EXECUTIVE INVESTORS TRUST, 485BPOS, 1995-04-25

EXECUTIVE INVESTORS TRUST
485BPOS, 1995-04-25

Previous: FRANKLIN MANAGED TRUST, 485BPOS, 1995-04-25

Next: MICHIGAN DAILY TAX FREE INCOME FUND INC, NSAR-B, 1995-04-25

<PAGE>

As filed with the Securities and Exchange Commission on April , 1995

Registration No. 33-10648
811-4927
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 16 X
-

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940

Amendment No. 16 X
-

----------

EXECUTIVE INVESTORS TRUST
(Exact name of Registrant as specified in charter)

Mr. Larry R. Lavoie
Secretary and General Counsel
First Investors Corporation
95 Wall Street
New York, New York 10005
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement

It is proposed that this filing will become effective on May 1, 1995 pursuant to
paragraph (b) of Rule 485.

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously elected to register an indefinite number of shares of beneficial
interest, no par value, under the Securities Act of 1933. Registrant filed a
Rule 24f-2 Notice for its fiscal year ending December 31, 1994 on February 21,
1995.

<PAGE>

EXECUTIVE INVESTORS TRUST

CROSS-REFERENCE SHEET

N-1A Item No. Location
- ------------- --------

PART A: PROSPECTUS

1. Cover Page. . . . . . . . . . . . . . . . Cover Page
2. Synopsis. . . . . . . . . . . . . . . . . Fee Table
3. Condensed Financial Information . . . . . Financial Highlights
4. General Description of Registrant . . . . Investment Objectives and
Policies; General Information
5. Management of the Fund. . . . . . . . . . Management
5A. Management's Discussion of
Fund Performance . . . . . . . . . . . . Performance Information
6. Capital Stock and Other Securities. . . . Description of Shares; Dividends
and Other Distributions; Taxes;
Determination of Net Asset Value
7. Purchase of Securities Being Offered. . . How to Buy Shares
8. Redemption or Repurchase. . . . . . . . . How to Exchange Shares; How to
Redeem Shares; Telephone
Transactions
9. Pending Legal Proceedings . . . . . . . . Management

PART B: STATEMENT OF ADDITIONAL INFORMATION

10. Cover Page. . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . Table of Contents
12. General Information and History . . . . . General Information
13. Investment Objectives and Policies. . . . Investment Policies; Investment
Restrictions; Hedging Strategies
14. Management of the Fund. . . . . . . . . . Trustees and Officers
15. Control Persons and Principal
Holders of Securities . . . . . . . . . . Not Applicable
16. Investment Advisory and Other Services. . Management
17. Brokerage Allocation. . . . . . . . . . . Allocation of Portfolio
Brokerage
18. Capital Stock and Other Securities. . . . Determination of Net Asset Value
19. Purchase, Redemption and Pricing
of Securities Being Offered . . . . . . . Reduced Sales Charges,
Additional Exchange and
Redemption Information and Other
Services; Determination of Net
Asset Value
<PAGE>

N-1A Item No. Location
- ------------- --------

20. Tax Status. . . . . . . . . . . . . . . . Taxes
21. Underwriters. . . . . . . . . . . . . . . Underwriter
22. Performance Data. . . . . . . . . . . . . Performance Information
23. Financial Statements. . . . . . . . . . . Financial Statements; Report of
Independent Accountants

PART C: OTHER INFORMATION

Information required to be included in Part C is set forth under
the appropriate item so numbered, in Part C hereof.

<PAGE>

EXECUTIVE INVESTORS TRUST
BLUE CHIP FUND
HIGH YIELD FUND
INSURED TAX EXEMPT FUND
95 Wall Street, New York, New York 10005/1-800-423-4026

This is a Prospectus for Executive Investors Trust ("Fund"), an open-end
diversified management investment company. The Fund offers three separate
diversified investment series, each of which has different investment objectives
and policies: BLUE CHIP FUND, HIGH YIELD FUND and INSURED TAX EXEMPT FUND
(individually and collectively, "Series"). There can be no assurance that any
Series will achieve its investment objective. Each Series has designated its
issued and outstanding shares as Class A shares.

HIGH YIELD FUND primarily seeks high current income and secondarily seeks
capital appreciation. The Series seeks its objectives by investing, under
normal market conditions, at least 65% of its total assets in high risk, high
yield securities. INVESTMENTS IN HIGH YIELD, HIGH RISK SECURITIES, COMMONLY
REFERRED TO AS "JUNK BONDS," ENTAIL RISKS THAT ARE DIFFERENT AND MORE PRONOUNCED
THAN THOSE INVOLVED IN HIGHER RATED SECURITIES. SEE "HIGH YIELD SECURITIES-RISK
FACTORS."

INSURED TAX EXEMPT FUND seeks to provide a high level of interest income
which is exempt from Federal income tax and, for non-corporate shareholders, the
Federal alternative minimum tax. The Series seeks to achieve its objective by
investing at least 80% of its total assets in tax-exempt obligations 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 and,
for non-corporate shareholders, the Federal alternative minimum tax. 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 THE SERIES' NET ASSET VALUE PER SHARE. FOR MORE INFORMATION REGARDING
THE SERIES' INSURANCE COVERAGE, SEE "INSURANCE" ON PAGE 12.

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. Executive Investors Management Company, Inc. ("EIMCO" or
"Adviser") serves as investment adviser to the Series and Executive Investors
Corporation ("EIC" or "Underwriter") serves as distributor of the Series'
shares. A Statement of Additional Information ("SAI"), dated May 1, 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 Fund
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 May 1, 1995

<PAGE>
FEE TABLE

The following table is intended to assist investors in understanding the
expenses associated with investing in each Series.

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . . . . 4.75%
Deferred Sales Load
(as a percentage of the lower of original purchase
price or redemption proceeds). . . . . . . . . . . . . . -0-*
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . -0-**

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

TOTAL FUND
MANAGEMENT 12B-1 OTHER OPERATING
FEES(1) FEES EXPENSES (2) EXPENSES(3)
----------- ------ ------------ -----------

BLUE CHIP FUND . . . . . . 0.75%+ 0.50% 0.40%+ 1.65%+
HIGH YIELD FUND. . . . . . 0.75+ 0.50 0.38 1.63+
INSURED TAX EXEMPT FUND. . 0.75+ 0.50 0.30 1.55+

- ----------------

* A contingent deferred sales charge ("CDSC") of 1.00% will be assessed on
certain redemptions of 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 December
31, 1995. Each Series reserves the right to change or suspend this
privilege after December 31, 1995. See "How to Exchange Shares."
+ Net of waiver and/or reimbursement.
(1) Management Fees have been restated. The Adviser will waive 0.25% in
advisory fees for each Series for a minimum period ending December 31,
1995. Otherwise, such fee would be 1.00% for each Series.
(2) Other Expenses for BLUE CHIP FUND have been restated. The Adviser will
reimburse Other Expenses for that Series in excess of 0.40% for a minimum
period ending December 31, 1995. Otherwise, Other Expenses would be 1.04%.
(3) If certain Management Fees and Other Expenses were not waived and/or
reimbursed, Total Fund Operating Expenses would have been as follows: BLUE
CHIP FUND - 2.54%; HIGH YIELD FUND - 1.88%; and INSURED TAX EXEMPT FUND -
1.80%.

For a more complete description of the various costs and expenses, see
"Investment Objectives and Policies--Insurance," "How to Buy Shares," "How to
Redeem Shares," "Management" and "Distribution Plan." 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 expense data for each Series' fiscal year
ended December 31, 1994, except that certain Operating Expenses have been
restated, as noted above.

<PAGE>

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:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- ------- --------
BLUE CHIP FUND . . . . . . $63 $97 $133 $234
HIGH YIELD FUND. . . . . . 63 96 132 232
INSURED TAX EXEMPT FUND. . 63 94 128 223

THE EXPENSES IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION BY THE
SERIES OF FUTURE EXPENSES. ACTUAL EXPENSES IN FUTURE YEARS MAY BE GREATER OR
LESS THAN THOSE SHOWN.

<PAGE>

FINANCIAL HIGHLIGHTS

The following table 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. 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.

PER SHARE DATA
-----------------------------------------------------------------------------------------------------------
Income from Investment Operations Less Distributions From
--------------------------------------- ---------------------------
Net Asset Net Asset
Value Net Realized Dividends Net Value
--------- Net and Unrealized Total From from Net Realized Gain ---------
Beginning Investment Gain (Loss) on Investment Investment from Security Total End
of Period Income Investments Operations Income Transactions Distributions of Period
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

BLUE CHIP FUND
5/17/90* to 12/31/90 $11.43 $.16 $(.52) $(.36) $.16 $ -- $.16 $10.91
1991 . . . . . . . . 10.91 .31 2.68 2.99 .30 .11 .41 13.49
1992 . . . . . . . . 13.49 .25 .30 .55 .26 -- .26 13.78
1993 . . . . . . . . 13.78 .23 .88 1.11 .23 .59 .82 14.07
1994 . . . . . . . . 14.07 .24 (.41) (.17) .22 .93 1.15 12.75

HIGH YIELD FUND
3/24/87* to 12/31/87 9.60 .73 (1.12) (.39) .74 -- .74 8.47
1988 . . . . . . . . 8.47 1.22 .52 1.74 1.20 -- 1.20 9.01
1989 . . . . . . . . 9.01 1.18 (1.25) (.07) 1.20 -- 1.20 7.74
1990 . . . . . . . . 7.74 .95 (1.84) (.89) .96 -- .96 5.89
1991 . . . . . . . . 5.89 .82 1.17 1.99 .78 -- .78 7.10
1992 . . . . . . . . 7.10 .80 .29 1.09 .76 -- .76 7.43
1993 . . . . . . . . 7.43 .72 .50 1.22 .76 -- .76 7.89
1994 . . . . . . . . 7.89 .70 (.87) (.17) .74 -- .74 6.98

INSURED TAX
EXEMPT FUND
7/26/90* to 12/31/90 11.43 .22 .20 .42 .14 -- .14 11.71
1991 . . . . . . . . 11.71 .78 .72 1.50 .78 .04 .82 12.39
1992 . . . . . . . . 12.39 .74 .59 1.33 .72 .17 .89 12.83
1993 . . . . . . . . 12.83 .71 1.27 1.98 .72 .32 1.04 13.77
1994 . . . . . . . . 13.77 .68 (1.23) (.55) .69 -- .69 12.53

Average Monthly Average Monthly
Amount of Debt Amount of Debt Number of Shares Average Amount of
INSURED TAX Outstanding at Outstanding Outstanding Debt Per Share
EXEMPT FUND End of Period During the Period During the Period During the Period
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>

7/26/90* to 12/31/90 $239,223 $39,871 52,282 $0.76
1991 . . . . . . . . -- 32,701 200,690 0.16
1992 . . . . . . . . -- -- 410,953 --
1993 . . . . . . . . -- 18,126 582,792 0.03
1994 . . . . . . . . -- -- 771,907 --

<FN>
- ----------------
(a) Annualized
* Commencement of operations
** Calculated without sales charge
+ Net of expenses waived or assumed by the investment adviser, the
underwriter and the transfer agent from commencement of operations through
December 31, 1994.
</TABLE>

<PAGE>

RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
Ratio to Average
Net Assets Before
Ratio to Expenses Waived
Average Net Assets+ or Assumed
Net Assets -------------------------- -------------------------
End of Net Net Portfolio
Period (in Investment Investment Turnover
Total Return**(%) thousands) Expenses(%) Income(%) Expenses(%) Income(%) Rate(%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

BLUE CHIP FUND
5/17/90* to 12/31/90 (6.02)(a) $313 -- 2.74(a) 4.67(a) (1.93)(a) 21
1991 . . . . . . . . 27.65 677 .03 2.58 3.72 (1.11) 31
1992 . . . . . . . . 4.13 786 .41 1.95 2.55 (.19) 50
1993 . . . . . . . . 8.13 956 .50 1.63 2.30 (.17) 47
1994 . . . . . . . . (1.21) 1,041 .50 1.82 2.54 (.22) 89

HIGH YIELD FUND
3/24/87* to 12/31/87 (5.55)(a) 1,156 -- 7.06(a) 1.78(a) 5.27(a) 27
1988 . . . . . . . . 21.31 9,205 -- 13.63 2.14 11.49 56
1989 . . . . . . . . (1.11) 20,335 -- 13.61 1.82 11.79 36
1990 . . . . . . . . (12.51) 11,683 .31 13.71 1.94 12.08 44
1991 . . . . . . . . 35.38 11,071 .95 12.22 2.17 11.00 40
1992 . . . . . . . . 16.89 10,491 1.29 10.72 2.10 9.90 83
1993 . . . . . . . . 17.04 14,231 1.34 9.49 1.95 8.88 89
1994 . . . . . . . . (2.32) 15,142 1.33 9.45 1.88 8.90 53

INSURED TAX
EXEMPT FUND
7/26/90* to 12/31/90 8.00(a) 653 .09(a) 4.41(a) 1.70(a) 2.79(a) 0
1991 . . . . . . . . 13.20 4,369 .12 6.23 2.41 3.94 112
1992 . . . . . . . . 11.03 5,875 .47 5.88 1.89 4.47 131
1993 . . . . . . . . 15.74 9,447 .50 5.29 1.68 4.11 97
1994 . . . . . . . . (3.95) 10,363 .50 5.39 1.80 4.09 215

</TABLE>

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

BLUE CHIP FUND

BLUE CHIP FUND seeks to provide investors with high total investment return
consistent with the preservation of capital. The Series seeks to achieve its
objective by investing, under normal market conditions, at least 65% of its
total assets in securities of "Blue Chip" companies, including common and
preferred stocks and securities convertible into common stock, that the Adviser
believes have potential earnings growth that is greater than the average company
included in the Standard & Poor's 500 Composite Stock Price Index ("S&P 500").
The Series also may invest up to 35% of its total assets in the equity
securities of non-Blue Chip companies that the Adviser believes have significant
potential for growth of capital or future income consistent with the
preservation of capital. When market conditions warrant, or when the Adviser
believes it is necessary to achieve the Series' objective, the Series may invest
up to 25% of its total assets in fixed income securities.

The Series defines Blue Chip companies as those companies that have a
market capitalization of at least $300 million, are dividend paying and are
included in the S&P 500. Market capitalization is the total market value of a
company's outstanding common stock. Blue Chip companies are considered to be of
relatively high quality and generally exhibit superior fundamental
characteristics, which may include: potential for consistent earnings growth, a
history of profitability and payment of dividends, leadership position in their
industries and markets, proprietary products or services, experienced
management, high return on equity and a strong balance sheet. Blue Chip
companies usually exhibit less investment risk and share price volatility than
smaller, less established companies. Examples of Blue Chip companies are
American Telephone & Telegraph, General Electric, Pepsico Inc. and Bristol-Myers
Squibb.

The fixed income securities in which the Series may invest include money
market instruments (including prime commercial paper, certificates of deposit of
domestic branches of U.S. banks and bankers' acceptances), obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Obligations"), including mortgage-related
securities, and corporate debt securities. However, no more than 5% of the
Series' total assets may be invested in corporate debt securities rated below
Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group ("S&P"). The Series may borrow money for temporary or emergency
purposes in amounts not exceeding 5% of its total assets. The Series may also
invest up to 5% of its net assets in American Depository Receipts ("ADRs"),
enter into repurchase agreements and make loans of portfolio securities. See
"Description of Certain Securities, Other Investment Policies and Risk Factors"
and the SAI for additional information concerning these securities.

HIGH YIELD FUND

HIGH YIELD FUND primarily seeks high current income and secondarily seeks
capital appreciation by investing, under normal market conditions, at least 65%
of its total assets in high risk, high yield securities, commonly referred to as
"junk bonds" ("High Yield Securities"). High Yield Securities include the
following instruments: fixed, variable or floating rate debt obligations
(including bonds, debentures and notes) which are rated below Baa by Moody's or
below BBB by S&P, or are unrated and deemed to be of comparable quality by the
Adviser; preferred stocks and dividend-paying common stocks that have yields
comparable to those of high yielding debt securities;

<PAGE>

any of the foregoing securities of companies that are financially troubled, in
default or undergoing bankruptcy or reorganization ("Deep Discount Securities");
and any securities convertible into any of the foregoing. The Series actively
seeks to achieve its secondary objective of capital appreciation to the extent
consistent with its primary objective. See "High Yield Securities--Risk
Factors" and "Deep Discount Securities."

The Series may invest up to 5% of its total assets in debt securities
issued by foreign governments and companies located outside the United States
and denominated in foreign currency. The Series also may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets,
make loans of portfolio securities, invest in restricted securities and zero
coupon and pay-in-kind securities. In order to attempt to hedge against changes
in interest rates, the Series may engage in short sales "against the box" and
transactions involving interest rate futures contracts. See the SAI for more
information concerning these securities.

The Series may invest up to 35% of its total assets in the following
instruments: common and preferred stocks, other than those considered to be
High Yield Securities; debt obligations of all types (including bonds,
debentures and notes) rated A or better by Moody's or S&P; U.S. Government
Obligations; warrants and money market instruments consisting of prime
commercial paper, certificates of deposit of domestic branches of U.S. banks,
bankers' acceptances and repurchase agreements.

In any period of market weakness or of uncertain market or economic
conditions, the Series may establish a temporary defensive position to preserve
capital by having all or part of its assets invested in high grade debt
securities (rated A or better by recognized rating services) or U.S. Government
Obligations.

The medium- to lower-rated and unrated securities deemed to be of
comparable quality by the Adviser in which the Series invests tend to offer
higher yields than higher-rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not be as
strong as that of other issuers. Debt obligations rated lower than A by Moody's
or S&P tend to have speculative characteristics or are speculative, and
generally involve more risk of loss of principal and income than higher-rated
securities. Also, their yields and market values tend to fluctuate more than
higher quality securities. The greater risks and fluctuations in yield and
value occur because investors generally perceive issuers of lower-rated and
unrated securities deemed to be of comparable quality by the Adviser to be less
creditworthy. These risks cannot be eliminated, but may be reduced by
diversifying holdings to minimize the portfolio impact of any single investment.
In addition, fluctuations in market value do not affect the cash income from the
securities, but are reflected in the Series' net asset value. When interest
rates rise, the net asset value of the Series tends to decrease. When interest
rates decline, the net asset value of the Series tends to increase.

Variable or floating rate debt obligations in which the Series may invest
periodically adjust their interest rates to reflect changing economic
conditions. Thus, changing economic conditions specified by the terms of the
security would serve to change the interest rate and the return offered to the
investor. This reduces the effect of changing market conditions on the
security's underlying market value.

<PAGE>

A High Yield Security may itself be convertible into or exchangeable for
equity securities, or may carry with it the right to acquire equity securities
evidenced by warrants attached to the security or acquired as part of a unit
with the security. Although the Series invests primarily in High Yield
Securities, securities received upon conversion or exercise of warrants and
securities remaining upon the break-up of units or detachment of warrants may be
retained to permit orderly disposition, to establish a long-term holding basis
for Federal income tax purposes or to seek capital appreciation.

Because of the greater number of investment considerations involved in
investing in High Yield Securities, the achievement of the Series' investment
objectives depends more on the Adviser's research abilities than would be the
case if the Series were investing primarily in securities in the higher rated
categories. Because medium- to lower-rated securities generally involve greater
risks of loss of income and principal than higher-rated securities, investors
should consider carefully the relative risks associated with investments in
securities that carry medium to lower ratings or, if unrated, deemed to be of
comparable quality by the Adviser. See "High Yield Securities--Risk Factors"
and Appendix A for a description of corporate bond ratings.

The dollar weighted average of credit ratings of all bonds held by the
Series during the fiscal year ended December 31, 1994, computed on a monthly
basis, is set forth below. This information reflects the average composition of
the Series' assets during the 1994 fiscal year and is not necessarily
representative of the Series as of the end of its 1994 fiscal year, the current
fiscal year or at any other time in the future.

COMPARABLE QUALITY
OF UNRATED SECURITIES
RATED BY MOODY'S TO BONDS RATED BY MOODY'S
---------------- -------------------------
Baa 0.27% 0%
Ba 9.12 2.04
B 73.27 3.69
Caa 5.28 0
Ca 0.17 0
----- ----
TOTAL 88.11% 5.73%

INSURED TAX EXEMPT FUND

INSURED TAX EXEMPT FUND seeks to provide a high level of interest income
which is exempt from Federal income tax and, for non-corporate shareholders, the
Federal alternative minimum tax. The Series seeks to achieve its objective by
investing at least 80% of its total assets in municipal bonds 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 and,
for non-corporate shareholders, the Federal alternative minimum tax. The Series
also may invest up to 20% of it total assets in certificates of participation
("COPs"), municipal notes, municipal commercial paper and variable rate demand
instruments ("VRDIs"). See "Municipal Instruments."

The Series may purchase securities on a "when-issued" basis, make loans of
portfolio securities and invest in zero coupon municipal securities. The Series
also may invest 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. The 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

<PAGE>

obligations or an index (commonly referred to as inverse floaters) and may
acquire detachable call options relating to municipal bonds. The 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 the Series generally invests in municipal bonds rated Baa or
higher by Moody's or BBB or higher by S&P, the Series may invest up to 5% of its
net assets in lower rated municipal bonds or in unrated municipal bonds deemed
to be of comparable quality by the Adviser. See "Debt Securities--Risk
Factors." 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 the Series. A
description of municipal bond ratings is contained in Appendix A.

For temporary defensive purposes, the Series may invest up to 20% of its
assets in high quality fixed income obligations or money market funds, the
interest on which is subject to Federal income taxes. Investments in money
market funds involve an additional management fee imposed by the money market
fund.

The Series may invest more than 25% of its total assets in a particular
segment of the 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 the
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 the Series' investments could increase market risks, but risk
of non-payment of interest when due, or default in the payment of principal, are
covered by the insurance feature.

GENERAL. 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 Series will achieve its investment objective.

DESCRIPTION OF CERTAIN SECURITIES, OTHER INVESTMENT POLICIES AND RISK FACTORS

CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or
dividends paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than common
stocks, but lower yields than comparable non-convertible securities, (2) are
less subject to fluctuation in value than the underlying stock because they have
fixed income characteristics, and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases. See
the SAI for more information on convertible securities.

<PAGE>

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 the 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. In addition, the market value of debt securities is influenced by
perceptions of the credit risks associated with such securities. See Appendix A
for a description of corporate bond ratings.

DEEP DISCOUNT SECURITIES. HIGH YIELD FUND may invest up to 15% of its
total assets in securities of companies that are financially troubled, in
default or undergoing bankruptcy or reorganization. Such securities are usually
available at a deep discount from the face value of the instrument. The Series
will invest in Deep Discount Securities when the Adviser believes that there
exist factors that are likely to restore the company to a healthy financial
condition. Such factors include a restructuring of debt, management changes,
existence of adequate assets or other unusual circumstances. Debt instruments
purchased at deep discounts may pay very high effective yields. In addition, if
the financial condition of the issuer improves, the underlying value of the
security may increase, resulting in a capital gain. If the company defaults on
its obligations or remains in default, or if the plan of reorganization is
insufficient for debtholders, the Deep Discount Securities may stop paying
interest and lose value or become worthless. The Adviser will balance the
benefits of Deep Discount Securities with their risks. While a diversified
portfolio may reduce the overall impact of a Deep Discount Security that is in
default or loses its value, the risk cannot be eliminated. See "High Yield
Securities--Risk Factors."

HIGH YIELD SECURITIES--RISK FACTORS. High Yield Securities are subject to
certain risks that may not be present with investments in higher grade
securities.

EFFECT OF INTEREST RATE AND ECONOMIC CHANGES. Debt obligations rated
lower than Baa by Moody's or BBB by S&P, commonly referred to as "junk bonds"
are speculative and generally involve a higher risk or loss of principal and
income than higher-rated securities ("High Yield Securities"). The prices of
High Yield Securities tend to be less sensitive to interest rate changes than
higher-rated investments, but may be more sensitive to adverse economic changes
or individual corporate developments. Periods of economic uncertainty and
changes generally result in increased volatility in the market prices and yields
of High Yield Securities and thus in a Fund's net asset value. A strong
economic downturn or a substantial period of rising interest rates could
severely affect the market for High Yield Securities. In these circumstances,
highly leveraged companies might have greater difficulty in making principal and
interest payments, meeting projected business goals, and obtaining additional
financing. Thus, there could be a higher incidence of default. This would
affect the value of such securities and thus a Fund's net asset value. Further,
if the issuer of a security owned by a Fund defaults, that Fund might incur
additional expenses to seek recovery.

Generally, when interest rates rise, the value of fixed rate debt
obligations, including High Yield Securities, tends to decrease; when interest
rates fall, the value of fixed rate debt obligations tends to increase. If an
issuer of a High Yield Security containing a redemption or call provision
exercises either provision in a declining interest rate market, a Series would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if a Series experiences unexpected net redemptions in
a rising interest rate market, it might be forced to sell

<PAGE>

certain securities, regardless of investment merit. This could result in
decreasing the assets to which Series expenses could be allocated and in a
reduced rate of return for that Series. While it is impossible to protect
entirely against this risk, diversification of a Series' portfolio and the
Adviser's careful analysis of prospective portfolio securities should minimize
the impact of a decrease in value of a particular security or group of
securities in a Series' portfolio.

THE HIGH YIELD SECURITIES MARKET. The market for below investment
grade bonds expanded rapidly in the 1980's, and its growth paralleled a long
economic expansion. During that period, the yields on below investment grade
bonds rose dramatically. Such higher yields did not reflect the value of the
income stream that holders of such bonds expected, but rather the risk that
holders of such bonds could lose a substantial portion of their value as a
result of the issuers' financial restructuring or default. In fact, from 1989
to 1991 during a period of economic recession, the percentage of lower quality
securities that defaulted rose significantly, although the default rate
decreased in subsequent years. There can be no assurance that such declines in
the below investment grade market will not reoccur. The market for below
investment grade bonds generally is thinner and less active than that for higher
quality bonds, which may limit a Fund's ability to sell such securities at fair
value in response to changes in the economy or the financial markets. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower rated securities,
especially in a thinly traded market.

CREDIT RATINGS. The credit ratings issued by credit rating services
may not fully reflect the true risks of an investment. For example, credit
ratings typically evaluate the safety of principal and interest payments, not
market value risk, of High Yield Securities. Also, credit rating agencies may
fail to change on a timely basis a credit rating to reflect changes in economic
or company conditions that affect a security's market value. Although the
Adviser considers ratings of recognized rating services such as Moody's and S&P,
the Adviser primarily relies on its own credit analysis, which includes a study
of existing debt, capital structure, ability to service debt and to pay
dividends, the issuer's sensitivity to economic conditions, its operating
history and the current trend of earnings. HIGH YIELD FUND may invest in
securities rated D by S&P or C by Moody's or, if unrated, deemed to be of
comparable quality by the Adviser. Debt obligations with these ratings either
have defaulted or in great danger of defaulting and are considered to be highly
speculative. See "Deep Discount Securities." The Adviser continually monitors
the investments in a Series' portfolio and carefully evaluates whether to
dispose of or retain High Yield Securities whose credit ratings have changed.
See Appendix A for a description of corporate bond ratings.

LIQUIDITY AND VALUATION. Lower-rated bonds are typically traded among
a smaller number of broker-dealers than in a broad secondary market. Purchasers
of High Yield Securities tend to be institutions, rather than individuals, which
is a factor that further limits the secondary market. To the extent that no
established retail secondary market exists, many High Yield Securities may not
be as liquid as higher-grade bonds. A less active and thinner market for High
Yield Securities than that available for higher quality securities may result in
more volatile valuations of a Series' holdings and more difficulty in executing
trades at favorable prices during unsettled market conditions.

The ability of a Series to value or sell High Yield Securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. During such periods, there may be less reliable objective information
available and thus the responsibility of the Fund's Board of Trustees to value
High Yield Securities becomes more difficult, with judgment playing a greater
role. Further,

<PAGE>

adverse publicity about the economy or a particular issuer may adversely affect
the public's perception of the value, and thus liquidity, of a High Yield
Security, whether or not such perceptions are based on a fundamental analysis.

LEGISLATION. Provisions of the Revenue Reconciliation Act of 1989
limit a corporate issuer's deduction for a portion of the original issue
discount on "high yield discount" obligations (including certain pay-in-kind
securities). This limitation could have a materially adverse impact on the
market for certain High Yield Securities. From time to time, legislators and
regulators have proposed other legislation that would limit the use of high
yield debt securities in leveraged buyouts, mergers and acquisitions. It is not
certain whether such proposals, which also could adversely affect High Yield
Securities, will be enacted into law.

INSURANCE-INSURED TAX EXEMPT FUND. All municipal bonds in the INSURED TAX
EXEMPT FUND's 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 the Fund, on behalf of the Series, from an
independent insurance company; (2) under an insurance policy obtained subsequent
to a 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 Series' portfolio 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 the
Series. Investors should note that while all municipal bonds in which the
Series will invest will be insured, the Series may invest up to 20% of its total
assets in portfolio securities not covered by the insurance feature. The 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, the 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 the Series, its yield is reduced by this expense. See
"Insurance" in the SAI for a detailed discussion of the insurance feature.

INVERSE FLOATERS. INSURED TAX EXEMPT FUND may invest in securities on
which the rate of interest varies inversely with interest rates on similar
securities or the value of an index. For example, an inverse floating rate
security may pay interest at a rate that increases as a specified interest rate
index decreases but decreases as that index increases. The secondary market for
inverse floaters may be limited. The market value of such securities generally
is more volatile than that of a fixed rate obligation and, like most debt
obligations, will vary inversely with changes in interest rates. The interest
rates on inverse floaters may be significantly reduced, even to zero, if
interest rates rise. INSURED TAX EXEMPT FUND may invest up to 10% of its net
assets in inverse floaters.

MONEY MARKET INSTRUMENTS. Investments in commercial paper are limited to
obligations rated Prime-1 by Moody's or A-1 by S&P. Commercial paper includes
notes, drafts, or similar instruments payable on demand or having a maturity at
the time of issuance not exceeding nine months, exclusive of days of grace or
any renewal thereof. Investments in certificates of deposit will

<PAGE>

be made only with domestic institutions with assets in excess of $500 million.
See the SAI for more information regarding money market instruments and Appendix
A to the SAI for a description of commercial paper ratings.

MUNICIPAL INSTRUMENTS-INSURED TAX EXEMPT FUND. As used in this Prospectus
and in the SAI, "Municipal Instruments" include the following: (1) municipal
bonds; (2) COPs, (3) municipal notes; (4) municipal commercial paper; and (5)
VRDIs. Generally, the value of Municipal Instruments varies inversely with
changes in interest rates.

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.
Generally, the value of municipal bonds varies inversely to changes in interest
rates. See Appendix A for a description of municipal bond ratings.

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. The possibility that a municipality will not
appropriate funds for lease payments is a risk of investing in COPs, although
this risk is mitigated by the fact that each COP will be covered by the
insurance feature. See "Certificates of Participation" in the SAI for further
information on COPs.

MUNICIPAL COMMERCIAL PAPER. Issues of municipal commercial paper
which the 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 A to the SAI.

MUNICIPAL NOTES. Municipal notes which the Series may purchase will
be principally tax anticipation notes, bond anticipation notes, revenue
anticipation notes and project notes. The

<PAGE>

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 the Series may purchase will be selected if it meets criteria
established and designed by the Fund's Board of Trustees to minimize risk to the
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.

PORTFOLIO TURNOVER. The relatively small size of INSURED TAX EXEMPT FUND
allowed active management of the portfolio. In particular, the Series routinely
took advantage of trading opportunities created by pricing inefficiencies in the
municipal bond market. This resulted in a portfolio turnover rate of 215% for
the fiscal year ending December 31, 1994 for the Series as opposed to 97% for
the prior fiscal year. A high rate of portfolio turnover generally leads to
transaction costs and may result in a greater number of taxable transactions.
See "Allocation of Portfolio Brokerage" in the SAI. See the SAI for the other
Series' portfolio turnover rate and for more information on portfolio turnover.

PREFERRED STOCK. A preferred stock is a blend of the characteristics of a
bond and common stock. It can offer the higher yield of a bond and has priority
over common stock in equity ownership, but does not have the seniority of a bond
and, unlike common stock, its participation in the issuer's growth may be
limited. Preferred stock has preference over common stock in the receipt of
dividends and in any residual assets after payment to creditors should the
issuer be dissolved. Although the dividend is set at a fixed annual rate, in
some circumstances it can be changed or omitted by the issuer.

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 the Board of
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. INSURED TAX EXEMPT FUND 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. The
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. The Series may invest in highly liquid taxable
obligations in order to avoid the necessity of liquidating portfolio investments
to meet redemptions by Series investors. The Series' temporary investments in
taxable securities may consist of: (1) U.S. Government Obligations; (2) other
debt securities rated within the highest grade of S&P or Moody's; (3) commercial
paper

<PAGE>

rated in the highest grade by either of such rating services; (4) certificates
of deposit and letters of credit; and (5) money market funds. 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.

ZERO COUPON AND PAY-IN-KIND SECURITIES. Zero coupon securities are debt
obligations that do not entitle the holder to any periodic payment of interest
prior to maturity or a specified date when the securities begin paying current
interest. They are issued and traded at a discount from their face amount or
par value, which discount varies depending on the time remaining until cash
payments begin, prevailing interest rates, liquidity of the security and the
perceived credit quality of the issuer. Pay-in-kind securities are those that
pay interest through the issuance of additional securities. The market prices
of zero coupon and pay-in-kind securities generally are more volatile than the
prices of securities that pay interest periodically and in cash and are likely
to respond to changes in interest rates to a greater degree than do other types
of debt securities having similar maturities and credit quality. Original issue
discount earned on zero coupon securities and the "interest" on pay-in-kind
securities must be included in a Series' income. Thus, to continue to qualify
for tax treatment as a regulated investment company and to avoid a certain
excise tax on undistributed income, a Series may be required to distribute as a
dividend an amount that is greater than the total amount of cash it actually
receives. See "Taxes" in the SAI. These distributions must be made from a
Series' cash assets or, if necessary, from the proceeds of sales of portfolio
securities. HIGH YIELD FUND and INSURED TAX EXEMPT FUND will not be able to
purchase additional income-producing securities with cash used to make such
distributions, and their current income ultimately could be reduced as a result.

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 "EIC" received in EIC'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. 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 EIC 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 EIC 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 EIC. 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.

<PAGE>

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 through
a full exchange of Class A shares of another "Eligible Fund," as defined below.
Accounts opened through an exchange of Class A 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.
You may open a Series account with $250 for individual retirement accounts
("IRAs") or, at the Series' discretion, a lesser amount for Simplified Employee
Pension Plans ("SEPs"), salary reduction SEPs ("SARSEPs") and qualified or other
retirement plans. 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 EIC, directly to Executive 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.

ELIGIBLE FUNDS. Class A shares of each Series are eligible to participate
in certain shareholder privileges noted in this Prospectus and the SAI,
including the cross-investment or exchange of Series shares at net asset value,
PROVIDED such shares have either (a) been acquired through an exchange from an
Eligible Fund (as defined herein) which imposes a maximum sales charge of 6.25%,
or (b) been held for at least one year from their date of purchase (singularly,
"Eligible Fund" and, collectively "Eligible Funds"). Shares of all the funds
and/or series in the First Investors family of funds, except for First Investors
Special Bond Fund, Inc., First Investors Life Series Fund and First Investors
U.S. Government Plus Fund, are deemed to be Eligible Funds. Shares of the Money
Market Funds, unless otherwise noted, are not deemed to be Eligible Funds.

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

<PAGE>

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 shares
of a Series at net asset value all the cash distributions from Class A shares of
another Eligible Fund. You may also elect to invest cash distributions of a
Series' shares into Class A shares of another Eligible Fund, including the Money
Market Funds. See "Dividends and Other 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 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.
You may also elect to invest Systematic Withdrawal Plan payments of shares from
a Series into Class A shares 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.

SALES CHARGE. 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:

SALES CHARGE AS % OF
---------------------- CONCESSION TO
OFFERING NET AMOUNT DEALERS AS % OF
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------- -------- ---------- ---------------

Less than $100,000 . . . . . . . 4.75% 4.99% 4.27%
$100,000 but under $250,000. . . 3.90 4.06 3.51
$250,000 but under $500,000. . . 2.90 2.99 2.61
$500,000 but under $1,000,000. . 2.40 2.46 2.16

There is no sales charge on transactions of $1 million or more, including
transactions subject to the Cumulative Purchase Privilege or a Letter of Intent.
The Underwriter will pay from its own resources a sales commission to FIC
Representatives and a concession equal to 0.90% of the amount invested to
Dealers on such purchases. If shares are purchased on or after the date of this
Prospectus and are redeemed within 24 months of purchase (this holding period is
18 months for shares purchased prior to the date of this Prospectus), a
contingent deferred sales charge ("CDSC") of 1.00% will be deducted from the
redemption proceeds. The CDSC will not be imposed on (1) the redemption of
shares acquired through the reinvestment of 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 of purchase price). In determining whether a CDSC is payable on any
redemption, it will be assumed that the redemption is made first of any shares
acquired as dividends or distributions, and next of shares that have been held
for a sufficient period of time such that the CDSC no longer is applicable to
such shares. This will result in your paying the lowest possible CDSC.

WAIVERS OF SALES CHARGES. Sales charges do not apply to: (1) any purchase
by an officer, director, trustee or full-time employee (who has completed the
introductory period) of the 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 the Fund, the
Underwriter, the Adviser, or their affiliates,

<PAGE>

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.

The sales charge will be waived on any purchase of shares by a participant
in a Qualified Plan account, as defined under "Retirement Plans," if the
purchase is made with the proceeds from a redemption of shares of a fund in
another fund group on which either an initial sales charge or a CDSC has been
paid.

CUMULATIVE PURCHASE PRIVILEGE AND LETTERS OF INTENT. You may purchase
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, 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 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.

RETIREMENT PLANS. You may invest in shares of BLUE CHIP FUND or HIGH YIELD
FUND through a 401(k) plan, profit sharing or money purchase plan. In addition,
any of such plans which are participant-directed (each, a "Qualified Plan") are
entitled to a reduced sales charge based upon the number of employees who are
eligible to participate, as follows:

SALES CHARGE AS % OF
---------------------- CONCESSION TO
NUMBER OF OFFERING NET AMOUNT DEALERS AS % OF
ELIGIBLE EMPLOYEES PRICE INVESTED OFFERING PRICE
- -------------------- -------- ---------- ---------------

99 or less . . . . . . . . . . . 3.00% 3.09% 2.55%
100 or more. . . . . . . . . . . 1.00% 1.01% 0.85%

The reduced sales charge will be available regardless of whether the
account is registered with the Transfer Agent in the name of the individual
participant or the sponsoring employer or plan trustee. A Qualified Plan
account will be subject to the lower of the sales charge for Qualified Plans or
the sales charge for the purchase of Series shares (see page 17).

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 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 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). SHARES OF A SERIES MAY BE EXCHANGED ONLY FOR CLASS A SHARES OF ANOTHER
FUND. Exchanges can only be made into accounts

<PAGE>

registered to identical owners. If your exchange is into a new account, it must
meet the minimum investment and other requirements of the fund into which the
exchange is being made. Additionally, the fund 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 you
should read the Prospectus of the fund into which the exchange is to be made.
You may obtain Prospectuses and information with respect to which funds qualify
for the exchange privilege free of charge by calling Shareholder Services at 1-
800-423-4026. Exchange requests may be made 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
state: (1) 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) the exchange request 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 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; redemption requests received after that time

<PAGE>

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.

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, other than
institutions on behalf of the shareholder, (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 request or an
exchange to a Money Market Fund of $50,000 or more.

REDEMPTIONS BY TELEPHONE. See "Telephone Transactions" for instructions on
making redemptions by telephone.

SYSTEMATIC WITHDRAWAL PLAN. If you own noncertificated 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 Class A shares of any other
Eligible Fund, including the Money Market Funds. 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 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 Series or Class A shares of any
other Eligible Fund (including the Money Market Funds), at net asset value, on
the date the Transfer Agent receives your purchase request. 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 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 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.

<PAGE>

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 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 so as to increase your account balance to the
required minimum. 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

Provided you have selected telephone privileges on your account
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. 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).
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. Telephone exchanges to Money Market Funds
are not available if your address of record has changed within 60 days prior to
the exchange request.

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. Retirement plan accounts are
not eligible for the telephone redemption option. For joint accounts, telephone
redemption instructions will be accepted from any one owner.

ADDITIONAL INFORMATION. The Fund, 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. If the Fund, 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'

<PAGE>

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 TRUSTEES. The Fund's Board of Trustees, as part of its overall
management responsibility, oversees various organizations responsible for that
Series' day-to-day management.

ADVISER. Executive 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
Delaware corporation located at 95 Wall Street, New York, NY 10005. First
Investors Consolidated Corporation ("FICC") owns all of the voting common stock
of the Adviser and all of the outstanding stock of EIC 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, 1994, HIGH YIELD FUND paid 0.45% of its average daily net assets,
net of waiver, to the Adviser. The Adviser waived advisory fees of 1.00% of
average daily net assets accrued by each of BLUE CHIP FUND and INSURED TAX
EXEMPT FUND.

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, 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 MANAGERS. Patricia D. Poitra, Director of Equities has been
primarily responsible for the day-to-day management of the BLUE CHIP FUND since
October 1994. Ms. Poitra is assisted by a team of portfolio analysts. Ms.
Poitra also is responsible for the management of the Special Situation Series,
the Blue Chip Series and the small capitalization equity portion of the Total
Return Series, all series of First Investors Series Fund. In addition, Ms.
Poitra is responsible for the management of the Made In The U.S.A. Fund of First
Investors Series Fund II, Inc. and the Blue Chip Series and Discovery Series of
First Investors Life Series Fund. Ms. Poitra joined FIMCO in 1985 as a Senior
Equity Analyst.

Clark D. Wagner has been portfolio manager of INSURED TAX EXEMPT FUND 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.

<PAGE>

George V. Ganter has been Portfolio Manager for HIGH YIELD FUND since 1989.
Mr. Ganter joined FIMCO in 1985 as an Analyst. In 1986, he was made Portfolio
Manager for First Investors Special Bond Fund, Inc. and in 1989, he was made
Portfolio Manager for the High Yield Series of First Investors Life Series Fund
and First Investors High Yield Fund, Inc.

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.
Brokerage may be directed to brokers who provide research. See the SAI for more
information on allocation of portfolio brokerage.

UNDERWRITER. The Fund has entered into an Underwriting Agreement with
Executive 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' shares and may receive payments under a plan of
distribution. See "Distribution Plan."

REGULATORY MATTERS. In June 1992, FIC, an affiliate of the Fund's
underwriter, 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, an affiliate of the Fund's adviser, 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 trustee of the Fund, 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 suspensions from associating with
broker-dealers and in some cases other regulated entities in a supervisory
capacity.

DISTRIBUTION PLAN

Pursuant to an Amended and Restated Class A Distribution Plan (the "Plan"),
each Series is authorized to compensate the Underwriter for certain expenses
incurred in the distribution of that

<PAGE>

Series' shares ("distribution fees") and the servicing or maintenance of
existing Series shareholder accounts ("service fees"). Pursuant to the Plan,
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 the Plan, each Series is authorized to pay the Underwriter a
distribution fee at the annual rate of 0.25% that Series' average daily net
assets and a service fee of 0.25% of that Series' average daily net assets.
Payments made to the Underwriter under the Plan will represent compensation for
distribution and service activities, not reimbursement for specific expenses
incurred. Each Series will not carry over any fees under the Plan to the next
fiscal year. See "Distribution Plan" in the SAI for a full discussion of the
Plan.

DETERMINATION OF NET ASSET VALUE

The net asset value of shares 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 Fund's Board of
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 Fund's Board of 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 by
INSURED TAX EXEMPT FUND and HIGH YIELD FUND and quarterly by BLUE CHIP FUND.
Unless you direct the Transfer Agent otherwise, (a) dividends declared by HIGH
YIELD FUND and INSURED TAX EXEMPT FUND are paid in additional shares of the
distributing Series at the net asset value generally determined as of the close
of business on the first business day of the following month, and (b), dividends
declared by BLUE CHIP FUND are paid in additional shares of that 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 dividend. If you redeem all of
your shares of HIGH YIELD FUND or INSURED TAX EXEMPT FUND 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. Net investment
income includes interest and dividends, 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, and for HIGH
YIELD FUND, any net realized gains from foreign currency transactions. Unless
you direct the Transfer Agent otherwise, these distributions are paid in
additional shares 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

<PAGE>

distribution if necessary to avoid a Federal excise tax on certain undistributed
income and capital gain.

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 notifying
the Transfer Agent.

You may elect to invest the entire amount of any cash distribution on
Series' shares in Class A shares of any other 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 by a Series will be paid in
additional Series shares and not in cash if any of the following events occur:
(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

Each Series intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended ("Code"),
so that it will be relieved of Federal income tax on that part of its investment
company taxable income (consisting generally of net investment income, net
short-term capital gain and, for HIGH YIELD FUND, net gains from certain foreign
currency transactions) and net capital gain that is distributed to its
shareholders. In addition, INSURED TAX EXEMPT FUND intends to continue to
qualify to pay "exempt-interest dividends," 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.

Dividends from a Series' investment company taxable income are taxable to
you as ordinary income, to the extent of the Series' earnings and profits,
whether paid in cash or in additional Series shares. Distributions by INSURED
TAX EXEMPT FUND of the excess of interest income from Municipal Instruments over
certain amounts disallowed as deductions, which are designated by it as "exempt-
interest dividends," generally may be excluded by you from your gross income.
Distributions of a Series' net capital gain, when designated as such, are
taxable to you as long-term capital gain, whether paid in cash or in additional
Series shares, regardless of the length of time you have owned your shares. If
you purchase shares shortly before the record date for a dividend or other
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.

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

<PAGE>

shareholder) if a Series is not furnished with your correct taxpayer
identification number, and that percentage of such dividends and 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. An exchange of Series shares for shares of any Eligible Fund
generally will have similar tax consequences. However, special tax rules apply
when a shareholder (1) disposes of 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 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.

Interest on indebtedness incurred or continued to purchase or carry shares
of INSURED TAX EXEMPT FUND will not be deductible for Federal income tax
purposes to the extent that Series' distributions consist of exempt-interest
dividends. INSURED TAX EXEMPT FUND does do 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 INSURED TAX EXEMPT FUND and the value of its
portfolio securities would be affected. In that event, the Series would
reevaluate its investment objective and policies.

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, INSURED TAX
EXEMPT FUND's distributions may be wholly or partly taxable under state and/or
local laws. You therefore are urged to consult your own tax adviser.

PERFORMANCE INFORMATION

For purposes of advertising, each Series' performance may be calculated
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 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

<PAGE>

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.

HIGH YIELD FUND and INSURED TAX EXEMPT FUND also may advertise their yield.
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 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. Each Series may also advertise its "actual
distribution rate" for each class of shares. This is computed in the same
manner as yield except that actual income dividends declared per share during
the period in questions are substituted for net investment income per share. In
addition, each Series calculates its "actual distribution rate" based upon net
asset value for dissemination to existing shareholders.

INSURED TAX EXEMPT FUND also may advertise its tax-equivalent yield.
Tax-equivalent yields show the taxable yields an investor would have to earn to
equal the 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 the 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 Fund's Annual Report which may be obtained without charge by contacting
the Fund at 1-800-423-4026.

GENERAL INFORMATION

ORGANIZATION. The Fund is a Massachusetts business trust organized on
September 23, 1988. The Fund is authorized to issue an unlimited number of
shares of beneficial interest, no par value, in such separate and distinct
series and classes of shares as the Board of Trustees shall from time to time
establish. The shares of beneficial interest of the Fund are presently divided
into three separate and distinct series, each having one class, designated Class
A shares. The Fund does not hold annual shareholder meetings. If requested to
do so by the holders of at least 10% of the Fund's outstanding shares, the
Fund's Board of Trustees will call a special meeting of shareholders for any
purpose, including the removal of Trustees. Each share of each Series has equal
voting rights. Each share of a Series is entitled to participate equally in
dividends and other distributions and the proceeds of any liquidation.

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 EIMCO and EIC, 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. Ownership of shares of each Series is recorded
on a stock register by the Transfer Agent and

<PAGE>

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.

ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. It is the Fund's practice
to mail only one copy of its annual and semi-annual reports to any address at
which more than one shareholder with the same last name has indicated that mail
is to be delivered. Additional copies of the reports will be mailed if
requested in writing or by telephone by any shareholder. The Fund will ensure
that an additional copy of such reports are sent to any shareholder who
subsequently changes his or her mailing address.

APPENDIX A
DESCRIPTION OF CORPORATE AND MUNICIPAL BOND RATINGS

STANDARD & POOR'S RATINGS GROUP

The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.

The ratings are based, in varying degrees, on the following considerations:

1. Likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment
of principal in accordance with the terms of the obligation;

2. Nature of and provisions of the obligation;

3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights.

AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

<PAGE>

A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B, CCC, CC, C Debt rated "BB," "B," "CCC," "CC" and "C" is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation
and "C" the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.

BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

B Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.

CCC Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

CC The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.

C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

CI The rating "CI" is reserved for income bonds on which no interest is
being paid.

D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

<PAGE>

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
categories.

MOODY'S INVESTORS SERVICE, INC.

Aaa Bonds which are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat greater than the Aaa
securities.

A Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.

Baa Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa Bonds which are rated "Caa" are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

Ca Bonds which are rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C Bonds which are rated "C" are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

<PAGE>

Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

<PAGE>

TABLE OF CONTENTS
- ----------------------------------------------------------------

Fee Table. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Highlights . . . . . . . . . . . . . . . . . . . . 4
Investment Objectives and Policies . . . . . . . . . . . . . 6
How to Buy Shares. . . . . . . . . . . . . . . . . . . . . . 15
How to Exchange Shares . . . . . . . . . . . . . . . . . . . 18
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . 19
Telephone Transactions . . . . . . . . . . . . . . . . . . . 21
Management . . . . . . . . . . . . . . . . . . . . . . . . . 22
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . 23
Determination of Net Asset Value . . . . . . . . . . . . . . 24
Dividends and Other Distributions. . . . . . . . . . . . . . 24
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Performance Information. . . . . . . . . . . . . . . . . . . 26
General Information. . . . . . . . . . . . . . . . . . . . . 27
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . 28

INVESTMENT ADVISER CUSTODIAN
Executive Investors The Bank of New York
Management Company, Inc. 48 Wall Street
95 Wall Street New York, NY 10286
New York, NY 10005
TRANSFER AGENT
UNDERWRITER Administrative Data
Executive Investors Management Corp.
Corporation 10 Woodbridge Center Drive
95 Wall Street Woodbridge, NJ 07095-1198
New York, NY 10005
AUDITORS
LEGAL COUNSEL Tait, Weller & Baker
Kirkpatrick & Lockhart Two Penn Center Plaza
1800 M Street, N.W. Philadelphia, PA 19102-1707
Washington, D.C. 20036

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 THE FUND, EXECUTIVE 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.
<PAGE>

Executive Investor
Trust

- ------------------------------------

Blue Chip Fund
High Yield Fund
Insured Tax Exempt Fund

- ------------------------------------

Prospectus
- ------------------------------------

May 1, 1995

Vertical line from top to bottom in center of page about 1/2 inch in thickness.

The following language appears to the left of the above language in the printed
piece:

The words "BULK RATE U.S. POSTAGE PAID PERMIT NO. 7379" in a box to the right of
a circle containing the words "MAILED FROM ZIP CODE 11201" appears on the
righthand side.

The following language appears on the lefthand side:

EXECUTIVE INVESTORS TRUST
95 WALL STREET
NEW YORK, NY 10005

EITP001

<PAGE>
EXECUTIVE INVESTORS
TRUST
---------------------------------------------------------------

BLUE CHIP FUND
HIGH YIELD FUND
INSURED TAX EXEMPT FUND
-------------------------------------------------------------------------

PROSPECTUS
---------------------------------------------------------------
MAY 1, 1995
<PAGE>

EXECUTIVE INVESTORS TRUST
BLUE CHIP FUND
HIGH YIELD FUND
INSURED TAX EXEMPT FUND

95 Wall Street
New York, New York 10005 1-800-423-4026

STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1995

This is a Statement of Additional Information ("SAI") for Executive
Investors Trust ("Fund"), an open-end diversified management investment company.
The Fund offers three separate series, each of which has different investment
objectives and policies: BLUE CHIP FUND, HIGH YIELD FUND and INSURED TAX EXEMPT
FUND (collectively, "Series"). The investment objective of each Fund is as
follows:

BLUE CHIP FUND seeks to provide investors with high total investment return
consistent with the preservation of capital.

HIGH YIELD FUND primarily seeks high current income and secondarily seeks
capital appreciation.

INSURED TAX EXEMPT FUND seeks to provide a high level of interest income
which is exempt from Federal income taxes and, for non-corporate shareholders,
the Federal alternative minimum tax. Such income may be subject to state and
local taxes.

There can be no assurance that any Series will achieve its investment
objective.

This SAI is not a prospectus. It should be read in conjunction with the
Fund's Prospectus dated May 1, 1995 which may be obtained free of cost from the
Fund at the address or telephone number noted above.

TABLE OF CONTENTS PAGE

Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Hedging and Option Income Strategies . . . . . . . . . . . . . . . . . 10
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 16
Trustees and Officers. . . . . . . . . . . . . . . . . . . . . . . . . 23
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Underwriter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . 28
Allocation of Portfolio Brokerage. . . . . . . . . . . . . . . . . . . 29
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services . . . . . . . . . . . . . 30
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . 35
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . 40
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 44

<PAGE>

INVESTMENT POLICIES

AMERICAN DEPOSITORY RECEIPTS. ADRs are receipts typically issued by a U.S.
bank or trust company evidencing ownership of the underlying securities of
foreign issuers, and other forms of depository receipts for securities of
foreign issuers. Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities markets. Thus, these
securities are not denominated in the same currency as the securities into which
they may be converted. ADRs are considered to be foreign securities by each
Series and are treated as such for purposes of certain investment limitation
calculations.

BANKERS' ACCEPTANCES. Each Series may invest in bankers' acceptances.
Bankers' acceptances are short-term credit instruments used to finance
commercial transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or importer to obtain a stated amount of funds to pay for
specific merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
asset or it may be sold in the secondary market at the going rate of interest
for a specific maturity. Although maturities for acceptances can be as long as
270 days, most acceptances have maturities of six months or less.

BOND MARKET CONCENTRATION. INSURED TAX EXEMPT FUND may invest more than
25% of its total assets in a particular segment of the bond market, such as
hospital revenue bonds, housing agency bonds, industrial development bonds,
airport bonds and university dormitory bonds. Such concentration may occur in
periods when one or more of these segments offer higher yields and/or profit
potential. The Series has no fixed policy as to concentrating its investments
in a particular segment of the bond market, because bonds are selected for
investment based on appraisal of their individual value and income. This
possible concentration of the assets of the 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 the Series'
investments could increase market risks, but risk of non-payment of interest
when due, or default of principal, are covered by the insurance obtained by the
Fund. As of December 31, 1994, the Series had 28.1% of its assets invested in
general obligation bonds.

CERTIFICATES OF DEPOSIT. Each Series may invest in bank certificates of
deposit ("CDs") subject to the restrictions set forth in the Prospectus. The
Federal Deposit Insurance Corporation is an agency of the U.S. Government which
insures the deposits of certain banks and savings and loan associations up to
$100,000 per deposit. The interest on such deposits may not be insured if this
limit is exceeded. Current Federal regulations also permit such institutions to
issue insured negotiable CDs in amounts of $100,000 or more, without regard to
the interest rate ceilings on other deposits. To remain fully insured, these
investments currently must be limited to $100,000 per insured bank or savings
and loan association.

CERTIFICATES OF PARTICIPATION. The Fund's Board of Trustees has
established guidelines for determining the liquidity of the COPs in the Series'
portfolios and, subject to its review, 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

<PAGE>

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.

CONVERTIBLE SECURITIES. BLUE CHIP FUND and HIGH YIELD FUND may invest in
convertible securities. While no securities investment is without some risk,
investments in convertible securities generally entail less risk than the
issuer's common stock, although the extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells above
its value as a fixed income security. The Series' investment adviser, Executive
Investors Management Company, Inc. ("Adviser" or "EIMCO"), will decide to invest
based upon a fundamental analysis of the long-term attractiveness of the issuer
and the underlying common stock, the evaluation of the relative attractiveness
of the current price of the underlying common stock and the judgment of the
value of the convertible security relative to the common stock at current
prices.

DETACHABLE CALL OPTIONS. INSURED TAX EXEMPT FUND may invest in detachable
call options. Detachable call options are sold by issuers of municipal bonds
separately from the municipal bonds to which the call options relate and permit
the purchasers of the call options to acquire the municipal bonds at the call
prices and call dates. In the event that interest rates drop, the purchaser
could exercise the call option to acquire municipal bonds that yield above-
market rates. During the coming year, the Series expects to acquire detachable
call options relating to municipal bonds that it already owns or will acquire in
the immediate future and thereby, in effect, make such municipal bonds non-
callable so long as the Series continues to hold the detachable call option.
The Series will consider detachable call options to be illiquid securities and
they will be treated as such for purposes of certain investment limitation
calculations.

FOREIGN SECURITIES--RISK FACTORS. HIGH YIELD FUND may sell a security
denominated in a foreign currency and retain the proceeds in that foreign
currency to use at a future date (to purchase other securities denominated in
that currency) or the Fund may buy foreign currency outright to purchase
securities denominated in that foreign currency at a future date. Because HIGH
YIELD FUND does not intend to hedge its foreign investments against the risk of
foreign currency fluctuations, changes in the value of these currencies can
significantly affect the Fund's share price. In addition, the Fund will be
affected by changes in exchange control regulations and fluctuations in the
relative rates of exchange between the currencies of different nations, as well
as by economic and political developments. Other risks involved in foreign
securities include the following: there may be less publicly available
information about foreign companies comparable to the reports and ratings that
are published about companies in the United States; foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S. companies;
some foreign stock markets have substantially less volume than U.S. markets, and
securities of some foreign companies are less liquid and more volatile than
securities of comparable U.S. companies; there may be less government
supervision and regulation of foreign stock exchanges, brokers and listed
companies than exist in the United States; and there may be the possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments which could affect assets of the HIGH YIELD FUND held in
foreign countries.

INSURANCE-INSURED TAX EXEMPT FUND. The municipal bonds in INSURED TAX
EXEMPT FUND's portfolio will be insured as to their scheduled payments of
principal and interest at the time of purchase either (1) under a Mutual Fund
Insurance Policy written by an independent insurance company; (2) under an
insurance policy obtained subsequent to a municipal bond's original issue (a
"Secondary Market Insurance Policy"); or (3) under an insurance policy obtained
by the issuer or underwriter of such

<PAGE>

municipal bond at the time of original issuance (a "New Issue Insurance
Policy"). An insured municipal bond in the Series' portfolio 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.

The Fund, on behalf of INSURED TAX EXEMPT FUND, has purchased a Mutual Fund
Insurance Policy ("Policy") from AMBAC Indemnity Corporation ("AMBAC
Indemnity"), a Wisconsin stock insurance company, with its principal executive
offices in New York City. The Policy guarantees the payment of principal and
interest on municipal bonds purchased by the Series which are eligible for
insurance under the Policy. Municipal bonds are eligible for insurance if they
are approved by AMBAC Indemnity prior to their purchase by the Series. AMBAC
Indemnity furnished the Series with an approved list of municipal bonds at the
time the Policy was issued and subsequently provides amended and modified lists
of this type at periodic intervals. AMBAC Indemnity may withdraw particular
securities from the approved list and may limit the aggregate amount of each
issue or category of municipal bonds therein, in each case by notice to the
Series prior to the entry by the Series of an order to purchase a specific
amount of a particular security otherwise eligible for insurance under the
Policy. The approved list merely identifies issuers whose issues may be
eligible for insurance and does not constitute approval of, or a commitment by,
AMBAC Indemnity to insure such securities. In determining eligibility for
insurance, AMBAC Indemnity has applied its own standards which correspond
generally to the standard it normally uses in establishing the insurability of
new issues of municipal bonds and which are not necessarily the criteria which
would be used in regard to the purchase of municipal bonds by the Series. The
Policy does not insure: (1) obligations of, or securities guaranteed by, the
United States of America or any agency or instrumentality thereof; (2) municipal
bonds which were insured as to payment of principal and interest at the time of
their issuance; (3) municipal bonds purchased by a Series at a time when they
were ineligible for insurance; (4) municipal bonds which are insured by insurers
other than AMBAC Indemnity; and (5) municipal bonds which are no longer owned by
the Series. AMBAC Indemnity has reserved the right at any time, upon 90 days'
prior written notice to the Series, to refuse to insure any additional municipal
bonds purchased by the Series, on or after the effective date of such notice.
If AMBAC Indemnity so notifies the Series, the Series will attempt to replace
AMBAC Indemnity with another insurer. If another insurer cannot be found to
replace AMBAC Indemnity, the Series will ask its shareholders to approve
continuation of its business without insurance.

In the event of nonpayment of interest or principal when due, in respect of
an insured municipal bond, AMBAC Indemnity is obligated under the Policy to make
such payment not later than 30 days after it has been notified by the Series
that such nonpayment has occurred (but not earlier than the date such payment is
due). AMBAC Indemnity, as regards insurance payments it may make, will succeed
to the rights of the Series. Under the Policy, a payment of principal on an
insured municipal bond is due for payment when the stated maturity date has been
reached, which does not include any earlier due date by reason of redemption,
acceleration or other advancement of maturity or extension or delay in payment
by reason of governmental action.

The Policy does not guarantee the market value or yield of the insured
municipal bonds or the net asset value or yield of the Series' shares. The
Policy will be effective only as to insured municipal bonds owned by the Series.
In the event of a sale by the Series of a municipal bond insured under the
Policy, the insurance terminates as to such municipal bond on the date of sale.
If an insured municipal bond in default is sold by the Series, AMBAC Indemnity
is liable only for those payments of interest and principal which are then due
and owing and, after making such payments, AMBAC Indemnity will have no further
obligations to the Series in respect of such municipal bond. It is the
intention of the Series, however, to

<PAGE>

retain any insured securities which are in default or in significant risk of
default and to place a value on the defaulted securities equal to the value of
similar insured securities which are not in default. While a defaulted bond is
held by the Series, the Series continues to pay the insurance premium thereon
but also collects interest payments from the insurer and retains the right to
collect the full amount of principal from the insurer when the municipal bond
comes due. See "Determination of Net Asset Value" for a more complete
description of the Series' method of valuing securities in default and
securities which have a significant risk of default.

The Fund may purchase a Secondary Market Insurance Policy from an
independent insurance company having a claims-paying ability rated AAA by S&P
and Aaa by Moody's which insures a particular bond for the remainder of its term
at a premium rate fixed at the time such bond is purchased by the Series. It is
expected that these premiums will range from 1% to 5% of par value. Such
insurance coverage will be noncancellable and will continue in force so long as
such bond so insured is outstanding. The Series may also purchase municipal
bonds which are already insured under a Secondary Market Insurance Policy. A
Secondary Market Insurance Policy could enable the Series to sell a municipal
bond to a third party as an AAA/Aaa rated insured municipal bond at a market
price higher than what otherwise might be obtainable if the security were sold
without the insurance coverage. (Such rating is not automatic, however, and
must specifically be requested for each bond.) Any difference between the
excess of a bond's market value as an AAA/Aaa rated bond over its market value
without such rating and the single premium payment would inure to the Series in
determining the net capital gain or loss realized by the Series upon the sale of
the bond.

In addition to the contract of insurance relating to the Series, there is a
contract of insurance between AMBAC Indemnity and First Investors Multi-State
Insured Tax Free Fund, between AMBAC Indemnity and First Investors New York
Insured Tax Free Fund, Inc., between AMBAC Indemnity and First Investors Series
Fund and between AMBAC Indemnity and First Investors Insured Tax Exempt Fund,
Inc. Otherwise, neither AMBAC Indemnity nor its parent AMBAC Inc., or any
affiliate thereof, has any material business relationship, direct or indirect,
with the Fund.

AMBAC Indemnity is a Wisconsin-domiciled stock insurance corporation
regulated by the Office of the Commissioner of Insurance of the State of
Wisconsin and licensed to do business in 50 states and the District of Columbia,
with admitted assets of approximately $2,145,000,000 (unaudited) and statutory
capital of approximately $1,218,000,000 (unaudited) as of December 31, 1994.
Statutory capital consists of AMBAC Indemnity's policyholders' surplus and
statutory contingency reserve. AMBAC Indemnity is a wholly owned subsidiary of
AMBAC Inc., a 100% publicly held company. Moody's and S&P have both assigned a
triple-A claims-paying ability rating to AMBAC Indemnity.

Copies of AMBAC Indemnity's financial statements prepared in accordance
with statutory accounting standards are available from AMBAC Indemnity. The
address of AMBAC Indemnity's administrative offices and its telephone number are
One State Street Plaza, 17th Floor, New York, New York, 10004 and 1-212-668-
0340.

AMBAC Indemnity has obtained a ruling from the Internal Revenue Service to
the effect that the insuring of an obligation by AMBAC Indemnity will not affect
the treatment for Federal income tax purposes of interest on such obligation and
that insurance proceeds representing maturing interest paid by AMBAC Indemnity
under policy provisions substantially identical to those contained in its
municipal bond insurance policy shall be treated for Federal income tax purposes
in the same manner as if such payments were made by the issuer of the municipal
bonds.

<PAGE>

AMBAC Indemnity makes no representation regrading the municipal bonds
included in the investment portfolio of the Series or the advisability of
investing in such municipal bonds and makes no representation regarding, nor has
it participated in the preparation of, the Prospectus and this Statement of
Additional Information.

The information relating to AMBAC Indemnity contained above has been
furnished by AMBAC Indemnity. No representation is made herein as to the
accuracy or adequacy of such information, or as to the existence of any adverse
changes in such information, subsequent to the date hereof.

LOANS OF PORTFOLIO SECURITIES. Each Series may loan securities to
qualified broker-dealers or other institutional investors provided: the borrower
pledges to the Series and agrees to maintain at all times with the Series
collateral equal to not less than 100% of the value of the securities loaned
(plus accrued interest or dividend, if any); the loan is terminable at will by
the Series; the Series pays only reasonable custodian fees in connection with
the loan; and the Adviser monitors the creditworthiness of the borrower
throughout the life of the loan. Such loans may be terminated by the Series at
any time and the Series may vote the proxies if a material event affecting the
investment is to occur. The market risk applicable to any security loaned
remains a risk of the Series. The borrower must add to the collateral whenever
the market value of the securities rises above the level of such collateral.
The Series could incur a loss if the borrower should fail financially at a time
when the value of the loaned securities is greater than the collateral. BLUE
CHIP FUND and INSURED TAX EXEMPT FUND may make loans not in excess of 10% of
each Series' total assets. HIGH YIELD FUND may make loans, together with
illiquid securities, not in excess of 15% of its net assets.

MORTGAGE-RELATED SECURITIES. BLUE CHIP FUND may invest in mortgage-backed
securities, including those representing an undivided ownership interest in a
pool of mortgage loans. Each of the certificates described below is
characterized by monthly payments to the security holder, reflecting the monthly
payments made by the mortgagees of the underlying mortgage loans. The payments
to the security holders (such as the Series), like the payments on the
underlying loans, represent both principal and interest. Although the
underlying mortgage loans are for specified periods of time, such as twenty to
thirty years, the borrowers can, and typically do, repay them sooner. Thus, the
security holders frequently receive prepayments of principal, in addition to the
principal which is part of the regular monthly payments. A borrower is more
likely to prepay a mortgage which bears a relatively high rate of interest.
Thus, in times of declining interest rates, some higher yielding mortgages might
be repaid resulting in larger cash payments to the Series, and the Series will
be forced to accept lower interest rates when that cash is used to purchase
additional securities.

Interest rate fluctuations may significantly alter the average maturity of
mortgage-backed securities, due to the level of refinancing by homeowners. When
interest rates rise, prepayments often drop, which should increase the average
maturity of the mortgage-backed security. Conversely, when interest rates fall,
prepayments often rise, which should decrease the average maturity of the
mortgage-backed security.

GNMA CERTIFICATES. Government National Mortgage Association ("GNMA")
certificates ("GNMA Certificates") are mortgage-backed securities, which
evidence an undivided interest in a pool of mortgage loans. GNMA Certificates
differ from bonds in that principal is paid back monthly by the borrower over
the term of the loan rather than returned in a lump sum at maturity. GNMA
Certificates that the Fund purchases are the "modified pass-through" type.
"Modified pass-through" GNMA Certificates entitle the holder to receive a share
of all interest and principal payments paid and owed on

<PAGE>

the mortgage pool net of fees paid to the "issuer" and GNMA, regardless of
whether or not the mortgagor actually makes the payment.

GNMA GUARANTEE. The National Housing Act authorizes GNMA to guarantee
the timely payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or the Farmers'
Home Administration ("FMHA"), or guaranteed by the Department of Veteran Affairs
("VA"). The GNMA guarantee is backed by the full faith and credit of the U.S.
Government. GNMA also is empowered to borrow without limitation from the U.S.
Treasury if necessary to make any payments required under its guarantee.

LIFE OF GNMA CERTIFICATES. The average life of a GNMA Certificate is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of principal
investment long before maturity of the mortgages in the pool. The Series
normally will not distribute principal payments (whether regular or prepaid) to
its shareholders. Rather, it will invest such payments in additional mortgage-
related securities of the types described above. Interest received by the
Series will, however, be distributed to shareholders. Foreclosures impose no
risk to principal investment because of the GNMA guarantee. As prepayment rates
of the individual mortgage pools vary widely, it is not possible to predict
accurately the average life of a particular issue of GNMA Certificates.

YIELD CHARACTERISTICS OF GNMA CERTIFICATES. The coupon rate of
interest on GNMA Certificates is lower than the interest rate paid on the VA-
guaranteed or FHA-insured mortgages underlying the Certificates by the amount of
the fees paid to GNMA and the issuer. The coupon rate by itself, however, does
not indicate the yield which will be earned on GNMA Certificates. First,
Certificates may trade in the secondary market at a premium or discount.
Second, interest is earned monthly, rather than semi-annually as with
traditional bonds; monthly compounding raises the effective yield earned.
Finally, the actual yield of a GNMA Certificate is influenced by the prepayment
experience of the mortgage pool underlying it. For example, if the higher-
yielding mortgages from the pool are prepaid, the yield on the remaining pool
will be reduced.

FHLMC SECURITIES. The Federal Home Loan Mortgage Corporation
("FHLMC") issues two types of mortgage pass-through securities, mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro rata
share of all interest and principal payments made and owed on the underlying
pool.

FNMA SECURITIES. The Federal National Mortgage Association ("FNMA")
issues guaranteed mortgage pass-through certificates ("FNMA Certificates").
FNMA Certificates resemble GNMA Certificates in that each FNMA Certificate
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. FNMA guarantees timely payment of interest on FNMA
Certificates and the full return of principal.

Risk of foreclosure of the underlying mortgages is greater with FHLMC and
FNMA securities because, unlike GNMA Certificates, FHLMC and FNMA securities are
not guaranteed by the full faith and credit of the U.S. Government.

PORTFOLIO TURNOVER. Although each Series generally will not invest for
short-term trading purposes, portfolio securities may be sold from time to time
without regard to the length of time they have been held when, in the opinion of
the Adviser, investment considerations warrant such action. Portfolio

<PAGE>

turnover rate is calculated by dividing (1) the lesser of purchases or sales of
portfolio securities for the fiscal year by (2) the monthly average of the value
of portfolio securities owned during the fiscal year. A 100% turnover rate
would occur if all the securities in a Series' portfolio, with the exception of
securities whose maturities at the time of acquisition were one year or less,
were sold and either repurchased or replaced within one year. A high rate of
portfolio turnover generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Allocation of Portfolio
Brokerage."

For the fiscal years ended December 31, 1993 and 1994, BLUE CHIP FUND's
portfolio turnover rate was 47% and 89%, respectively, and HIGH YIELD FUND's
portfolio turnover rate was 89% and 53%, respectively. See the Prospectus for
INSURED TAX EXEMPT FUND's portfolio turnover rate.

REPURCHASE AGREEMENTS. Each Series may enter into repurchase agreements
with banks which are members of the Federal Reserve System or securities dealers
who are members of a national securities exchange or are market makers in
government securities. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will a Series invest in
repurchase agreements with more than one year in time to maturity. The
securities which are subject to repurchase agreements, however, may have
maturity dates in excess of one year from the effective date of the repurchase
agreement. Each Series will always receive, as collateral, securities whose
market value, including accrued interest, which will at all times be at least
equal to 100% of the dollar amount invested by the Series in each agreement, and
the Series will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian. If the seller
defaults, a Series might incur a loss if the value of the collateral securing
the repurchase agreement declines, and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy or
similar proceedings are commenced with respect to the seller of the security,
realization upon the collateral by a Series may be delayed or limited. No
Series may enter into a repurchase agreement with more than seven days to
maturity if, as a result, more than 15% of such Series' net assets would be
invested in such repurchase agreements and other illiquid investments.

RESTRICTED AND ILLIQUID SECURITIES. No Series will purchase or otherwise
acquire any security if, as a result, more than 15% of its net assets (taken at
current value) would be invested in securities that are illiquid by virtue of
the absence of a readily available market or legal or contractual restrictions
on resale. This policy includes foreign issuers' unlisted securities with a
limited trading market, repurchase agreements maturing in more than seven days
and detachable call options. This policy does not include restricted securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended ("1933 Act"), which the Board of Trustees or the Adviser has determined
under Board-approved guidelines are liquid. As a result of an undertaking to a
certain state securities commission, BLUE CHIP FUND will not invest more than
10% of its net assets in illiquid securities, including restricted securities
(excluding Rule 144A securities), and unseasoned issuers.

Restricted securities which are illiquid may be sold only in privately
negotiated transactions or in public offerings with respect to which a
registration statement is in effect under the 1933 Act. Such securities include
those that are subject to restrictions contained in the securities laws of other
countries. Securities that are freely marketable in the country where they are
principally traded, but would not be freely marketable in the United States,
will not be subject to this 15% limit. Where registration is required, a Series
may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the Series may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions
were to develop, a Series might obtain a less favorable price than prevailed
when it decided to sell.

<PAGE>

In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are either themselves exempt from registration or sold in
transactions not requiring registration. Institutional investors generally will
not seek to sell these instruments to the general public, but instead will often
depend on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.

Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by a Series, however, could affect adversely the marketability
of such portfolio securities and a Series might be unable to dispose of such
securities promptly or at reasonable prices.

SHORT SALES. Although it does not intend to do so in the foreseeable
future, HIGH YIELD FUND may borrow securities for cash sale to others. This
type of transaction is commonly known as a "short sale." The Series will engage
in short sales for hedging purposes only. The Series only may make short sales
"against the box," which occurs when the Series enters into a short sale with a
security identical to one it already owns or has the immediate or unconditional
right, at no cost, to obtain the identical security. The Series' investments in
short sales is limited to 10% of its total assets.

U.S. GOVERNMENT OBLIGATIONS. Securities issued or guaranteed as to
principal and interest by the U.S. Government include (1) U.S. Treasury
obligations which differ only in their interest rates, maturities and times of
issuance as follows: U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years) and U.S. Treasury bonds
(generally maturities of greater than ten years), and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are backed by
the full faith and credit of the United States, such as securities issued by the
Federal Housing Administration, Government National Mortgage Association, the
Department of Housing and Urban Development, the Export-Import Bank, the General
Services Administration and the Maritime Administration and certain securities
issued by the Farmers Home Administration and the Small Business Administration.
The range of maturities of U.S. Government Obligations is usually three months
to thirty years.

WARRANTS. HIGH YIELD FUND may purchase warrants, which are instruments
that permit the Series to acquire, by subscription, the capital stock of a
corporation at a set price, regardless of the market price for such stock.
Warrants may be either perpetual or of limited duration. There is greater risk
that warrants might drop in value at a faster rate than the underlying stock.
The Series' investments in warrants is limited to 5% of its total assets, of
which no more than 2% may not be listed on the New York or American Stock
Exchange.

WHEN-ISSUED SECURITIES. HIGH YIELD FUND and INSURED TAX EXEMPT FUND may
each invest up to 10% and 25%, respectively, of its net assets in securities
issued on a when-issued or delayed delivery basis at the time the purchase is
made. A Series generally would not pay for such securities or

<PAGE>

start earning interest on them until they are issued or received. However, when
a Series purchases debt obligations on a when-issued basis, it assumes the risks
of ownership, including the risk of price fluctuation, at the time of purchase,
not at the time of receipt. Failure of the issuer to deliver a security
purchased by a Series on a when-issued basis may result in that Series'
incurring a loss or missing an opportunity to make an alternative investment.
When a Series enters into a commitment to purchase securities on a when-issued
basis, it establishes a separate account with its custodian consisting of cash
or liquid high-grade debt securities equal to the amount of that Series'
commitment, which are valued at their fair market value. If on any day the
market value of this segregated account falls below the value of a Series'
commitment, that Series will be required to deposit additional cash or qualified
securities into the account until equal to the value of that Series' commitment.
When the securities to be purchased are issued, the Series will pay for the
securities from available cash, the sale of securities in the segregated
account, sales of other securities and, if necessary, from sale of the
when-issued securities themselves although this is not ordinarily expected.
Securities purchased on a when-issued basis are subject to the risk that yields
available in the market, when delivery takes place, may be higher than the rate
to be received on the securities a Series is committed to purchase. Sale of
securities in the segregated account or other securities owned by a Series and
when-issued securities may cause the realization of a capital gain or loss.

HEDGING AND OPTION INCOME STRATEGIES

The Adviser may engage in certain options and futures strategies to hedge
the Series' portfolios, in other circumstances permitted by the Commodities
Futures Trading Commission ("CFTC") and, for INSURED TAX EXEMPT FUND, engage in
certain options strategies to enhance income. The instruments described below
are sometimes referred to collectively as "Hedging Instruments." Certain
special characteristics of and risks associated with using Hedging Instruments
are discussed below. In addition to the non-fundamental investment guidelines
(described below) adopted by the Board of Trustees to govern each Series'
investments in Hedging Instruments, use of these instruments is subject to the
applicable regulations of the Securities and Exchange Commission ("SEC"), the
several options and futures exchanges upon which options and futures contracts
are traded, the CFTC and various state regulatory authorities. In addition, a
Series' ability to use Hedging Instruments will be limited by tax
considerations. See "Taxes."

Participation in the options or futures markets involves investment risks
and transaction costs to which a Series would not be subject absent the use of
these strategies. If the Adviser's prediction of movements in the direction of
the securities and interest rate markets are inaccurate, the adverse
consequences to the Series may leave the Series in a worse position than if such
strategies were not used. The Series might not employ any of the strategies
described below, and there can be no assurance that any strategy will succeed.
The use of these strategies involve certain special risks, including
(1) dependence on the Adviser's ability to predict correctly movements in the
direction of interest rates and securities prices, (2) imperfect correlation
between the price of options, futures contracts and options thereon and
movements in the prices of the securities being hedged, (3) the fact that skills
needed to use these strategies are different from those needed to select
portfolio securities, (4) the possible absence of a liquid secondary market for
any particular instrument at any time, and (5) the possible need to defer
closing out certain hedged positions to avoid adverse tax consequences.

BLUE CHIP FUND. Although it does not intend to engage in these strategies
in the coming year, BLUE CHIP FUND may attempt to hedge against changes in
market conditions by buying U.S. exchange-

<PAGE>

traded put and call options on stock indices and enter into closing transactions
with respect to such options.

HIGH YIELD FUND. Although it does not intend to engage in these strategies
in the coming year, HIGH YIELD FUND may buy and sell interest rate futures
contracts traded on a board of trade as a hedge against adverse changes in
interest rates.

INSURED TAX EXEMPT FUND. Although it does not intend to engage in these
strategies in the coming year, INSURED TAX EXEMPT FUND may buy U.S. exchange-
traded put and call options on stock indices and enter into closing transactions
with respect to such options. The Series also may sell covered listed put and
call options and buy call and put options on its portfolio securities and may
enter into closing transactions with respect to such options. The Series also
may buy and sell financial futures contracts and buy and sell call and put
options thereon traded on a U.S. exchange or board of trade and enter into
closing transactions with respect to such options.

COVER FOR HEDGING AND OPTION INCOME STRATEGIES. No Series will use
leverage in its hedging and option income strategies. In the case of each
transaction entered into as a hedge, each Series will hold securities or other
options or futures positions whose values are expected to offset ("cover") its
obligations hereunder. Each Series will not enter into a hedging or option
income strategy that exposes the Series to an obligation to another party unless
it owns either (1) an offsetting ("covered") position in securities or other
options or futures contracts or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations. Each Series will comply with guidelines established by the SEC
with respect to coverage of hedging and option income strategies by mutual funds
and, if required, will set aside cash and/or liquid, high-grade debt securities
in a segregated account with its custodian in the prescribed amount. Securities
or other options or futures positions used for cover and securities held in a
segregated account cannot be sold or closed out while the hedging or option
income strategy is outstanding unless they are replaced with similar assets. As
a result, there is a possibility that the use of cover or segregation involving
a large percentage of a Series' assets could impede portfolio management or the
Series' ability to meet redemption requests or other current obligations.

OPTIONS STRATEGIES. INSURED TAX EXEMPT FUND may purchase call options on
securities that the Adviser intends to include in its portfolio in order to fix
the cost of a future purchase. Call options also may be used as a means of
participating in an anticipated price increase of a security. In the event of a
decline in the price of the underlying security, use of this strategy would
serve to limit the Series' potential loss to the option premium paid;
conversely, if the market price of the underlying security increases above the
exercise price and the Series either sells or exercises the option, any profit
eventually realized will be reduced by the premium. INSURED TAX EXEMPT FUND may
purchase put options in order to hedge against a decline in the market value of
securities held in its portfolio. The put option enables the Series to sell the
underlying security at the predetermined exercise price; thus the potential for
loss to the Series below the exercise price is limited to the option premium
paid. If the market price of the underlying security is higher than the
exercise price of the put option, any profit the Series realizes on the sale of
the security will be reduced by the premium paid for the put option less any
amount for which the put option may be sold.

INSURED TAX EXEMPT FUND may write covered call options on securities to
increase income in the form of premiums received from the purchasers of the
options. Because it can be expected that a call option will be exercised if the
market value of the underlying security increases to a level greater than the
exercise price, the Series will write covered call options on securities
generally when the Adviser believes

<PAGE>

that the premium received by the Series, plus anticipated appreciation in the
market price of the underlying security up to the exercise price of the option,
will be greater than the total appreciation in the price of the security. The
strategy may be used to provide limited protection against a decrease in the
market price of the security in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price
of the underlying security held by the Series declines, the amount of such
decline will be offset wholly or in part by the amount of the premium received
by the Series. If, however, there is an increase in the market price of the
underlying security and the option is exercised, the Series will be obligated to
sell the security at less than its market value. The Series gives up the
ability to sell the portfolio securities used to cover the call option while the
call option is outstanding. Such securities may also be considered illiquid in
the case of over-the-counter ("OTC") options written by the Series, to the
extent described under "Investment Policies--Restricted and Illiquid Securities"
and therefore subject to the Series' limitation on investments in illiquid
securities. In addition, the Series could lose the ability to participate in an
increase in the value of such securities above the exercise price of the call
option because such an increase would likely be offset by an increase in the
cost of closing out the call option (or could be negated if the buyer chose to
exercise the call option at an exercise price below the securities' current
market value).

INSURED TAX EXEMPT FUND may write put options. A put option gives the
purchaser of the option the right to sell, and the writer (seller) the
obligation to buy, the underlying security at the exercise price during the
option period. So long as the obligation of the writer continues, the writer
may be assigned an exercise notice by the broker-dealer through which such
option was sold, requiring it to make payment of the exercise price against
delivery of the underlying security. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options. The Series may write covered put options in
circumstances when the Adviser believes that the market price of the securities
will not decline below the exercise price less the premiums received. If the
put option is not exercised, the Series will realize income in the amount of the
premium received. This technique could be used to enhance current return during
periods of market uncertainty. The risk in such a transaction would be that the
market price of the underlying security would decline below the exercise price
less the premiums received, in which case the Series would expect to suffer a
loss.

BLUE CHIP FUND and INSURED TAX EXEMPT FUND may purchase U.S. exchange-
traded put and call options on stock indices in much the same manner as the more
traditional equity and debt options discussed above, except that stock index
options may serve as a hedge against overall fluctuations in the securities
markets (or a market sector) rather than anticipated increases or decreases in
the value of a particular security. A stock index assigns relative values to
the stock included in the index and fluctuates with changes in such values.
Stock index options operate in the same way as the more traditional equity
options, except that settlements of stock index options are effected with cash
payments and do not involve delivery of securities. Thus, upon settlement of a
stock index option, the purchaser will realize, and the writer will pay, an
amount based on the difference between the exercise price and the closing price
of the stock index. The effectiveness of hedging techniques using stock index
options will depend on the extent to which price movements in the stock index
selected correlate with price movements of the securities in which a Series
invests.

Currently, many options on equity securities are exchange-traded, whereas
options on debt securities are primarily traded on the OTC market. Exchange-
traded options in the U.S. are issued by a clearing organization affiliated with
the exchange on which the option is listed which, in effect, guarantees
completion of every exchange-traded option transaction. In contrast, OTC
options are contracts between a Series and the opposite party with no clearing
organization guarantee. Thus, when a Series purchases

<PAGE>

an OTC option, it relies on the dealer from which it has purchased the OTC
option to make or take delivery of the securities underlying the option.
Failure by the dealer to do so would result in the loss of the premium paid by
the Series as well as the loss of the expected benefit of the transaction.

OPTIONS GUIDELINES. In view of the risks involved in using options, the
Board of Trustees has adopted non-fundamental investment guidelines to govern
the use of options by BLUE CHIP FUND and INSURED TAX EXEMPT FUND that may be
modified by the Board without shareholder vote: (1) options will be purchased
or written only when the Adviser believes that there exists a liquid secondary
market in such options; and (2) no Series may purchase a put or call option if
the value of the option's premium, when aggregated with the premiums on all
other options held by such Series, exceeds 5% of that Series' total assets.

SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING. BLUE CHIP FUND and
INSURED TAX EXEMPT FUND may effectively terminate their right or obligation
under an option by entering into a closing transaction. If either Series wishes
to terminate its obligation to sell securities under a call option it has
written, the Series may purchase a call option of the same series (that is, a
call option identical in its terms to the call option previously written); this
is known as a closing purchase transaction. Conversely, in order to terminate
its right to purchase or sell specified securities under a call or put option it
has purchased, a Series may write an option of the same series as the option
held; this is known as a closing sale transaction. Closing transactions
essentially permit a Series to realize profits or limit losses on its options
positions prior to the exercise or expiration of the option. Whether a profit
or loss is realized from a closing transaction depends on the price movement of
the underlying index or security and the market value of the option.

The value of an option position will reflect, among other things, the
current market price of the underlying security or stock index, the time
remaining until expiration, the relationship of the exercise price to the market
price, the historical price volatility of the underlying security or stock index
and general market conditions. For this reason, the successful use of options
depends upon the Adviser's ability to forecast the direction of price
fluctuations in the underlying securities market or, in the case of stock index
options, fluctuations in the market sector represented by the index selected.

Options normally have expiration dates of up to nine months. Unless an
option purchased by a Series is exercised or unless a closing transaction is
effected with respect to that position, a loss will be realized in the amount of
the premium paid and any transaction costs.

A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. The ability to
establish and close out positions on the exchanges is subject to the maintenance
of a liquid secondary market. Although BLUE CHIP FUND and INSURED TAX EXEMPT
FUND intend to purchase or write only those exchange-traded options for which
there appears to be a liquid secondary market, there is no assurance that a
liquid secondary market will exist for any particular option at any particular
time. Closing transactions may be effected with respect to options traded in
the OTC markets (currently the primary markets for options on debt securities)
only by negotiating directly with the other party to the option contract or in a
secondary market for the option if such market exists. Although a Series will
enter into OTC options only with dealers that agree to enter into, and that are
expected to be capable of entering into, closing transactions with a Series,
there is no assurance that the Series will be able to liquidate an OTC option at
a favorable price at any time prior to expiration. In the event of insolvency
of the opposite party, a Series may be unable to liquidate an OTC option.
Accordingly, it may not be possible to effect closing transactions with respect
to certain options,

<PAGE>

with the result that a Series would have to exercise those options that it has
purchased in order to realize any profit. With respect to options written by a
Series, the inability to enter into a closing transaction may result in material
losses to the Series. For example, because a Series must maintain a covered
position with respect to any call option it writes, that Series may not sell the
underlying assets used to cover an option during the period it is obligated
under the option. This requirement may impair the Series' ability to sell a
portfolio security or make an investment at a time when such a sale or
investment might be advantageous.

Stock index options are settled exclusively in cash. If a Series purchases
an option on a stock index, the option is settled based on the closing value of
the index on the exercise date. Thus, a holder of a stock index option who
exercises it before the closing index value for that day is available runs the
risk that the level of the underlying index may subsequently change. For
example, in the case of a call option, if such a change causes the closing index
value to fall below the exercise price of the option on the index, the
exercising holder will be required to pay the difference between the closing
index value and the exercise price of the option.

A Series' activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs; however, a Series also
may save on commissions by using options as a hedge rather than buying or
selling individual securities in anticipation or as a result of market
movements.

FUTURES STRATEGIES. HIGH YIELD FUND and INSURED TAX EXEMPT FUND may engage
in futures strategies to attempt to reduce the overall investment risk that
would normally be expected to be associated with ownership of the securities in
which they invest.

HIGH YIELD FUND and INSURED TAX EXEMPT FUND may use interest rate futures
contracts and, for INSURED TAX EXEMPT FUND, options thereon, to hedge the debt
portion of their portfolios against changes in the general level of interest
rates. A Series may purchase an interest rate futures contract when it intends
to purchase debt securities but has not yet done so. This strategy may minimize
the effect of all or part of an increase in the market price of those securities
because a rise in the price of the securities prior to their purchase may either
be offset by an increase in the value of the futures contract purchased by a
Series or avoided by taking delivery of the debt securities under the futures
contract. Conversely, a fall in the market price of the underlying debt
securities may result in a corresponding decrease in the value of the futures
position. A Series may sell an interest rate futures contract in order to
continue to receive the income from a debt security, while endeavoring to avoid
part or all of the decline in the market value of that security that would
accompany an increase in interest rates.

INSURED TAX EXEMPT FUND may purchase a call option on a financial futures
contract to hedge against a market advance in debt securities that the Series
plans to acquire at a future date. The Series also may write covered call
options on financial futures contracts as a partial hedge against a decline in
the price of debt securities held in the Series' portfolio or purchase put
options on financial futures contracts in order to hedge against a decline in
the value of debt securities held in the Series' portfolio.

FUTURES GUIDELINES. In view of the risks involved in using futures
strategies described below, the Board of Trustees has adopted non-fundamental
investment guidelines to govern the use of such investments by HIGH YIELD FUND
and INSURED TAX EXEMPT FUND that may be modified by the Board without
shareholder vote. Each Series will not purchase or sell futures contracts or,
for INSURED TAX EXEMPT FUND, related options, if, immediately thereafter, the
sum of the amount of initial margin deposits on such Series' existing futures
positions and, for INSURED TAX EXEMPT FUND, margin and premiums paid

<PAGE>

for related options, would exceed 5% of the market value of that Series' total
assets. The value of all futures sold will not exceed the total market value of
a Series' portfolio. In addition, each Series may not purchase interest rate
futures contracts if immediately thereafter more than 30% of its total assets
would be so invested.

SPECIAL CHARACTERISTICS AND RISKS OF FUTURES TRADING. No price is paid
upon entering into futures contracts. Instead, upon entering into a futures
contract, HIGH YIELD FUND and INSURED TAX EXEMPT FUND are required to deposit
with their custodian in a segregated account in the name of the futures broker
through which the transaction is effected an amount of cash, U.S. Government
securities or other liquid, high-grade debt instruments generally equal to 3%-5%
of the contract value. This amount is known as "initial margin." When writing
a put or call option on a futures contract, margin also must be deposited in
accordance with applicable exchange rules. Initial margin on futures contracts
is in the nature of a performance bond or good-faith deposit that is returned to
a Series upon termination of the transaction, assuming all obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, a
Series may be required by an exchange to increase the level of its initial
margin payment. Additionally, initial margin requirements may be increased
generally in the future by regulatory action. Subsequent payments, called
"variation margin," to and from the broker, are made on a daily basis as the
value of the futures position varies, a process known as "marking to market."
Variation margin does not involve borrowing to finance the futures transactions,
but rather represents a daily settlement of a Series' obligation to or from a
clearing organization.

Holders and writers of futures positions and options thereon can enter into
offsetting closing transactions, similar to closing transactions on options on
securities, by selling or purchasing, respectively, a futures position or
options position with the same terms as the position or option held or written.
Positions in futures contracts and options thereon may be closed only on an
exchange or board of trade providing a secondary market for such futures or
options.

Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures contract or related option may vary
either up or down from the previous day's settlement price. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit. The daily limit governs only price movements
during a particular trading day and therefore does not limit potential losses
because prices could move to the daily limit for several consecutive trading
days with little or no trading and thereby prevent prompt liquidation of
unfavorable positions. In such event, it may not be possible for a Series to
close a position and, in the event of adverse price movements such Series would
have to make daily cash payments of variation margin (except in the case of
purchased options). However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the contracts
can be terminated. In such circumstances, an increase in the price of the
securities, if any, may partially or completely offset losses on the futures
contract. However, there is no guarantee that the price of the securities will,
in fact, correlate with the price movements in the contracts and thus provide an
offset to losses on the contracts.

Successful use by HIGH YIELD FUND and INSURED TAX EXEMPT FUND of futures
contracts and, for INSURED TAX EXEMPT FUND, related options, will depend upon
the Adviser's ability to predict movements in the direction of the overall
securities and interest rate markets, which requires different skills and
techniques than predicting changes in the prices of individual securities.
Moreover, futures contracts relate not to the current price level of the
underlying instrument but to the anticipated levels at some point in the future.
There is, in addition, the risk that the movements in the price of the futures
contract or related option will not correlate with the movements in prices of
the securities being hedged. In addition, if a

<PAGE>

Series has insufficient cash, it may have to sell assets from its portfolio to
meet daily variation margin requirements. Any such sale of assets may or may
not be made at prices that reflect the rising market. Consequently, a Series
may need to sell assets at a time when such sales are disadvantageous to that
Series. If the price of the futures contract or related option moves more than
the price of the underlying securities, a Series will experience either a loss
or a gain on the futures contract or related option, that may or may not be
completely offset by movements in the price of the securities that are the
subject of the hedge.

In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between price movements in the futures or related
option position and the securities being hedged, movements in the prices of
futures contracts and related options may not correlate perfectly with movements
in the prices of the hedged securities because of price distortions in the
futures market. As a result, a correct forecast of general market trends may
not result in successful hedging through the use of futures contracts and
related options over the short term.

Positions in futures contracts may be closed out only on an exchange or
board of trade that provides a secondary market for such futures contracts or
related options. Although HIGH YIELD FUND and INSURED TAX EXEMPT FUND intend to
purchase or sell futures and, for INSURED TAX EXEMPT FUND, related options, only
on exchanges or boards of trade where there appears to be a liquid secondary
market, there is no assurance that such a market will exist for any particular
contract or option at any particular time. In such event, it may not be
possible to close a futures or option position and, in the event of adverse
price movements, a Series would continue to be required to make variation margin
payments.

Like options on securities, options on futures contracts have a limited
life. The ability to establish and close out options on futures will be subject
to the development and maintenance of liquid secondary markets on the relevant
exchanges or boards of trade. There can be no certainty that liquid secondary
markets for all options on futures contracts will develop.

Purchasers of options on futures contracts pay a premium in cash at the
time of purchase. This amount and the transaction costs are all that is at
risk. Sellers of options on a futures contract, however, must post initial
margin and are subject to additional margin calls that could be substantial in
the event of adverse price movements. In addition, although the maximum amount
at risk when INSURED TAX EXEMPT FUND purchases an option is the premium paid for
the option and the transaction costs, there may be circumstances when the
purchase of an option on a futures contract would result in a loss to the Series
when the use of a futures contract would not, such as when there is no movement
in the level of the underlying stock index or the value of the securities being
hedged.

HIGH YIELD FUND and INSURED TAX EXEMPT FUND'S activities in the futures
and, for INSURED TAX EXEMPT FUND, related options, markets may result in a
higher portfolio turnover rate and additional transaction costs in the form of
added brokerage commissions; however, a Series also may save on commissions by
using futures and related options as a hedge rather than buying or selling
individual securities in anticipation or as a result of market movements.

INVESTMENT RESTRICTIONS

The investment restrictions set forth below have been adopted by the
respective Series and, unless identified as non-fundamental policies, may not be
changed without the affirmative vote of a majority of

<PAGE>

the outstanding voting securities of that Series, voting separately from any
other series of the Fund. As provided in the Investment Company Act of 1940, as
amended ("1940 Act"), a "vote of a majority of the outstanding voting securities
of the Series" means the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares of the Series or (2) 67% or more of the shares of the
Series present at a meeting, if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. Changes in values of a
particular Series' assets will not cause a violation of the following investment
restrictions so long as percentage restrictions are observed by that Series at
the time it purchases any security.

BLUE CHIP FUND. BLUE CHIP FUND will not:

(1) Make short sales of securities to maintain a short position.

(2) Issue senior securities, borrow money or pledge its assets except that
the Series may borrow from a bank for temporary or emergency purposes in amounts
not exceeding 5% (taken at the lower of cost or current value) of its total
assets (not including the amount borrowed) and pledge its assets to secure such
borrowings.

(3) Make loans, except loans of portfolio securities (limited to 10% of
the Series' total assets).

(4) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result 25% or more of the Series'
total assets (taken at current value) would be invested in a single industry.

(5) With respect to 75% of the Series' total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Series' total assets would be invested in the securities of that issuer,
or (b) the Series would hold more than 10% of the outstanding voting securities
of that issuer.

(6) Pledge, mortgage or hypothecate any of its assets except that the
Series may pledge its assets to secure borrowings made in accordance with
paragraph (2) above, provided the Series maintains asset coverage of at least
300% for pledged assets.

(7) Buy or sell commodities or commodity contracts or real estate or
interests in real estate limited partnerships, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate.

(8) Act as an underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an underwriter
under certain Federal securities laws.

(9) Make investments for the purpose of exercising control or management.

(10) Purchase any securities on margin.

(11) Purchase or sell portfolio securities from or to the Adviser or any
director, officer or Trustee thereof or of the Fund, as principals.

(12) Invest in any securities of any issuer if, to the knowledge of the
Series, any officer, director or Trustee of the Fund or of the Adviser owns more
than 1/2 of 1% of the outstanding securities

<PAGE>

of such issuer, and such officers, directors or Trustees who own more than 1/2
of 1% own in the aggregate more than 5% of the outstanding securities of such
issuer.

The following investment restrictions are not fundamental and may be
changed without prior shareholder approval. These investment restrictions
provide that the Series will not:

(1) Purchase any security if as a result the Series would then have more
than 5% of its total assets invested in securities of companies (including
predecessors) less than three years old.

(2) Invest in securities of other registered investment companies, except
by purchases in the open market involving only customary brokerage commissions
and as a result of which not more than 5% of its total assets would be invested
in such securities, or except as part of a merger, consolidation or other
acquisition. The Series may incur duplicate fees to the extent that it invests
in other investment companies.

(3) Purchase oil, gas or other mineral interests. However, the Series may
purchase and sell the securities of companies engaged in the exploration,
development, production, refining, transporting and marketing of oil, gas or
minerals.

(4) Write, purchase or sell options (puts, calls or combinations thereof),
except that the Series may purchase put and call options on U.S. exchange-traded
options on stock indices (and may enter into closing sale transactions with
respect to such options) provided that the premiums paid for such options do not
exceed 5% of the Series' total assets.

(5) Purchase warrants if as a result the Series would then have more than
5% of its total assets, valued at the lower of cost or market, invested in
warrants (of which no more than 2% may be warrants not listed on the New York or
American Stock Exchange).

(6) Purchase any security if, as a result, more than 15% of its net assets
would be invested in illiquid securities, including repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
any securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market. The Trustees, or the
Series' investment adviser acting pursuant to authority delegated by the
Trustees, may determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, or any other applicable rule, and therefore that such securities are
not subject to the foregoing limitation.

The Fund, on behalf of the Series, has filed the following undertakings to
comply with requirements of certain states in which shares of the Series are
sold, which may be changed without shareholder approval:

(1) Notwithstanding fundamental investment restriction (6) above, the
Series will not pledge, mortgage or hypothecate more than one-third of its total
assets to secure such borrowings.

(2) Notwithstanding fundamental investment restriction (7) above, the
Series will not invest in real estate limited partnership interests or in
interests in real estate investment trusts that are not readily marketable.

<PAGE>

(3) Notwithstanding non-fundamental investment restrictions (1) and (6)
above, the Series will not invest more than 10% of its net assets in illiquid
securities, including restricted securities (excluding Rule 144A securities),
and unseasoned issuers.

(4) Notwithstanding non-fundamental investment restriction (3) above, the
Series will not purchase oil, gas or other mineral leases.

HIGH YIELD FUND. HIGH YIELD FUND will not:

(1) Borrow money, except from banks and only for temporary or emergency
purposes and then in amounts not in excess of 5% of its total assets.

(2) Engage in "short sales" in excess of 10% of the Series' total assets.

(3) Pledge, mortgage or hypothecate any of its assets, except that the
Series may pledge its assets to secure borrowings made in accordance with
paragraphs (1) and (2) above and for margin to secure its obligations under
interest rate futures contracts, provided the Series maintains asset coverage of
at least 300% for pledged assets.

(4) Make loans, except by purchase of debt obligations and through
repurchase agreements. However, the Fund's Board of Trustees may, on the
request of broker-dealers or other institutional investors which they deem
qualified, authorize the Series to loan securities to cover the borrower's short
position; provided, however, the borrower pledges to the Series and agrees to
maintain at all times with the Series cash collateral equal to not less than
100% of the value of the securities loaned, the loan is terminable at will by
the Series, the Series receives interest on the loan as well as any
distributions upon the securities loaned, the Series retains voting rights
associated with the securities, the Series pays only reasonable custodian fees
in connection with the loan, and the Adviser monitors the creditworthiness of
the borrower throughout the life of the loan; provided further, that such loans
will not be made if the value of all repurchase agreements with more than seven
days to maturity, and other illiquid assets is greater than an amount equal to
15% of the Series' net assets.

(6) Purchase the securities of an issuer if such purchase, at the time
thereof, would cause more than 5% of the value of the Series' total assets to be
invested in securities of issuers which, including predecessors, have a record
of less than three years' continuous operation.

(7) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under federal securities laws.

(8) Purchase or sell real estate or commodities or commodity contracts.
However, the Series may purchase interests in real estate investment trusts
whose securities are registered under the 1940 Act and are readily marketable
and may invest in interest rate futures contracts and options thereon (provided
the margin required does not violate the investment restrictions pertaining to
pledged assets).

<PAGE>

(9) Invest in companies for the purpose of exercising control or
management.

(10) Invest in securities of other investment companies, except in
connection with a merger of another investment company.

(11) Purchase any securities on margin (however, the Series' engaging in
"hedging transactions" and the margins required thereon shall not be considered
a violation of this provision).

(12) Purchase or retain securities of any issuer if any officer and
director or trustee of the Fund or the Adviser owns beneficially more than 1/2
of 1% of the securities of such issuer or if all such officers and directors or
trustees together own more than 5% of the securities of such issuer.

(13) Invest 25% or more of the value of its total assets in a particular
industry at any one time.

(14) Invest more than 5% of the value of its net assets in warrants, with
no more than 2% in warrants not listed on either the New York or American Stock
Exchanges.

(15) Purchase or sell portfolio securities from or to the Adviser or any
trustee or officer thereof or of the Fund, as principals.

(16) Invest more than 15% of the value of its total assets, at the time of
purchase, in deep discount securities of companies that are financially
troubled, in default or in bankruptcy or reorganization.

(17) Issue senior securities.

(18) Invest any of its assets in interests in oil, gas or other mineral
exploration or development programs, or in puts, calls, straddles or any
combination thereof.

(19) Invest more than 10% of its net assets in when-issued securities at
the time such purchase is made.

The following investment restrictions are not fundamental and may be
changed without shareholder approval:

(1) Notwithstanding fundamental investment restriction (8) above, the
Series will not invest in real estate limited partnership interests or in
interests in real estate investment trusts that are not readily marketable.

(2) The Series will not purchase any security if, as a result, more than
15% of its net assets would be invested in illiquid securities, including
repurchase agreements not entitling the holder to payment of principal and
interest within seven days and any securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market. The Trustees, or the Series' investment adviser acting
pursuant to authority delegated by the Trustees, may determine that a readily
available market exists for securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933, as amended, or any other applicable rule, and
therefore that such securities are not subject to the foregoing limitation.

<PAGE>

The Fund, on behalf of the Series, has also filed the following undertaking
to comply with requirements of a certain state in which shares of the Series are
sold, which may be changed without shareholder approval: In the event the
original custodian or any successor custodian resigns or for any reason cannot
or will not continue to serve as custodian and no successor can be found, the
Series will submit to shareholders for their approval or disapproval, the matter
of possible liquidation of the Series.

INSURED TAX EXEMPT. INSURED TAX EXEMPT FUND will not:

(1) Borrow money except for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 5% of the value of its
total assets (including the amount borrowed) less liabilities (other than
borrowings). Any borrowings that exceed 5% of the value of the Series' total
assets by reason of a decline in net assets will be reduced within three
business days to the extent necessary to comply with the 5% limitation. This
policy shall not prohibit deposits of assets to provide margin or guarantee
positions in connection with transactions in options, futures contracts, swaps,
forward contracts, and other derivative instruments or the segregation of assets
in connection with such transactions.

(2) Issue senior securities.

(3) Make loans, except loans of portfolio securities (limited to 10% of
the Series' total assets), provided such loans are at all times secured by cash
or equivalent collateral of no less than 100% by marking to market daily.

(4) With respect to 75% of the Series' total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Series' total assets would be invested in the securities of that issuer,
or (b) the Series would hold more than 10% of the outstanding voting securities
of that issuer. With respect to pre-refunded bonds, the Adviser considers an
escrow account to be the issuer of such bonds when the escrow account consists
solely of U.S. Government obligations fully substituted for the obligation of
the issuing municipality.

(5) Invest in any municipal bonds unless they will be insured municipal
bonds or unless they are already insured under an insurance policy obtained by
the issuer or underwriter thereof.

(6) Buy or sell real estate or interests in real estate limited
partnerships, although it may purchase and sell securities which are secured by
real estate or interests therein.

(7) Underwrite any issue of securities, although the Series may purchase
municipal bonds directly from the issuer thereof for investment in accordance
with the Series' investment objective, policy and limitations.

(8) Make investments for the purpose of exercising control or management.

(9) Purchase or sell portfolio securities from or to the Adviser or any
director, officer or Trustee thereof or of the Fund, as principals.

(10) Invest in any securities of any issuer if, to the knowledge of the
Series, any officer, director or Trustee of the Fund or of the Adviser owns more
than 1/2 of 1% of the outstanding securities

<PAGE>

of such issuer, and such officers, directors or Trustees who own more than 1/2
of 1% own in the aggregate more than 5% of the outstanding securities of such
issuer.

The following investment restrictions are not fundamental and may be
changed without shareholder approval. These investment restrictions provide
that the Series will not:

(1) Purchase any security if, as a result, more than 15% of its net assets
would be invested in illiquid securities, including repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
any securities that are illiquid by virtue of legal or contractual restrictions
on resale or the absence of a readily available market. The Trustees, or the
Series' investment adviser acting pursuant to authority delegated by the
Trustees, may determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, or any other applicable rule, and therefore that such securities are
not subject to the foregoing limitation.

(2) Purchase or sell physical commodities unless acquired as a result of
ownership of securities (but this restriction shall not prevent the Series from
purchasing or selling options, futures contracts, caps, floors and other
derivative instruments, engaging in swap transactions or investing in securities
or other instruments backed by physical commodities).

(3) Enter into futures contracts or options on futures contracts if
immediately thereafter the aggregate margin deposits on all outstanding futures
contracts positions held by the Series and premiums paid on outstanding options
on futures contracts, after taking into account unrealized profits and losses,
would exceed 5% of the market value of the total assets of the Series, or enter
into any futures contracts or options on futures contracts if the aggregate
amount of the Series' commitments under outstanding futures contracts positions
and options on future contracts written by the Series would exceed the market
value of the total assets of the Series.

(4) Pledge assets, except that the Series may pledge its assets to secure
borrowings made in accordance with fundamental investment restriction (1) above,
provided the Series maintains asset coverage of at least 300% for pledged
assets; provided, however, this limitation will not prohibit escrow, collateral
or margin arrangements in connection with the Series' use of options, futures
contracts or options on futures contracts.

(5) Purchase securities on margin, except that the Series may obtain such
short-term credits as are necessary for the clearance of transactions, and
provided that margin payments and other deposits made in connection with
transactions in options, futures contracts, swaps, forward contracts, and other
derivative instruments shall not be deemed to constitute purchasing securities
on margin.

(6) Sell securities short, unless it owns or has the right to obtain
securities, without additional consideration, equivalent in kind and amount to
the securities sold short, and provided that transactions in options, futures
contracts, swaps, forward contracts, and other derivative instruments are not
deemed to constitute selling securities short.

<PAGE>

(1) Notwithstanding fundamental investment restriction (6) above, the
Series will not invest in real estate limited partnership interests or in
interests in real estate investment trusts that are not readily marketable.

(2) Purchase any security if as a result the Series would then have more
than 5% of its total assets invested in securities of companies (including
predecessors) less than three years old.

(3) Invest in securities of other investment companies, except in the case
of money market funds offered without selling commissions, or in the event of
merger with another investment company.

(4) Invest in oil, gas or other mineral leases or development programs.

(5) Invest in puts, calls, straddles, spreads or any combination thereof
if as a result the Series would have more than 5% of its total assets in such
investments.

TRUSTEES AND OFFICERS

The following table lists the Trustees and executive officers of the Fund,
their business address and principal occupations during the past five years.
Unless otherwise noted, an individual's business address is 95 Wall Street, New
York, New York 10005.

GLENN O. HEAD*+, President and Trustee. Chairman of the Board, Director and
Treasurer, Administrative Data Management Corp. ("ADM"); Chairman of the Board
and Director, EIMCO, First Investors Management Company, Inc. ("FIMCO"),
Executive Investors Corporation ("EIC"), First Investors Corporation ("FIC") and
First Investors Consolidated Corporation ("FICC").

JAMES J. COY, Trustee, 90 Buell Lane, East Hampton, NY 11937. Retired; formerly
Senior Vice President, James Talcott, Inc. (financial institution).

ROGER L. GRAYSON*, Trustee. Director, FIC and FICC; President and Director,
First Investors Resources, Inc.; Commodities Portfolio Manager.

KATHRYN S. HEAD*+, Trustee, 10 Woodbridge Center Drive, Woodbridge, NJ 07095.
President, FICC and FIMCO; Vice President, Chief Financial Officer and Director,
FIC and EIC; President and Director, First Financial Savings Bank, S.L.A.;
Chief Financial Officer, ADM.

F. WILLIAM ORTMAN, JR., Trustee, 50 B Cambridge Circle, Lakehurst, NJ 08723.
Retired; formerly Management Consultant.

REX R. REED, Trustee, 76 Keats Way, Morristown, NJ 07960. Retired; formerly
Senior Vice President, American Telephone & Telegraph Company.

HERBERT RUBINSTEIN, Trustee, 145 Elm Drive, Roslyn, NY 11576. Retired; formerly
President, Belvac International Industries, Ltd.; President, Central Dental
Supply.

JOHN T. SULLIVAN*, Trustee and Chairman of the Board; Director, FIMCO, FIC, FICC
and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.

<PAGE>

ROBERT F. WENTWORTH, Trustee, RR1, Box 2554, Upland Downs Road, Manchester
Center, VT 05255. Retired; formerly financial and planning executive with
American Telephone & Telegraph Company.

JOSEPH I. BENEDEK, Treasurer, 10 Woodbridge Center Drive, Woodbridge, NJ 07095.
Treasurer, FIC, FIMCO, EIMCO and EIC.

GEORGE V. GANTER, Vice President. Vice President, First Investors Asset
Management Company, Inc., First Investors Special Bond Fund, Inc. and First
Investors High Yield Fund, Inc.; Portfolio Manager, FIMCO.

PATRICIA D. POITRA, Vice President. Vice President, First Investors U.S.
Government Plus Fund, First Investors Series Fund II, Inc. and First Investors
Series Fund; Director of Equities, FIMCO.

CLARK D. WAGNER, Vice President. Vice President, First Investors Multi-State
Insured Tax Free Fund, First Investors New York Insured Tax Free Fund, Inc.,
First Investors Insured Tax Exempt Fund, Inc. and First Investors Series Fund;
Chief Investment Officer, FIMCO; Vice President, General Electric Investment
Corporation from 1988 to 1991.

CONCETTA DURSO, Vice President and Secretary. Vice President, FIMCO, EIMCO and
ADM; Assistant Vice President and Assistant Secretary, FIC.

CAROL LERNER BROWN, Assistant Secretary. Secretary, FIMCO, EIMCO, FIC, EIC and
ADM.

- ----------------
* These Trustees may be deemed to be "interested persons," as defined in the
1940 Act.
+ Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.

All of the officers and Trustees, except for Messrs. Ganter and Wagner and
Ms. Poitra, hold identical or similar positions with First Investors Series
Fund, First Investors Cash Management Fund, Inc., First Investors Global Fund,
Inc., First Investors Government Fund, Inc., First Investors Insured Tax Exempt
Fund, Inc., First Investors High Yield Fund, Inc., First Investors Fund For
Income, Inc., First Investors Life Series Fund, First Investors Multi-State
Insured Tax Free Fund, First Investors New York Insured Tax Free Fund, Inc.,
First Investors Series Fund II, Inc., First Investors Special Bond Fund, Inc.,
First Investors Tax-Exempt Money Market Fund, Inc. and First Investors U.S.
Government Plus Fund. Mr. Head is also an officer and/or Director of First
Investors Asset Management Company, Inc., First Investors Credit Funding
Corporation, First Investors Leverage Corporation, First Investors Realty
Company, Inc., First Investors Resources, Inc., N.A.K. Realty Corporation, Real
Property Development Corporation, Route 33 Realty Corporation, First Investors
Life Insurance Company, First Financial Savings Bank, S.L.A., First Investors
Credit Corporation and School Financial Management Services, Inc. Ms. Head is
also an officer and/or Director of First Investors Life Insurance Company, First
Investors Credit Corporation and School Financial Management Services, Inc.

Compensation to officers and interested Trustees of the Fund is paid by the
Adviser and not by the Fund. In addition, compensation to non-interested
Trustees of the Fund is currently voluntarily paid by the Adviser.

<PAGE>

MANAGEMENT

Investment advisory services to each Series are provided by Executive
Investors Management Company, Inc. pursuant to an Investment Advisory Agreement
("Advisory Agreement") dated June 13, 1994. The Advisory Agreement was approved
by the Board of Trustees of the Fund, including a majority of the Trustees who
are not parties to the Fund's Advisory Agreement or "interested persons" (as
defined in the 1940 Act) of any such party ("Independent Trustees"), in person
at a meeting called for such purpose and by a majority of the public
shareholders of each Series.

Pursuant to the Advisory Agreement, EIMCO shall supervise and manage each
Series' investments, determine each Series' portfolio transactions and supervise
all aspects of each Series' operations, subject to review by the Fund's
Trustees. The Advisory Agreement also provides that EIMCO shall provide the
Fund with certain executive, administrative and clerical personnel, office
facilities and supplies, conduct the business and details of the operation of
the Fund and each Series and assume certain expenses thereof, other than
obligations or liabilities of the Series. The Advisory Agreement may be
terminated at any time, with respect to a Series, without penalty by the Fund's
Trustees or by a majority of the outstanding voting securities of such Series,
or by EIMCO, in each instance on not less than 60 days' written notice, and
shall automatically terminate in the event of its assignment (as defined in the
1940 Act). The Advisory Agreement also provides that it will continue in
effect, with respect to a Series, for a period of over two years only if such
continuance is approved annually either by the Fund's Trustees or by a majority
of the outstanding voting securities of such Series, and, in either case, by a
vote of a majority of the Fund's Independent Trustees voting in person at a
meeting called for the purpose of voting on such approval.

Under the Advisory Agreement, each Series pays the Adviser an annual fee,
paid monthly, according to the following schedules:

Annual
Average Daily Net Assets Rate
- ------------------------ ------
Up to $200 million . . . . . . . . . . . . . . . . . . . 1.00%
In excess of $200 million up to $500 million . . . . . . 0.75
In excess of $500 million up to $750 million . . . . . . 0.72
In excess of $750 million up to $1.0 billion . . . . . . 0.69
Over $1.0 billion. . . . . . . . . . . . . . . . . . . . 0.66

The SEC staff takes the position that fees of 0.75% or greater are higher than
those paid by most investment companies.

For the fiscal years ended December 31, 1992, 1993 and 1994, BLUE CHIP
FUND'S advisory fees were $7,045, $8,194 and $9,661, respectively, all of which
were voluntarily waived by the Adviser. For the fiscal years ended December 31,
1992, 1993 and 1994, INSURED TAX EXEMPT FUND'S advisory fees were $51,829,
$78,279 and $98,612, respectively, all of which were voluntarily waived by the
Adviser. For the fiscal years ended December 31, 1992, 1993 and 1994, HIGH
YIELD FUND'S advisory fees were $108,445, $118,399 and $150,442, respectively.
Of such amounts, the Adviser voluntarily waived $78,567, $72,317 and $82,743,
respectively. For the fiscal year ended December 31, 1994, the Adviser
voluntarily reimbursed BLUE CHIP FUND and TAX EXEMPT FUND an additional $7,855
and $22,172, respectively.

<PAGE>

Pursuant to certain state regulations, the Adviser has agreed to reimburse
a Series if and to the extent that Series' aggregate operating and management
expenses, including advisory fees but generally excluding interest, taxes,
brokerage commissions and extraordinary expenses, exceed any limitation on
expenses applicable to that Series for any full fiscal year (unless a waiver of
such expense limitation is obtained). The amount of any such reimbursement is
limited to the amount of the advisory fees paid or accrued to the Adviser for
the fiscal year. For the fiscal year ended December 31, 1994, no reimbursement
was required pursuant to these regulations.

The Adviser has an Investment Committee composed of Ronald Rolleri,
George V. Ganter, Margaret Haggerty, Glenn O. Head, Nancy W. Jones, Patricia D.
Poitra, Clark D. Wagner and John Tomasulo. The Committee usually meets weekly
to discuss the composition of the portfolio of each Series and to review
additions to and deletions from the portfolios.

UNDERWRITER

The Fund has entered into an Underwriting Agreement ("Underwriting
Agreement") with Executive Investors Corporation ("Underwriter" or "EIC") which
requires the Underwriter to use its best efforts to sell shares of the Series.
Pursuant to the Underwriting Agreement, the Underwriter shall bear all fees and
expenses incident to the registration and qualification of the Series' shares.
In addition, the Underwriter shall bear all expenses of sales material or
literature, including prospectuses and proxy materials, to the extent such
materials are used in connection with the sale of the Series' shares, unless the
Series has agreed to bear such costs pursuant to a plan of distribution. See
"Distribution Plan." The Underwriting Agreement was approved by the Fund's
Board of Trustees, including a majority of the Independent Trustees. The
Underwriting Agreement provides that it will continue in effect from year to
year, with respect to a Series, only so long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees or by a vote of a
majority of the outstanding voting securities of such Series, and in either case
by the vote of a majority of the Fund's Independent Trustees, voting in person
at a meeting called for the purpose of voting on such approval. The
Underwriting Agreement will terminate automatically in the event of its
assignment.

For the fiscal year ended December 31, 1992, BLUE CHIP FUND paid EIC
underwriting commissions of $1,182. For the same period, EIC reallowed an
additional $54,422 to unaffiliated dealers and $249 to FIC. For the fiscal year
ended December 31, 1993, BLUE CHIP FUND paid EIC underwriting commissions of
$1,273. For the same period, EIC reallowed an additional $923 to unaffiliated
dealers and $705 to FIC. For the fiscal year ended December 31, 1994, BLUE CHIP
FUND paid EIC underwriting commissions of $1,120. For the same period, EIC
reallowed an additional $395 to unaffiliated dealers and $1,120 to FIC.

For the fiscal year ended December 31, 1992, HIGH YIELD FUND paid EIC
underwriting commissions of $4,104. For the same period, EIC reallowed an
additional $19,581 to unaffiliated dealers and $62,692 to FIC. For the fiscal
year ended December 31, 1993, HIGH YIELD FUND paid EIC underwriting commissions
of $14,773. For the same period, EIC reallowed an additional $42,239 to
unaffiliated dealers and $36,522 to FIC. For the fiscal year ended December 31,
1994, HIGH YIELD FUND paid EIC underwriting commissions of $20,237. For the
same period, EIC reallowed an additional $122,072 to unaffiliated dealers and
$20,237 to FIC.

<PAGE>

For the fiscal year ended December 31, 1992, INSURED TAX EXEMPT FUND paid
EIC underwriting commissions of $7,569. For the same period, EIC reallowed an
additional $266,738 to unaffiliated dealers and $7,182 to FIC. For the fiscal
year ended December 31, 1993, INSURED TAX EXEMPT FUND paid EIC underwriting
commissions of $15,667. For the same period, EIC reallowed an additional
$42,775 to unaffiliated dealers and $49,237 to FIC. For the fiscal year ended
December 31, 1994, TAX EXEMPT FUND paid EIC underwriting commissions of $9,975.
For the same period, EIC reallowed an additional $70,565 to unaffiliated dealers
and $9,975 to FIC.

DISTRIBUTION PLAN

As stated in the Series' Prospectus, pursuant to an Amended and Restated
Class A Distribution Plan adopted by the Fund pursuant to Rule 12b-1 under the
1940 Act (the "Plan"), each Series is authorized to compensate the Underwriter
for certain expenses incurred in the distribution of that Series' shares and the
servicing or maintenance of existing Series shareholder accounts.

In adopting the Plan for the Fund, the Fund's Board of Trustees considered
all relevant information and determined that there is a reasonable likelihood
that the Plan will benefit each Series and its shareholders. The Fund's Board
believes that the amounts spent pursuant to the Plan have assisted each Series
in providing ongoing servicing to shareholders, in competing with other
providers of financial services and in promoting sales, thereby increasing the
net assets of that Series.

The Plan was approved by the Fund's Board of Trustees, including a majority
of the Independent Trustees, and by a majority of the outstanding voting
securities of each Series. The Plan will continue in effect, with respect to a
Series, from year to year as long as its continuance is approved annually by
either the Fund's Board of Trustees or by a vote of a majority of the
outstanding voting securities of that Series. In either case, to continue, the
Plan must be approved by the vote of a majority of the Independent Trustees of
the Fund. The Fund's Board reviews quarterly and annually a written report
provided by the Treasurer of the amounts expended under the Plan and the
purposes for which such expenditures were made. While the Plan is in effect,
the selection and nomination of the Fund's Independent Trustees will be
committed to the discretion of such Independent Trustees then in office. The
Plan can be terminated, with respect to a Series, at any time by a vote of a
majority of the Fund's Independent Trustees or by a vote of a majority of the
outstanding voting securities of that Series.

For the fiscal year ended December 31, 1994, BLUE CHIP FUND, HIGH YIELD
FUND and INSURED TAX EXEMPT FUND paid $4,830, $75,221 and $49,700, respectively,
in fees pursuant to the Plan. For the same period, the Underwriter incurred the
following Plan-related expenses with respect to each Series:

COMPENSATION COMPENSATION TO
SERIES ADVERTISING TO SALES PERSONNEL* UNDERWRITER**
- ------ ----------- ------------------- ---------------

BLUE CHIP FUND $0 $ 2,873 $ 1,581
HIGH YIELD FUND 0 40,168 27,951
INSURED TAX EXEMPT FUND 0 28,602 16,797

* Represents service fees
** Represent distribution fees.

<PAGE>

DETERMINATION OF NET ASSET VALUE

Except as provided herein, a security listed or traded on an exchange or
the Nasdaq national market system is valued at its last sale price on the
exchange or market system where the security is primarily traded, and lacking
any sales on a particular day, the security is valued at the mean between the
closing bid and asked prices on that day. Each security traded in the over-the-
counter ("OTC") market, including the municipal bonds in which INSURED TAX
EXEMPT FUND invests and securities listed on exchanges whose primary market is
believed to be OTC, is valued at the mean between the closing bid and asked
prices based upon quotes furnished by a market maker for such securities. In
the absence of market quotations, a Series will determine the value of bonds
based upon quotes furnished by market makers, if available, or in accordance
with the procedures described herein. In that connection, the Board of Trustees
has determined that a Series may use an outside pricing service. The pricing
service uses quotations obtained from investment dealers or brokers for the
particular securities being evaluated, information with respect to market
transactions in comparable securities and other available information in
determining value. Short-term debt securities that mature in 60 days or less
are valued at amortized cost if their original term to maturity from the date of
purchase was 60 days or less, or by amortizing their value on the 61st day prior
to maturity if their term to maturity from the date of purchase exceeded 60
days, unless the Board of Trustees determines that such valuation does not
represent fair value. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
supervision of the Fund's officers in a manner specifically authorized by the
Board of Trustees of the Fund.

With respect to the HIGH YIELD FUND and INSURED TAX EXEMPT FUND, "when-
issued securities" are reflected in the assets of the Series as of the date the
securities are purchased. Such investments are valued thereafter at the mean
between the most recent bid and asked prices obtained from recognized dealers in
such securities. With respect to HIGH YIELD FUND, quotations of foreign
securities in foreign currencies are converted into U.S. dollar equivalents
using the foreign exchange equivalents in effect.

INSURED TAX EXEMPT FUND intends not to dispose of municipal bonds which are
in significant risk of, or are in, default in the payment of principal or
interest, until the default has been cured or the principal and interest
outstanding are paid by an insurer or the issuer of any letter of credit or
other guarantee supporting such municipal bond. In its evaluation of municipal
bonds for portfolio valuation purposes, the Board of Trustees will consider the
value of insurance or any other type of guarantee supporting payments of
principal and interest. This will be accomplished by comparing the value of the
municipal bonds which are in significant risk of, or are in, default with other
municipal bonds of similar maturity, interest rate and type which are not in
default. This results in the Board of Trustees ascribing a good faith value to
the insurance or guarantee on any municipal bond which is in, or is in
significant risk of, default equal to the difference between the insured or
guaranteed security's market value and the then-prevailing market rate for
other, similar non-defaulting municipal bonds.

The Board of Trustees may suspend the determination of a Series' net asset
value for the whole or any part of any period (1) during which trading on the
New York Stock Exchange ("NYSE") is restricted as determined by the SEC or the
NYSE is closed for other than weekend and holiday closings, (2) during which an
emergency, as defined by rules of the SEC in respect to the United States
market, exists as a result of which disposal by a Series of securities owned by
it is not reasonably practicable for the Series fairly to determine the value of
its net assets, or (3) for such other period as the SEC has by order permitted.

<PAGE>

ALLOCATION OF PORTFOLIO BROKERAGE

Purchases and sales of portfolio securities by HIGH YIELD FUND and INSURED
TAX EXEMPT FUND may be principal transactions. In principal transactions,
portfolio securities are normally purchased directly from the issuer or from an
underwriter or market maker for the securities. There will usually be no
brokerage commission paid by the Series for such purchases. Purchases from
underwriters will include the underwriter's commission or concession and
purchases from dealers serving as market makers will include the spread between
the bid and asked price. Certain money market instruments may be purchased by
the Series directly from an issuer, in which no commission or discounts are
paid. The Series may purchase fixed income securities on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer.

BLUE CHIP FUND may deal in securities which are not listed on a national
securities exchange or the Nasdaq national market system but are traded in the
OTC market. The Series also may purchase listed securities through the "third
market." When transactions are executed in the OTC market, the Series seeks to
deal with the primary market makers, but when advantageous they utilize the
services of brokers.

In effecting portfolio transactions for the Series, the Adviser seeks best
execution of trades either (1) at the most favorable and competitive rate of
commission charged by any broker or member of an exchange, or (2) with respect
to agency transactions, at a higher rate of commission if reasonable in relation
to brokerage and research services provided to the Series or the Adviser, by
such member or broker. Such services may include, but are not limited to, any
one or more of the following: information as to the availability of securities
for purchase or sale and statistical or factual information or opinions
pertaining to investments. The Adviser may use research and services provided
to it by brokers in servicing all the Series; however, not all such services may
be used by the Adviser in connection with a Series. No portfolio orders are
placed with an affiliated broker, nor does any affiliated broker participate in
these commissions.

The Adviser may combine transaction orders placed on behalf of a Series,
funds in the First Investors Group of Funds and First Investors Life Insurance
Company, affiliates of the Fund, for the purpose of negotiating brokerage
commissions or obtaining a more favorable transaction price; and where
appropriate, securities purchased or sold may be allocated, in terms of price
and amount, to a Series according to the proportion that the size of the
transaction order actually placed by a Series bears to the aggregate size of the
transaction orders simultaneously made by other participants in the transaction.
The Fund's Board of Trustees has authorized and directed the Adviser to use
dealer concessions available in fixed-price underwritings of municipal bonds to
pay for research services which are beneficial in the management of INSURED TAX
EXEMPT FUND'S portfolio.

For the fiscal year ended December 31, 1992, BLUE CHIP FUND paid $1,626 in
brokerage commissions, none of which was paid to brokers who furnished research
services on portfolio transactions. For the fiscal year ended December 31,
1992, HIGH YIELD FUND paid $212 in brokerage commissions, all of which was paid
to brokers who furnished research services on portfolio transactions in the
amount of $46,438. For the fiscal year ended December 31, 1993, BLUE CHIP FUND
paid $1,573 in brokerage commissions, none of which was paid to brokers who
furnished research services on portfolio transactions. For the fiscal year
ended December 31, 1993, HIGH YIELD FUND did not pay brokerage commissions and
for the fiscal years ended December 31, 1992, 1993 and 1994, INSURED TAX EXEMPT
FUND did not pay brokerage commissions. For the fiscal year ended December 31,
1994, BLUE CHIP FUND paid $2,388 in

<PAGE>

brokerage commissions, none of which was paid to brokers who furnished research
services on portfolio transactions. For the fiscal year ended December 31,
1994, HIGH YIELD FUND paid $507 in brokerage commissions, all of which was paid
to brokers who furnished research services on portfolio transactions in the
amount of $15,211.

REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND
REDEMPTION INFORMATION AND OTHER SERVICES

ELIGIBLE FUNDS. Class A shares of each Series are eligible to participate
in certain shareholder privileges noted in this SAI and the Prospectus,
including the cross-investment or exchange of Series shares at net asset value,
PROVIDED such shares have either (a) been acquired through an exchange from an
Eligible Fund (as defined herein) which imposes a maximum sales charge of 6.25%,
or (b) been held for at least one year from their date of purchase (singularly,
"Eligible Fund" and, collectively "Eligible Funds"). Shares of all the funds
and/or series in the First Investors family of funds, except for First Investors
Special Bond Fund, Inc., First Investors Life Series Fund and First Investors
U.S. Government Plus Fund, are deemed to be Eligible Funds. Shares of the Money
Market Funds, unless otherwise noted, are not deemed to be Eligible Funds.

REDUCED SALES CHARGES

Reduced sales charges are applicable to purchases made at one time of
shares of any one or more of the Series or of Class A shares of any one or more
of the other Eligible Funds by "any person," which term shall include an
individual, or an individual, his or her spouse and children under the age of
21, or a trustee or other fiduciary of a single trust, estate or fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under section 401 of the Internal Revenue
Code of 1986, as amended (the "Code")), although more than one beneficiary is
involved; provided, however, that the term "any person" shall not include a
group of individuals whose funds are combined, directly or indirectly, for the
purchase of redeemable securities of a registered investment company, nor shall
it include a trustee, agent, custodian or other representative of such a group
of individuals.

Ownership of Class A and Class B shares of any Eligible Fund, except as
noted below, qualify for a reduced sales charge on the purchase of Series
shares. Class A shares purchased at net asset value, Class A shares of the
Money Market Funds, or shares owned under a Contractual Plan are not eligible
for the purchase of shares of a Series at a reduced sales charge through a
Letter of Intent or the Cumulative Purchase Privilege.

LETTER OF INTENT. Any of the eligible persons described above may, within
90 days of their investment, sign a statement of intent ("Letter of Intent") in
the form provided by the Underwriter, covering purchases of shares of any one or
more of the Series and of Class A shares of the other Eligible Funds to be made
within a period of thirteen months, provided said shares are currently being
offered to the general public and only in those states where such shares may be
legally sold, and thereby become eligible for the reduced sales charge
applicable to the total amount purchased. A Letter of Intent filed after the
date of investment is considered retroactive to the date of investment for
determination of the thirteen-month period. The Letter of Intent is not a
binding obligation on either the investor or the Series. During the term of a
Letter of Intent, Administrative Data Management Corp. ("Transfer Agent") will
hold

<PAGE>

shares representing 5% of each purchase in escrow, which shares will be released
upon completion of the intended investment.

Purchases of Series shares made under a Letter of Intent are made at the
sales charge applicable to the purchase of the aggregate amount of shares
covered by the Letter of Intent as if they were purchased in a single
transaction. The applicable quantity discount will be based on the sum of the
then current value at public offering price (I.E., net asset value plus
applicable sales charge) of all shares of the Series and Class A shares of the
other Eligible Funds and the net asset value of all Class B shares of the other
Eligible Funds, including Class B shares of the Money Market Funds, currently
owned, together with the aggregate offering price of purchases to be made under
the Letter of Intent. If all such shares are not so purchased, a price
adjustment is made, depending upon the actual amount invested within such
period, by the redemption of sufficient shares held in escrow in the name of the
investor (or by the investor paying the commission differential). A Letter of
Intent can be amended (1) during the thirteen-month period if the purchaser
files an amended Letter of Intent with the same expiration date as the original
Letter of Intent, or (2) automatically after the end of the period, if total
purchases credited to the Letter of Intent qualify for an additional reduction
in the sales charge. The Letter of Intent privilege may be modified or
terminated at any time by the Underwriter.

CUMULATIVE PURCHASE PRIVILEGE. Upon written notice to EIC, shares of a
Series are also available at a quantity discount on new purchases if the then
current value at the current public offering price (I.E., net asset value plus
applicable sales charge) of all shares of the Series and all Class A shares of
the other Eligible Funds and the net asset value of all Class B shares of the
other Eligible Funds, including Class B shares of the Money Market Funds,
previously purchased and then owned, plus the value of Series shares being
purchased at the current public offering price, amount to $100,000 or more.
Such quantity discounts may be modified or terminated at any time by the
Underwriter.

RETIREMENT PLANS

PROFIT-SHARING/MONEY PURCHASE PENSION PLANS. FIC offers prototype Profit-
Sharing, Money Purchase Pension and 401(k) Retirement Plans ("Retirement Plans")
approved by the IRS for corporations, sole proprietorships and partnerships.
The Custodial Agreement for each Profit-Sharing and Money Purchase Pension Plan
provides that First Financial Savings Bank, S.L.A. ("First Financial Savings"),
an affiliate of FIC, will furnish all required custodial services.

Additional versions of prototype qualified retirement plans for eligible
employers, including 401(k), money purchase, profit sharing and target benefit
plans, are offered.

Currently, there are no annual service fees chargeable to participants in
connection with a Plan account. Participants are, however, charged $5.00 for
opening a Plan account, other than a 401(k) Plan account. Each Series currently
pays the annual $10.00 custodian fee for each Plan account, if applicable,
maintained with such Series. This policy may be changed at any time by a Series
on 45 days' written notice. First Financial Savings has reserved the right to
waive its fees at any time or to change the fees on 45 days' prior written
notice.

A participant/shareholder's account under any of the foregoing retirement
plans may be charged a distribution fee (at the time of withdrawal) of $7.00 for
a single distribution of the entire account and $1.00 for each periodic
distribution therefrom.

<PAGE>

The Plan documents contain further specific information about the Plans and
may be obtained from your Representative. Prior to establishing a Plan, you are
advised to consult with your legal and tax advisers.

SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own shares of a Series with a
net asset value of at least $5,000 may establish a Systematic Withdrawal Plan
("Withdrawal Plan") and either (a) receive monthly, quarterly, semi-annual or
annual checks for any designated amount (minimum $25); or (b) automatically
reinvest the proceeds at net asset value in Class A shares of any other Eligible
Fund, including the Money Market Funds. Dividends and other distributions, if
any, are reinvested additional shares of the Series. Shareholders may add
shares to the Withdrawal Plan or terminate the Withdrawal Plan at any time.
Withdrawal Plan payments will be suspended when a distributing Series has
received notice of a shareholder's death on an individual account. Payments may
recommence upon receipt of written alternate payment instructions and other
necessary documents from the deceased's legal representative. Withdrawal
payments will also be suspended when a payment check is returned to the Transfer
Agent marked as undeliverable by the U.S. Postal Service after two consecutive
mailings.

The withdrawal payments derived from the redemption of sufficient shares in
the account to meet designated payments in excess of dividends and other
distributions may deplete or possibly extinguish the initial investment,
particularly in the event of a market decline, and may result in a capital gain
or loss depending on the shareholder's cost. Purchases of additional shares of
a Series concurrent with withdrawals are ordinarily disadvantageous to
shareholders because of tax liabilities and sales charges.

TELEPHONE TRANSACTIONS. As stated in the Series' Prospectus, the Fund, 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, such
as (1) obtaining some or all of the following information: account number;
name(s) and social security number registered to the account; and personal
identification; (2) recording all telephone transactions; and (3) sending
written confirmation of each transaction to the registered owner.

TAXES

In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Code, a Series -- each Series being treated as a
separate entity for these purposes -- must distribute to its shareholders for
each taxable year at least 90% of its investment company taxable income
(consisting generally of taxable net investment income, net short-term capital
gain and net gains from certain foreign currency transactions) plus, its net
interest income excludable from gross income under Section 103(a) of the Code
("Distribution Requirement") and must meet several additional requirements. For
each Series these requirements include the following: (1) the Series must
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of securities, foreign currencies, or other income (including
gains from options or futures contracts) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); (2) the
Series must derive less than 30% of its gross income each taxable year from the
sale or other disposition of securities, or any of the following, that were held
for less than three months -- options or futures contracts, or foreign
currencies that are not directly related to the Series' principal business of
investing in securities (or options and futures with respect thereto) ("Short-
Short

<PAGE>

Limitation"); (3) at the close of each quarter of the Series' taxable year, at
least 50% of the value of its total assets must be represented by cash and cash
items, U.S. Government securities, securities of other RICs and other
securities, with those other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Series' total assets
and that does not represent more than 10% of the issuer's outstanding voting
securities; and (4) at the close of each quarter of the Series' taxable year,
not more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RICs) of any
one issuer.

Dividends and other distributions declared by a Series in October, November
or December of any year and payable to shareholders of record on a date in any
of those months are deemed to have been paid by the Series and received by the
shareholders on December 31 of that year if the distributions are paid by the
Series during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

A portion of the dividends from BLUE CHIP FUND's investment company taxable
income may be eligible for the dividends-received deduction allowed to
corporations. The eligible portion may not exceed the aggregate dividends
received by the Series from U.S. corporations. However, dividends received by a
corporate shareholder and deducted by it pursuant to the dividends-received
deduction are subject indirectly to the alternative minimum tax. No dividends
paid by INSURED TAX EXEMPT FUND or BLUE CHIP FUND are expected to be eligible
for this deduction.

If shares of a Series are sold at a loss after being held for six months or
less, the loss (to the extent, in the case of INSURED TAX EXEMPT FUND, it is not
disallowed) will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.

Each Series will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.

Dividends and interest received by HIGH YIELD FUND may be subject to
income, withholding or other taxes imposed by foreign countries that would
reduce the yield on its securities. Tax conventions between certain countries
and the United States may reduce or eliminate these foreign taxes, however, and
many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors.

The use by a Series of hedging strategies, such as writing (selling) and
purchasing options and futures contracts involves complex rules that will
determine for income tax purposes the character and timing of recognition of the
gains and losses such Series realizes in connection therewith. Income from
foreign currencies (except certain gains therefrom that may be excluded by
future regulations), and income from transactions in options and futures
contracts derived by a Series with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under the
Income Requirement. However, income from a Series' disposition of options and
futures contracts will be subject to the Short-Short Limitation if they are held
for less than three months. Income from a Series' disposition of foreign
currencies that are not directly related to its principal business of investing
in securities (or options and futures with respect to securities) also will be
subject to the Short-Short Limitation if they are held for less than three
months.

<PAGE>

If a Series satisfies certain requirements, then any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Series satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Series intends that, when it engages in hedging strategies, it will qualify for
this treatment, but at the present time it is not clear whether this treatment
will be available for all of such Series' hedging transactions. To the extent
this treatment is not available, such Series may be forced to defer the closing
out of certain options or futures contracts beyond the time when it otherwise
would be advantageous to do so, in order for such Series to continue to qualify
as a RIC.

Dividends paid by INSURED TAX EXEMPT FUND will qualify as exempt-interest
dividends as defined in the Prospectus, and thus will be excludable from gross
income by its shareholders, if the Series satisfies the requirement that, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of securities the interest on which is excludable from
gross income under section 103(a) of the Code; the Series intends to continue to
satisfy this requirement. The aggregate dividends excludable from the
shareholders' gross income may not exceed the Series' net tax-exempt income.
The shareholders' treatment of dividends from the Series under state and local
income tax laws may differ from the treatment thereof under the Code.

If shares of INSURED TAX EXEMPT FUND are sold at a loss after being held
for six months or less, the loss will be disallowed to the extent of any exempt-
interest dividends received on those shares.

Tax-exempt interest attributable to certain private activity bonds ("PABs")
(including, in the case of a RIC receiving interest on such bonds, a
proportionate part of the exempt-interest dividends paid by that RIC) is an item
of tax preference for purposes of the alternative minimum tax. Exempt-interest
dividends received by a corporate shareholder also may indirectly be subject to
that tax without regard to whether INSURED TAX EXEMPT FUND's tax-exempt interest
was attributable to such bonds. Entities or persons who are "substantial users"
(or persons related to "substantial users") of facilities financed by PABs or
industrial development bonds ("IDBs") should consult their tax advisers before
purchasing shares of INSURED TAX EXEMPT FUND because, for users of certain of
these facilities, the interest on such bonds is not exempt from Federal income
tax. For these purposes, the term "substantial user" is defined generally to
include a "non-exempt person" who regularly uses in trade or business a part of
a facility financed from the proceeds of PABs or IDBs.

Up to 85% of social security and certain railroad retirement benefits may
be included in taxable income for recipients whose modified adjusted gross
income (which includes income from tax-exempt sources such as INSURED TAX EXEMPT
FUND) plus 50% of their benefits exceeds certain base amounts. Exempt-interest
dividends from INSURED TAX EXEMPT FUND still are tax-exempt to the extent
described in the Prospectus; they are only included in the calculation of
whether a recipient's income exceeds the established amounts.

INSURED TAX EXEMPT FUND may invest in municipal bonds that are purchased,
generally not on their original issue, with market discount (that is, at a price
less than the principal amount of the bond or, in the case of a bond that was
issued with original issue discount, a price less than the amount of the issue
price plus accrued original issue discount) ("municipal market discount bonds").
Gain on the disposition of a municipal market discount bond purchased by the
Series after April 30, 1993 (other than a bond with a fixed maturity date within
one year from its issuance), generally is treated as ordinary (taxable) income,

<PAGE>

rather than capital gain, to the extent of the bond's accrued market discount at
the time of disposition. Market discount on such a bond generally is accrued
ratably, on a daily basis, over the period from the acquisition date to the date
of maturity. In lieu of treating the disposition gain as above, the Series may
elect to include market discount in its gross income currently, for each taxable
year to which it is attributable.

If INSURED TAX EXEMPT FUND invests in any instruments that generate taxable
income, distributions of the interest earned thereon will be taxable to the
Series' shareholders as ordinary income to the extent of its earnings and
profits. Moreover, if the Series realizes capital gain as a result of market
transactions, any distributions of such gain will be taxable to its
shareholders. There also may be collateral Federal income tax consequences
regarding the receipt of tax-exempt dividends by shareholders such as S
corporations, financial institutions and property and casualty insurance
companies. A shareholder falling into any such category should consult its tax
adviser concerning its investment in shares of INSURED TAX EXEMPT FUND.

Each Series may acquire zero coupon securities issued with original issue
discount. As a holder of those securities, each Series must include in its
income the original issue discount that accrues on the securities for the
taxable year, even if the Series receives no corresponding payment on the
securities during the year. Similarly, each Series must include in its gross
income securities it receives as "interest" on pay-in-kind securities. Because
each Series annually must distribute substantially all of its investment company
taxable income, including any original issue discount and other non-cash income,
in order to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax, a Series may be required in a particular year to distribute as a
dividend an amount that is greater than the total amount of cash it actually
receives. Those distributions will be made from the Series' cash assets or from
the proceeds of sales of portfolio securities, if necessary. A Series may
realize capital gains or losses from those sales, which would increase or
decrease its investment company taxable income and/or net capital gain (the
excess of net long-term capital gain over net short-term capital loss). In
addition, any such gains may be realized on the disposition of securities held
for less than three months. Because of the Short-Short Limitation, any such
gains would reduce the Series' ability to sell other securities, or options on
futures contracts, held for less than three months that it might wish to sell in
the ordinary course of its portfolio management.

PERFORMANCE INFORMATION

A Series may advertise its performance in various ways.

Each Series' "average annual total return" ("T") is an average annual
compounded rate of return. The calculation produces an average annual total
return for the number of years measured. It is the rate of return based on
factors which include a hypothetical initial investment of $1,000 ("P" in the
formula below) over a number of years ("n") with an Ending Redeemable Value
("ERV") of that investment, according to the following formula:

T=[(ERV/P)(1/n)]-1

The "total return" uses the same factors, but does not average the rate of
return on an annual basis. Total return is determined as follows:

<PAGE>

[ERV-P]/P = TOTAL RETURN

In providing such performance data, each Series will assume the payment of
the maximum sales charge of 4.75% (as a percentage of the offering price) on the
initial investment ("P"). Each Series will assume that during the period
covered all dividends and other distributions are paid in additional Series
shares at net asset value per share, and that the investment is redeemed at the
end of the period.

Return information may be useful to investors in reviewing a Series'
performance. However, certain factors should be taken into account before using
this information as a basis for comparison with alternative investments. No
adjustment is made for taxes payable on distributions. Return will fluctuate
over time and return for any given past period is not an indication or
representation by a Series of future rates of return on its shares. At times,
the Adviser may reduce its compensation or assume expenses of a Series in order
to reduce the Series' expenses. Any such waiver or reimbursement would increase
the Series' return during the period of the waiver or reimbursement. Average
annual total return for the periods ending December 31, 1994 are listed below:

AVERAGE ANNUAL TOTAL RETURN:

TWELVE MONTHS FIVE YEARS FROM INCEPTION
------------- ---------- ----------------

BLUE CHIP FUND (5.89%) N/A 6.00%
HIGH YIELD FUND (6.92) 8.36 7.19
INSURED TAX EXEMPT FUND (8.54) N/A 7.48

Average annual total return and total return may also be based on
investment at reduced sales charge levels or at net asset value. Any quotation
of return not reflecting the maximum sales charge will be greater than if the
maximum sales charge were used. Average annual return computed at net asset
value for the periods ended December 31, 1994 for each Series' shares is set
forth in the table below:

AVERAGE ANNUAL TOTAL RETURN:*

TWELVE MONTHS ENDED FIVE YEARS ENDED FROM INCEPTION**
------------------- ---------------- ----------------

BLUE CHIP FUND (1.21)% N/A 7.12
HIGH YIELD FUND (2.32) 9.43 7.86
INSURED TAX EXEMPT FUND (3.96) N/A 8.66

- ----------------

* All average annual total return figures reflect the current maximum sales
charge of 4.75%. In addition, certain expenses of the Series have been waived
or reimbursed from commencement of operations through December 31, 1994.
Accordingly, return figures are higher than they would have been had such
expenses not been waived or reimbursed. The figures also assume the payment of
dividends in additional shares at net asset value.

** The inception dates for the Series are as follows: BLUE CHIP FUND - May 17,
1990; HIGH YIELD FUND - March 24, 1987; and INSURED TAX EXEMPT FUND - July 26,
1990. Certain expenses of the Series have been waived or reimbursed from
commencement of operations through December 31, 1994. Accordingly, return
figures are higher than they would have been had such expenses not been waived
or reimbursed.

<PAGE>

Yield for HIGH YIELD FUND and INSURED TAX EXEMPT FUND is presented for a
specified thirty-day period ("base period"). Yield is based on the amount
determined by (i) calculating the aggregate amount of dividends and interest
earned by a Series during the base period less expenses accrued for that period
(net of reimbursement), and (ii) dividing that amount by the product of (A) the
average daily number of shares of that Series outstanding during the base period
and entitled to receive dividends and (B) the per share maximum public offering
price of that Series on the last day of the base period. The result is
annualized by compounding on a semi-annual basis to determine a Series' yield.
For this calculation, interest earned on debt obligations held by a Series is
generally calculated using the yield to maturity (or first expected call date)
of such obligations based on their market values (or, in the case of
receivables-backed securities such as GNMA Certificates, based on cost).
Dividends on equity securities are accrued daily at their estimated stated
dividend rates.

INSURED TAX-EXEMPT FUND's tax-equivalent yield during the base period may
be presented in one or more stated tax brackets. Tax-equivalent yield is
calculated by adjusting the Series' tax-exempt yield by a factor designed to
show the approximate yield that a taxable investment would have to earn to
produce an after-tax yield equal to the Series' tax-exempt yield.

To calculate a taxable bond yield which is equivalent to a tax-exempt bond
yield (for Federal tax purposes), shareholders may use the following formula:

TAX FREE YIELD
-------------------- = Taxable Equivalent Yield
1 - Your Tax Bracket

For the 30 days ended December 31, 1994, the yield and tax-equivalent yield
(assuming a Federal tax rate of 36%) for INSURED TAX EXEMPT FUND was 5.80% and
9.06%, respectively. The maximum Federal tax rate for this period was 39.6%.
For the 30 days ended December 31, 1994, the yield for HIGH YIELD FUND was
9.37%. Some of each Series' expenses were waived or reimbursed during this
period. Accordingly, yields are higher than they would have been had such
expenses not been waived or reimbursed.

The distribution rate for each Series is presented for a twelve-month
period. It is calculated by adding the dividends for the last twelve months and
dividing the sum by that Series' offering price per share at the end of that
period. The distribution rate is also calculated by using the Series' net asset
value. Distribution rate calculations do not include capital gain
distributions, if any, paid. The distribution rate for the twelve-month period
ended December 31, 1994 for shares of HIGH YIELD FUND and INSURED TAX EXEMPT
FUND calculated using the offering price was 10.03% and 5.23%, respectively.
The distribution rate for the same period for shares of HIGH YIELD FUND and
INSURED TAX EXEMPT FUND calculated using the net asset value was 10.53% and
5.49%, respectively. During this period certain expenses of the Series were
waived or reimbursed. Accordingly, the distribution rates are higher than they
would have been had such expenses not been waived or reimbursed.

Each Series may include in advertisements and sales literature,
information, examples and statistics to illustrate the effect of compounding
income at a fixed rate of return to demonstrate the growth of an investment over
a stated period of time resulting from the payment of dividends and capital gain
distributions in additional shares. These examples may also include
hypothetical returns comparing taxable versus tax-deferred growth which would
pertain to an IRA, section 403(b)(7) Custodial Account or other

<PAGE>

qualified retirement program. The examples used will be for illustrative
purposes only and are not representations by the Series of past or future yield
or return.

From time to time, in reports and promotional literature, the Series may
compare their performance to, or cite the historical performance of, Overnight
Government repurchase agreements, U.S. Treasury bills, notes and bonds,
certificates of deposit, and six-month money market certificates or indices of
broad groups of unmanaged securities considered to be representative of, or
similar to, the Series' portfolio holdings, such as:

Lipper Analytical Services, Inc. ("Lipper") is a widely-recognized
independent service that monitors and ranks the performance of regulated
investment companies. The Lipper performance analysis includes the
reinvestment of capital gain distributions and income dividends but does
not take sales charges into consideration. The method of calculating total
return data on indices utilizes actual dividends on ex-dividend dates
accumulated for the quarter and reinvested at quarter end. This
calculation is at variance with SEC release 327 of August 8, 1972, which
utilizes latest 12 month dividends. The latter method is the one used by
S&P.

Morningstar Mutual Funds ("Morningstar"), a semi-monthly publication of
Morningstar, Inc. Morningstar proprietary ratings reflect historical risk-
adjusted performance and are subject to change every month. Funds with at
least three years of performance history are assigned ratings from one star
(lowest) to five stars (highest). Morningstar ratings are calculated from
the funds' three-, five-, and ten-year average annual returns (when
available) and a risk factor that reflects fund performance relative to
three-month Treasury bill monthly returns. Fund's returns are adjusted for
fees and sales loads. Ten percent of the funds in an investment category
receive five stars, 22.5% receive four stars, 35% receive three stars,
22.5% receive two stars, and the bottom 10% receive one star.

Salomon Brothers Inc., "Market Performance," a monthly publication which
tracks principal return, total return and yield on the Salomon Brothers
Broad Investment-Grade Bond Index and the components of the Index.

Telerate Systems, Inc., a computer system to which the Adviser subscribes
which daily tracks the rates on money market instruments, public corporate
debt obligations and public obligations of the U.S. Treasury and agencies
of the U.S. Government.

The Wall Street Journal, a daily newspaper publication which lists the
yields and current market values on money market instruments, public
corporate debt obligations, public obligations of the U.S. Treasury and
agencies of the U.S. Government as well as common stocks, preferred stocks,
convertible preferred stocks, options and commodities; in addition to
indices prepared by the research departments of such financial
organizations as Lehman Bros., Merrill Lynch, Pierce, Fenner and Smith,
Inc., First Boston, Salomon Brothers, Morgan Stanley, Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette, Value Line, Datastream International, James
Capel, S.G. Warburg Securities, County Natwest and UBS UK Limited,
including information provided by the Federal Reserve Board, Moody's, and
the Federal Reserve Bank.

Merrill Lynch, Pierce, Fenner & Smith, Inc., "Taxable Bond Indices," a
monthly corporate government index publication which lists principal,
coupon and total return on over 100 different

<PAGE>

taxable bond indices which Merrill Lynch tracks. They also list the par
weighted characteristics of each Index.

Lehman Brothers, Inc., "The Bond Market Report," a monthly publication
which tracks principal, coupon and total return on the Lehman Govt./Corp.
Index and Lehman Aggregate Bond Index, as well as all the components of
these Indices.

Standard & Poor's 500 Composite Stock Price Index and the Dow Jones
Industrial Average of 30 stocks are unmanaged lists of common stocks
frequently used as general measures of stock market performance. Their
performance figures reflect changes of market prices and quarterly
reinvestment of all distributions but are not adjusted for commissions or
other costs.

The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics,
is a commonly used measure of inflation. The Index shows changes in the
cost of selected consumer goods and does not represent a return on an
investment vehicle.

The NYSE composite of component indices--unmanaged indices of all
industrial, utilities, transportation, and finance stocks listed on the
NYSE.

The Russell 2500 Index, prepared by the Frank Russell Company, consists of
U.S. publicly traded stocks of domestic companies that rank from 500 to
3000 by market capitalization. The Russell 2500 tracks the return on these
stocks based on price appreciation or depreciation and does not include
dividends and income or changes in market values caused by other kinds of
corporate changes.

The Russell 2000 Index, prepared by the Frank Russell Company, consists of
U.S. publicly traded stocks of domestic companies that rank from 1000 to
3000 by market capitalization. The Russell 2000 tracks the return on these
stocks based on price appreciation or depreciation and does not include
dividends and income or changes in market values caused by other kinds of
corporate changes.

Reuters, a wire service that frequently reports on global business.

Standard & Poor's Utilities Index is an unmanaged capitalization weighted
index comprising common stock in approximately 40 electric, natural gas
distributors and pipelines, and telephone companies. The Index assumes the
reinvestment of dividends.

Moody's Stock Index, an unmanaged index of utility stock performance.

From time to time, in reports and promotional literature, performance
rankings and ratings reported periodically in national financial publications
such as MONEY, FORBES, BUSINESS WEEK, BARRON'S, FINANCIAL TIMES and FORTUNE may
also be used. In addition, quotations from articles and performance ratings and
ratings appearing in daily newspaper publications such as THE WALL STREET
JOURNAL, THE NEW YORK TIMES and NEW YORK DAILY NEWS may be cited.

<PAGE>

GENERAL INFORMATION

AUDITS AND REPORTS. The accounts of each Series are audited twice a year
by Tait, Weller & Baker, independent certified public accountants, Two Penn
Center Plaza, Philadelphia, PA, 19102-1707. Shareholders of each Series receive
semi-annual and annual reports, including audited financial statements, and a
list of securities owned.

5% SHAREHOLDERS. As of April 17, 1995, the following beneficially owned
more than 5% of the outstanding Class B shares of the BLUE CHIP FUND:

SHAREHOLDER % OF SHARES
----------- -----------

Ruth B. Schott 5.0
4411 3rd Street NW
Hickory, NC 28601

Alice P. Skokos 6.9
130 Laurel Ave
Sea Girt, NJ 08750

Irwin M. Yanowitcz 5.1
1244 Yahres Road
Sharon, PA 16146

Robert E. Nunnally, Jr. 9.1
3361 Lakeland Dr., SW
Roanoke, VA 24018

TRANSFER AGENT. Administrative Data Management Corp., 10 Woodbridge Center
Drive, Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as
transfer agent for the Series and as redemption agent for regular redemptions.
The fees charged to each Series by the Transfer Agent are $5.00 to open an
account; $3.00 for each certificate issued; $.65 per account per month; $10.00
for each legal transfer of shares; $.45 per account per dividend declared; $5.00
for each exchange of shares into a Series; $5.00 for each partial withdrawal or
complete liquidation; and $1.00 per account per report required by any
governmental authority. Additional fees charged to the Series by the Transfer
Agent are assumed by the Underwriter. The Transfer Agent reserves the right to
change the fees on prior notice to the Series. The $5 administrative fee for
exchange transactions into the Series, which is generally to be charged to the
shareholder, is being borne on a voluntary basis by the Series for an indefinite
period. Upon request from shareholders, the Transfer Agent will provide an
account history. For account histories covering the most recent three year
period, there is no charge. The Transfer Agent charges a $5.00 administrative
fee for each account history covering the period 1983 through 1990 and $10.00
per year for each account history covering the period 1974 through 1982.
Account histories prior to 1974 will not be provided. If any communication from
the Transfer Agent to a shareholder is returned from the U.S. Postal Service
marked as "Undeliverable" two consecutive times, the Transfer Agent will cease
sending any further materials to the shareholder until the Transfer Agent is
provided with a correct address. Furthermore, if there is no known address for
a shareholder for at least one year, the Transfer Agent will charge such
shareholder's account $40 to cover the Transfer Agent's expenses in trying to
locate the shareholder's correct address. For the fiscal year ended
December 31, 1994, HIGH YIELD FUND paid

<PAGE>

$19,046 in transfer agency fees and expenses. For the fiscal year ended
December 31, 1994, BLUE CHIP FUND and INSURED TAX EXEMPT FUND accrued $2,192 and
$7,133, respectively, in transfer agency fees and expenses, all of which were
voluntarily waived by the Transfer Agent. The Transfer Agent's telephone number
is 1-800-423-4026.

SHAREHOLDER LIABILITY. The Fund is organized as an entity known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable for the
obligations of the Fund. The Declaration of Trust however, contains an express
disclaimer of shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each agreement, obligation,
or instrument entered into or executed by the Fund or the Trustees. The
Declaration of Trust provides for indemnification out of the property of the
Fund of any shareholder held personally liable for the obligations of the Fund.
The Declaration of Trust also provides that the Fund shall, upon request, assume
the defense of any claim made against any shareholder for any act or obligation
of the Fund and satisfy any judgment thereon. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
The Adviser believes that, in view of the above, the risk of personal liability
to shareholders is immaterial and extremely remote. The Declaration of Trust
further provides that the Trustees will not be liable for errors of judgment or
mistakes of fact or law, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office. The Fund may have an
obligation to indemnify Trustees and officers with respect to litigation.

TRADING BY PORTFOLIO MANAGERS AND OTHER ACCESS PERSONS. Pursuant to
Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, the Fund and the
Adviser have adopted Codes of Ethics restricting personal securities trading by
portfolio managers and other access persons of the Fund. Among other things,
such persons: (a) must have all trades pre-cleared by the Adviser; (b) are
restricted from short-term trading; (c) must have duplicate statements and
transactions confirmations reviewed by a compliance officer; and (d) are
prohibited from purchasing securities of initial public offerings.

APPENDIX A
DESCRIPTION OF COMMERCIAL PAPER RATINGS

STANDARD & POOR'S RATINGS GROUP

Standard & Poor's Rating Group ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. Ratings are graded into several categories, ranging from
"A-1" for the highest quality obligations to "D" for the lowest.

A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) designation.

<PAGE>

MOODY'S INVESTORS SERVICE, INC.

Moody's Investors Service, Inc. ("Moody's") short-term debt ratings are
opinions of the ability of issuers to repay punctually senior debt obligations
which have an original maturity not exceeding one year. Obligations relying
upon support mechanisms such as letters-of-credit and bonds of indemnity are
excluded unless explicitly rated.

PRIME-1 Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:

- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.

APPENDIX B
DESCRIPTION OF MUNICIPAL NOTE RATINGS

STANDARD & POOR'S RATINGS GROUP

S&P's note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment.

- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).

- Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).

Note rating symbols are as follows:

SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.

<PAGE>

MOODY'S INVESTORS SERVICE, INC.

Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). This distinction is in
recognition of the difference between short-term credit risk and long-term risk.

MIG-1. Loans bearing this designation are of the best quality, enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.

<PAGE>

Financial Statements

as of December 31, 1994

44
<PAGE>

<TABLE>
<CAPTION>
Portfolio of Investments
EXECUTIVE INVESTORS BLUE CHIP FUND
December 31, 1994
- ----------------------------------------------------------------------------------------------
Amount
Invested
For Each
$10,000 of
Shares Security Value Net Assets
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--89.5%
Basic Industry--2.7%
400 Monsanto Company $ 28,200 $ 271
- ----------------------------------------------------------------------------------------------
Capital Goods--8.9%
200 Boeing Co. 9,350 90
100 Browning Ferris Industries, Inc. 2,837 27
100 Deere & Company 6,625 64
150 Dover Corporation 7,744 74
50 Eaton Corp. 2,475 24
100 Emerson Electric 6,250 60
550 General Electric Company 28,050 269
75 Ingersoll-Rand Co. 2,363 23
100 ITT Corporation 8,863 85
50 McDonnell Douglas Corp. 7,100 68
200 *Varity Corp. 7,250 70
150 WMX Technologies Inc. 3,937 38
- ----------------------------------------------------------------------------------------------
92,844 892
- ----------------------------------------------------------------------------------------------
Consumer Durables--2.4%
100 Chrysler Corporation 4,900 47
250 Ford Motor Co. 7,000 67
200 General Motors Corp. 8,450 81
50 Goodyear Tire & Rubber Company 1,680 16
150 Masco Corporation 3,394 33
- ----------------------------------------------------------------------------------------------
25,424 244
- ----------------------------------------------------------------------------------------------
Consumer Non-Durables--18.2%
250 Abbott Laboratories 8,155 78
100 American Home Products Corp. 6,275 60
50 Anheuser Busch Companies, Inc. 2,544 24
150 Bristol-Myers Squibb Co. 8,681 83
450 Coca Cola Company 23,175 223
200 CPC International Inc. 10,650 102
100 Eastman Kodak Co. 4,775 46
50 Gillette Co. 3,738 36
200 Johnson & Johnson 10,950 105
100 Kellogg Company 5,812 56
150 Kimberly Clark Corporation 7,575 73
100 Lilly (Eli) & Co. 6,563 63
400 Merck & Co., Inc. 15,250 147
250 Pepsico Inc. 9,063 87
200 Pet, Inc. 3,950 38
100 Pfizer Inc. 7,725 74
350 Philip Morris Cos., Inc. 20,125 194
200 Procter & Gamble Co. 12,400 119
100 *Ralcorp Holdings Inc. 2,225 21
250 Sara Lee Corp. 6,313 61
50 Schering-Plough Corp. 3,700 36
300 Stride Rite Corp. 3,338 32
50 Unilever PLC 5,825 56
- ----------------------------------------------------------------------------------------------
188,807 1,814
- ----------------------------------------------------------------------------------------------
Consumer Services--7.5%
100 Albertson's Inc. 2,900 28
100 Dayton-Hudson Corp. 7,075 69
150 Disney (Walt) Company 6,919 66
100 GAP, Inc. (The) 3,050 29
150 Home Depot, Inc. (The) 6,900 67
100 *Kroger Company 2,413 23
50 Mattel Inc. 1,256 12
100 May Department Stores Co. 3,375 32
200 McDonald's Corp. 5,850 56
150 Nordstrom Inc. 6,300 61
150 Officemax Inc. 3,975 38
100 Rite Aid Corp. 2,338 22
100 Sears, Roebuck & Co. 4,600 44
25 Time Warner Inc. 878 8
100 *Toys "R" Us, Inc. 3,050 29
100 *Viacom Inc.--Class "B" 4,063 39
600 Wal-Mart Stores, Inc. 12,750 124
- ----------------------------------------------------------------------------------------------
77,692 747
- ----------------------------------------------------------------------------------------------
Energy--18.5%
300 Alcan Aluminum Ltd. 7,612 73
300 Amoco Corp. 17,738 170
150 Atlantic Richfield Co. 15,263 147
50 Burlington Resources Inc. 1,750 17
200 Chevron Corp. 8,925 86
100 Dow Chemical Co. 6,725 65
200 Du Pont (E.I.) De Nemours & Co. 11,250 108
200 Enron Corporation 6,100 59
400 Exxon Corp. 24,300 233
100 Halliburton Co. 3,313 32
100 Inland Steel Industries, Inc. 3,513 34
50 Kerr-McGee Corp. 2,300 22
130 Minnesota Mining & Manufacturing Company 6,939 67
150 Mobil Corporation 12,637 121
200 NICOR, Inc. 4,550 44
150 Nucor Corp. 8,325 80
100 Pacific Enterprises 2,125 20
50 Phillips Petroleum Co. 1,638 16
225 Royal Dutch Petroleum Company 24,187 232
100 Schlumberger, Ltd. 5,038 48
100 Scott Paper Co. 6,913 66
100 Texaco Inc. 5,988 58
200 Unocal Corp. 5,450 52
- ----------------------------------------------------------------------------------------------
192,579 1,850
- ----------------------------------------------------------------------------------------------
Financial--7.9%
150 American Express Co. 4,425 43
100 American International Group Inc. 9,800 94
247 Banc One Corporation 6,268 60
250 BankAmerica Corporation 9,875 95
100 Chase Manhattan Corp. 3,438 33
100 Chemical Banking Corp. 3,588 34
150 Citicorp 6,206 60
150 Federal National Mortgage Association 10,930 105
150 First Fidelity Bancorporation 6,731 65
350 MGIC Investment Corporation 11,594 111
200 NationsBank Corporation 9,025 87
- ----------------------------------------------------------------------------------------------
81,880 787
- ----------------------------------------------------------------------------------------------
Health Care Miscellaneous--2.1%
150 Columbia/HCA Healthcare Corporation 5,475 53
300 U.S. Healthcare, Inc. 12,375 119
50 Warner-Lambert Company 3,850 37
- ----------------------------------------------------------------------------------------------
21,700 209
- ----------------------------------------------------------------------------------------------
Retail Trade--.1%
100 *Price/Costco, Inc. 1,288 12
- ----------------------------------------------------------------------------------------------
Technology--9.3%
200 *Airtouch Communications Inc. 5,825 56
50 Autodesk Inc. 1,981 19
100 Automatic Data Processing, Inc. 5,850 56
100 Cisco Systems, Inc. 3,513 34
50 *Compaq Computer Corp. 1,975 19
100 Hewlett-Packard Co. 9,987 96
100 Intel Corporation 6,387 61
200 International Business Machines Corp. 14,700 142
300 MCI Communications Corp. 5,513 53
200 *Microsoft Corp. 12,225 118
200 Motorola, Inc. 11,575 111
200 National Semiconductor Corp. 3,900 37
300 *Oracle Systems Corp. 13,237 127
- ----------------------------------------------------------------------------------------------
96,668 929
- ----------------------------------------------------------------------------------------------
Transportation--1.0%
50 *AMR Corp. 2,662 26
300 *Southern Pacific Rail Corp 5,436 52
125 Southwest Airlines Co. 2,094 20
- ----------------------------------------------------------------------------------------------
10,192 98
- ----------------------------------------------------------------------------------------------
Utilities--10.9%
300 A T & T Corp. 15,075 145
200 Ameritech Corp. 8,075 78
150 Bell Atlantic Corp. 7,462 72
150 BellSouth Corp. 8,117 78
200 Carolina Power & Light Co. 5,325 51
400 Cinergy Corp. 9,350 90
200 Duke Power Co. 7,625 73
250 FPL Group, Inc. 8,780 84
300 GTE Corporation 9,113 87
150 Nynex Corp. 5,513 53
200 Pacific Telesis Group 5,700 55
200 Pacificorp 3,625 35
200 *SBC Communications Inc. 8,075 78
200 Texas Utilities Co. 6,400 61
150 U.S. West, Inc. 5,344 51
- ----------------------------------------------------------------------------------------------
113,579 1,091
- ----------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $913,199) 930,853 8,944
- ----------------------------------------------------------------------------------------------
CONVERTIBLE BONDS--1.2%
Leisure Time
$20M Bell Sports Corporation, 4 1/4%, 2000 (cost $14,991) 12,875 124
- ----------------------------------------------------------------------------------------------
Total Value of Investments (cost $928,190) 90.7% 943,728 9,068
Other Assets, Less Liabilities 9.3 97,010 932
- ----------------------------------------------------------------------------------------------
Net Assets 100.0% $1,040,738 $10,000
==============================================================================================

*Non-income producing

See notes to financial statements
</TABLE>

<TABLE>
<CAPTION>
Portfolio of Investments
EXECUTIVE INVESTORS HIGH YIELD FUND
December 31, 1994
- -------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--92.8%
Aerospace/Defense--5.4%
$ 300M Allison Engine Company, Inc., 10%, 2003 $ 309,000 $ 204
275M Dyncorp, PIK, 16%, 2003 259,506 171
250M Fairchild Industries, Inc., 12 1/4%, 1999 246,562 163
- -------------------------------------------------------------------------------------------------------------------------
815,068 538
- -------------------------------------------------------------------------------------------------------------------------
Apparel/Textiles--2.4%
400M Westpoint Stevens, Inc., 9 3/8%, 2005 361,000 238
- -------------------------------------------------------------------------------------------------------------------------
Automotive--6.9%
400M JPS Automotive Products Corp., 11 1/8%, 2001 391,000 258
150M Lear Seating, Inc., 11 1/4%, 2000 152,813 101
500M SPX Corp., 11 3/4%, 2002 499,375 330
- -------------------------------------------------------------------------------------------------------------------------
1,043,188 689
- -------------------------------------------------------------------------------------------------------------------------
Building Materials-- .5%
185M Waxman Industries, Inc., 0%-12 3/4%, 2004 82,325 54
- -------------------------------------------------------------------------------------------------------------------------
Chemicals--11.4%
425M Buckeye Cellulose, Inc., 10 1/4%, 2001 399,500 264
550M Harris Chemical North America, Inc., 0%-10 1/4%, 2001 456,500 301
500M OSI Specialties, Inc., 9 1/4%, 2003 457,500 303
400M Rexene Corp., 11 3/4%, 2004 411,000 271
- -------------------------------------------------------------------------------------------------------------------------
1,724,500 1,139
- -------------------------------------------------------------------------------------------------------------------------
Conglomerates--1.4%
500M International Semi-Tech Microelectronics, Inc., 0%-11 1/2%, 2003 212,500 140
- -------------------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--1.7%
250M Calmar, Inc., 12%, 1997 251,250 166
- -------------------------------------------------------------------------------------------------------------------------
Durable Goods Manufacturing--1.2%
200M Fairfield Manufacturing, Inc., 11 3/8%, 2001 188,000 124
- -------------------------------------------------------------------------------------------------------------------------
Electrical Equipment--3.4%
450M Essex Group, Inc., 10%, 2003 420,750 279
44M Thermadyne Industries, Inc., 10 1/4%, 2002 42,240 28
62M Thermadyne Industries, Inc., 10 3/4%, 2003 58,280 38
- -------------------------------------------------------------------------------------------------------------------------
521,270 345
- -------------------------------------------------------------------------------------------------------------------------
Energy Services--5.3%
400M Giant Industries, Inc., 9 3/4%, 2003 358,000 236
223M Synergy Group, Inc., 9 1/2%, 2000 178,400 118
250M Transco Energy Co., 11 1/4%, 1999 266,875 176
- -------------------------------------------------------------------------------------------------------------------------
803,275 530
- -------------------------------------------------------------------------------------------------------------------------
Entertainment/Leisure-- .4%
300M +SHRP Capital Corp., 11 3/4%, 1999 52,500 35
- -------------------------------------------------------------------------------------------------------------------------
Financial Services--4.1%
300M Lomas Mortgage, USA, 10 1/4%, 2002 255,000 168
400M Olympic Financial, Ltd., 11 3/4%, 2000 368,000 244
- -------------------------------------------------------------------------------------------------------------------------
623,000 412
- -------------------------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--2.7%
400M Fleming Co., Inc., 10 5/8%, 2001 402,000 265
- -------------------------------------------------------------------------------------------------------------------------
Food Services-- .9%
150M Americold Corp., 11 1/2%, 2005 135,375 89
- -------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging--1.2%
220M Casino America, Inc., 11 1/2%, 2001 185,900 123
- -------------------------------------------------------------------------------------------------------------------------
Healthcare--4.3%
350M American Medical International, Inc., 13 1/2%, 2001 383,469 254
300M Mediq/PRN Life Support Services, Inc., 11 1/8%, 1999 271,500 179
- -------------------------------------------------------------------------------------------------------------------------
654,969 433
- -------------------------------------------------------------------------------------------------------------------------
Media/Cable Television--7.3%
300M Garden State Newspapers, Inc., 12%, 2004 298,500 197
250M Lamar Advertising, Inc., 11%, 2003 239,375 158
400M Outdoor Systems, Inc., 10 3/4%, 2003 362,000 239
200M Summit Communications Group, 10 1/2%, 2005 204,500 135
- -------------------------------------------------------------------------------------------------------------------------
1,104,375 729
- -------------------------------------------------------------------------------------------------------------------------
Mining/Metals--9.7%
300M Carbide/Graphite Group, Inc., 11 1/2%, 2003 303,000 200
200M Geneva Steel Co., Inc., 11 1/8%, 2001 189,000 125
300M Geneva Steel Co., Inc., 9 1/2%, 2004 253,125 167
400M WCI Steel, Inc., 10 1/2%, 2002 385,000 254
400M Wheeling-Pittsburgh Steel Corp., 9 3/8%, 2003 342,000 226
- -------------------------------------------------------------------------------------------------------------------------
1,472,125 972
- -------------------------------------------------------------------------------------------------------------------------
Miscellaneous--1.0%
350M +Acme Holdings, Inc., 11 3/4%, 2000 147,000 97
- -------------------------------------------------------------------------------------------------------------------------
Paper/Forest Products--9.5%
400M Gaylord Container Corp., 11 1/2%, 2001 408,000 269
200M Rainy River Forest Products Co., Inc., 10 3/4%, 2001 199,500 132
500M Stone Container Corp., 9 7/8%, 2001 475,000 314
350M S. D. Warren Co., Inc., 12%, 2004 (Note 6) 358,750 237
- -------------------------------------------------------------------------------------------------------------------------
1,441,250 952
- -------------------------------------------------------------------------------------------------------------------------
Retail-Food/Drug--2.6%
400M Penn Traffic Co., Inc., 10.65%, 2004 393,000 260
- -------------------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.0%
2M Barry's Jewelers, Inc., 12 5/8%, 1996 1,061 1
- -------------------------------------------------------------------------------------------------------------------------
Telecommunications--4.5%
700M PanAmSat Capital Corp., 0%-11 3/8%, 2003 437,500 289
250M Paging Network, Inc., 11 3/4%, 2002 249,375 165
- -------------------------------------------------------------------------------------------------------------------------
686,875 454
- -------------------------------------------------------------------------------------------------------------------------
Transportation--5.0%
300M Moran Transportation Co., 11 3/4%, 2004 283,500 187
500M Trism, Inc., 10 3/4%, 2000 472,500 312
- -------------------------------------------------------------------------------------------------------------------------
756,000 499
- -------------------------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $15,237,316) 14,057,806 9,284
- -------------------------------------------------------------------------------------------------------------------------
UNITS--2.3%
Telecommunications
650 Echostar Communications Corp., 0%-12 7/8%, 2004(a) (cost $373,755) 339,625 224
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--.3%
Electrical Equipment--.1%
648 *Thermadyne Holdings Corp. 7,573 5
- -------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging--.0%
5,063 *Divi Hotels, Inc. 380 --
2,000 *Goldriver Hotel & Casino Corp., Series "B" 3,000 2
- -------------------------------------------------------------------------------------------------------------------------
3,380 2
- -------------------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.2%
4,497 *Barry's Jewelers, Inc. 31,478 21
- -------------------------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $233,978) 42,431 28
- -------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--2.0%
Financial Services
3,000 California Federal Bank, 10 5/8%, Series "B" (cost $300,000) 300,000 198
- -------------------------------------------------------------------------------------------------------------------------
WARRANTS--.1%
Building Materials--.0%
5,900 *Waxman Industries, Inc. (expiring 6/1/04) (Note 6) 2,950 2
- -------------------------------------------------------------------------------------------------------------------------
Entertainment/Leisure--.0%
800 *SHRP Capital Corp. (expiring 7/15/99) (Note 6) -- --
- -------------------------------------------------------------------------------------------------------------------------
Financial Services--.0%
2,400 *Olympic Financial, Ltd. (expiring 9/1/99) 4,200 3
- -------------------------------------------------------------------------------------------------------------------------
Gaming/Lodging-- .1%
717 *Casino America, Inc. (expiring 11/15/96) 179 --
200 *Goldriver Finance Corp., Liquidating Trust 3,000 2
1,800 *Presidential Riverboat Casinos, Inc. (expiring 9/15/96) (Note 6) 7,200 5
- -------------------------------------------------------------------------------------------------------------------------
10,379 7
- -------------------------------------------------------------------------------------------------------------------------
Retail-General Merchandise--.0%
100 *Payless Cashways, Inc. (expiring 11/1/96) 150 --
- -------------------------------------------------------------------------------------------------------------------------
Total Value of Warrants (cost $14,363) 17,679 12
- -------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $16,159,412) 97.5% 14,757,541 9,746
Other Assets, Less Liabilities 2.5 384,387 254
- -------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $15,141,928 $10,000
=========================================================================================================================
* Non-income producing
+ In default as to principal and/or interest (Note 7).
(a) Each unit consists of a $1,000 principal amount of 12 7/8% senior
secured discount note due 6/1/04 and warrants to purchase six shares of
Class "A" common stock.

See notes to financial statements
</TABLE>

<TABLE>
<CAPTION>
Portfolio of Investments
EXECUTIVE INVESTORS INSURED TAX EXEMPT FUND
December 31, 1994
- -------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS--97.5 %
Arizona--4.4%
$250M Maricopa County, Arizona Dev. Auth. Hosp. Facs. Rev.
Samaritan Health Services Series "A" 7%, 12/1/2016 $ 261,563 $ 253
200M Maricopa County, Arizona Sch. Dist. (No. 80 Chandler) 6 1/4%, 7/1/2011 195,250 188
- -------------------------------------------------------------------------------------------------------------------------
456,813 441
- -------------------------------------------------------------------------------------------------------------------------
California--15.6%
Los Angeles County, Calif. Transportation Comm. Sales Tax Revenue:
100M 6 3/4%, 7/1/2020 107,000 103
100M 6.9%, 7/1/2021 107,750 104
200M San Diego Cnty. Water Authority Ctf. of Partn. RITES Var. Rate 4/22/2009 187,000 180
250M San Francisco, Calif. City & County Parking Auth. 7%, 6/1/2017 252,188 243
500M San Francisco, Calif. City & County Redev. Agcy. 6 3/4%, 7/1/2015 497,500 480
250M San Jose, Calif. Redev. Agcy. 6%, 8/1/2015 230,625 223
250M Santa Ana, Calif. Finance Authority 6 1/4%, 7/1/2015 237,500 229
- -------------------------------------------------------------------------------------------------------------------------
1,619,563 1,562
- -------------------------------------------------------------------------------------------------------------------------
Colorado--3.3%
350M Roaring Fork, Colorado General Obligation 6.6%, 12/15/2014 346,500 334
- -------------------------------------------------------------------------------------------------------------------------
Connecticut--3.7%
400M Connecticut State Special Tax Oblig. Rev. 6.1%, 10/1/2011 383,000 370
- -------------------------------------------------------------------------------------------------------------------------
District of Columbia--.9%
90M District of Columbia General Obligation Series "A" 6 7/8%, 6/1/2011 95,963 93
- -------------------------------------------------------------------------------------------------------------------------
Georgia--2.3%
100M Cherokee County, Ga. Water & Sewer Auth. Rev. 7.1%, 8/1/2019 108,500 105
125M Hall County, Georgia School District 6.7%, 12/1/2014 125,625 121
- -------------------------------------------------------------------------------------------------------------------------
234,125 226
- -------------------------------------------------------------------------------------------------------------------------
Illinois--6.8%
100M Du Paige Water Commission, Illinois Water Rev. 6 7/8%, 5/1/2014 105,250 102
500M Illinois Dev. Fin. Auth. Rev. (Rockford School 205) 6.55%, 2/1/2009 498,750 481
100M Will County School District General Obligation 7.1%, 12/1/2009 103,875 100
- -------------------------------------------------------------------------------------------------------------------------
707,875 683
- -------------------------------------------------------------------------------------------------------------------------
Indiana--1.3%
130M Delaware Cnty. Hosp. Auth. (Ball Memorial Hosp.) 6 5/8%, 8/1/2006 133,738 129
- -------------------------------------------------------------------------------------------------------------------------
Maine--2.4%
250M Maine Muni Bond Bank Variable Rate 6 1/2%, 11/1/2014 247,187 239
- -------------------------------------------------------------------------------------------------------------------------
Massachusetts--2.3%
250M Mass. Health & Edl. Facs. Auth. (South Shore Hosp.) 6 1/2%, 7/1/2022 239,687 231
- -------------------------------------------------------------------------------------------------------------------------
Michigan--2.2%
1,000M Howell Michigan Public Schools Cap. Appreciation Zero Cpn. 5/1/2006 225,000 217
- -------------------------------------------------------------------------------------------------------------------------
Missouri--4.9%
500M Missouri State Health & Educational Facilities Authority:
BJC Health Systems Series "A" 6 3/4%, 5/15/2010 506,250 489
- -------------------------------------------------------------------------------------------------------------------------
Nevada--.9%
80M Reno Hosp. Rev. (St. Mary's Hospital) 7 3/4%, 7/1/2015 88,400 85
- -------------------------------------------------------------------------------------------------------------------------
New Jersey--12.4%
500M New Jersey Economic Development Authority Market Trans. Fac. Rev.
5 7/8%, 7/1/2011 471,250 455
350M New Jersey Health Care Fac. Fin. Auth. (Dover Gen. Hosp. & Med Ctr)
5 7/8%, 7/1/2012 323,312 312
485M New Jersey Housing & Mortgage Fin. Rev. 6.55%, 10/1/2010 487,425 470
- -------------------------------------------------------------------------------------------------------------------------
1,281,987 1,237
- -------------------------------------------------------------------------------------------------------------------------
New York--11.2%
440M Buffalo, New York General Obligation Series "E" 6 1/2%, 12/1/2020 423,500 409
500M Metropolitan Transit Authority, New York Commuter Facs. Rev.
Series "A" 6 1/8%, 7/1/2014 470,625 454
290M New York City Municipal Water Fin. Auth. 5 7/8%, 6/15/2012 268,250 259
- -------------------------------------------------------------------------------------------------------------------------
1,162,375 1,122
- -------------------------------------------------------------------------------------------------------------------------
Ohio--1.8%
200M Portage County, Ohio 6.2%, 12/1/2014 190,250 184
- -------------------------------------------------------------------------------------------------------------------------
Pennsylvania--9.6%
200M Jeannette, Pa. School District 6.65%, 6/15/2021 210,000 203
500M Pennsylvania State Ind. Dev. Auth. 5 1/2%, 1/1/2014 428,750 414
400M Pennsylvania State Turnpike Revenue 5 1/2%, 12/1/2012 357,500 344
- -------------------------------------------------------------------------------------------------------------------------
996,250 961
- -------------------------------------------------------------------------------------------------------------------------
Rhode Island--4.4%
250M Kent County, Rhode Island Water Auth. Rev. 6.35%, 7/15/2014 238,437 230
200M Rhode Island Convention Center Auhority Series "A" 6.7%, 5/15/2020 212,750 205
- -------------------------------------------------------------------------------------------------------------------------
451,187 435
- -------------------------------------------------------------------------------------------------------------------------
Texas--7.1%
500M Harris County General Obligation 6 1/2%, 8/15/2013 494,375 477
250M Houston, Texas Water Cert. of Part. 6 1/4%, 12/15/2012 240,000 232
- -------------------------------------------------------------------------------------------------------------------------
734,375 709
- -------------------------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $10,201,145) 97.5% 10,100,525 9,747
Other Assets, Less Liabilities 2.5 262,101 253
- -------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $10,362,626 $10,000
=========================================================================================================================

See notes to financial statements

</TABLE>

<TABLE>
<CAPTION>
Statement of Assets and Liabilities
EXECUTIVE INVESTORS TRUST
December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
EXECUTIVE INVESTORS
----------------------------------------------
Blue Chip High Yield Insured Tax
Fund Fund Exempt Fund
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in securities:
At identified cost $ 928,190 $16,159,412 $10,201,145
========== =========== ===========
At value (Note 1A) $ 943,728 $14,757,541 $10,100,525
Cash 129,452 139,339 29,976
Receivables:
Investment securities sold 48,008 -- 580,824
Interest and dividends 2,680 320,283 179,717
Trust shares sold 11,880 77,270 524
Other assets 4 4,966 17
---------- ----------- -----------
Total Assets 1,135,752 15,299,399 10,891,583
---------- ----------- -----------
Liabilities
Payables:
Investment securities purchased 77,130 -- 473,681
Trust shares redeemed 14,213 41,082 14,398
Dividends payable January 15, 1995 2,446 75,423 28,842
Accrued expenses 1,225 35,319 12,036
Accrued advisory fees -- 5,647 --
---------- ----------- -----------
Total Liabilities 95,014 157,471 528,957
---------- ----------- -----------
Net Assets $1,040,738 $15,141,928 $10,362,626
---------- ----------- -----------
Net Assets Consist of:
Capital paid in $1,023,160 $21,198,107 $10,486,919
Undistributed net investment income 2,040 36,461 3,810
Accumulated net realized loss on investments -- (4,690,769) (27,483)
Net unrealized appreciation (depreciation) in value
of investments 15,538 (1,401,871) (100,620)
---------- ----------- -----------
Net Assets $1,040,738 $15,141,928 $10,362,626
========== =========== ===========
Shares of Beneficial Interest Outstanding (Note 2) 81,640 2,170,241 827,176
========== =========== ===========
Net Asset Value and Redemption Price Per Share
(Net assets divided by shares of beneficial
interest outstanding) $12.75 $6.98 $12.53
====== ===== ======
Maximum Offering Price Per Share
(Net Asset Value/.9525)* $13.39 $7.33 $13.15
====== ===== ======
* On purchases of $100,000 or more, the sales charge is reduced.

See notes to financial statements
</TABLE>

<TABLE>
<CAPTION>
Statement of Operations
EXECUTIVE INVESTORS TRUST
Year Ended December 31, 1994
- -------------------------------------------------------------------------------------------------------------------
EXECUTIVE INVESTORS
----------------------------------------------
Blue Chip High Yield Insured Tax
Fund Fund Exempt Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Interest $ 955 $ 1,577,388 $580,740
Dividends (Note 1D) 21,464 30,151 --
Consent fees -- 14,000 --
--------- ----------- ---------
Total income 22,419 1,621,539 580,740
--------- ----------- ---------
Expenses:
Advisory fee (Note 4) 9,661 150,442 98,612
Distribution plan expenses (Note 5) 4,830 75,221 49,700
Professional fees 4,265 19,211 13,454
Shareholder servicing costs (Note 4) 2,768 21,335 7,133
Reports and notices to shareholders 830 12,467 3,569
Custodian fees 1,112 102 434
Other expenses 1,072 4,517 4,722
--------- ----------- ---------
Total expenses 24,538 283,295 177,624
Less: Expenses waived or assumed (Note 4) 19,708 82,743 127,917
--------- ----------- ---------
Net expenses 4,830 200,552 49,707
--------- ----------- ---------
Net investment income 17,589 1,420,987 531,033
--------- ----------- ---------
Realized and Unrealized Gain (Loss) on Investments (Note 3):
Net realized gain (loss) on investments 70,824 80,680 (27,483)
Net unrealized depreciation of investments (102,509) (1,873,704) (894,199)
--------- ----------- ---------
Net loss on investments (31,685) (1,793,024) (921,682)
--------- ----------- ---------
Net Decrease in Net Assets Resulting from Operations $ (14,096) $ (372,037) $(390,649)
========= =========== =========

See notes to financial statements
</TABLE>

<TABLE>
<CAPTION>
Statement of Changes in Net Assets
EXECUTIVE INVESTORS TRUST

- -------------------------------------------------------------------------------------------------------------------------
Executive Investors
---------------------------------------------------------------------------------
INSURED
BLUE CHIP FUND HIGH YIELD FUND TAX EXEMPT FUND
------------------------- ------------------------ -----------------------
Year Ended December 31 1994 1993 1994 1993 1994 1993
- ---------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net
Assets from Operations
Net investment income $ 17,589 $ 13,362 $ 1,420,987 $ 1,124,173 $ 531,033 $ 413,982
Net realized gain (loss) on
investments 70,824 39,615 80,680 453,896 (27,483) 215,101
Net unrealized appreciation
(depreciation) of investments (102,509) 9,987 (1,873,704) 267,519 (894,199) 463,392
---------- --------- ----------- ----------- ----------- ----------
Net increase (decrease) in net as-
sets resulting from operations (14,096) 62,964 (372,037) 1,845,588 (390,649) 1,092,475
---------- --------- ----------- ----------- ----------- ----------
Distributions to Shareholders
from:
Net investment income (15,549) (13,550) (1,486,797) (1,157,690) (538,977) (413,864)
Net realized gain from security
transactions (70,824) (38,434) -- -- -- (213,953)
---------- --------- ----------- ----------- ----------- ----------
Total Distributions (86,373) (51,984) (1,486,797) (1,157,690) (538,977) (627,817)
---------- --------- ----------- ----------- ----------- ----------
Trust Share Transactions(a)
Issued 307,337 282,580 4,684,633 4,670,832 2,357,147 3,664,979
Issued on reinvestments 83,856 51,591 659,544 569,983 271,847 365,569
Redeemed (206,473) (174,173) (2,574,747) (2,188,744) (783,306) (923,763)
---------- --------- ----------- ----------- ----------- ----------
Net increase from trust share
transactions 184,720 159,998 2,769,430 3,052,071 1,845,688 3,106,785
---------- --------- ----------- ----------- ----------- ----------
Total increase in net assets 84,251 170,978 910,596 3,739,969 916,062 3,571,443
Net Assets
Beginning of year 956,487 785,509 14,231,332 10,491,363 9,446,564 5,875,121
---------- --------- ----------- ----------- ----------- ----------
End of year+ $1,040,738 $956,487 $15,141,928 $14,231,332 $10,362,626 $9,446,564
========== ========= =========== =========== =========== ==========
+ Includes undistributed net
investment income of $ 2,040 -- $ 36,461 $ 102,271 $ 3,810 $ 11,754
========== ========= =========== =========== =========== ==========
(a)Trust Shares Issued and
Redeemed
Issued 21,798 19,652 620,568 601,429 180,398 268,309
Issued on reinvestments 6,516 3,661 89,317 73,550 21,136 26,640
Redeemed (14,678) (12,327) (343,344) (282,878) (60,322) (67,014)
---------- --------- ----------- ----------- ----------- ----------
Net increase in Trust shares 13,636 10,986 366,541 392,101 141,212 227,935
========== ========= =========== =========== =========== ==========

See notes to financial statements
</TABLE>

Notes to Financial Statements
Executive Investors Trust

1. Significant Accounting Policies--The Trust, a Massachusetts business
trust, is registered under the Investment Company Act of 1940 (the
"1940 Act") as a diversified, open-end management investment company.
The Trust consists of unlimited shares of beneficial interest of the
Blue Chip Fund, the High Yield Fund and the Insured Tax Exempt Fund,
and accounts separately for the assets, liabilities and operations of
each Fund.

A. Security Valuation--Except as provided below, a security listed or
traded on an exchange or the NASDAQ National Market System is valued at
its last sale price on the exchange or system where the security is
principally traded, and lacking any sales, the security is valued at
the mean between the closing bid and asked prices. Each security traded
in the over-the-counter market (including securities listed on
exchanges whose primary market is believed to be over-the-counter) is
valued at the mean between the last bid and asked prices based upon
quotes furnished by a market maker for such securities. Securities for
which market quotations are not readily available are valued on a
consistent basis at fair value as determined in good faith by or under
the direction of the Trust's officers in a manner specifically
authorized by the trustees.

Securities in the High Yield Fund may also be priced by a pricing
service which uses quotations obtained from investment dealers or
brokers, information with respect to market transactions in comparable
securities and other available information in determining value.
The municipal bonds in which the Insured Tax Exempt Fund invests are
traded primarily in the over-the-counter markets. Such securities are
valued daily on the basis of valuations provided by a pricing service
approved by the Board of Trustees. The pricing service considers
security type, rating, market condition and yield data, as well as
market quotations and prices provided by market makers in determining
value. "When Issued Securities" are reflected in the assets of the Fund
as of the date the securities are purchased.

The municipal bonds held by the Insured Tax Exempt Fund are insured as
to payment of principal and interest by the issuer or under insurance
policies written by independent insurance companies. It is the
intention of the Fund to retain any insured securities which are in
default or in significant risk of default and to place a value on the
defaulted securities equal to the value of similar securities which are
not in default.

B. Federal Income Taxes--No provision has been made for federal income
taxes on net income or capital gains since it is the policy of the
Trust to continue to comply with the special provisions of the Internal
Revenue Code applicable to investment companies and to make sufficient
distributions of income and capital gains (in excess of any available
capital loss carryovers) to relieve it from all, or substantially all,
federal income taxes. At December 31, 1994, the High Yield Fund had
capital loss carryovers of $4,651,284 of which $3,364,392 expires in
1998, and $1,286,892 in 1999 and the Insured Tax Exempt Fund had a
capital loss carryover of $19,495 which expires in 2002.

C. Expense Allocation--Expenses directly charged or attributable to a
Fund are paid from the assets of that Fund. General expenses of the
Trust are allocated among and charged to the assets of each Fund on a
fair and equitable basis, which may be based on the relative assets of
each Fund or the nature of the services performed and relative
applicability to each Fund.

D. Other--Security transactions are accounted for on the date the
securities are purchased or sold. Cost is determined, and gains and
losses are based, on the identified cost basis for both financial
statement and federal income tax purposes. Interest income and
estimated expenses are accrued daily. Dividend income is recorded on
the ex-dividend date. Shares of stock received in lieu of cash
dividends on certain preferred stock holdings are recognized as
dividend income and recorded at the market value of the shares
received. During the year ended December 31, 1994, the High Yield Fund
recognized $12,738 of dividend income from these taxable "pay in kind"
distributions.

E. Distributions to Shareholders--Dividends from net investment income
to shareholders of the High Yield Fund and the Insured Tax Exempt Fund
are declared daily and paid monthly. Dividends from net investment
income of the Blue Chip Fund are declared and paid quarterly.
Distributions from net realized capital gains are declared and paid
annually.

Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for capital loss carryforwards and post October
losses.

2. Trust Shares--The Declaration of Trust permits the issuance of an
unlimited number of shares of beneficial interest, of one or more
series.

3. Security Transactions--For the year ended December 31, 1994,
purchases and sales of securities other than United States Treasury
bills and short-term notes, were as follows:

<TABLE>
<CAPTION>
BLUE CHIP HIGH YIELD INSURED TAX
FUND FUND EXEMPT FUND
------------ ------------- --------------
<S> <C> <C> <C>
Securities
- ----------
Cost of purchases $879,981 $10,671,321 $21,197,324
======== =========== ===========
Proceeds of sales $832,932 $ 7,656,688 $19,686,703
======== =========== ===========
</TABLE>

At December 31, 1994, aggregate cost and net unrealized appreciation
(depreciation) of securities for federal income tax purposes were as
follows:
<TABLE>
<CAPTION>
BLUE CHIP HIGH YIELD INSURED TAX
FUND FUND EXEMPT FUND
------------ ------------- --------------
<S> <C> <C> <C>
Aggregate cost $928,190 $ 16,159,412 $ 10,201,145
======== ============ ============
Unrealized appreciation $ 44,848 $ 101,938 $ 128,904
Unrealized depreciation 29,310 1,503,809 229,524
-------- ------------ ------------
Net unrealized appreciation (depreciation) $ 15,538 $ (1,401,871) $ (100,620)
======== ============ ============
</TABLE>

4. Advisory Fee and Other Transactions With Affiliates (Also see Note
5)--Certain officers and trustees of the Trust are officers and
directors of its investment adviser, Executive Investors Management
Company, Inc. ("EIMCO"), its underwriter, Executive Investors
Corporation ("EIC"), its transfer agent, Administrative Data Management
Corp. ("ADM") and/or First Financial Savings Bank, S.L.A. ("FFS"),
custodian of the Trust's Individual Retirement Accounts. Officers and
trustees received no remuneration from the Trust for serving in such
capacities. Their remuneration (together with certain other expenses of
the Trust) is paid by EIMCO or First Investors Corporation ("FIC").

The Investment Advisory Agreement provides as compensation to EIMCO an
annual fee, payable monthly, at the rate of 1% on the first $200
million of each Fund's average daily net assets, .75% on the next $300
million, declining by .03% on each $250 million thereafter, down to
.66% on average daily net assets over $1 billion. The total advisory
fees earned by EIMCO from all Funds was $258,715, of which $191,016 was
waived. In addition, expenses of $30,027 were assumed by EIMCO.

Pursuant to certain state regulations, EIMCO has agreed to reimburse
each Fund if and to the extent that each Fund's aggregate operating
expenses, including the advisory fee but generally excluding interest,
taxes, brokerage commissions and extraordinary expenses, exceed any
limitation on expenses applicable to the Fund in those states (unless
waivers of such limitation have been obtained). The amount of any such
reimbursement is limited to the yearly advisory fee. For the year ended
December 31, 1994, no reimbursement was required pursuant to these
provisions.

For the year ended December 31, 1994, EIC, as underwriter of the Trust,
received $31,332 in commissions after allowing $65,694 to FIC (an
affiliated dealer) and $158,670 to other dealers. Shareholder servicing
costs consist of $28,372 in transfer agent fees and out of pocket
expenses accrued to ADM, (of which $9,325 was waived by the transfer
agent) and $2,864 in custodian fees, paid to FFS.

5. Distribution Plan--Pursuant to a Distribution Plan adopted under
Rule 12b-1 of the 1940 Act, each Fund pays a fee equal to .50% of its
average net assets on an annualized basis each fiscal year, payable
quarterly. The fee consists of a distribution fee and a service fee.
The service fee is payable to the underwriter or other securities
dealers for the ongoing servicing of their clients who are shareholders
of any of the Funds.

6. Rule 144A Securities--Under rule 144A, certain restricted securities
are exempt from the registration requirements of the Securities Act of
1933 and may be resold to qualified institutional investors. At
December 31, 1994 the High Yield Fund held four 144A securities with an
aggregate value of $368,900 representing 2.4% of the High Yield Fund's
net assets. These securities are valued as set forth in Note 1A.

7. Concentration of Credit Risk--The High Yield Fund's investment in
high yield securities, whether rated or unrated, may be considered
speculative and subject to greater market fluctuations and risks of
loss of income and principal than lower yielding, higher rated, fixed
income securities. The risk of loss due to default by the issuer may be
significantly greater for the holders of high yielding securities,
because such securities are generally unsecured and are often
subordinated to other creditors of the issuer. At December 31, 1994,
the High Yield Fund held two defaulted securities with a value of
$199,500 representing 1.3% of the Fund's net assets.
<PAGE>

Independent Auditor's Report

To the Shareholders and Trustees of
Executive Investors Trust

We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of Executive Investors Blue
Chip Fund, Executive Investors High Yield Fund and Executive Investors
Insured Tax Exempt Fund (comprising Executive Investors Trust), as of
December 31, 1994, the related statement of operations for year then
ended, the statement of changes in net assets for each of the two years
in the period then ended, and financial highlights for each of the
periods presented. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.

Our procedures included confirmation of securities owned as of December
31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Executive Investors Blue Chip Fund, Executive
Investors High Yield Fund and Executive Investors Insured Tax Exempt
Fund as of December 31, 1994, and the results of their operations,
changes in their net assets and the financial highlights for each of
the respective periods presented, in conformity with generally accepted
accounting principles.

Tait, Weller & Baker

Philadelphia, Pennsylvania
January 31, 1995

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

Financial Statements are set forth in Part B, Statement of Additional
Information.

(b) Exhibits:

(1)(11) Amended and Restated Declaration of Trust

(2)(11) By-laws

(3) Not Applicable

(4)(2)(5)(6) Specimen Certificates

(5)(11) Investment Advisory Agreement between Registrant and
Executive Investors Management Company, Inc.

(6)(10) Underwriting Agreement between Executive Investors
Corporation and the Registrant

(7) Not Applicable

(8)(10) Custodian Agreement

a.(1) Custodian Agreement between Irving Trust Company and
Executive Investors High Yield Fund

b.(4) Custodian Agreement between The Bank of New York and
Registrant

c.(8) Supplement to Custodian Agreement between The Bank of
New York and Registrant

(9)(8) Administration Agreement by and among Administrative
Data Management Corp., Executive Investors Corporation
and Registrant

(10)(9) Opinion of Counsel

(11)a. Consent of independent accountants

b.(8) Powers of Attorney

(12) Not Applicable

C-1

<PAGE>

(13)(2)(3)(4) Undertakings of the Investment Adviser

(14)a.(7) First Investors Profit Sharing/Money Purchase Pension
Retirement Plan for Sole Proprietorships, Partnerships,
and Corporations

b.(8) First Investors Individual Retirement Account

c.(5) First Investors 403(b) Custodial Account

d.(8) First Investors SEP-IRA and SARSEP-IRA

(15)(11) Amended and Restated Class A Distribution Plan

(16) Performance Calculations

- ---------------
1 Incorporated by reference from Registrant's Registration Statement (File
No. 33-10648) filed on December 8, 1986.
2 Incorporated by reference from Pre-Effective Amendment No. 1 to
Registrant's Registration Statement (File No. 33-10648) filed on December
24, 1986.
3 Incorporated by reference from Post-Effective Amendment No. 5 to
Registrant's Registration Statement (File No. 33-10648) filed on February
15, 1990.
4 Incorporated by reference from Post-Effective Amendment No. 7 to
Registrant's Registration Statement (File No. 33-10648) filed on May 14,
1990.
5 Incorporated by reference from Post-Effective Amendment No. 8 to
Registrant's Registration Statement (File No. 33-10648) filed on September
20, 1990.
6 Incorporated by reference from Post-Effective Amendment No. 9 to
Registrant's Registration Statement (File No. 33-10648) filed on January
29, 1991.
7 Incorporated by reference from Post-Effective Amendment No. 11 to
Registrant's Registration Statement (File No. 33-10648) filed on August 30,
1991.
8 Incorporated by reference from Post-Effective Amendment No. 13 to
Registrant's Registration Statement (File No. 33-10648) filed on April 29,
1993.
9 Incorporated by reference from Registrant's Rule 24f-2 Notice for its
fiscal year ending December 31, 1994 filed on February 21, 1995.
10 Incorporated by reference from Post-Effective Amendment No. 14 to
Registrant's Registration Statement (File No. 33-10648) filed on April 29,
1994.
11 Incorporated by reference from Post-Effective Amendment No. 15 to
Registrant's Registration Statement (File No. 33-10648) filed on December
29, 1994.

C-2

<PAGE>

Item 25. Persons Controlled by or under common control with Registrant

There are no persons controlled by or under common control with the
Registrant.

Item 26. Number of Holders of Securities

Number of
Record Holders as of
Title of Class February 28, 1995
--------------- --------------------
Class A

Executive Investors
High Yield Fund 915

Executive Investors
Blue Chip Fund 110

Executive Investors
Insured Tax Exempt Fund 312

Item 27. Indemnification

Indemnification provisions are contained in:

1. Article XI, Sections 1 and 2 of Registrant's Declaration of Trust
(Exhibit 1 to Part C hereof);

2. Paragraph 7 of the Investment Advisory Agreement by and between
Executive Investors Management Company, Inc. and Registrant (Exhibit 5 to Part C
hereof); and

3. Paragraph 7 of the Underwriting Agreement by and between Executive
Investors Corporation and Registrant (Exhibit 6 to Part C hereof).

The general effect of these indemnification provisions will be to
indemnify the officers and Trustees of the Registrant from costs and expenses
arising from any action, suit or proceeding to which they may be made a party by
reason of their being or having been a trustee or officer of the Registrant,
except where such action is determined to have arisen out of the willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the trustee's or officer's office.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers or persons
controlling the Registrant pursuant to the foregoing, the Registrant has been
informed that, in the opinion of the

C-3

<PAGE>

Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable. See Item 32
herein.

Item 28. Business and Other Connections of Investment Adviser

Affiliations of the officers and directors of the Investment Adviser
are set forth in Part B, Statement of Additional Information, under "Trustees
and Officers."

Item 29. Principal Underwriters

(a) Inapplicable

(b) The following persons are the officers and directors of the
Underwriter:

Position and Office Position and
Name and Principal with Executive Office with
Business Address Investors Corporation Registrant
- ----------------- --------------------- ------------
Glenn O. Head Chairman and Director President
95 Wall Street and Trustee
New York, NY 10005

Marvin M. Hecker President None
95 Wall Street
New York, NY 10005

John T. Sullivan Director Chairman of the
95 Wall Street Board of Trustees
New York, NY 10005

Joseph I. Benedek Treasurer Treasurer
10 Woodbridge
Center Drive
Woodbridge, NJ 07095

Concetta Durso Assistant Vice Vice President
95 Wall Street President and Secretary
New York, NY 10005

Hyman Dolber Vice President None
95 Wall Street
New York, NY 10005

Kathryn S. Head Vice President, Trustee
10 Woodbridge Ctr Chief Financial
Drive Officer and Director
Woodbridge, NJ 07095

Carol Lerner Brown Secretary Assistant Secretary
95 Wall Street
New York, NY 10005

C-4

<PAGE>

Item 30. Location of Accounts and Records

Physical possession of the books, accounts and records of the
Registrant are held by Executive Investors Management Company, Inc. and its
affiliated companies, Executive Investors Corporation and Administrative Data
Management Corp., at their corporate headquarters, 95 Wall Street, New York, NY
10005 and administrative offices, 10 Woodbridge Center Drive, Woodbridge, NJ
07095, except for those maintained by the Registrant's Custodian, The Bank of
New York, 48 Wall Street, New York, NY 10286.

Item 31. Management Services

Inapplicable

Item 32. Undertakings

The Registrant undertakes to carry out all indemnification provisions
of its Declaration of Trust, Advisory Agreement and Underwriting Agreement in
accordance with Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.

Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the provisions under Item 27 herein, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

The Registrant hereby undertakes to furnish a copy of its latest
annual report to shareholders, upon request and without charge, to each person
to whom a prospectus is delivered.

C-5

<PAGE>

INDEX TO EXHIBITS

Exhibit
Number Description
------- ------------------------

11(a) Consent of Accountants

11(b) Power of Attorney

16 Performance Calculations

C-6

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant represents that this Amendment
meets all the requirements for effectiveness pursuant to Rule 485(b) under the
Securities Act of 1933, and has duly caused this Post-Effective Amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
17th day of April, 1995.

EXECUTIVE INVESTORS TRUST
(Registrant)

By: /s/ Glenn O. Head
-------------------
Glenn O. Head
President and Trustee

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.

/s/ Glenn O. Head Principal Executive April 17, 1995
- ---------------------- Officer and Trustee
Glenn O. Head

/s/ Joseph I. Benedek Principal Financial April 17, 1995
- ---------------------- and Accounting Officer
Joseph I. Benedek

/s/ Kathryn S. Head Trustee April 17, 1995
- ----------------------
Kathryn S. Head

/s/ James J. Coy Trustee April 17, 1995
- ----------------------
James J. Coy

/s/ F. William Ortman Trustee April 17, 1995
- ----------------------
F. William Ortman, Jr.

<PAGE>

/s/ Roger L. Grayson Trustee April 17, 1995
- ----------------------
Roger L. Grayson

/s/ Herbert Rubinstein Trustee April 17, 1995
- ----------------------
Herbert Rubinstein

/s/ James M. Srygley Trustee April 17, 1995
- ----------------------
James M. Srygley

/s/ John T. Sullivan Trustee April 17, 1995
- ----------------------
John T. Sullivan

/s/ Rex R. Reed Trustee April 17, 1995
- ----------------------
Rex R. Reed

/s/ Robert F. Wentworth Trustee April 17, 1995
- ----------------------
Robert F. Wentworth

*By: /s/ Larry R. Lavoie
-------------------
Larry R. Lavoie
Attorney-in-fact

<PAGE>

Consent of Independent Certified Public Accountants

Executive Investors Trust
95 Wall Street
New York, New York 10005

We consent to the use in Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A (File No. 33-10648) of our report dated
January 31, 1995 relating to the December 31, 1994 financial statements of
Executive Investors Trust, which are included in said Registration Statement.

/s/ Tait, Weller & Baker

TAIT, WELLER & BAKER

Philadelphia, Pennsylvania
April 11, 1995

<PAGE>

Executive Investors Trust

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of Executive Investors Trust hereby appoints Larry R. Lavoie or Glenn O. Head,
and each of them, his true and lawful attorney to execute in his name, place and
stead and on his behalf a Registration Statement on Form N-1A for the
registration pursuant to the Securities Act of 1933 and the Investment Company
Act of 1940 of shares of beneficial interest of said Massachusetts business
trust, and any and all amendments to said Registration Statement (including
post-effective amendments), and all instruments necessary or incidental in
connection therewith and to file the same with the Securities and Exchange
Commission. Said attorney shall have full power and authority to do and perform
in the name and on behalf of the undersigned every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do, the undersigned hereby ratifying and
approving all such acts of said attorney.

IN WITNESS WHEREOF, the undersigned has executed this instrument this 19th
day of January, 1995.

/s/James M. Srygle
---------------------------------
James M. Srygley

<PAGE>

Distribution yields for Executive Investor's Funds are calculated using the
following formula:

Yield = (a/b)

Where:

a = dividends declared during the last 12 months.

b = Maximum offering price per share on the last day of the period.

The following is a list of the information used to calculate the distribution
yield for Executive Investors Trust as of December 31, 1994.

Distribution
a b Yield
- - -----
High Yield Fund $.735 $7.33 10.03%
Insured Tax Exempt Fund $.688 $13.15 5.23%

<PAGE>

SEC Standardized Total Returns

Average Annual Total Return and Total Return for Executive Investors Funds
are calculated using the following standardized formula:

Average Annual
Total Return = ((ERV DIVIDED BY P) ) - 1

Total Return = ((ERV - P) DIVIDED BY P)

WHERE: ERV = Ending redeemable value of a hypothetical
$1,000 investment made at the beginning of
1, 5, or 10 year periods (or fractional
period there of,)

P = a hypothetical initial investment of $1,000

N = number of years

The following table lists the information used to calculate the standardized
average annual total return and total return for Executive Investors Trust as
of December 31, 1994.

AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
Blue Chip Fund
--------------
1 year: $941.10 $1,000.00 1.00 (5.89%) (5.89%)

Life of Fund: $1,309.60 $1,000.00 4.63 6.00% 30.96%

High Yield Fund
---------------
1 year: $930.80 $1,000.00 1.00 (6.92%) (6.92%)

5 years: $1,493.90 $1,000.00 5.00 8.36% 49.39%

Life of Fund: $1,715.50 $1,000.00 7.78 7.19% 71.55%

Insured Tax Exempt Fund
-----------------------
1 year: $914.60 $1,000.00 1.00 (8.54%) (8.54%)

Life of Fund: $1,379.70 $1,000.00 4.46 7.48% 37.97%

<PAGE>

NAV Only Total Returns

Average Annual Total Return and Total Return for Executive Investors Funds
are calculated using the following standardized formula:

Average Annual
Total Return = ((ERV DIVIDED BY P) ) - 1

Total Return = ((ERV - P) DIVIDED BY P)

WHERE: ERV = Ending redeemable value of a hypothetical
$1,000 investment made at the beginning of
1, 5, or 10 year periods (or fractional
period there of.)

P = a hypothetical initial investment of $1,000

N = number of years

The following table lists the information used to calculate the average
annual total return and total return for Executive Investors Trust as
of December 31, 1994.

AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
Blue Chip Fund
--------------
1 year: $987.90 $1,000.00 1.00 (1.21%) (1.21%)

Life of Fund: $1,374.90 $1,000.00 4.63 7.12% 37.49%

High Yield Fund
---------------
1 year: $976.80 $1,000.00 1.00 (2.32%) (2.32%)

5 years: $1,569.20 $1,000.00 5.00 9.43% 56.92%

Life of Fund: $1,801.30 $1,000.00 7.78 7.86% 80.13%

Insured Tax Exempt Fund
-----------------------
1 year: $960.40 $1,000.00 1.00 (3.96%) (3.96%)

Life of Fund: $1,448.50 $1,000.00 4.46 8.66% 44.85%

<PAGE>

Yields for Executive Investor's Funds are calculated using the following
formula:

((((((a-b) + ((cd)-e))+1)-)-1)

Where:

a = dividends and interest earned during the 30 day period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.

d = the maximum offering price per share on the last day of the period.

e = undeclared earned income.

The following is a list of the information used to calculate the for
Executive Investors Trust as of December 31, 1994.

<TABLE>
<CAPTION>
*Tax
Equivalent
a b c d e Yield Yield
- - - - - ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>

High Yield Fund $144,684 $16,390 2,167,887 $7.33 $.00 9.37% N/A
Insured Tax Exempt Fund $56,043 $4,143 825,830 $13.15 $.00 5.80% 9.06%

<FN>
*Tax Equivalent Yields are computed assuming a maximum federal tax rate of
36%.

</TABLE>

<PAGE>

Distribution yields for Executive Investor's Funds are calculated using the
following formula:

Yield = (a/b)

Where:

a = dividends declared during the last 12 months.

b = Net asset value per share on the last day of the period.

The following is a list of the information used to calculate the distribution
yield for Executive Investors Trust as of December 31, 1994.

Distribution
a b Yield
- - -----

High Yield Fund $.735 $6.98 10.53%
Insured Tax Exempt Fund $.688 $12.53 5.49%

<PAGE>
<ARTICLE> 6
<CIK> 0000807332
<NAME> EXECUTIVE INVESTORS TRUST
<SERIES>
<NUMBER> 2
<NAME> EXECUTVE BLUE CHIP FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 928
<INVESTMENTS-AT-VALUE> 944
<RECEIVABLES> 51
<ASSETS-OTHER> 129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1136
<PAYABLE-FOR-SECURITIES> 77
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18
<TOTAL-LIABILITIES> 95
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1023
<SHARES-COMMON-STOCK> 82
<SHARES-COMMON-PRIOR> 68
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16
<NET-ASSETS> 1041
<DIVIDEND-INCOME> 21
<INTEREST-INCOME> 1
<OTHER-INCOME> 0
<EXPENSES-NET> 5
<NET-INVESTMENT-INCOME> 18
<REALIZED-GAINS-CURRENT> 71
<APPREC-INCREASE-CURRENT> (103)
<NET-CHANGE-FROM-OPS> (14)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16)
<DISTRIBUTIONS-OF-GAINS> (71)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 307
<NUMBER-OF-SHARES-REDEEMED> 206
<SHARES-REINVESTED> 84
<NET-CHANGE-IN-ASSETS> 84
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25
<AVERAGE-NET-ASSETS> 966
<PER-SHARE-NAV-BEGIN> 14.07
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> (.41)
<PER-SHARE-DIVIDEND> .22
<PER-SHARE-DISTRIBUTIONS> .93
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.75
<EXPENSE-RATIO> .5
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000807332
<NAME> EXECUTIVE INVESTORS TRUST
<SERIES>
<NUMBER> 1
<NAME> EXECUTIVE HIGH YIELD FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 16159
<INVESTMENTS-AT-VALUE> 14758
<RECEIVABLES> 398
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15299
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 157
<TOTAL-LIABILITIES> 157
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21198
<SHARES-COMMON-STOCK> 2170
<SHARES-COMMON-PRIOR> 1804
<ACCUMULATED-NII-CURRENT> 36
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4691)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1402)
<NET-ASSETS> 15142
<DIVIDEND-INCOME> 30
<INTEREST-INCOME> 1577
<OTHER-INCOME> 14
<EXPENSES-NET> 201
<NET-INVESTMENT-INCOME> 1421
<REALIZED-GAINS-CURRENT> 81
<APPREC-INCREASE-CURRENT> (1874)
<NET-CHANGE-FROM-OPS> (372)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1487)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4685
<NUMBER-OF-SHARES-REDEEMED> 2575
<SHARES-REINVESTED> 660
<NET-CHANGE-IN-ASSETS> 911
<ACCUMULATED-NII-PRIOR> 102
<ACCUMULATED-GAINS-PRIOR> (4771)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 150
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 283
<AVERAGE-NET-ASSETS> 15044
<PER-SHARE-NAV-BEGIN> 7.89
<PER-SHARE-NII> .7
<PER-SHARE-GAIN-APPREC> (.87)
<PER-SHARE-DIVIDEND> .74
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.98
<EXPENSE-RATIO> 1.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000807332
<NAME> EXECUTIVE INVESTORS TRUST
<SERIES>
<NUMBER> 3
<NAME> EXECUTIVE INVESTORS INSURED TAX EXEMPT FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 10201
<INVESTMENTS-AT-VALUE> 10101
<RECEIVABLES> 76192
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10892
<PAYABLE-FOR-SECURITIES> 474
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55
<TOTAL-LIABILITIES> 529
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10487
<SHARES-COMMON-STOCK> 827
<SHARES-COMMON-PRIOR> 686
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (27)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (101)
<NET-ASSETS> 10363
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 581
<OTHER-INCOME> 0
<EXPENSES-NET> 50
<NET-INVESTMENT-INCOME> 531
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> (894)
<NET-CHANGE-FROM-OPS> (391)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (539)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2357
<NUMBER-OF-SHARES-REDEEMED> 783
<SHARES-REINVESTED> 272
<NET-CHANGE-IN-ASSETS> 916
<ACCUMULATED-NII-PRIOR> 12
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 99
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 178
<AVERAGE-NET-ASSETS> 9861
<PER-SHARE-NAV-BEGIN> 13.77
<PER-SHARE-NII> .68
<PER-SHARE-GAIN-APPREC> (1.23)
<PER-SHARE-DIVIDEND> .69
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.53
<EXPENSE-RATIO> .5
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>