<PAGE>
FIRST INVESTORS NEW YORK INSURED TAX FREE FUND, INC.
FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND
CONNECTICUT, FLORIDA, GEORGIA, MARYLAND, MASSACHUSETTS,
NEW JERSEY, NORTH CAROLINA, PENNSYLVANIA AND VIRGINIA SERIES
SUPPLEMENT TO PROSPECTUS DATED JANUARY 12, 1995
The following replaces the tax disclosure for the Florida Series on page 35:
FLORIDA. In the opinion of Rudnick & Wolfe, Florida tax counsel to MULTI-
STATE INSURED, under existing law, shareholders of the FLORIDA SERIES will not
be subject to the Florida intangible personal property tax on their ownership of
FLORIDA SERIES shares or on distributions of income or gains made by the FLORIDA
SERIES to the extent that such distributions are attributable solely to
obligations issued by the United States government and its agencies, or by the
Commonwealths of Puerto Rico, Guam, the Virgin Islands, American Somoa, or the
Northern Mariana Islands (collectively, "Exempt Instruments") or to money,
notes, bonds, and other obligations issued by the State of Florida and its
municipalities, counties, and other taxing districts. If the FLORIDA SERIES is
not invested solely in Exempt Instruments and money, notes, bonds, and other
obligations issued by the State of Florida and its municipalities, counties, and
other taxing districts as of the last business day of each calendar year, then
the Florida intangible personal property tax ("Intangible Tax") will apply as
follows:
(a) The portion of the net asset value of the FLORIDA SERIES'
portfolio that is attributable to Exempt Instruments will be exempt from
the Intangible Tax.
(b) If the remaining portion of the net asset value of the FLORIDA
SERIES' portfolio, after removing the portion representing Exempt
Instruments, represents assets which are themselves exempt from the
Intangible Tax, then this portion will also be exempt from the Intangible
Tax.
(c) If the remaining portion of the net asset value of the FLORIDA
SERIES' portfolio, after removing the portion representing Exempt
Instruments, represents any asset which is subject to the Intangible Tax
under Florida law, then the remaining portion of the net asset value of the
FLORIDA SERIES' portfolio will be subject to the Intangible Tax.
Shareholders of the FLORIDA SERIES will be exempt from the Intangible Tax
on their shares to the extent that the net asset value of the FLORIDA SERIES'
portfolio is exempt. (The FLORIDA SERIES has no present intention of investing
in assets which will be subject to the Intangible Tax.)
Because Florida does not impose any income tax on individuals, individual
shareholders will not be subject to any Florida income tax on income or gains
distributed by the FLORIDA SERIES or on gains resulting from the redemption or
exchange of shares of the FLORIDA SERIES. Corporate shareholders will be
subject to the Florida income tax on all distributions received from the FLORIDA
SERIES, regardless of the tax-exempt status of interest received from the
FLORIDA SERIES which is attributable to bonds under section 103(a) of the Code
or any other Federal law; however, if a corporation does not have its commercial
domicile within the State of Florida, its non-business income generated from the
FLORIDA SERIES is not allocated as Florida income subject to Florida corporate
income tax. Non-business income includes capital gains and interest to the
extent they do not arise from transactions and activities in the regular course
of a taxpayer's business.
For Florida state income tax purposes, the FLORIDA SERIES itself will not
be subject to the Florida income tax so long as it has no income subject to
Federal taxation.
Shareholders of the FLORIDA SERIES will be subject to Florida estate tax on
their FLORIDA SERIES shares only if they are Florida residents, certain natural
persons not domiciled in Florida, or certain natural persons not residents of
the United States. However, the Florida estate tax is limited to the amount of
the credit allowable under the Code (currently section 2011 and in some cases
section 2102 of the Code for death taxes actually paid to the several states).
Neither interests held by shareholders of the FLORIDA SERIES nor Exempt
Instruments nor money, notes, bonds, and other obligations issued by the State
of Florida and its municipalities, counties, and other taxing districts held by
the FLORIDA SERIES will be subject to the Florida ad valorem property tax, the
Florida sales and use tax or the Florida documentary stamp tax.
February 24, 1995
<PAGE>
FIRST INVESTORS NEW YORK INSURED TAX FREE FUND, INC.
FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND
CONNECTICUT, FLORIDA, GEORGIA, MARYLAND, MASSACHUSETTS, NEW JERSEY,
NORTH CAROLINA, PENNSYLVANIA AND VIRGINIA SERIES
95 Wall Street, New York, New York 10005/1-800-423-4026
This is a Prospectus for FIRST INVESTORS NEW YORK INSURED TAX FREE FUND, INC.
and FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND (collectively, the
"Funds"), each an open-end diversified management investment company. FIRST
INVESTORS NEW YORK INSURED TAX FREE FUND, INC. ("NEW YORK INSURED") consists of
a single investment series and FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND
("MULTI-STATE INSURED") consists of seventeen separate investment series. This
Prospectus relates to NEW YORK INSURED and the nine Series of MULTI-STATE
INSURED listed above (singularly and collectively, "Series"). Each Series sells
two classes of shares. Investors may select Class A or Class B shares, each
with a public offering price that reflects different sales charges and expense
levels. See "Alternative Purchase Plans."
NEW YORK INSURED. The investment objective of NEW YORK INSURED is to provide
a high level of interest income which is exempt from Federal income tax, New
York State and New York City personal income taxes and, for non-corporate
shareholders, the Federal alternative minimum tax.
MULTI-STATE INSURED. The investment objective of each Series of MULTI-STATE
INSURED is to achieve a high level of interest income which is exempt from
Federal income tax and, to the extent indicated for a particular Series, from
state and local income taxes for residents of that state and, for non-corporate
shareholders, the Federal alternative minimum tax.
Each Series invests primarily in tax-exempt obligations issued by or on
behalf of the states or a particular state, its municipal governments and public
authorities, as well as tax-exempt obligations issued by territories or
possessions of the United States, the interest on which is exempt from Federal
income tax, the income or other taxes of a particular state and, for non-
corporate shareholders, the Federal alternative minimum tax. Each Series'
municipal bonds are insured as to payment of principal and interest through the
issuer or under insurance policies written by independent insurance companies.
There can be no assurance that the objective of any Series will be realized.
THE SERIES' MUNICIPAL BONDS ARE INSURED AS TO TIMELY PAYMENT OF PRINCIPAL AND
INTEREST. INSURANCE DOES NOT PROTECT AGAINST FLUCTUATIONS IN THE BONDS' MARKET
VALUE OR EACH SERIES' NET ASSET VALUE PER SHARE. FOR MORE INFORMATION REGARDING
THE SERIES' INSURANCE COVERAGE, SEE "INSURANCE" ON PAGE 11.
This Prospectus sets forth concisely the information about the Series that a
prospective investor should know before investing and should be retained for
future reference. First Investors Management Company, Inc. ("FIMCO" or
"Adviser") serves as investment adviser to the Series and First Investors
Corporation ("FIC" or "Underwriter") serves as distributor of the Series'
shares. A Statement of Additional Information ("SAI"), dated January 12, 1995
(which is incorporated by reference herein), has been filed with the Securities
and Exchange Commission. The SAI is available at no charge upon request to the
Funds at the address or telephone number indicated above.
AN INVESTMENT IN THESE SECURITIES IS NOT A DEPOSIT OR OBLIGATION OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK AND IS NOT FEDERALLY INSURED OR PROTECTED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is January 12, 1995
<PAGE>
FEE TABLE
The following table is intended to assist investors in understanding the
expenses associated with investing in each class of shares of a Series. Shares
of the Series issued prior to the date of this Prospectus have been designated
as Class A shares.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
------- -----
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) . . . . . . . . . . . . . . 6.25% None
Deferred Sales Load
(as a percentage of the lower of original purchase
price or redemption proceeds) . . . . . . . . . . . . . . . . . None 4% in the first year;
declining to 0% after
the sixth year
Exchange Fee** None None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
MANAGEMENT TOTAL FUND
FEES(2) 12B-1 FEES(3) OTHER EXPENSES(4) OPERATING EXPENSES(5)
------------------ ------------------ ------------------- --------------------
Class A Class B(1) Class A Class B(1) Class A Class B(1) Class A Class B(1)
Shares Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New York Insured 0.75% 0.75% 0.30 1.00% 0.20%+ 0.20%+ 1.25+ 1.95%+
Connecticut Series 0.75 0.75% 0.30 1.00% 0.20 0.20 1.25 1.95
Florida Series 0.75 0.75% 0.30 1.00% 0.15 0.15 1.20 1.90
Georgia Series 0.75 0.75% 0.30 1.00% 0.20+ 0.20+ 1.25+ 1.95+
Maryland Series 0.75 0.75% 0.30 1.00% 0.20+ 0.20+ 1.25+ 1.95+
Massachusetts Series 0.75 0.75% 0.30 1.00% 0.20 0.20 1.25 1.95
New Jersey Series 0.75 0.75% 0.30 1.00% 0.16 0.16 1.21 1.91
North Carolina Series 0.75 0.75% 0.30 1.00% 0.20+ 0.20+ 1.25+ 1.95+
Pennsylvania Series 0.75 0.75% 0.30 1.00% 0.15 0.15 1.20 1.90
Virginia Series 0.75 0.75% 0.30 1.00% 0.20+ 0.20+ 1.25+ 1.95+
<FN>
- -------------------------
* A contingent deferred sales charge ("CDSC") of 1.00% will be assessed on
certain redemptions of Class A shares that are purchased without a sales
charge. See "How to Buy Shares."
** Although there is a $5.00 exchange fee for exchanges into a Series, this
fee is being assumed by that Series for a minimum period ending April 30,
1995. Each Series reserves the right to change or suspend this privilege
after April 30, 1995. See "How to Exchange Shares."
+ Net of expenses assumed.
1 Since Class B shares were not issued prior to the date of this Prospectus,
Other Expenses and Total Fund Operating Expenses are based on estimated
amounts for the period January 3 through April 30, 1995.
2 Management Fees have been restated for each Series of MULTI-STATE INSURED
to reflect the maximum annualized Management Fees that may be incurred
through April 30, 1995.
3 12b-1 Fees have been restated for Class A shares of each Series of MULTI-
STATE INSURED to reflect the maximum annualized 12b-1 Fees that may be
incurred through April 30, 1995.
2
<PAGE>
4 The Adviser will assume Other Expenses for each class of each Series in
excess of 0.20% (annualized) for a minimum period ending April 30, 1995.
Otherwise, annualized Other Expenses for each class of each Series would
be as follows: NEW YORK INSURED - 0.22%, GEORGIA SERIES - 0.96%, MARYLAND
SERIES - 0.33%, NORTH CAROLINA SERIES - 0.41% and VIRGINIA SERIES - 0.21%.
5 If certain Operating Expenses were not assumed, annualized Total Fund
Operating Expenses for Class A shares would be as follows: NEW YORK
INSURED - 1.27%, GEORGIA SERIES - 2.01%, MARYLAND SERIES - 1.38%, NORTH
CAROLINA SERIES - 1.46% and VIRGINIA SERIES - 1.26%; and for Class B
shares are estimated to be as follows: NEW YORK INSURED - 1.97%, GEORGIA
SERIES - 2.71%, MARYLAND SERIES - 2.08%, NORTH CAROLINA SERIES - 2.16% and
VIRGINIA SERIES - 1.96%.
</TABLE>
For a more complete description of the various costs and expenses, see
"Investment Objectives and Policies--Insurance," "Alternative Purchase Plans,"
"How to Buy Shares," "How to Redeem Shares," "Management" and "Distribution
Plans." Due to the imposition of 12b-1 fees, it is possible that long-term
shareholders of a Series may pay more in total sales charges than the economic
equivalent of the maximum front-end sales charge permitted by the rules of the
National Association of Securities Dealers, Inc.
The Example below is based on Class A expense data for each Series' fiscal
year ended December 31, 1993, except that certain Operating Expenses have been
restated as noted above. Expense data for Class B shares has been estimated
because the shares have not previously been offered.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
NEW YORK INSURED SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 60 91 125 227
CONNECTICUT SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 60 91 125 227
FLORIDA SERIES
Class A. . . . . . . . . . . . . . $74 $98 $124 $199
Class B. . . . . . . . . . . . . . 59 90 123 222
GEORGIA SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 60 91 125 227
MARYLAND SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 60 91 125 227
MASSACHUSETTS SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 60 91 125 227
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
NEW JERSEY SERIES
Class A. . . . . . . . . . . . . . $74 $99 $125 $200
Class B. . . . . . . . . . . . . . 59 90 123 223
NORTH CAROLINA SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 60 91 125 227
PENNSYLVANIA SERIES
Class A. . . . . . . . . . . . . . $74 $98 $124 $199
Class B. . . . . . . . . . . . . . 59 90 123 222
VIRGINIA SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 60 91 125 227
<FN>
You would pay the following expenses on the same $1,000 investment, assuming
(1) 5% annual return and (2) no redemption at the end of each time period:
</TABLE>
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
NEW YORK INSURED SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 20 61 105 227
CONNECTICUT SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 20 61 105 227
FLORIDA SERIES
Class A. . . . . . . . . . . . . . $74 $98 $124 $199
Class B. . . . . . . . . . . . . . 19 60 103 222
GEORGIA SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 20 61 105 227
MARYLAND SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 20 61 105 227
MASSACHUSETTS SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 20 61 105 227
NEW JERSEY SERIES
Class A. . . . . . . . . . . . . . $74 $99 $125 $200
Class B. . . . . . . . . . . . . . 19 60 103 223
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
NORTH CAROLINA SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 20 61 105 227
PENNSYLVANIA SERIES
Class A. . . . . . . . . . . . . . $74 $98 $124 $199
Class B. . . . . . . . . . . . . . 19 60 103 222
VIRGINIA SERIES
Class A. . . . . . . . . . . . . . $74 $100 $127 $204
Class B. . . . . . . . . . . . . . 20 61 105 227
</TABLE>
THE EXPENSES IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION BY THE
SERIES OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES IN FUTURE YEARS MAY BE
GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The table on the following pages sets forth the per share operating
performance data for a share of beneficial interest outstanding, total return,
ratios to average net assets and other supplemental data for each period
indicated. Financial highlights are not presented for Class B shares since no
shares of that class were outstanding during these periods. The table has been
derived from financial statements which have been examined by Tait, Weller &
Baker, independent certified public accountants, whose report thereon appears in
the SAI. This information should be read in conjunction with the Financial
Statements and Notes thereto, which also appear in the SAI, available at no
charge upon request to the Series.
5
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------------------------------------------
PER SHARE DATA
----------------------------------------------------------------------------------------------------------
Income From Investment Operations Less Distributions from
--------------------------------------- -------------------------------------
Net
Realized Net
Net Asset and Asset
Value Unrealized Net Value
--------- Net Gain Total from Net Realized ------
Beginning Investment (Loss) on Investment Investment Gain on Total End of
of Period Income Investments Operations Income Investments Distributions Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIRST INVESTORS NEW YORK
INSURED TAX FREE FUND, INC.
---------------------------
6/4/84** to 12/31/84 $ 11.13 $.417 $.653 $1.070 $.380 $ -- $.380 $11.82
1985 11.82 .942 1.228 2.170 .960 -- .960 13.03
1986 13.03 .932 1.238 2.170 .950 -- .950 14.25
1987 14.25 .919 (1.109) (.190) .910 -- .910 13.15
1988 13.15 .902 .388 1.290 .930 -- .930 13.51
1989 13.51 .901 .339 1.240 .880 -- .880 13.87
1990 13.87 .889 (.119) .770 .890 -- .890 13.75
1991 13.75 .881 .574 1.455 .875 -- .875 14.33
1992 14.33 .844 .386 1.230 .840 -- .840 14.72
1993 14.72 .809 .608 1.417 .820 .137 .957 15.18
1/1/94-6/30/94 15.18 .384 (.944) (.560) .390 -- .390 14.23
FIRST INVESTORS MULTI-STATE
INSURED TAX FREE FUND
- ---------------------------
CONNECTICUT SERIES
- ------------------
10/8/90** to 12/31/90 11.17 .034 (.014) .020 -- -- -- 11.19
1991 11.19 .630 .449 1.079 .625 .004 .629 11.64
1992 11.64 .669 .401 1.070 .660 -- .660 12.05
1993 12.05 .615 1.053 1.668 .625 .043 .668 13.05
1/1/94-6/30/94 13.05 .299 (1.029) (.730) .300 -- .300 12.02
FLORIDA SERIES
- --------------
10/5/90** to 12/31/90 11.17 .018 (.058) (.040) -- -- -- 11.13
1991 11.13 .658 .582 1.240 .640 .030 .670 11.70
1992 11.70 .702 .508 1.210 .700 -- .700 12.21
1993 12.21 .664 1.032 1.696 .671 .095 .766 13.14
1/1/94-6/30/94 13.14 .322 (.994) (.672) .318 -- .318 12.15
GEORGIA SERIES
- --------------
5/1/92** to 12/31/92 11.17 .267 .233 .500 .250 -- .250 11.42
1993 11.42 .603 1.091 1.694 .619 .005 .624 12.49
1/1/94-6/30/94 12.49 .292 (.868) (.576) .294 -- .294 11.62
MARYLAND SERIES
- ---------------
10/8/90** to 12/31/90 11.17 .021 .189 .210 -- -- -- 11.38
1991 11.38 .628 .287 .915 .615 -- .615 11.68
1992 11.68 .669 .426 1.095 .665 -- .665 12.11
1993 12.11 .653 1.083 1.736 .660 .036 .696 13.15
1/1/94-6/30/94 13.15 .325 (1.025) (.700) .330 -- .330 12.12
<FN>
* Annualized
** Commencement of operations
+ Calculated without sales charge
++ Net of expenses waived or assumed by the investment adviser and the
transfer agent from the commencement of operations of each Series of
Multi-State Insured through June 30, 1994.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
RATIOS / SUPPLEMENTAL DATA
----------------------------------------------------
Ratio to Average
Net Assets Before
Ratio to Average Expenses Waived
Net Assets++ or Assumed
------------------- --------------------
Net Assets Net Net Portfolio
Total End of Period Investment Investment Turnover
Return+ (in thousands) Expenses Income Expenses Income Rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
16.82%* $13,166 .43%* 8.65%* N/A N/A 1%
18.92% 44,606 1.18% 8.02% N/A N/A 32%
17.03% 83,760 1.13% 6.90% N/A N/A 10%
(1.25)% 103,892 1.10% 6.91% N/A N/A 2%
10.10% 121,017 1.26% 6.77% N/A N/A 21%
9.43% 150,154 1.14% 6.57% N/A N/A 13%
5.81% 156,022 1.23% 6.53% N/A N/A 33%
10.89% 162,296 1.24% 6.29% N/A N/A 25%
8.84% 181,389 1.29% 5.84% N/A N/A 46%
9.82% 211,967 1.27% 5.35% N/A N/A 31%
(3.71)% 200,839 1.31%* 5.25%* N/A N/A 32%
7.71%* 625 -- 1.75%* 1.46%* .28%* 0%
9.92% 5,050 .06% 5.83% 1.60% 4.28% 35%
9.49% 10,828 .33% 5.73% 1.20% 4.86% 46%
14.10% 17,202 .80% 4.83% 1.15% 4.48% 29%
(5.62)% 15,776 .89%* 4.80%* 1.24%* 4.45%* 30%
(1.48)%* 1,339 -- 1.20%* 1.03%* .17%* 0%
11.45% 6,891 .06% 6.12% 1.12% 5.06% 70%
10.67% 12,678 .29% 5.97% 1.17% 5.10% 65%
14.19% 21,397 .45% 5.20% 1.10% 4.55% 53%
(5.14)% 21,043 .54%* 5.14%* 1.19%* 4.49%* 52%
6.75%* 365 -- 4.45%* 3.32%* 1.13%* 53%
15.16% 1,469 .13% 4.96% 1.84% 3.24% 50%
(4.64)% 1,601 .20%* 4.87%* 2.37%* 2.70%* 46%
8.08%* 403 -- 1.69%* 2.88%* (1.19)%* 0%
8.30% 1,543 .05% 5.74% 1.88% 3.92% 26%
9.64% 3,575 .20% 5.72% 1.38% 4.55% 38%
14.62% 6,643 .45% 5.16% 1.28% 4.33% 50%
(5.35)% 6,756 .45%* 5.18%* 1.39%* 4.25%* 19%
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------------------------------------------
PER SHARE DATA
----------------------------------------------------------------------------------------------------------
Income From Investment Operations Less Distributions from
--------------------------------------- -------------------------------------
Net
Realized Net
Net Asset and Asset
Value Unrealized Net Value
--------- Net Gain Total from Net Realized ------
Beginning Investment (Loss) on Investment Investment Gain on Total End of
of Period Income Investments Operations Income Investments Distributions Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIRST INVESTORS MULTI-STATE
INSURED TAX FREE FUND
---------------------
MASSACHUSETTS SERIES
- --------------------
1987 11.13 .533 (1.143) (.610) .510 -- .510 10.01
1988 10.01 .753 .547 1.300 .770 -- .770 10.54
1989 10.54 .725 .345 1.070 .730 -- .730 10.88
1990 10.88 .748 (.038) .710 .750 -- .750 10.84
1991 10.84 .732 .468 1.200 .730 -- .730 11.31
1992 11.31 .687 .399 1.086 .676 .010 .686 11.71
1993 11.71 .653 .716 1.369 .660 .139 .799 12.28
1/1/94-6/30/94 12.28 .312 (.863) (.551) .319 -- .319 11.41
NEW JERSEY SERIES
- -----------------
9/13/88** to 12/31/88 $ 11.13 $.083 $.117 $.200 $ -- $ -- $ -- $11.33
1989 11.33 .797 .373 1.170 .770 -- .770 11.73
1990 11.73 .787 .013 .800 .800 -- .800 11.73
1991 11.73 .762 .548 1.310 .750 -- .750 12.29
1992 12.29 .716 .439 1.155 .716 .059 .775 12.67
1993 12.67 .680 .947 1.627 .684 .103 .787 13.51
1/1/94-6/30/94 13.51 .328 (.984) (.656) .334 -- .334 12.52
NORTH CAROLINA SERIES
- ---------------------
5/4/92** to 12/31/92 11.17 .272 .188 .460 .260 -- .260 11.37
1993 11.37 .595 .962 1.557 .604 .043 .647 12.28
1/1/94-6/30/94 12.28 .295 (1.018) (.723) .297 -- .297 11.26
PENNSYLVANIA SERIES
- -------------------
4/30/90** to 12/31/90 11.17 .296 .214 .510 .270 -- .270 11.41
1991 11.41 .714 .429 1.143 .695 .008 .703 11.85
1992 11.85 .699 .427 1.126 .716 -- .716 12.26
1993 12.26 .667 1.048 1.715 .663 .152 .815 13.16
1/1/94-6/30/94 13.16 .313 (.985) (.672) .318 -- .318 12.17
VIRGINIA SERIES
- ---------------
4/30/90** to 12/31/90 11.17 .320 .080 .400 .300 -- .300 11.27
1991 11.27 .715 .523 1.238 .690 .018 .708 11.80
1992 11.80 .683 .481 1.164 .702 .032 .734 12.23
1993 12.23 .636 .915 1.551 .639 .082 .721 13.06
1/1/94-6/30/94 13.06 .305 (1.025) (.720) .310 -- .310 12.03
<FN>
* Annualized
** Commencement of operations
+ Calculated without sales charge
++ Net of expenses waived or assumed by the investment adviser and the
transfer agent from the commencement of operations of each Series of the
Multi-State Insured through June 30, 1994.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
RATIOS / SUPPLEMENTAL DATA
----------------------------------------------------
Ratio to Average
Net Assets Before
Ratio to Average Expenses Waived
Net Assets++ or Assumed
------------------- --------------------
Net Assets Net Net Portfolio
Total End of Period Investment Investment Turnover
Return+ (in thousands) Expenses Income Expenses Income Rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5.43% 1,595 .05% 6.32% 1.13% 5.24% 16%
13.40% 2,901 .10% 7.33% 1.29% 6.14% 31%
10.43% $8,292 .10% 6.78% 1.03% 5.85% 11%
6.85% 12,760 .06% 7.01% .99% 6.09% 22%
11.45% 17,608 .28% 6.66% .99% 5.94% 4%
9.90% 20,067 .70% 5.99% 1.17% 5.52% 28%
11.93% 23,653 .90% 5.37% 1.15% 5.12% 32%
(4.50)% 21,585 .97%* 5.32%* 1.22%* 5.07%* 29%
5.96%* $2,148 -- 4.95%* .95%* 3.99%* 0%
10.61% 17,380 .03% 6.82% .92% 5.93% 10%
7.10% 30,686 .10% 6.93% .91% 6.12% 16%
11.52% 42,475 .44% 6.38% .98% 5.84% 22%
9.74% 54,372 .78% 5.76% 1.13% 5.41% 42%
13.09% 64,558 .96% 5.12% 1.11% 4.97% 44%
(4.88%) 60,638 1.01%* 5.06%* 1.16%* 4.91%* 28%
6.21%* 1,084 -- 4.53%* 2.20%* 2.33%* 10%
13.98% 3,883 .13% 4.99% 1.28% 3.83% 32%
(5.92)% 4,555 .20%* 5.06%* 1.67%* 3.59%* 24%
6.88%* 6,252 .05%* 5.39%* 1.05%* 4.39%* 1%
10.24% 16,118 .29% 6.28% 1.03% 5.54% 26%
9.81% 26,036 .56% 5.84% 1.12% 5.28% 18%
14.28% 35,514 .79% 5.17% 1.10% 4.86% 37%
(5.13)% 34,556 .91%* 4.97%* 1.16%* 4.72%* 56%
5.40%* 3,327 .08%* 5.56%* 1.22%* 4.43%* 0%
11.31% 9,756 .13% 6.32% 1.10% 5.36% 15%
10.19% 16,507 .56% 6.75% 1.22% 5.09% 41%
12.94% 24,684 .81% 4.97% 1.16% 4.62% 39%
(5.55)% 23,521 .87%* 4.89%* 1.22%* 4.54%* 26%
</TABLE>
9
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
NEW YORK INSURED
The investment objective of NEW YORK INSURED is to provide a high level of
interest income which is exempt from Federal income tax, New York State and New
York City personal income taxes and, for non-corporate shareholders, the Federal
alternative minimum tax. NEW YORK INSURED seeks to achieve its objective by
investing at least 80% of its total assets in Municipal Instruments, as defined
below, issued by or on behalf of New York State and its municipal governments
and by public authorities in New York State, as well as by territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest on which is
exempt from Federal income tax, New York State and New York City personal income
taxes and, for non-corporate shareholders, the Federal alternative minimum tax.
See "Municipal Instruments."
MULTI-STATE INSURED
The investment objective of each Series of MULTI-STATE INSURED is to achieve
a high level of interest income which is exempt from Federal income tax and, to
the extent indicated for a particular Series, from state and local income taxes
for residents of that state and, for non-corporate shareholders, the Federal
alternative minimum tax. Each Series of MULTI-STATE INSURED seeks to achieve
its objective by investing at least 80% of its total assets in Municipal
Instruments, as defined below, issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest on which is
exempt from Federal income tax, state and local income taxes in the states for
whose residents the particular Series is established and, for non-corporate
shareholders, the Federal alternative minimum tax. See "Municipal Instruments."
As used in this Prospectus and in the SAI, "Municipal Instruments" include
the following: (1) municipal bonds; (2) certificates of participation ("COPs");
(3) municipal notes; (4) municipal commercial paper; and (5) variable rate
demand instruments ("VRDIs"). Generally, the value of Municipal Instruments
varies inversely to changes in interest rates.
GENERAL POLICIES
Each Series may purchase securities on a "when-issued" basis and invest in
zero coupon municipal securities. Each Series also may invest up to 20% of its
assets, on a temporary basis, in high quality fixed income obligations, the
interest on which is subject to Federal and state or local income taxes. Each
Series also may invest up to 10% of its total assets in municipal obligations on
which the rate of interest varies inversely with interest rates on other
municipal obligations or an index (commonly referred to as inverse floaters) and
may acquire detachable call options relating to municipal bonds. Each Series
may borrow money for temporary or emergency purposes in amounts not exceeding 5%
of its total assets. See "Description of Certain Securities, Other Investment
Policies and Risk Factors," below, and the SAI for more information regarding
these securities.
Although each Series generally invests in municipal bonds rated Baa or higher
by Moody's Investors Service, Inc. ("Moody's") or BBB or higher by Standard &
Poor's Ratings Group ("S&P"), each Series may invest up to 5% of its net assets
in lower rated municipal bonds or in unrated
10
<PAGE>
municipal bonds deemed to be of comparable quality by the Adviser. However, in
each instance such municipal bonds will be covered by the insurance feature and
thus are considered to be of higher quality than lower rated municipal bonds
without an insurance feature. See "Insurance" for a discussion of the insurance
feature. The Adviser will carefully evaluate on a case-by-case basis whether to
dispose of or retain a municipal bond which has been downgraded in rating
subsequent to its purchase by a Series. A description of municipal bond ratings
is contained in Appendix A to the SAI.
Each Series may invest more than 25% of its total assets in a particular
segment of the municipal bond market, such as hospital revenue bonds, housing
agency bonds, industrial development bonds, airport bonds and university
dormitory bonds, during periods when one or more of these segments offer higher
yields and/or profit potential. This possible concentration of the assets of a
Series may result in the Series being invested in securities which are related
in such a way that economic, business, political developments, or other changes
which would affect one security would probably likewise affect the other
securities within that particular segment of the bond market. Such
concentration of a Series' investments could increase market risks, but risk of
non-payment of interest when due, or default in the payment of principal, is
covered by the insurance feature of each Series.
Each Series' net asset value fluctuates based mainly upon changes in the
value of its portfolio securities. Each Series' investment objective and
certain investment policies set forth in the SAI that are designated fundamental
policies may not be changed without shareholder approval. There can be no
assurance that any of the Series will achieve its investment objective.
DESCRIPTION OF CERTAIN SECURITIES, OTHER INVESTMENT POLICIES AND RISK FACTORS
DEBT SECURITIES--RISK FACTORS. The market value of debt securities is
influenced primarily by changes in the level of interest rates. Generally, as
interest rates rise, the market value of debt securities decreases. Conversely,
as interest rates fall, the market value of debt securities increases. Factors
which could result in a rise in interest rates, and a decrease in market value
of debt securities, include an increase in inflation or inflation expectations,
an increase in the rate of U.S. economic growth, an expansion in the Federal
budget deficit, or an increase in the price of commodities such as oil. Debt
obligations rated lower than Baa by Moody's or BBB by S&P, commonly referred to
as "junk bonds" or "high yield securities," are speculative and generally
involve a higher risk of loss of principal and income than higher-rated
securities. See Appendix A to the SAI for a description of municipal bond
ratings.
HEDGING AND OPTION INCOME STRATEGIES. Each Series may attempt to reduce the
overall risk of their investments (hedge) by using options and futures contracts
and may engage in certain strategies involving options to enhance income. A
Series' ability to use these instruments may be limited by market conditions,
regulatory limits and tax considerations. No Series presently intends to engage
in these strategies. See the SAI for more information regarding hedging and
option income strategies.
INSURANCE. All municipal bonds in each Series' portfolio will be insured as
to their scheduled payment of principal and interest at the time of purchase
either (1) under a Mutual Fund Insurance Policy purchased by NEW YORK INSURED
and by MULTI-STATE INSURED, on behalf of the Series, from an independent
insurance company; (2) under an insurance policy obtained subsequent to a
11
<PAGE>
municipal bond's original issue (a "Secondary Market Insurance Policy") or (3)
under an insurance policy obtained by the issuer or underwriter of such
municipal bond at the time of original issuance (a "New Issue Insurance
Policy"). An insured municipal bond in the portfolio of a Series typically will
be covered by only one of the three policies. For instance, if a municipal bond
is already covered by a New Issue Insurance Policy or a Secondary Market
Insurance Policy, then that security will not be additionally insured under the
Mutual Fund Insurance Policy. All three types of insurance policies insure the
scheduled payment of all principal and interest on the Series' municipal bonds
as they fall due. The insurance does not guarantee the market value or yield of
the insured municipal bonds or the net asset value or yield of the shares of a
Series. Investors should note that while all municipal bonds in which the
Series will invest will be insured, each Series may invest up to 35% of its
total assets in portfolio securities not covered by the insurance feature. Each
Fund has purchased a Mutual Fund Insurance Policy from AMBAC Indemnity
Corporation ("AMBAC"), a Wisconsin stock insurance company with its principal
executive offices in New York City. Under certain circumstances, each Fund may
obtain such insurance from an insurer other than AMBAC, provided such insurer
has a claims-paying ability rated AAA by S&P and Aaa by Moody's. Because these
insurance premiums are paid by each Series, a Series' yield is reduced by this
expense. See "Insurance" in the SAI for a detailed discussion of the insurance
feature.
INVERSE FLOATERS. Inverse floaters include components of securities on which
interest is paid in two separate parts -- an auction component, which pays
interest at a rate that is set periodically through an auction process or other
method, and a residual component, which pays interest at a rate equal to the
difference between the rate that the issuer would have paid on a fixed-rate
obligation at the time of issuance and the rate paid on the auction component.
The market value of an inverse floater will be more volatile than that of a
fixed-rate obligation and, like most debt obligations, will vary inversely with
changes in interest rates. Because the interest rate paid to holders of
residual components is generally determined by subtracting the interest rate
paid to the holders of auction components from a fixed amount, the interest rate
paid to residual component holders will decrease as the auction component's rate
increases and increase as the auction component's rate decreases. Moreover, the
extent of the increases and decreases in market value of residual components may
be larger than comparable changes in the market value of an equal principal
amount of a fixed-rate municipal obligation having similar credit quality,
redemption provisions and maturity. Each Series may invest up to 10% of its net
assets in inverse floaters.
MUNICIPAL INSTRUMENTS
MUNICIPAL BONDS. Municipal bonds are debt obligations that generally are
issued to obtain funds for various public purposes and have a time to maturity,
at issuance, of more than one year. The two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds. General
obligation bonds are secured by the issuer's pledge of its full faith and credit
for the payment of principal and interest. Revenue bonds generally are payable
only from revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special tax or other specific revenue
source. There are variations in the security of municipal bonds, both within a
particular classification and between classifications, depending on numerous
factors. The yields on municipal bonds depend on, among other things, general
money market conditions, condition of the municipal bond market, size of a
particular offering, the maturity of the obligation and rating of the issuer.
12
<PAGE>
PRIVATE ACTIVITY BONDS OR INDUSTRIAL DEVELOPMENT BONDS. Certain types of
revenue bonds, referred to as private activity bonds ("PABs") or industrial
development bonds ("IDBs"), are issued by or on behalf of public authorities to
obtain funds to provide for various privately operated facilities, such as
airports or mass transportation facilities. Most PABs and IDBs are pure revenue
bonds and are not backed by the taxing power of the issuing agency or authority.
See "Taxes" in the SAI for a discussion of special tax consequences to
"substantial users," or persons related thereto, of facilities financed by PABs
or IDBs.
CERTIFICATES OF PARTICIPATION. COPs provide participation interests in
lease revenues and each certificate represents a proportionate interest in or
right to the lease-purchase payment made under municipal lease obligations or
installment sales contracts. In certain states, COPs constitute a majority of
new municipal financing issues. NEW YORK INSURED's Board of Directors and
MULTI-STATE INSURED's Board of Trustees (collectively, "Board") have established
guidelines for determining the liquidity of the COPs in the applicable Series'
portfolio and, subject to review by that Fund's Board, has delegated that
responsibility to the Adviser. Pursuant to these guidelines, the Adviser will
consider (1) the frequency of trades and quotes for the security, (2) the number
of dealers willing to purchase or sell the security and the number of other
potential buyers, (3) the willingness of dealers to undertake to make a market
in the security, (4) the nature of the marketplace, namely, the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer, (5) the coverage of the obligation by new issue insurance, (6) the
likelihood that the marketability of the obligation will be maintained through
the time the security is held by the Series, and (7) for unrated COPs, the COPs'
credit status analyzed by the Adviser according to the factors reviewed by
rating agencies.
MUNICIPAL COMMERCIAL PAPER. Issues of municipal commercial paper which a
Series may purchase are rated P-1 by Moody's or A-1 by S&P or have insurance
through the issuer or an independent insurance company and include unsecured,
short-term, negotiable promissory notes. Municipal commercial paper is issued
usually to meet temporary capital needs of the issuer or to serve as a source of
temporary construction financing. These obligations are paid from general
revenues of the issuer or are refinanced with long-term debt. A description of
commercial paper ratings is contained in Appendix C to the SAI.
MUNICIPAL NOTES. Municipal notes which a Series may purchase will be
principally tax anticipation notes, bond anticipation notes, revenue
anticipation notes and project notes. The obligations are sold by an issuer
prior to the occurrence of another revenue producing event to bridge a financial
gap for such issuer. Municipal notes are usually general obligations of the
issuing municipality. Project notes are issued by housing agencies, but are
guaranteed by the U.S. Department of Housing and Urban Development and are
secured by the full faith and credit of the United States. Such municipal notes
must be rated MIG-1 by Moody's or SP-1 by S&P or have insurance through the
issuer or an independent insurance company. A description of municipal note
ratings is contained in Appendix B to the SAI.
VARIABLE RATE DEMAND INSTRUMENTS. VRDIs are Municipal Instruments, the
interest on which is adjusted periodically, and which allow the holder to demand
payment of all unpaid principal plus accrued interest from the issuer. A VRDI
that a Series may purchase will be selected if it meets criteria established and
designed by that Fund's Board to minimize risk to that Series. In addition, a
VRDI must be rated MIG-1 by Moody's or SP-1 by S&P or insured by the issuer or
an independent insurance company. There is a recognized after-market for VRDIs.
13
<PAGE>
RESTRICTED AND ILLIQUID SECURITIES. Each Series may invest up to 15% of its
net assets in illiquid securities, including (1) securities that are illiquid
due to the absence of a readily available market or due to legal or contractual
restrictions on resale and (2) repurchase agreements maturing in more than seven
days. However, illiquid securities for purposes of this limitation do not
include securities eligible for resale under Rule 144A under the Securities Act
of 1933, as amended (the "1933 Act"), which each Fund's Board of Directors or
Trustees or the Adviser has determined are liquid under Board-approved
guidelines. See the SAI for more information regarding restricted and illiquid
securities.
TAXABLE SECURITIES. Each Series may invest up to 20% of its assets, on a
temporary basis, in high quality fixed income obligations, the interest on which
is subject to Federal and state or local income taxes. A Series may, for
example, invest the proceeds from the sale of portfolio securities in taxable
obligations pending the investment or reinvestment thereof in Municipal
Instruments. A Series may invest in highly liquid taxable obligations in order
to avoid the necessity of liquidating portfolio investments to meet redemptions
by Series investors. Each Series' temporary investments in taxable securities
may consist of: (1) obligations of the U.S. Government, its agencies or
instrumentalities; (2) other debt securities rated within the highest grade of
S&P or Moody's; (3) commercial paper rated in the highest grade by either of
such rating services; and (4) certificates of deposit and letters of credit.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return.
STATE SPECIFIC RISK FACTORS
Most of the securities in which each Series invests are issued within that
Series' state. Thus, each Series' yield and share price stability are closely
tied to conditions within that state, and to the financial conditions of that
state, its authorities and municipalities. These factors could have varying
effects on different industries or geographical areas within each state. In
addition, economic developments within a single state or region could have a
greater impact on a Series' portfolio than on an investment portfolio composed
of securities of more geographically diverse issuers. Each Series seeks to
mitigate these potential risks through careful credit risk analysis and the use
of insurance, as previously discussed. Summaries of certain relevant
information regarding each state's economy is set forth below.
RISK FACTORS FOR THE CONNECTICUT SERIES. Connecticut's economy is generally
diverse, but concentration in several important sectors, such as manufacturing,
finance, insurance and real estate, wholesale and retail trade and services, may
cause the State's economy to be adversely affected by cyclical changes.
Connecticut derives more than 60% of its revenue from the collection of taxes,
principally personal income, sales and use, corporation and motor fuel taxes.
The State finances a wide array of capital programs and projects through the
issuance of general obligation bonds backed by the general taxing authority of
the State and special tax obligation bonds backed by a dedicated stream of
revenue. The State has also enacted numerous statutes enabling various
municipalities in the State to issue general obligation or project revenue bonds
which are not backed by the credit of the State. While the State Comptroller
reported deficits from the State's General Fund operations for fiscal years
1990-92, the Office of Policy and Management reported that the General Fund
operations showed a surplus for the 1993 fiscal year and estimates that the
General Fund operations will show a surplus for the 1994 fiscal year. See the
SAI for an expanded discussion of the risk considerations for the CONNECTICUT
SERIES.
14
<PAGE>
RISK FACTORS FOR THE FLORIDA SERIES. Florida's economy has diversified and
has shifted emphasis from resource manufacturing and construction to tourism,
other services and trade. While Florida's dependency on the highly cyclical
construction industries has declined, detrimental developments in construction
activity have and may continue to adversely affect the Florida economy. In
addition, economic development affecting the service industry, the tourism
industry and high-tech manufacturing could have severe effects on the Florida
economy. Due to the development of amusement and educational theme parks, the
seasonal and cyclical character of Florida's tourist industry has been reduced.
However, a decline in the national economy, competition from other tourist
destinations, crime and international developments (particularly currency
fluctuations) all may affect Florida tourism. While Florida's population growth
has traditionally helped its economy to perform above the national average, the
rapid population growth experienced by the State in the 1980s is not expected to
be repeated in the 1990s. Due to the large number of retirees, Florida personal
income has generally been insulated from certain national economic effects. A
reduction in the number of retirees moving to Florida and an increasing native
birthrate may increase the susceptibility of Florida's economy to national
economic effects affecting personal income. In addition, the economic well-
being of Florida's retirees could be adversely affected by cuts in the federal
Medicare and Medicaid dollars available to the elderly as well as cuts in Social
Security and other entitlements. In addition, various limitations on the State
of Florida, its governmental agencies and Florida local governmental agencies
may inhibit the ability of the issuers to repay existing municipal indebtedness
and issue additional indebtedness. The Florida constitution and statutes
require a balanced budget which may affect the ability of Florida to issue
and/or repay its obligations. The value of Florida municipal instruments may
also be affected by general conditions in the money markets or the municipal
bond markets, the levels of Federal income tax rates, the supply of tax-exempt
bonds, the credit quality and rating of the issues and perceptions with respect
to the level of interest rates. See the SAI for an expanded discussion of the
risk considerations for the FLORIDA SERIES.
RISK FACTORS FOR THE GEORGIA SERIES. The GEORGIA SERIES will concentrate its
investments in debt obligations of the State of Georgia and guaranteed revenue
debt of its instrumentalities (the "Georgia Obligations"). The Georgia
Obligations may be adversely affected by economic and political conditions and
developments within the State. Georgia's economy is expected to improve in most
sectors during 1995, and anticipated job growth will increase as the 1996 Summer
Olympics approach. Although economic recovery has been slow, Georgia has
experienced a growth in population, a below national average unemployment rate,
stability in real estate values and increased revenues. Actual revenues for the
State of Georgia have increased in each of the past five years along with an
increase in the amount of taxes and fees collected. Should the above-mentioned
trends slow or reverse themselves, the Georgia economy and State revenues could
be adversely affected. There can be no assurance that these, or other events,
will not negatively affect the market value of the Georgia Obligations or the
ability of either the State or its instrumentalities to pay interest and repay
principal on the Georgia Obligations in a timely manner. See the SAI for an
expanded discussion of the risk considerations for the GEORGIA SERIES.
RISK FACTORS FOR THE MARYLAND SERIES. Maryland's rate of economic growth has
been slower in the early 1990's than it had been during the 1980's. State
revenues in recent years have been less than expected and, because Maryland's
constitution requires a balanced budget, expenditures were cut. The public
indebtedness of Maryland and its instrumentalities is divided into three basic
types. The State issues general obligation bonds for capital improvements and
for various State-sponsored projects. The Department of Transportation of
Maryland issues limited, special obligation bonds for
15
<PAGE>
transportation purposes payable primarily from specific, fixed-rate excise taxes
and other revenues related mainly to highway use. Certain authorities issue
obligations payable solely from specific non-tax enterprise fund revenues and
for which the State has no liability and has given no moral obligation
assurance. While the ratings assigned to Maryland municipal instruments by
nationally recognized statistical ratings organizations indicate that Maryland
and its principal subdivisions and agencies are overall in satisfactory economic
health, there can, of course, be no assurance that this will continue or that
particular bond issues may not be adversely affected by changes in state or
local economic or political conditions. Maryland tax-free securities include
obligations issued by the State of Maryland or its counties, municipalities,
authorities, or other subdivisions. The performance of these securities is
closely tied to economic and political conditions within the State. See the SAI
for an expanded discussion of the risk considerations for the MARYLAND SERIES.
RISK FACTORS FOR THE MASSACHUSETTS SERIES. The Commonwealth of Massachusetts
and certain of its cities and towns have at certain times in the past
experienced serious financial difficulties which have adversely affected their
credit standing. The recurrence of such financial difficulties could adversely
affect the market values and marketability of, or result in default in payment
on, outstanding obligations issued by the Commonwealth or its public authorities
or municipalities. In addition, recent developments regarding the Massachusetts
statutes which limit the taxing authority of certain Massachusetts governmental
entities may impair the ability of the issuers of some Massachusetts tax-exempt
obligations to maintain debt service on their obligations. In Massachusetts,
the tax on personal property and real estate is the principal source of tax
revenues available to cities and towns to meet local costs. "Proposition 2
1/2," an initiative petition adopted by the voters of the Commonwealth of
Massachusetts in November 1980, limits the power of Massachusetts cities and
towns and certain tax-supported districts and public agencies to raise revenue
from property taxes to support their operations, including the payment of debt
service. Proposition 2 1/2 required many cities and towns to reduce their
property tax levies to a stated percentage of the full and fair cash value of
their taxable real estate and personal property and limited the amount by which
the total property taxes assessed by all cities and towns might increase from
year to year. The reduction in local revenues and anticipated reductions in
local personnel and services resulting from Proposition 2 1/2 created strong
demand for substantial increases in Commonwealth funded local aid, which
increased significantly in fiscal years 1982 through 1989. The effect of this
increase in local aid was to shift a major part of the impact of Proposition 2
1/2 to the Commonwealth. Because of decreased Commonwealth revenues, local aid
declined significantly in fiscal years 1990-92, but increased somewhat in fiscal
1993 and is expected to increase again in fiscal 1994. See the SAI for an
expanded discussion of the risk considerations for the MASSACHUSETTS SERIES.
RISK FACTORS FOR THE NEW JERSEY SERIES. New Jersey has a diversified
economic base consisting of, among others, commerce and service industries,
selective commercial agriculture, insurance, tourism, petroleum refining and
manufacturing, although New Jersey's manufacturing industry has shown a downward
trend in the last few years. New Jersey is a major recipient of Federal
assistance. Hence, a decrease in Federal financial assistance may adversely
affect New Jersey's financial condition. As a result of high levels of
unemployment in the 1970's, New Jersey defaulted on employment benefits in 1974
and received advances from the U.S. Department of Labor in order to continue
meeting benefit obligations. In the early 1980's New Jersey's trust fund for
unemployment insurance was bankrupt and until 1984 the trust fund was subject to
a Federal penalty surtax. While New Jersey's economic base has become more
diversified over time and thus its economy appears to be less vulnerable during
recessionary periods, a recurrence of high levels of
16
<PAGE>
unemployment could adversely affect New Jersey's overall economy and its ability
to meet its financial obligations. New Jersey law requires a municipality to
maintain a balanced budget and generally to restrict increases of certain
appropriations, excluding debt service, to the lesser of a certain price index
or 5% annually. Maintaining a balanced budget may adversely affect a
municipality's ability to repay its obligations. The value of New Jersey
obligations may also be affected by general conditions in the money markets or
the municipal bond markets, the levels of Federal and New Jersey income tax
rates, the supply of tax-exempt bonds, the size of the particular offering, the
maturity of the obligation, the credit quality and rating of the issue and
perceptions with respect to the level of interest rates.
RISK FACTORS FOR NEW YORK INSURED. New York is still experiencing financial
difficulties as a result of the national recession that commenced in mid-1990.
Although a recovery commenced near the start of the 1993 calendar year, the
recession had been more severe in the State owing to a significant retrenchment
in the financial services industry, cutbacks in defense spending, and an
overbuilt real estate market. Although the recovery is expected to continue,
there can be no assurance that the State economy will not experience worse than
predicted results. NEW YORK INSURED'S performance is closely tied to conditions
within the State and its authorities and municipalities, particularly the City
of New York (the "City"). To the extent the State experiences economic
difficulties, its ability to assist its public authorities and subdivisions is
impaired. Debt service on outstanding obligations of the State's authorities
("Authorities") is normally paid out of revenues generated by the Authorities'
projects, such as fares, user fees, bridge and tunnel tolls and rentals for
dormitory rooms and housing. In recent years, however, the State has provided
special financial assistance, in some cases on a recurring basis, to certain
Authorities for operating and other expenses, and for debt service pursuant to
moral obligations indebtedness provisions or otherwise. Certain Authorities
continue to experience financial difficulties. Failure of the State to
appropriate necessary amounts or to take other action to permit the Authorities
to meet their obligations could result in a default by one or more of the
Authorities. If a default were to occur, it would likely have a significant
adverse effect on the market price of obligations of the State and its
Authorities. The fiscal health of the State is closely related to that of its
localities, including the City. Primarily as a result of falling tax revenues,
the City faces substantial budget gaps for upcoming fiscal years that require
significant actions be taken by the City, including reductions in spending and
tax increases. Certain lawsuits pending against the State or its officers or
employees could have a substantial or long-term adverse effect on State
finances. There are also outstanding claims against the City and other
localities in the State. The State has historically been one of the wealthiest
states in the nation. For decades, however, the State economy has grown more
slowly than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of the relative decline are varied
and complex, in many cases involving national and international developments
beyond the State's control. Part of the reasons for the long-term relative
decline in the State's economy has been attributed to the combined State and
local tax burden, which is among the highest in the nation. The existence of
this tax burden limits the State's ability to impose higher taxes in the event
of future financial difficulties. See the SAI for an expanded discussion of the
risk considerations for NEW YORK INSURED.
RISK FACTORS FOR THE NORTH CAROLINA SERIES. The following information
discusses certain North Carolina risk factors arising from the NORTH CAROLINA
SERIES relating to investment in North Carolina State and municipal securities
and the general economic climate of the State of North Carolina. This
information constitutes only a brief discussion, does not purport to be a
complete
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<PAGE>
description, and is based on information obtained from governmental agencies.
For a more expansive and detailed discussion, see the SAI.
In North Carolina the issuance of municipal debt is overseen by the North
Carolina Local Government Commission. This Commission handles the approval,
sale and delivery of all local bonds and notes issued in North Carolina and
monitors fiscal accounting standards prescribed by the Local Government Budget
and Fiscal Control Act. No unit of local government can incur bonded
indebtedness without the Commission's prior approval. If approved, the
obligations are sold by the Commission on a sealed bid basis. The Commission
then monitors the local unit's debt service through a system of monthly reports.
Over the past twenty years, North Carolina State debt obligations have
maintained ratings of Aaa by Moody's and AAA by S&P. There can be no assurance
that the State's current ratings will be maintained for any given period or that
such ratings will not be lowered, suspended or withdrawn entirely by either
rating agency.
North Carolina State and municipal securities may be adversely affected by
economic and political conditions and developments within the State of North
Carolina. The North Carolina Constitution requires that the total expenditures
of the State for the fiscal period covered by the budget shall not exceed the
total receipts during that fiscal period plus the surplus remaining in the State
Treasury at the beginning of the period. The State has not recognized any
revenue shortfalls in recent fiscal years. For the two most recent fiscal
periods ending June 30, 1993 and 1994, the State recognized budgetary credit
balances of approximately $578.9 million and $887.5 million, respectively.
However, during the 1989-90 and 1990-91 fiscal years, the State had revenue
shortfalls of approximately $346.2 million and $727.3 million, respectively,
requiring the Governor and General Assembly to mandate significant spending
constraints through reductions in spending authorizations and hiring
restrictions to fulfill the constitutional requirement of maintaining a balanced
budget. Therefore, even though the State has not experienced any revenue
shortfalls in recent years, there is no guarantee that budgetary credit balances
will continue to be recognized in future periods.
During 1994, the North Carolina General Assembly held a special session where
$256.6 million worth of anti-crime legislation was passed. This anti-crime
legislation will be funded from beginning budgetary credit balances and
operational revenues. The Regular Session of the 1994 General Assembly
authorized additional General Fund expenditures of $1.02 billion in excess of
the previously authorized 1994-95 budget. A major portion of these additional
expenses consists of a $427.1 million compensation package for public school
teachers, state employees and employees of state-funded local programs. The
funding of these additional expenditures is to come from the collection of
additional revenues and a reduction in existing programs. The SAI provides a
detailed summary of specific legislation and litigation that may have a
potential economic impact on the fiscal condition of the State and its political
subdivisions.
The economic profile of the State consists of a combination of industry,
agriculture and tourism. The labor force has undergone significant changes
during recent years. The State has moved from a predominantly agricultural
economy to a service and goods producing economy. According to the North
Carolina Employment Securities Commission, the labor force grew 5.56% to
3,639,500 by September 1994 from 3,445,000 in 1991. North Carolina's largest
segment of employment is in the manufacturing industry where an estimated
859,100 jobs existed in October 1994 in contrast to 826,100 in 1991. Total non-
agricultural wage and salary employment accounted for approximately
18
<PAGE>
3,390,900 jobs in October 1994 (compared to 3,072,200 jobs in 1991) with the
majority of this employment spread among manufacturing, retail trade, services
and the government sector. The Employment Security Commission estimates the
unadjusted unemployment rate in September 1994 to have been 4.5% of the labor
force, as compared with a national unemployment rate of 5.6%. The North
Carolina annual average unemployment rate over the past five years has ranged
from a high of 5.9% in 1992 to a low of 3.5% in 1989. The effect of these
changes in the State's economic profile can be seen in the SAI, which provides a
figurative breakdown of the State's population, labor force, employment and
revenue from various employment areas.
RISK FACTORS FOR THE PENNSYLVANIA SERIES. Pennsylvania's economy has
historically depended on manufacturing and mining, with the steel and coal
industries being of national importance. However, due in part to the decline in
the steel and coal industries, Pennsylvania's economy has become more
diversified, with major new sources of growth in the service sector, including
trade, medical and health services, education and financial institutions. This
diversification has helped reduce Pennsylvania's unemployment rate to
approximately the same as the national average. The availability,
marketability, and market value of Pennsylvania municipal securities may be
affected by certain Pennsylvania circumstances which, if not resolved, could
adversely affect the various issuers' abilities to meet their financial
obligations. For example, Pennsylvania's continued dependence on manufacturing,
mining, steel and coal has made the state vulnerable to cyclical fluctuations,
foreign imports and environmental concerns. Pennsylvania had a budget surplus
of $218.0 million and $302.2 million for the 1993 and 1994 fiscal years,
respectively, and the 1995 budget forecasts a budget surplus of $4.1 million.
Changes in Pennsylvania's economic conditions or governmental policies could
have a significant effect on the PENNSYLVANIA SERIES' performance. See the SAI
for an expanded discussion of the risk considerations for the PENNSYLVANIA
SERIES.
RISK FACTORS FOR THE VIRGINIA SERIES. Virginia's economy is based primarily
on manufacturing, the government and service sectors, agriculture, mining and
tourism, and unemployment rates are typically below the national average. The
Commonwealth has a long history of fiscal stability, due in large part to a
conservative financial philosophy, broad-based employment opportunities and
diverse sources of revenue. The 1994-96 biennium budget for the Commonwealth
forecasts a slower economic growth in the Commonwealth than in the nation at
large because of the expected significant reductions in the federal government's
defense budget and the high concentration of defense-dependent industries in
Northern Virginia and Tidewater areas of the Commonwealth. The Constitution of
Virginia requires a balanced budget and limits the ability of the Commonwealth
to create debt. General obligation debt may be incurred to meet certain short-
term needs, to finance capital projects and, under less stringent restrictions,
to finance revenue-producing capital projects. Also, "special fund" revenue
bonds, to which the constitutional debt restrictions do not apply and which are
not supported by the full faith and credit of the Commonwealth, may be issued to
finance qualifying Commonwealth revenue projects. General obligations of
cities, towns and counties are payable from the general revenues of the entity,
including ad valorem tax revenues on property within the jurisdiction. Revenue
obligations issued by other entities are payable only from revenues from the
particular project or projects involved. Securities held in the VIRGINIA SERIES
that are not general obligations of the Commonwealth may be subject to economic
risks or uncertainties peculiar to the issuers of such securities or the sources
from which they are to be paid. See the SAI for an expanded discussion of the
risk considerations for the VIRGINIA SERIES.
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<PAGE>
ALTERNATIVE PURCHASE PLANS
Each Series has two classes of shares, Class A and Class B, which represent
interests in the same portfolio of securities and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that each class (i) is subject to a different sales charge and bears its
separate distribution and certain other class expenses; (ii) has exclusive
voting rights with respect to matters affecting only that class; and (iii) has
different exchange privileges.
CLASS A SHARES. Class A shares are sold with an initial sales charge of up
to 6.25% of the amount invested with discounts available for volume purchases.
Class A shares are subject to a maximum 12b-1 fee at the annual rate of 0.30% of
each Series' average daily net assets attributable to Class A shares, of which
no more than 0.25% may be paid as a service fee and the balance thereof paid as
an asset-based sales charge. The initial sales charge is waived for certain
purchases and a CDSC may be imposed on such purchases. See "How to Buy Shares."
CLASS B SHARES. Class B shares are sold without an initial sales charge, but
are generally subject to a CDSC which declines in steps from 4% to 0% during a
six-year period and bear a higher 12b-1 fee than Class A shares. Class B shares
pay a 12b-1 fee at the annual rate of 1.00% of each Series' average daily net
assets attributable to Class B shares, of which no more than 0.25% may be paid
as a service fee and the balance thereof paid as an asset-based sales charge.
Class B shares automatically convert into Class A shares after eight years. See
"How to Buy Shares."
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES. In deciding which
alternative is most suitable, an investor should consider several factors, as
discussed below. Regardless of whether an investor purchases Class A or Class B
shares, your Representative, as defined under "How to Buy Shares," receives
compensation for selling shares of a Series, which may differ for each class.
The principal advantages of purchasing Class A shares are the lower overall
expenses, the availability of quantity discounts on volume purchases and certain
account privileges which are not offered to Class B shareholders. If an
investor plans to make a substantial investment, the sales charge on Class A
shares may either be lower due to the reduced sales charges available on volume
purchases of Class A shares or waived for certain eligible purchasers. Because
of the reduced sales charge available on quantity purchases of Class A shares,
it is recommended that investments of $250,000 or more be made in Class A
shares. Investments in excess of $1,000,000 must be made in Class A shares.
Distributions paid by each Series with respect to Class A shares will also
generally be greater than those paid with respect to Class B shares because
expenses attributable to Class A shares will generally be lower.
The principal advantage of purchasing Class B shares is that, since no
initial sales charge is paid, all of an investor's money is put to work from the
outset. Furthermore, although any investment in a Series should only be viewed
as a long-term investment, if a redemption must be made soon after purchase, an
investor will pay a lower sales charge than if Class A shares had been
purchased. Conversely, because Class B shares are subject to a higher asset-
based sales charge, long-term Class B shareholders may pay more in an asset-
based sales charge than the economic equivalent of the maximum sales charge on
Class A shares. The automatic conversion of Class B shares into Class A shares
is designed to reduce the probability of this occurring.
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<PAGE>
HOW TO BUY SHARES
You may buy shares of a Series through a First Investors registered
representative ("FIC Representative") or through a registered representative
("Dealer Representative") of an unaffiliated broker-dealer ("Dealer") which is
authorized to sell shares of the Series. Your FIC Representative or Dealer
Representative (collectively, "Representative") may help you complete and submit
an application to open an account with a Series. Applications accompanied by
checks drawn on U.S. banks made payable to "FIC" received in FIC's Woodbridge
offices by the close of regular trading on the New York Stock Exchange ("NYSE"),
generally 4:00 P.M. (New York City time), will be processed and shares will be
purchased at the public offering price determined at the close of regular
trading on the NYSE on that day. The "public offering price" is defined in this
Prospectus as net asset value plus the applicable sales charge for Class A
shares and net asset value for Class B shares. Checks received after the close
of regular trading on the NYSE will be processed at the public offering price
determined at the close of regular trading on the NYSE on the next trading day.
Orders given to Representatives before the close of regular trading on the NYSE
and received by FIC at their Woodbridge offices before the close of its business
day, generally 5:00 P.M. (New York City time), will be executed at the public
offering price determined at the close of regular trading on the NYSE on that
day. Orders received by Representatives after the close of regular trading on
the NYSE or received by FIC after the close of its business day will be executed
at the public offering price determined after the close of regular trading on
the NYSE on the next trading day. It is the responsibility of Representatives
to promptly transmit orders they receive to FIC. Each Series reserves the right
to reject any application or order for its shares for any reason and to suspend
the offering of its shares.
WHEN YOU OPEN A SERIES ACCOUNT, YOU MUST SPECIFY WHICH CLASS OF SHARES YOU
WISH TO PURCHASE. If not, your order will be processed as follows: (1) if you
are opening an account with a new registration with First Investors your order
will not be processed until the Series receives notification of which class of
shares to purchase; (2) if you have existing First Investors accounts solely in
either Class A shares or Class B shares with the identical registration, your
investment in the Series will be made in the same class of shares as your
existing account(s); (3) if you are an existing First Investors shareholder and
own a combination of Class A and Class B shares with an identical registration,
your investment in the Series will be made in Class B shares; and (4) if you own
in the aggregate at least $250,000 in any combination of classes, your
investment will be made in Class A shares.
INITIAL INVESTMENT IN A SERIES. You may open a Series account with as
little as $1,000. This account minimum is waived if you open an account for a
particular class of shares through a full exchange of shares of the same class
of another "Eligible Fund," as defined below. Class A share accounts opened
through an exchange of shares from First Investors Cash Management Fund, Inc. or
First Investors Tax-Exempt Money Market Fund, Inc. (collectively, "Money Market
Funds") may be subject to an initial sales charge. Automatic investment plans
allow you to open an account with as little as $50, provided you invest at least
$600 a year. See "Systematic Investing."
ADDITIONAL PURCHASES. After you make your first investment in a Series,
you may purchase additional shares of the Series by mailing a check made payable
to FIC, directly to First Investors Corporation, 10 Woodbridge Center Drive,
Woodbridge, NJ 07095-1198, Attn: Dept. CP. Include your account number on the
face of the check. There is no minimum on additional purchases of Series
shares.
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<PAGE>
ELIGIBLE FUNDS. Shares of all the funds and/or series in the First
Investors family of funds, except as noted below, are eligible to participate in
certain shareholder privileges noted in this Prospectus and the SAI (singularly,
"Eligible Fund" and, collectively, "Eligible Funds"). Shares of First Investors
Special Bond Fund, Inc., First Investors Life Series Fund and First Investors
U.S. Government Plus Fund are not deemed to be Eligible Funds. Shares of the
Money Market Funds, unless otherwise noted, are not deemed to be Eligible Funds.
Shares of each series of Executive Investors Trust ("Executive Investors") are
deemed to be Eligible Funds if such shares have either (a) been acquired through
an exchange from an Eligible Fund which imposes a maximum sales charge of 6.25%,
or (b) been held for at least one year from their date of purchase.
SYSTEMATIC INVESTING
FIRST INVESTORS MONEY LINE. This service allows you to invest in a
Series through automatic deductions from your bank checking account. Scheduled
investments may be made on a bi-weekly, semi-monthly, monthly, quarterly, semi-
annual or annual basis provided a minimum total of $600 is invested per year.
Shares of the Series are purchased at the public offering price determined at
the close of business on the day your designated bank account is debited and a
confirmation will be sent to you after every transaction. You may decrease the
amount or discontinue this service at any time by calling Shareholder Services
or writing to Administrative Data Management Corp. (the "Transfer Agent"), 10
Woodbridge Center Drive, Woodbridge, NJ 07095-1198, Attn: Control Dept. To
increase the amount, send a written request to the Transfer Agent at the address
noted above, which may take up to five days to process. Money Line application
forms are available from your Representative or by calling Shareholder Services
at 1-800-423-4026.
AUTOMATIC PAYROLL INVESTMENT. You also may arrange for automatic
investments into a Series on a systematic basis through salary deductions,
provided your employer has direct deposit capabilities. Shares of the Series
are purchased at the public offering price determined as of the close of
business on the day the electronic fund transfer is received by the Series, and
a confirmation will be sent to you after every transaction. You may change the
amount or discontinue the service by contacting your employer. An application
is available from your Representative or by calling Shareholder Services at 1-
800-423-4026. Arrangements must also be made with your employer's payroll
department.
CROSS-INVESTMENT OF CASH DISTRIBUTIONS. You may elect to invest in
Class A shares of a Series at net asset value all the cash distributions from
the same class of shares of another Eligible Fund provided the distributions are
equal to at least $600 per year. You may also elect to invest cash
distributions of a Series' Class A shares into the same class of another
Eligible Fund, including the Money Market Funds. See "Dividends and
Distributions." To arrange for cross-investing, call Shareholder Services at 1-
800-423-4026.
INVESTMENT OF SYSTEMATIC WITHDRAWAL PLAN PAYMENTS. You may elect to
invest in Class A shares of a Series at net asset value through payments from a
Systematic Withdrawal Plan you maintain with any other Eligible Fund. Scheduled
investments may be made on a monthly, quarterly, semi-annual or annual basis,
provided a minimum of $600 is invested per year. You may also elect to invest
Systematic Withdrawal Plan payments of Class A shares from a Series into the
same class of another Eligible Fund, including the Money Market Funds. See "How
to Redeem Shares." To arrange for Systematic Withdrawal Plan investments, call
Shareholder Services at 1-800-423-4026.
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<PAGE>
CLASS A SHARES. Class A shares of each Series are sold at the public
offering price, which will vary with the size of the purchase, as shown in the
following table:
<TABLE>
<CAPTION>
SALES CHARGE AS % OF
--------------------- CONCESSION TO
OFFERING NET AMOUNT DEALERS AS % OF
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------- ----- ---------- ---------------
<S> <C> <C> <C>
Less than $25,000. . . . . . . . . . 6.25% 6.67% 5.13%
$25,000 but under $50,000. . . . . . 5.75 6.10 4.72
$50,000 but under $100,000 . . . . . 5.50 5.82 4.51
$100,000 but under $250,000. . . . . 4.50 4.71 3.69
$250,000 but under $500,000. . . . . 3.50 3.63 2.87
$500,000 but under $1,000,000. . . . 2.50 2.56 2.05
</TABLE>
There is no sales charge on transactions of $1 million or more. The
Underwriter will pay Dealers on such purchases an amount equal to 0.90% of the
investment on purchases of $1 million and up to $2 million; 0.80% on purchases
over $2 million and up to $3 million; 0.20% on purchases over $3 million and up
to $5 million; and 0.08% on purchases over $5 million. If such shares are
redeemed within 18 months of purchase, a CDSC of 1.00% will be deducted from the
redemption proceeds. The CDSC will be calculated in the same manner as the CDSC
on the Class B shares. See "Class B Shares."
WAIVERS OF CLASS A SALES CHARGES. Sales charges on Class A shares do not
apply to: (1) any purchase by an officer, director, trustee or full-time
employee (who has completed the introductory period) of either Fund, the
Underwriter, the Adviser, or their affiliates, by a Representative, or by the
spouse, or by the children and grandchildren under the age of 21 of any such
person; and (2) any purchase by a former officer, director, trustee or full-time
employee of either Fund, the Underwriter, the Adviser, or their affiliates, or
by a former FIC Representative; provided they had acted as such for at least
five years and had retired or otherwise terminated the relationship in good
standing:
Additionally, policyholders of participating life insurance policies issued
by First Investors Life Insurance Company, an affiliate of the Adviser and
Underwriter, may elect to invest dividends earned on such policies in Class A
shares of a Series at net asset value, provided the annual dividend is at least
$50 and the policyholder has an existing account with the Series.
CUMULATIVE PURCHASE PRIVILEGE AND LETTERS OF INTENT. You may purchase Class
A shares of a Series at a reduced sales charge through the Cumulative Purchase
Privilege or by executing a Letter of Intent. You may combine your Class A and
Class B shares of any Eligible Fund (including Class B shares of the Money
Market Funds) to qualify for this reduced sales charge. Under the Cumulative
Purchase Privilege, Class A shares of a Series are available at quantity
discounts. By completing a Letter of Intent, you state your intention to invest
a specific amount in Class A shares over the next 13 months which, if made in
one lump sum, would qualify you for a reduced sales charge. For more
information, see the SAI, call your Representative or call Shareholder Services
at 1-800-423-4026.
UNITHOLDERS. Holders of certain unit trusts ("Unitholders") who have elected
to invest the entire amount of cash distributions from either principal,
interest income or capital gains or any combination thereof ("Unit
Distributions") from the following trusts may invest such Unit Distributions in
Class A shares of a Series at a reduced sales charge.
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<PAGE>
Unitholders of various series of New York Insured Municipals-Income Trust
sponsored by Van Kampen Merritt Inc. (the "New York Trust"); Unitholders of
various series of the Multistate Tax Exempt Trust sponsored by Advest Inc.; and
Unitholders of various series of the Municipal Insured National Trust, J.C.
Bradford & Co. as agent, may purchase Class A shares of a Series with Unit
Distributions at an offering price which is the net asset value per share plus a
sales charge of 1.5%. Unitholders of various series of tax-exempt trusts, other
than the New York Trust, sponsored by Van Kampen Merritt Inc. may purchase Class
A shares of a Series with Unit Distributions at an offering price which is the
net asset value per share plus a sales charge of 1.0%. Each Series' initial
minimum investment requirement is waived for purchases of Class A shares with
Unit Distributions. Shares of a Series purchased by Unitholders may be
exchanged for Class A shares of any Eligible Fund subject to the terms and
conditions set forth under "How to Exchange Shares."
CLASS B SHARES. The public offering price of Class B shares of each Series
is the next determined net asset value, with no initial sales charge imposed. A
CDSC, however, is imposed upon most redemptions of Class B shares at the rates
set forth below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
YEAR SINCE PURCHASE AS A PERCENTAGE OF DOLLARS INVESTED
PAYMENT MADE OR REDEMPTION PROCEEDS
------------------- -----------------------------------
<S> <C>
First . . . . . . . . . . . . 4
Second. . . . . . . . . . . . 4
Third . . . . . . . . . . . . 3
Fourth. . . . . . . . . . . . 3
Fifth . . . . . . . . . . . . 2
Sixth . . . . . . . . . . . . 1
Seventh and thereafter. . . . 0
</TABLE>
The CDSC will not be imposed on (1) the redemption of Class B shares acquired
as dividends or other distributions, or (2) any increase in the net asset value
of redeemed shares above their initial purchase price (in other words, the CDSC
will be imposed on the lower of net asset value or purchase price). In
determining whether a CDSC is payable on any redemption, it will be assumed that
the redemption is made first of any Class B shares acquired as dividends or
distributions, second of Class B shares that have been held for a sufficient
period of time such that the CDSC no longer is applicable to such shares and
finally of Class B shares held longest during the period of time that a CDSC is
applicable to such shares. This will result in your paying the lowest possible
CDSC.
As an example, assume an investor purchased 100 shares of Class B shares at
$10 per share for a total cost of $1,000 and in the second year after purchase,
the net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares as dividends. If at such time the
investor makes his or her first redemption of 50 shares (proceeds of $600), 10
shares will not be subject to a CDSC charge because redemptions are first made
of shares acquired through dividend reinvestment. With respect to the remaining
40 shares, the charge is applied only to the original cost of $10 per share and
not to the increase in net asset value of $2 per share. Therefore, $400 of the
$600 redemption proceeds will be charged at a rate of 4.00% (the applicable rate
in the second year after purchase).
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<PAGE>
For purposes of determining the CDSC on Class B shares, all purchases made
during a calendar month will be deemed to have been made on the first business
day of that month at the average cost of all purchases made during that month.
The holding period of Class B shares acquired through an exchange with another
Eligible Fund will be calculated from the first business day of the month that
the Class B shares were initially acquired in the other Eligible Fund. The
amount of any CDSC will be paid to FIC.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares approximately eight years after the date
of purchase, together with a pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class B shares. The Class
B shares so converted will no longer be subject to the higher expenses borne by
Class B shares. The conversion will be effected at the relative net asset
values per share of the two classes on the first business day of the month
following that in which the eighth anniversary of the purchase of the Class B
shares occurs. If a shareholder effects one or more exchanges between Class B
shares of the Eligible Funds during the eight-year period, the holding period
for the shares so exchanged will commence upon the date of the purchase of the
original shares. Because the per share net asset value of the Class A shares
may be higher than that of the Class B shares at the time of conversion, a
shareholder may receive fewer Class A shares than the number of Class B shares
converted. See "Determination of Net Asset Value."
GENERAL. The Underwriter may at times agree to reallow to Dealers up to an
additional 0.25% of the dollar amount of shares of the Series and/or certain
other First Investors or Executive Investors funds sold by such Dealers during a
specific period of time. From time to time, the Underwriter also will pay,
through additional reallowances or other sources, a bonus or other compensation
to Dealers which employ a Dealer Representative who sells a minimum dollar
amount of the shares of the Series and/or certain other First Investors or
Executive Investors funds during a specific period of time. Such bonus or other
compensation may take the form of reimbursement of certain seminar expenses, co-
operative advertising, or payment for travel expenses, including lodging
incurred in connection with trips taken by qualifying Dealer Representatives to
the Underwriter's principal office in New York City.
HOW TO EXCHANGE SHARES
Should your investment needs change, you may exchange, at net asset value,
shares of a Series for shares of any Eligible Fund (including the Money Market
Funds). In addition, Class A shares of a Series may be exchanged at net asset
value for units of any single payment plan ("plan") sponsored by the
Underwriter. SHARES OF A PARTICULAR CLASS MAY BE EXCHANGED ONLY FOR SHARES OF
THE SAME CLASS OF ANOTHER FUND. For example, you can exchange Class A shares of
a Series only for Class A shares of another Eligible Fund. Exchanges can only
be made into accounts registered to identical owners. If your exchange is into
a new account, it must meet the minimum investment and other requirements of the
fund or plan into which the exchange is being made. Additionally, the fund or
plan must be available for sale in the state where you reside. A $5.00 exchange
fee is charged for each exchange. However, currently this fee is being
voluntarily borne by the fund into which you are making the exchange and, thus,
that fund's shareholders are bearing the fee ratably. Before exchanging Series
shares for shares of another fund or plan, you should read the Prospectus of the
fund or plan into which the exchange is to be made. You may obtain Prospectuses
and information with respect to which funds or plans qualify for the exchange
privilege free of charge by calling Shareholder Services at 1-800-423-4026.
Exchange requests may be made
25
<PAGE>
in writing or by telephone (for shares held on deposit only) if telephone
privileges were elected on your application. Exchange requests received in
"good order" by the Transfer Agent before the close of regular trading on the
NYSE, generally 4:00 P.M. (New York City time), will be processed at the net
asset value determined as of the close of regular trading on the NYSE on that
day; exchange requests received after that time will be processed on the
following trading day.
EXCHANGES BY MAIL. To exchange shares by mail, you should mail requests to
Administrative Data Management Corp., 10 Woodbridge Center Drive, Woodbridge, NJ
07095-1198. Shares will be exchanged after the request is received in "good
order" by the Transfer Agent. "Good order" means that exchange requests must:
(1) state the names of the funds; (2) account numbers (if existing accounts);
(3) the dollar amount, number of shares or percentage of the account you wish to
exchange; and (4) must be signed by all registered owners exactly as the account
is registered. If information is missing, your request is ambiguous or the
value of your account is less than the amount indicated on your request, the
exchange will not be processed. The Transfer Agent will seek additional
information from you and process the exchange on the day it receives such
information. Signature guarantees may be required to process certain exchange
requests. See "How to Redeem Shares--Signature Guarantees."
EXCHANGES BY TELEPHONE. See "Telephone Transactions" for instructions on
making exchanges by telephone.
ADDITIONAL EXCHANGE INFORMATION. Exchanges should be made for investment
purposes only. A pattern of frequent exchanges may be contrary to the best
interests of a Series' other shareholders. Accordingly, each Series has the
right, at its sole discretion, to limit the amount of an exchange, reject any
exchange, or, upon 60 days' notice, materially modify or discontinue the
exchange privilege. Each Series will consider all relevant factors in
determining whether a particular frequency of exchanges is contrary to the best
interests of the Series and/or a class of the Series and its other shareholders.
Any such restriction will be made by a Series on a prospective basis only, upon
notice to the shareholder not later than ten days following such shareholder's
most recent exchange.
HOW TO REDEEM SHARES
You may redeem your Series shares at the next determined net asset value,
less any applicable CDSC, on any day the NYSE is open, directly through the
Transfer Agent. Your Representative may help you with this transaction. Shares
may be redeemed by mail or telephone (provided written authorization for
telephone transactions is on file). Redemption requests received in "good
order" by the Transfer Agent before the close of regular trading on the NYSE,
generally 4:00 P.M. (New York City time), will be processed at the net asset
value, less any applicable CDSC, determined as of the close of regular trading
on the NYSE on that day; exchange requests received after that time will be
processed on the following trading day. Payment of redemption proceeds will be
made within seven days. If the shares being redeemed were recently purchased by
check, payment may be delayed to verify that the check has been honored,
normally not more than fifteen days.
REDEMPTIONS BY MAIL. Written redemption requests should be mailed to
Administrative Data Management Corp., 10 Woodbridge Center Drive, Woodbridge, NJ
07095-1198. For your redemption request to be in good order, you must include:
(1) the name of the Series; (2) your account number; (3) the dollar amount,
number of shares or percentage of the account you want redeemed; (4) share
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certificates, if issued; (5) the original signatures of all registered owners
exactly as the account is registered; (6) signature guarantees as described
below; and (7) additional documents required for redemptions by corporations,
trusts, partnerships, organizations, retirement, pension or profit sharing plans
and for requests from anyone other than the shareholder(s) of record. If
information is missing, your request is ambiguous or the value of your account
is less than the amount indicated on your request, the redemption will not be
processed. The Transfer Agent will seek additional information and process the
redemption on the day it receives such information.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect you, the
Series and their agents. Members of STAMP (Securities Transfer Agents Medallion
Program), MSP (New York Stock Exchange Medallion Signature Program), SEMP (Stock
Exchanges Medallion Program) or any underwriter of any issue for which the
Transfer Agent acts as transfer agent are eligible signature guarantors. A
notary public is not an acceptable guarantor. The guarantee must be manually
signed by an authorized signatory of the guarantor and the words "Signature
Guaranteed" must appear in direct association with such signature. Although
each Series reserves the right to require signature guarantees at any other
time, signature guarantees are required whenever: (1) the amount of the
redemption is $50,000 or more, (2) an exchange in the amount of $50,000 or more
is made into the Money Market Funds, (3) a redemption check is to be made
payable to someone other than the registered accountholder, (4) a redemption
check is to be mailed to an address other than the address of record, (5) an
account registration is being transferred to another owner, (6) an account,
other than an individual, joint, UGMA or UTMA nonretirement account, is being
exchanged or redeemed, (7) the redemption request is for certificated shares, or
(8) your address of record has changed within 60 days prior to a redemption or
exchange request.
REDEMPTIONS BY TELEPHONE. See "Telephone Transactions" for instructions on
making redemptions by telephone.
SYSTEMATIC WITHDRAWAL PLAN. If you own noncertificated Class A shares with a
net asset value of $5,000 or more in a single Series account, you may set up a
plan for redemptions to be made automatically at regular intervals. You may
elect to have the payments (a) sent directly to you or persons you designate; or
(b) automatically invested at net asset value in shares of the same class of any
other Eligible Fund, including the Money Market Funds, provided you invest at
least $600 per year. See the SAI for more information on the Systematic
Withdrawal Plan. To establish a Systematic Withdrawal Plan, call Shareholder
Services at 1-800-423-4026.
REINVESTMENT AFTER REDEMPTION. If you redeem Class A or Class B shares in
your Series account, you can reinvest within ninety days from the date of
redemption all or any part of the proceeds in shares of the same class of the
same Series or any other Eligible Fund (including the Money Market Funds), at
net asset value, on the date the Transfer Agent receives your purchase request.
If you reinvest the entire proceeds of a redemption of Class B shares for which
a CDSC has been paid, you will be credited for the amount of the CDSC. If you
reinvest less than the entire proceeds, you will be credited with a pro rata
portion of the CDSC. All credits will be paid in Class B shares of the fund
into which the reinvestment is being made. The period you owned the original
Class B shares prior to redemption will be added to the period of time you own
Class B shares acquired through reinvestment for purposes of determining (a) the
applicable CDSC upon a subsequent redemption and (b) the date on which Class B
shares automatically convert to class A shares. If your reinvestment is into a
new account, it must meet the minimum investment and other requirements of the
fund into which the reinvestment is being made. To take advantage of this
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option, send your reinvestment check along with a written request to the
Transfer Agent within 90 days from the date of your redemption. Include your
account number and a statement that you are taking advantage of the
"Reinvestment Privilege."
REPURCHASE THROUGH UNDERWRITER. You may redeem Class A shares for which a
certificate has been issued through a Dealer. In this event, the Underwriter,
acting as agent for each Series, will offer to repurchase or accept an offer to
sell such shares at a price equal to the net asset value next determined after
the making of such offer. The Dealer may charge you an added commission for
handling any redemption transaction.
REDEMPTION OF LOW BALANCE ACCOUNTS. Because each Series incurs certain fixed
costs in maintaining shareholder accounts, each Series may redeem without your
consent, on at least 60 days' prior written notice (which may appear on your
account statement), any Series account of Class A or Class B shares which has a
net asset value of less than $500. To avoid such redemption, you may, during
such 60-day period, purchase additional Series shares of the same class so as to
increase your account balance to the required minimum. There will be no CDSC
imposed on such redemptions of Class B shares. The Series will not redeem
accounts that fall below $500 solely as a result of a reduction in net asset
value. Accounts established under a Systematic Investment Plan which have been
discontinued prior to meeting the $1,000 minimum are subject to this policy.
Additional information concerning how to redeem shares of the Series is
available upon request to your Representative or Shareholder Services at
1-800-423-4026.
TELEPHONE TRANSACTIONS
You may exchange or redeem noncertificated Series shares by telephone
beginning five business days after you select this option on your original
Account Application or complete the telephone privileges authorization section
on the Special Services Application. You may redeem or exchange noncertificated
shares of a Series by calling the Special Services Department at 1-800-342-6221
weekdays (except holidays) between 9:00 A.M. and 5:00 P.M. (New York City time).
Exchange or redemption requests received after the close of regular trading on
the NYSE, generally 4:00 P.M. (New York City time), will be processed at the net
asset value, less any applicable CDSC, determined as of the close of business on
the following business day. For your convenience, you may authorize your FIC
Representative (or your Dealer Representative, provided certain minimum sales
requirements are met) to exchange or redeem shares for you.
TELEPHONE EXCHANGES. Telephone exchanges are available between nonretirement
accounts and between IRA accounts of the same class of shares registered in the
same name. Any new nonretirement account which is established will have the
same registration and distribution options as the present account. A telephone
exchange also is available from an individually registered nonretirement account
to an IRA account of the same class of shares in the same name (provided an IRA
application is on file). Dividend distributions on the new IRA account will be
paid in additional shares unless otherwise directed. Telephone exchanges are
not available for exchanges of Series shares for plan units. For joint
accounts, telephone exchange instructions will be accepted from any one owner.
You are limited to one telephone exchange within any 30-day period for each
account authorized.
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TELEPHONE REDEMPTIONS. The telephone redemption privilege may be used
provided: (1) the redemption proceeds are being mailed to the address of record;
(2) your address of record has not changed within the past 60 days; (3) the
shares to be redeemed have not been issued in certificate form; (4) the proceeds
of the redemption do not exceed $50,000; and (5) shares have not been redeemed
by telephone from the account in the past 30 days. For joint accounts,
telephone redemption instructions will be accepted from any one owner.
ADDITIONAL INFORMATION. The Series, the Underwriter and their affiliates will
not be liable for any loss, damage, cost or expense arising out of any
instruction (or any interpretation of such instruction) received by telephone
which they reasonably believe to be authentic. In acting upon telephone
instructions, these parties use procedures which are reasonably designed to
ensure that such instructions are genuine. This policy places the entire risk
of loss for unauthorized or fraudulent transactions on the shareholder, except
that if the Series, the Underwriter or their affiliates do not follow reasonable
procedures, some or all of them may be liable for any such losses. For more
information on telephone transactions see the SAI. Each Series has the right,
at its sole discretion, upon 60 days' notice, to materially modify or
discontinue the telephone exchange and redemption privilege. During times of
drastic economic or market changes, telephone exchanges or redemptions may be
difficult to implement. If you experience difficulty in making a telephone
exchange or redemption, your exchange or redemption request may be made by
regular or express mail, and it will be implemented at the next determined net
asset value, less any applicable CDSC, following receipt by the Transfer Agent.
MANAGEMENT
BOARD OF DIRECTORS OR TRUSTEES. Each Fund's Board of Directors or Trustees,
as part of its overall management responsibility, oversees various organizations
responsible for the applicable Series' day-to-day management.
ADVISER. First Investors Management Company, Inc. supervises and manages
each Series' investments, determines each Series' portfolio transactions and
supervises all aspects of each Series' operations. The Adviser is a New York
corporation located at 95 Wall Street, New York, NY 10005. The Adviser
presently acts as investment adviser to 14 mutual funds. First Investors
Consolidated Corporation ("FICC") owns all of the voting common stock of the
Adviser and all of the outstanding stock of FIC and the Transfer Agent. Mr.
Glenn O. Head (and members of his family) and Mrs. Julie W. Grayson (as
executrix of the estate of her deceased husband, David D. Grayson) are
controlling persons of FICC and, therefore, jointly control the Adviser.
As compensation for its services, the Adviser receives an annual fee from
each of the Series, which is payable monthly. For the fiscal year ended
December 31, 1993, NEW YORK INSURED paid 0.75% of its average daily net assets
in advisory fees. For the fiscal year ended December 31, 1993, the advisory
fees paid by each Series of MULTI-STATE INSURED, as a percentage of such Series'
average daily net assets, net of waivers, were as follows: CONNECTICUT SERIES -
0.40%; FLORIDA SERIES - 0.10%; MASSACHUSETTS SERIES - 0.50%; NEW JERSEY SERIES -
0.60%; PENNSYLVANIA SERIES - 0.44%; and VIRGINIA SERIES - 0.40%. The advisory
fees accrued by the GEORGIA SERIES, MARYLAND SERIES and NORTH CAROLINA SERIES
were voluntary waived by the Adviser in their entirety.
Each Series bears all expenses of its operations other than those incurred by
the Adviser or Underwriter under the terms of its advisory or underwriting
agreements. Series expenses include,
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but are not limited to: the advisory fee; shareholder servicing fees and
expenses; custodian fees and expenses; legal and auditing fees; expenses of
communicating to existing shareholders, including preparing, printing and
mailing prospectuses and shareholder reports to such shareholders; and proxy and
shareholder meeting expenses.
PORTFOLIO MANAGER. Clark D. Wagner has been Portfolio Manager of each Series
since he joined FIMCO in 1991. Mr. Wagner is also Portfolio Manager for all of
First Investors municipal bond funds. In 1992, he became Chief Investment
Officer of FIMCO. Prior to joining FIMCO, Mr. Wagner was a Vice President at
General Electric Investment Corporation from 1988-1991, where he managed a tax-
exempt portfolio.
BROKERAGE. Each Series may allocate brokerage commissions, if any, to
broker-dealers in consideration of Series share distribution, but only when
execution and price are comparable to that offered by other broker-dealers. See
the SAI for more information on allocation of portfolio brokerage.
UNDERWRITER. The Fund has entered into an Underwriting Agreement with First
Investors Corporation, 95 Wall Street, New York, NY 10005, as Underwriter. The
Underwriter receives all sales charges in connection with the sale of each
Series' Class A shares and all contingent deferred sales charges in connection
with each Series' Class B shares and may receive payments under a plan of
distribution. See "How to Buy Shares" and "Distribution Plans."
REGULATORY MATTERS. In June 1992, the Funds' underwriter FIC, entered into a
settlement with the Securities and Exchange Commission ("SEC") to resolve
allegations by the agency that certain of FIC's sales representatives had made
misrepresentations concerning the risks of investing in two high yield bond
funds, the First Investors Fund For Income, Inc. and the First Investors High
Yield Fund, Inc. ("High Yield Funds"), and had sold these Funds to investors for
whom they were not suitable. Without admitting or denying the SEC's
allegations, FIC: (a) consented to the entry of a final judgment enjoining it
from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 thereunder and Section 17(a) of the 1933 Act; (b) agreed to the entry of
an administrative order censuring it and requiring it to comply with
undertakings to improve its policies and procedures with regard to sales,
training, supervision and compliance; and (c) agreed to pay $24.7 million to
certain investors who purchased shares of the High Yield Funds from in or about
November 1984 to in or about November 1990.
FIC, FIMCO and/or certain affiliated entities and persons have entered into
settlements with regulators in 29 states to resolve allegations, similar to
those made by the SEC, concerning sales of the High Yield Funds. In October
1993, as part of settlements with Maine, Massachusetts, New York, Virginia and
Washington ("State Settlements"), FIC, FIMCO and certain affiliated entities
and persons agreed, without admitting or denying any of the allegations, (a) to
be enjoined from violating certain provisions of the state securities laws, (b)
to engage in remedial measures designed to ensure that proper sales practices
are observed in the future, and (c) to pay $7.5 million, in addition to the
$24.7 million previously paid by FIC in connection with the SEC settlement, to
investors in the High Yield Funds. In addition, as part of those settlements,
several FIC executives, including Glenn O. Head, who is an officer and Director
or Trustee of the Funds, agreed to be suspended and enjoined temporarily from
associating with any broker-dealer in a supervisory capacity in certain of the
states. On December 8, 1993, several present and former FIC executives,
including Mr. Head, also agreed, without admitting or denying the allegations,
to temporary SEC
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suspensions from associating with broker-dealers and in some cases other
regulated entities in a supervisory capacity.
DISTRIBUTION PLANS
Pursuant to separate distribution plans pertaining to each Series' Class A
and Class B shares ("Class A Plan" or "Class B Plan," and collectively,
"Plans"), each Series may reimburse or compensate, as applicable, the
Underwriter for certain expenses incurred in the distribution of that Series'
shares ("distribution fees") and the servicing or maintenance of existing Series
shareholder accounts ("service fees"). Pursuant to the Plans, distribution fees
are paid for activities relating to the distribution of Series shares, including
costs of printing and dissemination of sales material or literature,
prospectuses and reports used in connection with the sale of Series shares.
Service fees are paid for the ongoing maintenance and servicing of existing
shareholder accounts, including payments to Representatives who provide
shareholder liaison services to their customers who are holders of that Series,
provided they meet certain criteria.
Pursuant to each Class A Plan, the applicable Fund's Board of Directors or
Trustees, in its sole discretion, may periodically allocate the portion of
distribution fees and services fees that each Series may spend, provided the
aggregate of such fees paid by that Series may not exceed an annual rate of
0.30% of the Series' average daily net assets attributable to Class A shares in
any one fiscal year. Of that amount, no more than 0.25% of a Series' average
daily net assets attributable to Class A shares may be paid as service fees.
Payments made to the Underwriter under each Class A Plan may only be made for
reimbursement of specific expenses incurred in connection with distribution and
service activities.
Pursuant to each Class B Plan, each Series is authorized to pay the
Underwriter a distribution fee at the annual rate of 0.75% of that Series'
average daily net assets attributable to Class B shares and a service fee of
0.25% of the Series' average daily net assets attributable to Class B shares.
Payments made to the Underwriter under each Class B Plan will represent
compensation for distribution and service activities, not reimbursement for
specific expenses incurred.
Although Class B shares are sold without an initial sales charge, the
Underwriter pays from its own resources a sales commission to FIC
Representatives and a concession equal to 3.5% of the amount invested to Dealers
who sell Class B shares. In addition, the Underwriter will make quarterly
payments of service fees to Representatives commencing after the thirteenth
month following the initial sale of Class B shares. The Underwriter will make
such payments at an annual rate of up to 0.25% of the average net asset value of
Class B shares which are attributable to shareholders for whom the
Representatives are designated as dealer of record.
Each Series may suspend or modify payments under the Plans at any time, and
payments are subject to the continuation of each Plan, the terms of any dealer
agreements between Dealers and the Underwriter and any applicable limits imposed
by the National Association of Securities Dealers, Inc. Each Series will not
carry over any fees under the Plans to the next fiscal year. See "Distribution
Plans" in the SAI for a full discussion of the various Plans.
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DETERMINATION OF NET ASSET VALUE
The net asset value of each Series' shares fluctuates and is determined
separately for each class of shares. The per share net asset value of the Class
B shares will generally be lower than that of the Class A shares because of the
higher expenses borne by the Class B shares. The net asset value of shares of a
given class of each Series is determined as of the close of regular trading on
the NYSE (generally 4:00 P.M., New York City time) on each day the NYSE is open
for trading, and at such other times as the applicable Fund's Board of Directors
or Trustees deems necessary, by dividing the market value of the securities held
by such Series, plus any cash and other assets, less all liabilities, by the
number of shares of the applicable class outstanding. If there is no available
market value, securities will be valued at their fair value as determined in
good faith pursuant to procedures adopted by the applicable Fund's Board of
Directors or Trustees. The NYSE currently observes the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividends from net investment income are generally declared daily and paid
monthly by each Series. Unless you direct the Transfer Agent otherwise,
dividends declared on a class of shares of a Series are paid in additional
shares of that class at the net asset value generally determined as of the close
of business on the first business day of the following month. If you redeem all
of your shares of a Series at any time during a month, you are paid all
dividends declared through the day prior to the date of the redemption, together
with the proceeds of your redemption, less any applicable CDSC. Net investment
income includes interest, earned discount and other income earned on portfolio
securities less expenses.
Each Series also distributes with its regular dividend at the end of the year
substantially all of its net capital gain (the excess of net long-term capital
gain over net short-term capital loss) and net short-term capital gain, if any,
after deducting any available capital loss carryovers. Unless you direct the
Transfer Agent otherwise, these distributions are paid in additional shares of
the same class of the distributing Series at the net asset value generally
determined as of the close of business on the business day immediately following
the record date of the distribution. A Series may make an additional
distribution in any year if necessary to avoid a Federal excise tax on certain
undistributed ordinary (taxable) income and capital gain.
Dividends and other distributions paid on both classes of a Series' shares
are calculated at the same time and in the same manner. Dividends on Class B
shares of a Series are expected to be lower than those for its Class A shares
because of the higher distribution fees borne by the Class B shares. Dividends
on each class also might be affected differently by the allocation of other
class-specific expenses.
In order to be eligible to receive a dividend or other distribution, you must
own Series shares as of the close of business on the record date of the
distribution. You may elect to receive dividends and/or other distributions in
cash by notifying the Transfer Agent by telephone or in writing prior to the
record date of any such distribution. If you elect this form of payment, the
payment date generally is two weeks following the record date of any such
distribution. Your election remains in effect until you revoke it by written
notice to the Transfer Agent.
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You may elect to invest the entire amount of any cash distribution on Class A
shares in shares of the same class of any Eligible Fund, including the Money
Market Funds, by notifying the Transfer Agent. See "How to Buy Shares--Cross-
Investment of Cash Distributions." The investment will be made at the net asset
value per share of the other fund, generally determined as of the close of
business, on the business day immediately following the record date of any such
distribution.
A dividend or other distribution paid on a class of shares of a Series will
be paid in additional shares of that class and not in cash if any of the
following events occurs: (1) the total amount of the distribution is under $5,
(2) the Series has received notice of your death on an individual account (until
written alternate payment instructions and other necessary documents are
provided by your legal representative), or (3) a distribution check is returned
to the Transfer Agent, marked as being undeliverable, by the U.S. Postal Service
after two consecutive mailings.
TAXES
FEDERAL INCOME TAX. Each Series intends to continue to qualify for treatment
as a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), so that it will be relieved of Federal income tax on that
part of its investment company taxable income (consisting generally of taxable
net investment income and net short-term capital gain) and net capital gain that
is distributed to its shareholders. In addition, each Series intends to
continue to qualify to pay "exempt-interest dividends" (as defined below), which
requires, among other things, that at the close of each calendar quarter at
least 50% of the value of its total assets must consist of Municipal
Instruments.
Distributions by a Series of the excess of interest income from Municipal
Instruments over certain amounts disallowed as deductions, which are designated
by the Series as "exempt-interest dividends," generally may be excluded by you
from gross income. Distributions by a Series of interest income from taxable
obligations and net short-term capital gain, if any, are taxable to you as
ordinary income to the extent of the Series' earnings and profits, whether
received in cash or paid in additional Series shares. Distributions of a
Series' realized net capital gain, if any, when designated as such, are taxable
to you as long-term capital gains, whether received in cash or paid in
additional Series shares, regardless of the length of time you have owned your
shares. If you purchase your shares shortly before the record date for a
taxable dividend or capital gain distribution, you will pay full price for the
shares and receive some portion of the price back as a taxable distribution.
You will receive an annual statement following the end of each calendar year
describing the tax status of distributions paid by your Series during that year.
Interest on indebtedness incurred or continued to purchase or carry shares of
a Series will not be deductible for Federal income tax purposes to the extent
the Series' distributions consist of exempt-interest dividends. Each Series
does not intend to invest in PABs or IDBs the interest on which is treated as a
tax preference item for purposes of the Federal alternative minimum tax.
Proposals may be introduced before Congress for the purpose of restricting or
eliminating the Federal income tax exemption for interest on Municipal
Instruments. If such a proposal were enacted, the availability of Municipal
Instruments for investment by each Series and the value of its portfolio
securities would be affected. In that event, each Series would reevaluate its
investment objective and policies.
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Each Series is required to withhold 31% of all taxable dividends, capital
gain distributions and redemption proceeds payable to you (if you are an
individual or certain other non-corporate shareholder) if the Series is not
furnished with your correct taxpayer identification number, and that percentage
of dividends and such distributions in certain other circumstances.
Your redemption of Series shares will result in a taxable gain or loss to
you, depending on whether the redemption proceeds are more or less than your
adjusted basis for the redeemed shares (which normally includes any initial
sales charge paid on Class A shares). An exchange of Series shares for shares
of any other Eligible Fund generally will have similar tax consequences.
However, special tax rules apply when a shareholder (1) disposes of Class A
shares through a redemption or exchange within 90 days of purchase and (2)
subsequently acquires Class A shares of an Eligible Fund without paying a sales
charge due to the 90-day reinvestment privilege or exchange privilege. In these
cases, any gain on the disposition of the original Class A shares will be
increased, or loss decreased, by the amount of the sales charge paid when the
shares were acquired, and that amount will increase the basis of the Eligible
Fund's shares subsequently acquired. In addition, if you purchase Series shares
within 30 days before or after redeeming other shares of that Series (regardless
of class) at a loss, all or a portion of the loss will not be deductible and
will increase the basis of the newly purchased shares.
No gain or loss will be recognized to a shareholder as a result of a
conversion of Class B shares into Class A shares.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting each Series and its shareholders; see the SAI
for a further discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor; for example, a Series'
distributions may be wholly or partly taxable under state and/or local laws.
You therefore are urged to consult your own tax adviser.
STATE INCOME TAXES.
CONNECTICUT. In the opinion of Kelley Drye & Warren, Connecticut tax counsel
to MULTI-STATE INSURED, shareholders who are Connecticut resident individuals
will not be subject to the Connecticut personal income tax on distributions from
the CONNECTICUT SERIES to the extent that these distributions qualify as
(i) exempt-interest dividends, as defined in section 852(b)(5) of the Code, that
are attributable to interest on either (a) obligations issued by or on behalf of
the State of Connecticut, any political subdivision thereof, or any public
instrumentality, state or local authority, district or similar public entity
created under the laws of the State of Connecticut or (b) obligations, the
income with respect to which taxation by any state is prohibited by federal law,
or (ii) "exempt dividends" for Connecticut tax purposes. Distributions to
Connecticut shareholders of the CONNECTICUT SERIES that are attributable to
sources other than those described above will generally be includable in the
Connecticut income of such shareholders.
A corporate shareholder of the CONNECTICUT SERIES subject to tax in
Connecticut will be required to include in its tax base measured by net income
distributions (other than distributions that are exempt-interest dividends) made
by the CONNECTICUT SERIES and gains resulting from the redemption or sale of
shares of the Connecticut Series for purposes of calculating its Connecticut
corporation business tax. For corporate shareholders of the CONNECTICUT SERIES,
generally 70% of
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the amount of includable distributions that qualify as dividends under
section 316 of the Code will be deductible in determining net income.
Except when acceptable investments are unavailable to the CONNECTICUT SERIES,
it will maintain at least 80% of the value of its assets in debt obligations
which are exempt from federal income tax and the Connecticut personal income
tax.
FLORIDA. In the opinion of Rudnick & Wolfe, Florida tax counsel to MULTI-
STATE INSURED, under existing law, shareholders of the FLORIDA SERIES will not
be subject to the Florida intangible personal property tax on their ownership of
FLORIDA SERIES shares or on distributions of income or gains made by the FLORIDA
SERIES to the extent that such distributions are attributable to interest-
bearing municipal bonds, industrial development bonds, municipal notes and
municipal commercial paper issued by or on behalf of the State of Florida, its
political subdivisions and authorities, by the U.S. Government and its agencies
or by the Commonwealths of Puerto Rico, Guam, the Virgin Islands, American Samoa
or the Northern Mariana Islands ("Florida Municipal Instruments"). Certain
portfolio securities that are not Florida Municipal Instruments, including
certain repurchase agreements, are not exempt from the Florida intangible
personal property tax. (The FLORIDA SERIES has no present intention of
investing in repurchase agreements which will be subject to the Florida
intangible personal property tax.)
Because Florida does not impose an income tax on individuals, individual
shareholders will not be subject to any Florida income tax on income or gains
distributed by the FLORIDA SERIES or on gains resulting from the redemption or
exchange of shares of the FLORIDA SERIES. Corporate shareholders will be
subject to income taxation under the Florida Income Tax Code ("Florida Code") on
all distributions received from the FLORIDA SERIES notwithstanding the tax-
exempt status of interest received from the FLORIDA SERIES which is attributable
to bonds under section 103(a) of the Code or any other Federal law; however, if
a corporation does not have its commercial domicile within the State of Florida,
its non-business income generated from the FLORIDA SERIES is not allocated as
Florida income subject to Florida corporate income tax. Non-business income
includes capital gains and interest to the extent they do not arise from
transactions and activities in the regular course of a taxpayer's business.
Shareholders of the FLORIDA SERIES will be subject to Florida estate tax on
their FLORIDA SERIES shares only if they are Florida residents, certain natural
persons not domiciled in Florida, or certain natural persons not residents of
the United States. However, the Florida estate tax is limited to the amount of
the credit allowable under the Code (currently section 2011 and in some cases
section 2102 of the Code for death taxes actually paid to the several states).
Neither interests held by shareholders of the FLORIDA SERIES nor the Florida
Municipal Instruments held by the FLORIDA SERIES will be subject to the Florida
ad valorem property tax, the Florida sales and use tax or the Florida
documentary stamp tax.
For Florida state income tax purposes, the FLORIDA SERIES will not be subject
to the Florida income tax imposed by the Florida Code so long as it has no
income subject to Federal taxation.
GEORGIA. In the opinion of Kutak Rock, Georgia tax counsel to MULTI-STATE
INSURED, shareholders of the GEORGIA SERIES that are individuals, estates or
trusts subject to the Georgia personal income tax will not be required to
include in the gross income for Georgia income tax
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purposes, distributions made by the GEORGIA SERIES that are derived from
interest on obligations issued by the State of Georgia or any political
subdivision thereof which obligations are exempt from Federal taxation under
section 103(a) of the Code. Similarly, individuals, estates and trusts may
exclude from the calculation of Georgia income tax, dividend distributions from
the GEORGIA SERIES to the extent attributable to interest on obligations of the
United States, its territories or possessions or any authority, commission or
instrumentality of the United States exempt from state income tax under Federal
law. To the extent that distributions of the GEORGIA SERIES are attributable to
short or long-term capital gains, such distributions will not be treated as tax-
exempt for Georgia personal income tax purposes.
In general, corporations may exclude dividend distributions which are
attributable to interest exempt from Federal income tax under section 103(a)
from the calculation of Georgia income tax to the extent derived from
obligations issued by the State of Georgia or any political subdivision thereof.
Further, corporations may exclude from the calculation of Georgia income tax,
dividend distributions from the GEORGIA SERIES to the extent attributable to
interest on obligations of the United States or its possessions. Corporations
will not be entitled to exclude from income any dividend distributions from the
GEORGIA SERIES which are attributable to interest exempt from Federal income tax
under section 103(a) and attributable to obligations issued by any other state
or political subdivision thereof.
Capital gains recognized as a result of the sale of shares in the GEORGIA
SERIES can not be excluded for purposes of calculating the Georgia income tax by
individuals, estates, trusts or corporations.
Although the application of the Georgia intangible personal property tax to
the ownership of shares in the GEORGIA SERIES is not clear, special tax counsel
believes that the shares in the GEORGIA SERIES will be deemed to be taxable
intangible property separate from an ownership interest in the underlying tax-
exempt Georgia obligations. Special tax counsel urges each potential investor
in the GEORGIA SERIES to consult his or her own tax advisor regarding the
application of the Georgia intangible personal property tax. Because
obligations or evidences of debt of Georgia, its political subdivisions and
public institutions are exempt from the Georgia intangible personal property
tax, special tax counsel believes that the GEORGIA SERIES will not be subject to
such tax as a result of holding such obligations or evidences of debt.
MARYLAND. In the opinion of Venable, Baetjer and Howard, Maryland tax
counsel to MULTI-STATE INSURED, holders of the MARYLAND SERIES who are
individuals, corporations, estates or trusts and who are subject to Maryland
state and local income tax will not be subject to tax in Maryland on MARYLAND
SERIES dividends to the extent that such dividends qualify as exempt-interest
dividends of a RIC under section 852(b)(5) of the Code and which are
attributable to (1) interest on tax-exempt obligations of the State of Maryland
or its political subdivisions or authorities, (2) interest on obligations of the
United States or an authority, commission, instrumentality, possession or
territory of the United States, or (3) gain realized by the MARYLAND SERIES from
the sale or exchange of bonds issued by Maryland or a political subdivision of
Maryland or of the United States or an authority, commission or instrumentality
of the United States.
To the extent that distributions of the MARYLAND SERIES are attributable to
sources other than those described above, such as (1) interest on obligations
issued by states other than Maryland or (2) income from repurchase contracts,
such distributions will not be exempt from Maryland state and
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local income taxes. In addition, gain realized by a shareholder upon a
redemption or exchange of MARYLAND SERIES shares will be subject to Maryland
taxation.
In the event the MARYLAND SERIES fails to qualify as a RIC, the MARYLAND
SERIES would be subject to corporate Maryland income tax and distributions would
be taxable as ordinary income to the shareholders.
Maryland presently includes in taxable net income items of tax preferences as
defined in the Code. Interest paid on certain private activity bonds
constitutes a tax preference. Accordingly, subject to a threshold amount, 50%
of any distributions on the MARYLAND SERIES attributable to such private
activity bonds will not be exempt from Maryland state and local income taxes.
Interest on indebtedness incurred (directly or indirectly) by a shareholder
of the MARYLAND SERIES to purchase or carry shares of the MARYLAND SERIES will
not be deductible for Maryland state and local income tax purposes to the extent
such interest is allocable to exempt-interest dividends.
MASSACHUSETTS. In the opinion of Palmer & Dodge, Massachusetts tax counsel
to MULTI-STATE INSURED, holders of shares of the MASSACHUSETTS SERIES who are
subject to Massachusetts personal income tax will not be subject to tax on
distributions from the MASSACHUSETTS SERIES for periods during which the
MASSACHUSETTS SERIES qualifies as a regulated investment company under
section 851 of the Code, to the extent that these distributions (1) qualify as
exempt interest dividends of a regulated investment company within the meaning
of Code section 852(b)(5) which are directly attributable to interest exempt
from Massachusetts taxation under any provision of law, on obligations issued by
the Commonwealth of Massachusetts, its instrumentalities or its political
subdivisions, by the government of Puerto Rico or by its authority, by the
government of Guam or by its authority, or by the government of the Virgin
Island or by its authority; (2) are attributable to interest on obligations of
the United States exempt from state income taxation; or (3) qualify as capital
gain dividends within the meaning of Code section 852(b)(3)(C) which are
attributable to gain exempt from Massachusetts taxation under any provision of
law, on obligations issued by the Commonwealth of Massachusetts, its
instrumentalities or political subdivisions. The MASSACHUSETTS SERIES must
identify the items not subject to tax in a written notice to the shareholders.
Holders of shares of the MASSACHUSETTS SERIES who are subject to Massachusetts
personal income tax will generally be subject to tax on distributions which are
from sources other than those described above.
If a holder of shares of the MASSACHUSETTS SERIES is a corporation subject to
the Massachusetts corporate excise tax, distributions received from the
MASSACHUSETTS SERIES are includable in gross income and generally may not be
deducted by such a corporate holder in computing its net income.
The holders of shares of the MASSACHUSETTS SERIES will recognize taxable gain
or loss upon an exchange or redemption of their shares. The shares of the
MASSACHUSETTS SERIES will be includable in the gross estate of a deceased
individual holder who is a resident of Massachusetts for purposes of the
Massachusetts Estate Tax.
NEW JERSEY. In the opinion of Hawkins, Delafield & Wood, New Jersey tax
counsel to MULTI-STATE INSURED, shareholders of the NEW JERSEY SERIES who are
New Jersey resident individuals, estates and trusts will not be subject to the
New Jersey Gross Income Tax on distributions of the interest and capital gains
made by the NEW JERSEY SERIES to the extent that such distributions are from
municipal bonds, private activity bonds, municipal notes and municipal
commercial paper
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issued by the State of New Jersey, or its counties, municipalities, authorities,
or other political subdivisions and within the scope of those obligations
described in N.J.S.A. 54A:6-14. In addition, such shareholders will not be
subject to the New Jersey Gross Income Tax on gains resulting from the
redemption or sale of shares of the NEW JERSEY SERIES. The foregoing will
apply, however, only if in the year in which the distribution is paid, the NEW
JERSEY SERIES qualifies as a RIC under the Code and the investments of the NEW
JERSEY SERIES are limited to interest-bearing obligations, obligations issued at
a discount, and cash and cash items, including receivables, and not less than
80% of the aggregate principal amount of its investments, excluding cash and
cash items (including receivables), are comprised of obligations described in
N.J.S.A. 54A:6-14.
A corporate shareholder of the NEW JERSEY SERIES subject to tax in New Jersey
will be required to include in its corporate tax base, distributions of interest
and capital gains made by the NEW JERSEY SERIES for purposes of calculating its
New Jersey Corporate Business Tax or its New Jersey Corporate Income Tax. In
addition, such corporate shareholder will be required to include in its
corporate tax base, gains resulting from the redemption or sale of shares of the
NEW JERSEY SERIES for purposes of calculating its New Jersey Business Tax or its
New Jersey Corporate Income Tax.
Except when acceptable investments are unavailable to the NEW JERSEY SERIES,
it will maintain at least 80% of the value of its assets in debt obligations
which are exempt from Federal income tax and New Jersey Gross Income Tax.
NEW YORK. In the opinion of Hawkins, Delafield & Wood, tax counsel to NEW
YORK INSURED, shareholders who are New York resident individuals will not be
subject to the personal income taxes imposed by New York State and by New York
City on distributions from NEW YORK INSURED to the extent that these
distributions qualify as exempt-interest dividends, as defined in section
852(b)(5) of the Code, and are attributable to interest on obligations issued by
or on behalf of the State of New York or any political subdivision thereof.
Distributions to New York resident individual shareholders of NEW YORK INSURED
that are attributable to other sources will generally be includable in the New
York personal income of such shareholders.
Interest on indebtedness incurred or continued to purchase or carry shares of
NEW YORK INSURED will not be deductible for New York personal income tax
purposes to the extent such interest is allocable to exempt-interest dividends
paid by that Fund.
NEW YORK INSURED distributions are not excluded from the determination of the
franchise and corporation taxes that are based on entire net income and
respectively imposed by the State and City of New York.
NORTH CAROLINA. In the opinion of Wyrick, Robbins, Yates & Ponton L.L.P,
North Carolina tax counsel to MULTI-STATE INSURED, and based on the current
administrative position of the North Carolina Department of Revenue (the
"Revenue Department"), shareholders of the NORTH CAROLINA SERIES who are
otherwise subject to the North Carolina individual or corporate income tax will
not be subject to either such tax on NORTH CAROLINA SERIES distributions to the
extent that such distributions qualify as exempt-interest dividends under the
Code and represent (a) interest on direct obligations of the United States or
its possessions, obligations of the State of North Carolina or its political
subdivisions or obligations of nonprofit educational institutions organized or
chartered under the laws of the State of North Carolina, or (b) interest upon
obligations, and gain from the disposition of obligations, if the North Carolina
law under which the obligations were issued
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specifically exempts from such taxes the interest or gain (collectively, "North
Carolina Exempt Obligations"). However, the non-taxability of dividends paid by
the NORTH CAROLINA SERIES to a shareholder is conditioned upon the NORTH
CAROLINA SERIES providing a supporting statement to the shareholder which must
specify the amount received by the shareholder which represents distributions on
North Carolina Exempt Obligations. In the absence of a supporting statement,
the total amount designated by the NORTH CAROLINA SERIES as exempt from tax is
subject to North Carolina income tax. The NORTH CAROLINA SERIES will provide to
the shareholders a supporting statement which meets the Revenue Department's
requirements.
Interest on certain other obligations may also be considered interest from
obligations of the United States and thus exempt from North Carolina income tax.
However, interest earned on obligations that are merely backed or guaranteed by
the U.S. Government (and thus are not considered "direct" obligations of the
United States) is subject to North Carolina income tax. For instance, interest
income realized on obligations of the Federal National Mortgage Association and
interest paid by the issuer of mortgage-backed certificates guaranteed by the
Federal government, Federal agencies or corporations formed by the Federal
government is not considered income from obligations of the United States and is
subject to North Carolina income tax. Also subject to North Carolina income tax
is interest paid in connection with repurchase agreements issued by banks and
savings and loan associations.
Distributions by the NORTH CAROLINA SERIES of interest on Federal obligations
will not be treated as dividends for purposes of the six percent dividend tax
credit which might otherwise be available to individual shareholders because
such interest is treated as flowing through to the shareholders.
In general, a shareholder of the NORTH CAROLINA SERIES who is subject to
North Carolina income tax will recognize capital gains for North Carolina income
tax purposes to the same extent as a shareholder would for Federal income tax
purposes when the NORTH CAROLINA SERIES makes a capital gain distribution or a
shareholder redeems or sells shares. In certain instances, however, North
Carolina legislation creating an entity issuing debt obligations expressly
exempts gain on the sale of such obligations from North Carolina income
taxation. In a letter to tax counsel, the Revenue Department stated its
administrative position that NORTH CAROLINA SERIES capital gain distributions
which are attributable to such obligations will not be subject to North Carolina
income taxation.
The North Carolina intangible personal property tax is a local property tax
on the total fair market value of all shares of stock, including shares of
mutual funds, owned by North Carolina residents having a business, commercial or
taxable situs in North Carolina on December 31 of each year. However, the share
value of a mutual fund, such as the NORTH CAROLINA SERIES, may be reduced by a
percentage equal to the ratio of "direct obligations" of the U.S. Government
(excluding obligations that are merely backed or guaranteed by the U.S.
Government) and "direct obligations" of the State of North Carolina and its
political subdivisions to the total investments held in the mutual fund as of
December 31. Upon request, a taxpayer must be able to provide information to
support any percentage reduction in the share value of a mutual fund. The NORTH
CAROLINA SERIES will provide a statement to shareholders setting forth
information to support any percentage reduction in share value as of December 31
of each year.
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Indebtedness owed to a broker, bank or other party incurred to purchase
shares of the NORTH CAROLINA SERIES as listed on the intangible tax return may
be deducted from the taxable value (net of any reduction in share value
calculated in accordance with the foregoing) of shares owned, subject to the
following requirements and limitations: the indebtedness must be incurred
directly to purchase the shares of the NORTH CAROLINA SERIES; the shares
purchased with proceeds of the indebtedness must be pledged as collateral; the
amount of indebtedness allowable is limited to the same percentage that the
taxable value of the shares of the NORTH CAROLINA SERIES purchased with the
borrowed money relates to the total value of such shares; the amount of
allowable indebtedness may not exceed the taxable value of the shares of the
NORTH CAROLINA SERIES purchased with proceeds of the indebtedness; and
information supporting a claim of allowable indebtedness must be furnished upon
request.
In June 1993, the North Carolina Court of Appeals in FULTON CORPORATION V.
JUSTUS ruled that certain portions of the intangible personal property tax
scheme violate the commerce clause of the U.S. constitution and are therefore
unconstitutional. The case is currently pending before the North Carolina
Supreme Court and a decision is expected this term. It is unclear at this time
whether, or to what extent, the decision will affect shareholders of the NORTH
CAROLINA SERIES.
PENNSYLVANIA. Individual shareholders of the PENNSYLVANIA SERIES who are
otherwise subject to the Pennsylvania personal income tax will not be subject to
that tax on distributions of interest by the PENNSYLVANIA SERIES that are
attributable to obligations issued by Pennsylvania, public authorities,
commissions, boards or agencies created by Pennsylvania, political subdivisions
of Pennsylvania or public authorities created by any such political subdivision
or obligations of the United States and certain qualifying agencies,
instrumentalities, territories and possessions of the United States ("Exempt
Obligations"). Distributions of gains on Exempt Obligations will be subject to
Pennsylvania personal income taxes in the hands of shareholders who are
otherwise subject to the Pennsylvania personal income tax. Distributions
attributable to most other sources will not be exempt from Pennsylvania personal
income tax.
Shares of the PENNSYLVANIA SERIES that are held by individual shareholders
who are Pennsylvania residents will be exempt from the Pennsylvania county
personal property tax to the extent that the PENNSYLVANIA SERIES' portfolio
consists of Exempt Obligations on the annual assessment date. Non-residents of
the Commonwealth of Pennsylvania are not subject to this tax. Shares of the
PENNSYLVANIA SERIES that are held by individual shareholders who are residents
of the City of Pittsburgh or the School District of Pittsburgh, or both will be
exempt from the personal property tax imposed by each such jurisdiction to the
extent that the PENNSYLVANIA SERIES' portfolio consists of Exempt Obligations on
the annual assessment date. Corporations are not subject to Pennsylvania
personal property taxes. For shareholders who are residents of the City of
Philadelphia, distributions of interest derived from Exempt Obligations are not
taxable for purposes of the Philadelphia School District investment net income
tax provided that the PENNSYLVANIA SERIES reports to its investors the
percentage of Exempt Obligations held by it for the year. The PENNSYLVANIA
SERIES will report such percentage to its shareholders.
The Pennsylvania Department of Revenue takes the position that a RIC is a
separate entity under Pennsylvania corporate net income tax law and, therefore,
the characteristics of income received by such company, to the extent that such
income would otherwise be includable in Pennsylvania corporate taxable income,
will not flow through to a corporate shareholder. However, because the
Pennsylvania corporate net income tax is based upon Federal taxable income,
items
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excluded from Federal taxable income and not required to be added to taxable
income by Pennsylvania law will also be excluded from Pennsylvania corporate
taxable income. Accordingly, "exempt-interest dividends," which are not
required to be so added, are also excluded from the Pennsylvania corporate
taxable income. Gains on Exempt Obligations are, however, subject to the
corporate net income tax in the hands of a corporate shareholder. The
Pennsylvania Department of Revenue also takes the position that shares of funds
similar to the PENNSYLVANIA SERIES are not considered exempt assets of a
corporation for the purpose of determining its capital stock value subject to
the Pennsylvania capital stock and franchise taxes.
Except when acceptable investments are unavailable to the PENNSYLVANIA
SERIES, at least 80% of the value of its net assets will be maintained in debt
obligations of the Commonwealth of Pennsylvania, its localities and political
subdivisions, which are exempt from regular Federal income tax and Pennsylvania
personal income tax and personal property taxes.
VIRGINIA. In the opinion of Sands, Anderson, Marks & Miller, Virginia tax
counsel to MULTI-STATE INSURED, interest on exempt obligations in the VIRGINIA
SERIES passed through to shareholders in qualifying distributions will retain
its exempt status in the hands of the shareholders. Accordingly, individual
shareholders of the VIRGINIA SERIES subject to Virginia personal income tax will
not be required to include in their gross income, for Virginia personal income
tax purposes, distributions made by the VIRGINIA SERIES that are exclusively (1)
both tax-exempt for Federal income tax purposes and derived from interest on
obligations of the Commonwealth of Virginia or any of its political
subdivisions, or (2) without regard to any exemption from Federal income tax,
derived from interest in certain obligations for which a Virginia income tax
exemption is independently provided, including, among others, obligations issued
under the Virginia Public Finance Act, certain revenue bonds for transportation
facilities, and obligations issued by the Virginia Housing Development
Authority, the Virginia Education Loan Authority, and industrial development
authorities created pursuant to the Virginia Industrial Development and Revenue
Bond Act.
If a distribution includes both taxable and tax-exempt interest, the entire
distribution is included in the gross income of the shareholder for Virginia
personal income tax purposes unless the exempt portion is designated with
reasonable certainty. Counsel has been advised that, in the event any such
commingled distributions are made by the VIRGINIA SERIES, the VIRGINIA SERIES
intends to provide such designation, in a manner acceptable to the Virginia
Department of Taxation, to shareholders of the VIRGINIA SERIES.
In general, an individual shareholder of the VIRGINIA SERIES who is a
Virginia resident will recognize capital gains for Virginia income tax purposes
to the same extent that he or she would for Federal income tax purposes when the
VIRGINIA SERIES makes a capital gains distribution or the shareholder redeems or
sells shares. In certain instances, however, legislation creating the entity
issuing debt obligations expressly exempts profit on the sale of the obligation
from Virginia income taxation.
Interest on indebtedness incurred (directly or indirectly) by shareholders to
purchase or carry shares of the VIRGINIA SERIES will not be deductible for
Virginia income tax purposes.
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PERFORMANCE INFORMATION
For purposes of advertising, each Series' performance may be calculated for
each class of its shares based on average annual total return and total return.
Each of these figures reflects past performance and does not necessarily
indicate future results. Average annual total return shows the average annual
percentage change in an assumed $1,000 investment. It reflects the hypothetical
annually compounded return that would have produced the same total return if a
Series' performance had been constant over the entire period. Because average
annual total return tends to smooth out variations in a Series' return, you
should recognize that it is not the same as actual year-by-year results.
Average annual total return includes the effect of paying the maximum sales
charge (in the case of Class A shares) or the deduction of any applicable CDSC
(in the case of Class B shares) and payment of dividends and other distributions
in additional shares. One, five and ten year periods will be shown unless the
class has been in existence for a shorter period. Total return is computed
using the same calculations as average annual total return. However, the rate
expressed is the percentage change from the initial $1,000 invested to the value
of the investment at the end of the stated period. Total return calculations
assume reinvestment of dividends and other distributions.
Each Series also may advertise its yield for each class of shares. Yield
reflects investment income net of expenses over a 30-day (or one-month) period
on a Series share, expressed as an annualized percentage of the maximum offering
price per share for Class A shares and the net asset value per share for Class B
shares at the end of the period. Yield computations differ from other
accounting methods and therefore may differ from dividends actually paid or
reported net income.
Tax-equivalent yields show the taxable yields an investor would have to earn
to equal a Series' tax-free yields. The tax-equivalent yield is calculated
similarly to the yield, except that the yield is increased using a stated income
tax rate to demonstrate the taxable yield necessary to produce an after-tax
yield equivalent to a Series' tax-free yield.
Each of the above performance calculations may be based on investment at
reduced sales charge levels or at net asset value. Any quotation of performance
figures not reflecting the maximum sales charge will be greater than if the
maximum sales charge were used. Additional performance information is contained
in the Series' Annual Reports which may be obtained without charge by contacting
the applicable Fund at 1-800-423-4026.
GENERAL INFORMATION
ORGANIZATION. NEW YORK INSURED was incorporated in the State of Maryland on
July 5, 1983. NEW YORK INSURED's authorized capital stock consists of one
billion shares of common stock, with a par value of $.01 per share. MULTI-STATE
INSURED was organized as a Massachusetts business trust on October 30, 1985. In
addition, to the nine Series of MULTI-STATE INSURED described in this
Prospectus, the following are also separate Series of that Fund:
FIRST INVESTORS ARIZONA INSURED TAX FREE SERIES
FIRST INVESTORS CALIFORNIA INSURED TAX FREE SERIES
FIRST INVESTORS COLORADO INSURED TAX FREE SERIES
FIRST INVESTORS MICHIGAN INSURED TAX FREE SERIES
FIRST INVESTORS MINNESOTA INSURED TAX FREE SERIES
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FIRST INVESTORS MISSOURI INSURED TAX FREE SERIES
FIRST INVESTORS OHIO INSURED TAX FREE SERIES
FIRST INVESTORS OREGON INSURED TAX FREE SERIES
Each Fund is authorized to issue shares of beneficial interest or common
stock, as applicable, in such separate and distinct series and classes of shares
as that Fund's Board of Directors or Trustees shall from time to time establish.
The shares of beneficial interest of MULTI-STATE INSURED are presently divided
into seventeen separate and distinct Series and the shares of common stock of
NEW YORK INSURED presently comprise one series. Each Series presently has two
classes, designed Class A shares and Class B shares. Each class of a Series
represents interests in the same assets of that Series. The classes differ in
that (1) each class has exclusive voting rights on matters affecting only that
class, (2) Class A shares are subject to an initial sales charge and relatively
lower ongoing distribution fees, (3) Class B shares bear higher ongoing
distribution fees, are subject to a CDSC upon certain redemptions and will
automatically convert to Class A shares approximately eight years after
purchase, (4) each class may bear differing amounts of certain other class-
specific expenses, and (5) each class has different exchange privileges. Each
Fund's Board of Directors or Trustees does not anticipate that there will be any
conflicts among the interests of the holders of the different classes of each
Series' shares. On an ongoing basis, each Fund's Board of Directors or Trustees
will consider whether any such conflict exists and, if so, take appropriate
action. The Funds do not hold annual shareholder meetings. If requested to do
so by the holders of at least 10% of a Fund's outstanding shares, that Fund's
Board of Directors or Trustees will call a special meeting of shareholders for
any purpose, including the removal of Directors or Trustees. Each share of each
Series has equal voting rights except as noted above. Each share of a Series is
entitled to participate equally in dividends and other distributions and the
proceeds of any liquidation except that, due to the higher expenses borne by the
Class B shares, such dividends and proceeds are likely to be lower for the Class
B shares than for the Class A shares.
CUSTODIAN. The Bank of New York, 48 Wall Street, New York, NY 10286, is
custodian of the securities and cash of each Series.
TRANSFER AGENT. Administrative Data Management Corp., 10 Woodbridge Center
Drive, Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as
transfer and dividend disbursing agent for each Series and as redemption agent
for regular redemptions. The Transfer Agent's telephone number is 1-800-423-
4026.
SHARE CERTIFICATES. The Series do not issue share certificates unless
requested in writing to do so. The Series do not issue certificates for Class B
shares. Ownership of shares of each Series is recorded on a stock register by
the Transfer Agent and shareholders have the same rights of ownership with
respect to such shares as if certificates had been issued.
CONFIRMATIONS AND STATEMENTS. You will receive confirmations of purchases
and redemptions of shares of a Series. Statements of shares owned will be sent
to you following a transaction in the account, including payment of a dividend
or capital gain distribution in additional shares or cash.
SHAREHOLDER INQUIRIES. Shareholder inquiries can be made by calling
Shareholder Services at 1-800-423-4026.
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TABLE OF CONTENTS
Fee Table...................................... 2
Financial Highlights........................... 5
Investment Objectives and Policies............. 10
Alternative Purchase Plans..................... 20
How to Buy Shares.............................. 21
How to Exchange Shares......................... 25
How to Redeem Shares........................... 26
Telephone Transactions......................... 28
Management..................................... 29
Distribution Plans............................. 31
Determination of Net Asset Value............... 32
Dividends and Other Distributions.............. 32
Taxes.......................................... 33
Performance Information........................ 42
General Information............................ 42
INVESTMENT ADVISER CUSTODIAN
First Investors Management The Bank of New York
Company, Inc. 48 Wall Street
95 Wall Street New York, NY 10286
New York, NY 10005
TRANSFER AGENT
UNDERWRITER Administrative Data
First Investors Corporation Management Corp.
95 Wall Street 10 Woodbridge Center Drive
New York, NY 10005 Woodbridge, NJ 07095-1198
LEGAL COUNSEL AUDITORS
Kirkpatrick & Lockhart Tait, Weller & Baker
1800 M Street, N.W. Two Penn Center Plaza
Washington, D.C. 20036 Philadelphia, PA 19102-1707
THIS PROSPECTUS IS INTENDED TO CONSTITUTE AN OFFER BY EACH FUND ONLY OF THE
SECURITIES OF WHICH IT IS THE ISSUER AND IS NOT INTENDED TO CONSTITUTE AN OFFER
BY ANY FUND OF THE SECURITIES OF ANY OTHER FUND WHOSE SECURITIES ARE ALSO
OFFERED BY THIS PROSPECTUS. NO FUND INTENDS TO MAKE ANY REPRESENTATION AS TO
THE ACCURACY OR COMPLETENESS OF THE DISCLOSURE IN THIS PROSPECTUS RELATING TO
ANY OTHER FUND. NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION, AND IF GIVEN OR
MADE, SUCH INFORMATION AND REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY EITHER FUND, FIRST INVESTORS CORPORATION, OR ANY AFFILIATE
THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SHARES OFFERED HEREBY IN ANY STATE TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
FIRST INVESTORS
NEW YORK INSURED
TAX FREE FUND, INC.
FIRST INVESTORS
MULTI-STATE
INSURED TAX FREE FUND
CONNECTICUT SERIES
FLORIDA SERIES
GEORGIA SERIES
MARYLAND SERIES
MASSACHUSETTS SERIES
NEW JERSEY SERIES
NORTH CAROLINA SERIES
PENNSYLVANIA SERIES
VIRGINIA SERIES
PROSPECTUS
JANUARY 12, 1995
The arabic numeral 1 separated in seven vertical segments followed by the words
"First Investors"
