions, or liabilities arising from investments or
distributions made or actions taken at the direction of the Account Holder, and
from any and all other liability whatsoever (including without limitation all
reasonable expenses incurred in defending against or settlement of such claims,
actions or liabilities) which may arise in connection with this Agreement or the
Account, except liability arising from the gross negligence or willful
misconduct of the Custodian.
6.5 Liability of Custodian. The Custodian's liability under this Agreement
and matters which it contemplates shall be limited to matters arising from the
Custodian's gross negligence or willful misconduct. The Custodian shall be
entitled to rely conclusively upon, and shall be fully protected in any action
or nonaction taken in reliance upon, any written notices or other communications
or instruments believed by the Custodian to be genuine and to have been properly
executed. The Custodian shall not under any circumstances be responsible for the
timing, purpose, or propriety of any contribution or of any distribution made
hereunder, nor shall the Custodian incur any liability or responsibility for any
tax imposed on account of any such contribution or distribution. The Custodian
shall not be obligated or expected to commence or defend any legal action or
proceeding in connection with this Agreement unless agreed upon by the Custodian
and Account Holder, and unless fully indemnified for so doing to the
satisfaction of the Custodian.
ARTICLE VII
FEES AND EXPENSES OF THE CUSTODIAN
7.1 Compensation of Custodian. In consideration for its services hereunder,
the Custodian shall be entitled to receive the applicable fees specified in the
Application. The Custodian may substitute a revised fee schedule from time to
time. The Custodian shall be entitled to such reasonable additional fees as it
may from time to time determine for services required of it and not clearly
identified on the fee schedule. The Employee acknowledges that the Custodian's
ability to earn income on amounts held in non-interest bearing accounts has been
taken into consideration in establishing the Custodian's fees. The Employee
agrees that the Custodian shall be entitled to retain any such income as a part
of its agreed compensation hereunder, and such income shall not be or become a
part of the Fund.
7.2 Charges Upon the Account. Any income taxes or other taxes of any kind
whatsoever that may be levied or assessed upon or in respect of the Account
(including any transfer taxes incurred in connection with the investment and
reinvestment of Account assets), expenses, fees and administrative costs
incurred by the Custodian in the performance of its duties (including fees for
legal services rendered to the Custodian), and the Custodian's compensation as
determined under Article 7.1 shall constitute a charge upon the assets of the
Account. At the Custodian's option, such fees, taxes or expenses shall be paid
from the Account or by the Account Holder. The Custodian may redeem Fund shares
and use the proceeds of redemption to pay such fees, taxes or expenses, and the
Custodian will have no liability for loss of income or appreciation as a result
of the Custodian's selection of Fund shares to be redeemed under this sentence.
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ARTICLE VIII
RESIGNATION OR REMOVAL OF CUSTODIAN
8.1 Resignation or Removal. The Custodian may resign at any time by written
notice to the Company which shall be effective 30 days after delivery thereof.
The Company shall appoint a successor Custodian who shall accept such
appointment in a writing provided to the Custodian and Account Holder within
such 30-day period. The Custodian may be removed by the Company at any time upon
30 days written notice to the Custodian, provided that the Company designates a
successor Custodian that accepts such appointment by a writing provided to the
Account Holder and the Custodian within such 30-day period. Upon such
resignation or removal, the Custodian shall transfer and deliver all assets of
the Account and copies of all records relative thereto to the successor
Custodian appointed by the Company, provided such successor Custodian has in
writing accepted this Agreement as it is or may be then amended. Notwithstanding
the foregoing, the Custodian is authorized to reserve such sum of money as it
may deem advisable for payment of all of its fees, compensation, costs and
expenses, or for payment of any other liability constituting a charge on or
against the assets of the Account or on or against the Custodian, and where
necessary may liquidate shares in the Account for such payments in accordance
with the last sentence of Section 7.2. Any balance of such reserve remaining
after the payment of all such items shall be paid over to the successor
Custodian.
8.2 Liability for Successor's Acts. Upon its resignation or removal, the
Custodian shall not be liable for the acts or omissions of any successor
Custodian. Upon the transfer of assets of the Account to a successor Custodian,
the resigning or removed Custodian shall be relieved of all further liability
with respect to this Agreement, the Account and the assets thereof.
ARTICLE IX
AMENDMENT AND TERMINATION
9.1 Amendment of Agreement.
(a) The Account Holder, Employer, and Custodian hereby delegate
to the Company the power to amend this Agreement, including
any retroactive amendment necessary for the purpose of
conforming the Agreement to the requirements of the Code.
The Company shall deliver written notice of any such
amendment to the Account Holder, Custodian and any Employer
who is party to this Agreement.
(b) No amendment to this Agreement shall cause or permit: any
part of the assets of the Account to be used for, or
diverted to, purposes other than for the exclusive benefit
of the Employee or Beneficiary, except with regard to
payment of the expenses of the Custodian and the Company as
authorized by the provisions of this Agreement and except to
the extent required by law; the Employee to be deprived of
any accrued benefits under this Agreement unless such
amendment is required for the purpose of conforming the
Agreement to the requirements of any law, government
regulation or ruling; or the imposition of any additional
duties or obligations on the Custodian without its written
consent.
9.2 Termination of Agreement. This Agreement shall terminate when all
assets in the Account have been distributed or otherwise transferred out of the
Account. Upon completion of such distribution, the Custodian shall be released
from all further liability with respect to all amounts so paid to the extent
permitted by applicable law. However, the provisions of this Agreement
protecting the Custodian or limiting the liability of the Custodian, including
specifically but without implied limitation Section 6.4, will survive the
termination of this Agreement.
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ARTICLE X
MISCELLANEOUS
10.1 Retirement Plan Provisions Shall Control. In the event contributions
are being made to the Account pursuant to any retirement plan or program
sponsored by the Employer, to the extent any provisions of this Agreement are
inconsistent with such retirement plan or program, the provisions of the
Employer's retirement plan or program shall control, provided:
(a) such provisions are not contrary to the rules and
regulations under Section 403(b)(7) of the Code; and
(b) such provisions do not impose any additional
responsibilities or duties on the Custodian without its
prior written consent. The Employer shall be responsible for
delivering the most recent copy of any such retirement plan
or program to the Custodian.
10.2 ERISA Requirements. If this Agreement is determined to constitute part
of an "employee benefit plan" established or maintained by the Employer subject
to Title I of ERISA, then the Employer shall be solely responsible for assuring
such employee benefit plan complies at all times with the requirements of Title
I of ERISA. In such a case, the Employer (or a person designated by the
Employer) will be the "plan administrator" of such employee benefit plan for
purposes of ERISA. Neither the Custodian nor the Company will be the "plan
administrator" of such employee benefit plan for purposes of ERISA.
10.3 Exclusive Benefit. The assets of the Account shall not be used for, or
diverted to, purposes other than for the exclusive benefit of the Employee or
his or her Beneficiary. The assets of the Account shall not be subject to the
claims of the creditors of the Employer.
10.4 Nonforfeitability and Nontransferability. The interest of the Employee
in the balance of the Account shall at all times be nonforfeitable and
nontransferable. All rights under this Agreement are enforceable solely by the
Employee or his or her Beneficiary, or any duly authorized representative of the
Employee or Beneficiary.
10.5 Nonalienation. The assets of the Account shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, attachment, garnishment, execution, or levy of any kind,
either voluntary or involuntary, except with regard to payment of expenses of
the Custodian as authorized by the provisions of the Agreement and except to the
extent required by law.
10.6 Notices. Any notice, accounting, or other communication which the
Custodian may give to the Employer or the Account Holder shall be deemed given
when mailed to the Employee at the latest address which has been furnished to
the Custodian. Any notice or other communication which the Employer or Account
Holder may give to the Custodian shall not become effective until actual receipt
of said notice by the Custodian.
10.7 Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of Missouri, to the extent not preempted by Federal
law. No provision of this Agreement shall be construed to conflict with any
provision of an Internal Revenue Service regulation, ruling, release, or other
order which affects, or could affect, the terms of this Agreement or its
compliance with the requirements of Section 403(b)(7) of the Code. The Account
Holder (and, if applicable, the Employer) agree that any legal action brought
against the Custodian by any other party must be brought in a state or federal
court located in the judicial district in which the principal offices of the
Custodian are located.
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IMPORTANT INFORMATION ABOUT YOUR INVESTORS RESEARCH 403(b)(7) ACCOUNT
Dear Investors Research 403(b)(7) Account Holder:
Recent legislation makes some changes in the tax law rules for the
403(b)(7) custodial accounts. The main changes for 403(b)(7) accounts are as
follows:
Previously, an employee could make only one salary reduction agreement (or
one modification to an existing salary reduction agreement) in a calendar year.
Now, an employee may (subject to any reasonable limitations imposed by his
employer) change his/her salary reduction agreement as often as he wishes. The
only requirement is that any change may relate only to compensation to be earned
in the future (i.e. future pay periods), not to any pay already earned at the
effective date of the change.
The current tax law rule requiring an employee to start receiving
distributions from his 403(b)(7) account on the April 1 following the calendar
year in which the employee reaches age 70-1/2 has been changed. Under the new
rule, distributions must start by the April 1 following the year in which the
employee reaches age 70-1/2 or retires, whichever is later. This change is
effective as of January 1, 1997.
The method for calculating the maximum 403(b)(7) contribution by an
employee has changed. First, the limit on voluntary salary reductions by an
individual (including both salary reduction contributions to a 403(b)(7) account
or to a 401(k) plan) has been increased from $9,500 in 1997 to $10,000 in 1998.
Second, the definition of "compensation" for purposes of calculating certain
other limits on an individual's contribution have been changed. Starting in
1998, compensation before salary reductions will be used to determine these
other contribution limits. These changes in general will result in eligible
employees being able to make larger 403(b)(7) contributions in 1998.
The tax law rule imposing a 15% penalty tax on very large withdrawals from
tax-favored retirement arrangements, including 403(b)(7) custodial accounts,
IRAs and qualified employer-sponsored plans has been repealed. A related 15%
penalty tax on large accumulations remaining in such tax-favored arrangements at
an individual's death has also been repealed.
Enclosed is an amendment and restatement of your 403(b)(7) Account
Agreement. This amendment revises your Agreement to reflect the new tax law
changes and to make other technical or clarifying changes. You do not need to
sign anything or return anything to us.
It is our pleasure to serve your retirement planning needs by continually
revising the documentation for your 403(b)(7) account as tax laws and other
legal rules change.
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ADOPTION OF DISTRIBUTION PLAN
WHEREAS, Investors Research Fund, Inc. (the Fund) is registered as an
open-end diversified management investment company under the Investment Company
Act of 1940 (the 1940 Act); and
WHEREAS, the Fund desires to finance distribution of its shares in
accordance with this Plan of Distribution pursuant to Rule 12b-1 under the Act;
and
WHEREAS, the Board of Directors of the Fund has determined to adopt this
Distribution Plan in accordance with the requirements of the 1940 Act and has
determined that there is a reasonable likelihood that the Plan will benefit the
Fund and its Shareholders; and,
WHEREAS, this Plan has been approved by a vote of the Board of Directors of
the Fund, including a majority of those directors who are not interested persons
of the Fund, as defined in the Act, and who have no direct or indirect financial
interest in the operation of this Plan (hereafter the 'disinterested
Directors"), cast in person at a meeting called for the purpose of voting on
this Plan.
NOW THEREFORE, the Fund hereby adopts the Plan on the following terms and
conditions:
1.(a) The Fund will make payments to broker-dealers who have engaged in the
marketing and distribution of the Fund's shares and who agree to provide certain
services of value to the Fund's Shareholders.
(b) Payments made out of or charged against the assets of the Fund are
subject, in total, to a maximum annual limit of .25% of the Fund's average daily
net assets, and for expenses of administration of this Plan.
(c) No payments whatsoever may be made from, or charged against, assets of
the Fund which directly or indirectly contribute to financing any activity which
is primarily intended to result in the sale of shares issued by the Fund except
those payments made pursuant to this Plan.
2. This Plan shall become effective immediately upon approval by a vote of
a majority of the outstanding voting securities of the Fund as defined in the
Act [Section 2 (42)], and shall continue in effect for a period of one (1) year
from the date of such approval unless terminated earlier as provided below.
Thereafter, the Plan shall continue in effect from year to year, provided that
the continuance is approved at least annually by a vote of the Board of
Directors of the Fund, including a majority of the Disinterested Directors who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan, cast in person at a meeting called for the
purpose of voting on such Plan, or by a vote of a majority of the outstanding
voting securities of the Fund.
3. Any person authorized to direct the disposition of monies paid or
payable by the Fund pursuant to the Plan or any related agreement shall provide
to the Fund's Board of Directors, and the Board shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made. No payments will be made by the Fund
hereunder after the date of termination of the Plan.
4. All material amendments to the Plan must be approved by the vote of the
Board of Directors of the Fund, including a majority of the Disinterested
Directors, cast in person at a meeting called for the purpose of voting on such
amendments. However, this Plan may not be amended to increase materially the
amount to be spend by the Fund hereunder without approval by a vote of a
majority of the outstanding voting securities of the Fund.
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<PAGE>
5. So long as the Plan remains in effect, the selection and nomination of
persons to serve as those Directors of the Fund who are not "interested persons"
of the Fund shall be committed to the discretion of the Directors then in office
who are not "interested persons" of the Fund. However, nothing contained herein
shall prevent the participation of other persons in the selection and nomination
process, provided that a final decision on any such selection or nomination is
within the discretion of, and approved by, a majority of the Directors of the
Fund then in office who are not "interested persons" of the Fund.
6. Any agreement related to the Plan shall be in writing and shall provide:
(a) that such agreement may be terminated at any time as to the Fund, without
payment of any penalty and with no obligation to make any further payments, by
vote of a majority of the Disinterested Directors who have no direct or indirect
financial interest in the operation of the Plan or in any agreements relating to
the plan or by vote of a majority of the outstanding voting Shares of the Fund,
on not more than sixty (60) days' written notice to any other party to the
agreement; and (b) that such agreement shall terminate automatically in the
event of its assignment.
7. The Fund shall preserve copies of the Plan and all reports made pursuant
to paragraph 4 hereof, together with minutes of all Directors meetings at which
the adoption, amendment or continuance of the Plan were considered (describing
the factors considered and the basis for decision), and any related reports or
minutes, as the case may be, for a period of not less than six (6) years from
the date of this Plan, the first two (2) years in an easily accessible place.
8. The Plan may be terminated at any time, without penalty, by the vote of
a majority of Disinterested Directors who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan
cast in person at a meeting called for the purpose of voting on such Plan, or by
the vote of a majority of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, Investors Research Fund, Inc. has executed this
Distribution Plan on December 1, 1992.
INVESTORS RESEARCH FUND, INC.
By:___________/S/____________
Edgar T. Wells, Jr.
President
Attest:___________/S/_____________
Francis S. Johnson
Vice President
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<PAGE>
INVESTORS RESEARCH FUND, INC.
P.O. Box 30, Santa Barbara, CA 93102
(805) 569-1011
From: 12b-1 PLAN DEALER AND BROKER
SERVICING AGREEMENT
(Form A)
TO: INVESTORS RESEARCH FUND, INC.
P.O. Box 30
Santa Barbara, CA 93102
Gentlemen:
We desire to enter into this agreement (the "Agreement") with you in
connection with our distribution of shares (the "Shares") of Investors Research
Fund, Inc., pursuant to a Distribution Plan (the "Plan") adopted by the Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940
Act"). This agreement defines the services to be provided by us, for which we
are to receive payment from you, pursuant to the Plan.
1. We are a member of the National Association of Securities Dealers, Inc.
and currently have an effective agreement with you for the distribution of
shares of Investors Research Fund, Inc. We agree to provide distribution
assistance and administrative support services in connection with the
distribution of shares of the Fund to customers who may from time to time
directly or beneficially own Shares, including but not limited to distributing
sales literature, answering routine customer inquiries regarding the Fund,
assisting in the establishment and maintenance of accounts in the Fund and in
processing of purchase and redemption of Share transactions, making the Fund's
investment plans and dividend options available, and providing such other
information and services in connection with the distribution of shares of the
Fund as you may reasonably request from time to time.
2. For such services, you shall pay us, within forty-five (45) days of the
end of each fiscal quarter of the Fund, a fee based upon the average daily net
asset value during the just ended fiscal quarter of Qualified Holdings owned by
use or by our customers for the minimum period determined from time to time by a
majority of the Fund's disinterested Directors (defined below), which fee shall
not exceed .0625% (.25% on an annual basis) of the average daily net asset value
of the Qualified Holdings during the quarter just ended; provided, however, that
no such payment shall be made to us for any quarter in which our Qualified
Holdings do not equal or exceed, at the end of such quarter, the Minimum
Qualified Holdings to be set by you with the approval of the Disinterested
Directors from time to time. You agree to notify us of the Minimum Qualified
Holdings and to provide us with written notice within thirty (30) days after any
change in that requirement.
3. We shall furnish you with such information as you shall reasonably
request with respect to the distribution assistance and administrative support
services furnished by us to our customers pursuant to this Agreement.
4. You may enter into other similar servicing agreements with any other
person without our consent.
5. This Agreement may be terminated at any time without payment of any
penalty by the vote of a majority of the Directors of the Fund who are not
"interested persons" of the Fund (as defined in the 1940 Act), and have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Disinterested Directors"), or by a vote of a
majority (as defined in the 1940 Act) of the Fund's outstanding voting
securities, on not more than sixty (60) days written notice. It will also be
terminated by any act which terminates either the Plan of the agreement between
us for distribution of shares of the Fund, and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act).
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<PAGE>
6. The provisions of the Plan (including without limitation its definition
of terms that are capitalized in this Agreement) are incorporated herein by
reference. This Agreement shall become effective upon execution and delivery and
shall continue in full force and effect so long as the continuance of the plan
and this Agreement are approved at least annually by a vote of the Funds'
Directors, including a majority of the Disinterested Directors, cast in person
at a meeting called for the purpose of voting thereon. All notices hereunder
shall be to the respective parties at the addresses listed hereon, unless
changed by notice given in writing. This Agreement and all the rights and
obligations of the parties hereunder shall be governed and construed under the
laws of the State of California.
Accepted: Firm (Name)__________________________
(Address)___________________________
INVESTORS RESEARCH FUND, INC.
By: ______________________________ By: _________________________
Authorized Signature
Date:_____________________________ ________________________
Name
AMENDMENTS
May 13, 1997
Resolved by the Board of Directors:
The amount of any difference between the funds paid out to broker-dealers under
the first sentence of subparagraph 1)a) and the total sum of .25% of average
daily net asset value may be expended under supervision of the Board of
Directors for purposes of financing distribution of the Fund's shares. To the
extent that any Rule 12b-1 funds are expended for distribution purposes pursuant
to the immediate preceding sentence, such funds are re-designated to be asset
based sales charges and are not service charges under the Board resolution
adopted on July 21, 1993.
August 12, 1997
AMENDMENT I. Paragraph 1)b) is amended to read as follows:
Payments made out of or charged against the assets of the Fund are subject, in
total, to a maximum annual limit of .50% of the Fund's average daily net assets.
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