As filed with the Securities and Exchange Commission on April 24, 1996
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. 17 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 17 X
EXECUTIVE INVESTORS TRUST
(Exact name of Registrant as specified in charter)
Ms. Concetta Durso
Secretary and Vice President
Executive Investors Trust
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 April 29,1996 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, 1995 on February 27,
1996.
<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...................Not Applicable
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.
C-1
<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 ("Trust"), an open-end
diversified management investment company. The Trust offers three separate
diversified investment series, each of which has different investment objectives
and policies: Executive Investors Blue Chip Fund, Executive Investors High Yield
Fund and Executive Investors Insured Tax Exempt Fund (individually, "Fund," and
collectively, "Funds"). There can be no assurance that any Fund will achieve its
investment objective. Each Fund has designated its issued and outstanding shares
as Class A shares.
Blue Chip Fund seeks to provide investors with high total investment
return consistent with the preservation of capital. The Fund seeks to achieve
its objective by investing, under normal market conditions, at least 65% of its
total assets in equity securities of larger, well-capitalized companies with
high earnings that have shown a history of dividend payments, commonly known as
"Blue Chip" companies.
High Yield Fund primarily seeks high current income and secondarily seeks
capital appreciation. The Fund 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 SecuritiesRisk
Factors."
Insured Tax Exempt Fund seeks to provide a high level of interest income
which is exempt from Federal income tax and is not an item of tax preference for
purposes of the Federal alternative minimum tax ("Tax Preference Item"). The
Fund 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 is not a Tax Preference Item. The Fund's
municipal bonds are insured as to timely payment of principal and interest
through the issuer or under insurance policies written by independent insurance
companies. Insurance does not protect against fluctuations in the bonds' market
value or the Fund's net asset value per share. For more information regarding
the Fund's insurance coverage, see "Insurance" on page 12.
This Prospectus sets forth concisely the information about the Funds 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 Funds and Executive Investors
Corporation ("EIC" or "Underwriter") serves as distributor of the Funds' shares.
A Statement of Additional Information ("SAI"), dated April 29, 1996 (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 Trust
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 April 29, 1996
<PAGE>
FEE TABLE
The following table is intended to assist investors in understanding the
expenses associated with investing in each Fund.
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-*
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Total Fund
Management 12b-1 Other Operating
Fees(1)+ Fees(2)+ Expenses(3) Expenses(4)+
<S> <C> <C> <C> <C>
Blue Chip Fund........................... 0.25% 0.40% 0.10%+ 0.75%
High Yield Fund.......................... 0.50 0.40 0.40 1.30
Insured Tax Exempt Fund.................. 0.25 0.40 0.10+ 0.75
</TABLE>
* A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of shares that are purchased without a sales charge. See "How
to Buy Shares."
+ Net of waiver and/or reimbursement.
(1) Management Fees have been restated to reflect current fees. For the fiscal
year ended December 31, 1995, the Adviser waived certain Management Fees.
Absent the waiver, such fees would have been 1.00% for each Fund. The
Adviser will waive Management Fees in excess of 0.25% for Blue Chip Fund
and Insured Tax Exempt Fund and 0.50% for High Yield Fund for a minimum
period ending December 31, 1996.
(2) The Underwriter has agreed through December 31, 1996 to cap its right to
claim 12b-1 Fees at the annual rates listed above for the Funds. The
Trust's Class A Distribution Plan provides for a 12b-1 Fee in the total
amount of up to 0.50% on an annual basis.
(3) Other Expenses for Blue Chip Fund and Insured Tax Exempt Fund have been
restated to reflect current expenses. For the fiscal year ended December
31, 1995, the Adviser reimbursed Blue Chip Fund and Insured Tax Exempt
Fund for certain Other Expenses. Absent such waiver, Other Expenses would
have been 0.70% for Blue Chip Fund and 0.24% for Insured Tax Exempt Fund.
The Adviser will reimburse Other Expenses for Blue Chip Fund and Insured
Tax Exempt Fund in excess of 0.10% for a minimum period ending December
31, 1996.
(4) If certain fees and expenses had not been waived or reimbursed, Total Fund
Operating Expenses would have been as follows: Blue Chip Fund - 2.20%;
High Yield Fund - 1.90%; and Insured Tax Exempt Fund - 1.74%.
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
2
<PAGE>
"Distribution Plan." Due to the imposition of 12b-1 Fees, it is possible that
long-term shareholders of a Fund 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 Fund's fiscal year
ended December 31, 1995, except that certain Operating Expenses have been
restated, as noted above.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Year 5 Years 10 Years
------ ------ ------- --------
<S> <C> <C> <C> <C>
Blue Chip Fund........................ $55 $70 $87 $136
High Yield Fund....................... 60 87 115 197
Insured Tax Exempt Fund............... 55 70 87 136
</TABLE>
The expenses in the Example should not be considered a representation by
the Funds of future expenses. Actual expenses in future years may be greater or
less than those shown.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth the per share operating performance data
for a share 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 Fund.
<TABLE>
<CAPTION>
PER SHARE DATA
Income from Investment Operations Less Distributions From
Net Asset Net Realized Dividends Net Net Asset
Value Net and Unrealized Total From from Net Realized Gain Value
----------- --------
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
1995................. 12.75 .30 4.30 4.60 .29 .74 1.03 16.32
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
1995................. 6.98 .70 .58 1.28 .67 -- .67 7.59
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
1995................. 12.53 .72 1.80 2.52 .73 .28 1.01 14.04
</TABLE>
<TABLE>
<CAPTION>
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 --
1995......................... -- 73,200 879,202 0.80
</TABLE>
(a) Annualized
* Commencement of operations
** Calculated without sales charge
+ Net of expenses waived or assumed from commencement of operations through
December 31, 1995.
4
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio to Average Net Assets Before
Net Assets Ratio to Average Net Assets+ Expenses Waived or Assumed
End of Net Net Portfolio
Period (in Investment Investment Turnover
Total Return**(%) thousands) Expenses(%) Income(%) Expenses(%) Income(%) Rate(%)
<S> <C> <C> <C> <C> <C>
(6.02)(a) $313 -- 2.74(a) 4.67(a) (1.93)(a) 21
27.65 677 .03 2.58 3.72 (1.11) 31
4.13 786 .41 1.95 2.55 (.19) 50
8.13 956 .50 1.63 2.30 (.17) 47
(1.21) 1,041 .50 1.82 2.54 (.22) 89
36.30 1,427 .50 1.99 2.20 .29 33
(5.55)(a) 1,156 -- 7.06(a) 1.78(a) 5.27(a) 27
21.31 9,205 -- 13.63 2.14 11.49 56
(1.11) 20,335 -- 13.61 1.82 11.79 36
(12.51) 11,683 .31 13.71 1.94 12.08 44
35.38 11,071 .95 12.22 2.17 11.00 40
16.89 10,491 1.29 10.72 2.10 9.90 83
17.04 14,231 1.34 9.49 1.95 8.88 89
(2.32) 15,142 1.33 9.45 1.88 8.90 53
19.08 15,672 1.35 9.50 1.90 8.95 69
8.00(a) 653 .09(a) 4.41(a) 1.70(a) 2.79(a) 0
13.20 4,369 .12 6.23 2.41 3.94 112
11.03 5,875 .47 5.88 1.89 4.47 131
15.74 9,447 .50 5.29 1.68 4.11 97
(3.95) 10,363 .50 5.39 1.80 4.09 215
20.53 13,342 .50 5.35 1.74 4.11 147
</TABLE>
5
<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 Fund seeks to achieve
its objective by investing, under normal market conditions, at least 65% of its
total assets in equity 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 Fund 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 Fund's objective, the Fund may invest up to 25% of its
total assets in fixed income securities.
The Fund 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 Fund 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-backed
securities, and corporate debt securities. However, no more than 5% of the
Fund's 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 Fund may borrow money for temporary or emergency
purposes in amounts not exceeding 5% of its total assets. The Fund 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
6
<PAGE>
dividend-paying common stocks that have yields comparable to those of high
yielding debt securities; 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 Fund 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 Fund 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 U.S. or foreign currency. The Fund 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. See the SAI for more information concerning
these securities.
The Fund 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 Fund 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 nationally recognized statistical rating
organizations) 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 Fund 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 Fund's net asset value. When interest rates
rise, the net asset value of the Fund tends to decrease. When interest rates
decline, the net asset value of the Fund tends to increase.
Variable or floating rate debt obligations in which the Fund 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.
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
7
<PAGE>
or acquired as part of a unit with the security. Although the Fund 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 Fund's investment
objectives depends more on the Adviser's research abilities than would be the
case if the Fund 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
Fund during the fiscal year ended December 31, 1995, computed on a monthly
basis, is set forth below. This information reflects the average composition of
the Fund's assets during the 1995 fiscal year and is not necessarily
representative of the Fund as of the end of its 1995 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
Ba 13.16% 1.33%
B 70.33 1.30
Caa 4.11 1.26
Ca 0.77 0
-------- --------
Total 88.37% 3.89%
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 is not a Tax Preference Item. The
Fund 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 is not a Tax Preference Item. The Fund 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 Fund may make loans of portfolio securities and invest in zero coupon
municipal securities. The Fund may invest up to 25% of its net assets in
securities on a "when-issued" basis, which involves an arrangement whereby
delivery of, and payment for, the instruments occur up to 45 days after the
agreement to purchase the instruments is made by the Fund. The Fund 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 Fund also may invest up to 10% of its total assets in
municipal obligations on which the rate of interest varies inversely with
interest rates on other municipal obligations or an index (commonly referred to
as inverse floaters) and may acquire detachable call options relating to
municipal bonds. The Fund may borrow money for
8
<PAGE>
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 Fund generally invests in municipal bonds rated Baa or higher
by Moody's or BBB or higher by S&P, the Fund 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 Fund. A description of municipal
bond ratings is contained in Appendix A.
For temporary defensive purposes, the Fund 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 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, during periods when one or more of these segments offer higher yields
and/or profit potential. This possible concentration of the assets of the Fund
may result in the Fund 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
Fund's 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 Fund's net asset value fluctuates based mainly upon changes
in the value of its portfolio securities. Each Fund's 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 Fund 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.
9
<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. 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
of loss of principal and income than higher-rated securities. See Appendix A for
a description of corporate and municipal 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 Fund
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 Fund would
have to replace the security, which could result in a decreased return for
shareholders. Conversely, if a Fund
10
<PAGE>
experiences unexpected net redemptions in a rising interest rate market, it
might be forced to sell certain securities, regardless of investment merit. This
could result in decreasing the assets to which Fund expenses could be allocated
and in a reduced rate of return for that Fund. While it is impossible to protect
entirely against this risk, diversification of a Fund's 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 Fund's portfolio.
The High Yield Securities Market. The market for below investment
grade bonds expanded rapidly in recent years and its growth paralleled a long
economic expansion. In the past, the prices of many lower-rated debt securities
declined substantially, reflecting an expectation that many issuers of such
securities might experience financial difficulties. As a result, the yields on
lower-rated debt securities rose dramatically. However, such higher yields did
not reflect the value of the income streams that holders of such securities
expected, but rather the risk that holders of such securities could lose a
substantial portion of their value as a result of the issuers' financial
restructuring or default. 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 as low as 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 Fund's 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 Fund's holdings and more difficulty in executing
trades at favorable prices during unsettled market conditions.
The ability of a Fund 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 Trust's Board of Trustees
11
<PAGE>
to value High Yield Securities becomes more difficult, with judgment playing a
greater role. Further, 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 Trust, on behalf of the Fund, from an
independent insurance company; (2) under an insurance policy obtained subsequent
to a municipal bond's original issue or (3) under an insurance policy obtained
by the issuer or underwriter of such municipal bond at the time of original
issuance. An insured municipal bond in the Fund's portfolio typically will be
covered by only one of the three policies. All three types of insurance policies
insure the scheduled payment of all principal and interest on the Fund's
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 Fund. Investors should note that while all municipal bonds in
which the Fund will invest will be insured, the Fund may invest up to 20% of its
total assets in portfolio securities not covered by the insurance feature. The
Trust 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 Trust 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 Fund, 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 derivative
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.
Market Risk. Blue Chip Fund is subject to market risk because it invests
primarily in common stocks. Market risk is the possibility that common stock
prices will decline over short or even extended periods. The U.S. stock market
tends to be cyclical, with periods when stock prices generally rise and periods
when stock prices generally decline.
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<PAGE>
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 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) private activity bonds or industrial development bonds, (3) COPs, (4)
municipal commercial paper; (5) municipal notes; and (6) 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 Fund 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
13
<PAGE>
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 Fund may purchase will be
principally tax anticipation notes, bond anticipation notes, revenue
anticipation notes and project notes. The obligations are sold by an issuer
prior to the occurrence of another revenue producing event to bridge a financial
gap for such issuer. Municipal notes are usually general obligations of the
issuing municipality. Project notes are issued by housing agencies, but are
guaranteed by the U.S. Department of Housing and Urban Development and are
secured by the full faith and credit of the United States. Such municipal notes
must be rated MIG-1 by Moody's or SP-1 by S&P or have insurance through the
issuer or an independent insurance company. A description of municipal note
ratings is contained in Appendix B to the SAI.
Variable Rate Demand Instruments. VRDIs are Municipal Instruments,
the interest on which is adjusted periodically, and which allow the holder to
demand payment of all unpaid principal plus accrued interest from the issuer. A
VRDI that the Fund may purchase will be selected if it meets criteria
established and designed by the Trust's Board of Trustees to minimize risk to
the Fund. 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.
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.
Repurchase Agreements. Repurchase agreements are transactions in which a
Fund purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Each Fund's risk is limited
primarily to the ability of the seller to repurchase the securities at the
agreed-upon price upon the delivery date. See the SAI for more information
regarding repurchase agreements.
Restricted and Illiquid Securities. Each Fund 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, 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
Fund 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 Fund may invest in highly liquid taxable obligations
in order to avoid
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<PAGE>
the necessity of liquidating portfolio investments to meet redemptions by Fund
investors. The Fund's 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 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 Fund's 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 Fund 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 Fund's 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.
Portfolio Turnover. The relatively small size of Insured Tax Exempt Fund
allowed active management of the portfolio. In particular, the Fund routinely
took advantage of trading opportunities created by pricing inefficiencies in the
municipal bond market. This resulted in a portfolio turnover rate of 147% for
the fiscal year ending December 31, 1995 and 215% for the prior fiscal year. A
high rate of portfolio turnover generally leads to greater 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 Funds' portfolio
turnover rate and for more information on portfolio turnover.
HOW TO BUY SHARES
You may buy shares of a Fund 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 a Fund. Your FIC Representative or Dealer
Representative (each, a "Representative") may help you complete and submit an
application to open an account with a Fund. Certain accounts may require
additional documentation. Applications accompanied by checks drawn on U.S. banks
made payable to "EIC" and received in EIC's Woodbridge offices by the close of
regular trading on the 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. Orders received by
Representatives before the close of regular trading on the NYSE and received by
EIC at their Woodbridge offices before the
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<PAGE>
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. It is the responsibility of Representatives to promptly
transmit orders they receive to FIC. The "public offering price" is the net
asset value plus the applicable sales charge. Each Fund reserves the right to
reject any application or order for its shares for any reason and to suspend the
offering of its shares.
Due to emergency conditions, such as snow storms, the Woodbridge offices
of EIC and Administrative Data Management Corp. (the "Transfer Agent") may not
be open for business on a day when the NYSE is open for regular trading and,
therefore, would be unable to accept purchase orders. Should this occur,
purchase orders will be executed at the public offering price determined at the
close of regular trading on the NYSE on the next business day that these offices
are open for business.
Initial Investment in a Fund. You may open a Fund 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 an "Eligible Fund," as defined below. Accounts
opened through an exchange of shares from First Investors Cash Management Fund,
Inc. or First Investors Tax-Exempt Money Market Fund, Inc. (collectively, "Money
Market Funds") may be subject to an initial sales charge. You may open a Fund
account with $250 for individual retirement accounts ("IRAs") or, at the Funds'
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 Fund, you may
purchase additional shares of a Fund by mailing a check made payable to EIC,
directly to Executive Investors Corporation, 581 Main Street, 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 Fund shares.
Eligible Funds. With respect to certain shareholder privileges noted in
this Prospectus and the SAI, each fund in the First Investors family of funds,
except as noted below, is an "Eligible Fund" (collectively, "Eligible Funds").
First Investors Special Bond Fund, Inc., First Investors Life Series Fund and
First Investors U.S. Government Plus Fund are not Eligible Funds. The Money
Market Funds, unless otherwise noted, are not Eligible Funds.
Shareholders of the Funds may participate in the shareholder privileges
noted in this Prospectus and the SAI, including the exchange or cross-investment
of Fund shares for Class A Shares of an Eligible Fund at net asset value,
provided the Fund shares either have been (a) acquired through an exchange from
an Eligible Fund which imposes a maximum sales charge of 6.25% or (b) held for
at least one year from their date of purchase. However, the Funds are Eligible
Funds with respect to these shareholder privileges if (a) the transaction is
between any of the Funds or the Money Market Funds or (b) Class A shares of an
Eligible Fund are being exchanged or cross-invested for shares of the Funds.
Systematic Investing. You may arrange for automatic investments in a Fund
on a systematic basis through First Investors Money Line and through automatic
payroll investments. You may also elect to invest in shares of a Fund at net
asset value all the cash distributions or Systematic Withdrawal Plan payments
from Class A shares of an existing account in an Eligible Fund. If you
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<PAGE>
wish to participate in any of these systematic investment plans, please call
Shareholder Services at 1-800-423-4026 or see the SAI.
Electronic Funds Transfer. Shareholders who have an account with a U.S.
bank, or other financial institution that is an Automated Clearing House member,
may establish Electronic Funds Transfer. This permits shareholders to purchase
shares of a Fund through electronic funds transfer from a predesignated bank
account. The minimum amount which may be electronically transferred is $500 or
$50 for systematic investment programs and the maximum amount is $50,000. You
may purchase shares of a Fund through electronic funds transfer if the amount of
the purchase, together with all other purchases made by electronic funds
transfer into the account during the prior 30-day period, does not exceed
$100,000. Each Fund has the right, at its sole discretion, to limit or terminate
your ability to exercise the electronic funds transfer privilege at any time.
For additional information, see the SAI. Applications to establish Electronic
Funds Transfer are available from your FIC Representative or by calling
Shareholder Services at 1-800-423-4026.
Shares of each Fund are sold at the public offering price, which will vary
with the size of the purchase, as shown in the following table:
<TABLE>
<CAPTION>
Sales Charge as % of Concession to
Offering Net Amount Dealers as % of
Amount of Investment Price Invested Offering Price
- -------------------- --------- -------------- ---------------
<S> <C> <C> <C>
Less than $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
</TABLE>
There is no sales charge on transactions of $1 million or more, including
transactions of this amount that are 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 redeemed within 24
months of purchase (or 18 months for shares purchased prior to May 1, 1995), 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 or purchase price). In determining whether a CDSC is payable on any
redemption, it will be assumed that the redemption is made first of any 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.
Cumulative Purchase Privilege and Letters of Intent. You may purchase
shares of a Fund at a reduced sales charge through the Cumulative Purchase
Privilege or by executing a Letter of Intent. For more information, see the SAI,
call your Representative or call Shareholder Services at 1-800-423-4026.
Waivers of the Sales Charges. Sales charges do not apply to: (1) any purchase by
an officer, director, trustee or employee (who has completed the introductory
employment period) of the Trust, the Underwriter, the Adviser, or their
affiliates, by a Representative, or by the spouse, or by the
17
<PAGE>
children and grandchildren under the age of 21 of any such person; (2) any
purchase by a former officer, director, trustee or employee of the Trust, the
Underwriter, the Adviser, or their affiliates, or by a former FIC
Representative; provided they had acted as such for at least five years and had
retired or otherwise terminated the relationship in good standing; (3) the
proceeds of any settlement reached with FIC, FIMCO and/or certain First
Investors funds; (4) any reinvestment of the loan repayments by a participant in
a loan program of any First Investors sponsored qualified retirement plan; (5) a
purchase with proceeds from the liquidation of a First Investors Life Variable
Annuity Fund A contract or a First Investors Life Variable Annuity Fund C
contract during the one-year period preceding the maturity date of the contract;
and (6) any purchase by a participant in a Group 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; and (7) any purchase in an IRA
account if the purchase is made with the proceeds of a distribution from a Group
Qualified Plan, as defined under "Retirement Plans," with a First Investors
fund. With respects to items (6) and (7) above, if shares are redeemed within 24
months of purchase, a CDSC of 1.00% will be deducted from the redemption
proceeds.
Retirement Plans. You may invest in shares of a Fund through an IRA, SEP,
SARSEP or any other retirement plan. Participant-directed plans, such as 401(k)
plans, profit sharing and money purchase plans and 403(b) plans, that are
subject to Title I of ERISA (each, a "Group Qualified Plan") are entitled to a
reduced sales charge provided the number of employees eligible to participate is
99 or less. The sales charge as a percentage of the offering price and net
amount invested is 3.00% and 3.09%, respectively, and the concession to dealers
as a percentage of the offering price is 2.55%.
There is no sales charge on purchases through a Group Qualified Plan with
100 or more eligible employees. A CDSC of 1.00% will be deducted from the
redemption proceeds of such accounts for redemptions made within 24 months of
purchase. The CDSC will be applied in the same manner as the CDSC with respect
to purchases of $1 million or more. 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. These sales charges
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 Group Qualified Plan account will be subject to the
lower of the sales charge for Group Qualified Plans or the sales charge for the
purchase of Fund shares.
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 Funds 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 that
employ a Dealer Representative who sells a minimum dollar amount of the shares
of the Funds 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 Fund for Class A shares of any Eligible Fund, including the Money
Market Funds. In addition, shares of a Fund may be exchanged at net asset value
for units of any single payment plan ("plan") sponsored
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<PAGE>
by the Underwriter. Exchanges can only be made into accounts registered to
identical owners. If your exchange is into a new account, it must meet the
minimum investment and other requirements of the fund or plan into which the
exchange is being made. Additionally, the fund or plan must be available for
sale in the state where you reside. Before exchanging Fund shares for shares of
another fund or plan, you should read the Prospectus of the fund or plan into
which the exchange is to be made. You may obtain Prospectuses and information
with respect to which funds or plans qualify for the exchange privilege free of
charge by calling Shareholder Services at 1-800-423-4026. Exchange requests
received in "good order," as defined below, by the Transfer Agent before the
close of regular trading on the NYSE 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., 581 Main Street, Woodbridge, NJ
07095-1198. Shares will be exchanged after the request is received in "good
order" by the Transfer Agent. "Good order" means that an exchange request must
include: (1) the names of the funds, account numbers (if existing accounts), the
dollar amount, number of shares or percentage of the account you wish to
exchange; (2) share certificates, if issued; and (3) the signature of all
registered owners exactly as the account is registered. If the request is not in
good order or information is missing, the Transfer Agent will seek additional
information from you and process the exchange on the day it receives such
information. Certain account registrations may require additional legal
documentation in order to exchange. To review these requirements, please call
Shareholder Services at 1-800-423-4026.
Exchanges By Telephone. See "Telephone Transactions."
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 Fund's other shareholders. Accordingly, each Fund 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 Fund will consider all relevant factors in determining whether a
particular frequency of exchanges is contrary to the best interests of the Fund
and its other shareholders. Any such restriction will be made by a Fund 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 Fund 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. Certain account registrations may require
additional legal documentation in order to redeem. Redemption requests received
in "good order" by the Transfer Agent before the close of regular trading on the
NYSE, 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. Payment
of redemption proceeds generally 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.
Due to emergency conditions, such as snow storms, the Woodbridge offices
of FIC and the Transfer Agent may not be open for business on a day when the
NYSE is open for regular trading
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and, therefore, would be unable to accept redemption requests. Should this
occur, redemption requests will be executed at the at the net asset value, less
any applicable CDSC, determined at the close of regular trading on the NYSE on
the next business day that these offices are open for business.
Redemptions By Mail. Written redemption requests should be mailed to
Administrative Data Management Corp., 581 Main Street, Woodbridge, NJ
07095-1198. For your redemption request to be in good order, you must include:
(1) the name of the Fund; (2) your account number; (3) the dollar amount, number
of shares or percentage of the account you want redeemed; (4) share
certificates, if issued; (5) the original signatures of all registered owners
exactly as the account is registered; and (6) signature guarantees, if required,
as described below. If your redemption request is not in good order or
information is missing, the Transfer Agent will seek additional information and
process the redemption on the day it receives such information. To review these
requirements, please call Shareholder Services at 1-800-423-4026.
Signature Guarantees. In order to protect you, the Trust and its agents,
each Fund reserves the right to require signature guarantees in order to process
certain exchange or redemption requests. A notary public is not an acceptable
guarantor. See the SAI or call Shareholder Services at 1-800-423-4026 for
instances when signature guarantees are required.
Redemptions By Telephone. See "Telephone Transactions."
Electronic Funds Transfer. Shareholders who have established Electronic
Funds Transfer may have redemption proceeds electronically transferred to a
predesignated bank account. The minimum amount which may be electronically
transferred is $500 and the maximum amount is $50,000. You may redeem shares of
a Fund through electronic funds transfer if the amount of the redemption,
together with all other redemptions made by electronic funds transfer from the
account during the prior 30-day period, does not exceed $100,000. Each Fund has
the right, at its sole discretion, to limit or terminate your ability to
exercise the electronic funds transfer privilege at any time. For additional
information, see the SAI. Applications to establish Electronic Funds Transfer
are available from your FIC Representative or by calling Shareholder Services at
1-800-423-4026.
Systematic Withdrawal Plan. If you own noncertificated shares, you may set
up a plan for redemptions to be made automatically at regular intervals. You may
elect to have the payments automatically (a) sent directly to you or, if
signature guarantees are obtained, to persons you designate; or (b) invested in
shares of any other Fund or in Class A shares of any Eligible Fund, including
the Money Market Funds; or (c) paid to FIL for the purchase of a life insurance
policy or a variable annuity. See the SAI for more information on the Systematic
Withdrawal Plan. For information regarding the Systematic Withdrawal Plan, call
Shareholder Services at 1-800-423-4026.
Reinvestment after Redemption. If you redeem shares in your Fund account,
you can reinvest within six months from the date of redemption all or any part
of the proceeds in shares of the same Fund, any other Fund or Class A shares of
any Eligible Fund, including the Money Market Funds, at net asset value, on the
date the Transfer Agent receives your purchase request. For more information on
the reinvestment privilege, please see the SAI or call Shareholder Services at
1-800- 423-4026.
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Repurchase through Underwriter. You may redeem shares through a Dealer. In
this event, the Underwriter, acting as agent for each Fund, will offer to
repurchase or accept an offer to sell such shares at a price equal to the net
asset value next determined after the making of such offer. The Dealer may
charge you an added commission for handling any redemption transaction.
Redemption of Low Balance Accounts. Because each Fund incurs certain fixed
costs in maintaining shareholder accounts, each Fund may redeem without your
consent, on at least 60 days' prior written notice (which may appear on your
account statement), any Fund account which has a net asset value of less than
$500. To avoid such redemption, you may, during such 60-day period, purchase
additional Fund shares so as to increase your account balance to the required
minimum. A Fund 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 that have been discontinued prior to meeting the $1,000 minimum
are subject to this policy.
Additional information concerning how to redeem shares of a Fund is
available upon request to your Representative or Shareholder Services at
1-800-423-4026.
TELEPHONE TRANSACTIONS
Unless you specifically decline to have telephone privileges, you, or any
person who we reasonably believe is authorized to act on your behalf, may redeem
or exchange noncertificated shares of a Fund 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 before
the close of regular trading on the NYSE will be processed at the net asset
value, less any applicable CDSC, determined as of the close of business on that
day. For more information on telephone privileges, please call Shareholder
Services at 1-800-423-4026 or see the SAI.
Telephone Exchanges. Exchange requests may be made by telephone (for
shares held on deposit only). 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) each
redemption does not exceed $50,000; and (5) the proceeds of the redemption,
together with all redemptions made from the account during the prior 30-day
period, do not exceed $100,000. Telephone redemption instructions will be
accepted from any one owner or authorized individual.
Additional Information. The Trust, the Adviser, the Underwriter and their
officers, directors, trustees and employees 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 or which they reasonably believe to be
authentic. This policy places the entire risk of loss for unauthorized or
fraudulent transactions on the shareholder, except that if the above-referenced
parties 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.
The Trust has the right, at its sole discretion, upon 60 days' notice, to
materially modify or discontinue the telephone exchange and redemption
privilege. During times of drastic economic or market changes, telephone
exchanges or redemptions may be difficult to
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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 Trust's Board of Trustees, as part of its overall
management responsibility, oversees various organizations responsible for that
Fund's day-to-day management.
Adviser. Executive Investors Management Company, Inc. supervises and
manages each Fund's investments, determines each Fund's portfolio transactions
and supervises all aspects of each Fund's 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 controls FICC and, therefore, controls the Adviser.
As compensation for its services, the Adviser receives an annual fee from
each of the Funds, which is payable monthly. For the fiscal year ended December
31, 1995, 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.
The SEC staff takes the position that advisory fees of 0.75% or greater are
higher than those paid by most investment companies.
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 Situations Fund, the Blue Chip
Fund and the equity portion of the Total Return Fund, all series of First
Investors Series Fund. In addition, Ms. Poitra is responsible for the management
of the U.S.A. Mid-Cap Opportunity Fund of First Investors Series Fund II, Inc.
and the Blue Chip Fund and Discovery Fund of First Investors Life Series Fund.
Ms. Poitra joined FIMCO in 1985 as a Senior Equity Analyst.
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 Fund of First Investors Life
Series Fund and First Investors High Yield Fund, Inc.
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. Mr. Wagner is also Portfolio Manager for
Government Fund, Target Maturity 2007 Fund and Target Maturity 2010 Fund of
First Investors Life Series Fund and First Investors Government Fund, Inc. Mr.
Wagner is also responsible for the day-to-day management of the U.S. Government
and mortgage-backed securities portion of Total Return Fund of First Investors
Series Fund. In 1992, he became Chief Investment Officer of FIMCO.
Brokerage. Each Fund may allocate brokerage commissions, if any, to
broker-dealers in consideration of Fund share distribution, but only when
execution and price are comparable to that
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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 Trust 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
Fund's shares and may receive other payments under a plan of distribution. See
"Distribution Plan."
DISTRIBUTION PLAN
Pursuant to an Amended and Restated Class A Distribution Plan (the
"Plan"), each Fund is authorized to compensate the Underwriter for certain
expenses incurred in the distribution of that Fund's shares ("distribution
fees") and the servicing or maintenance of existing Fund shareholder accounts
("service fees"). Pursuant to the Plan, distribution fees are paid for
activities relating to the distribution of Fund shares, including costs of
printing and dissemination of sales material or literature, prospectuses and
reports used in connection with the sale of Fund 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 Fund, provided they meet certain
criteria.
Pursuant to the Plan, each Fund is authorized to pay the Underwriter a
distribution fee at the annual rate of 0.25% that Fund's average daily net
assets and a service fee of 0.25% of that Fund's 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 Fund 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 Fund 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 Trust's Board
of Trustees deems necessary, by dividing the market value of the securities held
by such Fund, 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 Trust'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 Fund 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 Fund at the net
asset value generally determined as of the close of business on the business day
immediately following the record date of
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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 Fund also distributes with its regular dividend at the end of each
year substantially all of (a) 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 (b) 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 Fund 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 Fund may make an additional 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 Fund 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 in
shares of any other Fund or in Class A shares of any Eligible Fund, including
the Money Market Funds, by notifying the Transfer Agent. See "How to Buy
Shares--Cross-Investment of Cash Distributions." The investment will be made at
the net asset value per Class A 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 Fund will be paid in additional
Fund shares and not in cash if any of the following events occur: (1) the total
amount of the distribution is under $5, (2) the Fund 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 Fund 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.
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Dividends from a Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits,
whether paid in cash or in additional Fund 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 Fund's net capital gain, when designated as such, are
taxable to you as long-term capital gain, whether paid in cash or in additional
Fund 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 Fund during that year.
Each Fund is required to withhold 31% of all taxable dividends, capital
gain distributions and redemption proceeds payable to you (if you are an
individual or certain other non-corporate shareholder) if a Fund is not
furnished with your correct taxpayer identification number, and the same
percentage of such dividends and distributions in certain other circumstances.
Your redemption of Fund 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 Fund shares for shares of any other Fund or
for Class A shares of any Eligible Fund generally will have similar tax
consequences. However, special tax rules apply if you (1) dispose of Fund shares
through a redemption or exchange within 90 days of your purchase and (2)
subsequently acquire shares of the same Fund, any other Fund or Class A shares
of an Eligible Fund without paying a sales charge due to the reinvestment
privilege or exchange privilege. In these cases, any gain on your disposition of
the original shares will be increased, or loss decreased, by the amount of the
sales charge you paid when the shares were acquired, and that amount will
increase the basis of the Eligible Fund's shares you subsequently acquired. In
addition, if you purchase Fund shares within 30 days before or after redeeming
other shares of that Fund (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 Fund's 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.
Proposals have been, and in the future 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
Fund 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 Fund 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.
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PERFORMANCE INFORMATION
For purposes of advertising, each Fund's 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 Fund's performance
had been constant over the entire period. Because average annual total return
tends to smooth out variations in a Fund's 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 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 Fund 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 Fund 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 Fund 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 Fund's 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 Fund's 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 Trust's Annual Report which may be obtained without charge by contacting
the Trust at 1-800-423-4026.
GENERAL INFORMATION
Organization. The Trust is a Massachusetts business trust organized on
October 28, 1986. The Trust 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 Trust are presently divided into three
separate and distinct series, each having one class, designated Class A shares.
The Trust does not hold annual shareholder meetings. If requested to do so by
the holders of at least 10% of the Trust's outstanding shares, the Trust's Board
of Trustees will call a special meeting of shareholders for any purpose,
including the removal of Trustees. Each share of each Fund has equal voting
rights. Each
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share of a Fund 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 Fund.
Transfer Agent. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of EIMCO and EIC, acts as transfer and
dividend disbursing agent for each Fund and as redemption agent for regular
redemptions. The Transfer Agent's telephone number is 1-800-423-4026.
Share Certificates. The Funds do not issue certificates for shares
purchased under any retirement account. The Funds, however, will issue share
certificates at the shareholder's request. Ownership of shares of each Fund is
recorded on a stock register by the Transfer Agent and shareholders have the
same rights of ownership with respect to such shares as if certificates had been
issued.
Confirmations and Statements. You will receive confirmations of purchases
and redemptions of shares of a Fund. 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 Trust'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 Trust 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;
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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.
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.
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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.
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.
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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.
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.
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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........................ 23
Dividends and Other Distributions....................... 23
Taxes................................................... 24
Performance Information................................. 26
General Information..................................... 26
Appendix A.............................................. 27
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 581 Main Street
95 Wall Street Woodbridge, NJ 07095-1198
New York, NY 10005
Auditors
Legal Counsel Tait, Weller & Baker
Kirkpatrick & Lockhart LLP Two Penn Center Plaza
1800 Massachusetts Avenue, N.W. Philadelphia, PA 19102-1707
Washington, D.C. 20036
This Prospectus is intended to constitute an offer by the Trust only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this Prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this Prospectus relating to any
other Fund. No dealer, salesman or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representation must not be relied upon as having been
authorized by the Trust, First Investors Corporation, or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the shares offered hereby in any state to any person to whom
it is unlawful to make such offer in such state.
<PAGE>
Executive Investors
Trust
- ---------------------------
Blue Chip Fund
High Yield Fund
Insured Tax Exempt Fund
- ---------------------------
Prospectus
- ----------------------------
April 29, 1996
Verticle 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
<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 April 29, 1996
This is a Statement of Additional Information ("SAI") for Executive
Investors Trust ("Trust"), an open-end diversified management investment
company. The Trust offers three separate series, each of which has different
investment objectives and policies: Blue Chip Fund, High Yield Fund and Insured
Tax Exempt Fund (singularly, "Fund" and collectively, "Funds"). 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 is not an item of tax
preference for purposes of the Federal alternative minimum tax ("Tax Preference
Item"). Such income may be subject to state and local taxes.
There can be no assurance that any Fund will achieve its investment
objective.
This SAI is not a prospectus. It should be read in conjunction with the
Funds' Prospectus dated April 29, 1996 which may be obtained free of cost from
the Trust at the address or telephone number noted above.
TABLE OF CONTENTS PAGE
Investment Policies.................................................... 2
Hedging and Option Income Strategies................................... 11
Investment Restrictions................................................ 17
Trustees and Officers.................................................. 24
Management ............................................................ 26
Underwriter............................................................ 27
Distribution Plan...................................................... 28
Determination of Net Asset Value....................................... 29
Allocation of Portfolio Brokerage...................................... 30
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services........................... 31
Taxes.................................................................. 36
Performance Information................................................ 39
General Information.................................................... 44
Appendix A............................................................. 46
Appendix B............................................................. 47
Appendix C............................................................. 48
Financial Statements................................................... 54
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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 Fund
and are treated as such for purposes of certain investment limitation
calculations.
Bankers' Acceptances. Each Fund 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 Fund 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 Fund may result in the Fund 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 Fund's 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.
Certificates of Deposit. Each Fund 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 Trust's Board of Trustees has
established guidelines for determining the liquidity of the COPs in the Funds'
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
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<PAGE>
the security is held by the Fund, 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 Funds' 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 Fund 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 Fund continues to hold the detachable call
option. The Fund 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. 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
municipal bond at the time of
3
<PAGE>
original issuance (a "New Issue Insurance Policy"). An insured municipal bond in
the Fund's 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 Trust 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 Fund 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 Fund. AMBAC Indemnity furnished the Fund 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 Fund prior to the entry by the Fund 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
Fund. 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 the Fund 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 Fund. AMBAC Indemnity has reserved the right at any time,
upon 90 days' prior written notice to the Fund, to refuse to insure any
additional municipal bonds purchased by the Fund, on or after the effective date
of such notice. If AMBAC Indemnity so notifies the Fund, the Fund will attempt
to replace AMBAC Indemnity with another insurer. If another insurer cannot be
found to replace AMBAC Indemnity, the Fund 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 Fund 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 Fund. 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 Fund's shares. The Policy
will be effective only as to insured municipal bonds owned by the Fund. In the
event of a sale by the Fund 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 Fund, 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 Fund in respect of such municipal bond. It is the intention
of the Fund, however, to retain any insured securities which are in default or
in significant risk of default and to place a value on
4
<PAGE>
the defaulted securities equal to the value of similar insured securities which
are not in default. While a defaulted bond is held by the Fund, the Fund
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 Fund's method of
valuing securities in default and securities which have a significant risk of
default.
The Trust 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 Fund. 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 Fund may also purchase municipal bonds
which are already insured under a Secondary Market Insurance Policy. A Secondary
Market Insurance Policy could enable the Fund 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 Fund in determining the
net capital gain or loss realized by the Fund upon the sale of the bond.
In addition to the contract of insurance relating to the Fund, there is
a contract of insurance between AMBAC Indemnity and First Investors Multi-State
Insured Tax Free Fund, between AMBAC Indemnity and First Investors Series Fund,
between AMBAC Indemnity and First Investors New York Insured Tax Free Fund, Inc.
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
Funds.
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, the District of Columbia,
the Territory of Guam and the Commonwealth of Puerto Rico, with admitted assets
of approximately $2,439,000,000 (unaudited) and statutory capital of
approximately $1,378,000,000. (unaudited) as of December 31, 1995. 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. Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., Moody's Investors Service and Fitch Investors
Service L.P. have each assigned a triple-A claims-paying ability rating to AMBAC
Indemnity.
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.
AMBAC Indemnity makes no representation regarding the municipal bonds
included in the investment portfolio of the Fund 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 SAI.
5
<PAGE>
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.
The parent company of AMBAC Indemnity, AMBAC, Inc. (the "Company"), is
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's regional offices at 7 World Trade Center, New York, New
York 10048 and Northwestern Atrium Center; 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, the aforementioned material may also be
inspected at the offices of the New York Stock Exchange, Inc. (the "NYSE") at 20
Broad Street, New York, New York 10005. The Company's Common Stock is listed on
the NYSE.
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, 10004 and (212) 668-0340.
The following documents filed by the Company with the Commission (File
No. 1-10777) are incorporated by reference in this SAI:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, filed with the Commission on March 31, 1995;
(2) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995;
(3) The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995;
(4) The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995; filed with the Commission on
November 14, 1995;
(5) The Company's Current Report on Form 8-K filed with the
Commission on July 18, 1995; and
(6) The Company's Current Report on Form 8-K dated January 31,
1996.
All documents subsequently filed by the Company pursuant to the requirements of
the Exchange Act after the date of this SAI will be available for inspection in
the same manner as described above.
Loans of Portfolio Securities. Each Fund may loan securities to
qualified broker-dealers or other institutional investors provided: the borrower
pledges to the Fund and agrees to maintain at all times with the Fund 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 Fund; the
Fund pays only reasonable custodian fees in connection with the loan; and the
Adviser monitors the creditworthiness of the borrower throughout
6
<PAGE>
the life of the loan. Such loans may be terminated by the Fund at any time and
the Fund 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
Fund. The borrower must add to the collateral whenever the market value of the
securities rises above the level of such collateral. The Fund 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 Fund's total assets. High Yield
Fund may make loans, together with illiquid securities, not in excess of 15% of
its net assets.
Mortgage-Backed 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 Fund), 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 Fund, and the Fund 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 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
Fund normally will not distribute principal payments (whether regular or
prepaid) to its shareholders. Rather, it will invest such
7
<PAGE>
payments in additional mortgage-related securities of the types described above.
Interest received by the Fund 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.
Repurchase Agreements. A repurchase agreement essentially is a
short-term collateralized loan. The lender (a Fund) agrees to purchase a
security from a borrower (typically a broker-dealer) at a specified price. The
borrower simultaneously agrees to repurchase that same security at a higher
price on a future date (which typically is the next business day). The
difference between the purchase price and the repurchase price effectively
constitutes the payment of interest. In a standard repurchase agreement, the
securities which serve as collateral are transferred to a Fund's custodian bank.
In a "tri-party" repurchase agreement, these securities would be held by a
different bank for the benefit of the Fund as buyer and the broker-dealer as
seller. In a "quad-party" repurchase agreement, the Fund's custodian bank also
is made a party to the agreement. Each Fund 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 Fund 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 Fund 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 Fund in each agreement, and the Fund
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
Fund might incur
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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 Fund
may be delayed or limited. No Fund may enter into a repurchase agreement with
more than seven days to maturity if, as a result, more than 15% of such Fund's
net assets would be invested in such repurchase agreements and other illiquid
investments.
Restricted and Illiquid Securities. No Fund 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.
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 Fund
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 Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, a Fund might obtain a less favorable price than prevailed when it
decided to sell.
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 Fund, however, could affect adversely the marketability of
such portfolio securities and a Fund 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 Fund will engage in
short sales for hedging purposes only. The Fund only may make short
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sales "against the box," which occurs when the Fund 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 Fund's 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 Fund 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 Fund's 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 Fund generally would not pay for such securities or start earning
interest on them until they are issued or received. However, when a Fund
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 Fund on a when-issued basis may result in that Fund's incurring a loss or
missing an opportunity to make an alternative investment. When a Fund 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 Fund's 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 Fund's commitment, that Fund will be required
to deposit additional cash or qualified securities into the account until equal
to the value of that Fund's commitment. When the securities to be purchased are
issued, the Fund 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 Fund is committed to
purchase. Sale of securities in the segregated account or other securities owned
by a Fund and when-issued securities may cause the realization of a capital gain
or loss.
Portfolio Turnover. Although each Fund 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 turnover
rate is calculated by dividing (1) the lesser of purchases or sales of portfolio
securities for the
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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 Fund's 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, 1994 and 1995, Blue Chip Fund's
portfolio turnover rate was 89% and 33%, respectively, and High Yield Fund's
portfolio turnover rate was 53% and 69%, respectively. See the Prospectus for
Insured Tax Exempt Fund's portfolio turnover rate.
HEDGING AND OPTION INCOME STRATEGIES
The Adviser may engage in certain options and futures strategies to
hedge the Fund's 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 Fund's
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
Fund's 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 Fund 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 Fund may leave the Fund in a worse position than if such
strategies were not used. The Fund 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-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.
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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 Fund 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 Fund
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 Fund will use
leverage in its hedging and option income strategies. In the case of each
transaction entered into as a hedge, each Fund will hold securities or other
options or futures positions whose values are expected to offset ("cover") its
obligations hereunder. Each Fund will not enter into a hedging or option income
strategy that exposes the Fund 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 Fund 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 Fund's assets could impede portfolio management or the Fund's 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 Fund's potential loss to the option premium paid; conversely,
if the market price of the underlying security increases above the exercise
price and the Fund 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 Fund to sell the
underlying security at the predetermined exercise price; thus the potential for
loss to the Fund 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 Fund 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 Fund will write covered call options on securities generally
when the Adviser believes that the premium received by the Fund, 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 Fund
declines, the amount of such decline will be offset wholly or in part by the
amount of the premium received by the Fund. If, however, there is an increase in
the market price of the underlying security and the option is exercised, the
Fund
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will be obligated to sell the security at less than its market value. The Fund
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 Fund, to the extent described under "Investment Policies--Restricted and
Illiquid Securities" and therefore subject to the Fund's limitation on
investments in illiquid securities. In addition, the Fund 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 Fund 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 Fund 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 Fund 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 Fund
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 Fund and the opposite party with no clearing
organization guarantee. Thus, when a Fund purchases 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 Fund 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
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will be purchased or written only when the Adviser believes that there exists a
liquid secondary market in such options; and (2) no Fund 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 Fund, exceeds 5% of that Fund's 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 Fund wishes to
terminate its obligation to sell securities under a call option it has written,
the Fund 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 Fund 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 Fund 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 Fund 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 Fund 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 Fund, there
is no assurance that the Fund 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 Fund may be unable to liquidate an OTC option.
Accordingly, it may not be possible to effect closing transactions with respect
to certain options, with the result that a Fund would have to exercise those
options that it has purchased in order to realize any profit. With respect to
options written by a Fund, the inability to enter into a closing transaction may
result in material losses to the Fund. For example, because a Fund must maintain
a covered position with respect to any call option it writes, that Fund 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 Fund's ability to
sell a portfolio security or make an investment at a time when such a sale or
investment might be advantageous.
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Stock index options are settled exclusively in cash. If a Fund
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 Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs; however, a Fund 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 Fund 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 Fund 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 Fund 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
Fund plans to acquire at a future date. The Fund 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 Fund's 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 Fund's 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 Fund 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 Fund's existing futures positions
and, for Insured Tax Exempt Fund, margin and premiums paid for related options,
would exceed 5% of the market value of that Fund's total assets. This does not
limit a Fund's assets at risk to 5%. The value of all futures sold will not
exceed the total market value of a Fund's portfolio. In addition, each Fund 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
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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 Fund upon termination of the transaction, assuming all
obligations have been satisfied. Under certain circumstances, such as periods of
high volatility, a Fund 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 Fund's 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 Fund to close
a position and, in the event of adverse price movements such Fund 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 Fund 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 Fund may need to sell assets at a
time when such sales are disadvantageous to that Fund. If the price of the
futures contract or related option moves more than the price of the underlying
securities, a Fund 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.
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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 Fund 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 Fund 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 Fund 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 Fund and, unless identified as non-fundamental policies, may not be
changed without the affirmative vote of a majority of the outstanding voting
securities of that Fund, voting separately from any other Fund of the Trust. 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 Fund" means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Fund or (2) 67% or more of the shares of the Fund present at a meeting, if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy. Except with respect to borrowing, changes in values of a particular
Fund's assets will not cause a violation of the following investment
restrictions so long as percentage restrictions are observed by that Fund at the
time it purchases any security.
17
<PAGE>
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 Fund 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 Fund's 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
Fund's total assets (taken at current value) would be invested in a single
industry.
(5) With respect to 75% of the Fund's 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 Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund 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
Fund may pledge its assets to secure borrowings made in accordance with
paragraph (2) above, provided the Fund 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 Trust, as principals.
(12) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer, director or Trustee of the Trust or of the Adviser owns more
than 1/2 of 1% of the outstanding securities 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 Fund will not:
(1) Purchase any security if as a result the Fund would then have more
than 5% of its total assets invested in securities of companies (including
predecessors) less than three years old.
18
<PAGE>
(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 Fund may incur duplicate fees to the extent that it
invests in other investment companies.
(3) Purchase oil, gas or other mineral interests. However, the Fund 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 Fund 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 Fund's total assets.
(5) Purchase warrants if as a result the Fund 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 Fund's 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 Trust, on behalf of the Fund, has filed the following undertakings
to comply with requirements of certain states in which shares of the Fund are
sold, which may be changed without shareholder approval:
(1) Notwithstanding fundamental investment restriction (6) above, the
Fund 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
Fund will not invest in real estate limited partnership interests or in
interests in real estate investment trusts that are not readily marketable.
(3) Notwithstanding non-fundamental investment restriction (3) above,
the Fund 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 Fund's total
assets.
19
<PAGE>
(3) Pledge, mortgage or hypothecate any of its assets, except that the
Fund 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 Fund 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 Trust's Board of Trustees may, on the
request of broker-dealers or other institutional investors which they deem
qualified, authorize the Fund to loan securities to cover the borrower's short
position; provided, however, the borrower pledges to the Fund and agrees to
maintain at all times with the Fund cash collateral equal to not less than 100%
of the value of the securities loaned, the loan is terminable at will by the
Fund, the Fund receives interest on the loan as well as any distributions upon
the securities loaned, the Fund retains voting rights associated with the
securities, the Fund 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 Fund's net
assets.
(5) With respect to 75% of the Fund's 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 Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.
(6) Purchase the securities of an issuer if such purchase, at the time
thereof, would cause more than 5% of the value of the Fund's 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 Fund 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).
(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 Fund's 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 Trust 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.
20
<PAGE>
(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 Trust, 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
Fund will not invest in real estate limited partnership interests or in
interests in real estate investment trusts that are not readily marketable.
(2) The Fund 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 Fund's 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 Trust, on behalf of the Fund, has also filed the following
undertaking to comply with requirements of a certain state in which shares of
the Fund 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 Fund will submit to shareholders for their approval or disapproval,
the matter of possible liquidation of the Fund.
Insured Tax Exempt Fund. 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 Fund's 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.
21
<PAGE>
(2) Issue senior securities.
(3) Make loans, except loans of portfolio securities (limited to 10% of
the Fund's 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 Fund's 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 Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer. With respect to prerefunded 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 Fund may purchase
municipal bonds directly from the issuer thereof for investment in accordance
with the Fund's 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 Trust, as principals.
(10) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer, director or Trustee of the Trust or of the Adviser owns more
than 1/2 of 1% of the outstanding securities 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 Fund 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 Fund's 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 Fund from
purchasing or selling options, futures
22
<PAGE>
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 Fund 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 Fund, or enter
into any futures contracts or options on futures contracts if the aggregate
amount of the Fund's commitments under outstanding futures contracts positions
and options on future contracts written by the Fund would exceed the market
value of the total assets of the Fund.
(4) Pledge assets, except that the Fund may pledge its assets to secure
borrowings made in accordance with fundamental investment restriction (1) above,
provided the Fund 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 Fund's use of options, futures
contracts or options on futures contracts.
(5) Purchase securities on margin, except that the Fund 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.
The Trust, on behalf of the Fund, has filed the following undertakings
to comply with requirements of certain states in which shares of the Fund are
sold, which may be changed without shareholder approval:
(1) Notwithstanding fundamental investment restriction (6) above, the
Fund 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 Fund 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 Fund would have more than 5% of its total assets in
such investments.
23
<PAGE>
TRUSTEES AND OFFICERS
The following table lists the Trustees and executive officers of the
Trust, their age, 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*+ (70), President and Trustee. Chairman of the Board and Director,
Administrative Data Management Corp. ("ADM"), FIMCO, Executive Investors
Management Company, Inc. ("EIMCO"), First Investors Corporation ("FIC"),
Executive Investors Corporation ("EIC") and First Investors Consolidated
Corporation ("FICC").
James J. Coy (82), Trustee, 90 Buell Lane, East Hampton, NY 11937. Retired;
formerly Senior Vice President, James Talcott, Inc. (financial institution).
Roger L. Grayson* (39), Trustee. Director, FIC and FICC; President and Director,
First Investors Resources, Inc.; Commodities Portfolio Manager.
Kathryn S. Head*+ (40), Trustee, 581 Main Street, Woodbridge, NJ 07095.
President, FICC, EIMCO, FIMCO and ADM; Vice President, Chief Financial Officer
and Director, FIC and EIC; President and Director, First Financial Savings Bank,
S.L.A.
Rex R. Reed (74), Trustee, 1381 Fairway Oaks, Kiawah Island, SC 29455. Retired;
formerly Senior Vice President, American Telephone & Telegraph Company.
Herbert Rubinstein (74), Trustee, 145 Elm Drive, Roslyn, NY 11576. Retired;
formerly President, Belvac International Industries, Ltd. and President, Central
Dental Supply.
James M. Srygley (63), Trustee, 33 Hampton Road, Chatham, NJ 07982. Principal,
Hampton Properties, Inc. (property investment company).
John T. Sullivan* (64), Trustee and Chairman of the Board; Director, FIMCO, FIC,
FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.
Robert F. Wentworth (66), 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 (38), Treasurer, 581 Main Street, Woodbridge, NJ 07095.
Treasurer, FIC FIMCO, EIMCO and EIC; Comptroller and Treasurer, FICC.
Concetta Durso (61), Vice President and Secretary. Vice President, FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary, FIC and EIC.
Clark D. Wagner (37), Vice President. Vice President, First Investors Series
Fund, First Investors Insured Tax Exempt Fund, Inc., First Investors Multi-State
Insured Tax Free Fund, First Investors New York Insured Tax Free Fund, Inc. and
First Investors Government Fund, Inc.
24
<PAGE>
George V. Ganter (43), Vice President. Vice President, First Investors Asset
Management Company, Inc., First Investors High Yield, Inc., and First Investors
Special Bond Fund; Portfolio Manager, FIMCO.
Patricia D. Poitra (41), 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.
* 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 Ms. Poitra and Messrs.
Ganter and Wagner, hold identical or similar positions with 14 registered
investment companies in the First Investors Family of Funds. 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, School Financial
Management Services, Inc., First Investors Credit Funding Corporation, N.A.K.
Realty Corporation, Real Property Development Corporation, First Investors
Leverage Corporation and Route 33 Realty Corporation.
The following table lists compensation paid to the Trustees of the
Trust for the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
Total
Compensation
Pension or Estimated From First
Aggregate Retirement Benefits Annual Benefits Investors Family
Compensation Accrued as Part of Upon of Funds
Trustee From Fund* Fund Expenses Retirement Paid to Trustees*
- ------- ------------ -------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
James J. Coy $600 $-0- $-0- $37,200
Roger L. Grayson -0- -0- -0- -0-
Glenn O. Head -0- -0- -0- -0-
Kathryn S. Head -0- -0- -0- -0-
F. William Ortman, Jr.** 250 -0- -0- 15,500
Rex R. Reed 600 -0- -0- 37,200
Herbert Rubinstein 600 -0- -0- 37,200
James M. Srygley*** 600 -0- -0- 37,200
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth 600 -0- -0- 37,200
</TABLE>
* Compensation to officers and interested Trustees of the Trust is paid by the
Adviser. In addition, compensation to non-interested Trustees of the Trust is
currently voluntarily paid by the Adviser.
** For the period January 1, 1995 through September 21, 1995.
*** For the period January 19, 1995 through December 31, 1995.
25
<PAGE>
MANAGEMENT
Investment advisory services to each Fund 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 Trust, including a majority of the Trustees who
are not parties to the Funds' 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 Fund.
Pursuant to the Advisory Agreement, EIMCO shall supervise and manage
each Fund's investments, determine each Fund's portfolio transactions and
supervise all aspects of each Fund's operations, subject to review by the
Trust'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 Trust and each Fund and assume certain expenses thereof, other than
obligations or liabilities of the Fund. The Advisory Agreement may be terminated
at any time, with respect to a Fund, without penalty by the Trust's Trustees or
by a majority of the outstanding voting securities of such Fund, 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 Fund, for a period of over two years only if such continuance is approved
annually either by the Trust's Trustees or by a majority of the outstanding
voting securities of such Fund, and, in either case, by a vote of a majority of
the Trust's Independent Trustees voting in person at a meeting called for the
purpose of voting on such approval.
Under the Advisory Agreement, each Fund 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
For the fiscal years ended December 31, 1993, 1994, and 1995, Blue Chip
Fund's advisory fees were $8,194, $9,661 and $12,118, respectively, all of which
were voluntarily waived by the Adviser. For the fiscal years ended December 31,
1993, 1994 and 1995, Insured Tax Exempt Fund's advisory fees were $78,279,
$98,612 and $119,019, respectively, all of which were voluntarily waived by the
Adviser. For the fiscal years ended December 31, 1993, 1994 and 1995, High Yield
Fund's advisory fees were $118,399, $150,442 and $154,785, respectively. Of such
amounts, the Adviser voluntarily waived $72,317, $82,743 and $85,132,
respectively. For the fiscal year ended December 31, 1995, the Adviser
voluntarily reimbursed Blue Chip Fund and Insured Tax Exempt Fund an additional
$3,906 and $18,498, respectively.
Pursuant to certain state regulations, the Adviser has agreed to
reimburse a Fund if and to the extent that Fund's aggregate operating and
management expenses, including advisory fees but generally excluding interest,
taxes, brokerage commissions and extraordinary expenses, exceed any limitation
on
26
<PAGE>
expenses applicable to that Fund 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, 1995, no reimbursement
was required pursuant to these regulations.
The Adviser has an Investment Committee composed of George V. Ganter,
Margaret Haggerty, Glenn O. Head, Nancy W. Jones, Patricia D. Poitra, Michael
O'Keefe, Clark D. Wagner and Richard Guinnessey. The Committee usually meets
weekly to discuss the composition of the portfolio of each Fund and to review
additions to and deletions from the portfolios.
Each Fund bears all expenses of its operations other than those
incurred by the Adviser or Underwriter under the terms of its advisory or
underwriting agreements. Fund 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.
UNDERWRITER
The Trust 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 Funds.
Pursuant to the Underwriting Agreement, the Underwriter shall bear all fees and
expenses incident to the registration and qualification of the Funds' 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 Funds' shares, unless the
Funds have agreed to bear such costs pursuant to a plan of distribution. See
"Distribution Plan." The Underwriting Agreement was approved by the Trust'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 Fund, only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees or by a vote of a
majority of the outstanding voting securities of such Fund, and in either case
by the vote of a majority of the Trust'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, 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, 1995, Blue
Chip Fund paid EIC underwriting commissions of $574. For the same period, EIC
reallowed an additional $3,084 to unaffiliated dealers and $3,084 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. For the fiscal year ended December 31,
1995, High Yield Fund
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paid EIC underwriting commissions of $7,037. For the same period, EIC reallowed
an additional $49,621 to unaffiliated dealers and $4,349 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, Insured 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. For the fiscal year ended December
31, 1995, Insured Tax Exempt Fund paid EIC underwriting commissions of $9,502.
For the same period, EIC reallowed an additional $59,787 to unaffiliated dealers
and $3,812 to FIC.
DISTRIBUTION PLAN
As stated in the Funds' Prospectus, pursuant to an Amended and Restated
Class A Distribution Plan adopted by the Trust pursuant to Rule 12b-1 under the
1940 Act (the "Plan"), each Fund is authorized to compensate the Underwriter for
certain expenses incurred in the distribution of that Fund's shares and the
servicing or maintenance of existing Fund shareholder accounts.
In adopting the Plan for the Funds, the Trust's Board of Trustees
considered all relevant information and determined that there is a reasonable
likelihood that the Plan will benefit each Fund and its shareholders. The
Trust's Board believes that the amounts spent pursuant to the Plan have assisted
each Fund 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 Fund.
The Plan was approved by the Trust's Board of Trustees, including a
majority of the Independent Trustees, and by a majority of the outstanding
voting securities of each Fund. The Plan will continue in effect, with respect
to a Fund, from year to year as long as its continuance is approved annually by
either the Board of Trustees or by a vote of a majority of the outstanding
voting securities of that Fund. In either case, to continue, the Plan must be
approved by the vote of a majority of the Independent Trustees of the Trust. The
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 Trust'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 Fund, at any time by a vote of a majority of the
Independent Trustees or by a vote of a majority of the outstanding voting
securities of that Fund.
For the fiscal year ended December 31, 1995, Blue Chip Fund, High Yield
Fund and Insured Tax Exempt Fund paid $6,059, $77,393 and $59,509, respectively,
in fees pursuant to the Plan. For the same period, the Underwriter incurred the
following Plan-related expenses with respect to each Fund:
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Compensation Compensation to
Fund Advertising to sales personnel* Underwriter**
Blue Chip Fund $0 $ 3,752 $ 2,307
High Yield Fund 0 45,479 31,914
Insured Tax Exempt Fund 0 35,893 23,616
* Represents service fees
** Represent distribution fees.
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 Fund 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 Fund 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
Trust's officers in a manner specifically authorized by the Board of Trustees of
the Trust.
With respect to the High Yield Fund and Insured Tax Exempt Fund,
"when-issued securities" are reflected in the assets of the Fund 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
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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 Fund's 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 Fund of securities owned by it
is not reasonably practicable for the Fund fairly to determine the value of its
net assets, or (3) for such other period as the SEC has by order permitted.
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 Funds 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 Funds directly from an issuer, in which no commission or
discounts are paid. The Funds 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 Fund also may purchase listed securities through the
"third market." When transactions are executed in the OTC market, the Fund seeks
to deal with the primary market makers, but when advantageous they utilize the
services of brokers.
In effecting portfolio transactions for the Funds, 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 Funds 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 Funds; however, not all such
services may be used by the Adviser in connection with a Fund. 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 Fund,
other funds in the First Investors Group of Funds and First Investors Life
Insurance Company, affiliates of the Funds, 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 Fund according to the proportion that the size of the
transaction order actually placed by a Fund bears to the aggregate size of the
transaction orders simultaneously made by other participants in the transaction.
The Trust's Board of Trustees has authorized and directed the Adviser to use
dealer concessions available in
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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, 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. For the fiscal year
ended December 31, 1994, Blue Chip Fund paid $2,388 in 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.
For the fiscal year ended December 31, 1995, Blue Chip Fund paid $1,041
in brokerage commissions. Of that amount $565 was paid to brokers who furnished
research services on portfolio transactions in the amount of $380,234. For the
fiscal year ended December 31, 1995, High Yield Fund did not pay brokerage
commissions. For the fiscal years ended December 31, 1993, 1994 and 1995,
Insured Tax Exempt Fund did not pay brokerage commissions.
REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND
REDEMPTION INFORMATION AND OTHER SERVICES
Reduced Sales Charges
Reduced sales charges are applicable to purchases made at one time of
shares of any one or more of the Funds or of any one or more of the Eligible
Funds, as defined in the Prospectus, by "any person," which term shall include
an individual, or an individual's 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 Fund shares.
Shares of the Funds or Class A shares of the Eligible Funds 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 Fund 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 Funds and of Class A shares of the 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 Fund.
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During the term of a Letter of Intent, Administrative Data Management Corp.
("Transfer Agent") will hold shares representing 5% of each purchase in escrow,
which shares will be released upon completion of the intended investment.
Purchases of 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 public
offering price (i.e., net asset value plus applicable sales charge) of all
shares of a Fund and Class A shares of the Eligible Funds, including the net
asset value of all Class B shares of the Eligible Funds and 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
Fund are also available at a quantity discount on new purchases if the then
current public offering price (i.e., net asset value plus applicable sales
charge) of all shares of the Fund and Class A shares of the Eligible Funds, plus
the net asset value of all Class B shares of the Eligible Funds, including Class
B shares of the Money Market Funds, previously purchased and then owned, plus
the value of 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.
Systematic Investing
First Investors Money Line. This service allows you to invest in a Fund
through automatic deductions from your bank checking account. Scheduled
investments in the minimum amount of $50 may be made on a bi-weekly,
semi-monthly, monthly, quarterly, semi-annual or annual basis. Shares of the
Fund 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 change the amount or
discontinue this service at any time by calling Shareholder Services or writing
to Administrative Data Management Corp., 581 Main Street, Woodbridge, NJ
07095-1198, Attn: Control Dept. 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 in the minimum amount of $50 into a Fund on a systematic basis
through salary deductions, provided your employer has direct deposit
capabilities. Shares of the Fund 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 Fund, and a confirmation will be sent to you after every
transaction. You may change the amount or discontinue the service by contacting
your employer. An application is available from your Representative or by
calling Shareholder Services at 1-800-423-4026. Arrangements must also be made
with your employer's payroll department.
Cross-Investment of Cash Distributions. You may elect to invest in
Class A shares of a Fund at net asset value all the cash distributions from any
other Fund or Class A shares of any Eligible Fund.
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The investment will be made at the net asset value per share of the Fund,
generally determined as of the close of business, on the business day
immediately following the record date of any such distribution. You may also
elect to invest cash distributions of a Fund's shares into shares of any other
Fund or Class A shares of any Eligible Fund, including the Money Market Funds.
If your distributions are to be invested in a new account, you must invest a
minimum of $50 per month. See "Dividends and Other Distributions" in the
Prospectus. 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 Fund at net asset value through payments from a Systematic
Withdrawal Plan you maintain with any other Fund or Class A shares of an
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 Fund into any other Fund or Class A shares of an
Eligible Fund, including the Money Market Funds. If your Systematic Withdrawal
Payments are to be invested in a new account, you must invest a minimum of $50
per month. See "Systematic Withdrawal Plan," below. To arrange for Systematic
Withdrawal Plan investments, call Shareholder Services at 1-800-423-4026.
Systematic Withdrawal Plan. Shareholders who own noncertificated shares
may establish a Systematic Withdrawal Plan ("Withdrawal Plan"). If you have a
Fund account with a value of at least $5,000, you may elect to receive monthly,
quarterly, semi-annual or annual checks for any designated amount (minimum $25).
You may have the payments sent directly to you or persons you designate.
Regardless of the amount of your Fund account, you may also elect to the have
the Systematic Plan payments automatically (i) invested at net asset value in
shares of any other Fund or Class A shares of an Eligible Fund, including the
Money Market Funds, or (ii) paid to First Investors Life Insurance Company for
the purchase of a life insurance policy or a variable annuity. If your
Systematic Plan payments are to be invested in a new Eligible Fund account, you
must invest a minimum of $600 per year. Dividends and other distributions, if
any, are reinvested in additional shares of the same class of the Fund.
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
Fund 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
Fund concurrent with withdrawals are ordinarily disadvantageous to shareholders
because of tax liabilities and sales charges. To establish a Withdrawal Plan,
call Shareholder Services at 1-800-423-4026.
Electronic Funds Transfer. Fund shares will be purchased on the day the
Fund receives the funds, which is normally two days after the electronic funds
transfer is initiated. The electronic transfer normally will be initiated on the
next bank business day after the redemption request is received and will
ordinarily be received by the predesignated bank account within two days after
transmission. However, once the funds are transmitted, the time of receipt and
the availability of the funds are not within the Funds' control. No dividends
are paid on the proceeds of redeemed shares awaiting electronic transmittal.
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Signature Guarantees. The words "Signature Guaranteed" must appear in
direct association with the signature of the guarantor. Members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange
Medallion Signature Program), SEMP (Stock Exchanges Medallion Program) and FIC
are eligible signature guarantors. Although each Fund reserves the right to
require signature guarantees at any other time, signature guarantees are
required whenever: (1) the amount of the redemption is over $50,000, (2) an
exchange in the amount over $50,000 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 major financial institutions, as determined solely by
the Fund and its agent, on behalf of the shareholder, (4) a redemption check is
to be mailed to an address other than the address of record, preauthorized bank
account, or to a major financial institution for the benefit of a shareholder,
(5) an account registration is being transferred to another owner, (6) a
transaction requires additional legal documentation; (7) the redemption request
is for certificated shares; (8) your address of record has changed within 60
days prior to a redemption request; (9) multiple owners have a dispute or give
inconsistent instructions; and (10) the authority of a representative of a
corporation, partnership, association or other entity has not been established
to the satisfaction of a Fund or its agents. ERISA Title I 403(b) Plans and
401(k) Plans are exempt from the signature guarantee requirement except for
exchanges or redemption in amounts greater than $50,000.
Reinvestment after Redemption. If you redeem shares in your Fund
account, you can reinvest within six months from the date of redemption all or
any part of the proceeds in shares of the same Fund, any other Fund or in Class
A shares of an 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, other than the Money Market Funds, it must
meet the minimum investment and other requirements of the fund into which the
reinvestment is being made. If you reinvest into a new Money Market Fund within
one year from the date of redemption, the minimum investment is $500. To take
advantage of this option, send your reinvestment check along with a written
request to the Transfer Agent within six months from the date of your
redemption. Include your account number and a statement that you are taking
advantage of the "Reinvestment Privilege."
Telephone Transactions. Fund shares not held in certificate form may be
exchanged or redeemed by telephone provided you have not declined telephone
privileges. For corporations, partnerships, trusts and certain other accounts,
additional documents are required to activate telephone privileges. Telephone
exchanges are available between nonretirement accounts and between IRA and
403(b) accounts of the same class of shares registered in the same name.
Telephone exchanges are also 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 Fund shares for plan units.
As stated in the Funds' Prospectus, the Trust, the Adviser, the
Underwriter and their officers, directors, trustees and employees 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, address, social security number and such other
information as may be deemed necessary; (2) recording all telephone
instructions; and (3) sending written confirmation of each transaction to the
shareholder's address of record.
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Retirement Plans
Profit-Sharing/Money Purchase Pension/401(k) Plans. FIC offers
prototype Profit-Sharing, Money Purchase Pension and Code section 401(k)
Retirement Plans ("Retirement Plans") approved by the IRS for corporations, sole
proprietorships and partnerships. The Custodial Agreement for such a Money
Purchase Pension and Profit-Sharing Retirement Plan provides that First
Financial Savings Bank, S.L.A. ("First Financial Savings"), an affiliate of FIC,
will furnish all required custodial services.
FIC offers additional versions of prototype qualified retirement plans
for eligible employers, including 401(k), money purchase, profit-sharing and
target benefit plans.
Currently, there are no annual service fees chargeable to participants
in connection with a Retirement Plan account. Participants are, however, charged
$5.00 for opening a Retirement Plan account, other than a 401(k) Retirement Plan
account. Each Fund currently pays the annual $10.00 custodian fee for each
Retirement Plan account, if applicable, maintained with such Fund. This policy
may be changed at any time by a Fund 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.
The Retirement Plan documents contain further specific information
about the Retirement Plans and may be obtained from your Representative. Prior
to establishing a Retirement Plan, you are advised to consult with your legal
and tax advisers.
Individual Retirement Accounts. A qualified individual may purchase
shares of a Fund through an IRA or, as an employee of a qualified employer,
through a simplified employee pension-IRA ("SEPIRA") or a salary reduction
simplified employee pension-IRA ("SARSEP-IRA") furnished by FIC. Under the
related Custodial Agreements, First Financial Savings acts as custodian of each
of these retirement plans.
The Funds offer IRA accounts with specific provisions tailored to meet
the needs of certain groups of investors. The custodian fees are disclosed in
the IRA documents provided to investors in such accounts.
A taxpayer generally may make an annual IRA contribution no greater
than the lesser of (a) 100% of his or her compensation or (b) $2,000 (or $2,250
when also contributing to a spousal IRA). However, contributions are deductible
only under certain conditions. The requirements as to SEP-IRAs and SARSEP-IRAs
are described in IRS Forms 5305-SEP and 5305A-SEP, respectively, which are
provided to employers. Employers are required to provide copies of these forms
to their eligible employees. A disclosure statement setting forth complete
details of the IRA should be given to each participant before the contribution
is invested.
Currently, there are no annual service fees chargeable to a participant
in connection with an IRA, SEP-IRA or SARSEP-IRA. Each Fund currently pays the
annual $10.00 custodian fee for each IRA account maintained with such Fund. This
policy may be changed at any time by a Fund on 45 days' written notice to the
holder of any IRA, SEP-IRA or SARSEP-IRA. 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 to the holder of any IRA.
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An application and other documents necessary to establish an IRA,
SEP-IRA or SARSEP-IRA, are available from your Representative. Prior to
establishing an IRA, SEP-IRA or SARSEP-IRA, you are advised to consult with your
legal and tax advisers.
Retirement Benefit Plans for Employees of Eligible Organizations. FIC
makes available model custodial accounts under Section 403(b)(7) of the Code
("Custodial Accounts") to provide retirement benefits for employees of certain
eligible public educational institutions and other eligible non-profit
charitable, religious and humane organizations. The Custodial Accounts are
designed to permit contributions (up to a "maximum exclusion allowance") by
employees through salary reduction. First Financial Savings acts as custodian of
these accounts.
Contributions may be made to a Custodial Account under the Optional
Retirement Program for Employees of Texas Institutions of Higher Education
("ORP"), either by salary reduction agreement or otherwise, in accordance with
the terms and conditions of the ORP, and under the Texas Deferred Compensation
Plan Program for eligible state employees by salary reduction agreement.
Currently, there are no annual service fees chargeable to participants
in connection with a Custodial Account. Each Fund currently pays the annual
$10.00 custodian fee for each Custodial Account maintained with such Fund. This
policy may be changed at any time by a Fund on 45 days' written notice to a
Custodial Account participant. 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 to a Custodial Account participant.
An application and other documents necessary to establish a Custodial
Account are available from your Representative. Persons desiring to create a
Custodial Account are advised to confer with their legal and tax advisers
concerning the specifics of this type of retirement benefit plan.
Mandatory income tax withholding, at the rate of 20%, may be required
on "eligible rollover" distributions made from any of the foregoing retirement
plans (other than IRAs, including SEP-IRAs and SARSEP-IRAs). If the recipient
elects to directly transfer an eligible rollover distribution to an "eligible
retirement plan" that permits acceptance of such distributions, no withholding
will apply. For distributions that are not "eligible rollover" distributions,
the recipient can elect, in writing, not to require any withholding. This
election must be submitted immediately before, or must accompany, the
distribution request. The amount, if any, of any such optional withholding
depends on the amount and type of the distribution. Appropriate election forms
are available from the Custodian or Shareholder Services. Other types of
withholding nonetheless may apply.
Distribution Fees. A participant/shareholder's account under any of the
foregoing retirement plans (including IRAs) 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.
TAXES
Each Fund is treated as a separate corporation for Federal income tax
purposes. In order to continue to qualify for treatment as a regulated
investment company ("RIC") under the Code, a Fund must distribute to its
shareholders for each taxable year at least 90% 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) plus its net interest income excludable from gross income
36
<PAGE>
under section 103(a) of the Code ("Distribution Requirement") and must meet
several additional requirements. For each Fund these requirements include the
following: (1) the Fund 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 or 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 Fund 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 (other than those on foreign currencies), or foreign
currencies (or options or futures contracts thereon), that are not directly
related to the Fund's principal business of investing in securities (or options
and futures with respect thereto) ("Short-Short Limitation"); (3) at the close
of each quarter of the Fund's 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 Fund's 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 Fund's 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 Fund 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 Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
reported to shareholders of Insured Tax Exempt Fund and taxed to shareholders of
High Yield Fund and Blue Chip Fund for the year in which that December 31 falls.
Each Fund 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.
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 Fund 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 Federal alternative minimum tax. No
dividends paid by Insured Tax Exempt Fund or High Yield Fund are expected to be
eligible for this deduction.
If shares of a Fund 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.
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.
For High Yield Fund, gains from the disposition of foreign currencies
(except certain gains that may be excluded by future regulations) will qualify
as permissible income under the Income Requirement.
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<PAGE>
However, income from the Fund's 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) will be subject to the
Short-Short Limitation if they are held for less than three months.
High Yield Fund and Insured Tax Exempt Fund may acquire zero coupon
securities issued with original issue discount. As a holder of those securities,
each such Fund must include in its income the original issue discount that
accrues on the securities during the taxable year, even if it receives no
corresponding payment on them during the year. Similarly, each such Fund must
include in its gross income securities it receives as "interest" on pay-in-kind
securities. Because each Fund annually must distribute substantially all of its
investment company taxable income, including any original issue discount and
other non-cash income, to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax, either Fund 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 a Fund's cash
assets or from the proceeds of sales of portfolio securities, if necessary. A
Fund may realize capital gains or losses from those sales, which would increase
or decrease its investment company taxable income and/or net capital gain. 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 a Fund's ability to sell other securities, or certain options
or futures contracts or foreign currency positions, held for less than three
months that it might wish to sell in the ordinary course of its portfolio
management.
The use of hedging strategies, such as selling (writing) 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 a Fund realizes in connection therewith. Gains from options or futures
contracts derived by a Fund 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 Fund's disposition of options and
futures contracts will be subject to the Short-Short Limitation if they are held
for less than three months.
If a Fund 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 Fund 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
Fund 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 the Funds' hedging transactions. To the extent this
treatment is not available, a Fund may be forced to defer the closing out of
certain options or futures contracts and foreign currency positions beyond the
time when it otherwise would be advantageous to do so, in order for the Fund 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 for Federal tax purposes by its shareholders, if
the Fund satisfies the additional 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); the Fund intends to continue to satisfy this requirement. The aggregate
dividends excludable from the Fund shareholder's gross income may not exceed the
Fund's net tax-exempt income. The shareholders' treatment of dividends from the
Fund under state and local income tax laws may differ from the treatment thereof
under the Code. Investors should consult their tax advisers concerning this
matter.
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<PAGE>
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, and the portion of the loss
that is not disallowed, if any, will be treated as long-term, instead of
short-term, capital loss to the extent of any capital gain distributions
received on those shares.
Tax-exempt interest attributable to certain private activity bonds
("PABs") (including, in the case of Insured Tax Exempt Fund receiving interest
on such bonds, a proportionate part of the exemptinterest dividends paid by that
Fund) is Tax Preference Item. Exempt-interest dividends received by a corporate
shareholder also may be indirectly subject to the alternative minimum tax
without regard to whether the Fund's tax-exempt interest was attributable to
such bonds. Entities or other 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 the 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 the 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 Fund 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, 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 Fund 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 Fund's shareholders as ordinary income to the extent of its earnings and
profits. Moreover, if the Fund 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 exempt-interest 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 the Fund.
PERFORMANCE INFORMATION
A Fund may advertise its performance in various ways.
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<PAGE>
Each Fund's "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:
[ERV-P]/P = TOTAL RETURN
In providing such performance data, each Fund 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 Fund will assume that during the period
covered all dividends and other distributions are paid in additional Fund 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 Fund's
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 Fund of future rates of return on its shares. At times, the
Adviser may reduce its compensation or assume expenses of a Fund in order to
reduce the Fund's expenses. Any such waiver or reimbursement would increase the
Fund's return during the period of the waiver or reimbursement.
Average annual return and total return computed at the public offering
price for the periods ended December 31, 1995 are set forth in the tables below:
AVERAGE ANNUAL TOTAL RETURN:*
One Year Five Years Life of Fund**
Blue Chip Fund 29.78% 13.04% 10.84%
High Yield Fund 13.39 15.27 8.48
Insured Tax Exempt Fund 14.85 9.92 9.81
- --------
* All return figures reflect the current maximum sales charge of 4.75% and
dividends reinvested at net asset value. Prior to October 28, 1988, the maximum
sales charge for High Yield Fund was 4.00% and its dividends were reinvested at
the public offering price (net asset value plus applicable sales charge).
Certain expenses of the Funds have been waived or reimbursed from commencement
of operations through December 31, 1995. Accordingly, return figures are higher
than they would have been had such expenses not been waived or reimbursed.
** The inception dates for the Funds are as follows: Blue Chip Fund - May 17,
1990; High Yield Fund - March 24, 1987; and Insured Tax Exempt Fund - July 26,
1990.
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<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN:*
One Year Five Years Life of Fund**
<S> <C> <C> <C>
Blue Chip Fund 29.78% 84.54% 78.49%
High Yield Fund 13.39 103.55 104.29
Insured Tax Exempt Fund 14.85 60.46 66.32
</TABLE>
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 and total return computed
at net asset value for the periods ended December 31, 1995 is set forth in the
tables below:
AVERAGE ANNUAL TOTAL RETURN:*
<TABLE>
<CAPTION>
One Year Five Years Life of Fund**
<S> <C> <C> <C>
Blue Chip Fund 36.30% 14.13% 11.80%
High Yield Fund 19.08 16.39 9.09
Insured Tax Exempt Fund 20.53 10.99 10.80
TOTAL RETURN:*
One Year Five Years Life of Fund**
Blue Chip Fund 36.30% 93.68% 87.39%
High Yield Fund 19.08 113.57 114.51
Insured Tax Exempt Fund 20.53 68.40 74.60
</TABLE>
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 Fund 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 Fund outstanding during the base period
and entitled to receive dividends and (B) the per share maximum public offering
price of that Fund on the last day of the base period. The result is annualized
by compounding on a semi-annual basis to determine a Fund's yield. For this
calculation, interest earned on debt obligations held by a Fund 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 receivablesbacked
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 Fund's tax-exempt yield
- --------
* All return figures reflect the current maximum sales charge of 4.75% and
dividends reinvested at net asset value. Prior to October 28, 1988, the maximum
sales charge for High Yield Fund was 4.00% and its dividends were reinvested at
the public offering price (net asset value plus applicable sales charge).
Certain expenses of the Funds have been waived or reimbursed from commencement
of operations through December 31, 1995. Accordingly, return figures are higher
than they would have been had such expenses not been waived or reimbursed.
** The inception dates for the Funds are as follows: Blue Chip Fund - May 17,
1990; High Yield Fund - March 24, 1987; and Insured Tax Exempt Fund - July 26,
1990.
41
<PAGE>
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 Fund's 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, 1995, the yield and tax-equivalent
yield (assuming a Federal tax rate of 36%) for Insured Tax Exempt Fund was 4.86%
and 9.06%, respectively. The maximum Federal tax rate for this period was 39.6%.
For the 30 days ended December 31, 1995, the yield for High Yield Fund was
7.83%. Some of the Fund's 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 High Yield Fund and Insured Tax Exempt Fund
is presented for a twelve-month period. It is calculated by adding the dividends
for the last twelve months and dividing the sum by a Fund's offering price per
share at the end of that period. The distribution rate is also calculated by
using a Fund's 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, 1995 for shares of High Yield Fund and
Insured Tax Exempt Fund calculated using the offering price was 8.43% and 4.93%,
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 8.85%
and 5.18%, respectively. During this period certain expenses of the Funds were
waived or reimbursed. Accordingly, the distribution rates are higher than they
would have been had such expenses not been waived or reimbursed.
Each Fund 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 qualified retirement program.
The examples used will be for illustrative purposes only and are not
representations by the Funds of past or future yield or return. Examples of
typical graphs and charts depicting such historical performances, compounding
and hypothetical returns are included in Appendix C.
From time to time, in reports and promotional literature, the Funds 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, a Fund's 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.
42
<PAGE>
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 Fund's 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 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.
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<PAGE>
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.
GENERAL INFORMATION
Audits And Reports. The accounts of each Fund are audited twice a year
by Tait, Weller & Baker, independent certified public accountants, Two Penn
Center Plaza, Philadelphia, PA, 19102-1707. Shareholders of each Fund receive
semi-annual and annual reports, including audited financial statements, and a
list of securities owned.
5% Shareholders. As of April 1, 1996, the following beneficially owned
more than 5% of the shares of the Blue Chip Fund:
Shareholder % of Shares
Ruth B. Schott 8.8
4411 3rd Street NW
Hickory, NC 28601
Alice P. Skokos 6.7
130 Laurel Ave
Sea Girt, NJ 08750
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<PAGE>
Shareholder % of Shares
Irwin M. Yanowitcz 5.0
1244 Yahres Road
Sharon, PA 16146-3642
Robert E. Nunnally, Jr. 8.9
3361 Lakeland Dr., SW
Roanoke, VA 24018
Transfer Agent. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as transfer agent
for the Funds and as redemption agent for regular redemptions. The fees charged
to each Fund 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 Fund; $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 Funds by the Transfer Agent are assumed by the
Underwriter. The Transfer Agent reserves the right to change the fees on prior
notice to the Funds. 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, 1995, High Yield Fund paid $13,383 in transfer agency fees. For the
fiscal year ended December 31, 1995, Blue Chip Fund and Insured Tax Exempt Fund
accrued $1,734 and $6,929, 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 Trust 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 Trust. The Declaration of Trust however, contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation,
or instrument entered into or executed by the Trust or the Trustees. The
Declaration of Trust provides for indemnification out of the property of the
Trust of any shareholder held personally liable for the obligations of the
Trust. The Declaration of Trust also provides that the Trust shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Trust 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 Trust 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
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<PAGE>
in the conduct of his office. The Trust 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 Trust and the Adviser have
adopted Codes of Ethics restricting personal securities trading by portfolio
managers and other access persons of the Funds. Among other things, such
persons: (a) must have all non-exempt 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.
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.
46
<PAGE>
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.
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.
47
<PAGE>
APPENDIX C
[The following tables are represented as graphs in the printed document.]
The following graphs and chart illustrate hypothetical returns:
INCREASE RETURNS
This graph shows over a period of time even a small increase in returns can make
a significant difference.
Years 10% 8% 6% 4%
----- ------- ------ ------ ------
5 16,453 14,898 13,489 12,210
10 27,070 22,196 18,194 14,908
15 44,539 33,069 24,541 18,203
20 73,281 49,268 33,102 22,226
25 120,569 73,402 44,650 27,138
INCREASE INVESTMENT
This graph shows the more you invest on a regular basis over time, the more you
can accumulate.
Years $100 $250 $500 $1,000
----- ------ ------- ------- -------
5 7,348 18,369 36,738 73,476
10 18,295 43,736 91,473 182,946
15 34,604 86,509 173,019 346,038
20 58,902 147,255 294,510 589,020
25 95,103 237,757 475,513 951,026
<PAGE>
[The following table is represented as graph in the printed document.]
This chart illustrates the time value of money based upon the following
assumptions:
If you invested $2,000 each year for 20 years, starting at 25, assuming a 9%
investment return, you would accumulate $573,443 by the time you reach age 65.
However, had you invested the same $2,000 each year for 20 years, at that rate,
but waited until age 35, you would accumulate only $242,228 - a diference of
$331,215.
25 years old .............. 533,443
35 years old .............. 202,228
45 years old .............. 62,320
For each of the above graphs and chart it should be noted that systematic
investment plans do not assume a profit or protect against loss in declining
markets. Investors should consider their financial ability to continue purchases
through periods of both high and low price levels. Figures are hypothetical and
for illustrative purposes only and do not represent any actual investment or
performance. The value of a shareholder's investment and return may vary.
<PAGE>
[The following table is represented as chart in the printed document.]
The following chart illustrates the historical performance of the Dow Jones
Industrial Average from 1928 through 1995.
1928 .................. 300.00
1929 .................. 248.48
1930 .................. 164.58
1931 .................. 77.90
1932 .................. 59.93
1933 .................. 99.90
1934 .................. 104.04
1935 .................. 144.13
1936 .................. 179.90
1937 .................. 120.85
1938 .................. 154.76
1939 .................. 150.24
1940 .................. 131.13
1941 .................. 110.96
1942 .................. 119.40
1943 .................. 136.20
1944 .................. 152.32
1945 .................. 192.91
1946 .................. 177.20
1947 .................. 181.16
1948 .................. 177.30
1949 .................. 200.10
1950 .................. 235.40
1951 .................. 269.22
1952 .................. 291.89
1953 .................. 280.89
1954 .................. 404.38
1955 .................. 488.39
1956 .................. 499.46
1957 .................. 435.68
1958 .................. 583.64
1959 .................. 679.35
1960 .................. 615.88
1961 .................. 731.13
1962 .................. 652.10
1963 .................. 762.94
1964 .................. 874.12
1965 .................. 969.25
1966 .................. 785.68
1967 .................. 905.10
1968 .................. 943.75
1969 .................. 800.35
1970 .................. 838.91
1971 .................. 890.19
1972 .................. 1,020.01
1973 .................. 850.85
1974 .................. 616.24
1975 .................. 858.71
1976 .................. 1,004.65
1977 .................. 831.17
1978 .................. 805.01
1979 .................. 838.74
1980 .................. 963.98
1981 .................. 875.00
1982 .................. 1,046.55
1983 .................. 1,258.64
1984 .................. 1,211.56
1985 .................. 1,546.67
1986 .................. 1,895.95
1987 .................. 1,938.80
1988 .................. 2,168.60
1989 .................. 2,753.20
1990 .................. 2,633.66
1991 .................. 3,168.83
1992 .................. 3,301.11
1993 .................. 3,754.09
1994 .................. 3,834.44
1995 .................. 5,000.00
<PAGE>
[The following table is represented as a chart in the printed document.]
The following chart shows that inflation is constantly eroding the value of your
money.
THE EFFECTS OF INFLATION OVER TIME
1966 ....................... 96.61836
1967 ....................... 93.80423
1968 ....................... 89.59334
1969 ....................... 84.36285
1970 ....................... 79.88906
1971 ....................... 77.33694
1972 ....................... 74.79395
1973 ....................... 68.80768
1974 ....................... 61.27131
1975 ....................... 57.31647
1976 ....................... 54.63915
1977 ....................... 51.20820
1978 ....................... 46.98000
1979 ....................... 41.46514
1980 ....................... 36.85790
1981 ....................... 33.84564
1982 ....................... 32.60659
1983 ....................... 31.41290
1984 ....................... 30.23378
1985 ....................... 29.12696
1986 ....................... 28.81005
1987 ....................... 27.59583
1988 ....................... 26.43279
1989 ....................... 25.27035
1990 ....................... 23.81748
1991 ....................... 23.10134
1992 ....................... 22.45028
1993 ....................... 21.86006
1994 ....................... 21.28536
1995 ....................... 20.76620
1995........................ 1.00
1996........................ 1.03
1997........................ 1.06
1998 ....................... 1.09
1999 ....................... 1.13
2000 ....................... 1.16
2001 ....................... 1.19
2002 ....................... 1.23
2003 ....................... 1.27
2004 ....................... 1.30
2005 ....................... 1.34
2006 ....................... 1.38
2007 ....................... 1.43
2008 ....................... 1.47
2009 ....................... 1.51
2010 ....................... 1.56
2011 ....................... 1.60
2012 ....................... 1.65
2013 ....................... 1.70
2014 ....................... 1.75
2015 ....................... 1.81
2016 ....................... 1.86
2017 ....................... 1.92
2018 ....................... 1.97
2019 ....................... 2.03
2020 ....................... 2.09
2021 ....................... 2.16
2022 ....................... 2.22
2023 ....................... 2.29
2024 ....................... 2.36
2025 ....................... 2.43
Inflation erodes your buying power. $100 in 1966, could purchase the same amount
of goods and service as $21 in 1995.* Projecting inflation at 3%, goods and
services costing $100 today will cost $243 in the year 2025.
* Source: Consumer Price Index, U.S. Bureau of Labor Statistics.
<PAGE>
[The following tables are represented as graphs in the printed document.]
This chart illustrates that historically, the longer you hold onto stocks, the
greater chance that you will have a positive return.
1926 through 1995(1)
Total Number of Percentage of
Number of Positive Positive
Periods Periods Periods
------- ------- -------
1-Year Periods 70 50 71%
5-Year Periods 66 59 89%
10-Year Periods 61 59 97%
15-Year Periods 56 56 100%
20-Year Periods 51 51 100%
The following chart shows the compounded annual return of large company stocks
compared to U.S. Treasury Bills and inflation over the most recent 15 year
period. (2)
Compound Annual Return from 1981 -- 1995(1)
Inflation ..................... 3.93
U.S. Treasury Bills ........... 7.11
Large Company Stocks .......... 14.80
The following chart illustrates for the period shown that long-term corpoate
bonds have outpaced U.S. Treasury Bills and inflation.
Compound Annual Return from 1981 -- 1995(1)
Inflation ..................... 3.93
U.S. Treasury Bills ........... 7.11
Long-Term Corp. bonds ......... 13.46
(1) Sources: Stocks, Bonds, Bill and Inflation 1996 Yearbook, Ibbotson
Associates, Chicago.
(2) Please note that U.S. Treasury bills are guaranteed as to principal and
interest payments (although the funds that invest in them are not), while
stocks will fluctuate in share price. Although past performance cannot
guarantee future results, reeturns of U.S. Treasury bills historically have
not outpaced inflation by as great a margin as stocks.
The accompanying table illustrates that if you are in the 36% tax bracket, a
tax-free yield of 3% is actually equivalent to a taxable investment earning
4.69%.
Your Taxable Equivalent Yield
Your Federal TAx Bracket
---------------------------------------------
your tax-free yield 31.0% 36.0% 39.6%
------------------- ----- ----- -----
3.00% 4.35% 4.69% 4.97%
3.50% 5.07% 5.47% 5.79%
4.00% 5.80% 6.25% 6.62%
4.50% 6.52% 7.03% 7.45%
5.00% 7.25% 7.81% 8.25%
5.50% 7.97% 8.59% 9.11%
This information is general in nature and should not be construed as tax advice.
Please consult a tax or financial adviser as to how this information affects
your particular circumstances.
Financial Statements
as of December 31, 1995
48
<PAGE>
PORTFOLIO OF INVESTMENTS
EXECUTIVE INVESTORS BLUE CHIP FUND
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS--93.8%
BASIC INDUSTRY--3.8%
100 *Alumax, Inc. $ 3,062 $ 20
100 Dow Chemical Company 7,037 49
100 Du Pont (E.I.) De Nemours & Company 6,987 49
100 Freeport McMoRan Copper & Gold, Inc. Class "B" 2,812 20
200 IMC Global, Inc. 8,174 57
100 James River Corporation of Virginia 2,412 17
100 Mead Corporation 5,224 37
130 Minnesota Mining & Manufacturing Company 8,612 60
100 Sigma-Aldrich Corporation 4,950 35
100 Temple-Inland, Inc. 4,412 31
- ------------------------------------------------------------------------------------------------------
53,682 375
- ------------------------------------------------------------------------------------------------------
CAPITAL GOODS--7.6%
100 Boeing Company 7,837 56
100 Browning-Ferris Industries, Inc. 2,950 21
50 Eaton Corporation 2,680 19
100 Emerson Electric Company 8,174 57
100 Foster Wheeler Corporation 4,250 30
550 General Electric Company 39,600 278
75 Ingersoll-Rand Company 2,633 18
100 Lockheed Martin Corporation 7,900 55
100 Loral Corporation 3,537 25
200 Raytheon Company 9,450 66
100 United Technologies Corporation 9,488 67
100 *Varity Corporation 3,713 26
200 WMX Technologies, Inc. 5,975 42
- ------------------------------------------------------------------------------------------------------
108,187 760
<PAGE>
- ------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.3%
100 Corning, Inc. 3,200 22
350 Ford Motor Company 10,150 71
150 Masco Corporation 4,706 33
- ------------------------------------------------------------------------------------------------------
18,056 126
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
EXECUTIVE INVESTORS BLUE CHIP FUND
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--23.1%
250 Abbott Laboratories $ 10,438 $ 73
100 American Home Products Corporation 9,700 68
150 Anheuser-Busch Companies, Inc. 10,031 70
100 Astra AB (ADR) Class "A" 4,000 28
150 Bristol-Myers Squibb Company 12,881 90
450 Coca-Cola Company 33,413 234
150 Columbia/HCA Healthcare Corporation 7,613 53
200 CPC International, Inc. 13,725 96
100 Eastman Kodak Company 6,700 47
200 Eli Lilly & Company 11,250 79
100 General Mills, Inc. 5,775 40
100 Gillette Company 5,213 37
150 Heinz (H.J.) Company 4,969 35
100 Hershey Foods Corporation 6,500 46
200 Johnson & Johnson 17,125 120
100 Kellogg Company 7,725 54
100 Kimberly-Clark Corporation 8,275 58
350 Merck & Company, Inc. 23,013 161
300 Newell Company 7,763 54
2
<PAGE>
200 Nike, Inc. 13,925 98
200 PepsiCo, Inc. 11,175 78
200 Pfizer, Inc. 12,600 88
300 Philip Morris Companies, Inc. 27,150 190
200 Procter & Gamble Company 16,600 116
100 *Ralcorp Holdings, Inc. 2,425 17
100 Schering-Plough Corporation 5,475 38
200 Teva Pharmaceutical Industries Ltd. (ADR) 9,275 65
100 Unilever N.V. 14,075 99
100 United Healthcare Corporation 6,550 46
50 Warner-Lambert Company 4,856 34
- ------------------------------------------------------------------------------------------------------
330,215 2,312
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONSUMER SERVICES--9.5%
100 *CUC International, Inc. $ 3,413 $ 23
100 Gap, Inc. 4,200 29
150 Home Depot, Inc. 7,181 50
100 ITT Corporation 5,300 37
100 ITT Hartford Group, Inc. 4,838 34
100 ITT Industries, Inc. 2,400 17
100 *Kroger Company 3,750 26
150 Marriott International, Inc. 5,738 40
100 May Department Stores Company 4,225 30
200 McDonald's Corporation 9,025 63
100 McGraw-Hill Companies, Inc. 8,713 61
150 Nordstrom, Inc. 6,075 43
300 *Price/Costco, Inc. 4,575 32
100 Sears, Roebuck and Company 3,900 27
100 Talbots, Inc. 2,875 20
200 *Tele-Communications, Inc., Liberty Media Group Class "A" 5,375 38
300 *Tele-Communications, Inc., TCI Group Class "A" 5,963 42
3
<PAGE>
150 US West Media Group 2,850 20
100 *Viacom, Inc. Class "B" 4,738 33
150 *Vons Companies, Inc. 4,238 30
800 Wal-Mart Stores, Inc. 17,900 125
100 Walgreen Company 2,988 21
200 Walt Disney Company 11,800 83
300 *Woolworth Corporation 3,900 27
- ------------------------------------------------------------------------------------------------------
135,960 951
- ------------------------------------------------------------------------------------------------------
ENERGY--13.1%
100 Aluminum Company of America 5,288 36
150 Amoco Corporation 10,781 76
150 Atlantic Richfield Company 16,613 116
150 Avery Dennison Corporation 7,519 53
200 Baker Hughes, Inc. 4,875 34
200 Barrick Gold Corporation 5,275 37
200 Chevron Corporation 10,500 74
200 Enron Corporation 7,625 53
400 Exxon Corporation 32,050 225
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
EXECUTIVE INVESTORS BLUE CHIP FUND
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
ENERGY (continued)
50 Kerr-McGee Corporation $ 3,175 $ 22
100 Mobil Corporation 11,200 79
150 Morton International, Inc. 5,381 38
100 Pacific Enterprises 2,825 20
225 Royal Dutch Petroleum Company 31,753 223
100 Schlumberger Ltd. 6,925 49
4
<PAGE>
300 Sonat, Inc. 10,688 75
100 Texaco, Inc. 7,850 55
200 Unocal Corporation 5,825 41
- ------------------------------------------------------------------------------------------------------
186,148 1,306
- ------------------------------------------------------------------------------------------------------
FINANCIAL--12.2%
150 American Express Company 6,206 45
150 American International Group, Inc. 13,875 97
100 American Re Corporation 4,088 29
311 Banc One Corporation 11,740 82
100 Bank of New York Company, Inc. 4,875 34
150 BankAmerica Corporation 9,713 68
300 Charles Schwab Corporation 6,038 42
100 Chemical Banking Corporation 5,875 41
100 Chubb Corporation 9,675 68
200 Citicorp 13,450 94
100 Dean Witter Discover and Company 4,700 33
150 Federal National Mortgage Association 18,619 131
100 First Union Corporation 5,563 39
100 General Re Corporation 15,500 109
700 Hibernia Corporation Class "A" 7,525 53
50 Marsh & McLennan Companies, Inc. 4,438 31
100 Mellon Bank Corporation 5,375 38
150 NationsBank Corporation 10,444 73
300 Norwest Corporation 9,900 69
200 Salomon, Inc. 7,100 50
- ------------------------------------------------------------------------------------------------------
174,699 1,226
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED
FOR EACH
$10,000 OF
SHARES SECURITY VALUE NET ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
TECHNOLOGY--13.4%
200 *Airtouch Communications, Inc. $ 5,650 $ 40
5
<PAGE>
200 *Applied Materials, Inc. 7,875 55
100 *Ascend Communications, Inc. 8,112 57
500 A T & T Corp. 32,375 227
100 Automatic Data Processing, Inc. 7,425 52
100 *Cisco Systems, Inc. 7,462 52
100 Computer Associates International, Inc. 5,687 40
200 First Data Corporation 13,375 94
200 Hewlett-Packard Company 16,750 117
200 Intel Corporation 11,350 80
200 International Business Machines Corporation 18,350 129
200 MCI Communications Corporation 5,225 37
200 *Microsoft Corporation 17,550 123
200 Motorola, Inc. 11,400 80
200 *National Semiconductor Corporation 4,450 31
250 *Oracle Corporation 10,594 74
300 *Premenos Technology Corporation 7,912 55
- ------------------------------------------------------------------------------------------------------
191,542 1,343
- ------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--.4%
150 US West Communications Group 5,363 38
- ------------------------------------------------------------------------------------------------------
TRANSPORTATION--.5%
100 *AMR Corporation 7,426 52
- ------------------------------------------------------------------------------------------------------
UTILITIES--8.9%
200 Ameritech Corporation 11,800 84
150 Bell Atlantic Corporation 10,031 70
300 BellSouth Corporation 13,050 91
200 Carolina Power & Light Company 6,900 48
400 CINergy Corporation 12,250 86
200 Duke Power Company 9,475 66
250 FPL Group, Inc. 11,594 81
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
EXECUTIVE INVESTORS BLUE CHIP FUND
December 31, 1995
<TABLE>
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
6
<PAGE>
AMOUNT
INVESTED
SHARES OR FOR EACH
PRINCIPAL $10,000 OF
AMOUNT SECURITY VALUE NET ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
UTILITIES (continued)
300 GTE Corporation $ 13,200 $ 93
150 NYNEX Corporation 8,100 57
200 Pacific Telesis Group 6,725 47
200 PacifiCorp 4,250 30
200 SBC Communications, Inc. 11,500 81
200 Texas Utilities Company 8,225 58
- ------------------------------------------------------------------------------------------------------
127,100 892
- ------------------------------------------------------------------------------------------------------
TOTAL VALUE OF COMMON STOCKS (cost $1,038,662) 1,338,378 9,381
- ------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS--1.0%
CONSUMER SERVICES
$ 20M Bell Sports Corp., 4 1/4%, 11/15/00 (cost $15,641) 14,000 98
- ------------------------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $1,054,303) 94.8% 1,352,378 9,479
OTHER ASSETS, LESS LIABILITIES 5.2 74,130 521
- ------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $1,426,508 $ 10,000
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
*Non-income producing
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS
EXECUTIVE INVESTORS HIGH YIELD FUND
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED FOR
EACH $10,000
PRINCIPAL OF NET
7
<PAGE>
AMOUNT SECURITY VALUE ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
CORPORATE BONDS--91.9%
AEROSPACE/DEFENSE--3.0%
$ 250M Fairchild Industries, Inc., 12 1/4%, 1999 $ 267,500 $ 171
200M Howmet Corp., 10%, 2003 (Note 5) 208,000 133
- ------------------------------------------------------------------------------------------------------
475,500 304
- ------------------------------------------------------------------------------------------------------
APPAREL/TEXTILES--2.5%
400M Westpoint Stevens, Inc., 9 3/8%, 2005 396,000 253
- ------------------------------------------------------------------------------------------------------
AUTOMOTIVE--3.4%
150M Lear Seating, Inc., 11 1/4%, 2000 158,437 101
350M SPX Corp., 11 3/4%, 2002 372,750 238
- ------------------------------------------------------------------------------------------------------
531,187 339
- ------------------------------------------------------------------------------------------------------
BUILDING MATERIALS--.5%
185M Waxman Industries, Inc., 0%-12 3/4%, 2004 74,000 47
- ------------------------------------------------------------------------------------------------------
CHEMICALS--7.1%
500M Harris Chemical North America, Inc., 10 1/4%, 2001 486,875 311
400M Rexene Corp., 11 3/4%, 2004 425,000 271
200M Synthetic Industries, Inc., 12 3/4%, 2002 197,000 126
- ------------------------------------------------------------------------------------------------------
1,108,875 708
- ------------------------------------------------------------------------------------------------------
CONGLOMERATES--1.8%
500M Semi-Tech Corp., 0%-11 1/2%, 2003 271,875 173
- ------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--2.1%
300M Herff Jones, Inc., 11%, 2005 322,500 206
- ------------------------------------------------------------------------------------------------------
DURABLE GOODS MANUFACTURING--1.3%
200M Fairfield Manufacturing, Inc., 11 3/8%, 2001 196,000 125
- ------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.9%
350M Essex Group, Inc., 10%, 2003 346,500 221
44M Thermadyne Industries, Inc., 10 1/4%, 2002 44,220 28
62M Thermadyne Industries, Inc., 10 3/4%, 2003 62,310 40
- ------------------------------------------------------------------------------------------------------
453,030 289
- ------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<PAGE>
PORTFOLIO OF INVESTMENTS
EXECUTIVE INVESTORS HIGH YIELD FUND
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED FOR
EACH $10,000
PRINCIPAL OF NET
AMOUNT SECURITY VALUE ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
ENERGY--8.4%
$ 300M Falcon Drilling Co., Inc., 12 1/2%, 2005 $ 330,000 $ 211
400M Giant Industries, Inc., 9 3/4%, 2003 406,000 259
250M Maxus Energy Corp., 11 1/2%, 2015 263,750 168
300M United Meridian Corp., 10 3/8%, 2005 318,750 203
- ------------------------------------------------------------------------------------------------------
1,318,500 841
- ------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--2.1%
200M Olympic Financial Ltd., 13%, 2000 219,000 140
100M Terra Nova Holdings PLC, 10 3/4%, 2005 109,500 70
- ------------------------------------------------------------------------------------------------------
328,500 210
- ------------------------------------------------------------------------------------------------------
FOOD SERVICES--1.8%
300M Flagstar Corp., 10 3/4%, 2001 276,750 177
- ------------------------------------------------------------------------------------------------------
FOOD/BEVERAGE/TOBACCO--3.9%
300M Fleming Co., Inc., 10 5/8%, 2001 292,500 187
300M Van de Kamps, Inc., 12%, 2005 (Note 5) 312,000 199
- ------------------------------------------------------------------------------------------------------
604,500 386
- ------------------------------------------------------------------------------------------------------
GAMING/LODGING--3.5%
220M Casino America, Inc., 11 1/2%, 2001 207,900 133
250M Grand Casinos, Inc., 10 1/8%, 2003 261,875 167
300M SHRP Capital Corp., 11 3/4%, 1999 (Defaulted)(Note 4) 75,000 48
- ------------------------------------------------------------------------------------------------------
544,775 348
9
<PAGE>
- ------------------------------------------------------------------------------------------------------
HEALTHCARE--6.1%
300M Mediq/PRN Life Support Services, Inc., 11 1/8%, 1999 300,000 191
300M Ornda Healthcorp., 12 1/4%, 2002 330,000 211
300M Tenet Healthcare Corp., 10 1/8%, 2005 333,375 213
- ------------------------------------------------------------------------------------------------------
963,375 615
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED FOR
EACH $10,000
PRINCIPAL OF NET
AMOUNT SECURITY VALUE ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
MEDIA/CABLE TELEVISION--13.2%
$ 500M Bell Cablemedia PLC, 0%-11.95%, 2004 $ 353,750 $ 226
650M Echostar Communications Corp., 0%-12 7/8%, 2004 438,750 280
300M Garden State Newspapers, Inc., 12%, 2004 304,500 194
250M Lamar Advertising, Inc., 11%, 2003 260,000 166
400M Outdoor Systems, Inc., 10 3/4%, 2003 388,000 248
300M Rogers Cablesystems, Inc., 10%, 2005 323,625 206
- ------------------------------------------------------------------------------------------------------
2,068,625 1,320
- ------------------------------------------------------------------------------------------------------
MINING/METALS--9.7%
274M Carbide/Graphite Group, Inc., 11 1/2%, 2003 296,948 188
200M Gulf States Steel Inc., 13 1/2%, 2003 (Note 5) 181,000 115
240M UCAR Global Enterprises, Inc., 12%, 2005 274,800 175
400M WCI Steel, Inc., 10 1/2%, 2002 389,000 248
400M Wheeling-Pittsburgh Steel Corp., 9 3/8%, 2003 378,000 241
- ------------------------------------------------------------------------------------------------------
1,519,748 967
- ------------------------------------------------------------------------------------------------------
MISCELLANEOUS--1.8%
275M Monarch Marking Systems, Inc., 12 1/2%, 2003 288,750 184
- ------------------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--8.4%
400M Gaylord Container Corp., 11 1/2%, 2001 413,000 265
10
<PAGE>
200M Rainy River Forest Products Co., Inc., 10 3/4%, 2001 220,750 141
350M S.D. Warren Co., Inc., 12%, 2004 386,750 247
300M Stone Container Corp., 9 7/8%, 2001 292,875 187
- ------------------------------------------------------------------------------------------------------
1,313,375 840
- ------------------------------------------------------------------------------------------------------
RETAIL-FOOD/DRUG--1.2%
200M Penn Traffic Co., 10 1/4%, 2002 191,750 122
- ------------------------------------------------------------------------------------------------------
RETAIL-GENERAL MERCHANDISE--.0%
1M Barry's Jewelers, Inc., 12 5/8%, 1996 374 --
- ------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--3.3%
450M American Communication Services, Inc., 0%-13%, 2005 (Note 5) 247,500 158
250M CAI Wireless Systems, Inc., 12 1/4%, 2002 268,125 171
- ------------------------------------------------------------------------------------------------------
515,625 329
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
EXECUTIVE INVESTORS HIGH YIELD FUND
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED FOR
PRINCIPAL EACH $10,000
AMOUNT OR OF NET
SHARES SECURITY VALUE ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
TRANSPORTATION-- 3.9%
$ 300M Moran Transportation Co., 11 3/4%, 2004 $ 283,500 $ 181
350M Trism, Inc., 10 3/4%, 2000 341,250 218
- ------------------------------------------------------------------------------------------------------
624,750 399
- ------------------------------------------------------------------------------------------------------
TOTAL VALUE OF CORPORATE BONDS (cost $14,407,320) 14,388,364 9,182
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS--.9%
ELECTRICAL EQUIPMENT--.1%
11
<PAGE>
648 *Thermadyne Holdings Corporation 11,745 7
- ------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--.2%
2,400 *Olympic Financial Ltd. 39,000 25
- ------------------------------------------------------------------------------------------------------
GAMING/LODGING--.0%
5,063 *Divi Hotels, Inc. 380 --
2,000 *Gold River Hotel & Casino Corp., Series "B" 375 --
- ------------------------------------------------------------------------------------------------------
755 --
- ------------------------------------------------------------------------------------------------------
MEDIA/CABLE TELEVISION--.6%
3,900 *Echostar Communications Class "A" 94,575 60
- ------------------------------------------------------------------------------------------------------
RETAIL/GENERAL MERCHANDISE--.0%
1 *Barry's Jewelers, Inc. 3 --
- ------------------------------------------------------------------------------------------------------
TOTAL VALUE OF COMMON STOCKS (cost $150,046) 146,078 92
- ------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--5.4%
FINANCIAL SERVICES--2.1%
3,000 California Federal Bank, 10 5/8%, Series "B" 325,500 208
- ------------------------------------------------------------------------------------------------------
MEDIA/CABLE TELEVISION--1.5%
212 PanAmSat Capital Corp., 12 3/4% 239,040 153
- ------------------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--1.8%
9,000 *S.D. Warren Co., Inc., 14% 288,000 184
- ------------------------------------------------------------------------------------------------------
TOTAL VALUE OF PREFERRED STOCKS (cost $763,180) 852,540 545
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED FOR
EACH $10,000
OF NET
WARRANTS SECURITY VALUE ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
WARRANTS--.3%
12
<PAGE>
BUILDING MATERIALS--.0%
5,900 *Waxman Industries, Inc. (expiring 6/1/04)(Note 5) $ 2,950 $ 2
- ------------------------------------------------------------------------------------------------------
GAMING/LODGING--.1%
717 *Casino America, Inc. (expiring 11/15/96) 179 --
200 *Gold River Finance Corp., Liquidating Trust 3,000 2
1,800 *President Riverboat Casinos, Inc. (expiring 9/23/96)(Note 5) 5,400 3
800 *SHRP Capital Corp. (expiring 7/15/99)(Note 5) -- --
- ------------------------------------------------------------------------------------------------------
8,579 5
- ------------------------------------------------------------------------------------------------------
MINING/METALS--.0%
200 *Gulf State Steel Acquisition Corp. (expiring 4/1/03) 100 --
- ------------------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--.2%
9,000 *S.D. Warren Co., Inc. (expiring 12/15/06)(Note 5) 45,000 29
- ------------------------------------------------------------------------------------------------------
RETAIL-GENERAL MERCHANDISE--.0%
100 *Payless Cashways, Inc. (expiring 11/1/96) 25 --
- ------------------------------------------------------------------------------------------------------
TOTAL VALUE OF WARRANTS (cost $14,362) 56,654 36
- ------------------------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $15,334,908) 98.5% 15,443,636 9,855
OTHER ASSETS, LESS LIABILITIES 1.5 228,810 145
- ------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $15,672,446 $ 10,000
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
*Non-income producing
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS
EXECUTIVE INVESTORS INSURED TAX EXEMPT FUND
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED FOR
EACH $10,000
PRINCIPAL OF NET
AMOUNT SECURITY VALUE ASSETS
13
<PAGE>
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS--98.2%
ARIZONA--4.0%
$ 250M Maricopa County, Arizona Dev. Auth. Hosp. Facs. Rev.
Samaritan Health Services Series "A" 7%, 12/1/2016 $ 307,187 $ 231
200M Maricopa County, Arizona Sch. Dist. No. 80 (Chandler) 6 1/4%,
7/1/2011 222,500 167
- ------------------------------------------------------------------------------------------------------
529,687 398
- ------------------------------------------------------------------------------------------------------
CALIFORNIA--14.3%
250M Fresno, California Sewer Authority 6 1/4%, 9/1/2014 280,313 210
Los Angeles County, Calif. Transportation Comm. Sales Tax
Revenue:
100M 6 3/4%, 7/1/2001* 113,500 85
100M 6.9%, 7/1/2001* 114,125 86
250M San Francisco, Calif. City & County Parking Auth. 7%, 6/1/2017 291,875 219
500M San Francisco, Calif. City & County Redev. Agcy. 6 3/4%, 7/1/2015 558,125 418
250M San Jose Redev. Agency Tax Allocation 6%, 8/1/2015 273,750 205
250M Santa Ana, Calif. Finance Authority 6 1/4%, 7/1/2015 281,250 211
- ------------------------------------------------------------------------------------------------------
1,912,938 1,434
- ------------------------------------------------------------------------------------------------------
COLORADO--6.2%
425M Aurora, Colorado Postsecondary Education Foundation 6%, 9/1/2015 444,656 333
350M Roaring Fork, Colorado General Obligation 6.6%, 12/15/2014 380,625 285
- ------------------------------------------------------------------------------------------------------
825,281 618
- ------------------------------------------------------------------------------------------------------
CONNECTICUT--3.2%
400M Connecticut State Special Tax Oblig. Rev. 6.1%, 10/1/2011 427,500 320
- ------------------------------------------------------------------------------------------------------
FLORIDA--2.0%
250M Tampa, Florida Sales Tax Revenue 5 3/4%, 10/1/2020 265,313 199
- ------------------------------------------------------------------------------------------------------
GEORGIA--.8%
100M Cherokee County Water & Sewer Auth. Rev. 7.1%, 8/1/2000* 113,625 85
- ------------------------------------------------------------------------------------------------------
ILLINOIS--5.9%
100M Du Paige Water Commission, Illinois Water Rev. 6 7/8%, 5/1/1997* 105,750 79
500M Illinois Dev. Fin. Auth. Rev. (Rockford School 205) 6.55%,
2/1/2009 558,125 418
100M Will County School District General Obligation 7.1%, 12/1/2009 119,500 90
- ------------------------------------------------------------------------------------------------------
783,375 587
14
<PAGE>
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED FOR
EACH $10,000
PRINCIPAL OF NET
AMOUNT SECURITY VALUE ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
INDIANA--1.1%
$ 130M Delaware Cnty. Hosp. Auth. (Ball Memorial Hosp.) 6 5/8%, 8/1/2006 $ 142,675 $ 107
- ------------------------------------------------------------------------------------------------------
MAINE--2.0%
250M Maine Municipal Bond Bank 6 1/2%, 11/1/2014 274,062 205
- ------------------------------------------------------------------------------------------------------
MASSACHUSETTS--4.0%
500M Mass. Bay Transn. Auth. Gen. Sys. Series "A" 5.8%, 3/1/2013 530,000 397
- ------------------------------------------------------------------------------------------------------
MICHIGAN--6.3%
325M Detroit Sewer Disposal System Revenue 5%, 7/1/2025 309,562 232
1,000M Howell, Michigan Public Schools General Obligation Zero Cpn.
5/1/2006* 275,000 206
250M Oakland University Revenue 5 3/4%, 5/15/2015 257,500 193
- ------------------------------------------------------------------------------------------------------
842,062 631
- ------------------------------------------------------------------------------------------------------
MISSOURI--6.0%
200M Liberty, Missouri Sewer System Rev. 6.15%, 2/1/2015 216,500 162
500M Missouri State Health & Educational Facilities Authority
BJC Health Systems Series "A" 6 3/4%, 5/15/2010 583,750 438
- ------------------------------------------------------------------------------------------------------
800,250 600
- ------------------------------------------------------------------------------------------------------
NEVADA--.7%
80M Reno Hosp. Rev. (St. Mary's Hospital) 7 3/4%, 1/1/2000* 91,500 69
- ------------------------------------------------------------------------------------------------------
NEW JERSEY--5.8%
485M New Jersey Housing & Mortgage Fin. Rev. 6.55%, 10/1/2010 520,768 390
250M West Monmouth Utility Authority 5.6%, 2/1/2014 255,938 192
- ------------------------------------------------------------------------------------------------------
15
<PAGE>
776,706 582
- ------------------------------------------------------------------------------------------------------
NEW YORK--2.4%
290M New York City Municipal Water Fin. Auth. 5 7/8%, 6/15/2012 313,200 235
- ------------------------------------------------------------------------------------------------------
OKLAHOMA--4.3%
500M Grand River Dam Authority Revenue 6 1/4%, 6/1/2011 569,375 427
- ------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS
EXECUTIVE INVESTORS INSURED TAX EXEMPT FUND
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT
INVESTED FOR
EACH $10,000
PRINCIPAL OF NET
AMOUNT SECURITY VALUE ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------------------
PENNSYLVANIA--10.7%
$ 200M Jeannette, Pa. School District General Obligation 6.65%,
6/15/2001* $ 222,000 $ 166
400M Pennsylvania State Ind. Dev. Auth. 5 1/2%, 1/1/2014 404,500 303
400M Pennsylvania State Turnpike Commission Revenue 5 1/2%, 12/1/2012 407,000 305
350M Philadelphia Water & Wastewater Revenue 6 1/4%, 8/1/2012 391,563 293
- ------------------------------------------------------------------------------------------------------
1,425,063 1,067
- ------------------------------------------------------------------------------------------------------
PUERTO RICO--4.4%
545M Puerto Rico Indl. Tourist Edl. Med. & Env. Ctl. Facs. 6 1/4%,
7/1/2016 587,919 441
- ------------------------------------------------------------------------------------------------------
RHODE ISLAND--1.7%
200M Rhode Island Convention Center Authority Series "A" 6.7%,
5/15/2001* 225,500 170
- ------------------------------------------------------------------------------------------------------
TEXAS--10.5%
505M Austin, Texas Utilities System Rev. 6%, 11/15/2013 552,975 414
500M Harris County General Obligation 6 1/2%, 8/15/2013 570,000 427
16
<PAGE>
250M Houston Water Conveyance System Cert. of Part. 6 1/4%, 12/15/2012 279,688 210
- ------------------------------------------------------------------------------------------------------
1,402,663 1,051
- ------------------------------------------------------------------------------------------------------
VIRGINIA--1.9%
250M Norfolk, Virginia Water Revenue 5.6%, 11/1/2011 257,500 193
- ------------------------------------------------------------------------------------------------------
TOTAL VALUE OF MUNICIPAL BONDS (cost $11,925,468) 13,096,194 9,816
- ------------------------------------------------------------------------------------------------------
SHORT-TERM TAX EXEMPT INVESTMENTS--.7%
NEW YORK
100M New York State Energy Pollution Control 5.5%(a) (cost $100,000) 100,000 75
- ------------------------------------------------------------------------------------------------------
TOTAL VALUE OF INVESTMENTS (cost $12,025,468) 98.9% 13,196,194 9,891
OTHER ASSETS, LESS LIABILITIES 1.1 146,296 109
- ------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $13,342,490 $ 10,000
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a)Interest rates are determined and reset daily by the issuer. Interest rate
shown is the rate in effect at December 31, 1995.
*Municipal Bonds which have been prerefunded are shown maturing at the
prerefunded call date.
See notes to financial statements
<PAGE>
Statement of Assets and Liabilities
EXECUTIVE INVESTORS TRUST
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXECUTIVE INVESTORS
-------------------------------------------
BLUE CHIP HIGH YIELD INSURED TAX
FUND FUND EXEMPT FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities:
At identified cost....................................... $ 1,054,303 $ 15,334,908 $ 12,025,468
------------- ------------- -------------
17
<PAGE>
------------- ------------- -------------
At value (Note 1A)....................................... $ 1,352,378 $ 15,443,636 $ 13,196,194
Cash....................................................... 77,987 21,938 22,124
Receivables:
Interest and dividends................................... 2,200 326,567 198,326
Trust shares sold........................................ 609 853 28,778
Other assets............................................... 4 4,966 17
------------- ------------- -------------
Total Assets............................................... 1,433,178 15,797,960 13,445,439
------------- ------------- -------------
LIABILITIES
Payables:
Dividends payable January 15, 1996....................... 4,946 68,946 85,188
Trust shares redeemed.................................... -- 6,282 1,632
Accrued expenses........................................... 1,724 44,389 16,129
Accrued advisory fee....................................... -- 5,897 --
------------- ------------- -------------
Total Liabilities.......................................... 6,670 125,514 102,949
------------- ------------- -------------
NET ASSETS................................................. $ 1,426,508 $ 15,672,446 $ 13,342,490
------------- ------------- -------------
------------- ------------- -------------
NET ASSETS CONSIST OF:
Capital paid in............................................ $ 1,125,802 $ 20,424,083 $ 12,169,811
Undistributed net investment income........................ 2,631 95,103 1,953
Accumulated net realized loss on investment transactions... -- (4,955,468) --
Net unrealized appreciation in value of investments........ 298,075 108,728 1,170,726
------------- ------------- -------------
Total...................................................... $ 1,426,508 $ 15,672,446 $ 13,342,490
------------- ------------- -------------
------------- ------------- -------------
SHARES OF BENEFICIAL INTEREST OUTSTANDING.................. 87,409 2,063,556 950,251
------------- ------------- -------------
------------- ------------- -------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
(Net assets divided by trust shares outstanding)......... $16.32 $7.59 $14.04
MAXIMUM OFFERING PRICE PER SHARE
(Net asset value/.9525)*................................. $17.13 $7.97 $14.74
*On purchases of $100,000 or more, the sales charge is
reduced.
</TABLE>
See notes to financial statements
<PAGE>
18
<PAGE>
STATEMENT OF OPERATIONS
EXECUTIVE INVESTORS TRUST
Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXECUTIVE INVESTORS
-------------------------------------------
BLUE CHIP HIGH YIELD INSURED TAX
FUND FUND EXEMPT FUND
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Interest.................................................................. $ 1,512 $ 1,610,315 $ 696,385
Dividends................................................................. 28,660 45,877 --
Consent fees.............................................................. -- 23,579 --
------------- ------------- -------------
Total income................................................................ 30,172 1,679,771 696,385
------------- ------------- -------------
Expenses (Notes 1 and 3):
Advisory fee.............................................................. 12,118 154,785 119,019
Distribution plan expenses................................................ 6,059 77,393 59,509
Professional fees......................................................... 2,229 17,857 10,188
Shareholder servicing costs............................................... 2,253 19,569 6,929
Reports and notices to shareholders....................................... 583 11,573 3,233
Custodian fees............................................................ 2,392 5,749 4,080
Other expenses............................................................ 1,028 7,306 3,879
------------- ------------- -------------
Total expenses.............................................................. 26,662 294,232 206,837
Less: Expenses waived or assumed............................................ (20,603) (85,132) (147,328)
Custodian fees paid indirectly......................................... -- (2,922) --
------------- ------------- -------------
Net expenses................................................................ 6,059 206,178 59,509
------------- ------------- -------------
Net investment income....................................................... 24,113 1,473,593 636,876
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments..................................... 61,724 (264,699) 288,360
19
<PAGE>
Net unrealized appreciation of investments.................................. 282,537 1,510,599 1,271,346
------------- ------------- -------------
Net gain on investments..................................................... 344,261 1,245,900 1,559,706
------------- ------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 368,374 $ 2,719,493 $ 2,196,582
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
EXECUTIVE INVESTORS TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXECUTIVE INVESTORS
--------------------------------------------------------------------------
INSURED TAX
BLUE CHIP FUND HIGH YIELD FUND EXEMPT FUND
---------------------- ------------------------ ------------------------
Year Ended December 31 1995 1994 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income............ $ 24,113 $ 17,589 $ 1,473,593 $ 1,420,987 $ 636,876 $ 531,033
Net realized gain (loss) on
investments.................... 61,724 70,824 (264,699) 80,680 288,360 (27,483)
Net unrealized appreciation
(depreciation) of
investments.................... 282,537 (102,509) 1,510,599 (1,873,704) 1,271,346 (894,199)
---------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations................... 368,374 (14,096) 2,719,493 (372,037) 2,196,582 (390,649)
---------- ---------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............ (23,522) (15,549) (1,414,951) (1,486,797) (638,733) (538,977)
Net realized gains............... (61,724) (70,824) -- -- (260,877) --
---------- ---------- ----------- ----------- ----------- -----------
Total distributions............ (85,246) (86,373) (1,414,951) (1,486,797) (899,610) (538,977)
20
<PAGE>
---------- ---------- ----------- ----------- ----------- -----------
TRUST SHARE TRANSACTIONS(a)
Proceeds from shares sold........ 209,332 307,337 1,793,924 4,684,633 2,766,768 2,357,147
Value of distributions
reinvested..................... 79,327 83,856 578,661 659,544 538,422 271,847
Cost of shares redeemed.......... (186,017) (206,473) (3,146,609) (2,574,747) (1,622,298) (783,306)
---------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) from
trust share transactions..... 102,642 184,720 (774,024) 2,769,430 1,682,892 1,845,688
---------- ---------- ----------- ----------- ----------- -----------
Net increase in net assets... 385,770 84,251 530,518 910,596 2,979,864 916,062
NET ASSETS
Beginning of year................ 1,040,738 956,487 15,141,928 14,231,332 10,362,626 9,446,564
---------- ---------- ----------- ----------- ----------- -----------
End of year+..................... $1,426,508 $1,040,738 $15,672,446 $15,141,928 $13,342,490 $10,362,626
---------- ---------- ----------- ----------- ----------- -----------
---------- ---------- ----------- ----------- ----------- -----------
+ Includes undistributed net
investment income of............. $ 2,631 $ 2,040 $ 95,103 $ 36,461 $ 1,953 $ 3,810
---------- ---------- ----------- ----------- ----------- -----------
---------- ---------- ----------- ----------- ----------- -----------
(a)TRUST SHARES ISSUED AND REDEEMED
Sold............................. 13,332 21,798 244,106 620,568 201,812 180,398
Issued for distributions
reinvested..................... 4,767 6,516 78,556 89,317 39,073 21,136
Redeemed......................... (12,330) (14,678) (429,347) (343,344) (117,810) (60,322)
---------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) in
trust shares................. 5,769 13,636 (106,685) 366,541 123,075 141,212
---------- ---------- ----------- ----------- ----------- -----------
---------- ---------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
<PAGE>
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,
21
<PAGE>
liabilities and operations of each Fund. The objective of each Fund is as
follows:
BLUE CHIP FUND seeks 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 tax.
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 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
22
<PAGE>
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, 1995, the High
Yield Fund had
<PAGE>
capital loss carryovers of $4,862,452 of which $3,364,392 expires in 1998,
$1,286,892 expires in 1999 and $211,168 expires in 2003.
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. 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. E. 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, 1995,
the High Yield Fund recognized $13,430 of dividend income from these taxable
"pay in kind" distributions. The Funds' custodian has provided credits in the
amount of $8,130 against custodian charges based on the uninvested cash balances
of the Funds.
2. SECURITY TRANSACTIONS--For the year ended December 31, 1995, purchases and
sales of securities other than United States Treasury bills and short-term
notes, were as follows:
<TABLE>
<CAPTION>
23
<PAGE>
BLUE CHIP HIGH YIELD INSURED TAX
FUND FUND EXEMPT FUND
----------- ----------- -----------
<S> <C> <C> <C>
Cost of purchases....................... $444,533 $10,485,671 $18,495,474
----------- ----------- -----------
----------- ----------- -----------
Proceeds of sales....................... $380,144 $11,045,476 $17,059,511
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
EXECUTIVE INVESTORS TRUST
At December 31, 1995, aggregate cost and net unrealized appreciation 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.......................... $ 1,054,303 $15,334,908 $12,025,468
----------- ------------ -----------
----------- ------------ -----------
Unrealized appreciation................. $ 310,765 $ 720,817 $ 1,170,726
Unrealized depreciation................. 12,690 612,089 --
----------- ------------ -----------
Net unrealized appreciation............. $ 298,075 $ 108,728 $ 1,170,726
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
3. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES--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"), an affiliated dealer.
24
<PAGE>
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 $285,922 of
which $216,269 was waived. In addition, expenses of $22,404 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, 1995, no reimbursement was required pursuant to these
provisions.
For the year ended December 31, 1995, EIC, as underwriter of the Trust, received
$17,113 in commissions after allowing $11,245 to FIC and $112,534 to other
dealers. Shareholder servicing costs consist of $26,057 in transfer agent fees
and out of pocket expenses accrued to ADM, (of which $8,663 was waived by ADM)
and $2,694 in custodian fees (of which $519 was waived by FFS).
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
<PAGE>
or other securities dealers for the ongoing servicing of their clients who are
shareholders of any of the Funds.
4. 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, 1995, the
High Yield Fund held one defaulted security with a value of $75,000 representing
less than 1/2 of 1% of the High Yield Fund's net assets.
5. RULE 144A SECURITIES--Under rule 144A, certain restricted securities are
exempt from the registration requirements of the Securities Act of 1933 and may
25
<PAGE>
be resold to qualified institutional investors. At December 31, 1995, the High
Yield Fund held eight 144A securities with an aggregate value of $1,001,850
representing 6.4% of the High Yield Fund's net assets. These securities are
valued as set forth in Note 1A.
26
<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, 1995, the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and 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, 1995, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and 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, 1995, 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, 1996
27
<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) Amended and Restated Declaration of Trust
(2) By-laws
(3) Not Applicable
(4)1,4,5 Specimen Certificates
(5) Investment Advisory Agreement between Registrant and
Executive Investors Management Company, Inc.
(6) Underwriting Agreement between Executive Investors
Corporation and the Registrant
(7) Not Applicable
(8)a. Custodian Agreement between Irving Trust Company and
Registrant
b. Supplement to Custodian Agreement between The Bank of New
York and Registrant
(9) Administration Agreement by and among Administrative Data
Management Corp., Executive Investors Corporation and
Registrant
(10)8 Opinion of Counsel
(11)a. Consent of independent accountants
b. Powers of Attorney
(12) Not Applicable
(13)1,2,3 Undertakings of the Investment Adviser
(14)a.6 First Investors Profit Sharing/Money Purchase Pension
Retirement Plan for Sole Proprietorships, Partnerships, and
Corporations
b.7 First Investors Individual Retirement Account
<PAGE>
c.4 First Investors 403(b) Custodial Account
d.7 First Investors SEP-IRA and SARSEP-IRA
(15) Amended and Restated Class A Distribution Plan
(16) Performance Calculations
(17) Financial Data Schedule (filed as Exhibit 27 for
electronic filing purposes)
(18) Not Applicable
1 Incorporated by reference from Pre-Effective Amendment No. 1 to
Registrant's Registration Statement (File No. 33-10648) filed on
December 24, 1986.
2 Incorporated by reference from Post-Effective Amendment No. 5 to
Registrant's Registration Statement (File No. 33-10648) filed on
February 15, 1990.
3 Incorporated by reference from Post-Effective Amendment No. 7 to
Registrant's Registration Statement (File No. 33-10648) filed on
May 14, 1990.
4 Incorporated by reference from Post-Effective Amendment No. 8 to
Registrant's Registration Statement (File No. 33-10648) filed on
September 20, 1990.
5 Incorporated by reference from Post-Effective Amendment No. 9 to
Registrant's Registration Statement (File No. 33-10648) filed on
January 29, 1991.
6 Incorporated by reference from Post-Effective Amendment No. 11 to
Registrant's Registration Statement (File No. 33-10648) filed on
August 30, 1991.
7 Incorporated by reference from Post-Effective Amendment No. 13 to
Registrant's Registration Statement (File No. 33-10648) filed on
April 29, 1993.
8 Incorporated by reference from Registrant's Rule 24f-2 Notice for
its fiscal year ending December 31, 1995 filed on February 27,
1996.
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
<TABLE>
<CAPTION>
Number of
Record Holders as of
Title of Class February 9, 1996
Class A
<S> <C>
Executive Investors
High Yield Fund 830
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Executive Investors
<S> <C>
Blue Chip Fund 106
Executive Investors
Insured Tax Exempt Fund 347
</TABLE>
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 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:
<PAGE>
<TABLE>
<CAPTION>
Position and Office Position and
Name and Principal with Executive Office with
Business Address Investors Corporation Registrant
<S> <C> <C>
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
Joseph I. Benedek Treasurer Treasurer
581 Main Street
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
581 Main Street Chief Financial
Woodbridge, NJ 07095 Officer and Director
Carol Lerner Brown Secretary Assistant Secretary
95 Wall Street
New York, NY 10005
Robert J. Murphy Comptroller None
581 Main Street
Woodbridge, NJ 07095
</TABLE>
(c) Not applicable
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, 581 Main Street, 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
<PAGE>
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.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
99.B1 Amended and Restated Declaration of Trust
99.B2 By-laws
99.B5 Advisory Agreement
99.B6 Underwriting Agreement
99.B8.1 Custodian Agreement
99.B8.2 Supplement to Custodian Agreement
99.B9 Administration Agreement
99.B11.1 Consent of accountants
99.B11.2 Powers of Attorney
99.B15 Class A Distribution Plan
99.B16 Performance Calculations
27.01 FDS-Blue Chip Fund
27.02 FDS-High Yield Fund
27.03 FDS-Tax Exempt Fund
<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 PostEffective 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, 1996.
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, 1996
- ---------------------
Glenn O. Head Officer and Trustee
/s/Joseph I. Benedek Principal Financial April 17, 1996
Joseph I. Benedek and Accounting Officer
* Trustee April 17, 1996
- ---------------------
Kathryn S. Head
* Trustee April 17, 1996
- ---------------------
James J. Coy
* Trustee April 17, 1996
- ---------------------
F. William Ortman, Jr.
<PAGE>
* Trustee April 17, 1996
- ---------------------
Roger L. Grayson
* Trustee April 17, 1996
- ----------------------
Herbert Rubinstein
* Trustee April 17, 1996
- ----------------------
James M. Srygley
* Trustee April 17, 1996
- ---------------------
John T. Sullivan
* Trustee April 17, 1996
- ---------------------
Rex R. Reed
* Trustee April 17, 1996
- ---------------------
Robert F. Wentworth
*By: /s/Larry R. Lavoie
Larry R. Lavoie
Attorney-in-fact
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST
DECLARATION OF TRUST, made October 28, 1986 and amended
September 22, 1994, by James J. Coy, Roger L. Grayson, Glenn O. Head,
Kathryn S. Head, F. William Ortman, Jr., Rex R. Reed, Herbert
Rubinstein, John T. Sullivan and Robert F. Wentworth (the "Trustees").
WHEREAS, the Trustees desire to establish a trust fund
for the investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and
property contributed to the trust fund hereunder shall be held and
managed under this Declaration of Trust IN TRUST as herein set forth
below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1. This Trust shall be known as "Executive
Investors Trust".
DEFINITIONS
Section 2. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) The Terms "Affiliated Person",
"Assignment", "Commission", "Interested Person", "Majority
Shareholder Vote"
-1-
<PAGE>
(the 67% or 50% requirement of the third sentence of Section
3(a)(42) of the 1940 Act, whichever may be applicable) and
"Principal Underwriter" shall have the meanings given them in the
1940 Act, as amended from time to time;
(b) The "Trust" refers to Executive Investors Trust;
(c) "Net Asset Value" means the net asset value
of the Trust determined in the manner provided in Article X,
Section 3;
(d) "Shareholder" means a record owner of Shares
of the Trust;
(e) The "Trustees" refer to the individual
Trustees in their capacity as Trustees hereunder of the Trust and
their successor or successors for the time being in office as
such Trustees;
(f) "Shares" means the equal proportionate
transferable units of interest into which the beneficial
interest of the Trust shall be divided from time to time, and
includes fractions of Shares as well as whole Shares consistent
with the requirements of federal and/or other securities laws;
(g) The "1940 Act" refers to the Investment Company
Act of 1940, as amended from time to time.
-2-
<PAGE>
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a
continuous source of managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 1. The Shares of the Trust shall be issued in one
or more separate and distinct Portfolios and/or classes as the
Trustees may, without shareholder approval, authorize. Each Portfolio
shall be preferred over all other Portfolios in respect of the assets
allocated to that Portfolio. The beneficial interest of each
Portfolio shall at all times be divided into Shares, with or without
par value as the Trustees may specify, each of which shall represent an
equal proportionate interest in the Portfolio with each other Share of
the same Portfolio, none having priority or preference over another.
When issued, each such share shall be fully paid and nonassessable. Each
Portfolio shall be represented by one or more classes of Shares, with
each class possessing such rights (including, notwithstanding any
contrary provision herein, voting rights) as the Trustees,
without shareholder approval, authorize. The number of Shares
authorized shall be unlimited, and the Shares so authorized may be
represented in part by fractional Shares. The Trustees may from time
to time and without shareholder approval divide or combine the Shares
of any Portfolio or class
-3-
<PAGE>
into a greater or lesser number without thereby changing the
proportionate beneficial interest in the Portfolio.
OWNERSHIP OF SHARES
Section 2. The ownership of Shares shall be recorded in the
books of the Trust. The Trustees may make such rules as they consider
appropriate for the transfer of shares and similar matters. The record
books of the Trust shall be conclusive as to who are the holders of
Shares and as to the number of Shares held from time to time by each.
INVESTMENT IN THE TRUST
Section 3. The Trustees shall accept investments in the
Trust from such persons and on such terms as they may from time to
time authorize. Such investments may be in the form of cash or
securities in which the Trust is authorized to invest, valued as
provided in Article X, Section 3. After the date of the initial
contribution for capital, the number of Shares to represent the initial
contribution may in the Trustees' discretion be considered as
outstanding and the amount received by the Trustees on account of the
contribution shall be treated as an asset of the Trust. Subsequent
investments in the Trust shall be credited to the shareholder's account
in the form of full and fractional shares of the Trust at the Net
Asset value per Share next determined after
-4-
<PAGE>
the investment is received; provided, however, that the Trustees may,
in their sole discretion, impose a sales charge upon investments in the
Trust.
NO PREEMPTIVE RIGHTS
Section 4. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities issued
by the Trust or the Trustees.
LIMITATION OF PERSONAL LIABILITY
Section 5. The Trustees shall have no power to
bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such
as the Shareholder may at any time personally agree to pay by way of
subscription for any Shares or otherwise. Every note, bond, contract
or other undertaking issued by or on behalf of the Trust or the
Trustees relating to the Trust shall include a recitation limiting the
obligation represented thereby to the Trust and its assets (but the
omission of such a recitation shall not operate to bind any
Shareholder).
-5-
<PAGE>
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 1. The business and affairs of the Trust shall be
managed by the Trustees, and they shall have all powers necessary
and desirable to carry out that responsibility.
ELECTION: Initial Trustees
Section 2. On or before a date fixed by the
Trustees, the Shareholders shall elect not less than three Trustees. A
Trustee shall not be required to be a Shareholder of the Trust. The
initial Trustees shall be Andrew J. Donohue, David D. Grayson and
Glenn O. Head, and such other individuals as the Board of Trustees
shall appoint pursuant to Section 4 of this Article IV.
TERM OF OFFICE OF TRUSTEES
Section 3. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as hereinafter
provided; except that (a) any Trustee may resign by written
instrument signed by him and delivered to the other Trustees, which
shall take effect upon such delivery or upon such later date as is
specified therein; (b) any Trustee may be removed at any time by written
instrument, signed by at least two-thirds of the number of Trustees
prior to such removal, specifying the date when such removal shall
become effective; (c) any Trustee who requests in writing to be
retired or who has become incapacitated by illness or
-6-
<PAGE>
injury may be retired by written instrument signed by a majority of
the other Trustees, specifying the date of his retirement; and (d) a
Trustee may be removed at any Special Meeting of the Trust by a vote of
two-thirds of the outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the declination, death,
resignation, retirement, removal or inability of any Trustee, or in
case a vacancy shall, by reason of an increase in number, or for
any other reason, exist, the remaining Trustees shall fill such vacancy
by appointing such other person as they in their discretion shall see
fit. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by recording in the
records of the Trust, whereupon the appointment shall take effect.
Within three months of such appointment, the Trustees shall cause
notice of such appointment to be mailed to each Shareholder at his
address as recorded on the books of the Trust. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof
mailed to Shareholders as aforesaid in anticipation of a vacancy to
occur by reason of retirement, resignation or increase in number of
Trustees effective at a later date, provided that said appointment
shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon
as any Trustee so appointed shall have accepted this trust, the trust
estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he
-7-
<PAGE>
shall be deemed a Trustee hereunder. The power of appointment is
subject to the provisions of Section 16(a) of the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 5. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any
one time to any other Trustee or Trustees, provided that in no case
shall less than two Trustees personally exercise the other powers
hereunder except as herein otherwise expressly provided.
NUMBER OF TRUSTEES
Section 6. The number of Trustees, not less than three
(3) nor more than fifteen (15), serving hereunder at any time shall be
determined by the Trustees themselves.
Whenever a vacancy in the Board of Trustees shall occur and
until such vacancy is filled, or while any Trustee is absent from the
Commonwealth of Massachusetts or, if not a domiciliary of Massachusetts,
is absent from his state of domicile, or is physically or mentally
incapacitated by reason of disease or otherwise, the other Trustees
shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy, absence or incapacity, shall be
conclusive, provided, however, that no vacancy shall remain unfilled
for a period longer than six calendar months.
-8-
<PAGE>
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 7. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them,
shall not operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust.
ASSETS AND LIABILITIES OF THE TRUST
Section 8. The assets of the Trust shall be held
separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or any
successor Trustees. All of the assets of the Trust shall at all
times be considered as vested in the Trustees. No Shareholder shall
be deemed to have a severable ownership in any individual asset of the
Trust or any right of partition or possession thereof, but each
Shareholder of a Portfolio or class of shares of the Trust shall have a
proportionate undivided beneficial interest in the assets belonging to
the Portfolio or class of shares of the Trust held by the
shareholders of such Portfolio or class of shares in the Trust.
All consideration received by the Trust for the issue or sale of
Shares o f a particular Portfolio, together with all assets in
which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such
-9-
<PAGE>
proceeds in whatever form the same may be, shall be referred to as
"assets belonging to" that Portfolio and shall be held by the Trustees
in trust for the benefit of the Shareholders of that Portfolio. The
assets belonging to each particular Portfolio shall be charged
with the liabilities of that Portfolio and all expenses, costs,
charges and reserves attributable to that Portfolio. In addition,
any assets, income, earnings, profits, and proceeds thereof, funds, or
payments or any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as
belonging to or chargeable to any particular Portfolio shall be
allocated by the Trustees between and among one or more of the
Portfolios in such manner as they, in their sole discretion, deem
fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Portfolios for all purposes, and
shall be referred to as assets belonging to that Portfolio. Any
creditor of any Portfolio may look only to the assets of that Portfolio
to satisfy such creditor's debt.
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
Section 1. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to
do any and all acts and to make and execute any and all contracts and
instruments that they may consider necessary or appropriate in
-10-
<PAGE>
connection with the management of the Trust. The Trustees shall not in
any way be bound or limited by present or future laws or customs in
regard to Trust investments, but shall have full authority and power
to make any and all investments which they, in their uncontrolled
discretion, shall deem proper to accomplish the purpose of this
Trust. Subject to any applicable limitation in the Declaration of
Trust or the Bylaws of the Trust, the Trustees shall have power and
authority to do any act they are permitted by law to do, including:
(a) To buy, and invest funds in their hands in,
securities including, but not limited to, common stock,
preferred stock, bonds, debentures, warrants and rights to
purchase or sell securities, certificates of beneficial
interest, notes or other evidences of indebtedness issued by
corporations, trusts or associations, domestic or foreign, or
issued and guaranteed by the United States of America or any
agency thereof, by the government of any foreign county, or
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, or by any political subdivision or agency
of any foreign county, in "when-issued" contracts for any such
securities, or purchase and simultaneously resell for later
delivery any obligation, or retain such proceeds in cash, and
from time to time change the investment(s) of its funds.
(b) To adopt Bylaws not inconsistent with is
Declaration of Trust providing for the conduct of the
business
-11-
<PAGE>
of the Trust and to amend and repeal such Bylaws to the extent
that they do not reserve that right to the Shareholders.
(c) To elect and remove such officers and
appoint and terminate such agents as they consider appropriate.
(d) To employ a bank or trust company as custodian
of any assets of the Trust subject to any conditions set
forth in this Declaration of Trust or in the Bylaws, if any.
(e) To retain a transfer agent and Shareholder
servicing agent; or both.
(f) To provide for the distribution of interests
of the Trust either through a principal underwriter in the
manner hereinafter provided for or by the Trust itself, or both.
(g) To set record dates in the manner hereinafter
provided for.
(h) To delegate such authority as they consider
desirable to any officers of the Trust and to any agent, custodian
or underwriter.
(i) To sell or exchange any or all of the assets
of the Trust, subject to the provisions of Article XII, Section
4(b) hereof.
(j) To vote or give assent, or exercise any
rights of ownership, with respect to stock or other securities or
property; and to execute and deliver powers of attorney to such
person or persons as the Trustees shall deem proper, granting
to such person or persons such powers and discretion with
relation to securities or property as the Trustees shall deem
proper.
-12-
<PAGE>
(k) To exercise powers and rights of
subscription or otherwise which in any manner arise out of
ownership of securities.
(l) To hold any security or property in a
form not indicating any trust, whether in bearer,
unregistered or other negotiable form; or either in its own name
or in the name of a custodian or a nominee or nominees, subject
in either case to proper safeguards according to the usual
practice of trust companies or investment companies.
(m) To consent to or participate in any plan
for the reorganization, consolidation or merger of any
corporation or concern, any security of which is held in the
Trust; to consent to any contract, lease, mortgage, purchase or
sale of property by such corporation or concern, and to pay calls
or subscriptions which respect to any security held in the Trust.
(n) To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any matter in
controversy including, but not limited to, claims for taxes.
(o) To make distributions to Shareholders in the
manner hereinafter provided for.
(p) To borrow money from a bank for temporary or
emergency purposes and not for investment purposes. The
Trustees shall not pledge, mortgage or hypothecate the assets of
the Trust except that, to secure borrowings, it may pledge
securities.
(q) To establish, from time to time, a minimum
total investment for Shareholders, and to require the
-13-
<PAGE>
redemption of the Shares of any Shareholders whose investment
is less than such minimum upon giving notice to such Shareholder.
No one dealing with the Trustees shall be under any
obligation to make any inquiry concerning the authority of the
Trustees, or to see to the application of any payments made or
property transferred to the Trustees or upon their order.
(r) To establish separate and distinct Portfolios of
shares with separately defined investment objectives,
policies and purposes, and to establish separate classes of
each such Portfolio's shares and to allocate assets,
liabilities and expenses of the Trust to a particular
Portfolio or class of Shares or to apportion the same among
two or more Portfolios or classes, provided that any
liability or expense incurred by a particular Portfolio or
class of Shares shall be payable solely out of the
assets of that Portfolio or class.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 2. Any Trustee, officer or other agent of the
Trust may acquire, own and dispose of Shares of the Trust to the same
extent as if he were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold Shares of the Trust
to and buy such Shares from any such person of any firm or company in
which he is interested, subject only to the general limitations
herein contained as to the sale and purchase of
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<PAGE>
such Shares; and all subject to any restrictions which may be contained
in the Bylaws.
ACTION BY THE TRUSTEES
Section 3. The Trustees shall act by majority vote at a
meeting duly called, or by unanimous written consent without a
meeting, or by telephone consent provided a quorum of Trustees
participate in any such telephonic meeting, unless the 1940 Act
requires that a particular action be taken only at a meeting of the
Trustees. At any meeting of the Trustees, a majority of the Trustees
shall constitute a quorum. Meetings of the Trustees may be called
orally or in writing by the Chairman of the Trustees or by any two other
Trustees. Notice of the time, date and place of all meetings of the
Trustees shall be given by the party calling the meeting to each
Trustee by telephone or telegram sent to his home or business address
at least twenty- four (24) hours in advance of the meeting or by
written notice mailed to his home or business address at least
seventy-two (72) hours in advance of the meeting. Notice need not
be given to any Trustee who attends the meeting without objecting to
the lack of notice or who executes a written waiver of notice with
respect to the meeting. Subject to the requirements of the 1940 Act,
the Trustees by majority vote may delegate to any one of their number
their authority to approve particular matters or take particular
actions on behalf of the Trust.
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CHAIRMAN OF THE TRUSTEES
Section 4. The Trustees may appoint one of their number
to be Chairman of the Board of Trustees. The Chairman shall preside at
all meetings of the Trustees, shall be responsible for the
execution of policies established by the Trustees and the
administration of the Trust, and may also be any officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 1. The Trustees shall be reimbursed from the
assets belonging to the appropriate class of shares for their
expenses and disbursements, including, without limitation, fees and
expenses of Trustees who are not Interested Persons of the Trust
or its investment adviser; interest expense; taxes; fees and
commissions of every kind; expenses of pricing Trust portfolio
securities; expenses of issue, repurchase and redemption of shares,
including expenses attributable to a program of periodic repurchases or
redemptions; expenses of registering and qualifying the Trust and its
Shares under Federal and State laws and regulations; charges of
custodians, transfer agents and registrars; expenses of preparing and
setting up in type prospectuses; expenses of printing and
distributing prospectuses sent to existing shareholders; auditing
and legal expenses; reports to Shareholders; expenses or meetings
of Shareholders and proxy solicitations therefore; insurance expense;
association membership dues; and such
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nonrecurring items as may arise, including litigation to which the
Trust is a party and for all losses and liabilities, by them incurred
in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities, the Trustees shall have a lien
on the Trust estate prior to any rights or interests of the
Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 1. Subject to a Majority Shareholder Vote, the
Trustees in their discretion from time to time may enter into an
investment advisory or management contract whereby the other party to
such contract shall undertake to furnish the Trustees such management,
investment advisory, statistical and research facilities and services
and such other facilities and services, if any, and all upon such
terms and conditions, as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser (subject to such
general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales or exchanges of portfolio securities
of the Trust on behalf of the Trustees or may authorize any officer,
agent or Trustee to effect such purchases, sales or exchanges pursuant
to recommendations of
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the investment adviser (and all without further action by the Trustees).
Any such purchases, sales and exchanges shall be deemed to have been
authorized by all of the Trustees.
PRINCIPAL UNDERWRITER
Section 2. The Trustees may in their discretion from time
to time enter into a contract providing for the sale of the Shares
of the Trust, whereby the Trust may either agree to sell the Shares
to the other party to the contract or appoint such other party its
sales agent for such Shares. In either case, the contract shall be
on such terms and conditions as may be prescribed in the Bylaws, if any,
and such further terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this
Article VII, or of the Bylaws, if any; and such contract may also
provide for the repurchase or sale of Shares of the Trust by such
other party as principal or as agent of the Trust.
TRANSFER AGENT
Section 3. The Trustees may in their discretion from time
to time enter into a transfer agency and shareholder service
contract whereby the other party shall undertake to furnish the
Trustees transfer agency and Shareholder services including clerical and
accounting services. The contract shall be on such terms and
conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Declaration of Trust or of the
Bylaws, if any, and may provide for the
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computation of the Trust's Net Asset Value in accordance herewith.
Such services may be provided by one or more entities.
PARTIES TO CONTRACT
Section 4. Any contract of the character described in
Sections 1,2 and 3 of this Article VII or in Article IX hereof may be
entered into with any corporation, firm, partnership, trust or
association, although one or more of the Trustees or officers of the
Trust may be an officer, director, trustee, shareholder or member of
such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any
relationship, nor shall any person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the
Trust under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom. The same person
(including a firm, corporation, partnership, trust or association)
may be the other party to contracts entered into pursuant to Sections
1, 2 and 3 above or Article IX, and any individual may be financially
interested or otherwise affiliated with persons who are parties to
any or all of the contracts mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
Section 5. Any contract entered into pursuant to Section 1
and 2 of this Article VII shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act (including any
amendments thereof or other applicable Act of Congress hereafter
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enacted) with respect to its continuance in effect, its termination,
and the method of authorization and approval of such contract or
renewal thereof, and no amendment to any contract, entered into pursuant
to Section 1 of this Article VII, shall be effective unless assented
to by a Majority Shareholder Vote.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote:
(i) for the election of Trustees as provided in Article IV, Section
2; (ii) for the removal of Trustees as provided in Article IV, Section
3(d) (iii) with respect to any investment advisory or management
contract as provided in Article VII, Section 1; (iv) with respect to
the amendment of this Declaration of Trust as provided in Article XII,
Section 7; (v) to the same extent as the shareholders of a
Massachusetts business corporation, as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a
class action on behalf of the Trust of the Shareholders, provided,
however, that a Shareholder of a particular Portfolio shall not be
entitled to bring any derivative or class action on behalf of any other
Portfolio of the Trust, and (vi) with respect to such additional
matters relating to the Trust as may be required or authorized by law,
by this Declaration of Trust, or the By-Laws of the Trust, if any, or
any registration of the Trust with the Commission or any state, as the
Trustees may
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consider desirable. On any matter submitted to a vote of the
shareholders, all Shares shall be voted in the aggregate and not by
individual Portfolios; except that, (i) when required by the 1940 Act
or (ii) when the Trustees have determined that the matter affects
only the interest of one or more Portfolios, then only the
Shareholders of such Portfolio(s) shall be entitled to vote thereon.
Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in
person or by proxy. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required or
permitted by law, this Declaration of Trust or any By-Laws of the Trust,
to be taken by Shareholders.
MEETINGS
Section 2. The first Shareholder's meeting shall be
held as specified in Section 2 of Article IV at the principal office
of the Trust or such other place as the Trustees may designate.
Special meetings of the Shareholders may be called by the Trustees and
shall be called by the Trustees upon the written request of
Shareholders owning at least one-tenth (1/10) of the outstanding Shares
entitled to vote. Shareholders shall be entitled to at least fifteen
(15) days' notice of any meeting.
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QUORUM AND REQUIRED VOTE
Section 3. At any meeting of the Shareholders a quorum
for the transaction of business shall be a majority of Shares
entitled to vote in person or by proxy, except that where any
provision of law or of this Declaration of Trust permits or requires
that holders of any Portfolio vote, as a Portfolio, then a majority
of the aggregate number of Shares of that Portfolio entitled to vote
shall be necessary to constitute a quorum for the transaction of
business by that Portfolio, provided that a lesser number may make
adjournment of such meeting until a quorum is obtained. Any adjourned
session or sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity of further
notice. Except when a larger vote is required by law, this
Declaration of Trust or the By- Laws, a majority of the Shares voted
in person or by proxy shall decide any question and a plurality shall
elect a Trustee, provided that where any provision of law or of this
Declaration of Trust permits or requires that the holders of any
Portfolio shall vote as a Portfolio, then a majority of the Shares of
that Portfolio voted on the matter shall decide that matter insofar as
that Portfolio is concerned.
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ARTICLE IX
CUSTODIAN
APPOINTMENT AND DUTIES
Section 1. The Trustees shall at all times employ a bank or
trust company having capital, surplus and undivided profits of at least
two million dollars ($2,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and
deliver the same upon written order;
(2) to receive and receipt for any monies due to the
Trust and deposit the same in its own banking department or
elsewhere as the Trustees may direct; and
(3) to disburse such funds upon orders or vouchers. The
Trust may also employ such custodian as its agent:
(1) to keep the books and accounts of the Trust and
furnish clerical and accounting services; and
(2) to compute, if authorized to do so by the Trustees,
the Net Asset Value of the Trust in accordance with the provisions
hereof;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority
Shareholder Vote, the custodian shall deliver and pay over all
property of the Trust held by it as specified in such vote.
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The Trustees may also authorize the custodian to employ
one or more sub-custodians from time to time to perform such of the acts
and services of the custodian and upon such terms and conditions, as
may be agreed upon between the custodian and such sub-custodian and
approved by the Trustees, provided that in every case such
sub-custodian shall be a bank or trust company organized under the
laws of the United States or one of the states thereof and having
capital, surplus and undivided profits of at least two million dollars
($2,000,000).
CENTRAL CERTIFICATE SYSTEM
Section 2. Subject to such rules, regulations and orders
as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a
national securities exchange or a national securities association
registered with the Commission under the Securities Exchange Act of
1934, or such other person as may be permitted by the Commission, or
otherwise in accordance with the 1940 Act as from time to time amended,
pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of such securities, provided that all such
deposits shall be subject to withdrawal only upon the order of the
Trust.
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ARTICLE X
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 1.
(a) The Trustees shall have power, to the fullest
extent permitted by the laws of Massachusetts, at any time to declare
and cause to be paid dividends on Shares of a particular class or
Portfolio, from the assets belonging to such class or Portfolio, which
dividends, at the election of the Trustees, may be paid daily or
otherwise pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine and may
be payable in Shares of that class or Portfolio at the election of
each Shareholder of that class or Portfolio.
(b) Anything in this Declaration of Trust to the
contrary notwithstanding, the Trustees may at any time declare and
distribute pro rata among the Shareholders of a particular class or
Portfolio a "stock dividend."
(c) The record date for the determination of
Shareholders entitled to dividends or distributions declared pursuant
to (a) and (b) above shall be fixed by the Trustees as provided in
Article XII, Section 3 hereof.
(d) Dividends and distributions on Shares of a particular
class or Portfolio may be paid to the holders of Shares of that class
or Portfolio at such times, in such manner and only from such of the
income and capital gains, accrued or realized, from the assets
belonging to that class or Portfolio of shares,
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after providing for actual and accrued liabilities belonging to that
class or Portfolio of Shares, as the Board of Trustees may determine.
REDEMPTIONS
Section 2. In case any Shareholder of record of a
particular Portfolio desires to dispose of his Shares, he may deposit
at the office of the transfer agent or other authorized agent of the
Trust a written request or such other form of request as the Trustees
may from time to time authorize, requesting that the Trust purchase his
Shares in accordance with this Section 2; and the Shareholder so
requesting shall be entitled to require the Trust to purchase, and the
Trust or the principal underwriter of the Trust shall purchase his
said Shares, but only at the Net Asset Value thereof (as
described in Section 3 hereof). The Portfolio shall make payment for
any such Shares to be redeemed, as aforesaid, in cash to the extent
required by Federal law, and securities from such Portfolio's assets,
and payment for such Shares shall be made by the Portfolio or the
principal underwriter to the Shareholder of record within seven
(7) days after the date upon which the request is effective, provided,
however, that if Shares being redeemed have been purchased by check,
the Portfolio may postpone payment until the Trust has assurance that
good payment has been collected for the purchase of the Shares. The
Trust may require Shareholders to pay a sales charge to the Trust,
the underwriter or any other person designated by the Trustees upon
redemption or repurchase of Shares of any Portfolio in such amount
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as shall be determined from time to time by the Trustees. The amount of
such sales charge may but need not vary depending on various
factors, including without limitation the holding period of the
redeemed or repurchased Shares. The Trustees may also charge a
redemption or repurchase fee in such amount as may be determined from
time to time by the Trustees.
DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS
Section 3. The term "Net Asset Value" of a Portfolio or
class shall mean that amount by which the assets of that Portfolio or
class exceed its liabilities, all as determined by or under the
direction of the Trustees. Net Asset Value per share shall be
determined on such days and at such times as the Trustees may
determine. Such determination shall be made with respect to securities
for which market quotations are readily available, at the market value
of such securities; and with respect to other securities and assets, at
the fair value as determined in good faith by the Trustees, provided,
however, that the Trustees, without Shareholder approval, may
alter the method of appraising portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations and
interpretations thereof promulgated or issued by the Securities and
Exchange Commission or insofar as permitted by any Order of the
Securities and Exchange Commission. The Trustees may delegate any
powers and duties under this Section 3 with respect to appraisal
of assets and liabilities. At any time the Trustees may cause the
value per Share last determined to be
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determined again in similar manner and may fix the time when such
redetermined value shall become effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 4. The Trustees may declare a suspension of the
right of redemption or postpone the date of payment for the whole or
any part of any period (i) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings,
(ii) during which trading on the New York Stock Exchange is restricted,
(iii) during which an emergency exists as a result of which disposal
by the Trust of securities owned by it is not reasonably practicable
or it is not reasonably practicable for the Trust fairly to
determine the value of its net assets, or (iv) during any other
period when the Commission (or any succeeding governmental authority)
may for the protection of security holders of the Trust by order permit
suspension of the right of redemption or postponement of the date of
payment on redemption; provided that applicable rules and
regulations of the Commission (or any succeeding governmental
authority) shall govern as to whether the conditions prescribed in (ii),
(iii) or (iv) exist. Such suspension shall take effect at such time as
the Trustees shall specify but not later than the close of business
on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment until the
Trustees shall declare the suspension at an end, except that the
suspension shall terminate in any event on the first business day of
the Trust on which said stock exchange shall have reopened or the
period specified in (ii) or (iii) shall have expired (as to which in
the
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absence of an official ruling by said Commission or succeeding
authority, the determination of the Trustees shall be conclusive). In
the case of a suspension of the right of redemption, a Shareholder
may either withdraw his request for redemption or receive payment based
on the Net Asset Value existing after the termination of the suspension.
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section 1. Provided they have exercised reasonable care
and have acted under the reasonable belief that their actions are in
the best interest of the Trust, the Trustees shall not be responsible
for or liable in any event for neglect or wrongdoing of them or
any officer, agent, employee or investment adviser of the Trust,
but nothing contained herein shall protect any 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.
INDEMNIFICATION
Section 2.
(a) Subject to the exceptions and limitations
contained in Section (b) below:
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(i) every person who is, or has been, a Trustee or
officer of the Trust (a "Covered Person") shall be indemnified by
the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or o t her, including appeals), actual or threatened,
and the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the
Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office or (B) not to have
acted in good faith in the reasonable belief that his action was
in the best interest of the Trust; or
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(ii) in the event of a settlement, unless there has
been a determination that such Trustee or officer did not
engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office,
(A) by the court or other body approving the
settlement; or
(B) by at least a majority of those Trustees
who are neither interested persons of the Trust nor are
parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry);
or
(C) by written opinion of independent legal counsel
based upon a review of readily available facts (as
opposed to a full trial-type inquiry); provided, however,
that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees, or by
independent counsel.
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not be exclusive of or affect any other rights to which
any Covered Person may now or hereafter be entitled, shall continue as
to a person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors and administrators of such
a person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise
under law.
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(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or
proceeding of the character described in paragraph (a) of this
Section 2 may be paid by the Trust from time to time prior to final
disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the
Trust if it is ultimately determined that he is not entitled to
indemnification under this Section 2; provided, however, that either
(a) such Covered Person shall have provided appropriate security for
such undertaking, (b) the Trust is insured against losses arising
out of any such advance payments or (c) either a majority of the
Trustees who are neither interested persons of the Trust nor are
parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available
facts (as opposed to a full trial-type inquiry), that there is reason
to believe that such Covered Person will be found entitled to
indemnification under this Section 2.
SHAREHOLDERS
Section 3. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his being
or having been a Shareholder and not because of his acts or omissions or
for some other reason, the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or
in the case of a corporation or other entity, its corporate or other
general successor) shall be entitled out of the trust estate to be
held harmless from and indemnified against
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all loss and expense arising from such liability. The Trust shall,
upon request by the Shareholder, assume the defense of any claim made
against any Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon.
ARTICLE XII
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 1. It is hereby expressly declared that a trust and
not a partnership is created hereby. No Trustee hereunder shall have
any power to bind personally either the Trust's officers or any
Shareholder. All persons extending credit to, contracting with or
having any claim against the Trust or the Trustees shall look only to
the assets of the Trust for payment under such credit, contract or
claim; and neither the Shareholders nor the Trustees, nor any of their
agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect the
Trustee against any liability to which the Trustee would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their
powers and discretions hereunder in good faith and with reasonable
care
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under the circumstances then prevailing, shall be binding upon
everyone interested. Subject to the provisions of Section 1 of this
Article XII and to Article XI, the Trustees shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust, and subject to the provisions
of Section 1 of this Article XII and to Article XI, shall be under no
liability for any act or omission in accordance with such advice or
for failing to follow such advice. The trustees shall not be required
to give any bond as such, nor any surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 3. The Trustees may close the stock transfer books
of the Trust for a period not exceeding sixty (60) days preceding
the date of any meeting of shareholders, or the date for the
payment of any dividends or distributions, or the date for the
allotment of rights, or the date when any change or conversion or
exchange of shares shall go into effect; or in lieu of closing the stock
transfer books as aforesaid, the Trustees may fix in advance a date,
not exceeding sixty (60) days preceding the date of any meeting of
Shareholders, or the date for payment of any dividend or distributions,
or the date for the allotment of rights, or the date when any change or
conversion or exchange of Shares shall go into effect, as a
record date for the determination of the Shareholders entitled to
notice of, and to vote at, any such meeting, or entitled to receive
payment of any such dividend or distributions,
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or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be
Shareholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting, or to receive payment of such
dividend, or to receive such allotment or rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any
Shares on the books of the Trust after any such record date fixed as
aforesaid.
TERMINATION OF TRUST
Section 4.
(a) This Trust shall continue without limitation of
time but subject to the provisions of sub-sections (b), (c) and (d) of
this Section 4.
(b) The Trustees, with the approval of the
Shareholders by Majority Shareholder Vote and in accordance with all
applicable law, may sell and convey the assets of the Trust to another
trust, partnership, association or corporation organized under the laws
of any state of the United States, or political subdivision thereof, for
an adequate consideration which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust; and which may include shares of
beneficial interest or stock of such trust, partnership,
association or corporation. Upon making provision for the payment of
all such liabilities, by such assumption or otherwise, the
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Trustees shall distribute the remaining proceeds ratably among the
holders of the Shares of the Trust then outstanding.
(c) Subject to a Majority Shareholder Vote and in
accordance with all applicable law, the Trustees may at any time sell
and convert into money all the assets of the Trust. Upon making
provision for the payment of all outstanding obligations, taxes and
other liabilities, accrued or contingent, of the Trust, the Trustees
shall distribute the remaining assets of the Trust ratably among the
holders of the outstanding shares.
(d) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in subsection (b) and (c),
the Trust shall terminate and the Trustees shall be discharged of
any and all further liabilities and duties hereunder and the
right, title and interest of all parties shall be canceled and
discharged.
FILING OF COPIES, REFERENCES, HEADINGS
Section 5. The original or a copy of this instrument and
of each Declaration of Trust supplemental hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each Supplemental Declaration of Trust
shall be filed by the Trustees with the Secretary of the Commonwealth
of Massachusetts and the Boston City Clerk, as well as any other
governmental office where such filing may from time to time be
required. Anyone dealing with the Trust may rely on a certificate
by an officer or Trustee of the Trust as to whether or not any such
Supplemental Declarations of Trust have
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been made and as to any matters in connection with the Trust hereunder,
and with the same effect as if it were the original, may rely on a
copy certified by an officer or Trustee of the Trust to be a copy of
this instrument or of any such Supplemental Declaration of Trust. In
this instrument or in any such Supplemental Declaration of Trust,
references to this instrument, and all expressions like "herein",
"hereof" and "hereunder," shall be deemed to refer to this
instrument as amended or affected by any such Supplemental Declaration
of Trust. Headings are placed herein for convenience of reference
only and in case of any conflict, the text of this instrument,
rather than the headings, shall control. This instrument may be
executed in any number of counterparts, each of which shall be deemed an
original.
APPLICABLE LAW
Section 6. The Trust set forth in this instrument is
created under and is to be governed by and construed and administered
according to the laws of the Commonwealth of Massachusetts. The
Trust shall be of the type commonly called a Massachusetts business
trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
AMENDMENTS
Section 7. If authorized by votes of the Trustees and a
Majority Shareholder Vote, or by any larger vote which may be
required by applicable law or this Declaration of Trust in any
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particular case, the Trustees shall amend or otherwise supplement
this instrument, by making a Declaration of Trust supplemental hereto,
which thereafter shall form a part hereof. Copies of the Supplemental
Declaration of Trust shall be filed as specified in Section 5 of
this Article XII.
REGISTERED AGENT
Section 8. The Registered Agent of the Trust
within the Commonwealth of Massachusetts for service of process, and
the principal place of business of the Trust within the Commonwealth
of Massachusetts, shall be U.S. Corporation Company, One Court Street,
Boston, Massachusetts 02108.
FISCAL YEAR
Section 9. The fiscal year of the Trust shall be the
calendar year, provided, however, that the Trustees may, without
Shareholder approval, change the fiscal year of the Trust.
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IN WITNESS WHEREOF, the undersigned, being all of the
Trustees of the Trust, have executed this instrument this 22nd day of
September, 1994.
/s/James J. Coy
James J. Coy
95 Wall Street
New York, NY 10005
/s/Roger L. Grayson
Roger L. Grayson
95 Wall Street
New York, NY 10005
/s/Glenn O. Head
Glenn O. Head
95 Wall Street
New York, NY 10005
/s/Kathryn S. Head
Kathryn S. Head
95 Wall Street
New York, NY 10005
/s/F. William Ortman, Jr.
F. William Ortman, Jr.
95 Wall Street
New York, NY 10005
/s/Rex R. Reed
Rex R. Reed
95 Wall Street
New York, NY 10005
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/s/Herbert Rubinstein
Herbert Rubinstein
95 Wall Street
New York, NY 10005
/s/John T. Sullivan
John T. Sullivan
95 Wall Street
New York, NY 10005
/s/Robert F. Wentworth
Robert F. Wentworth
95 Wall Street
New York, NY 10005
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STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED, that on this 22nd day of September,
1994, personally came before me, a Notary Public in and for the State
of New York, JAMES J. COY, ROGER L. GRAYSON, GLENN O. HEAD, KATHRYN
S. HEAD, F. WILLIAM ORTMAN,JR., REX R. REED, HERBERT RUBINSTEIN, JOHN
T. SULLIVAN and ROBERT F. WENTWORTH, all of the parties to the
foregoing Declaration of Trust known to me personally to be such, and
severally acknowledged the said certificate to be the act and deed of
the signers respectively, and that the facts therein stated are truly
set forth, given under my hand and seal of office the day and year
aforesaid.
/s/Evan S. Israel
(SEAL)
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BY-LAWS
EXECUTIVE INVESTORS TRUST
ARTICLE I
Officers and Their Election
SECTION 1. Officers. The officers of the Trust shall be a
President, a Treasurer, a Secretary, one or more Vice Presidents and
such other officers as the Trustees may from time to time elect. It
shall not be necessary for any Trustee or other officer to be a holder
of shares in the Trust.
SECTION 2. Election of Officers. The Treasurer and Secretary shall be
chosen annually by the Trustees. The President shall be chosen
annually by and from the Trustees.
Two or more offices may be held by a single person
except the offices of President and Secretary. The officers shall
hold office until their successors are chosen and qualified.
SECTION 3. Resignations and Removals. Any officer of the Trust may
resign by filing a written resignation with the President or with the
Trustees or with the Secretary, which shall take effect on being so
filed at such time as may be therein specified. The Trustees may at any
meeting remove any officer.
ARTICLE II
Powers and Duties of Officers and Trustees
SECTION 1. Trustees. The business and affairs of the Trust shall be
managed by the Trustees, and they shall have all powers necessary
and desirable to carry out the responsibility, so far as such powers
are not inconsistent with applicable law, the Declaration of Trust, or
with these By-Laws.
SECTION 2. Executive and Other Committees. The Trustees may elect from
their own number an executive committee to consist of not less than
three nor more than five members which shall have the power and duty
to conduct the current and ordinary business of the Trust,
including the purchase and sale of securities, while the Trustees
are not in session, and such other powers and duties as the Trustees
may from time to time delegate to such committee. The Trustees may
also elect from their own number other committees from time to time,
the number composing such committees and the powers conferred upon the
same to be determined by vote of the Trustees.
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SECTION 3. Chairman of the Trustees. The Trustees may, but need not
appoint from among their number a Chairman. He shall perform any such
duties as the Trustees may from time to time designate.
SECTION 4. President. The President shall be the chief executive
officer of the Trust and, subject to the Trustees, shall have general
supervision over the business and policies of the Trust. When present,
he shall preside at all meetings of the shareholders and the
Trustees, and he may, subject to the approval of the Trustees, appoint a
Trustee to preside at such meetings in his absence. The President
shall perform such duties additional to all of the foregoing as the
Trustees may from time to time designate.
SECTION 5. Treasurer. The Treasurer shall be the principal
financial and accounting officer of the Trust. He shall deliver all
funds and securities of the Trust which may come into his hands to
such bank or trust company as the Trustees shall employ as Custodian
in accordance with Article IX of the Declaration of Trust. He shall
have the custody of the seal of the Trust. He shall make annual
reports in writing of the business conditions of the Trust, which
reports shall be preserved upon its records, and he shall furnish such
other reports regarding the business and conditions as the Trustees
may from time to time require. The Treasurer shall perform such
duties additional to the foregoing as the Trustees may from time to time
designate.
SECTION 6. Secretary. The Secretary shall record in books kept
for the purpose all votes and proceedings of the Trustees and the
shareholders at their respective meetings.
The Secretary shall perform such duties additional
to the foregoing as the Trustees may from time to time designate.
SECTION 7. Vice President. Each Vice President of the Trust shall
perform such duties as the Trustees may from time to time designate.
SECTION 8. Assistant Treasurer. The Assistant Treasurer of the Trust
shall perform such duties as the Trustees may from time to time
designate.
ARTICLE III
Shareholders' Meetings
SECTION 1. Special Meetings. A special meeting of the shareholders
shall be called by the Secretary whenever ordered by the Trustees
or requested in writing by the holder or holders of at least
one-tenth of the outstanding shares entitled to vote. A
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special meeting of the shareholders of any series shall be called by the
Secretary whenever ordered by the Trustees or requested in writing by
the holder or holders of at least one-tenth of the outstanding shares of
the class entitled to vote. If the Secretary, when so ordered or
requested, refuses or neglects for more than two days to call such
special meeting, the Trustees or the shareholders so requesting may,
in the name of the Secretary, call the meeting by giving notice
thereof in the manner required when notice is given by the Secretary.
SECTION 2. Notices. Except as above provided, notices of any special
meeting of the shareholders shall be given by the Secretary by
delivering or mailing, postage prepaid, to each shareholder entitled
to vote at said meeting, a written or printed notification of such
meeting, at least fifteen days before the meeting, to such address
as may be registered with the Trust by the shareholder.
SECTION 3. Place of Meeting. All special meetings of the shareholders
shall be held at the principal place of business of the Trust or at such
other place in the United States as the Trustees may designate.
ARTICLE IV
Trustees' Meetings
SECTION 1. Special Meetings. Special meetings of the Trustees
shall be called by the Secretary at the written request of the
President, the Treasurer, or any two Trustees, and if the Secretary when
so requested refuses or fails for more than twenty-four hours to call
such meeting, the President, the Treasurer, or such two Trustees,
may in the name of the Secretary call such meeting by giving due notice
in the manner required when notice is given by the Secretary.
SECTION 2. Regular Meeting. Regular meetings of the Trustees may
be held without call or notice at such places and at such times as
the Trustees may from time to time determine, provided that any Trustee
who is absent when such determination is made shall be given notice of
the determination.
SECTION 3. Quorum. A majority of the Trustees shall constitute a
quorum for the transaction of business.
SECTION 4. Notice. Except as otherwise provided, notice of any
special meeting of the Trustees shall be given by the Secretary to
each Trustee, by mailing to him, postage prepaid, addressed to him at
his address as registered on the books of the Trust or, if not so
registered, at his last known address, a written or printed
notification of such meeting at least three days before the meeting
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or by delivering such notice to him at least two days before the
meeting, or by sending to him at least 24 hours before the meeting, by
prepaid telegram, addressed to him at his said registered address, if
any, or if he has no such registered address, at his last known
address, notice of such meeting.
SECTION 5. Place of Meeting. All special meetings of the Trustees
shall be held at the principal place of business of the Trust or such
other place as the person or persons requesting said meeting to be
called may designate, but any meeting may adjourn to any other place.
SECTION 6. Special Action. When all the Trustees shall be present
at any meeting, however called, or wherever held, or shall assent to
the holding of the meeting without notice, or after the meeting shall
sign a written assent thereto on the record of such meeting, the acts of
such meeting shall be valid as if such meeting had been regularly held.
SECTION 7. Action by Consent. Any action by the Trustees may be
taken without a meeting if a written consent thereto is signed by all
the Trustees and filed with the records of the Trustees meetings, or
by telephone consent provided a quorum of Trustees participate in any
such telephone meeting. Such consent shall be treated as a vote of the
Trustees for all purposes.
ARTICLE V
Shares of Beneficial Interest
SECTION 1. Beneficial Interest. The beneficial interest in the Trust
shall at all times be divided into an unlimited number of
transferable shares without par value, each of which shall
represent an equal proportionate interest in the class or series with
each other share of the class or series outstanding, none having
priority or preference over another.
SECTION 2. Transfer of Stock. T h e shares of the Trust
shall be transferable, so as to affect the rights of the Trust,
only by transfer recorded on the books of the Trust, in person or by
attorney.
SECTION 3. Equitable Interest Not Recognized. The Trust shall be
entitled to treat the holder of record of any share or shares of
beneficial interest as the holder in fact thereof, and shall not be
bound to recognize any equitable or other claim or interest in such
share or shares on the part of any other person except as may be
otherwise expressly provided by law.
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ARTICLE VI
Inspection of Books
The Trustees shall from time to time determine whether and
to what extent, and at what times and places, and under what
conditions and regulations the accounts and books of the Trust or any
of them shall be open to the inspection of the shareholders; and no
shareholder shall have any right to inspect any account or book or
document of the Trust except as conferred by law or otherwise by the
Trustees or by resolution of the shareholders.
ARTICLES VII
Custodian
SECTION 1. Contract with Custodian. The Custodian employed by the
Trust pursuant to Article IX of the Declaration of Trust shall be
required to enter into a contract with the Trust which shall contain in
substance the following provisions:
(a) The Trust will cause all securities and funds owned by the
Trust to be delivered or paid to the Custodian.
(b) The Custodian will receive and receipt for any moneys due
to the Trust and deposit the same in its own banking
department and in such other banking institutions, if any,
as the Custodian and the Trustees may approve. The
Custodian shall have the sole power to draw upon any such
account.
(c) The Custodian shall release and deliver securities owned
by the Trust in the following cases only:
(1) Upon the sale of such securities for the account
of the Trust and receipt of payment therefore;
(2) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that in any such
case, the cash is to be delivered to the Custodian;
(3) To the issuer thereof or its agent for transfer
into the name of the Trust, the Custodian or a
nominee of either, or for exchange for a different
number of bonds or certificates representing the same
aggregate face amount or number of units; provided
that in any such case the new securities are to be
delivered to the Custodian;
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(4) To the broker selling the same for examination, in
accord with the "street delivery" custom;
(5) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities
of the issuer of such s e curities or pursuant
to provisions of any deposit agreement; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
(6) In the case of warrants, rights, or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities;
(7) To any pledge by way of pledge or hypothecation to
secure any loan, but openly within the limits
permitted to the Trust by Article V, Section 1(p)
of the Declaration of Trust.
(8) For deposit in a system for the central
handling of securities in accordance with the
provisions of Article IX, Section 2 of the Declaration
of Trust.
(d) The Custodian shall pay out monies of the Trust only
upon the purchase of securities for the account of the
Trust and the delivery in due course of such securities to
the Custodian, or in c o n nection with the conversion,
exchange or surrender of securities owned by the Trust
as set forth in (c), or for the repurchase of shares issued
by the Trust or for the making of any d i s bursements
authorized by the Trustees pursuant to the Declaration
of Trust or these By-Laws, or for the payment of any
expense or liability incurred by the Trust; provided
that, in every case where payment is made by the
Custodian in advance of receipt of the securities
purchased, the Custodian shall be absolutely liable to
the Trust for such securities to the same extent as if the
securities had been received by the Custodian.
(e) The Custodian shall make deliveries of securities and
payments of cash only upon written instructions signed or
initialled by such officer or officers or other agent or
agents of the Trust as may be authorized to sign or initial
such instruction by resolution of the Trustees; it being
understood that the Trustees may from time to time authorize
a different person or persons to sign or initial
instructions for different purposes.
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SECTION 2. Other Provision. The contract between the Trust and the
Custodian may contain any such other provisions not inconsistent with
the provisions of Article IX of the Declaration of Trust or with these
By-Laws as the Trustees may approve.
SECTION 3. Termination of Contract with Custodian. Upon termination
of the contract or inability of the Custodian to continue to serve,
the Custodian shall, upon written notice of appointment of another bank
or trust company as custodian, deliver and pay over to such successor
custodian all securities and moneys held by it for account of the
Trust. In such case, the Trustees shall promptly appoint a successor
custodian, but in the event that no successor custodian can be found
having the required qualifications and willing to serve, it shall be
the duty of the Trustees to call as promptly as possible a special
meeting of the shareholders to determine whether the Trust shall
function without a custodian or shall be liquidated. If so directed
by vote of the holders of a majority of the outstanding shares, the
Custodian shall deliver and pay over all property of the Trust held by
it as specified in such vote.
SECTION 4. Aggregate Capital Requirement. Such contract may also
provide that, pending appointment of a successor custodian or a
vote of the shareholders specifying some other disposition of the
funds and property, the Custodian shall not deliver funds and property
of the Trust to the Trust, but may deliver them to a bank or trust
company doing business in New York, New York, of its own selection
having an aggregate capital, surplus and undivided profits, as shown
by its last published report, of not less than $2,000,000, as the
property of the Trust to be held under terms similar to those on which
they were held by the retiring custodian.
SECTION 5. Subcustodians. Any sub-custodian employed by the
Custodian pursuant to authorization to do so granted by the Trust
pursuant to Article IX of the Declaration of Trust shall be required
to enter into a contract with the Custodian containing in substance
the same provisions as those described in paragraphs (a) through (e)
above, except that any contract with a sub- custodian performing its
duties outside the United States and its territories and possessions,
may omit or limit any of such conditions, provided that, any such
omission or limitation shall be expressly approved by a majority of the
Trustees of the Trust.
ARTICLE VIII
Seal
The seal of the Trust shall be circular in form
bearing the inscription:
"EXECUTIVE INVESTORS TRUST"
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ARTICLE IX
Fiscal Year
The fiscal year of the Trust shall be the calendar year.
However, the Trustees may adopt such other fiscal year as they may
approve pursuant to these By-Laws.
ARTICLE X
Limitations on Investments
SECTION 1. With respect to 75% of the Trust's total assets, the Trust
shall not 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 Trust's
total assets would be invested in the securities of that issuer, or
(b) the Trust would hold more than 10% of the outstanding voting
securities of that issuer.
SECTION 2. The Trust shall not purchase securities of any issuer
if such purchase at the time thereof would cause more than 5% of the
total assets of the Trust to be invested in securities of companies
which have a record of less than three years' continuous operation,
including in such three years the operation of any predecessor company
or companies, partnership or individual enterprise if the company
whose securities are to be purchased by the Trust had come into
existence as a result of a merger, consolidation, reorganization or the
purchase of substantially all of the assets of such predecessor company
or companies, partnership or individual enterprise.
SECTION 3. The Trust shall neither purchase for nor retain in its
portfolio securities issued by an issuer any of whose officers,
directors or security- holders is an officer or director, or
Trustee of the Trust or of its investment advisor if or so long as
the officers, directors and Trustees of the Trust and of its investment
advisor, together, own beneficially more than (5%) of any class of the
securities of such issuer.
ARTICLE XI
Amendments
These By-Laws may be amended at any meeting of the Trustees
of the Trust by a majority vote; provided, however, that any amendment
which changes or affects the provisions of Article VII, Article X,
or Article XII (other than changes which add further provisions not
inconsistent with the terms thereof) shall
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be approved by vote of a majority of the outstanding shares of the Trust
entitled to vote.
ARTICLE XII
Underwriting Arrangements
Any contract entered into for the sale of shares of the Trust
pursuant to Article VII, Section 2 of the Declaration of Trust shall
require the other party thereto (hereinafter called the
"Underwriter") whether acting as principal or as agent to use all
reasonable efforts, consistent with the other business of the
underwriter, to secure purchasers for the shares of the Trust. Such
contract shall require the underwriter to bear all expenses (except to
the extent the Trust, or any series of the Trust, has agreed to bear
any such expenses pursuant to a "Distribution Plan" or otherwise) (a)
of printing and distributing any Prospectus or reports prepared for its
use in connection with the offering of the shares of the Trust for sale
to the public, other than the expenses of preparing, setting up in
type, printing and distributing (i) Prospectuses used in connection
with the registration and qualification of shares under the Securities
Act of 1933 or various state laws, (ii) any report or other
communication to shareholders of the Trust in their capacity as such and
(iii) Prospectuses sent to existing shareholders, (b) of any
other literature used by it in connection with such offering, and (c)
advertising in connection with such offering.
ARTICLE XIII
Reports to Shareholders
The Trustees shall at least semi-annually submit to
the shareholders a written financial report of the transactions of
the Trust including financial statements which shall at least annually
be certified by independent public accountants.
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EXECUTIVE INVESTORS TRUST
INVESTMENT ADVISORY AGREEMENT
This Agreement is made as of June 13, 1994, by and between
EXECUTIVE INVESTORS TRUST, a Massachusetts business trust
("Company"), and EXECUTIVE INVESTORS MANAGEMENT COMPANY, INC., a New
York corporation ("Manager").
WHEREAS, the Company is registered under the Investment Company
Act of 1940, as amended ("1940 Act"), as an open-end, diversified
management investment company consisting of one or more separate
series of shares ("Series"), each having its own assets and investment
policies; and
WHEREAS, the Manager is an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Company desires to retain the Manager as investment
adviser to furnish investment advisory and portfolio management
services to each Series of the Company as now exists and to each
such other Series of the Company hereinafter established as agreed to
from time to time by the parties hereto (hereinafter, "Series" shall
refer to each Series of the Company which is subject to this
Agreement), and the Manager is willing to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. Appointment. The Company hereby appoints the Manager as
investment adviser of the Company and each Series listed on Schedule A
of this Agreement (as such Schedule may be amended from time to time)
for the period and on the terms set forth in this Agreement. The
Manager accepts such appointment and agrees to render the services
herein set forth for compensation as set forth on Schedule A. In the
performance of its duties, the Manager will act in the best interests
of the Company and the Series and will comply with (a) applicable
laws and regulations, including, but not limited to, the 1940 Act, (b)
the terms of this Agreement, (c) the Company's Declaration of Trust,
By- Laws and currently effective registration statement under the
Securities Act of 1933, as amended, and the 1940 Act, and any
amendments thereto, (d) relevant undertakings to state securities
regulators which also have been provided to the Manager, (e) the stated
investment objective(s), policies and restrictions of each applicable
Series, and (f) such other guidelines as the Company's Board of Trustees
("Board") reasonably may establish.
2. Duties of the Manager.
(a) Investment Program. Subject to supervision by the
Board, the Manager will provide a continuous investment program for each
Series and shall determine what securities and other investments will be
purchased, retained or sold by each Series.
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The Manager will exercise full discretion and act for each Series in
the same manner and with the same force and effect as such Series
itself might or could do with respect to purchases, sales, or other
transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions.
(b) Other Management Services. The Manager agrees to
conduct the business and details of the operation of the Series as shall
be agreed to from time to time by the parties hereto; provided,
however, that the Manager shall not act as custodian for Series
assets. The Manager also agrees, at its own cost, to provide the
Series with certain executive, administrative and clerical personnel
and to provide the Series with office facilities and supplies.
(c) Execution of Transactions. The Manager will place
orders pursuant to its investment determinations for each Series either
directly with the issuer or through any brokers or dealers. In the
selection of brokers or dealers and the placement of orders for the
purchase and sale of portfolio investments for each Series, the Manager
shall use its best efforts to obtain for each Series the most
favorable price and execution available, except to the extent that it
may be permitted to pay higher brokerage commissions for brokerage or
research services as described below. In using its best efforts to
obtain the most favorable price and execution available, the
Manager, bearing in mind each Series' best interests at all times,
shall consider all factors it deems relevant, including by way of
illustration, price, the size of the transaction, the nature of the
market for the security, the amount of the commission, the timing of
the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or dealer
involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Board may
determine, the Manager shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused a Series to pay a broker that
provides brokerage or research services to the Manager an amount of
commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker would have charged for
effecting that transaction if the Manager determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage or research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Manager's overall
responsibilities with respect to such Series and to other clients
of the Manager as to which the Manager exercises investment discretion.
(d) Reports to the Board. Upon request, the Manager will
provide the Board with economic and investment analyses and reports and
make available to the Board any economic, statistical and
investment services normally available to institutional or other
customers of the Manager.
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(e) Delegation of Authority. Any of the foregoing duties
specified in this paragraph 2 with respect to one or more Series may be
delegated by the Manager, at the Manager's expense, to an appropriate
party, subject to such approval by the Board and shareholders of
the applicable Series as may be required by the 1940 Act. The
Manager shall oversee the performance of delegated duties by any such
other party and shall furnish the Board with periodic reports
concerning the performance of delegated responsibilities by such party.
3. Services Not Exclusive. The services furnished by the
Manager hereunder are not to be deemed exclusive and the Manager
shall be free to furnish similar services to others so long as
its services under this Agreement are not impaired thereby. Nothing
in this Agreement shall limit or restrict the right of any director,
officer or employee of the Manager, who may also be a Trustee,
officer or employee of the Company, to engage in any other business or
to devote his or her time and attention in part to the management or
other aspects of any other business, whether of a similar nature or a
dissimilar nature.
4. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Manager hereby agrees that all
records which it maintains for the Company are the property of the
Company and further agrees to surrender promptly to the Company any
of such records upon the Company's request. The Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records required to be maintained by Rule 31a-1 under the 1940
Act.
5. Expenses.
(a) Expenses of the Company. During the term of this
Agreement, each Series will bear all expenses not specifically
assumed by the Manager incurred in its operations and the offering of
its shares. Expenses borne by each Series will include, but not be
limited to, the following (or each Series' proportionate share of the
following): brokerage commissions relating to securities purchased or
sold by the Series or any losses incurred in connection therewith;
fees payable to and expenses incurred on behalf of the Series by the
Manager; expenses of organizing the Series; filing fees and expenses
relating to the registration and qualification of the Series' shares
under federal or state securities laws and maintaining such
registrations and qualifications; distribution fees; fees and salaries
payable to the members of the Board and officers who are not officers or
employees of the Manager; taxes (including any income or franchise
taxes) and governmental fees; costs of any liability, uncollectible
items of deposit and other insurance or fidelity bonds; any costs,
expenses or losses arising out of any liability of or claim for damage
or other relief asserted against the Company or Series for
violation of any law; legal, accounting and auditing expenses, including
legal fees of special counsel for the independent Trustees; charges of
custodians, transfer agents and other agents; costs of preparing
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share certificates; expenses of setting in type and printing
prospectuses and supplements thereto for existing shareholders,
reports and statements to shareholders and proxy materials; any
extraordinary expenses (including fees and disbursements of counsel)
incurred by the Company or Series; and fees and other expenses
incurred in connection with membership in investment company
organizations.
(b) Fee Waivers and Reimbursements. If the expenses borne
by a Series in any fiscal year exceed the applicable expense limitations
imposed by the securities regulations of any state in which shares
are registered or qualified for sale to the public, the Manager will
waive its fee or reimburse such Series for any excess up to the
amount of the fee payable to it during that fiscal year pursuant to
paragraph 6 hereof.
6. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement with respect to each Series, the
Company will pay the Manager, effective from the date of this
Agreement, a fee which is computed daily and paid monthly from each
Series' assets at the annual rates as percentages of that Series'
average daily net assets as set forth in the attached Schedule A,
which Schedule can be modified from time to time to reflect changes
in annual rates or the addition or deletion of a Series from the terms
of this Agreement, subject to appropriate approvals required by the 1940
Act. If this Agreement becomes effective or terminates with respect to
any Series before the end of any month, the fee for the period
from the effective date to the end of the month or from the beginning
of such month to the date of termination, as the case may be, shall
be prorated according to the proportion that such period bears to
the full month in which such effectiveness or termination occurs.
7. Limitation of Liability of the Manager. The Manager shall
not be liable for any error of judgment or mistake of law or for any
loss suffered by the Company or any Series in connection with the
matters to which this Agreement relate except a loss resulting from
the willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though
also an officer, partner, employee, or agent of the Manager, who may
be or become an officer, Board member, employee or agent of the Company
shall be deemed, when rendering services to the Company or acting in any
business of the Company, to be rendering such services to or acting
solely for the Company and not as an officer, partner, employee, or
agent or one under the control or direction of the Manager even though
paid by it.
8. Duration and Termination.
(a) Effectiveness. This Agreement shall become effective
upon the date hereinabove written, provided that, with respect to
a Series, this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those members of the
4
<PAGE>
Board who are not parties to this Agreement or interested persons of
any such party ("Independent Board Members") cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by
an affirmative vote of a majority of the outstanding voting securities
of such Series.
(b) Renewal. Unless sooner terminated as provided herein,
this Agreement shall continue in effect for two years from the above
written date. Thereafter, if not terminated, this Agreement shall
continue automatically for successive periods of twelve months each,
provided that such continuance is specifically approved at least
annually (i) by a vote of a majority of the Independent Board Members
cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or, with respect to any given Series,
by an affirmative vote of a majority of the outstanding voting
securities of such Series.
(c) Termination. Notwithstanding the foregoing, with respect
to any Series, this Agreement may be terminated at any time by vote of
the Board or by vote of a majority of the outstanding voting
securities of such Series on 60 days' written notice delivered or
mailed by registered mail, postage prepaid, to the Manager. The
Manager may at any time terminate this Agreement on 60 days' written
notice delivered or mailed by registered mail, postage prepaid, to the
Company. This Agreement automatically and immediately will terminate in
the event of its assignment. Termination of this Agreement pursuant
to this paragraph 8 shall be without the payment of any penalty.
Termination of this Agreement with respect to a given Series shall not
affect the continued validity of this Agreement or the performance
thereunder with respect to any other Series.
9. Amendment of This Agreement. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought, and no
material amendment of this Agreement as to a given Series shall be
effective until approved by vote of the holders of a majority of the
outstanding voting securities of such Series.
10. Name of Company. The Company or any Series may use
the name "Executive Investors" only for so long as this Agreement or
any extension, renewal or amendment hereof remains in effect, including
any similar agreement with any organization which shall have
succeeded to the business of the Manager. At such time as such an
agreement shall no longer be in effect, the Company and each Series will
(to the extent that it lawfully can) cease to use any name derived
from Executive Investors Management Company, Inc. or any successor
organization.
11. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without giving effect
to the conflicts of laws principles thereof, and in accordance
with the 1940 Act. To the extent that the applicable
5
<PAGE>
laws of the State of New York conflict with the applicable provisions of
the 1940 Act, the latter shall control.
12. Definitions. As used in this Agreement, the terms "majority
of the outstanding voting securities," "interested person," and
"assignment" shall have the same meanings as such terms have in the 1940
Act.
13. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors.
14. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect.
15. Massachusetts Business Trust. The Manager hereby acknowledges
that, although this Agreement is executed by an officer and/or
trustee of the Company, the obligations of this Agreement are not
binding upon any of them individually or upon the Company's
shareholders individually; rather, these obligations are binding only
upon the assets and property of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
EXECUTIVE INVESTORS TRUST
Attest:
/s/C. Durso By: /s/Glenn O. Head
C. Durso, Secretary Glenn O. Head, President
EXECUTIVE INVESTORS MANAGEMENT
Attest: COMPANY, INC.
/s/Carol R. Lerner By: /s/Kathryn S. Head
Carol R. Lerner, Secretary Kathryn S. Head, President
6
<PAGE>
EXECUTIVE INVESTORS TRUST
INVESTMENT ADVISORY AGREEMENT
SCHEDULE A
Compensation pursuant to Paragraph 6 of this Executive Investors
Trust Investment Advisory Agreement shall be calculated in
accordance with the following schedule:
Executive Blue Chip Fund
Executive High Yield Fund
Executive Insured Tax Exempt Fund
Advisory Fee as %
Average Daily of Average Daily
Net Assets Net Assets
Up to $200 million 1.00%
In excess of $200 million to $500 million 0.75%
In excess of $500 million to $750 million 0.72%
In excess of $750 million to $1.0 billion 0.69%
Over $1.0 billion 0.66%
Dated: June 13, 1994
7
<PAGE>
UNDERWRITING AGREEMENT
BETWEEN
EXECUTIVE INVESTORS TRUST
AND
EXECUTIVE INVESTORS CORPORATION
This AGREEMENT entered into the 17th day of March, 1994, by and
between EXECUTIVE INVESTORS TRUST, a Massachusetts business trust,
with an office located at 95 Wall Street, New York, New York 10005 (the
"Fund"), on behalf of e a ch of its separate designated Series
(singularly and collectively, "Series"), and EXECUTIVE INVESTORS
CORPORATION, a Delaware corporation with its principal office located
at 95 Wall Street, New York, New York 10005 (the "Underwriter").
In consideration of the mutual covenants and agreements of the parties
hereto, the parties mutually covenant and agree with each other as
follows:
1. Appointment. The Fund hereby appoints the Underwriter as
agent of the Fund to effect the sale and public distribution of shares
of each Series and each class of shares of beneficial interest of the
Fund as now exists or is hereafter established ("Shares"). This
appointment is made by the Fund and accepted by the Underwriter upon
the understanding that (a) upon the request of the Underwriter, the
Fund will prepare, execute and file such applications for registration
and qualification of the Shares as are required by federal and state
law in such amounts as the Underwriter reasonably may determine, (b) the
distribution of the Shares to the public be effected by the Underwriter
or through various securities dealers, and (c) the distribution of
the Shares shall be done in such manner that the Fund shall be under no
responsibility or liability to any person whatsoever on account of
the acts and statements of any such person or their agents or
employees. The Underwriter shall have the sole right to select the
security dealers to whom the Shares will be offered by it and, subject
to express provisions of this Agreement, the Declaration of Trust,
By-Laws and the Fund's then current Registration Statement, to
determine the terms and prices in any contract for the sale of Shares
to any dealer made by it as such agent for the Fund.
2. Underwriter as Exclusive Agent. The Underwriter shall
be the exclusive agent for the Fund for the sale of the Shares and
the Fund agrees that it will not sell any Shares to any person except
to fill orders for the Shares received through the Underwriter,
provided, however, that the foregoing exclusive right shall not apply
to: (a) Shares issued or sold in connection with the merger or
consolidation of any other investment company with the Fund or the
acquisition by purchase or otherwise of all or substantially all the
outstanding shares of any such company by the Fund, (b) Shares which
may be offered by each Series to its shareholders for
reinvestment of cash distributed from capital gains or net
investment income of such Series, or such gains or income paid in the
form of Shares, or (c) Shares which may be issued to
<PAGE>
shareholders of other investment companies who exercise the exchange
and/or cross-investment privileges set forth in the Fund's then
current Registration Statement.
3. Sales to Dealers. The Underwriter shall have the right
to sell the Shares to dealers, as needed (making reasonable
allowance for clerical errors and errors of transmission), but not
more than the Shares needed to fill unconditional orders for Shares
placed with the Underwriter by dealers. In every case the Fund shall
receive the net asset value for the Shares sold, determined as provided
in Paragraph 4 hereof. The Underwriter shall notify the Fund at the
close of each business day of the number of Shares sold during each day.
4. Determination of Net Asset Value. The net asset value
of each Series or class of Shares shall be determined by the Fund
or the Fund's custodian, or such officer or officers or other
persons as the Board of Trustees of the Fund may designate. The
determinations shall be made once a day on each day that the New York
Stock Exchange is open for a full business day and in accordance with
the method set forth in the Fund's then current Registration Statement.
5. Public Offering Price. The public offering price of each
Series or class of Shares shall be the net asset value per Share (as
determined by the Fund) of the outstanding Shares of such Series
or class, plus any applicable sales charge as described in the Fund's
then current Registration Statement. The Fund shall furnish (or
arrange for another person to furnish) the Underwriter with quotations
of public offering prices on each business day.
6. Repurchase and Redemption of Shares.
(a) The Fund appoints and designates the Underwriter as agent
of the Fund, and the Underwriter accepts such appointment as such agent,
to redeem or repurchase for retirement the Shares in accordance with
the provisions of the Declaration of Trust and By-Laws of the Fund.
(b) In connection with such redemptions or repurchases
the Fund authorizes and designates the Underwriter to take any
action, to make any adjustments in net asset value (including the
deduction of a contingent deferred sales charge, if applicable, as
provided in Paragraph 8 hereof) and to make any arrangements for the
payment of the redemption or repurchase price authorized or permitted
to be taken or made as set forth in the By-Laws and the Fund's then
current Registration Statement.
(c) The authority of the Underwriter under this Paragraph 6
may, with the consent of the Fund, be re-delegated in whole or in part
to another person or firm.
(d) To the extent permitted by law and applicable
regulations, the authority granted in this Paragraph 6 may be suspended
by the Fund at any time or from time to time until further notice to the
Underwriter.
-2-
<PAGE>
7. Allocation of Expenses. The Underwriter (or one of
its non- investment company affiliates) shall bear all fees and
expenses incident to the registration and qualification of the
Shares, the cost of preparing and disseminating sales material or
literature, as well as the costs of preparing and disseminating
prospectuses, proxy material and shareholder reports used in connection
with the sale of the Shares except, as discussed below, to the
extent that such materials are being sent to existing shareholders
or such Series has agreed to bear the cost of such expenses under a
Plan (as defined in Paragraph 8 hereof). Each Series shall bear
all expenses related to communications with its existing
shareholders, including the costs of preparing, printing and
mailing prospectuses, statements of additional information, proxy
materials and other materials sent to such shareholders.
8. Compensation. As compensation for providing services
under this Agreement, the Underwriter shall retain the sales charge, if
any (including a contingent deferred sales shares, if applicable),
on purchases or, if applicable, on redemptions of Shares as set
forth in the Fund's then current Registration Statement. With regard
to purchases, the Underwriter is authorized to collect the gross
proceeds derived from the sale of the Shares, remit the net asset value
thereof to the Fund upon receipt of the proceeds and retain the sales
charge, if any. With regard to redemptions, the Underwriter is
authorized to retain the contingent deferred sales charge, if any,
imposed on the redemption of Shares as may be authorized by the Board
of Trustees and set forth in the Fund's then current Registration
Statement. The Underwriter may reallow any or all of such sales
charges to such dealers as it may from time to time determine.
Whether a sales charge shall be retained by the Underwriter shall be
determined in accordance with the Fund's then current Registration
Statement and applicable law. The Underwriter may also receive from
each Series a distribution and/or service fee at the rate and under the
terms and conditions of any plan or plans of distribution
(collectively and singularly, "Plan") as have been or may be adopted by
the Fund, subject to any further limitations on such fee as the Board of
Trustees may impose.
9. Effectiveness of Agreement. This Agreement shall become
effective upon the date hereabove written, provided that, with respect
to any Series or class of Shares created after the date of this
Agreement, this Agreement shall not take effect unless such action
has first been approved by vote of a majority of the Board of Trustees
and by vote of a majority of those trustees of the Fund who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related
thereto (all such trustees collectively being referred to herein as
the "Independent Trustees"), cast in person at a meeting called
for the purpose of voting on such action.
10. Termination of Agreement. This Agreement shall continue in
effect with respect to a Series for a period of more than one year from
its effective date only as long as such continuance is approved, at
least annually, by the Board of Trustees of the Fund, including a
majority of the Independent Trustees, voting in person at a meeting
called for the purpose of voting on such approval.
-3-
<PAGE>
With respect to any Series, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board of
Trustees, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding voting securities of such
Series on 30 days' written notice by the Underwriter to the Series
or upon 30 days' written notice by the Series to the Underwriter.
Termination of this Agreement with respect to any given Series shall
in no way affect the continued validity of this Agreement or the
performance thereunder with respect to any other Series. This Agreement
shall automatically terminate in the event of its assignment by the
Underwriter, as the term "assignment" is defined by the Investment
Company Act of 1940, as amended ("1940 Act"), unless the
Securities Exchange Commission ("SEC") has issued an order exempting
the Fund and the Underwriter from the provisions of the 1940 Act which
would otherwise have effected the termination of this Agreement.
11. Amendments. No amendment to this Agreement shall be
executed or become effective with respect to any Series unless
its terms have been approved: (a) by a majority of the Trustees of
the Fund, or (b) by the vote of a majority of the outstanding
voting securities of such Series and, in either case, by a vote of a
majority of the Independent Trustees.
12. Limitation of Liability. The Underwriter agrees to use
its best efforts in effecting the sale and public distribution of the
Shares through dealers and in performing its duties in redeeming and
repurchasing the Shares, but nothing contained in this Agreement shall
make the Underwriter or any of its officers, directors or shareholders
liable for any loss sustained by the Fund or any of its officers,
trustees or shareholders, or by any other person on account of any act
done or omitted to be done by the Underwriter under this A g r eement,
provided that nothing contained herein shall protect the
Underwriter against any liability to the Fund or to any of its
shareholders to which the Underwriter would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence in the
performance of its duties as Underwriter or by reason of its
reckless disregard of its obligations or duties as Underwriter under
this Agreement. Nothing in this Agreement shall protect the
Underwriter from any liabilities which it may have under the
Securities Act of 1933, as amended ("1933 Act"), or the 1940 Act.
13. Massachusetts Business Trust. The Underwriter hereby
acknowledges that, although this Agreement is executed by an officer
and/or trustee of the Fund, the obligations of this Agreement are
not binding upon any of them individually or upon the Fund's
shareholders individually; rather, these obligations are binding only
upon the assets and property of the Fund.
14. Definitions. The terms "assignment," "interested
person," and "majority of the outstanding voting securities" shall have
the meanings given to them by Section 2(a) of the 1940 Act, subject to
such exemptions as may be granted by the SEC by any rule,
regulation or order. Additionally, with respect to each Series, the
term "Registration Statement" shall mean the registration statement
most recently filed with the SEC by the
-4-
<PAGE>
Fund, on behalf of such Series, and effective under the 1940 Act
and 1933 Act, as such R e gistration Statement is amended from time
to time, and the terms " P r o s pectus" and "Statement of
Additional Information" shall mean, respectively, the form of
prospectus(es) and statement(s) of additional information with
respect to such Series filed by the Fund as part of the Registration
Statement.
15. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without giving effect
to the conflicts of laws principles thereof, and in accordance
with the 1940 Act. To the extent that the applicable laws of the
State of New York conflict with the applicable provisions of the 1940
Act, the latter shall control.
16. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors.
17. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the
day and year first above written.
EXECUTIVE INVESTORS TRUST
By: /s/Glenn O. Head
Glenn O. Head
President
ATTEST:
/s/C. Durso
Concetta Durso
Secretary
EXECUTIVE INVESTORS CORPORATION
By: /s/Kathryn S. Head
Kathryn S. Head
Vice President
ATTEST:
/s/Carol R. Lerner
Carol R. Lerner
Assistant Secretary
-5-
<PAGE>
CUSTODIAN AGREEMENT
BETWEEN
IRVING TRUST COMPANY
AND
EXECUTIVE INVESTORS TRUST
CUSTODIAN AGREEMENT, made this 13th day of April, 1990
between EXECUTIVE INVESTORS TRUST, a Massachusetts business
trust, having its office and place of business at 120 Wall
Street, New York, New York 10005 (the "Trust"), on behalf of its
separate designated series, Executive Investors Blue Chip Fund,
and any series of the Trust hereafter established (individually
and collectively referred to herein as the "Fund"), and Irving
Trust Company, a banking corporation organized and existing under
the laws of the State of New York, having its principal office
and place of business at One Wall Street, New York, New York
10015 (hereinafter called the "Custodian").
WITNESSETH:
That for and in consideration of the mutual promises
hereinafter set forth the Fund and the Custodian agree as
follows:
I
APPOINTMENT OF CUSTODIAN
1. The Trust hereby constitutes and appoints the Custodian
as custodian of all the securities and monies at any time owned
by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter
set forth.
II
CUSTODY OF CASH AND SECURITIES
1. The Fund will deliver or cause to be delivered to the
Custodian all securities and all monies owned by it, including
cash received for the issuance of its shares, at any time during
the period of this Agreement. The Custodian will not be
responsible for such securities and such monies until actually
received by it.
2. The Custodian shall credit to a separate account in the
name of the Fund all monies received by it for the account of the
Fund, and shall disburse the same only:
(a) In payment for securities purchased, as provided
in Article III hereof;
EXECUTIVE 1
<PAGE>
(b) In payment of dividends or distributions as
provided in Article V hereof;
(c) In payment of original issue or other taxes, as
provided in Article VI hereof;
(d) In payment for shares of beneficial interest of
the Fund redeemed by it, as provided in Article VI hereof;
(e) Pursuant to an officers certificate, or with
respect to money market securities, as defined in Article IX, the
oral instructions of an authorized person, as defined in Article
IX, setting forth the name and address of the person to whom
payment is to be made, the amount to be paid, and the corporate
purpose for which payment is to be made; and
(f) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian, as provided in Article
VII hereof.
3. The Custodian shall provide the Fund promptly after the
close of business on each day with a statement summarizing all
transactions and entries for the account of the Fund during said
day, and it shall, at least monthly and from time to time, at the
reasonable request of the Fund, render a detailed statement of
the securities and monies held for the Fund under this Agreement.
4. All securities held for the Fund, which are issued or
issuable only in bearer form, shall be held by the Custodian in
that form; all other securities held for the Fund may be
registered in the name of the Fund or in the name of any duly
appointed and registered nominee of the Custodian, as the
Custodian may from time to time determine. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any securities
which it may held for the account of the Fund and which may from
time to time be registered in the name of the Fund. The
Custodian shall hold all securities in a separate account in the
name of the Fund physically segregated at all times from those of
any person or persons. Notwithstanding the foregoing, to the
extent authorized by the Board of Trustees of the Trust, the
Custodian may deposit securities in a clearing agency or the book
entry system of the Federal Reserve Banks, as provided in Rule
17f-4 of the Investment Company Act of 1940, as amended (the
"1940 Act"), and securities deposited in such agency may be
registered in the name of such agency or its nominee.
5. Unless otherwise instructed to the contrary by an
officers certificate, the Custodian shall, with respect to all
securities held for the Fund:
(a) Collect all income due or payable;
EXECUTIVE 2
<PAGE>
(b) Present for payment and collect the amount payable
upon all securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Surrender securities in temporary form for
definitive securities;
(d) Execute, as custodian, any necessary declarations
or certificates of ownership under the Federal Income Tax laws or
the laws or regulations of any other taxing authority now or
hereafter in effect; and
(e) Hold for the account of the Fund all stock
dividends, rights and similar securities issued with respect to
any securities held by it hereunder.
6. Upon receipt of an officers certificate and not
otherwise, the Custodian shall:
(a) Execute and deliver to such persons as may be
designated in such officers certificate, proxies, consents,
authorizations, and any other instruments whereby the authority
of the Fund as owner of any securities may be exercised;
(b) Deliver any securities held for the Fund in
exchange for other securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation or
the exercise of any conversion privilege;
(c) Deliver any securities held for the Fund to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement, such certificates of deposit, interim receipts or
other instruments or documents as may be issued to it to evidence
such delivery;
(d) Take such other action as may be authorized in
such officers certificate.
III
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
1. Promptly after each purchase of securities by the Fund, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
securities which are not money market securities an officers certificate
and (ii) with respect to each purchase of money market securities
such an officers certificate or oral instructions from an authorized
person, specifying with respect to
EXECUTIVE 3
<PAGE>
each such purchase: (a) the name of the issuer and the title of the
securities, (b) the number of shares or the principal amount
purchased, and accrued interest, if any, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, (f) the name of the person from whom or
the broker through whom the purchase was made and (g) such other
information as shall be necessary for the issuance by the Custodian
or a depository of escrow receipts relating to options purchased by
the Fund, if the issuance of escrow receipts is requested by the
officers certificate. The Custodian shall receive all securities
purchased by or for the Fund from the persons through or from whom
the same were purchased, and shall pay out the monies held for the
account of the Fund, the total amount payable upon such purchase as
set forth in such officers certificate or such oral instruments, as
the case may be, provided that the same conforms to the total amount
payable as set forth on such officers certificate or in such oral
instructions. The Custodian may make payment in such forms as shall be
satisfactory to it and may accept securities in accordance with the
customs prevailing among dealers.
2. Promptly after each sale of securities by the Fund, the Fund
shall deliver to the Custodian, (i) with respect to each sale of
securities which are not money market securities an officers
certificate and (ii) with respect to each sale of money m a r k et
securities such an officers certificate or oral instructions from
an authorized person specifying with respect to each such sale: (a)
the name of the issuer and the title of the securities, (b) the number
of shares or principal amount sold, and accrued interest, if any, (c)
the date of sale, (d) the sale price per unit, (e) the total amount
payable to the Fund upon such sale and (f) the name of the broker
through whom or the person to whom the sale was made. The Custodian
shall deliver the securities thus designated to the broker or other
person named in such officers certificate upon receipt of the total
amount payable to the Fund as set forth in such officers
certificate or such oral instructions as the case may be, with
respect to such sale. The Custodian may accept payment in such form
as shall be satisfactory to it, and may deliver securities and arrange
for payment in accordance with the customs prevailing among dealers in
securities.
IV
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Where the Fund is permitted to lend its portfolio
securities and wishes to lend its portfolio securities, the Fund shall
deliver to the Custodian an officers certificate specifying with respect
to each such loan: (a) the name of the issuer and the title of the
securities, (b) the number of shares or the principal amount loaned,
(c) the date of the loan and delivery, (d) the total amount to be
delivered to the Custodian against the loan of the
EXECUTIVE 4
<PAGE>
securities including the amount of cash collateral and the premium, if
any, separately identified and (e) the name of the broker to whom
the loan was made. The Custodian shall deliver the securities thus
designated to the broker to whom the loan was made upon receipt of the
total amount designated as to be delivered against the loan of
securities. The Custodian may accept payment only in the form of
immediately available funds or a certified or bank cashier's check
payable to the order of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of
securities by the Fund, the Fund shall deliver to the Custodian an
officers certificate specifying with respect to each such loan
termination and return of securities: (a) the name of the issuer and
the title of the securities to be returned, (b) the number of shares or
the principal amount to be returned, (c) the date of termination, (d)
the total amount to be delivered by the Custodian (including the
cash collateral for such securities minus any offsetting credits as
described in said officers certificate) and (e) the name of the
broker from whom the securities will be returned. The Custodian
shall receive all securities returned from the broker to whom such
securities were loaned and upon receipt thereof shall pay, out of the
monies held for the account of the Fund, the total amount payable upon
such return of securities as set forth in the officers certificate.
V
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of any
resolution of the Board of Trustees of the Trust, certified by t h e
Secretary or any Assistant Secretary of the Trust, authorizing
the declaration of dividends on a monthly, quarterly, semi-annual,
annual or other basis, and authorizing the Custodian to rely on the
oral instructions from an authorized officer of the Trust, setting
forth the date of the declaration of such dividend or distribution,
the date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, and the amount payable per
share to the shareholders of record as of that date and the total
amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such officers
certificate or oral instructions, the Custodian shall pay out of the
monies held for the account of the Fund the total amount payable to
the Dividend Agent for the Fund.
EXECUTIVE 5
<PAGE>
VI
SALE AND REDEMPTION OF CAPITAL STOCK OF THE FUND
1. Whenever the Fund shall sell any of its shares of
beneficial interest, it shall cause to be delivered to the
Custodian an officers certificate duly specifying:
(a) The number of shares sold, trade date, and price;
and
(b) The amount of money to be received by the
Custodian for the sale of such shares.
2. Upon receipt of such money the Custodian shall credit
such money into the account of the Fund.
3. Upon the issuance of any shares of beneficial interest
of the Fund in accordance with the foregoing provisions of this
Article, the Custodian shall pay, out of the money held for the
account of the Fund, all original issue or other taxes required
to be paid by the Fund in connection with such issuance upon the
receipt of an officers certificate specifying the amount to be
paid.
4. Except as provided hereinafter, whenever the Fund shall
hereafter redeem any of its shares of beneficial interest, it shall
furnish to the Custodian an officers certificate specifying:
(a) The number of shares redeemed; and
(b) The amount to be paid for the shares redeemed.
5. Upon receipt from the Transfer Agent of an advice
setting forth the number of shares received by the Transfer Agent for
redemption and that such shares are valid and in good form for
redemption, the Custodian shall make payment to the Transfer Agent out
of the monies held for the account of the Fund, of the total amount
specified in the officers certificate issued pursuant to the
foregoing paragraph 4 of this Article.
VII
CONCERNING THE CUSTODIAN
1. Neither the Custodian nor its nominee shall be liable for
any loss or damage including counsel fees, resulting from its action or
omission to act or otherwise, except for any such loss o r damage
arising out of its own negligence or willful misconduct. The
Custodian may, with respect to questions of law, apply for and obtain
the advice and opinion of counsel to the Fund or of its own
EXECUTIVE 6
<PAGE>
counsel, at the expense of the Fund, and shall be fully protected with
respect to anything done or omitted by it in good faith in conformity
with such advice or opinion.
2. Without limiting the generality of the foregoing, the
Custodian shall be under no duty or obligation to inquire into,
and shall not be liable for:
(a) The validity of the issue of any securities
purchased by or for the Fund, the legality of the purchase
thereof, or the propriety of the amount paid therefor;
(b) The legality of the sale of any securities by or for
the Fund or the propriety of the amount for which the same are sold;
(c) The legality of the issue or sale of any shares of
beneficial ownership of the Fund, or the sufficiency of the amount
to be received therefor;
(d) The legality of the redemption of any shares of
beneficial interest of the Fund, or the propriety of the amount to be
paid therefor;
(e) The legality of the declaration of any dividend by the
Fund or the legality of the issue of any shares of beneficial interest
of the Fund in payment of any share dividend or distribution;
(f) The legality of any loan of portfolio securities
pursuant to Article IV of this Agreement, nor shall the Custodian be
under any duty or obligation to see to it that any cash collateral
delivered to it by a brokerage firm or held by it at any time as a
result of such loan of the portfolio securities of the Fund is adequate
collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by
way of limitation, shall not be under any duty or obligation to
periodically check or notify the Fund that the amount of such cash
collateral held by it for the Fund is sufficient collateral for the
Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under
no duty or obligation to see that any brokerage firm to whom portfolio
securities of the Fund are lent pursuant to Article IV of this
Agreement makes payment to it of any dividends or interest which are
payable to or for the account of the Fund during the period of such
loan or at the termination of such loan, provided however, that
the Custodian shall promptly notify the Fund in the event that such
dividends or interest are not paid and received when due;
EXECUTIVE 7
<PAGE>
(g) The legality of a payment made pursuant to an
officers certificate or, in the case of money market securities,
pursuant to oral instructions of any authorized person.
3. The Custodian shall not be liable for, or considered to
be the Custodian of, any money represented by any check, draft,
or other instrument for the payment of money received by it on
behalf of the Fund, until the Custodian actually receives such
money.
4. The Custodian shall not be under any duty or obligation
to take action to effect collection of any amount due to the Fund
from the Transfer Agent of the Fund nor to take any action to
effect payment or distribution by the Transfer Agent of the Fund
of any amount paid by the Custodian to the Transfer Agent of the
Fund in accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation
to take action to effect collection of any amount, if the
securities upon which such amount is payable are in default or if
payment is refused after due demand or presentation, unless and
until (i) it shall be directed to take such action by an officers
certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action.
6 . The Custodian may appoint one or more banking
institutions, including, but not limited to, banking institutions
located in foreign countries, as Depository or Depositories or as a
Sub-Custodian of securities and monies at any time owned by the Fund,
upon terms and conditions approved in written instructions from two
officers of the Fund.
7. The Custodian shall not be under any duty or obligation
to ascertain whether any securities at any time delivered to or
held by it for the account of the Fund are such as may, properly
be held by the Fund under the provisions of the Trust's
Declaration of Trust.
8. The Custodian shall be entitled to receive and the Fund agrees
to pay to the Custodian, such compensation as may be agreed upon
from time to time between the Custodian and the Trust. The
Custodian may charge such compensation and any expenses incurred by
the Custodian in the performance of its duties pursuant to such
agreement against any money held by it for the account of the Fund.
The Custodian shall also be entitled to charge against any money held
by it for the account of the Fund the amount of any loss, damage,
liability or expense, including counsel fees, for which it shall
be entitled to reimbursement under the provisions of this
Agreement. The expenses which the Custodian may charge against the
account of the Fund include, but are not limited to, the expenses of
Sub- Custodians and foreign branches of the Custodian incurred in s
e ttling transactions involving the purchase and sale of
securities of the Fund.
EXECUTIVE 8
<PAGE>
9. The Custodian shall be entitled to rely upon any
officers certificate, notice or other instrument in writing
received by the Custodian and believed by the Custodian to be
genuine and to be signed by two officers of the Trust as defined in
Article IX. The Custodian shall be entitled to rely upon any oral
instructions received by the Custodian pursuant to Article III or V
hereof and believed by the Custodian to be genuine and to be given by
an authorized person. The Fund agrees to forward to the Custodian
written instructions from an authorized person confirming such oral
instructions in such manner so that such written instructions are
received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business of the same day that such oral
instructions are given to the C u s t o dian. The Custodian's
understanding of any oral instructions on which it has acted shall
be binding on the Fund notwithstanding receipt by the Custodian of
written confirmation of such oral instructions which is
inconsistent with the Custodian's understanding thereof. The Fund
agrees that the fact that such confirming written instructions are not
received by the Custodian shall in no way affect the validity of
transactions or enforceability of the transactions hereby authorized by
the Fund. The Fund agrees that the Custodian shall incur no liability
to the Fund in acting upon oral instructions given to the Custodian
hereunder concerning such transactions provided such instructions
reasonably appear to have been received from a duly authorized
person.
VIII
TERMINATION
1. Either of the parties hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be no less than
60 days after the date of the giving of such notice. In the event such
notice is given by the Trust, it shall be accompanied by a copy of a
resolution of the Board of Trustees of the Trust, certified by the
Secretary or any Assistant Secretary of the Trust, electing to
terminate this Agreement and designating a successor custodian or
custodians, each of which shall be a bank or trust company having not
less than $2,000,000 aggregate capital, surplus and undivided profits.
In the event such notice is given by the Custodian, the Trust
shall, on or before the termination date, deliver to the Custodian a
copy of resolution of its Board of Trustees, certified by the
Secretary or any Assistant Secretary, designating a successor
custodian or custodians. In the absence of such designation of the
Trust, the Custodian may apply to any court of competent jurisdiction
for the appointment of a successor custodian which shall be a bank or a
trust company having not less than $2,000,000 aggregate capital,
surplus and undivided profits. If the Trust fails to designate a
successor custodian, the Trust shall, upon the date specified in the
notice of termination of this Agreement and upon the delivery by the
Custodian of all securities
EXECUTIVE 9
<PAGE>
and monies then owned by the Trust be deemed to be its own
custodian and the Custodian shall thereby be relieved of all
duties and responsibilities pursuant to this Agreement.
2. Upon the date set forth in such notice, this Agreement
shall terminate and the Custodian shall, upon receipt of a notice
of acceptance by the successor custodian, on that date deliver
directly to the successor custodian all securities and monies
then owned by the Trust and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall be entitled.
IX
MISCELLANEOUS
1. The term "officers certificate" shall mean any notice,
instructions or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian signed by
two officers of the Trust, on behalf of the Fund.
2. The term "Officers" shall be deemed to include the
President, Vice-President, the Secretary, the Treasurer, any
Assistant Secretary, any Assistant Treasurer, or any other person
or persons duly authorized by the Board of Trustees of the Trust
t o execute any certificate, instruction, notice or other
instrument on behalf of the Fund. The term "securities" shall
include, but shall not be limited to, stocks, bonds, debentures,
notices, bankers' acceptances, certificates of deposit, options,
securities covered by options, and money market instruments.
3. The term "Trust" shall, when appropriate, mean each
Series of the Trust.
4. Annexed hereto as Appendix A, is a certificate signed by two of
the present officers of the Trust under its corporate seal, setting
forth the names and the signatures of the present officers of the
Trust. The Trust agrees to notify the Custodian promptly if any such
present officer ceases to be an officer of the Trust, and to furnish
the Custodian a new certificate in similar form in the event other or
additional officers as defined in Article IX are elected or
appointed. Until such new certificate shall be received, the
Custodian shall be fully protected in acting under the provisions of
this Agreement upon the signatures of the present officers as set
forth in said annexed certificate or upon the signatures of the
present officers as set forth in subsequently issued certificates.
5. The term "authorized person" shall be deemed to include the
Treasurer, the Secretary or any other persons, whether or not any such
person is an officer or employee of the Trust, duly authorized by
the Board of Trustees to execute any certificate,
EXECUTIVE 10
<PAGE>
instruction, notice or other instrument or to deliver oral
instructions on behalf of the Trust.
6. Annexed hereto as Appendix B is a certificate signed by two of
the present officers of the Trust under its corporate seal, setting
forth the names and signatures of the present authorized persons.
The Trust agrees to notify the Custodian promptly if any such
present authorized person ceases to be an authorized person and to
furnish to the Custodian a new certificate in similar form in the
event that other or additional authorized persons are elected or
appointed. Until such new certificate shall be received, the
Custodian shall be fully protected in acting under the provisions of
this Agreement upon oral instructions or signatures of the present
authorized persons a s set forth in said annexed certificate or
upon oral instructions or the signatures of the present authorized
persons as set forth in a subsequently issued certificate.
7. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at One Wall Street, New York, New
York 10015, Attn: Institutional Custody Administration
Department or at such other place as the Custodian may from time
to time designate in writing.
8. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Trust shall be
sufficiently given if addressed to the Trust and mailed or
delivered to it at its office, at 120 Wall Street, New York, New
York 10005, or at such other place as the Trust may from time to
time designate in writing.
9. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement, and authorized and
approved by a resolution of the Board of Trustees of the Trust.
10. The term "money market security" shall be deemed to
include, but not be limited to, debt obligations issued or
guaranteed as to interest and principal by the Government of the United
States or agencies or instrumentalities thereof, bank deposits,
certificates of deposit, commercial paper and bankers' acceptances,
where the purchase or sale of such securities normally requires
settlement in federal Trusts on the same day as such purchase or sale.
11. This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Trust without the written consent of the Custodian and shall
not be assignable by the Custodian without the written consent of
EXECUTIVE 11
<PAGE>
the Trust, authorized or approved by a resolution of its Board of
Trustees.
12. Notwithstanding any provision of law to the contrary, the
Custodian hereby severally waives any right to enforce this Agreement
against the individual and separate assets of any shareholder of
the Trust.
13. This Agreement shall be construed in accordance with
the laws of the State of New York.
14. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but such
counterparts shall, together, constitute only one instrument.
15. The term "written instructions" shall mean written
communications by telex or any other such system whereby the
receiver of such communications is able to verify by codes or
otherwise with a reasonable degree of certainty the authenticity
of the sender of such communications.
16. In accordance with the Declaration of Trust creating
the Trust, which was executed on October 28, 1986, it is
understood and agreed that no shareholder shall be subject to any
personal liability whatsoever under this Agreement, and no
Trustee, officer, employee, or agent of the Trust shall be
subject to any personal liability whatsoever under this
Agreement, except for that arising from his or her bad faith,
willful misconduct, gross negligence or reckless disregard of his
or her duties or for his or her failure to act in good faith and
in the reasonable belief that his or her action was in the best
interest of the Trust and the Investment Advisor shall look
solely to the Trust property for satisfaction of claims of any
nature arising in connection with the affairs of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective corporate officers,
thereunder duly authorized and their respective corporate seals
to be hereunto affixed as of the day and year first above
written.
EXECUTIVE INVESTORS TRUST
By: /s/ David D. Grayson
David D. Grayson, President
ATTEST:
/s/ C. Durso
Concetta Durso, Vice President
and Secretary
EXECUTIVE 12
<PAGE>
IRVING TRUST COMPANY
By:/s/ Signature Illegible
ATTEST:
/s/Signature Illegible
EXECUTIVE 13
<PAGE>
APPENDIX A
I, David D. Grayson, President and I, Concetta Durso,
Secretary of Executive Investors Trust, a Massachusetts business
trust (the "Trust"), do hereby certify that:
The following individuals serve in the following positions
with the Trust and each individual has been duly elected or
appointed to each such position and qualified therefor in
conformity with the Trust's Declaration of Trust and By-Laws and
the signatures set forth opposite their respective names are true
and correct signatures:
NAME POSITION SIGNATURE
David D. Grayson President /s/ David D. Grayson
Glenn O Head. Vice President /s/ Glenn O. Head
Concetta Durso Vice President /s/ C. Durso
and Secretary
George V. Ganter Vice President /s/George V. Ganter
Joseph I. Benedek Treasurer /s/ Joseph I. Benedek
Carol Lerner Assistant Secretary /s/ Carol Lerner
I, David D. Grayson, in my official capacity as President of
Executive Investors Trust, hereby certify that Concetta Durso is
currently the duly elected and appointed Secretary of Executive
Investors Trust and that the above named individuals have been
duly appointed to each such position and that the signatures
appearing opposite their names are true and correct signatures.
/s/ David D. Grayson
David D. Grayson, President
Dated: April 13, 1990
I, Concetta Durso, Secretary of Executive Investors Trust hereby
certify that the above named individuals have been duly elected
and appointed to each position and that the signature appearing
opposite their names are true and correct signatures.
/s/ C. Durso
Concetta Durso, Secretary
Dated: April 13, 1990
EXECUTIVE 14
<PAGE>
APPENDIX B
I, David D. Grayson, President, and I, Concetta Durso,
Secretary of Executive Investors Trust, a Massachusetts business
trust (the "Trust"), do hereby certify that:
The following individuals are duly authorized to execute any
certificate, instruction, notice or other instrument or to give
oral instructions on behalf of the Trust, and the signatures set
forth opposite their respective names are their true and correct
signatures:
NAME SIGNATURE
David D. Grayson /s/ David D. Grayson
Glenn O. Head /s/ Glenn O. Head
Concetta Durso /s/ Concetta Durso
Joseph I. Benedek /s/ Joseph I. Benedek
Joseph P. Abbamont /s/ Joseph P. Abbamont
Anthony Gentile /s/ Anthony Gentile
Robert J. Grosso /s/ Robert J. Grosso
Carol Lerner /s/ Carol Lerner
Irving P. David /s/ Irving P. David
Nanette A. King /s/ Nanette A. King
Mary T. Kohn /s/ Mary T. Kohn
Susan I. Grant /s/Susan I. Grant
EXECUTIVE 15
<PAGE>
I, David D. Grayson, in my official capacity as President of
Executive Investors Trust, hereby certify that Concetta Durso is
currently the duly elected and appointed Secretary of Executive
Investors Trust and that the above named individuals have been
duly authorized to execute any certificate, instruction, notice
or other instrument or to give oral instructions on behalf of the
Trust and the signatures set forth opposite their names are true
and correct signatures.
/s/ David D. Grayson
David D. Grayson, President
Dated: April 13, 1990
I, Concetta Durso, Secretary of Executive Investors Trust, hereby
certify that the above named individuals have been duly
authorized to execute any certificate, instruction, notice, or
other instrument or to give oral instructions on behalf of the
Trust and the signatures set forth opposite their names are true
and correct signatures.
/s/ C. Durso
Concetta Durso, Secretary
Dated: April 13, 1990
EXECUTIVE 16
<PAGE>
SUPPLEMENT
TO
CUSTODIAN AGREEMENT
This Supplement is added to and forms a part of the Custodian
Agreement between Executive Investors Trust (the "Fund") and The Bank
of New York, as successor-in-interest to Irving Trust Company (the
"Custodian") dated * (the "Agreement"). All defined terms used herein
shall have the meanings ascribed to them in the Agreement.
1. If the Custodian in its sole discretion advances Funds on
behalf of the Fund or any series thereof which results in an overdraft
because the moneys held by the Custodian in the separate account for
the Fund or such series shall be insufficient to pay the total amount
payable upon a purchase of securities specifically allocated to the
Fund or such series, as set forth in an officer's certificate, oral
instructions or written instructions, or which results in an overdraft
in the separate account of the Fund or such series for some other
reason, or if the Fund or such series is indebted to The Bank of New
York as the issuer of any letter of credit on behalf of the Fund or
such series, such overdraft or indebtedness shall be deemed to be a
loan made by the Custodian to the Fund (allocated to the appropriate
series, if any) payable on demand and shall bear interest from the
date incurred at a rate per annum (based on a 360-day year for the
actual number of days involved) equal to the Federal Funds Rate in
effect from time to time plus 1%, such rate to be adjusted on the
effective date of any change in the Federal Funds Rate, but in no
event to be less than 6% per annum. Promptly upon the occurrence of
any overdraft, the Custodian will notify the Fund of the amount of
such overdraft and the series to which it relates. In addition, the
Fund hereby agrees that the Custodian shall have a continuing lien and
security interest in and to any property of the Fund or specifically
allocated the Fund's series (if applicable) at any time held by it for
the benefit of the Fund or such series or in which the Fund may have
an interest which is then in the Custodian's possession or control or
in possession or control of any third party acting in the Custodian's
behalf. If, one business day after the Custodian has demanded
repayment of any overdraft or indebtedness, the Fund fails to pay the
same in full, the Custodian shall be entitled, in its sole discretion,
at any time to charge any outstanding overdraft or indebtedness
together with interest due thereon against any balance of account
standing to the Fund's or the appropriate series' credit on the
Custodian's books.
*Executive Investors High Yield Fund - December 18, 1986
All other Funds - April 13, 1990
2. The Fund will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate agreement,
the Custodian) for which it borrows money for investment or for
temporary or emergency purposes using securities held by the Custodian
hereunder as collateral for such borrowings, a notice or undertaking
in the form currently employed by any such bank setting forth the
amount which such bank will loan to the Fund against delivery of a
stated amount of collateral. The Fund shall promptly deliver to the
Custodian an officer's certificate specifying with respect to each
such borrowing: (a) the series to which such borrowing relates (if
applicable); (b) the name of the bank, (c) the amount and terms of the
borrowing, which may
- 1 -
<PAGE>
be set forth by incorporating by reference an attached promissory not,
duly endorsed by the Fund, or other loan agreement, (d) the time and
date, if known, on which the loan is to be entered into, (e) the date
on which the loan becomes due and payable, (f) the total amount
payable to the Fund on the borrowing date, (g) the market value of
securities to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the principal
amount of any particular securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or
emergency purposes and that such loan is in conformance with the
Investment Company Act of 1940 and the Fund's prospectus. The
Custodian shall deliver on the borrowing date specified in an
officer's certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms
to the total amount payable as set forth in the officer's
certificate. The Custodian may, at the option of the lending bank,
keep such collateral in its possession, but such collateral shall be
subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such
securities as additional collateral as may be specified in an o
f ficer's certificate to collateralize further any transaction
described in this paragraph. If the Custodian keeps the collateral in
its possession, it shall release such collateral as may be specified
in a notice or undertaking in the form currently used by the lending
bank, provided that the same conforms to the total amount set forth in
an officer's certificate. The Fund shall cause all securities
released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such
return of collateral as may be tendered to it. In the event that the
Fund fails to specify in an officer's certificate the series (if
applicable), the name of the issuer, the title and number of shares or
the principal amount of any particular securities to be delivered as
collateral by the Custodian, the Custodian shall not be under any
obligation to deliver any securities.
3. This Supplement shall be effective as of the date hereof
upon execution by the parties hereto, and any reference to the
Agreement shall be a reference to the Agreement as supplemented
hereby.
4. In the event of any conflict between the provisions of the
Agreement and the provisions of this Supplement, the provisions of
this Supplement shall control.
5. With respect to any obligations of the Fund on behalf of a
series arising out of this agreement, including, without limitation,
the obligations arising under this Supplement, the Custodian shall
look for payment or satisfaction of any obligation solely to the
assets and property of the series to which such obligation relates as
though the Fund had separately contracted with the Custodian by
separate written instrument with respect to each series.
6. Notwithstanding the provisions of any applicable law,
including without limitation the Uniform Commercial Code, the remedy
set forth in this Section 1 shall be the only right or remedy to which
the Custodian is entitled with respect to the lien and security
interest granted pursuant to this Section 1. Without limiting the
foregoing, the Custodian hereby waives and relinquishes all
contractual and common law rights of set off to which it may now or
hereafter be or become entitled
- 2 -
<PAGE>
with respect to any obligations of the Fund to the Custodian arising
under the Supplement.
IN WITNESS WHEREOF, the parties hereto have executed this
SUPPLEMENT as of the date first above written.
Executive Investors Trust
By:/s/C. Durso
Title: Vice President & Secretary
ATTEST:
/s/Susan I. Grant
THE BANK OF NEW YORK
By: /s/S. Grunston
Title: Vice President
ATTEST:
/s/Octavio Cabrero
- 3 -
<PAGE>
ADMINISTRATION AGREEMENT
This Agreement, dated as of the 18th day of November, 1991 made
by and among EXECUTIVE INVESTORS TRUST, a business trust duly organized
and existing under the laws of the Commonwealth of Massachusetts (the
"Trust"), on behalf of its separate, designated series presently
existing or hereafter established (hereinafter individually the "Fund"
and collectively the "Funds"); and ADMINISTRATIVE DATA MANAGEMENT
CORP., a corporation duly organized and existing under the laws of
the State of New York ("ADM").
WITNESSETH THAT:
WHEREAS, ADM has agreed to act as transfer agent to the Funds, as
their dividend disbursing agent, and as administrator of the Dividend
Reinvestment, Share Accumulation and Systematic Withdrawal Accounts of
the Funds ("Plans" as defined in Section 21 hereof), and ADM has also
agreed to act for the Trust and the Funds in other respects as
hereinafter stated; and
WHEREAS, the parties hereto desire to set forth certain terms
relating to the activities of ADM under this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual
covenants contained herein, the parties hereto, intending to be legally
bound, do hereby agree as follows:
THE TRANSFER AGENCY
Section 1. The Trust hereby appoints ADM as the Funds' transfer
agent and ADM accepts such appointment and agrees to act in such
capacity upon the terms set forth in this Agreement.
Section 2. ADM will maintain stock registry records in the
usual form in which it will note the issuance and redemption of shares
and the issuance and transfer of share certificates and is also
authorized to maintain an account entitled Unissued Share Certificate
Account in which it will record the shares and fractions thereof issued
and outstanding from time to time for which issuance of share
certificates is deferred. ADM is also authorized to keep records, which
will be part of the stock transfer records, as well as its records of
the Plans, in which it will note the names and registered addresses of
Planholders (as defined in Section 21 hereof), and the number of shares
and fractions thereof from time to time owned by them for which
no share certificates are outstanding. Each shareholder whether he or
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<PAGE>
she holds one or more share certificates will be assigned a single
account number.
Section 3. Whenever shares are purchased for Planholders,
the Fund authorizes ADM to dispense with the issuance and
countersignature of share certificates. In such case ADM, as transfer
agent, shall merely note on its stock registry records the issuance
of the shares and fractions thereof (if any), shall credit the proper
Unissued Share Certificate Account with the shares and fractions
thereof to the respective Planholders. Likewise, whenever ADM has
occasion to surrender for redemption shares and fractions thereof owned
by Planholders, it shall be unnecessary to issue share
certificates for redemption purposes. The Trust authorizes ADM in such
cases to process the transactions by appropriate entries in its
stock transfer accounts and debiting of the Unissued Share Certificate
Account and the record of shares outstanding. Whenever Planholders
are entitled to the issuance of share certificates for shares held
under Plans, the Trust authorizes ADM as transfer agent, to
countersign share certificates for issuance and delivery and to debit
the Unissued Certificate Account.
Section 4. ADM in its capacity as transfer agent will, in
addition to the duties and functions above-mentioned, perform the
usual duties and functions of a stock transfer agent for the Funds.
ADM may rely conclusively a n d a ct without further investigation
upon any list, instruction, certification, authorization, share
certificate or other instrument or paper reasonably believed by it to be
genuine and unaltered and to have been signed, counter-signed or
executed by a duly authorized person or persons or upon the instructions
of any officer of the Trust, or upon the advice of counsel for the
Trust or for ADM. ADM shall be protected in any action it takes or
does not take in reliance upon directions, advice or written
instructions it receives from the Trust or from counsel in accordance
with this Agreement and which ADM believes, in good faith, to be
consistent with those directions, advice or written instructions.
Nothing in this section shall be construed to impose an
obligation upon ADM (1) to seek such directions, advice or written
instructions or (2) to act in accordance with such directions,
advice or written instructions unless, under the terms of other
provisions of this Agreement, the same is a condition of ADM's properly
taking or not taking such action. Nothing in this subsection
shall excuse ADM when an action or omission on the part of ADM
constitutes willful misfeasance, bad faith, negligence or
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<PAGE>
reckless disregard by ADM of any duties, obligations or
responsibilities provided for in this Agreement.
THE DIVIDEND DISBURSEMENT AGENCY
Section 5. Upon declaration of each dividend and each securities
profit distribution by the Board of Trustees of the Trust on behalf of
any Fund, the Trust shall notify ADM of the date of such declaration,
the amount payable per share, the record date for determining the
shareholders entitled to payment, the payment date, the date for
issuance of shares as dividends, and the price which is to be used
to issue such shares. In the case of dividends and securities profit
distributions issued in shares, ADM will advise the applicable
Fund of the number of shares to be issued, or upon shareholder
election, pay such dividends and distributions in cash, if provided for
in the Fund's prospectus. In all cases, such issuance of shares or
payments of cash, as well as payments upon redemption, shall be made
after ADM deducts and pays the required amount of funds to be withheld
in accordance with any applicable tax law or other laws, rules or
regulations. ADM shall mail to each Fund's shareholders such tax
forms and other information, or permissible substitute notice, relating
to any dividends and distributions paid by the Fund as are required to
be filed and mailed by applicable law, rule or regulation.
Dividends and securities profit distributions directed to be
reinvested under Plans will be applied as provided in Section 11 below.
ADM shall prepare, maintain and file with the IRS and other
appropriate taxing authorities reports relating to all dividends paid by
any Series to its shareholders as required by tax or other law, rule or
regulation.
Section 6. On or about each payment date for cash payments, the
Trust will transfer, or cause the Custodian to transfer, to ADM in its
capacity as dividend disbursing agent, the total amount of the
dividend and/or distribution currently payable in cash, and ADM in
such capacity will, on the designated payment date, mail distribution
checks to the shareholders for the proper amounts payable to them.
THE ADMINISTRATION OF THE PLANS
Section 7. The Trust hereby appoints ADM as administrator of the
Plans and ADM accepts such appointment and agrees to act in such
capacity upon the terms set forth in this Agreement. As
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<PAGE>
provided in Section 2, ADM will maintain records, which will be part of
the stock registry records as well as its records of the
administration of the Plans, in which it will note the transactions
effected for the respective Planholders and the number of shares and
fractions thereof from time to time owned by them for which no
share certificates are outstanding.
Section 8. The Trust will from time to time keep ADM fully
informed of the respective prices which are applicable to Planholders
who are entitled to purchase shares at reduced offering prices. ADM may
conclusively rely on such information in placing orders for shares on
behalf of such Planholders.
Section 9. It will be the practice of ADM to process
payments by Planholders received by it in acceptable form between and
until the time of the closing of the New York Stock Exchange on each
day on which said Exchange is open, and the same time on the prior
business day in which said Exchange was open, and to obtain from the
Fund a quotation of the public offering price per Fund share (on which
it may conclusively rely) as of the close of business on said Exchange.
ADM will proceed to calculate the amount available for investment in
shares at the public offering price so quoted and, if
applicable, the amounts to be allocated as between commissions of
dealers, share of the Funds' principal underwriter and net asset value
to be deposited with the Custodian. While the public offering price
so quoted is still in effect, ADM, as agent for the Planholders, will
place an order with the Funds' principal underwriter for the proper
number of shares and fractions thereof, will advise the underwriter
of the breakdown of the total purchase price as between commissions of
dealers, share of the underwriter and net asset value, and will confirm
said figures in writing.
Section 10. ADM will thereupon set aside the commissions of
dealers, and the share of the Funds' principal underwriter, and will
pay over the balance available (i.e., the net asset value) to the
Custodian and will furnish said Custodian with the statements
required by the Custodian Agreement. Said Custodian will deposit the
net asset value in the Principal Account under the Custodian Agreement.
ADM will credit the bank account of the underwriter for its share. The
proper number of shares and fractions thereof will then be issued and
credited to the Unissued Certificate Account and the shares and
fractions thereof purchased for each Planholder will be credited to his
or her separate account. ADM will thereupon mail to each Planholder a
confirmation of the purchase, with copies to the Funds and the proper
dealers, if a Fund so requests. Such
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<PAGE>
confirmation will show the prior and new share balance, the shares held
under the Plans and shares (if any) for which share certificates are
outstanding, the amount invested, the price paid and other data.
ADM will remit commissions to the proper dealers weekly or at
other convenient intervals, as agreed upon between the Funds and ADM.
Section 11. As and when a Fund declares dividends and/or
securities profit distributions, it will promptly quote to ADM the
net asset value per share at the close of business on the payment
date for reinvestments. Thereafter, ADM promptly will advise the
Fund of the amounts which will be issued in full and fractional shares
on such payment date. Upon determination of the amount of the
dividends or distributions to be issued in shares under Plans, the
shares and fractions thereof purchased for the Plans will be issued
pursuant to a Statement of ADM and will be credited to the
Unissued Certificate Account. ADM will credit the shares and
fractions thereof so issued to the separate accounts maintained for the
respective Planholders, and will promptly mail to each Planholder a
confirmation of the purchase, with a copy to the Funds, showing the
prior and new share balance.
Section 12. Whenever a shareholder shall deposit shares
represented by share certificates in a Systematic Withdrawal Plan or
other Plan permitting deposit of shares thereunder, ADM as transfer
agent is authorized upon receipt of share certificates registered in
the name of the shareholder, or if not so registered in due form for
transfer, to cancel such share certificates, to debit the individual
share accounts and to credit the shares to the Unissued Certificate
Account. ADM as Plan administrator will credit the shares to be
deposited to the proper Plan accounts. In the event that a Planholder
shall desire to deposit under a Systematic Withdrawal Plan shares
held in an investment plan or other like plan, ADM will accomplish such
deposit by proper debiting and crediting of Plan accounts.
Section 13. ADM will administer the Systematic Withdrawal Plans
for the Planholders. ADM will note in such accounts the share
balances from time to time, the additional shares issued from the
payment of dividends and distributions in shares and the share
redeemed to provide the withdrawal payments. Confirmations will be
mailed to the Planholders reflecting each transaction, with copies to
the Funds.
-5-
<PAGE>
Section 14. Whenever ADM shall have received requests from
Planholders to redeem shares and remit proceeds, or whenever ADM is
required to redeem shares to make withdrawal payments under
Systematic Withdrawal Plans or the like, ADM will advise the Funds that
it has shares for redemption, stating the number of shares and
fractions thereof to be redeemed. The Funds will then quote to ADM the
applicable net asset value or redemption price, whereupon ADM will
furnish the Funds with an appropriate confirmation of the redemption and
will process the redemption by filing with the Custodian an
appropriate Statement of ADM as may be required by the Custodian
Agreement. The Custodian shall be authorized to pay over to ADM as
administrator, the total redemption price stated in the Statement of
ADM for proper distribution and application. T h e stock registry
books recording outstanding shares, the Unissued Certificate
Account and the individual accounts of the shareholders shall be
properly debited.
Section 15. The practices and procedures of ADM and the Funds
above outlined in Sections 7 to 14, inclusive, may be altered or
modified from time to time as may be mutually agreed by the parties to
this Agreement, so long as the intent and purposes of the Plans,
as stated from time to time in the prospectuses of the Funds, are
complied with. For special cases, the parties hereto may adopt such
procedures as may be appropriate or practical under the circumstances
and ADM may conclusively assume that any special procedure which has
been approved by the Trust does not conflict with or violate
any requirements of the Trust's Declaration of Trust or By-Laws or the
applicable Fund's current prospectus, or any applicable rule,
regulation or requirement of a regulatory body.
Section 16. ADM in acting for Planholders or in any other
capacity set forth in this Agreement, shall not be personally
liable for any taxes, assessments or governmental charges which may
be levied or assessed on any basis whatsoever in connection with the
administration of the Plans, excepting only for taxes assessed
against it in its corporate capacity out of its compensation
hereunder. ADM shall be under no duty to take any action on behalf
of a Fund, except as specifically set forth herein or as may be
specifically agreed to by ADM in writing. ADM shall be obligated to
exercise due care and diligence in the performance of its duties
hereunder, to act in good faith, and to use its best efforts in
performing services provided for under this Agreement. ADM shall be
liable for any damages arising out of or in connection with ADM's
performance of or omission or failure to perform its duties under this
Agreement to the extent such damages arise out of ADM's
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<PAGE>
negligence, reckless disregard of its duties, bad faith or
willful misfeasance.
Without limiting the generality of the foregoing or of any
other provision of this Agreement, ADM, in connection with its
duties under this Agreement, shall not be under any duty or obligation
to inquire into and shall not be liable for (a) the validity or
invalidity or authority or lack thereof of any written instruction,
notice or other instrument which conforms to the applicable requirements
of this Agreement, and which ADM reasonably believes to be genuine; or
(b) subject to the provisions of Section 27, delays or errors or loss
of data occurring by reason of circumstances beyond ADM's control,
including acts of civil or military authority, national emergencies,
labor difficulties, acts of God, insurrection, war, riots or failure
of the mails, transportation, communication or power supply.
MISCELLANEOUS
Section 17. In addition to the services as transfer agent,
dividend disbursing agent and administrator as set forth above, ADM
will perform other services for the Trust as agreed to from time
to time, including but not limited to preparation of Federal 1099
and other required tax information forms, mailing of annual and
semi-annual reports of the Funds, preparation of one annual list of
shareholders and mailing of notices of shareholders meeting, proxies
and proxy statements.
Section 18. The Trust, on behalf of the Funds, agrees to
pay ADM compensation for its services and to reimburse it for expenses
as set forth in Schedule A attached hereto, or as shall be set forth
in amendments to such schedule approved by the parties to this
Agreement.
Section 19. ADM may from time to time in its sole discretion
delegate some or all of its duties hereunder to any affiliate(s) or
other entity, which shall perform such functions as the agent of
ADM. To the extent of such delegation, the term "ADM" in this
Agreement shall be deemed to refer to both ADM and such affiliate(s)
or other entity or any of them, as the context may indicate; provided
that the assignment and delegation of any of ADM's duties under this
section shall not relieve ADM of any of its responsibilities or
liabilities under this Agreement.
Section 20. Nothing contained in this Agreement is intended to or
shall require ADM in any capacity hereunder to perform any functions
or duties on any holiday or other day of special
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<PAGE>
observances on which the Trust and ADM are closed. Functions or
duties normally scheduled to be performed on such days shall be
performed on, and as of, the next business day on which both the
Trust and ADM are open.
Section 21.All terms herein which are defined in the
Custodian Agreement shall have the same meanings as set forth therein.
In addition, the following terms as used in this Agreement shall
have the meaning set forth below unless the context otherwise requires:
Plan: The term "Plan" shall include such Dividend Reinvestment
Accounts, Share Accumulation Accounts, Systematic Withdrawal Plans
and other types of plans or accounts in a form acceptable to ADM,
which the Trust, on behalf of the Funds, may from time to time adopt
and make available to shareholders of the Series, including plans or
accounts adopted for pension and profit-sharing plans established by
self-employed individuals, partnerships, individuals, corporations and
not-for-profit organizations.
Planholder: The term "Planholder" shall mean a shareholder who
at the time of reference is participating in a Plan.
Section 22. This Agreement may be terminated by any party
to this Agreement by giving at least sixty (60) days' advance written
notice stating when thereafter such termination shall be effective. In
case of such notice of termination, the Board of Trustees of the Trust
shall, by resolution duly adopted, promptly appoint a successor to ADM
to serve upon the terms set forth in this Agreement as then amended
and supplemented. Unless and until a successor to ADM has been
appointed as above, provided ADM shall continue to perform according to
the terms of this Agreement, ADM shall be entitled to receive all the
payments and reimbursement to which it is entitled under this Agreement.
Section 23. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed to
be original, but such counterparts shall together constitute but one and
the same instrument.
Section 24. This Agreement shall extend to, and shall be binding
upon, the parties hereto and their respective successors and
assigns; provided however that this Agreement shall not be assignable
by the Trust without the written consent of the Trust, authorized or
approved by a resolution of its Board of Trustees.
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<PAGE>
Section 25. This Agreement shall be construed in accordance
with the laws of the State of New York, provided, however, that
Sections 26 and 27 below shall be construed in accordance with the
laws of the Commonwealth of Massachusetts.
Section 26. Notwithstanding any provision of law to the
contrary, ADM hereby waives any right to enforce this Agreement
against the individual and separate assets of any shareholder of
the Funds. With respect to any obligations of the Trust on behalf of
the Funds arising out of this Agreement, ADM shall look for payment
or satisfaction of any obligation solely to the assets and property of
the Funds to which such obligation relates as though the Funds had
separately contracted with ADM by separate written instrument with
respect to each Series.
Section 27. In accordance with the Declaration of Trust
creating the Trust, it is understood and agreed that no shareholder
shall be subject to any personal liability whatsoever under this
Agreement, and no Trustee, officer, employee, or agent of the Trust
shall be subject to any personal liability whatsoever under this
Agreement, except for that arising from his or her bad faith, willful
misconduct, gross negligence, or reckless disregard of his or her duties
or for his or her failure to act in good faith and in the
reasonable belief that his or her action was in the best interest
of the Trust, and ADM shall look solely to the Trust property for
satisfaction of claims of any nature arising in connection with the
affairs of the Trust.
Section 28. ADM shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of
insurance may provide for coverage of claims for liability or
indemnity by the parties set forth in this Agreement, the contracts of
insurance shall take precedence, and no provision of the Agreement
shall be construed to relieve an insurer of any obligation to pay
claims to the Funds, ADM or any other insured party which could
otherwise be a covered claim in the absence of any provision of this
Agreement.
Section 29. ADM shall enter into and shall maintain in
effect with appropriate parties one or more agreements making
reasonable provision for periodic backup of computer files and data
with respect to the Funds and emergency use of electronic data
processing equipment. In the event of equipment failures, ADM shall,
at no additional expense to the Trust, take all reasonable steps to
minimize service interruptions. ADM shall have no liability with
respect to the loss of data or service interruptions caused by equipment
failures, provided such loss or interruption is
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<PAGE>
not caused by the negligence of ADM and provided further that ADM
has complied with the provisions of this Section 29.
Section 30. ADM represents that it is currently registered
with the appropriate federal agency for the registration of
transfer agents, or is otherwise permitted to lawfully conduct
its activities without such registration and that it will remain
so registered for the duration of this Agreement. ADM agrees that it
will promptly notify the Trust in the event of any material change in
its status as a registered transfer agent. Should ADM fail to be
registered with the SEC as a transfer agent at any time during this
Agreement, and such failure to register does not permit ADM to
lawfully conduct its activities, the Funds may, on written notice to
ADM, terminate this Agreement upon five days written notice to ADM.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their duly authorized officers and their seals hereunto
duly affixed and attested as of the day and the year first above
written.
ATTEST: EXECUTIVE INVESTORS TRUST
/s/ C. Durso By: /s/ David D. Grayson
C. Durso, Vice President David D. Grayson, President
and Secretary
ATTEST: ADMINISTRATIVE DATA MANAGEMENT
CORP.
/s/ C. Durso By: /s/ David D. Grayson
C. Durso, Vice President David D. Grayson, President
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<PAGE>
ADMINISTRATION AGREEMENT
SCHEDULE A
Compensation and charges of Administrative Data Management
Corp. for services as Transfer Agent, Dividend Disbursing Agent
and Plan Administration, and for other services under the
Administration Agreement.
Opening New Account $5.00 for each account
Processing Payments $0.75 for each payment*
Processing Share Certificates $3.00 per certificate issued
General Account Maintenance $0.65 per account per month
Legal Transfers of Shares $10.00 per transfer
Dividend Processing $0.45 per account per dividend
declared
Partial Withdrawals and
Complete Liquidations $5.00 per transaction
Reports Required by
Governmental Authorities $1.00 for each account
Exchange Fee $5.00 for each exchange of shares
into a Fund
Systematic Withdrawal Plans $1.00 for each SWP check*
OUT-OF-POCKET EXPENSES: In addition to the above charges, the
Fund, First Investors Management Company, Inc. or First Investors
Corporation shall reimburse Administrative Data Management Corp.
for all out-of- pocket costs including but not limited to postage,
insurance, forms relating to shareholders of the Fund, envelopes and
other similar items, and will also reimburse Administrative Data
Management Corp. for counsel fees, including fees for the preparation
of the Administration Agreement and review of prospectus and application
forms.
THE ABOVE FEES AND OUT-OF-POCKET EXPENSES APPLY TO THE FOLLOWING FUNDS:
FIRST INVESTORS FUND FOR INCOME, INC., FIRST INVESTORS GLOBAL FUND,
INC., FIRST INVESTORS GOVERNMENT FUND, INC., FIRST INVESTORS HIGH
YIELD FUND, INC., FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.,
FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND, FIRST INVESTORS NEW
YORK INSURED TAX FREE FUND, INC., FIRST INVESTORS SERIES FUND, FIRST
INVESTORS SERIES FUND II, INC., FIRST INVESTORS U.S. GOVERNMENT
PLUS FUND - 1st, 2nd & 3rd SERIES, EXECUTIVE INVESTORS TRUST
* Administrative Data Management Corp. (ADM) bills the Fund. ADM is
then paid by the Fund, after which FIMCO reimburses the Fund.
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<PAGE>
Ex-99.B11.1
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. 17 to the
Registration Statement on Form N-1A (File No. 33-10648) of our report dated
January 31, 1996 relating to the December 31, 1995 financial statements of
Executive Investors Trust, which are included in said Registration Statement.
/s/Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 16, 1996
H:\LEGAL\WPDEPT\CONSENT\EXEC.
<PAGE>
<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 21st day of September, 1995.
/s/James J. Coy
James J. Coy
<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 21st day of September, 1995.
/s/Glenn O. Head
Glenn O. Head
<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 21st day of September, 1995.
/s/Roger L. Grayson
Roger L. Grayson
<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 21st day of September, 1995.
/s/Kathryn S. Head
Kathryn S. Head
<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 21st day of September, 1995.
/s/Rex R. Reed
Rex R. Reed
<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 21st day of September, 1995.
/s/James M. Srygley
James M. Srygley
<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 21st day of September, 1995.
/s/Herbert Rubinstein
Herbert Rubinstein
<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 21st day of September, 1995.
/s/John T. Sullivan
John T. Sullivan
<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 21st day of September, 1995.
/s/Robert F. Wentworth
Robert F. Wentworth
<PAGE>
AMENDED AND RESTATED
CLASS A DISTRIBUTION PLAN
OF
EXECUTIVE INVESTORS TRUST
WHEREAS, EXECUTIVE INVESTORS TRUST (the "Fund") is a diversified
open-end management investment company duly registered with the
Securities and Exchange Commission under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended
(the "1940 Act");
WHEREAS, the Fund employs one or more broker-dealers as
distributors of its shares ("Underwriter") pursuant to a written
agreement ("Underwriting Agreement");
WHEREAS, Rule 12b-1 under the 1940 Act permits registered
investment companies to bear certain expenses associated with the
distribution of their shares;
WHEREAS, the Fund offers multiple classes of shares for
purchase by shareholders;
WHEREAS, the Board of Trustees believes that payment of certain
expenses associated with the distribution of Class A shares of
the Fund and the servicing or maintenance of such Class A
shareholder accounts would be beneficial to the Fund and its
shareholders; and
WHEREAS, the Fund, on behalf of its separate designated series
presently existing or hereafter established (individually and
collectively, "Series"), wishes to adopt a plan under Rule 12b-1 to
permit each Series to pay some of the expenses involved in distributing
its Class A shares and the servicing or maintenance of its Class A
shareholder accounts; and
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the following distribution plan in accordance with
Rule 12b-1 (the "Class A Plan"):
1. Payment of the Fee. Pursuant to one or more
Underwriting Agreements which the Fund can enter into from time to
time and the Class A Plan, each Series shall pay as compensation for
the Underwriter's services an annualized Rule 12b-1 fee of up to an
aggregate of 0.30 of 1% of each Series' average daily net assets
attributable to Class A shares (referred to herein as the "Class A
12b-1 fee"). The Class A 12b-1 fee is payable by each Series monthly
or at such intervals as shall be determined by the Board of Trustees in
the manner provided for approval of the Class A Plan in paragraph
5(a). The Class A 12b-1 fee shall consist of a distribution fee and a
service fee, in such proportions as shall be determined from time to
time by the Board of Trustees in the manner provided for approval of
the Class A Plan in paragraph 5(a). The Class A 12b-1 fee shall
be payable regardless of whether that amount exceeds or is less than the
actual expenses incurred by the Underwriter in distributing Class A
shares of such Series in a particular year.
-1-
<PAGE>
2. Expenses Different from Annual Rate. To the extent that the
Class A 12b-1 fee paid by each Series in a particular year exceeds
actual expenses attributable to Class A Shares incurred by an
Underwriter in that year, the Underwriter would realize a profit in that
year. If the expenses attributable to Class A Shares incurred by an
Underwriter in a particular year are greater than the Class A 12b-1
fee, the Underwriter would incur a loss in that year and would not
recover from such Series such excess of expenses attributable to Class A
Shares over the Class A 12b-1 fee unless actual expenses attributable to
Class A shares incurred in a subsequent year in which the Class A
Plan remained in effect were less than the Class A 12b-1 fee paid under
the Class A Plan in that year.
3. Distribution and Service Fees. "Distribution" fees are
fees paid for the distribution of the Series' Class A shares,
including continuing payments to registered representatives and
dealers for sales of such shares, the costs of printing and
dissemination of sales material or literature, prospectuses used as
sales material and reports or proxy material prepared for the Series'
Class A shareholders to the extent that such material is used in
connection with the sales of the Series' Class A shares, and general
overhead of an Underwriter. "Service" fees are fees paid for services
related to the maintenance and servicing of existing Class A
shareholder accounts, including shareholder liaison services, whether
provided by individual representatives, dealers, an Underwriter or
others entitled to receive such fees.
4. Reports to Trustees. Quarterly and annually in each year
that the Class A Plan remains in effect, the Treasurer of the Fund
shall prepare and furnish to the Board of Trustees of the Fund a
written report of the amounts so expended and the purposes for which
such expenditures were made under the Class A Plan. The Board of
Trustees will promptly review the Treasurer's report.
5. Approval of Plan. The Class A Plan shall become
effective with respect to any Series of the Fund immediately upon
the approval by the majority vote of (a) the Fund's Board of Trustees
and of the Trustees who are not "interested persons" of the Fund,
within the meaning of the 1940 Act, and have no direct or indirect
financial interest in the operation of the Class A Plan or in any
agreements related to the Class A Plan (the "Independent Trustees")
cast in person at a meeting called for the purpose of voting on such
Class A Plan and (b) the outstanding Class A voting securities of such
Series, voting separately from any other class or Series of the Fund,
which for this purpose is defined in Section 2(a)(42) of the 1940 Act
and means the lesser of (1) more than 50% of the outstanding shares,
or (2) 67% or more of the shares present or represented at a
shareholders meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy, whichever is less.
6. Termination of Plan. The Class A Plan can be terminated
by any Series at any time without the payment of any penalty by vote of
a majority of the Independent Trustees or by vote of a majority of the
outstanding Class A voting securities of such Series, voting
separately from any other class or Series of the Fund (as defined in
Section 2(a)(42) of the 1940 Act), on not more than 60 days' written
notice to any other party to the Class A Plan.
-2-
<PAGE>
7. Amendments. Any material amendment to the Class A Plan
with respect to any Series may not be instituted without the approval of
a majority of the Fund's Board of Trustees and the Independent Trustees
and a majority of the outstanding Class A voting securities of such
Series, voting separately from any other class or Series of the Fund
(as defined in the 1940 Act). If Class B shares of any Series are
convertible into Class A shares, and if such Series implements any
amendment to the Class A Plan that would increase materially the
amount that may be borne by the Class A shareholders under the Class A
Plan, then Class B shares will stop converting into Class A shares
unless the holders of a majority of Class B shares of such Series,
voting separately as a class (as defined in the 1940 Act), also
approve the amendment.
8. Nomination of Trustees. While the Class A Plan shall
be in effect, the selection and nomination of the Independent
Trustees shall be committed to the discretion of the Independent
Trustees then in office.
9. Term. The Class A Plan shall remain in effect with respect
to any Series for one year from the date of its approval in accordance
with Rule 12b- 1(b) of the 1940 Act and may continue thereafter only
if the Class A Plan is approved at least annually by either the Board
of Trustees or by a vote of a majority of the outstanding Class A
voting securities of such Series, voting separately from any other class
or Series of the Fund, and in either case by a majority vote of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on the Class A Plan.
10. Payments Outside of the Plan. To the extent any payments
made by any Series to its investment advisor, its transfer agent
or any company affiliated with an Underwriter, may be deemed to be
indirect financing of any monies paid by the Underwriter or investment
advisor out of their own assets for distribution expenses, such
payments are permissible under the Class A Plan. Permissible payments
may include, but are not limited to, the payment by the Series of
investment advisory and service fees.
11. Massachusetts Business Trust. It is understood and
agreed that the obligations under the Class A Plan are not binding upon
any officer and/or Trustee of the Fund individually or upon the Fund's
shareholders individually; rather, these obligations are binding
upon the assets and property of the Fund.
12. Treatment of Expenses. The Trustees, including all
of the Independent Trustees, have determined that the Class A 12b-1
fee will not be an operating expense of the Series. However, while
it is expected that the payments under the Class A Plan will be
excluded from each Series' total expenses for purposes of determining
compliance with any state expense limitation, whether any
expenditure under the Class A Plan is subject to any such state expense
limitation will depend upon the nature of the expenditure and the terms
of the state regulation imposing the limitation. In any event, the
amounts paid under the Class A Plan will be an expense for
accounting purposes.
Dated: November 1990, as amended and restated as of
September 22, 1994
-3-
<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 (division sign) P) ) - 1
Total Return = ((ERV - P) (division sign) 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, 1995.
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
Blue Chip Fund
1 year: $1,363.00 $1,000.00 1.00 36.30% 36.30%
5 years: $1,936.80 $1,000.00 5.00 14.13% 93.68%
Life of Fund: $1,873.90 $1,000.00 5.63 11.80% 87.39%
High Yield Fund
1 year: $1,190.80 $1,000.00 1.00 19.08% 19.08%
5 years: $2,135.70 $1,000.00 5.00 16.39% 113.57%
Life of Fund: $2,145.10 $1,000.00 8.78 9.09% 114.51%
Insured Tax Exempt Fund
1 year: $1,205.30 $1,000.00 1.00 20.53% 20.53%
5 years: $1,684.00 $1,000.00 5.00 10.99% 68.40%
Life of Fund: $1,746.00 $1,000.00 5.46 10.80% 74.60%
<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 (division sign) P) ) - 1
Total Return = ((ERV - P) (division sign) 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, 1995.
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
Blue Chip Fund
1 year: $1,297.80 $1,000.00 1.00 29.78% 29.78%
5 years: $1,845.40 $1,000.00 1.00 13.04% 84.54%
Life of Fund: $1,784.90 $1,000.00 5.63 10.84% 78.49%
High Yield Fund
1 year: $1,133.90 $1,000.00 1.00 13.39% 13.39%
5 years: $2,035.50 $1,000.00 5.00 15.27% 103.55%
Life of Fund: $2,042.90 $1,000.00 8.78 8.48% 104.29%
Insured Tax Exempt Fund
1 year: $1,148.50 $1,000.00 1.00 14.85% 14.85%
5 years: $1,604.60 $1,000.00 5.00 9.92% 60.46%
Life of Fund: $1,663.20 $1,000.00 5.46 9.81% 66.32%
<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, 1995.
Distribution
a b Yield
High Yield Fund $.672 $ 7.59 8.85%
Insured Tax Exempt Fund $.727 $14.04 5.18%
<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, 1995.
Distribution
a b Yield
High Yield Fund $.672 $ 7.97 8.43%
Insured Tax Exempt Fund $.727 $14.74 4.93%
<PAGE>
Yields for Executive Investor's Funds are calculated using the
following formula:
2(((((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, 1995.
<TABLE>
<CAPTION>
*Tax
Equivalent
a b c d e Yield Yield
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield Fund $123,260 $17,105 2,074,010 $ 7.97 $.00 7.83% N/A
Insured Tax Exempt Fund $ 60,895 $ 5,550 935,826 $14.74 $.00 4.86% 9.06%
</TABLE>
* Tax Equivalent Yields are computed assuming a maximum federal tax
rate of 36%.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000807332
<NAME> EXECUTIVE INVESTORS TRUST
<SERIES>
<NUMBER> 01
<NAME> BLUE CHIP SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,054
<INVESTMENTS-AT-VALUE> 1,352
<RECEIVABLES> 3
<ASSETS-OTHER> 78
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,433
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6
<TOTAL-LIABILITIES> 6
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,126
<SHARES-COMMON-STOCK> 87
<SHARES-COMMON-PRIOR> 82
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 298
<NET-ASSETS> 1,427
<DIVIDEND-INCOME> 28
<INTEREST-INCOME> 2
<OTHER-INCOME> 0
<EXPENSES-NET> (6)
<NET-INVESTMENT-INCOME> 24
<REALIZED-GAINS-CURRENT> 62
<APPREC-INCREASE-CURRENT> 282
<NET-CHANGE-FROM-OPS> 368
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (24)
<DISTRIBUTIONS-OF-GAINS> (62)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13
<NUMBER-OF-SHARES-REDEEMED> 12
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 386
<ACCUMULATED-NII-PRIOR> 2
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (12)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (27)
<AVERAGE-NET-ASSETS> 1,212
<PER-SHARE-NAV-BEGIN> 12.75
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> 4.30
<PER-SHARE-DIVIDEND> .29
<PER-SHARE-DISTRIBUTIONS> .74
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.32
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000807332
<NAME> EXECUTIVE INVESTORS TRUST
<SERIES>
<NUMBER> 02
<NAME> HIGH YIELD SERIES
<MULTIPLIER> 1,000
<CURRENCY> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 15,335
<INVESTMENTS-AT-VALUE> 15,444
<RECEIVABLES> 327
<ASSETS-OTHER> 27
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,798
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 126
<TOTAL-LIABILITIES> 126
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,424
<SHARES-COMMON-STOCK> 2,064
<SHARES-COMMON-PRIOR> 2,170
<ACCUMULATED-NII-CURRENT> 95
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,955)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 108
<NET-ASSETS> 15,672
<DIVIDEND-INCOME> 46
<INTEREST-INCOME> 1,610
<OTHER-INCOME> 24
<EXPENSES-NET> (206)
<NET-INVESTMENT-INCOME> 1,474
<REALIZED-GAINS-CURRENT> (265)
<APPREC-INCREASE-CURRENT> 1,510
<NET-CHANGE-FROM-OPS> 2,719
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,415)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 244
<NUMBER-OF-SHARES-REDEEMED> 429
<SHARES-REINVESTED> 79
<NET-CHANGE-IN-ASSETS> 531
<ACCUMULATED-NII-PRIOR> 36
<ACCUMULATED-GAINS-PRIOR> (4,691)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (155)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (294)
<AVERAGE-NET-ASSETS> 15,478
<PER-SHARE-NAV-BEGIN> 6.98
<PER-SHARE-NII> .70
<PER-SHARE-GAIN-APPREC> .58
<PER-SHARE-DIVIDEND> .67
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.59
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000807332
<NAME> EXECUTIVE INVESTORS TRUST
<SERIES>
<NUMBER> 03
<NAME> INSURED TAX EXEMPT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 12,025
<INVESTMENTS-AT-VALUE> 13,196
<RECEIVABLES> 227
<ASSETS-OTHER> 22
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,445
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 103
<TOTAL-LIABILITIES> 103
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,170
<SHARES-COMMON-STOCK> 950
<SHARES-COMMON-PRIOR> 827
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,170
<NET-ASSETS> 13,342
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 696
<OTHER-INCOME> 0
<EXPENSES-NET> (59)
<NET-INVESTMENT-INCOME> 637
<REALIZED-GAINS-CURRENT> 288
<APPREC-INCREASE-CURRENT> 1,271
<NET-CHANGE-FROM-OPS> 2,196
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (639)
<DISTRIBUTIONS-OF-GAINS> (261)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 202
<NUMBER-OF-SHARES-REDEEMED> 118
<SHARES-REINVESTED> 39
<NET-CHANGE-IN-ASSETS> 2,980
<ACCUMULATED-NII-PRIOR> 4
<ACCUMULATED-GAINS-PRIOR> (27)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (119)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (207)
<AVERAGE-NET-ASSETS> 11,902
<PER-SHARE-NAV-BEGIN> 12.53
<PER-SHARE-NII> .72
<PER-SHARE-GAIN-APPREC> 1.80
<PER-SHARE-DIVIDEND> .73
<PER-SHARE-DISTRIBUTIONS> .28
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.04
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
